Where Will Magnite Be in 5 Years?
The ad tech company still has a bright future.
But in February of this year, during the Reddit-triggered rally in meme and growth stocks, the stock shot to an all-time high of $61.80. Today, shares trade at about $10 a share. That wild ride made Magnite seem dangerously volatile, but could it stabilize and continue to rise over the next five years?
What does Magnite do?
Magnite's original merger made it the world's largest independent sell-side platform (SSP) for digital ads. SSPs help publishers and digital media owners manage and sell their own ad inventory. They are at the other end of the ad supply chain than demand-side platforms (DSPs) such as The Trade Desk (TTD 4.25%), which allow trade desks, ad agencies and advertisers to bid on ad inventory and manage their ad campaigns.
Magnite generates the majority of its revenue from the desktop and mobile advertising markets. However, most of its growth comes from the connected TV (CTV) market, which is benefiting from the secular growth of ad-supported streaming video services and the extinction of linear TV platforms.
After the initial merger, Magnite acquired two more companies - SpotX and SpringServe - to further expand its CTV business. Earlier this year, Magnite also bought Carbon to gain more monetization tools for publishers.
How quickly has Magnite grown?
Magnite's formation and expansion have created a gap between reported and pro forma revenues, which normalize year-over-year comparisons for acquisitions. Magnite also measures its underlying growth by removing traffic acquisition costs (ex-TAC) from its revenues.
Therefore, to measure Magnite's true growth rates, investors should look at its pro forma "ex-TAC" revenues instead of its reported Generally Accepted Accounting Principles (GAAP) numbers.
Magnite generated 34% of its ex-TAC revenue from its CTV business in 2021. Another 39% came from mobile advertising and the remaining 27% from desktop advertising. However, growth in Magnite's CTV business has cooled in the last two quarters as supply chain challenges and other macroeconomic factors have hurt ad buys in certain sectors.
This slowdown spooked investors, as bulls had viewed Magnite as a promising long-term investment in the FTV advertising market.
Where will Magnite be in five years?
Last September, Magnite set some ambitious long-term goals during an Investor Day presentation. The company claimed it could achieve annual organic revenue growth of more than 25% over the next few years while maintaining an adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) margin of 35% to 40% - compared with adjusted EBITDA margins of 20% in 2020 and 36% in 2021.
Over the next five-plus years, Magnite believes it will process $15 billion to $20 billion in annual ad spend, compared to "several billion" dollars today. In addition, Magnite expects the overall CTV advertising market to grow more than fivefold by the end of that period, and its share of that growing pie to increase from about 20% to 25% in 2021 to more than 30%.
At the moment, analysts' expectations for the next three years are somewhat less optimistic than Magnite's rosy long-term forecasts. However, they also suggest that the adjusted EBITDA margin will be within the target range of 35% to 40%.
All of these estimates should be taken with a grain of salt, as advertising spending will inevitably decline in a new recession. But at a share price of $10, Magnite is currently trading at just seven times this year's adjusted EBITDA.
By comparison, The Trade Desk - which is expected to grow its revenue and adjusted EBITDA by 33% and 22%, respectively, this year - trades at 36 times that adjusted EBITDA estimate. We could therefore easily argue that Magnite deserves a much higher valuation.
If Magnite's adjusted EBITDA is in line with analysts' expectations through 2024, and the stock trades at a more reasonable valuation of 14 times projected adjusted EBITDA, Magnite's share price could triple to about $30 per share. If the company maintains this valuation and its adjusted EBITDA continues to grow at 20% over the following two years, the share price could easily reach the low $40s.
Author: Leo Sun/ Published by: Christian Walter
ChargePoint Stock Is Still a Great Pick for Long-Term Investors
Oil companies are not the only firms that are benefiting tremendously from high petroleum prices. The growth of America’s electric-vehicle (EV) sector is also accelerating rapidly due to the elevated gasoline prices in the country. ChargePoint (NYSE:CHPT) stock is extremely well-positioned to benefit from this situation over the long-term, making it a great pick for long-term investors.
High Gasoline Prices and U.S. EV Sales
The combination of elevated gasoline prices and the increased acceptance of EVs in America has jump-started adoption of EVs in the U.S. Another factor contributing to EV adoption is the fact that automakers with well-established reputations in America, including Ford (NYSE:F), Hyundai (OTCMKTS:HYMTF) and GM (NYSE:GM) have released multiple EV models.
In the first quarter, registrations of EVs soared 60% year-over-year in the U.S. The jump caused Car and Driver to assert that America’s “EV acceptance may have turned some important but invisible corner recently.”
Huge Demand for EV Chargers and Federal Help
In an April 2022 report, consulting firm McKinsey notes that the U.S. needs many more chargers to support President Joe Biden’s administration goals when it comes to EVs, while the Bipartisan Infrastructure Law has appropriated $7.5 billion to build an additional 500,000 chargers.
Even more encouragingly for ChargePoint, McKinsey estimates that if the administration’s 2030 goal is met, “America would require 1.2 million public EV chargers and 28 million private EV chargers by that year.” In other words, the firm believes that the demand for EV chargers will grow very rapidly over the next 7.5 years.
With more public chargers in the U.S. than any other company, a first-mover advantage in the space and $540 million of cash at the end of Q1, ChargePoint is very well-positioned to benefit both from the funds that will come from Washington to build new EV chargers and the huge demand for EV chargers that’s building.
ChargePoint’s Results Have Been Good and Will Get Better
In the first quarter, the company’s revenue soared 102% year-over-year to $81.6 million as it obtained more than 1,000 additional customers in Q1. For Q2, the company expects its revenue to jump to “$96 million to $106 million.” And for all of the current year, ChargePoint reiterated its previous revenue outlook of between $450 million and $500 million.
ChargePoint’s Q1 loss from operations was $89.8 million, well below the $46.6 million that it lost during the same period a year earlier.
But supply chain issues, which should clear up as global supply chains untangle, negatively impacted the company’s profitability. Moreover, since ChargePoint’s gross profit came in at a fairly healthy $12.1 million, as the company continues to rapidly grow, its bottom line should surge in the long-term.
In the coming months and years, the company’s rapid growth amid strong EV adoption and improving profitability should greatly boost CHPT stock.
Author: Larry Ramer/ Published by: Christian Walter
UPDATE 1-Verizon, AT&T agree to delay some 5G deployment until mid-2023
WASHINGTON, June 17 (Reuters) - The Federal Aviation Administration said Friday that Verizon Communications and AT&T have voluntarily agreed to delay some C-Band 5G usage until July 2023 as air carriers work to retrofit airplanes to ensure they will not face interference.
The two carriers agreed in January to delay through July 5 switching on some wireless towers and depowering others near airports. Verizon said Friday the new agreement will allow it to "lift the voluntary limitations on our 5G network deployment around airports in a staged approach over the coming months meaning even more consumers and businesses will benefit from the tremendous capabilities of 5G technology."
AT&T said with the FAA it had "developed a more tailored approach to controlling signal strength around runways that allows us to activate more towers and increase signal strength." AT&T added that it had voluntarily "chosen in good faith to implement these more tailored precautionary measures so that airlines have additional time to retrofit equipment."
Concerns that the 5G service could interfere with airplane altimeters, which give data on a plane's height above the ground and are crucial for bad-weather landing, led to disruptions at some U.S. airports earlier this year.
In recent months, the Federal Aviation Administration has been urging airlines to complete retrofits of some airplane radio altimeters.
Acting FAA Administrator Billy Nolen on Wednesday urged the chief executives of major U.S. airlines to move quickly to address risks from a 5G wireless rollout by installing filters on radio altimeters, in a bid to avoid potential disruptions at key airports from next month.
Airlines for America, an industry trade group representing American Airlines, Delta Air Lines, United Airlines and others, said at an FAA meeting Friday they learned "the vast majority" of members fleet of 4,800 total aircraft "would need to be retrofitted by July 2023" and raised questions if that is feasible. "Given that the FAA has not even approved solutions nor have manufacturers manufactured these products for most of this fleet, it is not at all clear that carriers can meet what appears to be an arbitrary deadline."
The FAA said Friday "filters and replacement units for the mainline commercial fleet should be available on a schedule that would permit the work to be largely completed by July 2023. After that time, the wireless companies expect to operate their networks in urban areas with minimal restrictions." Airlines CEOs on Jan. 17 had warned of an impending "catastrophic" aviation crisis that could have grounded almost all traffic because of the 5G deployment.
Author: David Shepardson/ Published by: Christian Walter
Musk: Tesla without FSD solution basically worth nothing, young electric car companies threatened with bankruptcy
Once again, Tesla CEO Elon Musk, who avoids contact with official media, gave an hour-long interview to some of his fans. After the first one, the second part of it was also published this week, with a third to follow. Even other followers are starting to get bored with this, however, because these meetings have a tendency to turn into audiences in which the Tesla boss tells what he wants in detail and without questioning, not for the first time. So far, the latest questioning has also included a lot of old stuff. But Musk was remarkably skeptical with an eye toward other young electric car companies - and Tesla's stock market value if autonomous driving doesn't pan out.
Lucid and Rivian at risk, according to Musk.
Musk's cautionary word on other electric car startups specifically referenced Rivian and Lucid, both of which recently launched their R1T pickup and Air sedan, respectively, and are currently losing money on every car they sell. It was no different for Tesla during its multi-year startup phase. But looking at even younger competitors, Musk now warned that if things don't change significantly there, they will go broke. "Their path leads to insolvency," the Tesla CEO declared.
For the blog Electrek, that's technically true, but still unfair in a way. In fact, neither Rivian nor Lucid are currently making money, which would have to change at some point, but that was part of the plan at this stage of their development. Like Tesla before them, the startups would have the opportunity to cut costs as production ramps up before their reserves are depleted. Invoking imminent doom here therefore sets the wrong tone, he said. After all, Tesla itself had been predicted to go bankrupt soon for years, which greatly angered Musk, Electrek writes.
However, the Tesla boss did not deny Rivian and Lucid every chance of getting out of the loss zone. His bankruptcy forecast only applied in the event that they could not change their course, Musk qualified, which he demonstrated with his hand falling as a plane on the desk in front of him (see photo above). But he said he hoped the two companies would do something about it in time. Otherwise, they would face insolvency, as in history all automakers in the U.S. except Ford and Tesla, the CEO said, reminding once again that the assembly line pioneer and his own company are rare exceptions in this regard.
Tesla value to be based on FSD solution
But he was also cautionary about Tesla in the interview, at least in terms of stock market value. For the most part, the company is focused on "solving Full Self-Driving," he explained. That term is more or less synonymous with autonomous driving, but at Tesla, abbreviated as FSD, it also stands for both the current beta software for the Autopilot system and its computer and the option you have to buy to use all its features. Full Self-Driving is critical, Musk added after thinking about it for a moment. Ultimately, he said, it makes the difference between Tesla being worth a lot and basically nothing.
This likely referred to market capitalization and has also been heard from Musk before, but not in this drastic form: Compared to robotaxis and FSD, everything else pales in comparison, he explained in the conference call on the business figures for the end of 2021, refusing to give an analyst information on how Tesla plans to drastically increase its electric car production by 2024 on this basis. He did not say, however, that Tesla has no value without an FSD solution - although the "practically" or "in principle" ("basically") in his current statement could, of course, be meant relative to the enormous value Musk sees autonomy software creating.
The 2 Best Robinhood Stocks to Buy Now For Under $20
Palantir (NYSE:PLTR) was one of the more controversial companies to go public in the last two years. One reason was the way it went public through a direct listing. Another reason is the company’s founder Peter Thiel is a controversial figure. And some of the company’s largest clients are in the U.S. government, specifically the defense industry.
However, the company has been consistently increasing the number of commercial clients on its roster. And in the company’s most recent earnings report the company posted a 54% year-over-year revenue increase in its commercial business. Plus, it continues to add clients within the government.
That being said, PLTR stock is now trading below its direct listing price. I’ve previously posed the question, what more does Palantir have to do? It could be that retail investors are beginning to ask the same question.
SoFi Technologies (NASDAQ:SOFI) is down 57% for the year. And for investors who bought SOFI stock at its 52-week high, the loss is even greater. SOFI entered the market at the height of the fintech bubble. However, investors are struggling to decide if the fintech firm represents a better alternative or is it just one of many.
One person who is placing his bets on SoFi being the former is its chief executive officer, Anthony Noto. He’s been buying shares with regularity. In fact, his most recent purchase was his 12th buy in the last 12 months. This is nearly always a bullish sign. Remember there are many reasons for insiders to sell a stock, but they typically only buy for one reason. That is, they believe the stock is undervalued. And at least one analyst shares that opinion. SoFi received a bullish upgrade from Piper Sandler.
Author: Chris Markoch/ Published by: Christian Walter
Inflation hits 40-year high as CPI rises 8.6% in May
U.S. consumer prices accelerated in May at the fastest rate since 1981, as Americans grapple with a surge in the cost of gas, food, and shelter, data showed Friday.
The Bureau of Labor Statistics' May Consumer Price Index (CPI) showed a year-over-year increase of 8.6% last month, up from 8.3% in April. Economists were expecting an 8.3% increase in May, according to estimates compiled by Bloomberg.
On a month-over-month basis, the broadest measure of inflation climbed 1.0%, compared to 0.3% in April. "Core" inflation, which strips out the more volatile costs of food and gas, rose 6% over the prior year in May, more than the 5.9% that was expected.
The biggest contributors to the latest jump in inflation were shelter, gasoline, and food, according to the BLS. The energy index rose 3.9% month-on-month in May, with the gasoline index rising 4.1%. Compared to the prior year, energy prices in May were up 34.6%, the most since September 2005.
Meanwhile, the food index rose 1.2% from April to May and 10.1% over the prior year, the largest jump since March 1981.
The cost of shelter rose 0.6% in May when compared to the prior month, the largest jump since March 2004. Owners' equivalent rent, a component of the shelter index, rose 0.6% in May, the most since August 1990.
Also driving the index higher were airline fares amid a surge in fuel prices and pent-up demand for travel as COVID restrictions ease. The price of airline fares rose 12.6% in May, though this marked a slight moderation from April's 18.6% increase.
“The increases were nearly ubiquitous – just no place to hide," Bankrate Chief Financial Analyst Greg McBride said. “With food, energy, and shelter prices continuing to escalate at the fastest pace in decades, any relief for household budgets remains elusive.”
Beyond serving as a gauge of the costs everyday Americans shell out for groceries, gas, housing and other goods and services, May’s consumer price index comes just before the Federal Reserve is poised to further ramp up interest rates at its policy-setting meeting next week.
Do Options Traders Know Something About Lyft (LYFT) Stock We Don't?
Investors in Lyft, Inc. LYFT need to pay close attention to the stock based on moves in the options market lately. That is because the Jun 10, 2022 $11.00 Call had some of the highest implied volatility of all equity options today.
What do the Analysts Think?
Clearly, options traders are pricing in a big move for Lyft shares, but what is the fundamental picture for the company? Currently, Lyft is a Zacks Rank #3 (Hold) in the Internet - Services industry that ranks in Bottom 34% of our Zacks Industry Rank. Over the last 60 days, no analysts have increased their earnings estimates for the current quarter, while five have revised their estimates downward. The net effect has taken our Zacks Consensus Estimate for the current quarter from earnings of 12 cents per share to a loss of 6 cents in that period.
Given the way analysts feel about Lyft right now, this huge implied volatility could mean there’s a trade developing. Often times, options traders look for options with high levels of implied volatility to sell premium. This is a strategy many seasoned traders use because it captures decay. At expiration, the hope for these traders is that the underlying stock does not move as much as originally expected.
Author: Zacks Equity Research / Published by: Christian Walter
IBM (IBM) grows faster than the stock market: what you should know
IBM (IBM) closed the last trading session at $142.88, up +1.2% from the previous session. This change outpaced the S&P 500's daily gain of 0.31%. At the same time, the Dow gained 0.05% and the tech-heavy Nasdaq rose 0.14%.
Prior to today, shares of the technology and consulting firm had gained 2.55% over the past month, outpacing the computer and technology sector's loss of 3.62% and the S&P 500's loss of 1.38% over the same period.
Wall Street will be waiting for positive signals from IBM ahead of its next earnings report. Analysts expect IBM to report earnings of $2.28 per share in that report. This would represent a 2.15% decline from a year ago. Our latest consensus estimate is for quarterly revenue of $15.06 billion, down 19.68% from the same period last year.
For the full year, the Zacks Consensus Estimates analysts expect earnings of $9.89 per share and revenue of $60.99 billion. These totals would represent year-over-year changes of +24.72% and -13.84%, respectively.
Investors are also likely to notice recent changes in analyst estimates for IBM. These recent revisions generally reflect evolving near-term business trends. Therefore, we can interpret positive estimate revisions as a good sign for the company's business outlook.
Based on our research, we believe that these estimate revisions are directly related to the performance of stocks close to the team. The Zacks Rank was developed to take advantage of this phenomenon. This system accounts for these estimate revisions and provides a clear, actionable valuation model.
The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has a proven, externally audited track record, with #1 ranked stocks having an average annual return of +25% since 1988. The Zacks Consensus EPS Estimate has been flat over the past month. IBM currently has a Zacks Rank of #3 (Hold).
In terms of valuation, IBM is currently trading at a forward P/E ratio of 14.28. This valuation represents a discount compared to the industry average forward P/E of 14.57.
We also see that IBM currently has a PEG ratio of 1.58. This popular ratio is similar to the widely known P/E ratio, except that the PEG ratio also takes into account the company's expected earnings growth rate. Computer - Integrated Systems stocks average a PEG ratio of 1.66 based on yesterday's closing prices.
Author: Zacks Equity Research / Published by: Christian Walter
Interactive Brokers is now officially available at TradingView!
The day has finally come, and we’re excited to introduce the newly integrated TradingView partner —Interactive Brokers! The TradingView community had been waiting for this day for a long time, and we now have our first global multi-asset integration live on platform.
Interactive Brokers Group, Inc. was founded by current Chairman Thomas Peterffy in 1977. For over 40 years, Interactive Brokers has been known as the global leader in international asset trading, global research products, as well as low fees. Today, it has grown to become one of the biggest securities firms in the world with over $10 billion in consolidated equity capital. Interactive Brokers (IBKR) is publicly listed at NASDAQ and regulated in more than ten tier-1 jurisdictions, making it a reputable broker.
Interactive Brokers offers clients from over 200 countries and territories with access to 150 markets globally. IBKR provides direct access trade execution and clearing services to institutional and professional traders for a wide variety of electronically traded products including stocks, options, futures, currencies, bonds, gold, cryptocurrency, ETFs and mutual funds globally. Interactive Brokers Group and its affiliates execute an over 2 million trades per day.
Interactive Brokers’ commissions and fees are highly competitive and include the lowest margin trading rates within the industry. Additionally, IBKR provides access to international markets across 33 countries and 25 currencies and a broad range of investment products globally.
With our soft launch, investors will have the ability to trade futures and stocks, with more asset classes launching soon.
So, without further ado — open the TradingView trading panel, find the new IBKR icon, connect your trading account, and start your brand new experience on TradingView, which we will continue to improve upon for the entire TradingView community.
UPDATE 3-Teva, Allergan reach $161.5 mln opioid settlement with West Virginia
May 25 (Reuters) - Teva Pharmaceutical Industries and AbbVie's Allergan unit reached a settlement worth $161.5 million to resolve claims the companies fueled an opioid epidemic in West Virginia, state attorney general Patrick Morrisey said on Wednesday.
The agreement is the largest state-negotiated settlement in West Virginia history, and consists of $134 million in cash plus the contribution of drugs used to treat opioid overdoses, Morrisey said at a news conference.
West Virginia had accused Teva and Allergan of deceiving prescribers about the risks of opioids when marketing their drugs for the treatment for chronic pain. The misleading marketing led to an increase in substance abuse and overdose deaths, according to West Virginia's complaint.
The settlement ended a trial that had been proceeding for two months in Kanawha County Circuit Court. The companies did not admit wrongdoing as part of the settlement.
The state's decision to press forward at trial helped it secure more money, Morrisey said.
"We took lot of risk to do the right thing, and it has paid off big for West Virginia," he added.
Teva said it will pay $83 million in cash and provide a 10-year supply of Narcan, a drug used to stop opioid overdoses, which the state valued at $27 million. Allergan said it will pay $51.2 million.
West Virginia has been hit particularly hard by opioid abuse and overdoses, with more than three times the national rate of overdose deaths in 2020, according to the U.S. Centers for Disease Control and Prevention.
West Virginia previously reached a $99 million settlement with Johnson & Johnson and a $26 million settlement with Endo International Plc. Endo settled before the trial began and J&J settled two weeks into the trial.
Israel-based Teva has been attempting to reach a nationwide settlement to resolve opioid lawsuits against the company, and has said it expects a deal by the end of the year.
The West Virginia settlement guarantees the state an additional payout if Teva and Allergan reach larger-than-expected settlements of their nationwide opioid liability, Morrisey said. That agreement would trigger if Teva and Allergan reach a nationwide deal worth more than $7.2 billion, he said.
More than 3,300 lawsuits have been filed against drugmakers, distributors and pharmacies over the U.S. public health crisis. J&J and the three largest U.S. drug distributors - AmerisourceBergen Corp, Cardinal Health Inc and McKesson Corp - previously reached final settlements worth $26 billion over their roles in the nationwide epidemic. (Reporting by Dietrich Knauth; Editing by Louise Heavens, Noeleen Walder and Bill Berkrot)
Author: Dietrich Knauth/ Published by: Christian Walter
More than $18-million investment to strengthen research and innovation in Newfoundland and Labrador
Memorial University, IBM Canada (NYSE: IBM), the Government of Canada and the Government of Newfoundland and Labrador today announced the launch of two new initiatives – the Centre for Analytics, Informatics and Research (CAIR) and the Accelerated Analytics and Machine Learning (AAML) project.
Led by Memorial, the two initiatives will focus on innovation and research in such diverse fields as data science and astrophysics, genetic analysis, artificial intelligence, machine learning, image analysis and scientific computing.
CAIR will be equipped with powerful high-performance computers able to process huge amounts of complex data, leading to faster insights for projects such as AAML.
Memorial will receive a more than $18-million investment from the Government of Canada, through the Atlantic Canada Opportunities Agency (ACOA), and the Government of Newfoundland and Labrador, as jurisdictional partners, and private-sector partner IBM. This includes a $16-million, in-kind investment of hardware, software and staffing from IBM during a period of four years. IBM will also provide free development and cloud credits to early stage entrepreneurs and startup companies via the Startup with IBM program. ACOA is providing $1.4 million towards the two initiatives and the Government of Newfoundland and Labrador will contribute $1.35 million.
Working with Memorial, IBM will also help drive further economic development in the province by supporting skills growth via the IBM SkillsBuild program. The free digital training program helps learners develop valuable new skills and find jobs, regardless of their background or education. SkillsBuild provides learners with professional workplace readiness and technical skills and enables them to earn digital badges recognized by the market. Globally, IBM is committed to providing 30 million people with new skills needed for the jobs of tomorrow by 2030.
Author: IBM / Published by: Christian Walter
Ford sells more shares of Rivian Automotive after vesting period ends
Ford Motor Co. sold more shares of Rivian Automotive Inc. on Friday, selling more shares of Rivian Automotive Inc. worth more than $400 million since the end of the lock-up period this week.
The U.S. auto giant sold 7 million Rivian shares Friday at $26.88 apiece, according to a report, reducing its stake in the company to nearly 87 million shares. The transaction follows Monday's sale of 8 million Rivian shares at $26.80 apiece after selling restrictions were lifted for certain insiders and investors.
Ford had invested $1.2 billion in Rivian and saw the value of its stake soar in the wake of the electric carmaker's stock market debut, the largest in the U.S. last year. Since then, however, Rivian's stock has crashed from a high of $172 in November to a low of $19.25 this week.
Ford called the stock sale "prudent," but would not say what the proceeds will be used for or whether the company plans to further reduce its stake.
"It is not uncommon for investors to take such an opportunity after a successful IPO," a Rivian spokesman said in a statement. "We remain focused on executing our vision to create a more sustainable future with electric vehicles and create long-term value for all of our current and future shareholders."
Dearborn, Michigan-based Ford makes its own electric pickup truck, the F150 Lightning, which is already seeing early success. Chief Executive Officer Jim Farley said in a Bloomberg interview in January, when asked about his company's stake in Rivian, that "everything is on the table."
Author: Shiyin Chen / Published by: Christian Walter
BP makes $6.2 billion profit amid debate over windfall taxes
Despite a massive $24 billion writedown over its exposure to Russia, British oil giant BP and its industry peers are raking in money faster than they can pump dead dinosaurs out of the earth's crust.
The British oil giant made it rain this Tuesday when it reported an adjusted profit of $6.2 billion in the first quarter, up from $2.6 billion in the same period last year - beating analysts' expectations of $4.5 billion. The company now faces a delicate balancing act: returning excess value to investors while reassuring governments that it is not benefiting from the weakening economy.
BP has acknowledged the obvious, attributing its stellar results to "exceptional oil and gas trading." Energy prices, including crude, have spent much of the year flirting with their highest levels since the 2008 recession. At the same time, this is an extremely delicate moment to be making so much money in the UK energy sector.
British households are struggling with rising energy bills after the country's energy price cap was raised by 54% on April 1. Seriously, 54%. Resolution Foundation researchers warned that as many as five million English households could be living in fuel poverty, meaning they have to spend more than 10% of their income on energy. Meanwhile, governments in Europe have debated whether energy companies should be taxed for so-called "windfall profits," large sums of money generated by commodity price fluctuations that some say harm working people. Against this backdrop, BP was especially eager to make shareholders and attentive government officials feel that they were being listened to. Let's look at the details:
Unlike Italy, which plans to raise a windfall profits tax on energy companies from 10% to 25%, the British government has not introduced a windfall tax. Chancellor of the Exchequer Rishi Sunak said that could change if British energy companies don't repatriate enough of their profits to the country. BP has pledged to invest £18 billion in green energy and fossil fuel development in the U.K. by 2030, which could be enough to keep Sunak and his Cabinet colleagues in check.
To satisfy loyal shareholders who endured years of underperformance before the energy boom, BP is accelerating quarterly share buybacks to a value of $2.5 billion by the end of the second quarter, up from $1.6 billion in the first quarter. By reducing the number of shares on the market, the buybacks may increase the value of the remaining shares - a good thing for investors, who have already seen BP's stock rise nearly 14% this year.
Shrugged off by Russia: BP's $24 billion write-down to cover its withdrawal from Russia was by far the largest loss by a major oil company from its Russian operations. Rival Shell's write-down was a comparatively modest $5 billion, Total's was $4 billion, and Exxon's was $3.5 billion. Still, BP brushed aside the loss, saying it would not interfere with cash payouts to its investors.
Author: The Daily Upside / Published by: Christian Walter
Pfizer (NYSE:PFE) shareholders to receive higher dividend than last year
The board of directors of Pfizer Inc. (NYSE:PFE) has announced that it will increase its divi-dend to $0.40 on June 10. This brings the dividend yield to 3.2%, which shareholders will be pleased about.Pfizer's payment has solid earnings coverage
If the payments are not sustainable, a high yield for a few years is not that important. However, prior to this announcement, Pfizer's dividend was well covered by both cash flow and earnings. This means that most of the company's revenue is used for its growth.
Next year's EPS is forecast to increase by 56.5%. If the dividend continues in line with recent trends, we estimate a payout ratio of 27%, which is in a range that convinces us about the sustainability of the dividend.
Pfizer has a solid track record
Even in its long history of paying dividends, the company's payouts have been remarkably stable. Since 2012, the first annual payment was $0.80, while the most recent full-year payment was $1.60. This means that the company has increased its distributions by about 7.2% annually during this period. The dividend has grown very well for a number of years and has provided shareholders with a nice income in their portfolios.
Dividend will likely continue to grow
Some investors will toy with the idea of buying some shares of the company based on its dividend history. Pfizer has impressed us with 28% annual EPS growth over the past five years. Earnings per share are growing at a solid pace, and the payout ratio is low, which we think is an ideal combination for a dividend stock, as the company can easily increase the dividend in the future.
Pfizer's dividend has potential
In summary, it is always positive when the dividend is increased, and we are particularly pleased with its overall sustainability. Earnings easily cover distributions, and the company generates ample cash. Considering all these factors, it is fair to say that this company has solid potential as a dividend stock.
Author: Simply Wall St / Published by: Christian Walter
Acquisition for $44 billion: What does Musk make of Twitter?
The fact that tweeting king Elon Musk is buying up Twitter seems logical to many observers. Now people are wondering what the Tesla boss plans to do with the short message service.
Elon Musk buys the only moderately successful short message service Twitter for around 44 billion dollars. The social network has been lagging behind other platforms such as Facebook, Instagram and TikTok for years. While Facebook has almost two billion daily users, Twitter has just 230 million. Why is Musk so fond of the San Francisco-based service and what does he intend to do with the hitherto unprofitable platform?
Resilient financing model
What looked like an extremely unlikely deal just a few days ago has now become reality. Negotiations between Musk and the company's supervisory board had dragged on into the early hours of yesterday morning. The turning point in the negotiations was apparently that the 50-year-old was able to make a resilient financing commitment.
According to this, Musk will pay 54.20 dollars per share, which corresponds to a total of around 44 billion dollars. Musk wants to raise this huge sum with the help of financial services provider Morgan Stanley and other lenders, among others. They are contributing 13 billion in debt capital. Musk will finance a further 12.5 billion dollars by mortgaging his Tesla shares. Last but not least, he wants to raise another $21 billion from his cash assets.
Twitter as the ideal stage for Musk?
In Silicon Valley, people don't quite know yet whether to cheer or condemn the takeover. In the tech world, there is a general admiration for the 50-year-old, whose fortune is estimated at nearly $270 billion. At the same time, however, he represents a new type of CEO who wants to be much more than a mere corporate leader who dutifully reports to his shareholders every three months. Musk is pursuing a different goal: He wants to influence public discourse. For him, his companies are platforms for what is close to his heart. Twitter is the ideal stage for him here.
There is definitely a trend here: Silicon Valley investor Marc Andreesen controls the audio platform "Clubhouse," Amazon founder Jeff Bezos owns the newspaper "Washington Post," tech investor Peter Thiel supports political candidates on the right spectrum and is considered a confidant of former U.S. President Donald Trump.
What does Musk mean by freedom of speech?
Although he repeatedly emphasizes how important freedom of expression and democracy are to him: Very few people in the tech industry believe him. For many observers, the best proof is a tweet Musk sent out last week after learning that Microsoft founder Bill Gates had reduced his Tesla shares. Musk then tweeted an unflattering picture of Gates and wrote, "In case you want to lose a boner fast"
For many in the tech industry, such tweets from Musk are a badge of how little the future owner of Twitter understands about content moderation in an age of hate speech and fake news, as it is at other companies such as Facebook, Snap and YouTube.
Still many questions unclear
But what's next for Twitter's workforce? Still Group CEO Parag Agrawal has met this afternoon with part of the good 7500 Twitter employees and informed them about the latest development. There will be no layoffs, he stressed, according to participants. One comment Agrawal made, however, was eye-opening: once Musk's takeover is complete, they don't know what direction the company will go in.
Many employees are concerned that they will lose their jobs under the new owner or that the company could move its headquarters to Texas, as Musk had already done with automaker Tesla.
Musk also ventilated the idea of shutting down the company's headquarters in the middle of San Francisco, laying off employees and no longer paying salaries to the company's board members. This could save three million dollars a year. That the current CEO, Parag Agrawal will have to go seems assured. He does not trust the company's management team, Musk had publicly stated several times.
Coffee guessing from Musk tweets
Musk had raised more questions than he answered in recent weeks with his tweets about what he would do differently at Twitter. Several times he had declared that he wanted to transform the service into a global platform for free speech. He accused the 500 or so content moderators of interfering too often and too much. Most of the existing moderation guidelines, which prohibit threats of violence, harassment or spamming, he wants to abolish, Musk said.
Is "TheRealDonaldTrump" coming back?
Another question that kept coming up in the past few days: What will happen to former U.S. President Donald Trump's Twitter account? The had been blocked from the platform after the violent riots on January 6, 2021. Facebook has also blocked Trump.
Musk could have the Trump account reactivated, who had tried unsuccessfully several times in recent months to set up his own social media platform. Similar to Musk, Trump considers Twitter his mouthpiece, through which he had insulted and defamed people in the past. However, a return of Trump is not certain, if only because the person concerned had rejected exactly that in an interview in mid-April.
Analysts and Wall Street are concerned
Analysts have not burst into jubilation over the entry. They fear Musk could neglect his other companies. The 50-year-old is head of both carmaker Tesla and rocket company SpaceX. He also owns biotech company Neuralink and tunneling firm Boring Company.
Twitter will release its quarterly results on Thursday. There should be no queries from analysts and the press this time. The company has canceled the press conference as a precaution. Too much is currently in the vague for the former social media shooting star.
Author: Marcus Schuler / Published by: Christian Walter
What Do Analysts Make of Plug Power’s Walmart Deal?
Investors liked the latest news coming out of Plug Power (PLUG) HQ on Tuesday. Specifically, the hydrogen specialist said that Walmart (WMT) has agreed on an option to buy up to 20 tpd (tons per day) of liquid green hydrogen.
The retail giant will use the hydrogen to power up to 9,500 material handling lift trucks spread across its U.S. distribution and fulfillment centers. The agreement is a continuation of an already existing relationship between the companies; the two have collaborated on the use of hydrogen-powered materials handling equipment for more than a decade and the agreement will go some way toward assisting Walmart meet its target of zero emissions by 2040.
Evercore’s James West calls the pact a “validation” of Plug’s green H2 production strategy.
“Plug Power continues to execute on its vision of a nation-wide and potentially global network of green H2 production facilities,” the analyst noted. “We expect additional, substantial, offtake agreements to be announced in the coming months which will further de-risk the company’s hydrogen production strategy.”
As a result, West maintains an Outperform (i.e. Buy) rating on PLUG shares, along with a $46 price target. At current valuation, he sees a 101% one-year upside for the shares.
With a goal of reaching 70 tons per day of green hydrogen production by the end of the year, BMO analyst Ameet Thakkar views the announcement as an “important, positive first step,” which should be followed by further off-take agreements of the company’s green hydrogen production.
The analyst thinks the deal might be an “early trial run” and sees the potential for Walmart to expand its green hydrogen supply with PLUG in the future.
However, before getting properly bullish, Thakkar thinks additional investigation of what the deal entails is required.
“Walmart's agreement is positive,” said the analyst, “but we are curious about what sort of pricing mechanics (index vs fixed) and other contractual terms that will allow investors to get more confidence around potential for PLUG to achieve its target 30% gross margins in fuel supply agreements such as this.”
As such, Thakkar sticks with a Market Perform (i.e. Hold) rating, backed by a $33 price target. Nevertheless, should that figure be met, investors are looking at one-year returns of 44%.
What does the rest of the Street make of PLUG’s prospects? 2 other analysts join Thakkar on the sidelines, but 7 others line up next to West, making the consensus view a Moderate Buy. The average price target sits somewhere between the two analysts’ projections; at $39.09, the figure represents 12-month gains of ~71%.
Author: TipRanks / Published by: Christian Walter
3 Top Metaverse Stocks to Buy in April
These stocks could help investors make the most of this emerging tech trend.
These stocks could help investors make the most of this emerging tech trend.
The metaverse is an emerging concept that is expected to explode thanks to its application in various fields - including gaming, education, work and entertainment - as it allows virtual avatars to interact with each other in a three-dimensional, digital world.
According to a third-party estimate, the global metaverse market could grow at a compound annual growth rate (CAGR) of 43% to $1.6 trillion by 2030. There are a number of ways people can benefit from this emerging opportunity.Roblox ( RBLX -3.64% ), Advanced Micro Devices ( AMD -2.62% ) and Qualcomm ( QCOM -1.82% ) are three companies that could benefit greatly from the Metaverse.
The Metaverse is a 3D virtual world in which avatars of real people located in different places on Earth interact with each other. Metaverse users could attend a virtual concert or sporting event, or they could even study virtually. Roblox builds these 3D virtual worlds.Roblox has already built a huge base of users and developers who help the company take advantage of the Metaverse. The company had 55 million daily active users and 29 million developers creating virtual experiences on the platform as of February 2022. In addition, Roblox engaged its users on its platform for 41.4 billion hours last year, a 35% increase from 2020.
Roblox thus appears to be in a good position to capitalize on the growing demand for virtual worlds, which should accelerate the company's already impressive growth. The company's revenue grew 108% to $1.9 billion in 2021, and analysts expect that momentum to continue.
With Roblox stock now trading at 12 times sales, compared to last year's multiple of 36, now seems like a good time for investors to buy this potential Metaverse winner.
2. Advanced Micro Devices
Simultaneous delivery of Metaverse content, such as virtual worlds, to millions of users around the globe would put massive strain on data centers. It is believed that building the Metaverse would require data center infrastructure that does not yet exist to support constant high-bandwidth data transfers.
Advanced Micro Devices is one of the companies trying to solve this problem. Meta Platforms is building what it claims is the world's fastest supercomputer for machine learning and natural language processing to power the Metaverse. AMD will provide 4,000 of its Epyc server processors for Meta's supercomputer. The chipmaker has already shipped 1,520 Epyc processors for Meta's supercomputer, with the remainder to be deployed by mid-year.
AMD expects revenue to grow 31% to $21.5 billion in 2022, thanks to strength across its businesses. Even better, analysts expect annual earnings growth of 30% over the next five years. The addition of catalysts like the Metaverse could help accelerate AMD's growth and drive the stock higher over the long term.
Qualcomm's Snapdragon processors are known for powering smartphones. By the end of 2021, the company had a 30% share of the smartphone application processor market. And now Qualcomm is pulling strings to ensure it remains one of the top players in the Metaverse with its chips for virtual reality (VR) and augmented reality (AR) headsets.
The partnership with Meta puts Qualcomm in a good position to capitalize on the growth of the AR/VR headset market, which is expected to grow rapidly over the long term. IDC estimates that 50 million headsets could ship in 2026, up from just over 10 million units last year. Qualcomm is expected to further strengthen its position in the headset market, as Meta's upcoming Oculus Quest 3 is expected to feature the chipmaker's Snapdragon XR3 processor.
Qualcomm's moves in the metaverse could help add another dimension to its already strong growth. The company reported a 30% year-over-year increase in revenue to $10.7 billion in the first quarter of fiscal 2022 (which ended Dec. 26, 2021) and a 49% increase in earnings per share to $3.23. Analysts expect Qualcomm to grow earnings by 15% annually over the next five years, although the company could do even better once catalysts like the Metaverse come into play.
All of this makes Qualcomm an enticing tech stock at the moment, as the company trades at just 16 times trailing earnings, making it much cheaper than the Nasdaq 100 multiple of 33.
Author: Harsh Chauhan / Published by: Christian Walter
Pure recession fear: This will be important for the Dax today
Recession or no recession - that is the question here: investors are currently puzzling over the outlook for the economy and stock market prices. "Continued higher prices as a result of the Ukraine war - not only for energy, but also for agricultural and industrial commodities - will dampen global growth and accelerate the downturn," warn experts at asset manager Jupiter. "We think a recession is almost certain in Europe and very likely in the U.S. in the longer term."
The U.S. bond market already sent corresponding signals in the old week: the two-year T-bonds yielded at times more than the ten-year. Experts see such an "inverse yield curve" as a strong indicator of an imminent downturn. The reason is investors' fear that the U.S. Federal Reserve will raise interest rates in its fight against inflation, plunging the economy into recession.
Benjamin Melman, chief investor at asset manager Edmond de Rothschild, is cautiously optimistic. To be sure, the Ukraine war and persistently high inflation are weighing on the stock market, he said. "Nevertheless, it should not be forgotten that the global recovery should continue even if there is a significant correction in growth in Europe."
Against this backdrop, investors will be carefully weighing every word of the minutes of the Federal Reserve's latest meeting, which are due to be released on Wednesday. In contrast, the start of the week is quiet. The Dax is currently valued at 14,470 points. From the Friday trading, the German share index goes with a plus of 0.2 percent and 14,447 points. Price impulses could trigger the publication of the German trade balance in the morning or the incoming orders of the U.S. industry in the afternoon. The Sentix economic index for Germany is also on the agenda. In addition, the Dax group Henkel invites shareholders to an online annual general meeting.
Author: NTV / Published by: Christian Walter
Can gold price tackle $2,000 next week? Here's how that can happen
After another solid week of gains, gold could be ready to take on the $2,000 an ounce level next week. But there are a few technical elements that need to come together for that to happen.
Gold was able to advance more than 1.3% on the week despite a massive surge in U.S. Treasury yields, triggered by markets betting on a more aggressive Federal Reserve. This comes after Fed Chair Jerome Powell signaled a possibility of 50-basis-point hikes at upcoming meetings in May and June.
On Friday, the 10-year rate jumped, hitting 2.503% on Friday — the highest level since May 2019. And April Comex gold futures were last at $1,957.00.
"Higher yields are typically negative for non-interest bearing gold, but for now, the ongoing divergence between the two asset classes highlights the market's newfound sensitivity to inflation and the need to buy any/all real assets (including gold) as a hedge," said MKS PAMP head of Metals Strategy Nicky Shiels.
There is also a growing concern that the yield curve will invert. The relationship analysts pay close attention to is the 2-year and 10-year Treasury yields.
"Typically, when you see an inversion of the yield curve, it projects a strong possibility of some kind of a recession further out. Markets are expecting to see weakness in the next two quarters. We already had one of the worst Januaries on record for equities. And gold has been making higher lows and higher highs. And it could push back up to $2,000," said Blue Line Futures chief market strategist Phillip Streible.
Inversion of the yield curve happens when long-term debt instruments have a lower yield than short-term debt instruments. And markets use this gauge to sometimes foreshadow a recession.
"We know that the yields curve is beginning to flatten. Rates continue to move higher. So far, there is no indication that the Fed is going to back off on rates. The market is talking about half-a-point moves at the next two meetings," RJO Futures senior market strategist Frank Cholly said.
There is a lot of debate around whether or not an inversion of the yield curve is a precursor to a recession. Still, the topic is definitely on everyone's minds as slower growth seems inevitable due to the Federal Reserve's aggressive monetary policy tightening.
"Once in a while, we'll see the curve starts to flatten. I am convinced yet that it is leading towards a recession. But I am concerned that the Fed may slam the brakes on growth a little too much if we do see continued rate hikes," Cholly told Kitco News.
However, markets might be pricing in too many rate hikes for this year, Streible pointed out. "The only thing the Fed can do is disappoint form here. It won't be able to raise rates in a weakening economic environment," he said.
The Fed is projecting seven rate hikes in 2022, but that number is likely to come down to five, Streible added.
For gold, this is a very constructive environment. "Gold is going to go higher next week. Gold is doing well against the yields. The number of rate hikes from here is limited. Rising yields are hitting their objectives at these levels. Gold should find some support," Streible told Kitco News.
And on top of the new safe-haven demand in light of the war in Ukraine, there is the inflation narrative that will continue to drive gold higher this spring.
The key level for gold to hit and sustain is the $1,957 an ounce, said Cholly. "I feel more bullish. Gold bounced up after hitting $1,900. We need to stay above $1,950. Once it is above $1,975, I start to feel encouraged again that we'll be above $2,000. We spent a week trading between $1,925-$1,950. The next level is $1,950-75 and then $2,000.”
Data to watch
Next week's two main data releases will be the U.S. Q4 GDP number and the employment report. Market projects see the GDP at 7.1% and for the U.S. economy to have added 488,000 jobs in March.
"The jobs numbers will be in focus, but while we know demand is incredibly strong, the issue is a lack of supply of workers to fill the vacancies available," said ING chief international economist James Knightley. "Like supply chain strains, a lack of suitable workers is holding back growth potential and putting up costs as wages get bid higher in a red hot jobs market."
Anything around 500,000 jobs for March would support expectations of a 50-basis-point rate hike in May, Knightley added.
Author: Anna Golubova / Published by: Christian Walter
Schlumberger (SLB) Gains But Lags Market: What You Should Know
In the latest trading session, Schlumberger (SLB) closed at $39.73, marking a +0.56% move from the previous day. This move lagged the S&P 500's daily gain of 1.17%. At the same time, the Dow added 0.8%, and the tech-heavy Nasdaq gained 0.18%.
Heading into today, shares of the world's largest oilfield services company had lost 3.89% over the past month, lagging the Oils-Energy sector's gain of 4.63% and the S&P 500's gain of 0.88% in that time.
Wall Street will be looking for positivity from Schlumberger as it approaches its next earnings report date. The company is expected to report EPS of $0.34, up 61.9% from the prior-year quarter. Our most recent consensus estimate is calling for quarterly revenue of $6.04 billion, up 15.63% from the year-ago period.
Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $1.97 per share and revenue of $26.48 billion. These totals would mark changes of +53.91% and +15.5%, respectively, from last year.
Investors might also notice recent changes to analyst estimates for Schlumberger. Recent revisions tend to reflect the latest near-term business trends. With this in mind, we can consider positive estimate revisions a sign of optimism about the company's business outlook.
Research indicates that these estimate revisions are directly correlated with near-term share price momentum. To benefit from this, we have developed the Zacks Rank, a proprietary model which takes these estimate changes into account and provides an actionable rating system.
The Zacks Rank system ranges from #1 (Strong Buy) to #5 (Strong Sell). It has a remarkable, outside-audited track record of success, with #1 stocks delivering an average annual return of +25% since 1988. The Zacks Consensus EPS estimate has moved 0.82% lower within the past month. Schlumberger is currently a Zacks Rank #3 (Hold).
Digging into valuation, Schlumberger currently has a Forward P/E ratio of 20.03. For comparison, its industry has an average Forward P/E of 26.33, which means Schlumberger is trading at a discount to the group.
The Oil and Gas - Field Services industry is part of the Oils-Energy sector. This group has a Zacks Industry Rank of 102, putting it in the top 41% of all 250+ industries.
The Zacks Industry Rank includes is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.
Author: Zacks Equity Research / Published by: Christian Walter
Uber Has an Answer to High Gas Prices (You Won’t Like It)
Uber Technologies has come up with a temporary solution to help its drivers and couriers relieve the impact of high gasoline prices.
The Russia invasion of Ukraine has led to a significant spike in gasoline prices that has raised costs for anyone using an automobile, including truckers, delivery drivers, commuters and ride-sharing services.
Inflation had already increased the cost of doing business for everyone, but the recent escalation of gas prices over the past two weeks compounds the problem even more.The average price of a gallon of gas on Sunday was $4.33, according to AAA data, which is 11.4% higher than last week, 19.7% higher than the price last month and 34.8% more than last year.
Businesses are starting to pass the higher cost of gas on to consumers with ride-sharing company Uber Technologies (UBER) - Get Uber Technologies, Inc. Report leading the charge by adding a temporary fuel surcharge for its drivers and couriers to collect beginning Wednesday.
What Uber is Doing About High Gas Prices
Uber ride-sharing rival Lyft (LYFT) - Get Lyft, Inc. Class A Report has not added a fuel surcharge at last check of its website and neither has food delivery services such as DoorDash (DASH) - Get DoorDash, Inc. Class A Report and Grubhub. But you can expect those services to follow Uber's lead as gas prices continue to rise.
Uber drivers will add a fuel surcharge of either 45 cents or 55 cents on each trip and either 35 cents or 45 cents on each Uber Eats order, depending on the location with 100% of that money being paid to the drivers, according to a Friday statement.
New York City, however, is exempt from the fuel surcharges as trips that start in the city and orders delivered to customers in the city are excluded from surcharges.
Uber noted in a statement that on March 1, drivers in the city began receiving a 5.3% increase in New York's mandated minimum earnings standard, which accounts for increased operating costs. It said the vast majority of the city's delivery workers use bicycles and not cars.The surcharges, which will be collected for at least 60 days, are based off the average trip distance and the increase in gas prices in each state. Kansas had the lowest average gas price among states on Sunday at $3.82, while California had the highest average at $5.74, according to AAA.
Will Uber Drivers Switch to Electric Vehicles?
Uber said that it is encouraging its drivers to switch to electric vehicles. Those who drive EVs can take advantage of Uber's Green Future Program that provides incentives to EV drivers, such as $1 per trip for up to $4,000 annually.
The ride-sharing company said that it has negotiated discounts for drivers on leading EV models and special deals on charging, but did not reveal any specific discounts or deals in the statement.
Uber added that it has negotiated an agreement with Hertz, which will make up to 50,000 fully electric Teslas available for eligible drivers to rent by 2023. However, Uber did not mention whether it has taken steps to ensure that its drivers will not encounter any legal issues from renting a Hertz vehicle.
Some 230 plaintiffs are currently suing Hertz for alleged false arrest and in some cases prosecution, with customers seeking more than $500 million in combined damages. The lawsuits allege that Hertz filed police reports for missing vehicles that may have been returned late or were misplaced, rather than conducting internal investigations to locate late or missing vehicles or to correct errors in their records.
Many of the police reports allegedly led to car renters being jailed in false arrests because of missing vehicles, according to lawsuits. At a recent hearing in a Delaware U.S. Bankruptcy Court, a judge ruled that several of the lawsuits can now proceed.
Author: KIRK O’NEIL / Published by: Christian Walter
Palantir share price down again
A new document filed with the SEC is pushing the Big Data company's stock price down.
Despite a day of gains for the broader market, shares of Palantir (PLTR -3.04%) are falling again. The data analytics company's share price fell about 4.2% at 2:40 p.m. ET on Friday. Meanwhile, the S&P 500 Index was up about 1.9% and the Nasdaq Composite Index was up about 1.1%.
Palantir shareholders haven't had it easy lately, and today's selloff appears to be due to a recent filing with the Securities and Exchange Commission (SEC). CFO David Glazer filed on Thursday showing that he had sold some of his shares in the company, and investors seem to take that as a bad sign.
What does it mean?
Glazer's filing with the SEC shows that he sold a total of 201,190 shares from Tuesday to Thursday, a value of about $2.1 million. An executive selling shares doesn't necessarily mean the underlying company is in trouble, but Palantir shareholders have had a variety of negative catalysts to consider lately, and investors are nervous.
Palantir reported its fourth-quarter and full-year results on Feb. 17. Revenues exceeded market expectations, but earnings fell short of average analyst targets. The company reported non-GAAP (adjusted) earnings per share of $0.02 on revenue of $432.9 million, while the average analyst estimate was for earnings of $0.04 per share on revenue of $418 million.
Following the earnings disappointment, Citigroup analyst Tyler Radke lowered his one-year price target on the stock to $10 per share from $13 and maintained his sell recommendation on the company. Palantir shares are down about 19% since the company's fourth-quarter earnings release.
Where do we go from here?
For the current quarter, the company expects revenue of $443 million and an adjusted operating margin of 23%. For the full year, the company is targeting an adjusted operating margin of 27% and reiterated its guidance for revenue growth of 30% or more through 2025.
Palantir now has a market capitalization of approximately $22.3 billion and is valued at 11 times expected revenue and 57 times expected earnings.
Author: Keith Noonan / Published by: Christian Walter
The SoFi has fallen: What next?
SoFi Technologies (NASDAQ:SOFI) hasn't had it easy as a publicly traded company, especially lately. SOFI stock has been in a brutal bear market, falling more than 50% since its peak in November.
Even though SOFI stock has taken a beating in a tough investment environment, there are a number of positives.
A closer look at SOFI stock
If you look at the chart (more on the technicals in a minute), you can see some pretty big swings to the upside. One of those occurred in early November, when many growth stocks were at multi-month lows. SOFI stock rallied back toward its Q2 highs after better-than-expected earnings.
Another rally - this time much more short-lived - occurred in mid-January. Shares shot up when it was announced that SoFi received regulatory approval to become a national bank. This even led one analyst to raise the price target to $30. At current levels, that would mean a return of over 145%.
At the time, there were warnings of the impending sell-off following this news.
Although the rally in SOFI stock did not continue due to the general downward trend in the stock market, these are promising developments when the dust eventually settles.
SoFi Technologies is expected to deliver its next quarterly report on March 1. It's entirely possible that it will be disappointing. But you might look at SOFI stock not as a one- or two-quarter value, but in the long run.
Long-term estimates are hard to pin down. A lot can happen between now and a few quarters, let alone a few years.
Still, analysts project revenue growth of 44% to $1.44 billion next year. And they expect revenue to grow about 40% annually through 2024.
The downside of all this? SoFi isn't profitable yet and isn't expected to be in the next few years. The upside is that it's impressive to see it grow in this way.
After that crazy explosion early in 2021, SoFi stock pulled back and bottomed out at $13.14. While that level was not a good one for the rest of the year remained untouched, it now plays an important role, especially as resistance.
SOFI stock has technically made a series of higher lows. Still, a single sharp pullback could be enough to retest last month's low at $10.51.
Without knowing when the market selloff will end or how far it will ultimately go, it's hard to say when or if SOFI stock has bottomed.
The bottom line on SOFI stock
From here, however, I'd like to see the stock move back above its fourth-quarter low of $13.66 and above its 50-day moving average. That could open the door to higher prices and put $15 to $16.50 in play. The latter part of that range is last month's high.
On the downside, SoFi is trying to hold the 10- and 21-day moving averages as support. However, there is no guarantee that this will be the case.
If it fails to recapture and hold these levels, a drop below $12 could bring the $10.50 level into play. Bulls can hope that this does not happen, but must be realistic and understand that it could.
Author: Bret Kenwell / Published by: Christian Walter
Are airline stocks worth buying after Frontier-Spirit deal?
Ultra low-cost carriers Frontier (ULCC) and Spirit Airlines (SAVE) announced plans Monday for a merger that could create a major low-cost airline to compete with the big four. Does it make sense to buy airline stock before a possible further consolidation?
Consolidation could bring more of what investors like about the airline industry: Less competition, a stronger balance sheet and more restraint in expanding service and lowering fares. It doesn't always work that way. But today's industry is more stable than in decades past, when overexpansion bankrupted many airlines.
The $6.6 billion deal announced Monday, in which Frontier shareholders would hold a majority stake in the new company, would "create America's most competitive ultra-low-fare airline for the benefit of consumers," they said.
The acquisition would follow two difficult years for the airline industry after the pandemic led to heavy losses and then higher costs and staffing problems. It could also help the two airlines strengthen their hold on the U.S. leisure travel market, which has recovered faster than the international and business travel markets as more people work from home.
"As the major airlines wait for international and business customers to return, more capacity has been added to the leisure market," Third Bridge analyst Peter McNally said in e-mailed comments. "Frontier and Spirit are consolidating their positions in this market with a larger entity that will keep them among the lowest-cost carriers in the industry."
Cowen analyst Helane Becker said the deal "makes sense." She said it would create an ultra-discount airline that would control about 7.5% of total U.S. airline service and address the pilot shortage for both carriers.
Some airline stock analysts said the deal could face opposition.
"In a normal environment, we would not expect regulatory hurdles," Raymond James analyst Savanthi Syth said in a research note. But "given the Biden administration's 'big is bad' approach, which has led to a Justice Department lawsuit against American and JetBlue's seemingly pro-competitive Northeast Alliance, we would expect some objections."
The Justice Department has sued to block the alliance between JetBlue and American that would strengthen service in areas such as Boston and New York. The agency called the pact anti-competitive.
Airline stocks have faltered since the big four U.S. carriers reported earnings in recent weeks as the industry struggles with thin staffing and bad weather. Omicron has seen the industry's recovery falter. Airlines have pushed back their schedule expansions and warned of a bumpy first quarter.
Below, we take a look at select airline stocks.
Delta stock has rallied from support at its 50-day line. It is still below its 200-day line.
Delta's EPS rating is 9 out of a possible 99, while its composite rating is 32.
The stock's relative strength line has rallied since December.
American Airlines stock
American Airlines stock is also below its 200-day line. It is on the verge of regaining support at the 50-day line.
American Airlines has a not-so-good composite rating of 35 and an EPS rating of 48.
United Airlines stock
United Airlines stock has also moved back above its 50-day line. Like other airlines, it is still below its 200-day line.
United Airlines' ratings are, only mediocre. United Airlines has a composite rating of 42, and its EPS rating is 50.
Are airline stocks a buy now?
IBD ratings for airlines are not very good. None are in the base. Bottom line: airline stocks are not a buying opportunity right now.
Investors looking to bet on the recovery could get in once these stocks enter the buy zone. However, IBD advises investors to look for stocks with better valuations that are closer to their highs.
Author: Bill Peters / Published by: Christian Walter
Are Apple and Microsoft shares for the ages?
Recent earnings reports confirm that even the world's largest companies can deliver strong growth.
When it comes to growth stocks, there are some who believe that the large, established companies are past their prime and that real growth can only come from smaller companies that are on their way up.
While it's true that large companies are generally past their hyper-growth phase, recent earnings reports from Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT) suggest that there are still plenty of reasons to buy their stocks. These two stocks lend themselves well to the "buy and hold forever" model. Here's why.
Apple announced its first-quarter 2022 results on Jan. 27, and the company did not disappoint. Revenue hit a record $124 billion, up 11% year-over-year and beating estimates by $5 billion. The company saw growth in every product area except iPad and in every geographic region except Japan. Apple's earnings per share of $2.10 were up 25% from the first quarter of 2021 and well above the estimate of $1.89. The company ended the quarter with $203 billion in cash and marketable securities.
Apple's ability to deliver revenue and earnings growth of this magnitude on a $2.8 trillion market cap is impressive in itself. However, investors also benefit from a management team that focuses on shareholder value. During the quarter, Apple paid more than $3 billion in dividends and repurchased $14 billion of its own stock. Over the past five years, Apple has reduced its share count by over 20%. Over the same period, the stock price has increased by 388%.
While there is no guarantee that this growth rate will continue, Apple's results in a key category should give investors confidence that the company can continue this growth trajectory. Services revenue (which includes AppleCare sales and digital content subscriptions) grew 27% in fiscal 2021, making it the third-highest-growing segment after iPhone and iPad. Since the services segment includes much higher-margin revenue (70% versus a 35% gross margin in the products segment), this growth has a positive impact on the company's profitability. One of Apple's strengths is that it uses its hardware to draw customers into its ecosystem of subscription-based services. Continued growth in the services segment indicates that this strategy is paying off and should provide future revenue growth beyond increasing hardware sales.
There is also the seemingly never-ending parade of rumors that Apple is working on augmented reality glasses and/or a self-driving car. These rumors shouldn't be the only reason to invest, but Apple has an impressive track record of launching new product categories with fantastic results.
As investors expected, Microsoft's Q2 2022 results once again showed that even as one of the largest companies in the world, Microsoft still has an impressive growth record. Revenue increased 20% year-over-year to $52 billion, operating income increased 24% to $22 billion, and net income increased 21% to $19 billion. In terms of the balance sheet, the quarter ended with over $125 billion in cash, cash equivalents and short-term investments.
Some of this cash has already been allocated. A few days before the earnings report was released, Microsoft announced the acquisition of video game company Activision Blizzard for $69 billion. This move puts the gaming sector in the spotlight, as Microsoft's management sees it as a growth opportunity. The move also marks another step by Microsoft into the emerging metaverse market.
Microsoft is no stranger to the metaverse. The company's Minecraft franchise helped its users create virtual worlds long before metaverse became a buzzword. Many companies are interested in the Metaverse, and if Microsoft can gain a foothold in this space, it would be another factor that would increase shareholder value in the coming years.
It remains to be seen to what extent the games segment will ultimately impact the overall business. However, Microsoft's cloud business continues to be the company's biggest growth driver. Microsoft's revenue from Azure and other cloud services grew 46% year over year, and it added some big-name companies as customers in the last quarter, including CVS Health, Johnson & Johnson Medical Devices and Wells Fargo.
The cloud is likely to remain critical to Microsoft's future, as the global cloud computing market is expected to more than double by 2026.
Bottom line for investors
Both Apple and Microsoft are companies that should already be in the portfolios of many investors. Their recent quarterly results confirm their strong position in the technology sector. Add to that the fact that both companies have fallen a bit in 2022 for reasons that clearly have nothing to do with their business performance, and these two stocks are an absolute must-buy now and hold forever.
Author: Jeff Santoro / Published by: Christian Walter
Here's Why SoFi's Long-Awaited Bank Charter Will Make the Business Better
After a difficult few months for the stock, SoFi (NASDAQ:SOFI) shareholders got some welcome news recently when regulators approved the company's application to become a bank. Now, SoFi will be able to complete its previously announced acquisition of Golden Pacific Bancorp and become a bank holding company.
SoFi plans to capitalize the bank with $750 million, and the bank will have $5.3 billion of assets once the deal with Golden Pacific closes, which is expected to happen in February. Following the news of the bank charter, SoFi's stock shot up.
Here's why SoFi's long-awaited bank charter will improve the company's operations.
Despite competing in the banking space, many fintech companies start as tech companies and do not have a formal banking license -- they are not easy to obtain. So, most fintechs tend to partner with licensed banks to do things like hold the deposits they gather from their members (unlicensed banks can't hold deposits on their balance sheet) and originate loans for them in some cases. This typically involves some kind of revenue share. Additionally, because banks can't use deposits to fund loan originations, they have to use higher-cost funding.
One of the main benefits of the bank charter will be enabling SoFi to lower its interest expense, which is the interest SoFi pays on the debt it uses to fund assets such as loans. According to its recent regulatory filing, the company's current funding sources for originations include securitization debt and funding from warehouse facilities. SoFi pays interest on this funding of nearly 4% and 1.6%, respectively. This funding is also not as reliable in certain market conditions. Currently, most savings and checking accounts pay out very little interest, and even a lot of high-yield savings accounts pay much less interest than these higher-cost sources.
With the bank charter, SoFi will be able to transfer all of the deposits in its cash management SoFi Money product that it currently sends to a partner bank back into SoFi to hold. SoFi Money accounts topped 1.16 million at the end of the third quarter, so they should offer a decent source of funding that will also grow in the future. This will significantly lower SoFi's cost of funding loan originations, or it can maintain both sources if it needs them to grow.
Additionally, having a bank charter will make it easier for SoFi to hold loans on its balance sheet, whether that means holding loans for longer periods or to completion. Most fintech consumer lenders sell loans they originate right away to an investor or bank for a fee. But when you hold a loan on the balance sheet, you can collect interest payments every month, and that loan ends up being more profitable over its life, as long as it doesn't go into default.
With a bank charter, SoFi will have more clarity from a regulatory perspective on its operations. It is also another signal to investors that SoFi is a trustworthy lender. While the company has a good reputation, given that it has been originating loans for several years now, I think investors see it as a good sign that a fintech company is willing to take some risk on its balance sheet, although I am not yet sure how long SoFi plans to hold its loans.
In its first presentation, management showed the impact of the bank charter on earnings before interest, taxes, depreciation, and amortization (EBITDA). While the numbers have likely changed, as this presentation is now roughly a year old, I think this is illustrative of how helpful the bank charter can be.
Author: Bram Berkowitz / Published by: Christian Walter
Tesla vs Lucid, Rivian, Nio and Ford
The race for electric car supremacy is in full swing, and there are plenty of options to choose from.
After making a splash in 2021, the electric vehicle industry has wasted no time making a name for itself in 2022. Although the Nasdaq Composite is down for the year, Lucid Group (NASDAQ:LCID) and Ford Motor Company (NYSE:F) stock prices have already risen more than 17% each as investors welcome electric vehicle investments and accelerated production targets.
Investors looking to get a piece of the EV pie can opt for an industry leader like Tesla (NASDAQ:TSLA), or more likely take a basket approach with multiple EV stocks like Lucid, Ford, Rivian Automotive (NASDAQ:RIVN) and Nio (NYSE:NIO).
The obvious choice is often the best choice
Tesla's long list of strengths starts with its extremely high growth rate in production and deliveries. Deliveries in 2021 were 936,172 vehicles, nearly four times the full-year 2018 delivery numbers, and high sales and a global footprint have helped Tesla improve profitability. Results for the full year are not yet available, but Tesla's figures for the past three years after the 12-month mark show how quickly the company's revenue and profitability are growing. For example, Tesla's revenue has increased 80% in the last 12 months compared to three years ago, net income has increased to $3.5 billion, and operating margin is 9.5%.
Tesla's profitability is likely to improve further as the company ramps up production and expands its manufacturing capacity thanks to the startup of gigafactories in Texas and Germany this year.
Tesla's strengths include its industry-leading position in the global electric vehicle market, advanced battery and self-driving technology, first-mover advantage, extensive DC fast-charging network, high brand equity, diversified business that includes other energy solutions, and industry-leading operating margin. The company's biggest weakness has nothing to do with Tesla itself, but rather with Tesla stock and its high valuation.
Buying Tesla seems like an easy decision. But so was simply buying big tech stocks like Apple, Microsoft or Alphabet in recent years - all three have crushed the market. Tesla could do worse than a basket of EV stocks. But it could also be a simple but effective solution that's good enough for investors looking for a small position in the electric car industry.
Take the emotion out of it
Comparing the recent stock prices of the undisputed EV king and its emerging competitors is an interesting exercise. Three weeks into the new year, stock movements in 2022 are still telling for those thinking about spreading their bets or buying into the market leader:
Ford is just starting to sell its Mach-E, and interest in the F-150 Lightning seems unabated, so investors are betting that the company will succeed in the electric vehicle space. Lucid has just begun deliveries of its luxury Air sedans and plans to grow overseas and with future new vehicle offerings, including its Gravity SUV. The company expects to begin sales in Europe this year and plans to begin production of the electric luxury SUV in late 2023.
Rivian has only recently gone public, and news that early investor and customer Amazon will spread its electric van purchases to other manufacturers has spooked investors.
Nio is the most established EV manufacturer in this group, along with Tesla. Expansion and growth are planned for 2022, but investors have already given the company a relatively high valuation.
If you believe in Tesla, even considering its $1 trillion valuation, this could be the EV stock for you. However, if a 40% or 50% drop in the stock would cause panic, investing in a group that is likely to have some winners and some losers might be a better approach. Lucid, Rivian, Ford and Nio could all be winners in the electric vehicle market. But if not, at least a mix could help take the emotion out of investing. And emotion is rarely an advantage when it comes to investment decisions.
Given the pros and cons of the items discussed, the best option for most investors might be to select EV stocks that match their risk tolerance and weight them accordingly in a basket of EV stocks. For many, that basket might include Tesla. For others, it might include a higher weighting of riskier but potentially more lucrative companies like Lucid and Rivian. And for risk-averse investors, it could mean sticking with long-established automakers like Ford that have committed to investing in the electric car industry.
Author: Daniel Foebler and Howard Smith / Published by: Christian Walter