Case Study: Lululemon (LULU) stock according to high performing analysts
Several other athletic apparel/footwear stocks, including Nike and Footlocker, struggled during the first quarter, largely due to inventory issues and ongoing macroeconomic uncertainty. However, when LULU posted its first quarter results, the stock exceeded expectations, posting strong results and offering full-year guidance that called for 15% sales growth.
Nobias Insights: 85% of recent articles published by credible authors focused on LULU shares offer a “bullish” bias. Four out of the five credible Wall Street analysts who cover Lululemon believe that shares are likely to rise in value. The average price target applied to LULU by these credible analysts is $430.00, implying an upside potential of 19.3% relative to the stock’s current share price of $360.40
Bullish Take: Harrison Miller, a Nobias 4-star rated author, said, “For the year, Lululemon anticipates earnings rise to range from $11.74 to $11.94 per share compared to $10.07 last year. The company sees a 17% revenue increase to $9.44 billion to $9.15 billion. The guidance surpasses FactSet earnings forecasts of $11.60 per share on $9.37 billion in sales.”
Bearish Take: Phil Wahba, a Nobias 4-star rated author, stated, “Since the acquisition, Lululemon has taken write-downs almost equal to Mirror’s price tag, meaning Mirror is now nearly worthless in accounting terms.”
Key Points
Performance
LULU shares rose by 0.28% this week, pushing their year-to-date gains up to 11.45%. This compares poorly to the S&P 500 which is up by 12.41% on a year-to-date basis.
Event & Impact
Lululemon posted its first quarter results last week, beating analyst consensus estimates on both the top and bottom lines. During Q1, LULU’s revenue totaled $2.0 billion, beating Wall Street’s consensus estimate by $80 million. Lululemon’s Q1 non-GAAP earnings per share came in at $2.28, which was $0.29/share above consensus estimates.
Noteworthy News:
Several other athletic apparel/footwear stocks, including Nike and Footlocker, struggled during the first quarter, largely due to inventory issues and ongoing macroeconomic uncertainty. However, when LULU posted its first quarter results, the stock exceeded expectations, posting strong results and offering full-year guidance that called for 15% sales growth.
Nobias Insights
85% of recent articles published by credible authors focused on LULU shares offer a “bullish” bias. Four out of the five credible Wall Street analysts who cover Lululemon believe that shares are likely to rise in value. The average price target applied to LULU by these credible analysts is $430.00, implying an upside potential of 19.3% relative to the stock’s current share price of $360.40
Bullish Take Harrison Miller, a Nobias 4-star rated author, said, “For the year, Lululemon anticipates earnings rise to range from $11.74 to $11.94 per share compared to $10.07 last year. The company sees a 17% revenue increase to $9.44 billion to $9.15 billion. The guidance surpasses FactSet earnings forecasts of $11.60 per share on $9.37 billion in sales.”
Bearish Take Phil Wahba, a Nobias 4-star rated author, stated, “Since the acquisition, Lululemon has taken write-downs almost equal to Mirror’s price tag, meaning Mirror is now nearly worthless in accounting terms.”
LULU Jun 2023
Last week, Lululemon (LULU) reported its first quarter earnings, beating Wall Street’s estimates on both the top and bottom lines. These positive surprises helped to turn the tide for LULU shares and buck the negative trend that has played out in the appeal space throughout 2023 thus far.
Other athletic apparel/footwear companies such as Nike (NKE) and Footlocker (FL) struggled during their Q1 reports due to operational struggles in the world’s largest markets, the U.S. and China, ongoing inventory issues, and concerns about margin compression associated with promotions to offload product backlogs, there was major concern for LULU coming into its first quarter results.
Bullish Nobias Credible Opinions:
But, as Harrison Miller, a Nobias 4-star rated author, pointed out in the report that he published at Investors.com last week, Lululemon’s growth is here to stay. Miller wrote, “Athleisure apparel giant Lululemon Athletica (LULU) reported strong first-quarter results and full-year guidance late Thursday in what's been a mixed bag for retailers this earnings season.”
However, he noted, “Lululemon earnings didn't have to break a sweat to beat analyst forecasts. Earnings vaulted 54% to $2.28 per share while revenue leapt 24% to $2 billion.” Regarding the expectations that Wall Street had for LULU coming into the quarter, Miller wrote, “Analysts expected Lululemon adjusted earnings to bolt 32.4% to $1.96 per share while sales sprinted 19.3% to $1.924 billion.”
Looking at operating data, Miller said, “Comparable sales rose 13%, slowing from the 28% growth last year and 27% growth in the fourth quarter, respectively. FactSet guided same-store sales to rise 15.4%.” “Direct-to-consumer net revenue represented 42% of total sales, slightly lower than 45% from Q1 2022,” he continued.
Miller noted that for the upcoming quarter, LULU management guided towards 15% revenue growth and EPS to arrive in a range of $2.47 to $2.52 (in-line with consensus estimates of $2.49/share). “For the year,” he added, “Lululemon anticipates earnings rise to range from $11.74 to $11.94 per share compared to $10.07 last year. The company sees a 17% revenue increase to $9.44 billion to $9.15 billion. The guidance surpasses FactSet earnings forecasts of $11.60 per share on $9.37 billion in sales.”
Shoshy Ciment, a Nobias 4-star rated author, also reported on LULU’s results in an article that she published at Yahoo Finance titled, “What Lululemon’s Strong Results Say About Its Growing Standing in Retail”. Ciment said, “The athleisure brand, which typically caters to higher income consumers, has consistently managed to weather macro-economic headwinds plaguing the retail industry at large.”
Regarding the company’s ability to navigate ongoing supply chain issues, uncertain markets, and inventory build ups in the environment where other retailers struggled, she said, “Lululemon managed to maintain a full-price selling model as other retailers implement large-scale promotions.” “According to Morgan Stanley analysts led by Alex Straton,” she wrote, “Lululemon’s “unique pricing power” is a result of its strong core assortment, price integrity and premium margins.”
Ciment ended her piece stating, “Given the positive results this quarter, analysts have largely remained bullish on Lululemon’ growth trajectory through the remainder of the year, as it introduces new products and expands to new markets.”
Bearish Nobias Credible Opinions:
Phil Wahba, a Nobias 4-star rated author, published an article this week at Yahoo Finance that highlighted the plan that Lululemon CEO, Calvin McDonald, put into place to generate such strong results.
Wahba began his piece by highlighting LULU’s $500 million acquisition of Mirror in 2020 - the company’s first attempt to diversify away from clothing and into the exercise space to compete with companies like Peloton (PTON).
However, he notes, “Since the acquisition, Lululemon has taken write-downs almost equal to Mirror’s price tag, meaning Mirror is now nearly worthless in accounting terms.” In response to that saga, Wahba says that McDonald has pivoted to growth ideas within the apparel space. “He [McDonald] told investors in 2022 that he plans to hit $12.5 billion in revenue by 2026 as Lululemon becomes an ever more formidable rival to Nike and leaves competitors like Under Armour in its dust,” Wahba wrote.
“Lululemon’s branding as a hip retailer targeting a wealthy clientele has been vital to its growth, hence why the company is credited with the invention of “athleisure,” at the intersection of good fit and high-quality fabrics,” he said.
However, Wahba added, McDonald wanted to diversify the company’s product lines. “It’s slowly expanded into menswear and, more recently, golfing and hiking clothes,” he wrote. “After all,” he continued, “one cannot reach $12.5 billion in annual sales on women’s yoga pants alone.” McDonald’s plan is obviously working; Wahba points out that LULU is clearly outperforming its peers.
“Lululemon’s performance contrasts with the sharp decline in sales in the past year at rival brands like Gap Inc.’s Athleta and despite the arrival of up-and-comers in the higher-end activewear space like Vuori, Rhone, and Alo Yoga,” he said.
“Another big prong in McDonald’s plan is making Lululemon a global player,” Wahba added. “Canada, its home market, and the U.S. together generate 86% of its revenue,” he wrote. “But Lululemon sees tremendous opportunities abroad, notably in the U.K. and China.” “Last quarter, international sales rose 60%,” Wahba said.
He states that Nike is expected to generate roughly $50 billion in revenue this year. So, Lululemon still has a long way to go to become the top brand in the athletic apparel space. But, he said that analysts believe that LULU has what it takes to continue to take market share over the long term.
Sell-side Analysts Opinions
Regarding Wall Street’s opinion of Lululemon, two 4-star Nobias ratings have updated their outlooks on LULU shares since the company’s recent Q1 report.
Paul Lejuez, a Nobias 4-star rated analyst from Citi, recently raised his price target on LULU shares. According to The Fly on the Wall, “Citi raised the firm's price target on Lululemon to $450 from $440 and keeps a Buy rating on the shares. The company's Q1 sales and earnings were better than expected on every line item and much better than investors feared, the analyst tells investors in a research note. In a "choppy macro environment" in the U.S., Lululemon grew sales 17% in the region, underscoring the strength of the brand in its most well-developed market, says the firm. Citi believes Lululemon is one of the most compelling growth stories in retail.”
John Kernan, a Nobias 4-star rated analyst from SG Cowen, also recently raised his LULU price target. According to The Fly on the Wall, “TD Cowen raised the firm's price target on Lululemon to $531 from $525 and keeps an Outperform rating on the shares.
Nicholas Ward is a Senior Investment Analyst at Wide Moat Research. He has spent the last 8 years writing about the stock market at various publications, including Seeking Alpha, The Street, Forbes Real Estate Investor, Sure Dividend, The Dividend Kings, iREIT, Safe High Yield, and The Intelligent Dividend Investor.
The firm said stores continue to be a key catalyst in customer retention and acquisition, and they also serve as "focal points for community gatherings, product launches and connectivity/loyalty that are key to the retailer's community-based customer engagement model".”
Overall bias of Nobias analysts and Bloggers:
Overall, 4 out of the 5 credible analysts who cover LULU believe that shares are likely to increase in value. The average price target being applied to Lululemon shares by these analysts is $430.00.
Currently, LULU trades for $360.40. Therefore, that average credible analyst price target implies upside potential of approximately 19.3%.
The credible authors that the Nobias algorithm tracks share this positive sentiment. 85% of recent articles focused on LULU shares have expressed a “bullish” bias.
Disclosure: Nicholas Ward has no LULU position. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.
Case Study: Apple (APPL) stock according to high performing analysts
Apple highlighted its first major product launch in years, with its augmented reality/virtual reality headset, the Vision Pro. This piece of hardware is slated to cost roughly $3,500 and, according to analysts, offers consumers access to cutting edge AR/VR capabilities. Analysts also believe that the AR/VR market is likely to grow at a rapid pace throughout the remainder of this decade, inspiring the bullish sentiment surrounding AAPL shares.
Nobias Insights: 49% of recent articles published by credible authors on AAPL shares offer a “neutral” bias after its nearly 45% year-to-date rally. Four out of the five credible Wall Street analysts covering Apple are “bullish”; however, the average price target being applied to AAPL by these credible analysts is $173.60, which implies downside potential of 4.1% relative to the stock’s share price of $180.96.
Bullish Take: Nobias 4-star rated author, Dani Cook, said, “The VR market is expected to hit a value of $227 billion by 2029, expanding at a compound annual growth rate of 45%, according to Fortune Business Insights.”
Bearish Take: The Value Portfolio, a Nobias 5-star rated author,stated, “For the upcoming quarter, the company expects a continued negative impact from forex along with massive weakness in the Mac and iPad division.”
Key Points
Performance
AAPL shares fell by 1.3% this week, pushing their year-to-date gains down to 44.69%. This compares favorably to the S&P 500 which is up by 12.41% on a year-to-date basis.
Event & Impact
Apple’s Worldwide Developers Conference (WWDC) occurred this week, causing Apple shares to rally to all-time highs of $184.95 on Monday.
Noteworthy News:
Apple highlighted its first major product launch in years, with its augmented reality/virtual reality headset, the Vision Pro. This piece of hardware is slated to cost roughly $3,500 and, according to analysts, offers consumers access to cutting edge AR/VR capabilities. Analysts also believe that the AR/VR market is likely to grow at a rapid pace throughout the remainder of this decade, inspiring the bullish sentiment surrounding AAPL shares.
Nobias Insights
49% of recent articles published by credible authors on AAPL shares offer a “neutral” bias after its nearly 45% year-to-date rally. Four out of the five credible Wall Street analysts covering Apple are “bullish”; however, the average price target being applied to AAPL by these credible analysts is $173.60, which implies downside potential of 4.1% relative to the stock’s share price of $180.96.
Bullish Take Nobias 4-star rated author, Dani Cook, said, “The VR market is expected to hit a value of $227 billion by 2029, expanding at a compound annual growth rate of 45%, according to Fortune Business Insights.”
Bearish Take The Value Portfolio, a Nobias 5-star rated author, stated, “For the upcoming quarter, the company expects a continued negative impact from forex along with massive weakness in the Mac and iPad division.”
AAPL Jun 2023
Apple (AAPL) shares hit new all-time highs this week after bullish commentary that came out of its WWDC 2023 event. The WWDC event is Apple’s Worldwide Developers Conference where the company typically highlights new hardware and/or software products or capabilities that it’s focused on launching each year.
The 2023 event was centered around Apple’s first major product launch in years. The company pulled back the curtains and shed light on its augmented/virtual reality headset, entering into the fierce competition for market share in this fast growing industry. Apple’s hardware, called the Vision Pro headset, is priced at roughly $3,500 and excited investors because of its long-term sales volume potential.
AAPL hit all-time highs of $184.95 on Monday before trending lower throughout the remainder of the week. During the last 5 days, AAPL shares are down by 1.30%; however, on a year-to-date basis, Apple is beating the broader market by a wide margin, up by 44.69%.
Bullish Nobias Credible Opinions:
This week, Nobias 4-star rated author, Dani Cook, highlighted Apple as a top buy in her article titled, “2 Virtual Reality Stocks to Invest in”. Looking at Apple’s AR/VR hardware specs, Cook wrote, “The Vision Pro has taken a massive step forward in VR, with features never before seen in competing headsets. “The device is a full-fledged computer in a headset casing, granting it all the productivity and entertainment capabilities of a MacBook,” she continued.
“Meanwhile,” Cook said , “it has removed the need for controllers required in headsets from Sony and Meta by utilizing eye tracking and hand gestures.” Overall, she’s bullish on this area of the market, stating, “The VR market is expected to hit a value of $227 billion by 2029, expanding at a compound annual growth rate of 45%, according to Fortune Business Insights.”
And therefore, she believes that Apple’s entrance into the space bodes well for its shares in the long-term. “Apple's dominance in consumer tech and brand loyalty strengthen its outlook in VR and make its stock an attractive buy as the industry blossoms,” she concludes.
Luke Lango, Nobias 4-star rated author, also published a report this week that put a spotlight on his bullish growth outlook for the AR/VR space. Writing about Apple’s Vision Pro launch, he said, “In fact, Apple isn’t even calling it a VR headset. It’s calling it a “spatial computer” to differentiate the product from the rest of the VR world.”
“You can enjoy both AR and VR experiences. You can control everything with your hands and gestures. And the headset boasts a better-than-4K screen resolution for each eye,” he said. Lango was quick to note, “None of that was possible before the Vision Pro.” He doesn’t believe that this will be a mass market product right away.
“At $3,499, the Vision Pro won’t become ubiquitous,” Lango wrote. “But,” he said, “it will generate significant interest in and engagement with extended reality content.” “And as wealthy folks shell out for this new tech, the average consumer will be watching from the sidelines. And that will drum up pent-up demand for a headset,” he explains. Over the next few years, Lango believes that, “The number of people using VR every day will grow by hundreds of percent, and the amount of content in VR environments will grow just as much.”
Bearish Nobias Credible Opinions:
The Value Portfolio, a Nobias 5-star rated author, recently published a bearish article in response to Apple’s recent product announcement and the stock’s ongoing rally. “Apple is a great company,” he said. “But it's a great company at too high a price.”
Regarding Apple’s new hardware launch, The Value Portfolio wrote: “Apple Inc. has announced its Vision Pro, the company's first new product category since the Apple Watch. The category has done incredibly well as a new wearables category for the company. However, we'd argue that was due to the health benefits. As we'll see throughout this article, we don't expect the Vision Pro to outperform, but even if it does, it won't justify Apple's valuation.”
Looking at the company’s fundamental results and forward guidance, The Value Portfolio noted, “For the 6-month period [trailing], the company's net sales dropped almost 5%.”During this same period of time, they said, “the company's net income has dropped roughly 4%.”
“That continued weakness at a 30+ P/E is a tough position for the company to be inside,” The Value Portfolio adds. Furthermore, looking at expectations for the coming quarters, The Value Portfolio stated, “There are warnings for a continued decline in revenue.”
Also, The Value Portfolio added, “for the upcoming quarter, the company expects a continued negative impact from forex along with massive weakness in the Mac and iPad division.”“The company thinks that the weakness won't necessarily continue,” The Value Portfolio said, “but at its valuation, it needs more than stagnation, it needs growth.” “As a result, we recommend against investing in the company at the present time,” the author concluded.
Although The Value Portfolio might not like Apple’s prospects in the near-term, AJ Fabino, a Nobias 4-star rated author, published an article at Benzinga this week stating the former Apple co-founder Steve Jobs’ biographer, Walter Isaacson, believes that Jobs would have “loved” the Vision Pro device.
“He would love it," Isaacson said in a CNBC interview earlier this week,” Fabino wrote. "I think he always wanted to go into new fields ever since he decided to make the iPod in the early 2000s, which was an unusual thing for, you know, a computer company to do, and likewise with the iPhone,” Isaacson continued.
Fabino noted that Jobs had an interest in the “advancement of human-computer interfaces” and used Siri as an example of Jobs’ affinity for this space. Isaacson agrees. “When he [Jobs] saw Siri, that was a great leap in human-computer interface, and this is one of the next big leaps in that,” he said.
Sell-side Analysts Opinions
Only one of the five credible Wall Street analysts who cover AAPL shares provided an update on their opinion on Apple stock after the company’s recent product launch. Nobias 5-star rated analyst, Toni Sacconaghi’s response to Apple’s Worldwide Developers Conference was neutral. In a note to clients this week, she maintained his $175.00 price target.
According to The Fly on the Wall, “Bernstein analyst Toni Sacconaghi notes that Apple executives delivered their keynote presentation at the company's annual Worldwide Developer Conference, or WWDC, which included the introduction of the company's much anticipated AR/VR device, the Vision Pro.
Nicholas Ward is a Senior Investment Analyst at Wide Moat Research. He has spent the last 8 years writing about the stock market at various publications, including Seeking Alpha, The Street, Forbes Real Estate Investor, Sure Dividend, The Dividend Kings, iREIT, Safe High Yield, and The Intelligent Dividend Investor.
The Vision Pro provided a glimpse into the future, the firm says, pointing out that Apple has a strong track record of creating new markets. Nonetheless, Bernstein continues to struggle with the consumer value proposition beyond traditional VR applications. The firm also highlights that the device is shipping later and is more expensive than anticipated, and will likely be immaterial to Apple's financials for at least a couple of years. Bernstein has a Market Perform rating on the shares with a price target of $175.”
Overall bias of Nobias Credible Analysts and Bloggers:
Overall, the average price target being applied to Apple shares by these 5 credible Wall Street analysts is $173.60. Apple currently trades for $180.96 after rallying to all-time highs this week. Therefore, the average Nobias credible analyst price target implies downside potential of approximately 4.1%. The credible authors that Nobias tracks share this fairly neutral outlook after Apple’s recent rally, with 49% of articles signaling that shares will increase in value.
Disclosure: Nicholas Ward is long AAPL. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.
Case Study: Palantir (PLTR) stock according to high performing analysts
This week, PLTR signed a $463 million contract with the U.S. Special Operations Command centered around AI. This continues the trend of PLTR winning large-scale AI-driven contracts, which is bolstering the stock’s year-to-date rally.
Nobias Insights: 57% of recent articles published by credible authors focused on PLTR shares offer a “bullish” bias. The one credible Wall Street analyst who covers Palantir believes that shares are likely to fall in value. The price target being applied to PLTR by this credible analyst is $7.00, which implies a downside potential of approximately 53% relative to the stock’s current share price of $15.02.
Bullish Take: 5-star rated author, The Value Portfolio, said, “At a 2% FCF yield with a double-digit growth rate, Palantir Technologies Inc. has the ability to continue growing. It has no debt and a strong net cash position which means profits can be rapidly directed to shareholders. Putting all of this together, Palantir is a valuable long-term investment that can drive substantial returns.”
Bearish Take: Michel Cohen, a Nobias 4-star rated author, stated, “The Bear Cave alleges that Palantir inflates its financial metrics through certain practices, like investing in companies and then requiring those companies to buy Palantir products. It reportedly invested about $400 million across 20 SPAC mergers, with those companies then purchasing at least $700 million in Palantir software.”
Key Points
Performance
Palantir (PLTR) shares rose by 1.90% this week, pushing their year-to-date gains up to 135.05%. This compares favorably to both the S&P 500 and the Nasdaq Composite, which are up by 12.41% and 27.65%, respectively, on a year-to-date basis.
Event & Impact
Bullish sentiment continues to push stocks with artificial intelligence tailwinds higher. Palantir is benefitting from this trend due to its strength with enterprise software and long-standing relationships with various segments of the U.S. government.
Noteworthy News:
This week, PLTR signed a $463 million contract with the U.S. Special Operations Command centered around AI. This continues the trend of PLTR winning large-scale AI-driven contracts, which is bolstering the stock’s year-to-date rally.
Nobias Insights
57% of recent articles published by credible authors focused on PLTR shares offer a “bullish” bias. The one credible Wall Street analyst who covers Palantir believes that shares are likely to fall in value. The price target being applied to PLTR by this credible analyst is $7.00, which implies a downside potential of approximately 53% relative to the stock’s current share price of $15.02.
Bullish Take 5-star rated author, The Value Portfolio, said, “At a 2% FCF yield with a double-digit growth rate, Palantir Technologies Inc. has the ability to continue growing. It has no debt and a strong net cash position which means profits can be rapidly directed to shareholders. Putting all of this together, Palantir is a valuable long-term investment that can drive substantial returns.”
Bearish Take Michel Cohen, a Nobias 4-star rated author, stated, “The Bear Cave alleges that Palantir inflates its financial metrics through certain practices, like investing in companies and then requiring those companies to buy Palantir products. It reportedly invested about $400 million across 20 SPAC mergers, with those companies then purchasing at least $700 million in Palantir software.”
PLTR Jun 2023
Artificial Intelligence has been one of the major driving forces of the broad market rally - and especially the tech-heavy Nasdaq’s outperformance—that we’ve seen throughout 2023 thus far. This year, the S&P 500 is up by 12.41% and the Nasdaq has risen by 27.65%.
Still, investors are looking for the next big secular growth trend to latch onto and the fervor behind artificial intelligence has ramped up recently, largely on the back of Nvidia's stellar Q1 earnings report. Nvidia shares are up by 170.3% on a year-to-date basis and bullish sentiment has increased for other names in the semiconductor and software industries that deal with artificial intelligence.
Another stock that has been a beneficiary of this bullish trend is Palantir Technologies (PLTR) which is up by 68.4% during the last month alone. Palantir’s recent rally has pushed its year-to-date gains into the triple digits as well. PLTR shares are up by 135.05% during 2023 thus far.
Yet, when looking at the reports by the credible authors and analysts that the Nobias algorithm tracks who cover PLTR shares, there is a major divergence in sentiment surrounding this stock. 57% of recent articles published by credible authors on PLTR stock have expressed a “Bullish” bias; however, the lone credible Wall Street analyst that Nobias tracks who has offered an opinion on PLTR shares believes that they’re likely to experience a significant sell-off.
Bullish Nobias Credible Opinions:
The most recent bullish report that a credible Nobias author has published on PLTR was by Nobias 5-star rated author, The Value Portfolio. In their June 7th article on Seeking Alpha, The Value Portfolio highlighted the company’s AI-driven growth.
The Value Portfolio said, “Palantir is one of the strongest companies in the AI space, especially when looking at directly selling AI to customers.” They put a spotlight on a $463 million contraction with the U.S. Special Forces for AI that was announced this week.
Looking at Q1 data, The Value Portfolio wrote, “The company signed 64 deals during the last quarter, and it's shown an increased ability to get large scale deals.” “The company has closed almost $400 million in new contracts, a 60% improvement YoY, foretelling strong potential revenue growth for the company versus prior growth rates,” they continued.
“Palantir's scale is also evident through deal sizes, with 22 deals at least $5 million and 8 at least $10 million,” The Value Portfolio said. And, they noted, that Palantir has a history of receiving larger and larger orders from legacy clients, resulting in “exciting” growth potential from its expanding client portfolio.
The Value Portfolio mentioned that at first glance, PLTR shares look expensive after their recent rally. Regarding PLTR’s valuation, they wrote, “the company has $750 million in annualized cash flow, which is a FCF yield of 2.5%. That's an atrocious long-term valuation and shows that the company has growth ahead to justify its current valuation.” But, due to Palatir’s rapid growth rate, The Value Portfolio believes that the company can grow into its present valuation - and more - concluding their report by saying:
“At a 2% FCF yield with a double-digit growth rate, Palantir Technologies Inc. has the ability to continue growing. It has no debt and a strong net cash position which means profits can be rapidly directed to shareholders. Putting all of this together, Palantir is a valuable long-term investment that can drive substantial returns.”
Bearish Nobias Credible Opinions:
Cavenagh Research, a Nobias 5-star rated author, who has been bullish on PLTR shares in the past, recently turned bearish, however. In an article published at Seeking Alpha on May 26, 2023, Cavenagh Research highlighted the reason for their sentiment shift.
“Overall,” they said, “I continue to like Palantir's value proposition in the fast-growing data analytics market. However, the risk/ reward for an investment is now considerably less attractive at about $13/ share than at $7/share, where the stock was trading only a few months ago.”
Cavenagh Research noted that PLTR beat Wall Street estimates on both the top and bottom lines during its Q1 report; however, they said, there were underlying concerns. Looking at PLTR’s Q1 top-line results, Cavenagh Research wrote, “During the period from January to end of March, the company generated group revenues of approximately $525.2 million, up about 18% YoY, and topping consensus estimate by approximately 4%, according to data collected by Refinitiv.”
Looking at profit-related metrics, they said, “GAAP operating income came in at $121.5 million, far exceeding even the upper end of optimistic estimates, and marking the second quarter in a row of GAAP profitability.” Despite these beats, Cavenagh Research laid out their bearish thesis on shares with 5 primary bullet points:
First, Palantir's dollar-based net retention rates fell about 400 basis points, to 111%, as compared to 115% one quarter prior.
Second, despite the revenue support brought about by SPACs related accounting, Palantir's commercial contribution margin declined 800 basis points.
Third, average revenue per employee fell $547 tsd of revenue per employee, down 9% YoY, as total headcount grew to 3,850, up 26% YoY.
Fourth, and expanding on employee-related metrics, I would like to point out that PLTR's share-based compensation expenses remain >20% of revenue!
Fifth, Palantir's growth appears to be slowing: Referencing, Palantir's 2Q revenue guidance of revenues in the range of $528-532M, I point out that QoQ growth slowed to 1%, while YoY growth slowed to 12% YoY, the lowest level since Palantir's IPO.
The author did note that Artificial Intelligence could be the growth catalyst that improves Palantir’s operations. “Recently, Palantir's management has emphasized the introduction of their Artificial Intelligence Platform (AIP), which enables customers to safely utilize large language models (LLMs),” they wrote.
“According to CEO [Alex] Karp,” Cavenagh Research said, “the demand for AIP has been unprecedented, as AI adoption captures the interest of a very wide range of customers, including the interest from over 100 Fortune 1000 companies.”
“Due to Palantir's significant experience in handling sensitive data and technology, the company is well-positioned to be a leading player in the emerging field of AI,” they added. However, the author concluded, “it is way too early to assign any 'equity value' to Palantir's AI capability and strategy, in my opinion.” And therefore, Cavenagh Research said, “Reflecting on rich valuation, paired with slowing growth in the core business, I downgrade Palantir to Underperform/ Sell.”
Michel Cohen, a Nobias 4-star rated author, recently highlighted another bearish report published by Edwin Dorsey, the author of The Bear Cave, which focused on PLTR’s recent rally and the future prospects of its shares.
Cohen wrote, “The Bear Cave views Palantir as an "AI imposter" and an "overhyped data consultant."’ Cohen said that Dorsey believes that Palantir “Management has fueled this enthusiasm, frequently mentioning "AI" during company calls. It was mentioned 68 times on their Q1 2023 conference call, up from 17 mentions in Q4 2022 and only six mentions in Q1 2022.”
Furthermore, Cohen wrote, “The Bear Cave alleges that Palantir inflates its financial metrics through certain practices, like investing in companies and then requiring those companies to buy Palantir products. It reportedly invested about $400 million across 20 SPAC mergers, with those companies then purchasing at least $700 million in Palantir software.” However, he states that Karp remains very bullish on his company’s prospects.
Cohen said, “Karp, meanwhile, spoke to Bloomberg on Thursday after hosting the company's AIPCon customer conference. His response to critics of the company and its software was "to ask the Russians."’
Sell-side Analysts Opinions
The most recent update provided on PLTR shares by Louie DiPalma, of William Blair & Company International, who is the only credible analyst that Nobias tracks who covers PLTR shares, was bearish as well.
According to the Fly on the Wall, “Last Tuesday, Space Systems Command, Los Angeles Air Force Base, announced that it awarded Palantir a three-month bridge extension, instead of a long-term renewal, on its Space Force data software services contract, which is Palantir's third-largest contract, William Blair analyst Louie DiPalma the analyst tells investors in a research note. And late Friday, Space Systems Command announced that it selected 17 other vendors along with Palantir for a five-year, $900M data analytics contract that builds upon the sole-sourced Palantir program, adds the analyst.
The firm says there is risk that Palantir's growth for the program will be limited as the Space Force "splits the pie among the numerous vendors." Over the long term, there is the potential for the same type of migration off of the Palantir platform that took place with the Raven program and is taking place for the FDA's CDER program, contends Blair. The firm sees risk that Palantir's "premium 8.5-times sales multiple will compress as competition pressures revenue growth and profitability." It keeps an Underperform rating on the shares and sees downside to $4 and $5 in a "bear case scenario."
Nicholas Ward is a Senior Investment Analyst at Wide Moat Research. He has spent the last 8 years writing about the stock market at various publications, including Seeking Alpha, The Street, Forbes Real Estate Investor, Sure Dividend, The Dividend Kings, iREIT, Safe High Yield, and The Intelligent Dividend Investor.
This report was published in late March of 2023. Since then, PLTR shares have continued to rally.
Overall bias of Nobias Credible Analysts and Bloggers:
When looking at the reports by the credible authors and analysts that the Nobias algorithm tracks who cover PLTR shares, there is a major divergence in sentiment surrounding this stock. 57% of recent articles published by credible authors on PLTR stock have expressed a “Bullish” bias; however, the lone credible Wall Street analyst that Nobias tracks who has offered an opinion on PLTR shares believes that they’re likely to experience a significant sell-off.
On March 31st, 2023, PLTR was trading for $8.45/share. Today, shares are trading at $15.02/share. The price target being applied to PLTR by DiPalma is $7.00, which represents downside potential of approximately 53%.
Yet, as bulls have stated, Artificial Intelligence remains a long-term growth tailwind for Palantir, meaning that the bulls and the bears are likely to be grappling over this speculative growth stock for years to come.
Disclosure: Nicholas Ward is long PLTR. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.
Case Study: Broadcom (AVGO) stock according to high performing analysts
Broadcom shares had experienced a massive run-up in earnings due to the recent success of its peers, who also design and manufacture artificial intelligence related semiconductors. AVGO shares gave back roughly 5% of their recent gains this week; however, during the last month, they've still been up by 30.75%. The company is expected to continue to grow at a high single digit rate moving forward. It pays a 2.27% dividend yield. And, AVGO continues to be generous with its buyback program, repurchasing $3.4 billion worth of shares during Q2.
Nobias Insights: 75% of recent articles published by credible authors focused on AVGO shares offer a “Bullish” bias. Four out of the five credible Wall Street analysts who cover Broadcom believe that shares are likely to rise in value and updated their price targets on shares this week after seeing the company’s Q2 results. The average price target from the post-earnings updates that we saw this week was $905.00. Therefore, looking at the most up-to-date credible analyst opinions, it appears that AVGO shares offer upside potential of approximately 11.5% relative to the current $812.00 share price.
Bullish Take: AJ Fabino, a Nobias 4-star rated author, said, “Broadcom issued earnings of $10.32 per share, ahead of a $10.08 estimate, on revenues of $8.73 billion, which beat the $8.71 billion estimates, according to Benzinga Pro.”
Bearish Take: Ahmed Farhath, a Nobias 4-star rated author, stated, “Over the last 3 months, EPS estimates have seen 18 upward revisions and 3 downward. Revenue estimates have seen 12 upward revisions and 8 downward.”
Key Points
Performance
Broadcom shares fell by 5.56% this week, pushing their year-to-date gains down to 46.71%. This compares favorably to both the S&P 500 and the Nasdaq Composite Index, which are up by 11.98% and 27.47%, respectively, on a year-to-date basis.
Event & Impact
Broadcom posted its second quarter results this week, beating analyst consensus estimates on both the top and bottom lines. During Q2, AVGO’s revenue totaled $8.73 billion, beating Wall Street’s consensus estimate by $20 million. Broadcom's Q2 non-GAAP earnings-per-share came in at $10.32, which was $0.18/share above consensus estimates.
Noteworthy News:
Broadcom shares had experienced a massive run-up in earnings due to the recent success of its peers, who also design and manufacture artificial intelligence related semiconductors. AVGO shares gave back roughly 5% of their recent gains this week; however, during the last month, they've still been up by 30.75%. The company is expected to continue to grow at a high single digit rate moving forward. It pays a 2.27% dividend yield. And, AVGO continues to be generous with its buyback program, repurchasing $3.4 billion worth of shares during Q2.
Nobias Insights
75% of recent articles published by credible authors focused on AVGO shares offer a “Bullish” bias. Four out of the five credible Wall Street analysts who cover Broadcom believe that shares are likely to rise in value and updated their price targets on shares this week after seeing the company’s Q2 results. The average price target from the post-earnings updates that we saw this week was $905.00. Therefore, looking at the most up-to-date credible analyst opinions, it appears that AVGO shares offer upside potential of approximately 11.5% relative to the current $812.00 share price.
Bullish Take AJ Fabino, a Nobias 4-star rated author, said, “Broadcom issued earnings of $10.32 per share, ahead of a $10.08 estimate, on revenues of $8.73 billion, which beat the $8.71 billion estimates, according to Benzinga Pro.”
Bearish Take Ahmed Farhath, a Nobias 4-star rated author, stated, “Over the last 3 months, EPS estimates have seen 18 upward revisions and 3 downward. Revenue estimates have seen 12 upward revisions and 8 downward.”
AVGO Jun 2023
After Nvidia’s (NVDA) and Marvell Technology’s (MRVL) beat-and-raise earnings reports last week that caused their shares to soar on the back of artificial intelligence-related growth, all eyes were on Broadcom (AVGO) this week.
AVGO reported its second quarter earnings results on Wednesday, and once again, beat analyst expectations on both the top and bottom lines. However, unlike its peers, AVGO shares didn’t experience double digit post-earnings rallies. It appears that much of AVGO’s results were priced into the stock, (which had experienced a 30%+ rally during the month coming into its second quarter report).
However, after examining its results, four of the five credible analysts that Nobias tracks who cover AVGO shares increased their price targets and despite its 46.71% year-to-date rally, it appears that Broadcom shares continue to offer double digit upside potential.
Bullish Nobias Credible Opinions:
Andrew Kessel, a Nobias 5-star rated author, touched upon one of Broadcom’s recent bullish catalysts in an article that he published at Proactive Investors this week. Prior to the blowout quarters from Nvidia and Marvell last week, AVGO shares were already headed higher because of news that broke between it and its largest customer, Apple (AAPL), which provided investors with peace of mind knowing that the iPhone maker wasn’t going to cut Broadcom out of its supply chain in the coming years.
“Earlier this week,” Kessel wrote, “Broadcom received a repeat ‘Buy’ rating from UBS analysts after the company announced two multi-year agreements with Apple to supply radio frequency and wireless components and modules.”
“The analysts wrote that the agreement also appeared to quash speculation from earlier this year that Apple would displace Broadcom components from its devices beginning in 2025, although they noted that Apple continues to push more technology in-house to reduce reliance on external vendors,” he added.
So, while it’s true that Apple continues to invest heavily in its own semiconductor assets in an attempt to move more and more of its supply chain under its own control, investors were pleased to hear that this isn’t a threat that Broadcom needs to worry about in the coming quarters.
This sigh of relief turned into an outright bullish fervor surrounding AVGO shares after two of its rivals in semiconductor industry, NVDA and MRVL beat analyst expectations by wide margins, causing their shares to rise by more than 25% and 40%, respectively, last week.
AVGO shares were dragged up by the NVDA and MRVL rallies. During the last month, Broadcom has seen its share price appreciate by 30.75%. This is an unprecedented move by this relatively mature semiconductor. AVGO is a large-cap stock with a market cap of $338.5 billion. However, unlike Nvidia and Marvell, which trade with forward price-to-earnings multiples of 51.6x and 39.3x, respectively, Broadcom is a relative value option for investors in the semiconductor segment, with a forward P/E ratio of just 19.5x. And therefore, coming into its most recent quarter, Broadcom had a lower bar to clear, as far as the growth expectations required to support its valuation multiples went.
AJ Fabino, a Nobias 4-star rated author, covered AVGO’s quarterly results in an article published at Business Insider this week. Fabino wrote, “Broadcom Inc, a global leader in semiconductor and infrastructure software solutions, issued second-quarter earnings which beat Street expectations.” He continued, “Broadcom issued earnings of $10.32 per share, ahead of a $10.08 estimate, on revenues of $8.73 billion, which beat the $8.71 billion estimates, according to Benzinga Pro.”
“The company repurchased 5.6 million shares during the quarter and announced a quarterly dividend of $4.60 per share,” he added. Lastly, Fabino noted, “Broadcom said it anticipates its third-quarter revenue to be about $8.85 billion, edging past estimates of $8.72 billion.”
Bearish Nobias Credible Opinions:
Ahmed Farhath, a Nobias 4-star rated author, covered the market’s expectations for Broadcom’s second quarter results in a recent article published at Seeking Alpha. Farhath touched upon the stock’s history of beating Wall Street’s expectations, stating, “Over the last 2 years, AVGO has beaten EPS estimates 100% of the time and has beaten revenue estimates 100% of the time.”
Looking at last quarter’s results, he added, “The company on March 2 reported Q1 Non-GAAP EPS of $10.33, beating estimates by 17 cents. Revenue of $8.92 billion was up 15.7% from last year and ahead of consensus by $20 million.”
Coming into this quarter, analysts have become increasingly more bullish on shares. Farhath wrote, “Over the last 3 months, EPS estimates have seen 18 upward revisions and 3 downward. Revenue estimates have seen 12 upward revisions and 8 downward.” Looking at Q2 estimates, he said, “The consensus EPS estimate is $10.14 and the consensus revenue estimate is $8.71 billion.”
These figures would represent top and bottom-line growth of approximately 7.5% and 12.0%, relative to last year’s second quarter results of $8.1 billion in sales with $9.07 in non-GAAP EPS.
Sell-side Analysts Opinions
Shares were relatively flat on these Q3 results. AVGO has hovered in the $800 area since reporting them, meaning that this company didn’t experience the same post-earnings rally as NVDA and MRVL. However, that may be due to the stock’s 30%+ run-up into earnings. And, looking at Wall Street’s response to its Q2 report, it appears that AVGO continues to have upside potential ahead of it.
After its Q2 numbers hit, several credible Wall Street analysts that Nobias tracks increased their price target on AVGO shares. According to the Fly on the Wall, “Deutsche Bank raised the firm's price target on Broadcom to $870 from $675 and keeps a Buy rating on the shares post the fiscal Q2 results.” The Deutsche Bank analyst who covers AVGO is Ross Seymore who carries a 5-star Nobias rating.
Christopher Rolland of Susquehanna , a Nobias 4-star rated analyst, also raised his price target. According to the Fly on the Wall, “Susquehanna raised the firm's price target on Broadcom to $910 from $785 and keeps a Positive rating on the shares. The firm said we remain encouraged by Broadcom's optimism around their new long-term deal in wireless and cellular and as they reiterated their mixed signal content.”
Truist analyst William Stein, a Nobias 4-star rated analyst, also came away from the quarterly results with a bullish bias. According to the Fly on the Wall, “Truist analyst William Stein raised the firm's price target on Broadcom to $890 from $700 and keeps a Buy rating on the shares. The company posted a "modest" Q2 earnings beat, though the management also offered more details in AI, including the 70% growth in the business, the analyst tells investors in a research note. In addition to AI, Broadcom continues to do well in many other respects - it's keeping lead times elevated at 50 weeks, its inventory is under solid control, its customer and channel inventory appear lean, and its buybacks are strong, Truist added.”
Nicholas Ward is a Senior Investment Analyst at Wide Moat Research. He has spent the last 8 years writing about the stock market at various publications, including Seeking Alpha, The Street, Forbes Real Estate Investor, Sure Dividend, The Dividend Kings, iREIT, Safe High Yield, and The Intelligent Dividend Investor.
Lastly, Bank of America analyst Vivek Arya, a Nobias 4-star rated analyst, also raised his price target significantly. According to the Fly on the Wall, “BofA analyst Vivek Arya raised the firm's price target on Broadcom to $950 from $800 and keeps a Buy rating on the shares after the company issued a "slight" fiscal Q2 beat and gave a Q3 revenue outlook above consensus. The firm's new target reflects a higher multiple as AI accelerates company growth potential. In a bull case scenario where Broadcom can grow AI exposure to about 25% of sales, and hold growth rates of non-AI assets at previously mentioned levels, the firm sees incremental $2B and $3 upside to its sales and EPS estimates, respectively, the analyst added.”
Overall bias of Nobias Credible Analysts and Bloggers:
Overall, 80% of credible analysts who cover AVGO shares believe that the company is likely to increase in value. 75% of recent reports published by the credible author community that the Nobias algorithm tracks have also expressed a “Bullish” bias towards shares.
Currently, Broadcom trades for $812.00. The average price target from the post-earnings updates that we saw this week was $905.00. Therefore, looking at the most up-to-date credible analyst opinions, it appears that AVGO shares offer upside potential of approximately 11.5%.
Disclosure: Nicholas Ward is long AVGO. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.
Case Study: 3M Company (MMM) stock according to high performing analysts
Legal headwinds surrounding these “forever chemicals” has cast a major shadow over 3M shares for years. Analysts have speculated that the overall cost of this issue could rise above the $100 billion level across the world. This results in major uncertainty for 3M shareholders moving forward, so settlements, even when costly, can provide a bullish catalyst for investors looking to begin to quantify the potential risk.
Nobias Insights: 50% of recent articles published by credible authors focused on MMM shares offer a “neutral” bias. Two of the four credible Wall Street analysts who cover 3M believe that shares are likely to rise in value. The average price target applied to MMM by these credible analysts is $129.00, which implies upside potential of approximately 25.8% relative to the stock’s current share price of $102.53..
Bullish Take: Nobias 4-star rated author, Bretty Ashcroft Green, said, “3M's stock jumped more than 10% on Friday morning after Bloomberg News reported the company agreed to a tentative settlement of at least $10 billion with a variety of U.S. cities and towns to resolve water pollution claims tied to "forever chemicals.”
Bearish Take: Samuel Smith of Sure Dividend, a Nobias 4-star rated author, stated, “3M is facing a number of uncertainties, including litigation headwinds, and global supply chain disruptions and logistics challenges.”
Key Points
Performance
MMM shares rose by 6.38% this week after rallying by 8.75% on Friday. This rally pushed MMM’s year-to-date losses up to -16.28%. This compares poorly to the S&P 500 which is up by 11.98% on a year-to-date basis.
Event & Impact
On Friday news broke that 3M Company had accepted a tentative agreement with certain U.S. towns and cities regarding its PFAS chemical pollution. The settlement is reported to be at least $10 billion and still requires approval by 3M’s Board of Directors.
Noteworthy News:
Legal headwinds surrounding these “forever chemicals” has cast a major shadow over 3M shares for years. Analysts have speculated that the overall cost of this issue could rise above the $100 billion level across the world. This results in major uncertainty for 3M shareholders moving forward, so settlements, even when costly, can provide a bullish catalyst for investors looking to begin to quantify the potential risk.
Nobias Insights
50% of recent articles published by credible authors focused on MMM shares offer a “neutral” bias. Two of the four credible Wall Street analysts who cover 3M believe that shares are likely to rise in value. The average price target applied to MMM by these credible analysts is $129.00, which implies upside potential of approximately 25.8% relative to the stock’s current share price of $102.53.
Bullish Take Nobias 4-star rated author, Bretty Ashcroft Green, said, “3M's stock jumped more than 10% on Friday morning after Bloomberg News reported the company agreed to a tentative settlement of at least $10 billion with a variety of U.S. cities and towns to resolve water pollution claims tied to "forever chemicals.”
Bearish Take Samuel Smith of Sure Dividend, a Nobias 4-star rated author, stated, “3M is facing a number of uncertainties, including litigation headwinds, and global supply chain disruptions and logistics challenges.”
MMM Jun 2023
3M Company (MMM) rallied by 8.75% on Friday due to positive headlines regarding its potential “forever chemicals” legal liability. The potential for significant legal and cleanup costs associated with the PFAS chemicals that MMM has manufactured over the years has made this stock a recent underperformer.
Even after Friday’s rally, during the trailing twelve month period MMM shares are down by 30.8%. On a year-to-date basis, 3M Company is still down by 16.28%. Yet, this weakness has pushed MMM’s valuation down well below its historical averages and collectively, the credible Wall Street analysts that Nobias tracks believe that 3M offers strong double digit upside potential.
Bearish Nobias Credible Analysts’ Opinions:
In early May, Samuel Smith of Sure Dividend, a Nobias 4-star rated author, provided readers with an annual update on 3M Company shares. Smith began his report by stating, “3M has one of the best track records in the entire market when it comes to dividend longevity. It has paid dividends for more than 100 years, and it has raised its dividend for over 60 years in a row.”
This company is more than a Dividend Aristocrat (companies with 25+ years of consecutive annual dividend increases); MMM is a Dividend King, which are companies with annual dividend increase streaks of 50+ years. Smith wrote, “There are only 48 Dividend Kings, including 3M.”
Looking at 3M’s operations, Smith wrote, “Today, 3M is a large diversified global manufacturer. It manufactures ~60,000 products, which are sold in ~200 countries around the world.”“To raise dividends for more than 60 years requires multiple durable competitive advantages,” he said. “For 3M, technology and intellectual property are its biggest competitive advantages.
“3M has more than 40 technology platforms and a team of scientists dedicated to fueling innovation. Innovation has provided 3M with over 100,000 patents obtained throughout its history, which helps fend off competitive threats,” Smith added.
Smith notes that the company has achieved this by maintaining a well diversified business structure. “3M is comprised of four divisions,” he said.
Regarding those 4 segments, Smith wrote:
The Safety & Industrial division produces tapes, abrasives, adhesives and supply chain management software, as well as personal protective gear and security products.
The Health Care segment supplies medical and surgical products, as well as drug delivery systems.
Transportation & Electronics division produces fibers and circuits with a goal of using renewable energy sources while reducing costs.
The Consumer division sells office supplies, home improvement products, protective materials and stationery supplies.
Looking at the stock’s recent performance, Smith said, “3M has struggled to generate growth over the past few years. Still, 3M maintains a promising long-term outlook.” He continued, “We believe the company is capable of growing adjusted earnings-per-share by 5% per year over the next five years.”
Moving onto MMM’s valuation, Smith wrote, “Based on expected adjusted earnings-per-share of ~$8.75 for 2023, 3M stock has a price-to-earnings ratio of 13.1.”“This is lower than its average valuation,” he added. Smith continued, “Our estimate of fair value is a price-to-earnings ratio of 17, which is a little below its 10-year historical average, but we believe it is warranted due to slowing growth and rising interest rates.” He also touched upon some of the negative catalysts that have inspired this relative undervaluation, writing, “3M is facing a number of uncertainties, including litigation headwinds, and global supply chain disruptions and logistics challenges.”
Bullish Nobias Credible Analysts Opinions:
These litigation concerns were the topic of an article published on Friday by Nobias 4-star rated author, Bretty Ashcroft Green titled, “3M: Positive Lawsuit Developments For This Cheap Dividend King”.
Green quoted a Seeking Alpha headline which read: “3M's stock jumped more than 10% on Friday morning after Bloomberg News reported the company agreed to a tentative settlement of at least $10 billion with a variety of U.S. cities and towns to resolve water pollution claims tied to "forever chemicals.” “Let's take a look at how cheap MMM stock might be after deducting some litigation cost assumptions combined with the exit of 3M's PFAS business come 2025,” he continued.
Green wrote, “I'm going to make a maybe not-so-conservative assumption here and assume that there are $30 Billion in litigation costs to carry forward.” He also noted that things could be worse. “I'm baking in $30 Billion to my equation, some were floating numbers above $100 Billion just for the PFAS portion alone. You never know where this will wind up,” Green said. He compared 3M’s legal issues to the talcum powder headwinds that healthcare company Johnson and Johsnon (JNJ) faces and put a spotlight on a recent $8.9 billion settlement that JNJ agreed to pay. “The proposed settlement would be paid out over 25 years through a subsidiary, which filed for bankruptcy to enable the $8.9 billion trust, Johnson & Johnson said in a court filing,” he wrote.
“Basically,” Green continued, “a trust is set up for the payout to occur over 25 years. I would assume something similar here. With that in mind, $30 Billion over 25 years would be a litigation cost of $1.2 Billion a year.” He noted that during the trailing twelve months, 3M Company generated $5.45 billion of net income. Therefore, he says that the company could cover this theoretical liability easily, with upwards of $4.1 billion of retained owner earnings left over.
Green says that owner earnings are one of the primary metrics that famed value investor, Warren Buffett, used when evaluating businesses, and with that in mind, he wrote: “Buffett discounted stabilized businesses such as these at the 10-year treasury rate. I baked in a high- and a low-end market cap based on the long and short ends of the risk-free yield curves. Blending the two gives a fair market cap of $98 billion. There are 551.672 million shares outstanding as of June 2, 2023. This gets us to a fair value of $177.64 a share based on these assumptions.”
Nicholas Ward is a Senior Investment Analyst at Wide Moat Research. He has spent the last 8 years writing about the stock market at various publications, including Seeking Alpha, The Street, Forbes Real Estate Investor, Sure Dividend, The Dividend Kings, iREIT, Safe High Yield, and The Intelligent Dividend Investor.
Green said that he personally owns 3M shares, writing, “I, like most, have been waiting to hear any revelations in the 3M court case. $10 billion sounds like a lot, with more to come, but at least we're getting some rational judgments.” With this news in hand, Green concluded his piece by stating that he plans to begin “buying” MMM shares again.
Overall bias of Nobias Credible Analysts and Bloggers:
Looking at credible analyst opinions on MMM shares, two out of the four credible individuals that Nobias tracks have expressed bearish outlooks for 3M shares. The credible author community is equally torn; 50% of recent reports published by these credible authors have expressed a “neutral” bias.
The most recent update that we’ve seen from a credible Wall Street analyst comes from Citi’s Andrew Kaplowitz, who is a Nobias 5-star rated analyst. According to the Fly on the Wall, “Citi analyst Andrew Kaplowitz raised the firm's price target on 3M to $126 from $117 and keeps a neutral rating on the shares. The analyst says megatrends and "still emerging fiscal tailwinds" should help moderate the potential downside for industrials in a slowing macro-economic environment. In addition, improving price versus cost trends and gradually improving supply chains should remain supportive of improving profitability for much of the group, Kaplowitz tells investors in a 2023 outlook research note.”
Overall, the average price target applied to 3M Company by credible analysts tracked by the Nobias algorithm is $129.00. After 3M’s rally on Friday, shares are trading for $102.53, meaning that the $129.00 average price target implies upside potential of approximately 25.8%.
Disclosure: Nicholas Ward has no MMM position. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.
Case Study: Verizon (VZ) stock according to high performing analysts
Despite the Amazon headwinds, Verizon shares appear to be historically cheap at current levels, trading with a single digit price-to-earnings ratio that represents a roughly 50% discount to their historical averages. Furthermore, Verizon shares provide investors with a 7.31% dividend yield after their recent sell-off.
Nobias Insights: 57% of recent articles published by credible authors focused on VZ shares offer a “bullish” bias. Both of the two credible Wall Street analysts who cover Verizon believe that shares are likely to rise in value. The average price target being applied to VZ by these credible analysts is $47.50, which implies an upside potential of approximately 37.4% relative to the stock’s current share price of $34.58.
Bullish Take: A recent analyst note from Nobias 5-star rated analyst, Simon Flattery, stated, “Morgan Stanley analyst Simon Flannery upgraded Verizon Communications to Overweight from Equal Weight with a price target of $44, up from $41, which offers over 20% total returns. Following the stock's significant underperformance in 2022, Verizon trades at a "historically attractive valuation on an absolute and relative basis," Flannery tells investors in a research note.”
Bearish Take: Reinhardt Krause, a Nobias 5-star rated author, stated, “Telecom stocks tumbled Friday on renewed reports that e-commerce giant Amazon.com plans to resell mobile phone services in the U.S. through its Prime loyalty program.”
Key Points
Performance
VZ shares fell by 0.85% this week, pushing their year-to-date losses down to -13.81%. This compares poorly to the S&P 500, which is up by 11.98% on a year-to-date basis.
Event & Impact
This week, rumors began to swirl that Amazon is interested in potentially disrupting the consumer wireless business by providing cellular services to Amazon Prime members. Oftentimes, when Amazon enters a new industry, it quickly becomes the 800-pound gorilla that its peers have to contend with. This caused a sell-off in the telecommunications space on Friday.
Noteworthy News:
Despite the Amazon headwinds, Verizon shares appear to be historically cheap at current levels, trading with a single digit price-to-earnings ratio that represents a roughly 50% discount to their historical averages. Furthermore, Verizon shares provide investors with a 7.31% dividend yield after their recent sell-off.
Nobias Insights
57% of recent articles published by credible authors focused on VZ shares offer a “bullish” bias. Both of the two credible Wall Street analysts who cover Verizon believe that shares are likely to rise in value. The average price target being applied to VZ by these credible analysts is $47.50, which implies an upside potential of approximately 37.4% relative to the stock’s current share price of $34.58.
Bullish Take A recent analyst note from Nobias 5-star rated analyst, Simon Flattery, stated, “Morgan Stanley analyst Simon Flannery upgraded Verizon Communications to Overweight from Equal Weight with a price target of $44, up from $41, which offers over 20% total returns. Following the stock's significant underperformance in 2022, Verizon trades at a "historically attractive valuation on an absolute and relative basis," Flannery tells investors in a research note.”
Bearish Take Reinhardt Krause, a Nobias 5-star rated author, stated, “Telecom stocks tumbled Friday on renewed reports that e-commerce giant Amazon.com plans to resell mobile phone services in the U.S. through its Prime loyalty program.”
VZ May 2023
On Friday the U.S. stock market rallied in a major way in response to the debt ceiling bill being passed by the Senate, signaling that an unprecedented debt default was no longer a threat to the U.S. economy.
The S&P 500 rose by 1.45% on Friday. The Dow Jones Industrial Average was up by 2.12%. And the tech-heavy Nasdaq was up by 1.07%. In other words, this was a broad based rally; however, two notable exceptions were the major U.S. wireless companies, AT&T (T) and Verizon (VZ).
During Friday’s trading session AT&T shares fell by 3.80% and Verizon dipped by 3.19%.This was in response to headlines that popped up regarding news that Amazon (AMZN) could be a competitive threat to the U.S. wireless companies in the future.
Bearish Nobias Credible Analysts’ Opinions:
Reinhardt Krause, a Nobias 5-star rated author, covered this news in a report published at Investors.com on Friday. Krause wrote, “Telecom stocks tumbled Friday on renewed reports that e-commerce giant Amazon.com plans to resell mobile phone services in the U.S. through its Prime loyalty program.”
“Dish Network surged and Amazon stock ended the day higher,” he added. “Reports that Amazon could partner with satellite TV broadcaster Dish surfaced a week ago,” Krause said. “Those reports said Dish would sell its prepaid Boost Mobile wireless plans through Amazon. Dish is a newcomer to the wireless phone market.”
However, right now, sources tell Krause that these headlines are more rumor than fact. “In an email to Investor's Business Daily,” he wrote, “an Amazon spokesperson said: "We are always exploring adding even more benefits for Prime members, but don't have plans to add wireless at this time."’
“Meanwhile,” Krause said, “Verizon spokesperson Rich Young in an email said nothing is going on.” He went on to quote Young, who said: "Verizon is not in negotiations with Amazon regarding the resale of the nation's best and most reliable wireless network. Our company is always open to new and potential opportunities, but we have nothing to report at this time."
Krause also noted that AT&T denied any immediate plans. Lastly, Krause highlighted an analyst note that UBS’s John Hodulik provided to clients this week.
According to Krause, Hodulik stated, "We believe such a distribution agreement could help DISH drive subscribers but it is unlikely to drive a meaningful shift in industry competition absent attractive handset promotions. We believe a bigger risk for the industry would be Amazon selling its own branded wireless service."
Bullish Nobias Credible Analysts Opinions:
Yet, in spite of these headlines, the majority of credible authors and analysts that the Nobias algorithm tracks continue to express bullish sentiment towards VZ shares. Gen Alpha, a Nobias 5-star rated author, recently published a bullish article on VZ shares titled, “Verizon: Seriously Undervalued, I'm Adding More”.
The author acknowledged Verizon’s recent underperformance, stating, “The market is undoubtedly concerned about what the future holds for Verizon, given that it lost 263K net consumer wireless postpaid phone customers during the first quarter.”
However, Gen Alpha sees growth coming from other areas of Verizon’s business. “Looking ahead,” they wrote, “fixed wireless continues to present a compelling opportunity for VZ, as it seeks to take a bigger share of the broadband pie.”
Gen Alpha continued, “This is reflected by the incumbent broadband provider Comcast seeing just 5,000 net broadband customer additions during Q1, while Verizon saw 437K total net adds in the same quarter, the highest net adds in over 10 years.” But, they said, this isn’t a story about sub-par losses, but instead, rising profits and attractive valuation.
“While the aforementioned decline in postpaid wireless customers is worth monitoring, it’s important to note that overall profitability is a more important metric,” Gen Alpha wrote. Regarding those bottom-line results, Gen Alpha stated, “Verizon’s results on the profitability front were better, as it grew wireless service revenue by 3% YoY to $11.9 billion during Q1 and grew adjusted EBITDA by $1.5 billion over the prior year period to $8.3 billion.” And, they continued, this bottom-line success is trickling down to shareholders in the form on a high dividend yield.
“Importantly for income investors, VZ now sports one of its highest yields in its history, as shown below,” wrote Gen Alpha. “The 7.2% dividend yield is well-covered by a 52% payout ratio and comes with 18 years of consecutive growth,” they continued. Furthermore, regarding the strength of VZ’s dividend, Gen Alpha said: “This yield is convenient because of the Rule of 72, which is a great way of calculating when your money will double. Based on this calculation, investors could double their capital every 10 years (72 divided by 7.2), even if Verizon doesn’t grow its dividend over the long-term, which I don’t believe will be the case.”
Looking at dividend safety, the author points out that Verizon maintains an investment grade rated balance sheet, stating, “Meanwhile, VZ maintains a BBB+ credit rating, and its net unsecured debt to adjusted EBITDA ratio stands at a reasonable 2.7x, down 0.1x from the prior year period.”
“Lastly,” the author says, “VZ appears to be in deep value territory at the current price of $36.05 with a forward PE of just 7.7, sitting far below its normal PE of 14.3.”
Gen Alpha concluded their article highlighting their “Buy” rating on VZ shares, stating, “I'm taking the opportunity to increase my income by adding at current levels, and income investors may be well-served to take a hard look at VZ at its current deeply discounted price.”
Dividend Sensei, a Nobias 4-star rated author, also recently put a spotlight on Verizon’s sell-off and the stock’s intriguing valuation in an article published at Seeking Alpha. They wrote, “Private equity is paying 11X for companies right now, meaning Verizon is dirt cheap by even private equity standards.”
“In fact,” Dividend Sensei continued, “in the first ten seasons of Shark Tank, the average multiple for a deal was 7X.” Therefore, they said, “Verizon isn't just a good deal; it's a Shark Tank-level good deal that pays a relatively safe 7% yield.
“What does a 7X multiple mean? “Verizon is priced for -3% permanent growth,” Dividend Sensei stated. With that in mind, they added, “You'll make a lot of money if it grows faster than that. The dividend will be safe forever if it grows 0% or faster.”
It’s not just credible authors who have noticed Verizon’s unique value proposition. In his most recent update on Verizon shares, Nobias 5-star rated analyst, Simon Flattery, increased his price target on VZ to $44.00/share.
Nicholas Ward is a Senior Investment Analyst at Wide Moat Research. He has spent the last 8 years writing about the stock market at various publications, including Seeking Alpha, The Street, Forbes Real Estate Investor, Sure Dividend, The Dividend Kings, iREIT, Safe High Yield, and The Intelligent Dividend Investor.
According to the Fly on the Wall, “Morgan Stanley analyst Simon Flannery upgraded Verizon Communications (VZ) to Overweight from Equal Weight with a price target of $44, up from $41, which offers over 20% total returns. Following the stock's significant underperformance in 2022, Verizon trades at a "historically attractive valuation on an absolute and relative basis," Flannery tells investors in a research note. The analyst sees room for improved operational performance in 2023 and the company's free cash flow ramping up by 45% by 2024. He switched his preference to Verizon from AT&T [sic], a stock he downgraded this morning to Equal Weight.”
Overall bias of Nobias Credible Analysts and Bloggers:
Overall, 100% of the credible analysts who cover VZ shares believe that they’re likely to increase in value. The average price target currently being applied to VZ by these analysts is $47.50. Today, VZ shares trade for $34.58, meaning that the average credible analyst price target implies an upside potential of approximately 37.4%. Also, 57% of recent articles published on Verizon by credible authors have expressed a “bullish” bias towards shares.
Disclosure: Nicholas Ward is long VZ. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.
Case Study: Nvidia (NVDA) stock according to high performing analysts
It’s true that NVDA beat estimates on both the top and bottom lines during Q1, but that’s not why the stock rallied more than 26% this week. The company issued Q2 guidance of $11 billion in sales, which was more than 50% above Wall Street’s Q2 estimate of $7.2 billion coming into the quarter. The demand for Nvidia’s data center and artificial intelligence chip sales is much higher than anyone on Wall Street projected coming into Q1 and after NVDA’s CEO’s comments during the company’s quarterly conference call, it appears that this positive momentum has long-term potential.
Nobias Insights: 56% of recent articles published by credible authors focused on NVDA shares offer a “bullish” bias. However, after NVDA’s big rally this week, only three out of the seven credible Wall Street analysts covering Nvidia believe that shares are likely to rise in value. The NVDA average price target of these analysts is $253.57, implying a downside risk of 35% relative to the current share price of $389.46.
Bullish Take: Luke Lango, a Nobias 4-star rated author, said, “Nvidia is guiding for $11 billion in revenues next quarter. Wall Street was looking for just $7 billion. That’s a $4 billion beat on expectations – the biggest beat I’ve ever seen in my career.”
Bearish Take: Howard Smith, a Nobias 4-star rated author, stated, “The company's market cap vaulted up to nearly $950 billion after the stock's run this week. That puts it at an extremely high valuation based on its price-to-earnings (P/E) ratio. Even looking forward to the next fiscal year, the P/E is still at a lofty level around 50.”
Key Points
Performance
NVDA shares rose by 26.41% this week, pushing their year-to-date gains up to 172.06%. This compares favorably to both the S&P 500 and the Nasdaq Composite Index, which are up by 9.97% and 24.92%, respectively, on a year-to-date basis
Event & Impact
Nvidia posted its first quarter results this week, beating analyst consensus estimates on both the top and bottom lines. During Q1, NVDA’s revenue totaled $7.19 billion, beating Wall Street’s consensus estimate by $670 million. Nvidia’s Q1 non-GAAP earnings-per-share came in at $1.09, which was $0.17/share above consensus estimates.
Noteworthy News:
It’s true that NVDA beat estimates on both the top and bottom lines during Q1, but that’s not why the stock rallied more than 26% this week. The company issued Q2 guidance of $11 billion in sales, which was more than 50% above Wall Street’s Q2 estimate of $7.2 billion coming into the quarter. The demand for Nvidia’s data center and artificial intelligence chip sales is much higher than anyone on Wall Street projected coming into Q1 and after NVDA’s CEO’s comments during the company’s quarterly conference call, it appears that this positive momentum has long-term potential.
Nobias Insights
56% of recent articles published by credible authors focused on NVDA shares offer a “bullish” bias. However, after NVDA’s big rally this week, only three out of the seven credible Wall Street analysts covering Nvidia believe that shares are likely to rise in value. The NVDA average price target of these analysts is $253.57, implying a downside risk of 35% relative to the current share price of $389.46.
Bullish Take Luke Lango, a Nobias 4-star rated author, said, “Nvidia is guiding for $11 billion in revenues next quarter. Wall Street was looking for just $7 billion. That’s a $4 billion beat on expectations – the biggest beat I’ve ever seen in my career.”
Bearish Take Howard Smith, a Nobias 4-star rated author, stated, “The company's market cap vaulted up to nearly $950 billion after the stock's run this week. That puts it at an extremely high valuation based on its price-to-earnings (P/E) ratio. Even looking forward to the next fiscal year, the P/E is still at a lofty level around 50.”
NVDA May 2023
Nvidia (NVDA) posted its first quarter earnings this week, which absolutely blew Wall Street away. That’s not hyperbole. Nvidia’s Q2 guidance was more than 50% above consensus Wall Street estimates, causing shares to rally by nearly 26.5% this week, adding nearly $200 billion to the stock’s market cap at its recent highs.
Nvidia ended the week with a market capitalization of $963.2 billion. No semiconductor stock has ever reached the $1 trillion market cap threshold, and after this week’s rally, it appears that NVDA shares may be the first to reach that milestone.
Despite this quarter, which inspired dozens of analysts to raise their price target on shares, there is a concern amongst the credible individuals that Nobias tracks that the stock’s valuation is too high. Moving forward, NVDA remains a battleground stock as growth investors and value investors attempt to find a middle ground. But, in the near-term, the company’s momentum remains incredibly strong with shares now up by 172.06% during 2023 thus far.
Bearish Nobias Credible Analysts’ Opinions:
After Nvidia’s earnings report and ensuing stock rally, Howard Smith, a Nobias 4-star rated author, published an article at the Motley Fool titled, “Why Nvidia Stock Broke Out This Week”. He wrote that the company’s quarterly results were “excellent”, noting that Nvidia, “showed a recovery in gaming and record revenue from Nvidia's data center segment” and most importantly, said that, “it was what the company said about how fast artificial intelligence (AI) is boosting sales in that latter segment that has investors scrambling to buy the stock.”
Looking at the quarterly results, Nvidia’s revenue totaled $7.19 billion, beating Wall Street’s consensus estimate by $670 million. The company’s non-GAAP earnings-per-share came in at $1.09, which was $0.17/share above estimates. Looking at the results, Smith said, “Nvidia reported $7.2 billion in sales, when its own most recent projection was $6.5 billion.” “But,” he continued, “it was the second-quarter estimate of $11 billion in sales that shocked investors.”
The company updated guidance for Q2, stating that it expected sales to be in the $11 billion area, which was approximately 50% above the $7.11 billion analyst consensus. Smith noted that during its quarterly report, NVDA’s CEO, Jensen Huang, explained why the demand for his company’s chips is so strong.
“Huang went on to explain that $1 trillion worth of data center infrastructure will have to transition existing processing units to accelerated computing chips,” Smith said. “And Nvidia is a leader in this area,” he added.
Despite the stock’s strong momentum after that big second quarter guidance raise, Smith stated that Nvidia stock could have valuation issues. “The company's market cap vaulted up to nearly $950 billion after the stock's run this week,” he said. “That puts it at an extremely high valuation based on its price-to-earnings (P/E) ratio. Even looking forward to the next fiscal year, the P/E is still at a lofty level around 50.”
Looking at historical averages, over the last 10 and 20-year periods, Nvidia’s average price-to-earnings ratios were 36.8x and 33.9x, respectively. Therefore, the stock’s current earnings multiple is well above the stock’s normal P/E levels; however, it appears that the market believes the premium is warranted due to Nvidia’s potential to continue to beat expectations and post unexpectedly high growth moving forward.
Bullish Nobias Credible Analysts Opinions:
Luke Lango, a Nobias 4-star rated author, published an article this week that put a spotlight on the very unique nature of Nvidia’s growth this quarter. He began his article by saying, “The company absolutely crushed Wall Street revenue and earnings estimates for the first quarter. Revenues beat estimates by a whopping $670 million. Earnings topped estimates by nearly 20%.” “But it was the guidance that really turned heads,” he added.
Lango wrote, “Nvidia is guiding for $11 billion in revenues next quarter. Wall Street was looking for just $7 billion. That’s a $4 billion beat on expectations – the biggest beat I’ve ever seen in my career.” He noted that Nvidia has been public since 1999, having survived - and thrived - throughout each recession since; however, he said that he’s never seen a quarter like this one.
Regarding Nvidia’s growth figures, Lango wrote, “That marks the first time in public company history – the first time in 25 years – that Nvidia will report a 50% surge in sales from one quarter to the next.” And, he continued, this trend is long-term, secular growth tailwinds. He made it clear that artificial intelligence is driving Nvidia’s growth and Lango believes that this trend is far from a fad. “AI isn’t crypto. It isn’t the metaverse. It’s not pot stocks, NFTs, ICOs, or SPACs,” he said. “It is the second coming of the internet – but bigger”.Looking at the market’s response to NVDA’s quarter on Wednesday, he said, “Altogether, AI stocks added about $300 billion in market value in about an hour yesterday afternoon.”
“For context,” he said, “that’s more the entire market value of Coca-Cola.”“Coca-Cola was founded in 1893. It spent 131 years trying to create $300 billion in economic value,” he added. He remains bullish on Nvidia moving forward, concluding his piece, “The AI stock boom has arrived.”
Nobias Credible Analysts
According to Yahoo Finance, since NVDA reported earnings on May 24th, 2023, 29 different Wall Street analysts have updated their opinions on NVDA shares. Overall, there are 40 Wall Street analysts who cover Nvidia shares, and the average price target that they’ve attached to NVDA shares is $424.92. This implies that even after NVDA’s 26% weekly rally, shares have upside potential of approximately 9.1%.
However, looking at the opinions expressed by the credible Wall Street analysts that the Nobias algorithm tracks (only those with Nobias ratings of 4 or 5 stars) the sentiment surrounding NVDA is much more bearish. This week,, a slew of these credible analysts raised their price targets in response to Nvidia’s quarter; however, their average target is still well below the stock’s current share price.
For instance, Ross Seymore of Deutsche Bank, a Nobias 5-star rated analyst, came away from the quarter with a very bullish outlook. According to the Fly on the Wall, “Deutsche Bank analyst Ross Seymore raised the firm's price target on Nvidia to $390 from $220 and keeps a Hold rating on the shares. "Just wow" is how the analyst describes the company's Q1 results.”
Seymore’s updated target is in-line with the stock’s post-rally share price. Yet, another 5-star rated analyst, Matt Bryson of Wedbush, came away from the quarter with a price target that represents double digit downside potential.
Nicholas Ward is a Senior Investment Analyst at Wide Moat Research. He has spent the last 8 years writing about the stock market at various publications, including Seeking Alpha, The Street, Forbes Real Estate Investor, Sure Dividend, The Dividend Kings, iREIT, Safe High Yield, and The Intelligent Dividend Investor.
According to the Fly on the Wall, “Wedbush analyst Matt Bryson raised the firm's price target on Nvidia to $290 from $216 and keeps a Neutral rating on the shares ahead of quarterly results. The firm expects Nvidia to exceed current Street and Wedbush targets and to offer a robust forward outlook.
The question rather, in the firm's view, is the magnitude and nature of upside the company will realize. Nvidia's data center business has only strengthened through early 2023, and Wedbush's checks through March into early April suggested surprisingly robust activity in gaming. Net, the firm sees almost no risk Nvidia comes up short this quarter or with guidance.”
Overall bias of Nobias Credible Analysts and Bloggers:
Credible authors that the Nobias algorithm tracks are more constructive on shares, with 56% of recent articles published on NVDA expressing a “bullish” bias.
On the other hand, of the seven credible analysts who cover NVDA shares, only three of them believe that the stock still has upside potential, leaving credible analysts bearish on NVDA . Overall, the average price target being applied to NVDA by these credible individuals is $253.47. Relative to the stock’s current share price of 389.46, that represents a downside risk of nearly 35%.
Disclosure: Nicholas Ward is long NVDA. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.
Case Study: Lowe's (LOW) stock according to high performing analysts
While LOW beat analyst estimates during Q1 its management team highlighted a slew of macroeconomic headwinds that is causing consumer weakness, leading it to lower its full-year sales and earnings guidance moving forward. However, Lowe’s management did show confidence this week, raising its dividend by 4.8%, marking the 60th consecutive year that Lowe’s has increased its annual dividend.
Nobias Insights: 65% of recent articles published by credible authors focused on LOW shares offer a “bullish” bias. 4 out of the 7 credible Wall Street analysts who cover Lowe’s believe that shares are likely to rise in value. The average price target applied to LOW by these credible analysts is $223.86, implying an upside potential of approximately 8.4% relative to the stock’s current share price of $206.52.
Bullish Take: Nobias 4-star rated analyst, Chris Graja of Argus, said, “Argus adds, however, that Lowe's remains well positioned to deliver future earnings growth and market share gains even as it navigates tighter monetary policy and consumers who have less money for discretionary spending.”
Bearish Take: Salman Ahmad, a Nobias 5-star rated author,stated, “When the Coronavirus pandemic hit, home improvement retailers did well. Recently, they became popular defensive plays amid inflation and global recession fears. According to Lowe’s and Home Depot’s Q1 financial results, rising interest rates are stifling the mortgage refinancing book that drove pandemic-era sales, and consumers appear cautious amid recession fears.”
Key Points
Performance
LOW shares fell by 0.55% this week, pushing their year-to-date gains down to 3.76%. This compares poorly to both the S&P 500 which is up by 9.97% on a year-to-date basis.
Event & Impact
Lowe’s posted its first quarter results this week, beating analyst consensus estimates on both the top and bottom lines. During Q1, LOW’s revenue totaled $22.35 billion, beating Wall Street’s consensus estimate by $670 million. Lowe’s Q1 non-GAAP earnings per share came in at $3.67, which was $0.22/share above consensus estimates.
Noteworthy News:
While LOW beat analyst estimates during Q1 its management team highlighted a slew of macroeconomic headwinds that is causing consumer weakness, leading it to lower its full-year sales and earnings guidance moving forward. However, Lowe’s management did show confidence this week, raising its dividend by 4.8%, marking the 60th consecutive year that Lowe’s has increased its annual dividend.
Nobias Insights
65% of recent articles published by credible authors focused on LOW shares offer a “bullish” bias. 4 out of the 7 credible Wall Street analysts who cover Lowe’s believe that shares are likely to rise in value. The average price target applied to LOW by these credible analysts is $223.86, implying an upside potential of approximately 8.4% relative to the stock’s current share price of $206.52.
Bullish Take Nobias 4-star rated analyst, Chris Graja of Argus, said, “Argus adds however that Lowe's remains well positioned to deliver future earnings growth and market share gains even as it navigates tighter monetary policy and consumers who have less money for discretionary spending.”
Bearish Take Salman Ahmad, a Nobias 5-star rated author, stated, “When the Coronavirus pandemic hit, home improvement retailers did well. Recently, they became popular defensive plays amid inflation and global recession fears. According to Lowe’s and Home Depot’s Q1 financial results, rising interest rates are stifling the mortgage refinancing book that drove pandemic-era sales, and consumers appear cautious amid recession fears.”
LOW May 2023
On a year-to-date basis, the S&P 500 is up by nearly 10%. When it comes to the major U.S. stock market indexes, the tech-heavy Nasdaq Composite is leading the way, up by 24.92%. And this divergence puts a spotlight on the underlying strength of the 2023 stock market rally; while it’s true that the broader indexes are up on the year, this is actually quite narrow.
Just a few big-tech stocks are accounting for the majority of the bullish momentum during 2023, driven by popular trends such as artificial intelligence. The major indexes are market cap-weighted, which means that the biggest companies will have the most significant impact on price movement. And this sets up an interesting dichotomy between the Main Street economy and the Wall Street economy (which is being largely driven by success coming out of Silicon Valley).
With regard to the health of Main Street, home improvement retailer Lowe's (LOW) often acts as a true barometer. Lowe’s reported earnings this week, which included lower forward guidance due to falling same store sales, signaling that the health of the average consumer is weakening.
This momentum was contrary to the bullish results posted by companies like Nvidia (NVDA) and Marvell Technology (MRVL), two leading semiconductor names in the artificial intelligence industry, which saw their share prices rise by 26% and 44%, respectively, this week alone.
“Real” economy plays like Lowe’s are underperforming in today’s tech-driven market environment. For instance, LOW shares are only up by 3.76% in 2023 so far. However, the credible author and analyst communities continue to express bullish bias towards LOW shares as a potential contrarian play relative to A.I. momentum.
Bearish Nobias Credible Analysts’ Opinions:
Salman Ahmad, a Nobias 5-star rated author, covered Lowe’s Q1 results in an article that he published at CTN News this week. Ahmad wrote, “Despite better-than-expected first-quarter results on Tuesday, Lowe’s (LOW) revised its full-year guidance as lumber prices dropped and home improvement enthusiasm faded.” He highlighted the macroeconomic pressures that Lowe’s faces at the moment, writing, “When the Coronavirus pandemic hit, home improvement retailers did well. Recently, they became popular defensive plays amid inflation and global recession fears. According to Lowe’s and Home Depot’s Q1 financial results, rising interest rates are stifling the mortgage refinancing book that drove pandemic-era sales, and consumers appear cautious amid recession fears.”
Looking at the company’s first quarter results, Ahmad said, “In Q1, Lowe’s reported EPS of $3.67, up 5% in comparison to $22.35 billion in revenue. In the first quarter, same-store sales declined 4.3%.” “Home improvement retailer Lowe’s reported lower comparable sales in Q1 due to a combination of falling lumber prices, unfavorable weather, and a decrease in discretionary sales,” he added.
Looking at the company’s updated future guidance figures, Ahmad wrote, “It now expects sales of between $87-$89 billion in 2023, down from the previous estimate of $88-$90 billion.” “According to the company,” he continued, “same-store sales will decrease between 2% and 4%. Adjusted diluted earnings per share are forecast at $13.20-$13.60, down from $13.60-$14.00 previously.”
Bullish Nobias Credible Analysts Opinions:
In an effort to respond to the post-pandemic slowdown, Parija Kavilanz, a Nobias 5-star rated author, notes that the company has developed a new strategy to pivot into rural markets in her recent article published at CNN.com.
“Lowe’s needs a new, more dependable engine for growth as sales slow in its vast fleet of urban and suburban retail stores. It appears to have found it: rural America,” she said. Kavilanz continued, “The home improvement chain said it’s rolling out a one-stop-shop store concept tailor made for shoppers living in rural communities. New or revamped stores will cater to that market’s indoor and outdoor needs with expanded product categories in pet, livestock, trailers, fencing, utility vehicles like ATVs, clothing and specialized hardware.”
“Lowe’s told analysts that it had piloted the rural store concept a year ago with successful results and was now expanding the idea into existing Lowe’s stores, primarily in the South, Midwest and Northeast throughout the summer,” Kavilanz wrote. Moving forward, she says that this is a 2023 growth story for the company.
During its recently quarter report, Kavilanz notes that, “Lowe’s ((LOW)) said it was scaling its rural store format to as many as 300 additional stores by year end for rural customers.” This is an interesting pivot by Lowe’s because the rural market is already dominated by Tractor Supply Company (TSCO). TSCO has grown its annual earnings-per-share for 14 consecutive years, with 10 of those annual EPS growth rates in the double digits.
However, Lowe’s $122.3 billion market cap is significantly larger than Tractor Supply’s $23.4 billion market cap, implying that Lowe’s has the cash flows to compete and potentially disrupt TSCO’s existing market share dominance. Either way, as Kavilanz points out, with urban/suburban sales slowing, Lowe’s wants a piece of the fast growing rural lifestyle market. Although Lowe’s share price has languished in recent weeks, the company continues to provide strong shareholder returns to investors.
During the company’s Q1 earnings conference call, Lowe’s CFO, Brandon Sink said, “During the quarter, the company generated $1.7 billion in free cash flow. We repurchased 10.6 million shares for $2.1 billion and paid $633 million in dividends at $1.05 per share, returning $2.8 billion to our shareholders.”
Also, this week, Lowe’s announced that it was increasing its annual dividend by 4.8%, from $1.05/share to $1.10/share. Lowe’s has increased its annual dividend for 60 consecutive years. Currently, LOW shares yield 2.13%. In response to Lowe’s Q1 report, Nobias 4-star rated analyst, Chris Graja of Argus, reduced his price target on shares, while maintaining a “buy” rating.
According to the Fly on the Wall, “Argus lowered the firm's price target on Lowe's to $250 from $290 but keeps a Buy rating on the shares after its Q1 results. The company's sales were down 5.6% as lumber deflation hurt the top line, the analyst tells investors in a research note. Argus adds however that Lowe's remains well positioned to deliver future earnings growth and market share gains even as it navigates tighter monetary policy and consumers who have less money for discretionary spending. The firm is cutting its FY24 EPS estimate to $13.45 from $13.84 and its FY25 estimate to $15.00 from $15.50 however.”
Scott Ciccarelli of Trust, a Nobias 4-star rated analyst, did the same thing. According to the Fly on the Wall, “Truist analyst Scot Ciccarelli lowered the firm's price target on Lowe's to $229 from $235 but keeps a Buy rating on the shares. The company's below-consensus outlook was widely expected given weather factors, lumber deflation, and a softer consumer spending environment, the analyst tells investors in a research note.
Nicholas Ward is a Senior Investment Analyst at Wide Moat Research. He has spent the last 8 years writing about the stock market at various publications, including Seeking Alpha, The Street, Forbes Real Estate Investor, Sure Dividend, The Dividend Kings, iREIT, Safe High Yield, and The Intelligent Dividend Investor.
The firm adds, however, that it remains bullish on the longer-term outlook as Lowe's earnings algorithm seems reasonably stable and its valuation at 15.5-times expected 2023 earnings helps provide support. Truist notes that if the Fed is done raising rates, then the stock will likely move ahead of fundamentals.”
In short, these two analysts were disappointed with Lowe’s falling sales and lowered guidance; however, they believe that shares are too cheap at their current cash flow multiples.
Overall bias of Nobias Credible Analysts and Bloggers:
Overall, 4 out of the 7 credible analysts that the Nobias algorithm tracks who cover Lowe’s stock believe that shares are likely to increase in value. Currently, the average price target being applied to LOW by these credible individuals is $223.86. Compared to LOW’s current share price of $206.52, this represents an upside potential of approximately 8.4%.
Combined with the stock’s 2%+ dividend yield, credible analysts are signaling double digit upside potential. The credible authors that Nobias tracks share this positive sentiment. 65% of recently published articles on LOW shares have expressed a “bullish” bias.
Disclosure: Nicholas Ward is long LOW and has no TSCO position. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.
Case Study: Intuit (INTU) stock according to high performing analysts
Q3 is Intuit’s biggest quarter of the year, by far, due to tax season’s positive impact on its TurboTax brand. The company posted year-over-year growth on both the top and bottom lines during Q3; however, its sales figure fell short of analyst estimates. Furthermore, Intuit’s Q4 guidance came in lower than Wall Street’s expectations on the top-line as well. This caused shares to dip during the week even though management raised its full-year EPS guidance figures (on the back on the strong Q3 beat).
Nobias Insights: 59% of recent articles published by credible authors focused on INTU shares offer a “bullish” bias. 4 out of the 5 credible Wall Street analysts who cover Intuit believe that shares are likely to rise in value. The average price target being applied to INTU by these credible analysts is $472.20, which implies an upside potential of approximately 12.85% relative to the stock’s current share price of $418.43.
Bullish Take: Angela Harmantas, a Nobias 4-star rated author, said, “Despite these variations, Intuit raised its guidance for the full fiscal year 2023, expecting higher revenue and operating income growth than previously projected on the strength of its Small Business unit.”
Bearish Take: Brody Ford, a Nobias 4-star rated author,stated, “The decrease in the expected number of tax filers “equates to approximately $200 million of negative impact to revenue per TurboTax, versus our original expectations,” Chief Executive Officer Sasan Goodarzi said on a conference call after the results,”
Key Points
Performance
Intuit shares fell by 6.37% this week, pushing their year-to-date gains down to 6.97%. This compares poorly to both the S&P 500 and the Nasdaq Composite Index, which are up by 9.97% and 24.92%, respectively, on a year-to-date basis.
Event & Impact
Intuit posted its fiscal 2023 third quarter results this week, missing consensus estimates on the top-line but beating them on the bottom-line. During Q3, INTU’s revenue totaled $6.02 billion, missing Wall Street’s consensus estimate by $70 million. Intuit’s Q3 non-GAAP earnings-per-share came in at $8.92, which was $0.43/share above consensus estimates
Noteworthy News:
Q3 is Intuit’s biggest quarter of the year, by far, due to tax season’s positive impact on its TurboTax brand. The company posted year-over-year growth on both the top and bottom lines during Q3; however, its sales figure fell short of analyst estimates. Furthermore, Intuit’s Q4 guidance came in lower than Wall Street’s expectations on the top-line as well. This caused shares to dip during the week even though management raised its full-year EPS guidance figures (on the back on the strong Q3 beat).
Nobias Insights
59% of recent articles published by credible authors focused on INTU shares offer a “bullish” bias. 4 out of the 5 credible Wall Street analysts who cover Intuit believe that shares are likely to rise in value. The average price target being applied to INTU by these credible analysts is $472.20, which implies an upside potential of approximately 12.85% relative to the stock’s current share price of $418.43.
Bullish Take Angela Harmantas, a Nobias 4-star rated author, said, “Despite these variations, Intuit raised its guidance for the full fiscal year 2023, expecting higher revenue and operating income growth than previously projected on the strength of its Small Business unit.”
Bearish Take Brody Ford, a Nobias 4-star rated author, stated, “The decrease in the expected number of tax filers “equates to approximately $200 million of negative impact to revenue per TurboTax, versus our original expectations,” Chief Executive Officer Sasan Goodarzi said on a conference call after the results,”
INTU May 2023
Intuit (INTU), a financial services software provider that owns notable brands such as TurboTax, QuickBooks, Mint, and Credit Karma, posted its fiscal 2023 third quarter earnings results this week. This is the company’s largest and most significant quarter of the year because it includes tax season.
Investors who follow this company eagerly await the Q3 results each year because of how heavily weighted the statistics are (relative to the company’s full-year results). For instance, last year during fiscal 2022, Intuit’s Q3 results accounted for approximately 59.8% of its full-year earnings. When Intuit reported results on May 23, 2023, its results were mixed.
Furthermore, the company’s Q4 guidance came in below Wall Street’s expectations. These disappointing results caused shares to fall by 6.37% this week, pushing INTU’s year-to-date gains down to 6.97%. This means that INTU shares are now underperforming the S&P 500 on the year; that major average is now up by 9.97% during 2023 thus far. Yet, even with this week’s sell-off and Intuit’s near-term underperformance in mind, the majority of both the credible author and credible analysts communities remain bullish on INTU shares moving forward.
Bullish Nobias Credible Analysts’ Opinions:
Patrick Seitz, a Nobias 4-star rated author, covered the company’s third quarter earnings report in an article that he published this week at Investors.com. Looking at the company’s top and bottom-line results, Seitz said, “The Mountain View, Calif.-based company late Tuesday said it earned an adjusted $8.92 a share on sales of $6.02 billion in the quarter ended April 30.” “Analysts polled by FactSet had expected earnings of $8.48 a share on sales of $6.09 billion,” he added, noting that the company beat Wall Street’s expectations on the bottom-line during Q3, but missed on the top-line.
Despite the mixed results, Seitz points out that Intuit continues to post reliable year-over-year growth. He said, “On a year-over-year basis, Intuit earnings rose 17% while sales climbed 7%.” Looking ahead, Seitz touched upon management’s Q4 guidance, stating, “For the quarter ending July 31, Intuit predicted earnings of an adjusted $1.46 a share on sales of $2.64 billion. That's based on the midpoint of its outlook. Wall Street called for earnings of $1.50 a share on sales of $2.45 billion in the fiscal fourth quarter.”
Angela Harmantas, a Nobias 4-star rated author, also published an overview of Intuit’s earnings this week. In her article at Proactive Investor, Harmantas wrote that despite the disappointing Q4 guide, INTU’s strong Q3 earnings-per-share beat is allowing management to raise its full-year earnings guidance.
“Despite these variations,” she said, “Intuit raised its guidance for the full fiscal year 2023, expecting higher revenue and operating income growth than previously projected on the strength of its Small Business unit.” “The firm is expecting full year 2023 revenue of $14.279 billion to $14.317 billion, and earnings per share of $14.20 to $14.25,” Harmantas continued.
Bearish Nobias Credible Analysts Opinions:
Looking at the disappointing Q4 guidance, Brody Ford, a Nobias 4-star rated author, published an article titled, “Intuit Drops After Tax Season Sales Fall Short of Estimates” at Yahoo Finance this week. In that piece, Ford wrote, “Intuit said the number of federal tax returns will decline about 2% by the end of the fiscal year and the market share among customers doing their own taxes will fall about three-quarters of a point.”
“The decrease in the expected number of tax filers “equates to approximately $200 million of negative impact to revenue per TurboTax, versus our original expectations,” Chief Executive Officer Sasan Goodarzi said on a conference call after the results,” he added.
However, Ford noted that like so many other technology-enabled service companies in the market today, Intuit is trying to latch onto the disruptive artificial intelligent (AI) trend that has driven stocks higher in recent weeks.
Ford wrote, “Intuit’s has been steering users toward a live, full-service version of the TurboTax service this year, in an attempt to compete with traditional accountants. “Our future is TurboTax live,” Goodarzi said. “Especially with AI capability, we can really disrupt the assisted segment.”’ He continued, “Goodarzi added that TurboTax already uses artificial intelligence to communicate with customers. The company had about 740 million digital interactions with customers this year, including through automated chat bots, compared with 24 million human interactions”, he said.
Nobias Credible Analysts
Currently, with its recent Q3 results being taken into account, the current consensus estimate for INTU’s full-year EPS results is $14.22 (according to FactSet Research). That estimate represents 20% EPS growth on a year-over-year basis which would mark the company’s 8th consecutive year of positive earnings growth should management hit the mid-point of its recently full-year estimate.
If Intuit is able to post positive earnings growth during fiscal 2023, it would be the 19th year out of the last 20 that Intuit has posted full-year EPS growth. It’s this strong full-year growth outlook that inspired Nobias 4-star rated analyst, Brad Stills, who covers Intuit for Bank of America, to raise his price target on INTU shares.
Nicholas Ward is a Senior Investment Analyst at Wide Moat Research. He has spent the last 8 years writing about the stock market at various publications, including Seeking Alpha, The Street, Forbes Real Estate Investor, Sure Dividend, The Dividend Kings, iREIT, Safe High Yield, and The Intelligent Dividend Investor.
According to the Fly on the Wall, “BofA raised the firm's price target on Intuit to $500 from $485 and keeps a Buy rating on the shares after the company reported "healthy" Q3 results and raised its FY23 outlook. Meaningful Quickbooks upside offset lighter Consumer tax revenue from lower-than-expected tax filings, the analyst noted.”
Stills isn’t alone with this bullish outlook.
Overall bias of Nobias Credible Analysts and Bloggers:
Right now, 4 out of the 5 credible Wall Street analysts tracked by the Nobias algorithm who have offered opinions on INTU shares believe that they’re likely to increase in value. The credible author community that Nobias tracks agrees. 59% of recent articles published by these credible individuals on Intuit expressed a “bullish” bias towards the stock.
Currently, the average price target among the credible Wall Street analysts who cover INTU is $472.20. Intuit shares closed the week trading for $418.43, meaning that this credible analyst average price target implies upside potential of approximately 12.85%.
Disclosure: Nicholas Ward has no INTU position. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.
Case Study: Target (TGT) stock according to high performing analysts
Target beat expectations during Q1; however, management provided disappointing guidance for the current quarter. Also, Target noted that organized crime and wide scale theft remain major issues, representing roughly $500 million in profit losses during the first quarter.
Nobias Insights: 62% of recent articles published by credible authors focused on Target shares offer a “bullish” bias. Three out of the six credible Wall Street analysts who cover TGT believe that shares are likely to rise in value. The average price target being applied to Target by these credible analysts is $180.33, implying upside potential of approximately 18.4% relative to the current share price of $152.28.
Bullish Take: An analyst report from 4-star rated Greg Melich stated, “Evercore ISI analyst Greg Melich raised the firm's price target on Target to $170 from $165 and keeps an In Line rating on the shares, arguing that the company's "beat and keep" Q1 report included "something for everyone."
Bearish Take: Nobias 4-star rated author, Aishwarya Venugopal, stated, “Target Corp on Wednesday forecast a grim second quarter as the retailer struggles with consumers shunning non-essentials such as electronics and home goods in the face of persistently high prices, but maintained its full-year profit expectations.”
Key Points
Performance
Target shares fell by -3.45% this week, pushing their year-to-date gains down to just 0.36%. This compares poorly to the S&P 500, which is up by 9.62% on a year-to-date basis.
Event & Impact
Target posted its first quarter results this week, beating consensus estimates on both the top and bottom lines. During Q1, TGT’s revenue totaled $25.32 billion, beating Wall Street’s consensus estimate by $40 million. Target’s Q1 non-GAAP earnings per share came in at $2.05, which was $0.29/share above consensus estimates.
Noteworthy News:
Target beat expectations during Q1; however, management provided disappointing guidance for the current quarter. Also, Target noted that organized crime and wide scale theft remain major issues, representing roughly $500 million in profit losses during the first quarter.
Nobias Insights
62% of recent articles published by credible authors focused on Target shares offer a “bullish” bias. Three out of the six credible Wall Street analysts who cover TGT believe that shares are likely to rise in value. The average price target being applied to Target by these credible analysts is $180.33, implying upside potential of approximately 18.4% relative to the current share price of $152.28.
Bullish Take An analyst report from 4-star rated Greg Melich stated, “Evercore ISI analyst Greg Melich raised the firm's price target on Target to $170 from $165 and keeps an In Line rating on the shares, arguing that the company's "beat and keep" Q1 report included "something for everyone."
Bearish Take Nobias 4-star rated author, Aishwarya Venugopal, stated, “Target Corp on Wednesday forecast a grim second quarter as the retailer struggles with consumers shunning non-essentials such as electronics and home goods in the face of persistently high prices, but maintained its full-year profit expectations.”
TGT May 2023
Target (TGT) was one of several big-box retail stores to announce first quarter earnings this week. TGT shares dropped by 3.45% this week after the market digested its results. This negative week pushed Target’s year-to-date gains down to just 0.36%. The S&P 500 is up by 9.62% on the year, meaning that Target shares have underperformed.
Coming into the quarter, investors were fearful of the negative impact that a slowing economy might have on retailers. Thus far during the first quarter earnings season, there has been mixed results coming out of the retail space. However, Target managed to beat Wall Street’s expectations on both the top and bottom lines during Q1, leading credible authors and analysts to signal that the stock’s recent dip represents a buying opportunity.
Bullish Nobias Credible Analysts’ Opinions:
SGB Media, a Nobias 4-star rated author, covered Target’s Q1 results in this week, providing readers with notable highlights from the quarter:
Target sales grew 0.5 percent, reflecting flat comparable sales combined with the benefit of sales from new stores;
Strength in frequency businesses (Beauty, Food & Beverage and Household Essentials) offset continued softness in discretionary categories;
At the end of Q1, inventory was 16 percent lower than in 2022, reflecting more than a 25 percent reduction in discretionary categories, partially offset by inventory investments to support rapidly-growing frequency categories and strategic investments to support long-term market-share opportunities;
First quarter GAAP and Adjusted EPS of $2.05 and operating margin rate of 5.2 percent were ahead of expectations, reflecting a higher gross margin rate than last year.
Marianne Wilson, a Nobias 4-star rated author, analyzed Target’s first quarter results in an article published at Chain Store Age this week. Looking at the quarter from a high level, Wilson said, “Target Corp.’s first-quarter earnings and sales were better than expected even as consumers focused on necessities over discretionary items and shopped more in-store than online.”
Breaking down the company’s fundamentals, Wilson wrote, “Target’s net income fell to $950 million, or $2.05 a share, for the quarter ended April 29, from $1.01 billion, or $2.16 a share, in the year-ago period. Adjusted earnings per share fell to $2.05 from $2.19, but easily topped analysts’ estimates of $1.77.”
Looking at the company’s top-line, Wilson added, “Total revenue edged up 0.6% to $25.32 billion, above estimates of $25.26 billion, with sales growth of 0.5%. Traffic rose 0.9%.”“Total comparable sales were flat last year. Same-store sales grew 0.7%, also better than expected,” she said. Wilson continued, “Comparable digital sales declined by 3.4%. Same-day services saw mid-single digit growth, led by high-single digit growth in drive-up. Target said strength in beauty, food & beverage and household essentials offset continued softness in discretionary categories.”
Lastly, she touched upon the company’s ongoing expansion, writing, “During the quarter, the retailer opened six of the 20 new stores it plans to open in 2023. It also began work on more than half of the approximate 175 stores scheduled to undergo full remodels and other enhancements this year.”
Bearish Nobias Credible Analysts Opinions:
Nobias 4-star rated author, Aishwarya Venugopal co-authored a report with Ananya Mariam Rajesh at MSN.com this week, which put a spotlight on Target’s poor forward looking growth outlook. She wrote, “Target Corp on Wednesday forecast a grim second quarter as the retailer struggles with consumers shunning non-essentials such as electronics and home goods in the face of persistently high prices, but maintained its full-year profit expectations.”
Venugopal quoted Target’s senior executive, Christina Hennington, who touched upon macro concerns during the company’s post-earnings analyst call. Hennington said, "American consumers continue to face difficult trade-off decisions as they juggle the wants and needs of their families ... The fear of a looming recession weighs heavily on many American families.”
Venugopal noted, “Target executives used the word "cautious" at least 13 times during the hour-long earnings call.” She also put a spotlight on an ongoing headwind that TGT continues to deal with: crime. “Target also warned theft and organized crime could reduce this year's profitability by more than $500 million, compared to 2022 when inventory shrink was over the $650 million expected,” she said.
Overall, Venugopal stated, “Target projected adjusted profit between $1.30 and $1.70 per share, below estimates of $1.93 for the current quarter and forecast comparable sales to decline in the low-single digits.”
Nobias Credible Analysts
This below-consensus forecast factored into the stock’s negative performance this week. After looking over the Q1 results, several credible analysts tracked by the Nobias algorithm updated their opinions on TGT shares.
According to The Fly on the Wall, “Evercore ISI analyst Greg Melich raised the firm's price target on Target to $170 from $165 and keeps an In Line rating on the shares, arguing that the company's "beat and keep" Q1 report included "something for everyone." Bulls liked the comp traffic, gross margin beat and improving inventory, bears "will obsess" with comps rolling over and the Q2 "talkdown" and the firm finds itself "in the middle," the analyst tells investors. While "still impressed" with Target's traffic, share, and comps, it "seems there is no magic recovery" for gross margins or EBIT margin, the analyst added.” Melich is a Nobias 4-star rated analyst.
The Fly on the Wall wrote, “Truist lowered the firm's price target on Target to $157 from $160 and keeps a Hold rating on the shares. The company's Q1 sales and earnings were modestly above expectations, supporting the view that the management's guidance was "overly conservative", though sales also deteriorated and turned negative at the end of the quarter, the analyst tells investors in a research note. Given Target's underwhelming performance over the last few quarters, along with incremental sales softness and potentially greater mix and margin pressures, it's tough to get excited about the stock at current levels, Truist added.” Truist’s retail analyst is Scot Ciccarelli, who carries a Nobias 4-star rating.
Nicholas Ward is a Senior Investment Analyst at Wide Moat Research. He has spent the last 8 years writing about the stock market at various publications, including Seeking Alpha, The Street, Forbes Real Estate Investor, Sure Dividend, The Dividend Kings, iREIT, Safe High Yield, and The Intelligent Dividend Investor.
Lastly, Michael Baker of DA Davidson, who is a Nobias 5-star rated author, updated his price target as well. According to the Fly on the Wall, “DA Davidson lowered the firm's price target on Target to $193 from $200 but keeps a Buy rating on the shares. Near term sales softness offsets the Q1 earnings beat and puts the pressure on a back half recovery, but the positives outweigh the negatives, the analyst tells investors in a research note. The firm adds that while Target was one of the more highly visible examples of the inventory glut that plagued retailers last year, the benefits of being "cleaner" were notable in its Q1 report.”
Overall bias of Nobias Credible Analysts and Bloggers:
According to the majority of credible authors and analysts that Nobias tracks, Amgen’s recent dip represents a buying opportunity. 78% of recent articles published by credible authors have expressed a “Bullish” bias towards AMGN shares.
Currently two out of the three credible Wall Street analysts who have provided opinions on AMGN shares believe that they’re likely to increase in value.
The average price target being applied to Amgen by these credible analysts is $255.67. Amgen shares trade for $223.42 at the moment, meaning that the credible analyst average price target implies upside potential of approximately 14.4%.
Disclosure: Nicholas Ward has no TGT position. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.
Case Study: Amgen (AMGN) stock according to high performing analysts
The Federal Trade Commission announced this week that it is opposing Amgen’s proposed $27.8 billion acquisition of Horizon Pharmaceuticals. Amgen faces significant patent cliffs on its largest drugs, and historically, it has used M&A to replace these lost sales and increase the growth potential of its drug pipeline. If the FTC begins to crack down on biotech M&A, large biopharma companies like Amgen could face significant growth hurdles.
Nobias Insights: 78% of recent articles published by credible authors focused on Amgen shares offer a “bullish” bias. Two out of the three credible Wall Street analysts who cover AMGN believe that shares are likely to rise in value. The average price target being applied to Amgen by credible analysts is $255.67, implying an upside potential of approximately 14.4% relative to the current share price of $223.42.
Bullish Take: Nobias 4-star rated author, Lee Jackson, said, “This biotech giant remains a safer way to play the massive potential growth in biosimilars.”
Bearish Take: Alex Phillippidis, a Nobias 4-star rated author, stated, “The U.S. The Federal Trade Commission (FTC) announced Tuesday that it will oppose the Amgen-Horizon deal on grounds that it will stifle innovation and the development of new drugs.”
Key Points
Performance
Amgen shares fell by 4.15% this week, pushing their year-to-date losses down up to -14.61%. This compares poorly to the S&P 500, which is up by 9.62% on a year-to-date basis. It also compares poorly to the Healthcare sector as a whole, which is down by -3.60% on the year.
Event & Impact
The Federal Trade Commission announced this week that it is opposing Amgen’s proposed $27.8 billion acquisition of Horizon Pharmaceuticals.
Noteworthy News:
Amgen faces significant patent cliffs on its largest drugs, and historically, it has used M&A to replace these lost sales and increase the growth potential of its drug pipeline. If the FTC begins to crack down on biotech M&A, large biopharma companies like Amgen could face significant growth hurdles.
Nobias Insights
78% of recent articles published by credible authors focused on Amgen shares offer a “bullish” bias. Two out of the three credible Wall Street analysts who cover AMGN believe that shares are likely to rise in value. The average price target being applied to Amgen by credible analysts is $255.67, implying an upside potential of approximately 14.4% relative to the current share price of $223.42.
Bullish Take Nobias 4-star rated author, Lee Jackson, said, “This biotech giant remains a safer way to play the massive potential growth in biosimilars.”
Bearish Take Alex Phillippidis, a Nobias 4-star rated author, stated, “The U.S. The Federal Trade Commission (FTC) announced Tuesday that it will oppose the Amgen-Horizon deal on grounds that it will stifle innovation and the development of new drugs.”
AMGN May 2023
This week news broke that the Federal Trade Commission (FTC) announced that it was opposing Amgen’s proposed acquisition of Horizon Pharmaceuticals (HZNP). This puts the $27.8 billion deal in jeopardy and brings up questions about Amgen’s drug pipeline and ability to overcome upcoming patent cliffs.
Amgen shares have been struggling throughout 2023 thus far and this news doesn’t help the stock’s growth outlook. Amgen shares fell by 4.15% this week in the aftermath of the FTC news. On a year-to-date basis, AMGN shares are down by 14.61%. This compares poorly to the S&P 500, which is up by 9.62% during 2023 thus far, and the Healthcare sector overall, which is down by -3.6% on the year.
Bullish Nobias Credible Analysts’ Opinions:
Despite the stock’s recent downfall, Nobias 4-star rated author, Lee Jackson, recently highlighted Amgen as a “Strong Buy” dividend stock in an article that he published at 24/7 Wall Street. Jackson wrote, “Amgen Inc. discovers, develops, manufactures, and delivers human therapeutics worldwide.”
“It focuses on inflammation, oncology/hematology, bone health, cardiovascular disease, nephrology and neuroscience,” he continued. Jackson also noted, “This biotech giant remains a safer way to play the massive potential growth in biosimilars.”
Lastly, he highlighted the company’s drug portfolio, stating, “The company’s products include:
Enbrel to treat plaque psoriasis, rheumatoid arthritis and psoriatic arthritis
Neulasta reduces the chance of infection due to a low white blood cell count in patients with cancer
Prolia to treat postmenopausal women with osteoporosis
Xgeva for skeletal-related events prevention
Otezla for the treatment of adult patients with plaque psoriasis, psoriatic arthritis and oral ulcers associated with Behcet’s disease
Aranesp to treat a lower-than-normal number of red blood cells and anemia
Kyprolis to treat patients with relapsed or refractory multiple myeloma
Repatha, which reduces the risks of myocardial infarction, stroke and coronary revascularization”
Looking at Amgen’s dividend related metrics, investors will see that shares currently yield 3.80%. According to Seeking Alpha, Amgen is on an 11-year annual dividend growth streak. Amgen’s 5-year dividend growth rate is 10.5%.
The stock has a dividend payout ratio of 45.64%. And, Amgen’s most recent dividend increase occurred on December 12th, 2022, when the company announced a 9.8% dividend raise.
Bearish Nobias Credible Analysts Opinions:
However, right now investors don’t appear to be focused on the dividend, but instead, the pressure that the FTC is putting on its Horizon Pharmaceuticals deal.
Alex Phillippidis, a Nobias 4-star rated author, covered the FTC’s complaints in an article published at Genetic Engineering and Biotechnology News. “News that federal regulators will oppose Amgen’s announced $27.8 billion buyout of Horizon Therapeutics began to send Horizon’s shares tailspinning Monday evening into early today,” he said.
Phillippidis continued, “The U.S. The Federal Trade Commission (FTC) announced Tuesday that it will oppose the Amgen-Horizon deal on grounds that it will stifle innovation and the development of new drugs.” This news caused HZPN shares to plummet; they fell more than 15% in response to the FTC headlines and ended up down by 9.67% on the week.
However, as Philippidis points out, the negative outcome may not be terrible for Amgen. In his piece, Phillippidis quoted a research note from Brian P. Skorney, CFA, a senior research analyst with Baird, which stated, “For AMGN stock specifically, we think this was going to be a relatively close to NPV [net present value]-neutral deal anyway, so whether it goes through or not, AMGN shares are unlikely to be materially impacted, in our view.”
Yet, as Phillippidis explained, this deal is important to Amgen’s growth prospects over the long-term. “Amgen’s purchase of Horizon, for example, was driven by its need to replenish its rare autoimmune, and inflammatory disease portfolios as its top-selling drug Enbrel® (etanercept), faces the start of its loss of exclusivity (LoE) on June 8, for patents related to its methods of treatment using aqueous formulations,” he noted.
Large cap bio-pharma stocks have used M&A to replenish their drug pipelines for decades and a harsh stance against mergers by regulators could drastically change how the healthcare sector works. Phillippidis highlighted poor M&A activity in recent quarters, stating, “The number of biotech M&A deals during Q1 fell 27% year-over-year, from the 15 reported a year ago. Deal volume during the first quarter was lower than for any quarter of 2021 or 2022.”
It’s too soon to tell what the ultimate outcome for this deal will be. The drama will be played out in the courtroom, and according to Guggenheim analyst, Michael Schmidt, it’s likely that Amgen prevails.
Jonathan Block, a Nobias 4-star rated author, highlighted Schmidt’s belief that Amgen will win out over regulators in a report published at Seeking Alpha. Block wrote, “Analyst Michael Schmidt said that while the FTC's action provides a "heightened risk of regulatory scrutiny from emboldened regulators willing to test novel theories of antitrust harm," the agency's arguments would need to align with how courts have recently ruled in cases regarding antitrust concerns, and recent precedents don't bode well for the FTC.”
Joe Toppe, a Nobias 4-star rated author, also covered the Amgen/Horizon news this week in an article that he posted at Yahoo Finance. He wrote, “The FTC said in the complaint that Amgen would be able to leverage its position with insurance companies and pharmacy benefit managers wanting access to its blockbuster drugs, while pressuring them into favorable terms for Horizon's two key products – the fast-growing thyroid eye disease treatment Tepezza and gout drug Krystexxa.”
“In response,” Toppe said, “Amgen issued a statement saying it was disappointed by the FTC decision and that it believed it had "overwhelmingly demonstrated" that the deal had no legitimate competitive issues.”
Nicholas Ward is a Senior Investment Analyst at Wide Moat Research. He has spent the last 8 years writing about the stock market at various publications, including Seeking Alpha, The Street, Forbes Real Estate Investor, Sure Dividend, The Dividend Kings, iREIT, Safe High Yield, and The Intelligent Dividend Investor.
“Meanwhile,” he added, “FTC Bureau of Competition Director Holly Vedova said: "Rampant consolidation in the pharmaceutical industry has given powerful companies a pass to exorbitantly hike prescription drug prices, deny patients access to more affordable generics, and hamstring innovation in life-saving markets."’
Overall bias of Nobias Credible Analysts and Bloggers:
According to the majority of credible authors and analysts that Nobias tracks, Amgen’s recent dip represents a buying opportunity. 78% of recent articles published by credible authors have expressed a “Bullish” bias towards AMGN shares.
Currently two out of the three credible Wall Street analysts who have provided opinions on AMGN shares believe that they’re likely to increase in value.
The average price target being applied to Amgen by these credible analysts is $255.67. Amgen shares trade for $223.42 at the moment, meaning that the credible analyst average price target implies upside potential of approximately 14.4%.
Disclosure: Nicholas Ward is long AMGN. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.
Case Study: Home Depot (HD) stock according to high performing analysts
The biggest news coming out of HD’s Q1 report was updated guidance calling for negative sales growth for the full year. If that occurs, it will be the first time that HD has posted negative y/y sales results since 2009. The company highlighted unique headwinds, such as weather, that are hurting its spring sales events. But, on top of that, rising interest rates and a slowing economy and housing market are making it difficult for this retailer to find growth.
Nobias Insights: 56% of recent articles published by credible authors focused on HD shares offer a “bullish” bias. Two out of the three credible Wall Street analysts covering HD believe that shares are likely to rise in value. The average price target applied to Home Depot by these analysts is $330.67, which implies upside potential of approximately 13.7% relative to the stock’s current share price of $290.88.
Bullish Take: Howard Smith, a Nobias 4-star rated author, said, “Home Depot caters to both residential homeowners and professional contractors, helping to balance its business. But it can't avoid being affected by less housing demand or an economic slowdown when those events occur. That is likely to be a near-term issue, however. Investors who pushed the stock off of its morning lows were looking long term, which makes sense based on the past success of the company,”
Bearish Take: Marianne Wilson, a Nobias 4-star rated author, stated, “The home improvement giant missed Wall Street estimates for the second consecutive quarter as consumers pulled back on big-ticket home improvement spending after the pandemic-fueled spending spree of the past few years. Cold weather and falling lumber prices also hurt sales.”
Key Points
Performance
Home Depot shares rose by 0.58% this week, pushing their year-to-date losses down to -7.92%. This compares poorly to the S&P 500, which is up by 9.62% on a year-to-date basis.
Event & Impact
Home Depot posted its first quarter results this week, beating consensus estimates on the bottom-line, but missing them on the top-line. During Q1, HD’s revenue totaled $37.3 billion, missing Wall Street’s consensus estimate by $1.05 billion. Home Depot’s Q1 GAAP earnings-per-share came in at $3.82, which was $0.03/share above consensus estimates.
Noteworthy News:
The biggest news coming out of HD’s Q1 report was updated guidance calling for negative sales growth for the full year. If that occurs, it will be the first time that HD has posted negative y/y sales results since 2009. The company highlighted unique headwinds, such as weather, that are hurting its spring sales events. But, on top of that, rising interest rates and a slowing economy and housing market are making it difficult for this retailer to find growth.
Nobias Insights
56% of recent articles published by credible authors focused on HD shares offer a “bullish” bias. Two out of the three credible Wall Street analysts covering HD believe that shares are likely to rise in value. The average price target applied to Home Depot by these analysts is $330.67, which implies upside potential of approximately 13.7% relative to the stock’s current share price of $290.88.
Bullish Take Howard Smith, a Nobias 4-star rated author, said, “Home Depot caters to both residential homeowners and professional contractors, helping to balance its business. But it can't avoid being affected by less housing demand or an economic slowdown when those events occur. That is likely to be a near-term issue, however. Investors who pushed the stock off of its morning lows were looking long term, which makes sense based on the past success of the company,”
Bearish Take Marianne Wilson, a Nobias 4-star rated author, stated, “The home improvement giant missed Wall Street estimates for the second consecutive quarter as consumers pulled back on big-ticket home improvement spending after the pandemic-fueled spending spree of the past few years. Cold weather and falling lumber prices also hurt sales.”
HD May 2023
Home Depot (HD) reported its first quarter earnings this week, spooking Wall Street with projections for its first annual negative revenue growth result since the Great Recession. Initially, after posting its results, HD shares fell approximately 5%. However, throughout the remainder of the week, the bounce returned, ultimately closing the week up by 0.58%. However, on a year-to-date basis, Home Depot has been a major underperformer, posting a share price movement of -7.92%.
For comparison’s sake, so far in 2023, the S&P 500 is up by 9.62%. Over the last decade, HD has been a major outperformer, up 273.7% compared to the S&P 500’s 151.9% gains.
And looking at the opinions expressed by the authors and analysts that Nobias tracks, it appears that the majority of credible individuals who follow this company believe that it has what it takes to regain its positive trajectory.
Bearish Nobias Credible Analysts’ Opinions:
Ahmed Farhath, a Nobias 4-star rated author, broke down the expectations for Home Depot’s quarters results coming into its first quarter report in an article published at Seeking Alpha this week, prior to the stock’s earnings date.
Farhath highlighted the company’s most recent results, which were mixed. “The company on Feb. 21 reported Q4 GAAP EPS of $3.30 beating estimates by $0.02. Revenue of $35.83B missed expectations by $170M,” he said.
Regarding the upcoming Q1 results, Farhath said, “The consensus EPS estimate is $3.81 and the consensus revenue estimate is $38.35B.” He continued, “Over the last 3 months, EPS estimates have seen 1 upward revision and 18 downward revisions. Revenue estimates have seen 2 upward revisions and 15 downward revisions.”
Despite this poor sentiment, historical data on Seeking Alpha shows that Home Depot has established a clear history of exceeding Wall Street’s expectations. According to Seeking Alpha’s data, Home Depot has beaten Wall Street’s consensus EPS estimates during 19 out of the last 20 quarters. This company has beaten Wall Street’s consensus revenue estimates during 15 out of the last 20 quarters.
Marianne Wilson, a Nobias 4-star rated author, published a post-earnings recap of Home Depots Q1 results at Chain Store Age this week. She provided a broad overview of the results, stating, “The home improvement giant missed Wall Street estimates for the second consecutive quarter as consumers pulled back on big-ticket home improvement spending after the pandemic-fueled spending spree of the past few years. Cold weather and falling lumber prices also hurt sales.”
Looking at the company’s top-line, Wilson said, “Revenue fell 4.2% to $37.26 billion, missing estimates of $38.28 billion. Comparable sales decreased 4.5%, with U.S. comps falling 4.6%. Lumber deflation accounted for more than 2 percentage points of the decrease.”
Focusing on profits, Wilson added, “The company reported net income of $3.87 billion, or $3.82 per share, for the first quarter (ended April 30), down 8.5% from $4.23 billion, or $4.09 per share, in the year-ago period. Analysts had expected earnings of $3.80 per share.”
Regarding forward guidance, Wilson wrote, “Home Depot said it now expects sales and comparable sales to decline between 2% and 5% for the fiscal year compared to its previous forecast of roughly flat sales for the period. Its operating margin rate is expected to come in lower for the year, in a range of between 14% and 14.3% compared with a previously expected 14.5%, which includes the impact of the $1 billion investment in employee wages it announced in February.”
Michelle Chapman, a Nobias 5-star rated author, also covered HD’s Q1 results, putting a spotlight on some of the operational headwinds that the company is facing in the market today in her article published at the Charleston Post and Courier this week.
Chapman began her piece by stating, “After years of explosive growth during the pandemic, Home Depot’s revenue during the first quarter fell short of expectations, and the company cut its profit and sales outlook for the year, sending shares lower at the opening bell.”
Highlighting the rarity of this event, Chapman noted, “Home Depot on Tuesday projected its first decline in annual revenue since 2009 in the aftermath of the bursting of the housing bubble and financial crisis.” She quoted Home Depot’s CEO, Ted Decker, who said, “After a three-year period of unprecedented growth for our sector, during which we grew sales by over $47 billion, we expected that fiscal 2023 would be a year of moderation for the home improvement market.” “Decker said weak sales were mostly due to lumber deflation and bad weather, particularly in its Western division, which had to contend with extreme weather in California.
Chapman also said that macroeconomic headwinds are at play. “The U.S. Federal Reserve has hiked benchmark interest rates 10 consecutive times with hopes of slowing the economy and cooling inflation,” she wrote.
And, as Chapman notes, these higher rates are starting to be seen in the broader economic growth metrics. “The U.S. economy slowed sharply from January through March, decelerating to just a 1.1% annual pace as higher interest rates hammered the housing market and businesses reduced their inventories,” she said. This is why, she concludes, HD’s guidance continues to fall.
Bullish Nobias Credible Analysts Opinions:
Howard Smith, a Nobias 4-star rated author, offered a bullish takeaway from his post-earnings report on HD published at the Motley Fool this week. Smith noted the stock’s weakness and the relatively poor guidance; however, he believes that the stock’s headwinds will prove to be transitory. “Home Depot caters to both residential homeowners and professional contractors, helping to balance its business. But it can't avoid being affected by less housing demand or an economic slowdown when those events occur. That is likely to be a near-term issue, however. Investors who pushed the stock off of its morning lows were looking long term, which makes sense based on the past success of the company,” he said.
Furthermore, he noted that the company’s management team appears to agree with this bullish sentiment by highlighting the stock’s shareholder returns.
Nicholas Ward is a Senior Investment Analyst at Wide Moat Research. He has spent the last 8 years writing about the stock market at various publications, including Seeking Alpha, The Street, Forbes Real Estate Investor, Sure Dividend, The Dividend Kings, iREIT, Safe High Yield, and The Intelligent Dividend Investor.
Smith wrote, “The company beat earnings per share (EPS) expectations, aided by Home Depot's ongoing share repurchase plan. Reducing share count increased per-share earnings, and the company bought back $2.9 billion of its stock in the quarterly period ended April 30.”
Overall bias of Nobias Credible Analysts and Bloggers:
Overall, 56% of recent articles published on HD shares by credible authors that the Nobias algorithm tracks have expressed a “bullish” bias towards shares. The credible Wall Street analyst community that Nobias tracks agrees with this sentiment.
Two out of the three credible analysts who have provided opinions on HD shares believe that they’re likely to rise in value. For instance, Brial Nagel, a Nobias 5-star rated analyst, updated his price target after examining the Q1 results and is still calling for double digit upside potential.
According to the Fly on the Wall: “Oppenheimer analyst Brian Nagel lowered the firm's price target on Home Depot to $360 from $400 and keeps an Outperform rating on the shares. The company's weaker than planned recent results offered a number of "notable intermediate, longer-term positives," including prospects for sales trends to re-solidify, as weather and lumber price dislocations abate, and "even more subdued" guidance and Street forecasts," the analyst tells investors in a research note. The firm believes any fundamental weakness nearer term should prove short-lived, and give way to a return to Home Depot's "historical healthy sales, and profit expansion algorithms."’
Currently, the average price target being applied to HD shares by the credible analyst community that Nobias tracks is $330.67. Compared to HD’s share price of $290.88 that represents upside potential of approximately 13.7%.
Disclosure: Nicholas Ward is long HD. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.
Case Study: PayPal (PYPL) stock according to high performing analysts
PayPal beat Wall Street’s expectations on the top and bottom lines and provided full-year earnings-per-share growth guidance of approximately 20%. However, the company pointed towards narrowing margins and it appears that Wall Street does not like this trend.
Nobias Insights: 57% of recent articles published by credible authors focused on PYPL shares offer a “bullish” bias. Both of the credible Wall Street analysts who recently covered PYPL believe that shares are likely to rise in value. The average price target applied to PayPal by these credible analysts is $110.00, which implies an upside potential of approximately 78.3% relative to the stock’s current share price of $61.69.
Bullish Take: Reinhardt Krause, a Nobias 5-star rated author, said, “For the quarter ended March 31, PayPal earnings rose 33% from a year earlier to $1.17 per share. The digital payments company said revenue climbed 9% to $7.04 billion, topping estimates by about 1%.”
Bearish Take: Andrew Kessell, a Nobias 5-star rated author, stated, “It’s possible there are concerns about Paypal’s succession plan. In February, the company confirmed that CEO Dan Schulman will step down later this year.”
Key Points
Performance
PayPal (PYPL) shares fell by 18.28% this week, pushing their year-to-date gains down to -17.28%. This compares poorly to the S&P 500 and the Nasdaq Composite Index, which are up by 7.84% and 18.27% on the year, respectively,
Event & Impact
PayPal posted its first quarter results this week, beating Wall Street’s expectations on both the top and bottom lines. During Q1, PYPL’s revenue totaled $7.04 billion, beating Wall Street’s consensus estimate by $50 million. PayPal’s Q1 non-GAAP earnings-per-share came in at $1.17, which was $0.07/share above consensus.
Noteworthy News:
PayPal beat Wall Street’s expectations on the top and bottom lines and provided full-year earnings-per-share growth guidance of approximately 20%. However, the company pointed towards narrowing margins and it appears that Wall Street does not like this trend.
Nobias Insights
57% of recent articles published by credible authors focused on PYPL shares offer a “bullish” bias. Both of the credible Wall Street analysts who recently covered PYPL believe that shares are likely to rise in value. The average price target applied to PayPal by these credible analysts is $110.00, which implies an upside potential of approximately 78.3% relative to the stock’s current share price of $61.69.
Bullish Take Reinhardt Krause, a Nobias 5-star rated author, said, “For the quarter ended March 31, PayPal earnings rose 33% from a year earlier to $1.17 per share. The digital payments company said revenue climbed 9% to $7.04 billion, topping estimates by about 1%.”
Bearish Take Andrew Kessell, a Nobias 5-star rated author, stated, “It’s possible there are concerns about Paypal’s succession plan. In February, the company confirmed that CEO Dan Schulman will step down later this year.”
PYPL May 2023
PayPal (PYPL) reported its first quarter earnings this week, creating a lot of volatility around its shares. According to PayPal’s report, the company beat Wall Street’s estimates and updated investors when it came to full-year growth guidance.
The company’s management team is still calling for strong double digit growth on the year; however, even with that beat & raise quarter in mind, shares fell double digits in the aftermath of its report. On the week, PYPL dropped by 18.28%. This pushed its year-to-date performance into negative territory.
During 2023 thus far, PayPal shares are now down by 17.28%, which compares poorly to the broader markets. The S&P 500 and the tech-heavy Nasdaq are up by 7.84% and 18.27% on the year, respectively, showing the stark underperformance that Paypal has generated throughout the first 5 months of the year.
And yet, looking at the opinions expressed by credible authors and analysts alike, it appears that this dip represents a buying opportunity. Currently, the average price target being applied to PYPL shares by credible Wall Street analysts represents double digit upside potential.
Bullish Nobias Credible Analysts’ Opinions:
Reinhardt Krause, a Nobias 5-star rated author, wrote an article that he published at Investors.com that broke down Paypal’s post-earnings volatility. Krause said, “PayPal stock plunged 12.7% to close at 65.91 on the stock market today.” He mentioned that the company reported earnings which had earnings, revenue, and total payment volumes that beat Wall Street’s expectations; and yet, the stock still fell.
So why did the stock fall double digits? “What hurt PayPal stock is that Wall Street seemed unimpressed with the size of the company's raised 2023 outlook,” he answered.
Looking at the company’s Q1 earnings data, he said, “For the quarter ended March 31, PayPal earnings rose 33% from a year earlier to $1.17 per share. The digital payments company said revenue climbed 9% to $7.04 billion, topping estimates by about 1%.”
“Analysts expected PayPal earnings of $1.10 a share on revenue of $6.98 billion. A year earlier, PayPal earned 88 cents a share on sales of $6.48 billion,” he continued, proving the top- and bottom-line beats. “Total payment volume processed from merchant customers climbed 10% to $354.5 billion. Analysts had projected total payment volume of $344.8 billion,” Krause added, highlighting the use of Paypal’s network during Q1. Then, he said, “The company predicted adjusted earnings growth of about 20% to $4.95 a share, including the first-quarter beat. Its earlier view called for 19% growth to about $4.87.”
At first glance, this 20% growth outlook was impressive as well. However, Krause wrote, “In a note to clients, Jefferies analyst Trevor Williams said the size of PayPal's guidance came in mixed.”
Bearish Nobias Credible Analysts Opinions:
Andrew Kessell, a Nobias 5-star rated author, also covered PayPal’s earnings report in an article this week; like Krause, he highlighted the company’s strong Q1 growth numbers and full-year outlook, before adding, “It’s possible there are concerns about Paypal’s succession plan. In February, the company confirmed that CEO Dan Schulman would step down later this year.”
Dave Kovaleski, a Nobias 4-star rated author, covered PayPal’s Q1 report in an article at the Motley Fool titled, “Why PayPal Stock Dropped 14.4% This Week”. He too, seemed perplexed by the negative post-earnings stock volatility, writing, “PayPal sank following the release of Q1 earnings results on Monday, but at first glance, it's not clear why.”
“However,” Kovaleski said, “several analysts lowered their price targets for PayPal, primarily due to projections of lower operating margin expansion than previously anticipated.” “Specifically,” he continued, “non-GAAP operating margin is anticipated to increase by 100 basis points this year, as opposed to the previous expectation of 125 basis points.”
Digging into this, Kovaleski wrote: “The company said the reduced guidance reflects its unbranded processing volume contributing more to growth. The unbranded processing business is its merchant processing arm, which operates through platforms like PayPal Braintree and PayPal Complete Payments. While growing, it is a lower-margin segment than its payment business.” However, after looking over the company’s results, Kovaleski still came away from the quarter with a bullish bias.
Nicholas Ward is a Senior Investment Analyst at Wide Moat Research. He has spent the last 8 years writing about the stock market at various publications, including Seeking Alpha, The Street, Forbes Real Estate Investor, Sure Dividend, The Dividend Kings, iREIT, Safe High Yield, and The Intelligent Dividend Investor.
“Overall,” he concluded, “PayPal plans to reduce this margin drag by expanding unbranded products and cross-selling services, so it seems like a minor concern. PayPal remains a good bargain right now with a forward price-to-earnings ratio of just 13.”
Overall bias of Nobias Credible Analysts and Bloggers:
However, we saw a different conclusion drawn from a credible Wall Street analyst, Moshe Katri, this week. Katri, who works for Wedbush, is a Nobias 4-star rated analyst. According to the Fly on the Wall, “Wedbush analyst Moshe Katri lowered the firm's price target on PayPal to $85 from $100 and keeps an Outperform rating on the shares. The firm notes that PayPal reported better-than-expected Q1/2023 results, with most operating and volume metrics exceeding expectations, including e-commerce growth inflecting from the prior quarter's trough levels. Maintaining its conservative tone, citing global macro challenges, the company's guidance suggested moderating revenue growth in Q2/2023, Wedbush adds.”
Although Katri lowered Wedbush’s price target, that $85.00/share level is still approximately 38% higher than PayPal’s current share price of $61.69. Overall, the average price target of the credible analysts who cover PYPL shares is $110.00. This represents upside potential of approximately 78.3%.
The credible author community leans bullish on shares as well. 57% of recent articles published on PYPL shares by credible authors tracked by the Nobias algorithm have expressed a “Bullish” bias.
Disclosure: Nicholas Ward is long PYPL. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.
Case Study: Disney (DIS) stock according to high performing analysts
Disney lost roughly 4 million paid streaming subscribers during Q2; however, the company saw its losses attached to the streaming segment narrow during the quarter due to North America price hikes for Disney+. Disney’s parks and resorts posted double digit growth during the quarter; however, the market continues to focus on the media giant’s struggles in the streaming market.
Nobias Insights: 61% of recent articles published by credible authors focused on DIS shares offer a “bullish” bias. Three out of the three credible Wall Street analysts who cover DIS believe that shares are likely to rise in value. The average price target being applied to Disney by these credible analysts is $122.33, which implies an upside potential of approximately 33% relative to the stock’s current share price of $91.99
Bullish Take: Angela Harmantas, a Nobias 4-star rated author, said, “Disney's Parks and Experiences segment witnessed a 17% revenue increase, reaching $7.78 billion, driven by the reopening of sites in Hong Kong and Shanghai.”
Bearish Take: Vladimir Dimitrov, CFA, a Nobias 4-star rated author, stated, “The recent disappointing results by Paramount Global (PARA) and problems related to Warner Bros. Discovery's (WBD) drop in DTC distribution revenues are pointing to a challenging environment.”
Key Points
Performance
Disney shares fell by 11.21% this week, pushing their year-to-date gains down to 3.39%. This compares poorly to the S&P 500, which is up by 7.84% on a year-to-date basis.
Event & Impact
Disney posted its fiscal 2023 second quarter results this week, beating consensus estimates on the top line, but missing expectations on the bottom line. During Q2, DIS’s revenue totaled $21.82 billion, beating Wall Street’s consensus estimate of $21.79. Disney’s Q2 non-GAAP earnings-per-share came in at $0.93, which was $0.01/share below consensus estimates.
Noteworthy News:
Disney lost roughly 4 million paid streaming subscribers during Q2; however, the company saw its losses attached to the streaming segment narrow during the quarter due to North America price hikes for Disney+. Disney’s parks and resorts posted double digit growth during the quarter; however, the market continues to focus on the media giant’s struggles in the streaming market.
Nobias Insights
61% of recent articles published by credible authors focused on DIS shares offer a “bullish” bias. Three out of the three credible Wall Street analysts who cover DIS believe that shares are likely to rise in value. The average price target being applied to Disney by these credible analysts is $122.33, which implies an upside potential of approximately 33% relative to the stock’s current share price of $91.99.
Bullish Take Angela Harmantas, a Nobias 4-star rated author, said, “Disney's Parks and Experiences segment witnessed a 17% revenue increase, reaching $7.78 billion, driven by the reopening of sites in Hong Kong and Shanghai.”
Bearish Take Vladimir Dimitrov, CFA, a Nobias 4-star rated author, stated, “The recent disappointing results by Paramount Global (PARA) and problems related to Warner Bros. Discovery's (WBD) drop in DTC distribution revenues are pointing to a challenging environment.”
DIS May 2023
The Walt Disney Company (DIS) reported its second quarter earnings report this week, and Vladimir Dimitrov, CFA, who is a Nobias 4-star rated author, updated his expectations for Disney coming into earnings season this week at Seeking Alpha in an article titled, “Disney's Q2 2023 Earnings: Now Is The Time To Deliver”.
Dimitrov began his report by stating, “Although making predictions on noisy quarterly results is a futile exercise, Disney now appears in a very good position to deliver better than expected results for the past 3-month period.” He noted that in 2019, he never would have predicted Disney’s recent underperformance; however, he continued, “Disney's management seems to have realized the grave mistake they have made of doubling down on a very poor strategy of prioritizing quantity of content over quality.”
Bearish Nobias Credible Analysts’ Opinions:
But, Dimitrov added, the Wall Street community was not bullish on DIS shares coming into the company’s Q2 report. "Analysts, on the other hand, have been adjusting their expectations with a total of 17 EPS revisions in the past 90-day period,” Dimitrov wrote.
All 17 of these revisions were negative. Dimitrov said that this bearish sentiment was largely due to the poor performance of Disney’s peers during their recent quarters. “The recent disappointing results by Paramount Global (PARA) and problems related to Warner Bros. Discovery's (WBD) drop in DTC distribution revenues are pointing to a challenging environment,” he said. Yet, Dimitrov points out, these companies don’t have Disney’s new CEO, Bob Iger, at the helm.
“With the new CEO, the company now has an ambitious target of $5.5bn cost-savings. From these, roughly $2.5bn will be related to selling, general, and administrative expenses, with $1bn expected to be realized during this fiscal year,” he wrote.
“In addition to the cost-cutting efforts and the lower losses in the DTC segment,” Dimitrov said, “Disney would also benefit from the current momentum in its Parks, Experiences, and Products segment.”
In concluding his article, Dimitrov wrote, “After years of struggles, Disney finally appears to be in a good spot to turn the business around and capitalize on the supportive macroeconomic environment.”
In terms of the media company’s tough macro environment, Dimitrov added, “investors should remain focused on the long-term issues at the company and take into account the risk of a recession in the coming months.”
Bullish Nobias Credible Analysts Opinions:
Angela Harmantas, a Nobias 4-star rated author, covered Disney’s quarterly report in an article that she published at Proactive Investors this week. She began, “The Walt Disney Company saw its streaming losses narrow in its fiscal 2Q as price increases offset subscriber losses.” This allowed Disney to beat Wall Street’s expectations on the top-line; however, the company’s bottom-line results came in below Wall Street’s expectations.
Harmantas touched upon Disney’s top-line results, stating, “Disney reported group revenues of $21.82 billion, surpassing the $21.79 billion consensus estimates by a narrow margin.” She moved onto the bottom-line, writing, “The company stated that adjusted diluted earnings for the fiscal 2Q 2023, which ended in March, stood at $0.93 per share, down 14% from the same period last year, aligning with Wall Street forecasts.”
Looking at Disney’s streaming results specifically, Harmantas noted that paid Disney+ subscribers fell by 4 million to 157.8 million, “largely due to the loss of televised cricket rights in India, the company said.” However, despite falling subs, Harmantas noted that Disney’s streaming segment “managed to reduce its losses to $659 million, compared to $1.1 billion in the previous quarter”. She said that this was largely due to a 20% price increase for North American users.
Disney touched upon this during its Q2 report, stating, “Domestic Disney+ average monthly revenue per paid subscriber increased from $5.95 to $7.14 due to an increase in average retail pricing.” “Meanwhile,” Harmantas said, “Disney's Parks and Experiences segment witnessed a 17% revenue increase, reaching $7.78 billion, driven by the reopening of sites in Hong Kong and Shanghai.”
During Disney’s second quarter analyst conference call, the company’s CFO, Christine McCarthy, noted that this top-line sales success led to strong profit growth from the Parks segment as well. McCarthy said, “Moving on to Parks, Experiences, and Products, operating income increased by over 20% versus the prior year to $2.2 billion, with increases at both international and domestic parks and experiences partially offset by lower merchandise licensing results at consumer products.”
All in all, this strength from the Parks segment wasn’t enough to spark a post-earnings rally for Disney shares. Disney shares fell by 11.2% this week, pushing their year-to-date gains down to just 3.39%. Disney’s CEO, Iger, was not distraught, however. In the post-earnings conference call, Iger told analysts, “We're also proud of what we continue to deliver for consumers, from movies to television to sports, news and our theme parks. A few recent highlights include Marvel Studios Guardians of the Galaxy Volume 3, which topped the global box office in its opening weekend with $289 million. The first round of the NBA playoffs was the most watched ever across Disney networks, and we've been averaging 5 million viewers throughout the first 22 games, up 15% versus the comparable point in last year's playoffs.”
Also, he highlighted plans at Disney+ to reignite growth, stating, “As a significant step toward creating a growth business, I'm pleased to announce that we will soon begin offering a one-app experience domestically that incorporates our Hulu content via Disney+.” After Disney’s Q1 earnings report, Nobias 4-star rated Wall Street analyst, Peter Supino, downgraded DIS shares.
According to the Fly on the Wall, “Wolfe Research analyst Peter Supino lowered the firm's price target on Disney to $128 from $211 and kept an Outperform rating on the shares after taking over coverage of the media, cable, and telecom sectors. Innovation and competition are accelerating while key segments face saturation, and "controversy sets up stock picking opportunities,"
Nicholas Ward is a Senior Investment Analyst at Wide Moat Research. He has spent the last 8 years writing about the stock market at various publications, including Seeking Alpha, The Street, Forbes Real Estate Investor, Sure Dividend, The Dividend Kings, iREIT, Safe High Yield, and The Intelligent Dividend Investor.
Supino tells investors in a research note. With more suppliers fighting for the same customers, the analyst sees "unremitting pressure" on subscriber acquisition costs and pricing.” After examining Disney’s earnings results, Supino was also bearish. The Fly on the Wall reported, “Wolfe Research downgraded Disney to Peer Perform from Outperform without a price target.”
Overall bias of Nobias Credible Analysts and Bloggers:
Overall, the average price target being applied to Disney shares by credible analysts is $122.33. Today, DIS shares trade for $91.99. Therefore, that average credible analyst price target represents an upside potential of approximately 33%.
On the whole, the credible authors that the Nobias algorithm tracks agree with this bullish sentiment. 61% of recent articles published by credible authors focused on DIsney have expressed a “bullish” bias.
Disclosure: Nicholas Ward is long DIS. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.
Case Study: Occidental Petroleum (OXY) stock according to high performing analysts
During Q1, OXY increased its oil production output; however, lower oil prices hurt its margins during the quarter. This caused OXY’s earnings and free cash flows to fall. However, the company continued to reward shareholders during the quarter, buying back more than $750 million worth of shares. Warren Buffett’s Berkshire Hathway continued to build its OXY position during the quarter.
Nobias Insights: 59% of recent articles published by credible authors focused on OXY shares offer a “bullish” bias. Three out of six credible Wall Street analysts who cover OXY believe that shares are likely to rise in value. The average price target applied to Occidental by these analysts is $70.33, implying upside potential of approximately 21% relative to the stock’s current share price of $58.09.
Bullish Take: Faisal Humayun, a Nobias 4-star rated author, said, “The most important point to note is that Occidental reported free cash flow of $13.6 billion in 2022. In the same year, the company retired $10.6 billion in debt.”
Bearish Take: Kit Norton, a Nobias 4-star rated author, stated, “Occidental Petroleum reported revenue slipping 13% to $7.26 billion in Q1. OXY earnings sank 48% to $1.09 per share.”
Key Points
Performance
Occidental Petroleum shares fell by 3.1% this week, pushing their year-to-date gains down to -4.45%. This compares poorly to the S&P 500 which is up by 7.84% on a year-to-date basis.
Event & Impact
Occidental Petroleum posted its first quarter results this week, missing Wall Street’s expectations on both the top and bottom lines. During Q1, OXY’s revenue totaled $7.26 billion, missing Wall Street’s consensus estimate by $110 million. Occidental’s Q1 non-GAAP earnings-per-share came in at $1.09, which was $0.18/share below consensus.
Noteworthy News:
During Q1, OXY increased its oil production output; however, lower oil prices hurt its margins during the quarter. This caused OXY’s earnings and free cash flows to fall. However, the company continued to reward shareholders during the quarter, buying back more than $750 million worth of shares. Warren Buffett’s Berkshire Hathway continued to build its OXY position during the quarter.
Nobias Insights
59% of recent articles published by credible authors focused on OXY shares offer a “bullish” bias. Three out of six credible Wall Street analysts who cover OXY believe that shares are likely to rise in value. The average price target applied to Occidental by these analysts is $70.33, implying upside potential of approximately 21% relative to the stock’s current share price of $58.09.
Bullish Take Faisal Humayun, a Nobias 4-star rated author, said, “The most important point to note is that Occidental reported free cash flow of $13.6 billion in 2022. In the same year, the company retired $10.6 billion in debt.”
Bearish Take Kit Norton, a Nobias 4-star rated author, stated, “Occidental Petroleum reported revenue slipping 13% to $7.26 billion in Q1. OXY earnings sank 48% to $1.09 per share.”
OXY May 2023
Occidental Petroleum (OXY), a popular stock in the energy sector due to Berkshire Hathaway’s significant investment in the company, reported its first quarter earnings this week. Roughly a month ago, Nobias 5-star rated author, Long Player, published a bullish article on OXY shares at Seeking Alpha which was focused on the fact that Warren Buffett continues to buy shares of Occidental Petroleum.
Due to Buffett’s fame as a successful investor, investors tend to pay close attention to what he’s investing in. On April 11th, Long Player wrote, “Warren Buffett of Berkshire Hathaway Inc. made the news when he again purchased more shares of Occidental Petroleum Corporation.” They noted that investors have questioned this decision from the Oracle of Omaha; however, the author stated that Buffett has to invest in large companies like OXY because they’re the only types of stocks that can truly move the needle for his firm at Berkshire. But, Long Player noted that Buffett’s interest isn’t only about size, but also the growth potential of Occidental moving forward, driven largely by the market’s misunderstanding of its recent M&A activity. Long Player wrote, “Occidental is not only doing well now, but the Anadarko acquisition may uncover additional value in the future that is not obvious to the market currently.”
Regarding the long-term impact of the Anadarko deal, Long Player wrote: “Occidental profitability is likely to improve for years because of the Anadarko acquisition (rather than one large profitability jump). The cyclical nature of the business makes it a bit hard to become apparent to the average shareholder because profitability will likely be greater at different oil prices throughout the industry cycle. This is something that is more likely to be measured by management in detail rather than easily apparent to the market.”
However, since this article was published, OXY shares have fallen by roughly 10%, creating what many credible authors believed to be an attractive entry point coming into earnings season. Shares have trended lower for months now after hitting 52-week highs in the upper $70’s late last year.
After falling another 3.1% this week, OXY shares trade in the $58 area; which is much closer to its $54.30 52-week lows than those prior highs. Occidental’s most recent leg lower was a response to its first quarter earnings results.
Bearish Nobias Credible Analysts’ Opinions:
Kit Norton, a Nobias 4-star rated author, put a spotlight on OXY’s Q1 results in an article that he published this week at Investors.com.
Regarding Wall Street’s expectations for Occidental coming into the quarter, Norton wrote, “Wall Street forecast EPS falling 42% to $1.24 in the first quarter, according to FactSet. Analysts predicted revenue dropping around 11% to $7.46 billion.” “For the year,” he continued, “consensus views call for a 43% earnings decline and a drop of nearly 17% in revenue.”
Looking at the company’s actual results, Norton said, “Occidental Petroleum reported revenue slipping 13% to $7.26 billion in Q1. OXY earnings sank 48% to $1.09 per share.” During the quarter, he also mentioned that, “Cash flow from operations came in at $2.9 billion, falling 10% compared to Q1 2022.”
“Meanwhile,” Norton added, “free cash flow dropped 33% in Q1, totaling $1.69 billion.” He highlighted the impact of lower oil prices on OXY’s top and bottom-line, stating, “Occidental Petroleum produced 1.22 million barrels of oil equivalent per day in the first quarter, up 13% from last year.” “OXY raised its full-year production guidance to average 1.195 million barrels of oil equivalent per day,” he said. So, even though oil is off of its highs, this company has plans to continue with its strong production numbers. Norton noted that the company continues to use its cash flows to return cash to shareholders. “Occidental Petroleum repurchased $752 million worth of stock, on pace for its 2023 $3 billion repurchase program,” he said.
Bullish Nobias Credible Analysts Opinions:
Despite the stock’s slowing fundamental growth, Faisal Humayun, a Nobias 4-star rated author, recently highlighted Occidental as a top pick in the energy sector. In his article titled, “3 Oil and Gas Stocks to Buy on Correction” Humayun expressed bullish sentiment for OXY shares, writing, “The 1.14% dividend yield stock looks attractive at a forward price-earnings ratio of 11.3.” He continued, “The most important point to note is that Occidental reported free cash flow of $13.6 billion in 2022. In the same year, the company retired $10.6 billion in debt.” But, this isn’t only a play on an improving balance sheet and shareholder returns.
Nicholas Ward is a Senior Investment Analyst at Wide Moat Research. He has spent the last 8 years writing about the stock market at various publications, including Seeking Alpha, The Street, Forbes Real Estate Investor, Sure Dividend, The Dividend Kings, iREIT, Safe High Yield, and The Intelligent Dividend Investor.
Humayun believes that Occidental is an attractive growth story, stating, “The company’s Permian asset production has continued to increase on a quarter-on-quarter basis. The outlook remains positive for 2023.” “Overall,” Humayun concluded, “OXY stock looks attractive with value creation through dividends, share repurchases, and potential stock upside.”
Overall bias of Nobias Credible Analysts and Bloggers:
Overall, 59% of recent articles published on OXY by credible authors that the Nobias algorithm follows have expressed a “bullish” bias. The credible Wall Street community that tracks OXY shares is less bullish, however.
Currently, only three out of six credible Wall Street analysts that Nobias tracks who cover OXY shares believe that they’re likely to increase in value. Neal Dingmann, a Nobias 4-star rated analyst from Truist, is one of them. Dingmann recently maintained his “buy” rating on OXY shares after examining the company’s Q1 results.
According to the Fly on the Wall, “Truist analyst Neal Dingmann lowered the firm's price target on Occidental Petroleum to $85 from $86 but keeps a Buy rating on the shares. The stock has underperformed peers and oil prices the past three months due to investor concerns over asset performance despite operations continuing to show improved efficiencies, the analyst tells investors in a research note. The firm adds that not only are key domestic plays such as the Permian and DJ generating results ahead of its estimates, other upstream plays continue to top its forecasts.”
The average price target being applied to OXY shares by the credible analysts community that the Nobias algorithm tracks is $70.33. Currently, OXY shares trade for $58.09. Therefore, that average price target implies upside potential of approximately 21%.
Disclosure: Nicholas Ward has no OXY position. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.
Case Study: Apple (APPL) stock according to high performing analysts
Apple beat top- and bottom-line estimates, showing strength in its iPhone and Service operating segments. The company also announced its annual shareholder return program, raising its dividend by 4% and adding $90 billion to its buyback authorization.
Nobias Insights: 49% of recent articles published by credible authors focused on AAPL shares offer a “neutral” bias. However, four out of the five credible Wall Street analysts who cover Apple believe that shares are likely to rise in value. The average price target being applied to Apple by these credible analysts is $173.60, which is essentially in line with the stock’s current share price of $173.57.
Bullish Take: Nobias 5-star rated author, Max Cherney, said, “Apple also raised its quarterly dividend 4% to 24 cents a share. That marked the eleventh year in a row it's increased that payout”.
Bearish Take: Luke Lango, a Nobias 4-star rated author, said, “Apple reported that its revenues dropped 2.5% in Q1. Last quarter, revenues dropped by about 5%. And the company said revenues will drop again in Q2 as well.”
Key Points
Performance
Apple shares rose by 2.45% this week, pushing their year-to-date gains down to 38.78%. This compares favorably to the S&P 500 and the Nasdaq Composite Index, which are up by 8.16% and 17.8% on the year thus far.
Event & Impact
Apple posted its fiscal 2023 second quarter results this week, beating consensus estimates on both the top and bottom lines. During Q2, Apple’s revenue totaled $94.84 billion, beating Wall Street’s consensus estimate by $2 billion. Apple’s Q2 GAAP earnings-per-share came in at $1.52 which was $0.09/share above consensus estimates.
Noteworthy News:
Apple beat top and bottom-line estimates, showing strength in its iPhone and Service operating segments. The company also announced its annual shareholder return program, raising its dividend by 4% and adding $90 billion to its buyback authorization.
Nobias Insights
49% of recent articles published by credible authors focused on AAPL shares offer a “neutral” bias. However, four out of five credible Wall Street analysts who cover Apple believe that shares are likely to rise in value. The average price target being applied to Apple by these credible analysts is $173.60, which is essentially in line with the stock’s current share price of $173.57.
Bullish Take Nobias 5-star rated author, Max Cherney, said, “Apple also raised its quarterly dividend 4% to 24 cents a share. That marked the eleventh year in a row it's increased that payout”
Bearish Take Luke Lango, a Nobias 4-star rated author, said, “Apple reported that its revenues dropped 2.5% in Q1. Last quarter, revenues dropped about 5%. And the company said revenues will drop again in Q2 as well.”
AAPL May 2023
Apple reported its fiscal 2023 second quarter earnings results this week, causing this $2.7 trillion company to rally to new 52-week highs. When it reported results after the closing bell on Thursday, Apple beat Wall Street’s expectations on both the top and bottom lines during Q2.
The company also announced a dividend increase and a new $90 billion buyback authorization. And although the company’s top-line results signaled slowing growth, the market was pleased with the report overall.
Apple shares rallied by 4.69% on Friday. On the week, Apple shares rose by 2.45%, pushing their year-to-date gains up to 38.78%. Therefore, throughout 2023 thus far, Apple has outperformed both the S&P 500 and the Nasdaq Composite Index, which are up by 8.16% and 17.8% on the year, by wide margins.
Bullish Nobias Credible Analysts’ Opinions:
Rida Imran, a Nobias 5-star rated author, covered Apple’s second quarter earnings results in an article that she published at I Think Different this week. Imran wrote, “Apple has published its earnings report for the second quarter of 2023 with $94.8 billion in revenue. In comparison to the same quarter the previous year, Apple saw a 3% year-on-year decline. However, its quarterly earnings per diluted share of $1.52 remained unchanged.”
Looking at the company’s top-line results, she said, “For Q2, 2022, Apple recorded an impressive quarter with a revenue record of $97.3 billion with a 9% Y-o-Y and quarterly earnings per diluted share of $1.52.” Also, Imran put a spotlight on Apple’s product sales segment results, writing:
iPhone – $51.334 billion (Up from $50.570 billion for the same quarter the previous year)
Mac – $7.168 billion (Down from $10.435 billion for the same quarter the previous year)
iPad – $6.670 (Up [sic] from $7.646 billion for the same quarter the previous year)
Wearable, Home, and Accessories – $8.757 (Slightly down from $8.806 billion for the same quarter the previous year)
Services – $20.907 (Up from $19.821 for the same quarter the previous year)
After examining Apple’s Q2 data, Bank of America analyst, Wamsi Mohan, who carries a Nobias 4-star rating, raised their price target for Apple shares. According to The Fly on the Wall, “BofA analyst Wamsi Mohan raised the firm's price target on Apple to $176 from $173 and keeps a Neutral rating on the shares. Apple executed well and "delivered decent performance," says the analyst, who sees "lots to like," along with "some concerns" from the company's earnings report and call. The firm's FY23 revenue and EPS estimates move up to $386B and $5.98 from $385B and $5.89, respectively, but BofA remains concerned about weak consumer spending and weak end market demand.”
The Fly on the Wall also reported that Nobias 4-star rated analyst, Ananda Baruah of Loop Capital, maintained their “Buy” rating no Apple shares, stating, “Loop Capital keeps a Buy rating and $180 price target on Apple after its better than expected Q2 results but also notes that the firm remains concerned by the company's potential softening in Q3. The analyst states that iPhone unit shipments are off to a slow start and actually tracking softer than originally anticipated, adding that it is "not clear" why Apple shares were up 2% afterhours following its earnings.”
Bearish Nobias Credible Analysts Opinions:
However, despite the stock’s strong post-earnings rally, not everyone who analyzed Apple’s Q2 report came away with a “Bullish” sentiment. Luke Lango, a Nobias 4-star rated author, published a post-earnings report this week which highlighted Apple’s relatively poor growth. He wrote, “Apple reported that its revenues dropped 2.5% in Q1. Last quarter, revenues dropped about 5%. And the company said revenues will drop again in Q2 as well.” “SImply put”, he added, “The company isn’t growing anymore.” “With a $2.5 trillion market cap, Apple stock’s days of scoring investors 10X-plus returns is behind it,” he said.
Lango put a spotlight on Apple’s illustrious history; however, he noted that the smartphone market is mature and therefore, Apple is going to struggle to grow unless it launched a new, innovative product. “Indeed,” he said, “smartphone penetration in the U.S. is 85%. And given how long the iPhone has been around, it’s highly unlikely that the 15% of Americans who are smartphone holdouts suddenly give in over the next few years.”
Regarding the sales growth momentum of Apple’s largest product, Lango wrote, “The number of iPhones sold per year by Apple soared from 11.6 million in 2008 to 231.2 million in 2015. Since then, annual unit sales have plateaued between 200- and 240 million units per year.
But, Lango also provided hope for investors, writing that an Apple car could be a game changer for this big-tech stock. He writes that Apple has been working on “Project Titan”, which is its secret car project, for years and today, he sees parallels between the iPhone launch and the electronic vehicle market today. “In 2007, smartphone penetration rates in the U.S. were about 10%. Last year, global EV penetration rates were about 10%,” Lango wrote. “The company has learned from its success with the iPhone. The key to driving long-term growth through a revolutionary product is to launch when that tech’s adoption is around 10%,” he added.
Lango concluded that an Apple car will be “a hit”; however, he says that investors should buy Apple suppliers - meaning the companies who supply the markets required to manufacture a product - instead of Apple shares due to the stock’s large market cap and its relatively limited upside.
Although Lango is cautious on Apple’s future, Nobias 5-star rated author, Max Cherney, notes that Apple’s management team is not. Cherney published an article this week highlighting Apple’s $90 billion repurchase authorization that was announced during its Q2 report. “Apple Inc. plans to buy back another $90 billion worth of it [sic] stock,” he said.
“The iPhone maker's board authorized the new buyback money due to "our confidence in Apple's future and the value we see in our stock," Luca Maestri, it [sic] chief financial officer, said in a press release,” Cherny continued. He notes that buybacks are a regular part of Apple’s capital allocation plans.
Nicholas Ward is a Senior Investment Analyst at Wide Moat Research. He has spent the last 8 years writing about the stock market at various publications, including Seeking Alpha, The Street, Forbes Real Estate Investor, Sure Dividend, The Dividend Kings, iREIT, Safe High Yield, and The Intelligent Dividend Investor.
Cherney said, “Apple spent $90.2 billion on stock repurchases in its last fiscal year and another $39 billion in this [sic] first half of its current fiscal year.”“In addition to increasing its buyback program,” he added, “Apple also raised its quarterly dividend 4% to 24 cents a share. That marked the eleventh year in a row it's increased that payout, Maestri said.”
Overall bias of Nobias Credible Analysts and Bloggers:
So, while growth is slowing, Apple’s shareholder return figures continue to rise. Overall, 49% of recent articles published by credible authors on Apple shares have expressed a “neutral” outlook, implying that after Apple’s nearly 39% year-to-date rally, shares are fully valued.
This sentiment is shared by the credible analyst community that the Nobias algorithm tracks as well. Four out of the five credible analysts that we track who recently covered AAPL shares believe that they’re likely to increase in value. However, the average price target being applied to Apple by these credible analysts is $173.60 which is essentially in-line with the stock’s current share price of $173.57.
Disclosure: Nicholas Ward is long AAPL. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.
Case Study: Realty Income (O) stock according to high performing analysts
Realty Income’s significant investments during 2022 showed up during their Q1 results; last year, this company acquired approximately $9 billion of commercial properties, and with a 99% occupancy ratio at the end of the first quarter, the company’s rent growth increased significantly. This allowed Realty Income to raise its dividend again during the quarter, extending its decades-long streak.
Nobias Insights: 81% of recent articles published by credible authors focused on O shares offer a “Bullish” bias. However, 2 out of the 3 credible Wall Street analysts who cover Realty Income believe that shares are likely to fall in value. The average price target being applied to Realty Income by these credible analysts is $69.67, which implies upside potential of approximately 10.7% relative to the stock’s current price of $62.95.
Bullish Take: Brett Ashcroft Green, a Nobias 4-star rated author, said, “In March, it increased the dividend for the 120th time since public listing in 1994, to an annual rate of $3.06 per share, representing 3.2% growth from the prior year period.”
Bearish Take: Value Quest, a Nobias 4-star rated author, said, “After comparing the forward P/FFO ratio of 14.75x with the sector median of 12.53x, I think the company is overvalued at current price levels as per the P/FFO valuation method.”
Key Points
Performance
Realty Income shares rose by 0.29% this week, pushing their year-to-date gains up to -1.33%. This compares poorly to the S&P 500 which is up by 8.16% on the year thus far.
Event & Impact
Realty Income posted its first quarter results this week, beating consensus estimates on both the top and bottom lines. During Q1, Realty Income’s revenue totaled $944.39 million, beating Wall Street’s consensus estimate by $61.3 million. Realty Income’s Q1 funds from operations came in at $1.04 which was $0.03/share above consensus estimates.
Noteworthy News:
Realty Income’s significant investments during 2022 showed up during their Q1 results; last year, this company acquired approximately $9 billion of commercial properties, and with a 99% occupancy ratio at the end of the first quarter, the company’s rent growth increased significantly. This allowed Realty Income to raise its dividend again during the quarter, extending its decades-long streak.
Nobias Insights
81% of recent articles published by credible authors focused on O shares offer a “bullish” bias. However, two out of three credible Wall Street analysts who cover Realty Income believe that shares are likely to fall in value. The average price target applied to Realty Income by credible analysts is $69.67, which implies upside potential of 10.7% relative to the stock’s current price of $62.95.
Bullish Take Brett Ashcroft Green, a Nobias 4-star rated author, said, “In March, it increased the dividend for the 120th time since public listing in 1994, to an annual rate of $3.06 per share, representing 3.2% growth from the prior year period.”
Bearish Take Value Quest, a Nobias 4-star rated author, said, “After comparing the forward P/FFO ratio of 14.75x with the sector median of 12.53x, I think the company is overvalued at current price levels as per the P/FFO valuation method.”
O May 2023
Realty Income (O), one of the world’s largest Real Estate Investment Trusts with a $42.5 billion market capitalization, posted earnings this week. Realty Income is often viewed as a proxy for the commercial real estate sector due to its 12,000+ property portfolio. Not only is Realty Income known for its large size, but also, its reliable monthly dividend.
This company has trademarked the phrase, “The Monthly Dividend Company” and has been paying out monthly dividends to shareholders for more than 50 years. What’s more, Realty Income has increased its annual dividend every year since becoming public in 1994, making it a Dividend Aristocrat (companies with 25+ years of consecutive annual dividend raises). Realty Income’s growing monthly dividend, alongside its relatively high 4.86% dividend yield, has made this stock a popular investment amongst retirees for decades.
Bullish Nobias Credible Analysts’ Opinions:
With the company’s first quarter results in place, the vast majority of credible authors that track the stock remain bullish. Brett Ashcroft Green, a Nobias 4-star rated author, covered Realty Income’s first quarter results in an article at Seeking Alpha this week, where he referred to the stock as “My Dollar Store Darling”. He noted that Realty Income is a Real Estate Investment Trust (REIT) and said that at the end of 2022, the company’s most recent 10K form stated that it, “owned or held interests in 12,237 properties”. That 10K form also stated, “Clients doing business in 84 separate industries; • Locations in all 50 United States ("U.S."), Puerto Rico, the United Kingdom ("U.K."), Spain, and Italy”.
And looking at this portfolio, Green wrote, “The tenants are my favorite part about Realty Income.” It has a beautiful stable of Dollar, grocery, and convenience stores. This is right where I want to be if we hit a recession.”
Examining Realty Income’s Q1 results, Green said, “Recent earnings trends from the May 4th call saw Realty Income miss on the top line by $883 million. It met expectations on the bottom line EPS at $.34 a share and delivered AFFO per share of $0.98.” “For the first quarter, occupancy was 99%, matching last quarter for the highest rate at the end of a reporting period in over 20 years,” he continued.
“In March,” Green added, “it increased the dividend for the 120th time since public listing in 1994, to an annual rate of $3.06 per share, representing 3.2% growth from the prior year period.” And he said, “With the projected forward yield at a tad over 5%, we're getting Realty Income at just about the top of its trailing 10-year average.”
Green notes that Realty Income is an income oriented investment, stating, “Hunting for stocks that both grow their yield and exceed the risk-free rate is not an easy task. High-yield FDIC-insured savings accounts and money market funds are throwing off somewhere in the neighborhood of 4.5+%. Not only is Realty Income Corporation at least matching that, their growth rate and frequency of compounding, which match the monthly compounding of an HYSA, are a great alternative that should be beating the risk-free rate in the not-too-distant future.”
With that in mind, he continued, “With a dividend yield now at the top of its 10-year average and a price that is only about 1.5 X the asset value, depending on how you want to slice it, the Realty Income Corporation price seems attractive.”
Overall, Green concluded, “This dividend aristocrat is down nearly 10% YTD and I have started adding monthly”. “Buy Realty Income Corporation stock with a target of $62 on the low end and $67 on the high end.”
Bearish Nobias Credible Analysts Opinions:
Value Quest, a Nobias 4-star rated author, recently covered Realty Income in an article that they published at Seeking Alpha as well. Like Green, Value Quest highlighted Realty Income’s size, scale, and the overall strength of its operations (historically speaking). They wrote, “Realty Income Corporation (NYSE:O) is a real estate investment trust ("REIT") that acquires and maintains standalone commercial buildings. The company has a long and consistent dividend growth record since 1994, when it went public (and since 1969 when it originated), and I believe it can sustain this growth in the coming years.”
Value Quest continued, “The company has an impressive and long track record of consistent dividend growth. As we can see in the above chart, the dividend payment of the company has increased steadily in the past. It has managed to maintain its dividend growth for 28 consecutive years and 101 quarters as a member of the S&P Dividends Aristocrats Index.” The author said, “It has a highly diversified portfolio in terms of regions, clients, and property type, ensuring the resiliency of its 92% rent from economic downturns.” “In addition,” they noted, “the company is highly dedicated to its expansion plans, which has significantly increased its acquisition volume to $9 billion in FY2022..”
These investments are a growth catalyst and Value Quest made it clear that this is showing up on the company’s top-line, stating, “The company has reported 59.8% YoY rental income growth driven by rising inflation and the acquisition of 1300 properties in 2022.” However, this growth doesn’t come without a cost. The author points out that “The company currently has $17.4 billion in long-term debt on its balance sheet, which is 42.3% of the current market capitalization.”
Overall, Value Quest acknowledged that Realty Income is a high quality company; however, they concluded that shares are too expensive in today’s market environment. “According to Seeking Alpha,” Value Quest wrote, “the company's FFO per share for FY2023 might be $4.00-$4.21, which is a growth of -0.1%-4.21%.” “After considering all the growth factors, I think that the growth of 4.21% is accurate. That is why I am estimating FFO per share of $4.21 for FY2023, which gives the forward P/FFO per share ratio of 14.75x,” they added.
And therefore, Value Quest said, “After comparing the forward P/FFO ratio of 14.75x with the sector median of 12.53x, I think the company is overvalued at current price levels as per the P/FFO valuation method.” They concluded, “Rising inflation and interest rates could adversely affect Realty Income Corporation profit margins.”
Nicholas Ward is a Senior Investment Analyst at Wide Moat Research. He has spent the last 8 years writing about the stock market at various publications, including Seeking Alpha, The Street, Forbes Real Estate Investor, Sure Dividend, The Dividend Kings, iREIT, Safe High Yield, and The Intelligent Dividend Investor.
Lastly, the author wrote, “I think the relatively high dividend yield cannot justify the overvalued share price for new investors.” Therefore, after considering all these factors, I assign a sell rating to Realty Income Corporation.”
Overall bias of Nobias Credible Analysts and Bloggers:
However, recent credible analyst reports disagree with this bearish sentiment. According to The Fly on the Wall, “Realty Income (NYSE:O) price target raised to $80 from $79 by RBC Capital analyst Brad Heffern. This maintains O as Outperform.” Heffern is a Nobias 4-star rated analyst.
Overall, 81% of recent articles published on Realty Income by credible authors have expressed a “bullish” sentiment. The credible Wall Street analysts who cover Realty Income aren’t quite so bullish, with two out of the three analysts that Nobias recently offering price targets that imply that Realty Income is overvalued.
However, because of Heffern’s bullish fair value estimate, the average price target being applied to Realty Income shares is $69.67, which represents upside potential of approximately 10.7%.
Disclosure: Nicholas Ward is long O. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.
Case Study: Starbucks (SBUX) stock according to high performing analysts
Starbucks posted strong growth results in Q2, with revenue, earnings, and global same-store sales all up double digits. The company also continued to build out its global store network, adding 464 locations during the quarter. SBUX management has upheld prior guidance and is expecting to see double digit full-year top- and bottom-line growth.
Nobias Insights: 49% of recent articles published by credible authors focused on SBUX shares offer a “bearish” bias. However, five out of six credible Wall Street analysts who cover SBUX believe that shares are likely to rise in value. The average price target being applied to Starbucks by these credible analysts is $218.50, which implies upside potential of approximately 10.6% relative to the stock’s current share price of $107.16.
Bullish Take: Marianne Wilson, a Nobias 4-star rated author, said, “Starbucks reaffirmed its fiscal 2023 outlook, with expected revenue growth of 10% to 12% and adjusted earnings per share growth on the low end of 15% to 20%.”
Bearish Take: David Tarantino, a Nobias 5-star rated analyst, said, “The analyst said Q2 global comps/EPS came in well ahead of estimates, but they surprisingly did not raise 2023 guidance and also signaled that U.S. comps have moderated into Q3 and that the China recovery is expected to be more shallow than we had been anticipating.”
Key Points
Performance
Starbucks shares fell by 6.59% this week, pushing their year-to-date gains down to 6.33%. This compares poorly to the S&P 500 which is up by 8.16% during 2023 thus far.
Event & Impact
Starbucks posted its fiscal 2023 second quarter results this week, beating consensus estimates on both the top and bottom lines. During Q2, SBUX’s revenue totaled $8.7 billion, beating Wall Street’s consensus estimate by $270 million. Starbucks’ Q2 non-GAAP earnings-per-share came in at $0.74, which was $0.09/share above consensus estimates.
Noteworthy News:
Starbucks posted strong growth results in Q2, with revenue, earnings, and global same-store sales all up double digits. The company also continued to build out its global store network, adding 464 locations during the quarter. SBUX management has upheld prior guidance and is expecting to see double-digit full-year top- and bottom-line growth.
Nobias Insights
49% of recent articles published by credible authors focused on SBUX shares offer a “bearish” bias. However, five out of six credible Wall Street analysts covering SBUX believe that shares are likely to rise in value. The average price target applied to Starbucks by these analysts is $218.50, implying an upside potential of approximately 10.6% relative to the current share price of $107.16.
Bullish Take Marianne Wilson, a Nobias 4-star rated author, said, “Starbucks reaffirmed its fiscal 2023 outlook, with expected revenue growth of 10% to 12% and adjusted earnings per share growth on the low end of 15% to 20%.”
Bearish Take David Tarantino, a Nobias 5-star rated analyst, said, “The analyst said Q2 global comps/EPS came in well ahead of estimates, but they surprisingly did not raise 2023 guidance and also signaled that U.S. comps have moderated into Q3 and that the China recovery is expected to be more shallow than we had been anticipating.”
SBUX May 2023
Starbucks (SBUX) reported its second quarter earnings this week, causing the stock to fall by 6.59% during the last 5 trading sessions. Yet, even with this 6.6% post-earnings sell-off in mind, SBUX’s gains on a year-to- date basis and during the trailing 12 month period are 6.33% and 38.37%, respectively.
Due to their recent dip, SBUX shares have underperformed the broader market in 2023 thus far. The S&P 500 is now up by 8.16% on the year. However, over longer periods of time, SBUX shares have outperformed the market, posting price gains of 86.6% and 230.8% during the last 5 and 10-year periods, respectively. These results compare favorably to the S&P 500, which is up by 55.1% and 148.1% during those same periods of time.
Bullish Nobias Credible Analysts’ Opinions:
However, over longer periods of time, SBUX shares have outperformed the market, posting price gains of 86.6% and 230.8% during the last 5 and 10-year periods, respectively. These results compare favorably to the S&P 500, which is up by 55.1% and 148.1% during those same periods of time.
Although SBUX sold off after posting its second quarter earnings, the credible analysts that Nobias tracks who have received the company’s results published bullish reports. Currently, credible analysts are calling for double digit upside potential, signaling that this near-term dip could represent a long-term buying opportunity.
Marianne Wilson, a Nobias 4-star rated author, covered Starbucks’ second quarter earnings report in an article that she published this week at Chain Store Age. In her piece, Wilson noted the leadership change at Starbucks, writing, “The report was Laxman Narasimhan's first earnings report since he took the reins of Starbucks from Howard Shultz in March, following a lengthy “immersion experience” in the company.”
She quoted Narasimhan, who said, “From my immersion observations, our leadership team now has a clear line of sight into our growth headroom, as well as our opportunities to enhance margins and modernize the business, brand, partner experience and culture of Starbucks.”
Looking at the company’s operating results, Wilson said, “Excluding items, Starbucks earned $0.74 per share, beating Street estimates of $0.64 per share.” During the same quarter a year ago, SBUX’s non-GAAP earnings-per-share came in at $0.59. Therefore, the company’s fiscal 2023 $0.74/share result in Q2 represented year-over-year growth of 25.4%.
Wilson also highlighted the company’s top-line results, stating, “Net sales rose 14.2% to $8.72 billion, topping analysts’ estimates of $8.4 billion.” She continued, “Global comparable store sales rose 11% in the quarter.”
“U.S. comparable-store sales rose 12%, driven by a 6% increase in comparable transactions and a 6% increase in average ticket,” she added. Another metric that Starbucks’ management team touted was the continued growth of its digital membership program.
Wilson said, “Active members of its U.S. loyalty program increased 15% from the year-ago period to 30.8 million.” Finally, she noted that the company provided a full-year update on guidance for investors. “Starbucks reaffirmed its fiscal 2023 outlook, with expected revenue growth of 10% to 12% and adjusted earnings per share growth on the low end of 15% to 20%,” Wilson concluded.
Bearish Nobias Credible Analysts Opinions:
Dee-Ann Durbin, a Nobias 4-star rated author, also covered Starbucks’ Q2 earnings this week. She wrote an article on the retailer’s results at Yahoo finance. Durbin put a spotlight on the company’s performance in China, writing, “Same-store sales in China were up 3%, reversing a 29% decline the company saw in its October-December period due to a spike in COVID infections. It was the first time Starbucks had seen positive same-store sales in China since 2021.”
Ken Martin, a Nobias 5-star rated author, threw some cold water on Starbucks’ Chinese growth prospects in a report that he published at Fox Business this week, however. “While the China recovery was better than the company expected, growth in average weekly sales there will be at a more moderate pace in the second half, Chief Financial Officer Rachel Ruggeri said during an earnings call,” he said.
Looking at domestic sales figures, Durbin pointed out the 12% same-store sales growth in the United States and highlighted comments made by Starbucks’ CFO, Rachel Ruggeri, who said, “For the full year, Starbucks expects North American same-store sales increases in the 7-9% range”.
Durbin also points out that SBUX continues to grow its global footprint with ongoing investments into its real estate portfolio. She said, “Starbucks said it opened 464 net new stores during the quarter, including 100 in North America. As part of a larger plan to reinvigorate sales, Starbucks has been closing underperforming locations and replacing them with stores in higher-traffic areas or smaller stores that are focused on pickup or drive-thru business.” She also touched upon commentary provided by Narasimhan during the quarterly report regarding plans to increase in-store efficiencies.
Nicholas Ward is a Senior Investment Analyst at Wide Moat Research. He has spent the last 8 years writing about the stock market at various publications, including Seeking Alpha, The Street, Forbes Real Estate Investor, Sure Dividend, The Dividend Kings, iREIT, Safe High Yield, and The Intelligent Dividend Investor.
“Starbucks CEO Laxman Narasimhan said the company also continues to introduce new equipment — like hand-held cold foamers — to improve execution and speed. But he said Starbucks must do a better job simplifying its supplies and operations; he noted that the company currently has 1,500 cup and lid combinations around the world,” Durbin wrote.
Overall bias of Nobias Credible Analysts and Bloggers:
Looking at the credible analyst response to SBUX’s Q2 earnings report there have been mixed results. According to the Fly of the Wall, “Baird raised the firm's price target on Starbucks to $110 from $105 and keeps a Neutral rating on the shares. The analyst said Q2 global comps/EPS came in well ahead of estimates, but they surprisingly did not raise 2023 guidance and also signaled that U.S. comps have moderated into Q3 and that the China recovery is expected to be more shallow than we had been anticipating.” Baird’s analyst is David Tarantino, who carries a Nobias 5-star rating.
While Tarantino raised his price target on SBUX shares, his new $110 fair value estimate only represents low single digit upside to Starbucks’ current share price of $107.16. However, BTIG analyst Peter Saleh, another Nobias 5-star rated analyst, came away from the quarter with a more bullish outlook for SBUX shares.
According to the Fly of the Wall, “Saleh raised the firm's price target on Starbucks to $125 from $120 and keeps a Buy rating on the shares after its Q2 earnings beat. The analyst cites the sales and margin momentum that the company achieved in the first half of the year. BTIG also believes that the guidance at Starbucks is conservative given the return to pre-pandemic transaction levels at breakfast and double-digit comp recovery in China.”
Nobias 5-star rated analyst, David Palmer of Evercore ISI also raised his price target to $125 after examining SBUX’s Q2 results. According to the Fly on the Wall, “Evercore ISI raised the firm's price target on Starbucks to $125 from $120 and keeps an Outperform rating on the shares, which the analyst also removed from the firm's "Tactical Outperform" list. Fiscal Q2 results were stronger than expected because of sales strength around the world, but the company noted that the pace of the China sales recovery has slowed in recent weeks and as a result, together with what the firm believes is "conservatism under new leadership," FY23 guidance is unchanged. The firm is "nudging" its EPS estimate higher based on a stronger start to the year.”
Overall, 5 out of the 6 credible Wall Street analysts that the Nobias algorithm tracks who have expressed an opinion on SBUX shares believe that they’re likely to increase in value. The average price target being applied to SBUX by these credible individuals is $118.50, which implies upside potential of approximately 10.6% relative to the stock’s current price of $107.16.
The credible author community is more bearish on SBUX shares with only 44% of recent articles published by credible authors expressing a “Bullish” sentiment towards shares.
Disclosure: Nicholas Ward is long SBUX. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.
Case Study: Meta (META) stock according to high performing analysts
Meta continued to show its ability to cut costs and focus on profits during Q1. The company’s global user base continues to grow. Looking forward, analysts are calling for ongoing cash flows/earnings-per-share growth throughout the remainder of 2023. Right now, the consensus analyst estimate for Meta’s full-year EPS growth rate sits at 39%.
Nobias Insights: 58% of recent articles published by credible authors focused on META shares offer a “Bullish” bias. 5 out of the 6 credible Wall Street analysts who cover META believe that shares are likely to rise in value. The average price target being applied to Meta by these credible analysts is $241.67, which implies relatively flat upside potential relative to the stock’s current share price of $240.32.
Bullish Take: Goldman Sachs analyst Eric Sheridan, a 4-star rated Nobias analyst, said, “Meta continued its momentum from last quarter in Q1 with management highlighting several key themes, including advertising revenue outperforming expectations and continued improvement in monetization efficiency, the analyst tells investors in a research note.”
Bearish Take: Growth at a Good Price, a Nobias 4-star rated author, stated, “The real problem with Meta Platforms, Inc. is that the stock has gotten fairly pricey. At 26 times earnings, this is definitely not the deep value opportunity it once was.”
Key Points
Performance
Meta Platform shares rose by 12.60% this week, pushing their year-to-date gains down to 92.66%. This compares favorably to both the S&P 500 and the Nasdaq Composite Index, which are up by 9.03% and 17.71%, respectively, on a year-to-date basis.
Event & Impact
Meta Platforms posted its first quarter results this week, beating consensus estimates on both the top and bottom lines. During Q1, META’s revenue totaled $28.65 billion, beating Wall Street’s consensus estimate by $990 million. Meta’s Q1 GAAP earnings-per-share came in at $2.20, which was $0.23/share above consensus estimates.
Noteworthy News:
Meta continued to show its ability to cut costs and focus on profits during Q1. The company’s global user base continues to grow. Looking forward, analysts are calling for ongoing cash flows/earnings-per-share growth throughout the remainder of 2023. Right now, the consensus analyst estimate for Meta’s full-year EPS growth rate sits at 39%.
Nobias Insights
58% of recent articles published by credible authors focused on META shares offer a “bullish” bias. 5 out of the 6 credible Wall Street analysts who cover META believe that shares are likely to rise in value. The average price target being applied to Meta by credible analysts is $241.67, which implies relatively flat upside potential relative to the stock’s current share price of $240.32.
Bullish Take Goldman Sachs analyst Eric Sheridan, a 4-star rated Nobias analyst, said, “Meta continued its momentum from last quarter in Q1 with management highlighting several key themes, including advertising revenue outperforming expectations and continued improvement in monetization efficiency, the analyst tells investors in a research note.”
Bearish Take Growth at a Good Price, a Nobias 4-star rated author, stated, “The real problem with Meta Platforms, Inc. is that the stock has gotten fairly pricey. At 26 times earnings, this is definitely not the deep value opportunity it once was.”
META Apr 2023
Meta Platforms (META) have been on an amazing run thus far throughout 2023, in large part, due to their management’s decision to make this a “year of efficiencies” and focus on cost cutting and profit generation instead of massive metaverse/virtual reality investments.
META shares are up by 92.66% on a year-to-date basis. After nearly doubling during 2023, META is now up by 16.8% during the trailing 12 month period. The Q1 earnings results reported this week served as the latest catalyst for META’s rally. META beat Wall Street’s expectations on both the top and bottom lines, causing shares to rally by another 12.6% this week alone.
Bearish Nobias Credible Analysts Opinions:
Shanthi Rexaline, a Nobias 4-star rated author, covered Meta’s earnings results in an article that she published at Business Insider this week. Rexaline wrote, “Meta Platforms, Inc. shares surged higher in premarket on Thursday after the social media giant wowed analysts and investors alike with its stellar quarterly results.”She continued, “The Mark Zuckerberg-led company reported first-quarter earnings per share of $2.20, beating the consensus estimate of $2.02. Revenue climbed 3% year-over-year to $28.65 billion compared to the Street estimate of $27.65 billion.” "Among the user metrics,” Rexaline added, “Meta's daily active users rose 4% to 2.04 billion.”
Growth at a Good Price, a Nobias 4-star rated author, also covered Meta’s Q1 results in an article this week which also highlighting their decision to sell their Meta shares. Looking at Meta’s bottom-line results, Growth at a Good Price said, “The company reported $6.9 billion in free cash flow ("FCF"), which shrinks to $3.9 billion if you subtract the $3 billion in stock-based compensation ("SBC") reported for the period.”
Looking at recent attempts to bolster profits, the author added, “CEO Mark Zuckerberg announced another round of cost cuts near the end of the first quarter; those cuts won’t make it into earnings until next quarter. So, there is some tentative cause to believe that margins could be better in Q2.” Then, they moved on to a growing concern: Meta’s investments into virtual reality and the metaverse.
Growth at a Good Price wrote, “Reality Labs’ revenue came in at a mere $339 million, which was down 51.2% from the same quarter a year before.” They continued, “Despite Meta’s initiatives to reduce costs, the company is still spending over $3 billion a quarter on it. It would be difficult for Mark Zuckerberg to just throw in the towel on the metaverse since he has invested so much in it and even re-named his company to reflect his ambitions in the space, but at this point, Meta’s VR segment is looking like a real money pit – one that’s not growing, at that.”
Moving onto META’s valuation metrics the author ey wrote, “At today’s price, Meta trades at:”
26 times earnings.
4.8 times sales.
4.3 times book value.
10.6 times operating cash flow.
36 times free cash flow
“Overall,” the author concluded, “Meta’s first quarter release was pretty good.” “The bottom line on Meta Platforms, Inc. is that it’s still a very profitable company with an admirable competitive position,” Growth at a Good Price said. “The real problem with Meta Platforms, Inc.,” the author continued, “is that the stock has gotten fairly pricey. At 26 times earnings, this is definitely not the deep value opportunity it once was.”
Therefore, they said, “I sold all my Meta shares earlier today. I think $250 is a reasonable valuation for META and the stock is already pretty close to that level. For this reason, I consider Meta Platforms, Inc. a hold at today’s prices.”
Bullish Nobias Credible Analysts Opinions:
Despite this author’s decision to sell, a slew of credible Wall Street analysts that Nobias tracks raised their price targets for META shares after digesting the company’s Q1 report. According to the Fly on the Wall: “DZ Bank analyst Ingo Wermann upgraded Meta Platforms to Buy from Hold with a price target of $270, up from $180.” Wermann is a Nobias 4-star rated analyst
“Bernstein analyst Mark Shmulik raised the firm's price target on Meta Platforms to $275 from $250 and keeps an Outperform rating on the shares following quarterly results. The company returned to growth, and guided for growth acceleration next quarter just as questions around a potential recession get louder, the firm notes.” Shmulik is a Nobias 5-star rated analyst.
“BofA analyst Justin Post raised the firm's price target on Meta Platforms to $300 from $250 and keeps a Buy rating on the shares following the company's Q1 beat. Above-Street Q2 revenue guidance suggests further acceleration and EPS upside, says the firm, which sees Meta as well positioned for ad revenue acceleration above the industry while cost efficiencies should provide additional EPS upside.” Post is a Nobias 5-star rated analyst.
“Guggenheim analyst Michael Morris raised the firm's price target on Meta Platforms to $320 from $240 and keeps a Buy rating on the shares. Though improved revenue trends "are the headline" from the company's Q1 report, accelerated DAU growth fueled by investment in AI recommendations should boost investor confidence that Meta can "effectively compete with TikTok and other platforms for consumer engagement," the analyst tells investors in a post-earnings note.” Morris is a Nobias 5-star rated analyst.
“Evercore ISI raised the firm's price target on Meta Platforms to $350 from $305 and keeps an Outperform rating on the shares. The company reported a "beat and raise" Q1, with the sales upside driven by an "impressive acceleration" in advertising revenue, the analyst tells investors in a research note. The firm says the stock's valuation is "still cheap" despite the almost 100% rally year-to-date. Meta remains Evercore's top internet long idea.” The Evercore analyst who covers META is Mark Mahaney and is a Nobias 4-star rated analyst.
And lastly, “Goldman Sachs analyst Eric Sheridan raised the firm's price target on Meta Platforms to $300 from $245 and keeps a Buy rating on the shares. Meta continued its momentum from last quarter in Q1 with management highlighting several key themes, including advertising revenue outperforming expectations and continued improvement in monetization efficiency, the analyst tells investors in a research note. The firm says Meta's revenue trajectory and cost efficiency narratives continue to gain momentum.” Sheridan is a Nobias 4-star rated analyst.
Nicholas Ward is a Senior Investment Analyst at Wide Moat Research. He has spent the last 8 years writing about the stock market at various publications, including Seeking Alpha, The Street, Forbes Real Estate Investor, Sure Dividend, The Dividend Kings, iREIT, Safe High Yield, and The Intelligent Dividend Investor.
According to the Fly on the Wall, “UBS raised the firm's price target on Amazon.com to $130 from $125 and keeps a Buy rating on the shares. The firm expects AWS to continue to decelerate into Q2 but start to recover in terms of sequential dollar growth in Q3, and UBS sees the retail margin story intact, though moving slightly slower than initially hoped”, the analyst tells investors in a research note.
Overall bias of Nobias Credible Analysts and Bloggers:
Overall, 58% of recent articles published by credible authors on Meta Platforms expressed a “Bullish” bias. And the community of credible Wall Street analysts that Nobias tracks is even more bullish on META shares, with 83% of credible individuals calling for META’s share price to rise.
After its 12% rally this week, META trades for $240.32. Currently, the average price target being applied to META shares is $241.67. This implies a slight upside ahead; however, as you can see by the new price targets above, this figure is being held down by one relatively low outlier at the moment.
Disclosure: Nicholas Ward has no META position. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.
Case Study: Amazon (AMZN) stock according to high performing analysts
Amazon’s year-to-date rally shows bullish sentiment attached to shares; however, the stock sold off this week on the news that its AWS cloud segment continues to produce slowing growth. Amazon trades at a high valuation multiple (its forward price-to-earnings ratio is 67x), and therefore, decelerating growth has the potential to result in significant multiple compression.
Nobias Insights: 52% of recent articles published by credible authors focused on AMZN shares offer a “neutral” bias. Six out of the six credible Wall Street analysts who cover Amazon believe that shares are likely to rise in value. The average price target applied to Amazon by these credible analysts is $148.17, which implies upside potential of approximately 40.5% relative to the stock’s current share price of $105.45
Bullish Take: Howard Smith, a Nobias 4-star rated author, said, “The company itself forecasts overall sales will continue to grow. It estimates second-quarter revenue will increase between 5% and 10% versus the prior year period. Long-term investors might want to take advantage of today's reaction to buy, or add, shares.”
Bearish Take: The Value Portfolio, a Nobias 5-star rated author, stated, “The company is facing competition across the board with all of its key businesses. Incredibly deep pocketed competitors such and Google and Apple are stealing the company's lunch. With a $1.1 trillion market cap, the company needs substantial profits to justify its valuation, and we don't see a path for it to accomplish those, making it a poor investment.”
Key Points
Performance
Amazon shares fell by 3.24% this week, pushing their year-to-date gains down to 22.87%. This compares favorably to both the S&P 500 and the Nasdaq Composite Index, which are up by 9.03% and 17.71%, respectively, on a year-to-date basis.
Event & Impact
Amazon posted its first quarter results this week, beating consensus estimates on both the top and bottom lines. During Q1, AMZN’s revenue totaled $127.4 billion, beating Wall Street’s consensus estimate by $2.85 billion. Amazon’s Q1 non-GAAP earnings-per-share came in at $0.31, which was $0.11/share above consensus estimates.
Noteworthy News:
Amazon’s year-to-date rally shows bullish sentiment attached to shares; however, the stock sold off this week on the news that its AWS cloud segment continues to produce slowing growth. Amazon trades at a high valuation multiple (its forward price-to-earnings ratio is 67x), and therefore, decelerating growth has the potential to result in significant multiple compression.
Nobias Insights
52% of recent articles published by credible authors focused on AMZN shares offer a “neutral” bias. Six out of the six credible Wall Street analysts who cover Amazon believe that shares are likely to rise in value. The average price target applied to Amazon by these credible analysts is $148.17, which implies upside potential of approximately 40.5% relative to the stock’s current share price of $105.45.
Bullish Take Howard Smith, a Nobias 4-star rated author, said, “The company itself forecasts overall sales will continue to grow. It estimates second-quarter revenue will increase between 5% and 10% versus the prior year period. Long-term investors might want to take advantage of today's reaction to buy, or add, shares.”
Bearish Take The Value Portfolio, a Nobias 5-star rated author, stated, “The company is facing competition across the board with all of its key businesses. Incredibly deep pocketed competitors such and Google and Apple are stealing the company's lunch. With a $1.1 trillion market cap, the company needs substantial profits to justify its valuation, and we don't see a path for it to accomplish those, making it a poor investment.”
AMZN Apr 2023
Amazon (AMZN) was one of several big-tech stocks that reported quarterly earnings this week. Companies like Microsoft (MSFT) and Meta Platforms (META) posted results which beat Wall Street’s expectations, causing them to rally post-earnings.
This week, Microsoft was up by 8.24% and Meta shares rose by 12.60%. However, Amazon didn’t follow along this same path. When it reported Q1 results Amazon beat on the top and bottom lines; however, the company’s pace of growth continued to slow down which caused fear in the market.
AMZN shares dipped by 3.24% during the last 5 trading sessions; however, this drop adds to what the credible Wall Street community sees as an attractive buying opportunity.
Bullish Nobias Credible Analysts Opinions:
Vidhi Choudhary, a Nobias 4-star rated author, published a report at Modern Retail this week which broke down Amazon’s first quarter results. Choudhary started, looking at Amazon’s top-line. She said, “Amazon’s revenue in the first quarter was $127.4 billion, a 9% year-over-year increase.”
Choudhary also touched upon Amazon’s bottom-line success, stating, “The company swung to a profit of $3.1 billion compared to a loss of $3.8 billion during the same period last year.” Looking at the company’s different operating segments, Choudhary wrote:
Services revenue, which includes the company’s advertising business and its cloud business called Amazon Web Services, cumulatively rose 17.3% to $70.3 billion from roughly $60 billion in the same period a year ago.
Amazon’s e-commerce sales remained flat as online store revenue stood at $51 billion at the three month period ending March 31.
One of the biggest drivers of Amazon’s growth continues to be its advertising business, which grew 21% year-over-year increase to $9.5 billion from $7.8 billion.
Revenue growth for other key divisions like AWS increased 16% year-over-year to $21.3 billion but remained flat compared to the previous quarter on a sequential basis.
Meanwhile, revenue from Amazon’s physical stores including Whole Foods rose 7% year-over-year to $4.8 billion.
She notes that while there was positive growth throughout Amazon’s Q1 report, the rates of growth are slowing compared to historical results. This concerned investors this week, causing AMZN shares to fall.
Overall, Choudhary concluded that these growth struggles may be here to stay, predicting that Amazon has a difficult year ahead of it. She wrote, “The e-commerce giant faces challenges like a weak consumer sentiment, slower e-commerce shipments and broader macroeconomic volatility as it focuses on efficiency efforts to drive profitability.”
Howard Smith, a Nobias 4-star rated author, published an article at the Motley Fool this week titled, “Why Amazon Stock Dropped After Earnings”. He said, “It's all about the cloud. At least, that's how investors are reacting.”
Smith also noted that Amazon shares ran up by roughly 7% into earnings, meaning that shares may have been pricing in a bigger beat. “But investors concluded that run-up was excessive after the company reported that its Amazon Web Services (AWS) cloud segment grew revenue by just 16% year over year. “That may sound positive on the surface, but it compares to 20% year-over-year growth in the fourth quarter of 2022 and 37% in the first quarter last year,” Smith added.
Regarding the slowing cloud growth, Smith said, “That has left investors wondering where the growth deceleration will bottom out, as Microsoft's Azure and other competitors presumably are gaining market share.”
Overall, though, he offered a bullish takeaway. Smith concluded, “The company itself forecasts that overall sales will continue to grow.” It estimates second-quarter revenue will increase between 5% and 10% versus the prior year period. “Long-term investors might want to take advantage of today's reaction to buy, or add, shares.”
Bearish Nobias Credible Analysts Opinions:
The Value Portfolio, a Nobias 5-star rated author, published an article on Amazon after its Q1 results this week at Seeking Alpha, titled, “Amazon: The Gravy Train Is Over”. Like Choudhary, they highlighted the company’s operating results. However, The Value Portfolio’s focused was on profitability, rising competition, and ultimately, poor shareholder returns. They wrote, “The company's earnings don't account for continued shareholder dilution.”
“Over the past year,” The Value Portfolio said, “the company's outstanding shares increased by 171 million shares. At just under $110/share, that means that the company added almost $19 billion in dilution. The company still has hundreds of millions of stock-based awards outstanding, and that number as increased YoY, so we expect dilution to continue.” “The largest risk to our thesis is the company's ability to drive additional shareholder returns as it decides to invest less in its business,” they added.
The Value Portfolio concluded, “Amazon is overvalued.” They continued, “The company is facing competition across the board with all of its key businesses. Incredibly deep pocketed competitors such and Google and Apple are stealing the company's lunch. With a $1.1 trillion market cap, the company needs substantial profits to justify its valuation, and we don't see a path for it to accomplish those, making it a poor investment.”
In an article that she published at Business Insider this week, Shanthi Rexaline, a Nobias 4-star rated author, highlighted post-earnings commentary by a notable Wall Street analyst regarding AMZN shares. She touched upon post-earnings commentary provided by Deepwater Asset Management's Gene Munster. She wrote, “Calling Amazon a "great company," Munster said Deepwater, a fund management firm he co-founded, does not own Amazon stock. There are other companies to own to gain outperformance, he added.”
Rexaline continued, “He, however, sees things changing by the middle of the year. "What keeps me up at night not owning AMZN: The company’s growth rates should start to improve in the back half of this year," he said.” She wrote, “Munster also delved into the weak AWS performance. Management commentary that the cloud business is tracking down 500 basis points in April suggests 11% growth for AWS in the June quarter, the tech analyst said. This would mean the company could undershoot the Street estimate for 11% growth, he added.” Munster believes that this ongoing weakness could give him an opportunity to add shares of this ‘great company’ to his investment portfolio.
Munster isn’t the only Wall Street analyst who is bullish on AMZN over the long-term. UBS analyst, Lloyd Walmsley, a Nobias 4-star rated analyst, raised his price target on AMZN shares after the company posted earnings this week.
Nicholas Ward is a Senior Investment Analyst at Wide Moat Research. He has spent the last 8 years writing about the stock market at various publications, including Seeking Alpha, The Street, Forbes Real Estate Investor, Sure Dividend, The Dividend Kings, iREIT, Safe High Yield, and The Intelligent Dividend Investor.
According to the Fly on the Wall, “UBS raised the firm's price target on Amazon.com to $130 from $125 and keeps a Buy rating on the shares. The firm expects AWS to continue to decelerate into Q2 but start to recover in terms of sequential dollar growth in Q3, and UBS sees the retail margin story intact, though moving slightly slower than initially hoped”, the analyst tells investors in a research note.
Overall bias of Nobias Credible Analysts and Bloggers:
Looking at the sentiment expressed by the credible author and credible Wall Street analyst communities that are tracked by the Nobias algorithm, we see a startling divergence. 52% of the articles recently published by credible authors expressed a “bullish” bias towards shares. However, 100% (six out of six) Wall Street analysts that Nobias tracks who cover AMZN shares believe that they’re likely to rise in value.
After its post-earnings dip, AMZN trades for $105.45. Currently, the average price target being applied to AMZN shares by the credible Wall Street analysts that Nobias tracks is $148.17. That represents upside potential of approximately 40.5% relative to Amazon’s share price.
Disclosure: Nicholas Ward is long AMZN. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.