Case Study: What Credible analysts are saying on Disney (DIS) stock

Key Points

The Walt Disney Company shares rallied by roughly 9% this week.  DIS shares are now down nearly 33.25% on the year, drastically underperforming the S&P 500, which is down by roughly 16% during 2022 thus far.  


Disney continues to invest heavily in its streaming platform and direct to consumer content; however, management doesn’t expect its Disney+ streaming service to be profitable until 2024.  High capital expenditures are hurting cash flows and this makes the company’s high debt load a concern for certain investors.

Disney announced that it was replacing its CEO, Bob Chapek, with former CEO, Bob Iger this week.  

54% of credible authors offer a “Neutral” bias towards Disney shares. 6 out of the 7 credible Wall Street analysts believe that DIS shares are headed higher.  The average price target being applied to Disney shares by credible analysts is $138.17 which implies upside potential of approximately 40% relative to DIS’s current share price of $96.20.

Morgan Stanley analyst Benjamin Swinburne, who receives a Nobias 4-star analyst rating, said that he believes Iger's return "improves the risk/reward" surrounding Disney shares.  

Matthew Clark, a Nobias 4-star rated author, said, “We consider it [Disney] a “High-Risk” stock and expect it to significantly underperform the market over the next 12 months.”  

Performance

Event & Impact

Noteworthy News:

Nobias insights

Bullish Take:

Bearish Take:

Last weekend, Disney made headlines announcing that it was removing its CEO, Bob Chapek, and replacing him with his predecessor, Bob Iger.  Nobias recently highlighted Disney’s recent Q3 earnings data in a report; however, this CEO news is material to sentiment surrounding shares and therefore, we wanted to provide an update to subscribers on Disney’s outlook.

DIS Nov 2022

Iger’s return was unexpected on Wall Street and the surprise caused Disney shares to rally by nearly 10%. Despite this rally, Disney shares have still underperformed the S&P 500 by a wide margin in 2022 thus far. On a year-to-date basis, Disney is now down by 33.25% compared to the S&P 500’s -16% performance. But, the credible Wall Street analysts that Nobias tracks see strong upside potential ahead for Disney shares, implying that the stock’s recent rally could spark a larger share price rebound.

Bearish Nobias credible authors:

Matthew Clark, a Nobias 4-star rated author, published a report at Money and Markets that highlighted the management transition at the Walt Disney Company.   Clark began his piece stating, “One Bob is out. An old Bob is in. “Over the weekend,” he continued, “The Walt Disney Co. surprised everyone by firing CEO Bob Chapek and appointing former CEO Bob Iger to the job.”

Clark said, “It’s been less than three years since Chapek replaced Iger, who was Disney’s CEO for 15 years.” He noted that this move was so surprising because in June on 2022, Disney extended Bob Chapek’s contract through 2025.  “At the time,” Clark said, “the board said Chapek’s leadership was key to helping the company through the COVID-19 pandemic.” He highlighted quarterly data showing that revenues rose coming out of the pandemic; however, in recent quarters, they “stagnated”. 

Disney’s focus as of late has been on growing its streaming platforms.  Streaming was the focus on many of the authors/analysts that we quoted in the recent Disney Q3 quarterly review.  And, Clark made it clear that Disney’s streaming platforms remained one of Chapek’s highest priorities.  

By November of 2022, Clark notes that Disney Plus had 164 million subscribers and Disney’s bundle, which includes Disney+, Hulu, and ESPN+ had 235 million subscribers overall.  “However, the streaming business continues to lose Disney money … to the tune of $1.5 billion last quarter and $4 billion for the year,” Clark said.  

Looking at a series of broader fundamental metrics, including, Disney’s size, volatility, growth, momentum, value, and quality, Clark notes that DIS stock’s performance was poor in all but the “Quality” rating system.  “That means we consider it a “High-Risk” stock and expect it to significantly underperform the market over the next 12 months,” he said.  

Ultimately, Clark wrote, “Bringing in former CEO Bob Iger to lead the business may turn around The Walt Disney Co.”  But, he continued, “it’s going to take patience” and therefore, Disney “is a stock to avoid in your portfolio now.”  

Trapping Value, a Nobias 4-star rated author, also covered Iger’s return in an article this week titled, “Disney: Why The Return Of The Jedi Won't Work”.  Trapping Value highlighted Iger’s past success, showing why the market’s initial reaction to his return to Disney was a positive one (Disney shares are still up by roughly 9% since Iger’s return to the c-suite was announced).  

The author wrote, “Iger's claim to fame comes from the tremendous performance of the stock from September 30, 2005 to February 25, 2020. During the nearly 15-year tenure of Iger, DIS stock rallied more than 500% for an annualized gain of 13.9% including dividends. Total returns demolished that of the S&P (SPY) by a huge margin and investors could not say enough good things about the old guard.” But, they also provided caution, stating, “While the numbers appear spectacular and they were, a good deal of the return came from valuation expansion. Disney's price-to-sales ratio more than doubled during Iger's tenure.”

For comparison’s sake, Trapping Value noted that the S&P 500’s price-to-sales ratio increased by only 60% during this same period of time, showing that Disney’s share price outperformance was driven largely by relative sentiment, as opposed to fundamental growth.  

Trapping Value was sympathetic towards Chapek, writing, “Chapek's term was of course marked by the brutal COVID-19 induced recession, but more importantly, is a tale of excesses coming home to roost.” And, while it’s possible that the positive sentiment that Iger has been known to garner could return and surround Disney shares for years to come, Trapping Value believes that investors should focus on the company’s fundamentals.  They said, “While Disney has got back to profitability quickly after COVID-19, investors are likely eyeing that cash flow statement with some concern. The company managed to generate free cash flow this year (8-K Link), but the amount trailed net income by more than $2.5 billion.”

Trapping Value continued, “Streaming costs are exploding in the current high inflation environment and there are plenty of competitors that are spending without worrying about profits. This remains the biggest concern and all hopes of significant free cash flow and we might add those big earning numbers for future years, depend upon turning this around.”

Ultimately, the author concluded, “As amazing as Iger's performance was, this comeback story has more room for disappointment than for a heroic ending.” And therefore, Trapping Value wrote, “We rate it [Disney] at Neutral for now.”

While Trapping Value provided a relatively neutral take on Iger’s return, Harold L. Vogel CFA, a Nobias 4-star rated author, provided a distinctly bearish piece this week, stating that investors should use the recent share price rally related to the Iger announcement as an opportunity to sell shares.  

Like Trapping Value, Vogel highlighted Iger’s prior success, stating, “His record as CEO for 15 years has generally been good, especially on the early acquisitions of Pixar, Marvel, and Lucasfilm (Star Wars franchise).” “However,” Vogel said, “it seems that he overpaid for Twentieth Century Fox entertainment assets. Rupert Murdoch, to make a pun, “outfoxed ” him and was prescient in seeing that Fox could not gain sufficient scale in streaming or films and had a chance to become a major shareholder of a better growth vehicle in Disney shares.”

Looking at Disney’s recent performance under Chapek, Vogel acknowledged the COVID-19 pandemic headwinds that Disney faced, but went on to say, “soon after in late 2020, the company began to falter, in my opinion.” He continued, “It [Disney] became a woke-driven company that seemed to forget that its history, traditions, underlying culture, and operating structure were intended to appeal to the core base of middle-income families.” This is going to be a difficult problem for Iger to solve, in Vogel’s opinion. 

Furthermore, he said, “In other areas, such as content distribution, Chapek approved a major reorganization that upset relations with creative talent. It will be a massive challenge for Iger to undo/fix this. In the process, much creative energy will be wasted as managers are reassigned and/or leave.”

“Meanwhile,” Vogel continued, “cord-cutting will continue to sap the high-margin profits of the cable networks as the transition to streaming is still largely a drain on cash flow.” “ESPN may eventually be spun off, and the linear ABC might also be headed for the same fate. Private equity companies are likely to be the buyers,” Vogel wrote.  

In the end, Vogel said, “Mr. Iger has the ability and power to fix some of the current disorders but he can't perform miracles.”  And therefore, he concluded, “I'd take the investors' enthusiasm rally about Mr. Iger's return as an opportunity to sell.”

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.

Bullish Nobias credible authors:

While we saw a couple of bearish reports published by credible authors this week, Morgan Stanley analyst Benjamin Swinburne, who receives a Nobias 4-star analyst rating, said that he believes Iger's return "improves the risk/reward" surrounding Disney shares.  

Swinburne said that Iger has the "experience and credibility to execute what can only be described as an operational turnaround." Swinburne maintained his “Overweight” weighting for Disney shares with a $125.00/share price target.  

Overall, the schism between the more bearish authors and the more bullish Wall Street analysts that recent reports highlight is representative of the broader sentiment being expressed by these two communities of credible individuals that the Nobias algorithm tracks.  

Overall bias of Nobias Credible Analysts and Bloggers:

54% of recent articles posted by credible analysts express a “Neutral” bias for Disney shares. However, 6 out of the 7 credible Wall Street analysts that Nobias tracks who have offered an opinion on Nobias shares believes that DIS is headed higher.   Currently, the average price target being applied to Disney shares by credible analysts is $138.17.  Relative to Disney’s current share price of $96.20, this implies upside potential of approximately 40%.  

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.

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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: What Credible analysts are saying on Medtronic (MDT) stock

Key Points

Medtronic shares fell by 4.3% this week.  On a year-to-date basis, MDT is now down by 25.4%.   This compares poorly to the S&P 500, which is down by approximately 16% during 2022 thus far.  


Supply chain issues in the semiconductor industry are hurting sales growth and product margins for large cap companies in the medical device segment of the healthcare sector

Medtronic posted Q3 earnings this week, beating Wall Street’s expectations on the bottom line, but missing consensus estimates the top-line.  MDT’s second quarter sales totaled $7.59 billion, which missed estimates by $110 million, and represented -3.3% year-over-year growth.  However, Medtronic’s non-GAAP earnings-per-share came in at $1.30, which beat consensus estimates by $0.02/share, representing -2% year-over-year growth. 

67% of recent articles published by credible authors focused on MDT shares offer a “Bullish” bias.  50% of credible Wall Street analysts believe shares are likely to rise in value.  The average price target being applied to Medtronic shares by credible analysts is $99.33, which implies an upside potential of approximately 25% relative to Medtronic's current share price of $78.96.

From Gen Alpha, a 5-star rated Nobias author: “I believe Medtronic is a premium quality enterprise that trades at a significant discount to its historical valuations.”  

Four credible Wall Street analysts: Wells Fargo analyst Larry Biegelsen, Stifel analyst Rick Wise, Citi analyst Joanne Wuensch, and Truist analyst Richard Newitter, all lowered their fair value estimates for MDT shares post-earnings.  

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Nobias insights

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Bearish Take:

Throughout much of 2022, large cap healthcare stocks have provided investors with a safe haven from the broader market’s negative volatility. Many of the large-cap bio-pharmaceutical companies have posted positive returns on the year (during a period of time when the S&P 500 has fallen by approximately 16%).  

However, the medical device segment of the healthcare sector has largely struggled due to supply chain issues associated with the semiconductors that are required to manufacture their products.  Medtronic (MDT) is one such medical device name that has struggled during 2022.  After falling roughly 4.3% this week, MDT shares are down by 25.4% on the year.  

MDT Nov 2022

Medtronic published its fiscal second quarter results on November 22, 2022, missing Wall Street estimates on the top-line, but beating analyst expectations on the bottom-line.  MDT’s second quarter sales totaled $7.59 billion, which missed estimates by $110 million, and represented -3.3% year-over-year growth.  However, Medtronic’s non-GAAP earnings-per-share came in at $1.30, which beat consensus estimates by $0.02/share, representing -2% year-over-year growth. 

Regarding its revenue breakdown, Medtronic’s press release stated: “Second quarter U.S. revenue of $4.069 billion represented 54% of company revenue and increased 2% as reported and 1% organic. Non-U.S. developed market revenue of $2.157 billion represented 28% of company revenue and decreased 13% as reported and increased 3% organic. Emerging Markets revenue of $1.359 billion represented 18% of company revenue and decreased 1% as reported and increased 4% organic.”  

During the company’s second quarter report, MDT’s CEO,-Geoff Martha, said, "We're taking decisive actions to improve the performance of the company." Martha continued:  "Slower than predicted procedure and supply recovery drove revenue below our expectations this quarter. We continue to take decisive actions to improve the overall performance of the company, including streamlining our organizational structure, strengthening our supply chain, driving a performance culture, and strategically allocating capital to support our best growth opportunities with the investments they deserve.  We're seeing the benefit of these changes – along with new incentives and strong execution – in certain businesses, and we're focused on ensuring these efforts translate into improved performance across the company. Looking ahead, we're confident we have a clear path to delivering durable growth and increased shareholder value." 

Medtronic also updated investors with new full-year fiscal 2023 guidance, stating: “The company expects fiscal year 2023 second half revenue growth of 3.5% to 4.0% on an organic basis, an acceleration over the first half. If foreign currency exchange rates as of the beginning of November hold, revenue growth in fiscal year 2023 would be negatively affected by approximately $1.740 billion to $1.840 billion versus the previously stated $1.4 billion to $1.5 billion impact.”

The company continued, “The company now expects fiscal year 2023 diluted non-GAAP EPS in the range of $5.25 to $5.30. EPS guidance includes an estimated 18 cent negative impact from foreign currency at rates as of the beginning November.”  

Regarding these new guidance figures, Medtronic’s chief financial officer, Karen Parkhill, said:  "We continue to expect organic revenue growth acceleration, with the second half growing faster than the first. However, given a slower pace of market and supply recovery, we're reducing our revenue expectations for the remainder of the year.  On the bottom line, we are driving expense reductions throughout the company to help offset the lower revenue and the effects of cost inflation. We are also committed to investing appropriately for the long-term, allocating capital to our most promising growth drivers and executing tuck-in acquisitions, all designed to reach more patients and create greater value for our shareholders."

Bearish Nobias credible authors:

Since posting these results and providing the market with new forward guidance, MDT shares have fallen by approximately 4%.  In response to Medtronic’s earnings report, several credible Wall Street analysts that the Nobias algorithm tracks lowered their fair value estimates for MDT shares.  

1. Truist analyst Richard Newitter, who receives a Nobias 4-star rating, lowered his price target from $89 to $84 and maintained a “Hold” rating on shares.  

2. Citi analyst Joanne Wuensch, who receives a Nobias 4-star rating, lowered her price target from $108 to $85 and reduced her “Buy” rating on MDT shares to “Neutral”.  

3. Wells Fargo analyst Larry Biegelsen, who receives a Nobias 4-star rating, lowered his price target from $96 to $82 and maintained an “Equal Weight” rating on MDT shares.  

4. And lastly, Stifel analyst Rick Wise, who receives a Nobias 4-star rating, lowered his price target on MDT shares from $105 to $90, keeping a “Buy” rating on shares.  

Bullish Nobias credible authors:

Poor guidance provided during the last quarter inspired several credible Wall Street analysts to lower their price targets for MDT shares.  Yet, despite these recent downgrades, the average price target being applied to MDT by credible Wall Street analysts implies upside potential that is greater than 25%. 

With this strong upside potential in mind, Jonathan Block, a Seeking Alpha News Editor who is also a Nobias 4-star rated author, recently published a report which focused on the macro growth tailwinds that medical device companies are expected to benefit from during the coming decades.  

Block wrote, “The global medical devices market was ~$489B in 2021, and is projected to increase to ~$496B in 2022.” “However,” he continued, “it is expected to expand to ~$719B by 2029, according to Fortune Business Insights, meaning several companies are set to benefit handsomely.”

Regarding the data from the Fortune Business Insight report, Block said, “The consulting firm sees a CAGR for the industry of 5.5% between 2022 and 2029.” Block said that increasing “prevalence of chronic disease around the world” is driving this growth trend.  For instance, Block noted that the International Diabetes Foundation says that there were 537 million people with the disease in 2021 and the Foundation expects to see that figure rise to 643 million by 2030 and 783 million by 2045.  

“Based on these insights,” Block wrote, “there are several companies set to benefit from an increase in demand for medical devices.”  He continued, “These include the top three medical device companies based on 2021 revenue: Medtronic (NYSE:MDT), Abbott (NYSE:ABT), and Johnson & Johnson (NYSE:JNJ).”

With specific regard to Medtronic, Block said, “Although Medtronic (MDT) operates several segments, it is perhaps known for its cardiovascular portfolio. But its products in medical surgical, neuroscience, and diabetes show that the company is well-positioned to benefit in multiple device areas.” 

Gen Alpha, a Nobias 5-star rated author, also highlighted a bullish outlook for Medtronic shares in a recent article titled, “Medtronic: Buy This 'A' Quality Gem On The Cheap”.   Gen Alpha said, “Medtronic is a medical device giant with a presence in over 150 countries. Its broad array of products includes pacemakers, stents and insulin pumps, treating 70 various health conditions.” They continued, “MDT employs over 90K employees around the world, and in the trailing 12 months, generated $31 billion in total revenue.”

Gen Alpha touched upon Medtronic’s recent struggles, writing, “It's fair to say that the past 9 months have been challenging, as MDT has had to contend due to chip shortages that have caused disruptions on the supply side.” But, they went on to say that the extent of MDT’s sell-off in response to supply chain issues has been irrational.  

Gen Alpha wrote, “I believe the market has not fully awakened to the fact that the chip shortage has greatly eased in recent months.”  While MDT investors wait for a share price rebound, Gen Alpha points out that Medtronic continues to provide generous shareholder returns.  They said, “Importantly, for dividend investors, MDT carries a strong A rated balance sheet. At the current price of $84.65, MDT yields a respectable 3.2%. The dividend is also well-protected by a 48% payout ratio, and comes with a 5-year CAGR of 8%.”

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.

Looking at Medtronic’s valuation, Gen Alpha concluded, “Given the quality of the enterprise, long-term growth attributes, and the turnaround in the chip supply chain, I believe the shares are too cheaply valued at present.”

When Gen Alpha wrote this, Medtronic shares were trading for $84.65.  Today, they’re even cheaper, trading for $79.12/share.  Ultimately, the author stated, “I believe Medtronic is a premium quality enterprise that trades at a significant discount to its historical valuations.” “As such,” they continued, “I view MDT as being a high quality buy for income and potentially strong total returns.”  

Overall bias of Nobias Credible Analysts and Bloggers:

Yet, despite this slew of downgrades from the credible Wall Street community that Nobias tracks, the majority of credible authors that have published reports on MDT shares recently continue to be bullish on shares.   67% of recent reports published by credible authors have expressed a “Bullish” bias.   While we saw 4 of the credible analysts that cover MDT lower their price targets on shares, the average price target amongst the credible individuals that the Nobias algorithm tracks for Medtronic is currently $99.33.  Therefore, compared to Medtronic’s current share price of $79.19, that average credible analyst price target implies upside potential of approximately 25.4%.  

Disclosure:  Nicholas Ward is long MDT.   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.

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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: What Credible analysts are saying on Amazon (AMZN) stock

Key Points

Amazon shares rallied by 10.9% this week, yet they’re still down by 40.85% on the year; this compares poorly to the S&P 500 which is down by 16.75% on the year and the Nasdaq Composite Index which has fallen by 28.48% during 2022 thus far.  

Amazon faces macroeconomic headwinds which have caused its major growth engines to slow.  Poor fundamental results have led to the stock’s price-to-earnings ratio increasing, even as its share price falls.  

AMZN posted Q3 earnings recently, missing Wall Street’s expectations with $127.1 billion in sales (which was $370 million below consensus), but beat estimates on the bottom-line, posting non-GAAP earnings-per-share of $0.28.  

59% of recent articles published by credible authors focused on AMZN shares were “Bullish”.  Only 14 out of 15 credible Wall Street analysts believe shares are headed higher.  The average price target being applied to Amazon shares by credible analysts is $177.21, which implies upside potential of approximately 69.9% relative to AMZN’s current share price of $100.77.   

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Event & Impact

Noteworthy News:

Nobias insights

Amazon is the poster child of tech companies that have generated fantastic long-term wealth for their shareholders. Since its IPO in May 1997, AMZN shares have generated total returns north of 134,000%.  During the last decade, AMZN shares have risen by 795%.

And yet, during 2022 this stock has been a major underperformer, falling by 40.85% on a year-to-date basis, compared to the S&P 500 which is down by 16.75% on the year and the Nasdaq Composite Index which has fallen by 28.48% during 2022 thus far.

Amazon recently reported third quarter earnings which disappointed Wall Street, inspiring the latest leg of the company’s sell-off.  And yet, despite serious weakness during 2022, the credible authors and analyst that Nobais tracks largely maintain their “Bullish” outlook for shares.

AMZN Nov 2022

Bearish Nobias credible authors:

Huileng Tan, a Nobias 4-star rated author, recently published an article at Business Insider that put the extent of Amazon’s recent sell-off into historical perspective.  Tan said, “Amazon has become the first public company ever to lose $1 trillion in market value amid the tech stock rout, according to Bloomberg.”

Breaking down the sell-off, Tan wrote, “The world's largest online retailer's share price closed 4.3% lower at $86.14 on Wednesday, taking its market capitalization to about $879 billion.” She continued, “The stock has lost around 48% of its value this year alone, and is a far cry from July 2021 when the company's market cap almost touched $1.9 trillion, per Bloomberg.”

Tan highlighted a quote provided by Amazon’s CFO, Brian Olsavsky, during the company’s recent Q3 earnings call.  Olsavsky said, "We are seeing signs all around that, again, people's budgets are tight, inflation is still high, energy costs are an additional layer on top of that caused by other issues.  We are preparing for what could be a slower growth period, like most companies."

During the third quarter, Amazon missed Wall Street’s expectations with $127.1 billion in sales (which was $370 million below consensus), but beat estimates on the bottom-line, posting non-GAAP earnings-per-share of $0.28..

Although Amazon missed sales expectations, the company is still growing revenues at a double digit rate.  In its Q3 report, the company stated, “Net sales increased 15% to $127.1 billion in the third quarter, compared with $110.8 billion in third quarter of 2021. “Excluding the $5.0 billion unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased 19% compared with third quarter of 2021.”

Dani Cook, a Nobias 4-star rated author, put a spotlight on Amazon’s recent earnings data in a recent report that she published at the Motley Fool.  Cook mentioned the company’s top and bottom-line results and then said, “Meanwhile, Amazon Web Services brought in $20.5 billion versus the expected $21.1 billion.” She continued, “​​AWS was responsible for 100% of Amazon’s operating income in Q3, underscoring how crucial the cloud computing business has become.” And, she said, “AWS lost some steam in the company's latest quarter, with its year-over-year rise of 27.4% lower than Q2 2022's increase of 33% and Q3 2021's 39%.” Amazon CFO Brian Olsavsky attributed the slowed growth primarily to consumers and businesses reining in spending.”

Cook believes that the slowdown in Amazon’s cloud business was a primary catalyst for its recent sell-off.  Also, she points out, the company’s forward guidance left investors wanting more. Cook wrote, “The company's fourth-quarter forecasts have also fallen short. Amazon is expecting revenue of $140 billion to $148 billion, amounting to a year-over-year rise of 2% to 8%. Analysts at Refinitiv had previously projected that the company would earn $155.15 billion for the quarter.”

In response to rising costs applied to the company’s retail business by high inflation, she says that the company is cutting costs.  Cook wrote, “So far, CEO Andy Jassy has responded by cutting costs in multiple divisions, such as reducing its warehouse footprint, axing some experimental tech projects, shutting down its telehealth service, Amazon Care, and pausing hiring in its executive positions.”  

The macroeconomic conditions that Amazon faces concern her.  Cook continued, “Amazon is likely to continue suffering declines in the short term as geopolitical and macroeconomic factors keep operating costs high but consumer spending low.”

However, she noted, “the future is still bright for the e-commerce titan.” “Regardless of temporary market declines in the next year,” Cook stated, “Amazon is well-positioned to see significant gains once it bounces back.” But, she states, “With a price-to-earnings ratio that is about 21% higher than a year ago -- despite the steep drop in the stock price -- Amazon's shares are not the cheapest around despite a sell-off.” And therefore, Cook concluded, “Amazon is likely to come back strong over the long term, but it might be best to first watch its AWS business and wait until it begins seeing improving quarterly growth again before committing to Amazon.”

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.

Kevin Coupe, a Nobias 4-star rated author, published a recent article that put a spotlight on the company’s cost cutting measures.  Coupe said, “Amazon said yesterday that it is freezing corporate hiring "for the next few months," a move that it said "is due to the economy and 'in light of how many people we have hired in the last few years'," the Seattle Times reports.” He continued, “The story notes that "Amazon already has paused hiring in its corporate retail division, which includes online and physical stores, its marketplace for third-party sellers, and its Prime subscription service. The company also reportedly stopped hiring for its advertising business and at Amazon Web Services, its cloud computing arm and one of the most profitable parts of the company.”

Tristan Bove, a Nobias 5-star rated author, also touched upon macroeconomic issues facing Amazon in a recent report that he published at Yahoo Finance, stating, “A week before the earnings report, Amazon founder and former CEO Jeff Bezos advised people to “batten down the hatches” in anticipation of a clouding economic environment.”

There is no shortage of macro concerns surrounding this mega-cap company; however, looking at the overall opinions expressed by the credible authors and analysts tracked by the Nobias algorithm, a clear bullish trend has emerged after the stock’s recent sell-off.  

Overall bias of Nobias Credible Analysts and Bloggers:

59% of recent articles published by credible authors have expressed a “Bullish” bias towards AMZN shares.  14 out of the 15 credible Wall Street analysts that Nobias tracks which have offered an opinion on Amazon stock believe that the company’s shares will increase in value.  Right now the average price target being applied to AMZN shares by credible analysts is $171.21.  Compared to Amazon’s current share price of $100.77, this represents upside potential of approximately 69.9%.  


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.

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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: What Credible analysts are saying on Occidental Petroleum (OXY) stock

Key Points

Occidental Petroleum (OXY) shares were flat this week; however, they’re up by nearly 17% during the last month.  On a year-to-date basis, Occidental shares are up by 139.31%, making the stock a major out-performer during a year when the S&P 500 is down nearly 17%.  

Warren Buffett’s Berkshire Hathaway continues to accumulate OXY shares, driving up its valuation.  

OXY posted Q3 results this week, beating Wall Street’s consensus on the top-line, but missing on the bottom-line by $0.01/share.  

73% of recent articles published by credible authors were “Bullish”.  Only 4 out of 8 credible Wall Street analysts believe shares are headed higher.  The average price target being applied to Occidental shares by credible analysts is $77.35, which implies upside potential of approximately 3.9% relative to OXY’s current share price of $74.33. 

Performance

Event & Impact

Noteworthy News:

Nobias insights

The energy sector continues to be the major out-performer during 2022.   Although the S&P 500 rallied more than 5% this week, the major index is still down nearly 17% on the year and the energy sector is the only sector showing positive performance.  

Energy stocks are up by 69.38% on the year, outpacing all other areas of the market by a wide margin.  And within the energy space, Occidental Petroleum (OXY) has been one of the biggest winners for investors this year, up 139.31% on a year-to-date basis.  

OXY shares were flat this week; however, over the last month they’ve risen by 16.8%.  The company posted third quarter earnings this week and with those results in mind, we’re seeing a mixed bag when it comes to future expectations between the credible author and analyst communities.  

OCY Nov 2022

Bearish Nobias credible authors:

Fun Trading, a Nobias 4-star rated author, published an article at Seeking Alpha this week titled, “Occidental Petroleum: Strong Quarter But Not Strong Enough”.  The author put a spotlight on OXY’s strong trailing twelve month performance, writing, “Occidental Petroleum is up 122% on a one-year basis.” They continued, “The excellent recovery was led by higher commodity prices reaching over $94 per barrel and Buffett's renewed interest in Berkshire Hathaway (BRK.A, BRK.B), increasing its stake in the company to 20.7% after buying nearly 6 million shares in September.”

Looking at the company’s quarterly results, Fun Trading said, “Occidental Petroleum reported third-quarter 2022 adjusted earnings of $2.44 per share, falling short of analysts' expectations but well over the $0.87 per share made last year.” They stated, “The increase can be attributed to operating efficiencies and significantly higher commodity prices.”

Looking at the company’s top-line, Fun Trading said, “Total revenues were $9.501 billion, which was better than expectations.” The author continued, highlighting Occidental’s segment revenue, stating:  

• Oil and Gas revenues were $7,098 million, up 43.3% from 3Q21.

• Chemical revenues were $1,691 million, up 21.1% from 3Q21.

• Midstream & Marketing revenues were $1,005 million, up 43.2% from last year.

Fun Trading also highlighted a quote from Occidental’s CEO, CEO Vicki Hollub, from the quarterly in the conference call: “We delivered another strong quarter operationally and financially, enabling us to further advance our shareholder return framework as we made meaningful progress toward completing our $3 billion share repurchase program. We achieved our goal of reducing the face value of our debt to the high-teens and plan to continue repaying debt through the remainder of this year before allocating a higher percentage of cash flow to shareholder returns next year.”

And yet, even with OXY’s fundamental growth and management’s increased shareholder return program in mind, Fun Trading remains concerned about the stock’s relative value. They wrote, “Buffett's buying spree has propelled the stock price artificially to new highs, pushing the stock to a much higher valuation than is fair if we compare it to a few other strong companies in this industry.”

“Still,” Fun Trading concluded, “I see it as an inflated level that could be a substantial negative if the world economy falters due to over-reasonable commodity prices, weakening world stability where emerging countries bear the brunt of the pain.” 

Two things that could justify a premium valuation are an improving balance sheet and unique long-term growth prospects.   In a recent article that he published at the Motley Fool on Occidental, Tyler Crowe, a Nobias 4-star rated author, highlighted both of these aspects.  

Crowe began his piece off on a bullish note, writing, “Occidental's oil and gas business is looking better by the day.” He continued, “ After taking a risky bet in 2019 to acquire Anadarko Petroleum, which required a lot of debt and special financing from Berkshire Hathaway, the recent period of high oil prices has helped to improve its financials drastically. According to management, its current operations can support its current dividend as long as domestic oil prices remain above $40, and it has been putting much of its excess cash toward debt reduction.”

Regarding Occidental’s balance sheet, Crowe said, “Its debt load peaked in the second quarter of 2020 at $37.4 billion, and has since been reduced to $20.2 billion for a debt-to-capital ratio of 43%.” But, echoing the Vicki Hollub statement highlighted by Fun Trading, Crowe wrote, “Management believes it no longer needs to pay down debt immediately and will pay down debt as it matures. In the interim, it plans to buy back stock. In the most recent quarter, it repurchased about $1.1 billion worth of shares.” 

With regard to long-term growth prospects, Crowe mentioned that, “The company's investor presentations highlight a plan to use its current oil and gas operations as a cash-generating engine to incubate its carbon capture and sequestration plans.” He continued, “Occidental is uniquely positioned in this business because it has extensive assets and expertise in what is known as Enhanced Oil Recovery (EOR). EOR is a type of oil production that involves injecting CO2 into older oil and gas wells to repressurize the reservoir and extract more oil.”

Crowe said, “Management believes that it can use these assets as a way to capture and transport CO2 to injection sites or to facilities that can create products from the captured carbon.” But, he notes that there is a potential issue for investors here. 

Crowe says, “The challenge to this whole plan is that it is based largely on a carbon market that does not yet exist.” He continued, “Much of the rationale for these facilities is based on Article 6 of the Paris Climate accords, which outlines a plan to develop a global market such that we can assign a dollar value to carbon emissions.”

With this uncertainty in mind, Crowe concluded, “Even though Occidental has the Buffett stamp of approval, I would be more comfortable knowing that a carbon trading market is established before buying this stock.”


Bullish Nobias credible authors:

While these two credible authors published cautious Occidental reports recently, Growth at a Good Price, a Nobias 4-star rated author, published a bullish post-earnings report at Seeking Alpha this week.  Growth at a Good Price also highlighted OXY’s valuation, stating:  “Before today’s earnings release came out, OXY traded at:

• 9.96 times adjusted earnings.

• 2 times sales.

• 3.9 times book value.

• 4.8 times operating cash flow.”

However, unlike Fun Trading, Growth at a Good Price likes the stock’s price, stating, “The bottom line on Occidental Petroleum is that it’s a thriving oil company that just put out solid earnings. It’s cheap, it’s growing fast, and it’s paying off its debt.”

Regarding earnings-per-share growth, the author said, “As I wrote previously, OXY is in a great position to grow its earnings and cash flows from here. Due to the ongoing debt reduction, it can increase its earnings even without rising oil prices. So, it’s safe to assume that there will be some year-over-year growth going forward. However, for the sake of conservatism, I will assume it’s only 10% per year.”

“Now,” the author said, “if we assume 0% growth, we can come up with a terminal value estimate for OXY. Using an 10% discount rate, the last 12 months’ cash flows are worth $130.09.” They continued, “If we assume 10% CAGR growth over 5 years and no growth after that, we get a $196 price target.”

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.

“That’s a truly enormous amount of upside to today’s prices,” Growth at a Good Price wrote. “But of course,” they continued, “this estimate involves a future growth projection that may not correspond to what unfolds.” “Nevertheless,” they concluded, “even with 0% growth, OXY has upside. So, despite all of the gains it has already made, the stock looks appealing.”

Summing up their bullish report, Growth at a Good Price stated, “This stock has been among the S&P 500’s best performers this year for a reason. Few companies have turned their fortunes around quite like OXY has since 2020. Yes, the company is subject to certain risk factors. But on the whole, the risks inherent in buying OXY are risks I’m comfortable taking. If you’re a risk-averse investor who is uncomfortable with volatility, then oil stocks might not be for you. For those willing to bet on the future of a very strong company, Occidental Petroleum Corporation is a worthy pick.”

Overall bias of Nobias Credible Analysts and Bloggers:

Overall, it appears that most of the credible authors covering OXY shares agree with Growth at a Good Price’s assessment; 73% of recent articles published by credible analysts have expressed a “Bullish” bias.  However, credible Wall Street analysts aren’t quite as enamored with OXY shares. Only 4 out of the 8 credible analysts that Nobias tracks believe that OXY shares should increase in value.   Right now, the average price target being applied to OXY by credible analysts is $77.25 which implies a 3.9% upside potential from today’s $74.33 share price.


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.

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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: What Credible analysts are saying on Disney (DIS) stock

Key Points

The Walt Disney Company shares sold off more than 5.5% this week.  DIS shares are now down nearly 39.4% on the year, drastically underperforming the S&P 500, which is down by 16.75% during 2022 thus far.  

Disney continues to invest heavily in its streaming platform and direct to consumer content; however, management doesn’t expect its Disney+ streaming service to be profitable until 2024.  

Disney reported Q4 earnings this week, missing Wall Street’s estimates on both the top and bottom lines.  

54% of credible authors offer a “Neutral” bias towards Disney shares. 6 out of the 7 credible Wall Street analysts believe that DIS shares are headed higher.  The average price target being applied to Disney shares by credible analysts is $138.17 which implies upside potential of approximately 45.4% relative to DIS’s current share price of $95.01.  

Performance

Event & Impact

Noteworthy News:

Nobias insights

Shares of the Walt Disney Company (DIS) fell by 5.54% this week, bucking the bullish trend that the broader indexes experienced.   The S&P 500 rose by 5.82% this week, pushing its year-to-date performance up to -16.75%.  Disney, on the other hand, is now down by 39.39% on the year, making it a drastic underperformer on the year.  

Disney released its fourth quarter/full year earnings report this week.  Disney missed Wall Street’s estimates on both the top and bottom lines, posting quarterly revenue of $20.15 billion, $1.29 billion below consensus, and non-GAAP earnings-per-share of $0.30, missing Wall Street’s target by $0.26.  

The company highlighted its fundamental results, stating: 

• Revenues for the quarter and year grew 9% and 23%, respectively.

• Diluted earnings per share (EPS) from continuing operations for the quarter was comparable to the prior-year quarter at $0.09. Excluding certain items(1), diluted EPS for the quarter decreased to $0.30 from $0.37 in the prior-year quarter.

• Diluted EPS from continuing operations for the fiscal year ended October 1, 2022 increased to $1.75 from $1.11 in the prior year. Excluding certain items(1), diluted EPS for the year increased to $3.53 from $2.29 in the prior year.

Disney’s CEO, Bob Chapek, led off the press release with a statement: “2022 was a strong year for Disney, with some of our best storytelling yet, record results at our Parks, Experiences and Products segment, and outstanding subscriber growth at our direct-to-consumer services, which added nearly 57 million subscriptions this year for a total of more than 235 million.  Our fourth quarter saw strong subscription growth with the addition of 14.6 million total subscriptions, including 12.1 million Disney+ subscribers. The rapid growth of Disney+ in just three years since launch is a direct result of our strategic decision to invest heavily in creating incredible content and rolling out the service internationally, and we expect our DTC operating losses to narrow going forward and that Disney+ will still achieve profitability in fiscal 2024, assuming we do not see a meaningful shift in the economic climate. By realigning our costs and realizing the benefits of price increases and our Disney+ ad-supported tier coming December 8, we believe we will be on the path to achieve a profitable streaming business that will drive continued growth and generate shareholder value long into the future. And as we embark on Disney’s second century in 2023, I am filled with optimism that this iconic company’s best days still lie ahead.”(2)

Looking at Disney’s operating segment performance, the company’s press release highlighted -3% revenue growth from the Disney Media and Entertainment Distribution segment and 36% revenue growth from the Disney Parks, Experiences and Products segment.  

DIS Nov 2022

Disney’s media segment posted $12.75 billion of sales and Disney’s Parks segment posted $7.4 billion of sales.   Disney highlighted 39% growth of Disney+ subscribers; however, the company’s average monthly revenue per subscriber fell by 10% in the U.S. and Canada market.   Disney+ Core’s average monthly revenue per subscriber fell by 4% and Global Disney+ saw this same metric fall by 5%.  So, while management has succeeded in growing its subscriber base, it appears to be sacrificing near-term profits for subscriber gains.  

During Q4, Disney’s cash from operations fell by 4% and its free cash flow fell by 10%.  Falling margins, net income, and free cash flow fueled the bear’s negativity, leading to a 10%+ sell-off following this Q4 earnings release.  Yet, as Chapek said, the company still believes that Disney+ will be a profitable operation by 2024, providing optimism for bulls.  

Bullish Nobias credible authors:

Dani Cook, a Nobias 4-star rated author, wrote about Disney’s recent earnings report in a bullish article at the Motley Fool this week.  Cook said, “The company's fourth-quarter earnings release on Nov. 8 was a bit of a mixed bag, as its parks revenue soared, but its media segment took some concerning hits.”

Cook mentioned the threat of recession moving forward and the potential negative impact of this on Disney’s consumer-centric business model; however, she also stated, “While Disney's short-term prospects may be uncertain, the company has proven the staying power of its content and is home to some of the world's most in-demand franchises.”

Because of the experiential aspect of Disney’s business (live sports, theme parks, and cruise ships) the company experienced a lot of volatility during the pandemic.  Cook highlighted this stating, “Its parks business experienced massive losses due to closures, while its streaming service Disney+ seemed to launch at the perfect time in 2019. The streaming service received a significant boost to its growth as home-bound people flocked to online entertainment platforms.”

But ultimately, she is bullish on the company because of the strength of its steaming platform.  Cook said, “In three years, Disney+ has reached 164.2 million members, pushing the company's total streaming subscribers to 235.7 million, and beating Netflix's (NASDAQ: NFLX) 223.09 million.”

Therefore, she continued, “Disney+ has risen faster than any streaming service in history.” Adding color to the Disney+ and Netflix comparison, Cook wrote, “Industry founder Netflix didn't reach Disney+'s current subscriber count until 2019, 12 years after its streaming service launched in 2007. Disney has accomplished its swift streaming expansion with the draw of its incredibly potent content brands such as Marvel, Star Wars, Pixar, 20th Century Studios, and all of its franchises from Walt Disney Studios.”

But, she says, this growth hasn’t come without headaches.  Cook said that Disney’s Media segment posted -91% year-over-year growth in terms of its operating income, writing, “The slump in earnings from Disney's Media and Entertainment segment was primarily driven by the company's $30 billion content spend in 2022 as it worked to grow Disney+.”  

Despite the rising costs associated with building out its streaming service, Cook likes the over-the-top media space, stating that this is currently a $327 billion industry.  Regarding the forward growth prospects of streaming services, Cook said, “Fortune Business Insights expects it to see a 19.9% compound annual growth rate and reach a value of $1.6 trillion by 2029.” 

Cook points out that Disney has taken steps to diversify the content on Disney+ in recent years as it attempts to expand its subscriber base.  And, she said, “Disney isn't done yet”. Cook said that Disney’s plans for an ad-supported version of Disney+ “still has yet to launch, which could open the door for a revenue boost in the second half of fiscal 2023.”

Ultimately, she concluded, “Disney has embarked on an expensive but promising transition to diversify its business, maximize efficiency, and grow revenue over the long term. And with a price-to-earnings ratio at 69% below what it was a year ago, Disney stock is a bargain and worth buying on the dip to hold long-term.”

Long Player, a Nobias 5-star rated author, also published a post-earnings article this week, focusing largely on the “culture wars” that Disney has been fighting in recent years.  The author began their piece stating, “Disney (NYSE:DIS) long ago made a statement about inclusion and diversity that earned the ire of the state of Florida. That ire meant that a very inadequate law was passed that meant for Florida to dissolve the self-governing unit that Disney has for its business unit, the theme park. But the law never stated how to unwind decades of business deals, nor did it state how bondholders would be paid off. Paying off the bondholders is part of the bond covenants.”

Long Player noted that the strong rhetoric surrounding Disney’s culture issues had quieted in recent quarters, with investors focused instead on its post-COVID-19 rebound.   “But, “ the author stated, recently “the CEO made a statement about "woke" which the news promptly carried and may well start the whole thing up again if management is not careful.”  

Long Player said, “Disney got itself caught in an unfortunate situation about diversity. Right now, that discussion appears to be largely out of favor in Florida. Despite the law being passed, there's unlikely to be a material change in the situation because bondholders have a change of control as part of the bond covenant.” 

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.

Long Player states that these political issues add uncertainty to Disney’s outlook moving forward, yet looking at the company’s recent results, they aren’t hurting the company’s growth.   Long Player wrote, “For all the talk about characters being appropriate for families and children, the company seems to have had no problems attracting streaming customers.” They continued, “This business, however, now needs to turn from the showing loss to a profit. That may or may not be possible, given that the streaming "wars" are just getting started.”

Long Player distinguishes Disney from its media peers, stating, “Disney does have an advantage in that the other parts of the integrated company may derive enough benefits from the streaming segment so that the company does not have to report a profit. Not all competitors appear to be in the same position.” 

Regarding ongoing growth prospects for Disney, Long Player said, “The acquisition of 21st Century Fox has yet to be fully exploited.” They continued, “That will likely happen in the post-pandemic period. But it could take a year or two for investors to see the results.

Acknowledging the “woke” headwinds, the author concluded, “The recovery potential far outweighs any adverse possibilities in Florida, if they even happen.”  

Overall bias of Nobias Credible Analysts and Bloggers:

Looking at the opinions expressed by the credible authors and credible analysts that the Nobias algorithm tracks, there is a schism between the two communities.  54% of recent articles released by credible authors have expressed a “neutral” bias for Disney shares.  However, 6 of the 7 credible Wall Street analysts that Nobias tracks believe that DIS shares are likely to rise in value. 

Right now, the average price target being applied to DIS shares by credible analysts is $138.17.  Relative to the stock’s current share price of $95.01, that average price target represents upside potential of approximately 45.4%.  



Disclosure:  Nicholas Ward is long DIS shares.    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.

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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.

Credible Wall Street analysts and bloggers on British Petroleum (BP) stock

Key Points

British Petroleum (BP) shares rose more than this week.  BP shares are now up by 23.98% on the year, meaning that they’ve drastically outperformed the broader market this year (the S&P 500 is down by 20.89% during 2022 thus far).  

BP posted earnings that included $8.6 billion in profits, allowing the company to increase its dividend and announce significant buyback plans moving forward

In response to rising profits and shareholder returns from the oil/gas space, politicians are discussing “windfall” taxes which could hurt profitability in the industry in the coming quarters.  

64% of recent articles published by credible authors were “Bullish”.  5 out of 6 credible Wall Street analysts believe shares are headed higher.  The average price target being applied to BP shares by credible analysts is $38.60 which implies upside potential of approximately 13.8% relative to BP’s current share price of $33.92.  

Performance

Event & Impact

Noteworthy News:

Nobias insights

The S&P 500 is down by 20.89% on a year-to-date basis.  Throughout 2022, there is only one sector that has posted positive results: energy.  The supply/demand imbalance created by removing Russian energy exports from the global markets alongside recent OPEC production cuts has caused the price of oil to soar.  This has resulted in robust profits for oil/gas companies, one of which reported earnings this week.  

British Petroleum (BP) posted Q3 results, missing Wall Street’s estimates on the top-line, but beating the Street’s consensus on the bottom-line.  Because of these results, BP shares rose by 3.18% this week.  This positive weekly performance pushed BP’s year-to-date gains up to 23.93%.  And yet, even after this nearly 45% relative outperformance (compared to the S&P 500) the credible authors and analysts that the Nobias algorithm tracks remain largely bullish on BP’s prospects moving forward.  

BP Nov 2022

Bullish Nobias credible authors:

Sam Meredith, a Nobias 4-star rated author, published a report at NBC Philadelphia which highlighted British Petroleum’s recent earnings report this week.  Meredith wrote, “The British energy major posted underlying replacement cost profit, used as a proxy for net profit, of $8.2 billion for the three months through to the end of September.” That compared with $8.5 billion in the previous quarter and marked a significant increase from a year earlier, when net profit came in at $3.3 billion.” The author points out that “Analysts polled by Refinitiv had expected a third-quarter net profit of $6 billion.”

Alex Kimani, a Nobias 4-star rated author, also published a report which focused on BP’s recent earnings last week at oilprice.com.  Kimani provided more detail on BP’s recent results, stating, “BP has high energy volatility to thank for the impressive earnings, which helped boost the earnings contribution from the oil giant’s big trading unit. Indeed, adjusted Q3 profit for the gas and low carbon energy unit totaled $6.24B, more than double the $3B profit the business made in Q2.”

Meredith touched upon shareholder returns, stating, “BP announced another $2.5 billion in share repurchases and said net debt had been reduced to $22 billion, down from $22.8 billion in the second quarter.” Kimani quoted an analyst report from Jeffreys which provided an even more aggressive outlook for the company’s buyback plan. He wrote, ‘“We believe BP will be able to set buyback at US$11bn over the next four quarters, setting BP's shareholder remuneration yield at the highest level in the sector (12%),” Jeffries analysts have said.”

Kimani says that these share buybacks are coming because capital expenditures across the oil space have been “mostly flat” in recent years.  He wrote, “Data from the U.S. Energy Information Administration (EIA) shows that Big Oil companies have mostly downshifted both capital spending and production for the second-quarter. An EIA review of 53 public U.S. gas and oil companies, responsible for about 34% of domestic production, showed a 5% decline in capital expenditures in the second-quarter vs. Q1 this year.”  

With regard to low capex and higher prices, Meredith wrote, “The world's largest oil and gas majors have reported bumper earnings in recent months, benefiting from surging commodity prices following Russia's invasion of Ukraine.” Meredith continued, “Combined with BP, oil majors Shell, TotalEnergies, Exxon and Chevron have posted third-quarter profits totaling nearly $50 billion.”

While these rising profits are great for the companies and their shareholders, the large buybacks and growing dividends that oil/gas companies have announced in recent months are creating problems for them in the political spectrum.  The United Kingdom has already announced a “windfall tax” on energy profits.  

An article published by the British Broadcasting Corporation this week broke down how the British tax works:  “Rishi Sunak introduced the tax when he was chancellor, describing it as a 25% Energy Profits Levy. It applies to profits made from extracting UK oil and gas, but not from other activities such as refining oil and selling petrol and diesel on forecourts.

The tax also allows the firms to apply for tax savings worth 91p of every £1 invested in fossil fuel extraction in the UK. When the BBC asked the government how much the tax break would cost it received no reply.” The BBC article said, “The Treasury says it expects the tax to raise £5bn in its first year, but that may be optimistic if Shell is not contributing until 2023.”  

Meredith points out that a similar tax proposal could arise in the United States as well, writing, “U.S. President Joe Biden on Monday called on oil majors to stop "war profiteering" and threatened to pursue higher taxes if industry giants did not work to cut gas prices.”   This would put further pressure on oil/gas company profits and potentially slow 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.

Michael Hewson, a Nobias 5-star rated author, published a report this week which provided more details on the UK’s Energy Profits Levy and its impact on BP.  Hewson said, “The “energy profits levy” as it is known, has been set at 25% until 2025 and puts BP and Shell effective UK tax rate at 65%.” He continued, “BP has already set aside an $800m adjustment in this quarter’s numbers in respect of the latest UK windfall tax, pushing the tax take from the North Sea to $2.5bn for this year. BP is also continuing to pay over $1.2bn a year in respect of the Gulf of Mexico oil spill.”

In Meredith’s piece, he highlighted recent commentary provided by BP’s CEO, Bernard Looney, who spoke at the ADIPEC conference in the United Arab Emirates on Monday.  With regard to the political pressure and BP’s current operating environment, Looney said, "Our job is to pay our taxes; our job is to invest.” We just announced a $4 billion acquisition in the United States just last week in renewable natural gas so that's what our job is to do. We will continue to do that and do the very best that we can.” 

Overall bias of Nobias Credible Analysts and Bloggers:

Despite rising political pressure against the oil and gas industry, the majority of the credible authors appear to be focused on rising profits as 64% of recent articles published on BP shares have expressed a “Bullish” bias.   5 out of the 6 credible analysts that the Nobias algorithm tracks who have expressed an opinion on BP shares are bullish as well.  With the company’s recent Q3 earnings results factored into recent analyst reports, the average price target that is currently being applied to BP shares by credible analysts is $38.60.  Today, BP shares trade for $33.92.  Therefore, even after BP’s year-to-date price gains of nearly 24%, the average credible analyst price target implies upside potential of approximately 13.80%.  


Disclosure:  Nicholas Ward has no position in any company discussed in this article.  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.

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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.

Credible Wall Street analysts and bloggers on Meta (FB) stock

Key Points

Meta Platforms shares sold off more than 21% this week.  META shares are now down nearly 72% from their 52-week highs and they’ve drastically underperformed the broader market this year (META shares are down by 70.70% on a year-to-date basis while the S&P 500 is down by 18.7%.   

META continues to invest heavily into its virtual reality platform; however, investors question whether or not these investments will ever pan out.  

Meta Platforms missed analyst consensus estimates on both the top and bottom lines during Q3.  

64% of recent articles published by credible authors were “Bullish”.  12 out of 15 credible Wall Street analysts believe shares are headed higher.  The average price target being applied to Apple shares by credible analysts is $215.57 which implies upside potential of approximately 117% relative to META’s current share price of $99.20.  

Performance

Event & Impact

Noteworthy News:

Nobias insights

Meta Platforms posted third quarter earnings this week, missing Wall Street consensus estimates, resulting in a 21.08% sell-off during the last 5 trading sessions.  META shares are now down by 71.9% from their 52-week highs.  This sell-off has largely come after a pivot by management - and notably, Meta’s founder and CEO, Mark Zuckerberg, who has a controlling interest in the company due to its dual class structure - which is now focused on allocating tens of billions of dollars per year towards virtual reality investments.  

Prior to the company’s transition from Facebook to Meta Platforms, it had a market cap north of $1 trillion.  Today, META’s market capitalization sits at just $263 billion.  And now, after reporting net income growth of -52%, credible authors and analysts alike are trying to decipher whether or not META shares are a deep value…or a value trap.  

META Nov 2022

Growth at a Good Price, a Nobias 4-star rated author, highlighted Meta’s Q3 performance and touched upon his bearish outlook for the company in an article that they published at Seeking Alpha this week. Regarding Meta’s shift towards the Metaverse, the author stated, “The Metaverse is hard to explain, but it’s basically a network of social communities with a VR gaming component. It’s centered around VR headsets and AR devices.”

They explained that high capital expenditures related to metaverse investments hurt the company’s profitability during the quarter, highlighting the company’s fundamental multiples: 

• Revenue: $27.7 billion, down 4%.

• Net income: $4.39 billion, down 52%.

• Operating income: $5.66 billion, down 46%.

• Free cash flow: $178 million, down 98%.

• Stock-based compensation: $3.1 billion.

• Buybacks: $6.55 billion.

The author went on to say, “The company beat on revenue but delivered a wide miss on the bottom line. Sales came in at $27.7 billion, down 4% year-over-year, while earnings per share (“EPS”) came in at $1.65, down 49% year-over-year.”

Growth at a Good Price put a spotlight on a couple Meta Platform’s main challenges that it faced during Q3, writing, “The company took a hit from Apple’s (AAPL) privacy changes last year, which CFO David Wehner said would cost it $10 billion this year.” They continued, “To add insult to injury, Apple Inc. announced just a day before Meta's release came out that it would start taking a 30% cut of "boosted post" revenue, so we now have the foundation for yet another Apple-related revenue headwind in the near future.”

Ultimately, they stated, “Wehner’s prediction came true, as Meta delivered the weakest revenue growth in its entire history in the first three quarters of 2022.” And therefore, Growth at a Good Price concluded,  “It's clear that in today's tech landscape, platform control counts, and Meta does not control the platforms that its apps run on.” This may be why Meta Platforms is investing so heavily into its metaverse operations. 

Meta Platforms doesn’t have an ecosystem in the mobile device industry; however, as Growth at a Good Price points out, the company could create one with the metaverse.  They said, “If the Metaverse takes off, then Meta will have its own hardware platform that it controls just like Apple and Google (GOOG, GOOGL) do.”

Even after the poor profit-related statistics that Meta produced during Q3, Growth at a Good Price said, “Meta’s stock is now cheaper than it has ever been.” They continued, “At today’s prices, it trades at just 11.3 times trailing earnings, 14 times forward earnings, and 6.3 times operating cash flow.”

Moving forward, the author believes, “The challenge for management is to get costs under control while bringing the new metaverse investments closer and closer to profitability.” “If the cost-cutting works out,” they said, “then it will help propel Meta stock higher, and if the Metaverse actually pays off, it will be a game-changer.”

But, the author believes that this is a speculative prospect which will take years to play out and therefore, they concluded their piece with this bearish announcement: “The bottom line about Meta Platforms is that it’s really two stocks in one: A stable but slow-growing ad-tech business, and a more speculative VR business. The former is under immense pressure due to Apple's policies, and the latter is an unprofitable long shot bet. As it stands today, with Reality Labs still 3-5 years away from profitability, Meta Platforms is extremely vulnerable to Apple's data privacy rules and app store fees. For this reason, I will be trimming my exposure by about 75% when the markets open tomorrow.”

The Value Portfolio, a Nobias 5-star rated author, also published a post-earnings article which cast doubt on Meta Platforms recent restructuring process.   The Value Portfolio said, “Meta Platforms (NASDAQ:META) dove again after hours on abysmal earnings as the company, in our view, refuses to act as a business versus a tech hobby fund. The company completely rebranded just over a year ago, triggering a massive market decline as the company continues to invest $10s of billions in a business model with no proven profits.”They continued, “In the most recent quarter, Reality Labs cost the company roughly 40% of its overall operating income. Even in the prior stronger quarter that number was almost 30%. That's a substantial increase from 2020 when that number for the company was <15%.”

The author stated, “we don't believe [this plan] is valid is [sic] when the company is losing >$10 billion a year (and accelerating) in a market where even if the company succeeds in constructing its vision, there's potentially no end-user who's interested.”

However, The Value Portfolio made it clear that they like Meta Platform’s legacy social media assets.  They stated, “WhatsApp, Instagram, and Facebook are all still incredibly strong players in their respective markets.” Looking at the quarterly user trends on the social media assets, The Value Portfolio wrote, “The company had some of its strongest user growth while maintaining the fixed 79% DAP / MAP [daily active users to monthly active user]  ratio highlighting how users remain relatively active.” “Surprisingly,” they said, “despite the well-known nature of the company's assets, it continues to connect more people each day.”

With regard to the size and scale of META’s social media family, during META’s recent Q3 report the company said that 2.93 billion people used its family of apps on a daily basis.   On a monthly basis, 3.71 billion people log into its family of apps.  

Looking towards the future, The Value Portfolio said, “In our view, the future success of Meta platforms depends on whether Mark Zuckerberg, with his majority ownership share, can admit that he was wrong.” Looking at capital expenditures, the author stated, “The company also needs to diversify, with this operating loss including multiple different "other bets" rather than all-in on the idea of VR.”

The author concludes that the major risk moving forward with META shares is management’s ability to execute.  They said, “Financially, the company has shown a unique ability to negatively impact profits and spend outside of its means, an ability that in our view makes the company a much riskier investment to have. Until the company can fix that, we expect it to continue to underperform.”

While it’s true that the two credible author reports that we’ve seen published since Meta’s earnings report expressed concern over the company’s current operational direction, the credible analyst community remains bullish on META shares after their recent sell-off.  

Theflyofthewall.com highlights analyst updates and this week we saw a slew of Nobias 5-star rated analysts come out with “Buy” ratings on META shares.  In each report, the credible analyst lowered their price target for META shares because of the company’s slowing growth; however, their price targets are still much lower than META’s current $99.20 share price, implying strong upside potential.  

According to Theflyonethewall.com:

• Bernstein analyst Mark Shmulik lowered the firm's price target on Meta Platforms to $135 from $195 to reflect lower management confidence, while keeping an Outperform rating on the shares following quarterly results

• Credit Suisse analyst Stephen Ju lowered the firm's price target on Meta Platforms to $145 from $174 and keeps an Outperform rating on the shares following quarterly results.

• BofA analyst Justin Post lowered the firm's price target on Meta Platforms to $136 from $150 and keeps a Neutral rating on the shares after the company outlined 2023 plans for $96B-$101B in expenses and $34B-$39B in capex, which were above respective Street estimates of $93B and $29B.

• Truist analyst Youssef Squali lowered the firm's price target on Meta Platforms to $160 from $240 but keeps a Buy 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.

Squali’s note continued, “The company's Q3 results and Q4 guidance suggest that it is actually performing better than feared amid a challenging ad market, the analyst tells investors in a research note.” The Fly on the Wall note stated, “Squali adds however that the 2023 expense guide to to further build out Meta's AI capacity and tech infrastructure is a "bold strategy that carries execution risk", though he remains positive on the stock as a "compelling" long-term opportunity.”

• Meta Platforms (NASDAQ:META) price target lowered to $165 from $200 by Goldman Sachs analyst Eric Sheridan. This maintains META as Buy.

• Jefferies analyst Brent Thill lowered the firm's price target on Meta Platforms to $200 from $225 and keeps a Buy rating on the shares.

Each of these individuals are Nobias 5-star rated analysts.  

Overall bias of Nobias Credible Analysts and Bloggers:

Overall, the average price target that is currently being applied to Meta Platforms shares by the Nobias credible analyst community is $215.47.  Relative to the stock’s $90.79 share price, that represents upside potential of more than 120%.  


Disclosure:  Nicholas Ward is long META.   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.

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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.

Credible Wall Street analysts and bloggers on Apple (APPL) stock

Key Points

Apple shares rallied 7.53% on Friday after reporting a top and bottom-line beat during their fiscal Q4 report.  This pushed their year-to-date results up to -14.4%, better than the S&P 500’s -18.7% results and the Nasdaq’s -29.9% year-to-date losses.  

Apple’s sticky ecosystem allowed it to generate reliable profits while other technology firms struggled.  

Apple posted record Q4 sales results, sparking a near-term rally.  

50% of recent articles published by credible authors were “Bullish”.  11 out of 13 credible Wall Street analysts believe shares are headed higher.  The average price target being applied to Apple shares by credible analysts is $$186.82 which implies upside potential of approximately 20%.  

Performance

Event & Impact

Noteworthy News:

Nobias insights

Apple (AAPL) reported fiscal 2022 fourth quarter results this week, beating Wall Street’s consensus estimates on both the top and bottom lines.  Year-to-date, Apple shares have outperformed the S&P 500, the Nasdaq, and its big-tech peers and this trend continued after the company reported its most recent quarterly results.   Apple rallied by 7.53% on Friday, pushing their 2022 losses up to just 14.4% (relatively better than the S&P 500’s -18.7% losses and the Nasdaq’s -29.9% losses).   And moving forward, the credible Wall Street analysts that the Nobias algorithm tracks see upside potential of approximately 20% ahead.  

AAPL Oct 2022

Bullish Nobias credible authors:

Patrick Seitz, a Nobias 4-star rated author, published a post-earnings report on Apple at Investors.com, highlighting the company’s operating results and several analyst updates on the stock.  Seitz wrote, “The Cupertino, Calif.-based company late Thursday said it earned $1.29 a share on sales of $90.1 billion in its fiscal fourth quarter ended Sept. 24.” He continued, “On a year-over-year basis, Apple earnings rose 4% while sales climbed 8%.”

In today’s volatile environment, the market rewarded Apple for its reliable growth with a 7.5% rally.  However, Seitz also pointed out that Apple’s ​​Chief Financial Officer, Luca Maestri, highlighted ongoing foreign exchange headwinds and weakness in the personal computer industry which will likely hurt Mac sales during the quarterly report.  

Seitz quoted Maestri who said, "Overall, we believe total company year-over-year revenue performance will decelerate during the December quarter as compared to the September quarter.”   But, Seitz also highlights bullish commentary provided by Apple’s CEO during the earnings call as well. He wrote, “On the earnings call, Chief Executive Tim Cook noted that Apple is supply-constrained on several new products. He said the company hasn't been able to make enough iPhone 14 Pro models and Apple Watch Ultra wearables to meet demand.”

Furthermore, Seitz also highlighted a bull/bear tug-of-war going on between a couple of credible Wall Street analysts. Seitz noted that Wedbush Securities analyst Daniel Ives, who is a Nobias 5-star rated analyst, called Apple "a tech standout in a dark economic and FX storm." 

Seitz continued, “In a report, Ives reiterated his outperform rating on Apple stock but trimmed his 12-month price target to 200 from 220.” Yet, not everyone was as bullish as Ives.  Seitz said, “At least six Wall Street analysts cut their price targets on Apple stock after the company's fiscal Q4 report.” He put a spotlight on one of these resorts stating, “Barclays analyst Tim Long was more cautious on the holiday quarter. He is now modeling 3% sales growth for Apple in the December quarter. Long rates Apple stock as equal weight, or neutral, with a price target of 156.”

Irfan Ahmad, a Nobias 5-star rated author, also wrote about Apple’s fiscal Q4 results this week at Digital Information World.   Ahmad said, “Apple’s report for this quarter provided an outlook of $90 billion of revenue generated while profits hit the $20 billion mark.”

Looking at operating segments, Ahmad wrote, “Both iPhone and Mac sales were up. The former had a 9.8% increase while the latter was up by a staggering 25%.” He continued, “iPad sales however showed a decline and were reported to be down by 13%.”

“Meanwhile,” Amhad said, “wearables and accessories also showed a 10% increase while services were noted to have gone up by 5%.” Like Seitz, Ahmad focused on Tim Cook’s optimism during Apple’s Q4 conference call.  

Regarding Cook’s comments, Ahmad said, “A lot of praise was given to Apple’s strong ecosystem and its strive to protect customers at all costs as this in turn led to record sales and the installation of new devices.” Ahmad concluded, “He [referring to Cook] was happy with the results and hoped to see the company succeed further in the next quarter as records continue to be broken and revenue continues to skyrocket when compared to previous years.”

Growth at a Good Price, a Nobias 4-star rated author, published an Apple post-earnings roundup article at Seeking Alpha this week.   The author highlighted Apple’s fundamental data, stating, “In the most recent quarter, Apple delivered:

• $90 billion in revenue, up 8%.

• $38 billion in gross profit, up 8.2%.

• $24.8 billion in operating income, up 4.7%.

• $20.72 billion in net income, up 0.82%.

• $1.29 in EPS, up 3.2%.

• $122 billion in full year cash from operations, up 17%.”

The author continued, “In addition, the profitability was healthy. Based on the metrics above, we get a 42% gross margin, a 27.5% EBIT margin, and a 23% net margin. A big win on all of these metrics.”

Growth at a Good Price mentioned that Apple shares were struggling coming into the Q4 report.  They wrote, “Apple's stock stumbled in the weeks heading into the release. Expectations were low, peer companies missed earnings estimates, and a rumor circulated saying that Apple cut iPhone 14 Plus production.”

However, they quickly provided their bullish counterpoint, writing, “I was personally optimistic heading into earnings, as I knew that the iPhone 14 rumor was overblown (the 14 Plus is just one of four iPhone 14 models). Still, the magnitude of the earnings beat impressed me.”

Growth at a Good Price says that while other big-tech stocks were struggling in recent months, Apple’s sticky consumer ecosystem allowed it to outperform.  

Regarding this ecosystem they said, “Apple's customer loyalty is legendary. Apple itself touted this factor as one of the reasons for its Q4 beat. Additionally, the firm 'Access' calculated Apple's brand loyalty (defined as customers who repeatedly buy similar products) at 87%. That figure is higher than average, so Apple's claims of having high customer loyalty are backed by third party studies.”

Furthermore, the author points out, “Apple was rated the world's most valuable brand in 2022 by the Visual Capitalist.”  Growth at a Good Price wrote, “Apple puts a lot of emphasis on building an interconnected ecosystem of devices that integrate well with each other.” They continued, “This incentivizes buying one Apple product after another, which leads to repeat sales.”

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.

After the stock’s 7%+ rally on Friday, the author turned towards the stock’s valuation.  They said, “If the treasury yield were to rise to 6%, Apple would need to grow much faster than 5% per year in order to be worth buying.” “It isn't conservative,” Growth at a Good Price noted, “to just assume that a huge company will grow faster than 5% per year forever”.   Therefore, they concluded, “Apple stock looks like a great value in 2022.”

“Certainly,” the author continued, “it's a comparatively good value by the standards of big tech.” They did provide a note of caution though, stating, “I would not personally be buying at prices higher than $171.” But, being that Apple shares closed the trading session on Friday at $155.74, Growth at a Good Price still sees upside ahead.  

Overall bias of Nobias Credible Analysts and Bloggers:

So does the community of credible Wall Street analysts that the Nobias algorithm tracks.  11 out of the  13 credible analysts that Nobias tracks believe that Apple shares are likely to increase in value moving forward.  Right now the average price target being applied to AAPL shares by these individuals is $186.82.  Therefore, the collective outlook of the credible analysts community sees upside potential of approximately 20%.  


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.

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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.

Credible Wall Street analysts and bloggers on International Business Machines (IBM) stock

Key Points

International Business Machines has been a major laggard in the tech sector over the last 5 and 10-year periods. However, the stock has outperformed during 2022 thus far, due to its strong cash flows and relatively low valuation.

IBM posted Q3 earnings this week, causing the stock to rally by 6.5%.

The credible analysts that Nobias tracks see total return potential of nearly 14% from the stock’s current share price.

Performance

Event & Impact

Nobias insights

International Business Machines (IBM) has been a bit of an enigma for investors over the last decade or so.   The company has drastically underperformed many of its big-tech peers, causing many to question whether or not this company has what it takes to return to the strong growth that it was once known for.  

Over the last decade, IBM shares are down by 29.6%, while the S&P 500 is by 165.79% and the tech-heavy Nasdaq is up by 263.45%.  During the last 5 years, IBM shares have fallen by 12.75% while the S&P 500 is up by 46.07% and the Nasdaq has risen by 64.58%.  However, during 2022, IBM has outperformed.  

IBM Oct 2022

On a year-to-date basis, IBM shares are down by just 4.51%, favorably compared to the S&P 500 which is down by 21.76% and the Nasdaq which is down by 31.41%.  Furthermore, IBM posted Q3 earnings this week, beating Wall Street’s consensus estimates on both the top and bottom lines.  These results caused IBM shares to rally by 6.53% this week.  

Bullish Nobias credible authors:

Coming into earnings season, Yves Sukhu, a Nobias 5-star rated author, published a pre-earnings breakdown of IBM’s business at Seeking Alpha.  Sukhu touched upon IBM’s recent operational strength, stating, “During the recent Goldman Sachs Communacopia and Technology Conference, John Granger, Senior Vice President of IBM Consulting, noted that “[IBM is] a big consulting player…[with] 150,000 professionals across the world. Revenue is approaching $20 billion. And within the IBM family, [consulting is] about a third of IBM’s revenue, but nearly two-thirds of IBM’s people.”’

Sukhu also highlighted recent merger and acquisition activity that IBM’s management team has embarked upon which, in their view, bolsters future growth prospects.  They wrote, “IBM’s acquisition of Instana in 2020 gave the company a boost in the large, multi-billion dollar application performance management (“APM”) market.”

Regarding IBM’s APM segment, Sukhu continued, “This complexity – which is increasing in many ways – drives the need for APM solutions, and I theorized in the same article on DDOG that investors might see a certain resiliency within that market despite the economic slowdown.”

Moving away from IBM’s APM segment and towards another area of the business with secular growth prospects, Sukhu highlighted recent activity in the digital security space.  They quoted Arvind Krishna, IBM’s CEO, stating, “During the Q2 FY ‘22 Earnings Call, Mr. Krishna noted that “[given] the importance of cybersecurity, in this past quarter, we also acquired Randori, a leading attack surface management, and offensive cybersecurity provider.”’

Sukhu went on to say, “This builds on the recent acquisition of ReaQta and the launch of QRadar XDR.” They continued, “As the computing environments become more complex (see the prior point), security becomes that much more difficult. I think management shows good judgment pushing further into the security space as it is somewhat hard to imagine enterprises spending significantly less on security regardless of economic conditions.”

And lastly, Sukhu put a spotlight on IBM’s work in the automation and artificial intelligence industries, writing, “Automation is also front-of-mind for many organizations today as they attempt to streamline routine workflows and free-up employees to focus on more strategic work.”

“Accordingly,” Sukhu continued, “Mr. Krishna explained that “[this] is one of the many reasons we are investing heavily in both AI and automation.”’ Ultimately, looking ahead to IBM’s recent Q3 earnings report, Sukhu concluded, “I think IBM’s core business will continue to throw off cash for a long time to come; and the stock likely will suit income investors just fine during that time.”

Lance Jepsen, a Nobias 4-star rated author, highlighted IBM’s Q3 top and bottom line results in a report published at Guerilla Stock Trading this week.  Jepsen wrote, “On October 19, 2022, IBM announced third-quarter 2022 earnings results.  IBM reported Q3 adjusted EPS of $1.81 versus the consensus estimate of $1.77.  The company reported Q3 revenue of $14.1B versus the consensus estimate of $13.51B.” He also quoted Krishna from the company’s Q3 report:  "IBM delivered strong revenue growth in the quarter, reflecting our continued focus on the execution of our strategy. Globally, clients view technology as an opportunity to enhance their business, which is evident in the results across our portfolio," said Arvind Krishna, IBM chairman and chief executive officer. "With our year-to-date performance, we now expect full-year revenue growth above our mid-single digit model."

Trapping Value, a Nobias 4-star rated author, published a post-earnings report titled, “IBM: Impressive Q3 Numbers, But The Stock Is Not Cheap” this week, analyzing the quarterly results and ultimately, confirming a tepid outlook for IBM shares moving forward.   Trapping Value highlighted a bullish aspect of IBM’s Q3 report: its strong margins.   They wrote, “Beyond the impressive revenue strength, IBM really brought it home for investors by maintaining gross margins in a very challenging environment. With the dual hits of inflation and US Dollar strength, one would have expected to see gross margins weaken substantially.”

Trapping Value continued, “We did see some weakness with overall gross margins dropping from 53.6% to 52.7%, but that is far less than what we thought would occur.” But, moving onto a “significant” concern for them, Trapping Value highlighted IBM's high debt load and a recent multi-billion headwind that the company experienced while attempting to fund its pension liabilities.  

Trapping Value wrote, “IBM set aside a certain amount of money to fund defined benefit pension obligations. On transfer to the third party, it was determined that IBM was overoptimistic with their return assumptions and the amount of cash set aside for the defined benefit, would not quite cut it. The net hit to IBM to get it off their books was $5.9 billion. As this expense is eligible for a tax write-off, the net impact was $4.4 billion.” They continued, “This is not chump change and exceeds the entire free cash flow till the third quarter for IBM.”

Taking a step back and looking at the quarter and the company’s full-year guidance, Trapping Value stated, “The $10 billion outlook for free cash flow on the current market capitalization is quite impressive.” They also noted, “If currency headwinds reverse next year, we could see this number move up to $11-$12 billion and that free cash flow yield would be enticing.” But, looking at the company’s dividend yield of 5.08% they said, “IBM's dividend yield is attractive for a large-cap firm, but in the context of rising interest rates, we don't see this as enough by itself.”

Transitioning towards IBM’s valuation, Trapping Value wrote, “The P/E multiple remains low and at 13x earnings, no one will complain that you are paying an arm and a leg for this.” “But,” they continued, “the bigger issue to get behind the company remains the total valuation when debt is included. EV to EBIT or EV to EBITDA don't look attractive at all.”

All in all, Trapping Value concluded, “With the rapid rise in interest rates and a plethora of opportunities around, we don't think we will chase IBM up here and continue to look for a two-digit price to get interested.” Although Trapping Value stated that IBM’s 5% dividend wasn’t attractive on a stand alone basis (in their opinion), this is a popular stock amongst income oriented investors.  

After the company posted its Q3 results, Tradevestor, a Nobias 5-star rated author, published an article at Seeking Alpha titled, “IBM Q3 Earnings: Dividend Coverage Check-In” which put a spotlight on the company’s dividend safety.  

Tradevestor touched upon IBM’s dividend safety metrics using the Q3 results, stating: 

• Total shares outstanding: 903.18 M

• Current quarterly dividend per share: $1.65

• Quarterly FCF required to cover dividends: $1.490 billion

• FCF in Q3: $0.8 billion - According to the earnings release: "On a consolidated basis, in the third quarter, the company generated net cash from operating activities of $1.9 billion or $1.2 billion excluding IBM Financing receivables. IBM's free cash flow was $0.8 billion."

• Payout ratio using FCF: 186.25% ($1.998 billion divided by $2.9 billion)

• EPS reported: 1.81 cents

• Payout ratio using EPS: 91% ($1.65 divided by $1.81)

They continued, “Wait, what? Is the dividend in danger given that EPS-based payout is so high at 91% and free cash flow based payout ratio is double that at a disastrous looking 186%? Not so fast. In the same earnings release, it says, "The company continues to expect about $10 billion in consolidated free cash flow."’

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.

Therefore, they ran the numbers using full-year guidance figures and came up with these results: 

• Total shares outstanding: 903.18 M

• Current annual dividend per share: $6.60

• Annual FCF required to cover dividends: $5.960 billion

• Projected FCF for 2022: $10 Billion. IBM already has $7.83 billion in the first 3 quarters, including the just reported ~0.8 billion.

• Payout ratio using annual FCF: 59.60% ($5.960 billion divided by $10 billion)

• Projected forward annual EPS for 2022: $9.29

• Payout ratio using EPS: 71% ($6.60 divided by $9.29)

Ultimately, Tradevestor concluded, “To summarize, IBM's dividend coverage after this quarterly result and projections is sound based on both FCF and EPS, with FCF projecting a more accurate picture.”

Overall bias of Nobias Credible Analysts and Bloggers:

Overall, 60% of recent articles published by credible authors tracked by the Nobias algorithm have expressed a “Bullish” bias towards shares.   And the credible Wall Street analysts that Nobias tracks agree with this sentiment.  Right now, the average price target being applied to IBM shares by credible analysts is $148.00.   After its 6.5% weekly rally, IBM closed Friday’s trading session at $129.90.   Therefore, relative to the credible analyst average price target, IBM shares offer upside potential of approximately 14%.  


Disclosure:  Nicholas Ward has no IBM 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.

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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.

What Nobias says about Lockheed Martin (LMT) stock

Key Points

Lockheed Martin posted Q3 results this week, beating Wall Street estimates on the bottom-line.

LMT shares are up more than 28% on a year-to-date basis, outperforming the S&P 500, which is down nearly 22% during 2022 by a wide margin.

The credible analysts that Nobias tracks see total return potential of nearly 10% from the stock’s current share price.

Performance

Event & Impact

Nobias insights

2022 has been a tough year for investors with the S&P 500 falling by 21.7% on a year-to-date basis.  However, defense stocks have offered investors rare shelter from the negative sentiment surrounding markets, with many of the hailing from that area of the economy posting positive returns during 2022 thus far.  

Lockheed Martin (LMT) is the largest U.S. defense contractor.  Lockheed posted Q3 earnings this week, which sent shares soaring.  LMT shares rallied 15.02% this week alone, bringing their year-to-date gains up to 28.29%.  And yet, even after this strong relative outperformance, the credible authors and analysts that the Nobias algorithm tracks remain overwhelmingly bullish on LMT shares.  

LMT Oct 2022

Bullish Nobias credible authors:

Cal Biesecker, a Nobias 5-star rated author, broke down the company’s recent Q3 results in an article published at Defense Daily.  Biesecker said, “Lockheed Martin on Tuesday reported higher sales in its third quarter due primarily to its work on the F-35 and air and missile defense programs while earnings tripled from a year ago when pension costs led to more than $1 billion in charges.” He continued, “Net income of $1.8 billion, $6.71 earnings per share (EPS), beat consensus estimates by 14 cents a share. A year ago, net income was $614 million ($2.21 EPS).”

Looking at the top-line, Biesecker wrote, “Sales in the quarter increased 3 percent to $16.6 billion from $16 billion a year ago.” He continued, “Sales drivers in the quarter included the F-35 fighter program, which benefited from a contract for Lot 15 aircraft in August, the Next Generation Interceptor missile defense development program, classified programs in the Aeronautics segment, and the Patriot Advanced Capability-3 (PAC-3) integrated air and missile defense program.”

Biesecker highlighted the company’s capital return program, stating, “The company also announced a $14 billion multi-year share repurchase program that includes $4 billion in accelerated share repurchases in the fourth quarter that will bring total stock buybacks to $8 billion in 2022, double earlier plans.”

Biesecker noted that during the company’s earnings report, Jay Malave, the company’s chief financial officer, said that “The company expects to repurchase about 10 percent of its outstanding shares over the next few years as it delivers long-term value to shareholders”.  

Looking ahead, Biesecker noted that Lockheed’s outlook for 2022 “remains intact after the company in the second quarter lowered its revenue guidance to around $6.3 billion and earnings to around $21.55 EPS.” He said that the company’s “Backlog at the end of the quarter stood at $139.7 billion, up 3 percent from $135.4 billion at the end of 2021.”

Biesecker also put a spotlight on “upside opportunities” that management highlighted looking out to 2024 regarding “programs that are getting a lot of attention in Ukraine’s war, including the HIMARS multiple rocket launcher, Javelin anti-tank guided missile, and the Guided Multiple Launch Rocket System surface-to-surface missiles, and some others”.  

Gen Alpha, another Nobias 5-star rated author, also recently published an article on Lockheed Martin at Seeking Alpha.   Gen Alpha highlighted Lockheed’s overall operations, stating, “Lockheed Martin is a global defense company that's strategically headquartered in Bethesda, Maryland, sitting just north of Washington D.C. It has a leadership position in high-end military aircraft, including the signature F-35 fighter jet program. Beyond fighter aircraft, LMT's other businesses include mission systems, including Sikorsky helicopters, missile defense, and space systems. Over the trailing 12 months, LMT generated $64 billion in total revenue.”

The author touched upon macro tailwinds for the stock, writing, “Moreover, defense spending is set to continue growing, given the ongoing Russian-Ukraine war, in which the U.S. and partners have been placed on heightened alert and have supplied critical arms.”

Looking at recent defense budgets passed by United States legislators, Gen Alpha said, “This is reflected by the recently proposed 9%, $37 billion, increase in defense spending for fiscal 2023 by the House Armed Services Committee with strong bipartisan support.”

Gen Alpha also touched upon Lockheed’s strong shareholder returns. They said, “LMT sports a strong A- rated balance sheet and it recently raised its dividend by 7% to $3 per share. This brings LMT's dividend yield to 3%, and the dividend is well protected by a low 45% payout ratio based on forward EPS of $26.74.” The author continued, “Notably, LMT has a robust 5-year dividend CAGR of 9%.”

Gen Alpha concluded, “LMT has seen some near-term challenges, but I believe they are transitory in nature. Plus, it's set to benefit from increased defense spending domestically and abroad. Given LMT's strong competitive advantages, excellent growth prospects and reasonable valuation, I believe the stock is a compelling buy for long-term growth investors seeking both capital appreciation and income.”

Passive Income Pursuit, a Nobias 4-star rated author, also touched upon Lockheed Martin’s recent dividend increase in a report that they published at their website.   They wrote, “On September 30th the Board of Directors at Lockheed Martin (LMT) approved an increase in the quarterly dividend payment.  The dividend was increased from $2.80 to $3.00 which is a solid 7.1% increase.”

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.

Passive Income Pursuit continued, “The new dividend will be payable December 30th to shareholders of record as of December 1st.” They said, “Lockheed Martin is a Dividend Contender with 20 consecutive years of dividend growth.”

Looking at dividend growth consistency, the author stated, “Although there is a dividend cut in 2000 when the dividend was cut by 50%.  Lockheed Martin resumed dividend growth in 2003 and has been raising it every year since.”

Passive Income Pursuit also touched upon Lockheed’s valuation, writing, “I consider the fair value range based on dividend yield theory to be the 3-year moving average yield +/- 10%.  That gives a fair value range of $398 - $488 and suggests that shares are currently trading below the low end of fair value.” 

Overall bias of Nobias Credible Analysts and Bloggers:

Even after LMT’s 15%+ rally this week, the majority of credible authors and all of the credible Wall Street analysts that the Nobias algorithm tracks are bullish on shares.  80% of recent articles published by credible authors on LMT have expressed a “Bullish” bias.  All three of the credible analysts that have offered opinions on LMT shares believe that the stock is headed higher.   Right now, the average price target being placed on LMT by those credible analysts is $486.33.  Lockheed closed the week trading at $454.61.  Therefore, relative to that average price target, Lockheed shares offer investors upside potential of approximately approximately 7% (plus the stock’s current 2.64% dividend yield).  


Disclosure:  Nicholas Ward is long LMT. 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.

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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.

What Nobias says about JPMorgan (JPM) stock

Key Points

JPM shares have underperformed the broader market during 2022 thus fall, falling more than 31%, compared to the S&P 500’s -25% performance.

Rising interest rates are bolstering JPM’s net interest income.

The company just beat Wall Street’s estimates on both the top and bottom lines, sparking a near-term rally.

57% of recent articles by credible authors are “Bullish” and so are  5 out of the 7 credible Wall Street analysts. JPM shares closed Monday’s trading session at $115.86/share; the credible analysts’ average price target of $134.14 represents upside potential of over 20%.

Performance

Event & Impact

Noteworthy news


Nobias insights

The big banks always kick off earnings season and last week JPMorgan, which is the largest U.S. bank, reported results which beat analyst estimates on both the top and bottom lines.  JPM shares rallied 1.66% in response to those results; however, this single-day bump doesn’t change the fact that 2022 has been a rough year for this company’s stock.  

After Friday’s rally, JPMorgan shares are down by 31.24% on a year-to-date basis.  Therefore, JPMorgan has underperformed the broader markets on a relative basis; the S&P 500, which is down by 25.30% during 2022 thus far.  Yet, after this relatively poor performance, the majority of credible authors and analysts that the Nobias algorithm tracks are bullish on JPM shares.   The average price target being applied to JPM by credible analysts calls for upside potential of more than 20%.  

JPM Oct 2022

Bullish Nobias credible authors:

Coming into earnings season, Nathan Reiff, a Nobias 4-star rated author, published a JPMorgan earnings preview report at Investopedia on October 11, 2022.  Reiff said, “JPMorgan Chase & Co. (JPM), the largest U.S. bank by consolidated assets, is likely to report that Q3 2022 profit slid by almost a quarter from the same period a year ago as investment banking fees dropped, even as interest income rose.” He went on to highlight the stock’s recent performance, stating, “JPMorgan shares, little changed in the quarter, were down 36% in the 12 months through September, compared with a 17% drop in the S&P 500.”

Looking at consensus estimates, Reiff wrote, “JPMorgan is likely to say earnings per share (EPS) for Q3 FY 2022 declined 23.3% year-over-year (YOY) to $2.87 as revenue climbed 6.9% to $31.7 billion, according to an average estimate from Visible Alpha.” He mentioned that the company’s management recently made statements potentially setting the stage for disappointing Q3 results, quoting JPMorgan’s CEO, Jamie Dimon, who “said Oct. 10 that a "very serious" combination of headwinds is likely to push the U.S. and global economy into recession by the middle of next year, citing accelerating price increases, Fed rate hikes and the war in Ukraine.”

But, Reiff notes, the poor macro economic environment has created a potential upside catalyst for JPMorgan in the form of rising interest rates.  He said, “JPMorgan's net interest margin measures the gap between the income banks generate from credit products like loans and mortgages and the interest they pay to depositors and other creditors.”  

Reiff continued, “JPMorgan's net interest margin gradually fell in 2020 and 2021 after the Fed lowered interest rates to mitigate the shock of COVID-19, making it easier for households and businesses to borrow. The Fed's rate hikes have already started to improve the bank's net interest margin.” Finally, he wrote, “In Q2 of this year, net interest margin rose to 1.80%, its highest in nine quarters. Analysts estimate that net interest margin will rise again in Q3, reaching 1.99%, still far short of pre-pandemic levels.” 

This metric is going to be key for the company moving forward, and after JPMorgan’s October 14th earnings report, Jon Hopkins, a Nobias 4-star rated author, published an article focused on those quarterly results titled, “JPMorgan sees profit fall beat estimates after gains from higher interest rates”.  

During Q3, JPMorgan beat Wall Street estimates on both the top and bottom lines.  The company’s Q3 revenue came in at $32.72 billion, up 10.4% on a year-over-year basis, and beating consensus estimates by $840 million.  JPMorgan’s GAAP earnings-per-share result of $3.12/share beat Wall Street’s consensus estimate by $0.23/share.  

Looking at the bank's bottom line, Hopkins said, “For the third quarter, JPMorgan's profit fell to $9.74 billion, or $3.12 per share, while revenue rose by 10% to $32.72 billion, helped by a 22% increase in revenue from fixed-income trading.” Looking at adjusted numbers, Hopkins continued, “The firm-the largest US bank-reported adjusted profit of $3.36 per share, well above analysts' average estimate of $2.88”.  

Specifically looking at net interest income, Hopkins wrote, “JPMorgan's net interest income excluding markets rose 51% to $16.9 billion in the quarter, driven by higher rates. For the fourth quarter, the bank said it expects the metric to rise to about $19 billion.”

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.

Regarding Dimon’s quarterly commentary, Hopkins said, “In a statement, JPMorgan chief executive Jamie Dimon noted that American consumers continue to spend and businesses remain healthy.”  Hopkins continued, “However, he [referring to Dimon] added, there were "significant headwinds immediately in front of us", noting stubbornly high inflation leading to higher global interest rates, the uncertain impacts of quantitative tightening, the war in Ukraine and the fragile state of oil supply and prices.”

Lastly, Hopkins highlighted one of the worst performing segments of JPMorgan’s business, writing, “Revenue from investment banking, one of the bank's biggest businesses, slumped by 43% to $1.7 billion as a mix of high inflation and fears of looming recession forced buyers and sellers to pause deals.”  

Overall bias of Nobias Credible Analysts and Bloggers:

With JPMorgan’s quarterly results in the books, both the communities of credible authors and credible analysts that the Nobias algorithm tracks are largely bullish on JPM shares.  57% of recent articles published which focused on JPMorgan by credible authors have expressed a “Bullish” bias towards shares.  5 out of the 7 credible Wall Street analysts that the Nobias algorithm tracks who have published opinions on JPM shares expect to see the stock rise in value.  Right now, the average price target being applied to JPM shares by credible analysts is $134.14.  JPM shares closed Monday’s trading session at $115.86/share; the average price target of $134.14 represents upside potential of over 20%.  

Disclosure:  Nicholas Ward has no JPM positions. 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.

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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.

What Nobias says about Tesla (TSLA) stock

Summary

• Tesla shares have fallen by nearly 30% during the last month, largely due to fears associated with Elon Musk being forced to sell shares to pay for his Twitter acquisition.

• Tesla announced its first semi-truck sale, representing a large growth opportunity for the company as it enters into another vehicle market.

• Credible authors are largely bearish on TSLA shares; however, credible analysts see upside potential of approximately 47%.

Last week Nobias published a report highlighting news that a deal between Elon Musk and Twitter was likely to close, with the billionaire reportedly agreeing to purchase Twitter for the originally $54.20/share agreed upon price.  This news was great news for Twitter shareholders; shares of that company are now up by approximately 19.6% during the last month.  However, a negative reverberation of this news has been a sell-off in Tesla (TSLA) shares.  TSLA is down by approximately 6.7% during the last week, pushing the stock’s losses during the last month down to -28.7%.  

TSLA Oct 2022

Bearish Nobias credible authors:

In a recent report, Puja Tayal, a Nobias 5-star rated author, highlighted why the Twitter deal is bad news for Tesla shareholders.  She wrote, “Now comes the twist. Faced with deposition and trial, Musk informed Twitter and the court that he is willing to complete the Twitter deal at the agreed-upon price. But he needs time to accumulate the funds. The judge gave Musk until October 28 to complete the deal and delayed the trial from October 17 to November.” 

Tayal continued, “Musk’s wealth is in his Tesla shares. He asked for more time as he cannot sell his shares before October 19, when Tesla reports its third-quarter earnings. And he can’t back out from the deal this time because it would immediately be followed by a lawsuit.”  “So,” she said, “Musk has eight days (October 19 -28) to pay Twitter US$44 billion. With Tesla shares near their 52-week low, you can expect a lot of offloading by Musk after the earnings. Moreover, preliminary data suggests that Tesla’s earnings might not be pleasing to shareholders as its third-quarter vehicle deliveries (343,000) fell short of analysts’ expectations (364,660).” 

Tayal believes that this selling pressure is likely to result in even more downside for Tesla shares and therefore, she concludes, “Instead of buying the stock today, wait till the end of the month to get a better deal.”  

Bullish Nobias credible authors:

Amy Legate-Wolfe, a Nobias 5-star rated author, recently published an article at Yahoo Finance which highlighted the bullish secular trend that she sees playing out for Tesla as consumers switch from ICE (internal combustion engines) to EVs (electronic vehicles).  She wrote, “Switching over to electric vehicles (EVs) is something more Americans are also considering these days. New registrations of of electric vehicles jumped 60% in the first quarter of 2022 and Teslas made up over half of new EV registrations.”

Legate-Wolfe continued, “There are currently a total of about 1.7 million EVs on the road in the U.S compared to around 400,000 in Q2 of 2018., and that number is expected to keep growing.” And, after analyzing insurance, maintenance, and depreciation data regarding EV’s (and Tesla models in particular), she concluded, “Consumers should certainly consider EVs as the world shifts away from gas models. And right now looks like a great time.” 

Howard Smith, a Nobias 4-star rated author, recently published an article highlighting another potential catalyst for Tesla’s long-term growth: semi-trucks. Smith wrote, “Tesla CEO Elon Musk made a big announcement last night, and it wasn't about his bid to buy Twitter .” Smith continued stating, “Musk went on Twitter last night to announce Tesla's first Semi truck delivery is expected to go to PepsiCo on Dec. 1.”

Like Tayal, Smith mentioned Musk selling pressure is serving as a near-term headwind for share price appreciation; however, he took a long-term view and remained bullish on the prospects of a more diversified revenue stream for Tesla moving forward.  Smith wrote, “Investors have been looking forward to Tesla diversifying its product offering with both the battery electric Semi truck and the Cybertruck. That electric pickup truck is scheduled to begin shipping next year.”

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.

Regarding the performance metrics of Tesla’s semi-truck, Smith said that it “will be able to travel 500 miles on a single charge.” He continued, “That compares favorably to the 330 mile range from rival Nikola 's Tre BEV (battery electric vehicle). Nikola expects to have a longer-range option with its upcoming hydrogen-powered fuel cell electric truck. But there could be plenty of demand for electric heavy trucks needed for shorter, local hauls.”

Ultimately, Smith stated, “The Semi truck won't noticeably impact Tesla's bottom line anytime soon, especially with the company expected to sell approximately 1.4 million electric cars and SUVs this year.” “But,” he said, “it's the first step in getting meaningful revenue from a more diversified product mix.”

Overall bias of Analyst and Blogger community:

Right now, there’s a big disconnect between the credible author community and the credible Wall Street analysts that Nobias tracks when it comes to Tesla shares.  90% of recent articles written on the company have expressed a “Bearish” bias, showing that credible authors agree with the stock’s recent negative trajectory.  However, when looking at the opinions expressed by credible analysts, we see that 6 out of 8 believe that Tesla shares are going to rise in value.   The average price target being placed of TSLA shares by credible analysts is $318.95.  TSLA is priced at $205. Therefore, the credible analyst average target implies upside potential of approximately 48%.  

Disclosure:  Nicholas Ward has no TSLA positions. 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.

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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.

What Nobias says about Texas Instruments (TXN) stock

Summary

• The U.S. Department of Commerce recently introduced new rules and regulations on semiconductor exports to China.

• These headlines caused the iShares Semiconductor ETF (SOXX) to sell-off by nearly 10% during the last week.

• However, credible authors and analysts believe that Texas Instruments is a bargain after its recent weakness, offering double digit total return potential.

In recent days news has broken regarding steps taken by the U.S. government to regulate the export of certain semiconductors to China.  A CNBC report on the news published this week stated, “On Friday, the U.S. Department of Commerce introduced sweeping rules aimed at cutting China off from obtaining or manufacturing key chips and components for supercomputers, in what is seen as a huge escalation in tensions between Beijing and Washington in the technology sphere.”

The report continued, “China’s ambitions to boost its domestic chip industry has likely become magnitudes more difficult and costly after the U.S. launched some of its most wide-ranging export controls related to technology against Beijing.”

Not only has this increased political tensions between the world’s two largest superpowers, but it has negatively impacted semiconductor stocks due to fears of slowing sales and increased uncertainty regarding potential counter-measures put into place by the Chinese Community Party.  

The stock market hates uncertainty.  And therefore, many of the most notable semiconductor stocks and brands have experienced precipitous sell-offs in response to this news.  During the last 5 days, the iShares Semiconductor ETF (SOXX) has fallen by 9.3%.  

And yet, this near-term sell-off has created long-term buying opportunities in the minds of several credible authors and analysts that the Nobias algorithm tracks.  In recent days we’ve seen a slew of bullish reports published on Texas Instruments (TXN), a $143 billion semiconductor company, which is down by nearly 7% during the last week alone.  

Historically, TXN shares have provided investors relatively defensive returns due to its market leading status and its generous management team, when it comes to shareholder returns.  TXN’s recent dip has pushed its dividend yield up above the 3% threshold.  Texas Instruments has also been known to reliably reduce its outstanding share count with share buybacks, helping to provide investors with peace of mind.  And, with negative sentiment surrounding the semiconductor space, these are the aspects of TXN shares that several credible individuals have highlighted as they look for attractive values amongst the beaten down semiconductor stocks.  

TXN Oct 2022

Bullish Nobias credible authors:

Geoff Considine, a Nobias 5-star rated author, recently published an article titled, “Texas Instruments Can Continue To Outperform Semiconductor Industry” which highlights his bullish outlook on Texas Instruments moving forward.  

Considine said, “Texas Instruments (NASDAQ:TXN) has performed much better than the chip industry so far in 2022. TXN has a total return of -11.8% for the YTD vs. -40.4% for the semiconductor industry as a whole (as calculated by Morningstar) and -37.7% for the iShares Semiconductor ETF (SOXX).” He noted, “It has been a bleak year for investors holding semiconductor stocks, but TXN has been a bright spot. While the consensus outlook is for an earnings decline in 2023 and slower earnings growth over the next several years, there are reasons to believe that TXN can deliver decent returns to shareholders.”

Looking at analyst ratings on TXN shares, Considine wrote, “The Wall Street consensus rating is a mixed bag.” He continued, “ETrade calculates a consensus buy rating, but Seeking Alpha comes out with a hold for TXN.” However, regarding returns, he was still bullish on the company’s prospects, writing, “The consensus 12-month price targets from Seeking Alpha and ETrade are very close, however, indicating an expected total return of 18% over the next year. Even though expected growth is muted, the consensus view indicates solid potential gains from the current reduced share price.”

Considine put a spotlight on Texas Instruments’ reliable bottom-line results, stating, “TXN has grown earnings at a steady clip over the past 3 years, consistently beating analyst expectations. In the most recent earnings report on July 26th, for Q2 of 2022, quarterly EPS exceeded the consensus expected value by 15.7%. The rate of earnings growth has slowed over the past year, and the outlook is for 2023 earnings to fall below the 2022 results. The consensus expectation for EPS growth over the next 3 to 5 years is a modest 6.1% per year.” He said that the stock’s ongoing fundamental growth, alongside its recent sell-off, has resulted in an intriguing valuation being associated with shares.  

Considine wrote, “With TXN’s price decline, the shares look reasonably valued relative to current and expected earnings. The forward and TTM P/E are 17.3 and 17.0, respectively, on the low end of TXN’s P/E range over the past 4+ years.”

Furthermore, he touched upon TXN’s history of translating bottom-line growth into dividend growth for shareholders.  He wrote, “The trailing 3-, 5-, and 10-year dividend growth rates are 14.3%, 18.1%, and 21.1% per year, respectively. With expected EPS growth of 6.1% per year, maintaining anything close to historical dividend growth rates will push up the payout ratio (currently at 47.6%).” He also said, “The current payout ratio is somewhat below TXN’s 5-year averages, 57.2% (GAAP) and 54.6% (non-GAAP), so there is some room for an increase.”

Considine isn’t the only credible author who has written about Texas Instrument’s dividend yield and dividend growth recently.  Jason Fieber, a Nobias 5-star rated author, recently published a report titled, “These 6 Dividend Stocks Just Boosted Their Payout, Again!” which included a breakdown of Texas Instruments’ most recent dividend raise.  

Fieber said, “Texas Instruments just increased its dividend by 7.8%. They say everything is bigger in Texas. Well, Texas Instruments continues to hand out big dividend increases.” He continued, “Now, this particular increase wasn’t quite as impressive as some of the past increases from Texas Instruments, but we have to keep in mind that we’re in the middle of unprecedented global economic turmoil. The fact that the company still came through with a near-8% dividend increase speaks volumes about their commitment to shareholders.”

Regarding TXN’s dividend growth history, Fieber stated, “The technology company has now increased its dividend for 19 consecutive years.  Texas Instruments has been so incredibly reliable with the dividend and the growth of it. The 10-year dividend growth rate is 21.5%, but there’s been a deceleration playing out in recent years. I wouldn’t continue to expect 20% annual dividend raises from Texas Instruments.” But, he added, “Even if Texas Instruments were only handing out 8% dividend increases per year, it’s hard to complain about that when you get a 3.1% starting yield.”

Fieber concluded his bullish report writing, “Texas Instruments has almost nothing to dislike. The dividend metrics are great, and the company also just announced a $15 billion buyback program – more than 10% of its entire market cap. Texas Instruments is about as shareholder friendly as it gets.”

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.

Jim Kelleher of Argus, a Nobias 4-star rated analyst, also recently published a recent note on TXN in response to the stock’s recent sell-off.   This note was highlighted in a report at theflyonthewall.com which wrote that Kelleher said, “Texas Instruments shares offer "good value" at current levels as the stock trades at 16.6-times his expected 2022 GAAP earnings and 15.6-times his 2023 projections - below the five-year average P/E multiple of 21.9-times.”

The theflyonthewall report continued, “Kelleher adds that while semiconductor shortages continuing to plague the industry, Texas Instruments' role as a prime supplier has extended its competitive advantage over fabless companies dependent on busy merchant fabs, also citing its market strength and diversified customer base.” Kelleher rates Texas Instruments a “Buy” with a price target of $225.00/share.  

Overall bias of Analyst and Blogger community:

Overall, 44% of recent articles published on TXN have expressed “Bearish” sentiment; however, the last 3 reports published by credible individuals (in a post-semiconductor sell-off world) have expressed “Bullish” bias.  The average credible analyst price target currently being applied to TXN shares is $165.75. 

After their recent dip, TXN shares trade for $152.70.  Therefore, relative to the average credible analyst price target, TXN shares appear to offer price return upside of approximately 8.5%.  And, when the stock’s current 3.23% dividend yield is factored into the equation, the total return potential for investors moving forward rises up above the 10% threshold.  


Disclosure:  Nicholas Ward is long TXN.  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.

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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 on Credit Suisse (CS) with Nobias technology

Summary

• In recent days, the rumor-mill on Twitter began circulating reports and headlines that Credit Suisse (CS) is headed towards a Lehman Brothers-like collapse due to rising credit default swaps.

• CS’s credit default swaps are now approaching the highs seen during the 2008 financial crisis, which saw U.S. investment bank Lehman Brothers go bankrupt.

• Yet, contrarian investors bought looked past rumors of the bank’s demise and bought the dip this week, causing a 30%+ rally.

• Credible authors and analysts tracked by the Nobias algorithm do not agree with the stock’s recent bullish momentum.

In recent days, the rumor-mill on Twitter began circulating reports and headlines that Credit Suisse (CS) is headed towards a Lehman Brothers-like collapse due to rising credit default swaps.  This put a major spotlight on CS shares as investors pondered whether or not the European banking system is headed towards a crisis reminiscent of the 2008 financial crisis in the United States.  Others questioned whether or not Credit Suisse is an institution that is too big to fail?  

CS Oct 2022

Looking at the company’s fundamentals, it’s clear that Credit Suisse is facing operational and balance sheet issues.  And yet, after a late-September dip from the $5.00/share area to new 52-week lows of $3.71, the renewed focus on the bank this week inspired a 30.38% rally as contrarian investors placed bets against this Swiss bank’s demise.  

Some of the bank's current operational issues were foreshadowed during the company’s recent second quarter earnings report.  Anna Sokolidou, a Nobias 4-star rated analyst, covered those results in an article published on Seeking Alpha.  

Looking at the bank’s top-line results, Sokolidou said, “In the past quarter, the bank's net revenues totaled CHF 1.15 billion, down from the value of CHF 2.02 billion reported for the previous quarter.”

Moving onto the bottom-line, Sokolidou continued, “The bank reported a net loss attributable to shareholders of CHF [the Swiss franc] 1.6 billion, compared to net income attributable to shareholders of CHF 253 million in 2Q21.” She also noted, “Credit Suisse's pre-tax loss totaled CHF 1.2 billion, quite a poor result compared to a pre-tax income of CHF 813 million in 2Q21.”

This report was published back in August, so it doesn’t factor in the latest headlines. However, after looking over Credit Suisse’s Q2 results, Sokolidou concluded: “Credit Suisse shares are highly undervalued right now.” This undervaluation reflects poor earnings results, numerous past scandals, and investors' uncertainty about the health of the global economy. Whilst I understand conservative people not wanting to risk buying the shares just yet, the current situation could be used as a good buying opportunity for patient long-term investors. CS shares used to trade much higher when the bank reported poorer results. The management's cost-saving initiatives might work and the geopolitical situation "shall pass too."’

Looking at the stock’s strong rally this week, it appears that the market agrees with Sokolidou’s take regarding an irrationally low valuation.  Moving onto the recent “too big to fail” concerns, Shanthi Rexaline, a Nobias 4-star rated author, covered the Credit Suisse story in an article that was published on Benzinga this week.  

Rexaline wrote, “Credit Suisse has seen its fundamentals deteriorate rapidly, thanks to a combination of macroeconomic factors and company-specific malaise. The bank has been rocked by a string of scandals and mishaps that impacted its financials, with the most notable being the situation that arose from the collapse of U.S. hedge fund Archegos Capital, founded by Bill Hwang, in early 2021.” “Additionally,” she continued, “the bank was fined by a Swiss court in June for the lax controls it had, which allowed one of its employees to help a Bulgarian drug ring launder money, the New York Times reported.”

Touching upon the primary catalyst for the concern surrounding the bank’s viability, Rexaline highlighted the company’s soaring credit default swaps.  She said, “Credit Suisse’s Credit Default Swaps, or CDS, a derivative instrument that allows an investor to swap their credit risk with another investor, surged on Friday, reflecting the market perception of increasing risk. It is now approaching the highs seen during the 2008 financial crisis, which saw U.S. investment bank Lehman Brothers go bankrupt.”

Rexaline also quoted a report published in the Financial Times, which highlighted the company’s response to the bearish rumors.  She said, “In a briefing note sent to clients, the bank said, “Our position in this respect is clear. Credit Suisse has a strong capital and liquidity position and balance sheet. Share price developments do not change this fact.”’

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.

Jordan Brodie Farooqui, a Nobias 4-star rated author, also published a report on the Credit Suisse sell-off last week.   In an article published at ProactiveInvestors.com, Farooqui said, “Credit Suisse has also been in talks with investors to raise capital, Reuters reported, citing people close to the matter, including the chance that the lender may “largely” exit the American market.” He noted, “Credit Suisse said it is in the process of a strategy review, which would likely include asset sales and divestitures.”

Farooqui quoted  John Vail, chief global strategist at Nikko Asset Management, who said, “The silver lining at the end of this period is the fact that central banks will probably start to relent some time as both inflation is down and financial conditions worsen dramatically.” Regarding the Credit Suisse news, Vail concluded, “I don’t think it’s the end of the world.”

However, looking at the opinions expressed by the credible authors and Wall Street analysts that the Nobias algorithm tracks, a bearish trend related to CS shares has clearly formed. After the 30%+ rally that CS shares experienced during the past week, only 25% of credible analysts predict that Credit Suisse shares are going to rise in value from the stock’s current $4.85 share price.  Furthermore, 83% of recent articles published on Credit Suisse by credible authors have expressed a “bearish” bias.  Therefore, this isn’t a rally that credible minds in the financial space want to chase.  

Disclosure:  Nicholas Ward has no CS position.    Nicholas Ward wrote this article for Nobias at their request with a view 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.

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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 on Walgreens Boots Alliance (WBA) with Nobias technology

Summary

• Walgreens Boots Alliance (WBA) is down by 42.48% on a year-to-date basis.

• After this weakness, shares yield 5.95%.

• Credible analysts are calling for upside potential north of 33%.

Walgreens Boots Alliance (WBA) is down by 42.48% on a year-to-date basis.  This poor 2022 performance has pushed WBA’s medium and long-term total returns down into negative territory as well.  Walgreen’s trailing 5-year and trailing 10-year price returns are -56.31% and -15.08%.  This means that the stock has underperformed the S&P 500 by a wide margin during the last decade.  

The SPDR S&P 500 Trust ETF (SPY) has posted gains of 42.48% during the last 5 years and gains of 153.89% during the last 10 years.  And yet, despite this underperformance, several credible authors have recently published bullish reports on WBA shares, highlighting what they believe to be attractive value and a high dividend yield.  

The credible Wall Street analysts that Nobias tracks agree.  Their average price target implies upside potential of approximately 33%.  Jeff Reeves, a Nobias 5-star rated author, recently published a bullish article on Walgreens Boots Alliance titled, “Snag a 5.8% Dividend From This Solid, Recession-Proof MVP”.  

WBA Oct 2022

Reeves highlighted WBA stock as one of the most attractively valued, high yielding equities in the market today.  He touched upon the company’s strong operations and forward looking growth plans, stating, “Walgreens is in the middle of a multiyear strategic initiative to emphasize higher operating margins, customer loyalty and other key operational metrics. And it’s paying off big-time, with digitization initiatives driving higher revenue and organic growth outside of brick-and-mortar operations. On top of that, at the end of its fiscal year in August, WBA announced that it had surpassed $2 billion in annual cost savings a full year ahead of its previously announced restructuring plans.”

Regarding the stock’s valuation, Reeves said, “WBA stock is valued at just under $29 billion, with a forecast of $134 billion in revenue next fiscal year – giving it a rock-bottom valuation where it trades at roughly 20% of sales. By contrast, its closest peer CVS Health (CVS) trades for about 40% of sales and staples retailers like Target (TGT) and Walmart (WMT) trade at about 65% of sales.”

Looking at the stock through a price-to-earnings lens, Reeves wrote, “Walgreens also trades at a significant discount to future profits, with a forward price-to-earnings ratio of 7.1 while CVS trades at 11.6 times earnings and WMT is in the 20s even after recent declines.”

He also touched upon WBA’s illustrious history of shareholder returns, writing, “On top of a tremendous current yield of 5.8%, Walgreens has been paying dividend for almost nine straight decades – including increasing its payout in each of the past 47 years to make it one of Wall Street’s vaunted Dividend Aristocrats.”

Reeves said that this is the type of defensive pick that he’s choosing for his portfolio in today’s volatile market environment.  He concluded his article stating, “Walgreens has a solid business model, a dynamic long-term strategy and a bargain valuation that will create a safe floor under prices. And with a rock-solid 5.8% yield, there’s ample reason to venture into this leading company – even if the pundits on CNBC are telling you the sky is falling.”

Kevin Coupe, a Nobias 4-star rated author, also recently published a report which highlights Walgreen’s future growth prospects at the Morning News Beat.  Coupe wrote about the company’s ongoing automation efforts, saying, “The Wall Street Journal reports that Walgreens is using robotics to help compensate for staffing shortages in its retail pharmacies, "setting up a network of automated, centralized drug-filling centers that could fill a city block. Rows of yellow robotic arms bend and rotate as they sort and bottle multicolored pills, sending them down conveyor belts. The company says the setup cuts pharmacist workloads by at least 25% and will save Walgreens more than $1 billion a year."’ Coupe continued, “The story points out that "Walgreens in the past two years has opened eight automated drug-filling centers serving 1,800 stores and plans to operate close to two dozen by 2025.”’

Gen Alpha, a Nobias 5-star rated author, recently published a bullish report on WBA stock, highlighting what they believe to be an attractive valuation after the stock’s recent sell-off.  Gen Alpha wrote, “Walgreens Boots Alliance is a global leader in retail pharmacy with over a century's experience in the space. It brands itself as "America's Drugstore" and has around 13,000 locations in all 50 states and Europe and Latin America. In addition, Walgreens has a material equity stake in the drug distribution giant, AmerisourceBergen (ABC).” 

Maintaining a balanced approach, Gen Alpha noted, “Longtime investors and followers of Walgreens know that the company hasn't been without its challenges. While Walgreens has traditionally enjoyed competitive advantages and stronger margins compared to smaller players, it's come under pressure in recent years in correlation with the growth in negotiating leverage of pharmacy benefit managers.” However, they stated that these fearful concerns are overstated because of WBA’s “relatively stable” core business.  

Gen Alpha states that recent data supports this opinion, writing, “This is reflected by U.S. retail sales growing by 1.4% YoY (2.4% excluding tobacco) during its fiscal third quarter, with positive comparable store transactions. Moreover, WBA's Boots UK comparable sales grew at a more impressive 24%, with market share gains across all major categories.”

Furthermore, Gen Alpha said, “WBA carries a strong BBB rated balance sheet, and has plenty of flexibility. This is supported by its stake in AmerisourceBergen, of which it sold 6 million shares worth $900 million in the recent reported quarter, thereby giving WBA an alternate funding source for its growth initiatives.”

Like Reeves, Gen Alpha also put a spotlight on Walgreen’s dividend.  The author noted that the stock’s recent sell-off has pushed its dividend yield up to the 6% threshold and said, “The dividend is well-protected by a 35% payout ratio and comes with a 5-year CAGR of 5%. As shown below, WBA is now yielding the highest in over 30 years.”

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.

Also, Gen Alpha discussed WBA’s relatively cheap valuation.  Gen Alpha’s piece was published roughly a week later than Reeves’ and during this period of time, the stock fell roughly 5%.   With the most recent leg of WBA’s sell-off in mind, Gel Alpha wrote, “I view the stock as being materially undervalued at the current price of $30.52 with a forward P/E of just 6.1, sitting at less than half of its normal P/E of 13.2 over the past decade.” They continued, “This translates to potential very strong double-digit annual returns should WBA simply revert to its mean valuation.”

In conclusion, Gen Alpha said, “WBA stock has gotten enticingly cheap and sports a historically high dividend yield that's well protected by earnings. I believe the market is overly rotated on short-term headwinds while ignoring the ongoing transformation of the enterprise. As such, the current stock price presents a strong buying opportunity on this dividend aristocrat.”

Looking at the collective opinion of the credible authors that the Nobias algorithm tracks, this bullish sentiment is not shared by all.  50% of recent reports published on WBA stock by credible authors have included a “Bearish” bias.  Yet, the credible Wall Street analysts that Nobias tracks are collectively bullish on WBA.  Right now, the average credible analyst price target for Walgreens Boots Alliance is $40.67.  WBA shares closed the week trading for $30.52.  Therefore, this average price target represents upside potential of approximately 33.2%.  

Disclosure:  Nicholas Ward has no WBA position.    Nicholas Ward wrote this article for Nobias at their request with a view 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.

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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 on Pfizer (PFE) with Nobias technology

Summary

• President Biden recently announced that the COVID-19 pandemic is ending in the United States.

• Pfizer shares are down by more than 22% on a year-to-date basis.

• Despite this weakness, the majority of recent articles that Nobias tracks on the stock recently have been bullish and the average price target being applied to shares by credible Wall Street analysts implies upside potential of approximately 25%.

Pfizer (PFE) has been one of the major beneficiaries of the COVID-19 pandemic.  This stock’s yearly earnings-per-share have skyrocketed from $2.79 in 2019 to the $6.40 area today.  Prior to PFE’s recent sell-off its shares had risen from approximately $37.00 at the start of 2020 to recent highs in the $62.00 range.  And yet, PFE is currently trading well off of those highs.  

PFE shares have fallen by more than 22% during 2022 thus far, pushing this former market darling down into bear market territory.  However, the negative sentiment that currently surrounds shares has not changed the bullish opinions being expressed by credible authors and analysts when it comes to PFE shares.  The majority of recent articles that Nobias tracks on the stock recently have been bullish and the average price target being applied to shares by credible Wall Street analysts implies upside potential of approximately 25%.  

PFE Sep 2022

In early September, Paul Best, a Nobias 5-star rated author, published a bullish report on Pfizer at Yahoo Finance, highlighting the approval of a new COVID-19 vaccine.  Best wrote, “Centers for Disease Control and Prevention Director Rochelle Walensky gave the final sign off for updated COVID-19 vaccines targeting the omicron strain on Thursday.” He continued, “Moderna's updated vaccine was approved for people ages 18 and older, while Pfizer's was approved for people ages 12 and older.”

Best said that, “BA.5, a subvariant of omicron, is responsible for about 89% of new coronavirus infections, according to CDC data.”With this in mind, he quoted Walensky on the importance of those new vaccines, who said, "They can help restore protection that has waned since previous vaccination and were designed to provide broader protection against newer variants.”

However, Best also pointed out that the pandemic appears to be waning.  He wrote, “COVID-19 cases have steadily declined since mid-July, with the 7-day moving average falling from 130,387 new cases on July 16 to 85,761 on Aug. 31.”

So, while new approvals open up the door for continued COVID-19 revenue from Pfizer, it appears as if this multi-year tailwind is coming to an end.  John Dylan, a Nobias 5-star rated author, also recently published a bullish report on PFE, titled, “Best Stocks To Buy Now? 4 Biotech Stocks In Focus”.  

Dylan highlighted the fact that Pfizer is much more than just a COVID-19 vaccine play.  He said, “Pfizer Inc. (PFE) is an American multinational pharmaceutical corporation. For starters, Pfizer develops and produces medicines and vaccines for a wide range of medical disciplines, including immunology, oncology, cardiology, diabetes/endocrinology, and neurology.”

Dylan also noted that Pfizer offers a high dividend yield, stating, “Today, Pfizer offers its shareholders an annual dividend yield of 3.34%.” Furthermore, he touched upon the stock’s recent “stronger-than-expected” earnings results as another bullish tailwind for shares.  

Dylan wrote, “The company posted earnings of $2.04 per share, with revenue of $27.7 billion. This beat analysts’ estimates that were earnings of $1.75 per share and revenue of $26.0 billion. Additionally, Pfizer reported an increase in revenue by 46.2% during the same period, in 2021.” He continued, highlighting PFE’s re-affirmed guidance, stating, “The company said it estimates 2022 earnings of $6.30 to 6.45 per share. Meanwhile, the company also reaffirmed its revenue outlook of $98.0 billion to $102.0 billion.”

This earnings-per-share guidance calls for approximately 45% growth when compared to PFE’s $4.42 2021 full-year EPS, showing the strong growth that this company is producing.  And, despite this good news, PFE shares have struggled recently, falling by 8.6% during the last month.  

As Kinjel Shah, a Nobias 4-star rated author, points out in a recent Zacks article, this weakness is due, in part, to President Biden recently announcing that the pandemic in the U.S. is coming to an end.  Shah wrote, “The stocks of companies making COVID-19 vaccines and medicines declined on Monday after U.S. President Joe Biden said that the pandemic is over in the United States in an interview over the weekend on “60 Minutes” on CBS News.”

Shah continued, “The President said that though there was still a problem with COVID and a “lot of work” was going on for that, the pandemic was over. He said that the fact that no one is wearing masks suggests the pandemic is over in the country.”  

Furthermore, Shah said, “Though the World Health Organization still considers COVID-19 a pandemic, its director general Tedros Adhanom Ghebreyesus said last week that the world is in a better position to end the pandemic. He went on to say that the end of the pandemic was in sight.”  

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.

“However,” the author continued, “public health officials still consider the pandemic a health emergency and warn of a possible surge in infections in the fall and winter months. Thousands of people are being infected from the virus every day. Death rates from COVID are more than 400 per day, which though significantly down from a peak of more than 3,000 in late January 2021 and 2,600 in February 2022, are still quite high.” 

Regarding Pfizer’s prospects, Shah said, “If the pandemic ends, the demand for COVID-19 vaccines and other medicines will decline, which will significantly hurt these companies’ [referring to Pfizer, Moderna, and BioNTech] sales and profits.” 

Yet, the author stated, “Pfizer and BioNTech have seen a major influx of cash from their vaccine/medicine sales. They can use the cash for more research and can successfully develop new products to make up for lost revenues from COVID products.”

Looking at the consensus opinions provided by the credible authors and credible Wall Street analysts that the Nobias algorithm tracks, it appears that both groups believe that the end of the COVID-19 pandemic will not stop Pfizer’s share price appreciation.  62% of recent articles published by credible authors on Pfizer have expressed a “Bullish” bias.  Right now, the average price target that the credible analysts have attached to PFE shares is $55.20.  Today, PFE shares trade for $44.08.  Therefore, this average price target implies upside potential of 25.2%.  


Disclosure:  Nicholas Ward is long PFE.  Nicholas Ward wrote this article for Nobias at their request with a view 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.

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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 on Ford (F) with Nobias technology

Summary

• Ford shares experienced their worst sell-off in 11 years yesterday, falling by 12.3%.

• Management pre-released earnings data, highlighting lower profit forecasts in the near-term due to rising costs.

• Like other large cap names, Ford management expressed concerns about the health of the broader economy in the face of hawkish Fed policies.

On Wednesday, September 21, 2022, Ford (F) shares experienced their worst trading day in 11 years when the company pre-released earnings data which highlighted unexpected product delays and higher than expected costs.  

A report published by Michael Wayland on CNBC stated, “Shares of Ford closed Tuesday at $13.09 apiece, down by 12.3%. The Detroit automaker lost roughly $7 billion off its market value.” This move wasn’t quite as bad as the -13.4% performance that the company posted in early 2011 in response to a poor Q4 report; however, the stock’s double digit sell-off has certainly caught the attention of investors.  

F Sep 2022

Jordyn Grzelewski, a Nobias 5-star rated author, covered Ford’s sell-off in an article published in the Sun Herald this week.  Grzelewski wrote, “Ford Motor Co. reaffirmed its full-year financial guidance Monday even as it said it expects to have a "higher-than-planned" number of vehicles assembled but awaiting parts at the end of the third quarter due to supply shortages.” She highlighted the supply chain woes that automakers like Ford have been facing all year, stating, “The global automotive industry has been struggling with supply-chain issues, particularly a shortage of semiconductor chips, for well over a year. The parts shortages have curtailed automotive production and resulted in a new-vehicle inventory crunch.”

With specific regard to yesterday’s guidance, Grzelewski said, “The Dearborn automaker said in a news release that it expects to have 40,000 to 45,000 vehicles sitting and awaiting parts when the July-September quarter ends. It expects to deliver those vehicles to dealers in the fourth quarter. The vehicles awaiting parts "disproportionately include high-demand, high-margin models of popular trucks and SUVs," according to Ford.” This came as such a surprise to the market because during the second quarter, data appeared to show that these inventory issues were abating.  

Regarding the Q2 figures, Grzelewski wrote, “The company ended the quarter with inventory of about 18,000 vehicles waiting for parts, down from 53,000 at the start of the April-June period.” Finally, Grzelewski concluded, “It [Ford] also gave guidance for third-quarter financial results, saying it expects adjusted EBIT to land in the range of $1.4 billion to $1.7 billion. In the second quarter, Ford reported net income of $667 million and adjusted EBIT of $3.7 billion. Through the first half of the year, the company has reported a net loss of $2.4 billion and adjusted EBIT of $6 billion.” In a separate article that Grzelewski published in The Island Packet regarding the guidance update, she stated, “Still, Ford reaffirmed its full-year guidance of adjusted EBIT of between $11.5 billion and $12.5 billion.”

Luc Olinga, a Nobias 4-star rated author, also covered the disappointing headlines in a report published at The Street. Touching upon the difficult macro environment that Ford has faced over the last several years, Olinga stated: “The Covid-19 pandemic both prompted and worsened these difficulties. Societal lockdowns to contain the spread of the virus forced carmakers to halt operations at factories in certain regions. Semiconductor shortages forced them to suspend the production of certain models. 

Russia's Feb. 24 invasion of Ukraine sent raw-materials prices soaring, which increased costs and sourcing difficult [sic], particularly for electric vehicles. Both countries are suppliers of materials needed to produce EVs.” He highlighted a statement that the company made in a regulatory filing, "The supply shortages will result in a higher-than-planned number of 'vehicles on wheels' built but remaining in Ford's inventory awaiting needed parts, at the end of the third quarter.” 

But, adding more uncertainty to the situation, Olinga continued, “According to industry sources, the missing parts are neither semiconductors nor other technological parts. Ford does not say which parts are missing and which models are affected.”

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.

What’s more, he said, “Ford also warned about the weakening economy and the impact of inflation, which is at its sharpest in 40 years.” He noted that Ford said that inflationary pressures are adding roughly $1 billion of unexpected costs during the third quarter.  

In the short-term, he says, this news is expected to “eat into profit at the company”.   “In the long term,” Olinga concluded, “it is more than possible that the car manufacturer will decide to pass on this additional and unexpected cost increase to consumers in the form of higher vehicle prices.”

Looking at the opinions expressed on Ford stock by the credible author community that Nobias tracks, we see that 53% of recent articles written about this company have expressed a “Bearish” sentiment.   However, the credible analyst community is much more bullish.  

Currently, the average price target that these individuals place on F shares is $21.33. None of the credible Wall Street analysts that Nobias tracks have updated their price targets for Ford yet, in response to this news.  With that in mind, the consensus price target could sink lower in the coming days.  However, for the time being, credible analysts are calling for immense upside potential here.  After yesterday’s sell-off, F shares trade for $12.96/share.   Therefore, that credible analyst average price target implies upside potential of approximately 64.6%.  

Disclosure:  Nicholas Ward has no F position.  Nicholas Ward wrote this article for Nobias at their request with a view 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.

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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 on Costco (COST) with Nobias technology

Summary

• Costco posted earnings on Friday, with sales meeting Wall Street expectations and earnings-per-share beating consensus estimates.

• However, COST shares fell by 4.26%, being pulled lower alongside the rest of the market during Friday’s macro sell-off.

• Credible analysts aren’t dismayed by the recent results; their average price target for COST shares implies upside potential of approximately 17%.
  

Costco (COST) has been a relative bright spot in the market throughout 2022 for investors in the retail space, outperforming its peers and the broader indexes as well, on a year-to-date basis.  However, as the market sold off on Friday, COST shares were caught up in the negative momentum.  They fell by 4.26% on the same day that they reported fiscal 2022 Q4 earnings results which beat Wall Street expectations.   And yet, after this weakness, the credible analysts that Nobias tracks remain bullish on shares, calling for upside potential of approximately 17%.  

COST Sep 2022

Derek Lewis, a Nobias 5-star rated author, published an earnings preview report at Zacks.com last week.  Lewis began by saying, “Costco Wholesale sells high volumes of foods and general merchandise (including household products and appliances) at discounted prices through membership warehouses.”

In today’s high inflationary environment with the threat of recession looming, the market has been bullish on COST’s operations.  Lewis commented on the stock’s strong 2022 performance, noting, “Costco shares have been notably defensive in 2022, declining nearly 11% and vastly outperforming the S&P 500’s decline of 18%.” That’s especially been the case recently, as we’ve seen an uptick in negative volatility.  

Lewis continued, “Over the last three months, COST shares have continued on their market-beating trajectory, increasing 13% in value vs. the general market’s climb of 6.3%.” Because of its strong share price performance, Lewis points out that COST shares trade with a relatively high premium attached to them.   He wrote, “COST shares trade at steep valuation multiples – the company’s 35.1X forward earnings multiple is undoubtedly expensive, representing a steep 42% premium relative to its Zacks Sector.”

Coming into the quarter, Lewis said that, “The Zacks Consensus EPS Estimate of $4.11 suggests Y/Y earnings growth of an impressive 5.4%.” He also touched upon the company’s top-line expectations, saying that COST is expected to generate “a commendable double-digit 15% Y/Y uptick in revenue.” What’s more, Lewis points out that Costco has a consistent history of beating analyst estimates, meaning that the company’s Q4 results could be even stronger. 

Regarding Costco’s past success, he wrote, “The wholesaler has exceeded the Zacks Consensus EPS Estimate in eight of its previous ten releases.” “Top-line results paint the same positive story,” Lewis continued, “Costco has registered eight revenue beats over its last ten quarters.”

In conclusion, Lewis noted, “Shares are a bit expensive, with the company’s forward P/E ratio sitting well above its Zacks Sector average.” And although he expects to see relatively strong fundamental growth during the quarter, he highlights Zack’s “Hold” rating on shares.  

When Costco published its Q4 results on Friday, September 23, 2022, Russell Redman, a Nobias 4-star rated author, was on the beat, covering the results in an article published at supermarketnews.com.   Redman wrote, “The Issaquah, Wash.-based warehouse club chain posted double-digit net and comparable sales growth for its fiscal 2022 fourth quarter and full year, while topping Wall Street’s consensus earnings-per-share forecast for both periods.”   He continued, “Net sales came in at $70.76 billion, up 17.5% from $61.44 billion a year earlier”. 

Regarding COST’s top-line results, Redman stated, “Total comparable sales in the quarter climbed 13.7% from a year ago (10.4% adjusted, excluding fuel and FX), reflecting gains of 15.8% in the United States (9.6% adjusted), 13.4% in Canada (13.7% adjusted) and 2.9% internationally (11.3% adjusted). A year ago, Costco reported that comp sales increased 15.5% (9.4% adjusted), including an increase of 14.9% in the U.S. (10.3% adjusted).”  

Redman also touched upon COST’s full-year results, stating, “For the 2022 fiscal year, net sales came in at $222.73 billion, up 16% from $192.05 billion in fiscal 2021, when the company rang of a 17.7% gain.” He continued, “Full-year comp sales for the 52 weeks rose 14.4% overall (10.6% adjusted, excluding fuel and FX), reflecting upticks of 15.8% in the U.S. (10.4% adjusted), 15.2% in Canada (12.1% adjusted) and 6.6% internationally (13.4% adjusted). In fiscal 2021, Costco recorded comp sales growth of 16% overall (13.4% adjusted), including a gain of 14.8% in the U.S. (13.6% adjusted).”

Redman highlighted Costco’s continued eCommerce growth, writing, “Fiscal 2022 e-commerce sales surged by 10.1% (10.4% excluding FX) atop of growth of 44.4% (42.6% excluding FX) on a comparable basis in fiscal 2021.”  

Moving onto the bottom-line, Redman said, “Costco’s 2022 fourth-quarter net income totaled $1.87 billion, or $4.20 per diluted share, compared with $1.67 billion, or $3.76 per diluted share, a year ago.”   He also remarked, “For the full 2022 fiscal year, net earnings were $5.84 billion, or $13.14 per diluted share, versus $5.01 billion, or $11.27 per diluted share, in 2021.”  

Redman quoted Costco’s Chief Financial Officer Richard Galanti, who said, “In terms of the Q4 comp-sales metrics, traffic or shopping frequency increased 7.2% worldwide and was up 5.2% in the U.S. Our average transaction or ticket was up 6% worldwide and 10.0% in the U.S. during the fourth quarter.” 

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.

Galanti was also quoted, discussing the inflationary headwinds that Costco faced during the quarter.  The executive said, “They’re still present, but we are seeing just a little light at the end of the tunnel.  And if you recall in the third quarter, we indicated that price inflation overall was about 7% plus for us. For the fourth quarter, and talking with our merchants, the estimated price inflation overall was about 8%, a little higher on the food and sundries side, a little lower on fresh foods, and both higher and lower on the nonfood side.”

Overall, Redman notes, there is still strong demand for the Costco brand.  He said, “Membership fee income advanced 7.5% year over year (10.5% excluding the impact of foreign exchange rates) to $1.33 billion. Total paid member households rose 6.5% to 65.8 million, and the total cardholder count grew 6.5% as well to 118.9 million.”  Redman said that Costco expects to open up another 29 stores in 2023, pointing towards continued growth ahead.  

After this earnings beat, the credible analysts that Nobias tracks who cover COST shares remain bullish on the company’s prospects.  5 out of the 8 credible analysts that Nobias tracks believe that COST shares are headed higher.  Right now, the average price target being applied to COST shares by these individuals is $545.75.   After COST’s sell-off on Friday, shares trade for $466.40.  Therefore, relative to the credible analyst average price target, COST shares appear to offer upside potential of approximately 17%.  



Disclosure:  Nicholas Ward has no COST position.  Nicholas Ward wrote this article for Nobias at their request with a view 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.

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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 on Fedex (FDX) with Nobias technology

Summary

• FedEx pre-announced earnings on Friday, lowering full-year estimates on the top and bottom lines, causing its shares to fall by 21.4%.

• Management highlighted cost saving measures that they plan to take to combat the macro headwinds that they’re experiencing.

• Despite the stocks recent weakness, credible analysts remain bullish on shares, with an average price target that implies upside potential of approximately 40%.

FedEx shares had their worst trading day in decades on Friday, falling 21.40% in response to a preliminary earnings update which disappointed Wall Street.  Jon Hopkins, a Nobias 4-star rated author, covered the report in an article published at proactiveinvestors.com.  He wrote, “FedEx Corp has pulled the full-year financial guidance it issued just three months ago after forecasting below-forecast first-quarter revenue and profit as a global demand slowdown accelerates.”

FDX Sep 2022

Hopkins continued, “FedEx noted that it expects to report revenue of $23.2 billion for the first quarter, missing analysts' expectations of $23.59 billion, while adjusted earnings are expected to be $3.44 per share, well below estimates of $5.14.”

To help combat rising costs, Hopkins noted that FedEx, “said it was cutting costs including shutting some FedEx Office locations, reducing labor hours and consolidating some sorting facilities.” He also quoted senior management who touched upon near-term turnaround plans.  

Hopkins wrote, “FedEx's new chief executive officer, Raj Subramaniam said in a statement: “Global volumes declined as macroeconomic trends significantly worsened later in the quarter, both internationally and in the US. We are swiftly addressing these headwinds, but given the speed at which conditions shifted, first-quarter results are below our expectations."’

STAT Times, a Nobias 5-star rated author, also published a report Friday which highlighted FedEx’s precipitous sell--off.  The author noted the disappointing fundamental guidance and then went on to say that management “announced closure of over 90 office locations, cancellation of planned network capacity and deferral of staff hiring.”

Regarding operational segment performance from the preliminary earnings report, STAT Times said, “FedEx Express reported revenue of $11.1 billion and operating income of $174 million. While FedEx Ground clocked $8.2 billion revenue, FedEx Freight logged revenue of $2.7 billion.”

The author quoted FedEx’s press release which highlighted specific weakness brought upon by the challenging macro environment.  STAT Times said that “according to an official statement…FedEx Express results were particularly impacted by macroeconomic weakness in Asia and service challenges in Europe, leading to a revenue shortfall in this segment of approximately $500 million relative to company forecasts. FedEx Ground revenue was approximately $300 million below company forecasts."

STAT times said that the company has reduced capital spending guidance from “$500 million to $6.3 billion.” However, they highlighted good news on the shareholder returns front, stating, “The company has reaffirmed plans to repurchase $1.5 billion stock in 2023.”  

Jonathan Chappell of Evercore ISI, a Nobias 4-star rated analyst, also published a research note on FDX shares Friday.  He said that because of the vague statements provided by management on the cost cutting measures, their exact time tables, and ultimately, their expected impacts on long-term performance, it is going to be “difficult” to model performance out past Q2. 

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.

With this uncertainty in mind, Chappell lowered his price target on FDX shares from $318.00 to $247.00.   Chappell called the stock a “Tactical Underperform” in today’s environment; however, he maintained his long-term “Outperform” rating.  

Although 50% of recent articles published on FedEx by credible authors (only individuals with 4 and 5-star Nobias ratings) have expressed a “Neutral” sentiment, the majority of credible Wall Street analysts that Nobias tracks remain bullish on shares. 

Right now, the average price target that these analysts place upon FDX shares is approx. $200.  This is below the stock’s fairly tight trading range in the $200-$240 area since April of 2022.  However, the stock’s recent sell-off sent shares plummeting through support.  

It’s certainly possible to see more downgrades like Chappells in the coming days and/or weeks which would move the average price target lower; however, for the being being, it represents significant upside potential.    The current average price target being applied to shares implies upside potential of approximately around than 40%.  

Disclosure:  Nicholas Ward has no FDX position.  Nicholas Ward wrote this article for Nobias at their request with a view 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.

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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 on Adobe (ADBE) with Nobias technology

Summary

• ADBE posted mixed results on Thursday morning when it reported fiscal Q3 earnings data.

• The company also announced its $20 billion acquisition of Figma during the quarterly release.

• ADBE shares fell by nearly 17% during the trading session on Thursday, pushing their year-to-date returns down to -45.23%.

• However, credible analysts believe that this weakness has gone too far, with an average price target on ADBE shares which calls for 43.4% upside.

Adobe reported fiscal Q3 earnings on Thursday before the market opened.  The company missed analyst consensus estimates by $10 million  on the top-line, posting $4.43 billion in sales.  ADBE beat Wall Street’s expectations on the bottom-line by $0.06 with non-GAAP earnings-per-share of $3.40.  The stock opened the trading session down roughly 13%.  By the time the market closed on Thursday, shares had fallen by 16.79%.  And yet, it appears that this sell-off wasn’t based upon the company’s fundamental results, but instead, a large acquisition that management announced alongside the earnings data.  

Patrick Seitz, a Nobias 5-star rated author, covered ADBE’s earnings report in an article published at IDB.    Regarding the company’s quarter, Seitz wrote, “The San Jose, Calif.-based company [referring to Adobe] earned an adjusted $3.40 a share on sales of $4.43 billion in the quarter ended Sept. 2. Analysts polled by FactSet expected Adobe earnings of $3.35 a share on sales of $4.44 billion. On a year-over-year basis, Adobe earnings rose 9% while sales increased 13%.”  

Seitz also touched upon forward guidance, stating, “​​For the current quarter, Adobe forecast adjusted earnings of $3.50 a share on sales of $4.52 billion. Analysts were looking for earnings of $3.47 a share on sales of $4.6 billion in the fiscal fourth quarter. In the year-earlier period, Adobe earned $3.20 a share on sales of $4.11 billion.” 

ADBE Sep 2022

Seitz quoted ABDE’s management team, writing: "Fueled by our groundbreaking technology, track record of creating and leading categories and consistent execution, Adobe delivered another record quarter," Chief Executive Shantanu Narayen said in a news release. "With the announcement of our intent to acquire Figma, we believe we have a unique opportunity to usher in a new era of collaborative creativity."

Regarding the M&A that shook the stock, Seitz said, “announced a deal to acquire Figma, a web-first collaborative design platform, for about $20 billion.”  He continued, “Figma expects to double its annualized recurring revenue this year to over $400 million. Figma has positive operating cash flows and gross margins of about 90%, according to a news release.”

Seitz highlighted the size of this deal, writing, “The Figma deal is Adobe's biggest acquisition ever. It is four times larger than the $4.75 billion it paid for Marketo in October 2018.”  And, he concluded, it was the price that Adobe paid for the Figma assets that sparked the negative sentiment surrounding shares.  Seitz quoted Brett Thill of Jefferies, a Nobias 4-star rated analyst, who said that the Figma deal “looks pricey” in an analyst note.  

Thill continued, "While Figma may prove transformative as in past deals (e.g., Macromedia), payback period is years out on a record investment.”  Ultimately, in response to ADBE’s Q3 results, Thill cut his price target for Adobe from $475.00 to $440.00/share.  

Seitz noted that ADBE’s CEO, Dan Durn, told IBD that the combined company’s assets will lead to a "new era of creative productivity.” Durn went on to say that, "This is a game-changing transaction for us." However, Seitz cited a report from Scott Kessler, an analyst from Third Bridge, who believes there could be regulatory headwinds associated with this deal.  

Nickie Louise, a Nobias 4-star rated author, also covered the Figma deal in an article published at techstartups.com.  Louise highlighted Figma’s operations, stating, “Founded in 2012 by Dylan Field and Evan Wallace, San Francisco-based Figma is a design platform for teams who build products together. Born in the browser, Figma helps the entire product team create, test, and ship better designs, faster.”

Louise also wrote, “Figma allows collaborators to work on designs and brainstorm in the same online space. Its customers include companies such as Zoom Video Communications, Airbnb, and Coinbase among its customers.”

Trapping Value, a Nobias 4-star rated author, also wrote about ADBE’s sell-off in a report published at Seeking Alpha, ultimately offering a bearish conclusion.  Trapping Value said, “At first glance the results were not too bad.” They continued, “The $3.23B in revenue for the Digital Media division was a13% increase over the prior year or a 16% increase in constant currency. Creative revenue was up about 14% in constant currency. Document Cloud was the star with a 25% in constant currency growth.”

However, the author noted that increased capex and share count dilution hurt ADBE’s bottom-line growth, writing, “The impact was so bad that GAAP earnings were down 5% year over year ($2.42 vs $2.52) per share. This is despite a monumental effort by the company to reduce shares outstanding.”  

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.

Admittedly, Trapping Value was looking at GAAP EPS instead of non-GAAP, but the author defended that decision, writing, “We have all been brainwashed into looking for the Non-GAAP number, so yes that one was up. That would be like your doctor telling you that your cardiac health was up if we adjusted for the fact that you ate enough steak to put cows on the endangered species list. So if we ignore the 79 cents of stock based compensation in the quarter, we did get growth.”  

Regarding the Figma purchase and the high price that Thill noted, Trapping Value said, “ADBE just paid 50X sales at the worst possible time.” The author based their bearish opinion of ADBE’s on the company’s valuation, largely focused on the stock’s price-to-sales ratio.  They said, “That drop from 13X to 9X revenues was 50% of the journey.”

Ultimately, Trapping Value concluded, “So we are halfway there, and Adobe is still livin' on a prayer.” 52% of recent articles published by the credible authors that the Nobias algorithm tracks have expressed a “Neutral” rating on ADBE, so there definitely isn’t a lot of enthusiasm about the stock from that community.  However, looking at the opinions expressed by the credible Wall Street analysts that Nobias tracks, the sentiment is decidedly bullish.  Right now, 8 out of the 11 credible analysts that Nobias tracks believe that ABDE shares will rise in value. Currently, the average price target that this cohort is applying to ADBE shares is $443.36.   Adobe closed the trading session on Thursday at $309.13.  Therefore, that $443.36 average credible analyst price target implies upside potential of 43.4%.  



Disclosure:  Nicholas Ward is long ADBE.  Nicholas Ward wrote this article for Nobias at their request with a view 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.

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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.