Case Study: Oracle (ORCL) stock according to high performing analysts
Although Oracle missed top-line estimates during Q3, the company’s sales still increased by 18% on a year-over-year basis. The company’s management team highlighted its ongoing cloud growth and market share expansion. Oracle also announced that it was increasing its dividend by 25% alongside its third quarter numbers.
Nobias Insights: 65% of recent articles published by credible authors focused on Oracle shares offer a “bullish” bias. 1 out of the 2 credible Wall Street analysts who cover ORCL believe shares are likely to rise in value. The average price target being applied to Oracle by these credible analysts is $101.00, which implies upside potential of approximately 20.1% relative to the stock’s current share price of $84.07.
Bullish Take: Vladimir Dimitrov, a Nobias 4-star rated author, said, “Given Oracle's high margin growth and strong competitive advantages, I'm still optimistic on the long-term attractiveness of the stock. With a forward non-GAAP P/E ratio of only 18x and sell-side analysts still have a lot of catching-up to do, Oracle remains as one of my highest conviction ideas.”
Bearish Take: Andrew Kessel, a Nobias 5-star rated author, said, “The cloud computing company posted revenue of $12.4 billion in the quarter ended February 28, up 18% year-over-year, just short of the Street's expectations of $12.43 billion.”
Key Points
Performance
Oracle shares fell by 6.71% this week, pushing their year-to-date gains down to just 0.42%. This compares poorly to the S&P 500 which is up by 0.98% on a year-to-date basis thus far, and the Nasdaq Composite Index, which is up by 7.24% on the year.
Event & Impact
Oracle posted fiscal 2023 third quarter results this week, beating Wall Street estimates on the bottom line while missing expectations on the top-line. During Q3, ORCL’s revenue totaled $12.40 billion, missing Wall Street’s consensus estimate by $20 million. Oracle’s Q3 non-GAAP earnings-per-share came in at $1.22, beating Wall Street’s consensus estimate by $0.02/share.
Noteworthy News:
Although Oracle missed top-line estimates during Q3, the company’s sales still increased by 18% on a year-over-year basis. The company’s management team highlighted its ongoing cloud growth and market share expansion. Oracle also announced that it was increasing its dividend by 25% alongside its third quarter numbers.
Nobias Insights
65% of recent articles published by credible authors focused on Oracle shares offer a “bullish” bias. One out of the two credible Wall Street analysts who cover ORCL believes shares are likely to rise in value. The average price target being applied to Oracle by credible analysts is $101.00, implying upside potential of approximately 20.1% relative to the stock’s current share price of $84.07.
Bullish Take Vladimir Dimitrov, a Nobias 4-star rated author, said, “Given Oracle's high margin growth and strong competitive advantages, I'm still optimistic on the long-term attractiveness of the stock. With a forward non-GAAP P/E ratio of only 18x and sell-side analysts still have a lot of catching-up to do, Oracle remains as one of my highest conviction ideas.”
Bearish Take Andrew Kessel, a Nobias 5-star rated author, said, “The cloud computing company posted revenue of $12.4 billion in the quarter ended February 28, up 18% year-over-year, just short of the Street's expectations of $12.43 billion.”
ORCL Mar 2023
Oracle (ORCL) posted its fiscal 2023 third quarter earnings this week, missing Wall Street’s estimates on the top-line, but beating expectations on the bottom-line. Although Oracle missed revenue estimates, the stock still produced 18% year-over-year growth, showing strong demand for its products and services. Yet, even with this growth in mind, Oracle shares fell by 6.71% on the week, pushing its year-to-date gains down to just 0.42%.
Bearish Nobias Credible Analysts Opinions:
A Seeking Alpha report put a spotlight on an opinion expressed by Barclay's analyst Raimo Lenschow who said that Oracle had "an in-between quarter" that "did not represent a catalyst" for future growth. Lenschow bumped his price target for Oracle up from $81 to $85 and said, "We believe many investors will remain skeptical. If Oracle is correct, then we would have a multi-year story here, and waiting for actual numbers is a viable strategy for investors."
Andrew Kessel, a Nobias 5-star rated author, published a post-earnings update on Oracle this week at Proactive Investors. Looking at the company’s Q3 results, Kessel said, “The cloud computing company posted revenue of $12.4 billion in the quarter ended February 28, up 18% year-over-year, just short of the Street's expectations of $12.43 billion. Non-Gaap earnings were $1.22 per share, up from $1.13 a year ago and ahead of expectations of $1.20.”
“However,” Kessel continued, “net income fell to $1.9 billion from $2.3 billion a year earlier.” “The biggest driver of revenue growth was cloud services. Fiscal third quarter cloud revenue was $4.1 billion, up 45% year-over-year,” he said.
And, he pointed out that Oracle’s CEO, Safra Catz, put a spotlight on this as well during the company’s earnings report, stating, “Our strong quarterly earnings growth was driven by 48% constant currency growth for the total revenue of our two cloud businesses, infrastructure and applications.”
Brody Ford, a Nobias 4-star rated author, also wrote a post-earnings report on Oracle this week. His report was published at Yahoo Finance and once again, he focused on the strength of the company’s cloud operations.
Ford said, “While Oracle’s cloud infrastructure business — renting computing power and storage — has been a relative laggard in the market, analysts have been optimistic the services are gaining customers and helping accelerate growth. The software giant has employed aggressive marketing and favorable pricing in an attempt to win clients from larger competitors Microsoft Corp. and Amazon.com Inc., which have seen cloud division growth slowdowns in recent quarters.”
“More than two-thirds of Oracle’s cloud revenue is generated by business applications such as Fusion software for managing corporate finances and NetSuite’s enterprise planning tools, which are targeted at small- and mid-size companies. Fusion sales increased 25% in the quarter, compared with 23% growth in the previous period. NetSuite revenue jumped 23%, compared with 25% in the fiscal second quarter,” he continued.
Ford also touched upon the performance of Cerner, the healthcare oriented data company that Oracle purchased for $28 billion last year. He wrote, “Oracle’s digital health records provider Cerner generated sales of $1.5 billion in the period, and Chairman Larry Ellison said the company anticipates even stronger growth for the unit.”
Ford also highlighted analyst commentary on Oracle’s Q3 results, stating, “Large cloud deals, including one announced with Uber Technologies Inc., increased investor excitement ahead of earnings, wrote JP Morgan’s Mark Murphy.” He also said that Bloomberg Intelligence’s Anurag Rana said, “We continue to believe the company is navigating the slowdown better than most large rivals.”
Looking ahead, Ford mentioned that the company provided guidance for the current quarter. He said that Catz projected top-line growth of 16% during the quarter. Ford continued, “The outlook is in line with estimates. Profit, excluding some items, will be $1.56 a share to $1.60 a share, she added. Analysts, on average, projected $1.45 a share.”
Lastly, regarding shareholder returns, he said, “Oracle increased its dividend 25% to 40 cents a share.”
According to Seeking Alpha, ORCL raised its dividend from $0.32/share to $0.40/share and this payment will be made on April 24th, 2032 to shareholders of record on April 11th, 2023. Currently, Oracle yields 1.90%.
Bullish Nobias Credible Analysts Opinions:
Vladimir Dimitrov, a Nobias 4-star rated author, doubled down on his bullish sentiment towards Oracle shares, writing an article this week which highlighted the stock as one of his highest conviction ideas in the market.
Dimitrov noted that he likes Oracle’s operational “playbook” with regard to focusing on internal growth and high margin sales. He said, “One of the main pillars of Oracle's strategy has been to retain its high profitability, which allows the company to finance internally most of its growth projects.”
“This way,” Dimitrov wrote, “Oracle's management does not need to increase prices and slash fixed cost at a time when many of its peers would be forced by the market to do so. Thus, the company is in a much better position to consistently gain market share.”
“While some competitors are looking for ways to slash costs, Oracle is now doubling down on its strategy to grow organically by pursuing higher return on capital projects,” Dimitrov said. “During the latest quarter, ORCL has reported capital expenditure at nearly 20% of sales, which highlights the level of growth in demand that the company is experiencing,” he continued.
With these ongoing investments in mind, Dimitrov believes that Oracle can continue to take market share from larger peers in the cloud space. He concluded this report, “Given Oracle's high margin growth and strong competitive advantages, I'm still optimistic on the long-term attractiveness of the stock. With a forward non-GAAP P/E ratio of only 18x and sell-side analysts still have a lot of catching-up to do, Oracle remains as one of my highest conviction ideas.”
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.
And it’s not just authors who are bullish on ORCL shares. After the company’s Q2 report back in December of 2022, Bank of America analyst, Brad Stills, who carries a Nobias 4-star rating, raised his price target on ORCL shares from $90 to $95, due to the stock’s double digit revenue growth projections.
Stills hasn’t updated his outlook following the Q3 report yet; however, overall, the average price target being placed on ORCL shares by the credible analysts that the Nobias algorithm follows is $101.00/share.
Overall bias of Nobias Credible Analysts and Bloggers:
Today, Oracle trades at $84.07. Therefore, the average analyst price target implies upside potential of approximately 20.1%. Overall, the credible author community is bullish on ORCL shares as well. 65% of recent articles that focused on the stock expressed a “bullish” bias.
Disclosure: Nicholas Ward has no ORCL position. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.
Case Study: Altria (MO) stock according to high performing analysts
Altria announced this week that it is acquiring eVapor company, NJOY, for $2.75 billion, in the company’s latest attempt to move away from a cigarette-centric business model.
Nobias Insights: 66% of recent articles published by credible authors focused on Altria shares offer a “bullish” bias. The credible Wall Street analyst who covers MO believes shares are likely to rise in value. The average price target being applied to Altria by these credible analysts is $59.00, which implies upside potential of approximately 26.6% relative to the stock’s current share price of $46.61.
Bullish Take: Dividend Sensei, a Nobias 4-star rated author, said, “Altria Group, Inc. is one of the most celebrated dividend kings in history. Not just for its incredible 53-year dividend growth streak, but also because it's the single best-performing stock in history.”
Bearish Take: Tradevestor, a Nobias 4-star rated author, said, “I hope Altria Group, Inc. is proceeding with more caution as well this time after e-"vapor"-ating $13 Billion last time around.”
Key Points
Performance
Altria's shares fell by 0.65% this week, pushing their year-to-date gains down to 2.39%. This compares favorably to the S&P 500 which is up by 0.98% on a year-to-date basis thus far.
Event & Impact
In 2018, Altria made two major investments, accounting for nearly $15 billion, into reduced risk products in an attempt to diversify its revenue stream away from combustible tobacco products (cigarettes). Those investments didn’t work, resulting in billions of write downs. And yet, Altria’s cigarette volumes continue to fall, forcing the company into more M&A activity this week.
Noteworthy News:
Altria announced this week that it is acquiring eVapor company, NJOY, for $2.75 billion, in the company’s latest attempt to move away from a cigarette-centric business model.
Nobias Insights
66% of recent articles published by credible authors focused on Altria shares offer a “bullish” bias. The one credible Wall Street analyst who covers MO believes shares are likely to rise in value. The average price target being applied to Altria by these credible analysts is $59.00, which implies upside potential of approximately 26.6% relative to the stock’s current share price of $46.61.
Bullish Take Dividend Sensei, a Nobias 4-star rated author, said, “Altria Group, Inc. is one of the most celebrated dividend kings in history. Not just for its incredible 53-year dividend growth streak, but also because it's the single best-performing stock in history.”
Bearish Take Tradevestor, a Nobias 4-star rated author, said, “I hope Altria Group, Inc. is proceeding with more caution as well this time after e-"vapor"-ating $13 Billion last time around.”
MO Mar 2023
For decades, Altria (MO) has been providing not only a high dividend yield, but also, market beating total returns to its shareholders. And yet, during the last 5 years, the stock has majorly underperformed the major averages.
Altria is the leading U.S. tobacco company and a societal shift away from combustible tobacco has hurt the stock’s sales volumes in a significant way. But, as we saw this week, the company is still aggressively trying to reduce its dependency on cigarette sales and move into markets that provide a more sustainable future in terms of sales and earnings growth.
Bullish Nobias Credible Analysts Opinions:
Dividend Sensei, a Nobias 4-star rated author, recently published an article on Altria which highlighted its near-term headwinds and the company’s long-term plans to overcome them. Dividend Sensei began their article by stating, “Altria Group, Inc. (NYSE:MO) is one of the most celebrated dividend kings in history. Not just for its incredible 53-year dividend growth streak, but also because it's the single best-performing stock in history.” They continued, noting that, “$1 invested 90 years ago into $173,000 today, adjusted for inflation.” And yet, despite being the top performing long-term stock in the market, Altria faces major headwinds in 2023.
Regarding Altria’s cigarette sales volumes, Dividend Sensei said, “MO's volume declines in Q4 were surprisingly bad, at 12%. The company was able to mostly offset this with 9% price increases for the quarter and 9.5% for the entire year, higher than the 8% inflation rate of 2022.” The author continued, “Do you know what U.S. cigarette sales will likely be in 2061? Zero. So how can MO survive for four decades if its current core business is extinct? Because the RRP-based smoke-free future will succeed.”
Dividend Sensei highlighted Altria’s post-cigarette future plans, writing, “MO has a joint venture with Japan Tobacco to market its Horizon heat sticks through its retail network in the U.S. as soon as the FDA approves them.” They also wrote, “It's on! Oral nicotine pouches are growing at 70% though granted from a small base. Still, it's achieved a 6% market share of the oral tobacco market, and its market share in this fast-growing part of the industry is slowly but steadily rising.”
RRP stands for “reduced risk products” and its clear that the company is focused on investing in non-combustible tobacco products to diversify its revenue stream. Dividend Sensei said that there are risks associated with such a major operational change; however, they concluded, “For now, I can confidently say that all the best data points to one clear thing. Altria remains an 8% yielding rich retirement dream aristocrat that continues to deliver where it counts.”
Lee Jackson, a Nobias 4-star rated author, also recently covered Altria at 24/7 Wall Street, putting a spotlight on the stock’s recent weakness and its relatively attractive valuation. Jackson wrote, “This maker of tobacco products offers value investors a great entry point now as it has been hit as cigarette sales have slowed.” He continued, “Altria Group Inc. is the parent company of Philip Morris USA (cigarettes), UST (smokeless), John Middleton (cigars), Ste. Michelle Wine Estates and Philip Morris Capital. PMUSA enjoys a 51% share of the U.S. cigarette market, led by its top cigarette brand Marlboro.”
“Altria also owns over 10% of Anheuser-Busch InBev, the world’s largest brewer, which some feel is worth more than $10 billion and may be a segment of the company that could be sold,” Jackson added. Lastly, he touched upon the stock’s $1 billion “shareholder-friendly” buyback plan that was recently announced and said that, “Investors receive a 7.93% dividend” as well.
Jackson concluded his piece stating, “Stifel has a $50 target price on Altria stock. The consensus target is $49.65, and the shares ended Wednesday trading at $47.14.”
Although Altria’s long-term performance has proven to be top notch, over the last 5 years this company has underperformed the market in a major way. Altria shares are down by 29.52% during the trailing 5-year period, whereas the S&P 500 has risen by 39.64% during this same time period. One of the major reasons that Altria has underperformed recently its its failed JUUL acquisition saga.
On Dec. 20th, 2018, Altria acquired a 35% stake in JUUL, a leading vaping company at the time, for $12.8 billion. Furthermore, the company invested $1.8 billion into Cronos, a marijuana company, in late 2020 as well. These moves were meant to diversify its revenue away from combustible tobacco; however, in hindsight, neither move panned out, resulting in billions of dollars in write downs.
In their article, Dividend Sensei wrote, “while Juul and Cronos were a mistake, which management has admitted, the balance sheet damage has since been fixed.” With that stronger balance sheet in mind, Altria announced a new acquisition this week, with the company, once again, trying to buy its way into the e-vapor market.
Bearish Nobias Credible Analysts Opinions:
Tradevestor, a Nobias 4-star rated author, covered this M&A activity in their recent article at Seeking Alpha. The author wrote, “Altria Group, Inc. investors are having a déjà vu moment this morning. The company has announced its $2.75 Billion acquisition of NJOY Holdings, as reported by Seeking Alpha. This is not a surprise given recent news items including the Juul exit (thank heavens for that, although it means little at this point financially) and swirling rumors about an NJOY deal.” They highlighted their outlook on the deal, stating, “After listening to Altria's business update webcast, I am presenting a few reasons why I am cautiously optimistic that this time is different with Altria's attempt to buy growth.”
Listing the differences between Altria’s JUUL and NJOY acquisitions, Tradevestor said, “The most obvious difference is the price tag. With Juul, Altria shelled out $13 Billion. While $2.5 Billion is still a hefty amount, it represents only 3% of Altria's current market cap.” They continued, “With Juul, Altria had a 35% majority stake but was not the outright owner. This time, Altria has outright acquired NJOY, giving it both strategic and operational control it likely never had with Juul. As the CEO mentioned, Altria can leverage its existing resources to benefit the consumers (and the business of course).”
And, regarding regulatory approval of products, Tradevestor wrote, “NJOY's ACE is the only pod-based e-vapor product with FDA marketing authorization, with the E-cigarette and Vape Market expected to have a CAGR of 30% between 2023 and 2030.”
”NJOY currently holds 6 of the 23 e-vapor marketing authorization from the FDA, according to the business update,” they added. Furthermore, Tradevestor said, “It also appears like NJOY is being responsible in marketing and securing its products as it is not in the top products used by under-age smokers.”
In conclusion, the author stated, “Whenever someone says Altria Group, Inc. is a bad investment due to declining volume, I make a case for the company by showing its history, operating discipline, pricing power, undervaluation, and the general power of compounding.”
“I am still fully invested in Altria and plan to do so based on what I've read so far about NJOY and what I heard on this business update. However, I am proceeding with caution and not adding to my position here,” they said.
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.
Highlighting the ongoing risk with Altria shares, Tradevestor ended their report by stating, “I hope Altria Group, Inc. is proceeding with more caution as well this time after e-"vapor"-ating $13 billion last time around.”
Overall bias of Nobias Credible Analysts and Bloggers:
Despite the ongoing uncertainty surrounding Altria with regard to cigarette volumes and its ability to grow its RRP product portfolio, 66% of recent articles published by credible authors have included a “Bullish” bias towards shares. Also, the only credible Wall Street analysts that Nobias tracks who has provided an opinion on Altria is bullish.
Currently, the average price target being applied to MO shares by the credible Wall Street analyst community is $59.00. Today, MO trades for $46.61. Therefore, that credible analyst price target implies upside potential of approximately 26.6%. And, once you factor in the stock’s roughly 8% dividend yield, near-term total return potential rises up to the 35% area.
Disclosure: Nicholas Ward is long MO.. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.
Case Study: Broadcom (AVGO) stock according to high performing analysts
Broadcom continues to execute on its growth plans, resulting in strong fundamentals. These fundamentals have trickled down to shareholders’ pockets, with AVGO becoming a favorite stock amongst dividend investors. Yet, there is M&A risk at play here, with Broadcom’s proposed ~$60 billion acquisition of VMWare still up in the air.
Nobias Insights: 90% of recent articles published by credible authors focused on Broadcom shares offer a “Bullish” bias. 3 out of the 4 credible Wall Street analysts who cover AVGO believe shares are likely to rise in value. The average price target being applied to AVGO by these credible analysts is $626.25, which implies downside potential of approximately 1.0% relative to the stock’s current share price of $632.76.
Bullish Take: Nobias 4-star rated author, Jonathan Wheeler, said, “I've long admired Broadcom from afar, but haven't opened a position. I think that's going to change here in the near future. The more I dig into the company, the more I like it.”
Bearish Take: Vladimir Dimitrov, a Nobias 4-star rated author, said, However, organic growth is slowing down, and Broadcom Inc.'s more aggressive movement into infrastructure software also holds a number of risks. These risks were not as pronounced in the company's prior deals. Thus, investors should not rely so heavily on Broadcom Inc.'s prior success. Although I see Broadcom Inc. as one of the best-positioned semiconductors stocks, I have a hard time turning bullish on the stock.
Key Points
Performance
Broadcom shares rose by 8.15% this week, pushing their year-to-date gains up to 14.32%. This compares favorably to the S&P 500 which is up by 5.79% on a year-to-date basis thus far and the Nasdaq Composite Index, which is up by 12.54% during 2023 thus far.
Event & Impact
Broadcom posted 2023 Q1 quarter results this week, beating Wall Street estimates on the top and bottom lines. During Q1, AVGO’s revenue totaled $8.92 billion, beating Wall Street’s consensus estimate by $20 million. Broadcom’s Q1 non-GAAP earnings-per-share came in at $10.33, beating Wall Street’s consensus estimate by $0.17/share.
Noteworthy News:
Broadcom continues to execute on its growth plans, resulting in strong fundamentals. These fundamentals have trickled down to shareholders’ pockets, with AVGO becoming a favorite stock amongst dividend investors. Yet, there is M&A risk at play here, with Broadcom’s proposed ~$60 billion acquisition of VMWare still up in the air.
Nobias Insights
90% of recent articles published by credible authors focused on Broadcom shares offer a “bullish” bias. 3 out of the 4 credible Wall Street analysts believe AVGO shares are likely to rise in value. The average price target being applied by these credible analysts is $626.25, which implies downside potential of approximately 1.0% relative to the stock’s current share price of $632.76.
Bullish Take Nobias 4-star rated author, Jonathan Wheeler, said, “I've long admired Broadcom from afar, but haven't opened a position. I think that's going to change here in the near future. The more I dig into the company, the more I like it.”
Bearish Take Vladimir Dimitrov, a Nobias 4-star rated author, said, However, organic growth is slowing down, and Broadcom Inc.'s more aggressive movement into infrastructure software also holds a number of risks. These risks were not as pronounced in the company's prior deals. Thus, investors should not rely so heavily on Broadcom Inc.'s prior success. Although I see Broadcom Inc. as one of the best-positioned semiconductors stocks, I have a hard time turning bullish on the stock.
AVGO Mar 2023
Broadcom (AVGO) reported its fiscal 2023 Q1 results this week, beating Wall Street’s expectations on both the top and bottom lines, causing shares to rally by 8.15% during the past 5 trading sessions. This strong weekly performance has pushed AVGO’s year-to-date gains up to 14.32%, which beats both the S&P 500 and the Nasdaq Composite Index’s year to date returns.
Those two indexes have posted gains of 5.79% and 12.54%, respectively, during 2023 thus far. After Broadcom’s weekly rally, the stock is essentially trading in-line with the credible analyst average price target. Yet, 90% of articles published by credible authors remain bullish on AVGO shares.
Bullish Nobias Credible Analysts Opinions:
Nobias 4-star rated author, Jonathan Wheeler, covered Broadcom in a recent report, highlighting his bullish stance on the company. He wrote, “I've long admired Broadcom from afar, but haven't opened a position. I think that's going to change here in the near future. The more I dig into the company, the more I like it.”
Wheeler said, “The company is a $250B market cap behemoth today, and is an amalgamation of multiple business lines purchased over time. The Broadcom you bought 15 years ago isn't the same company today, by a long shot.”
Looking at its operations, Wheeler noted, “The company derives the majority of its revenues (~70%) currently from semiconductors, with a significant portion of that derived from Apple (AAPL) (~20%) in its wireless line.” But, he likes this industry, stating, “Smartphones have only grown more complex, and Broadcom's chips are more necessary than ever in 5G phones, although competition among the chipmakers is fierce.”
Furthermore, Wheeler notes, “As companies move to the cloud and further digitize, Broadcom's networking expertise should keep their chips in demand in both cloud and on-premises servers.” Then, he points out that Broadcom has a growing software applications business as well.
Wheeler said, “Infrastructure software represents around 30% of the business, and is growing relatively slowly, coming in at 4% on the most recent quarter. However, operating at a 72% margin, it's significant for the company's bottom line, and provides a solid base of cash flows.” He notes that these high margins attract shareholders and said that the company is working on an acquisition that would drastically increase the size of this area of Broadcom’s business.
Wheeler wrote, “The company is looking to dole out ~$60B this year for VMware (VMW), the data center virtualization company. This would bring software revenues up from around 30% to around 50% of revenues.” Looking at AVGO’s balance sheet, Wheeler said, “The company has $39.5B in total debt, and generated $16.31B in free cash flow this past year. What's impressive here is the company is turning 50% of revenues into free cash flow, which grew 25% yoy in the most recent quarter.”
Wheeler also put a spotlight on the company’s shareholder returns, stating, “Broadcom has hiked the dividend every year since 2011, and most recently authorized a 12% increase. On top of that, the company repurchased $8.5B in shares this past year and still has $13B remaining on the current authorization.”
“Since going public, Broadcom has compounded earnings growth at ~30% per year,” he said.. Wheeler continued, “Broadcom has compounded its free cash flow 29% per year since going public.” “However,” he points out, “it's still trading for ~15X earnings and a 3% dividend yield. These types of numbers are almost kind of shocking, and what I'd expect to find in a no-growth type business, not one that just grew revenues 21% last year.”
Looking at forward return expectations, Wheeler stated, “Based on FCF multiples and analyst estimates, an investment today could yield around 12% annualized. That's at current multiples, not the average multiple, which would be substantially more.” Wheeler wrote this report on February 24th, 2023 and concluded it, “Broadcom is a strong buy here.”
Heavy Moat Investments, a Nobias 5-star rated author, also recently published a bullish report on AVGO. This author analyzed the stock from a dividend income lens, highlighting the stock’s popularity amongst dividend growth investors.
Regarding this strategy, they said, “Dividend Growth Investing (often abbreviated as DGI) has been a very popular strategy among investors in recent years due to its potential to generate stable and growing income streams over the long term.”
Heavy Moat Investments continued, “The true power of DGI is shown once dividends are reinvested into the company, creating a snowball effect by compounding the quarterly dividends received over the years.” Then, they highlighted AVGO’s dividend growth history, showing why it’s a great fit for this strategy.
Looking at Broadcom’s historical dividend payments, Heavy Moat Investments said, “From $0.67 in 2013 to $16.9 in the trailing twelve months, an astounding 25-fold increase translates to a median growth rate of 40%. This track record is unmatched and grew the company to one of the largest semiconductor stocks on the planet at an enterprise value of $272 billion.”
Even with such strong historical dividend growth in mind, Heavy Moat Investments believes that AVGO’s dividend remains safe and is likely to continue to grow moving forward. They wrote, “The dividend is also safe at a 41% Free cash flow payout ratio over the last year.”
“According to Seeking Alpha, analysts expect Broadcom to grow its earnings around mid to high single digits and I believe that is a very reasonable assumption. The large earnings power, a low payout ratio, and modest growth going forward should allow AVGO to continue raising its dividend alongside earnings in the high single digits to low teens,” Heavy Moat Investments said. They concluded their piece stating, “As a solid dividend growth stock with ample opportunity to raise its dividend, I'd consider Broadcom a light buy.”
Bearish Nobias Credible Analysts Opinions:
Vladimir Dimitrov, a Nobias 4-star rated author, covered AVGO’s Q1 results in an article published this week at Seeking Alpha, coming away with a more tepid outlook on AVGO shares than Wheeler and Heavy Moat Investments. He began by stating, “Even though performance across business segments was mixed and gross margins noted a decline, Broadcom stock's earnings per share exceeded expectations, both on a GAAP and Non-GAAP basis.”
Looking at Broadcom’s top-line results, he said, “Consolidated net revenue improved 16% year-on-year, entirely driven by Semiconductor Solutions, which increased by 21%. Infrastructure Software, however, fell by 1%, largely driven by softness in Brocade - a business acquired only a couple of years ago in 2017.”
“In a nutshell,” he continued, “it appears that until the pending VMware (VMW) transaction is complete, AVGO's topline growth is expected to be largely driven by its Semiconductor Solutions division and would likely slow down through the rest of 2023.”
“A forward revenue growth of 10% is still impressive but is well below the historical average for Broadcom,” noted Dimitrov. “In terms of gross profitability,” he said, “Broadcom is currently among the highest gross margin semiconductor companies. At the same time, the business is among the least capital-intensive within the broader peer group.”
“In the case of Broadcom,” he continued, “the company has achieved this largely through its recent acquisitions and a stronger focus on software. Although I personally, favor the more capital-intensive peers within the semiconductors space, Broadcom's management has done a very good job historically at both selecting its targets and integrating them within its long-term strategy.”
Ultimately, Dimitrov concluded, “Broadcom Inc.'s Q1 2023 results were yet another testament that the acquisition-led strategy is working. By focusing on low capital intensity and high gross margin areas that were also highly complementary with Broadcom's legacy business, the company was able to sustain both high topline growth and industry-leading margins. All that resulted in outstanding shareholder returns, high dividend increases, and a premium valuation.”
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.
But, even with this good news in mind, he couldn’t ignore the risks associated with Broadcom’s acquisition driven strategy. He said, “However, organic growth is slowing down, and Broadcom Inc.'s more aggressive movement into infrastructure software also holds a number of risks. These risks were not as pronounced in the company's prior deals. Thus, investors should not rely so heavily on Broadcom Inc.'s prior success. Although I see Broadcom Inc. as one of the best-positioned semiconductors stocks, I have a hard time turning bullish on the stock.”
Overall bias of Nobias Credible Analysts and Bloggers:
Overall, 90% of recent articles published by the credible authors that the Nobias algorithm tracks have expressed a “Bullish” bias towards Broadcom. 3 out of the 4 credible Wall Street analysts that the Nobias algorithm tracks who have expressed an opinion on AVGO shares believe that they’re likely to increase in value.
Yet, the lone bear here is dragging down the average analyst price target. After its rally this week, AVGO trades for $632.76. Currently, the average price target being applied to AVGO shares by the credible analysts that Nobias tracks is $626.25, implying slight downside potential of approximately 1%.
Disclosure: Nicholas Ward is long AVGO.. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.
Case Study: Lowe's (LOW) stock according to high performing analysts
After a strong post-pandemic rally (since during 2020, 2021 and 2022, Lowe’s earnings-per-share increased by 55%, 35%, and 15%, respectively) Lowe’s highlighted poor 2023 growth guidance, causing its shares to sell-off this week. Yet, even so, credible authors and analysts have pointed to Lowe’s historically cheap valuation as a source of bullish sentiment moving forward.
Nobias Insights: 70% of recent articles published by credible authors focused on Lowe’s shares offer a “Bullish” bias. 4 out of the 7 credible Wall Street analysts who cover LOW believe shares are likely to rise in value. The average price target being applied to Lowe’s by these credible analysts is $223.86, which implies upside potential of approximately 12.2% relative to the stock’s current share price of $199.73.
Bullish Take: Jonathan Wheeler, a Nobias 4-star rated author, said, “The company is trading right around 15X earnings, and for right around a 2% dividend yield. Combine that with a normal earnings growth rate of nearly 15% over the long-term, and I think LOW is a very attractive stock currently, even considering the macro short-term risks.”
Bearish Take: Shawn Johnson, a Nobias 4-star rated author, said, “The two largest home improvement retailers, Home Depot (HD) and Lowe’s (LOW), warned of market weakness in recent earnings reports, indicating that the year ahead is likely to be difficult as inflation weighs on consumers.”
Key Points
Performance
Lowe’s shares rose by 2.84% this week, pushing their year-to-date gains down to just 0.35%. This compares poorly to the S&P 500 which is up by 5.79% on a year-to-date basis thus far.
Event & Impact
Lowe’s posted fourth quarter results this week, beating Wall Street estimates on the bottom line while missing expectations on the top-line. During Q4, LOW’s revenue totaled $22.40 billion, missing Wall Street’s consensus estimate by $310 million. Lowe’s Q4 non-GAAP earnings-per-share came in at $2.28, beating Wall Street’s consensus estimate by $0.07/share.
Noteworthy News:
After a strong post-pandemic rally (since during 2020, 2021 and 2022, Lowe’s earnings-per-share increased by 55%, 35%, and 15%, respectively) Lowe’s highlighted poor 2023 growth guidance, causing its shares to sell-off this week. Yet, even so, credible authors and analysts have pointed to Lowe’s historically cheap valuation as a source of bullish sentiment moving forward.
Nobias Insights
70% of recent articles published by credible authors focused on Lowe’s shares offer a “Bullish” bias. 4 out of the 7 credible Wall Street analysts who cover LOW believe shares are likely to rise in value. The average price target being applied to Lowe’s by these credible analysts is $223.86, which implies upside potential of approximately 12.2% relative to the stock’s current share price of $199.73.
Bullish Take Jonathan Wheeler, a Nobias 4-star rated author, said, “The company is trading right around 15X earnings, and for right around a 2% dividend yield. Combine that with a normal earnings growth rate of nearly 15% over the long-term, and I think LOW is a very attractive stock currently, even considering the macro short-term risks.”
Bearish Take Shawn Johnson, a Nobias 4-star rated author, said, “The two largest home improvement retailers, Home Depot (HD) and Lowe’s (LOW), warned of market weakness in recent earnings reports, indicating that the year ahead is likely to be difficult as inflation weighs on consumers.”
LOW Mar 2023
Home Improvement giant, Lowe's (LOW), reported Q4 earnings this week, causing its stock to drop by 2.84%. These weekly declines pushed Lowe’s year-to-date gains down to just 0.35%. Therefore, Lowe’s is underperforming the S&P 500, which is up by 5.79% during 2023 thus far, by a wide margin.
During Lowe’s Q4 report the company beat Wall Street consensus on the bottom-line, with sales coming up short of consensus estimates. Yet, the credible authors and analysts that the Nobias algorithm tracks remain largely bullish on shares. The current average price target being applied to LOW stock implies double digit upside potential from current share price levels.
Bullish Nobias Credible Analysts Opinions:
Prior to Lowe’s Q4 report, Jonathan Wheeler, a Nobias 4-star rated author, published a bullish report on Lowe’s, noting that it has closed the historical performance gap between rival Home Depot in the home improvement retail industry.
Wheeler said, “The debate has been well hashed out among investment analysts as to whether to own Home Depot (HD) or LOW over the years. LOW was a perpetual laggard, while HD has had best-in-class metrics. However, LOW has actually outperformed over a shorter time horizon.”
During the last 5 years, LOW shares are up 129.3% while HD shares are up just 64.3%. He noted, “The gap between HD and LOW was stark. In the past two years, the company's initiatives have made up substantial ground, which shows a huge improvement in shareholder value creation and overall profitability.”
Wheeler shows that since 2019, Lowe’s return on invested capital (ROIC) is 33.3% whereas Home Dept’s figure comes in at just 12.56%. Looking at where Lowe’s management is investing its money, he said, “Management has invested significant capex in modernizing the company's tech, right-sizing employee output to improve productivity, and improving the supply chain.” And, he says, these investments are paying off. Wheeler noted that they have led to steady margins in the 13% area and free cash flows which have increased throughout the pandemic period.
Lastly, Wheeler touches upon valuation. He wrote, “The company is trading right around 15X earnings, and for right around a 2% dividend yield. Combine that with a normal earnings growth rate of nearly 15% over the long-term, and I think LOW is a very attractive stock currently, even considering the macro short-term risks.”
Wheeler continued, “Based on analyst projections for earnings growth and a return to the company's long-term average valuation, and investors could be looking at 18-19% annualized total returns from a purchase today.” He concluded his article, stating, “Metrics are all pointed in the right direction, the company is closing the gap with HD, and I see a bright future ahead. I'm calling LOW a buy here, and I'll be adding to my long-term position.”
Harrison Miller, a Nobias 4-star rated author, highlighted Lowe’s Q4 operating results in an article that he published at Investors.com this week. Regarding LOW’s bottom-line, MIller said, “Lowe's earnings accelerated for the third quarter in a row, jumping 28% to $2.28 per share as revenue climbed 5.2% to $22.445 billion.”
Looking at the company’s top-line results, Miller said, “Lowe's comparable sales fell 1.5% for the fourth quarter while U.S. comparable sales dipped 0.7%. FactSet projected flat growth year-over-year.” Overall, Lowe’s Q4 revenue came in at $22.4 billion.
Miller touched upon these mixed results, relative to the analyst consensus, stating, “The FactSet consensus projected a 24% earnings increase to $2.21 per share on 6.4% revenue growth to $22.7 billion.” “For full-year 2022,” he said, “Lowe's earnings were $13.76 per share on $97 billion in sales.” And finally, touching upon full-year guidance, Miller said, “For fiscal 2023, Lowe's forecasts earnings to range from $13.60 to $14 per share on $88 billion to $90 billion in total sales.”
Sticking to the capital allocation theme that Wheeler highlighted in his piece, during Lowe’s Q4 earnings report, the company highlighted its shareholder returns, stating: “During the quarter, the company repurchased approximately 10 million shares for $2.0 billion, and it repurchased 71 million shares for $14.1 billion for the year. Total share repurchases in 2022 were $1.1 billion higher than anticipated, reflecting better-than-expected operating performance and the company's commitment to return excess capital to shareholders.
The company also paid $643 million in dividends in the fourth quarter and $2.4 billion in dividends for the year. In total, the company returned $16.5 billion to shareholders through share repurchases and dividends in 2022.”
Bearish Nobias Credible Analysts Opinions:
Shawn Johnson, a Nobias 4-star rated author, published a post-earnings report this week, highlighting the macro environment that Lowe’s is operating in. He wrote, “The two largest home improvement retailers, Home Depot (HD) and Lowe’s (LOW), warned of market weakness in recent earnings reports, indicating that the year ahead is likely to be difficult as inflation weighs on consumers.”
Johnson quoted Lowe’s Chief Financial Office, Brandon Sink, who touched upon the macro environment during Lowe’s Q4 earnings conference call, saying, “In 2023, residential investment will be under some pressure, given elevated levels of inflation, higher interest rates and a more cautious consumer. We are forecasting a slight decline in the home improvement market.”
Johnson wrote, “For 2023, Lowe’s sales are projected to be between $88-$90 billion, while same-store-sales are projected to be flat or down 2% for the year. Executives view the pullback in DIY demand as fleeting, and other industry experts see a “historic boom” for home remodeling.” He also noted that, “Shares of both Home Depot and Lowe’s are down more than 10% in the past month.” But, he says, there is potential good news on the horizon.
“Ellison [Lowe’s CEO} noted that the average equity for homes in the US is approximately $330,000, and expectations of an aging housing stock could point to continued demand for home upgrades,” Johnson said. Furthermore, he stated, “The housing meltdown has led to a lumber crisis, with lumber futures down 70% within the past year. And homebuilders are taking notice.”
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.
Johnson wrote, “Pulte Group (PHM) [a $12.5 billion home builder company] announced in its latest earnings call that the company is increasing its pace of construction amid rising lumber stocks and more affordable pricing”
Despite the poor growth projections for 2023 by Lowe’s management team during its Q4 report, the majority of credible authors and analysts that the Nobias algorithm tracks remain bullish on LOW shares.
Overall bias of Nobias Credible Analysts and Bloggers:
70% of recent articles published on the stock by credible authors have expressed a “Bullish” opinion. 4 out of the 7 credible Wall Street analysts that the Nobias algorithm follows who have expressed an opinion on LOW shares believe that they’re likely to increase in value.
Presently, Lowe’s is trading for $199.73/share. The average credible analyst price target for LOW shares is currently $223.86, which implies upside potential of approximately 12.1%.
Disclosure: Of the stocks discussed in this article, Nicholas Ward is long LOW and HD. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.
Case Study: Target (TGT) stock according to high performing analysts
Although Target’s sales were on the rise during Q4, its margins continue to suffer, coming in well below pre-pandemic levels. However, the company’s management team highlighted a $5 billion capex program with a goal to resolve these margin related issues.
Nobias Insights: 52% of recent articles published by credible authors focused on Target shares offer a “Neutral” bias. After the stock’s 9.4% year-to-date rally, only 38% credible Wall Street analysts who cover TGT believe shares are likely to rise in value. The average price target being applied to TGT by these credible analysts is $179.57, which implies upside potential of approximately 8.2% relative to the stock’s current share price of $166.00.
Bullish Take: Mark Soloman, a Nobias 4-star rated author, said, “Earlier this month, Target said it would invest $100 million through 2026 to add more than half a dozen additional sortation facilities to its U.S. network. Its goal is to reach 15 sort centers within the next four years, up from the current level of nine.”
Bearish Take: Mariane Wilson, a Nobias 4-star rated author, said, “For fiscal 2023, Target expects that comparable sales will range from a low single-digit decline to a low single-digit increase. The retailer expects full-year earnings per share of between $7.75 and $8.75, below Wall Street’s expectations of $9.23 per share.”
Key Points
Performance
Target shares rose by 1.84% this week, pushing their year-to-date gains up to 9.40%. This compares favorably to the S&P 500 which is up by 5.79% on a year-to-date basis thus far.
Event & Impact
Target posted fourth quarter results this week, beating Wall Street estimates on the top and bottom lines. During Q4, TGT’s revenue totaled $31.40 billion, beating Wall Street’s consensus estimate by $670 million. Target’s Q4 non-GAAP earnings-per-share came in at $1.89, beating Wall Street’s consensus estimate by $0.49/share.
Noteworthy News:
Although Target’s sales were on the rise during Q4, its margins continue to suffer, coming in well below pre-pandemic levels. However, the company’s management team highlighted a $5 billion capex program with a goal to resolve these margin related issues.
Nobias Insights
52% of recent articles published by credible authors on Target shares offer a “neutral” bias. After the stock’s 9.4% year-to-date rally, only 38% credible Wall Street analysts believe TGT shares are likely to rise in value. The average price target being applied by these credible analysts is $179.57, which implies upside potential of approximately 8.2% relative to the stock’s current share price of $166.00.
Bullish Take Mark Soloman, a Nobias 4-star rated author, said, “Earlier this month, Target said it would invest $100 million through 2026 to add more than half a dozen additional sortation facilities to its U.S. network. Its goal is to reach 15 sort centers within the next four years, up from the current level of nine.”
Bearish Take Mariane Wilson, a Nobias 4-star rated author, said, “For fiscal 2023, Target expects that comparable sales will range from a low single-digit decline to a low single-digit increase. The retailer expects full-year earnings per share of between $7.75 and $8.75, below Wall Street’s expectations of $9.23 per share.”
TGT Mar 2023
Target (TGT) reported its fiscal 2022 Q4 results this week, beating Wall Street’s expectations on both the top and bottom lines. These results culminate a terrible year for the company - fundamentally speaking - where its earnings-per-share fell by approximately 56%.
Yet, management provided forward looking guidance which calls for a return pre-pandemic profitability in the not too distant future and it appears that Wall Street agrees, with TGT shares up by 9.4% on the year thus far throughout 2023.
Although the stock has already outperformed the S&P 500 by a wide margin on a year-to-date basis (during this period of time, the S&P as risen by 5.79%), credible analysts still see high single digit upside potential. What’s more, Target pays a 2.6% dividend yield, pointing towards a strong total return year for shareholders, overall, if the analyst consensus is correct.
Bullish Nobias Credible Analysts Opinions:
Harrison Miller, a Nobias 4-star rated author, covered Target’s Q4 earnings results in an article published this week at Investors.com. Miller highlights the company’s bottom-line results, stating, “Target's adjusted earnings dropped 40% to $1.89 per share while revenue climbed 1.3% to $31.48 billion for the quarter. That managed to top the FactSet consensus of a 56% earnings drop to $1.40 per share on a slight dip in revenue to $30.675 billion.”
Miller moved onto the top-line results, writing, “Total comparable sales inched up 0.7% for the period. Same store sales rose 1.9%, offset by a 3.6% decline in digital sales. FactSet projected same store sales to fall 1.6% during the period.”
Looking at Target’s updated forward guidance, Miller said, “For Q1 2023, Target forecasts comparable sales to range from a low-single digit decline to a single-digit increase. Adjusted earnings and GAAP earnings are both expected to range from $1.50 to $1.90 per share on a 4% to 5% increase in operating income.”
Mark Soloman, a Nobias 4-star rated author, also touched upon Target’s Q4 results in an article this week. Like Miller, Solomon highlighted the company’s operational results. But, he also went into depth about the company’s growth plans moving forward, putting a spotlight on management’s stated plans regarding capital expenditures on its supply chain facilities.
Solomon said, “The Minneapolis-based retailer also announced plans to spend up to $5 billion this year across a variety of disciplines, including an expansion of its supply chain facilities.” He continued, “Earlier this month, Target said it would invest $100 million through 2026 to add more than half a dozen additional sortation facilities to its U.S. network. Its goal is to reach 15 sort centers within the next four years, up from the current level of nine.”
“These facilities, erected next to or near Target locations, would take distribution pressure off the stores and allow employees to focus more time on serving customers,” Solomon wrote. Furthermore, he said, “Starting in the spring, Target will expand an offering known as Drive Up Returns that allows customers to return new, unopened items from their car at no charge. Drive Up Returns will be available on purchases made through Target.com accounts, the retailer said.” “The objective, according to Target, is to build in more efficiencies to the returns process and reduce the costs and inconvenience of handling mail-in returns,” noted Soloman.
Bearish Nobias Credible Analysts Opinions:
Mariane Wilson, a Nobias 4-star rated author, covered Target’s Q4 results and management investment plans in an article at Chain Store Age this week; however, instead of distribution and supply chain, Wilson focused her analysis on Target’s margin issues and management’s plans to fix them. She began by saying, “Target Corp. beat fourth-quarter expectations amid a “very challenging environment” and said it plans to expand its owned-brands as consumers spending shifted away from discretionary items.”
Later, Wilson wrote, “For fiscal 2023, Target expects that comparable sales will range from a low single-digit decline to a low single-digit increase. The retailer expects full-year earnings per share of between $7.75 and $8.75, below Wall Street’s expectations of $9.23 per share.”
These disappointing full-year EPS expectations are due to poor margins, yet it appears that the company is on its way towards resolving those issues. “In a presentation at the company's annual Financial Community Meeting in New York,” Wilson wrote, “Target said it plans to open about 20 stores in a variety of sizes in 2023, with many of the locations including new design elements that reflect the local community, sustainable features and experiences that highlight new brands, assortment and services.”
“In addition,” Wilson continued, “ Target is making investments in about 175 of its existing stores, ranging from full remodels to the addition of Ultra Beauty or Apple shop-in-shop experiences, or expanded capacity for same-day fulfillment service” “In other 2023 initiatives,” she added, “Target plans to launch or expand more than 10 owned brands. In an appeal to an increasingly value-conscious shopper, the retailer said will offer more items starting at $3, $5, $10 and $15. It also plans to emphasize more markdown campaigns and add new features to its Target Circle loyalty program.”
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.
And in conclusion, she said, “During the next three years, Target said it expects its operating income margin rate will reach, and begin to move beyond, its pre-pandemic rate of 6 percent, and believes it could reach an operating income margin rate of 6 percent as early as fiscal 2024, depending on the speed of recovery for the economy and consumer demand.”
Overall bias of Nobias Credible Analysts and Bloggers:
Overall, it appears as though the credible author and credible analyst communities haven’t been sold on this turnaround plan. 52% of recent articles about Target published by the credible authors that Nobias tracks have expressed a “Neutral” sentiment towards TGT shares.
Furthermore, only 38% of the credible Wall Street analysts that the Nobias algorithm follows who have expressed an opinion on TGT shares believe that they’re likely to rise in value. Currently, TGT is trading for $166.00/share. The average price target that the credible analyst community is placing on TGT is $179.57.
Therefore, although the credible bears outnumber the credible bulls on Wall Street, it appears that the bulls have higher conviction in their theses because even with 5 out of the 8 opinions that we’re compiling coming in bearish, the average price target associated with TGT shares implies upside potential of approximately 8.2%.
Disclosure: Nicholas Ward has no TGT position. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.
Case Study: Home Depot (HD) stock according to high performing analysts
Home Depot’s trailing earnings were essentially in-line with expectations and the company announced a 10% dividend increase during its Q4 report; however, management forward guidance, which called for negative mid-single digit EPS growth during 2023, spooked investors, causing a -2.0% sell-off on the week.
Nobias Insights: 58% of recent articles published by credible authors focused on Home Depot shares offer a “Bullish” bias. Yet, just 2 out of the 4 credible credible Wall Street analysts who cover HD believe shares are likely to rise in value. The average price target being applied to Home Depot by these credible analysts is $323.00, which implies upside potential of approximately 8.9% relative to the stock’s current share price of $296.66.
Bullish Take: Mark Roussin, a Nobias 4-star rated author, said, “HD also happens to be one of my favorite dividend growth stocks as they have proven to generate tons of free cash flow which has led to a fast growing dividend.”
Bearish Take: Marianne Wilson, a Nobias 4-star rated author, said, “For fiscal 2023, Home Depot expects sales to be flat versus fiscal 2022 and earnings per share to fall in the “mid-single digits” percentage range.”
Key Points
Performance
Home Depot shares fell by 2.01% this week, pushing their year-to-date losses down to -6.09%. This compares poorly to the S&P 500 which is up by 3.82% thus far during 2023.
Event & Impact
Home Depot posted fourth quarter results this week, beating Wall Street estimates on the bottom-line, but missing estimates on the top-line. During Q4, HD’s revenue totaled $35.83 billion, missing Wall Street’s consensus estimate by $170 million. Home Depot’s Q4 GAAP earnings-per-share came in at $3.30, beating Wall Street’s consensus estimate by $0.02/share.
Noteworthy News:
Home Depot’s trailing earnings were essentially in-line with expectations and the company announced a 10% dividend increase during its Q4 report; however, management forward guidance, which called for negative mid-single digit EPS growth during 2023, spooked investors, causing a -2.0% sell-off on the week.
Nobias Insights
58% of recent articles published by credible authors on Home Depot shares offer a “bullish” bias. Yet, only two out of the four credible Wall Street analysts who cover HD believe prices are likely to rise in value. The average price target applied to Home Depot is $323.00, which implies upside potential of approximately 8.9% relative to the stock’s current share price of $296.66.
Bullish Take Mark Roussin, a Nobias 4-star rated author, said, “HD also happens to be one of my favorite dividend growth stocks as they have proven to generate tons of free cash flow which has led to a fast growing dividend.”
Bearish Take Marianne Wilson, a Nobias 4-star rated author, said, “For fiscal 2023, Home Depot expects sales to be flat versus fiscal 2022 and earnings per share to fall in the “mid-single digits” percentage range.”
O Feb 2023
Home Depot reported Q4 earnings this week, missing Wall Street’s estimates on the top-line, but beating consensus estimates on the bottom-line. The company also announced disappointing full-year guidance for 2023, calling for negative earnings-per-share growth over the coming 12 month period.
Home Depot is one of the largest physical retailers in the world with a $302 billion market cap, so it is often viewed as a bellwether, in terms of consumer health. During its Q4 earnings report, Home Depot announced its annual dividend increase for 2023, stating, “The Company today announced that its board of directors approved a 10 percent increase in its quarterly dividend to $2.09 per share, which equates to an annual dividend of $8.36 per share.”
However, this wasn’t enough to stop the stock from falling by 2.01% during the week. This negative weekly performance pushed Home Depot’s year-to-date losses down to -6.09%. This means that the stock has underperformed the S&P 500 by a wide margin thus far during 2023. Comparatively, the S&P 500 has posted gains of 3.82% on a year-to-date basis.
Bearish Nobias Credible Analysts Opinions:
Marianne Wilson, a Nobias 4-star rated author, covered Home Depot’s Q4 results in an article that she published at Chain Store Age this week. Looking at HD’s quarterly results, Wilson wrote, “Home Depot reported net earnings of $3.36 billion, or $3.30 per share, for the quarter ended Jan. 29, compared with net earnings of $3.35 billion, or $3.21 per share, in the year-ago period. Analysts had expected earnings of $3.28 per share.”
Moving onto the bottom-line, she said, “Sales inched up 0.3% to $35.83 billion, missing estimates of $35.97 billion. Home Depot attributed the miss to a decrease in lumber prices, which are significantly down from a year ago.”
Wilson continued, “The average ticket rose 5.8%, to $90.05, with the increase largely fueled by inflation. Total customer transactions dropped 6%.” “For the full year,” she said, “Home Depot has sales of $6.2 billion, up 4.1% from the year-ago period. Comparable sales increased 3.1% and comparable sales in the U.S. increased 2.9%.”
Looking at the full-year bottom-line results, Wilson said, “Net earnings for fiscal 2022 were $17.1 billion, or $16.69 per share, compared with net earnings of $16.4 billion, or $15.53 per share in fiscal 2021.” And finally, looking at management’s forward guidance, Wilson stated, “For fiscal 2023, Home Depot expects sales to be flat versus fiscal 2022 and earnings per share to fall in the “mid-single digits” percentage range.”
This negative bottom-line guidance for fiscal 2023 played a heavy role in the stock’s sell-off this week, but Wilson explained one of the reasons why HD expects to struggle to produce earnings growth this year. She said, “The Home Depot is boosting its employees' pay amid a still tight labor market for retailers.” The home improvement giant announced the increased compensation in its fourth-quarter earnings release in which it provided a flat outlook for the coming year,” she continued.
Providing details on HD's compensation plans, Wilson said, “Beginning in the first quarter of fiscal 2023, Home Depot will invest an additional approximately $1 billion in annualized compensation for frontline, hourly associates. (At the end of the fourth quarter, the company had a total of approximately 475,000 associates.)”
She mentioned that management called its employee base “a key differentiator and competitive advantage for the company” and therefore, by investing in higher wages and benefits for its staff, Home Depot management believes that it is setting itself up for long-term success.
Bullish Nobias Credible Analysts Opinions:
Geoff Considine, a Nobias 5-star rated author, also penned an article this week which put a spotlight on HD’s negative guidance and the stock’s recent sell-off. Regarding 2023 headwinds, Considine wrote, “Higher labor costs are, of course, is a negative. The volatility in lumber prices in the past several years makes it harder to forecast sales and earnings. In the Q4 earnings call, management noted the negative impacts of declining lumber prices on sales. Higher interest rates have mixed impacts.”
“Another challenge for investors in assessing HD is that it will be hard for 2023 results to look favorable against the backdrop of very robust earnings growth over the past three years, a period during which diluted EPS increased by 60%,” he continued.
But, despite near-term headwinds, Considine believes that the stock’s recent weakness has created an attractive buying opportunity. He said, “A full-blown recession would be bad news for HD, as people rein in discretionary spending, but interest rates comparable to current levels may serve to encourage people to improve their current homes rather than moving.”
Furthermore, he wrote, “The Wall Street consensus outlook continues to be a buy, with a consensus 12-month price target that maps to an expected 12-month total return of 14.4% over the next year.” Considine concluded, “The market-implied outlooks to mid-2023 and into the start of 2024 are both modestly bullish. While the valuation is somewhat high today, even after the sell-off following the Q4 earnings call, I'm maintaining a buy rating on HD.”
Taking an even more bullish stance, Mark Roussin, a Nobias 4-star rated author, published an article titled, “3 Foundational Dividend Stocks To Build A Portfolio Around” this week, in which he highlighted Home Depot as a potential core position for investor portfolios.
Roussin said, “The third stock I consider a MUST OWN stock is Home Depot (HD), the leading home improvement retailer with a market cap of $327 billion [the other two companies that Roussin listed in this article were Microsoft (MSFT) and Johnson and Johnson (JNJ)].” He continued, “HD also happens to be one of my favorite dividend growth stocks as they have proven to generate tons of free cash flow which has led to a fast growing dividend.”
Regarding Home Depot’s dividend growth prowess, Roussin wrote, “Over the past 5 years, the company has increased their dividend at an average of 16.4% per year. The current dividend is $7.60 per share, which equates to a dividend yield of 2.4% [since this article was published HD’s share price has fallen, resulting in a dividend yield of 2.82%]. The company has increased the dividend for 13 consecutive years and counting.”
Taking a look at the company’s all-weather business model, Roussin stated, “Home Depot is unique in the fact that they do well when the real estate sector performs well, but on the flip side they can also perform well even without the real estate sector. Reason being is that when the real estate sector, particularly the home building sector, is doing well, new home buyers have numerous items to add to their new home. When the market is poor and interest rates are high, you will see more homeowners stay in place, but maybe do the home improvement projects they had been contemplating.”
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.
And finally, regarding the stock’s valuation, Roussin said, “HD shares are trading at a forward earnings multiple of 19x, which suggests flat to 1% adjusted EPS growth in 2023. This compares favorably to the company's five year average of 21.5x and the company's 10-year average earnings multiple of 22.0x, suggesting shares of HD are undervalued.”
Overall bias of Nobias Credible Analysts and Bloggers:
The credible author community that the Nobias algorithm follows agrees with this bullish sentiment. 58% of recent articles published by credible authors have expressed a “Bullish” bias. Yet, the credible Wall Street analyst community is less enthusiastic.
Only 50% of credible analysts that the Nobias algorithm follows who have expressed an opinion on HD shares believe that they’re likely to increase in value. The average price target being applied to Home Depot by these individuals is $323.00, which implies upside potential of approximately 8.9% relative to HD’s current share price of $296.66.
Adding the stock’s 2.82% dividend yield into the equation means that we arrive at double digit total return prospects moving forward; however, it’s clear that authors and analysts alike acknowledge a slew of macro headwinds that could serve as road bumps for the stock’s growth trajectory.
Disclosure: Nicholas Ward is long HD. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.
Case Study: Realty Income (O) stock according to high performing analysts
Realty Income continues to invest heavily in its property portfolio, putting $9.0 billion to work acquiring new buildings during 2022. Fears of higher interest rates are hurting the sentiment surrounding the stock, but Realty Income continues to reward shareholders with a growing dividend. This company is one of only 3 REIT dividend aristocrats (companies that have raised their dividends for at least 25 consecutive years).
Nobias Insights: 83% of recent articles published by credible authors focused on Realty Income shares offer a “Bullish” bias. 7 out of 9 credible credible Wall Street analysts who cover O believe shares are likely to rise in value. The average price target being applied to Realty Income by these credible analysts is $73.22, which implies upside potential of approximately 11.1% relative to the stock’s current share price of $64.98.
Bullish Take: Samuel Smith, a Nobias 4-star rated author, said, “Realty Income is undervalued at present and offers investors good total return potential. That said, we believe the stock also remains highly appealing for income investors looking for a secure payout with steady dividend growth.”
Bearish Take: Brent Nyitray, a Nobias 5-star rated author, said, “Realty Income stock saw a 25% drop in price between mid-August and mid-October over concerns about whether the REIT could manage the accelerated interest rate increases going on at the time”.
Key Points
Performance
Realty Income shares fell by 1.08% this week. This pushed their year-to-date gains down to 1.85%. This compares poorly to the S&P 500 and the Vanguard Real Estate ETF (VNQ), which are both up by 3.82% thus far in 2023.
Event & Impact
Realty Income posted fourth quarter results this week, beating Wall Street estimates on the top and bottom lines. During Q4, O’s revenue totaled $888.7 million, beating Wall Street’s consensus estimate by $48.13 million. Realty Income’s Q4 funds-from-operations came in at $1.00, beating Wall Street’s consensus estimate by $0.01/share.
Noteworthy News:
Realty Income continues to invest heavily in its property portfolio, putting $9.0 billion to work acquiring new buildings during 2022. Fears of higher interest rates are hurting the sentiment surrounding the stock, but Realty Income continues to reward shareholders with a growing dividend. This company is one of only 3 REIT dividend aristocrats (companies that have raised their dividends for at least 25 consecutive years).
Nobias Insights
83% of recent articles published by credible authors focused on Realty Income shares offer a “bullish” bias. 7 out of 9 credible Wall Street analysts who cover VNQ believe shares are likely to rise in value. The average price target applied to by these credible analysts is $73.22, which implies upside potential of approximately 11.1% relative to the stock’s current share price of $64.98.
Bullish Take Samuel Smith, a Nobias 4-star rated author, said, “Realty Income is undervalued at present and offers investors good total return potential. That said, we believe the stock also remains highly appealing for income investors looking for a secure payout with steady dividend growth.”
Bearish Take Brent Nyitray, a Nobias 5-star rated author, said, “Realty Income stock saw a 25% drop in price between mid-August and mid-October over concerns about whether the REIT could manage the accelerated interest rate increases going on at the time”.
O Feb 2023
Realty Income (O), one of the largest Real Estate Investment Trusts in the world posted its Q4/full-year earnings this week, beating Wall Street estimates. However, despite the higher than expected results, Realty Income shares fell during the week by 1.08%.
On a year-to-date basis, Realty Income shares are up by 1.85%, meaning that they’re underperforming the broader market. For comparison’s sake, the S&P 500 is up by 3.82% thus far during 2023, as is the Vanguard Real Estate ETF (VNQ). The credible authors and Wall Street analysts that the Nobias algorithm tracks show strong bullish sentiment towards O shares after this relative weakness, signaling a potential buying opportunity.
Bullish Nobias Credible Analysts Opinions:
Samuel Smith, a Nobias 4-star rated author, recently published a report on Realty Income on the Sure Dividend website. Realty Income in a REIT and Smith highlighted the Real Estate Investment Trust asset class, stating, “The REIT’s business model is quite simple and has delivered spectacular long-term results. Realty Income acquires well-located commercial properties, remains disciplined in acquisition underwriting, executes long-term net lease agreements, and actively manages the portfolio to maximize value.” He also wrote, “REITs are required to distribute at least 90% of their earnings to shareholders, which leads to steady dividend growth for the asset class, provided earnings grow over time.”
With specific regard to Realty Income’s dividend, Smith said, “Realty Income has a very impressive dividend history, particularly for a REIT. Realty Income is a Dividend Aristocrat. It is also a monthly dividend stock, meaning it pays shareholders 12 dividends each year instead of the more typical quarterly payment schedule.”
“The current dividend yield of 4.4% is well above the S&P 500 average, and the company has done an excellent job growing the dividend payout over time. Realty Income has paid over 625 consecutive monthly dividends without interruption and has raised the dividend over 116 times,” Smith wrote.
Looking at the company’s business model, Smith said, “Realty Income was founded in 1969.” He continued, “The trust employs a highly scalable business model that has enabled it to grow into a massive landlord of more than 11,700 properties. Realty Income is a large cap stock with a market cap of $42.1 billion.”
In conclusion, Smith stated, “Realty Income is undervalued at present and offers investors good total return potential. That said, we believe the stock also remains highly appealing for income investors looking for a secure payout with steady dividend growth.”
Bearish Nobias Credible Analysts Opinions:
Brent Nyitray, a Nobias 5-star rated author, touched upon Realty Income’s recent weakness in an article published at the Motley Fool, writing, “Realty Income stock saw a 25% drop in price between mid-August and mid-October over concerns about whether the REIT could manage the accelerated interest rate increases going on at the time”. “But,” he continued, “it has weathered that headwind and the stock has somewhat recovered (although it's still down about 2% over the past year).”
Gen Alpha, a Nobias 5-star rated author, recently highlighted Realty Income as a top income-oriented pick in an article titled, “2 Monthly Dividends With Up To 11% Yield”. The author wrote, “Realty Income (O) is the largest net lease REITs by asset size and is one of just 64 companies with the elite S&P 500 Dividend Aristocrats index.”
Gen Alpha stated, "It so prizes its reputation giving investors reliable income that it bills itself as the "Monthly Dividend Company". “Since IPO in 1994, Realty Income has given investors a 14.6% compound annual total return, far surpassing the long-term ~10% CAGR of the S&P 500 Index (SPY),” the author continued.
Gen Alpha put a spotlight on the stock’s strong balance sheet, saying, “Realty Income differentiates itself from the pack due to its low cost of capital, as it's just one of a handful of REITs with an A- or better credit rating, thereby resulting in lower cost of debt.”
Lastly, they noted, “Realty Income pays a respectable 4.5% dividend yield that's protected by a 75% FFO payout ratio. It's also reasonably priced at $66.85 with a forward P/FFO of 16.7, sitting below its normal P/FFO of 19.3, setting up investors for potentially strong total returns through dividends and capital appreciation.”
In their article, Gen Alpha discussed Realty Income’s recent diversification move, buying the Encore Boston Harbor Resort and Casino in 2022. They said, “This is sizeable $1.7 billion acquisition is triple-net leased by Wynn Resorts (WYNN) and comes with a respectable 5.9% cash cap rate and has annual lease escalators.” And, as it turns out, Realty Income isn’t done diversifying its assets away from the physical retail industry.
Shawn Johnson, a Nobias 4-star rated author, recently penned an article which touches upon Realty Income’s move into the agricultural industry via a $1 billion investment into vertical farming properties.
Johnson wrote, “Commercial real estate investment trust Realty Income will partner with SoftBank-backed vertical farming startup Plenty Unlimited Inc to invest up to $1 billion to make the startup lease farming space, the companies said on Tuesday.” He continued, “Vertical farms with stacked layers in a controlled indoor environment have been promoted as a sustainable way to grow fruits and vegetables closer to the point of consumption using less water.”
Johnson quoted Arama Kukutai, Plenty’s [the primary tenant of these agricultural investments] chief executive, who said, “Perhaps the biggest challenge facing indoor vertical farming … is the significant expense of building new farms to increase production. Access to this new stream of capital from realty income will accelerate the expansion of bountiful farms and the impact we can make.”
“Capital intensive vertical farms, which have been largely unprofitable, are trying to cut costs and find more capital efficient solutions to grow,” said Johnson. Partnering with a well capitalized real estate investing firm like Realty Income may prove to be a solution to this problem.
Realty Income reported its fourth quarter earnings this week, beating analyst expectations on both the top and bottom lines. Realty Income’s revenue came in at $888.7 million during the quarter, up 29.7% on a year-over-year basis, beating analyst estimates by $48.13 million.
The company’s funds-from-operations (REITs do not use earnings-per-share, but instead, funds-from-operations as their primary bottom-line metric) were $1.00/share during the quarter, beating estimates by $0.01/share. On a normalized basis, FFO/share was $1.05, representing 18% year-over-year growth. And, Realty Income’s adjusted funds-from-operations was $1.00, representing 6.4% year-over-year growth.
Realty Income highlighted its strong investment year, stating that it had “Invested $9.0 billion in 1,301 properties and properties under development or expansion, including $2.5 billion in Europe” during the full-year in 2022.
The company’s CEO, Sumit Roy, said, “I am proud of our team’s outstanding accomplishments in 2022, culminating in AFFO per share growth of 9.2% and a record year for property-level acquisitions of approximately $9 billion. Our investment philosophy is centered around acquiring prime real estate assets in partnership with operators who are leaders in their respective industries. Illustrating this philosophy was the acquisition of our first gaming asset, the Wynn Encore Boston Harbor, which contributed to a record quarter for property-level acquisitions during the fourth quarter of approximately $3.9 billion. In addition, since the start of the fourth quarter, we have acquired properties in several distinct verticals for future potential growth, including investments in properties related to the consumer-centric medical industry, a debut transaction in Italy, and the formation of a real estate development partnership with a leading vertical farming operator.”
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 its property portfolio, the company wrote, “As of December 31, 2022, we owned or held interests in 12,237 properties, which were leased to 1,240 clients doing business in 84 industries.” Our diversified portfolio of commercial properties under long-term, net lease agreements is actively managed, with a weighted average remaining lease term of approximately 9.5 years. Our portfolio of commercial real estate has historically provided dependable rental revenue, supporting the payment of monthly dividends. “As of December 31, 2022, portfolio occupancy was 99.0% with 126 properties available for lease or sale, as compared to 98.9% as of September 30, 2022, and 98.5% as of December 31, 2021.”
Overall bias of Nobias Credible Analysts and Bloggers:
Overall, the majority of credible authors and analysts agree with the upbeat sentiment that Roy expressed during O’s Q4 earnings report. 83% of recent articles published by credible authors which focused on Realty Income expressed a “Bullish” sentiment. 7 out of the 9 credible Wall Street analysts that the Nobias algorithm follows believe that Realty Income shares are likely to increase in value. The average price target being applied to O shares by these credible individuals is $73.22, which represents 11.1% upside potential relative to the stock’s current share price of $64.98.
Disclosure: Nicholas Ward is long Realty Income. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.
Case Study: Nvidia (NVDA) stock according to high performing analysts
Nvidia’s CEO, Jensen Huang, highlighted the stock’s growth potential related to Artificial Intelligence during the Q4 earnings conference call, sparking bullish sentiment.
Nobias Insights: 49% of recent articles published by credible authors focused on Nvidia shares offer a “Bearish” bias. After the stock’s 62% year-to-date rally, only 1 out of 4 credible credible Wall Street analysts who cover NVDA believe shares are likely to rise in value. The average price target being applied to NVDA by these credible analysts is $206.75, which implies downside potential of approximately 11.2% relative to the stock’s current share price of $232.86
Bullish Take: Nobias 4-star rated author, Shawn Johnson, said, “CEO Jensen Huang claimed that Nvidia’s GPUs have increased AI processing performance by no less than a millionth over the past 10 years.”
Bearish Take: Cavenagh Research, a Nobias 5-star rated author, said, “I understand that, as a business, Nvidia has lots of potential. However, I also would like to point out that the potential has an excessively rich price tag attached.”
Key Points
Performance
Nvidia (NVDA) shares rose by 8.74% this week, pushing their year-to-date gains up to 62.67%. This compares favorably to the S&P 500 and the Nasdaq Composite Index, which are up by 3.82% and 9.7% during 2023 thus far, respectively.
Event & Impact
Nvidia posted fourth quarter results this week, beating Wall Street estimates on the top and bottom lines. During Q4, NVDA’s revenue totaled $6.05 billion, beating Wall Street’s consensus estimate by $30 million. Nvidia’s Q4 non-GAAP earnings-per-share came in at $0.88, beating Wall Street’s consensus estimate by $0.08/share.
Noteworthy News:
Nvidia’s CEO, Jensen Huang, highlighted the stock’s growth potential related to Artificial Intelligence during the Q4 earnings conference call, sparking bullish sentiment.
Nobias Insights
49% of recent articles published by credible authors on Nvidia shares offer a “bearish” bias. After the stock’s 62% year-to-date rally, only 1 of 4 credible Wall Street analysts who cover NVDA believes shares are likely to rise in value and their average price target applied to NVDA is $206.75, implying downside potential of approx. 11.2% relative to the current price of $232.86
Bullish Take Nobias 4-star rated author, Shawn Johnson, said, “CEO Jensen Huang claimed that Nvidia’s GPUs have increased AI processing performance by no less than a millionth over the past 10 years.”
Bearish Take Cavenagh Research, a Nobias 5-star rated author, said, “I understand that, as a business, Nvidia has lots of potential. However, I also would like to point out that the potential has an excessively rich price tag attached.”
NVDA Feb 2023
Nvidia (NVDA) posted Q4 earnings this week, causing the stock to rise by 8.74% this week. Nvidia beat analyst estimates on both the top and bottom lines, while also providing bullish guidance and highlighting its long-term growth potential - largely centered around recent Artificial Intelligence developments - during its quarterly conference call.
After the stock’s nearly 9% weekly rally, NVDA shares are now up by 62.67% on a year-to-date basis. This means that they’ve outperformed the broader markets by a wide margin. Comparatively, the S&P 500 and the Nasdaq Composite Index are up by 3.82% and 9.70% on the year, respectively.
Bearish Nobias Credible Analysts Opinions:
Cavenagh Research, a Nobias 5-star rated author, covered Nvidia’s Q4 report in an article that they published at Seeking Alpha this week. The author began their piece, stating, “Although Nvidia's performance in the final quarter of FY 2023 topped analyst expectations with regards to both revenue and earnings, the market arguably was more focused on Nvidia's upbeat outlook with regards to nascent AI opportunities -- opportunities which CEO Jensen Huang sees "at an inflection point."’
”According to CEO Huang,” Cavenagh Research continued, “Nvidia is set to generate significant revenue from services such as selling access to supercomputers and pre-trained AI models, potentially [soon] generating "hundreds of millions of dollars" in sales.”
Looking at Nvidia’s quarterly results, Cavenagh Research wrote, “During the three months ending January 2023, the chip designer generated revenues of around $6.05 billion, representing a 2% QoQ growth from $5.9 billion one quarter prior.”
“Additionally,” they stated, “the company surpassed the estimated $6.03 billion of revenues as estimated by analyst consensus estimates, indicating somewhat lagging market sentiment.” “In terms of profitability,” Cavenagh Research noted, “NVDA achieved noteworthy improvements in FY Q4 2023, with GAAP gross margin expanding to 66.1%, up from 56.1% in FY Q3 2023.”
“Similarly, on the backdrop of both margin and revenue expansion, Nvidia's operating income for FY Q4 2023 jumped to $2.2 billion, as compared to $1.5 billion for Q3 2023 (up 45% QoQ). EPS for the quarter came in at $0.88, beating analyst consensus estimates by 8 cents,” they continued.
After highlighting Nvidia’s Q4 fundamentals, Cavenagh Research transitioned into a discussion of the company’s valuation, writing, “I understand that, as a business, Nvidia has lots of potential. However, I also would like to point out that the potential has an excessively rich price tag attached.” They stated, “According to data compiled by Seeking Alpha, Nvidia is valued at a one-year forward P/E of x67, which represents a more than 173% valuation premium versus the information technology sector.”
Cavenagh Research continued, “Nvidia's P/B is x21 and P/S is x18, valuation premia of 450% and 535%, respectively.”And due to these high valuation premiums, the author concluded, “it is difficult to argue that Nvidia stock is a "buying opportunity."’ “In fact,” Cavenagh Research said, “valued at FWD x10 EV/Sales, Nvidia Corporation stock is trading too expensive to warrant an investment, in my opinion. I reiterate a Hold" recommendation.”
Patrick Seitz, a Nobias 4-star rated author, also touched upon Nvidia’s Q4 report in an article at Investors.com this week. Like Cavenagh Research, Seitz highlighted Nvidia’s top and bottom-line beats. Then, he proceeded to analyze the company’s operating segment results, stating:
“Gaming chip sales remained weak in the fourth quarter, falling 46% year over year to $1.83 billion. However, data center chip sales rose 11% to $3.62 billion, fueled by cloud service providers investing in artificial intelligence technology.
In Nvidia's smaller business segments, professional visualization sales plummeted 65% to $226 million while automotive and embedded sales surged 135% to a record $294 million.” Seitz concluded his report with a quant breakdown of NVDA shares using the Investor Business Daily system.
“NVDA stock ranks ninth out of 34 stocks in IBD's fabless semiconductor industry group, according to IBD Stock Checkup. It has an IBD Composite Rating of 84 out of 99. IBD's Composite Rating is a blend of key fundamental and technical metrics to help investors gauge a stock's strengths. The best growth stocks have a Composite Rating of 90 or better,” he said.
Bullish Nobias Credible Analysts Opinions:
The growth potential of Artificial Intelligence is clearly the catalyst for Nvidia’s recent rally, and Nobias 4-star rated author, Shawn Johnson, highlighted this company’s strong standing in that particular industry in an article that he published at PC Gamer this week.
Johnson analyzed Nivdia’s Q4 conference call and said, “CEO Jensen Huang claimed that Nvidia’s GPUs have increased AI processing performance by no less than a millionth over the past 10 years.” He quoted Huang, who said, “Moore’s Law, at its best, would have delivered 100 times in a decade. By coming up with new processors, new systems, new interconnects, new frameworks and algorithms, and working with data scientists, AI researchers on new models, throughout that run, we’ve processed large language models a million times faster “
“Put another way: No Nvidia, no ChatGPT,” said Johnson. He continued, “The AI language model, which is said to run on roughly 10,000 Nvidia GPUs and has captured the world’s consciousness in recent months by displaying something resembling its actual consciousness, wouldn’t be here without Jensen.”
What’s more, Huang also stated, “Over the course of the next 10 years, I expect, working with developers to come up with new chips, new interconnects, new systems, new operating systems, new distributed computing algorithms and new AI algorithms and new models, I believe We’re going to make AI another million times faster.”
Johnson wrote, “If performing a million times over the past decade isn’t impressive enough, Huang has news for you: Nvidia is going to do it again.” It turns out, Johnson isn’t the only one who is bullish on Nvidia’s growth potential.
Shanthi Rexaline, a Nobias 4-star rated author, published a post-earnings article at Benzinga this week which put a spotlight on Wall Street’s reaction to Nvidia’s report and the consensus across these analyst firms was broadly bullish.
Rexaline said, “Sell-Side Savors Results: Reacting to the quarterly results, sell-side analysts raised their price targets for the shares:
Baird maintained its Neutral rating and increased the price target from $150 to $230.
Oppenheimer maintained an Outperform rating and hiked the price target from $250 to $275.
JPMorgan maintained an Overweight rating and increased the price target from $220 to $250.
Mizuho maintained a Buy rating and upped the price target from $200 to $230.
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.
Barclays maintained a Buy rating and increased the price target from $250 to $275.
Piper Sandler maintained an Overweight rating and hiked the price target from $225 to $275.
Needham maintained a Buy rating and raised the price target from $230 to $270.
Overall bias of Nobias Credible Analysts and Bloggers:
Looking at the credible analysts that the Nobias algorithm tracks (only individuals with 4 and 5-star ratings) the sentiment is less bullish. Only 1 out of the 4 credible Wall Street analysts that Nobias tracks believes that NVDA shares are likely to rise in value, with 2 out of the 4 credible analysts expressing “bearish” opinions.
The average price target being applied to NVDA shares by the credible analyst community is currently $206.75, which represents downside potential of approximately 11.2%. This tepid sentiment is shared by the credible authors who’ve recently written about Nvidia as well. 49% of recent articles published by credible analysts have included a “bearish” sentiment.
Disclosure: Nicholas Ward is long NVDA. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.
Case Study: Cisco (CSCO) stock according to high performing analysts
75% of recent articles published by credible authors focused on Cisco shares offer a “Bullish” bias. 1 out of 3 credible credible Wall Street analysts who cover CSCO believe shares are likely to rise in value. The average price target being applied to CSCO by these credible analysts is $58.33, which implies upside potential of approximately 14.9% relative to the stock’s current share price of $50.77.
Bullish Take: Yuvraj Malik, a Nobias 4-star rated author, said, “Cisco Systems Inc CSCO.O raised its full-year revenue growth forecast on Wednesday, banking on its ability to push backlog orders quickly and rapid adoption of 5G technology to keep demand upbeat.”
Bearish Take: Nobias 5-star rated author, Reinhardt Krause said, “Cisco's pivot to subscription software revenue has stalled.”
Key Points
Performance
Cisco (CSCO) shares rose by 6.75% this week, pushing their year-to-date gains into positive territory; CSCO is now up by 5.90% on the year. This compares poorly to the S&P 500 which is up by 6.67% during 2023 thus far.
Event & Impact
Cisco posted its fiscal 2023 second quarter results this week, beating Wall Street estimates on the top-line and meeting expectations on the bottom-line. During Q2, CSCO’s revenue totaled $13.6 billion, beating Wall Street’s consensus estimate by $190 million, representing 7.1% year-over-year growth. Cisco’s Q2 non-GAAP earnings-per-share came in at $0.88, beating estimates by $0.02/share.
Noteworthy News:
Cisco not only beat estimates on both the top and bottom lines, but also raised full-year 2023 growth guidance up to levels well above Wall Street’s consensus. The company also announced its 12th consecutive annual dividend increase, helping to bolster the bullish sentiment surrounding shares.
Nobias Insights
75% of recent articles published by credible authors focused on Cisco shares offer a “bullish” bias. 1 out of 3 credible Wall Street analysts who cover CSCO believe shares are likely to rise in value. The average price target being applied to CSCO by these credible analysts is $58.33, which implies upside potential of approximately 14.9% relative to the stock’s current share price of $50.77.
Bullish Take Yuvraj Malik, a Nobias 4-star rated author, said, “Cisco Systems Inc CSCO.O raised its full-year revenue growth forecast on Wednesday, banking on its ability to push backlog orders quickly and rapid adoption of 5G technology to keep demand upbeat.”
Bearish Take Nobias 5-star rated author, Reinhardt Krause said, “Cisco's pivot to subscription software revenue has stalled.” Krause said, “During the coronavirus pandemic, corporate spending on data networks slowed amid increased office vacancy rates. One view is that corporate networks will be less important if remote work becomes entrenched”
CSCO Feb 2023
Cisco (CSCO) posted its fiscal 2023 second quarter earnings this week, beating Wall Street’s estimates on both the top and bottom lines. The company also established guidance for the full year in 2023 which was well above consensus estimates.
This beat and raise quarter caused CSCO shares to rally by 6.75% this week. This 6.75% rally pushed the stock’s year-to-date into positive territory. Now, Cisco is up by 5.90% on the year. This compares poorly to the S&P 500, which is up by 6.67% thus far during 2023.
However, the average price target currently being applied to CSCO shares by the credible Wall Street analysts that Nobias tracks implies that the stock has more room to run, with upside potential of approximately 15%.
Bullish Nobias Credible Analysts Opinions:
Yuvraj Malik, a Nobias 4-star rated author, also covered CSCO’s recent earnings report and highlighted the company’s future guidance.
Malik wrote, “Cisco Systems Inc CSCO.O raised its full-year revenue growth forecast on Wednesday, banking on its ability to push backlog orders quickly and rapid adoption of 5G technology to keep demand upbeat.” He reported, “The company forecast fiscal 2023 revenue growth between 9% to 10.5%, compared with its earlier forecast of 4.5% to 6.5% growth.”
With regard to Cisco’s dividend, Tradevestor, a Nobias 4-star rated author, published an article this week highlighting the company’s 12th consecutive annual dividend increase. Cisco increased its quarterly dividend by a penny, from $0.38/share to $0.39/share and Tradevestor wrote, “Cisco's new quarterly dividend of 39 cents per share gives it a nice round current yield of 3.25% based on today's closing price.”
Looking at Cisco’s dividend growth history, the author said, “Since first initiating a dividend of 6 cents in 2011, Cisco's quarterly dividend has now gone up more than 6-fold in 12 years. Impressive to say the least.” “The dividend growth rate slowdown continues: going from 24% to 11% to 13% to 6% around 3% the last four years, including the current increase,” they said
Furthermore, Tradevestor touched upon share repurchases as well, stating, “While Cisco did not announce a new buyback this time around, the $15B buyback it announced last year is likely still in effect and is large enough to retire about 300 Million shares in total.” “I continue to believe Cisco Systems, Inc. is in the midst of a successful turnaround and I may soon initiate a position in the stock,” they said when concluding their piece.
Bearish Nobias Credible Analysts Opinions:
After Cisco posted its Q2 earnings, Nobias 5-star rated author, Reinhardt Krause, published an article titled, “Is Cisco Stock A Buy On Improved 2023 Outlook?”
Looking at the stock’s quarterly results, Krause wrote, “Cisco reported reported fiscal second quarter adjusted earnings of 88 cents per share on revenue of $13.6 billion, topping estimates of 85 cents and $13.42 billion.”
Regarding future guidance, Krause said, “For the current April quarter, it expects sales growth of 11% to 13% and EPS of 96 cents to 98 cents. Analysts had estimated 89 cents EPS for the April-ending period.” He continued, “Management raised the fiscal-year profit forecast to $3.73 to $3.78 per share.”
While the guidance increase was widely seen as impressive - sparking CSCO’s 6.75% rally this week - Krause noted that the company’s operations still face growth headwinds. He said, “The tech icon aims to increase recurring revenue from subscription-based software and services and shift away from its core business of selling network switches and routers.” “But,” he continued, “Cisco's pivot to subscription software revenue has stalled.”
Krause said, “During the coronavirus pandemic, corporate spending on data networks slowed amid increased office vacancy rates. One view is that corporate networks will be less important if remote work becomes entrenched” “As a result,” he stated, “Cisco stock needs to hike investments in next-generation enterprise networks.”
Krause went on to highlight Cisco’s past success with regard to mergers and acquisitions, stating:
Cisco in late 2019 agreed to buy U.K.-based IMImobile, which sells cloud communications software, in a deal valued at $730 million.
In May 2020, Cisco acquired ThousandEyes, a networking intelligence company, for about $1 billion.
In 2017, Cisco acquired software maker AppDynamics for $3.7 billion. It bought BroadSoft for $1.9 billion in late 2017.
In July 2019, Cisco acquired Duo Security for $2.35 billion, marking its biggest cybersecurity acquisition since its purchase of Sourcefire in 2013.
He also said, “Cisco in 2019 agreed to buy Acacia Communications for $2.6 billion in cash. China's government delayed approval of the deal. In January 2021, Cisco upped its offer for Acacia to $4.5 billion and the deal finally closed.”
Looking at the potential for ongoing M&A to serve as a positive catalyst for shares, Krause wrote, “There's more than $20 billion in cash on the balance sheet of Cisco stock, says Moody's. The company has slowed buybacks of its own stock. Some analysts speculate Cisco could make a large acquisition of a software company.”
Krause also implied strong demand for the company’s stock in the meantime, writing, “The company remains one of the top U.S. tech companies in terms of cash on its balance sheet. With 4% dividend yield, CSCO stock still finds support among institutional investors.”
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.
Krause also implied strong demand for the company’s stock in the meantime, writing, “The company remains one of the top U.S. tech companies in terms of cash on its balance sheet. With 4% dividend yield, CSCO stock still finds support among institutional investors.”
Overall bias of Nobias Credible Analysts and Bloggers:
Overall, 75% of recent articles published on Cisco by the credible authors that the Nobias algorithm tracks have expressed a “bullish” sentiment. Yet, 2 out of the 3 credible Wall Street analysts that Nobias tracks who have expressed an opinion on CSCO shares are bearish on the stock
However, the average price target amongst those 3 individuals for CSCO shares is $58.33, which implies upside potential of approximately 14.9% relative to CSCO’s current price of $50.77.
Therefore, it appears that the strong bullish sentiment being expressed by the one credible analyst who believes that CSCO is likely to increase in value overshadows the price targets of the two bears.
Disclosure: Nicholas Ward is long CSCO. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.
Case Study: Coka-Cola (KO) stock according to high performing analysts
48% of recent articles published by credible authors focused on Coca-Cola shares offer a “Neutral” bias. 2 out of 2 credible credible Wall Street analysts who cover KO believe shares are likely to rise in value. The average price target being applied to KO by these credible analysts is $73.00, which implies upside potential of approximately 21.4% relative to the stock’s current share price of $60.12.
Bullish Take: Tradevestor, a Nobias 4-star rated author, said, “But as I've written in the past, stocks like Coca-Cola are my homeowners and car insurance. I don't really pay attention to them until I need them. But when I need them, boy am I glad I had them! 2022 proved this emphatically, as Coca-Cola outperformed the market by more than 20% at various points.”
Bearish Take: Jonathan Wheeler, a Nobias 4-star rated author, said, “I just don't see the case for an investment today. There are much better opportunities out there for income, dividend growth, or just growth in general. There are also much cheaper ones. KO stock is a hold, I won't be buying any.”
Key Points
Performance
Coca-Cola (KO) shares rose by 0.42% this week; however, they’re still down by 4.50% on a year-to-date basis. This compares poorly to the S&P 500 which is up by 6.67% during 2023 thus far.
Event & Impact
Coca-Cola posted fourth quarter results this week, beating Wall Street estimates on the top-line and meeting expectations on the bottom-line. During Q4, KO’s revenue totaled $10.1 billion, beating Wall Street’s consensus estimate by $180 million, representing 6.3% year-over-year growth. Coke’s Q4 non-GAAP earnings-per-share came in at $0.45.
Noteworthy News:
Coca-Cola announced its 61st consecutive annual dividend increase alongside earnings. Also, the company provided full-year 2023 guidance, calling for organic sales growth in the 7-8% range, roughly doubling Wall Street’s consensus of 3.59%.
Nobias Insights
48% of recent articles published by credible authors focused on Coca-Cola shares offer a “neutral” bias. 2 out of 2 credible Wall Street analysts who cover KO believe shares are likely to rise in value. The average price target applied to KO by these credible analysts is $73.00, which implies upside potential of approximately 21.4% relative to the stock’s current share price of $60.12.
Bullish Take Tradevestor, a Nobias 4-star rated author, said, “But as I've written in the past, stocks like Coca-Cola are my homeowners and car insurance. I don't really pay attention to them until I need them. But when I need them, boy am I glad I had them! 2022 proved this emphatically, as Coca-Cola outperformed the market by more than 20% at various points.”
Bearish Take Jonathan Wheeler, a Nobias 4-star rated author, said, “I just don't see the case for an investment today. There are much better opportunities out there for income, dividend growth, or just growth in general. There are also much cheaper ones. KO stock is a hold, I won't be buying any.”
KO Feb 2023
Coca-Cola (KO) reported fourth quarter earnings this week. The company also announced its 61st consecutive annual dividend increase, raising its quarterly payment by 4.5% from $0.42/share to $0.44/share.
Coca-Cola beat Wall Street’s revenue estimates during Q4 and posted earnings-per-share that met expectations. Yet, KO shares have fallen by 4.50% on a year-to-date basis, underperforming the S&P 500, which is up by 6.67% during this same time period, by a wide margin.
Bullish Nobias Credible Analysts Opinions:
Tradevestor, a Nobias 4-star rated author, covered Coca-Cola’s Q4 report in an article published at Seeking Alpha this week. The author touched upon the beverage giant’s recent results, stating, “Compared to the Q3 quarter, which was a beat all around along with a raise in outlook, Q4 seems to be a mixed bag on initial review with EPS being inline, revenue beating by 1%, and global unit case volume declining by 1%.”
They went on, writing that Coca-Cola produced, “Q4 EPS of 45 cents came in line with expectations. That means, for FY 2022, Coca-Cola reported a comparable, non-GAAP EPS of $2.48.”
Tradevestor also said that Coca-Cola produced, “Q4 Revenue of $10.13 Billion beat by $180 Million. That helped Coca-Cola achieve a 11% full year revenue increase to $43 Billion.” “Organic sales came in at 15%, well above the consensus of 11%,” they said.
Looking at the company’s future guidance, Tradevestor said, “Coca-Cola expects organic revenue growth of 7% to 8% in 2023, despite inflationary and currency based headwinds.” “As a result,” they continued, “the company expects EPS growth to be a little muted at 4% to 5% in 2023. Using 2022's reported EPS of $2.48, the guided range for 2023 is between $2.57 and $2.60.”
“In summary,” Tradevestor wrote, “Coca-Cola had a reasonably strong Q4 as expected, but it was not an "all-out beat" like Q3 was.” They continued, “I believe at 23 times forward earnings, the stock is fully valued here, and with the market getting into "risk on" mode in the early days of 2023, I expect Coca-Cola to trade sideways unless inflation and as a result, The Fed, catch the market by surprise, sending more investors to seek safety.” The author said, “I am holding onto my The Coca-Cola Company shares and reinvesting the dividends while waiting for a pullback to add more.”
Regarding their long-term outlook for shares, Tradevestor summarized their reason for ownership, stating: “Coca-Cola has underperformed the S&P 500 Index (SP500) by about 10% YTD, and I expect this to continue should The Fed continue its recent dovish stance as inflation cools down. But as I've written in the past, stocks like Coca-Cola are my homeowners and car insurance. I don't really pay attention to them until I need them. But when I need them, boy am I glad I had them! 2022 proved this emphatically, as Coca-Cola outperformed the market by more than 20% at various points.”
Bearish Nobias Credible Analysts Opinions:
Jonathan Wheeler, a Nobias 4-star rated author, offered a more cautious take on Coca-Cola shares in a report that he recently published. Wheeler began his piece by stating, “Coca-Cola (NYSE:KO) is a company with a brand known by almost every person in the world. The length of its operating history and strength of its marketing have put it in a position to drive significant returns for its shareholders over time. Adding on to that, Buffett's legendary investment in KO back in the 1980's is discussed consistently in value circles, and it's elevated KO to an almost untouchable status among many investors.” “However,” he pivoted, “it's highly likely the next 2 decades won't look like the last 2 did for the company.”
Wheeler went on to highlight why it is that his future outlook is bleaker than Coca-Cola’s esteemed past, stating, “Debt has climbed consistently over the past 10 years, the company has relied heavily on acquisitions to change its volume mix in the face of rapidly shifting consumer tastes, and investors today have to hang their hat on further international penetration.”
He continued, “With the difficult macroeconomic environment, KO is well-positioned to shield itself from much of the pain due to its strong distributor and bottling partnerships and rock-solid pricing power. However, international distribution will be more difficult to manage compared to the disparate and smaller distributors in America.”
That isn’t to say that Coke hasn’t had success overseas. Wheeler acknowledges recent success, writing, “The company is among an elite group that has managed to find broad success globally, with Sprite recently becoming a $1B brand in India, and emerging markets will continue to be the major growth driver for KO as we look ahead.”
However, he notes, “The thing I want to point out here is that KO has shifted its company over time well to accommodate headwinds in consumer tastes. But with the company's debt load and 75% of earnings going out the door as dividends, it will be more difficult for the company to continue to snatch up brands over time.”
“I'm not calling for a liquidity crisis or doom and gloom here,” said Wheeler, “but growth won't be as easy going forward as it was when the company quadrupled its debt load from 2010-2020.”“I don't forecast or expect investors to lose money buying KO,” he said.
“What I do expect is that a purchase at today's valuation doesn't account for the actual likely path for KO from here. The company is likely to continue driving revenue and earnings growth, albeit somewhere in the single-digits. An investment at today's valuation based on analyst estimates for earnings growth and a return to the long-run average (assuming the company should remain at that multiple) could yield around 6% annualized total returns. Half of that comes from the dividend.”
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.
Wheeler concluded, “I just don't see the case for an investment today. There are much better opportunities out there for income, dividend growth, or just growth in general. There are also much cheaper ones. KO stock is a hold, I won't be buying any.”
Overall bias of Nobias Credible Analysts and Bloggers:
48% of recent articles published by the credible authors that Nobias tracks on Coca-Cola have expressed a “Neutral” sentiment, showing that many writers agree with Wheeler’s take. However, the credible Wall Street analysts that Nobias tracks who have offered an opinion on KO share are more bullish. 100% of these individuals believe that KO shares are likely to increase in value. Their average price target for Coca-Cola is $73.00, which implies upside potential of approximately 21.4% relative to KO’s current share price of $60.12.
Disclosure: Nicholas Ward is long KO Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.
Case Study: Roku (ROKU) stock according to high performing analysts
51% of recent articles published by credible authors focused on Roku shares offer a “Neutral” bias. 1 out of the 4 credible credible Wall Street analysts who cover ROKU believe shares are likely to rise in value. However, the average price target being applied to ROKU by these credible analysts is $99.00, which implies upside potential of approximately 38.3% relative to the stock’s current share price of $71.56.
Bullish Take: Luke Lango, a Nobias 4-star rated author, said, “Year-to-date, shares are already up about 75%, marking the stock’s sharpest rally of all time. Roku stock joins a long list of rocketing tech stocks that have returned from the dead in 2023. And in less than two months, they’re scoring a decade’s worth of returns for their investors.”
Bearish Take: Shawn Johnson, a Nobias 4-star rated author, said, “The operating loss represents a 1,270 percent decline from last year, when Roku reported operating income of $21.4 million during the holiday season.”
Key Points
Performance
Roku (ROKU) shares rose by 32.2% this week, pushing their year-to-date gains up to 76.4%. This compares favorably to the S&P 500 and the Nasdaq Composite index which are up by 6.67% and 13.48%, respectively, during 2023 thus far.
Event & Impact
Roku posted fourth quarter results this week, beating Wall Street estimates on both the top and bottom lines. During Q4, ROKU’s revenue totaled $867.06 million, beating Wall Street’s consensus estimate by $64.2 million, representing 0.2% year-over-year growth. Roku’s Q4 GAAP earnings-per-share came in at -$1.70, missing estimates by $0.03/share.
Noteworthy News:
Roku continued to grow its subscriber base during Q4, despite macro headwinds persisting in the digital advertising space. The company believes that it will generate positive results on the bottom-line by 2024.
Nobias Insights
51% of recent articles published by credible authors focused on Roku shares offer a “neutral” bias. 1 out of the four credible Wall Street analysts who cover ROKU believes shares are likely to rise in value. However, the average price target being applied to ROKU by these credible analysts is $99.00, which implies upside potential of approximately 38.3% relative to the stock’s current share price of $71.56.
Bullish Take Luke Lango, a Nobias 4-star rated author, said, “Year-to-date, shares are already up about 75%, marking the stock’s sharpest rally of all time. Roku stock joins a long list of rocketing tech stocks that have returned from the dead in 2023. And in less than two months, they’re scoring a decade’s worth of returns for their investors.”
Bearish Take Shawn Johnson, a Nobias 4-star rated author, said, “The operating loss represents a 1,270 percent decline from last year, when Roku reported operating income of $21.4 million during the holiday season.”
ROKU Feb 2023
Roku shares have been on quite a run throughout 2023 thus far, rising by 76.43% on a year-to-date basis. The stock was up 32.2% this week alone on the heels of its fourth quarter earnings report. What makes this story so interesting is that after its 76% year-to-date rally, ROKU shares are still down by 50.55% during the trailing 12 months. This speaks to the depth of ROKU’s 2022 sell-off and begs the question, can the stock’s amazing run continue?
Bullish Nobias Credible Analysts Opinions:
Luke Lango, a Nobias 4-star rated author, published an article this week at Business Insider which focused on the 2023 rally and the macro sentiment which has helped to fuel Roku’s recent rally. Lango said, “Did you know that more than 500 stocks have already risen more than 50% in 2023 alone? And more than 160 have already doubled!” “Some folks are calling this a “dead-cat bounce” for high-growth tech stocks,” he said. But, he quickly pivoted, stating, “It’s not. It’s actually the opposite – the start of a big new bull market for high-growth tech stocks.”
Lango noted, “All the factors that knocked down stocks in 2022 are reversing course in 2023.” He continued, “Rising inflation has become falling inflation. An increasingly hawkish Fed has become an increasingly dovish Fed. A deteriorating economic outlook has become a re-stabilizing economic outlook. Excessive valuations have become discounted valuations. “
“In short,” Lango wrote, “the headwinds of 2022 have become tailwinds in 2023. As this reversal progresses, the stock market will make an epic comeback.” Then, he pivoted away from the macro and towards the micro, highlighting Roku’s 2023 rally, stating, “Year-to-date, shares are already up about 75%, marking the stock’s sharpest rally of all time. Roku stock joins a long list of rocketing tech stocks that have returned from the dead in 2023. And in less than two months, they’re scoring a decade’s worth of returns for their investors.”
And, using history as a guide, Lango believes that Roku’s rally is likely to continue. He said, “Since 1950, the S&P 500 has rallied 6%-plus in January on 10 separate occasions.” And then continued, “In years when the red-hot January performance followed a bad prior year performance – as is the case in 2023 – average returns that year were almost 26%.” In other words, Lango believes that the macro rally has plenty of room to run.
Patrick Seitz, a Nobias 4-star rated author, broke down Roku’s Q4 results in an article that he published at Investors.com this week. Regarding the company’s subscriber base, Seitz wrote, “The San Jose, Calif.-based company late Wednesday said it added 4.6 million new active accounts in the holiday quarter, bringing its total to 70 million.” He continued, “Analysts had expected 3.04 million new users in the period.”
Regarding the company’s fourth quarter fundamentals, Seitz said, “Roku lost $1.70 a share on sales of $867 million in the fourth quarter amid a difficult advertising climate.” He compared those results to the analyst consensus, stating, “Analysts had predicted Roku would lose $1.72 a share on sales of $803 million. In the year-earlier period, Roku earned 17 cents a share on sales of $865 million.”
Looking ahead at the forward guidance that Roku’s management provided during the Q4 report, Seitz said, “For the current quarter, Roku forecast total revenue of $700 million, down 5% from the same period last year. But that topped Wall Street's goal of $692 million for the first quarter.” Roku published a Letter to Shareholders alongside its Q4 results and in that press release, the company focused on its size and scale within the streaming market.
Roku said, “Active Account net adds were 4.6 million in Q4 and 9.9 million in 2022, ending the year with 70.0 million active accounts globally. Full year net adds were above both 2019 and 2021 levels and driven primarily by the Roku TV program in the U.S. and international markets. In the U.S., our active accounts are approaching half of broadband households, and we believe this share will continue to grow.”
The company concluded that letter stating, “Looking ahead, although macro uncertainty seems likely to persist in 2023, our unmatched scale and engagement, along with our competitive advantages, give us conviction in our ability to navigate and execute in challenging times. “
Bearish Nobias Credible Analysts Opinions:
Shawn Johnson, a Nobias 4-star rated author, published an article highlighting Roku’s Q4 results this week as well; however, in his report, he focused his attention on the company’s operating losses. Johnson said, “The operating loss represents a 1,270 percent decline from last year, when Roku reported operating income of $21.4 million during the holiday season.” Yet, he noted, “Despite mounting losses, Roku stock rose nearly 10 percent in after-hours trading on the company’s better-than-expected revenue performance, which analysts had expected to land closer to $803 million.”
Maintaining that bottom-line focus, Johnson wrote, “For the current first quarter, Roku said it expects the net loss to remain the same but shrink to $205 million.” Lastly, Johnson touched upon Roku’s operating results, writing, “Total streaming hours for the quarter increased to 23.9 billion hours, an increase of 23 percent year-over-year.” He also noted, “Roku’s platform business continued to drive the majority of revenue, while the device business — hit by slower holiday sales — saw an 18 percent decline over the previous 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.
In the company’s Q4 letter to shareholders, Roku highlighted its plans to generate positive results on the bottom-line, stating: “Importantly, we plan to continue to improve our operating expense profile to better manage through the challenging macro environment, while building on our platform's monetization and engagement tools and partnerships. Through a combination of operating expense control and revenue growth, we are committed to a path that delivers positive adjusted EBITDA for full year 2024.”
Overall bias of Nobias Credible Analysts and Bloggers:
Overall, the credible authors that the Nobias algorithm tracks remain divided on Roku’s prospects, with 51% of recent articles published on ROKU shares expressing a “Neutral” opinion. The credible Wall Street analysts that Nobias tracks are divided on the shares as well. 50% of credible analysts who follow ROKU shares offer “Bearish” opinions. Just 1 of the 4 credible analysts who cover the stock believe that shares are likely to increase in value.
Yet, the strength of that bullish report pushes the average credible analyst price target for Roku shares up to $99.00/share, implying upside potential of approximately 38.3% relative to the stock’s current share price of $71.56.
Disclosure: Nicholas Ward has no ROKU position Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.
Case Study: Chipotle (CMG) stock according to high performing analysts
Chipotle’s same-store-sales missed expectations during Q4, coming in at 5.6% compared to consensus estimates of 7.0%. CMG continued to grow its store count, however, opening 100 new stores during Q4, signaling future revenue growth.
Nobias Insights: 67% of recent articles published by credible authors focused on Chipotle shares offer a “Bullish” bias. Also, 100% of the credible Wall Street analysts who cover CMG believe shares are likely to rise in value. The average price target being applied to Chipotle by these credible analysts is $1871.67, which implies upside potential of approximately 18.2% relative to the stock’s current share price of $1583.89.
Bullish Take: Margaret Moran, a Nobias 5-star rated author, said, “Chipotle has been posting sector-leading growth for several years now, more than doubling its store count over the past decade from around 1,400 to over 3,100 while also improving its same-store sales consistently.”
Bearish Take: Muslim Farooque, a Nobias 4-star rated author, said, “Investors must pay a premium to wager on Chipotle, but with economic uncertainty and bearish market sentiment, I think it would be best to avoid such an overvalued option.”
Key Points
Performance
Chipotle Mexican Grill (CMG) shares fell by 6.16% this week. However, on a year-to-date basis, CMG shares are up by 15.52%. This compares favorably to the S&P 500, which is up by 6.96% during 2023 thus far.
Event & Impact
Chipotle posted fiscal fourth quarter results this week, missing Wall Street estimates on both the top and bottom lines. During Q4, Chipotle’s revenue totaled $2.2 billion, which was $30 million below analyst estimates, representing 11.2% year-over-year growth. CMGs Q1 non-GAAP earnings-per-share came in at $8.29/share, missing Wall Street’s consensus estimate by $0.60/share.$0.99/share, beating Wall Street’s consensus estimate by $0.08/share.
Noteworthy News:
Chipotle’s same-store-sales missed expectations during Q4, coming in at 5.6% compared to consensus estimates of 7.0%. CMG continued to grow its store count, however, opening 100 new stores during Q4, signaling future revenue growth.
Nobias Insights
67% of recent articles published by credible authors focused on Chipotle shares offer a “bullish” bias. Also, 100% of the credible Wall Street analysts who cover CMG believe shares are likely to rise in value. The average price target applied to Chipotle by these credible analysts is $1871.67, which implies upside potential of approximately 18.2% relative to the stock’s current share price of $1583.89.
Bullish Take Margaret Moran, a Nobias 5-star rated author, said, “Chipotle has been posting sector-leading growth for several years now, more than doubling its store count over the past decade from around 1,400 to over 3,100 while also improving its same-store sales consistently.”
Bearish Take Muslim Farooque, a Nobias 4-star rated author, said, “Investors must pay a premium to wager on Chipotle, but with economic uncertainty and bearish market sentiment, I think it would be best to avoid such an overvalued option.”
CMG Feb 2023
Chipotle Mexican Grill (CMG) posted Q4 earnings this week, causing the stock to sell off. CMG shares were down by 6.16% on the week, pushing their year-to-date gains down to 15.52%. It’s important to note that these 15.5% year-to-date gains still represent significant outperformance relative to the S&P 500, which has risen by 6.96% thus far during 2023.
When it comes to CMG shares, there appears to be a bull/bear tug of war going on between individuals who believe that the stock’s high valuation premium is warranted due to the stock’s strong fundamental growth profile and those who believe that shares are overvalued.
Bearish Nobias Credible Analysts Opinions:
Taking the bearish side of the debate, Muslim Farooque, a Nobias 4-star rated author, highlighted Chipotle’s quarterly results in an article that he published at GuruFocus this week. He began his report stating, “Restaurant giant Chipotle Mexican Grill Inc. reported weaker-than-expected results to close out 2022 on Tuesday, leading to a sell-off.”
He continued, “Wrapping up 2022, Chipotle's results for the three months ended Dec. 31 came in behind analysts' estimates. The fourth quarter was a major blemish to its excellent record of earnings surprises as non-GAAP earnings per share missed estimates by 60 cents. Moreover, its $2.2 billion in revenue missed expectations by $30 million. Same-store sales growth of 5.6% also fell short of not only the market's projections, but its own.”
“On a more positive note,” Farooque said, “the company opened 100 new restaurants during the three-month period, bringing its total restaurant count to a whopping 3,100.”
With CMG’s slowing growth in mind, Farooque questioned the stock’s valuation level. He said, “Chipotle is currently trading at a price-earnings multiple of 59.99. While there is momentum, making it a strong contender for a premium valuation, given how new investors are playing and the stock's recent price surge, it may not currently be the best value opportunity.” He continued, “That becomes especially apparent when you contrast it with companies like Yum Brands Inc. (YUM) and McDonald's Corp. (MCD) which trade at multiples of 28.91 and 32.09.”
He put a spotlight on the macro risk that CMG shares are facing, stating, “A recession could have dire consequences for Chipotle since its fast-casual approach targets consumers who allocate much of their discretionary spending to restaurant dining.”
Farooque did note that , “Chipotle's stock has seen tremendous growth, with a return north of 500% over the past five years.” He said, “Revenue and Ebitda growth rates have averaged roughly 14% and 31.7% over the past five years.”
But, what’s in the past is in the past, and today, he says, “Investors must pay a premium to wager on Chipotle, but with economic uncertainty and bearish market sentiment, I think it would be best to avoid such an overvalued option.”
Bullish Nobias Credible Analysts Opinions:
Taking a bullish stance, Margaret Moran, a Nobias 5-star rated author, published an article at Yahoo Finance this week explaining why Chipotle is a “notable exception” to the poor performance that most growth stocks have posted over the last year or so. She touched upon CMG’s valuation, stating, “The quick-service Mexican-inspired food chain has a price-earnings ratio of 56.09 [reflecting the stock’s sell-off during the back half of this week], which stands far above its industry average of 23.60.”
With this premium valuation in mind, Moran posed the question, “Why is the market still so bullish on Chipotle?” “The answer could lie with the more defensive nature of its business in the food industry combined with its rapid growth in recent years,” she continued. “Moreover,” Moran wrote, “while competitors are trying to cut back on expenses, Chipotle is still chugging ahead with its expansion plans and it is doing so while maintaining an incredibly strong balance sheet.”
Regarding Chipotle’s historical growth, she said, “Chipotle has been posting sector-leading growth for several years now, more than doubling its store count over the past decade from around 1,400 to over 3,100 while also improving its same-store sales consistently.”
Furthermore, Moran touched upon the company’s future growth plans, stating, “In February 2022, CEO Brian Niccol upped that guidance, saying, Over the long term, we now believe we can operate at least 7,000 Chipotle restaurants in North America, up from our prior goal of 6,000.” She also noted that Chipotle’s food offering set it apart from its peers. She wrote, “The companys [sic] dedication to fresh and healthy ingredients makes it unique among large-scale fast-food chains.” “Additionally,” she said, “Chipotles meals are made to order rather than coming in a preset recipe that is impossible to change.”
With regard to CMG’s performance over the past year or so - during a period that the United States has experienced inflation that consumers haven’t seen in decades - Moran said, “A key indicator of customer loyalty and the existence of a moat is whether demand can withstand price increases due to inflation.” Looking at Chipotle’s data, she continued, “Year over year, its menu prices are up about 13%, but same-store sales still grew 7.6% year over year in the third quarter of 2022, indicating some resilience.”
Now, Moran makes it clear that “It has not all been smooth sailing” for the company or its shareholders over the past decade or so. She said, “While revenue growth has been consistent at a rate of 12.30% per year for the past decade, earnings have been inconsistent due to a combination of growth investments, the pandemic and a shocking E. coli breakout in July 2015 that resulted in 43 store closings”.
But, despite those headwinds, the stock continues to trade with that 56x earnings multiple and, as Moran notes, “According to GuruFocus discounted cash flow calculator, Chipotle will need to grow its earnings by around 27% per year for the next decade to be worth its current valuation.”
That’s a high bar to clear for any company, especially one that operates in the food and beverage space; however, Moran concluded her report by stating, “If Chipotle can double its store count over the next decade like it did during the previous decade, even if it does not mean the 27% per year threshold exactly, it could make up the difference with high valuation multiples.”
With regard to the company’s most recent quarterly results and the potential for ongoing price increases, Shawn Johnson, a Nobias 4-star rated author, noted that, “Chipotle (CMG) will let consumers digest its latest price hike before it cooks up more food in 2023” in a recent article that he published at Business News. Johnson quoted Chipotle CFO Jack Hartung who spoke in a recent Yahoo Finance Live video, saying, “We have no plans to dial back menu price increases, but we have no plans to raise prices.”
Johnson wrote, “Hartung’s call on prices came after Chipotle felt some pushback from low- and middle-income consumers in the fourth quarter.” He continued, “Same-store sales growth clocked in at 5.6%, cooling from a growth rate of over 7% in the third quarter as customer traffic softened.” “Fortunately for Chipotle,” he continued, “higher menu prices haven’t caused continued traffic weakness in 2023.”
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.
Although CMG’s Q4 results fell short of Wall Street’s expectations, Johnson wrote, “The company said same-store sales grew by a low double-digit percentage in January. For the first quarter, Chipotle guided for a high single-digit percentage same-store sales gain.”
Overall bias of Nobias Credible Analysts and Bloggers:
Overall, after CMG’s Q4 report and the stock’s recent pullback, both the credible author and analyst communities that the Nobias algorithm tracks remain overly bullish on Chipotle shares. 67% of recent articles published by credible authors on the stock have expressed a “Bullish” sentiment. 100% of the credible Wall Street analysts that Nobias follows who have expressed an opinion on CMG shares believe that they’re likely to increase in value.
Currently, Chipotle trades for $1583.89/share. The average price target being applied to the stock by the credible Wall Street analysts that Nobias follows is $1871.67, which implies upside potential of approximately 18.2%.
Disclosure: Nicholas Ward is long CMG. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.
Case Study: Disney (DIS) stock according to high performing analysts
49% of recent articles published by credible authors focused on Disney shares offer a “Neutral” bias. However, 100% of the credible Wall Street analysts who cover DIS believe shares are likely to rise in value. The average price target being applied to DIS by these credible analysts is $129.50, which implies upside potential of approximately 19.8% relative to the stock’s current share price of $108.06.
Bullish Take: Shanthi Rexaline, a Nobias 4-star rated author, said, “Walt Disney Company DIS shares took off after the entertainment giant reported above-consensus fiscal year 2023 first-quarter earnings.”
Bearish Take: Ian Lyndal, a Nobias 4-star rated author, said, “Peltz had previously expressed criticism over Disney's $71 billion acquisition of Fox in 2019 and its lack of succession planning.”
Key Points
Performance
Disney (DIS) shares fell by 1.87% this week. However, on a year-to-date basis, Disney shares are up by 21.46%. This compares favorably to the S&P 500, which is up by 6.96% during 2023 thus far.
Event & Impact
Disney posted fiscal 2023 Q1 results this week, beating Wall Street estimates on both the top and bottom lines. During Q1, Disney’s revenue totaled $23.51 billion, which was $230 million above analyst estimates, representing 7.7% year-over-year growth. Disney’s Q1 non-GAAP earnings-per-share came in at $0.99/share, beating Wall Street’s consensus estimate by $0.08/share.
Noteworthy News:
Disney beat analyst estimates on both the top and bottom-lines, but the growth was largely attributed to its Parks & Resorts segment. Bob Iger, Disney’s CEO, announced a restructuring plan to reduce costs and make its content segments profitable as well. Iger also mentioned that he plans to bring back Disney’s shareholder dividend in 2023.
Nobias Insights
49% of recent articles published by credible authors focused on Disney shares offer a “neutral” bias. However, 100% of the credible Wall Street analysts who cover DIS believe shares are likely to rise in value. The average price target applied to DIS by these credible analysts is $129.50, which implies upside potential of approximately 19.8% relative to the stock’s current share price of $108.06.
Bullish Take Shanthi Rexaline, a Nobias 4-star rated author, said, “Walt Disney Company DIS shares took off after the entertainment giant reported above-consensus fiscal year 2023 first-quarter earnings.”
Bearish Take Ian Lyndal, a Nobias 4-star rated author, said, “Peltz had previously expressed criticism over Disney's $71 billion acquisition of Fox in 2019 and its lack of succession planning.”
DIS Feb 2023
The Walt Disney Company released its Q1 fiscal 2023 earnings this week, beating Wall Street’s consensus estimates on both the top and bottom lines. Disney posted quarterly revenue of $23.51 billion, which was $230 million above analyst estimates, representing 7.7% year-over-year growth.
On the bottom-line, Disney’ Q1 non-GAAP earnings-per-share came in at $0.99/share, beating Wall Street’s consensus estimate by $0.08 share. This $0.99/share result was down from last year’s $1.06/share result; however, Disney management noted that on a diluted basis its Q1 EPS was $0.70/share, up roughly 11.1% from last year’s $0.63/share diluted figure.
During the company’s Q1 earnings report, Bog Iger, Disney’s newly appointed CEO, said, “After a solid first quarter, we are embarking on a significant transformation, one that will maximize the potential of our world-class creative teams and our unparalleled brands and franchises. We believe the work we are doing to reshape our company around creativity, while reducing expenses, will lead to sustained growth and profitability for our streaming business, better position us to weather future disruption and global economic challenges, and deliver value for our shareholders.”
Disney’s report also highlighted segment operating results, stating:
“Linear Networks revenues for the quarter decreased 5% to $7.3 billion, and operating income decreased 16% to $1.3 billion.”
“Domestic Channels revenues for the quarter decreased 1% to $6.1 billion, and operating income increased 5% to $928 million. The increase in operating income was due to higher results at Cable, while results at Broadcasting were comparable to the prior-year quarter.”
“International Channels revenues for the quarter decreased 21% to $1.2 billion and operating income decreased 64% to $131 million. The decrease in operating income was due to lower advertising revenue, an unfavorable foreign exchange impact and a decrease in affiliate revenue, partially offset by a decrease in programming and production costs.”
“Direct-to-Consumer revenues for the quarter increased 13% to $5.3 billion and operating loss increased $0.5 billion to $1.1 billion. The increase in operating loss was due to a higher loss at Disney+ and a decrease in results at Hulu, partially offset by improved results at ESPN+.”
With regard to its streaming service segment, Disney noted that, “The average monthly revenue per paid subscriber for domestic Disney+ decreased from $6.10 to $5.95 driven by a higher mix of subscribers to multi-product offerings, partially offset by an increase in retail pricing.”
Although it appears that Disney+ is losing pricing power, during Disney’s Q1 analyst conference call, Iger said, “ Our current forecasts indicate Disney+ will hit profitability by the end of fiscal 2024 and achieving that remains our goal.”
Moving away from its content divisions and into its Parks & Resorts segment, Disney noted that, “Disney Parks, Experiences and Products revenues for the quarter increased 21% to $8.7 billion and segment operating income increased 25% to $3.1 billion. Higher operating results for the quarter reflected increases at our domestic parks and experiences and, to a lesser extent, our international parks and resorts.”
Investors have applauded Disney’s double digit Park & Resort growth in spite of struggles from its content segments and during the Q1 conference call, Iger provided Disney bulls with more good news: the expected return of a shareholder dividend.
Iger said, “Now, when it comes to investing in growth and returning capital to shareholders, we will take a balanced and disciplined approach as we did throughout my previous tenure as CEO, when we invested in our core businesses and acquired new ones, bought back stock and paid a dividend to our shareholders.” He continued, “As a result of the impact of the COVID pandemic, we made the decision to suspend the dividend in the spring of 2020. Now that the pandemic impacts to our business are largely behind us, we intend to ask the Board to approve the reinstatement of a dividend by the end of the calendar year.”
Bullish Nobias Credible Analysts Opinions:
Shanthi Rexaline, a Nobias 4-star rated author, highlighted post-earnings reactions from several prominent names on Wall Street regarding Disney shares in an article that she published at Benzinga this week. Rexaline stated, “Walt Disney Company DIS shares took off after the entertainment giant reported above-consensus fiscal year 2023 first-quarter earnings.” Moving onto analyst opinions of the results, she said, “Disney is in inning one under Bob Iger, said Ross Gerber, co-founder and CEO of Gerber Kawasaki Wealth And Investment Management, apparently suggesting there is more to come.”
Rexaline also wrote, “CNBC Mad Money host Jim Cramer thanked Iger for delivering excellent news.If I were Nelson Peltz, I would be thrilled with these developments,” Cramer added.
Lastly, she touched upon an analyst upgrade from Keybanc Capital Markets. She highlighted a recent report by Keybanc analyst, Brandon Nispel, and said, “The analyst noted that the company made marginal changes with respect to its 2023 guidance, with the moving pieces in the near term could be taken negatively.”
“As such,” she continued, “KeyBanc lowered its 2023 estimates but raised its estimates for 2024, citing its increased conviction on sustained momentum in DPEP and the $5.5 billion cost savings underway at DMED[Disney Media and Entertainment Division]. Management commentary and restructuring were in line, the firm said.”
Ultimately, she concluded, “KeyBanc raised the price target for Disney shares by 9% from $119 to $130, attributing the revision to its higher 2024 estimates. The updated price target implies scope for a 16% upside from current levels. The firm has an Overweight rating on the shares.”
Bearish Nobias Credible Analysts Opinions:
Ian Lyndal, a Nobias 4-star rated author, published an article at Proactive Investors this week which specifically covered the recent proxy fight that Jim Cramer mentioned above between Nelson Peltz and the Walt Disney Company.
Lyndal wrote, “Nelson Peltz, the head of Trian Fund Management, announced the end of his proxy fight with The Walt Disney Company on Thursday after the entertainment giant unveiled a major restructuring plan, according to CNBC.” He continued, “The announcement followed Trian's January launch of a proxy fight, pushing for Peltz to gain a seat on Disney's board. At the time, Trian claimed to own 9.4 million shares valued at approximately $900 million.”
Disclosure: Nicholas Ward is long DIS.
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 for the cause of this proxy fight, Lyndal said, “Peltz had previously expressed criticism over Disney's $71 billion acquisition of Fox in 2019 and its lack of succession planning.” Lyndal also noted that Peltz had recently criticized Disney for "weak corporate governance". “However,” he concluded, “Disney's recent announcement to restructure its business into three divisions, cut $5.5 billion in costs, and lay off 7,000 employees has apparently satisfied Peltz's concerns.”
Overall bias of Nobias Credible Analysts and Bloggers:
49% of recent articles focused on Disney shares have provided a “Neutral” outlook, showing that the credible authors that the Nobias algorithm tracks remain tepid on Disney’s growth prospects.
However, a different story is playing out on Wall Street. 100% of the credible analysts that the Nobias algorithm tracks who have offered an opinion on Disney shares believe that the stock is likely to increase in value.
Currently, Disney trades for $108.06/share. The average price target being applied to DIS by the credible Wall Street analysts that Nobias tracks is $129.50. This implies upside potential of approximately 19.8%.
Disclosure: Nicholas Ward is long DIS. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.
Case Study: Paypal (PYPL) stock according to high performing analysts
PayPal beat analyst estimates on both the top and bottom-lines and raised 2023 full-year guidance during its Q4 report; however, the company's CEO also announced that he was leaving that position at the end of 2023, leading to leadership uncertainty.
Nobias Insights: 52% of recent articles published by credible authors focused on PayPal shares offer a “Neutral” bias. 2 out of the 4 credible credible Wall Street analysts who cover PYPL believe shares are likely to rise in value. The average price target being applied to PYPL by these credible analysts is $88.33, which implies upside potential of approximately 9.3% relative to the stock’s current share price of $80.80.
Bullish Take: Nobias 4-star rated author, Royston Yang, said, “It may take some time for the company to get back on its feet, but PayPal still possesses a long growth runway as its total addressable market remains at $110 trillion.”
Bearish Take: Reinhardt Krause, a Nobias 5-star rated author, said, “Total payment volume processed from merchant customers climbed 5% to $357.4 billion. Analysts had projected total payment volume of $360.38 billion.”
Key Points
Performance
PayPal shares fell by 2.74% this week, pushing their year-to-date gains down to 8.34%. This compares favorably to the S&P 500, which is up by 6.96% during 2023 thus far.
Event & Impact
PayPal posted fourth quarter results this week, beating Wall Street estimates on both the top and bottom lines. During Q4, PayPals’s revenue totaled $7.4 billion, beating Wall Street’s consensus estimate by $10 million, representing 6.9% year-over-year growth. PayPal’s Q4 non-GAAP earnings-per-share came in at $1.24, beating estimates by $0.04/share.
Noteworthy News:
PayPal beat analyst estimates on both the top and bottom-lines and raised 2023 full-year guidance during its Q4 report; however, the company's CEO also announced that he was leaving that position at the end of 2023, leading to leadership uncertainty.
Nobias Insights
52% of recent articles published by credible authors focused on PayPal shares offer a “neutral” bias. 2 out of the 4 credible Wall Street analysts who cover PYPL believe shares are likely to rise in value. The average price target being applied to PYPL by these credible analysts is $88.33, which implies upside potential of approximately 9.3% relative to the stock’s current share price of $80.80.
Bullish Take Nobias 4-star rated author, Royston Yang, said, “It may take some time for the company to get back on its feet, but PayPal still possesses a long growth runway as its total addressable market remains at $110 trillion.”
Bearish Take Reinhardt Krause, a Nobias 5-star rated author, said, “Total payment volume processed from merchant customers climbed 5% to $357.4 billion. Analysts had projected total payment volume of $360.38 billion.”
PYPL Feb 2023
PayPal (PYPL) announced Q4 earnings this week, beating Wall Street’s consensus estimates on both the top and bottom lines. PayPal’s management team also raised full-year earnings-per-share guidance.
However, even with this beat and raise quarter in mind, PYPL shares dipped by 2.74% this week. This diminished the stock’s year-to-date gains a bit. Now, PYPL shares are up by 8.34% during 2023 thus far. This is down from the nearly 15% gains that PayPal posted during January, but the stock’s 8.34% still beats the S&P 500’s year-to-date gains of 6.96%.
Bullish Nobias Credible Analysts Opinions:
Prior to PayPal’s recent earnings report, Nobias 4-star rated author, Royston Yang, published an article at the Motley Fool which highlighted the stock’s strong year-to-date rally. On February 8th, Yang noted that PayPal shares had risen by 14.4% in January alone, and touched upon a couple of macro catalysts that were benefitting the stock. He wrote, “The somber mood from last year has lifted somewhat as the Federal Reserve has pledged to slow down its interest rate hikes. With inflation moderating, investors have become more optimistic that the rate hike cycle is coming to an end soon, and have pushed up the prices of a wide swath of growth stocks.” Furthermore, he said, “PayPal is also looking forward to an increase in spending as China finally sheds its years-long strict zero-COVID policies.”
With regard to increasing demand for international travel coming out of the COVID-19 pandemic, he touched upon PayPal’s recently announced plans to launch a new service within its Xoom international money transfer service, named Credit Card Deposit. He said, “This service enables Xoom customers in the U.S. to send money directly to users in 25 different countries. PayPal is collaborating with Visa to include easy and secure access to funds, and its launch seems timed to coincide with an expected surge in cross-border payments as more countries resume normality and people fly more frequently for vacations and business trips.”
Yang also mentioned a recent announcement by the company which put a spotlight on job cuts related to roughly 7% of PayPal’s total workforce as well as office closures and other expense cutting measures, which could boost profitability moving forward.
Regarding the stock’s potential to continue to bounce back from the 2022 lows, Yang concluded, “It may take some time for the company to get back on its feet, but PayPal still possesses a long growth runway as its total addressable market remains at $110 trillion.”
Also, coming into PayPal’s recent quarter, Soumya Eswaran, a Nobias 4-star rated author, highlighted recent commentary that Investment management company RGA Investment Advisors provided regarding its outlook for PYPL shares moving forward.
Eswaran quoted the firm’s recent fourth quarter 2022 Investment Letter, which said: “PayPal Holdings, Inc. (NASDAQ:PYPL) suffered with the slowdown in e-commerce, yet still will have outgrown e-commerce when we see final 2022 numbers. Much like Amazon, PayPal invested far too aggressively on the expectation of sustained elevated growth rates in e-commerce and unfortunately, unlike with Amazon, PayPal’s investment was on ancillary product excursions from which the company is already retrenching. The good news is that with this retrenchment, the company should once again return to its recipe of healthy top line growth and incremental margin leverage, but rather than grow back into their old margin structure they will have to cost-cut their way there."
What’s more, Eswaran noted that RGA Investment Advisors isn’t alone in this relatively bullish opinion, writing “PayPal Holdings, Inc. (NASDAQ:PYPL) is in 17th position on our list of 30 Most Popular Stocks Among Hedge Funds.”
Eswaran said that at the end of the third quarter, PayPal was the 97th most held stock in the hedge fund portfolios that they follow, showing bullish sentiment amongst the Wall Street elite heading into the company’s fourth quarter earnings release.
Bearish Nobias Credible Analysts Opinions:
Although PayPal has been a relative outperformer on a year-to-date basis, shares are down by roughly 2.75% this week, largely in response to the company’s Q4 report and the surprise announcement that long-term CEO, Dan Schulman, will be stepping down from that role at the end of 2023.
Reinhardt Krause, a Nobias 5-star rated author, covered PayPal’s Q4 results in an article that he published at Investors.com this week. Looking at the com[any’s top and bottom-line results, Krause said, “PayPal earnings rose 12% from a year earlier to $1.24. The e-commerce company said revenue climbed 7% to $7.4 billion, edging by analyst estimates.”
Regarding Wall Street’s consensus coming into the print, Krause said, “Analysts expected PayPal earnings of $1.20 a share on revenue of $7.39 billion. A year earlier, PayPal earned $1.11 a share on sales of $6.92 billion.”
Krause touched upon one of the more disappointing aspects of PayPal’s Q4 numbers, writing, “Total payment volume processed from merchant customers climbed 5% to $357.4 billion. Analysts had projected total payment volume of $360.38 billion.” Then, he moved onto the company’s 2023 full-year guidance, stating, “For full-year 2023, PayPal forecast earnings per share of $4.87 at the midpoint of guidance, up roughly 18%. PayPal did not provide a 2023 revenue outlook.” He noted that these EPS expectations came in above Wall Street’s estimates, stating, “Analysts had predicted full-year earnings of $4.79 on revenue of $29.89 billion. For full-year 2023, analysts estimate 9.5% total payment volume growth to $1.49 trillion.”
Although the company beat earnings and raised expectations, PYPL’s share price has fallen throughout the week, and Krause attributed that to the CEO change that was announced during the quarter. During PayPal’s Q4 analyst conference call, Schulman touched upon his upcoming departure and the company’s succession planning, saying, “As some of you have noted, I turned 65 last month, albeit I will say, a very young 65. The board and I discussed CEO succession multiple times a year. And that informed the board that I plan to retire from serving as the President and CEO of PayPal at the end of this year.”
“Of course,” Schulman continued, “I will be flexible in my time frame in order to assure we seamlessly onboard the ideal next leader of PayPal, and I look forward to continuing to serve on the PayPal board.” Kate Fitzgerald, a Nobias 4-star rated author, covered Schulman’s departure in an article published this week at American Banker.
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.
Fitzgerald wrote, “In his final year as president and CEO of PayPal, Dan Schulman will focus on expanding the firm's market share within the increasingly competitive online checkout ecosystem.” And she continued, “Even as PayPal remains mired in a global e-commerce sales trough, the company this year aims to modernize its checkout technology by driving toward passwordless, one-click native in-app experiences as well as deploying the next generation of checkout using data and artificial intelligence, Schulman told analysts on Thursday when announcing the firm's fourth-quarter results.”
Overall bias of Nobias Credible Analysts and Bloggers:
Currently, there is a sentiment split between the credible authors and the credible Wall Street analysts that the Nobiasl algorithm tracks when it comes to PYPL shares. 52% of recent articles published by credible authors have expressed a “Neutral” sentiment. The credible analysts who cover PYPL are split bull/bear two to two; however, the average price target being to shares by these four credible individuals is $88.33, which is well above the stock’s current share price.
PayPal ended the week trading for $80.80/share. Therefore, the average credible analyst price target of $88.33 implies upside potential of approximately 9.3%.
Disclosure: Nicholas Ward is long PYPL. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.
Case Study: What Credible analysts are saying on Google (GOOGL) stock
A slowdown in digital advertising during today’s tough economic environment is hurting Alphabet’s sales. The company’s YouTube segment struggled the most, falling by 7.7% on a year-over-year basis. Also, as credible Nobias author Growth at a Good Price points out, this company also faces antitrust scrutiny from United States regulators.
A slowdown in digital advertising during today’s tough economic environment is hurting Alphabet’s sales. The company’s YouTube segment struggled the most, falling by 7.7% on a year-over-year basis. Also, as credible Nobias author Growth at a Good Price points out, this company also faces antitrust scrutiny from United States regulators.
Nobias Insights: 61% of recent articles published by credible authors focused on Alphabet shares offer a “Bullish” bias. 9 out of the 9 credible credible Wall Street analysts who cover GOOGL believe shares are likely to rise in value. The average price target being applied to GOOGL by these credible analysts is $131.56, which implies upside potential of approximately 25.6% relative to the stock’s current share price of $104.78.
Bullish Take: Growth at a Good Price, a Nobias 4-star rated author, said, “Google today does not have the premium price tag you'd associate with a dominant player; it's actually one of the cheaper big tech names out there. So, it looks like a bargain.”
Bearish Take: Daniel Howley, a Nobias 4-star rated author, said, “Google's ad revenue fell from $61.2 billion in Q4 2021 to $59 billion in Q4 2022. YouTube ad revenue, meanwhile, missed analysts' estimates, coming in at $7.9 vs estimate versus $8.2 billion.”
Key Points
Performance
Alphabet (GOOG) (GOOGL) shares rose by 7.36% this week, pushing their year-to-date gains up to 17.57%. This compares favorably to the S&P 500 and the Nasdaq Composite index, which are up by 8.17% and 15.6%, respectively, during 2023 thus far.
Event & Impact
Alphabet posted fourth quarter results this week, missing Wall Street estimates on both the top and bottom lines. During Q4, GOOGL’s revenue totaled $76.05 billion, missing Wall Street’s consensus estimate by $440 million, but representing 1.0% year-over-year growth. Alphabet’s’s Q4 GAAP earnings-per-share came in at $1.05, missing estimates by $0.14/share.
Noteworthy News:
A slowdown in digital advertising during today’s tough economic environment is hurting Alphabet’s sales. The company’s YouTube segment struggled the most, falling by 7.7% on a year-over-year basis. Also, as credible Nobias author Growth at a Good Price points out, this company also faces antitrust scrutiny from United States regulators.
Nobias Insights
61% of recent articles published by credible authors focused on Alphabet shares offer a “Bullish” bias. 9 out of the 9 credible credible Wall Street analysts who cover GOOGL believe shares are likely to rise in value. The average price target being applied to GOOGL by these credible analysts is $131.56, which implies upside potential of approximately 25.6% relative to the stock’s current share price of $104.78.
Bullish Take Growth at a Good Price, a Nobias 4-star rated author, said, “Google today does not have the premium price tag you'd associate with a dominant player; it's actually one of the cheaper big tech names out there. So, it looks like a bargain.”
Bearish Take Daniel Howley, a Nobias 4-star rated author, said, “Google's ad revenue fell from $61.2 billion in Q4 2021 to $59 billion in Q4 2022. YouTube ad revenue, meanwhile, missed analysts' estimates, coming in at $7.9 vs estimate versus $8.2 billion.”
GOOGL Feb 2023
Alphabet was one of many big-tech companies that reported earnings this week, yet unlike rivals such as Tesla (TSLA), Meta Platforms (META) and Apple (AAPL), all of which rallied after their recent earnings reports, Alphabet shares sold off in response to the numbers that they posted.
Alphabet missed Wall Street’s consensus estimates on both the top and bottom lines during Q4, causing the stock to dip by 2.75% on Friday. Yet, it’s important to note that this sell-off comes after a very strong week for the stock and the tech space overall and therefore, even with Friday’s weakness in mind, GOOGL shares finished the week up by 7.36%. This weekly rally pushed Alphabet’s 2023 returns up to 17.57%. This performance beats the S&P 500 and the Nasdaq Composite by a wide margin. Those two indexes are up by 8.17% and 15.60%, respectively, on a year-to-date basis thus far.
Bullish Nobias Credible Analysts Opinions:
Prior to Alphabet’s recent earnings announcement, Growth at a Good Price, a Nobias 4-star rated author, published a bullish report on the company, highlighting their willingness to buy the dip when it comes to the stock’s recent sell-off related to antitrust allegations.
Growth at a Good Price stated, “On Wednesday [January 25th, 2023] Google slipped 2.5%, when the NASDAQ-100 only fell 0.18% on the same day. The stock's move coincided with news that the Department of Justice ("DOJ") was suing the company for anti-competitive practices, specifically in its advertising business.”
The author continued, “It seems likely that the DOJ's lawsuit was the cause of Google's selloff on Wednesday.” They noted that the threat here is real. “For example,” Growth at a Good Price wrote, “Google recently got sued for $4 billion and lost its appeal-it will quite likely be forced to pay the amount out. There are countless examples of Google and other big tech companies being sued for large amounts of money, sometimes successfully.”
They went on to say, “As far as monetary compensation goes, investors may need to accept that there'll be a payout in the future. It won't be any time soon-the DOJ's 2020 lawsuit isn't going to trial until 2023-but it might happen eventually. If you're uncomfortable with a $5 billion settlement in a few years' time, then maybe GOOG isn't the stock for you.”
Continuing to list threats, the author noted, “the big thing with the Google lawsuit is that it's seeking much more than a mere monetary reward: it wants to unwind part of Google's business.” But, with this in mind, they stated that government regulators haven’t had as much success attempting to do this to big-tech players.
“For example,” Growth at a Good Price wrote, “in the 1990s, the Federal Trade Commission ("FTC") sued Microsoft, alleging that it had violated the Sherman Antitrust Act. The FTC initially won on a few of its claims, but parts of the lawsuit were eventually overturned by the D.C. Court of Appeals. Microsoft was not broken up.”
Ultimately, they concluded, “The bottom line on the DOJ's Google lawsuit is that it just confirms what bulls have always said about the stock: That it's a rock solid tech company with a dominant market position, that deserves a premium price. The whole reason the DOJ is upset at Google is because it's the dominant player in its industry, and they're right about that.”
“However,” the author continued, “Google today does not have the premium price tag you'd associate with a dominant player; it's actually one of the cheaper big tech names out there. So, it looks like a bargain.” And therefore, Growth at a Good Price stated, “I'm buying the DOJ lawsuit, and I'll probably be buying if the stock dips after earnings, too.” Growth at a Good Price got the dip they were looking for when GOOGL shares fell by 2.75% on Friday after the market digested its fourth quarter numbers.
Bearish Nobias Credible Analysts Opinions:
Daniel Howley, a Nobias 4-star rated author, covered Alphabet’s Q4 earnings when they were announced this week in an article that he published at Yahoo Finance. Howley wrote, “Google parent Alphabet (GOOG, GOOGL) announced its Q4 earnings after the bell on Thursday, falling short of expectations on revenue and earnings per share, as advertising declined year-over-year.” He continued, “Here are the most important numbers from the report, compared to what Wall Street was expecting, as compiled by Bloomberg.
Revenue (ex-TAC): $63.12 versus $63.2 billion expected
Earnings per share: $1.05 versus $1.18 expected”
Regarding Alphabet’s business segment performances, Howley said, “Google's ad revenue fell from $61.2 billion in Q4 2021 to $59 billion in Q4 2022. YouTube ad revenue, meanwhile, missed analysts' estimates, coming in at $7.9 vs estimate versus $8.2 billion. Google Cloud, meanwhile, lost $830 million in Q4, better than the $1.7 billion it lost in the same quarter last year.”
Abner Li, a Nobias 4-star rated author, also covered Alphabet’s Q4 results in an article published at 9to5Google.com. Li touched upon the company’s fundamental and operating results and then highlighted quotes from the company’s upper-level management from the fourth quarter report.
Li quoted Alphabet’s CEO, Sundar Pichai, saying: “Our long-term investments in deep computer science make us extremely well-positioned as AI reaches an inflection point, and I’m excited by the AI-driven leaps we’re about to unveil in Search and beyond. There’s also great momentum in Cloud, YouTube subscriptions, and our Pixel devices. We’re on an important journey to re-engineer our cost structure in a durable way and to build financially sustainable, vibrant, growing businesses across Alphabet.”
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.
Li also noted that Alphabet’s CFO, Ruth Porat, said: “Our Q4 consolidated revenues were $76 billion, up 1% year over year, or up 7% in constant currency, and $283 billion for the full year 2022, up 10%, or up 14% in constant currency. We have significant work underway to improve all aspects of our cost structure, in support of our investments in our highest growth priorities to deliver long-term, profitable growth.”
Overall bias of Nobias Credible Analysts and Bloggers:
Despite the stock’s Q4 top and bottom-line misses, the majority of credible authors and analysts that the Nobias algorithm tracks continue to be bullish on shares. 61% of recent articles published by credible authors focused on GOOGL shares have expressed a “Bullish” bias. Furthermore 9 out of 9 credible Wall Street analysts who have offered an opinion on Alphabet believe that GOOGL shares are likely to head higher.
Currently, GOOGL shares trade for $104.78 and the average credible analyst price target being applied to them is $131.56. Therefore, even with the stock’s year-to-date rally of 17.5% in mind, the credible analyst average target implies further upside potential of approximately 25.6%.
Disclosure: Nicholas Ward is long GOOGL. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.
Case Study: What Credible analysts are saying on Meta (META) stock
It wasn’t META’s Q4 results which caused the stock to rally 24%, but instead, management’s commitment towards disciplined spending. Meta’s CEO, Mark Zuckerberg called 2023 the “Year of Efficiency” which caused the sentiment surrounding the stock to shift rapidly.
Nobias Insights: 56% of recent articles published by credible authors focused on Meta shares offer a “Bullish” bias. 7 out of the 8 credible credible Wall Street analysts who cover META believe shares are likely to rise in value. The average price target being applied to Meta by these credible analysts is $220.00, which implies upside potential of approximately 17.9% relative to the stock’s current share price of $186.53.
Bullish Take: Shawn Johnson, a Nobias 5-star rated author, said, “Last year’s slump means the price-to-earnings ratio is only 17.17 (even with yesterday’s jump). For a tech giant, that’s pretty reasonable and gives me the confidence to buy. It also means that the share price can continue to rally without overvaluation.”
Bearish Take: Cavenagh Research, a Nobias 5-star rated author, said, “For Q4 2022, the firm's operating income fell to $6.4 billion, which is about only half the level achieved in 2021 (operating income margin in Q4 2022 was 20%, as compared to 37% in Q4 2021).”
Key Points
Performance
Meta Platforms (META) shares rose by 24.01% this week, pushing their year-to-date gains up to 49.54%. This compares favorably to the S&P 500 and the Nasdaq Composite index which are up by 8.17% and 15.6%, respectively, during 2023 thus far.
Event & Impact
Meta Platforms announced their fourth quarter earnings this week, beating Wall Street’s consensus estimates on the top-line, but missing them on the bottom-line. During Q4, META’s revenue totaled $32.17 billion, beating Wall Street’s consensus estimate by $480 million, but representing -4.5% year-over-year growth. META’s Q4 GAAP earnings-per-share came in at $1.76, missing estimates by $0.48/share.
Noteworthy News:
It wasn’t META’s Q4 results that caused the stock to rally 24%, but rather management’s commitment to disciplined spending. Meta’s CEO, Mark Zuckerberg, called 2023 the “Year of Efficiency,” which caused the sentiment surrounding the stock to shift rapidly.
Nobias Insights
56% of recent articles published by credible authors focused on Meta shares offer a “bullish” bias. 7 out of the 8 credible Wall Street analysts who cover META believe shares are likely to rise in value. The average price target being applied to Meta by these credible analysts is $220.00, which implies upside potential of approximately 17.9% relative to the stock’s current share price of $186.53.
Bullish Take Shawn Johnson, a Nobias 5-star rated author, said, “Last year’s slump means the price-to-earnings ratio is only 17.17 (even with yesterday’s jump). For a tech giant, that’s pretty reasonable and gives me the confidence to buy. It also means that the share price can continue to rally without overvaluation.”
Bearish Take Cavenagh Research, a Nobias 5-star rated author, said, “For Q4 2022, the firm's operating income fell to $6.4 billion, which is about only half the level achieved in 2021 (operating income margin in Q4 2022 was 20%, as compared to 37% in Q4 2021).”
META Feb 2023
Meta Platforms (META) reported its fourth quarter earnings this week, causing the stock to rally 24.01% this week. This rally was a part of Meta’s broader 2023 rally; shares are now up by 49.54% on a year-to-date basis. This performance beats the S&P 500 and the Nasdaq Composite by a wide margin. Those two indices are up by 8.17% and 15.60%, respectively, during 2023 thus far.
Meta’s 49.5% year-to-date gains haven’t erased the stock’s 2022 sell-off, however. On a trailing twelve month basis, META shares are still down by 21.55%. But, even after this week’s 24% upward move, the majority of the credible authors and analysts that the Noblas algorithm follows continue to believe that shares have more room to run.
Bearish Nobias Credible Analysts Opinions:
Cavenagh Research, a Nobias 5-star rated author, published a bullish post-earnings article on Meta Platforms this week titled, “Meta: Buy 'The Year Of Efficiency'”. Cavenagh Research began their piece, stating, “With Meta dedicating 2023 to 'a year of efficiency', I argue the company has lots of room to shift market sentiment away from the negative narrative surrounding the firms' Reality Labs investments.” That quote comes from the top of Meta’s Q4 earnings report.
To begin its earnings report, the company quoted Mark Zuckerberg, Meta founder and CEO, who said, "Our community continues to grow and I'm pleased with the strong engagement across our apps. Facebook just reached the milestone of 2 billion daily actives. The progress we're making on our AI discovery engine and Reels are major drivers of this. Beyond this, our management theme for 2023 is the 'Year of Efficiency' and we're focused on becoming a stronger and more nimble organization."
Cavenagh Research broke down the company’s top and bottom-line results during Q4, stating, “During the December quarter, Meta generated total group revenues of approximately $32.17 billion, which reflects a year over year contraction versus the same period in 2021 of close to 4%. Although the negative growth is certainly disappointing, the social media giant's topline beat analyst consensus estimates by about $475 million, according to data collected by Refinitiv.” They continued, “For the FY 2022, Meta recorded $116.61 billion of revenues, an increase of about 1% as compared to 2021.”
Moving onto the bottom-line, Cavenagh Research wrote, “For Q4 2022, the firm's operating income fell to $6.4 billion, which is about only half the level achieved in 2021 (operating income margin in Q4 2022 was 20%, as compared to 37% in Q4 2021).” They continued, “Adjusted EPS was recorded a $1.76, missing analyst estimates by 47 cents. However, it is worth pointing out that the net income in Q4 2022 includes $4.20 billion of restructuring charges. Excluding these costs, Meta's adjusted EPS would have been $1.24 higher.”
“In Q4 2022,” Cavenagh Research said, “daily active people (DAP) for the firms' Family of Apps reached 2.96 billion, an increase of 5% year over year.” During its Q4 report, Meta Platforms highlighted its daily active people and monthly active people growth across its various platforms, stating:
Family daily active people (DAP) – DAP was 2.96 billion on average for December 2022, an increase of 5% year-over-year.
Family monthly active people (MAP) – MAP was 3.74 billion as of December 31, 2022, an increase of 4% year-overyear.
Facebook daily active users (DAUs) – DAUs were 2.00 billion on average for December 2022, an increase of 4% year over-year.
Facebook monthly active users (MAUs) – MAUs were 2.96 billion as of December 31, 2022, an increase of 2% year over-year.
Cavenagh Research also highlighted Meta’s shareholder returns during Q4 and 2022 on the whole, stating, “Investors will likely appreciate that Meta repurchased $6.91 billion and $27.93 billion worth of stock in Q4 2022 and FY 2022 respectively.”
Overall, this 5-star rated author concluded, “In my opinion, Meta is committed to prove to investors that the social media giant remains a highly innovative, highly profitable technology giant. Reiterate 'Buy' rating; and raise target price to $254.56/ share.”
Neutral Nobias Credible Analysts Opinions:
Bashar Issa, a Nobias 4-star rated author, presented a report with a more cautious tone this week after Meta’s 20%+ post-earnings rally. Issa highlighted Meta’s attractive valuation coming into the Q4 report, stating, “Meta Platforms, Inc. (NASDAQ: META) skeptics may be right about the company's struggles, but the sharp stock decline has been significantly out of proportion to the problems faced by the social media giant.” He touched upon the company’s high capital expenditures related to “moonshot” ideas related to the metaverse, noting their risk.
But, like Cavenagh Research, Isaa noted that Meta appears to be changing its tune with regard to massive speculative spending in 2023. Issa also put a spotlight on Meta’s shareholder returns, stating, “The primary concern over Meta Platforms, Inc. is investors' confidence in CEO Mark Zuckerberg's capital allocation decisions. The company spent more on share buybacks in 2021, when shares traded above $300, than it did when shares fell below $100. Nonetheless, management now seems more committed to returning capital to shareholders than before the pandemic. In Q4, META spent $6.9 billion on share repurchases, bringing the total to $28 billion. The Board has authorized $40 billion of share buybacks in 2023, $10 billion below what META spent on the program in 2021, but about $10 billion above that of 2022 levels.”
Issa is bullish on Meta’s more aggressive balance sheet management as well. He wrote, “What is interesting is the issuance of long-term interest-bearing debt for the first time since the retirement of the debt balance in 2013. For the first time, META is paying interest. Part of the debt issuance is to fund the share repurchases as equity capital becomes expensive relative to debt, despite rising interest rates. This is a welcome move by management, as it shows a commitment to return capital to shareholders.”
Yet, looking at the stock’s recent momentum, Issa stated, “I don't believe the 20% post-market rally is sustainable, given the uncertainties lingering over the CEO's Metaverse plans under the Reality Labs brand, which reported $4.7 billion of losses in Q4.” He continued, “Meta Platforms, Inc. shares are not as cheap as they were a few weeks ago, but I believe that there is a moderate capital appreciation opportunity as the company provides more clarity over its capital spending plans.”
Issa offered a neutral conclusion, stating, “At this point, I believe the downside risk to Meta Platforms, Inc. stock is relatively limited. However, given the recent share price momentum, I believe that the chance of above-average returns for META stock has also closed.”
Bullish Nobias Credible Analysts Opinions:
Shawn Johnson, a Nobias 5-star rated author, published a bullish article highlighting Meta’s Q4 results at Business News this week. Johnson said, “After closing at $153 on Wednesday, Meta share price ended Thursday at $188.77, a jump of over 23%. The positive results issued after market close were the main catalyst. Yet with the stock still down 20% over the past year, I think it has room to go even higher.”
Regarding the Q4 report, he stated, “It [Meta] showed that the number of daily active users on Facebook grew by 4% year-on-year, finally breaking the 2bn mark. That’s a staggering number of users on one platform and shows the dominance (and growth) of the site.”
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.
“Another positive,” Johnson said, “was derived from cost reductions that are forecast going forward. Costs are expected to drop by $5 billion in 2023, partly due to 11,000 headcount cuts announced late last year.” “Furthermore,” the author stated, “last year’s slump means the price-to-earnings ratio is only 17.17 (even with yesterday’s jump). For a tech giant, that’s pretty reasonable and gives me the confidence to buy. It also means that the share price can continue to rally without overvaluation.” “On that basis I am seriously considering adding some meta shares to my portfolio,” Johnson concluded.
Overall bias of Nobias Credible Analysts and Bloggers:
Overall, 56% of recent articles published by credible authors expressed a “bullish” bias. 7 out of the 8 credible Wall Street analysts that have offered an opinion on META shares believe that they’re likely to increase in value.
Currently, the average price target being attached to META shares by these credible analysts is $220.00. Even after Meta’s 24% rally this week, that implies upside potential of approximately 17.9% relative to META’s current share price of $186.53.
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.
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 Apple (APPL) stock
Apple’s management cited foreign exchange issues, as well as ongoing production/demand issues in China as recent headwinds. Yet, the company still generated $36 billion in operating income during the first quarter.
Nobias Insights: 68% of recent articles published by credible authors focused on Apple shares offer a “bearish” bias. 2 out of the 4 credible Wall Street analysts who cover AAPL believe shares are likely to rise in value. The average price target being applied to Apple by these credible analysts is $169.67, which implies upside potential of approximately 9.8% relative to the stock’s current share price of $154.50.
Bullish Take: Vlad Savov, a Nobias 5-star rated author, said, “Apple’s iPhone set a new high for its share of profits from global smartphone sales in 2022, after navigating a dire year for the industry better than competitors.”
Bearish Take: Deanna Walker, a Nobias 4-star rated author, said, “Both Apple’s earnings and revenue missed analyst expectations, citing a strong dollar, production issues in China and a headwind in the macroeconomic environment for its various businesses.”
Key Points
Performance
Apple shares rose by 6.61% this week, pushing their year-to-date gains up to 23.53%. This compares favorably to the S&P 500 and the Nasdaq Composite index, which are up by 8.17% and 15.6%, respectively, during 2023 thus far.
Event & Impact
Apple announced fiscal 2023 first quarter earnings this week, missing Wall Street’s estimates on both the top and bottom lines. AAPL’s revenue during Q1 came in at $117.15 billion, down by 5.5% on a year-over-year basis, missing Wall Street’s consensus estimate by $4.5 billion. The company’s GAAP earnings-per-share totaled $1.88, missing consensus estimates by $0.07/share.
Noteworthy News:
Apple’s management cited foreign exchange issues, as well as ongoing production/demand issues in China as recent headwinds. Yet, the company still generated $36 billion in operating income during the first quarter.
Nobias Insights
68% of recent articles published by credible authors focused on Apple shares offer a “bearish” bias. 2 out of the 4 credible Wall Street analysts who cover AAPL believe shares are likely to rise in value. The average price target being applied to Apple by these credible analysts is $169.67, which implies upside potential of approximately 9.8% relative to the stock’s current share price of $154.50.
Bullish Take Vlad Savov, a Nobias 5-star rated author, said, “Apple’s iPhone set a new high for its share of profits from global smartphone sales in 2022, after navigating a dire year for the industry better than competitors.”
Bearish Take Deanna Walker, a Nobias 4-star rated author, said, “Both Apple’s earnings and revenue missed analyst expectations, citing a strong dollar, production issues in China and a headwind in the macroeconomic environment for its various businesses.”
AAPL Feb 2023
Apple reported fiscal 2023 first quarter earnings this week, missing on both the top and bottom lines. In the after hours trading session on Thursday evening, AAPL shares fell roughly 4% on the heels of this report. However, during the normal trading session of Friday they bounced back, ending the day up by 2.44%. These gains pushed Apple’s year-to-date price gains up to 23.53%. This means that the tech giant (Apple’s current market capitalization sits at $2.39 trillion) has outperformed both the S&P 500 and the Nasdaq composite by wide margins thus far in 2023.
On a year-to-date basis, the S&P 500 is up by 8.17%, while the Nasdaq has risen by 15.60%. These gains are welcomed by Apple bulls after the stock’s tough year in 2022. Even after Apple’s nearly 25% 2023 rally, the stock is still down by 10.64% during the trailing twelve month period.
Bearish Nobias Credible Analysts Opinions:
Deanna Walker, a Nobias 4-star rated author, covered Apple’s Q1 report in an article that she published at Business News this week. Walker wrote, “Both Apple’s earnings and revenue missed analyst expectations, citing a strong dollar, production issues in China and a headwind in the macroeconomic environment for its various businesses.” She went on to highlight important metrics from the company’s report, stating:
Earnings: $1.88 vs. $1.94 estimated, down -10.9% year over year
Revenue: $117.15 billion vs. $121.10 billion estimated, down -5.49% year over year
iPhone revenue: $65.78 billion vs. $68.29 billion estimated, down -8.17% year over year
Mac revenue: $7.74 billion vs. $9.63 billion estimated, down -28.66% year-over-year
iPad revenue: $9.4 billion versus $7.76 billion estimated, up 29.66% year over year
Services revenue: $20.77 billion versus $20.67 billion estimated, up 6.4% year over year
No guidance provided from Apple management
Walker did note that, “The one bright spot in the report was Apple Services revenue.” She continued, “Services is a departure from Apple’s bread and butter in hardware, but provides a high-margin, cash machine to diversify Apple’s income.”
Walker also mentioned Apple’s iPad segment as an area of the business with bullish tailwinds at play. She said, “All other hardware saw YoY decreases, including iPhones and Macs, but the iPad experienced a big bump. The iPad brought in $9.4 billion, which was a 30% YoY increase, and was partly attributed to the new cheaper iPad introduced as a part of the product lineup.”
“Another big highlight from Cook was the disclosure of figures for total active Apple devices,” said Walker. She continued, “Apple now has 2 billion active devices, including everything from iPhones to iPads and Mac computers.
Concluding her piece, she stated, “Even though Apple had a tough quarter, the future is still bright.” Walker noted, “Annual sales are projected to grow from $274 billion in 2020 to nearly $400 billion in 2022. That should cheer investors who are skeptical of Apple.” And, she points out, these rising sales allow the company to sustainably return a significant amount of cash to shareholders.
Walker said, “During the quarter, Apple returned $25 billion through dividend payments ($3.8 billion), and share repurchases ($19 billion).” Finally, she added, “Even in the face of a slowing economy, AAPL stock is practically as good as long-term Treasury bonds.”
Patrick Seitz, a Nobias 4-star rated author, touched upon Apple’s recent sell-off and the company’s forward looking growth drives in a recent article titled, “Is Apple Stock A Buy After December-Quarter Earnings Miss?” Seitz put a spotlight on Apple’s storied history, stating, “In January 2022, Apple hit a market value of $3 trillion when its shares reached 182.86. It was the first company to reach a market capitalization of $3 trillion.” But, he notes, the stock has lost roughly 33% of its value since then and now investors are wondering what Apple’s next big idea will be?
Seitz stated, “The biggest driver of Apple's modern success is the iPhone. The game-changing smartphone, which debuted in 2007, sparked years of massive growth and created a loyal base of customers willing to buy Apple products and services.”
Yet, he noted that the handset industry has matured and stated,”With the iPhone business maturing, investors are wondering what the next big growth driver will be for Apple stock.” “Recently,” he continued, “two businesses have given Apple's sales and profits a boost: services and wearables.”
Seitz said, “In the December quarter, Apple's services revenue rose 6% year over year to $20.77 billion. Meanwhile, its hardware sales declined 8% to $96.39 billion. Services include the App Store, AppleCare, iCloud, Apple Pay, Apple Music, Apple TV+, Apple Arcade and other offerings.”
Furthermore, he added, “News leaks suggest that Apple will announce a headset for virtual reality and augmented reality in 2023. The computer headset could be a driver of Apple stock, analysts say.” Seitz went on to note the stock’s poor performance recently, leading to unattractive momentum trading signals. With that in mind, he concluded, “Apple stock is not a buy right now.”
Bullish Nobias Credible Analysts Opinions:
In a recent article, Vlad Savov, a Nobias 5-star rated author, also touched upon the maturing smartphone business globally; however, his take away from Apple’s recent results was more bullish than Seitz’s.
Savov said, “In 2022, worldwide smartphone shipments fell by double digits, most severely in China, and those profits dwindled for the majority of companies.” Yet, he noted, “Apple’s iPhone set a new high for its share of profits from global smartphone sales in 2022, after navigating a dire year for the industry better than competitors.”
Savov continued, “The Cupertino, California-based tech giant [referring to Apple] collected 85% of operating profit and 48% of revenue from smartphone sales over the course of the year, new Counterpoint Research estimates showed.” He also said, “Apple’s 2022 performance comes despite its worst holiday performance in four years, after supply snags and a softening economy hurt iPhone revenue.”
This provides a potential bullish catalyst in the current quarter, said Savov. He also stated, “The Covid restrictions in China added to Apple’s woes, making it harder to ship enough of the most popular versions of the iPhone.”
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.
But, with regard to the recent China issues, Savov quoted Meng Zhang, analyst at Counterpoint Research, who views the COVID-19 related shutdowns as a potential near-term growth catalyst for the iPhone.
Savov wrote, “A more than 20% smartphone sales rise during the first two weeks of January could be due to pent-up demand from the prior two months, when the pandemic limited mobility in China, she said.”
Overall bias of Nobias Credible Analysts and Bloggers:
Overall, there is a bull/bear split between the credible author and analyst communities that the Nobias algorithm tracks when it comes to Apple shares. 68% of recent articles written about the stock by credible analysts (those with 4 and 5-star ratings) have expressed a “bearish” bias towards the stock.
However, the average price target that is currently being applied to Apple by the credible Wall Street analysts that the Nobias algorithm tracks (once again, individuals with Nobias 4 and 5-star ratings) is $169.67, which implies upside potential of approximately 9.8% relative to Apple’s share price of $154.50.
Disclosure: Nicholas Ward is long AAPL. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.
Case Study: What Credible analysts are saying on Chevron (CVX) stock
Chevron posted record oil production and cash generation from operations during 2022. Furthermore, the company raised its dividend by 6% this week, alongside a $75 billion buyback announcement.
Nobias Insights: 80% of recent articles published by credible authors focused on Chevron shares offer a “Bullish” bias. 2 out of the 4 credible credible Wall Street analysts who cover CVX believe shares are likely to rise in value. The average price target being applied to Chevron by these credible analysts is $198.50 which implies upside potential of approximately 10.6% relative to the stock’s current share price of $179.45.
Bullish Take: Kit Norton, a Nobias 4-star rated author, said, “The energy giant reported record profits and cash flow for 2022, on top of its earlier announcement launching a massive $75 billion share buyback and raising its dividend.”
Bearish Take: Scott Levine, a Nobias 4-star rated author, said, “While there was a lot to celebrate, it seems investors are acutely focused on the lower-than-expected earnings.”
Key Points
Performance
Chevron's shares fell by 1.0% this week. On a year-to-date basis, CVX is up by 3.14%. This compares poorly to the S&P 500, which is up by approximately 6.44% during 2023 thus far.
Event & Impact
Chevron announced Q4 earnings this week, beating Wall Street’s estimates on the top-line, but missing on the bottom-line. CVX’s revenue during Q4 came in at $56.47 billion, up by 17.3% on a year-over-year basis, beating Wall Street’s consensus estimate by $2.5 billion. The company’s non-GAAP earnings-per-share totaled $4.09, missing consensus estimates by $0.20/share.
Noteworthy News:
Chevron posted record oil production and cash from operations generation during 2022. Furthermore, the company raised its dividend by 6% this week, alongside a $75 billion buyback announcement.
Nobias Insights
80% of recent articles published by credible authors focused on Chevron shares offer a “bullish” bias. 2 out of the 4 credible Wall Street analysts who cover CVX believe shares are likely to rise in value. The average price target being applied to Chevron by these credible analysts is $198.50, which implies upside potential of approximately 10.6% relative to the stock’s current share price of $179.45.
Bullish Take Kit Norton, a Nobias 4-star rated author, said, “The energy giant reported record profits and cash flow for 2022, on top of its earlier announcement launching a massive $75 billion share buyback and raising its dividend.”
Bearish Take Scott Levine, a Nobias 4-star rated author, said, “While there was a lot to celebrate, it seems investors are acutely focused on the lower-than-expected earnings.”
CVX Jan 2023
Oil major Chevron (CVX) announces fourth quarter earnings this week. The company produced record oil production and announced a $75 billion buyback authorization; however, Chevron missed earnings-per-share estimates, causing shares to dip by 1.0% during the week.
Bullish Nobias Credible Analysts Opinions:
Coming into Chevron’s Q4 results, Ahmed Farhath, a Nobias 5-star rated author, published a news story at Seeking Alpha which highlighted the sentiment surrounding CVS’s earnings report on Wall Street. He said, “Over the last 2 years, CVX has beaten EPS estimates 50% of the time and has beaten revenue estimates 63% of the time.”
Farhath continued, “Over the last 3 months, EPS estimates have seen 7 upward revisions and 9 downward. Revenue estimates have seen 0 upward revisions and 4 downward.” He noted, “The oil major in late October posted an easy third quarter beat. Cash flow from operations surged to a record $15.3B.”
And, as Kit Norton, a Nobias 4-star rated author, who covered Chevron’s Q4 earnings results as well as its recent shareholder returns announcement in an article that he published at Investors.com this week noted, those record results continued to flow in.
Norton wrote, “The energy giant reported record profits and cash flow for 2022, on top of its earlier announcement launching a massive $75 billion share buyback and raising its dividend.” He highlighted Wall Street estimates as well as Chevron’s quarterly and annual results, stating:
“Estimates: Wall Street predicted EPS growing 69% to $4.33. Analysts targeted a 9% sales increase, to $52.68 billion.”
“Earnings: Chevron reported a 60% earnings jump, to $4.09 per share. Revenue grew 17% to $56.47 billion. Full-year earnings in 2022 ballooned 128% to $18.83 per share while sales increased 51% to $246.25 billion.”
Norton put a spotlight on the company’s bottom-line, writing, “Cash flow from operations in 2022 totaled $49.6 billion, compared with $29.2 billion in 2021.” “Meanwhile,” he said, “capital spending in 2022 was $12.3 billion, up from $8.6 billion in 2021.” In its Q4 report, Chevron highlighted record “annual cash flow from operations” as well as record “annual U.S. oil and gas production”. These record results gave management the confidence to return a significant account of cash to shareholders.
Norton said, “On Wednesday, Chevron announced its $75 billion stock buyback program, which represents 20% of shares outstanding at current price levels.” “Chevron's previous stock buyback program of $25 billion began on Jan. 2019 and will end on March 31, 2023,” he noted.
Furthermore, Norton said, “Chevron also boosted its quarterly dividend by 6%, to $1.51 a share.” While shareholders cheered these headlines, the White House wasn’t so happy. Norton quoted White House Assistant Press Secretary Abdullah Hasan, who tweeted, "For a company that claimed not too long ago that it was 'working hard' to increase oil production, handing out $75 billion to executives and wealthy shareholders sure is an odd way to show it.”
Bearish Nobias Credible Analysts Opinions:
Bhavik Nair, a Nobias 4-star rated author, also covered the White House’s disdain for Chevron’s buyback announcement. In an article published at Benzinga, Nair wrote, “U.S. Council of Economic Advisers member Jared Bernstein highlighted the fact that President Joe Biden considers excessive buybacks by corporations as problematic.”
Nair went on to quote Bernstein, who gave an interview to Bloomberg TV this week. In the interview Bernstein said, “If you listen to the President's comments on buybacks, this is something he views as problematic when it's excessive. That's one of the reasons why the Inflation Reduction Act had a 1% tax introduction on buybacks. That's in legislation. That's not specifically for one sector over another.”
Chevron shares rallied roughly 3.5% on Thursday in response to the buyback news; however, after CVX’s earnings miss on Friday, shares dropped 4.44% during Friday’s trading session. Regarding this sell-off, Scott Levine, a Nobias 4-star rated author, published an article at the Motley Fool titled, “Why Shares of Chevron Are Falling Today”.
Levine mentioned CVX’s record results, but said, “While there was a lot to celebrate, it seems investors are acutely focused on the lower-than-expected earnings.” Levine, on the other hand, was willing to focus on the company’s record cash flows. He put a spotlight on the most bullish aspects of CVX’s report, stating, “For one, Chevron reported $12.5 billion in cash from operations for the quarter, contributing to Chevron's achieving a company record for annual operational cash flow of $49.6 billion.” He also wrote, “With regards to free cash flow, Chevron reported $8.7 billion for Q4 2022, resulting in 2022 free cash flow of $37.6 billion -- a year-over-year increase of 78.2%.”
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 sell-off on Friday, Levine said, “Chevron's stock is currently on sale, trading at 10.8 times forward earnings.” He concluded, “While the bottom-line miss is driving some to exit their positions today, investors looking to power their portfolios with a leading energy stock would be wise to consider shares of Chevron.”
Overall bias of Nobias Credible Analysts and Bloggers:
The vast majority of credible authors who have covered Chevron recently agree with Levine’s conclusion. 80% of recent articles published by Nobias 4 and 5-star rated authors expressed a “bullish” bias.
Furthermore, the average price target being applied to CVX shares by the credible Wall Street analysts that the Nobias algorithm tracks is currently $198.50. Compared to Chevron’s closing price of $179.45 on Friday, that average price target represents upside potential of approximately 10.6%.
Disclosure: Nicholas Ward has no CVX position. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.
Case Study: What Credible analysts are saying on Microsoft (MSFT) stock
Microsoft’s cloud growth appears to be slowing; however, the company recently made a $10 billion bet on artificial intelligence, which could be the company’s next big growth driver.
Nobias Insights: 55% of recent articles published by credible authors focused on Microsoft shares offer a “bullish” bias. 3 out of the 5 credible Wall Street analysts who cover MSFT believe shares are likely to rise in value. The average price target being applied to Microsoft by these credible analysts is $248.60, which implies upside potential of approximately 0.2% relative to the stock’s current share price of $248.16.
Bullish Take: Tradevestor, a Nobias 5-star rated author, said, “I believe Microsoft is perhaps the best big tech stock to own as it offers a unique mix of sticky existing businesses, exciting new prospects including AI and further cloud expansion, a bit of dividend income, and enormous potential for dividend growth.”
Bearish Take: Nobias 4-star rated author, Cavenagh Research, said, “Reflecting on a challenging growth outlook, I now downgrade my EPS expectations for Microsoft Corporation through 2025, and based on a 8.75 cost of equity, I now model a fair implied share price for MSFT equal to $211.06/share.”
Key Points
Performance
Microsoft (MSFT) shares rose by 2.92% this week. On a year-to-date basis, MSFT is up by 3.58%. This compares poorly to the S&P 500, which is up by approximately 6.44% during 2023 thus far.
Event & Impact
Microsoft announces Q2 fiscal 2023 earnings this week, missing Wall Street consensus estimates on the top-line but beating on the bottom-line. During Q2, Microsoft posted sales of $52.7 billion, which were up by 1.9% on a year-over-year basis, but missed Wall Street’s estimate by $450 million. MSFT’s second quarter non-GAAP EPS totaled $2.32, beating estimates by $0.01/share.
Noteworthy News:
Microsoft’s cloud growth appears to be slowing; however,the company recently made a $10 billion bet on artificial intelligence which could be the company’s next big growth driver.
Nobias Insights
55% of recent articles published by credible authors focused on Microsoft shares offer a “bullish” bias. 3 out of the 5 credible Wall Street analysts believe shares are likely to rise in value. The average price target being applied to Microsoft by these credible analysts is $248.60 which implies upside potential of approximately 0.2% relative to the stock’s current share price of $248.16.
Bullish Take Tradevestor, a Nobias 5-star rated author, said, “I believe Microsoft is perhaps the best big tech stock to own as it offers a unique mix of sticky existing business, exciting new prospects including AI and further Cloud expansion, a bit of dividend income and enormous potential for dividend growth.”
Bearish Take Nobias 4-star rated author, Cavenagh Research, said, “Reflecting on a challenging growth outlook, I now downgrade my EPS expectations for Microsoft Corporation through 2025, and based on a 8.75 cost of equity, I now model a fair implied share price for MSFT equal to $211.06/share.”
MSFT Jan 2023
Microsoft (MSFT) posted its Q2 fiscal 2023 results this week, initially causing shares to fall. Microsoft opened trading the next day down roughly 4%; however, throughout the rest of the week, shares rallied and MSFT ended up rallying by 2.92% for the week, overall. This 2.92% rally pushed MSFT’s year-to-date gains up to 3.58%. This compares poorly to the S&P 500, which is up by 6.44% during 2023 thus far; however, it’s a bullish trend reversal for MSFT shares, which are still down by 17.24% during the trailing twelve month period.
Bearish Nobias Credible Analysts Opinions:
Nobias 4-star rated author, Cavenagh Research, covered Microsoft’s Q2 fiscal 2023 results this week. Cavenagh Research published an article at Seeking Alpha titled, “Microsoft: Bulls Are Still Standing On Shaky Legs” which stated, “Although revenues are up by approximately 2% versus the same period one year earlier ($51.7 billion), Microsoft failed to meet consensus analyst expectations by about $405 million ($58.15 billion estimated, according to data compiled by Refinitiv).”
The author moved onto MSFT’s bottom-line results, writing, “Operating income for the period came in at $20.4 billion, representing a 9% year over year contraction as compared to $22.25 for the same period in 2021. They continued, “Net-income was recorded, $16.4 billion ($2.20/share), which is a 15% contraction respectively.”
Importantly, Cavenagh Research highlighted the company’s near-term guidance, which was “softer than hoped” for. They wrote, “Microsoft forecasted that revenues for the upcoming quarter are likely to fall somewhere between $50.5 billion and $51.5 billion. This is around $1.5 billion less than what analysts had predicted at midpoint, and would represent only a 3% year over year increase as compared to Q3 in 2022.”
The author concluded, “Reflecting on a challenging growth outlook, I now downgrade my EPS expectations for Microsoft Corporation through 2025, and based on a 8.75 cost of equity, I now model a fair implied share price for MSFT equal to $211.06/share.”
Dina Bass, a Nobias 4-star rated author, also covered Microsoft’s earnings in an article posted at Yahoo Finance this week. She said, “Microsoft posted adjusted profit in the period ended Dec. 31 of $2.32 a share, while sales rose to $52.7 billion.”
Bass put a bearish spotlight on the results, stating, “Revenue growth of 2% in the second quarter was the slowest in six years, and Microsoft last week said it’s firing 10,000 workers.” She also said, “Excluding currency impacts, Azure revenue gained 38% for the full quarter, slightly topping analyst predictions.”
With regard to Microsoft’s Azure Cloud segment, Bass said, “After years of double-digit revenue gains fueled by Microsoft’s accelerating cloud business, and robust growth during the technology spending spree of the Covid-19 pandemic, Chief Executive Officer Satya Nadella acknowledged that the industry is going through a period of deceleration and will need to adjust.” It appears that one way Microsoft plans to adjust is further investments into artificial intelligence.
Bullish Nobias Credible Analysts Opinions:
Recently, news broke that Microsoft was investing billions of dollars into OpenAI, which is best known for creating ChatGPT. Shawn Johnson, a Nobias 4-star rated author, covered this M&A activity in a recent article..
Johnson wrote, “OpenAI is the hottest AI lab with one of the busiest and most exciting products out there: ChatGPT. And Microsoft is a great friend of this. On Monday, the two companies announced that Microsoft is investing $10 billion in OpenAI (that’s on top of the $3 billion Microsoft has given to OpenAI since 2019), and that Microsoft will add ChatGPT to its Bing search engine.” He continued, “Following news of Microsoft’s $10 billion investment, Wedbush analyst Daniel Ives wrote that ChatGPT was a “potential game-changer” for Microsoft, and that the company was not going to “repeat the same mistakes” of missing out on social and mobile.
Johnson said, “Perhaps OpenAI’s technology is a game changer. Maybe it’s just a party trick. Either way, Microsoft’s got it, and a lot of people think it’s amazing.” He also stated, “It appears that Microsoft is on the verge of becoming something it hasn’t been for a long time: cutting edge.”
There are investors who own Microsoft shares not because of its cutting edge technology, but instead, because of its reliably growing dividend. Headlines surrounding the fact that Microsoft’s Q2 free cash flow didn’t cover the dividend sparked concern for those individuals after the company’s Q2 report, causing, Tradevestor, a Nobias 5-star rated author, to cover the company’s dividend safety in an in-depth report published at Seeking Alpha this week.
In that article, Tradevestor broke down the company’s earnings results before saying,”Let us see how Microsoft's dividend coverage looks after this recent quarterly result.” They highlighted the company’s Q2 data, stating:
Total shares outstanding: 7.454 Billion
Current quarterly dividend per share: $0.68
Quarterly FCF required to cover dividends: $5.068 Billion
Microsoft's FCF in Q2: $4.9 Billion
Microsoft's Payout ratio using Q2 FCF: 103% ($5.068 billion divided by $4.9 billion). OUCH!
Microsoft's Q2 EPS reported: $2.32
Payout ratio using Q2 EPS: 29% ($0.68 divided by $2.32)
The author continued, “What's with that massive decline in FCF? As shown below, that's a 43% decline YoY compared to the $8.615 Billion recorded in Q2 2022. Is the dividend in danger? Maybe. Maybe not. Only way to find out is to read the fine prints as well to see how the annual FCF (trailing twelve months) looks.”
After looking through Microsoft’s report, they stated, “FCF took a massive hit this quarter due to a tax payment related to R&D.” Tradevestor continued, “Ignoring this impact, the apples-to-apples comparison results in a FCF decline of 16%, a far cry from the 43% that showed up on first glance. In other words, the adjusted Q2 FCF was $7.254 Billion, which gives Microsoft a Q2 FCF payout ratio of about 70%.”
Furthermore, they examined the company’s trailing 12 month data, and said, ”Microsoft's Payout ratio using TTM FCF: 34% ($20.274 Billion divided by $59.63 billion).” With that in mind, the author concluded, “Given the balance sheet and fundamental strengths, I fully expect another juicy dividend increase (10% at least) from Microsoft in September, marking its 14th consecutive annual dividend 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.
“Overall,” Tradevestor wrote, “I believe Microsoft is perhaps the best big tech stock to own as it offers a unique mix of sticky existing business, exciting new prospects including AI and further Cloud expansion, a bit of dividend income and enormous potential for dividend growth.”
Overall bias of Nobias Credible Analysts and Bloggers:
After MSFT’s nearly 3% rally this week, it appears that authors and analysts are torn on whether or not its rally will continue. 55% of recent articles published by credible authors of MSFT stock have expressed a “Bullish” bias.
Furthermore, 3 out of the 5 credible Wall Street analysts that the Nobias algorithm tracks who have expressed an opinion on MSFT shares believe that they’re likely to increase in value. However, after its recent rally, MSFT closed the week trading for $248.16/share. This is essentially in-line with the average price target of $248.60 that credible analysts have placed upon shares, implying upside potential of less than two-tenths of a percent.
Disclosure: Nicholas Ward is long MSFT. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.
Case Study: What Credible analysts are saying on Tesla (TSLA) stock
Tesla maintained its former growth guidance and reassured investors, calling for strong profit margins in the face of recent price cuts.
Nobias Insights: 94% of recent articles published by credible authors focused on TSLA shares offer a “Bearish” bias. 2 out of the 4 credible credible Wall Street analysts who cover Tesla believe shares are likely to fall in value. The average price target being applied to TSLA by these credible analysts is $138.67 which implies downside potential of approximately 22% relative to the stock’s current share price of $177.90.
Bullish Take: Luke Lango, a Nobias 4-star rated author, said, “Tesla is sprinting into 2023 with better demand than ever, along with relatively stable profit margins. That’s a winning combination.”
Bearish Take: 4-star rated Nobias author, Billy Duberstein, said, “Currently, shares go for 43 times trailing non-GAAP earnings per share (EPS) and 73 times trailing free cash flow.”
Key Points
Performance
Tesla (TSLA) just had its best week since 2013, up approximately 33%. On a year-to-date basis, JPM shares are now up by 64.57%. This compares favorably to the S&P 500, which is up by approximately 6.44% during 2023 thus far.
Event & Impact
Tesla announced Q4 earnings on Wednesday, posting top-line results which met Wall Street’s estimates and a bottom-line figure which beat consensus. During its Q4 report, TSLA posted $24.32 billion, which was in-line with Wall Street consensus, and $1.19/share in non-GAAP earnings, which beat Wall Street’s estimate by $0.08/share.
Noteworthy News:
Tesla maintained its former growth guidance and reassured investors, calling for strong profit margins in the face of recent price cuts.
Nobias Insights
94% of recent articles published by credible authors focused on TSLA shares offer a “Bearish” bias. 2 out of the 4 credible credible Wall Street analysts who cover Tesla believe shares are likely to fall in value. The average price target being applied to TSLA by these credible analysts is $138.67 which implies downside potential of approximately 22% relative to the stock’s current share price of $177.90.
Bullish Take Luke Lango, a Nobias 4-star rated author, said, “Tesla is sprinting into 2023 with better demand than ever, along with relatively stable profit margins. That’s a winning combination.”
Bearish Take 4-star rated Nobias author, Billy Duberstein, said, “Currently, shares go for 43 times trailing non-GAAP earnings per share (EPS) and 73 times trailing free cash flow.”
TSLA Jan 2023
CNBC just reported that Tesla shares had their best week since 2013. Tesla shares were up 11.00% on Friday, pushing their 5-day performance up to 33%. This rally was largely bolstered by the company’s Q4 earnings report which was posted on Wednesday, January 25th. In that report, TSLA posted $24.32 billion, which was in-line with Wall Street consensus, and $1.19/share in non-GAAP earnings, which beat Wall Street’s estimate by $0.08/share. Prior to this rally, TSLA was in the doghouse, falling from its 52-week high of $384.29 to recent lows of $101.81. Even after Tesla’s recent rally, shares are down by 35.6% during the trailing twelve month period.
Bullish Nobias Credible Analysts Opinions:
Luke Lango, a Nobias 4-star rated author, covered Tesla’s recent share price rally in an article that he published at Business Insider. He started, highlighting the negative sentiment surrounding the stock prior to its Q4 report.
Lango said, “CEO Elon Musk was dumping billions’ worth of shares. The company was cutting prices on all its cars. Delivery growth was significantly slowing into the end of 2022. Political issues were plaguing the brand.” “It seemed like everything was going wrong for Tesla all at once. As a result, pretty much everyone was saying to sell Tesla stock,” he wrote. But, “not us” Lango continued, highlighting a call from a month ago which called TSLA shares “oversold and undervalued”.
Lango also noted that he’s not interested in taking profits after the stock’s 40%+ rally. Why is he so bullish? Not because of TSLA’s Q4 results. Lango wrote, “The report itself wasn’t great. Delivery growth continued to slow last quarter. Average automobile sales price slipped. Gross margins contracted. Operating margins dropped sequentially. Free cash flow production crashed.”
“Honestly,” he said, “the numbers were pretty bad.” But, management’s commentary during the conference call was “great” he said. Lango stated, “Last night, Tesla showed us that both itself and the entire EV industry are due for a blockbuster 2023.”
With specific regard to the conference call, he noted, “Elon Musk and company essentially said that the worst of Tesla’s growth struggles are behind it and that the company’s growth profile should meaningfully re-accelerate in 2023 and ‘24. “
“According to Musk,” Lango wrote, “the company is seeing a record number of orders so far in January 2023, with demand outnumbering production by 2-to-1.” Furthermore, he continued, “Management specifically said on the conference call that it is their expectation that Tesla’s automotive gross margins will exceed consensus expectations in 2023.” He concluded, “Tesla is sprinting into 2023 with better demand than ever, along with relatively stable profit margins. That’s a winning combination.”
“Overall, then, it actually looks like that – despite all the negative press surrounding Tesla over the past few weeks – the EV titan is setting up for a record year in 2023,” said Lango, before proclaiming that he expects the stock’s rally to continue.
Poonam A. Arora, a Nobias 4-star rated author, broke down Tesla’s Q4 results in an article that she published at Seeking Alpha this week. Arora highlight the stock’s quarterly results, stating: “For the quarter, revenues were ~$21.3 billion (+33% compared to F4Q2021), and earnings per share came in at $1.07 (versus $0.68 during the same quarter last year). On a year-over-year basis, gross margins declined by 360 bps to 23.8%, and operating margins expanded by 129 bps to 16%. Net income for F4Q2022 was ~$3.69 billion, reflecting an uptrend of 59%, over the previous year’s same quarter.
During the period, the firm generated operating cash flows of $14.7 billion and free cash flows of $1.42 billion. At the end of F4Q2022, the company had a cash and cash equivalents balance of ~$22.2 billion and long-term debt of ~$1.6 billion, on its balance sheet.
For FY2022, revenues were ~$71.5 billion (+51 % compared to FY2021), and earnings per share came in at $3.62 (versus $1.63 during the previous year). On a year-over-year basis, gross margins expanded by 32 bps to 25.6%, and operating margins escalated by 464 bps to 16.8%. Net income for the period was ~$12.6 billion, reflecting an uptrend of 128% over the prior year.” She also touched upon TSLA’s price cuts, which have been in the headlines as of late, highlighting the company’s relatively attractive margin profile (when compared to peers in the automotive industry).
Arora said, “Competitively, the price cuts, set Tesla up to benefit, as the company’s margins are considerably higher than that of its peer group. Specifically, during F3Q2022, Tesla’s gross profit/car was $15,653, while that of General Motors (GM) was $9,969, BYD Company Limited (OTCPK:BYDDF) was $5,456, and Ford’s (F) was $3,115. During the same period, Tesla’s net profit/car was $9,574, compared to GM’s $2,150, BYD’s $1,575, and F’s $927.”
“In that regard,” she continued, “it is noteworthy that during 2022, Tesla accounted for ~65% of total revenues associated with the EV industry, with F at ~7.6%, and GM at ~3.5%, far behind. In addition, although the Model Y at $52,990 is still priced at a premium to F’s best selling EV Model, the Mach-E, it is priced below the firm’s higher-end EV Models. With respect to GM’s EV’s, Model Y’s base price is ~$10,000 below that of the company’s similarly sized EV SUV, the Cadillac Lyriq.”
Arora concluded, “The first mover advantage Tesla secured, sustained, and built on, almost ensures its dominance over the EV industry, through the course of its life cycle.” Lastly, she stated, “At current levels, Tesla’s stock represents a significant opportunity to generate massive returns on capital, over the long term.”
Bearish Nobias Credible Analysts Opinions:
4-star rated Nobias author, Billy Duberstein, published a report at the Motley Fool this week which highlighted the pros and cons of Tesla stock after its 2023 year-to-date rally. Duberstein also put a spotlight on TSLA’s recent price cuts, then went on to highlight the company’s production goals for 2023. He said, “Musk noted that the price cuts had sparked demand, with January orders now double Tesla's rate of production.”
“Of note,” Duberstein continued, “Musk thinks Tesla can produce around two million vehicles this year, above the company's "conservative" forecast for 1.8 million.” “For reference,” he said, “Tesla did just over 1.3 million deliveries in 2022.”
Despite these strong production numbers, Duberstein noted that TSLA shares trade with a high valuation premium. He said, “Currently, shares go for 43 times trailing non-GAAP earnings per share (EPS) and 73 times trailing free cash flow.”
Next, he asked the question,“Now what?” He answered, ”Whether or not Tesla can continue its recent run depends on a few things that will affect growth in 2023.” With regard to what investors should look for, he said, “First, the health of the global economy and whether we will see a recession or not, and if so, how bad it will be.”
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.
“Second,” Duberstein said, “ investors should monitor how consumers feel about the Tesla brand, as Elon Musk has become increasingly vocal and polarizing in his political commentary since acquiring Twitter in October.”
“Third,” he concluded, “investors should monitor if the incentives from last year's Inflation Reduction Act spur lots of incremental demand for EVs in 2023, as the incentives just kicked in on January 1.
Overall bias of Nobias Credible Analysts and Bloggers:
While we’ve seen credible authors come out with bullish reports since TSLA’s Q4 earnings were published, 94% of reports published by credible authors recently have expressed bearish opinions.
Furthermore, the average price target currently being attached to TSLA by the credible Wall Street analysts that the Nobias algorithm tracks is $138.67, which implies downside potential of approximately 22% relative to TSLA’s current share price of $177.90.
Disclosure: Nicholas Ward had no TSLA position. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.