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Stocks Travel

Airbnb (ABNB) Analysis: Network Effects Leader Warranting Strategic Entry Points

Airbnb – ABNB $145 Buy on declines around $125.

Solid long-term player, well entrenched, and has the virtuous cycle and network of being one of the largest players, with a large and wide choice of rentals and therefore attracting the largest number of travelers – perpetuating the network/cycle.

Had amazing revenue growth from $2.5Bn to $9.9Bn in 6 years through 2023 but has now come down to an estimated more sedate growth of 12% for the 3-5 years, but earnings should grow faster at 13-15% – it has matured and has good operating margins of 18-19%, this should improve. This is more of an earnings story now.

Has gone up 34% in the past year to $145, and with an earnings growth of only 12-14% the P/E multiple of 32 is high, more than two times the earnings growth – hence my preference for a dip for a better price. Unfortunately, with this raging market and because it is the largest player it deserves a premium, it might not happen. If you want to buy now and add more on declines that is not a bad strategy. I would think its still worth a 10-12% return in the next few years with the possibility of more upside.

Categories
Consumer Staples Stocks

Shopify (SHOP) Plummets 25% Post Earnings: Analyzing Valuation Concerns and Long-Term Growth Potential

Shopify (SHOP) $60 – Big 25% drop post earnings.

Shopify is still on the expensive side at 9x sales with 21% growth, and 63 x earnings with 35% growth. But it’s a lot cheaper after the drop.

What caused the drop, and does it change the long-term growth outlook?

  • Both revenue and earnings beat in small amounts.
  • Guidance was in line if you adjusted for the sale of the logistics business.

The drop was more valuation-related, which was high, and GAAP profitability has over the past year, become a sensitive issue with higher interest rates.

That said, the business is really, really solid – they’ve had two price increases (plus and premium tiers) with little churn from customers.

It does have Shopify has a significant competitive advantage in its dominant segment of SMBs –   in that it is the leader in small-to-medium-sized digital storefront provision of independent sites of access. The quality emphasis does resonate with customers who remain loyal.

I think it is worth accumulating on declines for the longer term- the only caveats being – that multiples are getting compressed and with Shopify’s relative maturity there will be scrutiny towards GAAP profitability, especially since their hyper-growth days are over. All that means that returns will be more sedate, but at this price, the downside is limited, with more upside potential.

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Consumer Discretionary Stocks

Starbucks (SBUX) Faces Revenue Growth Challenges: Insights on Market Saturation and Future Prospects

Source: Starbucks

Starbucks (SBUX) $76

The main problem is the lack of revenue growth – Starbucks is struggling to grow revenues even 5-7%, same-store sales are declining, it is a saturated market, and with work from home, the big urban markets remain flat or in decline with little chances of recovery, the same for global growth.

Howard Schulz’s bashing of his hand-picked successor is not good for company morale, but he does have a point about improving the customer experience, especially when you keep increasing prices.

Earnings still grow 12-14%, with a multiple of just 18-19, so that’s fairly reasonable, and I don’t see earnings stalling much, they’re an extremely profitable company, with a history of passing price increases. The dividend yield is 3%, which helps.

I would wait for a better price, say mid to high sixties, because even though Starbucks is an absolutely strong and irreplaceable brand, (it would decades for someone to even come close), you’re not likely to see much appreciation – 7-8% per year at the most. In fact, in the last 5 years, the stock was flat, the only way to make a return was to buy it really cheap.

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Industry Media Stocks

Reddit Looks Promising 

Reddit – (RDDT) $57 Hold, till post lock up expires on 8/9, we might get it around $50  

Last week I had written on Reddit when the stock was in the mid 60’s suggesting a Hold till it dropped 20-25% to around $50-54. Their lock up period post IPO expires on 8/9 and there could be a lot of shares for sale. With the recent turmoil I want to wait longer. 

Here’s the link. 

https://seekingalpha.com/article/4706184-reddit-waiting-for-a-better-price

Summary 

Reddit has an excellent business model of unique Subreddits. 

Its user base is enthusiastic, passionate and sticky. 

Reddit’s data licensing revenue stream is an excellent opportunity to grow – currently contracted for $203Mn for 2-3 years and a very profitable business.  
Reddit turned cash flow positive for the first time last quarter with a margin of 12%. 

The stock is expensive at 10X sales and could fall once the lock-up period post its 2024 IPO expires in August. 

Its biggest weakness is a low Average Revenue Per User (ARPU) $4.77, even Pinterest and Snapchat earn almost double – around $8, and Facebook is in a different league at $68, but this should only grow from such a low base. 

Categories
Enterprise Software Stocks

Confluent’s Strong Earnings Report: A Step Toward Profitability

Confluent (CFLT) Post Market $30.50 up 8%.

Confluent delivered better-than-expected results for the March quarter, with beats on revenue and adjusted earnings.

Adjusted Earnings came in at $0.05 per share against the $0.02 estimated and revenue at $217 v $211 expected.

Guidance was raised slightly in Q2 and FY 2024 as under:

Adjusted earnings – $0.04 to $0.05 V consensus of $0.04

Revenue $229-$230 v $229.3 expected. Growth 21.5%

EPS $0.19 to $0.20 v $0.18 consensus estimates

$957Mn revenue V $ 952.8 estimated – Growth of 23%

Confluent is swinging from adjusted losses into positive territory as promised to investors, though still far from GAAP profits, which would take at least two years.

Growth momentum remains, and I last accumulated at $28-29, which I plan to continue doing.

Will update further after the call.

Categories
Enterprise Software Stocks

Palantir (PLTR) Earnings Beat Expectations: A Strong Quarter Amidst Stock Decline

Source: Lord Of The Enterprise

Palantir (PLTR) Post Market down 6% but solid earnings and revenue beat and improved guidance.

Rev – $634Mn up 21% beats $615Mn consensus

Adjusted Operating income $226Mn beats forecast of $196-$200Mn

For the full year, Palantir lifted its revenue guidance to between $2.677 billion and $2.689 billion, above the previous range of $2.652 billion to $2.668 billion

Adjusted EPS – $0.08 per share in line with estimates

Palantir PLTR 8.06% followed up its “bombastic” December quarter with even better results for the March quarter as the data analytics software company continued to gain traction with its artificial intelligence tools in particular with U.S. commercial customers.

Nonetheless, the stock is losing ground following the announcement. Palantir shares, which rallied 8.1% in Monday’s regular session, was off more than 7% in late trading, leaving the stock up slightly from Friday’s close. The stock was up 47% this year as of Monday’s closing bell.

For the March quarter, Palantir posted revenue of $634 million, up 21% from a year ago, and ahead of both the company’s guidance range of $612 million to $616 million and Wall Street’s consensus of $615 million as tracked by FactSet.

Adjusted operating income was $226 million, well ahead of Palantir’s forecast of $196 million to $200 million. Adjusted profit was 8 cents a share, in line with Street estimates. Under generally accepted accounting principles, the company earned 4 cents a share.

Palantir gained impressive traction with U.S. commercial customers. That segment of the business grew 40% from a year ago and 14% sequentially to $150 million. Overall, commercial business was $299 million, up 27% and ahead of consensus at $292 million. Palantir said that the U.S. commercial business grew 69% year over year if you back out the contribution from customers where Palantir had made strategic investments a few years ago in a now-suspended program tied to SPAC-related IPOs.

Palantir said “remaining deal value” for U.S. commercial customers grew 74% from a year earlier and 14% sequentially. The total number of signed deals in the quarter increased 52% year over year for the quarter overall, including a 94% increase in U.S. commercial deals, Palantir reported.

Meanwhile, government segment revenue was $335 million, up 16% from a year ago, ahead of consensus at $322 million, and an acceleration from 11% growth in the December quarter.

“America is adopting technology and especially AI in a way no other part of the world is,” CEO Alex Karp said in an interview with Barron’s. “We are the only company providing the right infrastructure to make LLMs [large language models] actually valuable,” noting that the company is adopting a tagline of “beyond chat” for its AI business.

“We have a vibrancy of our tech and corporate scene that no one else has,” he said. “And as important as it is for Palantir, it’s going to change the GDP trajectory of America.” In the long run, he said the strongest players in AI will be in the U.S. and Middle East, with Europe “closing its eyes and hoping the nightmare will end.”

Palantir also provided strong guidance. For the June quarter, the company sees revenue of between $649 million and $653 million, ahead of consensus at $643 million, with adjusted operating income of between $209 million and $213 million, above the Street at $201 million.

For the full year, Palantir lifted its revenue guidance to between $2.677 billion and $2.689 billion, above the previous range of $2.652 billion to $2.668 billion. The company now sees U.S. commercial business for the year of above $661 million, up at least 45%; the previous guidance had called for 40% growth in that segment. Palantir also boosted its adjusted operating income guidance to between $868 million and $880 million from a previous forecast of $834 million to $850 million.

Categories
Networking Stocks

Arista Networks Posts Strong Earnings: A HOLD for Now

Arista Networks (ANET) $275 post earnings, HOLD

Beats all around and guidance is raised as well.

For the period ending March 31, Arista earned an adjusted $1.99 per share as revenue rose 16.3% year-over-year to $1.57B.

A consensus of analysts expected the company to earn $1.74 per share on $1.55B in revenue.

Looking ahead, Arista Networks expects to generate sales between $1.62B and $1.65B, compared to estimates of $1.62B.

Adjusted gross margin is forecast to be around 64% while adjusted operating margin is expected to be around 44%.

Arista also said that it has finished its previous $2B share buyback program and its board of directors has approved an additional program to repurchase up to $1.2B worth of shares.

Arista’s biggest clients Meta and Microsoft are ramping up Datacenter buildouts so Arista should remain strong. Excellent company, but has been expensive for the past 6 months, holding for now, and will re-assess if the price falls.

Categories
AI Stocks

Apple (AAPL) Q2 Earnings: Resilient Margins Amidst Sales Decline

source:apple

Apple (AAPL)

China sales are only 8% lower – this is better than expectations.

Japan and the rest of Asia-Pacific were much lower at 13% and 17% respectively.

iPhone sales down 10.4% – this could have been worse.

Services of course the biggest growth category with 14% growth.

The interesting thing here is that even as Apple keeps contracting in its product categories, margins get better with the higher margin services taking more share of the pie. Operating income dropped only 1.5% compared to the 4% revenue drop.

Apple (AAPL) $179 post-market, from $173.

  • Apple press release (NASDAQ: AAPL): Q2 GAAP EPS of $1.53 beats by $0.03.
  • Revenue of $90.8B (-4.3% Y/Y) beats by $190M.
  • Shares +2.4%.
  • Apple’s board of directors has declared a cash dividend of $0.25 per share of the Company’s common stock, an increase of 4 percent. The dividend is payable on May 16, 2024, to shareholders of record as of the close of business on May 13, 2024. The board of directors has also authorized an additional program to repurchase up to $110 billion of the Company’s common stock.
Categories
Semiconductors Stocks

Qualcomm (QCOM) Q2 Earnings: Strong Results and Guidance Boost Shares 4.5%

Qualcomm (QCOM) Maintaining Buy on Declines

Qualcomm (NASDAQ: QCOM) shares rose 4.5% in extended trading on Wednesday after the San Diego-based semiconductor firm offered up better-than-expected guidance on top of strong second-quarter results.

Auto is the big mover with a 35% increase in revenues. I’m also surprised that handsets held up considering Apple’s weakness.

Looking to the third quarter, Qualcomm said it expects to earn between $2.15 and $2.35 per share on an adjusted basis, with revenue forecast between $8.8B and $9.6B.

Analysts were expecting $2.16 per share in earnings and $9.05B in revenue.

For the period ending March 24, Qualcomm earned an adjusted $2.44 per share on $9.39B in revenue, as QCT sales rose 1% year-over-year to $8.02B. Revenue from handsets rose 1% year-over-year to $6.18B while automotive sales jumped 35% to $603M. Sales from (Internet of Things) IoT tumbled 11% to $1.243B.

Licensing revenue rose 2% year-over-year to $1.318B.

A consensus of analysts expected the company to earn $2.32 per share on $9.35B in revenue.

“We are pleased to report strong quarterly results, with EPS exceeding the high end of our guidance,” said Cristiano Amon, President and CEO of Qualcomm Incorporated. “We are excited about our continued growth and diversification, including achieving our third consecutive quarter of record QCT Automotive revenues, upcoming launches with our Snapdragon X platforms, and enabling leading on-device AI capabilities across multiple product categories.”

Categories
Cloud Service Providers

Amazon Q1 Earnings: Solid Revenue and AWS Growth, But Lower Guidance for Q2

Source:Seeking Alpha

Source:Seeking Alpha

  • Amazon press release (NASDAQ: AMZN): Q1 EPS of $0.98 may not be comparable to consensus of $0.83.
  • Revenue of $143.3B (+12.5% Y/Y) beats by $750M – Positive.
  • AWS segment sales increased 17% year-over-year to $25.0 billion – That’s a good sized growth compared to Google Cloud and Azure since it’s so much bigger.
  • Second Quarter 2024 Guidance
  • Lower guidance – Net sales are expected to be between $144.0 billion and $149.0 billion vs. $150.09B consensus, or to grow between 7% and 11% compared with the second quarter of 2023. This guidance anticipates an unfavorable impact of approximately 60 basis points from foreign exchange rates. In the first quarter of 2024, the impact from Leap Year added approximately 120 basis points to the year-over-year net sales growth rate.
  • Operating income is expected to be between $10.0 billion and $14.0 billion, compared with $7.7 billion in the second quarter of 2023.

The stock is up about 3% to $180, but that’s not even recovered the 4% that it lost in the day.