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Tag: revenue growth

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Stocks

PayPal Q1 Earnings: Revenue Beat and Optimistic Outlook Despite Market Challenges

Paypal (PYPL) $70 Pre-Market up 7%.

Maintaining Buy, at this price there’s little downside and Paypal seems to be walking the talk with steady increases in revenue in an overcrowded market. Paypal is a mature company and getting 12-15% a year is pretty good.

Q1 revenue of $7.70B, topping the $7.52B consensus, fell from $8.03B in Q4 2023 and grew from $7.04B in Q1 2023.

Q1 Non-GAAP EPS of $1.40 beats by $0.18.

Guidance

Non-GAAP earnings per diluted share are expected to increase by a mid-to-high single-digit percentage compared to $3.83 (based on the new non-GAAP methodology) in the prior year.2024 is a transition year, righting a ship that had screwed up quite badly for the past three years and I think they should be able to do a decent job. 

Categories
Cloud Service Providers

Microsoft Q3 Earnings: Strong Revenue Growth Across Key Segments, Stock Rises 5%

  • Microsoft press release (NASDAQ: MSFT): Q3 GAAP EPS of $2.94 beats by $0.11.
  • Revenue of $61.9B (+17.1% Y/Y) beats by $1.01B.
  • Shares +5%.
  • Revenue in Productivity and Business Processes was $19.6 billion and increased 12% (up 11% in constant currency)
  • Revenue in Intelligent Cloud was $26.7 billion and increased 21%
  • Revenue in More Personal Computing was $15.6 billion and increased 17%
  • Microsoft will provide forward-looking guidance in connection with this quarterly earnings announcement on its earnings conference call and webcast.
Categories
Media

Meta Platforms Earnings: A 20% Drop After Hitting the High Bar

Source:Meta

Meta Platforms (META)

The bar was too high for Meta to clear.

Post earnings the markets punished it 20% for a marginally weaker guidance and higher than expected CAPEX. Pre-earnings the stock had been up 130% for the past year, so this 20% drop was perhaps, overdue.

Rev beat of 36.46Bn v 36.12Bn 27% YoY – but too little a beat.

Rev guidance 36.5Bn to 39Bn or a midpoint of 37.75 V 38.24,  still 18.5% YoY growth but too much of a miss.

Capex is higher at 37.5Bn midpoint now V 33.5Bn – bad for Meta but good for Nvidia/AI  most of the Capex is for AI.

META has a GAAP operating profit margin of 49% in the family of apps business – that’s a phenomenal margin, but it drops substantially because of losses in the Reality Labs business. Still, its company-wide margin was 38% – a 52% increase YoY.

Will parse through the earnings call/analysts’ upgrades tomorrow morning, the selloff may be overdone.

Categories
Media

Buying Netflix (NFLX): A Bet on Operating Margins and Revenue Growth

There are some fears of the lack of transparency for the next quarters till analysts and investors get used to not seeing subscriber numbers, but operating margins are improving further, revenues are guided to 14% mid-point growth and earnings should increase 25% per year in the next 3. The stock is down 13% from its all-time high.

Netflix Q1-2024

Beats all around, and has better guidance as well.

GAAP EPS of $5.28 beats by $0.76.

Revenue of $9.37B (+14.8% Y/Y) beats by $90M.

Global streaming paid memberships: +9.33M to 269.6M. UP 165 YoY, Q1 is seasonally low, and in Q1-23, the YoY growth was inly 4.9% so this is quite impressive.

Q2 Guidance: Revenue of $9.49B vs. $9.28B consensus, 16% growth, 21% F/X neutral growth.

EPS of $4.68 vs. $4.54 consensus.

For the full year 2024, we expect healthy revenue growth of 13% to 15%, based on F/X rates at the end of Q1’24. 

We now expect an FY24 operating margin of 25%, based on F/X rates as of January 1, 2024, up from our prior forecast of 24%. 

It’s dropped 3% after hours, (of course,)

Categories
Fintech

MoneyLion: A Fintech with Roaring Potential but Credit Risks to Watch

source

MoneyLion (ML) $76, Fintech

Positives

Diverse base of revenue (subscription fees, interchange, interest, etc.).

Both consumer and fast-growing enterprise segments, with more than 1.1K channel partners, enterprise now accounts for about one-third of its overall revenue.

The online marketplace for third party vendors is a great idea to increase its offering options in areas like insurance, credit cards, and mortgages. At the end of Q4, about 48% of the products used by its customers were from third parties, up from 26% at the end of last year, showing its expanding marketplace.

ML management striving for GAAP profitability should be a positive catalyst.

Ernst & Young, EY partnership is also positive.

Customer acquisition costs are low at $15, they can expand without hurting profits.

Negatives and Risks

The biggest risk is credit – so far it has been under control, but as we’ve seen with Fintech, things start spiraling out of control very fast, without proper guardrails in place.

Credit quality remained steady. Its provision expense as a percentage of total originations was 3.4% for the full year – THIS MUST BE WATCHED FOR DETERIORATION. Management usually warns and expects over 4% of losses so they’re not downplaying the credit risk.

Valuation

112x adjusted earnings per share, with the hope of 300% growth in 2025. Much lower on adjusted earnings. Still high, but if earnings materialize the P/E drops to 26. Clearly the lion needs to roar.

If you have the capacity for some credit risk, this is potentially good and can return in excess of 20% per year.

Categories
Stocks

 Solventum Has No Revenue Growth Prospects

Solventum (SOLV) $67

The valuation is reasonable, the price to sales ratio is just 1.5x with a $12Bn Market Cap and $8.2Bn in sales.

Solid profit-making company with 25% operating margins and an EPS of $6.25, which gives it a decent multiple of 67/6.25 or just 11 – this is a discount to comparable health companies for sure.

The big problem is the lack of revenue growth, Solventum has been struggling at $8.2MBn in sales for the last three years, and even post spin-off is guiding to zero growth. That is also a bit difficult to swallow with all their segments – MedSurg, dental, health information and drinking water filtration, having 4-6% annual growth opportunities. There seems to be an execution problem.

Pre-spin off this was a well-entrenched 70 year business within 100,000 global customers, with presence in 75% of US hospitals and 50% international sales

3M has saddled it with $7.7Bn of debt so there is an interest burden of $400Mn which will dent profitability, till they reduce it in the next two three years.

The low valuation is definitely interesting, but we don’t want to walk into a value trap, where the stock just stagnates because of zero growth. Right now, there needs to be better execution or at least a strategic plan to start growing again. 

It might make sense to buy a small quantity to take advantage of the low valuation and then add more with better growth visibility.

Categories
Enterprise Software

Long-Term Investment Opportunity: Solid Cash Flow, Strong Margins, and Growth Potential in Cloud Storage

ntnx

Solid company with big improvements in cash flow and gross margins in the past few years. Revenue growth has slowed to 15-16%, and shouldn’t grow much faster in the next three years. Renewals have been good and they have a decent pipeline with two possible upsides from customers either moving from VMware after Broadcom acquired it, and a strategic tie up with Cisco, that should help business growth.

There are ample opportunities in cloud storage though it is competitive, it’s a growing market with all the datacenter spend right now.

The stock has already moved up 149% in the past year, so that could restrict upside gains. Valuation is OK with 7x sales and 16% growth, a bit on the higher side, Buy on declines or Dollar Cost Average, this is a good long term investment.

Categories
Enterprise Software

Adobe: A Strong Franchise Facing Valuation Challenges Amid Slowing Growth

Source: Adobe

Adobe (ADBE) – $506

It has strong defensible franchises, great branding and leadership. Very profitable in all its segments with operating margins in excess of 30%.

The threat of AI replacing some of the video editing and other products is still in its infancy and Adobe is also working on its own AI initiatives; they’ve just been slow to roll it out.

Revenue growth has slowed to 10-12% for the next three years, and management did disappoint for the next quarter’s guidance. However, Adobe is also a good earnings story with 13-14% earnings growth.

The only problem is the valuation, and the market perception that this is a mature company with $20Bn in revenue. At 28x earnings and 10.5x sales there’s not much left for appreciation with that slowing growth.

I would prefer to buy on declines at around $470. At $506 I would expect a return of about 12% or so a year.

Categories
Semiconductors

Marvell Technology: Positioned for AI Growth but Priced for Perfection

source

Marvell Technology (MRVL) $74

Networking infrastructure – It had a down year, with cyclicality in China and slower data center growth. China is about 50% of revenues.

That said, the forecast for the next three years is good, with 24% revenue growth and 35 to 40% adjusted earnings growth. 

A lot of this is riding on growth from Nvidia and other AI investments in data centers. 

Like most companies in the sector Marvell has also appreciated 73% in the past year so valuations are a bit expensive, 11x sales, with cyclicality and China exposure, it’s definitely on the higher side. It has also financed its acquisitions with debt, carrying a lot of interest burden.

I would prefer to buy 10% lower in the mid sixties for a better return – there is an AI event on April 11th, which may have more specifics/catalysts. Will keep a look out for that.

Categories
Enterprise Software

nCino: A SaaS Player Focused on Profitability but Facing Valuation Hurdles

source: ncino

nCino Inc (NCNO) $35.75

The stock jumped 15-20% post earnings on an earnings beat and slight revenue miss, from $30 yesterday. Guidance is also decent with 15% revenue growth for 2024.

You could buy around $32 or in installments.

Positives

Focusing on profitability, makes decent cash flow of 15% and adjusted operating of 3-5%, showing an improving trend with good estimates of earnings improving 35% in years 2025-2026. 

They have the leverage to do that, it’s a SaaS business but I would have preferred gross margins in the high 80’s. That must happen over time.

They are selling to higher cohort customers, growth in customers over 100K and $1Mn is much higher than baseline growth.

There is a switching cost competitive advantage, especially when you’re dealing with larger customers, and have more than one offering.

Negatives

Sales cycles are longer given the higher value customer.

Banking and financial services software is very competitive, not much to differentiate from one another.

Price has gotten a little expensive at 6x sales with 15% revenue growth so returns going forward will be muted in comparison.

Given the weaknesses in banks and the financial services sector, I don’t expect multiples to be more rewarding than the market, even though this is a tech company, but focused on one vertical.