Tag: Earnings Projections

Roku stock plunges as downbeat earnings forecast assumes ad budgets could ‘degrade’

[ad_1]

Roku Inc. shares plummeted 19% in after-hours trading Wednesday after the streaming company topped expectations with its latest results but gave a weaker-than-anticipated outlook for the holiday quarter as economic conditions could further “degrade advertising budgets.”

For the fourth quarter, Roku executives anticipate $800 million in revenue and a loss of $135 million on the basis of adjusted Ebitda. The FactSet consensus called for $899 million in revenue as well as a $48 million adjusted Ebitda loss.

“As we enter the holiday season, we expect the macro environment to further pressure consumer discretionary spend and degrade advertising budgets, especially in the TV scatter market,” the company said in its shareholder letter. “We expect these conditions to be temporary, but it is difficult to predict when they will stabilize or rebound.”

Chief Financial Officer Steve Louden shared on a call with reporters following the release that the company’s forecast “reflects the fact that we see a lot of challenges in the macro environment.”

He explained that Roku tends to be more exposed to the scatter ad market — which represents ads bought during the quarter — than the typical TV network. Scatter spending is easy for marketers to turn on, but also easier for them to turn off, he noted.

The forecast overshadowed the results from Roku’s third quarter, which were broadly better than expected.

The company posted a net loss of $122.2 million, or 88 cents a share, whereas it logged net income of $68.9 million, or 48 a share, in the year-earlier period. Analysts tracked by FactSet were expecting a $1.29 loss on a per-share basis.

Roku also reported a loss of $34 million on the basis of adjusted earnings before interest, taxes, depreciation and amortization. The company had posted positive adjusted Ebitda of $130 million in the year-before quarter. The FactSet consensus was for a $74 million loss on the non-GAAP metric.

Revenue rose to $761 million from $680 million, while analysts were anticipating $696 million.

The company generated $670 million in platform revenue and $91 million in player revenue. Analysts were expecting platform revenue of $613 million and player revenue of $87 million.

Roku had 65.4 million active accounts in the latest quarter, up from 63.1 million in the second quarter. Average revenue per user was $44.25 on a trailing-12-month basis, compared with $44.10 in the second quarter and $40.10 in the prior year’s third quarter.

Analysts were anticipating 64 million active accounts and $43.40 in average revenue per user.

Louden noted on the media call that the account numbers “outperformed expectations.” The company has seen “strong sales of smart TVs both in the U.S. and internationally,” with Louden adding that “it’s hard to tell how much is driven by a shift back to home or back to streaming, which is a very good value proposition if money is tight.”

Viewers spent 21.9 billion hours streaming content through Roku’s platform in the period. The FactSet consensus was for 20.9 billion hours streamed.

As companies like Netflix Inc.
NFLX,
-4.80%
and Walt Disney Co.
DIS,
-3.94%
explore ad-supported streaming more deeply, Louden sees opportunity for Roku to be of further value.

“That changes their focus a bit from only thinking about subscribers to thinking about engagement” and he sees Roku’s team members as “experts in understanding how consumers look at that.”

The company also noted in its shareholder letter that CFO Louden intends to leave Roku at some point in 2023 after helping to recruit and train his successor.

[ad_2]

Source link

November 2, 2022
Qualcomm stock drops more than 7% after poor outlook, months-long chip glut

[ad_1]

Qualcomm Inc. shares fell in the extended session Wednesday following the chip maker’s poor outlook, and estimates of about two months or more of inventory it needs to clear in its core business.

Qualcomm
QCOM,
-4.12%
shares dropped 7.6% after hours, following a 4.1% decline to close at $112.50 in the regular session. In late July, the San Diego-based chip maker cut its forecast because of weakness in the smartphone market that had yet to creep into the premium handset market.

On the call with analysts, Chief Executive Cristiano Amon said the accelerated weak demand was related to “macro economic headwinds and the prolonged COVID in China,” and “the rapid deterioration in demand and easing of supply constraints” across the chip industry.” would take out about 80 cents a share in first-quarter earnings.

“It’s the major factor,” Amon told analysts on the call. “It’s mostly a handset consumer story.” Earnings for the first quarter, as a results, would take a hit of 80 cents a share, the company said.

Another big factor is that companies are just spending less. Amon said “companies across the board had much higher inventory policies, supply chain got resolved, and you got that macro economic uncertainty, you have a drawdown trying to bring inventory to a different level than it was during the situation of demand constraint.”

Qualcomm forecast first-quarter earnings of $3 to $3.30 a share on revenue of $9.2 billion to $10 billion, while the Street estimated $3.43 a share on revenue of $12.02 billion.

Read: Meta spending slams Facebook stock, but here are the chip stocks that are benefiting

Chief Financial Officer Akash Palkhiwala told analysts there is about eight to 10 weeks of elevated in the channel. In the meantime, Qualcomm was instituting a hiring freeze, and looking into cost-saving measures, execs told analysts.

While handset-chip sales surged 40% to a record $6.57 billion from a year ago, topping the Street’s expectation of $6.55 billion, the company’s forecast indicates a big glut in inventory in Qualcomm’s CDMA Technologies unit, the one that includes handset and RF chips as well as chips for autos and Internet of Things.

Qualcomm expects QCT sales of $7.7 billion to $8.3 billion, and sales from Qualcomm’s technology licensing, or QTL, segment of $1.45 billion to $1.65 billion. Analysts had forecast forecast $10.42 billion in QCT sales and QTL revenue of $1.71 billion.

Qualcomm reported fourth-quarter QCT revenue of $9.9 billion, a 28% gain from a year ago. Analysts had estimated $9.84 billion, based on the company’s forecast of $9.5 billion to $10.1 billion.

Fourth-quarter auto-chip sales zoomed up 58% to a record $427 million, and Internet of Things, or IoT, sales rose 24% to a record $1.92 billion. The Street was expecting auto sales of $362.4 million, and IoT sales of $1.82 billion.

Revenue from the QTL segment fell 8% to $1.44 billion compared with Wall Street estimates of $1.58 billion, based on a company forecast of $1.45 billion to $1.65 billion.

Read about: Intel’s quarterly results, AMD’s quarterly results

The company reported fiscal fourth-quarter net income of $2.87 billion, or $2.54 a share, compared with $2.8 billion, or $2.45 a share, in the year-ago period. The chip maker reported adjusted earnings, which exclude stock-based compensation expenses and other items, of $3.13 a share, compared with $2.55 a share in the year-ago period. Total revenue for the third quarter rose to $11.4 billion from $9.34 billion in the year-ago period.

Analysts had estimated earnings of $3.13 a share on revenue of $11.32 billion, based on Qualcomm’s forecast of $3 to $3.30 a share on revenue of $11 billion to $11.8 billion.

Year to date, Qualcomm shares are down 38%, compared with a 41% decline for the PHLX Semiconductor Index
SOX,
-3.09%,
a 21% decline by the S&P 500 index
SPX,
-2.50%
and a 33% drop by the tech-heavy Nasdaq Composite Index
COMP,
-3.36%.

Shares of Advanced Micro Devices Inc.
AMD,
-1.73%
outperformed the broader market Wednesday after the chip maker said it would clear excess inventory by the end of the year, and forecast that data-center and embedded product sales would continue to rise.

[ad_2]

Source link

November 2, 2022
Uber earnings: What to expect

[ad_1]

Uber Technologies Inc. is scheduled to release third-quarter earnings Tuesday morning before trading begins in the U.S.

Analysts expect Uber
UBER,
-3.27%
to report a revenue increase of nearly 70% from a year ago, while the company’s losses are expected to narrow. Growth is largely expected to come from the company’s ride-hailing business, while its food-delivery business is expected to see slower growth after a pandemic-influenced boom.

What to expect

Earnings: According to FactSet, analysts on average expect Uber to post a loss of 18 cents a share, a strong improvement from the $1.28-a-share loss that the company reported in the same quarter a year ago — though that loss was influenced by a drop in shares of DiDi Global Inc.
DIDIY,
-3.03%,
and executives said adjusted losses in the third quarter last year were 17 cents a share. Estimize, which gathers estimates from analysts, hedge-fund managers, executives and others, expects the company to post a loss of 24 cents a share.

Revenue: Analysts on average expect revenue of $8.11 billion, according to FactSet, up from $4.85 billion a year ago. Estimize is expecting $8.37 billion.

Stock movement: In two of the past three quarters, Uber stock has fallen after the company reported earnings; it has risen after seven of the 14 reports the company has made since going public. Shares are down about 36% so far this year through Friday’s session, while the S&P 500 index
SPX,
-0.75%
has fallen about 19% year to date.

What analysts are saying

Analysts see a continued upside in both Uber’s ride-hailing and delivery businesses, but slower growth in delivery.

Aaron Kessler, an analyst for Raymond James who has an outperform rating on Uber’s stock, wrote in a note to clients that he estimates mobility bookings of $13.8 billion, up 40% year over year and 3.5% quarter over quarter.

Jason Heffstein, an analyst for Oppenheimer, also has an outperform rating on Uber shares. He wrote in a note that Oppenheimer has received numerous requests about the company’s long-term prospects, so he updated his total-addressable market analysis, which includes the following: “U.S. Mobility [is less than] 3% of [the] annual cost of car ownership, representing a compelling value proposition in a weakening macro environment.”

As for delivery, Kessler estimates bookings of $13.85 billion, which would be up 8% year over year and flat from the previous quarter. Heffstein estimates bookings to be up 9% year over year.

“We believe Uber’s superior network liquidity and leading logistics technology are well positioned to capture additional market share in ride-sharing … and online food delivery,” Heffstein wrote.

[ad_2]

Source link

October 31, 2022
Amazon stock sinks after holiday forecast and cloud growth, profit disappoint; $150 billion in market cap at risk

[ad_1]

Amazon.com Inc. predicted Thursday that holiday sales and profit would come in well lower than analysts expected as cloud growth slowed and Amazon Web Services profit missed expectations by nearly $1 billion, sending shares south in after-hours trading.

Amazon
AMZN,
-4.06%
executives guided for fourth-quarter operating profit of break-even to $4 billion and holiday sales of $140 billion to $148 billion, while analysts on average were expecting operating income of $5.05 billion on revenue of $155.09 billion, according to FactSet. AWS sales of $20.54 billion grew 27.5% from the year before, the lowest growth rate for the pioneering cloud-computing product in records dating back to the beginning of 2014, and lower than analysts’ average estimate of $21.2 billion; AWS operating income of $5.4 billion handily missed analysts’ average estimate of $6.37 billion, according to FactSet.

“As the third quarter progressed, we saw moderating sales growth across many of our businesses, as well as increased foreign-currency headwinds … and we expect these impacts to persist throughout the fourth quarter,” Chief Financial Officer Brian Olsavsky said in a conference call Thursday afternoon. “As we have done in similar times in our history we are also taking action to tighten our belt, including pausing hiring in certain businesses and winding down products and services where we believe our resources are better spent elsewhere.”

Shares dove as much as 20% in after-hours trading immediately following the release of the results, after closing with a 4.1% decline at $110.96, but ended the extended trading period down 13%. After-hours prices could chop roughly $150 billion from Amazon’s market capitalization and send it lower than $1 trillion for the first time since April 2020 if they were to persist through Friday’s regular trading session, according to FactSet.

Amazon reported its first quarterly profit of the year for the third quarter, and easily beat analysts’ expectations for the back-to-school period that included the company’s first Prime Day of the year, but earnings still declined from last year. Executives reported third-quarter profit of $2.87 billion, or 28 cents a share, down from 31 cents a share in the year-ago quarter after adjusting for Amazon’s 20-to-1 stock split.

Revenue grew to $127.1 billion from $110.8 billion, in the middle of executives’ forecast for $125 billion to $130 billion but slightly missing analysts’ expectations; executives said revenue would have been $5 billion higher without the effects of the strengthening dollar. Analysts on average expected earnings of 22 cents a share on sales of $127.39 billion, according to FactSet.

“There is obviously a lot happening in the macroeconomic environment, and we’ll balance our investments to be more streamlined without compromising our key long-term, strategic bets,” Chief Executive Andy Jassy said in a statement. “What won’t change is our maniacal focus on the customer experience, and we feel confident that we’re ready to deliver a great experience for customers this holiday shopping season.”

Amazon had reported quarterly losses through the first half of the year, largely because of a rapid post-IPO decline in one of its investments, Rivian Automotive Inc.
RIVN,
+0.17%.
But the Seattle-based company has also been looking to cut costs after spending wildly during the first two years of the COVID-19 pandemic to keep up with spiking demand for its online store and Amazon Web Services cloud-computing products.

Amazon’s stock has suffered as it faces comparisons to the headier days of last year, and will do so again in the holiday season, when it faces a comparison with a nearly $12 billion profit from its Rivian investment, which has declined more than 50% from its IPO price and stands at roughly one-fifth its peak post-IPO price.

There were thoughts that Amazon would be cautious with its holiday forecast, as its attempts to cut costs run into the need to keep its giant logistics operation running smoothly. The company is looking to hire 150,000 workers to get through the holiday season, and recently announced increased pay for fulfillment workers.

“On 4Q consensus estimates, we believe AMZN will likely err on the side of being more conservative, given the uncertain consumer spend environment,” MKM Partners Managing Director Rohit Kulkarni wrote in a note. “We believe recently announced wage hike, higher near-term content costs amortization (NFL & Lord Of Rings), and potentially greater merchandise discounting might weigh on 4Q Op Margins.”

Amazon’s e-commerce operations were boosted in the third quarter by the company’s annual Prime Day event in July, and the company tried to replicate the event in October, but analysts saw the second Prime Day as less successful and potentially a sign of weakness.

“We see Amazon’s decision to hold two Prime Day sales in one calendar year as a red flag for weak e-commerce sales; consistent with retailers, in general, holding more sales when their sales are under pressure,” D.A. Davidson analyst Tom Forte wrote in a preview of Amazon’s report.

In the third quarter — with back-to-school sales and the first Prime Day event — quarterly retail sales in North America hit $78.84 billion, while overseas revenue totaled $27.72 billion. Analysts on average were expecting $77.24 billion and $29 billion respectively, according to FactSet. Sales in both locations were unprofitable from an operating perspective for the fourth consecutive quarter, losing a total of $2.88 billion.

Amazon’s profit largely comes from the fat margins of its AWS cloud-computing offering, but there have been concerns about growth leveling off for cloud after rival Microsoft Corp.
MSFT,
-1.98%
reported a deceleration earlier this week and guided for a further decline in growth in the fourth quarter. AWS did provide enough profit in the third quarter to overcome the losses in e-commerce, but the result was the lowest quarterly operating income for Amazon overall since the first quarter of 2018, according to FactSet records.

Opinion: The cloud boom is coming back to Earth, and that could be scary for tech stocks

“The ongoing macroeconomic uncertainties have seen an uptick in AWS customers focused on controlling costs and we are proactively working to help customers cost-optimize just as we have done throughout our history, especially in periods of economic uncertainty,” Olsavsky said in Thursday’s conference call, before adding that revenue growth dipped to the mid-20s late in the period from an overall rate of 27.5% for the quarter.

“So carry that forecast to the fourth quarter, we are not sure how it’s going to play out, but that’s generally our assumption,” he said, suggesting that Amazon expects the AWS revenue-growth rate to decline again in the fourth quarter.

Amazon’s other higher-margin business is advertising, which has grown strongly in recent years as companies seeking to sell products on Amazon pay the company to list their products higher when consumers search for them on the e-commerce platform. Amazon reported third-quarter advertising revenue of $9.55 billion, up from $7.61 billion a year ago and topping the average analysts estimate of $9.48 billion.

The results seemed to spread fears to other e-commerce companies and cloud-focused companies. Wayfair Inc.
W,
+0.37%,
eBay Inc.
EBAY,
+0.71%
and Etsy Inc.
ETSY,
-0.48%
shares all fell roughly 5% or more in after-hours trading, as did cloud-software providers Snowflake Inc.
SNOW,
-0.20%,
MongoDB Inc.
MDB,
-0.35%
and Datadog Inc.
DDOG,
+0.81%
Microsoft’s stock declined about 1.5%.

Amazon stock has fallen 33.5% so far this year, as the S&P 500 index
SPX,
-0.61%
has dropped 19.6%.

[ad_2]

Source link

October 27, 2022
Microsoft stock slammed by cloud-growth fears, taking Amazon down with it

[ad_1]

Microsoft Corp. shares fell more than 6% in after-hours trading Tuesday as the company’s cloud-computing growth hit a sudden deceleration and executives guided for holiday-season revenue to come in more than $2 billion lower than expectations.

The Azure cloud-computing business has grown into the largest and most important business for Microsoft
MSFT,
+1.38%,
and there have been concerns about cloud growth as the U.S. faces a potential recession for the first time since the technology became ubiquitous. Microsoft executives said that Azure grew by 35% in their fiscal first quarter, a marked slowdown from Azure’s 40% growth rate in the previous quarter, as well as the 50% growth shown in the same quarter last year; analysts on average were expecting 36.5% growth, according to FactSet.

Opinion: The cloud boom is coming back to Earth, and that could be scary for tech stocks

In the current quarter, Chief Financial Officer Amy Hood suggested a similar sequential decline is in store for Azure, saying percentage growth should decline by five points on a constant-currency basis. Hood also suggested that more cost cuts could be coming to Microsoft, after the company confirmed layoffs of fewer than 1,000 employees earlier this month.

“While we continue to help our customers do more with less, we will do the same internally,” she said. “And you should expect to see our operating-expense growth moderate materially through the year while we focus on growing productivity of the significant head-count investments we’ve made over the last year.”

Microsoft shares slid to declines of more than 6% in after-hours trading following Hood’s forecast, which was provided in a conference call. Shares closed with a 1.4% increase at $250.66.

Concerns about cloud growth immediately spread to Azure’s biggest competitor, Amazon Web Services, as Amazon.com Inc. stock
AMZN,
+0.65%
fell more than 4% in after-hours trading.

Microsoft reported fiscal first-quarter earnings of $17.56 billion, or $2.35 a share, down from $2.71 a share in the same quarter a year ago, when the tech giant disclosed a 44 cent-per-share tax benefit. Revenue increased to $50.1 billion from $45.32 billion a year ago. Analysts on average were expecting earnings of $2.31 a share on sales of $49.66 billion, according to FactSet.

For the fiscal second quarter, Hood guided for revenue of $52.35 billion to $53.35 billion, while analysts on average were expecting sales of $56.16 billion, according to FactSet. Hood said that “Intelligent Cloud” revenue should land from $21.25 billion to $21.55 billion, while analysts on average were projecting $21.82 billion heading into the print; Microsoft’s other revenue-segment forecasts were even further off analysts’ average expectations.

Microsoft has also suffered from the strengthening dollar, as well as a sharp downturn in personal-computer sales, which spiked during the pandemic but are now showing record regression.

For more: The pandemic PC boom is over, but its legacy will live on

Microsoft reported PC revenue of $13.3 billion for the quarter, roughly flat from $13.31 billion a year before and beating the average analyst estimate of $13.12 billion, according to FactSet. While PCs have long been what consumers largely know Microsoft for, their importance to the company’s financials has declined in recent years as cloud computing has grown in importance.

“Historically, Windows was a very large driver of Microsoft revenue and, given its strong margins, a disproportionate driver of earnings,” Bernstein analysts wrote in a preview of the report, while maintaining an “overweight” rating. “Over time other businesses, especially Microsoft’s commercial Cloud, have grown fast while the Windows business has grown quite slower, decreasing the relative impact of Windows.”

The “Intelligent Cloud” segment reported first-quarter revenue of $20.3 billion, up from $16.96 billion a year ago but slightly lower than the average analyst estimate tracked by FactSet of $20.46 billion. Azure’s 35% growth was the slowest Microsoft has reported in records dating back through the prior two fiscal years; Microsoft only reports percentage growth for its Azure cloud-computing product, even as main rivals Amazon.com Inc.
AMZN,
+0.65%
and Alphabet Inc.
GOOGL,
+1.91%
GOOG,
+1.90%
report revenue and profit margin for their cloud-computing products.

Microsoft’s other revenue segment, “Productivity and Business Processes,” reported revenue of $16.5 billion, up from $15.04 billion a year ago and higher than the average analyst estimate of $16.13 billion, according to FactSet. That segment includes Microsoft’s core cloud-software properties such as its Office suite of products — which is being officially renamed Microsoft 365 — as well as LinkedIn and some other properties.

Microsoft stock has declined 25.5% so far this year, as the S&P 500 index
SPX,
+1.63%
has dropped 20.3% and the Dow Jones Industrial Average
DJIA,
+1.07%
— which counts Microsoft as one of its 30 components — has declined 13.3%.

[ad_2]

Source link

October 25, 2022
Tesla Stock Could Rebound in 3 Months. Here’s What it Would Take.

[ad_1]

Elon Musk says that

Tesla

could someday be worth more than

Apple

and Saudi Aramco, combined. First, it needs to get through the next few months.

Before Tesla (ticker: TSLA) reported third-quarter earnings this past week, investors had been hoping they would allay concerns that had been growing since the company released second-quarter numbers three months earlier. They did no such thing. While earnings topped expectations, third-quarter deliveries, sales, and profit margins all fell short of Street projections. Tesla shares slumped 6.7% following the release, putting them down 22% since the end of September, their second-worst start to a quarter since the first few weeks of 2016.

[ad_2]

Source link

October 21, 2022
Snap stock plummets more than 25% as online advertising continues to struggle

[ad_1]

A bruising year for Snap Inc.’s shares worsened Thursday, as the stock plummeted more than 20% in after-hours trading as executives launched the company’s first major share-repurchase program amid revenue issues in a poor environment for online advertising.

Snap
SNAP,
-0.64%
executives revealed that revenue increased less than 6% year-over-year in the quarter — its slowest quarterly grow ever recorded — and said that the holiday season is shaping up similarly, with sales increasing 9% so far in the quarter. The social-media company, which laid off roughly 20% of its staff this summer in response to the issues, also declined to provide a full forecast for the important fourth quarter.

“Our revenue growth continued to decelerate in Q3 and continues to be impacted by a number of factors we have noted throughout the past year, including platform policy changes, macroeconomic headwinds, and increased competition,” executives said in a letter to shareholders, outlining the results. “We are finding that our advertising partners across many industries are decreasing their marketing budgets, especially in the face of operating environment headwinds, inflation-driven cost pressures, and rising costs of capital.”

“Forward-looking revenue visibility remains incredibly challenging, and this is compounded by the fact that revenue in Q4 is typically disproportionately generated in the back half of the quarter, which further reduces our visibility,” executives explained about the lack of guidance in a letter to investors.

The board did approve a $500 million share repurchase, a first for the young company. In a news release, executives said that the move was meant “to opportunistically offset a portion of the dilution related to the issuance of restricted stock units to employees as part of the overall compensation program designed to foster an ownership culture.”

Snap’s results — the first among the major tech companies who rely heavily on digital advertising — likely portend even more turbulent times ahead for Alphabet Inc.’s
GOOGL,
+0.34%

GOOG,
+0.24%
Google, Facebook parent company Meta Platforms Inc.
META,
-1.28%,
Twitter Inc.
TWTR,
+1.18%,
Pinterest Inc.
PINS,
-0.30%
and others in the grip of inflation, a war in Ukraine, foreign-exchange worries and a widening recession.

Snap’s desultory news sent shares tumbling in extended trading for Pinterest (-8%), Trade Desk Inc.
TTD,
+2.26%
(-5), Meta (-4%) and Google (-3%).

Deteriorating macroeconomic conditions have left advertisers with little choice but to delay or cancel buys. At the same time, intensifying competition from the likes of TikTok and others has deepened headwinds.

“As a smaller player, Snap is more susceptible but no platform is immune,” Insider Intelligence analyst Jasmine Enberg told MarketWatch. “I expect more of the same results next week” when Google and Meta report, she added.

Snap reported a third-quarter net loss of $359.5 million, or 22 cents a share, compared with a loss of 5 cents a share a year ago. Analysts on average were expecting a loss of 24 cents a share.

Snap’s sales increased less than 6% to $1.13 billion, barely falling short of Street estimates of $1.14 billion. Daily active users rose 19% to 363 million. FactSet analysts had modeled 358.2 million.

Snap shares initially fell more than 20% in after-hours trading. They closed the regular trading session down 0.6% to $10.79. Shares of Snap have nosedived 77% this year, while the S&P 500 index
SPX,
-0.80%
is down 23%.

[ad_2]

Source link

October 20, 2022
IBM stock rallies on third-quarter results, upbeat forecast

[ad_1]

Shares of International Business Machines Corp. rallied in extended trading Wednesday, after the tech software, consulting and infrastructure giant reported third-quarter results that beat expectations and offered up a more upbeat full-year sales forecast.

IBM
IBM,
-0.35%
reported earnings as Wall Street tries to gauge the impact of a tough foreign-exchange environment, and the state of business spending on tech services amid worries over a downturn. But the company saw gains in hybrid cloud services, products like open-source software platform Red Hat, its consulting services and its zSystems servers and software.

“Globally, clients view technology as an opportunity to enhance their business, which is evident in the results across our portfolio,” Chief Executive Arvind Krishna said in a statement. He added that he now expects full-year sales growth “above our mid-single-digit model.”

That’s a bit more optimistic than the forecast he gave over the summer, when IBM reported second-quarter results. Krishna, at that time, said he continued “to expect full-year revenue growth at the high end of our mid-single-digit model.”

Wall Street expects IBM’s full-year sales to come in at $59.667 billion, according to FactSet. Analysts expect 2022 earnings per share of $9.28. IBM also said it continued to expect around $10 billion in consolidated free cash flow for the year.

For the third quarter, the company reported a net loss of $3.2 billion, or $3.54 per share, compared with a $1.1 billion profit, or $1.25 per share, in the year-earlier period. On an adjusted basis, IBM earned $1.81 per share.

Sales came in at $14.1 billion, compared with $13.3 billion a year ago.

Analysts polled by FactSet expected adjusted earnings per share of $1.79, on revenue of $13.517 billion.

Revenue in the company’s software segment grew 7.5%. Consulting revenue rose 5.4%, while the company’s infrastructure segment jumped 14.8%.

Shares gained 4.8% after hours on Wednesday.

Prior to the results, analysts had zeroed in on the impact of the strong dollar and what Morgan Stanley, in a recent note, described as “continued wage pressure in consulting.” IBM has also been trying to lean more into cloud and AI technology, unloading some businesses in an effort to narrow its focus.

Last year, in a move toward that goal, IBM spun off its infrastructure services business into Kyndryl Holdings
KD,
-2.85%.
But afterward, some analysts raised questions about IBM’s ability to grow sales and compete in the cloud-services industry. Francisco Partners, an investment firm, this year also acquired health-care data and analytics assets that were part of IBM’s Watson Health segment.

In January, IBM declined to provide an earnings-per-share forecast. The company also changed how it organizes its business segments at the beginning of this year.

But during the spring, Krishna said he saw “demand staying strong” even if economic growth flattens or enters into a brief recession, with the decision to halt business in Russia, following its invasion of Ukraine, the only drag on results.

IBM stock is down 8% year to date. By comparison, the S&P 500 Index
SPX,
-0.67%
is down 22%.

[ad_2]

Source link

October 19, 2022
Elon Musk teases massive Tesla stock buyback as CFO trims forecast for annual deliveries and stock falls

[ad_1]

Tesla Inc. Chief Executive Elon Musk suggested the electric-vehicle maker could repurchase up to $10 billion worth of its stock Wednesday, as shares declined following a third-quarter revenue miss and his CFO brought down delivery expectations for the full year.

Some Tesla
TSLA,
+0.84%
investors have been agitating for a stock buyback after multiple stock splits and the company losing more than a third of its market capitalization in 2022, and Musk said in an earnings conference call that Tesla’s board has discussed a buyback in the range of $5 billion to $10 billion.

“We debated the buyback idea extensively at board level. The board generally thinks that it makes sense to do a buyback, we want to work through the right process to do a buyback, but it is something possible for us to do a buyback on the order of $5 [billion] to $10 billion even in a downside scenario next year, given next year is very difficult,” he said, adding that it “is obviously pending board review and approval.”

“So it’s likely that we will do some meaningful buyback,” he concluded.

The statement did not immediately move Tesla’s stock, as it was followed closely by a forecast revision from Chief Financial Officer Zachary Kirkhorn, who said, “We do expect to be just under 50% growth [for deliveries] due to an increase in the cars in transit at the end of the year.”

Tesla delivered a record number of cars in the third quarter, but still missed analysts’ expectations and made it more difficult to hit executives’ target for the year of an increase of more than 50% in vehicle deliveries. Kirkhorn said that the company will increase production of cars by 50%, “although we are tracking supply-chain risks which are beyond our control.”

Shares declined more than 6% following the car company’s earnings report. Tesla reported third-quarter earnings of $3.29 billion, or 95 cents a share, on sales of $21.45 billion, up from $13.76 billion a year ago. After adjusting for stock-based compensation, the electric-vehicle manufacturer reported earnings of $1.05 a share, up from 62 cents a share a year ago.

Analysts on average were expecting adjusted earnings of $1 a share on sales of $21.98 billion, according to FactSet. Tesla shares declined about 5% in after-hours trading immediately following the release of the results, after closing with a 0.8% increase to $222.04 in the regular trading session.

Tesla shares have fallen more than 37% so far this year, a harder descent than the 22% decline of the S&P 500 index
SPX,
-0.67%,
after years of outsize gains. Pundits have put forth a variety of reasons for the downturn, including increasing competition in the EV market, negative press around Tesla’s full-self-driving claims and actual performance, and Musk’s attention being diverted to his attempt to acquire Twitter Inc.
TWTR,
+0.10%.

Don’t miss: Market share for electric vehicles expected to roughly double

None of that cowed Musk, however. He predicted that Tesla would be worth as much as the two most valuable companies in the world, Apple Inc.
AAPL,
+0.08%
and Saudi Arabian Oil Co.
2222,
+0.42%,
combined. Both companies have market capitalizations topping $2 trillion.

“Now I am of the opinion that we can far exceed Apple’s current market,” Musk said on the call, after referencing a previous prediction that Tesla would reach Apple’s then-record market cap. “In fact, I see a potential path for Tesla to be worth more than Apple and Saudi Aramco combined. That doesn’t mean it will happen or that it will be easy, in fact it will be very difficult, require a lot of work, very creative new products, expansion and always good luck. But for the first time I’m seeing, I see a way for Tesla to be, let’s say roughly twice the value of Saudi Aramco.”

In a preview of the report Tuesday, Wedbush Securities analyst Daniel Ives said that “the Street is starting to worry that the bloom is coming off the rose in the Tesla story with delivery shortfalls front and center.”

“Between logistical issues in China, supply-chain problems, FSD black-eye moments, the Musk Twitter fiasco and EV competition increasing across the board, there is growing pressure on Musk & Co. to prove themselves,” Ives wrote.

Tesla’s automotive gross margin, which declined in the second quarter despite price increases that Musk called “embarrassing,” were the same sequentially at 27.9%. Operating margin increased both sequentially and year-over-year, however, to 17.2% from 14.6% both in the third quarter a year ago and the previous quarter.

Earnings preview: Do record Tesla deliveries mask a demand problem?

In their communications with investors on Wednesday, Tesla executives disclosed that they will change the process for one of their most challenging tasks of late — transporting cars — in hopes of bringing costs down.

“We are reaching such significant delivery volumes in the final weeks of each quarter that transportation capacity is becoming expensive and difficult to secure. As a result, we began transitioning to a smoother delivery pace, leading to more vehicles in transit at the end of the quarter,” the company’s shareholder deck reads. “We expect that smoothing our outbound logistics throughout the quarter will improve cost per vehicle.”

[ad_2]

Source link

October 19, 2022
Netflix snaps streak of subscriber declines and beats on earnings, stock jumps 15%

[ad_1]

Netflix Inc. added more than 2 million subscribers in the third quarter after stumbling into 2022 with two consecutive quarterly declines, a rebound that sent shares more than 15% higher in after-hours trading Tuesday.

Netflix
NFLX,
-1.73%
reported a net gain of 2.41 million subscribers in the third quarter, while analysts on average were forecasting 1.1 million net additions, according to FactSet. That follows a decline of roughly 200,000 subscribers in the first quarter and nearly a million in the second quarter, which has led the company to plan massive changes, including a cheaper, ad-supported streaming tier set to arrive in the fourth quarter.

In a letter to shareholders, Netflix executives said they expect 4.5 million new subscribers to join in the fourth quarter, with revenue forecast to grow to $7.78 billion from $7.71 billion a year ago. Analysts on average were estimating revenue of $7.97 billion and a net subscriber gain of 4 million for the fourth quarter, according to FactSet.

“After a challenging first half, we believe we’re on a path to reaccelerate growth,” executives wrote in the letter.

The news sent Netflix shares up about 15% in after-hours trading following the release of the results, after closing with a 1.7% drop at $240.86. The stretch of subscriber declines has filleted Netflix shares, which have swooned 60% so far this year while the broader S&P 500 index
SPX,
+1.14%
has declined 22.8%.

The streaming-video giant’s downturn after a pandemic-boosted surge has only intensified pressure from rival streaming services at Walt Disney Co.
DIS,
+1.18%,
Apple Inc.
AAPL,
+0.94%,
Amazon.com Inc.
AMZN,
+2.26%,
Warner Bros. Discovery Inc.
WBD,
+4.55%,
Comcast Corp.
CMCSA,
-0.23%
and Paramount Global
PARA,
+1.56%.

That didn’t stop Netflix executives from taking a pot shot at streaming rivals over profitability. “Our competitors are investing heavily to drive subscribers and engagement, but building a large, successful streaming business is hard — we estimate they are all losing money, with combined 2022 operating losses well over $10 billion, vs. Netflix’s $5 to $6 billion annual operating profit,” Netflix executives said in the shareholder letter.

A dramatic shift in the video-streaming climate, one in which Disney surpassed Netflix as market leader in July, has prompted a radical makeover at Netflix. Last week, the company announced its long-awaited advertising-supported tier, which debuts Nov. 3 in the U.S. for $6.99 a month. Another 11 countries, including Canada and Mexico, will get the service by Nov. 10. The company has also vowed a crackdown on shared accounts, and is pushing forward on gaming.

The advertising-supported tier directly acknowledges competition and the necessity of Netflix “adapting to the streaming landscape’s new normal,” Insider Intelligence analyst Ross Benes said in a note late Tuesday.

For more: Netflix lost its streaming crown to Disney. Here’s how execs expect to win it back.

Netflix announced third-quarter earnings of $1.4 billion, or $3.10 a share, down from $3.16 a share a year ago. Netflix revenue improved to $7.93 billion in the quarter from $7.48 billion in the same period a year ago, but missed diminished expectations. Analysts polled by FactSet expected earnings of $2.14 a share on sales of $7.84 billion, estimates that had dipped in recent days.

Tuesday’s results follow some serious self-reflection among Netflix executives on how to stanch a decline in visits among subscribers that has led to cancellations. Co-CEO Reed Hastings has consulted with staff to find ways to make subscribers visit the platform more frequently, according to reports by The Wall Street Journal and Bloomberg News.

One such strategy is cracking down on multiple users sharing the same account. In the shareholder letter, Netflix said it has “landed on a thoughtful approach to monetize account sharing and we’ll begin rolling this out more broadly starting in early 2023.”

“After listening to consumer feedback, we are going to offer the ability for borrowers to transfer their Netflix profile into their own account, and for sharers to manage their devices more easily and to create sub-accounts (‘extra member’), if they want to pay for family or friends,” the letter said. “In countries with our lower-priced ad-supported plan, we expect the profile transfer option for borrowers to be especially popular.”

[ad_2]

Source link

October 18, 2022
JPMorgan profit falls but beats estimates while Wells Fargo misses

[ad_1]

JPMorgan Chase & Co. shares rose Friday after the megabank beat analyst targets for third-quarter profit and revenue and said it would top forecasts for its net interest in come in the coming quarter.

In a busy day for bank earnings, Wells Fargo & Co.
WFC,
+4.62%
fell short of earnings target but its stock rose in premarket trades as it beat revenue estimates.

Morgan Stanley
MS,
+3.55%
shares fell after it missed Wall Street’s targets for earnings and revenue.

Citigroup Inc.
C,
+5.17%
shares rose after beating its profit mark, although revenue fell 1% after breaking out the impact of divestitures.

Overall, banks benefited from higher interest rates and strong trading volumes, but investment banking deal activity fell sharply. Banks also channeled more capital into reserves and away from their collective bottom lines to prepare for a potential economic downturn.

As the largest bank in the U.S. and a bellwether for the sector, JPMorgan Chase
JPM,
+5.56%
turned in a “solid performance” in the latest quarter, in the words of Chief Executive Jamie Dimon.

The bank said it expects to meet its capital requirements under the international Basel III banking guidelines and resume stock buybacks early in 2023.

“In the U.S., consumers continue to spend with solid balance sheets, job openings are plentiful and businesses remain healthy,” Dimon said. “However, there are significant headwinds immediately in front of us – stubbornly high inflation leading to higher global interest rates, the uncertain impacts of quantitative tightening, the war in Ukraine, which is increasing all geopolitical risks, and the fragile state of oil supply and prices.”

Dimon said the bank remains “prepared for bad outcomes” so it can continue to operate even in the most challenging times.

Dimon’s prepared statement comes a day after the oft-quoted CEO said the U.S. consumer sector remains strong currently, but inflation will start weighing on people by 2023.

Also Read: JPMorgan CEO Dimon says inflation hasn’t dampened consumer spending yet but give it time

JPMorgan Chase’s stock rose 2.4% ahead of Friday’s open after it said its third-quarter net income fell 16.7% to $9.74 billion, or $3.12 a share, from $11.69 billion, or $3.74 a share, in the year-ago quarter.

Third-quarter revenue at the megabank rose to $32.72 billion from $29.65 billion in the year-ago quarter.

Wall Street analysts expected JPMorgan Chase to earn $2.90 a share on revenue of $32.12 billion, according to estimated compiled by FactSet. T

The bank said a net credit reserve build of $808 million ate into its net income for the latest quarter, compared with a net reserve release of $2.1 billion in the prior year.

Net interest income climbed 34% to $17.6 billion and net interest income excluding its Markets unit rose 51% to $16.9 billion on higher interest rates.

JPMorgan Chase’s total assets under management fell 13% to $2.6 trillion in the face of losses in the equities market and difficult conditions in the bond market.

Looking ahead, JPMorgan Chase said it expects fourth-quarter net interest income of about $19 billion, ahead of the $18.2 billion analyst estimate.

Octavio Marenzi, CEO of management consultant company Opimas said the bank’s results were “surprisingly solid” and if you strip away its payments for loan reserves, its profit is basically unchanged.

“Individual lines of business, such as investment banking and mortgages did predictably badly, but this was more than compensated for by strength in other areas of lending and in trading,” Marenzi said.

Shares of JPMorgan Chase have lost 30.9% in 2022 compared with a 17.3% drop by the Dow Jones Industrial Average
DJIA,
+2.83%
and a 23.0% loss by the S&P 500
SPX,
+2.60%.

Wells Fargo misses profit target but share rise

Wells Fargo & Co. shares advanced 2% in Friday’s premarket after the bank posted net income of $3.528 billion, or 85 cents a share, for the quarter to end September, down from $5.122 billion, or $1.17 a share, in the year-earlier quarter.

The megabank fell short of the earnings-per-share target of $1.09 a share.

Wells Fargo’s revenue rose to $19.505 billion from $18.834 billion a year ago, ahead of the $18.775 billion FactSet consensus.

Chief Executive Charlie Scharf said performance was “significantly impacted” by $2 billion, or 45 cents a share, in operating losses “related to litigation, customer remediation, and regulatory matters primarily related to a variety of historical matters.”

However, the bank is seeing historically low delinquencies and high payment rates, and the “timing of deterioration in those measures due to high inflation remains unclear. “

The bank set aside $784 million in provisions for loan losses, after reducing them by $1.395 billion a year ago.

Net interest income rose 36%, while noninterest income fell 25%, as mortgage banking income declined.

Citi analyst Keith Horowitz said Wells Fargo turned in a “good” quarter overall, although larger-than-expected one-time charges and a reserve build reduced profits. But Wells Fargo also raised its outlook for net interest income “and we still see upside to 2023 consensus,” Horowitz said.

Shares of Wells Fargo have declined 12% in the year to date.

Morgan Stanley shares fall on results

Morgan Stanley fell 2.6% in premarket trades after the investment bank missed Wall Street’s targets for earnings and revenue amid a drop in deal activity.

Morgan Stanley said its third-quarter net income fell to $2.49 billion, or $1.47 per share, from net income of $3.7 billion, or $1.98 per share in the year-ago quarter.

Third-quarter revenue dropped to $12.99 billion from $14.75 billion.

Wall Street analysts were looking for earnings of $1.52 a share and revenue of $13.29 billion, according to FactSet data.

“Firm performance was resilient and balanced in an uncertain and difficult environment, delivering a 15% return on tangible common equity,” said CEO James Gorman. “Wealth Management added an additional $65 billion in net new assets and produced a pre-tax margin of 28%, excluding integration-related expenses, demonstrating scale and stability despite declining asset values.”

Morgan Stanley shares have lost 19.2% in 2022.

Citi beats targets but shares lose ground

Citigroup shares fell 1.3% in premarket trades Friday after the bank posted stronger-than-expected profit, but revenue fell 1% after breaking out divestiture-related impacts, as growth in net interest income was more than offset by lower non-interest revenue.

Citi said its third-quarter net income dropped to $3.5 billion, or $1.63 per share, from $4.6 billion, or $2.15 a share, in the year-ago quarter.

Excluding divestiture-related impacts, earnings were $1.50 a share.

Total revenue increased to $18.5 billion from $17.4 billion.

Analysts were looking for earnings of $1.42 a share and revenue of $18.26 billion for Citigroup, according to a FactSet survey.

Citi said it continues to shrink its operations in Russia, and expects to end nearly all of the institutional banking services offered in the country next quarter. “To be clear, our intention is to wind down our presence in this country,” Chief Executive Jane Fraser said.

Shares of Citigroup have dropped 28.9% in 2022.

[ad_2]

Source link

October 14, 2022
AMD stock drops as $1 billion shortfall blamed on even weaker-than-expected PC sales

[ad_1]

Advanced Micro Devices Inc. shares fell in the extended session Thursday after the chip maker cut its already conservative forecast because a drop in PC sales after two years of pandemic-driven sales appears worse than feared.

AMD
AMD,
-0.13%
shares fell as much as 4% after hours, following a 0.1% decline in the regular session to close at $67.85.

Late Thursday, the company forecast third-quarter revenue of about $5.6 billion with adjusted gross margin of 50%.

“The PC market weakened significantly in the quarter,” said Lisa Su, AMD’s chair and chief executive, in a statement. “While our product portfolio remains very strong, macroeconomic conditions drove lower-than-expected PC demand and a significant inventory correction across the PC supply chain.”

AMD expects a 40% drop in client sales to about $1 billion, compared with Wall Street’s consensus estimate of $2.04 billion.

In early August, AMD held firm on its revenue forecast of $26 billion to $26.6 billion for the year, and forecast third-quarter revenue of $6.5 billion to $6.9 billion, which at the time fell below the Wall Street consensus, and gross margins of 54%.

Analysts polled by FactSet currently forecast third-quarter revenue of $6.71 billion, and annual sales of $26.13 billion. AMD is scheduled to report quarterly earnings on Nov. 1.

“The gross-margin shortfall to expectations was primarily due to lower revenue driven by lower client processor unit shipments and average selling price,” AMD said. “In addition, the third-quarter results are expected to include approximately $160 million of charges primarily for inventory, pricing and related reserves in the graphics and client businesses.”

Last week, after Micron Technology Inc.
MU,
-0.20%
reported an “unprecedented” oversupply problem, analysts debated whether this supply glut was worse than the one in 2019 that the industry has tried to avoid this time around, following two-years of COVID-19-related demand and supply-chain difficulties.

[ad_2]

Source link

October 6, 2022