Tag: Finance

Share buybacks, capacity expansion, acquisition plans, and semiconductor trade skirmishes all factor into the recent uptrend in Netherlands-based chip gear maker ASML (NASDAQ: ASML). 

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Shares soared 17.82% in the past week and 52.41% in the past month, and are currently trading 24% above their 50-day moving average. 

The uptrend began in October, on the heels of ASML’s better-than-expected third-quarter results. After that report, several analysts upgraded the stock or boosted their price targets, as you can see using MarketBeat analyst data. 

The consensus price target is now $797.29, a potential upside of 38.25%. Positive news was cited as a catalyst for the price target increase.  Analysts’ consensus rating on the stock is “buy,” but that should not be taken as a recommendation. It’s always important to evaluate any stock within the parameters of your risk tolerance, existing holdings, and financial goals.

That said, ASML is showing unusual strength. Other large chip gear makers, such as Applied Materials (NASDAQ: AMAT) and Lam Research (NASDAQ: LRCX) also rallied recently, but have trended lower in the past week, while ASML has maintained its gains.

Rally’s Pace Picked Up 

ASML’s rally gathered steam on November 10, when the stock gapped up 14.57% in more than double the average turnover. The company held an investors’ day, at which it announced several initiatives and updates, including:

• Despite an uncertain macro environment, the company expects longer-term demand and capacity to show healthy growth.
• It expects industry developments and innovation to drive growth across semiconductor markets.
• The company plans to boost its capacity to meet future demand.

CEO Peter Wennink said that even if China sales were excluded, that would not affect the company’s growth forecasts. His comments addressed concerns about U.S. restrictions on chip manufacturing gear to China. 

ASML also instituted a new share buyback program valued at around $12.2 billion, set to run through December 2025. 

ASML is part of the chip-equipment-gear industry. It manufactures extreme ultraviolet lithography systems, which it sells to semiconductor makers. It has carved out a niche in that category, giving it a dominant place in the wider semiconductor business. 

The company’s sales and earnings dipped in 2022, as chipmakers cut plans for capital spending. For the full year, Wall Street is eying net income of $14.14 per share, a decrease of 13%. However, that’s seen rising by 34% next year, to $18.92 per share. 

Coming In Ahead Of Views

MarketBeat earnings data for ASML show that the company has topped earnings views in each of the past eight quarters. 

Recent price action has been encouraging, although the stock has been underperforming the broad market in the past 12 months. A weekly chart gives the clearest indication of the company’s long downtrend, and where it’s currently trading, relative to its late 2021 highs. 

Shares retreated to a two-and-a-half-year low in October, shortly before the earnings release set the tone for a fresh rally. The stock has ticked higher, and is now back at its May 2022 level. 

ASML has characteristics of a growth stock, even in the current market downturn. For example, its price-to-earnings ratio is 39, which could be considered high. 

It’s true that it has a lot of ground to make up before regaining its September 2021 high of $895.93, but with this month’s price action, shares cleared a shorter-term consolidation that began in August. ASML is now trading above several key moving averages. In a potentially encouraging sign, the shorter-term averages are turning higher as the longer-term 200 day line turns lower. 

That’s a positive trend, and the stock may be headed for a bullish crossover in the next several session, as the 50-day line rises above the 200-day. That could be an indication that the current uptrend has enough momentum to lift the stock even higher, as analysts expect. 

You want to know more about the SLB dividend. Well, this is the right place because by the end of this article you will understand what SLB dividend is, why the distribution was cut and why it is a good choice for income investors who can sustain a little risk. 

MarketBeat.com – MarketBeat

The key takeaway for potential SLB investors is that SLB, formerly Schlumberger, is a multinational organization and the world’s largest oilfield services operator, period. This is key to know because the oilfield services industry is in the midst of a generational-quality super-cycle that began during the COVID-19 pandemic. This supercycle is expected to last for up to a decade or longer and will drive revenue, profits and capital gains for investors. 

The real opportunity at this time is dividend increases. The oilfield services stocks are well-known, or were before the pandemic, as dividend growers. Because SLB cut its distribution to preserve capital and cash during the crisis it is in a position to not only increase its payment but to make a series of large annual increases that will help to drive share prices back to their all-time highs or higher. 

Schlumberger Ltd. Overview 

Schlumberger Ltd., doing business as SLB, is a global oilfield services company and the world’s largest offshore driller. The company operates out of 4 primary offices that are located in Paris, Houston, London and The Hague. The stock trades on the NYSE, Euronext, LSE and Swiss SIX exchanges and is a very wide and tightly held company. 

SLB was founded in 1926 by two French brothers as the Electrical Prospecting Company. The two had experience conducting geophysical surveys throughout Europe and North America and went into business providing services and equipment. Among the company’s many feats is the 1st ever-recorded electrical resistivity test of a well, a test that is used today in the oil and gas industry to assess the structure of geological formations. 

The company expanded its operations into the US and logged its 1st well there in 1929. By 1934 the brothers were opening the Schlumberger Well Survey Company in Houston, Texas. In 1948 the company opened its research division, the Schlumberger-Doll Research Center, and then in 1956 Schlumberger Ltd. was formed as the holding company for all Schlumberger business. 

The company continued to grow via expansions and acquisitions until the COVID-19 pandemic hit. While the acquisitions did not end the company was forced to lay off about 25% of its workforce. Since then, it has been slowly rebuilding the workforce to meet the increasing demand from the industry. 

The company’s latest innovations center around GHG and sustainability. It has made advances in carbon capture, methane control, and flare control that are driving a reduction in emissions globally. While the company is not shifting away from carbon-based energy, it is committed to advancing the industry in a sustainable manner. 

SLB Dividend History

SLB is a regular dividend payer is not a consistent dividend grower. The company, aside from a distribution cut in 2020 related to the COVID-19 pandemic, has only ever increased its payment but not at a sustained, annual pace. For the first 25 years or so there were regular increases but that stopped in 2018 and carried through until 2021. Between those two times, the company’s payout fell from $0.50 per quarter or $2.00 annually to only $0.13 per quarter or $0.54 annually. This is a decline of 73% and the payout was not recovered by 2022 when others in the oil & gas industry were already reinstating theirs. Why buy dividend stocks? Because they pay you to own them and provide leverage for a portfolio. 

Ratings: SLB 

Schlumberger Dividend Statistics

Schlumberger’s dividend was yielding about 1.35% in late 2022 and is expected to rise in the coming years. The payout ratio was also low at 32% which helped to drive the expectation for future increases. The only bad news at the time was the -20% CAGR which was due to the COVID-19-related distribution cut in 2020. Before that, Schlumberger had only ever increased its payment since the dividend’s first distribution in 1989. 

Schlumberger Inside And Institutional Ownership

The insiders don’t hold a large amount of SLB stock but they do own some and they don’t sell it very often. The institutions, on the other hand, hold a great deal of the stock, more than 79% of it, and they have been buying it since 2021 and at an aggressive pace.

Schlumberger Analysts Activity

The analysts’ sentiment in SLB stock warmed in 2021 and has the consensus rating up to a Moderate Buy from a firm Hold in the previous years. The warming sentiment was compounded by a rising price target that is leading the stock higher. The high price target has the stock at a new multi-year high and completing reversal in price action that should get the stock back up to all-time highs or higher by the time the super-cycle is over. 

Schlumberger Debt Ratings

Schlumberger uses debt to finance growth, capex, and other corporate uses and is rated investment grade by all three major rating agencies. 

SLB Dividend Growth CAGR

The SLB dividend history CAGR is the compound annual growth rate or the average growth rate of the dividend payment over a set number of years. It is an important metric for those who want to learn how dividend stocks work. This is usually expressed as a 3, 5, or 10-year CAGR and is used to gauge the rate of increase an investor can expect. Because dividend increases can offset the impact of inflation on investment dollars, the higher the better. SLB dividend history shows a mixed CAGR because of the pandemic-driven distribution cut but that is expected to improve significantly over the next decade. 

Dividend Capture Strategy for SLB

Step #1 – Target The Dividend 

The first step is to target the dividend you want to capture. Stocks like SLB are a good choice because they make regular payments that are well-telegraphed to the market. Once done, it’s time to go to the next step. 

Step #2 – Buy The Stock 

Once the dividend is targeted it’s time to wait for the next declaration. Once declared, watch the stock price for an opportune entry point ahead of the Date of Record. The stock has to be owned at the close of business on the Date of Record for the investor to receive the recently declared distribution amount. 

Step #3 – Hold The Stock 

This step is simple, all you have to do is hold the stock past the Date of Record until the ex-Dividend Date which is the next day. 

Step #4 Sell The stock 

This step is harder because the price of a stock typically falls by the dividend amount on the ex-dividend day. If, however, a good entry was made there should be ample margin to produce a profit from the now “captured” dividend payment. When should you sell a dividend stock? The best time is when you can make a profit. 

Schlumberger Dividend Is Growing 

Schlumberger cut its distribution during the pandemic and that was smart. The move didn’t hurt the share prices and has helped to ensure the balance sheet is still healthy. Now, the payment is as safe as ever and there is a robust outlook for dividend increases in the coming years. Not only is the company in good shape, but a supercycle in oil-field services is underway. That’s a good reason to buy a dividend stock. How to invest in dividend stocks. Very carefully. 

FAQs

Does SLB pay a dividend?

Does SLB pay dividends? Yes, it does. The company has a healthy cash flow and returns cash to its shareholders on a regular basis. 

Does SLB pay monthly dividends?

SLB stock dividend is an annualized payment that is distributed in 4 quarterly payments. The payments are declared each quarter following board approval and the stock goes ex-dividend about 6 weeks later. 

What is Schlumberger yield?

Schlumberger dividend yield has varied over time as the stock price changes and the distribution amount too. The yield in late 2022 was about 1.35% but that was after a COVID-19-related distribution cut that did little to hurt share prices. 

Should you invest in Jack in the Box stock? 

MarketBeat.com – MarketBeat

By the time you get through this article, you’ll know what you need to know about the stock, the Jack in the Box share price and its dividend. 

The key takeaway: Jack in the Box can offer a turnaround story and a growth story as well as a Jack in the Box stock price that comes with an established dividend. The company is not yet well known as a dividend grower but that may change down the road. Until then, as an investor, you can look forward to growth and an attractive payout. 

Jack in the Box Inc. Overview 

Jack in the Box was founded in 1951 when its owner Robert Oscar Peterson rebranded an existing fast food concept as Jack in the Box. The new chain was to be drive-thru oriented and featured the first two-way intercom for drive-thru service. The concept proved popular and led to the design of the iconic Jack in the Box drive-thru locations featuring a smiling clown across California and the west. 

The original chain was company owned and private and eventually sold to Ralston Purina, which operated it for many years. During this time, the company grew and expanded until hitting a slow patch in the early 1980s. It was about this time that Ralston Purina decided to sell the company to management. Management reinvigorated the brand and by 1987, it went public. 

Longtime CEO Larry Comma altered the business during the early 2000s which led to brand stagnation and reduced sales and profits. In 2018, the franchisees held a “no confidence” vote, which led to his resignation. The current CEO, Darin Harris, came on board in June 2020 after serving as a franchise operator for Qdoba and Papa John’s and as a senior executive for Captain D’s, Arby’s and Cici’s Pizza. 

Today, the company has accelerated the switch from company-owned to franchised, leaning hard on digital, expanding into new territories, and unifying system-wide menu choices. These efforts helped reestablish Jack in the Box as a player during the COVID-19 pandemic and set it up for long-term sustained growth as well. The company sells a diverse range of chicken finger meals, hamburgers, chicken sandwiches and international-themed items like tacos and egg rolls. 

Jack in the Box Dividend and Dividend History

Jack in the Box first paid its dividend in 2014 so it has a recent dividend history. The company has increased its payout over the years if not at a consecutive annual pace. The average rate of increase is running well over 10% and company metrics suggest it could sustain a few more like it if it chose to do so. The dividend yield is attractive as well, about 2%, above the broad market average. The company pays its dividend on a quarterly basis and buys back shares as well. The board of directors approved a fresh buyback allotment late in 2022 that is worth $200 million to investors over the course of several years. 

Dividend stocks are the foundation of many investment strategies. How many dividend stocks you purchase is up to you, but Jack in the Box could be one of them. Read on for more information and to learn how dividend stocks work. 

Ratings: JACK

Let’s take a look at dividend safety and attractiveness, its positive balance sheet and analyst ratings to help you determine whether JACK fits into your investment goals.

Dividend Safety and Attractiveness

By Wall Street standards, you can consider Jack in the Box dividends relatively safe, with a low 28% payout ratio. This means the company only pays 28% of its earnings as dividends, a very reasonable amount that leaves ample cash flow to service debt and fund expansion plans. The yield near 2% is less attractive than competitors but the payout is cheap compared to competitors as well. Jack in the Box was trading near 15x its current-year earnings outlook in 2022 while competitors traded 19x to 25x earnings. 

Positive Balance Sheet 

Jack in the Box carries debt and net debt as well but the balance sheet is well managed. The long-term debt-to-asset ratio is very low at just over 1x assets, a strong position for a growth company. 

Analyst Consensus 

The analysts’ consensus in Jack in the Box slipped to a firm “hold” following the Del Taco acquisition because it was a little confusing. Why did Jack buy a taco store after it had already sold a taco store, Qdoba? Regardless of the reason, it was accretive to the top and bottom lines so sentiment should improve as results roll in and the expansion plans gain traction. 

JACK Dividend Growth CAGR

The compound annual growth rate (CAGR) for Jack in the Box is the mean annual growth rate of an investment over a specified period of time longer than one year. The higher the CAGR, the better and a reason to buy dividend stocks. Jack’s CAGR in 2022 was only 2%. That said, the company had not increased its dividend for several years before and the last two increases were 10% and 33%, which are substantial increases and attractive to dividend growth investors. Note that a high CAGR could decline in the following years and create a headwind for share prices. 

Dividend Capture Strategy for JACK

Let’s walk through the dividend capture strategies for Jack in the Box.

Step 1: Buy Jack in the Box stock. 

Buy the stock for the first step in the dividend capture strategy. You must do this before the day of record or the day of official ownership of the stock. You can hold the stock for the least amount of time by buying on the day of record or just before — only shareholders of record on the day of record can receive an upcoming payment. 

Step 2: Hold Jack in the Box stock. 

Next, hold Jack in the Box stock until after the day of record. Doing this entitles you to receive the upcoming dividend. It doesn’t matter whether or not the investor owns the stock on the day the payment is distributed — any owner of record will receive the payment. 

Step 3: Sell Jack in the Box stock.

The third and most difficult step involves selling the stock. Owners of record can sell the stock as soon as the ex-dividend day, which is the day after the date of record. The tricky part is selling the stock at break even or higher because any losses will cut into the profits earned by “capturing” the dividend. Jack stock price tends to rise as the date of record approaches, then falls the day after and often by the dividend amount, which often happens among known dividend payers. 

Additional Strategy: Invest in Jack in the Box.

How to invest in dividend stocks like Jack in the Box? Follow steps one and two but hold off on step three from above. Dividend stocks and income investing involve buying and holding so you can earn dividends over time. When you should sell dividend stocks depends on the portfolio strategy, share price and market action. 

Jack in the Box Winds Up for Growth  

Jack in the Box offers an interesting play on fast food and hamburgers for three reasons: 

1. The first is CEO Darin Harris, who seems clued into what the modern fast-food consumer wants. 
2. The opportunity for growth, which is phenomenal. The company would have to triple in size to outcompete the No. 3 player, Wendy’s, and then triple again to match the No. 2 player, Burger King. 
3. The dividend, which has not grown now but will once the growth story has matured. 

FAQs

Let’s take a look at some questions about Jack in the Box stock.

Is Jack in the Box’s dividend growing?

The Jack stock dividend continues to grow but is not yet a well-known dividend grower. The company has only made dividend increases but far fewer have been consecutive. The payout ratio is low so increases could be substantial at some point in the future. 

What is Jack in the Box’s dividend yield?

The Jack in the Box dividend yield varies with the share price but tends to run in the range of 2% or so. The yield is lower than competitors in the burger/fast food arena but there are mitigating factors that include the company’s growth opportunity and the outlook for future dividend increases. 

When does Jack in the Box pay dividends?

Jack in the Box dividend is an annualized payout that comes in four installments. Distributions are made once per quarter following the board’s approval. Jack in the Box has never paid a special dividend or irregular or extra dividend but it could happen in the future. 

If International Game Technology PLC (NYSE: IGT) were a slot machine, it would be showing three diamonds. The stock is up more than 60% from its September 2022 low and on the move following a sparkling third-quarter performance.

MarketBeat.com – MarketBeat

As far as reopening plays go, the electronic gaming equipment maker is proving to be a diamond in the rough. While most airlines and restaurants experience bumpy recoveries, casinos are booming.

According to the American Gaming Association, the U.S. casino industry had its best quarter ever in Q3. Commercial casino operators hauled in more than $15 billion as consumers continued to spend on experiences in the face of elevated gas and grocery prices. And since this excludes revenue at tribal casinos, the overall figure is likely much higher.

Americans’ willingness to visit casinos during economic weakness is welcomed news for IGT. Casinos are more likely to spend on new slot machines and table games when business is good. This along with the emergence of online gaming was evident in the company’s latest report.

How Were IGT’s Third Quarter Financial Results?

IGT reported an 8% year-over increase in third-quarter revenue. Leading the way was the Global Gaming division, which recorded a 31% jump in revenue as casinos reopened and reactivated installed equipment. IGT generates revenue not only from new equipment sales, but also from various maintenance and service streams. Revenue was down 4% in the Global Lottery business.

Third quarter earnings per share (EPS) came in at $0.43, which marked a 13% improvement from the prior year period. Both revenue and EPS topped Wall Street expectations.

As the income statement strengthened, so too did the balance sheet. IGT ended the period with $5.1 billion in net debt, a 16% year-over-year decline. Lower debt is a positive not only because it reduces interest expense, but also improves the company’s chances of securing additional funding to pursue organic growth or M&A opportunities. At 3.1x, IGT’s net debt leverage ratio is the lowest it has ever been. This is nothing short of remarkable considering what it endured during the early pandemic.

IGT wasn’t the only one that had a good third quarter. In September 2022, one lucky player at Foxwoods Resort Casino in Connecticut won over $1.2 million playing IGT’s Wheel of Fortune Pink Diamond slot machine. Given the Wheel of Fortune franchise has awarded more than 1,100 millionaires since its 1996 inception, it’s easy to see why casino operators (and their visitors) consider these must-have machines.

What is the Outlook for IGT?

Management maintained its 2022 revenue forecast of $4.1 billion to $4.2 billion, with $1 billion expected in the current quarter. At the midpoint, the full-year outlook represents minimal growth beyond 2021 levels. But some growth off a strong base beats a reversion to 2020 levels as has been commonplace in other reopening industries. In 2021, IGT’s revenue surged 31% and it swung from a deep loss to a big profit. 

Longer-term, the mid-cap company has a pair of aces in the hole that are expected to complement the traditional gaming equipment business. Online gaming is becoming a bigger part of the mix as states legalize Internet-based casinos. IGT’s suite of online gaming products gives casinos a cost-friendly alternative to developing an online gaming platform in-house. 

Sports betting is the real kicker in the IGT growth story. The company’s sports betting solutions similarly represent a quick way to enter the market — and avoid being late to the game. 

Will IGT Stock Keep Trending Higher?

IGT is a three-headed growth monster with promising opportunities in land-based casinos, online gambling and sports betting. Having a trio of diversified growth drivers in hand should keep investors coming to the tables.

Another aspect of the investment that could keep buyers interested is the dividend which was reinstated late last year. IGT presently has a 3.3% forward yield that is among the best in the consumer discretionary sector. This gives the stock a rare combination of growth and income that has been hard to come by in the market.

Of course, a major economic recession could dent people’s enthusiasm for in-person or online gaming. Thus far, Americans’ appetite for a night out at the casino has been resilient, though, and the stickiness of this trend will be a key theme to watch. If it recedes, expect IGT’s ascent to do the same. A setback in regulatory approvals could also slow the stock’s roll.

Since the Q3 report, a few sell-side analysts have weighed in on where IGT goes from here. The price target range of $25 to $29 implies limited upside after last week’s high volume gapper, a reflection of the uncertain economic outlook and tough market for growth names. 

Yet with long-term secular headwinds in its favor tied to the legalization of online gaming and sports betting, over time IGT could easily push past Wall Street’s latest targets. Any macro-related weakness would make the stock worth a roll of the dice.

The October CPI came in below expectations and fueled an explosive rally on Wall Street with the S&P 500 (SPY) up by more than 4% and bonds also shooting higher. In essence, the odds of a soft landing increase if inflation can turn lower and then keep moving lower. This development would also likely cause the Fed to slow its pace of hikes. Of course, the next big question, assuming that inflation has peaked, is how low will it fall? Will it plateau at higher levels or will it fall back to the 2% range? Today’s commentary will explore these questions and the implications for our portfolio. Read on below to find out more….

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(Please enjoy this updated version of my weekly commentary originally published November 11^th, 2022 in the POWR Stocks Under $10 newsletter).

Over the last week, the S&P 500 (SPY) is up by 6.4%. Following the FOMC, stocks were pretty choppy before roaring higher following the softer than expected CPI report.

It should be obvious to anyone why falling inflation is a big deal as it basically would mean that a massive market headwind turns into a tailwind.

Falling inflation, on its own, would bring relief to consumers and lead to margin expansion for companies.

In addition, it would result in rates turning lower which would also boost the housing market and reduce borrowing costs for corporations.

In essence, it would reverse a lot of the market pain. And that was evident in today’s action which saw leadership from both homebuilding stocks and speculative tech stocks as both groups have been hammered by rising rates.

Thus, it makes sense that if rates are going to reverse and turn lower, these are the groups that will outperform on the upside.

Inflation’s Path + Earnings

In hindsight, it’s looking like inflation peaked this summer. And, it’s possible that the stock market successfully sniffed this out as it bottomed along with the high reading in the CPI.

Then, these lows were re-tested and undercut in October with a lower high for the CPI but a higher high for core CPI, before once again recovering higher the last couple of weeks.

Going into the CPI report, I was of mixed opinion about the number but leaning bearish on the market due to a hawkish Fed and slowing economy.

The inflation reading neuters the former factor at least for the short-term. This is evident with the big decline in yields, and it would take higher highs in inflation to get new highs in yields.

In fact, I’m confident that we have seen the cycle high in yields.

This means the bearish case rests on seeing a contraction in earnings which causes another leg lower in stock prices.

And on a longer-term basis, the path that inflation takes will determine Fed policy and whether we are in the end stages or middle stages of the bear market.

Portfolio Implications

We moved to a neutral stance prior to the FOMC. And ironically we are back to those levels at today’s close.

Even with a higher than average cash allocation, our portfolio was up more than 3%, and we had numerous stocks that were up between 5 and 9%. YTD, the portfolio is down 5%, while the broader stock market (SPY) is down by 15% with an even deeper drawdown for the Russell 2000.

Like I said above, I do think the CPI report is a gamechanger… in the short term. It should put a bid under the market as it removes a bearish risk – yields constantly marching higher as inflation spiraled upwards.

In the more intermediate-term, if we assume that inflation keeps falling, then the focus will shift to earnings.

If earnings can stay flat or even keep growing, then I think stocks will keep rallying. If earnings begin to show damage, then we could see stock prices fall along with yields and inflation.

In terms of the portfolio, I have eschewed many tech and housing stocks due to the relentless rise in yields. This is no longer the case, and I think we can start bargain-hunting among this group.

Summary 

The FOMC meeting was bearish, because it meant that the window for a ‘soft landing’ had narrowed.

In my opinion, the latest CPI does strengthen the bullish case and could significantly bolster the bullish case if it proves to be the start of a trend of falling inflation.

But, it’s too soon to say if this is the case. And, we also have the dynamic of a slowing economy which is enough to pull stocks lower even with inflation moving lower.

What To Do Next?

If you’d like to see more top stocks under $10, then you should check out our free special report:

3 Stocks to DOUBLE This Year

What gives these stocks the right stuff to become big winners, even in the brutal 2022 stock market?

First, because they are all low priced companies with the most upside potential in today’s volatile markets.

But even more important, is that they are all top Buy rated stocks according to our coveted POWR Ratings system and they excel in key areas of growth, sentiment and momentum.

Click below now to see these 3 exciting stocks which could double or more in the year ahead.

3 Stocks to DOUBLE This Year

All the Best!

Jaimini Desai
Chief Growth Strategist, StockNews
Editor, POWR Stocks Under $10 Newsletter

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SPY shares closed at $398.51 on Friday, up $3.82 (+0.97%). Year-to-date, SPY has declined -15.12%, versus a % rise in the benchmark S&P 500 index during the same period.

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About the Author: Jaimini Desai

Jaimini Desai has been a financial writer and reporter for nearly a decade. His goal is to help readers identify risks and opportunities in the markets. He is the Chief Growth Strategist for StockNews.com and the editor of the POWR Growth and POWR Stocks Under $10 newsletters. Learn more about Jaimini’s background, along with links to his most recent articles.

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The post Inflation…How Low Can You Go? appeared first on StockNews.com

The latest inflation report has raised the odds of the Fed slowing down on its aggressive rate hikes, which might bode well for the tech sector. Moreover, demand for software goods and services remains robust amid the rapid digital transformation. Given the backdrop, quality software stock Salesforce (CRM) could be an ideal buy now. However, Bill.com Holdings (BILL) might be best avoided, given its bleak fundamentals. Keep reading….

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The consumer price index increased 7.7% in October, lower than expected, raising hopes that the Fed might slow down the pace of its rate hike in the next meeting, which might bode well for the software sector. San Francisco Fed President Mary Daly said, “Stepping down is an appropriate thing to think about.” The tech-heavy NASDAQ Composite has gained 6.1% over the past week.

Moreover, according to Gartner, enterprise software spending is projected to grow 8.6% in 2023. In addition, rapid digital transformation worldwide is boosting the application development software market growth. The market for application development software is anticipated to grow at a CAGR of 27.4%.

Given the backdrop, it could be wise to scoop up shares of fundamentally sound stock Salesforce, Inc. (CRM). However, Bill.com Holdings, Inc. (BILL) could be best avoided now, given its weak growth prospects.

Stock to Buy:

Salesforce, Inc. (CRM)

CRM is a customer relationship management technology provider. The company’s Customer 360 platform enables its customers to work together to deliver connected experiences.

On September 21, 2022, CRM partnered with Zywave at InsureTech Connect Vegas 2022. This collaboration aims to integrate the domains of insurance agency sales and client service, leading to more efficient, strategic workflows.

In terms of forward Price/Book, CRM is currently trading at 2.56x, 35.8% lower than the industry average of 3.99x.

CRM’s gross profit margin of 72.61% is 44.54% higher than the 50.24% industry average.

CRM’s total revenues came in at $7.72 billion for the second quarter that ended July 31, 2022, up 21.8% year-over-year. Moreover, its gross profit came in at $5.59 billion, up 18.3% year-over-year. Also, its income from operations came in at $5.4 billion, up 22.9% year-over-year.

Analysts expect CRM’s revenue to increase 17% year-over-year to $30.99 billion in 2023. Its EPS is expected to increase by 15.3% per annum for the next five years. It surpassed EPS estimates in all four trailing quarters. Over the past month, the stock has gained 7.3% to close the last trading session at $156.30.

CRM’s strong fundamentals are reflected in its POWR Ratings. The stock’s overall B rating indicates a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting. 

CRM has a B grade for Sentiment. In the Software – Application industry, it is ranked #31 out of 143 stocks. Click here for the additional POWR Ratings for Value, Stability, Momentum, Growth, and Quality for CRM.

Stock to Avoid:

Bill.com Holdings, Inc. (BILL)

BILL provides cloud-based software that simplifies, digitizes, and automates back-office financial operations for small and midsize businesses worldwide.

In terms of forward Price/Sales, BILL is currently trading at 12.63x, 400.7% higher than the industry average of 2.52x. The stock’s forward Price/Cash Flow multiple of 247.21 is 1340.8% higher than the industry average of 17.16.

BILL’s negative EBIT margin of 40.8% is lower than the 6.99% industry average. Its negative EBITDA margin of 29.1% is lower than the 12.18% industry average.

BILL’s loss from operations came in at $87.69 million for the first quarter that ended September 30, 2022, up 18.2% year-over-year. Moreover, its net loss came in at $81.64 million, up 9.9% year-over-year.

BILL’s EPS is expected to decrease by 28.7% per annum for the next five years. Over the past year, the stock has lost 63.3% to close the last trading session at $120.14.

BILL’s overall D rating equates to a Sell in our POWR Ratings system.

It has an F grade for Stability and a D for Value, Momentum, and Quality. It is ranked #121 in the same industry. Beyond what is stated above, we’ve also rated BILL for Growth and Sentiment. Get all BILL’s ratings here.

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CRM shares were trading at $159.33 per share on Friday afternoon, up $3.03 (+1.94%). Year-to-date, CRM has declined -37.30%, versus a -15.03% rise in the benchmark S&P 500 index during the same period.

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About the Author: RashmiKumari

Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master’s degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.

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Mid-cap Neurocrine Biosciences (NASDAQ: NBIX) continued its uptrend Thursday, along with the market-wide broad rally.

MarketBeat.com – MarketBeat

The stock came within a penny of Tuesday’s all-time high of $125.99 before pulling back. Nonetheless, the San Diego-based biotech finished the session with a gain of $1.40, or 1.15%, at $123.22. Trading volume was lighter than average.

The company develops and commercializes pharmaceutical treatments for neurological, endocrine, and psychiatric conditions.

On November 1, it easily trounced Wall Street’s third-quarter expectations. Earnings came in at $1.08 per share, way ahead of analysts’ consensus, calling for $0.81 a share. That marked a 69% year-over-year increase.

Revenue was up 31% to $387.9 million, beating forecasts of $377 million. In the past five quarters, revenue grew between 15% and 31%, with the latter number being a steady growth rate for the past three. 

A glance at MarketBeat earnings data for Neurocrine reveals that the company has a mixed history when it comes to meeting, beating or missing views on the top and bottom lines. 

One standout in the quarter was Ingrezza, Neurocrine’s product to treat a movement disorder called tardive dyskinesia, which may occur as a side effect of antipsychotic medications. Those sales came in at $376 million, which constituted nearly 97% of total revenue. 

Ingrezza’s revenue was ahead of expectations, and the company increased its full-year guidance. 

In his remarks accompanying the earnings release, Neurocrine CEO Kevin Gorman addressed additional potential for Ingrezza, using its chemical name. 

“With the submission of the sNDA of valbenazine for the treatment of chorea associated with Huntington Disease, we have the potential to help even more patients with our valbenazine franchise,” he said.

He also discussed clinical programs for drugs in the pipeline, such as crinecerfont, a treatment for congenital adrenal hyperplasia and for certain seizures. The former refers to genetic disorders that can affect adrenal glands. Gorman also mentioned the company’s lead muscarinic program for the treatment of schizophrenia. 

While Ingrezza essentially makes up all the company’s revenue at this point, Gorman was drawing attention to other treatments in the pipeline, signaling to Wall Street that Neurocrine is not satisfied being a one-trick pony. 

The stock climbed out of a flat base in early October, then trended higher along its 50-day average for the next four weeks. After the earnings report, the stock jumped nearly 4% and has been forming a potentially bullish ascending channel with higher highs and higher lows.  

This stock has notched strong performance relative not only to its biotech and biomedical industry peers, but also relative to the broader market. In this case, the best broad-market comparison is the S&P 400 Midcap index, of which Neurocrine is a component. 

That index, as tracked by the SPDR S&P MidCap 400 ETF (NYSEARCA: MDY), has notched the following performance numbers:

• 1 month: +5.10%
• 3 months: -4.40%
• Year-to-date: -15.28%

Meanwhile, here are Neurocrine’s returns:

• 1 month: +15.33%
• 3 months: +15.39%
• Year-to-date: +44.68%

When it comes to industry peers, small-caps Catalyst Pharmaceuticals (NASDAQ: CPRX) and Aveo Pharmaceuticals (NASDAQ: AVEO), and  Immunocore (NASDAQ: IMCR) are among the best price performers in recent months. 

Larger names, including Amgen (NASDAQ: AMGN), Gilead Sciences (NASDAQ: GILD), Regeneron Pharmaceuticals (NASDAQ: REGN) and Vertex Pharmaceuticals (NASDAQ: VRTX) are also outperforming the broader market. In this case, the best comparison is the S&P 500. 

With that many small and large stocks all outpacing their indexes, it’s clear that biomedical and biotech stocks are a leading industry. When scouting for new opportunities, it’s generally a good idea to focus on industries with multiple top-performing stocks. That kind of breadth indicates strong demand in the “rising tide lifts all boats” sense. 

Neurocrine is out of buy range at the moment, and if Thursday’s rally gathers steam in the coming weeks, it could move even further away from a reasonable buy point. However, it’s a good candidate to put on a watch list, and monitor it for a pullback to a key moving average.