Tag: Financial Performance

Mark Zuckerberg could pay millions to the IRS on Meta dividends. He still might be getting ‘a major break’.

[ad_1]

Mark Zuckerberg delighted Meta shareholders and Wall Street this week with news of the social media giant’s first-ever dividend.

The IRS may also be happy, now that it’s staring at millions in taxes on the Meta stock dividends bound for Zuckerberg’s portfolio.

Zuckerberg, the CEO of Meta Platforms Inc.
META,
+20.32%,
is poised to make $700 million in dividends yearly. He owns nearly 350 million shares, according to FactSet, and the company will start paying a quarterly dividend of 50 cents a share.

That would yield nearly $167 million in federal taxes yearly, after a qualified-dividend tax of 20% and another 3.8% tax on the investment returns of rich households, two accounting experts said.

California income taxes of 13.3% on the dividends could cost Zuckerberg another $93.1 million, said Andrew Belnap, an accounting professor at the University of Texas at Austin’s McCombs School of Business.

All in, that’s a combined $259.7 million in federal and state taxes annually on the Meta dividends, Belnap estimated.

For context, U.S. taxpayers reported over $285 billion in qualified-dividend income to the IRS though mid-November 2023, according to agency statistics. Nearly 30 million tax returns reported qualified dividends through that time.

Meta said it plans a quarterly cash dividend going forward, with the first such payment in March.

Meta shares soared 20.5% on Friday, ending with a record-high close of $474.99. The Dow Jones Industrial Average
DJIA,
S&P 500
SPX
and Nasdaq Composite
COMP
all closed higher Friday.

‘Zuck is getting a major break’

Meta announced the dividend payment in its earnings results Thursday, on the same week that Americans began filing their income taxes.

A look at Zuckerberg’s dividends and their tax implications offer a peek at the debate about the varying ways wages and wealth are taxed.

“Zuck is getting a major break,” said Andrew Schmidt, an accounting professor at North Carolina State University’s Poole School of Management who also crunched the numbers for MarketWatch.

Approximately $167 million “seems like a high tax bill,” he said. But if Zuckerberg received the $700 million as a straight salary, Schmidt estimated he’d be looking at a roughly $259 million tax bill on the wages after they were taxed at the top marginal rate of 37%.

Federal income tax brackets run from 10% to 37%.

Meanwhile, the IRS taxes qualified dividends and capital gains at 0%, 15% and 20%, depending on income and household status. The net investment income tax adds another 3.8% for individuals making at least $200,000 or married couples worth $250,000.

For federal and state taxes on the Meta dividends, Zuckerberg would face a combined rate of 37.1%, Belnap noted. “His tax rate on this is actually fairly high,” he said.

The gap in tax rates on income derived from wages and investments “has been a big criticism with U.S. tax policy,” Schmidt said, especially as lawmakers look for ways to come up with more tax revenue.

Regular retail investors enjoy the same preferential rates on capital gains and dividends as the top 1% of taxpayers, Schmidt added. The issue is that those dividends and stock profits are a smaller part of their income while salaries, taxed at higher rates, are a bigger proportion.

Belnap noted that California’s state tax rules don’t provide special treatment to dividends.

Read also: Where Trump, Biden and Haley stand on capital gains, the child tax credit and other key tax questions

Zuckerberg received a $1 base salary in 2022, a figure that hasn’t changed in several years. He is now worth $142 billion, according to the Bloomberg Billionaires Index, making him the fifth-richest person in the world.

Meta did not immediately respond to a request for comment.

Taxes on the Meta dividends will not be something Zuckerberg, or any Meta shareholders big or small, need to deal with until next year’s tax season, Belnap and Schmidt observed.

But as taxpayers amass their 1099-DIV forms on dividend income, IRS figures show that it’s mostly upper-echelon taxpayers reaping the rewards on the preferential rates for qualified dividends.

Households worth at least $1 million accounted for 40% of the approximate $285.3 billion in qualified dividends reported through mid-November, according to agency figures.

For less affluent investors, “it’s usually a nice supplement, but I’d say very few people are living off dividends,” Belnap said.

[ad_2]

Source link

February 2, 2024
Meta’s stock is the most overbought in 11 years, but that could be a good thing

[ad_1]

There’s a common belief that “overbought” is a technical condition for a stock, but in practice it seems to be more of an ability.

Meta Platforms Inc.’s stock
META,
+20.32%
soared so much Friday after a blowout earnings report, that some technical readings have reached levels not seen in 11 years.

The stock rocketed 20.9% to close at a record $474.99, to book the third-biggest gain since going public in May 2012. The only bigger rallies were 23.3% on Feb. 2, 2023 and 29.6% on July 25, 2013, which were also after earnings reports.

The stock’s Relative Strength Index, which is a momentum indicator that measures the magnitudes of recent gains and losses, climbed to 86.48. That’s the highest level seen since it closed at a record 89.39 on July 30, 2013.

But that shouldn’t scare off Meta bulls.

Many chart watchers believe RSI readings above 70 are signs of “overbought” conditions, which suggests bulls need a breather after running faster and farther than they are used to.

There are also many who believe the ability to become overbought is a sign of underlying strength, since a stock tends to be trending higher when RSI hurdles 70. (Read Constance Brown’s “Technical Analysis for the Trading Professional.”)

For example, the record RSI reading came three days after the record stock-price rally of 29.6% on July 25, 2013. Even though RSI closed at what was then a record of 88.27 after a record price gain on the 25th, the stock continued to rally and become even more overbought.

It was that spike that snapped the stock out of the year-long doldrum that followed the initial public offering, and flipped the long-term narrative on the stock to bullish. (Read “Facebook’s ‘breakaway gap’ is a bullish game changer,” from The Wall Street Journal.)

FactSet, MarketWatch

And while the record RSI readings in July 2013 did lead to a minor short-term pullback, it didn’t stop the stock from embarking on a long-term uptrend, in which RSI made multiple forays above 70.

FactSet, MarketWatch

And the last time RSI closed above 85 was Feb. 2, 2023, when it closed at 86.07, also after a blowout earnings report.

And similar to 10 years earlier, that historically high overbought reading helped launch another long-term rally.

FactSet, MarketWatch

So yes, Meta’s stock is now facing historically high overbought conditions. But as many chart watchers like to say, overbought doesn’t mean over.

One thing to consider, however, is that the two prior times RSI spiked above 85 were while the long-term fates of the stock were still in question — the stocks were working on short-term bounces following long-term downtrends.

FactSet, MarketWatch

But Friday’s blast off happened just days after the stock closed at a record high. There was no resistance to hurdle, so rather than a bullish “breakaway gap,” Friday’s jump could be considered more a bullish leap of faith.

Also read:

Meta’s killer stock rally could add $200 billion in market cap — a historic haul.

Nvidia’s stock could rise above $600 — despite signs it’s already overbought.

[ad_2]

Source link

February 2, 2024
Etsy’s stock is having its best day in seven months after Elliott takes ‘sizable’ stake

[ad_1]

Investors bought up shares of Etsy Inc. on Thursday after the online crafts marketplace added to its board of directors a partner of hedge fund Elliott Investment Management L.P., which recently acquired a “sizable” stake in the company.

Etsy
ETSY,
+9.31%
said Marc Steinberg, who is responsible for public- and private-equity investments at Elliott, has been appointed to the board, effective Feb. 5, and will also join the board’s audit committee.

“Etsy has a highly differentiated position in the e-commerce landscape and a uniquely attractive business model, supported by a distinctive and engaged community,” Steinberg said. “We became a sizable investor in Etsy and I am joining its board because I believe there is an opportunity for significant value creation.”

Etsy’s stock shot up 8% in afternoon trading, to pare earlier gains of as much as 14.2%. The stock was headed for its best one-day gain since it climbed 9.2% on July 11.

Elliott’s stake was acquired in recent months, as the fund’s disclosure of equity holdings through the third quarter did not list Etsy shares.

“Marc’s appointment reflects our ongoing commitment to enhance the perspectives and expertise on the Etsy Board,” said Etsy Chairman Fred Wilson. “We look forward to benefiting from his voice in the boardroom as a seasoned and experienced investor as we continue our journey of creating a leading global e-commerce platform.”

Etsy now has 10 board members.

Etsy’s stock has run up 18.6% over the past three months, but has tumbled 48.5% over the past 12 months. That’s compared with the S&P 500 index’s
SPX
18.7% rally over the past year.

Read (December 2023): Etsy to cut 11% of staff as CEO says company is on ‘unsustainable trajectory’

At an investor conference in December, Chief Executive Josh Silverman said business has slowed since the post-pandemic boom, as people have “had enough of buying things” and are now spending primarily on eating out and travel. Inflation and the loss of government subsidies was also weighing on spending.

Still, Silverman said, Etsy is now about two and a half times bigger than it was before the pandemic, and the company has more active buyers than it did at the peak of the pandemic.

[ad_2]

Source link

February 1, 2024

Shell Earnings Beat Forecasts on Strong Gas Trading; Launches $3.5 Bln Buyback — Update

[ad_1]

By Christian Moess Laursen

Shell’s annual profits fell last year, although by less than the market had expected, as the European energy sector grapples with lower oil and gas prices and weaker refining margins.

Still, the London-based energy giant said Thursday that it would buy back $3.5 billion in shares this quarter and hiked its fourth-quarter dividend by 20% to 34.40 cents a share, in line with its promise of lofty shareholder returns despite slipping commodity prices.

The oil-and-gas major posted $20.28 billion in full-year profit measured on a net current-cost-of-supplies basis–a metric similar to the net income that U.S. oil companies report. This compares with $41.56 billion in 2022 when oil and gas prices soared after Russian invaded Ukraine.

For the fourth quarter, Shell’s profit on a net current-cost-of-supplies basis dropped to $1.38 billion from $6.15 billion in the preceding three-month period, reflecting lower refining margins, margins from crude and oil products trading, and higher operating expenses.

However, adjusted fourth-quarter earnings–which strip out certain commodity-price adjustments and one-time charges–rose to $7.31 billion from $6.22 billion in the third quarter, beating a consensus forecast of $6.04 billion, based on a poll of 24 analysts compiled by Vara Research. The increase was driven by higher trading gains from liquefied natural gas, favorable tax movements, and higher production, Shell said.

Market watchers had expected a dip in quarterly earnings, forecasting results across the integrated energy sector to have been hit by lower oil prices and refining margins.

But despite the weaker market environment, Shell’s key integrated-gas unit, which includes its leading LNG business, posted adjusted fourth-quarter earnings of $3.96 billion, up from $2.53 billion in the preceding three months.

“As we enter 2024 we are continuing to simplify our organization with a focus on delivering more value with less emissions,” Chief Executive Wael Sawan said.

The company, the second-biggest by market cap on the FTSE 100 index, also booked a $3.9 billion impairment charge, dragging quarterly net profits, which fell to $474 million from $7.04 billion. This was flagged by the company in January.

Cash flow from operations–a measure of the cash a company generates from normal business operations–rose to $12.575 billion in the quarter, topping a consensus forecast of $11.59 billion, from $12.33 billion in the third quarter.

During the fourth quarter, Shell–Europe’s biggest integrated oil company–produced 901,000 oil-equivalent barrels a day, in line with its targeted range, and 7.1 million metric tons of LNG, likewise in line with its guidance.

Upstream production–the extraction of crude oil and natural gas–also met the targeted range at 1.87 million BOE a day.

For the current quarter, Shell expects an output between 930,000 and 990,000 BOE a day of integrated gas, 7.0 million-7.6 million tons of LNG and an upstream production of 1.73 million-1.93 million BOE a day.

Write to Christian Moess Laursen at christian.moess@wsj.com

[ad_2]

Source link

January 31, 2024

Alphabet’s stock dips because advertising was good, but not good enough

[ad_1]

Google parent Alphabet Inc.’s stock was tumbling late Tuesday, as a rebound in digital advertising fell short of analysts’ lofty expectations.

The search-engine powerhouse reported a jump in fourth-quarter sales, chiefly through advertising, but Alphabet’s shares
GOOGL,
-1.34%

GOOG,
-1.16%
fell 4% in after-hours trading.

Total revenue was $86.3 billion, up 13% from $76 billion a year ago. Sales minus total acquisition costs (TAC) came in at $72.3 billion, compared with $63.1 billion a year ago.

Alphabet reported fourth-quarter net income of $20.7 billion, or $1.64 a share, compared with net income of $13.6 billion, or $1.05 a share, in the year-ago quarter.

“We are pleased with the ongoing strength in Search and the growing contribution from YouTube and Cloud. Each of these is already benefiting from our AI investments and innovation. As we enter the Gemini era, the best is yet to come,” Alphabet Chief Executive Sundar Pichai said in a statement announcing the results.

Analysts surveyed by FactSet had expected on average net earnings of $1.59 a share on revenue of $85.3 billion and ex-TAC revenue of $71.2 billion.

Google’s total advertising sales climbed to $65.5 billion from $59 billion a year ago, edging analysts’ average expectations of $65.8 billion. YouTube ad sales rose to $9.2 billion from $7.96 billion a year. Google Cloud rang up $9.2 billion in sales, up from $7.3 billion.

Alphabet is also ramping up AI initiatives to improve operational efficiency and productivity for 2023 and beyond. The company is using AI in its finance organization and analytics, but Alphabet did not break out AI revenue in Tuesday’s earnings report.

Alphabet Chief Financial Officer Ruth Porat told CNBC that gen-AI will be a focus of the call with analysts now taking place.

Shares of Google have climbed 53% over the past 12 months. The S&P 500 index
SPX
has risen 21% the past year.

[ad_2]

Source link

January 30, 2024

Ryanair 3Q Rev EUR2.70B

[ad_1]

By Anthony O. Goriainoff

Ryanair Holdings said third-quarter adjusted profit after tax fell as higher fuel costs offset revenue gains, and narrowed its guidance for the year.

The Irish budget airline said Monday that for the quarter ended Dec. 31 adjusted post-tax profit–its preferred metric–was 15 million euros ($16.3 million) compared with EUR211 million the year before.

Revenue for the quarter was EUR2.70 billion, compared with EUR2.31 billion a year ago.

The company said revenue per passenger rose 9%, with ancillary revenue up 2% to around EUR23 and average fares up 13% to over EUR42.

The airline carried 41.4 million passengers in the quarter compared with 38.4 million a year ago. Load factor–a measure of how full a plane is–for the period fell one percentage point to 92%.

The company narrowed its profit after tax guidance for the year to between EUR1.85 billion and EUR1.95 billion, from prior guidance of between EUR1.85 billion and EUR2.05 billion.

The company said that although it will benefit from the first half of Easter traffic falling in late March, this was unlikely to fully offset weaker-than-previously-expected load factors and yields in late third quarter and early fourth quarter.

Write to Anthony O. Goriainoff at anthony.orunagoriainoff@dowjones.com

By Anthony O. Goriainoff

Ryanair Holdings said third-quarter adjusted profit after tax fell as higher fuel costs offset revenue gains, and narrowed its guidance for the year.

Revenue for the quarter was EUR2.70 billion, compared with EUR2.31 billion a year ago.

The company said revenue per passenger rose 9%, with ancillary revenue up 2% to around EUR23 and average fares up 13% to over EUR42.

The airline carried 41.4 million passengers in the quarter compared with 38.4 million a year ago. Load factor–a measure of how full a plane is–for the period fell one percentage point to 92%.

The company narrowed its profit after tax guidance for the year to between EUR1.85 billion and EUR1.95 billion, from prior guidance of between EUR1.85 billion and EUR2.05 billion.

Write to Anthony O. Goriainoff at anthony.orunagoriainoff@dowjones.com

[ad_2]

Source link

January 28, 2024

Denim pioneer Levi’s is rolling out ‘tech pants’ and other new offerings this year. But will retailers stock them?

[ad_1]

With a rough 2023 in the rearview mirror, Levi Strauss & Co. this year is trying to tackle its problems with new pants.

That includes pants with lighter-weight denim; pants for women that can be worn as high-rise or low-rise; and even nondenim pants that management, during Levi’s
LEVI,
+1.27%
earnings call on Thursday, referred to as a “tech pant” for men with “moisture control and 360 mobility.” The company also plans to expand its offerings of Performance Cool pants intended to keep the wearer cool and dry on hotter days.

But as those products roll out, the retailers that account for most of Levi’s sales are still cautious about packing their shelves with new apparel — even though Levi’s executives pointed to slightly better demand from clothing stores during the fourth quarter and holiday period. And as the denim pioneer cuts costs, brings in new leadership and tries to be a bigger e-commerce player, Wall Street will now be digging around for signs of a payoff.

“Ultimately, the market will be looking for evidence new strategies can drive accelerated growth,” Stifel analyst Jim Duffy said in a research note on Thursday.

“We continue to believe in brand vitality and opportunities for extension. With product reflective of new direction arriving in the marketplace across 2024, the proof will be in consumer response,” he continued.

In an interview with MarketWatch on Friday, Duffy said he was optimistic about Levi’s standing as an established brand and stronger demand for its dresses, skirts and other women’s clothing items. But the more products a company rolls out, he suggested, the more it has to invest to make them work — and the more it needs to manage if sales falter.

“The risk, as I see it, is that more categories means more SKUs and more product that is fashion rather than core basic styles, and more investment and inventory that, if it doesn’t translate to the marketplace, could result in higher markdowns,” he said, referring to the stock-keeping units by which retailers track inventory.

Levi’s on Thursday said it would lay off between 10% and 15% of its global corporate staff in the first half of this year, a move intended to save $100 million in costs over that period. The layoffs are part of a two-year plan, called Project FUEL, intended to save money and strengthen the part of Levi’s business that sells directly to consumers via its own e-commerce network and its physical stores, as opposed to third-party retail operations.

The layoff announcement arrived days ahead of Chief Executive Chip Berg’s departure from that role, with Michelle Gass taking over on Jan. 29. As the company tries to be bigger than men’s jeans, Gass, in Levi’s earnings release on Thursday, said she saw an opportunity to grow internationally, make Levi’s own online and bricks-and-mortar sales a greater priority, and turn the brand into a larger “denim apparel lifestyle business.”

Levi’s shares fell after hours Thursday, after the company’s full-year profit forecast came in below expectations. The stock rebounded 1.3% on Friday but is still down 10.3% over the past 12 months.

Still, Levi’s direct-to-consumer sales jumped 11% during the fourth quarter, and accounted for 42% of sales overall. Duffy said that the company has pushed deeper into its direct-sales business because it gives executives greater insight into what consumers want, as well as more control over how it markets and sells its clothing. Cutting out other retailers also widens margins on sales, he noted.

Levi’s operating margins were higher in the fourth quarter. It also declared a dividend of 12 cents per share, payable in cash on Feb. 23.

But sales in Levi’s wholesale segment — the sales it gets from retailers who buy Levi’s product, then sell it to consumers — fell 2%. Better results in the U.S. and Asia were offset by a drop in Europe, the company said.

Retailers have spent the past two years trying to clear unwanted clothes from their stockrooms, and cutting prices in the process, after spiking inflation restricted many shoppers’ appetites to basics.

As Gass prepares to take the reins, she sought to put a positive spin on retail-chain sentiment. “So net-net, overall, as a company, we’re exiting the year on a strong note,” Gass said on the earnings call. “And U.S. wholesale, we’re encouraged. But as it relates to that channel, we’re not declaring victory yet. There’s been a lot of volatility this past year, some in our control, some outside. And so we are taking a cautious approach as we look forward.”

[ad_2]

Source link

January 26, 2024
JetBlue, Spirit Airlines appeal court ruling blocking their proposed merger

[ad_1]

JetBlue Airways Corp. and Spirit Airlines Inc. said late Friday that they have appealed a court ruling that earlier this week blocked their planned merger.

JetBlue
JBLU,
-1.19%
and Spirit
SAVE,
+17.19%
announced the appeal in a terse press release that provided no more details, adding only that the process is “consistent with the requirements of the merger agreement.”

Wall Street was split on whether the airlines would be legally obliged to appeal the Tuesday ruling, which sided with the Justice Department in saying that a merger between low-cost JetBlue and ultra-low-cost Spirit would hurt competition.

Shares of Spirit rallied 12% after hours Friday, while JetBlue shares fell nearly 2%. Analysts at JP Morgan said this week that the ruling freed JetBlue from a “costly merger.”

Earlier Friday, Spirit sought to reassure investors about its liquidity and issued an upbeat fourth-quarter revenue guidance. Spirit has amassed about $5.5 billion in debt, and is reportedly seeking advisers to help restructure it.

The likelihood of Spirit attracting a new merger or takeover bid is considered low without a debt restructuring. Frontier Group Holdings Inc.
ULCC,
-2.13%
and JetBlue competed for Spirit in 2022, with Frontier ultimately bowing out in July of that year.

Raymond James analyst Savanthi Syth said in a note earlier Friday that it was “clear to us that Spirit is pressing JetBlue to appeal the antitrust ruling, but we continue to believe the chances of success are low.”

Syth has estimated that an appeal would take some four to five months.

Shares of Spirit have lost 67% in the past 12 months, while shares of JetBlue are down 41%. The U.S. Global Jets ETF
JETS
has lost 9% in the same period. Those losses contrast with gains of 24% for the S&P 500 index
SPX.

[ad_2]

Source link

January 19, 2024

U.K. Shoppers Bring Little Christmas Cheer as Sales Plunge

[ad_1]

By Joshua Kirby

Retail sales fell more sharply than expected in the U.K. in December, offering little succor to a listless economy at the end of the year.

Total trade volumes were 3.2% lower than a month earlier, according to figures published Friday by the Office for National Statistics.

This was worse than the slight dip expected, according to a Wall Street Journal poll of economists. It reverses rising sales in November, boosted by Black Friday promotions as well as lower inflation. Retailers reported that many shoppers stocked up on Christmas food and gifts in November, weighing on December’s spending.

For the quarter as a whole, retail sales were 0.9% lower than the previous three months, and will have a negative contribution to wider economic growth over the period, the ONS said.

Write to Joshua Kirby at joshua.kirby@wsj.com; @joshualeokirby

[ad_2]

Source link

January 18, 2024

Spirit Airlines Stock Gets a Downgrade. It’s the Least of the Carrier’s Problems.

[ad_1]

Spirit Airlines stock was falling again Thursday as the ultra-low-cost carrier’s predicament worsened.

Continue reading this article with a Barron’s subscription.
View Options

[ad_2]
Source link

January 18, 2024
Beware ‘pricey’ stocks as inflation may ‘roller-coaster back up,’ says BlackRock

[ad_1]

U.S. stocks appear on course for “another year of flip-flopping market narratives” as falling inflation may “roller-coaster back up” and rattle investor expectations for a “soft landing,” according to BlackRock.

“Market jitters in early January suggest there is some anxiety about macro risks further out,” said BlackRock Investment Institute strategists in a note Tuesday. “We stay selective as we expect resurgent inflation to come into view.”

The strategists also pointed to “pricey valuations” in the U.S. stock market.

Markets have favored a small group of seven megacap stocks “for their ability to leverage artificial intelligence,” they said. Those stocks’ price-to-earnings ratios for the next 12 months are “about a third higher than for the S&P 500 and when excluding them,” a chart in their note shows.

BLACKROCK INVESTMENT INSTITUTE NOTE DATED JAN. 16, 2024

Price-to-earnings ratios, which “divide a company’s share price by its earnings per share,” fell in the second half of 2023 as stronger earnings expectations supported the megacap rally, the BlackRock strategists said. The so-called Magnificent Seven, as those market-leading megacap tech stocks are known, skyrocketed last year, fueling the S&P 500 index’s 24% surge.

“Even after the market-wide rally in December, market concentration in a handful of megacaps — firms with ultra-large market capitalizations — remains high,” the strategists said.

The seven companies with massive market values — Apple Inc.
AAPL,
-1.24%,
Microsoft Corp.
MSFT,
+0.49%,
Google parent Alphabet Inc.
GOOGL,
-0.11%

GOOG,
-0.11%,
Amazon.com Inc.
AMZN,
-0.94%,
Nvidia Corp.
NVDA,
+3.09%,
Facebook parent Meta Platforms Inc.
META,
-1.88%
and Tesla Inc.
TSLA,
+0.49%
— have an outsized weighting in the S&P 500.

Chip maker Nvidia was among the best-performing stocks in the S&P 500 in afternoon trading on Tuesday, with a sharp gain of 2.7% at last check, according to FactSet data. By contrast, the broad S&P 500 index
SPX
was down 0.7% on Tuesday afternoon, while the Dow Jones Industrial Average
DJIA
and technology-heavy Nasdaq Composite
COMP
were also declining.

Read: What’s next for stocks as ‘tired’ market stalls in 2024 ahead of closely watched retail sales

Potential catalysts

“We find valuations tend to matter more for long-term rather than near-term stock returns, and that’s why they usually aren’t enough to spoil market sentiment without a catalyst,” the BlackRock strategists wrote.

“Earnings could be a catalyst,” as well as inflation, they said.

Consensus expectations for earnings growth rose last year, with forecasts now calling for an increase of as much as 11% in the next 12 months, their note says, citing LSEG data.

BlackRock expects that U.S. inflation will this year subside to near the Federal Reserve’s 2% target. For now, that may support the soft-landing scenario the stock market and Fed have “largely embraced,” in which the U.S. may avoid a recession as inflation falls to that desired target, according to the strategists.

Many investors expect the Fed may start cutting interest rates this year as inflation eases, after the central bank hiked rates aggressively in a bid to tame it.

“The problem: Inflation won’t remain at that target, in our view, and this risk becoming clearer could challenge upbeat sentiment,” the BlackRock strategists said. “So we monitor earnings season for any signs of cracks given pricey valuations.”

[ad_2]

Source link

January 16, 2024
Even Cloudflare's CEO says that viral firing video is 'painful' — here's what went wrong

[ad_1]

A tech employee’s recording of the meeting firing her from a sales role at Cloudflare
NET,
-1.79%
has spurred criticism of the company — and a broader conversation about the right way to let employees go.

Viewers have called the roughly 10-minute TikTok video, which went viral this week, “sad” and a “disaster.” Even Cloudflare CEO Matthew Prince responded on X (formerly Twitter) that it was “painful for me to watch.”

In the video captioned, “POV: You’re about to get laid off,” former Cloudflare account executive Brittany Pietsch logs into a virtual meeting with an HR representative and a director at the company, both of whom she says she’s never met before. In a caption, Pietsch writes that she assumed they were meeting to let her go, because she had heard from coworkers who had been axed already.

In the video, the company reps say that Pietsch hadn’t met performance expectations, and that Cloudflare had decided to “part ways” with her. Pietsch’s response is what has pushed this clip to be shared all over social-media newsfeeds: She asks for an explanation for why she, specifically, is being let go by the company, particularly because she’s a new employee who hasn’t heard any negative feedback. She also asks why her manager isn’t a part of this termination meeting.

“Every single one-on-one [meeting] I’ve had with my manager, every conversation I’ve had with him — he’s been giving me nothing but ‘I am doing a great job,’” she says during the meeting. “I’m just definitely very confused and would love an explanation that makes sense.”

The director, who can’t be seen in the video, says he “won’t be able to go into specifics” on Pietsch’s performance.

In a statement to MarketWatch, a Cloudflare spokesperson clarified that the company did not conduct layoffs, and is not engaged in a reduction of force. “When we do make the decision to part ways with an employee, we base the decision on a review of an employee’s ability to meet measurable performance targets,” the Cloudflare statement said. “We regularly review team members’ performance and let go of those who aren’t right for our team. There is nothing unique about that review process or the number of people we let go after performance review this quarter.”

Pietsch did not immediately respond to a request for comment.

Company CEO Prince added on X, formerly known as Twitter, that the company fired 40 salespeople out of 1,500 in its go-to-market division. “That’s a normal quarter,” he wrote in his post. “When we’re doing performance management right, we can often tell within 3 months or less of a sales hire, even during the holidays, whether they’re going to be successful or not.”

But he also added: “We try to fire perfectly. In this case, clearly we were far from perfect. The video is painful for me to watch. Managers should always be involved. HR should be involved, but it shouldn’t be outsourced to them … We don’t always get it right.”

Many viewers seem to agree, as the video has drawn close to 200,000 views on TikTok and millions of views on X, along with going viral on Reddit.

“Total disaster on both sides,” lawyer Eric Pacifici said.

“Totally unfair to her,” wrote Austen Allred, CEO of the online-coding bootcamp Bloom Institute of Technology. “Pretty sad across the board.”

On LinkedIn, Pietsch gave her own response to the social-media uproar. She said that her manager was unaware that she was being let go, and that she asked questions during the meeting not to try and save her job, but rather to get greater clarity on why she had been singled out for termination.

“I’ll never be able to wrap my mind around it,” she wrote in the post. “We as employees are expected to give 2 weeks notice and yet we don’t deserve even a sliver of respect when the roles are reversed?”

What’s the right way to fire an employee?

It’s never easy to part ways with an employee, according to Molly, a human-resources consultant who runs the TikTok account HR Molly, which has 80,000 followers. She asked only to be identified by her first name for privacy reasons.

But that being said, it’s very important to treat affected employees with respect. That can include sharing as much information as possible about why the decision is being made.

“I tell people that even if you catch someone stealing, even that termination meeting should have a level of decency,” she said. “It seems like there’s a significant consensus that the meeting [in the viral video] lacked some dignity.”

It’s also important to understand these kinds of conversations will be difficult for an employee no matter what, Molly added.

“We know this impacts people and we know this is emotional and that it’s harmful. How can we do it in a way that creates the least amount of additional harm?” she said, noting that she picked up the concept from fellow TikTok creator and diversity consultant Ciarra Jones. “Companies need to prioritize the well-being of the employee that’s impacted.”

As for recording your layoff or firing meeting — that can be risky, Molly said, and downright illegal in states that require you to receive consent before doing so.

But companies and HR professionals would be wise to remind themselves that, in this day and age, it can happen, she said. And if a camera or tape recorder would change the way you handle an interaction, it’s a good sign to reevaluate.

According to its company website, Cloudflare has dozens of job postings for open positions across the company, including sales roles.

In her LinkedIn post, Pietsch said that she’s not very concerned about any backlash over the video that might impede her chances of getting another job.

“Any company that wouldn’t want to hire me because I shared a video of how a company fired me or because I asked questions as to why I was being let go is not a company I would ever want to work for anyway,” she wrote.

[ad_2]

Source link

January 12, 2024
Hewlett Packard Enterprises to buy Juniper Networks in $14 billion deal

[ad_1]

In an effort to keep up in the accelerating AI arms race, cloud-services provider Hewlett Packard Enterprise Co. on Tuesday agreed to buy Juniper Networks, Inc. in a deal worth around $14 billion.

Under the terms of the deal, Hewlett Packard Enterprises
HPE,
-8.92%
will acquire Juniper
JNPR,
+21.81%
— which makes communications-networking products and also has an AI segment called Mist AI — for $40 a share. The companies expect the deal to close late this year or in early 2025.

“The acquisition is expected to double HPE’s networking business, creating a new networking leader with a comprehensive portfolio that presents customers and partners with a compelling new choice to drive business value,” the companies said in a release.

After the deal is completed, Juniper Chief Executive Rami Rahim will lead the combined HPE networking business, and report to HPE CEO Antonio Neri.

“This transaction will strengthen HPE’s position at the nexus of accelerating macro-AI trends, expand our total addressable market, and drive further innovation for customers as we help bridge the AI-native and cloud-native worlds, while also generating significant value for shareholders,” Neri said in a statement.

HPE said the addition of Juniper will boost margins and result in up to $450 million in annual cost savings within three years of the deal’s completion, as well as accelerate growth. HPE’s networking segment was the company’s top source of quarterly earnings before taxes, $401 million, on $1.4 billion in revenue.

HPE’s deeper plunge into networking closes a chapter of sorts. Then-Hewlett-Packard Co. acquired Aruba Networks for about $3 billion in March 2015, months before Silicon Valley’s original garage startup split in half, resulting in the formation of HPE, which sells servers and other equipment for data centers, and HP Inc.
HPQ,
-2.71%,
which makes PCs and printers.

The Wall Street Journal reported the possibility of a deal on Monday, sending shares of Juniper higher.

Shares of Juniper
JNPR,
+21.81%
rose 0.5% after hours, after jumping 21.8% during regular trading hours. Hewlett Packard
HPE,
-8.92%
shares were down 0.4% after hours, after falling 8.9% during the day.

As of Tuesday’s close, Juniper had a market cap of $9.64 billion, while HPE’s was $23.04 billion.

The companies hope the deal can provide a much-needed jolt after a series of lackluster quarterly earnings. Juniper shares have gained 15.7% over the past 12 months, while HPE shares are down 5.4% over that span. The S&P 500
SPX,
in comparison, is up about 21.4% over the past year.

For decades, Juniper has lagged rival Cisco Systems Inc.
CSCO,
-1.09%
in the networking-equipment market. In its most recent quarter, Juniper reported net income of $76 million on revenue of $1.4 billion, down 1% from the same quarter a year earlier.

[ad_2]

Source link

January 9, 2024
AMC extends losing streak to five days, hits another record low close

[ad_1]

AMC Entertainment Holdings Inc. extended its losing streak to five days Friday, with the stock ending the session down 2.5% to $5.15.

AMC
AMC,
-2.45%
shares are now on their longest losing streak since a seven-day slide that ended on Aug. 29, 2023. The movie-theater chain and onetime meme-stock darling ended Thursday’s session at a then-record-low close of $5.30. AMC was a top trending symbol on Stocktwits, a social platform for investors and traders, at Friday’s open.

The stock’s previous record closing low had been $6.07, which was set on Dec. 21, 2023, according to Dow Jones Market Data, citing available information dating back to Dec. 18, 2013.

Related: AMC hits another record-low close, extends losing streak to four days

The decline in AMC’s share price is a far cry from its meme-stock heyday, when it hit an all-time closing high of $339.05 on June 2, 2021.

In a regulatory filing Tuesday, AMC said that between Dec. 28 and Dec. 29, 2023, the company entered into a series of privately negotiated exchange agreements to issue nearly 3.26 million shares of Class A common stock in exchange for $22.5 million of its notes due in 2026. The common stock issued had an implied value of $6.94 per share, according to AMC. “The company may engage in similar transactions in the future but is under no obligation to do so,” AMC said in the filing.

The move is the latest in AMC’s attempts to tackle its debt burden, which reached more than $5 billion in 2022. That year, AMC launched its APE special dividend, and in 2023 it completed the conversion of the APEs into AMC common stock and a reverse 1-for-10 split of common stock.

Related: AMC CEO slams ‘prophets of doom,’ says company is ‘blazing new trails’ as it enters 2024

In December, AMC also completed its latest at-the-market equity offering, raising approximately $350 million. AMC CEO Adam Aron has repeatedly warned that the company faces liquidity challenges.

AMC shares are down 84.8% in the last 12 months, compared with S&P 500 index’s
SPX
gain of 20.6%.

[ad_2]

Source link

January 5, 2024
If Nvidia looked more like Salesforce, it might unlock billions more in cash

[ad_1]

Nvidia Corp. is raking in billions in cash, but one analyst thinks the chip maker could throw $100 billion more onto the pile if it started to look more like Salesforce Inc.

Nvidia
NVDA,
+2.29%
might unlock even more cash by developing businesses that expand recurring revenue, according to BofA Securities analyst Vivek Arya. The company has suffered some boom-and-bust cycles in recent years, and another bust could be smoothed by developing longer-term software contracts akin to those of Salesforce
CRM,
-0.05%.
, Workday Inc.
WDAY,
-0.48%
and ServiceNow Inc.
NOW,
+0.64%,
which generate recurring revenue from their customers.

Arya sees a pathway for Nvidia to rake in $100 billion in incremental free cash flow over the next two years if it can bulk up its own recurring-revenue options.

Read: Apple’s stock needs to get ‘unstuck’ — and its innovation rut may not be helping

“While NVDA has a solid lead in AI, hardware-oriented businesses are not valued as highly as visibility tends to be limited,” Arya wrote. Nvidia generates only about $1 billion, or 2%, of its sales from software and subscriptions. Arya doesn’t think the company can get much higher than $5 billion with its software and subscription offerings unless it turns to acquisitions.

Nvidia has shown some openness to deals that would beef up its intellectual property and software offerings, Arya notes, as it tried to buy British chip designer Arm Holdings
ARM,
-1.96%
before facing regulatory pushback.

“We envision [Nvidia] considering more enhanced partnerships/M&A of software companies that are helping traditional enterprise customers deploy, monitor and analyze [generative AI] apps,” he wrote. Nvidia “is already serving them via on-premise hardware and/or its DGX cloud service, but we believe greater direct recurring software/service channel could be more impactful.”

The addition of more recurring-revenue streams could help Nvidia’s “relatively depressed trading multiple,” in Arya’s view. Nvidia shares trade at a 20% to 30% discount to its “Magnificent Seven” peers on the basis of price to earnings as well as enterprise value to free cash flow, even though the company’s compound annual growth rate on the top line is three times what it is for those other tech giants.

The discount is “partly due to uncertainty in [calendar 2025] growth prospects, and partly due to a very hardware-dependent business unlike other large-cap software/internet peers that have recurring-revenue profiles,” he wrote.

Arya has a buy rating and $700 price objective on the stock.

See also: Amazon’s stock could be helped by this secret weapon in 2024, BofA says

[ad_2]

Source link

January 5, 2024
Medical Properties Trust Stock Is Crashing

[ad_1]

Shares of Medical Properties Trust plummeted after the real estate investment trust said it is ramping up efforts to recover uncollected rent and outstanding loans from its largest tenant.

Continue reading this article with a Barron’s subscription.
View Options

[ad_2]
Source link

January 5, 2024
Mark Zuckerberg sold $428 million of Meta stock in the last two months of 2023

[ad_1]

Mark Zuckerberg cashed in on his company’s 2023 stock rally in a big way — selling nearly $428 million worth of shares in Meta Platforms Inc. over the final two months of the year.

The Meta
META,
-0.53%
co-founder and chief executive offloaded just under 1.8 million shares over the course of every trading day between Nov. 1 and the end of last year, according to a regulatory filing with the U.S. Securities and Exchange Commission on Tuesday.

The sales were in accordance with a Rule 10b5-1 trading plan adopted by Zuckerberg in July and saw him capitalize on Meta’s rebounding stock price, which soared 194.1% in 2023 — and nearly threefold since it hit a seven-year low in November 2022. By comparison, the S&P 500
SPX
and the Nasdaq Composite
COMP
indexes gained 24.2% and 43.4%, respectively, in 2023.

The moves also broke a two-year hiatus, dating back to November 2021, during which Zuckerberg did not sell any of his stock in the Facebook parent company, according to Bloomberg, which first reported the news. Zuckerberg, who owns roughly 13% of Meta, is ranked the seventh-richest person in the world with a net worth of $125 billion, according to the Bloomberg Billionaires Index.

Nasdaq-listed Meta shares, which fell 0.5% on Wednesday to $344.47, are now roughly 11% off their all-time closing high of $382.18 from September 2021.

Representatives for Meta could not immediately be reached for comment.

[ad_2]

Source link

January 3, 2024
Apple's stock falls after 'sell' call from Barclays

[ad_1]

Shares of Apple Inc. are starting 2024 with a selloff, after Barclays analyst Tim Long said it was “time for a breather,” citing weak hardware sales as iPhone 15 demand disappoints.

“We are still picking up weakness on iPhone volumes and mix, as well as a lack of bounce-back in Macs, iPads and wearables,” Long wrote in a note to clients. “The biggest takeaway from the latest checks is incrementally worse [iPhone] 15 data points out of China, together with developed markets remaining soft.”

He cut his rating on the stock
AAPL,
-0.54%
to underweight from neutral, and trimmed his price target to $160 from $161. The new target implies about 17% downside from Friday’s closing price of $192.53.

The stock slumped 1.8% in premarket trading Tuesday, putting it on track to open at a seven-week low.

Long said iPhone 15 sales have been “lackluster” and believes Phone 16 sales will be the same, as he expects other hardware categories to remain weak. He said it’s time for investors to take a “breather” on the stock, as he doesn’t think it can keep rallying in the face of downbeat demand data, like it did in 2023.

“We expect reversion after a year when most quarters were missed and the stock outperformed,” Long wrote.

He expects Apple to report “in-line” fiscal first-quarter results, which runs through December, but he trimmed his second-quarter to further below consensus expectations.

He now expects earnings per share and revenue for the quarter through March to be down in the low-single-digit percentage range, while the FactSet consensus calls for EPS to be up 2.6% at $1.57 and revenue to rise 1.1% to $95.8 billion.

Apple’s stock surged 48.2% in 2023, or almost double the S&P 500 index’s
SPX
gain of 24.2%, even as revenue for each quarter of fiscal 2023 through September was below that of a year ago.

Long is now one of just four of the 44 analysts surveyed by FactSet who are bearish on Apple’s stock, while 27 (61%) are bullish and 13 are neutral. His $160 price target is 19.2% below the average target of $197.92.

[ad_2]

Source link

January 2, 2024

These 20 stocks soared the most in 2023

[ad_1]

(Updated with Friday’s closing prices.)

The 2023 rally for stocks in the U.S. accelerated as more investors bought the idea that the Federal Reserve succeeded in its effort to bring inflation to heel.

The S&P 500
SPX
ended Friday with a 24.2% gain for 2023, following a 19.4% decline in 2022. (All price changes in this article exclude dividends). Among the 500 stocks, 65% were up for 2023. Below is a list of the year’s 20 best performers in the benchmark index.

This article focuses on large-cap stocks. MarketWatch Editor in Chief Mark DeCambre took a broader look at all U.S. stocks of companies with market capitalizations of at least $1 billion, to list 10 with gains ranging from 412% to 1,924%.

The Fed began raising short-term interest rates and pushing long-term rates higher in March 2022 by allowing its bond portfolio to run off. That explains the poor performance for stocks in 2022, as bonds and even bank accounts because more attractive to investors.

The central bank hasn’t raised the federal-funds rate since moving it to the current target range of 5.25% to 5.50% in July, and its economic projections point to three rate cuts in 2024.

Investors are anticipating the return to a low-rate environment by scooping up 10-year U.S. Treasury notes
BX:TMUBMUSD10Y,
whose yield ended the year at 3.88%, down from 4.84% on Oct. 27 — the day of the S&P 500’s low for the second half of 2023.

Read: Treasury yields end mostly higher but little changed on year after wild 2023

Before looking at the list of best-performing stocks of 2023, here’s a summary of how the 11 sectors of the S&P 500 performed, with the full index and three more broad indexes at the bottom:

Sector or index	2023 price change	2022 price change	Price change since end of 2021	Forward P/E	Forward P/E at end of 2022	Forward P/E at end of 2023
Information Technology	56.4%	-28.9%	11.5%	26.7	20.0	28.2
Communication Services	54.4%	-40.4%	-7.6%	17.4	14.3	21.0
Consumer Discretionary	41.0%	-37.6%	-11.4%	26.2	21.7	34.7
Industrials	16.0%	-7.1%	8.0%	20.0	18.7	22.0
Materials	10.2%	-14.1%	-4.9%	19.5	15.8	16.6
Financials	9.9%	-12.4%	-3.4%	14.6	13.0	16.3
Real Estate	8.3%	-28.4%	-21.6%	18.3	16.9	24.7
Healthcare	0.3%	-3.6%	-3.3%	18.2	17.7	17.3
Consumer Staples	-2.2%	-3.2%	-5.4%	19.3	20.6	21.4
Energy	-4.8%	59.0%	51.8%	10.9	9.8	11.1
Utilities	-10.2%	-1.4%	-11.4%	15.9	18.7	20.4

S&P 500 SPX	24.2%	-19.4%	0.4%	19.7	16.8	21.6
Dow Jones Industrial Average DJIA	13.7%	-8.8%	3.8%	17.6	16.6	18.9
Nasdaq Composite COMP	43.4%	-33.1%	-3.5%	26.9	22.6	32.0
Nasdaq-100 NDX	53.8%	-33.0%	3.5%	26.3	20.9	30.3
Source: FactSet

A look at 2023 price action really needs to encompass what took place in 2022 for context. The broad indexes haven’t moved much from their levels at the end of 2022 (again, excluding dividends). We have included current forward price-to-earnings ratios along with those at the end of 2021 and 2022. These valuations have declined a bit, which may provide some comfort for investors wondering how likely it is for stocks to continue to rally in 2024.

Biggest price increases among the S&P 500

Here are the 20 stocks in the S&P 500 whose prices rose the most in 2023:

Company	Ticker	2023 price change	2022 price change	Price change since end of 2021	Forward P/E	Forward P/E at end of 2022	Forward P/E at end of 2021
Nvidia Corp.	NVDA,	239%	-50%	68%	24.9	34.4	58.0
Meta Platforms Inc. Class A	META, -1.22%	194%	-64%	5%	20.2	14.7	23.5
Royal Caribbean Group	RCL, -0.37%	162%	-36%	68%	14.3	14.9	232.4
Builders FirstSource Inc.	BLDR, -1.02%	157%	-24%	95%	14.2	10.7	13.3
Uber Technologies Inc.	UBER, -2.49%	149%	-41%	47%	56.9	N/A	N/A
Carnival Corp.	CCL, -0.70%	130%	-60%	-8%	18.7	41.3	N/A
Advanced Micro Devices Inc.	AMD, -0.91%	128%	-55%	2%	39.7	17.7	43.1
PulteGroup Inc.	PHM, -0.26%	127%	-20%	81%	9.1	6.3	6.2
Palo Alto Networks Inc.	PANW, -0.24%	111%	-25%	59%	50.2	38.0	70.1
Tesla Inc.	TSLA, -1.86%	102%	-65%	-29%	66.2	22.3	120.3
Broadcom Inc.	AVGO, -0.55%	100%	-16%	68%	23.2	13.6	19.8
Salesforce Inc.	CRM, -0.92%	98%	-48%	4%	28.0	23.8	53.5
Fair Isaac Corp.	FICO, -0.46%	94%	38%	168%	47.1	29.3	28.7
Arista Networks Inc.	ANET, -0.62%	94%	-16%	64%	32.7	22.3	41.4
Intel Corp.	INTC, -0.28%	90%	-49%	-2%	26.6	14.6	13.9
Jabil Inc.	JBL, -0.45%	87%	-3%	81%	13.5	7.9	10.3
Lam Research Corp.	LRCX, -0.81%	86%	-42%	9%	25.2	13.5	20.2
ServiceNow Inc.	NOW, +0.57%	82%	-40%	9%	56.0	42.6	90.1
Amazon.com Inc.	AMZN, -0.94%	81%	-50%	-9%	42.0	46.7	64.9
Monolithic Power Systems Inc.	MPWR, -0.23%	78%	-28%	28%	49.1	27.3	57.9
Source: FactSet

Click on the tickers for more about each company.

Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.

Don’t miss: Nvidia tops list of Wall Street’s 20 favorite stocks for 2024

[ad_2]

Source link

December 30, 2023

Uber and Lyft shares rallied in 2023 but may not go much higher, analysts say

[ad_1]

Shares of Uber Technologies Inc. and the ride-hailing giant’s smaller rival, Lyft Inc., have sprinted higher this year. But analysts on Friday suggested there might not be much left in the tank for either stock heading into 2024.

Nomura analysts Anindya Das and Masataka Kunugimoto on Friday downgraded Uber
UBER,
-2.49%
to a neutral rating from buy, arguing that most of the things that could drive the stock higher are already baked into the price. They also downgraded Lyft
LYFT,
-3.54%
to their equivalent of a sell rating from buy, saying the company failed to fully capitalize on the travel industry’s post-pandemic recovery.

Shares of Uber, which closed out the year up 142%, were down 2.5% on Friday. Lyft’s stock gave up 3.4% and finished 2023 up 34.8%.

Uber, the analysts said, had managed to grow this year while occasionally turning a profit, and consolidated its grip on the ride-sharing markets in the U.S. and Canada. Meanwhile, Lyft, they said, had stumbled in its efforts to take advantage of the travel rebound after pandemic restrictions eased, cutting more staff this year after doing the same in 2022.

After years of losing money, they said Uber’s stronger financials this year allowed it to refinance its debt at a lower interest rate and extend the terms of that debt. They noted the company recently joined the S&P 500 Index
SPX
and that the market is expecting more stock buybacks from the company, as well as interest-rate cuts by the Federal Reserve next year.

“Thus, most of the milestones and catalysts that we were anticipating to boost Uber’s stock value have been largely met,” they said.

They added: “At this time, we think most of the catalysts for the stock are already priced in, and Uber is fairly valued at the current price. We therefore downgrade it to Neutral from Buy.”

Lyft has tried to cut its prices to compete with Uber, and has held off on expanding into areas like food delivery. But as travel demand settles, the analysts suggested, the advantages would still flow to its archrival.

“We expect 2024 to be more of a ‘normal’ year, in terms of people’s propensity to travel,” the analysts said. “Once the current rebound in travel subsides, we think Lyft’s subscale market positioning, and lack of cross-selling opportunities (unlike Uber), could constrain topline growth for the company.”

“Offsetting a more moderate pace of ridership growth by raising prices would be challenging for Lyft,” they said, “as we think it would be bound by the actions of its larger and more profitable peer, Uber.”

[ad_2]

Source link

December 29, 2023

Tag: Financial Performance

‘Zuck is getting a major break’

BLACKROCK INVESTMENT INSTITUTE NOTE DATED JAN. 16, 2024

Potential catalysts

What’s the right way to fire an employee?

Biggest price increases among the S&P 500