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Tag: operating income

  • 2 Artificial Intelligence (AI) Companies That Could Follow Nvidia’s Lead and Split Their Stock

    2 Artificial Intelligence (AI) Companies That Could Follow Nvidia’s Lead and Split Their Stock

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    Stock splits generate a lot of buzz in the investing world, especially among the amateur crowd. You probably already know that a split doesn’t affect the company’s underlying value — if you have one share worth $100 and the company executes a 10-for-1 split, you would have 10 shares worth $10 each for the same $100 value.

    However, there are some advantages to shrinking per-share prices. For example, it’s easier for smaller investors to accumulate a position. Let’s say you put $300 into an account monthly; it’s easier to accumulate a position in a stock selling for $100 than $2,000. The announcements also draw attention to the company, which is potentially of help.

    Nvidia is the latest big tech company to announce a split (its second in the past three years). The stock split 10-for-1 last week after an incredible run over the previous few years, as shown below. But Nvidia isn’t the only company with a swelling stock price. The artificial intelligence (AI) boom sent several other stocks to all-time highs.

    Could one of these below be next to split their stock?

    Super Micro Computer

    Let’s look first at Super Micro Computer (NASDAQ: SMCI), which trades above $750 per share. This is well below its 52-week high of $1,229 but well above the 52-week low price of $213. Supermicro (as its known) is a nuts-and-bolts play in the AI sector, as its server, storage, and networking hardware are critical to data centers, edge computing, and more.

    The intense customer demand, primarily driven by AI, caused revenue and operating income to skyrocket recently, as shown below.

    SMCI Revenue (TTM) Chart

    SMCI Revenue (TTM) Chart

    The company’s latest quarter saw 200% year-over-year sales growth to $3.9 billion, and Supermicro expects intense growth to continue next quarter with a forecast of $5.1 billion to $5.5 billion. The great thing about this sales growth is that Supermicro is doing it profitably, as you can see by the rising operating income in the chart above. Data center growth is a tailwind that should last for years (check out this article for details).

    If the stock price stays high, the company could move to split the stock — potentially soon.

    ServiceNow

    Companies are turning to automation like never before. Automating tasks is critical to efficiency, which is paramount in the hyper-competitive business world. With the Now Platform provided by ServiceNow (NYSE: NOW), customers get virtual customer service agents, process automation, and AI-based issue detection, routing, and problem-solving solutions.

    ServiceNow has an expanding customer base of over 8,100, including 85% of the Fortune 500. This includes nearly 2,000 large customers that spend an average of $4.6 million each with ServiceNow annually. The company also boasts a 98% renewal rate. Like Supermicro, ServiceNow’s sales and operating profits are soaring, as shown below.

    NOW Revenue (TTM) ChartNOW Revenue (TTM) Chart

    NOW Revenue (TTM) Chart

    The $9.5 billion in trailing-12-month sales above include $2.6 billion in the first quarter, a 24% increase over the prior year. ServiceNow’s stock price has followed suit and trades near $700 per share. If the stock remains elevated, ServiceNow could follow other tech companies and consider a split.

    In the grand scheme of the stock market, stock splits aren’t very consequential. They best serve investors by keeping most stocks trading within the same relative range. It would complicate things if all companies did what Berkshire Hathaway did; its stock trades for over $600,000 per share after decades of growth without splitting (although investors can still buy the Class B shares much more cheaply).

    Still, stock splits garner attention, open the market up to smaller investors, and create fun topics of conversation. Nvidia is the latest titan to split; more could soon follow.

    Should you invest $1,000 in Super Micro Computer right now?

    Before you buy stock in Super Micro Computer, consider this:

    The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Super Micro Computer wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

    Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $740,886!*

    Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

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    *Stock Advisor returns as of June 10, 2024

    Bradley Guichard has positions in Nvidia. The Motley Fool has positions in and recommends Berkshire Hathaway, Nvidia, and ServiceNow. The Motley Fool has a disclosure policy.

    2 Artificial Intelligence (AI) Companies That Could Follow Nvidia’s Lead and Split Their Stock was originally published by The Motley Fool

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  • PepsiCo Is Known for Sodas Such as Pepsi and Mountain Dew. But Almost 50% of Its Profits Comes From Something Else Entirely.

    PepsiCo Is Known for Sodas Such as Pepsi and Mountain Dew. But Almost 50% of Its Profits Comes From Something Else Entirely.

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    The granddaddy of the colas is The Coca-Cola Company, with the Coca-Cola brand launching in 1886. The Pepsi-Cola Company, now PepsiCo (NASDAQ: PEP), wasn’t far behind with its own Pepsi-Cola drink in 1898. And the two have locked horns for cola supremacy ever since.

    Neither Coke nor Pepsi was able to take down its cola competitor. So it wasn’t long before these two companies upped the ante by developing comprehensive soda-brand portfolios. Nowadays, PepsiCo sells well-known sodas such as Mountain Dew, Pepsi Wild Cherry, Mug Root Beer, Crush, and Starry in addition to its eponymous Pepsi.

    PepsiCo built its portfolio by making several key acquisitions. Its 1964 acquisition of Mountain Dew was especially crucial to its present-day success. In the U.S. carbonated soft-drink market, Mountain Dew had 6.6% market share in 2022, according to Statista. I’d say that buyout worked out quite well.

    Pepsi’s Mountain Dew acquisition was huge. But a merger the following year was even more significant for the company and its shareholders.

    It has nothing to do with carbonated soft drinks. But almost half of Pepsi’s profits today are derived from a source that would have shocked the beverage company’s founders.

    When a beverage company dreamed bigger

    In 1965, Pepsi-Cola merged with Frito-Lay — a snack company with a portfolio that today includes Lay’s, Fritos, Doritos, Cheetos, Funyuns, Spitz, Cracker Jack, and more. This was a strong departure for a business formerly focused entirely on carbonated soft drinks. But it was a good move.

    Through the first three quarters of 2023, PepsiCo’s Frito-Lay North America business segment has generated revenue of $17.4 billion. That’s nearly as big as its Beverages North America segment’s revenue of $19.7 billion.

    In North America, Pepsi’s snack revenue nearly matches the revenue from beverages. But these snack foods actually have better profit margins. Frito-Lay’s operating income of $4.9 billion is better than operating income of just $2.2 billion for beverages.

    Not only is Frito-Lay’s operating income higher than beverages, it’s also accounted for 48% of PepsiCo’s total operating income year to date. In short, if Pepsi hadn’t pivoted to snacks nearly 60 years ago, it would be half the company that it is today.

    Why it matters for investors

    There are so many potential takeaways with an observation like this for PepsiCo. For starters, as one of the largest beverage companies in the world both then and now, Pepsi’s growth would have been more limited if it had stayed completely within its core competency. Expanding outside of it into an adjacent market with robust cross-promotion opportunities made a lot of sense.

    It’s similar to what Hershey is doing now, extending beyond candy and into snack items such as pretzels and popcorn.

    More broadly, companies that can expand beyond core competencies often make good investments; this trait is known as optionality. Many companies attempt to branch out and few do it well. But PepsiCo is one of the grand success stories.

    PepsiCo’s blend of beverage revenue and snack sales has an additional benefit for shareholders: It’s a potentially more reliable business because it has greater diversity.

    All other things being equal, I would choose PepsiCo stock over a pure-play beverage company because of this stabilizing quality. If headwinds blow in the carbonated soft-drink industry for whatever reason, PepsiCo has another part of the business that can help carry it through the challenges.

    That’s particularly good news for dividend investors. PepsiCo has raised its dividend for 51 consecutive years, making it a Dividend King. Many investors choose to invest in these companies for their predictable dividend payments. Having a diverse business makes it more likely that PepsiCo won’t get knocked off the list by a sudden shock to its business.

    And it’s all possible because the management team for The Pepsi-Cola Company — a beverage business — had the foresight to branch into an entirely different arena when it merged with snacking company Frito-Lay.

    Should you invest $1,000 in PepsiCo right now?

    Before you buy stock in PepsiCo, consider this:

    The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and PepsiCo wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

    Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.

    See the 10 stocks

     

    *Stock Advisor returns as of December 18, 2023

     

    Jon Quast has no position in any of the stocks mentioned. The Motley Fool recommends Hershey and recommends the following options: long January 2024 $47.50 calls on Coca-Cola. The Motley Fool has a disclosure policy.

    PepsiCo Is Known for Sodas Such as Pepsi and Mountain Dew. But Almost 50% of Its Profits Comes From Something Else Entirely. was originally published by The Motley Fool

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  • ESAF Small Finance Bank’s net profit up by 143%  

    ESAF Small Finance Bank’s net profit up by 143%  

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    ESAF Small Finance Bank has reported a net profit of ₹140.12 crore in the second quarter of the financial year 2023-24, registering a y-o-y growth of 143.35 per cent.

    The net operating profit for the quarter is ₹289.65 crore, an increase of 37.39 per cent over the revenue recorded in the corresponding period of the previous year.

    Total business reached ₹34,906 crore registering a growth of 32.81 per cent, while total deposits increased from ₹13,520 crore to ₹17,416 crore, up by 28.82 per cent. The Advances Under Management (AUM) grew by 37.03 per cent to reach ₹17,490 crore from ₹12,764 crore. The gross NPA stood at 2.64 per cent and net NPA at 1.19 per cent during the second quarter. Capital Adequacy Ratio (CRAR) stood at 20.57 per cent.

    As of September 30, the bank’s distribution network was at 700 branches and 579 ATMs across 236 districts in 21 states and 2 Union Territories. In addition, the bank has 25 business correspondents and 855 customer service centres.

    Commenting on the quarterly performance, K. Paul Thomas, MD & CEO, ESAF Small Finance Bank said, “Our steadfast focus on rural and semi-urban locations along with the sustainable model we pursue has played a pivotal role in driving this success. In line with our strategic vision, our wholehearted dedication to expanding our presence in these underserved areas, contributing not only to our bottom line but also to the economic development of these communities.”

    He also emphasised on the sustainable approach that ensured growth, not only beneficial for the company but also created a positive impact on the lives of individuals. “Investment in digital technologies continues to be our priority, and we are confident that our strategic initiatives will further propel us towards even greater heights in the future,” he added.

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