Weekly Preview: Earnings to Watch This Week (AMD, LYFT, MRNA, NIO)
An important week in the first-quarter earnings season just concluded, where tech giants such as Amazon (AMZN), Apple (AAPL), Meta (FB), Google parent Alphabet (GOOG , GOOGL) and Microsoft (MSFT), among others, reported their results which either confirmed what the market assumed about the state of their businesses or dispelled concerns that they can maintain their level of dominance. In all, it was a mixed bag.
In the case of Alphabet, its Q1 revenue fell short of Street expectations which sent the stock tumbling towards 52-week lows. Amazon also fell 14% following its results after the company said cash flow fell 41% from a year ago to $39.3 billion. The stock had been trading at almost 40 times cash flow from operations, which became glaringly expensive following the results. Conversely, there’s Microsoft and Meta, which impressed the market with better-than expected numbers.
Meta, which was believed to be suffering as a results of TikTok, demonstrated that it can still grow its users among its family of apps. It also decided it will trim operating expenses which analysts applauded. In the case of Microsoft, the company forecasted double-digit revenue growth for its next fiscal year. For some investors, this scenario between good and bad created some buying opportunities, particularly in Amazon. For others, the outlook remains too muddied to buy any dip during this selloff.
While it’s still early, and there are still more than half of the earnings season still remain, the outlook companies have provided so far suggests rising inflation and rising interest rates is manageable. But Friday’s stock performance did not reflect that optimism. The Dow Jones Industrial Average was punished again Friday, falling 939.18 points, or 2.77%, to end the session at 32,977.21. There was no place to hide. All of the Dow components were in red.
The S&P 500 lost 155.57 points, or 3.63%, finishing at 4,131.93, while the tech-heavy Nasdaq Composite dropped 536.89 points, or 4.17%, to close at 12,334.64. The Nasdaq was pressured by the aforementioned 14% decline in Amazon, which led all of the FAANGs lower. Will the mixed to weak growth trend continue throughout the entire Q1 earnings season? That remains to be seen. As noted, inflation and rising interest rates will continue to drive headlines.
Friday’s selloff in stocks also suggests investors remain uncertain about the direction of the economy and the near-term and long-term impact of monetary policy decisions. In the meantime, will the “wait-and-see” approach continue to work or will dip-buyers finally enter the fray? I suspect that this question will be answered by the end of this earnings season.
Here are the earnings I’ll be watching this week:
Advanced Micro Devices (AMD) - Reports after the close, Tuesday, May 3
Wall Street expects AMD to earn 91 cents per share on revenue of $5.52 billion. This compares to the year-ago quarter when earning were 52 cents per share on $3.44 billion in revenue.
What to watch: Despite consistent headwinds with chip supply chain challenges, AMD continues to deliver strong operating results, suggesting that issues related to rivals such as Intel (INTC) are their own to deal with. Nevertheless, Intel’s disappointing Q1 results last week dragged down the entire sector, taking AMD with it. A weak forecast in the PC market by Intel is believed to be pressure point for chip stocks. However, for AMD, the company posted almost 50% revenue growth in Q4, while EPS surged by 77%. Unlike its chief rival, AMD demonstrated strong operating leverage given that it is able to grow profits at a faster rate than its revenue. What’s more, while its rivals struggled with a tight chip supply market, AMD used that dynamic to grow its margins. Notably, that strong revenue total did not include the impact of the Xilinx acquisition that AMD closed in February 2022. As such, having surpassed both revenue and profit estimates in twelve straight quarters, AMD stock which is down 37% year to date and 26% in six moths, deserves more respect than it’s currently getting. Assuming the company’s growth metrics remains intact in Q1, this would present a great buying opportunity for AMD stock.
Lyft (LYFT) - Reports after the close, Tuesday, May 3
Wall Street expects Lyft to lose 7 cents per share on revenue of $846 million. This compares to the year-ago quarter when it reported a loss of 35 cents per share on revenue of $608.96 million.
What to watch: There are still tons of catalysts to propel Lyft higher and sustain growth over the long term. Aside from healthy growth in GDP, there is a noticeable shift in discretionary consumer spending that is going away from goods towards areas such as travel, dining and entertainment. Rising inflation is one reason for this. While it’s a headwind for consumers, it stands to benefit Lyft, along with the rebound in corporate travel. Yet shares of the ride-sharing pioneer have discounted these potential signals. The stock down 21% year-to-date and 47% over the last 12 months. To be sure, the company didn’t excite investors when it issued Q1 guidance in its last earnings report which forecasted revenue to decrease by 12% to 18% sequentially, while its adjusted Q1 profit to be in the $5-15 million range. For some context, that would be a significant decline from $75 million in Q4. Investors will keep a watchful eye on these metrics on Tuesday. For the stock to rebound, Lyft not only must deliver a top- and bottom-line beat, it also needs upside guidance that lays out a path towards stronger profitability.
Moderna (MRNA) - Reports before the open, Wednesday, May 4
Wall Street expects Moderna to earn $5.21 per share on revenue of $4.62 billion. This compares to the year-ago quarter when earnings were $2.84 per share on $1.94 billion in revenue.
What to watch: Can Moderna still a provide healthy returns? Given that Covid-19 numbers have been dropping globally, the assumption is that Moderna will struggle to grow revenue. The company, however, believes that Covid-19 is moving towards an endemic phase that will still require the use of Spikevax, among other vaccines. Moderna projects roughly $22 billion in Spikevax sales this year, along with strong commitments for 2023. What’s more, the company’s product pipeline, which uses its messenger RNA (mRNA) technology, has several candidates that can come to market to sustain long-term growth. Candidates include drug development for influenza and HIV vaccine. All told, under the mRNA technology, Moderna has more than three dozen programs in the pipeline that are being advanced for clinical development. So, while the stock price has been under heavy selling pressure, down 60% in six months and 44% year to date, Moderna’s business fundamentals are still intact. Nonetheless, investors are anxious to hear what the company has to say on Wednesday about its growth expectations for both the near term and long term.
Nio Limited (NIO) - Reports after the close, Friday, May 6
Wall Street expects Nio to report a per-share loss of 13 cents on revenue of $1.49 billion. This compares to the year-ago quarter when it reported a per-share loss of 49 cents on revenue of $1.23 billion.
What to watch: Shares of Chinese electric vehicle maker Nio have been in reverse over the past year, losing some 60% of its value. With the stock now down 46% year to date, including 20% decline over the past thirty days, investors want to know if now’s the right time to take a position? Covid-related supply chain issues have pressured the entire industry. But the issue is not impacting every EV stocks the same. In the case of NIO, it is one of only a handful of electric vehicle makers that has positive free cash flow. What’s more, not only is NIO delivering vehicles to customers each year, the company’s deliveries are growing. Estimates suggests that electric vehicle sales are projected to grow at a compound annual rate of 24.5% through 2028. These trends are poised to benefit NIO. But with the stock down significantly from its 52-week high, the company on Friday can make a strong case for its value by delivering a top- and bottom line beat, along with strong delivery guidance for the next quarter and full year.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.