The three major U.S. equity indexes closed lower Tuesday. The Dow Jones industrials dropped 1.23%, the S&P 500 slipped by 0.67%, and the Nasdaq dipped by 0.16%. All 11 sectors ended the day lower, led down the slope by real estate (1.3%), financials and industrials (both down 1.1%).

An unknown attacker on Tuesday drained more than 8,000 Solana wallets of at least $5 million in a variety of cryptocoins. According to a report at CoinDesk, the attacker obtained the ability to sign transactions on behalf of users, “suggesting a trusted third-party service may have been compromised in a so-called supply chain attack.” In the first hour of Wednesday’s regular session, all three equity indexes traded higher.
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After markets closed on Tuesday, Airbnb beat analysts’ consensus estimate for earnings per share (EPS) but missed the revenue estimate slightly. Shares traded down by about 4.9% Wednesday morning.

AMD beat estimates on both the top and bottom lines, but a warning on a declining PC market has given investors the jitters. Shares traded down about 1.6% in the morning.

Occidental Petroleum also beat top- and bottom-line estimates. The company also paid down $5 billion in debt, has repurchased $1.1 billion in stock so far this year, and the company has said it will focus on returning capital to shareholders. Investors did not seem too impressed. Shares traded down by about 1.9% Wednesday morning.

Livent also topped estimates, but shares were down 6.4% in morning trading.

PayPal beat both estimates and issued inline EPS guidance for the current quarter and raised full-year guidance. The $2 billion investment from Elliott Management has resulted in an information sharing agreement with the private equity giant, and investors have rewarded the stock by pushing it up 10.6% Wednesday morning.

Starbucks beat estimates on both the top and bottom lines. The stock traded up about 1.7%.

Before markets opened on Wednesday, Under Armour met the EPS estimate and beat on revenues, and it lowered EPS guidance for the fiscal year while guiding revenue up by 5% to 7% year over year. Shares traded up by more than 4%.

After markets close Wednesday afternoon, APA, Energy Transfer, Lucid and Robinhood are on deck to report quarterly results. Thursday morning brings reports from Alibaba, ConocoPhillips, Nikola and Paramount Global. And we also previewed four companies set to report earnings later on Thursday: AES, AMC, Block, Virgin Galactic and Warner Bros. Discovery.

Here are previews of three earnings reports due out first thing Friday morning.

Marijuana grower and cannabis products maker Canopy Growth Corp. (NASDAQ: CGC) has seen its share price drop by nearly 85% over the past 11 months and three weeks. In June, the stock dumped 39.5% of its share price. Cannabis stocks have had a rough year, and Canopy’s was tougher than most. In late June, the company announced a $198 million convertible note exchange that boosted its cash position but diluted current shareholders’ holdings. Investors really dislike that sort of thing. The convertible debt swap also led Fitch Ratings to downgrade Canopy’s issuer default rating.
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Analysts continue to take a moderately negative view on the stock. Of 21 brokerages covering the shares, eight have a Hold rating and 11 have Sell or Strong Sell ratings. Only two rate the shares at Buy. At the recent price of around $2.90 a share and a median price target of $3.00, the stock has little potential upside. At the high price target of $15.70, the upside potential is more than 400%.

Analysts estimate that Canopy Growth’s first-quarter revenue for fiscal 2023 will come in at $88.21 million, down 12.6% sequentially and by 19.7% year over year. The consensus estimate calls for an adjusted loss per share of $0.22, better than an adjusted loss of $0.42 in the prior quarter and worse than the year-ago loss of $0.01 per share. For the full 2023 fiscal year ending in March, analysts expect a loss of $0.74 per share, far worse than last year’s EPS of $0.42. Full-year revenue is forecast at $397.88 million, down about 14.6%.

Canopy Growth is not expected to post a profit in 2023, 2024 or 2025. The company’s enterprise value to sales multiple for 2023 is 4.0, and it is 3.1 for 2024 and 1.8 for 2025. The stock’s 52-week trading range is $2.13 to $19.85. Canopy Growth does not pay a dividend, and the total shareholder return for the past year is negative 84%.

DraftKings

Online sports betting and gambling company DraftKings Inc. (NASDAQ: DKNG) has seen its share price decline by 67.7% over the past 12 months. Since its peak in early September, the stock is down 75%. The stock got a nice lift last month when Snap reported that DraftKings ran a promotion on Snapchat that boosted the app’s number of new installations by more than 10% and a nearly 200% increase in new deposits. DraftKings’ customer acquisition costs represent approximately 75% of their spending. Investors will be waiting to hear more good news about growth.

Analysts remain somewhat bullish on the stock, with 17 of 30 having a Buy or Strong Buy rating. The rest rate the shares at Hold. At a share price of around $15.80, the upside potential based on a median price target of $25.00 is 58.2%. At the high target of $60.00, the upside potential is about 280%.
Second-quarter revenue is forecast at $437.69 million, up 5% sequentially and about 47% higher year over year. Analysts are forecasting a loss per share of $0.68 in the quarter, compared to a prior quarter loss of $1.24 and a year-ago loss of 0.76 per share. For the full 2022 fiscal year, DraftKings is expected to post a per-share loss of $2.98, better than the $3.69 loss per share in 2021. Sales are forecast to rise 61.5% year over year to $2.09 billion.
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The company’s stock trades at 5.9 times expected 2022 EPS, 5.7 times estimated 2023 earnings of $8.51 and 7.0 times estimated 2024 earnings of $6.90 per share. The stock’s 52-week range is $18.62 to $26.52. It pays an annual dividend of $0.93. The total shareholder return for the past year was negative 3%.

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Western Digital

The stock price of storage device and solutions provider Western Digital Corp. (NASDAQ: WDC) has declined by nearly 25% over the past 12 months. Rival Seagate reported weak earnings last month and offered up a weak outlook that included a cut in production. Seagate blamed COVID-19 lockdowns in Asia and the weakening global economy.

Western Digital is unlikely to be able to dodge similar headwinds. Late last month, the company and its memory chip maker, Japan’s Kioxia, announced a $690 million subsidy for the two companies’ new fab in Japan. Production of 3D flash memory chips at the new facility is expected to begin this fall.

Analysts are mostly bullish on the stock, with 18 of 28 brokerages having a Buy or Strong Buy rating. The rest have Hold ratings. At a share price of around $48.40, the upside potential based on a median price target of $65.00 is 31.3%. At the high target of $90.00, the upside potential is about 86.0%.

Fourth-quarter 2022 revenue is forecast at $4.58 billion, up 4.5% sequentially but down 6.9% year over year. Analysts are forecasting EPS of $1.74 in the quarter, up 5.3% sequentially and down 19.4% year over year. For full fiscal 2022, Western Digital is expected to post EPS of $8.18, up 79.7%. Sales are forecast to rise 11.5% year over year to $18.86 billion.

Western Digital is not expected to post a profit in either 2022, 2023 or 2024. Shares trade at an enterprise value to sales multiple of 3.0 based on the consensus estimate, a multiple of 2.2 times estimated 2023 sales and 1.7 times estimated 2024 sales. The stock’s 52-week range is $41.63 to $669.99. The company does not pay a dividend, and the total shareholder return for the past year was negative 26.8%.

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