The three major U.S. equity indexes closed lower again Tuesday. The Dow Jones industrials ended the day down by 1.03%, the S&P 500 closed 1.44% lower and the Nasdaq pulled back 2.00%. Ten of 11 sectors closed lower, with energy (−2.65%) and communications services (−2.57%) falling the most. Utilities (0.66%) posted Tuesday’s only gain.
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The U.S. Energy Information Administration (EIA) reported Wednesday morning that petroleum inventories fell by 5.19 million barrels last week on top of a 12.58 million barrel decline in the prior week. Domestic production rose to 12.2 million barrels per day, up 7.7% in one year. On Friday, the Bureau of Labor Statistics will issue its report on the producer price index (PPI) for November. Economists expect the index to rise by 0.2%, as it did in October. Core PPI is expected to rise by 0.2% compared to no month-over-month increase in October.
The three major indexes traded mixed after the first hour of Wednesday’s regular session.
After U.S. markets closed Tuesday, MongoDB reported adjusted earnings per share (EPS) of $0.23, while the consensus estimate had called for a loss per share of $0.17. Revenue beat the estimate by about 9.5%, and the company issued upside guidance for its fourth quarter. The stock traded up more than 17% Wednesday morning.
Toll Brothers also beat estimates on the top and bottom lines and issued guidance for the first quarter and all of fiscal 2023. For the year, the homebuilder expects sales of 8,000 to 9,000 units, with a gross margin of 27% and an average delivered price of $965,000 to $985,000 per unit. Shares traded up 5.6%.
SentinelOne reported better-than-expected revenue and a smaller-than-expected loss per share. Shares traded down about 1% Wednesday morning.
Stitch Fix missed consensus estimates for both EPS and revenue. Active client totals also fell. The company also issued downside revenue guidance for the current (second) quarter but raised its outlook for adjusted EBITDA. The stock traded up 3.8%.
Before markets opened Wednesday, Academy Sports beat the consensus EPS estimate but missed on revenue. The retailer issued mixed guidance for fiscal 2023, raising its EPS outlook above consensus but lowering the top end of revenue guidance below the consensus forecast. Shares traded up nearly 13.8% Wednesday.
Campbell Soup beat estimates on both the top and bottom lines. The venerable food producer also raised full-year EPS and revenue guidance beyond consensus estimates. Shares traded up 4.8%.
Ciena, Express and GameStop are set to report quarterly results late Wednesday or early Thursday. Look for Chewy, Costco, Li Auto and Lululemon to post quarterly results later on Thursday or Friday morning.
Here is a preview of three more companies expected to report quarterly results after U.S. markets close on Thursday.
Broadcom
Over the past 12 months, shares of Broadcom Inc. (NASDAQ: AVGO) have declined by nearly 11%. That is actually the third-best performance among the semiconductor stocks we track and considerably less than the losses of 50% or more at AMD, Marvell and Nvidia.
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The big news from Broadcom is its pending $61 billion acquisition of VMware. U.K. regulators accepted comments on the merger until Tuesday and are likely to decide soon whether to launch a full-on investigation of the deal. EU regulators have agreed to decide later this month whether an investigation is called for. The U.S. Federal Trade Commission is reviewing the deal and has twice asked Broadcom for additional details.
Analysts remain strongly bullish on the stock, with 22 of 26 having Buy or Strong Buy ratings. The other four rate the shares at Hold. At a recent price of around $525.80 a share, the potential upside based on a median price target of $650.00 is 23.6%. Based on a high price target of $775.00, the upside potential is 47.4%.
For Broadcom’s fiscal 2022 fourth quarter that ended in October, analysts are looking for revenue of $8.9 billion, which would be up 5.2% sequentially and by 6.6% year over year. Adjusted EPS are forecast at $10.29, up 5.7% sequentially and 31.8% higher year over year. For the full fiscal year, current estimates call for EPS of $37.50, up almost 34%, on sales of $33.17 billion, up 20.8%.
Broadcom trades at 14.0 times expected 2022 EPS, 13.0 times estimated 2023 earnings of $40.41 and 12.3 times estimated 2024 earnings of $42.92 per share. The stock’s 52-week trading range is $415.07 to $677.76. Broadcom pays an annual dividend of $16.40 (yield of 3.09%). Total shareholder return for the past year was negative 8.25%.
DocuSign
Shares of cloud-based signature and contract management software vendor DocuSign Inc. (NASDAQ: DOCU) have dropped by about 72% over the past 12 months. DocuSign fired about 9% of its workforce in September, but that may not make a large difference in the results it reports Thursday afternoon. Sales have been growing, but the gains have been small. Earnings also have been smaller over the first two quarters of the current fiscal year, and analysts are really in a holding pattern, waiting to see which way the company’s performance breaks.
Of 22 brokerages covering the company, five have rated the stock at Buy or Strong Buy and 14 have a Hold rating. At a share price of around $41.40, the upside potential based on a median price target of $59.35 is about 43.3%. At the high price target of $93.00, the upside potential is nearly 125%.
Fiscal second-quarter revenue is forecast at $627.23 million, up 0.8% sequentially and by 15.0% year over year. Adjusted EPS are forecast at $0.42, down 3.5% sequentially and 27.6% lower year over year. For the full 2023 fiscal year ending in January, DocuSign is expected to post EPS of $1.66, down 16%, on sales of $2.48 billion, up 17.6%.
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DocuSign trades at 25.1 times expected 2023 EPS, 22.2 times estimated 2024 earnings of $1.88 and 19.1 times estimated 2025 earnings of $2.19 per share. The stock’s 52-week range is $39.57 to $163.77. The company does not pay a dividend, and the total shareholder return for the past year is negative 69.8%.
Manchester United
English Premier League football (soccer) club Manchester United PLC (NYSE: MANU) has posted a share price gain of more than 54% over the past 12 months. The stock had been traded down by about 10% until late last month when the majority owner Glazer family indicated that the club might be sold.
Potential buyers include Sir Jim Ratcliffe, founder, board chair and CEO of chemical giant Ineos; Saudi Arabia’s Public Investment Fund; and Apple. The Glazers acquired the club in 2005 for £790 million (about $965 million in current dollars). A buyer would likely pay £4.0 to £4.5 billion and possibly more. According to a rating of sports franchises, the team is valued at $4.6 billion, tied for 19th in a ranking of the world’s most valuable teams. It is the third-most valuable soccer team, trailing Real Madrid ($5.1 billion) and FC Barcelona ($5 billion).
Only three analysts cover the stock, and two rate the shares at Buy while the other has a Hold rating. At a share price of around $22.10, the stock trades above its median price target of $17.37. At the high target of $24.78, the implied gain is about 12.1%.
Fiscal first-quarter revenue is forecast at $158.11 million, up 9.7% sequentially and by 25.0% year over year. The club is expected to post an adjusted loss of $0.12 per share, flat sequentially but worse than the prior-year loss of $0.08 per share. For the full year ending in June, Manchester United is expected to post a loss per share of $0.49, almost double the $0.25 loss in 2022, on revenue of $718.44 million, up 1.2% year over year.
The team is not expected to post a profit in 2023, 2024 or 2025. The enterprise value-to-sales multiples for 2023, 2024 and 2025 are 5.9, 5.4 and 5.1, respectively. The stock’s 52-week range is $10.41 to $23.35, and Manchester United pays an annual dividend of $0.18 per share (yield of 0.81%).
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