Investing

Earnings Previews: Coinbase, Palo Alto Networks, Transocean

Paul Ausick

Published: February 20, 2023 8:21 am

U.S. bond and equity markets are closed Monday in observance of President’s Day.

Six of 11 market sectors closed higher Friday, but two of the three major indexes closed lower. Energy (down 3.65%) and technology (down 1.19%) gave up the most. Consumer staples (up 1.29%) and utilities (up 1%) posted the best gains. The Dow closed up 0.39%, the S&P 500 closed down 0.28%, and the Nasdaq Composite closed down 0.58%. Two-year Treasuries closed down 2 basis points at 4.6%, and 10-year notes slipped by 4 basis points to close at 3.82%. Oil traded down about 2.2% Friday and traded up by 0.65% early Monday morning at $76.78.

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Thursday’s trading volume was slightly above the five-day average, and NYSE losers outpaced winners by 1,713 to 1,309, while Nasdaq advancers led decliners by about 11 to 10.

Before U.S. markets open Tuesday morning, Home Depot, Teck Resources, and Walmart will report quarterly results. Here’s our preview.

These three companies are on deck to report results after markets close Tuesday afternoon.

Coinbase

Coinbase Global Inc. (NASDAQ: COIN) posted its 52-week high nearly 11 months ago. Since then the shares have declined by 66%. The good news is that the stock has added 84% since the beginning of the year. Last week, the U.S. Securities and Exchange Commission proposed new rules to help protect crypto investors from fraud. Coinbase, which operates as an exchange, received a notice that it is now recognized as a qualified custodian by the SEC. That means its books are subjected to independent audits and that it complies with other SEC requests for documents. One could argue that Coinbase is in a better position than nearly every other crypto exchange as the SEC kicks off what appears to be an enforcement approach to regulating crypto.

Of 26 analysts covering the stock, just 9 have given the shares a Buy or Strong Buy rating, and 11 rate the stock a Hold. At a current price of around $65.00, the shares have outrun their median price target of $57.00. At the high target of $120.00, the upside potential is about 84.6%.

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For the fourth quarter of 2022, the consensus revenue estimate is $587.37 million, down by about 0.5% sequentially and down by about 92% year over year. Analysts are forecasting an adjusted loss per share of $1.41, compared to a loss of $2.15 per share in the third quarter and adjusted earnings per share (EPS) of $3.35 in the year-ago quarter. For the full year, analysts now expect a loss per share of $5.55, compared to 2021 EPS of $17.10, on sales of $3.14 billion, down nearly 60%.

Coinbase is not expected to post a profit in 2022, 2023, or 2024. The enterprise value to sales multiple for each of the three years is 4.3, 4.9, and 3.9, respectively. The stock’s 52-week range is $31.55 to $206.79. Coinbase does not pay a dividend and the total shareholder return for the past year was negative 66.03%.

Palo Alto Networks

Palo Alto Networks Inc. (NYSE: PANW) is a global supplier of cybersecurity platforms, including both hardware and software along with subscription security and other professional services. Over the past 12 months, the share price has increased by about 1.7%, thanks to a jump of more than 21% since the beginning of 2023. The company has beaten quarterly EPS estimates for the past five years and topped revenue estimates in every quarter except one. For the 2022 fiscal year that ended last July, revenue rose nearly 30% year over year and EPS rose by about 23%.

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Analysts remain strongly bullish on the stock, with 39 of 46 brokerages giving the shares a Buy or Strong Buy rating. At a current price of around $169.00, the stock’s upside potential based on a median price target of $208.00 is 23.4%. At the high price target of $250.00, the upside potential is 47.9%.

For its second fiscal quarter of 2023, Palo Alto Networks is expected to report revenue of $1.65 billion, up 5.5% sequentially and up 25% year over year. Adjusted EPS is forecast at $0.77, down 6.6% sequentially and up 32.8% year over year. For the full fiscal year ending in July, analysts are looking for EPS of $3.42, up 35.7%, and revenue of $6.89 billion, up 25.2%.

Palo Alto Networks stock trades at a multiple of 49.5 times expected 2023 EPS, 42.1 times estimated 2024 earnings of $4.03, and 35.1 times estimated 2025 earnings of $4.82 per share. The stock’s split-adjusted 52-week range is $132.22 to $213.36, and Palo Alto Networks does not pay a dividend. Total shareholder return for the past 12 months was 1.74%.

Transocean

Switzerland-based offshore drilling giant Transocean Ltd. (NYSE: RIG) has seen its share price rise by 95% over the past 12 months. Earlier this month, the company reported that it had added $1.9 billion in new contracts to its backlog, raising the company’s total backlog to around $8.5 billion. According to the weekly Baker Hughes rig count report, the offshore count rose by 30 in 2022 and the North American offshore count has risen by 5 to 17 so far this year. Internationally, the offshore rig count is up by 31 year over year through the end of January.

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Of the 14 brokerages covering the company, 5 give the shares a Buy or Strong Buy rating and 7 have given the stock a Hold rating. At a current price of around $7.00, the stock has outrun its median price target of $5.50. At the high target of $10.00, the upside potential on the stock is 42.9%.

For the fourth quarter, analysts expect the company to report revenue of $620.89 million, down 10.2% sequentially and flat year over year. The expected loss per share is $0.20, worse than the $0.06 loss in the prior quarter, and worse than the $0.19 per-share loss a year ago. For the full year, analysts expect a loss per share of $0.57 compared to the year-ago loss of $0.74 and sales of $2.63 billion, up 3% year over year.

At the current price, Transocean shares trade at an enterprise value-to-sales multiple of 4.3 times expected 2022 EBIT, 3.6 times estimated 2023 EBIT, and 3.1 times estimated 2024 EBIT. The stock’s 52-week range is $2.32 to $7.69. Transocean does not pay a dividend and the total shareholder return for the past year was 95.81%.