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Daily Brief United States: Alcoa Inc, Microsoft Corp, Moody’s Corp, Stryker Corp and more

By | Daily Briefs, United States

In today’s briefing:

  • Alcoa Corp: The Alumina Price Upside & Other Drivers
  • Microsoft Corporation: The Continuing Cloud Momentum
  • Moody’s Corporation: The Latam Expansion & Other Drivers
  • Stryker Corporation: The Vocera Acquisition & Other Drivers

Alcoa Corp: The Alumina Price Upside & Other Drivers

By Ishan Majumdar

  • Alcoa Corp is seeing improving shipment volumes and benefitting heavily from the stronger U.S. dollar as well as the higher alumina price index.
  • Higher costs and lower aluminum and alumina premiums combined with lower metal prices, which included about $40 million to set inventories to net realizable value, more than offset those advantages.
  • It is worth highlighting that Alcoa holds accreditations from the Aluminum Stewardship Initiative, the most comprehensive independent system for auditing ethical aluminum production.

Microsoft Corporation: The Continuing Cloud Momentum

By Ishan Majumdar

  • Despite the massive size of its revenues, Microsoft has proven to be a remarkable story in terms of percentage-basis top-line growth over the past few years.
  • The Microsoft Cloud achieved a quarterly revenue milestone of $25 billion for the first time, up 28% and 33% in constant currency.
  • Additionally, Microsoft acquired the cyber threat research and analysis company Miburo to advance threat intelligence gathering on fresh foreign cyber threats.

Moody’s Corporation: The Latam Expansion & Other Drivers

By Ishan Majumdar

  • Moody’s Corporation has seen its business get hit badly by the impact of volatile market conditions and foreign exchange fluctuations.
  • The issuance activity for high yield bonds and leveraged loans has been dampened in the prevailing high-interest rate environment affecting the company.
  • Given the current environmental uncertainty, we provide the stock of Moody’s Corporation with a ‘Hold’ rating with a revision in the target price.

Stryker Corporation: The Vocera Acquisition & Other Drivers

By Ishan Majumdar

  • Stryker Corporation has faced a challenging macro environment and is undergoing various supply shortages but this did not stop the company from delivering a solid growth in organic sales.
  • Spine and orthopedics net sales also increased in the quarter in constant currency.
  • We prove the stock of Stryker Corporation with a ‘Hold’ rating and a revision in the target price.

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Daily Brief United States: Vertex Pharmaceuticals, 3 M Co, Hawkins Inc, Shenandoah Telecommunications Company, Howard Hughes Corp, Schlumberger Ltd, Texas Pacific Land Trust, Cadence Design Sys and more

By | Daily Briefs, United States

In today’s briefing:

  • Vertex Pharmaceuticals (VRTX US): Beat-And-Raise Q2 Results Driven by Strong Uptake of Trikafta
  • 3M Company: Innovation
  • HWKN: A Growth Story Continues
  • SHEN: Return of Debt
  • HHC: Operating Model Generating Income
  • Schlumberger NV: Increasing Exploration Activity
  • TPL: Multiple Revenue Streams
  • Cadence Design Systems Inc: The Future Facilities Acquisition & Other Drivers

Vertex Pharmaceuticals (VRTX US): Beat-And-Raise Q2 Results Driven by Strong Uptake of Trikafta

By Tina Banerjee

  • Vertex Pharmaceuticals (VRTX US) reported strong Q2 results, with both revenue and adjusted EPS surpassing consensus. Flagship drug, Trikafta reported 51% y/y revenue growth and contributed 86% of revenue.
  • Vertex estimates more than 25K CF patients that are addressable with its Trikafta are still untreated, thereby providing sustainable growth opportunities. No immediate competition is seen.
  • The company lifted 2022 product revenue guidance by 2% at the mid-point to $8.6–8.8 billion. R&D costs are also expected to remain elevated as multiple ongoing clinical trials.

3M Company: Innovation

By Ishan Majumdar

  • Apart from being known as one of the most innovative companies in today’s times, 3M also has a strong reputation of successful restructuring and cost management which has helped the industrial conglomerate survive through many challenging business cycles.
  • The company continues to benefit from strong spending discipline, restructuring savings, and selling price actions.
  • We provide the stock of 3M Company with a ‘Hold’ rating with a revision in the target price.

HWKN: A Growth Story Continues

By Hamed Khorsand

  • HWKN reported fiscal first quarter (June) results where continued price increases resulted in the Company reporting higher sales and earnings compared to our estimates
  • HWKN operates a business where the increase in sales generates higher gross profit dollars with minimal change in operating expenses
  • HWKN reported sales of $246.5 million compared to our forecast of $209.9 million. A LIFO charge of $3.8 million was lower and led to EPS beating our estimate

SHEN: Return of Debt

By Hamed Khorsand

  • SHEN reported a narrower than expected operating loss for the second quarter as revenue increased from first quarter levels. 
  • SHEN has started to see an increase in the number of Glo Fiber subscribers as the Company ramps up its fiber buildout
  • SHEN drew on its credit facility in July and expects to draw additional capital before the end of the year. The return of leverage could lead to a lower valuation.

HHC: Operating Model Generating Income

By Hamed Khorsand

  • HHC delivered discernable second quarter 2022 results of progress in a pivot from landowners to landowners and operators
  • Q2 results displayed how HHC’s business model can work. HHC’s operating assets within MPCs are generating a higher level of income as the MPCs’ population have increased
  • HHC’s decision to pivot to operating assets in MPCs continued the trend of giving investors another value point

Schlumberger NV: Increasing Exploration Activity

By Ishan Majumdar

  • Schlumberger has benefitted from the growing oil industry activity by leveraging the strength of its core, its global reach, and its technology, showcasing its capacity to seize growth in every land and offshore basin.
  • The management also reports substantial offshore and onshore growth in North America’s increased drilling and completion activity.
  • Besides, their second quarter sequential growth in most regions and in support of all divisions was largely due to the increase in offshore activity, particularly deepwater.

TPL: Multiple Revenue Streams

By Hamed Khorsand

  • TPL reported second quarter results exceeding our expectations as the increase in activity in the Permian Basin resulted in higher revenue across all segments. 
  • TPL is benefiting from higher oil and gas prices enticing energy companies to boost production
  • The second quarter results did not show a rebound in overall barrels of oil equivalent (“BOE”) as we had hoped would be the case from the first quarter results.

Cadence Design Systems Inc: The Future Facilities Acquisition & Other Drivers

By Ishan Majumdar

  • Digital transformation is accelerating across various industries thanks to generational trends like 5G, hyperscale computing, and autonomous vehicles supported by AI, ML, and data analytics.
  • These trends are boosting design activity, creating a strong secular tailwind for the core end-to-end EDA, IP, and expanding systems portfolio.
  • Cadence also acquired Future Facilities during the quarter to expand its CFD portfolio to include data centres.

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Daily Brief United States: Microstrategy Inc Cl A, Moderna Inc, General Electric Co, Coca Cola Co, Confluent, Mondelez International, Shopify Inc and more

By | Daily Briefs, United States

In today’s briefing:

  • MicroStrategy (MSTR US): Saylor Mirrors Bitcoin’s Fall
  • Moderna (MRNA US): Better-Than-Expected Q2 Result; Guidance Reiterated; $3B Share Buyback Announced
  • General Electric Company: New Product Lines
  • The Coca-Cola Co: The Jack & Coke Launch
  • Better Than Expected 2Q22 Results, Cloud Growth of 139% YoY, FY22 Revenue Guidance Moves Higher
  • Mondelez International Inc.: The Clif Bar Acquisition & Other Drivers
  • Breaking Growth Short Candidates: Shopify, Snowflake, Intuitive Surgical, ServiceNow

MicroStrategy (MSTR US): Saylor Mirrors Bitcoin’s Fall

By David Blennerhassett

  • Microstrategy Inc (MSTR US)‘s Michael Saylor will now assume the new role of Executive Chairman and Phong Le, MSTR’s President, will serve as the company’s new CEO.
  • As Executive Chairman, Saylor will focus more on MSTR’s bitcoin acquisition strategy and related bitcoin advocacy initiatives.
  • With one of the most bullish and influential players in the industry now focusing on crypto, this should be considered bullish, according to some media reports. That’s a desperate takeaway.

Moderna (MRNA US): Better-Than-Expected Q2 Result; Guidance Reiterated; $3B Share Buyback Announced

By Tina Banerjee

  • Moderna Inc (MRNA US) reported strong Q2 results, with both revenue and EPS surpassing consensus. Profitability was negatively impacted by one-off inventory write-down charge.
  • Management has reiterated advance purchase agreements for expected delivery of ~$21 billion in 2022. Assuming an endemic situation, Moderna’s commercial infrastructure is prepared for a 2023 commercial market.
  • The Board of Directors has approved a new share repurchase program for $3 billion in August 2022, with no expiry. Moderna shares have gained 27% in last three months.

General Electric Company: New Product Lines

By Ishan Majumdar

  • General Electric has started seeing a solid recovery in its aerospeace business which has become an important growth driver for the company.
  • Macro pressures and supply chain have affected the revenue adversely by approximately 5%.
  • The company has recently unveiled the innovative branding of its new companies, GE Vernova, GE Healthcare, and GE Aerospace.

The Coca-Cola Co: The Jack & Coke Launch

By Ishan Majumdar

  • Coca-Cola has been implementing various growth initiatives off-late to continue expanding its top-line.
  • The company had a good quarter and delivered an all-around beat and increased its volume and value share during the quarter.
  • Coca-Cola continued its strong marketing efforts and launched end-to-end digital-first brand campaigns for smartwater and vitaminwater.

Better Than Expected 2Q22 Results, Cloud Growth of 139% YoY, FY22 Revenue Guidance Moves Higher

By Andrei Zakharov

  • Confluent (CFLT US)  reported solid 2Q22 results, and most metrics were above sell-side expectations, including subscription revenue, gross margins, and operating margins. 
  • We are impressed with Confluent Cloud’s revenue growth of +139% y/y and strong subscription gross margins. Management raised FY22 revenue and profitability guidance. 
  • Our price target of $28 is slightly below the current share price. However, we see room for further multiple expansion due to revenue acceleration above consensus.

Mondelez International Inc.: The Clif Bar Acquisition & Other Drivers

By Ishan Majumdar

  • Mondelez International has been looking to strengthen its position in the snacking category and the recent $2.9 billion acquisition of Clif Bar is a key step in the process.
  • The company managed to deliver a strong result and an all-around beat with strong bottom and top-line performance growth in overall categories and regions.
  • These results, along with ongoing revenue growth management, simplification, and cost discipline, are delivering strong cash flow and robust profit dollar growth.

Breaking Growth Short Candidates: Shopify, Snowflake, Intuitive Surgical, ServiceNow

By Eric Fernandez, CFA

  • This model looks for slowing growth, margin declines, sales and/or earnings disappointments, troubling working capital trends, poor estimate trends or lowered guidance, among other characteristics.
  • The key judgement is whether a slowdown is temporary or the beginning of a trend.  These shorts tend to have high valuations and betas.  Multiple compression accelerates the stock’s decline.
  • Today we are flagging: Shopify, Snowflake, Intuitive Surgical, and ServiceNow

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Daily Brief United States: S&P 500, Tesla Motors, Faraday Future Intelligent Electric, International Business Machines, Netflix Inc, Inari Medical and more

By | Daily Briefs, United States

In today’s briefing:

  • S&P 500 Reverses 4-Month Downtrend; Upgrading Consumer Discretionary to Market Weight
  • Tesla Inc.: Capacity Expansion
  • Faraday Future (FFIE) Claims It Lined Up Funding but Details Are Vague
  • International Business Machines (IBM): The Databand Acquisition & Other Drivers
  • Netflix Inc.: Ad-Supported Subscription To Counter Subscriber Losses & Other Developments
  • Inari Medical. Company Update: Downgrade To Neutral

S&P 500 Reverses 4-Month Downtrend; Upgrading Consumer Discretionary to Market Weight

By Joe Jasper

  • In last week’s Compass (July 26) we discussed positive signals that we believe suggested the lows for this bear market may have already been established, or that downside is limited.
  • We continue to see more evidence that supports this claim; as a result, we are upgrading our outlook to neutral.
  • The SPX is reversing topside its 4-month downtrend, and the Russell 2000 (IWM), Russell Micro-Caps (IWC), and Russell 2000Growth (IWO) are each reversing topside their 9-month downtrends; the bottom’s in.

Tesla Inc.: Capacity Expansion

By Ishan Majumdar

  • Tesla had been in the process of carrying out upgrades which resulted in a lengthy shutdown of its Shanghai factory.
  • The company faced its fair share of challenges but had a highly resilient quarter and managed to produce an all-around beat.
  • The most significant accomplishment was setting production records in Shanghai and Fremont in June.

Faraday Future (FFIE) Claims It Lined Up Funding but Details Are Vague

By SC Capital

  • Fardaday Future (FF) announced it lined up at least $100m in funding from two investors but gave little detail. Deal is set to close on or before August 8th. 
  • Given that it’s a senior secured convert deal, we doubt more than $100m-$200m can be raised, despite FF’s release saying the deal has capacity for $600m.
  • FF only had $222m in cash in April after -$173m in FCF in Q1. They need $1bn to last through 2023. Anything less than $600m in funding would be negative.

International Business Machines (IBM): The Databand Acquisition & Other Drivers

By Ishan Majumdar

  • As a legacy tech company, IBM may have seen a slowdown in its growth trajectory but its acquisition-led growth approach continues to work.
  • With this performance, the company is maintaining its model of mid-single-digit revenue growth and a double-digit performance in IBM Consulting.
  • In this report, we have carried out a fundamental analysis of the historical financial statements of the company.

Netflix Inc.: Ad-Supported Subscription To Counter Subscriber Losses & Other Developments

By Ishan Majumdar

  • Netflix has had a bad 2022 so far.
  • The company continued with its trajectory of subscriber losses in the most recent quarter and lost another million subscribers.
  • Given the current uncertainty levels, we give Netflix a ‘Hold’ rating with a revised target price.

Inari Medical. Company Update: Downgrade To Neutral

By Andrei Zakharov

  • We downgrade Inari Medical (NARI US) shares to Neutral and lower a price target to $83.00, implying a ~4% upside. 
  • We see limited upside to Inari Medical (NARI US)  shares due to peer-group multiple compression, slow expansion in Europe and Asia, and rising operating expenses.
  • Inari Medical (NARI US) completed SPO, issued 2.3M shares, and raised ~$174M to strengthen the balance sheet in 1Q22.  

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Daily Brief United States: Amazon.com Inc, Ethereum, NFT, Texas Instruments, Elastic NV, Gold, Chipotle Mexican Grill, Ecovyst, United Parcel Service Cl B, ATN International and more

By | Daily Briefs, United States

In today’s briefing:

  • Amazon 2Q22: Delivering an Inflection Point
  • #33 To be or not to be a security
  • Sporting Crypto – August 1st 2022: Immortalising Geoff Hurst’s Memories Using NFTs
  • Texas Instruments: New Semiconductor Plants & Other Developments
  • Elastic NV: Initiation of Coverage – Enhancements To The Elastic Observatory Solution & Other Drivers
  • The Commodity Report #62
  • Chipotle Mexican Grill Inc.: Expansion of the Loyalty Program & Other Developments
  • ECVT: Echoes of Free Cash Flow
  • United Parcel Service Inc.: Expansion In The Indian Market & Other Developments
  • ATNI: Network Expansion

Amazon 2Q22: Delivering an Inflection Point

By Aaron Gabin

  • Profitability ready to kick in again as Amazon grows into the overbuilt warehouse capacity and headcount from the past few quarters. 3Q22’s guidance clearly conservative based on 2Q22’s outperformance.
  • Revenue reacceleration beginning to play out. 2Q22’s 7% leading to 3Q22’s 15%, and back to the 20%s by 2023.
  • AWS continues its indomitable run. $79B TTM revenues are growing 37% with 31% margins.

#33 To be or not to be a security

By Carbono Insights

  • To be or not to be a security. The question of whether cryptocurrencies are securities or commodities (or another type of asset, for that matter) does not have a final answer yet.
  • However, it has been on the table for a long time.
  • Commodities are interchangeable goods, and securities are financial assets, in a dangerously short definition.

Sporting Crypto – August 1st 2022: Immortalising Geoff Hurst’s Memories Using NFTs

By Sporting Crypto

  • Most sport athlete NFT projects are awful.
  • But this project, that immortalises legendary England striker Geoff Hurst’s memories – in NFT form – is pretty awesome.
  • World Cup Winner Geoff Hurst is digitally preserving his memories of the 1966 World Cup Final for The Everlasting Memory Project in support of Alzheimer’s Research UK.

Texas Instruments: New Semiconductor Plants & Other Developments

By Ishan Majumdar

  • Texas Instruments delivered its third consecutive all-around beat in the recent result with a reported revenue of $5.21 billion this quarter.
  • Among major developments, Texas Instruments has recently broken the ground on the new semiconductor plants of 300-mm for water fabrication in Sherman, Texas.
  • Texas Instruments has a strong balance sheet and the management continues investing in building capacity.

Elastic NV: Initiation of Coverage – Enhancements To The Elastic Observatory Solution & Other Drivers

By Ishan Majumdar

  • This is our first report on Elastic NV, a major technology solutions provider catering to multi-cloud environments.
  • All over the year, customers continued to adopt Elastic Cloud, expanding over use cases and increasing consumption as there was a growth in the enterprise data.
  • Elastic continues expanding its land-and-expand approach because customers wish to adopt over one Elastic solution to support their business initiatives.

The Commodity Report #62

By The Commodity Report

  • Commodities rallied as the dollar weakened and real rates declined again.
  • As you can see above, the CRB index bounced right from the 200D MA.
  • More important commodities did so even while GDP data was worse than expected.

Chipotle Mexican Grill Inc.: Expansion of the Loyalty Program & Other Developments

By Ishan Majumdar

  • Chipotle Mexican Grill has been in the news for an amazing rebound in its stock price after delivering a robust set of results surpassing Wall Street expectations in terms of earnings.
  • The in-restaurant sales increased while digital sales were also up and the management added 51 new restaurants in 42 locations.
  • We provide the stock of Chipotle Mexican Grill with a ‘Hold’ rating with a revision in the target price.

ECVT: Echoes of Free Cash Flow

By Hamed Khorsand

  • ECVT continued to benefit from the growing need of sulfuric acid and catalysts throughout its customer base.
  • Refineries are operating at high utilization rates resulting in eco services sales rising faster than expected. The silica catalysts segment continues to benefit from polyethylene demand
  • The free cash flow ECVT is generating has resulted in ECVT lowering its debt ratio to lowest in the Company’s history. However, the stock price has yet to reward shareholders

United Parcel Service Inc.: Expansion In The Indian Market & Other Developments

By Ishan Majumdar

  • UPS managed to deliver an all-around beat in the past quarter despite the fact that its macro environment remained dynamic.
  • In spite of the decline in volume, UPS continues to win in maximum parts of the market, having strong gains in revenue quality.
  • All segments of the business have delivered growth in the operating profit.

ATNI: Network Expansion

By Hamed Khorsand

  • ATNI reported progress in growing its network size and subscriber base in the second quarter. ATNI reported a sequential increase in the number of high-speed data and mobile subscribers
  • ATNI’s steady progress with its network expansion is expected to help cash flow from operations in future quarters. 
  • The addition of Sacred Wind is supposed to give ATNI a broader reach in New Mexico. Sacred Wind should end up being complimentary to ATNI

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Daily Brief United States: Crude Oil, SPDR S&P Metals & Mining ETF, Silver Crest Acquisition and more

By | Daily Briefs, United States

In today’s briefing:

  • Bulls & Bears: Near-Term and Short-Term View on Oil Prices
  • XME and XLE Longs Meeting Targets
  • Sweet Deal

Bulls & Bears: Near-Term and Short-Term View on Oil Prices

By Vandana Hari

  • Crude price movements have been almost entirely dictated by sentiment in the broader financial markets since around mid-June.
  • Prices rose in the week to July 29 as part of a broader relief rally in risk assets. The rally is exhausted but may help resist sharp downswings for now.
  • For the mid-Aug to mid-Sep period, we are mildly bullish. 

XME and XLE Longs Meeting Targets

By Thomas Schroeder

  • XME and XLE long bets outlined on July 18 are meeting targets to unwind/reverse with XME displaying intermediate potential out of a bull wedge formation.
  • Weak buy volumes on this rise fit with it being corrective in nature (vulnerable bounce), calling for a fresh bear test into September.
  • XME bull wedge brewing and 40 macro support stand out as a macro bull set up from September into year-end.

Sweet Deal

By subSPAC

  • Tim Horton China has bucked the recent trend of Chinese Companies, opting to list in the US through a SPAC rather than aiming for an IPO on shore.
  • The company is looking to capitalize on the rapidly growing Chinese Coffee market by tapping into capital from US investors.
  • However, growing geopolitical tensions and a regulatory crackdown from the SEC could dampen deal prospects.

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Daily Brief United States: Russell 2000 Index, Dropbox Inc, MongoDB Inc, Akamai Technologies and more

By | Daily Briefs, United States

In today’s briefing:

  • Defining US Risk Inflection
  • Dropbox Inc.: Initiation of Coverage – The DocSend Acquisition & Other Drivers
  • MongoDB Inc.: Initiation of Coverage – Business Model & The Database Industry Boom
  • Akamai Technologies Inc.: Initiation of Coverage – Business Strategy
  • Akamai Technologies Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report

Defining US Risk Inflection

By Thomas Schroeder

  • Russell and NDX are knocking on resistance levels that have capped previous rally attempts as we enter the early August cycle timeline.
  • Tech rally reacting to backward earnings. E’s will buckle into a recession. The July risk on rally cycle is closing.
  • NDX 13k and RTY 1,930 are key inflection levels that will drive the global risk cycle ahead of a more turbulent late August to October period.

Dropbox Inc.: Initiation of Coverage – The DocSend Acquisition & Other Drivers

By Ishan Majumdar

  • This is our first report on Dropbox, a major player within the cloud storage, file transfer, and e-signature domain.
  • Dropbox is continuing to evolve its core FSS business to drive monetization and improve attention.
  • This quarter, Dropbox has launched its newest version of Dropbox backup that has upgraded management settings and restoration flow.

MongoDB Inc.: Initiation of Coverage – Business Model & The Database Industry Boom

By Ishan Majumdar

  • This is our first report on database major, MongoDB.
  • The company delivered yet another all round beat in the previous result with a staggering 57% growth year over year.
  • The revenue generated by Atlas alone increased by 82% year over year and accounted for 60% of MongoDB’s total revenue.

Akamai Technologies Inc.: Initiation of Coverage – Business Strategy

By Ishan Majumdar

  • This is our first report on Akamai Technologies, a renowned content delivery network and cloud service provider. the growth in security and computing has been the main driver of revenues for Akamai in the past years but it has been adversely impacted by the U.S. dollar’s sharp increase in value and the slowing of traffic growth in the company’s delivery business.
  • The consistent double-digit growth in security revenue has been driven by Guardicore’s continued outstanding performance and rapid growth in their application security business.

Akamai Technologies Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report

By Ishan Majumdar

  • Akamai Technologies is a well-known cybersecurity company, content delivery network, and cloud service provider.
  • The growth in security and computing has been the main driver of revenues for Akamai in the past years but it has been adversely impacted by the U.S. dollar’s sharp increase in value and the slowing of traffic growth in the company’s delivery business.
  • With pandemic-related restrictions being lifted globally and the related tailwinds receding, the company has seen a slower growth rate of traffic on its network in the gaming and OTT verticals.

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Daily Brief United States: Teladoc Health, Inc., Meta Platforms (Facebook), Microsoft Corp, Servicenow Inc, Nocera, EzFill Holdings Inc, Arista Networks, Netgear Inc, Iridium Communications, Fox Factory Holding and more

By | Daily Briefs, United States

In today’s briefing:

  • Teladoc Health Inc (TDOC US): Q2 Revenue Beat Expectations; Here Is Why the Stock Toppled
  • Facebook 2Q22: Network Effects Are Yesterday’s News, AI Is the Future
  • Microsoft:  Growth Bulls Versus Value Bears
  • TMT Earnings Quick Hits: Spotify and ServiceNow
  • Nocera Inc. – Investment Thesis, Key Drivers, Financial & Price Forecasts, DCF Valuation 07/22
  • EzFill Holdings Inc. – Investment Thesis
  • Arista Networks Inc.: Initiation of Coverage – Market Position
  • NTGR: Catalysts for Growth, Buy
  • IRDM: Calling Home with Free Cash Flow
  • Earnings Quality Short Candidates: Fox Factory, Beyond Meat, Coupa SW, Beacon Roofing

Teladoc Health Inc (TDOC US): Q2 Revenue Beat Expectations; Here Is Why the Stock Toppled

By Tina Banerjee

  • Teladoc Health, Inc. (TDOC US) reported mixed Q2 results, with revenue and adjusted EBITDA coming in above the midpoint of guidance range. However, EPS came significantly below consensus and guidance.
  • Teladoc has already took $9.8 billion hit from impairment charge in H1 2022. Moreover, the company now expects results to be toward the lower end of already reduced guidance range.
  • Since publishing Q1 results in April, the stock plummeted 23% in three months. From its peak in February 2021, the stock is now down 85%. No immediate recovery is expected.  

Facebook 2Q22: Network Effects Are Yesterday’s News, AI Is the Future

By Aaron Gabin

  • Optically weak earnings and guidance due to FX and macro headwinds aren’t as bad as it seems… Meta’s ad business grew faster QoQ than Google’s Search.
  • Zuckerberg downplayed the social graph as core to Meta’s LT competitive advantage. AI is the future.
  • At $160, we think Meta is preposterously undervalued. 2023 revenue acceleration and margin expansion means the stock is trading 9x forward P/E ex-cash. 

Microsoft:  Growth Bulls Versus Value Bears

By Steven Holden

  • Microsoft Corporation is the most widely held stock among active US equity investors. Of the 297 active strategies in our analysis, 80.1% own Microsoft at an average weight of 5.10%
  • There is a growing dispersion between Value and Growth managers in MSFT.  Growth managers are at record levels of ownership, whereas Value managers are running their largest underweight on record.
  • US Growth managers are relying on Microsoft to deliver an increasing proportion of the Growth within their portfolios. The cost of that growth is coming under scrutiny by Value managers

TMT Earnings Quick Hits: Spotify and ServiceNow

By Aaron Gabin

  • Spotify’s earnings were not as impressive as they seemed. Revenue beats driven by huge FX tailwinds, while MAU beats are coming from low ARPU regions.
  • ServiceNow’s earnings were not as weak as seemed. Uberbullish CEO Bill McDermott had already guided to elongated sales cycles, but we think reiterated margin targets and 130% NRR matter more. 
  • Inverse results…Spotify jumped without any evidence of progress towards an unbelievable LT operating model, while ServiceNow fell without evidence that its (superb) LT model is in question.

Nocera Inc. – Investment Thesis, Key Drivers, Financial & Price Forecasts, DCF Valuation 07/22

By Ishan Majumdar

  • This is our first report on Nocera and we look to provide a detailed account of the various industries that the company operates in and the key macro-economic factors.
  • While Nocera did report a net loss and incurred one-time costs related to its listing last year, things ought to be entirely different in 2022.
  • However, given how quickly the company’s revenues are increasing, the stock price should also rise quickly.

EzFill Holdings Inc. – Investment Thesis

By Ishan Majumdar

  • This is our first report on EzFill Holdings and we look to provide a detailed account of the various drivers that will be responsible for the company’s growth in the coming years.
  • However, it is trading at a revenue multiple of around 1x whereas it can easily command a 5-6x revenue multiple.
  • EzFill’s current share price does not reflect the potential upside of its huge revenue growth potential as well as its attractiveness as an acquisition target for oil majors.

Arista Networks Inc.: Initiation of Coverage – Market Position

By Ishan Majumdar

  • This is our first report on cloud networking solutions provider, Arista Networks.
  • The company had a strong quarter and generated record quarterly revenues of $877.1 million backed by a strong performance in software support renewals and services.
  • Cloud titans were their strongest and largest vertical for the last quarter, followed by enterprise, cloud specialty providers and financials tied for second place, and service providers in fourth.

NTGR: Catalysts for Growth, Buy

By Hamed Khorsand

  • NTGR is reaching the inflection point of rebalancing its channel inventory after deciding to transition away from lower priced wireless routers
  • Upgrading to Buy Rating from Neutral with inventory rebalancing near the end, strong SMB sales trends momentum, and growth within service provider
  • The higher sales performance from the SMB segment was not expected and should contribute to NTGR growing revenue in 2023 with upcoming release of WiFi 7 on deck

IRDM: Calling Home with Free Cash Flow

By Hamed Khorsand

  • IRDM continues to benefit from the momentum in consumer adoption of personal communications devices embedded with capabilities to use IRDM’s satellite network
  • The quarterly results were overshadowed by IRDM’s disclosure of entering into a technology sharing relationship for using IRDM’s satellite network as backup connectivity to smartphones
  • During the second quarter 2022, IRDM added approximately 80 thousand new commercial IOT subscribers to bring the total to over 1.3 million

Earnings Quality Short Candidates: Fox Factory, Beyond Meat, Coupa SW, Beacon Roofing

By Eric Fernandez, CFA

  • This model seeks short-sale candidates among companies that use aggressive accounting and/or exhibit deteriorating quality of earnings.  
  • They are typically highly idiosyncratic shorts and require thoughtful analyses of upcoming catalysts.  When the company’s issues become well-known, there is often multiple compression as well as a rerating.
  • These shorts can have high or low betas, valuations based on artificial earnings and exhibit good short responses to subsequently disappointing earnings.

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Daily Brief United States: Digital Turbine, Ipg Photonics and more

By | Daily Briefs, United States

In today’s briefing:

  • Digital Turbine Inc.: Initiation of Coverage – Partnerships With Google & AccuWeather
  • Digital Turbine Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report
  • IPG Photonics Corporation: Initiation of Coverage – Acquisitions

Digital Turbine Inc.: Initiation of Coverage – Partnerships With Google & AccuWeather

By Ishan Majumdar

  • This is our first report on the mobile growth platform provider, Digital Turbine.
  • Digital Turbine is now in an expansion mode as evident from its recent results as well as its acquisition-oriented strategy.
  • However, in recent quarters, the investors of Digital Turbine have turned against various technology-focused assets, and its stock price also lost much value.

Digital Turbine Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report

By Ishan Majumdar

  • Digital Turbine is a major mobile growth platform provider across the globe and is operating in expansion mode as evident from its recent results as well as its acquisition-oriented strategy.
  • However, in recent quarters, the investors of Digital Turbine have turned against various technology-focused assets, and its stock price also lost much value.
  • Digital Turbine recently unveiled a single strategy and a unified corporate brand for its partners and clients.

IPG Photonics Corporation: Initiation of Coverage – Acquisitions

By Ishan Majumdar

  • This is our first report on IPG Photonics, one of the leading manufacturers of lasers and amplifiers catering to materials processing across the globe.
  • The company was off to a strong start in 2022 profiting from increased demand in Europe, North America, and Japan.
  • IPG Photonics also saw the expansion of medium-power and pulsed lasers, mainly fueled by increased demand for new applications.

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Daily Brief United States: MGM Resorts International, Faraday Future Intelligent Electric, Select Medical Holdings, Jabil Circuit, Fidelity National Info Serv, Viavi Solutions and more

By | Daily Briefs, United States

In today’s briefing:

  • MGM: A Gaming Portfolio Within a Portfolio at an Attractive Entry Point at US$30
  • Faraday Future (FFIE) Delays New EV Launch; Says It Needs More Cash
  • Downgrading Utilities & Staples to Market Weight; Buy Ideas in Health Care & Trucking
  • Jabil Inc.: Initiation of Coverage – Collaborations With SolarEdge, Cardo Systems, & Other Key Drivers, Financial Forecasts, DCF & Comparables Valuation, Key Risks (07/22)
  • Fidelity National Information Services: Initiation of Coverage – Core Processing Business Upside & Other Drivers, Financial Forecasts, DCF & Comparables Valuation, ESG & Other Risks (07/22)
  • Fidelity National Information Services: Detailed Credit Analysis & Financial Strength Evaluation Report, Key Risks & ESG Assessment (07/2022)
  • Viavi Solutions Inc.: Initiation of Coverage – The NTT DOCOMO Partnership, New Product Launches & Other Drivers, Financial Forecasts, DCF & Comparables Valuation, Key Risks (07/22)
  • Jabil Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report, Key Risks (07/2022)
  • Viavi Solutions Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report, Key Risks (07/2022)

MGM: A Gaming Portfolio Within a Portfolio at an Attractive Entry Point at US$30

By Howard J Klein

  • With a dominant presence on the Las Vegas strip as recovery revenue ballast, MGM is seeing recovery in its US regional properties, growth in digital and news flow from Asia.
  • The company’s BetMGM sports betting partnership with UK giant Entain is thriving. It ambitions to buy out its partner, or its partner’s parent are clear.
  • As Macau slowly reopens its long awaited recovery arc will be positive news flow in Q3 and Q4 for MGM due to its two property footprint there.

Faraday Future (FFIE) Delays New EV Launch; Says It Needs More Cash

By SC Capital

  • Faraday Future (FF) announced that it has delayed the Q3 2022 launch of its first EV and is “continuing to engage” in fundraising talks. 
  • FF says it needs $325m to last through the year or 47% of its market cap. A PIPE deal could be underway, albeit the 8-K filing was cautiously worded. 
  • Depending on the agreement, it may pave the way for the recently deposed founder to place a crony on the Board, which could be negative for future funding. 

Downgrading Utilities & Staples to Market Weight; Buy Ideas in Health Care & Trucking

By Joe Jasper

  • We are starting to see some positive signals that suggest the lows for this bear market may have already been established, or that additional downside is limited from here.
  • We need to see downtrend reversals (get above 4030-4040 on SPX, $189 on IWM, and $115 on IWC) and for the NDX(QQQ) to break above $315, to get more constructive.
  • Positive signals include, among other things: the Financial Sector (XLF) and Broker-Dealers/Exchanges ETF (IAI) are reversing topside their 4-5-month downtrends.

Jabil Inc.: Initiation of Coverage – Collaborations With SolarEdge, Cardo Systems, & Other Key Drivers, Financial Forecasts, DCF & Comparables Valuation, Key Risks (07/22)

By Ishan Majumdar

  • This is our first report on diversified manufacturing services and solutions provider, Jabil Inc.
  • The company has maintained a strong diversification strategy which has helped it perform despite a difficult supply chain environment and widely reported shutdowns in China.
  • During the quarter, the company further collaborated with two companies, SolarEdge and Cardo Systems, to expand its supply chain.

Fidelity National Information Services: Initiation of Coverage – Core Processing Business Upside & Other Drivers, Financial Forecasts, DCF & Comparables Valuation, ESG & Other Risks (07/22)

By Ishan Majumdar

  • This is our first report on the leading global technology solutions provider to the banking and finance industry – Fidelity National Information.
  • The company’s annual organic growth expectations were all exceeded with a 9% organic top-line growth.
  • In this report, we have carried out a fundamental analysis of the historical financial statements of the company.

Fidelity National Information Services: Detailed Credit Analysis & Financial Strength Evaluation Report, Key Risks & ESG Assessment (07/2022)

By Ishan Majumdar

  • Fidelity National Information is a technology solutions provider to the worldwide banking and finance industry.
  • The company had a strong start to the year, 2022 far outpacing its projections for revenue and delivering a solid organic top-line growth.
  • During the quarter, they launched their Guaranteed Payments solution, making it the only payment processor to provide a fully integrated solution guaranteed to increase e-commerce transaction approval rates and remove chargebacks resulting from fraudulent purchases.

Viavi Solutions Inc.: Initiation of Coverage – The NTT DOCOMO Partnership, New Product Launches & Other Drivers, Financial Forecasts, DCF & Comparables Valuation, Key Risks (07/22)

By Ishan Majumdar

  • This is our first report on Viavi Solutions, a major player within the network test solutions and monitoring space.
  • As North American service providers upgraded and expanded their networks with fibre, fibre grew by double-digit percentages from the same time the previous year.
  • We initiate coverage on Viavi Solutions with a ‘Hold’ rating with a revised target price.

Jabil Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report, Key Risks (07/2022)

By Ishan Majumdar

  • Jabil Inc is a highly diversified manufacturing services and solutions provider across multiple industries.
  • The company has maintained a strong diversification strategy which has helped it perform despite a difficult supply chain environment and widely reported shutdowns in China.
  • The strong demand within EMS, partially offset by sporadic Covid-19 challenges within DMS, was the primary factor driving their revenues since the start of 2022.

Viavi Solutions Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report, Key Risks (07/2022)

By Ishan Majumdar

  • Viavi Solutions is a leading provider of network test solutions, monitoring and assurance solutions to the telecom industry, enterprises, network equipment manufacturers, Governments, and avionics corporations.
  • The North American service providers upgraded and expanded their networks with fibre which benefitted the company.
  • Its solutions for assurance and products for data centres have been experiencing significant growth.

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