Investing

Earnings Previews: Docusign, JinkoSolar

This week’s earnings reports dwindle to just two of note, with one due Thursday afternoon and the other before markets open Friday.

Wednesday morning’s noteworthy reports included Campbell Soup, which met profit estimates but missed on revenue, and clothing retailer Express, which beat both top-line and bottom-line expectations. Tuesday evening’s releases included H&R Block, which posted a smaller-than-expected loss but missed on revenue.

After markets close Wednesday, AMC Entertainment, Cloudera and Oracle are scheduled to report results while Thursday morning includes reports from cruise line operator Carnival and fuel cell maker Ballard Power.

DocuSign

After markets close Thursday, DocuSign Inc. (NASDAQ: DOCU), a cloud-based software company offering an e-signature solution that businesses large and small use to prepare, execute and act on agreements, reports fourth-quarter and fiscal 2021 results. The shares added 200% to their price last year and had added nearly 20% on top of that before the late February sell-off in tech stocks.

Since February 23, shares have dropped from up 20% to down more than 4% for the year to date. Part of that is likely due to the stock’s inclusion in three popular ARK Invest exchange-traded funds: the ARK Fintech Innovation ETF (NYSEARCA: ARKF), the ARK Innovation ETF (NYSEARCA: ARKK) and the ARK Next Generation Internet ETF (NYSEARCA: ARKW). Combined, the three funds hold just over 3 million shares in DocuSign, about 1.6% of the company’s shares outstanding. Since the end of 2020, the Innovation ETF has increased its stake in DocuSign by more than 250,000 shares.

Analysts are bullish on the stock as well, placing a consensus price target on the shares of $278.41. Shares closed Tuesday at $213.22 and were trading fractionally higher midday Wednesday. The potential upside on the stock at its current trading price is around 30%. At the high target of $300, the potential upside is more than 40%.

Estimates for DocuSign’s fiscal fourth quarter (ended in January) call for earnings per share (EPS) of $0.22, up by 45% year over year, and revenue of $407.7 million, up 48%. For the full year, analysts are looking for EPS of $0.74, up nearly 140% year over year, on sales of $1.43 billion, a jump of 47%. Over the past 12 months, DocuSign shares have returned about 175%.

Even with such generous potential, shares still trade at rich multiples to expected earnings. For fiscal 2021, the multiple is 288, dropping to 190 in 2022 and 122 in 2023.

JinkoSolar

China-based solar photovoltaic maker JinkoSolar Holding Co. Ltd. (NYSE: JKS) is set to report earnings before markets open on Friday. After posting an all-time high share price of $90.20 in October of last year, shares have declined by about 50%. At its peak in 2020, JinkoSolar stock was up about 290% and closed the year up 175%, before dropping more than 25% for 2021. That’s still a share-price gain of 150% over the past 12 months.

Analysts have a median price target on the stock of $58, about 29% above its trading price on Wednesday morning. At the high target of $75 a share, the potential upside on JinkoSolar. The company trades American depositary shares (ADSs) in the United States, with each one equal to four ordinary shares. The company completed an at-the-market offering of $100 million of ADSs in early January.

The consensus EPS estimate for the fourth quarter is $0.36, a decline of 76% year over year, on sales of $1.38 billion, up less than 1%. For fiscal 2020, analysts expect the company to report EPS of $3.24, five cents lower than a year ago on sales of $5.12 billion, up nearly 20%. While revenue is rising, profits are slipping, and that is largely the result of ever-declining prices for solar panels. Caveat emptor: Selling more products at lower margins only works until it doesn’t.

The ADSs trade at a multiple of around 14 times expected 2020 earnings per share, 10 times expected 2021 earnings and nine times expected EPS in 2022.