Investing

Earnings Previews: Roblox, StoneCo, Tencent Music

Paul Ausick

Published: August 13, 2021 12:12 pm

Once again, the ratio of companies beating earnings to companies missing earnings was fairly narrow for firms reporting after markets closed Thursday. No companies of note report June-quarter results either Friday afternoon or Monday morning.

There are, however, several interesting reports due out late Monday and Tuesday morning. Here’s a preview of three company reports due Monday afternoon.
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Roblox

Since coming public in early March, shares of Roblox Corp. (NYSE: RBLX) have increased in value by about 19%. In early June, the stock was up 43%. The company’s spectacular growth prior to its IPO was considered by many investors to be just a pandemic play, while the nation’s children were being kept out of school. Cathie Wood’s ARK Next Generation ETF was not one of them. At the end of March, the fund held 516,877 shares of Roblox, and at the end of June, the fund held 967,608 shares. As of Thursday, the fund’s stake had risen to 1.24 million shares.

Just seven surveyed analysts cover the stock, with six giving the stock a Buy or Strong Buy rating and the other one rating the stock a Sell. At a recent price of around $82.70, the stock’s implied upside based on a median price target of $88 is about 6.4%. At the high price target of $103, the upside potential is nearly 25%.

Second-quarter revenue is forecast at $647.80, up 78% sequentially, and adjusted earnings per share (EPS) is forecast at $0.14, up from a break-even first quarter. For the full year, analysts expect EPS of $0.90, up from $0.48 in 2020, and revenue of $2.7 billion, 43% higher year over year.

The stock trades at 94.5 times expected 2021 EPS, 101.6 times estimated 2022 earnings and 76.3 times estimated 2023 earnings. The stock’s post-IPO range is $60.50 to $103.87, and Roblox does not pay a dividend.

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StoneCo

StoneCo Ltd. (NASDAQ: STNE) is a fintech company based in the Cayman Islands and operating in Brazil. It is Berkshire Hathaway’s only fintech investment, and Warren Buffett’s company owned 10.7 million shares at the end of June, unchanged from the reported total in March. Buffett realized a gain of 17.6% ($115.3 million) on the stock in the June quarter. Cathie Wood’s ARK Fintech Revolution ETF also owns StoneCo shares. The fund acquired 585,570 shares in the June quarter and has since raised its total stake to 1.03 million shares.
Of 17 analysts covering StoneCo, 10 give the stock a Buy or Strong Buy rating and the rest rate the shares a Hold. At a price of around $54.40, the stock’s potential upside based on a median price target of $81.59 is 50%. At the high target of $106.57, the upside potential is nearly 96%.

Analysts expect the company to report June-quarter revenue of $225.42 million, a year-over-year increase of 46%. Adjusted EPS are forecast at $0.19, up from $0.10 in the same quarter last year. For the full year, the forecast calls for EPS of $0.91, up 42%, on sales of $1.0 billion, or 56% higher.
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StoneCo stock trades at 62.4 times expected 2021 EPS, 37.0 times estimated 2022 earnings and 29.3 times estimated 2023 earnings. The 52-week trading range is $9.51 to $32.25, and the company does not pay a dividend.

Tencent Music

China-based streaming music company Tencent Music Entertainment Group (NYSE: TME) is a subsidiary of Tencent Holdings, which trades over-the-counter in the United States with a primary listing in Hong Kong. The ARK Fintech Revolution ETF held 6 million of Tencent Holdings’ U.S.-traded American depositary receipts at the end of June, down from about 6.9 million held in March. As of Thursday’s close, the fund had pared its holdings to 716,787 shares.

Of 23 analysts covering Tencent Music, 17 rate the shares a Buy or Strong Buy and the other six give the stock a Hold rating. At a price of around $9.90, the upside potential to the median price target of $20.72 is 109%. At the high price target of $35.99, the upside potential is 264%. The Chinese government’s clampdown on foreign share listings has hit the stock hard since the stock hit a 52-week high in late March.

Second-quarter revenue is forecast at $1.25 billion, up about 4.7% both sequentially and year over year. Adjusted EPS are expected to be two cents lower sequentially and down by one cent year over year to $10. For the full year, analysts expect the company to report EPS of $0.39, down nearly 13%, on a 19% increase in sales to $5.3 billion.

The stock trades at 26.8 times expected 2021 EPS, 20.2 times estimated 2022 earnings and 15.4 times estimated 2023 earnings. Tencent Music’s 52-week range is $9.51 to $32.25, and the company does not pay a dividend.