After U.S. markets closed Thursday and before they opened Friday, semiconductor equipment maker Applied Materials and farming and heavy equipment maker Deere, respectively, reported quarterly earnings. Both exceeded expectations on the top and bottom lines.
Looking ahead to next week, JD.com and TAL Education are scheduled to report quarterly results before markets open on Monday. Both have felt the pressure from the Chinese government’s crackdown on overseas-listed equities, and TAL just received new instructions on what it must do to change its business.
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After markets close Monday, there is just one earnings report of note on the calendar. On Tuesday morning, however, we are looking forward to four reports.
Palo Alto Networks
Palo Alto Networks Inc. (NYSE: PANW) supplies cybersecurity platforms, including both hardware and software, along with subscription and other professional services. Over the past 12 months, the stock has gained about 35%, of which just over 2% can be attributed to 2021. As more people return to their offices over the next year, demand for traditional corporate security services is expected to grow, and that’s good for Palo Alto Networks. The company reports results after markets close Monday.
Analysts are strongly bullish on the stock, with 33 of 37 brokerages giving the shares a Buy or Strong Buy rating. At a price of around $364.90, the stock’s upside potential, based on a median price target of $445, is 22%. At the high price target of $515, the upside potential is 41%.
For its fourth quarter of fiscal 2021, Palo Alto Networks is expected to report revenue of $1.17 billion, which would be up 9.2% sequentially and 23% year over year, and adjusted earnings per share (EPS) of $1.44, or up 4.2% sequentially and down 2.7% year over year. For the full fiscal year, analysts are looking for EPS of $5.99, up 22.7%, and revenue of $4.21 billion, or 23.5% higher.
The company’s stock trades at 60.5 times expected 2021 EPS, 51.0 times estimated 2022 earnings and 41.8 times estimated 2023 earnings. The stock’s 52-week range is $219.34 to $406.92, and Palo Alto Networks does not pay a dividend.
Best Buy
Consumer Electronics retailer Best Buy Co. Inc. (NYSE: BBY) reports fiscal second-quarter results before markets open on Tuesday. The past 12 months have not been especially good for Best Buy. The stock has added less than 2% and currently trades at the same level as in late October of last year, when the shares added nearly 19%. The share price has risen by almost 300% over the past five years, but Best Buy had better have an answer for the question of what it has done lately.
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Analysts are mixed on the stock, with 14 of 29 rating the shares a Buy or Strong Buy. Twelve have given the stock a Hold rating. At a price of around $111.70, the stock’s implied gain to a median price target of $126 is 12.8%. At the high target of $150, the upside potential is 34.2%.
Second-quarter revenue is forecast at $11.54 billion, down less than 1% sequentially and up 17.5% year over year. EPS are expected to come in at $1.89, down 15% year over year and up 10.5% year over year. Current estimates for the full fiscal year call for EPS of $8.44, which would be 6.7% higher, and revenue of $49.34 billion, up about 4.4%.
The stock trades at 13.0 times expected 2022 EPS, 12.8 times estimated 2023 earnings times and 11.8 times estimated 2024 earnings. Best Buy’s 52-week trading range is $95.93 to $128.57, and the company pays an annual dividend of $2.80 (yield of 2.54%).
Medtronic
Medical device maker Medtronic PLC (NYSE: MDT) has posted a share price gain of around 32% over the past 12 months, including a year-to-date gain of nearly 12%. Demand for surgeries postponed last year due to the pandemic has boosted the company’s revenue this year. In the longer term, a robotic-assisted surgery system is already in use in Latin America, as Medtronic readies regulatory filings in other countries around the world.
Of 29 analysts covering the company, 23 rate the shares a Buy or Strong Buy and the rest have a Hold rating. At a price of around $129.60, the stock’s implied upside to a median price target of $140 is 8%. At the high target of $153, the upside potential is 18%.
For the fiscal first quarter ended in July, the company is expected to report revenue of $7.88 billion, down about 3.8% sequentially and up 21% year over year. The EPS forecast is $1.32, down nearly 12% sequentially but more than double last year’s quarterly total of $0.62. For the full 2022 fiscal year, analysts are forecasting EPS of $5.69, up 28%, and revenue of $33.2 billion, more than 10% higher.
The stock trades at 22.7 times expected 2022 EPS, 20.5 times estimated 2023 earnings and 18.9 times estimated 2024 earnings. The stock’s 52-week range is $98.44 to $132.39, and Medtronic pays an annual dividend of $2.52 (yield of 1.95%).
New Oriental Education
New Oriental Education & Technology Group Inc. (NYSE: EDU) is a Beijing-based test preparation, after-school tutoring and language training service. The stock has collapsed since late April and now trades down more than 86% over the course of the past 12 months.
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As was the case with TAL Education, New Oriental on Thursday posted a press release announcing significant government-mandated changes in its after-school tutoring business. Here’s the money quote: “[T]he excessive burden upon students from school homework and after-school tutoring, the education expenditures from their families and the burden on their parents’ energy will be effectively reduced by the end of 2021, with significant impact achieved within two years.”
Given the howling headwinds, analysts seem surprisingly blasé. Of 12 ratings on the stock, five are a Buy and five are a Hold. At a price of around $1.90, the upside potential to a median price target of $5.35 is 182%. At the high target of $23.55, the implied gain is 1,140%. Barring a change of heart by Chinese authorities, you would need to believe in the tooth fairy to think New Oriental is going to reach either target.
Analysts are looking for fiscal fourth-quarter revenue of $1.12 billion when the company reports results Tuesday morning. That would be down 5.7% sequentially but up about 40% year over year. Adjusted EPS are tabbed at $0.03, down 67% sequentially and about 90% year over year. For the full year, EPS are expected to fall from $3.03 a year ago to $0.28. Revenue, however, is forecast to rise to $4.18 billion, a year-over-year increase of about 17%.
New Oriental stock trades at 7.1 times to expected 2021 EPS, 5.9 times estimated 2022 earnings and 4.7 times estimated 2023 earnings. The stock’s 52-week range is $1.74 to $19.97, and the company does not pay a dividend.
Pinduoduo
Shanghai-based e-commerce platform provider Pinduoduo Inc. (NASDAQ: PDD) also reports results first thing Tuesday. Between August of 2020 and mid-February, the stock added more than 110% to its share price. As of Thursday’s close, the stock traded down 58% for the year to date. Since June 30, Cathie Wood’s ARK Fintech Innovation ETF has pared its holding in Pinduoduo stock from about 1.54 million to less than half a million.
Analysts, however, remain staunchly bullish, with 27 of 37 brokerages rating the stock a Buy or Strong Buy. Eight more give the shares a Hold rating. At a price of around $80.10, the stock’s upside potential, based on a median price target of $164.90, is 106%. At the high target of $229, the upside potential is about 186%.
The difference between Pinduoduo’s potential gains and New Oriental’s is that the former’s have some chance of being met. Yet, the company can do little if the government tightens its regulations.
The forecast for second-quarter revenue is $4.08 billion, up nearly 21% sequentially and up 136% year over year. Pinduoduo is expected to post a per-share loss of $0.21, an improvement of two cents sequentially and worse than last year’s loss of a penny a share. For the full year, analysts forecast a loss per share of $0.66, worse than last year’s per-share loss of $0.38. Revenue is forecast to rise by nearly 95% this year, to $17.73 billion.
The stock trades at 191.0 times estimated 2022 earnings and 50.7 times estimated 2023 earnings. The stock’s 52-week range is $69.89 to $212.60. Pinduoduo does not pay a dividend.
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