Investing

Earnings Previews: Li-Cycle, Oracle

The three major U.S. equity indexes closed lower Thursday, likely succumbing to jitters related to Friday’s report on the consumer price index. The Nasdaq dropped by 2.75%, the S&P 500 fell by 2.38% and the Dow Jones industrials closed 1.94% lower. The CPI report for May reported a 1.0% rise in the overall index and an increase of 9.6% in core CPI (excluding gasoline and food). Economists had expected a 0.7% increase in the CPI and a 0.5% rise in core CPI. The annualized CPI rose from 8.3% in April to 8.6%. Economists had expected the annualized rate to come in flat.

After markets closed Thursday, Vail Resorts reported solid beats on both profit and revenue. Weekday and nonholiday visits were higher than in 2019 for the ski season to date. Shares traded about 6% higher in Friday’s premarket.

Stitch Fix missed both top-line and bottom-line estimates and reported that active clients dropped by 5% year over year. The stock is down 15% in premarket trading.

DocuSign missed the consensus profit estimate, but revenue came in higher than analysts expected. Shares were pummeled in Friday’s premarket trading, dropping more than 25%.

Here is a look at two companies scheduled to release quarterly results Monday afternoon or Tuesday morning.

Li-Cycle

Lithium-ion battery recycler Li-Cycle Holdings Corp. (NYSE: LICY) came public through a SPAC merger in mid-August of 2021. Since posting a high above $15 in mid-November, the shares have dropped nearly 47%. The company will report results before markets open on Tuesday.

Commodities trading giant Glencore agree last month to invest $200 million in the company in exchange for convertible notes equal to about 10% of Li-Cycle’s outstanding shares if all the notes are converted within five years. Li-Cycle has the right to redeem the note with interest payments at any time during that period.

Of eight brokerages covering the stock, six have a Buy or Strong Buy rating and the other two give it a Hold rating. At a recent share price of around $7.50, the upside potential based on a median price target of $13.00 is 73.3%. Based on a high price target of $18, the upside potential on the stock is 140%.

Fiscal second-quarter revenue is forecast at $6.14 million, which would be up 60% sequentially. Analysts are looking for an adjusted per-share loss of $0.11, better than the prior quarter’s loss of $0.13 per share. For the full 2022 fiscal year ending in October, the adjusted loss per share is forecast at $0.34 on sales of $36.56 million, up nearly 400%.

Shares trade at 22 times estimated 2024 earnings per share (EPS) of $0.33. Li-Cycle is not expected to post a profit in 2023. The stock’s post-IPO range is $5.90 to $14.28. Li-Cycle does not pay a dividend, and the total shareholder return for the past year is negative 33.4%.

Oracle

Software and cloud-computing giant Oracle Corp. (NYSE: ORCL) has dropped about 17% from its share price over the past 12 months. Since reaching an all-time high in mid-December, the share price has dropped by 32%. Oracle reports quarterly results after markets close Monday.

Oracle closed its $28.3 billion merger with electronic health records giant Cerner on Wednesday. Chairperson Larry Ellison said the company plans to build a unified national health records database “where the health records all American citizens’ health records not only exist at the hospital level but also are in a unified national health records database.”

Of 27 analysts covering the stock, seven have a Buy or Strong Buy rating and 18 have a Hold rating. At a share price of around $69.20, the upside potential based on a median price target of $88.00 is about 27.2%. At the high price target of $126, the upside potential is 82.1%.

Fiscal fourth-quarter revenue is forecast at $11.97 billion, up 11.0% sequentially and 3.9% higher year over year. Adjusted EPS are pegged at $1.38, up 21.9% sequentially and down 10.4% year over year. For full fiscal 2022 that ended in May, current estimates call for EPS of $4.75, up 1.7%, on sales of $42.27 billion, up 4.4%.

Oracle stock trades at 14.6 times expected 2022 EPS, 13.2 times estimated 2023 earnings of $5.24 and 12.0 times estimated 2024 earnings of $5.78 per share. The stock’s 52-week range is $66.72 to $106.34. The company pays an annual dividend of $1.28 (yield of 1.85%). Total shareholder return for the past year is negative 16.9%.

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