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Earnings Previews: Block, Carvana, Coinbase, PayPal, Starbucks

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The three major U.S. equity indexes closed lower on Tuesday. The Dow Jones industrials ended the day down 0.24%, the S&P 500 closed 0.41% lower and the Nasdaq retreated 0.89%. Six of 11 sectors closed lower, led by communication services (−1.81%)  and consumer cyclicals (−1.35%). Energy (0.99%) posted the largest gain.

This week’s economic highlight is the Federal Open Market Committee (FOMC) meeting, which began Tuesday and concludes with a press announcement Wednesday afternoon. The FOMC is expected to tack on another 0.75% interest rate hike, raising the federal funds rate from a range of 3.00% to 3.25% to a new range of 3.75% to 4.00%. On Friday, the monthly report on nonfarm payrolls is expected to show a gain of 220,000 jobs, down from the September total of 263,000 new jobs. The headline unemployment rate is forecast to tick higher, from 3.5% to 3.6%.

The three major indexes traded lower in Wednesday’s premarket.

After U.S. markets closed Tuesday, AMD missed consensus estimates for both adjusted earnings per share (EPS) and revenue. The good news is that the company still sees growth in its embedded and data center businesses that will more than offset the slowdown in PC and gaming sales. For fiscal 2023, the company expects to see continued growth in U.S. data centers. The stock traded up about 6% in Wednesday’s premarket.

Airbnb beat estimates on both the top and bottom lines. The company’s outlook for bookings in the current quarter was disappointing. Shares traded down 6.4% Wednesday morning.

Devon Energy also beat on both the top and bottom lines but reduced its third-quarter dividend from $1.55 to $1.35. The stock traded down about 2.7%.

Energy Transfer beat the consensus EPS estimate but fell short on revenue. The company raised fiscal 2022 EPS guidance to a new range of $12.8 billion to $13.0 billion. Shares traded essentially flat in Wednesday’s premarket.

Before markets opened Wednesday morning, CVS Health beat consensus estimates on both the top and bottom lines. The health care giant also boosted fiscal-year EPS guidance and raised cash flow from operations guidance by $1 billion at each end of the prior range. Shares traded down 1.7% in Wednesday’s premarket.

Cenovus Energy beat both top-line and bottom-line estimates. The stock traded down about 2.5%.

Paramount Global missed both top-line and bottom-line forecasts. Shares traded down about 7.5% early Wednesday.

After Wednesday’s closing bell, Albemarle, Marathon Oil, Qualcomm and Robinhood are set to report quarterly results. Before U.S. markets open on Thursday, Barrick Gold, ConocoPhillips, Exelon and Peloton will share their quarterly results.


Here is a preview of five companies set to report quarterly results after U.S. markets close on Thursday.

Block

Over the past 12 months, Block Inc. (NYSE: SQ) has seen its share price fall by almost 77%. The bleeding started last November, shortly after the company posted its 52-week high. Block gets high marks from analysts thanks to its Cash App digital wallet and its integration of recently acquired Afterpay, a buy-now-pay-later platform, into a broader e-commerce platform. A major remaining issue is whether the current weak economy will sink the company’s efforts.
Analysts remain mostly bullish on Block, with 29 of 43 brokerages having a Buy or Strong Buy rating. Another 11 rate the stock at Hold. At a recent price of $59.00 a share, the upside potential based on a median price target of $100.00 is 69.5%. At the high price of $210.00, the upside potential is 256%.

Third-quarter revenue is forecast at $4.47 billion, up 1.5% sequentially and by 16.4% year over year. Adjusted EPS are expected to come in at $0.23, up 27.5% sequentially but down 37.8% year over year. For the full 2022 fiscal year, estimates call for EPS of $0.85, down 50%, on sales of $17.54 billion, down 0.7%.

Square stock trades at about 69.1 times expected 2022 EPS, 38.3 times estimated 2023 earnings of $1.54 and 23.9 times estimated 2024 earnings of $2.46 per share. The stock’s 52-week trading range is $51.45 to $255.95. Square does not pay a dividend. The total shareholder return for the past year was negative 76.9%.

Carvana

Used car retailer Carvana Co. (NYSE: CVNA) has had a tough year. The stock has dropped 95% of its value over the past 12 months and posted a 52-week low late last month. Carvana got some welcome news on Tuesday when analyst Rajat Gupta at J.P. Morgan raised his rating on the stock from Underweight to Neutral and pasted on a $20 price target. That’s not much good news, but it is the best news Carvana has gotten since CarMax reported quarterly results in September that cast a chill over the entire auto dealership business.

Analysts have adopted a wait-and-see position on the shares. Of 27 brokerages covering the company, 16 have a Hold rating and 10 have a Buy or Strong Buy rating. At a share price of around $15.30, the upside potential based on a median price target of $42.00 is nearly 175%. At the high price of $100.00, the upside potential is more than 550%.

Third-quarter revenue is forecast at $2.75 billion, down 3.5% sequentially but 7.8% higher year over year. Carvana is expected to post an adjusted loss per share of $1.97, better than the $2.35 loss per share in the prior quarter but much worse than the year-ago per-share loss of $0.38. For the full 2022 fiscal year, estimates call for an adjusted loss per share of $8.93, much worse than the year-ago loss of $1.63 per share. Full-year sales are forecast at $14.95 billion, up 16.7% year over year.

Carvana is not expected to post a profit in 2022, 2023 or 2024. The company’s enterprise value to sales multiple for 2022 is 0.6, dropping to 0.5 in 2023 and 0.4 in 2024. The stock’s 52-week range is $12.90 to $307.11. The company does not pay a dividend. The total shareholder return for the past year was negative 94.9%.

Coinbase

Like Carvana, Coinbase Global Inc.’s (NASDAQ: COIN) 52-week (and post-IPO) high will begin dropping next week. But the company’s record of missing sales estimates and earnings estimates more often than not does not seem to be in jeopardy. In late September, a crypto patent troll filed a $350 million infringement suit against Coinbase. On the plus side, the Netherlands recently approved the company’s application to become the country’s first major crypto exchange. The good news needs to come in a flood, though, not a trickle. Shares have lost more than 80% in the past 12 months.
Of 26 analysts covering Coinbase stock, 13 have a Buy or Strong Buy rating and another nine rate the shares at Hold. At a share price of around $63.30, the upside potential based on a median price target of $87.00 is 37.4%. At the high target of $220.00, the upside potential is about 248%.

For the third quarter of 2022, the consensus revenue estimate is $641.88 million, down by 20.6% sequentially and by 51.0% year over year. Analysts are forecasting an adjusted loss per share of $1.47, compared to a loss of $0.87 per share in the second quarter and adjusted EPS of $1.85 in the year-ago quarter. For the full year, analysts now expect a loss per share of $6.64, compared to 2021 EPS of $17.10, on sales of $3.32 billion, down nearly 58%.

Coinbase is not expected to post a profit in 2022, 2023 or 2024. The enterprise value to sales multiple for 2022 is 3.7. For 2023, the multiple is 3.0, and for 2024, it is 2.3. The stock trades in a 52-week range of $40.83 to $368.90. Coinbase does not pay a dividend, and the total shareholder return for the past year was negative 80.9%.

PayPal

PayPal Holdings Inc. (NASDAQ: PYPL) has seen its share price drop by 64% over the past 12 months. The payments company surprised to the upside when it reported prior-quarter results and announced a new $15 billion share buyback program, but the bounce was small and short-lived. A recent agreement with Amazon will allow customers to use PayPal’s Venmo to make purchases. That is good news, coming as the holiday shopping season begins. If the company can repeat its surprise performance in the third quarter, the stock could get a more permanent boost.

Of 47 analysts covering the stock, 34 rate PayPal shares as a Buy or Strong Buy and the other 13 have a Hold rating. At a share price of around $83.10, the upside potential based on a median price target of $120.00 is 44.4%. At the high target of $160.00, the upside potential is 92.5%.

Third-quarter revenue is expected to come in at $6.82 billion, up 0.2% sequentially and 10.4% higher year over year. Adjusted EPS are forecast at $0.96, up 3.3% sequentially but 13.5% lower year over year. For the full 2022 fiscal year, estimates call for EPS of $3.63, down 14.5%, on sales of $27.87 billion, up 9.9%.

PayPal stock currently trades at about 21.1 times expected 2022 EPS, 17.3 times estimated 2023 earnings of $4.82 and 14.6 times estimated 2024 earnings of $5.69 per share. The stock’s 52-week range is $67.58 to $232.76. PayPal does not pay a dividend, and total shareholder return for the past 12 months was negative 64.1%.

Starbucks

Starbucks Corp. (NASDAQ: SBUX) posted its 52-week high in early January. Since then, the shares have dropped by more than 20%. The stock posted a new 52-week low on Tuesday.

Unionization efforts have slowed since 71 U.S. stores petitioned for union representation in March, but a recent ruling by the National Labor Relations Board is forcing the company to reopen a store in Ithaca, New York, that the agency found was closed in retaliation for a vote to unionize the store. Another complaint, in North Carolina, accuses the company of adding undisclosed amounts of potassium to one of its dark roast brews.

Analyst sentiment is cool on the stock, with 20 of 35 having a Hold rating and 15 a Buy or Strong Buy rating. At a share price of around $87.10, the upside potential based on a median price target of $96.50 is 10.8%. At the high price target of $136.00, the upside potential is 56.1%.

For the company’s fiscal fourth quarter that ended in September, analysts are expecting revenue of $8.32 billion, up 2.0% sequentially and by 2.1% year over year. Adjusted EPS are pegged at $0.72, down 14.3% sequentially and by 28.0% year over year. For the 2022 fiscal year, current estimates call for EPS of $2.87, down 11.3%, on sales of $32.15 billion, up 10.6%.

Starbucks stock trades at about 30.3 times expected 2022 EPS, 26.4 times estimated 2023 earnings of $3.30 and 22.4 times estimated 2024 earnings of $3.88 per share. The stock’s 52-week range is $68.39 to $117.80. Starbucks pays an annual dividend of $2.12 (yield of 2.53%). Total shareholder return for the past year was negative 18.9%.

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