All three major U.S. equity indexes posted gains of more than 1% Tuesday but gave some of that back in premarket trading Wednesday. Interest on 10-year Treasuries has risen above 3%, stoking worries about rising inflation and declining consumer spending. The monthly report on housing starts and new building permits showed that both slipped in April. Rising mortgage rates, record-high home prices and the high cost of building materials get the blame.
Before markets opened on Wednesday, big-box retailer Target reported a big miss on earnings, as operating margins were hit by the company’s efforts to reduce inventory and higher freight and transportation costs. The stock traded down nearly 25% in the premarket.
Lowe’s reported better-than-expected earnings but missed on revenue. The home improvement retailer reaffirmed prior guidance for its 2023 fiscal year. The stock traded down more than 4%.
Chipmaker Analog Devices beat estimates on both the top and bottom lines and raised fiscal third-quarter earnings per share (EPS) and revenue guidance. The stock traded up by about 2%.
Container shipper ZIM beat both the revenue and GAAP EPS estimate and declared a dividend payment of $2.85 per share. Shares traded up about 4%.
We already have previewed earnings reports from Cisco, Kohl’s, SQM and Trip.com that are due out after markets close Wednesday or before they open again on Thursday.
Here is a look at two tech firms set to report earnings after Thursday’s closing bell.
Applied Materials
Shares of semiconductor equipment maker Applied Materials Inc. (NASDAQ: AMAT) have declined by about 5.7% in the past 12 months. From their 52-week high of mid-January, the shares are down nearly 30%. The company last month released details for manufacturing 3-nanometer transistors along with advances in extreme ultraviolet technology. The former is generally called gate-all-around and is expected to drive a growing proportion of logic density improvements over the next several years.
Of 31 analysts covering Applied Materials stock, 21 have Buy or Strong Buy ratings and the other 10 rate the shares at Hold. At a recent price of around $116.80 a share, the upside potential based on a median price target of $175 is 34.8%. At the high target of $205, the upside potential is 75.5%.
For the company’s second quarter of fiscal 2022, analysts are expecting revenue of $6.35 billion, which would be up 1.2% sequentially and 21.5% higher year over year. Adjusted EPS are forecast at $1.90, up 0.7% sequentially and 16.3% year over year. For the full fiscal year, analysts are currently forecasting EPS of $8.12, up 18.7%, on sales of $26.5 billion, up 14.9%.
Applied Materials’ stock trades at 14.4 times expected 2022 EPS, 12.5 times estimated 2023 earnings of $10.60 and 12.5 times estimated 2024 earnings of $9.35 per share. The stock’s 52-week range is $102.99 to $167.06. Applied Materials pays an annual dividend of $0.98 (yield of 0.84%). Total shareholder return over the past year was negative 4.78%.
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 share price has increased by 40.5%. Since posting an all-time high in mid-April, however, the stock has dropped 24.4%. It has been bumping higher for the past few trading sessions, perhaps indicating that there are some buy-the-dip investors out there who are primed if more people come to the party.
Analysts are strongly bullish on the stock, with 35 of 38 brokerages having a Buy or Strong Buy rating. At a share price of around $473.30, the stock’s upside potential based on a median price target of $635.05 is 34.2%. At the high price target of $823.00, the upside potential is 73.9%.
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