The three major U.S. equity indexes closed sharply lower Monday. The Dow Jones industrials dropped 1.91%, the S&P 500 lost 2.14% and the Nasdaq tumbled by 2.55%. All 11 sectors ended the day with losses, led by communications services (2.9%), technology (2.8%) and consumer cyclicals (2.8%). The 10-year Treasury note popped above 3% for the first time in a month, while meme stocks AMC (down 42%) and Bed Bath & Beyond (down 16%) continued sinking. In Tuesday’s premarket session, the three major indexes traded lower.
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After markets closed Monday, Palo Alto Networks reported better-than-expected profit and revenue. The company also raised full-year guidance for earnings per share (EPS) and revenue. Shares were up more than 10% early Tuesday.
Zoom Video beat EPS estimates but missed analysts’ consensus revenue estimate. The company also released downside guidance for the current quarter and for the fiscal year. Premarket trading had the stock down about 12.5%.
Before markets opened on Tuesday, JD.com reported better-than-expected profit and revenue. The stock traded up about 1.5%.
KE Holdings also beat both top-line and bottom-line estimates but issued downside guidance for the current quarter. The stock traded up 3.5% in Tuesday’s premarket.
Macy’s also beat estimates on both the top and bottom lines. Current-quarter guidance was a bit short of the profit estimate but higher than the consensus revenue estimate. Inventory remains an overhang. Shares traded up about 1.6%.
Medtronic beat the EPS estimate by a penny, but revenue came in better than expected. The company reaffirmed prior fiscal-year guidance. Shares traded down about 1%.
After markets close Tuesday, Nordstrom, Petco, Toll Brothers and Urban Outfitters are expected to post their quarterly results.
Here is what to expect when these four companies report results Wednesday afternoon.
Nvidia
From their peak in late November, shares of Nvidia Corp. (NASDAQ: NVDA) have plummeted by nearly 47%. The semiconductor industry as a group has fallen by around 17% over the same period.
Earlier this month, the company said it expects its gaming division to put up lower sales than originally expected. Coupled with the 50% haircut to Bitcoin prices since late April, Nvidia has to look for growth from its data center business, where it competes with AMD and Intel, and continued success in its auto industry business. Nvidia expects to begin shipping its new Grace Hopper superchip early next year.
Of 42 analysts covering the stock, 32 have a Buy or Strong Buy rating and another nine rate the shares at Hold. At a recent price of around $170.30 a share, the upside potential based on a median price target of $220.00 is 29.2%. At the high price target of $370.00, the upside potential is 117%.
For its second quarter of fiscal 2023, Nvidia’s revenue is forecast at $6.7 billion, which would be down 19.2% sequentially but 2.9% higher year over year. Adjusted EPS are forecast at $0.50, down 63.4% sequentially and by 51.9% year over year. For the full fiscal year ending in January, analysts are looking for EPS of $3.72, down 16.2%, on sales of $29.24 billion, up 8.6%.
Nvidia stock trades at 45.8 times expected 2023 EPS, 31.3 times estimated 2024 earnings of $5.44 and 26.3 times estimated 2025 earnings of $6.47 per share. The stock’s 52-week trading range is $140.55 to $346.47. The company pays an annual dividend of $0.16 (yield of 0.09%). Total shareholder return for the past year was negative 18.1%.
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Salesforce
Shares of enterprise software maker Salesforce Inc. (NYSE: CRM) have struggled over the past 12 months, particularly since early November. The stock has lost about 31% of its value in the past year and 43% of its value since early November.
Earlier this month, the company made some changes in its management team, but its major headwind is the weak economic outlook. Profit expectations have been pulled in, but revenue is expected to be up.
Of 50 analysts covering the stock, 44 have a Buy or Strong Buy rating. Another five rate the shares at Hold. At a share price of around $177.00, the upside potential based on a median price target of $240.00 is 35.6%. At the high price target of $385, the upside potential is 117.5%.
The consensus revenue estimate for the second quarter of fiscal 2023 is $7.7 billion, up 3.9% sequentially and by 21.5% year over year. Adjusted EPS are forecast at $1.03, up 4.9% sequentially but down 30.4% year over year. For the full fiscal year ending in January, current estimates call for EPS of $4.75, down 0.6%, on sales of $31.73 billion, up 19.8%.
Salesforce stock trades at 37.3 times expected 2023 EPS, 30.4 times estimated 2024 earnings of $5.82 and 25.7 times estimated 2025 earnings of $6.88 per share. The stock’s 52-week range is $154.55 to $311.75. The company does not pay a dividend. Total shareholder return for the past year was negative 30.9%.
24/7 Wall St.Snowflake
Over the past 12 months, cloud-based data platform provider Snowflake Inc. (NYSE: SNOW) has seen its share price plunge by more than 43%. The stock hit an all-time high in mid-November and has dropped nearly 62% since.
Snowflake’s top-line growth over the past three fiscal years has been 174%, 124% and 106%. In the first quarter of this year, Snowflake’s revenue grew by 85% year over year, and management has said it expects product revenue to grow by around 74% year over year in the second quarter. If the company does not hammer that estimate, the shares could take another beating.
Despite the plummeting stock price, analyst sentiment remains positive. Of 37 brokerages covering Snowflake stock, nine rate the shares a Hold and 26 have a Buy or Strong Buy rating. At a share price of around $151.60, the upside potential based on a median price target of $183.00 is 20.7%. At the high price target of $530.00, the upside potential is 250%.
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Fiscal second-quarter revenue is forecast at $467.31 million, up 10.6% sequentially and 71.7% year over year. Snowflake is expected to post a loss per share of $0.01 in the quarter, flat sequentially but better than the loss of $0.04 per share a year ago. For the full 2023 fiscal year ending in January, Snowflake is expected to post adjusted EPS of $0.15, up from the year-ago EPS of $0.01, on sales of $2.02 billion, up 65.5%.
Snowflake stock trades at 377.0 times expected 2024 earnings of $0.40 and 183.3 times estimated 2025 earnings of $0.83 per share. The stock’s 52-week range is $110.27 to $405.00. The company does not pay a dividend, and the total shareholder return for the past year was negative 43.2%.
Splunk
Shares of real-time data collection and reporting platform Splunk Inc. (NASDAQ: SPLK) have dropped about 26.4% over the past 12 months, though they are up about 10% in the past 90 days.
Like Snowflake, Splunk is a growth story, although not at the same level. Over the past year, revenues have risen by about 24%, compared to 98.4% growth at Snowflake over the same period. Other competitors (like DataDog and Elastic) have higher revenue growth rates and much higher enterprise value to sales ratios. That could mean that Splunk’s stock is a bargain. Now the company has to prove it.
Analysts are bullish on the stock with 25 of 39 giving Splunk a Buy or Strong Buy rating and the rest rating the shares at Hold. At a share price of around $106.20, the upside potential based on a median price target of $130.00 is 22.4%. At the high price target of $200.00, the upside potential is nearly 94%.
For the second quarter of fiscal 2023, which ended in July, Splunk is expected to post revenue of $747.92 million, up 11% sequentially and by 23.5% year over year. The estimated adjusted loss per share is $0.35, worse than the prior quarter’s per-share loss of $0.32 but below the year-ago loss per share of $0.62. For the full fiscal year, Splunk is expected to report EPS of $0.23, compared to last year’s loss of $1.25 per share, on sales of $3.33 billion, up 24.4%.
Splunk stock trades at 465.3 times expected 2023 earnings, 101.8 times estimated 2024 earnings of $1.04 and 41.4 times estimated 2025 earnings of $2.57 per share. The stock’s 52-week range is $84.63 to $176.66. The company does not pay a dividend, and the total shareholder return for the past year was negative 26.4%.
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