Tag Archives: Earnings
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SHANGHAI/BEIJING (Reuters) – Chinese internet search firm Baidu Inc posted a forecast-beating quarterly revenue increase and unveiled a U.S. listing plan for its Netflix-like video platform iQiyi as it looks to rev up new drivers for growth.
Baidu posted on Tuesday fourth quarter revenue of 23.6 billion yuan ($ 3.72 billion), up 29 percent against the same period a year ago and topping analysts’ forecasts of 23.05 billion yuan and the company’s own guidance.
The strong results are a major fillip for Baidu as it looks to ramp up spending on riskier gambles in autonomous driving and fend off cashed-up rivals such as Tencent Holdings Ltd and Alibaba Group Holding Ltd in online video content.
A U.S. listing would bring extra financial muscle for its popular iQiyi platform as it ramps up spending. Baidu said the size of any IPO was not yet set, but that it would likely remain iQiyi’s controlling shareholder. iQiyi could be worth $ 8 billion or more, according to Reuters Breakingviews.
“An IPO will bolster iQiyi’s position in the market and give it more cash to buy content or make content on their own,” said Ni Shuang, Beijing-based Pacific Securities analyst, adding it would help Baidu keep pace with rivals in the space.
The strong quarterly showing – driven by the core search and news feed businesses – is also key to generating cash flow “to fund our new AI businesses”, Baidu chief executive Robin Li told a post-earnings conference call.
The company’s shares rose nearly 5 percent in extended trading after the results, overturning a nearly 4 percent fall since the start of the year.
Herman Yu, the firm’s chief financial officer, said content costs rose 70 percent last year to 13.4 bln yuan as iQiyi acquired content. These costs would rise at a similar pace this year.
The firm will also raise R&D spending in areas like its Apollo open-source software platform for autonomous driving, which executives said would eventually become a “very material and significant revenue source for the company”.
“Having said that, a key caveat is that this market will take time to build,” chief operating officer Qi Lu told the conference call.
Strong results in its more traditional businesses were central to Baidu’s success, with revenue from its core online marketing – including its search platform and news feed – jumping 26.3 percent to 20.4 billion yuan.
The results will help soothe Baidu investors as the company looks to turn around its fortunes after a series of missteps sparked steep losses in 2016 and hit its advertising revenue from internet searches.
Baidu, part of China’s trinity of tech giants along with Alibaba and Tencent, posted net income of 4.16 billion yuan in the quarter ended Dec. 31, up from 4.13 billion yuan a year earlier.
Excluding one-time items, the company earned 14.9 yuan per ADS, above forecasts.
Baidu pegged its guidance for first-quarter revenue growth, between 19.86 billion yuan and 20.97 billion yuan, a 25-32 percent increase against the same period of 2017. That compared with analysts’ average estimate of 21.18 billion yuan.
Reporting by Adam Jourdan in SHANGHAI, Pei Li in BEIJING and Arjun Panchadar in BENGALURU; Editing by Eric Meijer and Muralikumar Anantharaman
By Bob Ciura
Apple, Inc. (AAPL) stock whipsawed after the company posted quarterly earnings. After initially dropping 2%, shares turned up 3.5% in after-hours trading, only to give up the gains and decline nearly 3% on Friday, February 2nd.
Indeed, there is reason for the market’s mixed reaction. On one hand, Apple sold fewer phones than it did a year ago. And, after a massive 32% rally in the past one year, the stock is trading well above its average valuation.
On the other hand, Apple is still generating strong growth rates. Average iPhone selling prices continue to rise, and the services business is booming. Apple also has appeal for dividend growth investors. Since Apple re-instituted its dividend in 2012, it has increased its dividend by 10% each year. Apple is one of 331 stocks in the technology sector that pays a dividend. You can see all 331 dividend-paying tech stocks here.
There seem to be good reasons for both the bullish and bearish case for Apple. This article will discuss why the tug-of-war could continue.
For the fiscal 2018 first quarter ended December 30th, Apple had earnings-per-share of $ 3.89, on revenue of $ 88.3 billion. Earnings-per-share beat analyst forecasts by $ 0.04. Revenue increased 12.7% from the same quarter a year ago, and beat expectations by $ 670 million. Apple sold 77.3 million iPhones in the quarter, which was down from 78.3 million in the same quarter last year. Apple was expected to report 80 million iPhones sold.
At the same time, average iPhone selling price increased over $ 100, from $ 695 last year to $ 796 in the most recent quarter. Analysts were forecasting an average iPhone selling price of $ 737. This could be the reason why Apple stock jumped over 3%, after initially selling off. While Apple sold fewer phones overall, the bigger-than-expected increase in average selling price indicates a more favorable shift to higher-priced models. Stronger demand for upper-end iPhones, such as the iPhone X, would be a very good sign.
Once again, Apple’s cash mountain continued to grow. Cash, marketable securities, and long-term investments hit $ 285.1 billion, which represents an all-time high. Cash and investments totaled $ 268.9 billion in the same quarter last year. Apple’s current cash pile amounts to 33% of its market capitalization. This is a huge amount of cash, which Apple can use to reward shareholders with cash returns, and invest for future growth.
Overall, Apple had a good quarter. Revenue and earnings-per-share increased 13% and 16%, respectively. Both measures hit all-time records, and going forward, there is plenty of room for growth to continue. Apple continues to be hugely popular; its active installed base of devices reached 1.3 billion in January, a 30% increase in the past two years.
Earnings growth of 10%+ each year is within reach for Apple. Consumers love their Apple devices, and are willing to pay a premium for them. Apple is the most valuable brand in the world, and as a result, the company holds tremendous pricing power. Since the iPhone business is Apple’s most important by far, the ability to sell higher-priced iPhones is crucial to future earnings growth.
Another catalyst for Apple is its booming services business, which includes iTunes, the App Store, Apple Pay, and more. Services revenue is now a $ 30 billion-a-year business for Apple. In the most recent quarter, services revenue increased 18%, the highest-growth product aside from the “other” category. Services are now Apple’s second-largest segment, behind the iPhone.
Valuation & Expected Returns
Apple is a very high-quality business, with continued room for growth. But even after its strong quarter, the stock fell over 2% after earnings. After a huge gain last year, Apple seems to be taking a breather, which is confusing since the company is still generating strong growth. One reason for the market’s cautious tone toward Apple, could be the valuation of the stock, which has expanded significantly in recent years.
Apple had earnings-per-share of $ 9.73 in the past four quarters. As a result, the stock has a price-to-earnings ratio of 17.8. At first glance, Apple does not seem to be undervalued, relative to the broader market index. The S&P 500 trades for an average price-to-earnings ratio of 26.3.
But in a different context, it is reasonable why investors might be reluctant to bid the stock up even further. In terms of its own historical average, Apple’s valuation is at a multi-year high. Apple has not traded for a price-to-earnings ratio above 18 since 2009. According to ValueLine, over the past five years, Apple has held an average price-to-earnings ratio of just 13.1.
Apple currently trades at a 35% premium to its average price-to-earnings ratio of the past five years. A reversion to the mean would negatively impact the stock. For example, if Apple reverted back to a price-to-earnings ratio of 15-16, the stock would decline approximately 10% to 15%.
To be sure, Apple will generate positive returns, from earnings growth and dividends. In the past 5 years, Apple has increased earnings at a 10% average rate, each year. A potential breakdown of future returns is below:
- 6%-8% sales growth
- 3% share repurchases
- 1.5% dividend yield
The combination of earnings growth and dividends could yield annual returns of 10%-13% each year. But even in this scenario, total returns could still be mediocre, if the valuation multiple declines. For example, if Apple’s price-to-earnings ratio declines to 15 over the next three years, contraction of the valuation multiple would reduce annual returns by 5% per year. In that case, total annual returns would be in the 5%-8% range over that time.
Apple is a fantastic business, and the company is growing revenue and earnings at impressive rates. The only significant risk for the stock moving forward, could be the valuation. While Apple is not overvalued relative to the S&P 500, it does trade at a much higher valuation than it has over the past five years. If the stock were to return to its average valuation, it could be a headwind for the stock.
Investors looking for superior returns should consider high-quality dividend growth stocks, such as the Dividend Aristocrats, which have increased their dividends for 25+ consecutive years. The Dividend Aristocrats have outperformed the S&P 500 Index in the past 10 years. Apple is not yet a Dividend Aristocrat, but there are many other high-quality Dividend Aristocrats, with lower valuations and higher dividend yields. Find them with our service Undervalued Aristocrats provides actionable buy and sell recommendations on some of the most undervalued dividend growth stocks around. Click here to learn more.
Disclosure: I am/we are long AAPL.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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Welcome to Seeking Alpha’s Stocks to Watch – a preview of key events scheduled for the next week. Follow this account and turn the e-mail alert on to receive this article in your inbox every Saturday morning.
By all appearances it’s going to take a lot to knock the stock market off its 2018 upward drive as potential landmines such as North Korea, political chaos and looming government shutdowns continue to be sidestepped with animal spirits stirred up. On that note, Bespoke Investment Group added up the cumulative declines on the S&P 500 on a rolling six-month basis to find that it’s been over 50 years since so little downward pressure has been applied to stocks. Looking ahead to next week, some heavy hitters are expected to post tax benefit-adjusted guidance in what could be another driver for investor enthusiasm.
Expected IPO filings Pagseguro Digital (Pending:PAGS) and Entera Bio (OTC:ENTZ) on Jan. 23; Solid Biosciences (Pending:SLDB), Gates Industrial (Pending:GTES) and Menlo Therapeutics on Jan. 24; Adial Pharmaceuticals (Pending:ADIL), PlayAGS (Pending:AGS) and Armo Biosciences (Pending:ARMO) on Jan. 25.
FDA watch: GlaxoSmithKline (NYSE:GSK), Innovia (NASDAQ:INVA) and Theravance Biopharma (NASDAQ:TBPH) are expected to find out if the supplemental new drug application for triple therapy inhaler Trelegy Ellipta has been accepted for review by the regulator. The FDA’s Tobacco Products Scientific Advisory Committee is also meeting on Jan. 24-25 to review Philip Morris International’s (NYSE:PM) iQOS. Feedback from the committee on the alternative tobacco product could also impact British American Tobacco (NYSEMKT:BTI), Altria (NYSE:MO), Vector Group (NYSE:VGR) and Turning Point Brands (NYSE:TPB).
IPO/secondary share lockup period expirations: Bill Barrett (NYSE:BBG), RBB Bancorp (NASDAQ:RBB), First Republic (NYSE:FRC) and Corbus Pharmaceuticals (NASDAQ:CRBP) on Jan. 22; Sienna Biopharmaceuticals (NASDAQ:SNNA), Ablynx (NASDAQ:ABLX), Immune Design (NASDAQ:IMDZ), Savara (NASDAQ:SVRA) and UniQure (NASDAQ:QURE) on Jan. 23; Newater Technology (NASDAQ:NEWA), Redfin (NASDAQ:RDFN), Idera Pharmaceuticals (NASDAQ:IDRA), Atossa Genetics (NASDAQ:ATOS) and Hutchison China MediTech (NASDAQ:HCM) on Jan. 24; First Bancshares (NASDAQ:FBMS), VBI Vaccines (NASDAQ:VBIV) , Celsion (NASDAQ:CLSN) on Jan. 25.
Notable earnings reports: Earnings season really heats up this week with major reports out of every sector. Netflix (NASDAQ:NFLX) and Halliburton (NYSE:HAL) on January 22; Johnson & Johnson (NYSE:JNJ), Texas Instruments (NYSE:TXN), Verizon (NYSE:VZ), Procter & Gamble (NYSE:PG), United Continental (NYSE:UAL), Capital One Financial (NYSE:COF) and Kimberly-Clark (NYSE:KMB) on Jan 23.; Ford (NYSE:F), General Electric (NYSE:GE), Las Vegas Sands (NYSE:LVS), Comcast (NASDAQ:CMCSA), United Technologies (NYSE:UTX) on Jan. 24; Intel (NASDAQ:INTC), Starbucks (NASDAQ:SBUX), (NYSE:VMW), Wynn Resorts (NASDAQ:WYNN) and Western Digital (NYSE:WDC) on Jan. 25; Honeywell (NYSE:HON), AbbieVie (NYSE:ABBV) and Colgate-Palmolive (NYSE:CL) on Jan. 26. See Seeking Alpha’s Earnings Calendar for the complete list.
M&A watch:There are potential deals brewing with Juno Therapeutics (NASDAQ:JUNO), Acorda Therapeutics (NASDAQ:ACOR), Kroger (NYSE:KR)-Overstock.com (NASDAQ:OSTK), CBS (NYSE:CBS), Fossil (NASDAQ:FOSL), Bloomin’ Brands (NASDAQ:BLMN) and in REIT world with Vici Properties (OTCPK:VICI)-MGM Growth Properties (NYSE:MGP).
Detroit Auto Show: With the dreamy talk about next-gen electrification and mobility goals out of the way, the second week of the Detroit Auto Show is all about letting the public see new models. Front and center in Detroit will be the Ford (F) Ranger, Chevrolet (NYSE:GM) Silverado and Ram (NYSE:FCAU) 1500. BMW (OTCPK:BMWYY) is looking to gain traction in a new sub-segment with the sporty X2 SUV, while Volkswagen (OTCPK:VLKAY) is showcasing the new sub-$ 20K Jetta as it looks to rebuild U.S. sales. On the exotic side, Steve McQueen fans might want to take a look at the special edition Ford Mustang Bullitt. Although Tesla (NASDAQ:TSLA) is skipping the Detroit Auto Show for the third year in a row, the Model 3 will be in the spotlight this week as it makes its way into more showroom. Early test drive reviews (Los Angeles Times, Edmunds (video), USA Today) are already starting to roll in.
Crypto: A couple of mainstream events are on the calendar this week with the Blockchain Davos Conference 2018 and Cannaccord Blockchain Investor Day scheduled for Jan. 23. The blockchain-focused Amplify Transformational Data Sharing ETF (NYSEARCA:BLOK) and Reality Shares Nasdaq NexGen Economy ETF (NASDAQ:BLCN) will also catch the spotlight as they close out their first week of trading. As always, expect volatility in the sector. 7-day crypto scorecard: Bitcoin -14%, Ripple -25%, Ethereum -18%, Bitcoin Cash -31%, Litecoin -19%, Cardano -24%, NEM -25%, NEO +5%, TRON -25%, Stellar -10% and IOTA -26%.
Investor/Analyst Days: The Medicines Company (NASDAQ:MDCO) on Jan 23.
Sales/business updates: HP (NYSE:HPQ) on Jan. 22; Workhorse Group (NASDAQ:WKHS) on Jan. 23; Progressive on (NYSE:PGR) on Jan. 24.
Extraordinary shareholder meetings: CTI Biopharma on (NASDAQ:CTIC) on Jan. 24; Broadsoft (NASDAQ:BSFT) on Jan. 25.
Americas Lodging Investment Summit: Just days after a big industry-rattling deal between Wyndham Worldwide (NYSE:WYN) and La Quinta (NYSE:LQ), hotel management execs meet in L.A. on Jan 22-25. Presenters include Hyatt (NYSE:H), Choice Hotels (NYSE:CHH), Park Hotels & Resorts (NYSE:PK), Marriott International (NYSE:MAR), Red Lion Hotels (NYSE:RLH) and Ashford (NYSEMKT:AINC).
Barron’s mentions: In part 2 of its Roundtable, the panel discusses potential bargains including Samsung (OTC:SSNLF), Starbucks, GrubHub (NYSE:GRUB) and MetLife (NYSE:MET), among others. A set of picks for top stocks in emerging markets include Sberbank (OTCPK:SBRCY), Posco (NYSE:PKX), China Construction Bank (OTCPK:CICHY) and Hollysys Automation Technologies (NASDAQ:HOLI). And retailer H&M (OTCPK:HNNMY) isn’t a bargain yet despite a recent 20% decline.
Sources: CNBC, EDGAR, Bloomberg and Nasdaq.com.
Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.
More than 2,300 companies have now reported their Q3 2017 earnings results since earnings season began back on October 9th. With just a week left until the unofficial end of the reporting period, the S&P 500 is up 1.3% since the start of earnings season. While the S&P’s gain is nice to see, the underlying price action of S&P 500 stocks that have reported has been weak. This is a concerning sign. As shown in the chart below, the average S&P 500 stock that has reported EPS this season has fallen 0.33% on its earnings reaction day. This means investors have been doing more selling than buying of individual stocks that make up the S&P 500 in reaction to their earnings news.
… is expected to highlight the growth of Single’s Day and the success of new business lines, such as its cloud computing and data center businesses.
The growth is attributed to the expansion of IBM’s key businesses, which includes cloud computing and AI solutions. ( Ethan Miller | Getty Images ).