Curaleaf Holdings to Report Relatively Strong Q4 in Terms of Revenue Growth: ROTH

Curaleaf Holdings is expected to post Q4 revenues of $239.5 million leading to EBITDA of $55 million as the market cap/revenue leader in U.S. cannabis industry is coming off a strong third quarter which showed the potential of the consolidated business the Massachusetts-based company has built through licensing wins and aggressive mergers and acquisitions, according to analysts at ROTH Capital Partners.

The leading U.S. provider of consumer products in cannabis will report its financial and operating results for the fourth quarter and fiscal year ended December 31, 2020 after market close on March 9, 2021.

Roth Capital Partners forecasts EPS loss of 2 cents in the fourth quarter, worse compared to a cent loss in the third quarter. For the full-year 2021, Newport Beach, California-based privately held investment banking company forecasts EPS of 14 cents on revenue of $1.25 billion, up 96.8%.

“We believe the results will indicate the direction for the rest of the industry and are expecting a relatively strong quarter in terms of revenue growth, with integration still weighing on profits. Additionally, we are adjusting our estimates to reflect ‘As Reported’ revenue to align our estimates with consensus and company guidance. Maintain Buy,” said Scott Fortune, equity analyst at ROTH Capital Partners.

“We believe 2021 will be the transformational year for CURA with revenue estimates above $1.2 billion and full integration of all its acquisitions provides the true leverage/scale of its footprint. We are expecting a conservative guidance for the 2021 year without factoring in new legalized states or acquisitions being layered on. We believe CURA will continue to lead the industry through its 100+ store footprint and sizable distribution network.”

Curaleaf Holdings Stock Price Forecast

The U.S.-listed Curaleaf Holdings shares, which surged about 90% in 2020 and added another 23% so far this year, closed nearly 2% lower at $14.75 on Friday.

Six analysts who offered stock ratings for Curaleaf Holdings in the last three months forecast the average price in 12 months of $20.34 with a high forecast of $25.41 and a low forecast of $15.76. The average price target represents a 37.90% increase from the last price of $14.75. All of those six analysts rated “Buy”, according to Tipranks.

Curaleaf had its price objective hoisted by Stifel Nicolaus to $32.25 from $23. The firm currently has a buy rating on the stock. Roth Capital lifted their price target to $20 from $14 and gave the stock a buy rating. Craig Hallum began coverage and issued a buy rating and a $19 price target.

Several other analysts have also updated their stock outlook. Needham & Company LLC raised their price target to $18.50 from $14 and gave the stock a buy rating. Canaccord Genuity boosted their price objective to $29.00 and gave the company a buy rating. Cantor Fitzgerald raised their target price to $23.50 from $20 and gave the stock an overweight rating.

“Our $20 price target is derived using a 22x multiple on our 2022 EV/EBITDA estimate of $632.6 billion, discounted back 15%. Our target price deserves a premium to the MSO peers due to its leading national scale. We set valuation using a multiple we thought appropriate for the growth rate while discounting for risks,” ROTH Capital Partners’ Fortune added.

Check out FX Empire’s earnings calendar

European Equities: German Industrial Production and China in Focus

Economic Calendar:

Monday, 8th March

German Industrial Production (MoM) (Jan)

Tuesday, 9th March

German Trade Balance (Jan)

French Non-Farm Payrolls (QoQ) (Q4)

Eurozone GDP (QoQ) (Q4) Final

Eurozone GDP (YoY) (Q4) Final

Thursday, 11th March

ECB Interest Rate Decision (Mar)

ECB Press Conference

Friday, 12th March

German CPI (MoM) (Feb)

Spanish CPI (YoY) (Feb)

Spanish HICP (YoY) (Feb)

Eurozone Industrial Production (MoM) (Jan)

The Majors

It was a bearish end to the week for the European majors on Friday.

On Friday, the DAX30 fell by 0.96%, with the CAC40 and the EuroStoxx600 ending the day with losses of 0.82% and 0.78% respectively.

Economic data from Germany and the U.S failed to reverse losses from early in the day, as U.S Treasury yields climbed further.

For the European markets, it had also been the first opportunity to respond to FED Chair Powell’s post-European session speech.

A lack of commitment to address yields led to a pullback in the U.S equities, which spilled into the European session.

The Stats

It was a relatively busy day on the economic calendar on Friday.  German factory orders were in focus going into the European open.

In January, factory orders increased by 1.4%, coming in ahead of a forecasted 0.7% increase. In December, orders had fallen by 1.9%.

According to Destatis,

  • Compared with January 2020, new orders were up 2.5% and by 3.7% when compared with February 2020.
  • Domestic orders slid by 2.6%, while foreign orders increased by 4.2%, month-on-month.
  • New orders from the euro area rose 3.9%, with new orders from other countries jumping by 4.4%.
  • Manufacturers of intermediate goods saw new orders increase by 0.2%, with new orders of capital goods up 3.3%.
  • Consumer goods manufacturers, however, reported a 5.8% slide in new orders.

From the U.S

It was a busier session, with official government labor market figures for February in focus late in the European session.

Nonfarm payrolls impressed, with a 379K jump in February. The better than expected rise took the unemployment rate down from 6.3% to 6.2%.

In January, nonfarm payrolls had risen by a more modest 166k.

The Market Movers

For the DAX: It was a bullish day for the auto sector on Friday. Volkswagen rallied by 3.68%, with Daimler rising by 1.32%. BMW and Continental saw relatively modest gains of 0.90% and 0.45% respectively.

It was also a bullish day for the banks. Deutsche Bank rallied by 3.59%, with Commerzbank gaining by 0.92%.

From the CAC, it was a mixed day for the banks. BNP Paribas fell by 0.12%, while Credit Agricole and Soc Gen ended the day with gains of 0.87% and 0.57% respectively.

The French auto sector saw further losses. Stellantis NV and Renault fell by 1.04% and by 1.60% respectively.

Air France-KLM and Airbus SE ended the day down by 6.13% and by 4.87% respectively.

On the VIX Index

A run of 3 consecutive days in the green came to an end for the VIX on Friday. Reversing a 7.12% rise from Thursday, the VIX slid by 13.69% to end the day at 24.66.

The NASDAQ rose by 1.55%, with the Dow and S&P500 gaining by 1.85% and by 1.95% respectively.

VIX 08321 Daily Chart

The Day Ahead

It’s quieter day ahead on the European economic calendar. German industrial production figures for January are due out later this morning.

With little else for the markets to consider, we can expect the numbers to influence going into the European session.

From the U.S, there are no material stats to provide direction, leaving the majors in the hands of FOMC member chatter and chatter from Capitol Hill.

Ahead of the European open, any updates from China’s National People’s Congress will need considering.

Trade data from China will also set the tone.

In February, China’s U.S Dollar trade surplus widened from $78.17bn to $103.25bn. Economists had forecast a narrowing to $60.00bn.

Year-on-year, exports jumped by 60.6%, following an 18.1% increase in January. Economists had forecast a 38.9% surge.

Imports rose by 22.2%, following a 6.5% increase in January. Economists had forecast a 15.0% jump.

The Futures

In the futures markets, at the time of writing, the Dow Mini was up by 101 points with the DAX up by 133 points.

For a look at all of today’s economic events, check out our economic calendar.

Earnings to Watch Next Week: MongoDB, Campbell Soup, JD.com and Oracle in Focus

Earnings Calendar For The Week Of March 8

Monday (March 8)

Ticker Company EPS Forecast
PSON Pearson £32.79
CASY Casey’s General Stores $0.95
YQ M17 Entertainment -$0.06
GOCO Gocompare.Com $0.47
DM Dominion Midstream Partners -$0.06
YALA Yalla $0.12

 

Tuesday (March 9)

IN THE SPOTLIGHT: MONGODB

MongoDB Inc, which provides an open-source database platform for automating, monitoring, and deployment backups, is expected to report a loss of $0.39 per share in the fourth quarter, which represents a year-over-year decline of 56% from -$0.25 per share seen in the same quarter a year ago. However, in the last four consecutive quarters, on average, the company has delivered an earnings surprise of over 30%.

New York City-based company would post year-over-year revenue growth of over 27% to $156.97 million.

MongoDB has established itself as one of the most popular databases to support the development of modern net-new apps. Into CY21, we see the business at a crucial inflection point. First, it is poised to garner the majority of revs from its public cloud business – the segment where market growth and share gains are the strongest. Second, the acceleration in customer adds suggests that its go-to-market model has matured to scale a modern, cloud-first business,” said Sanjit Singh, equity analyst at Morgan Stanley.

“As a result, an equation for durable 30%+ growth emerges (20%+ customer base growth with near 120% net-expansion from the existing base) – a growth story that does not look overly demanding given the strategic nature of this asset.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE MARCH 9

Ticker Company EPS Forecast
SLA Standard Life Aberdeen PLC £6.04
CMD Cantel Medical Corp $0.51
NAV Navistar International $0.01
DQ Daqo New Energy $1.12
THO Thor Industries $1.57
DKS Dick’s Sporting Goods $2.24
OSH Oak Street Health -$0.23
ABM ABM Industries $0.59
AVAV AeroVironment $0.00
MDB MongoDB Inc -$0.39
HRB H&R Block -$1.19
CLNE Clean Energy Fuels $0.00
ADOOY Adaro Energy ADR $0.05
ITV ITV £5.82

 

Wednesday (March 10)

IN THE SPOTLIGHT: CAMPBELL SOUP

CAMPBELL SOUP: Camden County, New Jersey-based processed food and snack company is expected to report a profit of $0.83 per share in the fiscal second quarter, which represents year-over-year growth of over 15% from $0.72 per share seen in the same quarter a year ago.

In the last four consecutive quarters, on average, the company has delivered an earnings surprise of over 9%. One of the world’s top soup makers would post year-over-year revenue growth of over 6% to $2.3 billion.

“High exposure to secularly challenged soup category: Shelf-stable soup (26.5% of sales) faces headwinds given shifts in preferences toward better-for-you and fresh foods, competition from private label, and pricing pressure. Snacking brands are well-positioned, but face competitive pressures: Milano, Goldfish, Farmhouse, and Snyder’s-Lance have strong brand equity but face high competition from PEP and MDLZ,” said Pamela Kaufman, equity analyst at Morgan Stanley.

“Significant organizational changes over last two years refocused the company and show promise: Divesting non-core businesses and new leadership refreshes the company’s strategic plan, allowing the company to focus on its key segments and geographies.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE MARCH 10

Ticker Company EPS Forecast
VERX Vertex Inc. Cl A $0.07
CPB Campbell Soup $0.83
AMC AMC Entertainment -$3.39
SUMO Sumo -$0.12
CLDR Cloudera Inc. $0.11
FNV Franco Nevada $0.70
VNET 21Vianet $0.05
BAK Braskem $1.05
SMTC Semtech $0.48

 

Thursday (March 11)

IN THE SPOTLIGHT: JD.COM, ORACLE

JD.COM: Chinese e-commerce platform JD.com is expected to report a profit of $0.22 in the fourth quarter, which represents year-over-year growth of over 177% from $0.08 per share seen in the same quarter a year ago.

The leading B2C e-commerce player in China, which accounts for over 20% of China’s total B2C online market and over 50% of the online direct sales market, would post year-over-year revenue growth of about 35% to $33.1 billion.

JD’s recent accelerated moves in Community Group Buying business could leverage its advantages in the e-commerce supply chain. Its fast-growing businesses could bring incremental growth momentum into 2021. Maintain Overweight,” said Eddy Wang, equity analyst at Morgan Stanley.

“We forecast that JD’s total revenue will grow 29% YoY in 4Q20, driven by strong demand for electronics and home appliance consumption during promotion season, as well as sustainable strong demand for online FMCG (i.e., JD’s GMV grew 33% YoY during the Double 11 promotion period). Meanwhile, we expect JD to increase its reinvestment to boost consumption in 4Q20, which could drag on its 4Q margin; as such, we forecast that JD’s 4Q20 non-GAAP net margin will reach 0.97% (vs. 0.5% in 4Q19 and 3.19% in 3Q20).”

ORACLE: Austin, Texas-based computer technology corporation is expected to report a profit of $1.11 in the fiscal third quarter, which represents year-over-year growth of over 14% from $0.97 per share seen in the same quarter a year ago.

In the last four consecutive quarters, on average, the company has delivered an earnings surprise of over 5%. One of the largest vendors in the enterprise IT market would post $10.06 billion in sales for the current fiscal quarter, according to Zacks Investment Research. On average, analysts expect that Oracle will report full-year sales of $40.02 billion for the current year, with estimates ranging from $39.44 billion to $40.33 billion.

Oracle’s current low valuation at 13x CY22e EPS reflects its slower growth rate compared to peers. Despite potential opportunities within existing database customers and cloud-based ERP applications, offsets from waning businesses mean 2021 likely lacks the catalysts for the positive inflection in revenue growth investors would need to see to drive multiples higher,” Keith Weiss, equity analyst at Morgan Stanley.

“We see 15% EPS growth in FY21 and 6% in FY22, driven by an aggressive pace of share buybacks. However, cc revenue growth is 2%, in a software sector filled with strong secular growth stories, and just 2% operating income growth points to Oracle potentially reaching peak margins, leaving us Equal-weight at our $67 price target.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE MARCH 11

Ticker Company EPS Forecast
JD JD.com $0.22
ULTA Ulta Salon Cosmetics Fragrance $2.18
MTN Vail Resorts $2.03
DOCU DocuSign Inc. $0.22
WPP WPP ADR $2.75
ORCL Oracle $1.11
CELH Celsius $0.03

 

Friday (March 12)

Ticker Company EPS Forecast
SHCAY Sharp ADR $0.08
EBR Centrais Eletricas Brasileiras $0.24

 

European Equities: A Week in Review – 05/03/21

The Majors

After a bearish final week of the month in February, it was a bullish start to the month in March.

The CAC40 rallied by 1.39%, with the DAX30 and the EuroStoxx600 seeing gains of 0.97% and 0.88% respectively.

Through the early part of the week, better than expected manufacturing PMI figures provided the majors with support.

An easing in U.S Treasury yields from the previous week’s spike, however, was the main driver early in the week.

Later in the week, a combination of weak economic data and pickup in yields saw the majors give up some of their earlier gains.

The Stats

It was a busy week on the economic data front, with February private sector PMIs in focus.

Manufacturing PMI numbers impressed, while the services sector continued to struggle as a result of extended containment measures.

Weighed by service sector woes, the Eurozone’s composite PMI rose modestly from 47.8 to 48.8. The overall picture continued to paint a gloomy picture and reflected the downside risks to the Eurozone economy.

Other stats in the week included German and Eurozone retail sales and unemployment figures and German factory orders.

Retail sales figures were particularly disappointing, while both Germany and the Eurozone’s unemployment rates held steady in January.

At the end of the week, factory orders from Germany impressed, rising by a larger than anticipated 1.4%. More significantly, orders were up by 3.7% when compared with Feb-2020, the month prior to the pandemic.

From the U.S

ISM private sector PMI figures for February also delivered mixed results, For the U.S, manufacturing sector activity picked up, while service sector growth slowed.

The all-important ISM Non-Manufacturing PMI fell from 58.7 to 55.3 in February.

Labor market figures ahead of Friday’s nonfarm payrolls also disappointed.

According to the ADP, nonfarm employment increased by just 117k in February, following a 195k increase in January.

Weekly jobless claims were on the rise in the final week of February, with initial jobless claims increasing from 736k to 745k.

At the end of the week, the government’s official labor market numbers wrapped things up.

Nonfarm payrolls impressed, with a 379K jump in February. The better-than-expected rise took the unemployment rate down from 6.3% to 6.2%.

In January, nonfarm payrolls had risen by a more modest 166k.

On the monetary policy front, FED Chair Powell failed to assure the markets of action to stem the rise in yields on Thursday.

A spike in the Dollar and a sell-off in the U.S equity markets had spilled into the European markets on Friday.

The Market Movers

From the DAX, it was a bullish week for the auto sector. Volkswagen surged by 13.27%, with BMW and Daimler rallying by 6.18% and by 6.52% respectively. Continental ended the week up by a more modest 3.53%.

It was also a bullish week for the banking sector. Deutsche Bank rallied by 4.40%, with Commerzbank gaining 1.47%.

From the CAC, it was yet another particularly bullish week for the banks. Credit Agricole rallied by 5.25%, with BNP Paribas and Soc Gen gaining 4.69% and 3.90% respectively.

It was a relatively bullish week for the French auto sector. Renault and Stellantis NV ended the week up by 1.91% and by 3.85% respectively.

Air France-KLM slid by 7.17%, with Airbus ending the week down by 0.51%.

On the VIX Index

It was back into the red for the VIX  in the week ending 5th March. Partially reversing a 26.76% jump from the previous week, the VIX fell by 11.77% to end the week at 24.66.

The VIX had been on track for a 3rd consecutive weekly gain before a Friday rebound from early losses across the U.S equity markets.

For the week, the NASDAQ fell by 2.06%, while the Dow and the S&P500 rose by 1.82% and by 0.81% respectively.

VIX 06321 Weekly Chart

The Week Ahead

It’s a relatively busy week ahead on the economic calendar.

From Germany, industrial production and trade figures for January are due out on Monday and Tuesday.

Expect the industrial production figures to have the greatest impact on the majors.

On Tuesday, finalized 4th quarter GDP numbers for the Eurozone will also draw interest ahead of Eurozone industrial production figures on Friday.

On the inflation front, finalized inflation figures from Germany and Spain are due out at the end of the week. Barring marked upward revisions, however, these should have a muted impact on the majors.

While the stats will provide direction, it will be the ECB press conference on Thursday, however, that will be the main event.

With the markets expecting the ECB to stand past on policy, Lagarde’s view on inflation, yields and the impact on the economy and monetary policy will be key.

From the U.S, the economic calendar is on the lighter side.

On Wednesday, February inflation figures will draw interest ahead of the weekly jobless claim figures on Thursday.

At the end of the week, prelim March consumer sentiment figures will also influence late in the European session.

Following FED Chair Powell’s comments from last week, FOMC member chatter in the week ahead will also need monitoring.

Costco Wholesale Misses Earnings Estimates; Analysts Cut Target Price

Costco Wholesale Corporation, which operates a chain of membership-only big-box retail stores, reported a lower-than-expected profit in the second quarter, prompting several analysts to lower their one-year price targets.

The leading warehouse club reported net income for the quarter of $951 million, or $2.14 per diluted share, which includes $246 million pretax, or $0.41 per diluted share, in costs incurred primarily from COVID-19 premium wages. That was below the market consensus estimates of $2.45.

COST is positioned to comp the comp in the quarters ahead, and we expect will maintain a significant share. Compares getting challenging, but stronger traffic, re-opening driving fuel & other categories should support robust comps. Renewal returned to all-time high of 91.0% as shoppers are satisfied and loyal. We view curbside pickup pilot as a long-term positive,” said Oliver Chen, equity analyst at Cowen and Company.

Net sales for the quarter increased 14.7%, to $43.89 billion, from $38.26 billion last year. Net sales for the first 24 weeks increased 15.8%, to $86.23 billion, from $74.49 billion last year.

Costco Wholesale shares, which surged over 30% in 2020, traded about 3% lower at $311.08 on Friday.

“Our $332 per share valuation of wide-moat Costco should not change much after it announced second-quarter earnings. Its sales growth outpaced our target (12.9% adjusted comparable expansion across the company versus our 12.0% mark), but we expected cost leverage on the heightened revenue that did not materialize (25 basis points of operating margin degradation, to 3.0%, rather than our forecast for 25 basis points of improvement),” said Zain Akbari, equity analyst at Morningstar.

“As the double-digit sales growth is attributable to the pandemic and the margin shortfall to freight and fuel pressures we see as transitory, we continue to expect mid-single-digit percentage sales growth and 3%-4% operating margins over the next 10 years. We suggest investors await a greater margin of safety, as Costco faces an uncertain normalize action of spending habits once the pandemic ebbs.”

Costco Wholesale Stock Price Forecast

Eighteen analysts who offered stock ratings for Costco Wholesale in the last three months forecast the average price in 12 months of $379.44 with a high forecast of $420.00 and a low forecast of $325.00.

The average price target represents a 21.81% increase from the last price of $311.49. Of those 18 analysts, 12 rated “Buy”, six rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $410 with a high of $520 under a bull scenario and $270 under the worst-case scenario. The firm gave an “Overweight” rating on the apparel retail company’s stock.

“Healthy underlying Q2 results, but tough compares are ahead. SG&A leverage (as COVID costs are lapped) should offset gross margin pressure in F’Q3/Q4. We like COST as a longer-term holding – especially as the multiple has come in – but stock may tread water until visibility on COVID laps improves,” said Simeon Gutman, equity analyst at Morgan Stanley.

Several other analysts have also updated their stock outlook. UBS cuts target price to $395 from $415. Oppenheimer cuts target price to $350 from $400. Stifel cuts target price to $370 from $395. BMO cuts target price to $410 from $430. Deutsche bank cuts target price to $344 from $347.

Moreover, Citigroup cuts price target to $360 from $380. Telsey Advisory Group cuts price target to $375 from $430. JP Morgan cuts target price to $369 from $411. D.A. Davidson cuts price target to $325 from $390. Jefferies cuts price target to $405 from $435.

Analyst Comments

COST’s results have consistently been among the best in Retail. Over the past decade, COST has delivered 6% comps and 10% EBIT growth on average. It is rare to find a business with COST’s solid comp/membership growth, while relative e-commerce insulation differentiates its value proposition from other retailers,” Morgan Stanley’s Gutman added.

“We are Overweight even as the stock trades at an elevated valuation given COST’s scarcity value, safety, and scale. In the near-term, we expect incremental sales uplifts from COVID-19 disruption, and earnings power looks stronger despite COVID-19 expenses,” said Morgan Stanley’s Greenberger added.”

Check out FX Empire’s earnings calendar

Apparel Retailer Gap Tops Q4 Earnings Estimates; Forecasts Sales Growth in 2021

San Francisco, California-based apparel retailer Gap Inc reported better-than-expected earnings in the fourth quarter and said it expects this year’s sales to reflect mid-to high-teens growth versus last year, sending its shares up over 4% in extended trading on Thursday.

The U.S. specialty apparel retailer said its comparable sales were flat in the quarter, including a 49% increase in online sales and total net sales fell 5% due to store closures and COVID-19 impacts. Store sales declined by 28% in the quarter, with impacts from the pandemic and strategic closures noted above.

Gap reported earnings per share of 28 cents, 9 cents more than Wall Street’s expectations. For the fiscal year 2021, the company expects diluted earnings per share to be in the range of $1.20 to $1.35.

Following this optimism, Gap shares, which surged over 14% in 2020, rose over 4% to $25.42 in after-trading hours on Thursday.

“4Q was mixed – with signs of the company’s Power Plan taking hold in the form of significant occupancy leverage, lower markdowns, and a better trend at the core Gap brand, offset by a moderating trend at Old Navy.  Margin enhancing initiatives are encouraging, but we look for greater clarity around Old Navy, which remains the key profit driver for GPS. Reiterate Hold,” said Janine Stichter, equity analyst at Jefferies.

Gap Stock Price Forecast

Five analysts who offered stock ratings for Gap in the last three months forecast the average price in 12 months of $25.40 with a high forecast of $28.00 and a low forecast of $22.00.

The average price target represents a 0.08% increase from the last price of $25.38. From those five analysts, one rated “Buy”, four rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $29 with a high of $42 under a bull scenario and $14 under the worst-case scenario. The firm gave an “Equal-weight” rating on the apparel retail company’s stock.

“4Q GM expansion & controlled SG&A spend bring the 10% EBIT margin target back into view. But management must deliver sales acceleration for positive EPS revisions, the key unlock to further stock price appreciation given high valuation. Raise price target to $29; stay Equal-weight as we await signs of revenue acceleration,” said Kimberly C Greenberger, equity analyst at Morgan Stanley.

Several other analysts have also updated their stock outlook. JP Morgan raised the target price to $32 from $30. RBC upped the price objective to $30 from $28. B Riley increased the stock price forecast to $27 from $22. Jefferies raised the price target to $25 from $24. UBS upped the target price to $25 from $22.

Analyst Comments

GPS is in need of significant transformation. However, we are more positive on the LT forecast given new management’s commitment to fleet and corporate downsizing. The separation work and COVID-19 were the catalysts GPS needed to downsize its business, as reflected by management’s comprehensive plan for the business outlined at its 2020 Investor Day,” said Morgan Stanley’s Greenberger added.

“Our fundamental concerns remain (falling store traffic, eComm disintermediation, declining brand health, apparel price deflation, falling margins), but are exacerbated in the NT due to COVID-19. A portion of GPS‘ portfolio value proposition is less competitive, as Gap brand and BR require significant transformation; ON and Athleta are bright spots.”

Check out FX Empire’s earnings calendar

European Equities: German Factory Orders and U.S Nonfarm Payrolls in Focus

Economic Calendar:

Friday, 5th March

German Factory Orders (MoM) (Jan)

The Majors

It was a mixed day for the European majors on Thursday.

Mixed economic data from the Eurozone and the U.S provided little support for the European boerses.

The lingering fear of the impact of reinflation on monetary policy continued to weigh on the majors late in the week.

On Thursday, the DAX30 the EuroStoxx600 fell by 0.17% and by 0.38% respectively, while the CAC40 rose by 0.01%.

The European majors came under further pressure as the markets responded to a pickup in U.S Treasury yields on the day.

The Stats

It was a relatively busy day on the economic calendar on Thursday.  Key stats from the Eurozone included Eurozone retail sales figures along with January’s unemployment rate.

Retail sales slid by 5.9% in January, reversing a downwardly revised 1.8% increased from December. Economists had forecast a more modest 1.1% fall.

Year-on-year, retail sales fell by 6.4% across the Eurozone in January, which was worse than a forecasted 1.2% decline. In December, retail sales had risen by an upwardly revised 0.9%.

According to Eurostat,

  • Month-on-month, non-food product sales slid by 12.0%, with automotive fuel sales by 1.1%.
  • There was a 1.1% increase in the sales of food, drinks, and tobacco.
  • By member state, Austria (-16.6%), Ireland (-15.7%), and Slovakia (-11.1%) registered the largest falls.
  • Estonia registered the largest increase, rising by a relatively modest 1.7%.

While retail sales figures disappointed, the Eurozone’s unemployment rate held steady at 8.1% in January. December’s unemployment rate was revised down from 8.3% to 8.1%.

According to Eurostat,

  • While stable at 8.1%, this was up from January 2020’s 7.4%.

Ahead of today’s key stats, construction PMI figures from Germany failed to impress. In February, the IHS Markit Construction PMI slid from 46.6 to 41.0.

From the U.S

Weekly jobless claim figures were in focus along with January factory orders late in the European session.

In the week ending 26th February, initial jobless claims increased from 736k to 745k. Economists had forecast a rise to 750k.

Factory orders were positive for riskier assets. In January, factory orders increased by 2.6%, following a 1.6% rise in December. Economists had forecast a 2.1% increase.

The Market Movers

For the DAX: It was a mixed day for the auto sector on Thursday. Volkswagen rallied by 2.02%, with Continental and Daimler rising by 0.16% and by 1.15% respectively. BMW bucked the trend, however, falling by 0.32%.

It was a bearish day for the banks. Deutsche Bank slid by 3.16%, with Commerzbank falling by 1.34%.

From the CAC, it was a bearish day for the banks. BNP Paribas fell by 0.14%, with Credit Agricole and Soc Gen seeing heavier losses of 1.30% and 1.23% respectively.

The French auto sector also struggled. Stellantis NV and Renault fell by 0.25% and by 0.50% respectively.

Air France-KLM and Airbus SE ended the day down by 1.08% and by 0.16% respectively.

On the VIX Index

It was a 3rd consecutive day in the green for the VIX on Thursday. Following a 10.66% gain on Wednesday, the VIX rose by 7.12% to end the day at 28.57.

The NASDAQ slid by 2.11%, with the Dow and S&P500 falling by 1.11% and by 1.34% respectively.

VIX 05321 Daily Chart

The Day Ahead

It’s quieter day ahead on the European economic calendar. German factory order numbers for January are due out later this morning.

Expect any heavy fall in orders to raise questions over the recent uptrend in German survey-based figures.

Back in January, Germany’s Manufacturing PMI survey had reported a continued rise in new orders, albeit at a slower pace than in December.

From the U.S, nonfarm payrolls and February’s unemployment rate will also garner plenty of interest later in the day.

Ahead of the European open, China Premier Li Keqiang’s National People’s Congress speech will draw interest.

The Futures

In the futures markets, at the time of writing, the Dow Mini was down by 12 points.

For a look at all of today’s economic events, check out our economic calendar.

Kroger Tops Q4 Estimates, But Expects Sales Slowdown as Pandemic-Driven Demand Wanes

Kroger, one of the world’s largest food retailers, reported better-than-expected profit in the fourth quarter but the company flagged that its pandemic-driven sales growth will fade this year.

The retailer which operates over 2,500 supermarkets in the U.S. said it earned $0.81 per share in the quarter ended on January 30, 2021, beating Wall Street consensus estimates of $0.69 cents per share.

The company said its total company sales were $30.7 billion in the fourth quarter, compared to $28.9 billion for the same period last year. Excluding fuel and dispositions, sales grew 10.7%.

Kroger Q4 ID sales growth came in >10% y/y, FY’21 guidance was provided, the FY’21 capex range’s midpoint is <10% higher than consensus, and the all-important Investor Day is scheduled for Wed Mar 31 — clearing the investment community’s bar on each front, in our view. Q4 EPS of $0.81 beat our/consensus $0.69, driven by higher gross margin and lower interest expense, and consensus currently sits below FY’21 ID sales growth, operating profit, and EPS ranges,” noted Matt Fishbein, equity analyst at Jefferies.

However, Kroger reported a net attributable loss of $77 million, worse compared to a profit of $327 million seen in the same period a year ago. Kroger forecasts adjusted full-year same-store sales to decline in the range of 3%-5% and earnings per share in the range of $2.75-$2.95.

Kroger shares, which rose over 9% in 2020, traded about 3% higher at $34.11 on Thursday.

Kroger Stock Price Forecast

Eight analysts who offered stock ratings for Kroger in the last three months forecast the average price in 12 months of $32.43 with a high forecast of $39.00 and a low forecast of $28.00.

The average price target represents a -4.48% decrease from the last price of $33.95. From those eight analysts, none rated “Buy”, five rated “Hold” and three rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $28 with a high of $45 under a bull scenario and $15 under the worst-case scenario. The firm gave an “Underweight” rating on the multi-department stores’ stock.

Several other analysts have also updated their stock outlook. BofA Global Research lowered the price objective to $28 from $40. Stephens raised the target price to $35 from $30. Telsey advisory group slashed the price objective to $39 from $43.

Moreover, Kroger had its price objective increased by research analysts at Wells Fargo & Company to $34 from $31. The brokerage presently has an “equal weight” rating on the stock. Zacks Investment Research cut from a “buy” rating to a “hold” rating and set a $34.00 price objective on the stock. Barclays cut from an “equal weight” rating to an “underweight” rating and set a $31.00 price objective on the stock.

Analyst Comments

Kroger (KR) is one of the largest conventional food retailers, with competitive advantages including leading scale, an advanced customer data science platform, and ramping digital capabilities. 2020 was a historically strong year for KR driven by COVID-19 uplifts, but KR’s share gains are already normalizing we anticipate an industry sales slowdown in 2021-2022 that is underappreciated in Street estimates,” said Simeon Gutman, equity analyst at Morgan Stanley.

“Meanwhile we model EBIT margins to return to pre-COVID-19 levels by 2022 as normalizing promotional activity and e-comm pull-forward pressure margins. Longer-term we continue to struggle to model a path to sustainable EBIT growth and margin stabilization,”

Check out FX Empire’s earnings calendar

Snowflake Shares Slump on Wider-Than-Feared Loss

San Mateo, California-based cloud data platform provider Snowflake’s shares slumped about 9% on Wednesday after the company reported a bigger-than-expected loss in the fourth quarter.

The company, which enables customers to consolidate data into a single source to drive business insights reported a loss of $0.70 per share, compared with a $1.67 loss seen in the same period a year ago. But that was worse compared with Wall Street consensus estimates for a loss of 17 cents per share.

Snowflake shares, which fell about 18% since it started trading publicly on 16 Sept 2020, slumped another 8.7% to $247 on Wednesday.

However, revenue for the quarter jumped 117% year-over-year to $190.5 million, beating analysts’ expectations of $178.50 million. The data cloud company said its product revenue for the quarter was $178.3 million, surging 116% y/y.

Snowflake’s revenue guidance for fiscal 2022 was more bearish than we expected. Nonetheless, adjustments we made for the year were countered with a boost from the time value of money, leading to our sustained fair value estimate of $204 per share for no-moat Snowflake,” said Julie Bhusal Sharma, equity analyst at Morningstar.

“With shares down 2% to near $242 after results, Snowflake shares are now within 3-star, fairly-valued territory, which encapsulates a wide range of share prices given our very high uncertainty rating.”

Snowflake Stock Price Forecast

Ten analysts who offered stock ratings for Snowflake in the last three months forecast the average price in 12 months of $313.33 with a high forecast of $350.00 and a low forecast of $270.00.

The average price target represents a 26.84% increase from the last price of $247.03. From those ten analysts, three rated “Buy”, seven rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $270 with a high of $500 under a bull scenario and $100 under the worst-case scenario. The firm gave an “Equal-weight” rating on the data cloud company’s stock.

“The 116% YoY product revenue growth in Q4 well illustrates SNOW’s strong positioning at the confluence of Data and Cloud trends. However, the data points on ramping adoption of Data Cloud may be even more important in establishing clear competitive moats and the longer-term durability of growth,” said Keith Weiss, equity analyst at Morgan Stanley.

Several other analysts have also updated their stock outlook. Credit Suisse lowered the target price to $275 from $310. Barclays cut their stock price forecast to $270 from $295. Rosenblatt Securities initiated with a neutral rating and set the target price at $285. Citigroup raised the price objective to $325 from $300. Deutsche Bank lowered the price target to $270 from $335.

Analyst Comments

“By bringing the scalability and elasticity of the public cloud to data management, Snowflake allows customers to more easily and economically derive insight and value from their data. It’s momentum today (124% revenue growth in FY21) highlights the attractive share gain opportunity from legacy on-premise vendors that currently dominate the market, current competitive differentiation from the solutions of the public cloud vendors and the size of its potential market opportunity (broadly estimated at $56 billion as of 2019),” Morgan Stanley’s Weiss added.

“However, currently trading 50x CY22e sales vs. high-growth peers closer to 29x CY22e sales, we see success priced in already, keeping us Equal-weight.”

Check out FX Empire’s earnings calendar

European Equities: Economic Data and Bond Yields in Focus

Economic Calendar:

Thursday, 4th March

German IHS Markit Construction PMI (Feb)

ECB Economic Bulletin

Eurozone Retail Sales (MoM) (Jan)

Eurozone Unemployment Rate (Jan)

Friday, 5th March

German Factory Orders (MoM) (Jan)

The Majors

It was another relatively bullish day for the European majors on Wednesday.

The CAC40 and the DAX30 saw gains of 0.35% and 0.29% respectively, while the EuroStoxx600 ended the day flat.

It was a choppy session for the majors, which faced rising Treasury yields late in the European session. News that the U.S would have enough vaccine doses to vaccinate everyone in the U.S before the summer drove yields higher.

Earlier in the session, economic data from the Eurozone had delivered mixed results. While the February PMI numbers were largely better than expected, the Eurozone’s private sector continued to contract.

The Stats

It was a busy day on the economic calendar on Wednesday.  Service sector PMI numbers for Italy and Spain were in focus early in the European session.

Finalized service and composite PMI figures for France, Germany, and the Eurozone also provided the majors with direction.

In February, Spain’s services PMI increased from 41.7 to 43.1. Economists had forecast a rise to 43.0.

Service sector activity also continued to contract in Italy. In February, the Services PMI increased from 44.7 to 48.8, coming in ahead of a forecasted 46.0.

For France, the services PMI fell from 47.3 to 45.6 in February, which was up from a prelim 43.6.

German’s Services PMI fell from 46.7 to 45.7, which was down from a prelim 45.9.

It was a different story for the composite PMIs, however.

An impressive pickup in manufacturing sector activity in Germany led to a rise in the German composite from 50.8 to 51.1. This was down marginally from a prelim 51.3.

For France, the Composite fell from 47.7 to 47.0. This was up from a prelim 45.2, however.

The Eurozone

For the Eurozone, the Services PMI rose from 45.4 to 45.7 in February, which was better than a prelim 44.7.

As a result of better numbers from Italy and Spain, the Composite PMI rose from 47.8 to 48.8, an upward revision from a prelim 48.1.

According to the February survey,

  • The modest fall in activity was closely linked to a decline in new orders, which fell for a 5th consecutive month.
  • In spite of this, new export business increased at its strongest pace for nearly 3-years.
  • For the Eurozone, there was a net increase in employment for the 1st time in 12-months.
  • Input cost inflation was recorded for the 9th successive month and to the sharpest degree since the Nov-2018.
  • As a result, output charges rose for the first time since last February.
  • Optimism hit its highest level in 3-years, supported by the rollout of vaccines and easing of restrictions.

From the U.S

The market’s preferred ISM Non-manufacturing PMI and ADP nonfarm employment change figures were in focus late in the session.

In February, the ISM Non-Manufacturing PMI fell from 58.7 to 55.3. Economists had forecast for the PMI to hold steady at 58.7.

  • The Price Index rose from 64.2% to 71.8%, aligned with a marked pickup in inflationary pressures in other major economies.
  • Other sub-indexes were in decline, weighing on the headline PMI figures.
    • ISM Non-Manufacturing Business Activity Index fell from 59.9 %to 55.5%.
    • The Employment Index fell from 55.2% to 52.7%.
    • Finally, the New Orders Index slid from 61.8% to 51.9%.

The ADP Nonfarm Employment figures for February also disappointed, with employment rising by just 117k in February. Economists had forecast a 177k rise following a 195k increase in January.

The Market Movers

For the DAX: It was a bullish day for the auto sector on Wednesday. BMW (+4.54%), Continental (+4.49%), and Volkswagen (+4.67%) led the way, while Daimler trailed with a more modest 0.94% gain.

It was also a bullish day for the banks. Deutsche Bank ended the up by 1.62%, with Commerzbank gaining 1.02%.

From the CAC, it was a bullish day for the banks. BNP Paribas and Credit Agricole rose by 2.52% and by 2.46% respectively, with Soc Gen rallying by 3.62%.

It was a mixed day for the French auto sector, however. Stellantis NV slipped by 0.22%, while Renault rallied by 5.21%. While Stellantis closed out the day in the red, Stellantis delivered positive earnings and an optimistic outlook on Wednesday that supported the broader auto sector.

Air France-KLM eked out a 0.07% gain, with Airbus SE ending the day up by 1.37%.

On the VIX Index

It was a 2nd consecutive day in the green for the VIX on Wednesday. Following a 3.21% gain on Tuesday, the VIX rose by 10.66% to end the day at 26.67.

Rising U.S Treasury yields delivered the upside for the VIX, as the U.S equity markets responded to vaccine updates from the administration.

The NASDAQ slid by 2.70%, with the Dow and S&P500 falling by 0.39% and by 1.31% respectively.

VIX 040321 Daily Chart

The Day Ahead

It’s another busy day ahead on the European economic calendar. Key stats include retail sales and unemployment figures for the Eurozone, with the ECB Economic Bulletin due out ahead of the numbers.

While we can expect some market sensitivity to the numbers, expect the ECB Economic Bulletin to be the key driver early on.

With the ECB in action next week, the markets will be looking for clues on what to expect at the press conference. Inflation, the economic outlook, EUR strength, and their impact on monetary policy will likely be the main areas of focus.

From the U.S, the weekly jobless claims figures and January factory order numbers will also influence late in the European session.

The Futures

In the futures markets, at the time of writing, the Dow Mini was down by 45 points.

For a look at all of today’s economic events, check out our economic calendar.

UK Homebuilder Persimmon’s Shares Gain on Strong Guidance; Target Price GBX 3,160

The UK’s second-largest homebuilder Persimmon said its revenue and profit declined in 2020 but forecasts houses deliveries to reach pre-COVID-19 levels by 2022, sending its shares up over 6% on Wednesday.

The company is engaged in house building within the United Kingdom said its average private weekly sales for the first eight weeks were 7% ahead of last year. The company also said it expects 1H21 completion volumes to be in line with 1H19 of 7,584 units, with similar delivery in 2H.

“With much of FY20 results already known, investors will be focused on scope for upgrades and an update on the CEO priorities. We see no update of margins guidance. The new priorities set out by the CEO may be the key to further upgrades – the first two bringing lower costs, and the positioning of growth on the list suggesting greater ambitions: 1) build right first time, 2) customer first, 3) growth, 4) maintaining and growing financial strength, 5)forefront of sustainability,” said Glynis Johnson, equity analyst at Jefferies.

“The group has confirmed it will return 235p this year, albeit the payments are slightly more spread (125p March, 55p Aug, 55p Dec), and reiterated its previous policy: 125pfinal, and interim reflecting excess capital (clarified as levels above £700m cash).”

The FTSE-100-listed Persimmon shares, which rose about 3% in 2020, surged nearly 6% to GBX 2,871 on Wednesday.

Persimmon Stock Price Forecast

Seven analysts who offered stock ratings for Persimmon in the last three months forecast the average price in 12 months of GBX 3,159.86 with a high forecast of GBX 3,349 and a low forecast of GBX 2,950.

The average price target represents a 10.48% increase from the last price of GBX 2,860. From those seven analysts, six rated “Buy”, one rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of GBX 2,950 with a high of GBX 3,900 under a bull scenario and GBX 1,100 under the worst-case scenario. The firm gave an “Equal-weight” rating on the UK’s largest housebuilders’ stock.

“FY20 contained few surprises after its January trading statement, but its 2021 volumes guidance was 2-3% ahead of our and consensus estimates,” said Christopher Fremantle, equity analyst at Morgan Stanley.

Several other analysts have also updated their stock outlook. JP Morgan raised the target price to GBX 3,360 from GBX 3,210. Citigroup lowered the price objective to GBX 3,130 from GBX 3,197. Jefferies upped the price target to GBX 3,349 from GBX 3,213.

Moreover, Barclays upgraded to overweight from equal weight and raised the target price to GBX 3,000 from GBX 2,800. Credit Suisse lowered the target price to GBX 3,006 from GBX 3094. Deutsche Bank raised the target price to GBX 3,283 from GBX 3,173.

Analyst Comments

Persimmon has broad UK coverage and low exposure to the south-east and London. This has helped the company in recent years, given a weaker market in this region. Persimmon entered the crisis in good shape, with good cash balances and a smaller land creditor position than peers; it has outperformed peers through a lockdown and is set to deliver a strong performance at 2H,” Morgan Stanley’s Fremantle added.

“At c12x 2021e EPS and 2.6x 2021 TBV (sector: 1.5x), valuation is full, in our view; 2021 is still uncertain and the investment case continues to depend on the extent to which Persimmon can sustain revenues, margins and RoE from already very elevated levels, particularly given risks from Help to Buy phase-out and CEO transfer.”

Upside and Downside Risks

Risks to Upside: We see house price growth heavily correlated with nominal GDP growth, with changes in household leverage and interest rates other key factors. As local currency players, sector share prices have tended to be positively correlated with sterling strength/weakness, and with house price growth 6 months forward – highlighted by Morgan Stanley.

Risks to Downside: See ‘Risks to Upside’. Also Help to Buy removal remains a downside risk to volumes.

Check out FX Empire’s earnings calendar

NIO Shares Slump on Big Q4 Loss, Slowing Sales Due to Global Chip Shortage

Chinese electric vehicle maker NIO’s shares slumped 13% on Tuesday after the company’s loss far surpassed analysts’ expectations for the fourth quarter and warned the global chip shortage would slow the pace of EV deliveries in the first quarter.

The company, which designs, manufactures, and sells smart and connected premium electric vehicles, reported a fourth-quarter net loss of 1.49 billion yuan, way above Wall Street consensus estimates for a loss of 757 million yuan.

NIO’s reported a net loss per share of $1.05 for the fourth quarter, largely missing the market expectations for a loss of $0.16 per share. The firm said its revenue surged over 130% to $6.64 billion from the same period last year but came a little below analyst’s forecasts of $6.71 billion.

“NIO concluded a transformational 2020 with a new quarterly delivery record of 17,353 vehicles in the fourth quarter of 2020. The strong momentum has continued in 2021 as we achieved a historic monthly delivery of 7,225 vehicles in January and a resilient delivery of 5,578 vehicles in February, representing strong 352% and 689% year-over-year growth, respectively,” said William Bin Li, founder, chairman and chief executive officer of NIO.

“Supported by competitive product offerings, outstanding services and innovative business models, we have won increasing recognition from our users and expect to deliver 20,000 to 20,500 vehicles in the first quarter of 2021.”

However, that is slower than the 42% increase the Chinese electric vehicle maker reported between the third and the fourth quarter.

Following this, the U.S.-listed NIO shares, which surged over 1,100% in 2020, slumped 13% to $43.29 on Tuesday. However, it gained 1.6% to $43.98 in extended trading.

“We cut our DCF-based TP to USD91 from USD100 after factoring in our new earnings forecasts while our WACC assumption is unchanged. We reiterate our Buy rating on NIO as we see its technology as ahead of peers with strong sales volume growth ahead. The recent share-price retreat serves as a good entry point, in our view. Key downside risks: lower-than-expected sales volume and margin,” said Daiwa’s Kelvin Lau.

“Our 2021-2023E earnings are more conservative than the street likely as we are more cautious on its EBIT margin outlook. However, we are likely more positive on NIO’s long-run outlook.”

NIO Stock Price Forecast

Ten analysts who offered stock ratings for NIO in the last three months forecast the average price in 12 months of $68.26 with a high forecast of $80.30 and a low forecast of $54.00.

The average price target represents a 57.68% increase from the last price of $43.29. From those ten analysts, seven rated “Buy”, three rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $60 with a high of $122 under a bull scenario and $42 under the worst-case scenario. The firm gave an “Overweight” rating on the Chinese electric vehicle makers’ stock.

Several other analysts have also updated their stock outlook. JPMorgan lowered their target price to $70 from $75. Jefferies set a hold rating and a $60 target price for the company. Nomura set a buy rating and $80.30 target price for the company.

Moreover, Nomura set a buy rating and $80.30 target price for the company. Bank of America boosted their price objective to $70 from $59 and gave the stock a buy rating.

Analyst Comments

“Solid 1Q volume guidance suggests the good trajectory of sales recovery post CNY, corroborating superior market recognition of NIO’s models and brand. The strong balance sheet can finance more aggressive channel expansion and technology investment. Tight component supply will likely cap 2Q sales upside,” said Tim Hsiao, equity analyst at Morgan Stanley.

“We expect higher long-term growth visibility from the software development BaaS initiative. Tesla’s success in China has also attracted fund flows for EV makers, which we think bodes well for NIO’s long-term R&D investment capability and growth potential. Proven scale benefits with continuous gross margin improvement.”

Upside and Downside Risks

Risks to Upside: 1) Progress in planned A-share listing. 2) Stronger-than-expected sales volume. 3) Better-than-expected improvements in operating efficiency- highlighted by Morgan Stanley.

Risks to Downside: 1) Weaker-than-expected sales volume. 2) Lack of signs of efficiency improvement. 3) Lower-than-expected NOP option take rate.

Check out FX Empire’s earnings calendar

European Equities: Service PMIs from the Eurozone and the U.S in Focus

Economic Calendar:

Wednesday, 3rd March

Spanish Services PMI (Feb)

Italian Services PMI (Feb)

French Services PMI (Feb) Final

German Services PMI (Feb) Final

Eurozone Markit Composite PMI (Feb) Final

Eurozone Services PMI (Feb) Final

Thursday, 4th March

German IHS Markit Construction PMI (Feb)

ECB Economic Bulletin

Eurozone Retail Sales (MoM) (Jan)

Eurozone Unemployment Rate (Jan)

Friday, 5th March

German Factory Orders (MoM) (Jan)

The Majors

It was a relatively bullish day for the European majors on Tuesday.  The EuroStoxx600 and DAX30 both rose by 0.19% respectively, with the CAC40 ending the day up by 0.29%.

Disappointing economic data from the Eurozone failed to peg back the European majors that had kicked off the day in the red.

An easing in government bond yields continued to deliver support, with no major stats from the U.S to rock the boat.

Optimism of a speedy economic recovery remained the key driver, with economies supported by both fiscal and monetary policy and vaccination rollouts.

The Stats

It was a relatively busy day on the economic calendar on Tuesday. Retail sales and unemployment figures from Germany were in focus early in the session.

Later in the morning, prelim February inflation figures for the Eurozone also drew interest.

German Retail Sales and Unemployment

Month-on-month, retail sales fell by 4.5% in January, following an upwardly revised 9.1% slide in December. Economists had forecast a more modest 0.3% decline.

According to Destatis,

  • Year-on-year, retail sales was down by 8.7% in January. In December, retail sales had risen by 2.8%.
  • Compared with Feb-2020, the month prior to the COVID-19 outbreak, turnover was 5.8% lower.

In February, unemployment rose by 9k, partially reversing a 37k fall in January. In spite of the rise, the unemployment rate held steady at 6.0%.

Economists had forecast a 13k fall in unemployment and for the unemployment rate to hold steady at 6.0%.

Eurozone Inflation

The annual core rate of inflation softened from 1.4% to 1.1% in February, according to prelim figures. Economists had forecast for inflation to hold at 1.4%.

The annual rate of inflation held steady at 0.9%, however, which was in line with forecasts.

According to Eurostat,

  • Food, alcohol & tobacco is expected to have the highest annual rate (1.4% compared with 1.5% in January).
  • Services is forecasted to have an annual rate of 1.2% compared with 1.4% in January.
  • Non-energy industrial goods are expected to see its annual rate soften from 1.5% to 1.0%.
  • Energy remained a drag, with an expected annual rate of -1.7% compared with -4.2% in January.

From the U.S

There were no material stats to provide the European majors with direction later in the day.

The Market Movers

For the DAX: It was another mixed day for the auto sector on Tuesday. Daimler rallied by 2.34%, with BMW and Volkswagen seeing gains of 0.29% and 0.76% respectively. Continental saw red once more, however, falling by 0.89%.

It was also a mixed day for the banks. Deutsche Bank ended the day flat, while Commerzbank rose by a modest 0.33%.

From the CAC, it was a mixed day for the banks. BNP Paribas and Credit Agricole rose by 2.68% and by 1.66% respectively, while Soc Gen fell by 0.24%.

It was another bearish day for the French auto sector. Stellantis NV and Renault ended the day with losses of 0.06% and 0.57% respectively.

Air France-KLM fell by 0.96%, with Airbus SE ending the day down by 1.57%.

On the VIX Index

It was back into the green, following 2nd consecutive day in the red, for the VIX on Tuesday. Partially reversing a 16.46% slide from Monday, the VIX rose by 3.21% to end the day at 24.10.

The NASDAQ slid by 1.69%, with the Dow and S&P500 falling by 0.46% and by 0.81% respectively.

VIX 03321 Daily Chart

The Day Ahead

It’s another busy day ahead on the European economic calendar. Key stats include Italian and Spanish service PMI figures for February.

Finalized PMIs for France, Germany, and the Eurozone are also due out.

Barring marked revisions to prelim figures, Italy and the Eurozone’s PMIs will have the greatest impact on the majors.

Expect the stats to draw plenty of interest early in the European session.

From the U.S, the market’s preferred ISM Non-Manufacturing PMI and ADP nonfarm employment change figures will also provide direction later in the day.

Ahead of the European open, service and composite PMI numbers from China will set the tone.

The Futures

In the futures markets, at the time of writing, the Dow Mini was up by 34 points.

For a look at all of today’s economic events, check out our economic calendar.

AutoZone Tops Q2 Earnings Estimates; Stock Has Over 15% Upside Potential

Memphis, Tennessee-based auto parts retailer AutoZone reported better-than-expected earnings in the second quarter, largely driven by government stimulus and recovery in consumer demand from the COVID-19 pandemic slump, sending its shares up over 1% on Tuesday.

The United States’ leading retailer and a leading distributor of automotive replacement parts and accessories reported quarterly adjusted earnings of $14.93​​ per share for the quarter ended in February, beating Wall Street consensus estimates of $13.07 per share.

The auto parts retailer’s revenue surged more than 15% to $2.91 billion from a year ago​, higher than the market expectations of $2.76 billion.

Following this upbeat result, AutoZone shares rose 1.35% to $1185.17 on Tuesday.

AutoZone’ (AZO) comps were 15.2%, significantly better than consensus of 8.2% and our upwardly revised estimate of 10%. This was better than both O’Reilly’s and Advance Auto Part’s most recent quarterly comps of 11.2% and 4.7%. This makes sense as AZO’s quarter ended in mid-February, and thus included what we think was a very strong month of January for the industry as a whole,” noted Michael Baker, senior research analyst at D.A. Davidson.

“The others had quarter ends at the end of December and will thus see this benefit next quarter. Nonetheless, AZO’s beat should be viewed positively relative to estimates, and we maintain our BUY rating.”

AutoZone Stock Price Forecast

Seven analysts who offered stock ratings for AutoZone in the last three months forecast the average price in 12 months of $1,370.00 with a high forecast of $1,565.00 and a low forecast of $1,206.00.

The average price target represents a 16.10% increase from the last price of $1,180.06. From those seven analysts, six rated “Buy”, one rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $1,505 with a high of $1,980 under a bull scenario and $1,000 under the worst-case scenario. The firm gave an “Overweight” rating on the leading auto parts retailer’s stock.

“Top- and bottom-line growth is still near record highs but decelerating (as expected). Strong FQ2 results in absolute terms but enough to pick at (weak GM) to leave the sector’s debate unresolved. We like AutoZone (AZO) as an inexpensive LT compounder but the stock could remain stuck in neutral in the NT,” said Simeon Gutman, equity analyst at Morgan Stanley.

Several other analysts have also updated their stock outlook. Jefferies raised the target price to $1,455 from $1,325. Credit Suisse upped the target price to $1,437 from $1300. RBC increased the price objective to $1269 from $1190.

Moreover, Goldman Sachs lowered the target price to $1206 from $1265. Stephens cut the target price to $1,350 from $1,420. D.A. Davidson slashed the target price to $1,355 from $1,400.

Analyst Comments

AutoZone (AZO) is our top pick in DIY Auto. We see it as a high-quality retailer with the ability to compound earnings/FCF growth over time. While not immune to a tougher macro backdrop (fewer miles driven), we believe AZO is best positioned through any recession given its leading exposure to the more defensive DIY segment (80% of sales),” Morgan Stanley’s Gutman added.

“In addition, its DIFM growth was accelerating pre-COVID and we think it can gain more share in that segment going forward. In our view, ongoing share gains coupled with solid expense management should allow AZO to overcome headwinds from less driving in the near- to medium-term.”

Upside and Downside Risks

Risks to Upside: Longer than expected industry shift towards DIY; share gains in both DIY and DIFM segments. A shift to DIY insulates gross margin headwinds. Tapering of investments/higher expense growth- highlighted by Morgan Stanley.

Risks to Downside: Less than expected share gain amid a recession. Greater than expected margin pressure due to rising expenses and ongoing investments. Increasing e-commerce penetration in the DIY market.

Check out FX Empire’s earnings calendar

Economic Data from Germany Tests EUR Support Ahead of Inflation Figures

It was a relatively busy morning on the economic calendar, with economic data from Germany and the Eurozone in focus.

Consumer Spending

After a string of positive stats from Germany and the Eurozone in recent days, retail sales disappointed this morning.

Month-on-month, retail sales fell by 4.5% in January, following an upwardly revised 9.1% slide in December. Economists had forecast a more modest 0.3% decline.

According to Destatis,

  • Year-on-year, retail sales was down by 8.7% in January. In December, retail sales had risen by 2.8%.
  • Compared with Feb-2020, the month prior to the COVID-19 outbreak, turnover was 5.8% lower.

Unemployment

Unemployment figures from Germany were mixed, following the disappointing retail sales figures.

In February, unemployment rose by 9k, partially reversing a 37k fall in January. In spite of the rise, the unemployment rate held steady at 6.0%.

Economists had forecast a 13k fall in unemployment and for the unemployment rate to hold steady at 6.0%.

Market Impact

In response to the retail sales figures, the EUR slipped from 1.20224 to a low $1.19990 before steadying.

German unemployment figures added further downside pressure, leading the EUR back down from a post-retail-sales high $1.20163 to a current day low $1.19919 upon release of the figures.

At the time of writing, the EUR was down by 0.41% to $1.19984. Earlier in the day, the EUR had struck a pre-stat current day high $1.20504 before hitting reverse.

EURUSD 020321 Minute Chart

In spite of the disappointing numbers, the European boerses recovered from early losses.

At the time of writing, the DAX30 was up by 0.20%, with the CAC40 and EuroStoxx600 up by 0.15% and by 0.14% respectively.

Next Up

Prelim February inflation figures for the Eurozone…

Zoom Shares Surge Over 10% On Solid Q4 Earnings, Upbeat Guidance

San Jose, California-based communications technology company Zoom’s shares rose over 10% in extended trading on Monday after the video conferencing platform provider reported better-than-expected earnings in the fourth quarter and issued a solid outlook for the first quarter.

The company, which provides videotelephony and online chat services through a cloud-based peer-to-peer software platform, reported quarterly revenue of $882.5 million, beating the market expectations of $811.8 million.

On an adjusted basis, Zoom’s earnings per share rose to $1.22 per share, which represents year-over-year growth of over 710% from $0.15 per share seen in the same quarter a year ago. That also beat Wall Street’s estimates of 79 cents per share.

Zoom Video Communications forecast first-quarter revenue in the range of $900 million-$905 million, better than analysts’ expectations of $829.2 million. For the adjusted earnings, Zoom expected to be between $0.95 and $0.97 with approximately 307 million non-GAAP weighted average shares outstanding.

Following this optimism, Zoom shares, which surged over 395% in 2020 and added another 21% so far this year, rose about 10% to $444 in extended trading on Monday.

“I said in our preview to customers that if they can maintain the 2-year revenue growth rate of the last 2 quarters of 451% growth then I care less what their guide is. Well, they did. But add to that they actually gave a strong guide. But I still think there’s a big upside to their guide. The company beat on gross margins too but gave a weak gross margin guide because they are giving away to schools for free during the pandemic,” noted Chaim Siegel, equity analyst at Elazar Advisors.

“I think they are conservative on gross margins too. As a bonus, they have on their website to end free education subscriptions July 31st. If so margins will jump and worst case the hit is short term. The company said apps is their largest opportunity and that’s not even in our model. Wow! For expenses, their opex growth has been running about 35% of revenue growth. So running that through also I get the big upside. Our bull case is 65x 2021 $10.63 = $692 target. That’s on 2021 numbers. In April we start using 2022 numbers. Yikes.”

Zoom Stock Price Forecast

Eleven analysts who offered stock ratings for Zoom in the last three months forecast the average price in 12 months of $488.64 with a high forecast of $610.00 and a low forecast of $375.00.

The average price target represents a 19.28% increase from the last price of $409.66. From those 11 analysts, six rated “Buy”, five rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $420 with a high of $490 under a bull scenario and $270 under the worst-case scenario. The firm gave an “Equal-weight” rating on the communications software company’s stock.

“Uncertainty in what real room looks like, but FY22 virtual backdrop looks beautiful for now. Zoom remains in a leadership position within the large UC opportunity, a dynamic we believed was being lost ahead of the quarter but seems more fully realized post-run up into quarter and after hours. We were encouraged in FQ4 by strong traction with upmarket and positive proof points with Phone, which should help Zoom trade above our base case for now, but questions of churn in 2H keep us more reserved,” said Meta Marshall, equity analyst at Morgan Stanley.

“As previewed, negative investor concerns around heightened SMB customer churn were largely dismissed as churn came in below expectations and the company posted a meaningful beat in the quarter, growing 369% Y/Y. We are encouraged by a strong setup into FY22, a reason we were tactically positive into the print. We could become more positive longer-term were channel commentary around Zoom Phone to improve.”

Several other analysts have also updated their stock outlook. JP Morgan raised the target price to $456 from $450. Credit Suisse upped the stock price forecast to $375 from $340. Rosenblatt Securities lowered their target price to $350 from $435.

Analyst Comments

Zoom has established its position as the newly emerged leader in video conferencing, now a growth market, largely credible to the company itself given an introduction of a solution that employees actually use. Company has meaningful competitive moat built on more than just architecture, but a rapid uptick in video usage has attracted significant investment efforts from competitors,” Morgan Stanley’s Marshall added.

“Position within customers makes an attractive opportunity to expand into broader UC market. Early wins encouraging. Environment post-COVID-19 and large-scale WFH, and timing to reach, less certain.”

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European Equities: Economic Data from Germany and Eurozone Inflation in Focus

Economic Calendar:

Tuesday, 2nd March

German Retail Sales (MoM) (Jan)

German Unemployment Change (Feb)

German Unemployment Rate (Feb)

Eurozone CPI (YoY) (Feb) Prelim

Wednesday, 3rd March

Spanish Services PMI (Feb)

Italian Services PMI (Feb)

French Services PMI (Feb) Final

German Services PMI (Feb) Final

Eurozone Markit Composite PMI (Feb) Final

Eurozone Services PMI (Feb) Final

Thursday, 4th March

German IHS Markit Construction PMI (Feb)

ECB Economic Bulletin

Eurozone Retail Sales (MoM) (Jan)

Eurozone Unemployment Rate (Jan)

Friday, 5th March

German Factory Orders (MoM) (Jan)

The Majors

It was a bullish start to the week for the European majors on Monday.  The EuroStoxx600 rose by 1.80%, with the CAC40 and the DAX30 gaining 1.57% and 1.64% respectively.

Economic data from the Eurozone provided support to the European majors on the day.

The upside ultimately, however, came as a result of a calming across the bond markets at the start of the week.

COVID-19 vaccine news also supported demand for the European majors following last week’s pullback. Johnson & Johnson’s single dose vaccine delivery should bring a nearer end to containment measures.

Disappointing private sector PMI numbers out of China on the weekend and head of the European open on Monday failed to peg the majors back.

The Stats

It was a particularly busy day on the economic calendar on Monday, with manufacturing sector activity and inflation in focus.

Manufacturing PMIs

Spain’s manufacturing PMI rose from 49.3 to 52.9, with Italy’s manufacturing PMI increasing from 55.1 to a 37-month high 56.9. For Spain, it was the highest reading since Jul-2020.

Finalized numbers from France and Germany were also better than prelim figures.

The French manufacturing PMI rose from 51.6 to 56.1 in February, revised up from a prelim 55.0.

German manufacturing sector activity also came in better than initially expected. In February, the PMI rose from 57.1 to 37-month high 60.7, revised up from a prelim 60.6.

As a result of the pickup in member state manufacturing sector activity, the Eurozone’s manufacturing PMI increased from 54.8 to 57.9. This was up from a prelim 57.7/

According to the Eurozone’s finalized manufacturing Market Survey,

  • Operating conditions improved to the greatest degree for 3-years.
  • All 3 broad market groups recorded an improvement in operation conditions.
  • Investment goods producers registered the strongest growth (best since Jan-2018), followed by intermediate goods.
  • Consumer goods recorded relatively modest growth but the most marked since Sep-2020.
  • Manufacturing sector growth was broad-based, with the exception of Greece.
  • Germany and the Netherlands continued to sit at the top of the table, with export gains remaining particularly strong.
  • Austria recorded the best performance in 3-years, whilst France and Italy saw the most marked gains since the beginning of 2018.
  • Spain and Ireland recorded relatively modest growth, however.

Inflation

On the inflation front, Italian consumer prices rose by 0.1%, month-on-month, according to prelim February figures. In January, consumer prices had risen by 0.7%.

The annual rate of inflation, however, ticked up from 0.4% to 0.6% in February. Economists had forecast an annual rate of inflation of -0.1%

In Germany, consumer prices increased by 0.7%, month-on-month, following a 0.8% rise in January. Economists had forecast a 0.5% increase.

According to Destatis,

  • The annual rate of inflation accelerated from 1.0% to 1.3% in February, coming in ahead of a forecasted 1.2%.
  • Prices for services increased by 1.4%, year-on-year, while prices for goods increased by a more modest 1.0%.
  • Energy prices increased by 0.3% after having fallen by 2.3% in January, year-on-year.
  • Food prices rose by 1.4% softening from a 2.2% increase in January.

From the U.S

It was a relatively busy day, with the ISM Manufacturing PMI for February the key stats of the day. Finalized Market manufacturing PMI figures were also in focus though had a muted impact on the markets.

In February, the ISM Manufacturing PMI rose from 58.7 to 60.8 in February, coming in ahead of a forecasted 58.8.

  • The new orders index increased by 3.7 percentage points to 64.8%, with the production index rising from 60.7% to 63.2%.
  • Supporting new orders was a pickup in new export orders. The new export orders index increased by 2.3 percentage points to 57.2%.
  • Labor market conditions across the sector also improved, with the Employment Index rising by 1.8 percentage points to 54.4%.

The Market Movers

For the DAX: It was a mixed day for the auto sector on Monday. Volkswagen rose by 1.54%, with BMW and Daimler seeing gains of 0.68% and 0.562% respectively. Continental saw red once more, however, falling by 0.63%.

It was a bullish day for the banks, however. Deutsche Bank rallied by 2.37%, with Commerzbank rising by 0.52%.

From the CAC, it was a mixed day for the banks. BNP Paribas fell by 0.28%, while Credit Agricole and Soc Gen gained 1.42% and 1.19% respectively.

It was also a bullish day for the French auto sector. Stellantis NV rallied by 3.52%, with Renault ended the day up by 1.37%.

Air France-KLM found even more support, rising by a further 0.90%, with Airbus SE rallying by 4.97%.

On the VIX Index

It was a 2nd consecutive day in the red for the VIX on Monday. Following a 3.25% fall from Friday, the VIX slid by 16.46% to end the day at 23.35.

A rebound across the U.S equity markets supported by a pullback in U.S Treasury yields supported the fall in the VIX on the day.

The NASDAQ and S&P500 rallied by 3.01% and by 2.38% respectively, with Dow rising by 1.95%.

VIX 02321 Daily Chart

The Day Ahead

It’s another busy day ahead on the European economic calendar. Key stats include German retail sales, unemployment, and prelim February inflation figures for the Eurozone.

Expect the stats to draw plenty of interest early in the European session.

From the U.S, there are no material stats to provide the majors with direction.

The lack of stats from the U.S will leave the European majors in the hands of chatter from Capitol Hill.

The Futures

In the futures markets, at the time of writing, the Dow Mini was up by 38 points.

For a look at all of today’s economic events, check out our economic calendar.

Gold Futures Lag Far Behind the Other Three Precious Metals in Trading Today

However, at the same time, the three other precious metals that trade on the futures exchange gained value. Silver futures gained $0.19 (+0.70%) in trading today and are currently fixed at $26.625. Platinum futures gained $6.20 (+0.52%) and are currently fixed at $1191.50. Lastly, palladium futures gained $33 (+1.43%) and remained the most expensive of the precious metals complex at $2346.50.

gld 31

si 31

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pa march 1

The most reasonable explanation for why gold continues to underperform when valued against the other three precious metals that are traded on the futures complex is that gold has the least industrial usage when compared to platinum, palladium, and silver. That fact, coupled with the strong rally in U.S. equities markets today, is at the root of why three precious white metals have been consistently outperforming gold recently. It was another strong showing in all three major indexes, with the Dow Jones industrial average gaining 603 points (+1.95%), the Standard & Poor’s gained 90.67 points (+2.38%), and the NASDAQ composite gaining 398 points (+3.010%).

While it has been recent gains in Treasury yields that led to the strong selling pressure witnessed in gold last week, the primary factor moving equities higher and gold pricing lower is data that suggests that the economy in the United States is gaining momentum that is resulting in a rally in stocks on the first trading day of March.

As reported in MarketWatch, Jim Baird, chief investment officer at Plante Moran Financial Advisors, said, “Increasingly, it appears that the economy sidestepped a feared hard-landing despite a period of soft consumer spending that contributed to negative conditions for parts of the service sector and a surge in layoffs. If anything, it appears that manufacturers may have benefited from consumer spending habits that favored goods over services in recent months.”

One recent development has been the emergency use approval by the CDC of the Johnson & Johnson one shot coronavirus vaccine, which was greenlighted by the FDA last week. In fact, J&J began shipping their vaccine today, beginning with four 4 million doses. While not as effective as the other two primary vaccines granted emergency use (Pfizer-BioNTech and Moderna), the J&J vaccine is stable when stored in a refrigerator for three months and requires only one shot. Many medical professionals believe that this potentially could be key to the rural areas of the United States, which makes it difficult to ship and store the other vaccines at subzero temperatures.

These developments, when coupled with the passage in the Congress last week of President Biden’s $1.9 trillion aid package, have has shifted market sentiment towards the risk-on asset class rather than the safe-haven assets.

For more information on our service, simply use this link.

Wishing you, as always, good trading and good health,

Gary S. Wagner

 

Target Has Strong Upside Potential; Likely to Log Over 50% Jump in Q4 Profit

Target, one of the largest North American retailers offering customers both everyday essentials and fashionables, is expected to report a profit of $2.55 per share in the fourth quarter, which represents year-over-year growth of over 50% from $1.69 per share seen in the same quarter a year ago.

“We maintain our 4Q20 EPS estimate of $2.55 on comps +17.2%, in line with holiday sales, but could see upside on stimulus benefit in Jan. We model FY21 EPS of $8.96, +2% above Street. Target’s (TGT) ability to comp the comp will be the headline topic at its Investor Day, and management could conservatively guide FY21 comps and EPS to -LSD to -MSD,” said Oliver Chen, equity analyst at Cowen and Company.

“Fundamentally, we do believe TGT’s momentum is well-positioned to continue as consumers invest in home, appreciate TGT’s private brands, and take advantage of a myriad of convenient and innovative shopping modalities including Drive-Up; furthermore, the backdrop of stimulus payments and a high savings rate are strong positives.”

In the last four consecutive quarters, on average, the company has delivered an earnings surprise of 60%. The Minneapolis, Minnesota-based company would post year-over-year revenue growth of over 17% to $27.419 billion.

Target shares, which surged over 37% in 2020 and added another 6% so far this year, traded about 2% higher at $186.51 on Monday.

Target Stock Price Forecast

Twelve analysts who offered stock ratings for Target in the last three months forecast the average price in 12 months of $216.33 with a high forecast of $235.00 and a low forecast of $195.00.

The average price target represents a 16.35% increase from the last price of $185.93. From those 12 analysts, 10 rated “Buy”, two rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $195 with a high of $250 under a bull scenario and $135 under the worst-case scenario. The firm gave an “Equal-weight” rating on the mass-market retail company’s stock.

“We like Target (TGT) and believe its positioning post-COVID-19 is among the best across Retail. We are equal weight rated as valuation seems fair against Street estimates that also seem reasonable. As highlighted in our 2021 Outlook, we could be more constructive on TGT if we could more comfortably get to an $11 2022 EPS scenario. We think bullish ’21 EPS estimates are in the $10-$10.50 range followed by something similar and/or modest growth in ’22. Getting to $11 by ’22 is not unrealistic as it would take 3%-4% comps in each of the next two years,” said Simeon Gutman, equity analyst at Morgan Stanley.

“This top-line growth seems a bit optimistic though and assumes TGT retains nearly 100% of its 2020 market share gains. As we look for ways to get more constructive, we thought valuing Shipt offers an interesting angle with “hidden” asset value. As discussed below, we think Shipt could be worth ~$7b and have reflected this in our updated bull case. Our TGT bull/bear case spread now tilts positively and as we learn more about this asset, we will consider incorporating it into our base case.”

Several other analysts have also updated their stock outlook. BofA Global Research raised the price objective to $260 from $225. Stifel upgraded to buy from hold and upped the target price to $225 from $200. Target had its price objective boosted by Telsey Advisory Group to $225 from $190. The brokerage currently has an outperform rating on the retailer’s stock.

Moreover, Raymond James upped their price objective to $200 from $180 and gave the stock a strong-buy rating. Argus upgraded Target from a hold rating to a buy rating and set a $205 price target on the stock.

Analyst Comments

TGT comped +17.2% in November and December and we believe trends accelerated in January driven by the stimulus. Hence, we expect TGT to print a high teens comp in Q4 with EPS in the $2.50-$3 range, vs consensus at +16% comps and $2.54 in EPS. Similar to other COVID environment beneficiaries, a Q4 beat is unlikely to change the debate as investors are focused on ’21 guidance,” Morgan Stanley’s Gutman added.

“We expect TGT to guide to slightly negative to flat comps for ’21 and EPS between $9 and $10 (vs. the Street at -3.5% comps and EPS of $8.78), including gross margin expansion as mix normalizes and modest SG&A deleverage on lower sales growth. Bulls are likely looking for a flat to LSD comp guide and ’21 EPS in the $10 – $10.50 range, which would require SG&A leverage in addition to gross margin expansion.”

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DraftKings Shares Soar as Q4 Earnings, 2021 Guidance Top Estimates

The U.S.-focused gambling operator DraftKings’ shares jumped over 6% on Friday after it reported better-than-expected earnings in the fourth quarter and raised 2021 revenue guidance well ahead of analysts’ expectations.

Boston-based sports betting platform said its revenue increase of 146% to $322 million in the quarter ended December 31, 2020, up from $131 million during the same period a year ago. That was above Wall Street’s consensus estimates of $232.6 million.

DraftKings raised their forecasts for 2021 revenue in the range of $900 million to $1 billion from the previous target of $750 million-$850 million. That was also above the market expectations of $872.15 million for the year.

Following this optimism, DraftKings shares, which surged over 335% in 2020 and added another 32% so far this year, closed 6.43% higher at $61.53 on Friday.

“Following DraftKings‘ reported Q4:20 results, we are raising our FY21 revenue estimates reflecting upwardly revised management guidance. Our price target goes from $55 to $60 based on higher out-year estimates, driving an upward revision to our DCF. We remain Market Perform given tough 2H:21 compares including a moderating shelter-at-home tailwind and a cautious stance on the upcoming Investor Day,” said Stephen Glagola, equity analyst at Cowen and Company.

Executive Comments

“With a favorable fourth quarter sports calendar and strong marketing execution, DraftKings was able to generate tremendous customer acquisition and engagement that propelled us to $322 million in fourth-quarter revenue, a 98% year over year increase,” said Jason Robins, DraftKings’ co-founder, CEO and Chairman of the Board.

“In the fourth quarter of 2020, we saw MUPs increase 44% to 1.5 million and ARPMUP increase 55% to $65. We are raising our revenue outlook for 2021 due to our expectation for continued growth, the outperformance of our core business, and newly launched states that were not included in our previous guidance.”

DraftKings Stock Price Forecast

Fifteen analysts who offered stock ratings for DraftKings in the last three months forecast the average price in 12 months of $66.07 with a high forecast of $100.00 and a low forecast of $41.00.

The average price target represents a 7.38% increase from the last price of $61.53. From those 15 analysts, 10 rated “Buy”, four rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $66 with a high of $188 under a bull scenario and $13 under the worst-case scenario. The firm gave an “Overweight” rating on the gambling operator’s stock.

“4Q results and 2021 guidance were better than expected. We expect iGaming share to be higher than we previously forecasted. As a result, our ’25e EBITDA rises to $1.1 billion, and our price target goes to $66 accordingly. Reiterate Overweight,” said Thomas Allen, equity analyst at Morgan Stanley.

Several other analysts have also updated their stock outlook. Truist Securities raised the price target to $65 from $60. Evercore ISI upped the stock price forecast to $75 from $70. JP Morgan increased the price target to $58 from $48. BofA Global Research raised the price objective to $65 from $60. Bernstein started covering with an outperform rating and set the price target at $71.

Analyst Comments

“We forecast legal US sports betting & iGaming to increase from <$1.5 billion in 2019 to $15 billion in 2025, with COVID-19 increasing the market opportunity as states look for new sources of tax revenue. Forecast DraftKings to maintain top 2 shares, 25% in sports betting and 18% in iGaming in 2025,” Morgan Stanley’s Allen added.

“CAC advantage through its legacy Daily Fantasy Sports (DFS) database and improving marketing efficiency drives 30%/34% 2025/2028 EBITDA margins.”

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