Earnings Roundup From a Tough Week
As we march toward a well-deserved weekend, the market is looking to hold support (S&P 500 holding up so far while Nasdaq has cracked a little). There’s no sugarcoating it – this has been a horrific week. But if there is a glass half full perspective it’s that when everybody is bearish it just might be time to start buying.
We’re not making any new moves today, however. Rather, just following up on earnings reports from the week. On balance I’d say our companies are reporting very good numbers. But the bar is set too high to be achievable, at least in the short term.
Next week we have a new crop of reports coming our way, and we may well reduce some position sizes depending on how the chips fall. But for right now I’m looking to let the dust from the last few days settle.
Here’s a quick roundup of the last week’s quarterly reports.
Sprout Social (SPT) revenue of $57.4 million (+41%) beat by $1.2 million. Adjusted EPS of -$0.03 beat by a penny. Full-year guidance was given for $252 - $253 million (+34% - 35%), an increase of $3 million. Profitability is on the horizon in 2024 assuming revenue growth remains over 30%, which seems like an increasingly comfortable lower bound for several years. The big question remains just how much investors are willing to pay for shares. Good quarter, tough sector. Keep at hold for now. HOLD
Cloudflare (NET) revenue of $212.2 million (+54%) beats by $6.54 million. Adjusted EPS of a penny beats by a penny. Record new customer additions. Now 58% of revenue from larger customers (over $100K) and gross margin up 1.1% to 78.7%. Great company, great story, still expensive valuation. It will turn around, question is just at what price. We’re sitting on a quarter position with an 84% gain remaining and I’m comfortable with that for now. HOLD A QUARTER
Bill.com (BILL) Q3 fiscal 2022 revenue up 179% to $167 million, beating by $9 million. Adjusted EPS of -$0.08 beats by $0.08. Guidance for the full year was raised and partnerships with financial institutions ramping (new customer count +43%). Organic total payment volume (TPV) was a relative soft spot (+57%, market looking for over 60%). Overall, good quarter and solid business momentum, but in this environment these high-growth software names have to be better than perfect. Shares off today but we have partial position (half) and will let dust settle with that. May consider selling another quarter if market doesn’t stabilize soon. HOLD HALF
Fisker (FSR) delivered a report with few surprises as it marches toward commercial launch of the Ocean (roughly six months away). While exciting, the practical challenge is share price is down and company will need capital to ramp headcount and vehicle manufacturing (albeit outsourced, but still). Management also teased new sportscar model, Ronin, said to be a four-seat GT sports car with 550-mile range. Conversations right now regarding FSR are that it could be huge if it executes but get destroyed if it falters. High risk, high reward. Stock trading near support at 10 which supports hold rating. HOLD
ZoomInfo (ZI) revenue was up 58% to $242 million (beat by $13.8 million) and adjusted EPS was up 38% to $0.18 (beat by $0.03). Added 171 net new $100,000 customers (total now at 1,623, up 71%). International was +80% and now 12% of revenue. Full-year revenue raised $50 million to $1.07 billion (+41.7%). Overall very strong quarter and ZI seems to remain a favorite among analysts. I think it can help lead us out of the current tech rout so keeping, though still at hold until momentum builds. HOLD
Airbnb (ABNB) revenue +70% to $1.5 billion (beats by $60 million) and GAAP EPS of -$0.03 (beats by $0.27). Active listings growing (most demand remains in rural areas) and management sees a strong summer travel season and is little concerned about inflation, wage increases, etc. Biggest concern out there remains valuation as ABNB may need time to grow into it. Keeping at buy a half. BUY A HALF
Portillo’s (PTLO) revenue of $134.5 million (+15%) misses by $950,000 while GAAP EPS of $0.00 beats by $0.04. Chain is selling more food at more stores and new stores operating well (Florida and Texas discussed specifically on the call). Seeing some food inflation but offsetting with price increases while dealing with higher labor costs with efficiency initiatives. Will see how it all goes but management sounds quite confident and stock price seems beat-up enough to allow comfortable margin of safety for new buyers in what should be a solid growth story. BUY