Earnings Season Updates: IOT, RIVN, SNOW, XPOF
Samsara (IOT) has had a terrific day, rising between 10% and 20% depending on the hour. We started with a half position and will stick with the “buy half” rating as we hope to see some follow-through strength next week. Our recorded buy price will be the average of the day’s high and low. BUY HALF
Rivian (RIVN) also reported this week, and the stock was taken down a notch afterward. The issues are that production isn’t as high as expected (thanks supply chain issues), gross margins aren’t as good as expected (thanks lower production) and cash use is higher than expected (car manufacturing ain’t cheap). The net effect is that analysts are pulling in 2023 revenue expectations with consensus likely to land somewhere around $3.6 -$4.0 billion. Despite the growth headwinds, Rivian remains a potential beast in the EV market with a terrific product, brand recognition and what seems like a very viable business model, albeit potentially needing capital in 2024. It’s a confidence booster to see more of these vehicles on the road and liking them every time (or maybe that’s just me). We started with a half position acknowledging that this is quite early-stage and some flexibility to average down may be prudent. Sticking with buy half now and biding our time on the second half. RIVN is doing better today. BUY HALF
Snowflake (SNOW) reported this week with results that beat on the top and bottom lines. Revenue grew 53.5% to $589 million (beat by $13.6 million) while adjusted EPS of $0.14 beat by $0.09. It wasn’t a brilliant quarter, and there are signs that customers are taking longer to sign deals and looking for smaller contracts than they did a year or two ago. Guidance implies a slightly lower revenue growth outlook, but a slightly better profit margin profile. Note that Snowflake just closed out its fiscal 2023 (which ended in January), so forward-year guidance is for fiscal 2024 (ends January 31, 2024). Management is now saying to expect 40% growth (had been closer to 47% previously) but for free cash flow margin to be about 25% (versus 23% previously). As with RIVN, we entered this position with the perspective that half a stake seemed appropriate given macro-uncertainty, but with conviction that SNOW could be one of the biggest opportunities in the medium-to-large-cap software space over the next decade. Nothing in this quarter throws cold water on that thesis. BUY HALF
Xponential Fitness (XPOF) reported another great quarter after the closing bell yesterday, sending shares up over 15% today. Revenue grew 44.3% to $71.3 million (beat by $4.4 million) while adjusted EPS of $0.11 beat by $0.01. Management provided an interim update in January that was good, so the strong report yesterday wasn’t a total surprise. Still, it’s good to see the stock react well to the biggest new item, which is bullish 2023 guidance. Management says it’s looking for 540-560 studio openings (75% in the U.S.) and about 30% same-store-sales growth as demand for fitness classes remains extremely high (still working off all that pandemic home-baked bread?). That means revenue guidance of $285 - $295 million whereas consensus was closer to $289 million. If history is any guide, management is leaving room to continue their beat-and-raise cadence. Hard to find anything wrong here. Continue to hold. HOLD 2/3
