Daily Update - February 23, 2023

Selected highlights of the day

By: Matthew Otto

 

Nvidia

Announced better-than-expected financial results for the January quarter, with adjusted earnings per share of 88 cents and revenue of $6.05 billion. The company’s revenue forecast for the current quarter was also higher than analysts’ expectations.

Nvidia’s management cited the potential for a boost in revenue from the latest wave of artificial intelligence services as a factor in the strong performance. The company is known for producing advanced graphics processing units (GPUs) that are widely used in machine learning and other AI applications. As these applications continue to grow in popularity, Nvidia’s revenue is likely to benefit.

The outlook for Nvidia’s revenue in the current quarter is even stronger than the January quarter, with the company giving a forecast range of $6.5 billion at the midpoint, above Wall Street’s consensus of $6.31 billion. This suggests that Nvidia is well-positioned to benefit from the growing interest in AI and its applications in various industries.

Nvidia is a leading maker of chips used in gaming, AI, and cloud computing applications, which puts it in a strong position to benefit from the increasing adoption of these technologies. The recent release of OpenAI’s ChatGPT has sparked new interest in AI products, and Nvidia’s CFO Colette Kress is optimistic that this will lead to new revenue opportunities for the company.

In addition to the AI market, Nvidia’s CFO also commented on the gaming graphics card inventory levels, stating that the company expects inventory levels to become “normalized” in the current quarter ending in April.

Wall Street Action

  • Truist Securities analyst William Stein increased his price target from $238 to $266 while maintaining a Buy rating.
  • B of A Securities analyst Vivek Arya increased his price target from $255 to $275 while maintaining a Buy rating.
  • BMO Capital analyst Ambrish Srivastava raised his price target from $240 to $255 and maintained an Outperform rating.
  • Wells Fargo analyst Aaron Rakers increased his price target from $250 to $275 while maintaining an Overweight rating.
  • Rosenblatt analyst Hans Mosesmann reiterated his Buy rating and raised his price target to $320.
  • Morgan Stanley analyst Joseph Moore maintained an Equal-Weight rating while increasing his price target from $145 to $220.
  • Baird analyst Tristan Gerra maintained a Neutral rating but increased his price target from $150 to $230.
  • Oppenheimer analyst Rick Schafer increased his price target from $250 to $275 while maintaining an Outperform rating.
  • JP Morgan analyst Harlan Sur increased his price target from $220 to $250 while maintained an Overweight rating.
  • Mizuho analyst Vijay Rakesh raised his price target from $200 to $230 while maintained a Buy rating.
  • Barclays analyst Blayne Curtis increased his price target from $250 to $275 while maintaining an Overweight rating.
  • Piper Sandler analyst Harsh Kumar raised his price target from $225 to $275 while maintained an Overweight rating.
  • Citigroup analyst Atif Malik increased his price target from $210 to $245 while maintaining a Buy rating.
  • Needham analyst Rajvindra Gill raised his price target from $230 to $270 while maintained a Buy rating.

WING

Wingstop has reported financial results for its fiscal fourth quarter and full year 2022, showing significant growth in system-wide sales, net income, and adjusted EBITDA.

In the fiscal fourth quarter 2022, the company experienced a 28.9% increase in system-wide sales, reaching $775.7 million, with 61 net new restaurant openings. Domestic same store sales grew by 8.7%, and digital sales increased to 63.2%. Total revenue for the quarter increased by 45.6% to $104.9 million, and net income increased by 155.2% to $17.6 million, or $0.59 per diluted share. Adjusted EBITDA increased by 71.6% to $34.7 million.

For the full fiscal year 2022, Wingstop’s system-wide sales grew by 16.8% to $2.7 billion, and the company opened 228 net new locations, bringing its worldwide restaurant count to 1,959. Domestic same store sales increased by 3.4%, and total revenue increased by 26.6% to $357.5 million. Net income increased by 24.1% to $52.9 million, or $1.77 per diluted share, and adjusted net income and adjusted earnings per diluted share both increased by 37.3% to $55.4 million, or $1.85 per diluted share. Adjusted EBITDA increased by 23.1% to $108.8 million.

Outlook

Wingstop has reaffirmed its three- to five-year outlook of mid-single digit domestic same store sales growth, indicating the company’s confidence in its ability to maintain its strong financial performance in the future.

For the 52-week fiscal year 2023, Wingstop anticipates approximately 240 global net new units, which would contribute to the company’s ongoing expansion efforts. The company also expects SG&A of between $82.0 – $84.0 million, reflecting its commitment to investing in its operations and marketing efforts. In addition, Wingstop projects stock-based compensation expense of between $11.5 – $12.5 million and depreciation and amortization of between $14.0 – $15.0 million.

  • BTIG analyst Peter Saleh downgraded his rating from Buy to Neutral.
  • Stephens & Co. analyst Joshua Long raised his price target from $173 to $200, while maintaining an Overweight rating.
  • Barclays analyst Jeffrey Bernstein increased his price target from $167 to $205 while maintaining an Overweight rating.
  • Cowen & Co. analyst Andrew Charles raised his price target from $180 to $200 while maintaining an Outperform rating.
  • Wedbush analyst Nick Setyan raised his price target from $177 to $200 while maintaining an Outperform rating.
  • Citigroup analyst Jon Tower maintained a Buy rating and raised his price target from $193 to $200.

PowerSchool

Has announced its fourth quarter and full year 2022 financial results, showing positive growth in total revenue and improved financial performance.

For the full year 2022, the company’s total revenue increased by 13% year-over-year to $630.7 million, reflecting the company’s strong performance in the education technology market. In the fourth quarter of 2022, the company’s total revenue increased by 10% year-over-year to $161.1 million.

In addition, the company’s net loss for Q4 2022 improved by 80% to $3.2 million, demonstrating the company’s efforts to improve its financial position. The company’s adjusted EBITDA also increased by 59% year-over-year to $52.8 million, which exceeded the company’s outlook and represented 33% of revenue.

PowerSchool has provided its financial outlook for the first quarter ending March 31, 2023 and the full year ending December 31, 2023.

For the first quarter ending March 31, 2023, the company expects total revenue to be in the range of $158 million to $160 million, with adjusted EBITDA expected to be in the range of $47 million to $49 million.

For the full year ending December 31, 2023, the company expects total revenue to be in the range of $688 million to $694 million, with adjusted EBITDA expected to be in the range of $222 million to $227 million.

  • Baird analyst Joe Vruwink has maintained an Outperform rating and raised the price target from $24 to $26.
  • Barclays analyst Saket Kalia has raised the price target from $26 to $28 while maintaining an Overweight rating.
  • Needham analyst Ryan MacDonald has reiterated a Buy rating and raised the price target to $26.
  • Piper Sandler analyst Arvind Ramnani has maintained an Overweight rating and raised the price target from $22 to $28.
  • RBC Capital analyst Matthew Hedberg has reiterated an Outperform rating and a $29 price target.

 

Wix

Has reported its financial results for the fourth quarter and full year 2022, which exceeded its guidance and demonstrated strong financial performance.

In the fourth quarter of 2022, Wix achieved total revenue of $355.0 million, up 6% year-over-year. On a constant currency basis, total revenue was $361.4 million, up 8% year-over-year. The company also reported its most profitable free cash flow quarter in its history, with FCF1 of $52.0 million, ahead of guidance.

The company is expected to generate additional cost efficiencies of $50 million in 2023, accelerating its path to profitability. Wix also expects to achieve a Creative Subscriptions non-GAAP gross margin of 80% in FY 2023 and an FCF1 margin of 10-11% of revenue for the full year 2023, increasing each quarter and exiting the year at 12-13%. Wix is committed to achieving positive GAAP net income in FY 2025, ahead of plan, driven by accelerated profitability.

Wix’s brand strength has enabled the company to evolve its marketing strategy and maintain its category leadership. Despite reducing acquisition marketing spend by ~50% in Q4, the company saw stable new cohort bookings. The company executed $243 million of share repurchases in Q4.

Outlook

Wix has provided its financial outlook for the first quarter of 2023 and the full year of 2023.For the first quarter ending March 31, 2023, the company expects total revenue to be in the range of $367 million to $371 million, representing approximately 7-9% year-over-year growth.For the full year 2023, Wix expects total revenue to be in the range of $1,510 million to $1,535 million, representing approximately 9-11% year-over-year growth.

  • Morgan Stanley analyst Elizabeth Porter has maintained an Equal-Weight rating on and has increased her price target from $94 to $102.
  • Wolfe Research analyst Deepak Mathivanan has reaffirmed an Outperform rating.
  • Citigroup analyst Ronald Josey gave a Buy rating with a price target of $120.
  • Needham analyst Bernie McTernan reaffirmed his Buy rating while increasing his price target price to $125.
  • Barclays analyst Trevor Young kept an Equal Weight Rating while increasing her price target from $78 to $87.
  • Piper Sandler’s Clarke Jeffries upgrades from Underweight to Neutral and raises her price target from $80 to $99.