Daily Update - February 3, 2023

Selected highlights of the day

By: Matthew Otto

Apple reveals quarterly figures

Despite experiencing a rare 5% drop in sales during their fiscal first quarter, Apple’s situation was further compounded by a similar performance in March. This decline included an 8% decrease in iPhone revenues and a 29% decline for Macs, with only iPads experiencing growth at 30%. However, there may be a silver lining as Tim Cook’s assessment suggests that this potential disaster could be averted due to supply shortages affecting overall revenue rather than a lack of demand.

Wedbush analyst Dan Ives suggested that Apple’s demand environment is more robust than anticipated, despite the supply chain disaster. He attributed the market reaction to caution, but posited a rebound in China as it eases Covid-19 lockdowns would be beneficial for the company over time.

Wall Street Action

Ives maintained his Outperform rating on Apple and increased his price target of $175 to $180 .
Cowen & Co. analyst Krish Sankar adjusted his outlook for Apple from Outperform to a revised price target of $195.
JP Morgan’s Samik Chatterjee maintained an Overweight and lowered his price target $180 to $175.
Raymond James’ Melissa Fairbanks increased her price target from $145 to to $220 whilst keeping her rating at Outperform.
Barclays showed more caution as Tim Long held onto Equal-Weight but modified the prediction form $133 to $145.
Needham Laura Martin’s set her stock forecast to $170 and recommended a Buy.
Piper Sandler Harsh Kumar’s forecast set a $195 price target and an Overweight rating.

Amazon reported fourth quarter sales that exceeded analysts’ estimations

The online retailer projected first-quarter revenue of between $121 and $126 billion; however this fell short of the expected figure of approximately $125.1 billion according to Refinitiv data. Although there was some disappointment as their web services growth only achieved 20%, they recorded overall earnings at 3 cents per share, with quarterly revenue totaling an estimated 149.2 billion compared to 145 billion anticipated by Refinitiv figures, along with a total Advertising income exceeding 11 billion dollars in comparison to predictions closer to 11.38 billion expected, according to StreetAccount.

Amazon’s 4th Quarter cloud business, Amazon Web Services (AWS), did not meet analyst estimates due to a decline in corporate expenditure. AWS years-over-year growth slowed from 27.5% to 20%. Meanwhile, the eCommerce giant predicted its first quarter revenues would range between $121 -$126 billion with an anticipated year over year of 4%-8%, yet fell short on industry expectations of $125.1 as compiled by Refinitiv.

Furthermore, sales for their online store segment contracted 2%, which may have been caused by increasing expenses and shoppers returning to brick & mortar stores after the post pandemic boom expired; thus leading to the 18K job layoffs announced earlier this month Jan 2021.

Wall Street Action

Credit Suisse Stephen Ju and Wedbush Michael Pachter analysts have recently revised their assessments of Amazon.com, lowering price targets from $171 to $150 and from $140 to 125 respectively while maintaining an Outperform rating.
DA Davidson Tom Forte has raised his target price to $134 with a Buy stance.
Colin Sebastian at Baird set an Outperform
Thomas Champion’s of Piper Sandler kept an Overweight with an increase in price target $123 from $119.
Needham’s Laura Martin remained with a ‘Buy’ rating for Amazon and upgraded her stock forecast from $120 to $125.
Barclays’ Ross Sandler raised his price target from $130 to $150 while an Overweight rating.
Barton Crockett of Rosenblatt maintained a Neutral stance and $106 price target.
Morgan Stanley’s Brian Nowak raised his price target from $140 to $150
JP Morgan’s Doug Anmuth set an Overweight rating with a target price of $142.
Benchmark analyst Daniel Kurnos held a Buy rating and upped his prediction from $125 to $130.
Cowen & Co.’s Ronald Josey maintained an Outperform rating while also boosting his price target up from $140 to $150.
Oppenheimer’s Jason Helfstein set Outperform alongside increasing his stock forecast to $135 per share, up from $130.

BILL sees revenue rise

The second quarter of fiscal 2023 saw a strong performance for BILL’s standalone platform, with total revenue increasing by 66%, subscription fees up 25% year-over-year and transaction fees climbing 59%. Furthermore, the core business had an impressive 49% growth from last fiscal. This was powered in large part by increased subscriptions at $52.7 million plus additional Divvy and Invoice2go transactions that totaled $86.6 million this past quarter alone.

In the second quarter of fiscal 2023, Bill.com Holdings saw a significant net loss of $95.1 million compared to their net loss in the same period last year at $80.4 million; however, there was some improvement with non-GAAP earnings standing at $49.4 million as opposed to a small losses experienced earlier this year on that criterion ($0.2mn).

In light of these results and outlooks from analysts such James Friedman (Positive rating/ lowered price target) and Matt VanVliet (Neutral Rating), Board members approved the repurchase program allowing up to 300$ worth common stock buyback signaling an assurance in future performance prospects for Bill Com Holdings going forward.

Wall Street Action

SMBC Nikko’s Andrew Bauch downgraded Bill.com from ‘Outperform’ to ‘Neutral’ and reduced his target price from $140 per share to $110.
Credit Suisse analyst Bill Katz maintained an ‘Outperform’, but decreased his price predictions from a previous level of $283 to $266.
Mizuho’s Siti Panigrahi target price decreased from $105 to $100.
BMO Daniel Jester reduced his stock forecast from $158 down to$128 with Marketperform rating.
Oppenheimer Ken Wong lowered his target price from $150 to $125.
Canaccord Joseph Vafi kept a Buy but scaled back his stock forecast from $250 to $175.
Keybanc Josh Beck changed his target price from $130 down to $125 while retaining an Overweight recommendation.

Microchip Technology reported quarter for their fiscal year 2023

Microchip’s net sales reached an all-time high of $2.169 billion, with gross margins of 67.8%. The results demonstrated that the non-GAAP basis achieved its highest ever in terms of operating income ($1.030 billion), net income ($863.7 million), and diluted earnings per share (EPS; $1.56).

These outcomes exceeded Microchip’s internal guidance provided on November 3rd, 2022, by 5 cents per EPS point, creating a new performance standard for the company across various metrics within the industry and internally to MicroChip.

Microchip announced paybacks of $719.1 million and returned approximately $409.8 million to shareholders through dividends and stock repurchases. During March’s period, Microchip issued its highest quarterly dividend ever: 35 cents, increasing 9% sequentially while rising 41% year on year.

Wall Street Action

Wells Fargo analyst Gary Mobley has affirmed Microchip Technology with a Equal-Weight rating, increasing the price target from $80 to $85.
Susquehanna analyst Christopher Rolland maintains a Positive rating and raises the price target from $85 to $100.
B. Rile’s Craig Ellis maintains a “Buy” and increasing his price target from $86 to $106.
William Stein has his rating at “Buy” and increased his price target from $85 to $94.
Credit Suisse analyst Chris Caso stays at Neutral a $98 price target.
Citigroup analyst Christopher Danely has assigned Microchip Technology with a Neutral rating and has adjusted the price target from $74 to $85.
Raymond James analyst Melissa Fairbanks holds a Strong Buy with her updated price target of $90 to $105.
Mizuho analyst Vijay Rakesh keeps his Neutral rating on Microchip and raising a new price target from $72 to $79.
Piper Sandler analyst Harsh Kumar sets an Overweight rating and upgrades his price target from $80 to $100.
Needham analyst Rajvindra Gill keeps a Buy rating and raises the price target from $82 to $110.

Paylocity announced the financial results for their second quarter of fiscal year 2023.

Total revenue for the quarter was recorded at $273.0 million, a 39% increase compared to the same period in fiscal year 2022. Moreover, recurring and other revenue jumped by 31% from last year’s figures, driving them up to $256.4 million during Q2 FY 2023.

Paylocity has also issued their third quarter outlook for 2023. The forecast indicates that total revenue is projected to be between $330.5 and $334.5 million, representing a 35% increase in comparison to their 2022 third quarter total revenue. Additionally, it is expected that the non-GAAP measure of Adjusted EBITDA will fall within a range spanning $121.5 and $124.5 million.

For the 2023 fiscal year, the outlook anticipates that total revenue could reach anywhere from $1.156 billion to $1.161 billion – garnering an estimated 36% growth when compared to its 2022 revenue figures. Simultaneously, the non-GAAP measure of Adjusted EBITDA should pencil out around between $358.5 and $362.5 million for the year.

Wall Street Action

JMP Securities analyst Patrick Walravens reaffirms his Market Outperform rating and a price target of $320.
Cowen analyst Bryan Bergin continues with an Outperform rating while also raising his price target from $231 to $265.
Scott Berg of Needham also has a Buy rating, keeping his price target at $325.
Jason Celino of Keybanc upgrades his rating to Overweight, along with raising his price target from $295 to $305.
Piper Sandler analyst Arvind Ramnani also maintains an Overweight rating and ups the price target from $276 to $297.