Analysts Stocks

      Daily Update - March 10, 2023

      Selected highlights of the day

      By: Matthew Otto

      SVB Financial Group’s stock continued to decline on Friday

      After the company sold assets for a loss due to a decline in deposits. The fall in SIVB’s stock price caused concern among investors in the banking sector, who had previously assumed that the sector was insulated from recession worries and rising interest rates. SVB’s difficulties emerged as the bank was forced to sell securities to realign its portfolio in response to higher interest rates while also managing lower deposit levels from clients, many of whom are venture capitalists burning through cash. The bank’s stock has dropped more than 80% from its record high in late 2021 as interest rates have increased, boosting the cost of the deposits the bank uses to fund loans. The decline in deposits forced SVB to take drastic action, including selling all of its $21 billion in securities classified as available for sale and raising $2.25 billion, including $500 million from private-equity firm General Atlantic. Other banks fear they may face similar troubles if their deposits were to fall. However, some observers contend that the worries are overblown, and SVB had a singular funding base, which made life difficult for it when start-up companies ran out of easy cash.

      • Truist Securities analyst Brandon King downgraded the stock from Buy to Hold and lowered the price target from $174 to $100.
      • Raymond James analyst David Long also downgraded the stock from Outperform to Market Perform.
      • Wolfe Research analyst Bill Carcache also downgraded the stock from Outperform to Peer Perform.
      • Wedbush analyst David Chiaverini has maintained SVB with a Neutral rating and lowered the price target from $250 to $200.

      DocuSign

      DocuSign has reported positive growth across key metrics in its fourth quarter and fiscal year 2023 financial results. In Q4, the company reported total revenue of $659.6 million, representing a 14% YoY increase, and subscription revenue of $643.7 million, up 14% YoY. For the fiscal year 2023, the company reported total revenue of $2.5 billion, a 19% YoY increase, and subscription revenue of $2.4 billion, up 20% YoY. The company’s billings were $2.7 billion, an increase of 13% YoY, and GAAP gross margin was 79%. DocuSign also provided its guidance for the quarter ending April 30, 2023, and the fiscal year ending January 31, 2024, showing expected growth in revenue, subscription revenue, and billings, with non-GAAP gross margin expected to be between 81% to 82%, and non-GAAP operating margin in the range of 21% to 23%.

      • JMP Securities analyst Joe Goodwin has reiterated DocuSign with a Market Outperform rating and maintains the price target at $84.
      • JP Morgan analyst Mark Murphy has downgraded DocuSign from Neutral to Underweight and lowered the price target from $58 to $48.

      Apparel retailer Gap  has reported a disappointing Q4

      Posting a loss of 75 cents per share, compared to analysts’ expectation of a loss of 41 cents per share. Sales were also down by 6% from a year earlier, falling short of projections at $4.2 billion compared to estimates of $4.4 billion. The company’s same-store sales fell 5%, more than the expected 3.1% decline. The company has also forecasted a low to mid-single-digit decrease in net sales for 2023, while analysts were forecasting a slight uptick. To improve profit and margins, Gap is cutting costs and has identified $300 million in annualized savings in fiscal 2023. The restructuring also includes changes at the C-Suite level, with the chief growth officer role being eliminated, and other executives leaving the team, including Mary Beth Laughton, president and CEO of Athleta.

      • JP Morgan analyst Matthew Korn raises the price target of Gap from $9 to $10 while maintaining an Underweight rating.
      • Goldman Sachs analyst Brooke Roach lowers the price target of Gap from $18 to $16 but maintains a Buy rating.
      • Telsey Advisory Group analyst Dana Telsey keeps a Market Perform rating for Gap and lowers the price target from $15 to $13.

      Allbirds

      Announced its financial results for Q4 and full-year 2022. Net revenue for the full year grew by 7% to $297.8 million compared to 2021 and by 36% compared to 2020. Q4 net revenue, which included $1.5 million in revenue primarily associated with the discontinuation of certain first-generation apparel, fell by 13% to $84.2 million compared to Q4 2021 and increased by 6% compared to Q4 2020. The company’s US physical retail channel sales grew by 60% compared to 2021, with 19 stores opened in the US during the year, ending the period with 42 locations. Allbirds reported a full-year 2022 net loss of $101.4 million and a Q4 2022 net loss of $24.9 million.

      Financial guidance targets for the first quarter of 2023, they expect:

      • Net revenue of $45 million to $50 million, which is a decrease of 20% to 28% compared to the first quarter of fiscal 2022.
      • Adjusted EBITDA loss of $29 million to $26 million.
      • Baird analyst Mark Altschwager lowers Allbirds from Outperform to Neutral and the price target from $7 to $2.
      • Guggenheim analyst Robert Drbul downgrades Allbirds as well from Buy to Neutral.

      Oracle reported its fiscal third-quarter financial results

      With revenue coming in slightly below the consensus estimate. The software company posted revenue of $12.4 billion, up 18% from a year ago or 21% adjusted for currency. This result missed the consensus estimate of $12.43 billion. However, the company’s adjusted earnings per share exceeded expectations, coming in at $1.22 versus the expected $1.20. Oracle’s management provided an adjusted earnings-per-share guidance range of $1.56 to $1.60 for the current quarter, which was better than the $1.47 average estimate. Additionally, the company’s board of directors approved a 25% increase in the quarterly cash dividend to 40 cents per share.

      • JP Morgan analyst Mark Murphy is maintaining an Overweight rating and raising the price target from $87 to $93.
      • BMO Capital analyst Keith Bachman maintains  a Market Perform rating and raising the price target from $95 to $96.
      • Piper Sandler analyst Brent Bracelin reiterating an Overweight rating and maintaining a $104 price target.

      Vail Resorts

      Jas reported a net income of $208.7 million for its fiscal second quarter of 2023, a decrease from $223.4 million in the same period in the prior year. The company’s Resort Reported EBITDA for the quarter was $394.8 million, which is down compared to $397.9 million in the same period in the prior year. However, it’s important to note that the decrease in Resort Reported EBITDA was mainly due to lower acquisition and integration related expenses in the current quarter. Additionally, the company reported an increase in total skier visits of 3.6% and an increase in total lift revenue of 2.5% through March 5, 2023, compared to the prior year season-to-date period through March 6, 2022.

       

      Outlook

      Vail Resorts also updated its guidance for fiscal year 2023, expecting net income attributable to Vail Resorts, Inc. to be between $282 million and $328 million and Resort Reported EBITDA to be between $831 million and $859 million. Additionally, the company’s Board of Directors approved an 8% increase in the quarterly cash dividend to $2.06 per share beginning with the dividend payable on April 11, 2023 to shareholders of record as of March 27, 2023, and increased the company’s authorization for share repurchases by 2.5 million shares to approximately 3.5 million shares.

      MTN’s guidance came up short of analysts’ estimates. Their projection of net income and adjusted EBITDA were notably lower than expected.

      • Truist Securities analyst Patrick Maurice maintains Vail Resorts with a Hold and lowers the price target from $292 to $262.
      • Credit Suisse analyst Benjamin Chaiken maintains Vail Resorts with an Outperform and lowers the price target from $380 to $333.
      • JP Morgan analyst Rob Sanderson maintains Vail Resorts with a Neutral and lowers the price target from $262 to $231.
      • Barclays analyst Brandt Montour maintains Vail Resorts with an Underweight and lowers the price target from $232 to $222.

      Roblox

      • Is expected to exhibit substantial growth even amidst macroeconomic pressures. According to Jefferies analyst Andrew Uerkwitz who upgraded the company’s rating from Hold to Buy, and increased the price target from $30 to $48.

      UAL

      Barclays analyst Brandon Oglenski has upgraded United Airlines Holdings from an Equal-Weight rating to an Overweight rating. Additionally, he has increased the price target from $52 to $80.

      Ulta Beauty

      Reported its financial results for the fourth quarter and fiscal year 2022 ended January 28, 2023. The company’s net sales for the quarter were $3.2 billion, an 18.2% increase from the same period last year. Comparable sales increased by 15.6%. The company’s CEO, Dave Kimbell, expressed optimism about the strength and resiliency of the beauty category and is excited about the opportunities to expand the company’s leadership position, capture market share gains, and drive long-term value for all stakeholders. Ulta Beauty’s annual revenue surpassed $10 billion, annual net income exceeded $1 billion, and the company exceeded 40 million Ultamate Rewards members for the first time in its history.

      Ulta has announced its fiscal 2023 outlook, which includes net sales of $10.95 billion to $11.05 billion, comparable sales growth of 4% to 5%, and 25-30 new stores. The company plans to undertake 20-30 remodel and relocation projects, while maintaining an operating margin of 14.7% to 15.0%. It also expects diluted earnings per share of $24.70 to $25.40 and share repurchases of approximately $900 million. Ulta Beauty has set a capital expenditure budget of $400 million to $475 million and expects depreciation and amortization expenses to range between $245 million to $250 million.

      • Credit Suisse Michael Binetti has maintained an Outperform rating and increased the price target from $535 to $580.
      • BMO Capital’s Simeon Siegel has kept a Market Perform rating while raising the price target from $390 to $510.
      • Barclays Adrienne Yih has maintained an Overweight rating and increased its price target from $548 to $636.
      • Dana Telsey of Telsey Advisory Group has also maintained an Outperform rating and increased her price target from $575 to $600.

      Apple may be able to gain market share in India

      As the company shifts its focus on the Indian market, according to a report by Evercore ISI. The report comes after Bloomberg reported that Apple is changing the management of its international business and will make India its own sales region. While Apple has yet to comment on the matter, Chief Executive Tim Cook has previously described India as a “major focus” and “hugely exciting market” for the company. According to a report by International Data Corp, Apple is not currently among the top five smartphone companies in India. However, if Apple can attain China-like market share in India, it could bring in millions of new customers and increase revenue.

      • Walter Piecyk fromLightShed Partners, downgraded Apple from Neutral to Sell and set a price target of $120.
      • Laura Martin, an analyst at Needham, reiterated her Buy rating on Apple and maintained a price target of $170.