🌟 Roblox: The Bottom Just Fell Out of the…
Ticker Reports for May 11th
These 7 Stocks Surged Double-Digits and Have Double-Digits to Go
Earnings reports often catalyze big moves in a stock’s price; the bigger the move, the more conviction the market shows. Catalysts for these moves include better-than-expected results, gained traction, and improved guidance pointing to additional upside. The stocks on this list surged more than 10% after their earnings releases, indicating a significant change in outlook. Because a significant spike in volume accompanied these surges, they have a higher-than-average chance to continue moving higher this year.
Griffon Surges 10% on Improved Guidance
Griffon (NYSE: GFF) manufactures commercial and residential building supplies. The company’s outlook has been hampered by high interest rates and a tepid housing market, but results were better than expected. The company beat on the top and bottom lines and raised guidance, leading the stock to surge by more than 10%. The surge is partly driven by analysts’ sentiment, which is on the rise. Marketbeat tracks three analysts with ratings on GFF stock; one issued a price target revision to set a new high. The consensus target implies about a 9% upside and a new all-time high; the high target implies another 10% upside from the consensus.
Teva Pharmaceuticals Enters Reversal
Shares of Teva Pharmaceuticals (NYSE: TEVA) entered a reversal following its latest release. The company beat on the top and bottom line with its core business and announced positive results from a pipeline study. Late-stage trial results for TEV-’769 affirmed the treatment’s intended use and set it up for approval. The news increased shares by 10% following the release, and the move extended by 5% the day after. Volume spiked to 4X average the day of the release.
Payoneer Global Pioneers Cross-Border Payments
Payoneer Global (NASDAQ: PAYO) sent its shares up 15% following its release. The payments processor outperformed the top and bottom line expectations and raised guidance to above consensus. Results are underpinned by strength in the retail and commercial segments led by growth in the higher-margin commercial business. Analysts are raising their price targets because of the news. The consensus target implies another 15% upside, and the freshest targets include a new high of $8 or 25% upside.
Siemens Energy Jumps 18%, Shares Still Advancing
Siemens Energy (OTCMKTS: SMEGF) had a solid quarter, with growth and operations turning profitable compared to last year’s losses. The company also raised guidance for the year and a shake-up in the wind unit. The wind unit will get a new CEO over the summer, which may help get it on the right track. Analysts are happy with the news and are raising their price targets. The new range suggests a 50% upside or more from current levels.
Dutch Bros Serves Up A Good Report
Dutch Bros (NYSE: BROS) served up a solid top and bottom line beat on top of 40% top-line growth, suggesting it is taking share from Starbucks (NASDAQ: SBUX) in its operating arena. The company also raised guidance to a level that may still be cautious. Analysts are raising their price targets because of the news and see this stock advancing another 15% to 20% by year-end. Assuming the company continues outperforming, analysts will likely lead this stock above $40 and into a complete reversal.
Hannon Armstong Sustainable Infrastructure Capital
Hannon Armstrong Sustainable Infrastructure Capital (NYSE: HASI) was once a REIT but is no longer. The company gave up its election and is now an unsheltered asset manager, which the market likes. The company beat on the top and bottom lines in Q1, growing revenue by 53% with a 30% increase in GAAP NII. The company is a high-yield stock, paying nearly 5.5%. Analysts are raising their targets for the stock and see it advancing 10% to 20%.
Wolverine Worldwide Widens Margins, Guides Above Consensus
Wolverine Worldwide’s (NYSE: WWW) Q1 expectations were low, and the company easily cleared the bar. Better-than-expected results, wider margins, and favorable guidance offset the double-digit revenue decline. Shares surged more than 20% because of the reset outlook and may continue higher. The technical setup favors a $3 or 20% gain that could lead to additional upside. The risk is the analysts who are not bullish. They rate the stock at a consensus Hold. There has been a single price target increase since the release, but the consensus target is 20% below the current action, and the high target is just above, providing a target for resistance that may not be broken.
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New Highs in Sight For Symbotic and its AI Warehouse Automation
Symbotic’s (NASDAQ: SYM) Q2 results were not a blowout, but they don’t have to be with hyper-growth figures, triple-digit increases in recurring revenue, and improved guidance. The takeaway from the report is that the business is gaining momentum in its two key segments and has a strong, secular growth story to drive it. Warehouse automation is a budding industry and a critical step in improving business efficiency.
Symbotic is the leader and has only eighteen systems deployed, a small number relative to its three top clients. Walmart (NYSE: WMT), Target (NYSE: TGT), and Albertson’s (NYSE: ACI) operate more than 120 warehouses and distribution centers, providing an avenue for 500% growth without adding new clients. Because the business is accelerating deployment, growing recurring revenue faster than expected, and on track to double its footprint in the foreseeable future, its hyper-growth should continue and may even accelerate.
Symbotic Growth Supported by Improved Deployment Times
Symbotic’s Q2 is highlighted by several developments that resulted in improved deployment times. Among them are a software upgrade that enhances throughput and capacity, another upgrade to improve modularization, and a new AI chip that provides more power. Three deployments were completed, and three started, more than forecast, bringing the total number of systems operating to eighteen.
Accelerated deployment is important for the top line because it produced better-than-expected equipment sales and boosted recurring revenue sooner than expected. The company operates in two segments, with products and deployment on one side and services on the other. Services growth is important because it is the higher-margin segment and will lead to sustained margin improvements over time. The net result is that revenue grew 59% to $424.3 million, recurring revenue by 145%, to outpace the Marketbeat.com consensus by 300 basis points.
The company continues to post GAAP losses but was EBITDA positive for the quarter and generated positive free cash flow. The company’s cash flow resulted in a 40% improvement in cash. Cash and equivalents are up to nearly $1 billion and are expected to grow over time. The balance sheet is in solid shape with virtually no debt, cash and assets up, and shareholder equity turning positive. Long-term debt is less than 0.1X equity for this tech stock.
Symbotic Guidance Leads the Analysts to Revise Estimates, Raise Targets
Symbotic’s Q2 results are compounded by robust guidance, which came in above the analysts’ consensus at the low end. The high end of the range implies 500 basis points of outperformance relative to the pre-release estimate and may be cautious. In addition to core momentum strength, the new GreenBox venture is taking off. The company revealed that the first client is C&S Wholesales Grocers, the eighth largest wholesale food distributor in the US, with nearly three dozen warehouse/distribution centers nationwide. The first revenue from that deal will be recognized in the current quarter.
Analysts like what they see in Symbotic’s results and issued several positive revisions following the release. Marketbeat.com tracks four revisions from top firms, including three boosted targets and one reiterated target that aligns with or is above the consensus. The consensus implies about 20% upside and is up about 100% YOY, leading the market to higher levels. A move to the consensus of $55 aligns with the all-time highs.
Is Range-Bound Symbotic Ready to Move Higher?
The price action in Symbotic is range bound and may not be able to move higher soon. The market surged following the release but is capped near $49.50 and the high end of the range. If the market cannot move above $49.50 soon, it will likely remain range-bound below that level well into the summer, possibly longer. So, new highs are in sight, but whether the market will move up to that level is questionable. Even if it does, fresh all-time highs are unlikely until later this year or next year when the interest rate outlook clarifies.
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Roblox: The Bottom Just Fell Out of the Metaverse
There were high hopes for Roblox (NYSE: RBLX) going into the Q1 release, and they were shattered on the rocks of reality. The reality is that the metaverse, as neat as it sounds, just isn’t producing the accelerating growth that market participants had come to expect. The last report, Q4 2023, provided hope and pointed to much stronger results than were reported for Q1. The Q1 results aren’t bad but are far short of expectations and compounded by even weaker guidance that has deflated the market.
The upshot is that Roblox may now trade at a reasonable level. The market is down 30% from the pre-release level in pre-market trading and is still above critical support at the bottom of its trading range. The market may fall another 10% to retest the bottom, but support is expected to be as strong at this level as it has been. The risk is that RBLX shares will fall to a new low, opening the door to a deeper decline that could shave another 50% off the price.
Roblox’s Good Quarter Falls Far Short of Expectations
Robust bookings figures from Q4 led the market to expect a significantly larger growth spurt in Q1 and 2024. The Q1 revenue of $801.3 million is up 22% compared to last year and slightly outpaced the consensus estimate but is offset by whisper numbers that were higher, weak bookings and guidance.
The booking miss is more profound, considering that analysts have been trimming their targets and lowered the bar during the quarter. Also, top-line growth is slowing from the high-20% range to the low-20% range and may fall into the teens by year-end. Bookings in Q1 came in at +19%, decelerating from +25% in Q4, suggesting additional slowdown should be expected.
The internal data is not all bad but aligns with an outlook for decelerating growth. Average daily active users and average monthly unique players grew solidly at 17% and 13%, but the growth slowed sequentially from 22% and 18%, with no pickup expected this year. Bookings growth is sequentially flat at up 6% but is offset by decelerating engagement growth. Hours are up only 2% compared to 21% in Q4 and unlikely to accelerate this year.
The margin news is the best, but it comes with a caveat. The company significantly improved its operating losses, cash flow, and free cash flow to drive outperformance on the bottom line but at the cost of investment. The business cut its CAPEX by 50%, which may have something to do with the quarterly results, but GAAP losses persist.
Guidance is among the worst news items. The company lowered its guidance for FY bookings, increased its outlook for annual losses, and provided a weak outlook for Q2, which may lead to another guidance reduction for this tech stock.
Expect Analysts to Cap Upside for Roblox
Ironically, Roblox is listed among the Top Rated Stocks by analysts on the Marketbeat platform. That is because the trend in analysts’ sentiment has been bullish over the last twelve months, playing into the post-release disappointment felt today. Upgrades and price target revisions lifted the rating to Moderate Buy from Hold and the price target by 25%, but that trend is unlikely to continue. Investors should expect downgrades and price target reductions over the next few days and weeks. The risk now is that Roblox will remain range-bound and at the low end of its range.
The technical outlook could be better. The 30% discount is an attractive entry but may not lead to gains soon, if at all. Roblox is growing and building leverage but continues to struggle with growth outside of its largest demographic, nine to twelve-year-olds, and profitability is still years away. With growth slowing and analysts on track to reset the consensus outlook, the risk of a new low is high.
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