Yahoo Finance Splunk and NIO have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – April 21, 2023 – Zacks Equity Research shares Splunk SPLK as the Bull of the Day and NIO NIO as the Bear of the Day. In addition, Zacks Equity Research provides analysis on The Boeing Company BA, Spirit AeroSystems SPR and Embraer ERJ.
Here is a synopsis of all five stocks:
Bull of the Day:
Splunk is a Zacks Rank #1 (Strong Buy) that develops and markets cloud services and licensed software solutions. The stock was a high-flyer back in 2020 as cloud-based stocks were the hot new thing. However, the market became saturated and the cloud bubble popped, bringing Splunk shares down over 70% in two years.
The stock looks to have bottomed, almost doubling off its 2021 lows from October. Splunk is now consolidating in a sideways trade since pulling back after a big earnings beat.
Investors seem to have accepted the current market price for the stock as they wait for the next catalyst.
More About Splunk
The company incorporated in 2003 and is headquartered in San Francisco, California. It employs 8,000 and has a market cap of $15.3 billion.
Splunk has a focus in two markets: Security and full-stack monitoring & analysis. Revenues stem from the sale of software licenses, cloud subscriptions, and maintenance and support.
The stock has a Zacks Style Score of "A" in Growth, but "F" in Value. The Forward PE is 33 and the stock pays no dividend.
Q4 Earnings
Splunk reported earnings in early March, seeing an 84% surprise to the upside. The company also beat on the top line, but issued weak guidance.
Splunk guided Q1 revenue at $710-$725M vs the $807M expected and guided FY24 revenues at $3.85-3.9B vs the $4.02B. The numbers were disappointing and the stock sold off about 15% in the week after the earnings release.
However, the stock has stabilized and it looks like investors are focusing on the long-term as the stock sees estimates revised upwards for the current year.
Estimates Mixed
Short-term, we still see estimates headed in both directions. While analysts dropped their numbers after the March earnings, we see a small tick higher for the current quarter. Over the last week analysts have lifted estimates a tick, going from -$0.12 to -$0.11.
For next quarter, we see a small tick down. Over the last 7 days, we see numbers fall to $0.26 from $0.27.
So to go along with the stock, there is a flatlining of the short-term earnings expectations.
But when we look to the current year, we see estimates have ticked 8% higher since earnings, going from $2.55 to $2.75. For next year we see a hike of 5%, with analysts lifting numbers from $3.14 to $3.30.
Analysts that are bullish on the stock cite significant growth opportunities in the observability, cybersecurity, and core machine search markets. Additionally, Splunk has made cost-saving and operating leverage improvements.
The Technical Take
Splunk was a cloud darling in 2020, hitting highs of $225. But over the last two years, the stock fell to $65 before rallying to $110.
While the stock is well off its lows, its struggling to break away from its 200-day moving average. SPLK has been glued to the $92 level, no higher than 6% above or below that price. This is a tight range for such a volatile stock and something must give.
Earnings will be the catalyst, so investors should watch for similar companies reporting as we approach SPLK earnings in late May.
For those looking to buy, here are some levels.
21-day Moving Average (MA): $92
200-day MA: $91.50
Fibonacci support (50%): $87.50
Fibonacci support (61.8%): $82.50
The 50-day MA is at $96.50 and will provide resistance until a catalyst can break through it. Upside levels to consider taking profits would be $120-125 and $145-150
In Summary
While the numbers are not quite there yet, the bulls see some opportunity headed into next quarter and especially next year. The next earnings report will be a major catalyst that will either help the stock well above $100 or take out recent lows.
Bulls should be looking to accumulate shares at support levels and watch estimates for any big changes in expectations.
Bear of the Day:
NIO is a Zacks Rank #5 (Strong Sell) that designs, develops, manufactures, and sells smart electric vehicles in China.
The stock had a big run back in 2020, but NIO has since lost all gains since the EV bull run started. Investors are at a loss as earnings continue to underperform and analysts' lower estimates.
About the Company
The Shanghai based company was founded in 2014 and is considered the Tesla of China. NIO offers five, six, and seven-seater electric SUVs, as well as smart electric sedans. The company also is also involved in the provision of energy and service packages to its users.
NIO is valued at $14.7 Billion and holds Zacks Style Scores of "F" in Growth, "D" in Value, but "B" in Momentum. The stock pays no dividend.
Q4 Earnings
NIO released Q4 earnings in early March seeing EPS at -$0.44 vs the -$0.16 expected. While sales were up to $2.33B from the $1.55B last year, the EPS miss brought selling into the stock.
The big issue was a contraction in margins that came in at 3.9%, down from the 17.2% the year prior. NIO blamed the contraction to accelerated depreciation, and losses on purchase commitments for the existing ES8, ES6 and EC6 amid the transition to new models under the NIO Technology Platform 2.0.
Estimates
Since earnings, analysts have been cutting their numbers aggressively for the current year. Over the last 90 days, we have seen numbers fall from -$0.51 top -$1.36.
Looking at next year, things don't get much better. 90 days ago, estimates were expected to come in at a gain of 6 cents. But now, a loss of 47 cents is expected.
Considering the Tesla earnings report coming up short, investors might want to take extreme caution as we head into NIO earnings.
Technical Take
In early 2020, NIO was just a $3 stock that had a dream. When EV got hot, this dream was realized as the stock ran all the way to $66. From there, the stock became very volatile in 2021 and started to bleed lower in 2022.
The collapse continues as the stock recently hit lows not seen since July of 2022.
For those interested in moving averages, the 50-day is at $9.40 and the 200-day is at $13.50. These will likely become areas of resistance if the stock manages to rally.
Summary
NIO was a former EV highflyer that continues to bleed lower. The estimates are showing no relief coming anytime soon, so investors should shy away from the name.
Additional content:
Will Abnormal 787 Costs Hurt Boeing (BA) in Q1?
The Boeing Company is set to release first-quarter 2023 results on Apr 26, before the opening bell.
In the last reported quarter, the company incurred a loss of $1.75 per share, which came in much wider than the Zacks Consensus Estimate of earnings of 5 cents. Solid delivery figures, both commercial and defense, along with robust aftermarket services trend, must have boosted Boeing'sfirst-quarter earnings performance. Yet, abnormal costs associated with 787 might adversely impact its overall first-quarter results.
Solid Product Deliveries to Aid Results
Boeing's first-quarter deliveries reflect a solid 36.8% surge in commercial shipments from the year-ago reported figure. Defense shipments have also increased 2.4% year over year.
The jet giant's military and commercial business revenues comprised almost 35% and 39% of its total revenues (as of 2021-end), respectively, thereby together constituting almost 75% of its total revenues.
For manufacturing companies like Boeing, successful deliveries of finished products play a crucial role in boosting its revenue growth. Therefore, such a significant improvement witnessed in the jet maker's deliveries for both its commercial and defense segments is expected to benefit Boeing's overall first-quarter results.
Expectations for BGS
As far as Boeing Global Services (BGS) unit's first-quarter performance is concerned, we remain optimistic.
Notably, a steady growth observed in both domestic and international air travel recently are expected to have bolstered fleet utilization, thereby once again boosting aftermarket commercial jet services in the first quarter of 2023. Meanwhile with 737 Max having returned to China in the fourth quarter of 2022 must have also ushered in some aftermarket services contract for Boeing in the soon to be reported quarter.
This, as well as a robust cargo market with several Boeing converted freighter and materials management agreements, is likely to have added an impetus to BGS' first-quarter revenues.
The Zacks Consensus Estimate for the unit's revenues is pegged at $4,503 million, indicating an improvement of 4.4% from the year-ago reported number.
The same for its earnings is pegged at $639 million, indicating growth of 7.9% from the prior-year quarter.
Cash Flow Projections
Higher jet deliveries, especially that of 737 aircraft, along with the recent strong order activity and increased aftermarket services, are expected to have contributed to Boeing's cash flow reserve.
Q1 Expectations
Considering the aforementioned discussion, we remain optimistic about BA's overall first-quarter revenue and earnings performance. However, abnormal costs in relation to the 787 program, along with periodic expenses, might adversely impact its bottom-line performance.
The Zacks Consensus Estimate for Boeing's total revenues is pegged at $17.36 billion, implying a 24.1% improvement from the prior-year reported figure. The bottom line estimate is pinned at a loss of 98 cents per share, indicating a significant improvement from the year-ago quarter's loss of $2.75 per share.
What the Zacks Model Unveils
Our proven model does not conclusively predict an earnings beat for Boeing this time around. The combination of a positiveEarnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. However, this is not the case for BA.
Boeing has an Earnings ESP of -7.50% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they're reported with ourEarnings ESP Filter.
Stocks to Consider
Below are three defense stocks that have the right combination of elements to come up with an earnings beat this reporting cycle:
Spirit AeroSystems: The company is expected to release first-quarter results on May 3. SPR has an Earnings ESP of +16.58% and a Zacks Rank #3. You can seethe complete list of today's Zacks #1 Rank stocks here.
Spirit AeroSystems delivered a four-quarter average negative earnings surprise of 157.65%. The bottom-line estimate for SPR is pegged at a loss of 31 cents, indicating a deterioration from the prior-year quarter's earnings of 3 cents per share.
Embraer: The company is scheduled to release first-quarter results on May 3. ERJ has an Earnings ESP of +116.67% and a Zacks Rank #3.
Embraer delivered a four-quarter average earnings surprise of 105.32%. The bottom-line estimate for ERJ is pegged at a loss of 3 cents per share, indicating an improvement from the year-ago quarter's loss of 43 cents per share.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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The Boeing Company (BA) : Free Stock Analysis Report
Embraer-Empresa Brasileira de Aeronautica (ERJ) : Free Stock Analysis Report
Spirit Aerosystems Holdings, Inc. (SPR) : Free Stock Analysis Report
Splunk Inc. (SPLK) : Free Stock Analysis Report
NIO Inc. (NIO) : Free Stock Analysis Report
