Last week, our trending stock lists collected a motley crew of companies ranging from biotech to regular tech to home entertainment tech. In general, there was just a lot of tech.
For the week of May 16, many of those same stocks hit our trending roundup again – for good reason. From a 49 million square foot downgrade to a pilot program intended to put credit cards in the hands of the credit-less, here’s an inside look at what’s making the market pop.
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International Business Machines Corporation (IBM)
First up in our weekly trending list is International Business Machines, which closed up 0.35% on Friday to $144.68 with 2.7 million trades on the books. The stock is up almost 15% for the year.
IBM a repeat customer from last week, after announcing the week before that they had developed the world’s first 2nm chip-making technology. Now, IBM is trending, likely in part due to a slew of messages surrounding the future of the company’s working arrangements.
CEO Arvind Krishna declared last week that IBM expects up to 80% of its 350,000 employees to opt for a hybrid office-remote work arrangement, with the remaining 20% keeping their position as fully remote employees. And while he cautioned that “nobody should make firm plans for another two or three months,” he also acknowledged that these arrangements will vary around the world to account for individual countries’ situations regarding the pandemic.
In anticipation of this massive workplace shift, IBM is planning to shed “tens of millions” of square feet of real estate. The company plans to move to the CrossPoint office complex in Lowell, Massachusetts, downsizing from almost 50 million square feet to a mere 150,608.
The downgrade will likely help IBM’s bottom line as well as their employee working conditions – something the company has surely considered. Although an operating income of $8.58 billion in the last fiscal year doesn’t exactly put the company in “hurting” territory, this is a touch over half of their $13.2 billion operating income three years ago.
Plus, their mere 0.21% in revenue growth to $73.6 billion isn’t quite up to snuff compared to their three-year-ago revenue of nearly $79.6 billion. Their EPS has fallen in the same timeframe, too, from $9.52 to $6.23, while their ROE has decline from 50.3% to 26.4%.
Still, when you’re down, there’s nowhere to go but up: the company is expected to see revenue growth of 0.57% in the next twelve months. And with a forward 12-month P/E of 12.8x, their stock shows plenty of room for growth, as well.
Our AI sees IBM as having above-average potential overall, as well, though it could be doing better in some areas. The company earned C’s in Technicals and Growth, and B’s in Quality Value and Low Volatility Momentum, setting them up for an optimistic future.
Netflix, Inc (NFLX)
Although Netflix fell short 2 million subscribers in its most recent earnings report, it still closed up almost 1.4% on Friday to $493.37 per share, ending the week on a positive note with 2.88 million trades in the bank. Still, its stock remains down 8.8% YTD.
Netflix’s high stock prices are mostly supported by its underlying performance – revenue grew almost 5.6% in the last fiscal year and 67% in the last three, bringing total revenue to $25 billion. Of this, the company netted $4.585 billion in operating income, almost triple their $1.6 billion operating income three years ago. And their EPS has risen 35.9% in the last year alone and 208% in the last three, seeing per-share earnings grow from $2.68 to $6.08.
And while you might think that a company this big has nowhere to go, you’d be wrong: Netflix’s revenue is expected to expand 3.33% in the next twelve months. At the same time, some analysts see the stock as overvalued (largely due to the inability to monetize their Netflix Originals via traditional methods), and their forward 12-month P/E of 47.53 appears to support this claim.
Still, our AI doubts that Netflix has reached its cap; far from it. In fact, Netflix earned an A in Growth, with B’s in Low Volatility Momentum and Quality Value – though it did net a D in Technicals. Only time will tell if Netflix is able to grow as pandemic restrictions loosen at last and the broader economy reopens.
Moderna, Inc (MRNA)
Last week was a roller coaster week for vaccine manufacturers after the Biden administration openly supported an initiative to waive Covid-19 vaccine patents in order to bolster global production. This announcement – as well as Moderna’s
Once again, Moderna makes our list of trending stocks as shares closed up 7.7% on Friday to $161.38 on volume of 6.5 million trades. While the stock has been falling over the past month, as indicated in the 22-day price average of $167 and change, the stock is still up almost 54.5% YTD.
Moderna can once again thank the government for its upward trend, as shares of the biotech company rose after an announcement from the CDC that individuals who are fully vaccinated can “participate in indoor and outdoor activities, large or small, without wearing a mask or physical distancing.” While Moderna can’t claim full credit, distributing hundreds of millions of doses of their mRNA vaccine surely helped make this long-awaited declaration possible.
And in further good news, Australia last week noted that it’s in talks with Moderna to establish domestic production of messenger RNA vaccines. The company is also supposedly conferring with Samsung BioLogics Co Ltd to start production of the Moderna vaccine in South Korea (though no official decision has been made) after two expert panels recommended that Moderna’s vaccine be approved for emergency use.
Moderna is one of those fortunate companies that benefitted from the pandemic more than it was hurt, as the biotech company saw their revenue expand 240% in the last fiscal year to $803 million, compared to $135 million three years ago. Their operating income almost doubled in the same time frame, from $413 million to $763 million, though per-share earnings plummeted from $4.95 to $1.96.
Moderna is expected to see revenue growth of 16.2% over the next twelve months. And with a forward-facing P/E of 5.84x, there’s some indication that the company may be undervalued.
However, our AI is wary of Moderna – especially after a year of such rapid, and situation-specific, growth. The company scored its highest rating, B, in Growth, with D’s across the rest of the board in Technicals, Quality Value, and Low Volatility Momentum.
Intel Corporation (INTL)
After making our trending list last week after Atlantic Equities downgraded the chipmaker to underweight, Intel
Intel’s struggles in chip manufacturing and delivery have been compounded in recent weeks during the global chip shortage, with the company still behind several nanometers in design – not to mention grappling with the results of a $2.2 billion judgment by a federal jury in March over patent infringement. Still, the company managed to deliver strong Q1 results in April, driven by exceptional product demand.
However, Intel’s last year was not its best – its numbers are roughly stagnant in the three-year timespan. Revenue is up 9.7% over the past three years, from $70.8 billion to $77.9 billion, though operating income barely ticked up from $23.2 billion to $23.9 billion. Its EPS has risen by around $0.50 to $4.94 in per-share earnings, with ROE down to 26% from 29%. All in all, Intel is trading with a forward 12-month P/E of 12.94x.
Our AI doesn’t have much faith in Intel to turn its situation around anytime soon, either. The company earned below-average ratings across the board from our artificial intelligence, with C’s in Quality Value and Low Volatility Momentum, D in Growth, and F in Technicals.
Wells Fargo & Company (WFC)
Wells Fargo has been on a massive public rehabilitation campaign since 2018, wading through scandal after lawsuit due to deplorable business practices that damaged the credit of their members and tarnished their reputation (and bottom line). In the years since, despite some slip-ups, Wells Fargo has done their best to make a comeback – and with their stock earnings approaching pre-pandemic numbers at last, the company may just be about to make it.
Later this year, Wells Fargo is set to join a number of companies – including fellow financial giants US Bancorp
This program gives Wells Fargo – a company that once hurt the credit of thousands of its members – a chance to redeem itself and give members a financial foot forward. That’s something that the company has experienced itself in the last year, as the company saw a revenue increase of 9.3% to $58.3 billion (down from $84.7 billion three years ago), and operating income growth of 216% to $2.1 billion (down from $28.5 billion three years ago).
And while its EPS and ROE remain in the tank – $0.41 and 1.92%, respectively – Wells Fargo maintains a forward 12-month P/E of 14.16x.
Still, our AI remains skeptical of Wells Fargo, rating the company just below average with a D in Quality Value and C’s in Technicals, Growth, and Low Volatility Momentum.
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