Thursday proved to be a strong trading day following a flurry of corporate announcements on Wednesday. The NASDAQ
From the upcoming retirement of one of the internet’s favorite meme browsers to the inevitable retirement of a Wall Street banking legend, see why Netflix, Morgan Stanley
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L Brands, Inc (LB)
The company’s revenue hit $3.02 billion (compared to $3.01 billion estimates) with net income rising to $276.6 million as total sales surged more than 80% YOY. L Brands credits relaxed pandemic restrictions, government stimulus checks, and heightened momentum for its Victoria’s Secret lingerie brand for the most recent boost.
These numbers proved to be a boost after fiscal 2020’s profits, which saw L Brands’ revenue grow 11.5% to $11.85 billion, with operating income ballooning over 42% to $1.87 billion in the same period. Per-share earnings rose, too, by 66.8% in fiscal 2020, ending the year at $3 per share. Currently, L Brands is trading at 11.75x earnings.
Unfortunately, L Brands, Inc. does not rate highly in the eyes of our AI, which has graded the company C in Technicals, Growth, and Quality Value, and D in Low Volatility Momentum.
Netflix, Inc (NFLX)
Netflix’s 2020 fiscal year proved profitable all-around, with revenue up almost 5.6% to almost $25 billion, and operating income growing nearly 22% to $4.585 billion. This saw per-share earnings swell 36% to $6.08 in per-share earnings, compared to a paltry $2.68 three years ago. In the same time frame, ROE bumped up from 27.5% to over 29.6%.
Netflix is currently trading with a forward 12-month P/E of 48.26, suggesting that the company’s stock may be bordering on (if not fully entrenched in) overvaluation territory. But while stock prices are falling, future projections indicate that Netflix’s revenue is expected to grow 3.33% in the next year.
Furthermore, our artificial intelligence views Netflix as a solid investment for the most part, with A in Growth, B in Low Volatility Momentum and Quality Value, and D in Technicals.
Morgan Stanley (MS)
Morgan Stanley is the third trending stock on today’s list, brought about by a day of busy activities Wednesday. Of particular interest is CEO James Gorman’s leadership shakeup, as the 62-year-old tapped two co-presidents – and a small group of other lieutenants – to take bigger roles in the company’s future.
This all comes about as the 11-year-tenured veteran of Morgan Stanley admits he plans to stay on at least three more years, while also noting that he is “highly confident one of them will be the CEO in the future.”
Morgan Stanley closed down 1% on the news, ending the day at $86.05 per share with 10 million trades on the books. The stock is up 25.6% since January, with Wednesday coming in about $2.50 over the 22-day price average.
In the last year, Morgan Stanley’s revenue grew 13.4% to $48.2 billion compared to $40 billion three years ago, producing record-high cash flow to go with its ballooning stock prices. Operating income ballooned almost 19% to $17.9 billion, significantly outpacing $13.7 billion operating income three years ago. This brought EPS to $6.46, an upward change of 18.3%. Overall, the company’s ROE hit 12% in fiscal 2020.
Morgan Stanley is currently trading with a forward 12-month P/E of 13.24x. Our AI has graded the wealth management powerhouse A in Growth, B in Low Volatility Momentum, and C in Technicals and Quality Value.
AT&T, Inc (T)
AT&T is trending this week after announcing on 17 May that the company would combine AT&T’s WarnerMedia (formerly Time Warner) with Discovery Communications to build a Hollywood rival for streaming giants Netflix and Disney+. The deal is officially expected to close in mid-2022, though investors are currently in a tizzy as AT&T’s dividend will be cut to account for WarnerMedia’s shareholder distribution.
AT&T continued its downward spiral Wednesday, losing 2% and closing out at $28.96 per share with a total trade volume of 122.6 million. This is a sharp price drop from the 10-day average of $31.58, with the stock barely trading up 0.7% YTD.
However investors feel about losing their dividends, the move may prove fruitful for AT&T, as the merger will alleviate some of the media giant’s debt and allow them to focus fully on telecommunications and high-speed internet.
And a change of some kind is desperately needed, as AT&T’s revenue stalled out at 0.68% in the last year to $171.76 billion (though, admittedly, once you reach triple-digit billions it’s hard to grow much more). At the same time, though, operating income grew 12% to $25.66 billion, down from $31.6 billion three years ago.
And whereas EPS was $2.85 billion in the three-year-ago period, it fell to $0.75 during the pandemic. ROE, too, plummeted, from 11.9% three years ago to 2% this year. Currently, the company is trading with a forward 12-month P/E of 9.5x.
Our AI also shows that AT&T is a mixed bag for investors, with an A in Low Volatility Momentum, C’s in Growth and Quality Value, and D in Technicals.
Microsoft Corporation (MSFT)
Microsoft barely inched up 0.02% on Wednesday, ending at $243.12 per share with over 25.7 million trades on the books. The tech giant has been slipping in recent weeks, down from its 22-day price average of $251.06, though the stock remains up 9.3% YTD.
Microsoft’s slight price change Wednesday may be a reflection of the market’s reaction to the announcement that Internet Explorer 11 will be retired on 15 June 2022 for some versions of Windows 10. Instead, Microsoft will be pushing its Edge browser, which is faster, slicker, and more secure than Internet Explorer (and also happens to run on the same technology as Google Chrome).
This change comes about after Microsoft spent 2020 expanding, perfecting, and capitalizing on its products, fueling work-from-home capabilities with its Office Suite, Skype, and of course, Xbox (for after-hours, naturally).
The company saw revenue grow 12% to $143 billion in the last year, compared to $110 billion three years ago, while operating income leaped 21.3% to almost $53 billion. This saw Microsoft’s per-share earnings rise over 27% in the last year alone (and 244% in the last three) to $5.76 in per-share earnings. All told, Microsoft’s ROE over doubled in a three-year period, from 19.5% to over 40.1%.
Currently, Microsoft is trading with a forward 12-month P/E of 30.68. And while that may seem like overvaluation territory on its face, keep in mind that the company’s projected revenue over the next twelve months is expected to grow by 8.5%.
Not to mention, despite Microsoft’s banner year, the company hasn’t topped out its potential. In fact, our AI rates Microsoft A in Low Volatility Momentum and Quality Value, B in Growth, and C in Technicals.
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