For Immediate Release
Chicago, IL – March 15, 2024 – Zacks Equity Research shares Meta Platforms META as the Bull of the Day and MongoDB MDB as the Bear of the Day. In addition, Zacks Equity Research provides analysis on NIKE Inc. NKE, PVH Corp. PVH and Carnival Corp. CCL.
Here is a synopsis of all five stocks:
Bull of the Day:
Meta Platforms continues to see estimates rise after their last quarterly report and so it remains a Zacks #1 Rank Strong Buy based on its earnings momentum.
My colleague Derek Lewis wrote about the resurgence of META in early February after their 10% EPS beat and raised guidance.
Q4 EPS of $5.33 bested the year-ago number by a whopping 200%, while revenues of $40.11 billion beat the Zacks Consensus Estimate by 2.87% and jumped 24.7% year over year. At constant currency (cc), the top line improved 22%.
When Derek wrote about upward estimate revisions on February 7, analyst consensus for this year and next stood at EPS of $19.41 and $22.42 respectively.
Now those projections have risen to $19.94 and $23.09, representing 34% and 16% annual growth.
What About Reality Labs?
After Apple made a big splash with their new mixed reality device Vision Pro, I decided to check in to see how Zuck & Co. are fairing with their line of VR/AR headsets known as Quest.
The division that makes and sells Quest gear is still a money-losing operation, but that's by design for their long-term development plan.
I recently wrote about META's Reality Labs for my forthcoming special report on the Metaverse because I wanted to investigate how and when this king-pin of social media advertising, commerce and communication would realize profits from this new technology realm.
You can get on the waiting list for that report by emailing Ultimate@Zacks.com and tell 'em Cooker sent you.
Core Growth = Cash to Invest
Besides the stock ramping 400% since its nadir in Q4'22, META revenues troughed at $117 billion in that year and tagged $135B in 2023. Even better, topline growth this year is projected to approach $160B for an 18% advance.
That resurgence in META's core business growth gives them room to experiment with the new technology platforms.
Here's what I wrote recently in my Metaverse report...
The launch of Meta Quest Pro was a small success, but it won't move the needle on META earnings as word is that this is still a money-losing business for them. Meta's Reality Labs unit brought in more than $1 billion in fourth-quarter sales (the holiday quarter) but recorded an operating loss of $4.65 billion. Clearly, this is a division that Zuck & Co. can afford to invest in for a while.
According to AR Insider, whose team does a breakdown of quarterly revenue for the Meta Reality Labs unit, MRL's topline was only $210 million in Q3 and they extrapolated that into $161.7 million for hardware sales. And these figures were down 24% sequentially and 27% year-over-year.
Plus, the cheaper Quest 2 still way out-sells the Quest Pro, with estimated revenue of $140 million. They concluded "Considering an average unit price of $315, this means that Meta sold approximately 443,931 Quest 2s in Q3." With Quest Pro's estimated revenue at barely $9 million and a Q3 ASP of $999 (the price dropped from $1,499 in Q1 the AR Insider team noted) this means that Meta sold approximately 8,934 Quest Pros in Q3.
So for now, the META story is still about its consumer engagement and the ability of the platform to sell more advertising and automate the shopping experience. If you've scrolled Instagram or any Reels lately, you know how "sticky" these apps are.
And again, this is the base of 1-2 billion daily active users that will be able to leverage the next Metaverse experiences in social and ecommerce. "I think the software and social platform might be the most critical part of what we're doing, but software is just a lot less capital intensive to build than the hardware," Zuckerberg said in February of 2023.
Meta Reality Labs reported $13.7 billion in operating losses for 2022 and lost $16.1 billion in 2023. They expect its operating losses to increase year over year in 2024, but I expect Zuck & Co. to keep investing to eventually leverage Metaverse tools and apps for profits -- just like Apple is experimenting with what comes after the iPhone.
Bottom line on META: The Metaverse is a foot race of titans since the hardware development is so expensive. While AAPL growth stagnates at 6.5 times sales, I think META is a buy here trading 7X sales with 15% topline growth.
Be sure to grab my Metaverse report to find out which other stocks I'm picking in that race.
Bear of the Day:
MongoDBis a $27 billion provider of datacenter solutions and is a key alternative to AWS and Azure because developers seem to love the platform.
Mongo has established itself as the clear next-generation, NoSQL, general purpose database leader with over $2B of annualized revenue growing at 20%+ and its core Atlas product growing high double-digits. Based on its large total addressable market, their growing platform capabilities position MongoDB for strong growth for many years.
But despite a big earnings beat on March 7, MongoDB slipped into the cellar of the Zacks Rank this week on weaker guidance that forced analysts to lower their growth projections.
MongoDB forecast revenue growth in a range of +13% to +15% for its current FY'25 that began Feb. 1. The guidance lagged consensus views of 22% increase.
For fiscal 2025, MongoDB expects revenues between $1.9 billion and $1.93 billion. And non-GAAP net income per share is anticipated between $2.27 and $2.49.
This news compelled analysts to lower this year's EPS consensus 19% from $3.08 to $2.49, representing a -25% drop in annual profits.
Quarter Details
MongoDB reported Q4 FY24 (ended January) adjusted earnings of 86 cents per share, which beat the Zacks Consensus Estimate by 86.96% and increased 50.9% year over year.
Revenues of $457.5 million jumped 26.6% year over year and surpassed the consensus mark by 6.02%.
MongoDB's subscription revenues accounted for 97.1% of revenues and totaled $444.3 million, up 27.6% year over year. Services revenues declined 0.5% year over year to $13.1 million, contributing 2.9% to revenues.
Increased User Base
MongoDB added 1,400 customers sequentially to reach 47,800 at the end of the quarter under review. Of this, more than 7,000 were direct-sales customers.
The company's Atlas revenues soared 34% year over year, contributing 68% to total revenues. Atlas had more than 46,300 customers at the end of the reported quarter, adding 1,400 customers sequentially.
MongoDB ended the quarter with 2,052 customers (with at least $100K in ARR) compared with 1,651 in the year-ago quarter.
Bottom line: Most analysts remain bullish on MongoDB and see the lowered guidance as a temporary blip that the company will quickly overcome in the next few quarters.
Additional content:
Here's How NIKE (NKE) Looks a Week Ahead of Earnings
NIKE Inc. is slated to release third-quarter fiscal 2024 results on Mar 21. The leading sports apparel retailer is likely to have witnessed year-over-year declines in the top and bottom in the fiscal third quarter.
The company has been gaining from its Consumer Direct Acceleration strategy, along with strong demand, compelling products and robust performance in its digital and DTC businesses. Supply-chain constraints, continued weakness in Greater China and higher costs have been weighing on its bottom-line performance.
The Zacks Consensus Estimate for fiscal third-quarter revenues is pegged at $12.3 billion, suggesting 0.8% decline from the year-ago quarter's reported figure. The Zacks Consensus Estimate for the company's fiscal third-quarter earnings is pegged at 70 cents per share, indicating a decline of 11.4% from the year-ago reported number. Earnings estimates for the fiscal third quarter have declined 2.8% in the last 30 days.
In the last reported quarter, the company delivered an earnings surprise of 22.6%. Its bottom line beat the consensus estimate by 25%, on average, over the trailing four quarters.
Key Factors to Note
NIKE is expected to have witnessed continued gains from brand strength, robust consumer demand and an innovative product pipeline in the fiscal third quarter. Gains from its Consumer Direct Acceleration strategy, and robust digital and DTC performances are expected to have been other tailwinds.
Continued strength in retail traffic trends within NIKE Direct has been boosting conversion rates. The strong member buying trends are likely to have led to a record digital performance in the to-be-reported quarter. Strength in the North America, EMEA and APLA regions, fueled by increasing traffic, higher conversion and growth in average order value, is likely to have aided sales in the to-be-reported quarter.
The NIKE Direct business has been benefiting from robust growth across regions and an efficient digital ecosystem, which comprises its online site, and commercial and activity apps. Revenues at NIKE-owned stores are expected to have gained from improved traffic, higher conversion rates and growth in average order value. The NIKE Direct business is likely to have benefited from growth in North America, EMEA and APLA, offset by continued weakness in Greater China in the to-be-reported quarter.
We expect total NIKE Brand revenues to increase 1.5% year over year to $11,748.2 million in the fiscal third quarter, driven by a 0.8% rise in the Wholesale business.
On the last reported quarter's earnings call, management stated that it expects strong gross margin execution and disciplined cost management to offset soft second-half revenues and drive earnings growth.
However, NKE has been witnessing a decline in the gross and operating margins due to rising costs, higher markdowns, increased freight and logistic costs, elevated input costs, and currency headwinds. Also, elevated SG&A expenses are concerning.
On the last reported quarter's earnings call, the company predicted 160-180 bps improvement in the gross margin for the third quarter of fiscal 2024, driven by gains in strategic pricing, improved markdowns and lower ocean freight rates.
We expect gross profit to increase 3.2% year over year in third-quarter fiscal 2024, with a 160-bps expansion in the gross margin to 44.9%.
NIKE has been witnessing elevated SG&A expenses, driven by increased demand-creation expenses due to the normalization of sporting activities and overhead costs related to higher wages. Demand-creation expenses are likely to have increased in the fiscal third quarter, owing to elevated marketing and advertising investments. These investments are likely to have supported significant global sports moments and product launches, and investment in capabilities to transform NIKE's operating model for greater speed and effectiveness.
Operating overhead expenses are expected to have resulted from higher wage-related expenses and NIKE Direct costs, as well as increased technology investments to support digital transformation in the to-be-reported quarter.
We expect demand-creation expenses to increase 9.6% year over year and operating overheads to rise 2.1% year over year in the fiscal third quarter.
Driven by the gross margin growth offset by higher SG&A expenses, our model suggests a 20-bps expansion in the operating margin to 11.6% in the fiscal third quarter.
Zacks Model
Our proven model conclusively predicts an earnings beat for NIKE this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
NIKE has an Earnings ESP of +5.21% and a Zacks Rank of 3.
Other Stocks Poised to Beat Earnings Estimates
Here are some other companies that you may want to consider, as our model shows that these also have the right combination of elements to post an earnings beat.
PVH Corp. currently has an Earnings ESP of +1.23% and a Zacks Rank of 2. The company is expected to register bottom-line growth when it reports fourth-quarter fiscal 2024 results. The Zacks Consensus Estimate for PVH's quarterly revenues is pegged at $2.4 billion, which suggests a decline of 3.3% from the figure reported in the year-ago quarter. You can see the complete list of today's Zacks #1 Rank stocks here.
The consensus estimate for PVH's bottom line has moved up 0.6% in the last 30 days to $3.49 per share, which suggests growth of 46.6% from the figure reported in the year-ago quarter. PVH has delivered an earnings surprise of 18.9%, on average, in the trailing four quarters.
Carnival Corp. currently has an Earnings ESP of +6.26% and a Zacks Rank of 2. The company is anticipated to register top and bottom-line growth in fourth-quarter fiscal 2023. The Zacks Consensus Estimate for CCL's quarterly revenues is pegged at $5.4 billion, suggesting growth of 22% from the figure reported in the year-ago quarter.
The Zacks Consensus Estimate for Carnival's quarterly loss per share has narrowed by a penny in the last seven days to 17 cents per share. The consensus mark suggests 69.1% growth from the year-ago quarter's reported number. CCL delivered an earnings surprise of 19.2%, on average, in the trailing four quarters.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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