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Netflix's long-term prospects have not worsened
Netflix, stock, Netflix\'s long-term prospects have not worsened Netflix (NFLX) results for October-December 2021 mostly coincided with consensus expectations, while management forecasts for the next reporting period greatly disappointed investors. After the release of the quarterly report, the shares of the streaming service fell by 20%.The company's revenue grew by 16% YoY, to $7.71 billion, coinciding with preliminary market estimates. Operating margin exceeded investors' expectations, reaching 8.2%. GAAP EPS increased from $1.19 to $1.33 with the consensus of Wall Street experts at $0.83.According to the results of the fourth quarter of 2021, the subscriber base expanded by 8.28 million to 221.84 million, slightly falling short of the expectations of investors and the initial forecast of management at the level of 8.4 million and 8.5 million, respectively. However, many investment houses have previously pointed out this risk, therefore, from our point of view, it was taken into account in the quotes even before the release of the report. The actual data turned out to be even better than some investors had expected. The dynamics of the service's audience growth really slowed down significantly in November after the decline in interest in the series "The Squid Game", but the end of the year turned out to be quite strong due to the busy release schedule and the seasonality factor.Investors were disappointed by the following two aspects of the report:In the first quarter of 2022, the company forecasts an expansion of the subscriber base by only 2.5 million against consensus expectations of 5.8 million. Such a weak gain was an unpleasant surprise for all Wall Street analysts and investors. Management noted that this forecast reflects a higher density of premieres at the end of the quarter compared to its beginning, but the exact reason for the slowdown in audience growth is not yet clear. It is possible that this may be due to macroeconomic factors, as well as competition from other streaming services that are actively expanding geographically.According to management's expectations, the operating margin by the end of 2022 will be 19-20%, which is worse than the preliminary forecasts of investors. The possible strengthening of the dollar will put pressure on the indicator, since 60% of the streaming service's revenue is generated outside the United States, and its expenses are denominated mainly in American currency. According to Netflix, the strengthening of the dollar against major currencies over the last half of the year may lead to a decrease in revenue for 2022 by $1 billion.Such a weak guidance of the management for the current quarter increases uncertainty about the long-term trajectory of audience growth. As a result, we lower the target price for NFLX paper on the horizon of the year from $690 to $505.Despite the significant revision of the target, we still positively assess the long-term prospects of the issuer due to the following key factors:The global transition from traditional TV to streaming will continue, and Netflix is the market leader. The company owns the rights to six of the 10 most popular (according to the Google search engine) TV series of 2021.The subscriber base in the USA and Canada (in the home market of the service) grew by 1.2 million in the last quarter, to 75.2 million (with a consensus of +550 thousand), demonstrating the highest rate of expansion since the beginning of the pandemic. Consequently, the company is able to increase penetration in the most saturated market, despite the growing competition, which is a positive sign.According to management comments, free cash flow will still remain positive in 2022.Despite the growing costs of content creation, management maintains a target to increase operating margin at an average level of +3 percentage points per year, although investors were afraid of a decrease in the gaidens due to the acceleration of inflation. EPS in 2022-2025 may increase by more than 20% on average.The schedule of movie and TV series releases in 2022 is characterized by balance, so audience engagement will be maintained at a high level throughout the year.The epidemic factor no longer leads to delays in the filming process.The company is still actively developing mobile games, so we expect that in order to form an experienced development team, Netflix will continue to enter into small M&A deals, but large acquisitions are unlikely. Netflix will create games based on popular TV series, experimenting with various genres.We expect that in the coming year, investors will begin to perceive Netflix as a company with an effective business model, since the issuer will generate significant free cash flow and conduct a share repurchase program, while competitors are characterized by negative cash flow from streaming due to the smaller scale of the business.Taking into account all these factors, we believe that the reaction of investors to the report is excessively negative, since the long-term prospects of the business have not deteriorated. We believe that the sell-off in the issuer's securities was caused not so much by a change in investors' expectations regarding the company itself, as by a temporary weakening of interest in the shares of most fast-growing chips against the background of the expected tightening of the Fed policy. For this reason, in the near future, Netflix shares may show sideways dynamics or even continue to decline. However, if there are these securities in the portfolio, we do not recommend getting rid of them, since the long-term prospects of the company, in our opinion, are still ...
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Procter & Gamble struggles for profitability
Procter & Gamble, stock, Procter & Gamble struggles for profitability Procter & Gamble (NYSE: PG) raises prices for most of its products due to the rise in the cost of raw materials and transportation.Procter & Gamble has warned retailers about price increases for laundry and textile care products from February 28, and for personal care products from April. In total, the price increase will affect eight categories of goods, and this step will be made not only for the main one for Procter & Gamble of the US market, characterized by high purchasing power, but also abroad.For the second quarter of the current fiscal year Procter & Gamble recorded organic growth of 6% across all five major segments of its business. Half of this growth was due to higher prices even before the aforementioned decision to raise the cost of a number of goods for retailers. The consensus assumed that the corporation's sales would grow by only 3%.The rise in the cost of these products potentially pushes consumers to choose cheaper analogues, but P&G, in our opinion, is confident in its pricing strategy, since, according to management, its competitors face the same trends in prices for raw materials and transportation. At the same time, the impact of exchange rate differences is a bigger blow to P&G due to its broad global presence. In addition, the company believes that consumers of its products are willing to pay more for a brand they know and will not change their preferences. In this regard, the Procter management & Gamble is not afraid of damage to the business or loss of market share.Due to the increase in raw materials and logistics costs, P&G actually recorded a decrease in gross profit by 4 percentage points, but it was leveled by optimizing costs and increasing prices.P&G has improved its forecast for sales growth this year from 2-4% to 4-5%. The cash flow forecast has also been raised. This means that the corporation has a large amount of resources that it can invest in the business even while maintaining large dividend payments and actively repurchasing shares. For this year, the company plans to send $17-18 billion to shareholders against $15-16 billion set in previous goals. Despite the difficulties associated with rising costs, we give an optimistic forecast of P&G's financial performance and raise the target price for its shares to ...
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Bank of America - a model of financial stability
Bank of America, stock, Bank of America - a model of financial stability The second largest US financial institution by assets, Bank of America Corporation (BAC), increased earnings per share by 38.9% YoY to $0.82 in the fourth quarter of 2021, with a consensus of $0.77. Net profit increased by 28.2% YoY, reaching $7.01 billion. Net revenue increased by 9.75% YoY to $22.06 billion, slightly short of the $22.18 billion expected by the market. Bank of America's operating expenses increased by 5.7% YoY to $14.73 billion.Commenting on the publication of the financial statements, the bank's management noted that the quality of its assets remains at a high level due to the improvement of the creditworthiness of customers and the general state of the economy. The share of non-performing loans in total assets (net charge-off) of Bank of America by the beginning of the current quarter was a record low 0.15%, having decreased by 3 bps compared to last year's result. The volume of loans that are overdue for 30 and 90 days decreased by 14.5% and 30% YoY - to $5.28 billion and $1.4 billion, respectively. This indicates a reduction in risks for the loan portfolio. The volume of loans for which there is a risk of delinquency (reserved criticized utilized exposure) decreased by 73% YoY, to $22.38 billion. The volume of overdue loans in the portfolio for legal entities decreased by 29% YoY and by 7% QoQ, to $1.58 billion. At the same time, delinquency on consumer and mortgage loans increased by 9.7% YoY, $2.99 billion. And yet this share is 1-2% less than in the previous quarters of 2021.The disbandment of reserves for expected credit losses at Bank of America slowed down somewhat, but due to this, the issuer received $489 million in additional profit. However, these receipts are of a one-time nature. We believe that the impact of this factor will decrease in subsequent quarters due to an increase in the volume of loans and a tighter monetary policy of the Fed.Despite the minimum interest rates, Bank of America's net interest income increased by 11.3% YoY to $11.41 billion. Non-interest income increased by 8.2% YoY, $10.65 billion.Bank of America's net revenue from retail lending (consumer banking) increased by 8% YoY, to $8.9 billion. Income from asset management (GWIM) rose by 16% YoY, to $5.4 billion, due to an increase in the volume of assets under management by the same 16% yoy, to a record $1.6 trillion. Revenue from investment banking (global banking) increased by an impressive 24% YoY, to $5.9 billion, thanks to an increase in remuneration for financial advice on M&A transactions. Revenues from operations in the capital markets (global markets) rose by only 2% YoY, to $3.8 billion, due to a decrease in trading volumes and revenue from marketmaking amid weakening market volatility.Due to the presence of diversified sources of profit, Bank of America managed to show strong results in conditions of increased uncertainty and low interest rates. At the end of the year, the bank increased its net profit by 78.7% YoY, to $31.98 billion, due to which the return on equity (ROE) increased to 12.23%. The basic capital adequacy ratio of CET-1 decreased from 11.9% to 10.6% at the industry median level of 11.1%. However, with this value of the indicator, the bank is able to maintain stability and cover possible losses. Bank of America has enough resources to continue repurchasing shares and stable dividend payments.Our base target price for the BAC stock is $52, at the moment the paper is fairly priced by the market, but we recommend it for purchase. With the development of a "bearish" trend, the quote may drop to $43, with the implementation of an optimistic scenario, the stock may rise to $ ...
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UnitedHealth remains an interesting investment
UnitedHealth Group, stock, UnitedHealth remains an interesting investment UnitedHealth (UNH) reported better than investors' expectations for the fourth quarter. The company's adjusted earnings per share were $4.48, beating consensus by 4.2%. Strong operating results are supported by a strong outlook for the current year.The company's revenue for October-December increased by 1.9% QoQ and by 12.6% YoY, reaching $73.74 billion, which was 1% higher than general market expectations.Revenue from the UnitedHealthcare segment increased by 12% YoY for the quarter and by 11% for the full year 2021. The number of clients served in the past year increased by 2.2 million, mainly due to an increase in the number of participants in the Medicare Advantage and Dual Special Needs programs by 900 thousand, the same trends were noted in relation to the Medicaid program. Revenues from the Optum direction increased by 14.6% YoY for the quarter and by 14.1% YoY for the year. The number of Optum customers in 2021 increased by 2 million, reaching 100 million. Revenue per customer for the year increased by 33% YoY, thanks to the modernization of the service delivery system, including home-based services in addition to online and offline services available in medical institutions. Optum Insight's revenue backlog for 2021 increased by $2.2 billion to $22.4 billion, including $100 million for October-December. Last year, the company signed a number of new contracts with healthcare institutions and expanded the range of services in the areas of payments, digital modernization and coordination of patient care.UnitedHealth's operating profit for the fourth quarter increased by 0.6% YoY to $5.54 billion. More than 60% of operating profit ($3.4 billion) was generated by the Optum segment. In 2021, operating profit amounted to $24 billion, half of which was provided by revenues from Optum, which remains the main driver of UnitedHealth's profit growth. The company's adjusted EPS increased by 13% YoY to $19.02. The MCR index for October-December increased by 0.7% QoQ and amounted to 83.7%, recovering to a normal level. We expect this indicator to continue growing in the current quarter due to the new wave of the COVID-19 epidemic at the beginning of the year in the United States.UnitedHealth management confirmed a positive forecast for 2022, published in November. This forecast includes revenue in the range of $317-320 billion (+10.2-11.2% YoY) with adjusted EPS within $21,1–21,6 (+10,9–13,6% YoY) and operating cash flow of $23-24 billion (+2.9-7.4% YoY).We evaluate the UnitedHealth report positively, we raise the target price to ...
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Articles about financial markets

The main trends of pharmaceutical corporations in 2022
JPMorgan Chase, stock, Pfizer, stock, Moderna, stock, The main trends of pharmaceutical corporations in 2022 The JPMorgan Chase & Co (JPM) annual healthcare conference ended in San Francisco on January 13. This event with a forty-year history is considered one of the most significant in the medical community: pharmaceutical company executives participate in it, important statements about mergers and acquisitions are made on its site, new drugs are presented and breakthrough research is announced.Taking into account the new realities, for the second year in a row, the event is held in an online format. Let's list the most interesting industry trends that were outlined in the speakers' speeches.The use of RNA is recognized as the main trend in pharmacologyRibonucleic acid (RNA) is one of the three main macromolecules in the cells of all living organisms. Although the functions of RNA are not yet fully understood, studies show that this acid plays an important role in the coding and regulation of genes.Ribonucleic acid has attracted increased attention in connection with the development of vaccines against Covid-19. The previous generation of vaccines involved the introduction of a weakened virus into the body to form a subsequent immune response. Moderna (MRNA) and Pfizer (PFE) vaccines, created on the basis of informational RNA, work differently: they ”teach" human cells to produce a protein that triggers an immune response to prevent infection with coronavirus. Thus, the immune system of a vaccinated person is trained to recognize a protein containing Covid-19 and produce antibodies to it.As part of the conference, Pfizer announced the conclusion of three agreements with smaller industry players to accelerate RNA developments. The company sees a huge potential for RNA-based drugs - in particular, in the treatment of cancer and rare diseases. Amgen's interest in collaborating with Arrakis Therapeutics in the study of RNA is widely discussed, which could result in an order for several billion dollars for the latter. Pharmaceutical giants Johnson & Johnson (JNJ) and Eli Lilly (LLY) have so far limited themselves to restrained statements that they are exploring the possibilities of RNA technologies.Coronavirus pushes for partnerships instead of mergersFor the second year in a row, the healthcare sector has not heard about major deals. The coronavirus has shuffled all the cards. Previously, when a breakthrough technology was discovered, a pioneer was usually expected to be absorbed at a premium to the market, but the pandemic has taught companies to think in a new way, and now they are increasingly inclined to partnerships.The most telling example was the collaboration in the development of a coronavirus vaccine between Pfizer and BioNTech (BNTX). Through partnership, large players actually place an order for development to specialized companies with lower turnover. As a result, both sides benefit: pharmaceutical giants save money, and their partners receive orders and financing.Covid-19 ComebackHaving not had time to fully vaccinate against Covid-19, humanity faced a threat in the form of a new and more contagious variant of the coronavirus - "omicron". A strain from South Africa sets anti-records for morbidity in developed countries, involving pharmaceutical giants in a new development race.Some companies at the conference reported on the supply of their drugs against coronavirus. So, Moderna reported that its sales in 2021 amounted to $ 18.5 billion. GlaxoSmithKline (GSK), in partnership with Vir Biotechnology (VIR), reported on the supply to the US government of 600 thousand doses of the drug for the treatment of Covid-19 sotrivimab. Novavax (NVAX) announced that it has already made the first shipments to Europe of its Covid-19 vaccine, but did not specify the volume of orders. And Gilead Sciences (GILD) has informed that its drug remdesivir may soon be approved by the US regulator for the treatment of coronavirus.As for the development of drugs aimed directly against the omicron strain, only Regeneron (REGN) and Pfizer have made statements about this. Regeneron is going to test the treatment of omicron with antibodies in the first quarter, and Pfizer spoke about the progress in creating a new vaccine against Covid-19, which will also work against the new strain.There is an opinion that omicron as an opportunity rather than a threat. Perhaps omicron is our salvation from coronavirus restrictions, since the body of vaccinated people, having met with a new strain of virus from South Africa, gives an immune response, which can be considered as an alternative to booster vaccination. Which, in a global effect, can give massive protection against coronavirus infection.Patent diversificationLarge pharmaceutical companies are in a hurry to reassure investors who are beginning to pay attention to the patent terms of drugs that occupy a large share in their sales.As a rule, after the expiration of a patent for a particular drug, the market is flooded with its cheaper copies, which significantly reduces the revenue of the manufacturer of the original drug. Therefore, investors expect a diversified portfolio of developments from pharmaceutical giants, which will include not only expensive cancer drugs, but also a wide range of medicines for other diseases.For example, the patent of the anti-cancer drug from Merck & Co (MRK) Keytruda expires in 2028. Total sales of this drug for 2020 amounted to $14.4 billion, which accounted for 30% of Merck's revenue. If the company does not explain to investors before the expiration of the exclusivity period how it is going to compensate for the upcoming "loss” of sales volumes, the market reaction can be very negative.Analysts' opinionAn endless "arms race" continues in the pharmaceutical sector. Since breakthrough technologies and patents provide only a temporary competitive advantage, companies have to constantly set themselves new and new goals.However, the JPMorgan conference reflected some changes in the behavior of both pharmaceutical companies and their investors. Industry representatives confirmed their propensity to create partnerships, and investors confirmed their demands for diversification of development portfolios.The most obvious new trend among the elite of pharmacology has been the use of ribonucleic acid to encode the human immune system. It is assumed that with the proper development of technology, scientists will be able not only to achieve the necessary immune response to various infectious diseases, but also to eliminate defects in hormones or blood quality.And the main intrigue remains who will be the first to develop a vaccine against the omicron strain. Leading pharmaceutical giants are studying its characteristics, causes of origin and the reaction of previously vaccinated people to it. Thus, the beginning of this year is similar to the beginning of the previous one. Back then, we were also on the verge of creating a working version of the vaccine and watched the deadly virus walk around the planet ...
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About the trends of 2022
Litecoin/USD, cryptocurrency, Ethereum/USD, cryptocurrency, Bitcoin/USD, cryptocurrency, Pfizer, stock, Moderna, stock, About the trends of 2022 A couple of steps away from the new year, many are trying to predict the direction of market winds over the next year, and maybe several. We have also analyzed promising ideas of stock exchanges, and today we will share them with you. In general, everything promising in the coming year is connected with the healthcare sector. Next, let's talk about the two most promising companies in this segment.NovavaxNovavax company was one of the first to enter the championship in the development and creation of a vaccine, but in this case it is still far from the podium. Does the company have real prospects? Let's talk about this further.At the beginning of the year, many experts argued that it was simply not advisable to get involved in the company's struggle. This was due to the fact that there were already many manufacturers of similar drugs, and there was not enough space for new ones. As a result, the experts' "verdict" turned out to be reckless, and today many are confident that the company's assets are among the most attractive in the coming year.The vaccine was one of the first to be released in Europe. It is based on a protein, which in the future can become an alternative for patients who refuse to be vaccinated by Pfizer and Moderna, developed on the basis of RNA.In the spring of 2021, she presented the results of testing a new vaccine to the world, and in mid-summer, repeated tests were conducted in America. The effectiveness of the drug according to the test results ranges from 89.7% to 90.4%. This high indicator allowed the drug to get into the top three most effective, and the company to become a leader in the world market of manufacturers.Immediately after the publication of the results, it was expected that the company's assets should increase in value, but problems with bureaucratic hitches and permission to use the vaccine on world markets led to the fact that the share price remained in place, and subsequently even declined.Different sources explain this fall in different ways. Some argue that there are no special technological lines for the production of the drug in the United States. Others are sure that the drug simply does not meet the standards established in the state, contains unnecessary impurities that can cause a lot of side effects.Today, the drug is recognized in several countries of the world, including Indonesia, India. The vaccine has the permission of the WHO and the euroregulator, together with the submission of the application, it has received permission in several other countries.Today Novavax is awaiting regulatory approval in many countries around the world, including Australia, Canada, South Korea, and the United Kingdom. To accelerate the production of the drug, the company is sponsored by a number of large-scale organizations, including the Gates Foundation and even the American government.If new strains of coronavirus continue to appear, the disease will be transferred to the category of endemic. That is why vaccination will very soon become a routine procedure, and it is also likely that the demand for combined drugs will grow, which the company is currently testing.It is not enough to be able to treat well, you also need to correctly diagnose diseases. That is why next we will talk about the manufacturer of medical equipment for diagnostics.Thermo Fisher ScientificThermo Fisher Scientific is geographically located in Massachusetts. It is one of the leaders in the production of diagnostic tools and equipment used in laboratory and outpatient settings, as well as consumables. The production of coronavirus vaccines and medicines for this pathology is considered to be an equally significant area of activity of the enterprise. From the beginning of the pandemic to the present time, the demand for the company's products remains at a height, so the company today occupies a leading position in the field of medicine.In the spring of 2021, the International Health Association granted the company a license to produce SARS-CoV-2, a test for detecting covid-19. The volume of revenue received only from anti-weed products today has already amounted to $2.05 billion. With the emergence of new strains of coronavirus, the demand for the company's products will only grow.The TMO quarterly report, released on October 27, turned out to be quite strong. Revenue exceeded last year's figure by 15%, as well as by $ 1.2 billion in monetary terms. In total, it amounted to 37.1 billion dollars. According to forecasts, the amount of revenue will increase by $1 billion, and will amount to $7.7 billion.The forecast for this indicator was $40.5 billion, which shows the excellent position of the enterprise, especially for modern market realities. The growth of the company's asset price index exceeded the S&P 500, and reached 40%. With great probability, we can say that the group's positions will continue to be stable.Another trend of the century is electric carsThe vast majority of major analysts last year warned against acquiring Nio assets. At that moment, no one could have thought that the company's market capitalization could reach $90 billion. The volume of cars produced at the same time is 20 thousand units annually.However, over the past year, the company has managed to become an industry leader, and excellent financial results are expected in 2022. This is despite supply disruptions and other problems associated with the pandemic. The company has several new products that will help it increase its market share in China, and take a strong position on it.In the autumn of 2021, the number of cars produced by the company reached 10,900 units, which indicates an active growth in demand for cars with an engine capacity of more than 130,000 per year. The company is going to release about 600 thousand units of cars by the end of 2022. Nio's management plans to introduce three new electric cars to the world market. If the sales growth of cars remains at the planned indicators, then Nio may well have the opportunity to bypass Tesla by this parameter. At least in the Chinese market.An important advantage of the enterprise is the already launched Battery-as-a-service or BaaS program. It allows you to make a monthly payment, which allows you to change the battery on an electric car in the future or update the battery charge. It will also be possible to buy a car without a battery, rearranging it from old equipment.This system will allow the company to receive high-margin revenue in the long term. In addition, we should expect an increase in customer loyalty to the products. The company's assets showed a 13% growth in 2020, but during 2021 they managed to fall by 44%. Today they are stable at around $30. We are waiting for strong growth.Basic Attention TokenIt is already impossible to imagine the financial world without cryptocurrency. How to choose correctly between all the options – Bitcoin, Litecoin, Ethereum and others, and not be left out? An interesting option is offered by the Basic Attention Token.Over the past six months, investors' attention has been focused on tokens supporting the application. If we take into account that since the beginning of the year, the growth of bitcoin has approached 73%, then this is a minuscule compared to the start of the Siba-anu meme token, which soared to 47000000%. However, the main investment flow today is considered to be directed to a cryptocurrency that provides support for applications.In the large list of tokens, the Basic Attention Token from Brave Software deserves special attention. In particular, the token is especially attractive for investing for a long period. The company is now managed by B. Eich is the founder of Mozilla and JavaScript.Coins are mined using the Brave browser, where they are obtained by viewing advertising content. The web browser provides a high degree of security due to the built-in ad blocker and functions to block the collection of user data. Allows you to personally view ads released by program partners, as well as earn tokens by viewing it.Throughout December, bears dominated the cryptocurrency market, which negatively affected the VAT. As a result, the price of the token fell by 30% from the historical highs seen at the end of autumn. However, Bravo is confident that the price will recover its indicators very ...
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Dell business maintains strong growth momentum
Dell, stock, Dell business maintains strong growth momentum Dell's financial results for the third quarter were again better than investors' expectations. The issuer's revenue (taking into account VMware indicators) increased by 21% (last quarter: +15%), by 3.8% exceeding the consensus of analysts and by 4.5% exceeding the initial forecast of management. Diluted non-GAAP EPS increased by 17% YoY, beating market-wide expectations by 3%. Management noted strong demand for a wide range of products against the backdrop of economic recovery and digital transformation. In addition, the CEO pointed to the expansion of market share in key segments of the presence, referring to IDC data.After a slowdown in growth in the last quarter (up to +3%), the infrastructure segment demonstrates an increase in sales dynamics: at the end of the reporting period, revenues increased by 5% due to increased spending by companies on IT infrastructure. Sales of server products increased by 9%, storage solutions - by 1%. It is important to note that during the quarter, the issuer was the first in the industry to introduce a SAN storage solution based on the NVMe/TCP protocol.The customer products segment also showed accelerated growth: sales increased by 35% (last quarter: +27%). At the same time, competitors turned out to be noticeably weaker: Apple's similar business segment expanded by only 1.6%, HP - by 13%.Against the background of an increase in the share of the client direction in the sales structure and an increase in inflationary pressure, the gross margin decreased by 3.4 percentage points YoY. Due to the weaker dynamics of operating expenses (+9%), operating profit increased by 19%, and operating margin reached 4.7% with a non-GAAP operating margin of 10%.The management confirmed the long-term target growth rates of the business: revenue is expected to increase by 3-4% (with a CAGR of the current target market at 3% and a CAGR of promising areas of 8% on the horizon until 2024), EPS - by 6%. In addition, management plans to return 40-60% of the adjusted FCF to shareholders.Among the short-term growth drivers, we can note the preservation of the company's leading positions in the hyperconverged solutions segment (VxRail satellite nodes for edge computing became available at the end of November), as well as the expansion of the software portfolio (a Bare Metal Orchestrator network management product was offered to communication providers). In addition, it should be noted an increase in the volume of obligations to perform (RPO) by 32%, to $36 billion (excluding VMware RPO). According to the forecast, in the next quarter revenue will increase by 12-16%, operating margin - by 6.2%.We can characterize Dell's results as strong: revenue and profit turned out to be better than expected, the customer solutions segment shows a strong growth momentum, despite industry problems with semiconductors. We also note the effectiveness of the issuer's strategy to promote subscription solutions: at the end of the quarter, renewable revenue increased by 13% to $6 billion (21% of the total). The point of uncertainty remains inflationary pressure, which may worsen margins in the future for several ...
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Salesforce successfully copes with the difficulties of growth
Salesforce, stock, Salesforce successfully copes with the difficulties of growth Salesforce.com (CRM) reported for the third quarter, surpassing the general market consensus. Management also raised its sales and margin forecast for the full year 2021. The issuer's revenue grew by 27% (26% excluding currency fluctuations), 0.9% beating the consensus of analysts and 2% exceeding the initial forecast of management. Adjusted diluted EPS decreased by 27%, but turned out to be 37.7% higher than preliminary market estimates.In addition to industry trends and a strong product offer, sales were supported by a record low outflow of customers, which at the end of the quarter amounted to only 7.75% (compared to 8.25% in the second quarter). Revenue growth in the "sales cloud" segment continued to accelerate: sales increased by 17% YoY (against +15% last quarter). In addition, the CEO of the company noted an increase in the number of customers using more than five cloud products by 33% YoY.The service segment added 20%, marketing - 25%. The direction of the "platform" has expanded by 51% against the background of the effect of the inclusion of Slack in the company's structure. The growth dynamics of Slack remains strong: the number of customers spending more than $100 thousand per year increased by 44% YoY, the demand for Slack Connect solution is increasing at a triple-digit rate (+179% yoy). Slack continues to offer new solutions, including Slack Huddles (an audio chat platform) and Slack Clips (an application for short video messages). Overall, revenues from the Slack division reached $280 million, which exceeded management forecasts by 12%.The "data" segment (includes MuleSoft and Tableau) added 20% YoY, although management noted that the MuleSoft product "faced growth difficulties" during the quarter, but did not specify the problem.Customer demand remains steady: performance obligations increased by 23% to $18.8 billion. At the end of the quarter, the adjusted operating margin remained unchanged, amounting to 19.8% (higher than management expectations).According to management's forecast, revenue in the next reporting period will grow by 24% to $7.23 billion. The positive aspect of the publication was an increase in the annual sales forecast to $26.4 billion (+24% YoY), as well as an upward revision of expectations for non-GAAP operating margin by 0.1 percentage points, to 18.6% (including the negative effect of recent M&A transactions at 1.4 percentage points). At the same time, it is predicted that in 2022 non-GAAP operating margin will grow to 20%, and the expected level of revenue next year will remain at $31.8 billion. Non-GAAP EPS for the year, according to the company's current estimates, will be $4.68-4.69 (including the negative effect of M&A activity at $0.49).In general, we assess the company's results as strong: key business areas maintain a strong momentum for growth, the sales cloud and Slack segments are expanding at an accelerated pace. We consider the sell-off of Salesforce shares against the background of a weaker-than-expected EPS forecast for the next quarter to be overly emotional reactions and expect that the company will be able to increase operating margins in the medium ...
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