Monday, December 11, 2023

Earnings to Watch (DIS, LCID, LYFT, PLUG)

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A weaker-than-expected jobs report couldn’t keep stocks from surging Friday, reaffirming what we have always said that bad news for the economy can sometimes be good news for the stock market. That is, of course, when the bad news in question is not too terrible.
Although the labor department reported that payrolls rose by 150,000 in October, which came in 20,000 fewer than expected, it presents a scenario where the Federal Reserve may consider taking no further action with regards to interest rates. It also helps that wage gains were also somewhat muted, coming in roughly inline with analyst expectations. To date, the Fed’s previous eleven rate hikes have shown to be effective, and now recent data suggests they might be done and the long-awaited pivot could be imminent. Investors are seemingly anticipating just that.

Stocks rallied on Friday, with both the the Dow Jones Industrial Average and the S&P 500 booking strong gains for the day and for the week. The Dow on Friday added 222.24 points, or 0.66%, to close at 34,061.32. Leading the gains on the Dow were, among others, Walt Disney (DIS), Microsoft (MSFT), Intel (INTC) and IBM (IBM). The S&P 500 climbed 40.56 points, or 0.94%, ending the day at 4,358.34, while the tech-heavy Nasdaq Composite rose 1.38%, adding 184.09 points to close at 13,478.28.
Investors have been looking for reasons to jump head-first back into the market to scoop up some mega-cap tech names such as Amazon (AMZN), Meta Platforms (META) and Alphabet (GOOG , GOOGL) which were punished during the recent correction. The weaker-than-expected economic data could be the catalysts for a sustained rally to close out the year. Investors are also anticipating a less-hawkish Fed. Currently, for the Fed’s policy meeting in December, there is now a less than 10% chance that the Fed will hike.
What’s more, traders are also betting that the Fed will cut rates as early as next May, according to CME Group tracking. And that’s where the divergence between good news and bad news would come in again. While investors would favor for a rate cut, it would also mean that the Fed believes the economy has slowed to a point to warrant such a move. However, the market’s focus on the Fed’s policy decisions is understandable. But in the near term, the more pressing question is if the stock rally will continue this week, driven by stronger earnings? Here are the stocks to watch.
Lucid Group (LCID) – Reports after the close, Tuesday, Nov. 7

Wall Street expects Lucid to post a per-share loss of 35 cents on revenue of $192.72 million. This compares to the year-ago quarter loss of 24 cents per share on revenue of $209.06 million.
What to watch: As the battle for electric vehicle supremacy forges ahead, investors want to know where Lucid falls into the mix. Their shares recently tumbled to an all-time low after the luxury EV maker reported Q3 deliveries of its Air sedan that fell far short of analysts’ estimates. The stock has fallen 32% year to date, compared with a 14% rise for the S&P 500 index. As it now stands, Lucid has lost more than 80% of its value since the company’s first day of trading in 2021. Heading into next week’s quarterly results, investors want to know whether Lucid has lasting power.
For period that ended September, Lucid reported a delivery total of 1,457 of its Air sedans. While that delivery total is 59 more than a year ago and 53 more than in the second quarter, it still fell almost 30% short of analysts estimates of about 2,000. During the quarter, the company produced 1,550 vehicles, compared with 2,282 vehicles produced in the third quarter of last year and 2,173 in the second quarter of 2023. However, company CEO Peter Rawlinson is not discouraged. In August, Rawlinson assured investors that Lucid “was on track” to meet its full-year production target of more than 10,000 vehicles. To better capitalize the company, the management announced a restructuring effort, including an 18% reduction in its workforce, or about 1,300 employees. On Tuesday investors will want more details on the company’s restructuring efforts, ways to achieve its growth objectives and meeting profitably targets.
Disney (DIS) – Reports after the close, Wednesday, Nov. 8
Wall Street expects Disney to earn 68 cents per share on revenue of $20.13 billion. This compares to the year-ago quarter when earnings came to 30 cents per share on revenue of $20.15 billion.

What to watch: Can Disney stock ever regain its magic? That is a question investors have asked for the past twelve months. While the company has enjoyed success with its streaming platform Disney+, its shares have been a disappointment, down 16% over the past year, trailing the 16% rise in the S&P 500 index. Meanwhile, over the past six months, the stock is down 14%, while the S&P 500 index has risen 6%. Disney, a stalwart of the entertainment industry, has struggled despite having a strong competitive edge. The company grapples with a set of challenges that has weighed on its stock price, including persistently weak profit margins, operating losses stemming from the Direct-to-Consumer segment, an imposing mountain of debt.
And there hasn’t been any signs to suggest that Bob Iger’s return as CEO of the company was a great decision. The company recently announced plans to acquire Comcast’s (CMCSA) 33% stake in streaming service Hulu. Combining Hulu with Disney+ will present Disney with tons of advantages, including stronger leverage with advertisers, driving down churn, new licensing deals as well as and cost savings opportunities. These integration benefits can potentially have a strong effect on the bottom line. Disney said it expects to pay about $8.61 billion, while analysts have valued the 33% stake held by Comcast at between $9 billion and $13 billion. It remains to be seen what the eventual purchase price is. But assuming Disney can realize the benefits and leverage of combining the platforms, Disney stock may finally begin to rise in the next 12 to 18 months. On Wednesday investors will want additional details about the company’s long-term growth strategy.
Lyft (LYFT) – Reports after the close, Wednesday, Nov. 8
Wall Street expects Lyft to earn 13 cents per share on revenue of $1.14 billion. This compares to the year-ago quarter when earnings were 10 cents per share on revenue of $1.06 billion.
What to watch: Shares of Lyft have surged more than 15% over the past week, suggesting the market has begun to appreciate the fundamental improvements the management has made to get the company in a more stable position. Not only has the company established more supply and demand balance on its ride-hailing platform, there also a more noticeable cost control aspect that has reduced some of the operating risks that once plagued the company. While some challenges still remain before Lyft can compete more effectively with Uber (UBER), Lyft’s valuation now appears more attractive given there are now fewer competitive hurdles.

Skeptics will point out that the company’s international expansion initiatives as well as driver incentives are issues to be addressed. But domestically, Lyft continues to enjoy a strong rebound in rider demand, which was reflected in both the first quarter and second quarter results. In Q2 the number of drivers using Lyft grew 20% year over year, while driver hours increased by more than 35%. These trends have not faded, with Q3 driver numbers up 25% year over year in July, while driver hours surged almost 45%. Notably, all of this is taking place as Lyft has begun to price its rise more competitively, helping the company to reach second quarter revenue of $1.21 billion, up 3% year over year. On the one hand, while that is supporting its platform growth, the aggressive pricing is having an adverse effect on margins. With the stock still down 4% year to date, including 25% decline over the past 12 months, value investors should see this as an opportunity to add ahead of next week’s results.
Plug Power (PLUG) – Reports after the close, Thursday, Nov. 9
Wall Street expects Plug Power to report a per-share loss of 30 cents on revenue of $237.92 million. This compares to the year-ago quarter loss of 30 cents per share on revenue of $247.98 million.
What to watch: Plug Power’s ambition for green hydrogen energy continues to generate tons of excitement. But investors are still waiting for the excitement to show up in the company’s stock price. PLUG stock has fallen 40% year to date, trailing the 14% rise in S&P 500 index. The shares are down some 55% over the past twelve months, compared to just a 16% rise in the S&P 500 index. The company has struggled recently with execution. But with its focus on societal value benefits of green hydrogen, its management believes the company has a bight future ahead.

Recently, at its annual Plug Symposium at its Vista manufacturing facility in New York, the management said they expect to generate about $6 billion in revenues by 2027 and $20 billion by 2030. Those are aggressive revenue targets, given that the company’s fiscal 2023 revenue projection is about $1.2 billion. That means for the 2027 forecast to be achieved, Plug’s revenue would have to surge 400% in the following four years. In the second quarter, Plug Power reported revenue of $260 million, marking a 72% year over year growth. The revenue growth total is impressive and reached a company record. The challenge has been with keeping costs down to boost the bottom line. As revenue surges 72% in Q2, the company also reported a record loss of 40 cents per share. As noted, the company remains optimistic about its future prospects, forecasting 30% gross margin for 2026. These are ambitious targets, suggesting more than 600% growth above 2022. Whether the company can reach this goal remains to be seen. But in the near term, the company must show more progress in gross margin improvement for the stock to rebound.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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