Weekly Roundup: February 13-17, 2023 (Week 7/52)
Market Review:
It almost feels like we are on a rollercoaster at this point. The volatility of the stock market is crazy, as investors and consumers kind of play the waiting game to see what the verdict of the economy is. We got the unfortunate news that CPI came in a little higher than we were anticipating. This shows that inflation is still around and that The Fed has some work to do still. We will definitely see more interest rate hikes, but it is the matter of how aggressive they are going to get with them. This put the market into a frenzy and volatility was the name of the game. Wednesday showed us that retail sales were up, which gave us a sigh of a relief for a moment. The stocks rallied and everything looked good. All of that joy was short-lived, as PPI came out on Thursday and shot it down. The PPI numbers came out higher than expected, and this comes to show a correlation with Tuesday. We are still seeing inflation at high levels and The Fed is going to have to act on that. This led to Friday's sell off and the S&P leaning lower this week. Overall, it is a rough time for the economy. I was very shocked to see retail sales come in that high, but we know inflation is an issue. With all of the layoffs seeming to happen, and unemployment potentially on the rise, I expect those retail sales to go down a little bit.
As for some business news, sportsbooks set records for the Super Bowl on sunday. Ford has plans to continue on with its EV battery plant with a Chinese company, this comes after the company had some trouble with its Ford Lightning. The company is also planning on cutting 3,800 jobs in Europe to focus more on EV production. FanDuel (a sportsbook) parent company is considering a listing on the U.S. exchange, after they brought in record numbers for the Super Bowl. Subway is in exploration mode on plans to sell the restaurant chain. Elon Musk has planned to open 7,500 Tesla chargers to fit the needs of other EVs. Boeing received an order for 220 planes from Air India, but this was not included in the rough earnings report. Chipotle is in talks to launch a possible spinoff of Farmesa. Diamond Sports is in preparation for a possible bankruptcy. Paramount + is planning to increase its prices, after the recent surge in subscribers.
Stock of the Week:
ATI Inc ($ATI)
The company manufactures and sells specialty materials and components worldwide. They are headquartered in Dallas, Texas and were founded in 1960. The company made its debut on the stock market in 1999.
I used our DCF calculation to assess the valuation of the company. I have came to the conclusion that the company is undervalued. The company looks to be cheap right now, and may be at an opportunity to buy. They look to be on a nice uptrend and made a decent return last year, while the market was down. This could be a stock to add to your watchlist. I don't know much about the operations they do or the businesses they serve. Just from a DCF perspective, it looks pretty solid.
*Disclaimer: This is based off of my own research and not to buy or sell the stock solely off my recommendation. I highly encourage you to do your own research before taking action on this stock.
*Financials were pulled from ATI Website and Yahoo Finance.
Company Earnings:
Tuesday:
- Coca-Cola Company ($KO)- Coca-Cola saw its revenues beat estimates, and earnings come in line with expectations. The company raised prices in the quarter, which was the main backing behind the increase in revenues. Coca-Cola serves internationally and has all differences amount its region. They are hoping that the reopening in China will allow for them to boost their revenues in the upcoming quarters. The company is looking for about a 3 to 5 percent growth in revenue, and a 4 to 5 percent growth in EPS. Coca-Cola has done a wonderful job diversifying its business. As you can see from the earnings report, some areas of the business declined. However, with the diversification, the growth in some of the other parts of the business allowed the company to beat revenues. I was interested to see that the zero-sugar volume was up 9%, and that the coffee branch saw growth of 11%. Overall, Coca-Cola is going to be a company that is around forever and will always grow. Some of their products almost seem inelastic to consumers at this point.
- Airbnb, Inc. ($ABNB)- Airbnb absolutely killed it this quarter, with both revenues and earnings beating the top line expectations. The revenue was up 24% in the fourth quarter, which is the largest fourth quarter ever for the company. This shows that the demand and supply growth for the company had a stronghold throughout the end of 2022. Defying the odds, the company has a plan to continue hiring and growing its business in 2023. This is a bit unusual in a time where it seems a lot of companies are laying off employees. Obviously travel plays a huge role in the companies performance, and we saw a lot of that in 2022. It will be interesting to see how it plays out in 2023, as consumers seem to be getting a little more weary on the state of the economy. I just want to take a second to point out the balance sheet and cash flows, the company is doing a tremendous job of positioning itself with a huge cash reserve compared to debt. With the company becoming profitable and growing, it could mean a long run of success if they keep this up.
- Cisco Systems, Inc. ($CSCO)- Cisco stock got a boost after earnings beat and the company increased its forecast for the 2023 fiscal year. The main help for the company this quarter was the easing supply inflation. They saw revenues increase by 6% in comparison to a year earlier. I see some worry with this company, as they may be falling behind in the tech world. We are seeing rapid growth with many other tech companies, but Cisco has seen growth be stagnant. The company has more physical products, whereas may of its peers has switched to some subscription and cloud technology. I don't see this company have a lot of upside in the future, unless some significant changes are made.
- Deere & Company ($DE) - Deere stock popped off, after reporting earnings before the market opened on Friday morning. The company beat estimates on both the top and bottom lines. The sentiment for the future of the company by management also added to the increase in the stock price. Deere saw a 124% increase in EPS and revenue surged 32%. This is pretty abnormal for a company that has been around for a while and is an established business not crazily focused on growth anymore. The company is seeing a lot better operating environment, which in turn, is leading to higher supply. The demand for farm equipment was off the charts, and Deere put itself in a solid position to thrive on it. Deere looks to be a solid pick, after they had a pretty rough 2022 with supply chain issues and a lot of headwinds in the business. The guidance looks to be pretty promising too for the company, Deere is a stock to watch!
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