Weekly Roundup: January 30-February 3, 2023 (Week 5/52)

 Weekly Roundup: Week 5

 Market Review:

        Are we going to have a recession or not? The way the stock market rallied in January, gives me a feeling like we had in 2021. This week was a big one, with not only a lot of earnings, but a lot of economic prints coming out. Fed chair Powell also had his speech on Wednesday. The Fed decided to hike the interest rate by .25%. This is seen as a win and shows that the inflation might be cooling down a bit. We are hoping to have a soft landing, but the Fed can't get complacent with this. It is somewhat in control, but is not fully resolved yet. Unemployment rate dropped to the lowest level at 3.4%. This is unique with the current state of the economy. Job Openings also came out higher than expected at 11 million. We have seen corporate layoffs swarming all around the economy. It's honestly a unique thing to judge. The way I view it, is that the talent getting laid off at the big corporations is being scooped up at the mid level corporations to try and boost them. The big corporations are trying to cut costs and gain profitability and growth back.

         In news around businesses, Renault and Nissan have decided to restructure their alliance that they have had for awhile. Renault will transfer 28.4% of the Nissan shares into a French trust. In other car news, Audi has decided to take a minority stake in Sauber, ahead of their 2026 F1 entry. Showtime and Paramount + are coming together to rebrand with a new name. Peloton seems to be headed back on the right track, as the company posted subscription revenue growth. Layoffs seem to be the new hot topic of late 2022 and early 2023. DraftKings has decided to lay off 140 jobs, as the company is undergoing a reorganization. FedEx is cutting 10% of officers and directors as demand is cooling for them. Southwest is facing a lot of scrutiny after their debacle with all the canceling of flights. They have dented their reputation with a lot of customers, which is opportunity for other airliners to jump in and take those customers.

        I decided to start something new. I am going to be doing a stock of the week. It will be selected from a random stock generator online and I will give background information on the company. I will also do a reverse DCF to see the current valuation of the company as well. This is solely my research and I will give my thoughts on whether to buy or not. Remember to do your own research and that my advice should not be your sole reasoning for buying a stock. 

Stock of the Week:

Saia, Inc. ($SAIA)

The company operates as a transportation company in North America. It is headquartered in Johns Creek, Georgia. The company was founded in 1924 and made its debut on the public market in 2002. Saia does not currently pay a dividend. 

I used our DCF calculation to assess the valuation of the company. I have came to the conclusion that the company is overvalued. The company would need to grow at about 36% a year for the company to be at fair value. The debt outweighed the cash by a little bit and the FCF was just not enough. The company is also not known for its wide growth, so it may be hard for them to achieve the growth rate. For me to be interested in this company, we would need the stock price to drop for me to be seen as an investor.

*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 Saia Website and Yahoo Finance.

Company Earnings:

Tuesday:

• Exxon Mobil Corporation ($XOM)- Exxon Mobil absolutely killed earnings throughout the whole entire year. The company brought in over $50 billion in profit this year, after consumers were hit with some high gas prices throughout the year. The company was hit with a $1.3 billion EU windfall tax that they are suing the EU on. They also had some asset impairments that brought the profit down a little bit. Exxon performed the best out of all the Western Oil companies, and they have a bunch of cash on hand to show for it. We will see how much they decide to invest back into the business and how much they distribute out to shareholders. I don't see why the company would change gas prices or anything like that with how successful they have been. For consumers, this may be a bad sign as gas prices may stay high for a long time.
• McDonald's Corporation ($MCD)- McDonald's was able to beat estimates from earnings and revenues. McDonald's saw the traffic through their restaurant increase. As inflation rises, the restaurant is looking a lot more attractive to consumers. Not only is the company dominating in the domestic market, but the company performed well in its foreign markets as well. The company warned about a mild inflation running in 2023. This scared investors a little bit, but I don't think it should affect anything too much in the long-term. 

Wednesday: 

• Meta Platforms, Inc. ($META)- Meta stock price was soaring, after the company reported earnings after the market closed on Wednesday afternoon. The company had a beat on the revenue estimates and provided some solid guidance for the revenue numbers next quarter. Another factor that caused the stock to soar was the $40 billion stock buyback the company announced. The company is in a unique place, with a lot of reliance on the future and operating at a significant loss due to the investments in the future. The $40 billion in stock buybacks opens my eye, because if we look at cash on hand, it looks like cash is just a little above that level. A positive sign, is that expenses look to be guided a little bit lower than analyst were anticipating. It is going to be a company to keep an eye out for, especially if Tik Tok gets banned, they will be able to accumulate a majority of market share in social media.  

Thursday:

• Apple Inc. ($AAPL)- Apple had a rare, disappointing quarter. The company saw sales drop by 5% in its first quarterly decline since 2016. It was also the first time the company missed expectations since 2016, as well. Tim Cook had a couple of factors to blame for the poor results this quarter. The first one, was the strong dollar. The strong dollar compared to other currencies apprehended the earnings the company had in other countries when they convert the currency back to US dollar. The second factor was the production of the Iphone in China. The Covid policies messed with the amount of workers in the production factories in China. Apple has already explored moving to other area for production to reduce the possibilities of this happening again. The last factor, was the overall macroeconomic condition. This affected a lot of companies, but we are hoping a decent recovery and return to normalcy soon. Apple looks to learn from these difficulties and continue growing its business. This may hurt them in the short-term, but this is still one of the most prolific stocks on the market. 
• Alphabet Inc. ($GOOG)- Alphabet is the parent company for Google. The company missed on both revenue and earnings estimates. YouTube was the main to blame on the miss, as the application fell short on revenue. The company is facing some hefty costs with the layoffs and the reduction in real estate. These costs will likely incur in Q1 of this year, and some additional costs will be incurred in future periods. YouTube is struggling in the competition with TikTok. The company is looking to strive into some AI, as competitor Microsoft looks pretty intelligent with its investment in Open AI. Google may not do well in the short-term, but like Apple, it is a very prolific stock.
• Amazon.com, Inc. ($AMZN)- Amazon beat on estimate and AWS grew by 20%, but that fell short of what analysts were expecting. Guidance was to blame, as the numbers the company is expecting revenue were on the short end of the analyst range. Growth has slowed down tremendously over the past year, and is the slowest year of growth in its time as a public company. The inflationary pressures have played a pivotal role in slowing down Amazon. A lot of buzz is going around criticizing the current CEO and are calling for Bezos to come back in and fix up some things. However, some dents were left in the company when Bezos had left. The company had some turning around to do, but it is already in the process of doing so. I think this is a once in a lifetime opportunity for investors to take position in what seems like a monopoly. The growth is going to comeback and a dividend will now start being paid out to reward shareholders.

Market Outlook:

        While the peak of earnings season is past us, we still have some important factors to look out for in this week. They may not be as exciting as our news this week and they won't impact the market as much as the factors this week did. Our first factor we are watching is the University of Michigan Consumer Sentiment Index. We are expecting this number to rise a little bit as consumers fear of a recession seems to be subsiding. The final factor we will be keeping an eye on, will be the GDP numbers from the UK. These numbers will print on Friday, and we are expecting some stagnation. The numbers will most likely disappoint, as the UK seems to be facing a lot more trouble with their economy. Although most of the earnings have been reported already, we still await to hear from a couple of notable companies. Disney is probably the one to keep a close eye on, as the earnings are expected to disappoint with a decline from the prior year. We will see earnings from Toyota and Honda, I am interested to see which way these earnings lean. Competitors GM and Ford reported earnings in the near past, with GM wowing investors and Ford with some mighty disappointment. Some other notable companies earnings to watch is Pepsi and Activision.

I apologize for not sending out last weeks report, but I will be back on track from here on out!

Thank you for reading and have a wonderful week!