Weekly Earnings Review: August 14, 2023- August 18, 2023

     As earnings season winds down, the length of my report will get gradually shorter. However, on the bright side, I will be able to go a little bit more in depth on the earnings report. This week brings us 4 of my holdings that will report earnings, and two of them are major players in the retail area. A controversial semiconductor play that is a high risk stock will be 3rd. Lastly, I will report on a company that is located in the Netherlands. 

Tuesday, August 15, 2023

Home Depot, Inc. (HD)-

    Home Depot saw a pretty flat trading session after the company reported earnings. The company beat on both top and bottom line compared to analysts expectations. It looks some headwinds loom for the business as the company has seen slowing growth ever since the pandemic boom of home remodeling. It was noted that the strength was in the smaller projects and that pressure was felt in the big-ticket items. Home Depot initiated a $15 billion stock buyback plan and they kept the outlook for the full year steady. They acquired Redi Carpet, which doesn't play too much of a significance, but it adds to the arsenal of the business. I think the shortage in the housing market can help Home Depot in the coming future, as more homes are going to be built. The supplies will come from the likes of Home Depot and Lowe's. Although sales seem to be lagging for Home Depot at this time, I don't think it will be too much longer until we see a positive growth trend come back. I have no big concerns with Home Depot, and I look forward to continually holding it for a while. 

Wednesday, August 16, 2023

Target Corporation (TGT)-

    Target saw a rise in its stock price after reporting earnings. The company missed on the top line, but saw a surprise beat on the bottom line. The company is facing a lot of turmoil regarding its recent clothing line dilemma. However, it has many other problems that seem to be an industry wide problem. Inventory theft continues to rise, as Target is now expecting to lose about $500 million more than last year in crime. The company has been able to respond to this effectively by driving down costs and reducing inventory in a strategic manner. This is what led to a surprise on the bottom line in the quarter. As interest rates continue to rise and student loan payments coming back into effect, Target is seeing a decrease in the discretionary categories. They decided to reduce the Adj. EPS outlook to be between $7-8. This is still solid, given that they pay out a dividend. Target looks to be making things strategically right, and I think at the discount it is trading at, it will reward long-term shareholders if they get in right now. 

Wolfspeed, Inc. (WOLF)- 

    Wolfspeed plummeted on a beat on the top line but a severe miss on the bottom line. The guidance also reflected a much larger loss than what was anticipated. I think a lot of the piling losses can be contributed to the accounting practices. The company has received a substantial amount of funding and investment to start producing facilities. These facilities are in the process of being built and currently are reported under operating expenses. Since these facilities have no revenue generating from them yet, this causes the losses to mount up. The company specializes silicon carbide chips, which is a specialty kind of chip. They have plenty of contracts that will drive in revenues, but they are waiting to finish these facilities to ramp up production. The EV revolution seems to be the main source of customers. I think the market is overreacting and not taking a deeper dive on this one. The company has plenty of cash to cover during the period of losses and does not carry significant amounts of current liabilities with them. The long-term debt is accumulating, but I have faith that the company will be able to ramp up production to cover this and have no problems with default. I have a lot of optimism with Wolfspeed and think they can dominate this niche market when things get organized. 

Thursday, August 17, 2023

Adyen N.V. (ADYE.Y)-

    Adyen is a dutch payment platform company that is traded on the Netherlands stock exchange. The company is unique in that it reports earnings on a half-year basis. Adyen reported earnings for the 1st half of 2023 and the stock saw a rapid decline. The company missed on the top and bottom lines in comparison to expectations. However, revenue still grew 21% in comparison with the prior year. I think the main concern for investors was the EBITA margin slip. The margin fell 1600 bps to 43% as the company decided to invest heavily into expanding its employees. This is odd given the current conditions of the job market, but I guess the company sees something that will benefit from it. Executives of Ayden said that they didn't see any developments that change the structure of the business over the medium to long-term time frame. One headwind that the company is currently facing is the competitive pricing in the United States market. This was evidenced by the processing volume being up just 1% in comparison to last half-year report. I think the margins will recover as the company continues to expand operations internally. This was a shocker because results have been near immaculate in the past, and a shock in margins caused a huge overreaction. I think this one is still a wonderful company and will be able to recover from this downturn. 

Thank you for reading!