In Wednesday’s trade, major US indices posted strong gains, with the tech-heavy Nasdaq leading.
Tech, including those at the forefront of the 2020 work-from-home rally, have fallen badly since late last year.
Rising interest rates often cause significant damage to growth stocks, including tech. That’s because these growth names tend to have high price-to-earnings ratios and low (or non-existent) dividend payouts. Growth companies often put the earnings back into high-potential projects instead of distributing the earnings back to investors in the form of dividends. This is especially true in his early years.
However, when inflation rises and interest rates rise, technology can suffer, as companies’ ability to invest back into projects is reduced.
Palantir, The company, which specializes in enterprise software for data analysis, is up 50% since reporting its first quarter on May 9. It is set to deliver second quarter results on August 8, before the opening bell. Wall Street is eyeing earnings per share of $0.03 per share on revenue of $468.16 million. This will decrease by one penny per share on the bottom line, but will increase on the top line.
Revenue growth has declined in each of the last three quarters.
Can Palantir beat the earning visuals?
Will the company do Top View? The so-called “whisper” estimate on the stock is calling for earnings of $0.04 per share, which would equal the year-ago quarter. According to marketbeat earnings figuresSince going public in September 2020, Palantir has consistently outperformed revenue considerations. The bottom line, however, is a different story, with the company missing out on ideas over the past two quarters.
As with any stock that is approaching its earnings report, it is wise to consider the impact of holding through this event. One omission or any kind of unexpected or discouraging news can put the stock down. In fact, Palantir fell 21% after recalling first-quarter views.
Shopify, which allows retailers to build a custom online store and sell through brick-and-mortar locations, has been mired in reform since November. It is now trading at March 2020 levels.
After triple-digit earnings growth during the height of the pandemic online shopping, Shopify’s bottom-line growth stalled over the past four quarters. Revenue also slowed in the last five quarters.
Marketbeat Earnings Data show that Shopify missed both top- and bottom-line views in its most recent quarterly report. It lost $0.03 per share on revenue of $1.295 billion.
The company plans to build out its fulfillment network to address weak demand for online shopping as consumers return to physical stores.
vertical integration of logistics
In the earnings call, CEO Tobias Lutke emphasized the company’s plans to vertically integrate logistics activities to help online sellers streamline the buying, selling, shipping and delivery processes.
Shopify, of course, due to the nature of its business, is betting that e-commerce spend will outpace physical retail in the long run. While that may ultimately be the case, the company may struggle to find its footing while it navigates through the pandemic, high-inflation “new normal.”
Many analysts believe that Shopify will eventually return to strong growth, but in the short term, the picture isn’t so rosy. The company laid off 10% of its workforce, acknowledging that consumer e-commerce spending was not growing as fast as it had hoped.
For the full year, analysts see Shopify losing $0.07 per share. Next year the company expects to show earnings of $0.03 per share.
Even when a company demonstrates strong future potential, it may underperform the broader market for an extended period of time before rebounding. It is true that the stock may rise even if analysts anticipate losses. However, it is wise to consider whether a stock is worth risking the opportunity cost when others are showing superior earnings potential, as well as superior technical strength.