Earnings Watch: After Uber and Lyft failed to resuscitate their stocks in first reports, here come some Wall Street freshman with better early report cards
Lyft Inc. and Uber Technologies Inc. haven’t given 2018 initial public offerings a good reputation, but investors are about to hear from a few companies that have.
Both Lyft LYFT, +5.09% and Uber UBER, +1.53% have already reported results that failed to change Wall Street’s gloomy view of the ride-hailing stocks, which are still trading below their IPO prices. Coming up in the week ahead are reports from a trio of companies that have won favor—in a big way—since making their public debuts: Beyond Meat Inc. BYND, +5.61% , Zoom Video Communications Inc. ZM, -0.86% and PagerDuty Inc. PD, -0.79% are all expected to report quarterly earnings Thursday afternoon.
Beyond Meat surprised the investment world when it went public in early May, as shares more than doubled in their first day of trading and proceeded to head ever higher, recently trading up 300%. The company sees big potential for plant-based meat alternatives and its executives will be pressed Thursday on upcoming partnerships, including rumors of a potential tie with McDonald’s Corp. after rival Impossible Foods linked up with Burger King.
It will be worth watching whether Beyond Meat’s revenue is growing at a fast enough rate to justify the company’s fresh $6 billion valuation. Beyond Meat grew the top line by 170% last year, and analysts surveyed by FactSet expect that the company increased first-quarter revenue by more than 200%, to $39 million, from a year earlier, but even meeting expectations might not be enough for Beyond Meat.
”There is a widely held view that Beyond’s FY19-21 guidance is too conservative,” Jefferies analysts wrote in a preview. “Given the high bar, we suspect simply reaffirming Beyond’s outlook would be met with disappointment by the market.”
Zoom Video has also more than doubled from its IPO price, becoming the most expensive U.S. tech stock on a price-to-sales ratio and spooking analysts who think it may be overpriced. Unlike many of its young peers in the tech space, the videoconferencing company is expected to report profit in its first quarter as a public company, though a slight one.
PagerDuty has largely avoided the notoriety that gains have provided Beyond Meat and Zoom Video, but the San Francisco software company has also doubled its valuation since going public. Like Zoom, analysts wonder if the valuation has gotten ahead of the opportunity, but PagerDuty won more buy ratings in its wave of initiations this month.
Pressure will be on all three young companies to prove their booming valuations are worthy of sticking around, and plenty of people are betting the other way: Shorts have pushed up fees to borrow shares off the shallow floats to some of the highest around, with Beyond Meat leading the list.
While Wall Street’s freshmen take their turn in the earnings spotlight, the veterans will largely hang back. Only five S&P 500 index SPX, -1.32% components are expected to report earnings in the coming week, and no Dow Jones Industrial Average DJIA, -1.41% components will report. Slightly more than three dozen companies in the tech-heavy Nasdaq Composite Index COMP, -1.51% are on the docket, though, as software earnings continue to roll in.
Salesforce leads the software parade
Salesforce.com Inc. CRM, -2.73% is one of the most prominent software companies in Silicon Valley, and has long been a favorite of analysts and investors. That sentiment could be shifting, however, as a weak forecast in its last earnings report hit the stock, which has been treading water since. When the company reports earnings Tuesday, Salesforce may face a tough outlook again, as it accounts for a recent outage and reported resulting rebates.
While the 2019 IPOs will command some headlines, the 2018 class will also be prominent with half a dozen of last year’s new entrants on the docket: Docusign Inc. DOCU, +1.05% , Domo Inc. DOMO, -0.89% , Elastic N.V. ESTC, -2.16% , Pivotal Software Inc. PVTL, -7.18% , Smartsheet Inc. SMAR, -1.15% and Stitch Fix Inc. SFIX, -1.49% . Other tech companies expected to report this week include Box Inc. BOX, -3.60% , Amabarella Inc. AMBA, -1.38% , Cloudera Inc. CLDR, -1.71% , Coupa Software Inc. COUP, -1.05% , Guidewire Software Inc. GWRE, -2.39% , MongoDb Inc. MDB, +0.25% and SecureWorks Inc. SCWX, -6.41%
More retail and food
After a couple weeks chock full of retail reports, we are down to just a handful remaining. The coming week’s slate includes Ann Taylot and Lane Bryant parent Ascena Retail Group Inc. ASNA, +0.96% , The Michaels Companies Inc. MIK, -0.44% , Kirkland’s Inc. KIRK, -2.66% , Ollie’s Bargain Outlet Holdings Inc. OLLI, -0.29% , Tiffany & Co. TIF, -1.04% and Zumiez Inc. ZUMZ, -0.40% Two food companies in the S&P 500 index will also report in J.M. Smucker Co. SJM, +0.32% and Campbell Soup Co. CPB, +1.42%