Beat and raise: the three words investors want to hear after a company reports earnings.
For companies that can shrug off trade wars, geopolitical turmoil, and plunging sovereign bond yields and produce financial results that beat expectations, their share prices can rise amid the volatility.
This column has recently featured
(MTCH), all of which have reported numbers this month that markedly exceeded analyst expectations, provided guidance above Wall Street’s consensus, and posted big stock gains despite the volatility in the stock market.
First, videogame maker Take-Two. In May, we wrote positively on the company, saying that it made some of the industry’s highest-quality products and owned some of its most vibrant game franchises.
Last Monday, Take-Two delivered. It reported adjusted revenue of $422 million for its fiscal first quarter, versus the $357 million estimate. The company posted non-GAAP per-share earnings of 27 cents for the quarter, surpassing the estimate of four cents.
Take-Two CEO Strauss Zelnick told Barron’s in a phone interview that the company saw strength across all of its major games. Zelnick added that he doesn’t expect any hiccups from the transition to new console launches, which are widely expected next year. “The last transition to a new console cycle was not at all disruptive,” he says. “We don’t think this will be disruptive at all. It will be a positive.”
The company’s adjusted revenue guidance for its September quarter also beat expectations, with a range of $860 million to $910 million, compared with the $852 million consensus. Goldman Sachs analyst Michael Ng explains that his estimates, “which are ahead of Take-Two’s recently raised guidance,” are because of a “catalyst-rich path ahead.”
Take-Two’s strong financial results are showing up in its stock price. While the company’s two main competitors,
(ATVI), have seen shares fall 35% to 40% from last year’s highs, Take-Two stock is now just off its all-time peak, rising 12% in the days following its earnings.
Looking ahead: The last three versions of Take-Two’s most important franchise, Grand Theft Auto, came out in 2013, 2008, and 2004, suggesting that it won’t be long until the next blockbuster is released.
for merchants looking to sell online.
On Aug. 1, the cloud-based software company—which offers online-store platform services—reported adjusted second-quarter earnings per share of 14 cents, well above the Wall Street consensus forecast of three cents. Revenue was $362 million, versus expectations of $350.5 million. The company’s guidance for the current quarter also beat Wall Street expectations: Shopify forecast a range of $377 million to $382 million in sales, compared with the $374 million average estimate. “Shopify’s superior technology capabilities, massive secular growth opportunity, and significant demand for expanding e-commerce services should continue to justify premium multiples,” Baird analyst Colin Sebastian wrote.
Looking ahead: Shopify said demand for its Shopify Fulfillment Network, which gives merchants the ability to offer fast deliveries using a dedicated network of fulfillment centers, was higher than it expected. The new initiative should be a key driver of growth for many years.
Lastly, in May, our colleague Emily Bary wrote in this column how Match Group was thriving as the leader in the online dating market. She cited the big growth opportunity for its Tinder Gold paid-subscription business, which gives users extra features such as the ability to see who has already liked them on the app.
Last Tuesday, the company crushed consensus numbers. It posted second-quarter revenue of $498 million, ahead of the $489 million estimate. Tinder subscribers rose to 5.2 million, up 503,000 sequentially. The company now expects full-year Tinder subscriber additions of 1.6 million, versus one million previously. Match also guided the current-quarter sales to a range of $535 million to $545 million, compared with the $520 million estimate. Its stock rallied 16% after its earnings.
Looking ahead: The company’s international markets in Asia and Europe, including the aging population of Japan, are big opportunities.
Another company primed for more upside surprises in the coming quarters is Advanced Micro Devices (
In December, we wrote how AMD could be a big winner in 2019 due to the potential of its coming Rome server chip. The chip launched last Wednesday to stellar reviews, with attributes far beyond our optimistic expectations.
“The launch of AMD’s second-generation EPYC [Rome] processors is nothing short of historic, beating the competition by a large margin in almost every metric: performance, performance per watt, and performance per dollar,” said AnandTech, a widely read technology website.
The reviewer added that the Rome server chip offered up to 50% to 100% higher performance at a 40% lower price versus its Intel competition. Wall Street was also impressed. “We anticipate Rome will begin a series of strong quarters of share gains starting in [the third quarter for AMD],” Cowen analyst Matthew Ramsay wrote last week.
Ramsay predicts that AMD will capture 10% of the server-chip market by early next year and hit a 15% share by year-end 2020. He noted that the company now has cloud-computing partnerships with every major vendor—including Amazon,
Sounds like several beat-and-raises could be ahead for the chip maker.
Write to Tae Kim at [email protected]
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