The largest US mobile operator Verizon Communications in the second quarter increased its net profit by 22.9%, revenue by 10.9%. Revenue reached $ 33.764 billion against $ 30.447 billion a year earlier. Net income in April-June rose to $ 5.949 billion, or $ 1.4 per share, up from $ 4.839 billion, or $ 1.14 per share, in the same period last year. Earnings excluding one-off factors were $ 1.37 per share. The market consensus was for adjusted earnings of $ 1.3 per share on $ 32.8 billion in revenues.
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We highly appreciate the business prospects of Tilray
Tilray released its results for the first quarter of its fiscal year 2022, which ended August 31. The company’s revenue increased by 250% compared to the first quarter of last year to $ 168 million. However, the figure was 3% less than our consensus due to the fact that the company still feels pressure on its business due to the Covid pandemic. However, according to the press release, in-store traffic is starting to grow markedly, which gives confidence in the short term. The management announced that it continues to implement the program to reduce costs and is already close to achieving the planned target. In annual terms, Tilray managed to save about $ 55 million from the planned $ 80 million.
Weak labor market figures increase the likelihood of continued soft monetary policy
Last week, the S&P 500 Index added 0.8%, while the Nasdaq 100 remained at the levels of the previous week (+ 0.2%). Throughout the week, American indices have shown steady dynamics, however, on Friday, after the publication of macroeconomic statistics on the labor market for September, the indicators turned around and closed at the end of the day in a slight minus. The number of jobs in the US economy in September increased by 194 thousand, at the lowest rate since the beginning of the year. However, unemployment fell to its lowest level since March 2020 – 4.8%, up from 5.2% in August. The market consensus assumed the growth of the first indicator by 500 thousand and a decrease in unemployment to 5.1%. The slow pace of job growth suggests that the economic recovery is uneven. This, in turn, reinforces expectations that the Federal Reserve may leave stimulus measures for a longer period than anticipated. Recall that the recovery of the labor market is a key variable that will determine further monetary policy in the country.
We Improve Costco Valuation Amid Strong Operating Results
We are raising our valuation for Costco Wholesale from $ 440 to $ 520 per share. The company reported strong results in September. Like-for-like sales rose 14.3% year-on-year, with a 14.6% increase in the US. Global traffic to Costco stores increased 7.2% yoy, including 7.4% in the US. We have a positive outlook for Costco’s business and believe that the company is able to continue to grow its market share through a broad product portfolio and competitive pricing policy. The company continues to expand its club program, which allows Costco to grow steadily through an annual membership fee. Membership customers rose to 91.3% in the US and 88.7% in Canada, an all-time high.
Li-Cycle will support global electrification trend
We begin coverage of Li-Cycle, a pioneer in the North American lithium-ion battery recycling market, which we believe will grow as the transition to electric vehicles accelerates. Recycling lithium-ion batteries partly solves the global supply disruption caused by the pandemic and helps reduce the risk of millions of tons of spent batteries ending up in landfills. We estimate the fair value of Li-Cycle shares at $ 15.
Leafly
Founded in 2010, Leafly operates an online trading platform for the North American legal cannabis market. The company’s service helps customers learn about all the cannabis products featured on the platform. On the other hand, licensed manufacturers can post information about their products with the option of selling. Leafly’s mission is to provide maximum customer information about products in terms of safety, recreational value and quality in the burgeoning cannabis market. On the other hand, the platform allows you to single out individual manufacturers based on a rating system, which helps to increase audience loyalty. Leafly says the platform is used by 125 million people a year and 7,800 independent vendors.
The company’s revenue comes primarily from the monthly subscription fees paid by cannabis sellers to list their products on the Leafly platform. More than 55% of all North American licensed cannabis growers currently use Leafly’s SaaS services, according to the company. The company also makes money from advertising. It is expected that Leafly’s revenue by the end of 2021 will amount to $ 43 million, and by the next year the figure may grow to $ 65 million. It is expected that the company will enter net profit closer to 2024. In February 2021, Leafly announced a new strategic partnership with Jane, an online cannabis promotion platform. The union of the two companies, according to the management, will cause an explosive growth of online orders across North America.
Over a decade of operations, Leafly has raised $ 47 million in two investment rounds in May 2020 ($ 15.5 million) and June 2021 ($ 31.5 million). In early August, it was revealed that Leafly had made the decision to go public through SPAC in its deal with Merida Merger Corp, which raised $ 120 million through a 2019 listing. The indicative terms of the deal indicate that Leafly could be valued at $ 532 million, while the company could raise $ 161.5 million, which is planned to be used for platform scaling and marketing goals. Following the merger with Merida Merger Corp, the main shareholder of Privateer Holdings will continue to own a 72% stake. Leafly is expected to be listed on the Nasdaq by the end of 2021 under the ticker LFLY.
We believe the Leafly placement will be accompanied by strong demand as the cannabis market grows and the expected easing of legislation in individual states. Leafly has an important role to play in connecting consumers and manufacturers as they cannot advertise on social media under US law. Among the main risks, it is worth highlighting the growing competition in the cannabis market, including among online trading platforms. Among the positive drivers for publicly traded companies in the industry could be the launch of the new Roundhill Cannabis ETF in November.
PepsiCo increased revenue, but reduced net profit
PepsiCo increased its revenue by 11.6% in the third quarter of fiscal year 2021, but reduced its bottom line. Revenue increased to $ 20.19 billion from $ 18.09 billion, outperforming the market consensus of $ 19.39 billion. The company posted moderate revenue growth in North America, while revenues in Latin America, Africa, the Middle East and South Asia skyrocketed by 27-33%. The Covid factor continues to weigh on the company’s earnings. Thus, the company’s net income for the twelve weeks ended September 4 was $ 2.22 billion, or $ 1.6 per share, compared with $ 2.29 billion, or $ 1.65 per share, received in the comparable period a year earlier. Earnings excluding one-off factors were $ 1.79 per share, better than market consensus of $ 1.73 per share.
Netflix stocks hit hysterical highs
Netflix shares gained more than 5% yesterday, hitting an all-time high. The growth in the company’s capitalization occurred against an overall positive background, as well as improved market forecasts relative to quarterly results, which are due to be published on October 19. We are also optimistic and expect the number of paid subscribers to increase by 3.63 million in July-September, compared with management’s forecast of 3.5 million, as autumn is a seasonally favorable period for the company’s subscriber base growth. In addition, we admit that the prolonged Covid factor can lead to more positive results that may exceed even our expectations. Recall that in April-June, the number of subscribers to paid services increased by 1.54 million to 209.18 million, while at the end of April Netflix assumed that the increase would be only 1 million.
We expect good reporting for the quarter
The spread of the new delta strain affected US scheduled operations in Q3, so we cut our MedDevice sales forecast for the previous quarter by $ 157 million. In the diagnostics division, weak quarterly data on major items will be more than offset by growth in revenue from sales of Covid tests. Thus, we raised our Diagnostics division’s quarterly revenue estimate to $ 184 million and maintained our valuation for the campaign’s stock at $ 140. Overall, we expect Abbott’s 3Q financials to outperform market expectations, so we assume that our outlook is somewhat conservative. The company will publish reports on October 20.
September retained the status of a seasonally weak month
In the last trading week in September, US indices intensified their correctional movement. Thus, the S&P 500 fell by 2.2%, while the capitalization of the Nasdaq 100 decreased by 3.5%. Both indicators showed their worst monthly performance since March 2020. The past month was difficult for the stock market amid expectations of rate hikes, controversies in parliament over raising the government debt ceiling, fears about inflation and concerns about the situation in the Chinese real estate market due to the problems of the developer China Evergrande Group. The yield on US 10-year Treasuries rose from 1.3% to 1.5%.