Newsletter 5: Let the FOMO Begin

Tuesday, November 17th

WALMART – $WMT

Walmart like other major brick and mortar stores has seen a decline in overall foot traffic to both Sam’s Club and Walmart stores. What is important to understand is the increase in online shopping from Walmart. The pandemic has accelerated online grocery and general merchandise shopping for the entire retail sector. These key areas will drive Walmart into 2021.

Walmart:

• Same-store sales rose 6.4%

• E-commerce soared 79% and contributed approximately 570 basis points to comp sales

• Comparable sales at its discount unit Sam’s Club were up 11.1% 

• Reduced tobacco sales negatively affected comp sales by approximately 4.2% 

• Sam’s Club e-commerce sales grew 41%

• Membership income increased 10.4% at Sam’s Club

• Total revenue was $134.7 billion, an increase of $6.7 billion, or 5.2%

• Walmart International net sales were $29.6 billion, an increase of 1.3% after currency

• Consolidated operating income was $5.8 billion, an increase of 22.5%

• Operating cash flow year to date has been strong and increased approximately$8.3 billion versus last year to almost $23 billion

Takeaways: 

Walmart has had strong all around growth in Q3. Even after currency exchange expenses, its international sales have grown. Shoppers are spending more at Walmart per visit than pre-pandemic. Its online presence has allowed it to compete with Target and Whole Foods for store pickups, which have expanded to 3600 stores with same day delivery at 2900. Walmart is one of the largest corporations in the US with good economies of scale capable of continued growth during and post this pandemic, and it’s apparent in their report.

   

HOME DEPOT – $HD

Due to the closing of malls and stores that were not deemed essential the majority of the retail sector at the start of the pandemic experienced a major decline in revenue. $HD Home Depot however unlike many other retailers has seen an increase in revenue in part because it is classified as an essential business and due to many more persons working from home. More persons working from home in a pandemic has led to more homeowners renovating their living space to make it more suitable to work from home.

Home Depot

• Actual earnings per share $3.18

• $3.06 expected earnings per share

• 33.54 billion revenue

• 32.04 billion expected

• Net sales increased by 23%

• 33.5 billion in net sales (Q3 2020)

• 27.2 billion in net sales (Q3 2019)

• Average customers sale rose by more than 10% 

Takeaways:

Similar to earnings last quarter Home Depot beat analysts expectations. Yet, this beat resulted into a 1%+ decline in share price. Today Home Depot has beat expectations but this beat has lead skeptics to question how well $HD will perform in a post pandemic economy. Will customers still feel the need to renovate their homes in a post-vaccine economy and if so will net revenue see an increase or decrease when laborers are able to ditch their home offices and return back to the workspace.

NIO – $NIO

Electric vehicles are gaining popularity globally. Sleek designs coupled with multiple countries publicly announcing their push towards EV in the years to comes enables a hyper competitive atmosphere in the EV market. NIO being based in China is an advantage in terms of potential market share.

• 31,430 vehicles delivered (10/31) 111% year-over year growth

• Adjusted loss per share 12 cents 

• Expected loss per share 18 cents 

• Revenue: 666 million v. 663 million expected

• Actual gross margin: 12.9%

• Expected gross margin: 11.25%

Takeaways:

Value investors may have difficulty in understanding NIO’s  current valuation relative to their current earnings. Nio’s current price is not based on what it is today but is based on what NIO could be in the not so distant future. Indicative of this valuation is their current growth as of October 31st 111% year-over-year growth gives NIO a promising future. In addition to NIOs current gross margin is higher than expected which will likely aid NIO is scaling up to higher production numbers and ensuring profitability on vehicles as demands grows.

Wednesday, November 18th

Nvidia – $NVDA

Nvidia is the premier GPU producer. Their cards are years ahead of the competition and that’s evident in their $300 Billion market cap compared to their competitor AMD’s $100 Billion market cap. They are also extremely integrated in the data center sector, which is their best performing division in terms of profits to expenses and growth.

• Record revenue of $4.73 billion, up 57 percent Y/Y

• Record Gaming revenue of $2.27 billion, up 37 percent Y/Y

• Record Data Center revenue of $1.90 billion, up 162 percent Y/Y

• GAAP earnings per diluted share for the quarter were $2.12, up 46 percent from $1.45 Y/Y, and up 114 percent from $0.99 Q/Q

• Third-quarter revenue was a record $1.90 billion, up 8 percent from the previous quarter and up 162 percent Y/Y

• Shared news that Amazon Web Services and Oracle Cloud Infrastructureannounced general availability of cloud computing instances based on the NVIDIA A100™ GPU, following Google Cloud Platform and Microsoft Azure (not sure what we want to do about hyperlinks. They do lead to articles with the announcements.)

Extended its lead on MLPerf performance benchmarks for inference, winning every test across all six application areas for data center and edge computing systems

Takeaways:

NVIDIA’s GPU segment is taking off rapidly and better than ever before. As new games come out that utilize ray tracing, the RTX GPU becomes more relevant. Unseen loads of everyday life are being automated, put online, or requiring very precise and technical technological inputs from GPUs and CPUs in our society. Of these two, they lead in GPU technology, and the acquisition of ARM will allow NVIDIA to fully compete with AMD in the CPU division with their state of the art processors. CPUs were the only division NVIDIA was not leading in. NVIDIA has excellent growth drivers that continue to accelerate business growth and push the company forward well into the future.

Thursday, November 19th

Workday – $WDAY

Workday has been able to expand throughout the last year owing to its ability for an ease of use platform.

• Total revenues were $1.11 billion, an increase of 17.9% from the third quarter of fiscal 2020

• Subscription revenue was $968.5 million, an increase of 21.3% Y/Y

• Operating loss was $14.1 million, or negative 1.3% of revenues, compared to an operating loss of $110.3 million, or negative 11.8% of revenues Y/Y

• . Non-GAAP operating income for the third quarter was $268.1 million, or 24.2%of revenues, compared to a non-GAAP operating income of $142.6 million, or 15.2% of revenues Y/Y

• Operating cash flows were $293.8 million compared to $258.0 million in the prior year

Takeaways:

Subscription service growth has led the way for Workday’s growth the past year. Even in the midst of the pandemic, Workday has been able to grow revenue and shrink their operating loss Y/Y from (11.8%) to (1.3%). Workday’s partnership with Accenture will help make an even more ergonomic friendly experience for Workday users through “greater visibility and simplified experiences”.

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