#7: Stock Market Hits New All Time High, What’s Next?

“Opportunity does not knock, it presents itself when you beat down the door.” – Kyle Chandler

Friday, December 4th Closing Price

TABLE OF CONTENTS

  1. VACCINE LATEST UPDATE
  2. REVIEW OF LAST WEEK’S EARNINGS
  3. UPCOMING EARNINGS
  4. UPCOMING EVENTS & TALKS
  5. MERCHANDISE
  6. DISCORD RECAP
  7. STOCKS ON OUR RADAR
  8. EDUCATIONAL LEARNING SEGMENT
  9. BOOK OF THE WEEK
  10. VIDEO OF THE WEEK
MARKET LAST WEEK (11/30 – 12/4)

MARKET

VACCINE LATEST UPDATE

Pfizer is set to roll out their vaccine in the UK today and December 15th in the U.S. for non clinical recipients. While this presents a lot of logistical challenges there are a lot of interesting potential ramifications down the road. If the vaccine lives up to or even nears the success rate seen in clinical trials we can expect to see pfizer stock benefit handsomely from their position in the forefront of the COVID-19 vaccine. Looking forward to 2021, positive results have great implications for travel as well as brick and mortar retail. Conversely, a failure to see significant benefits may lead to many who added $PFE to their portfolio due to the positive news exiting the position. Pfizer has also cut their vaccine production targets nearly 50% due to a shortage of the necessary raw materials which will delay the ability to distribute in both the UK and the U.S. The negatively impacted industries can only survive so long as we have already seen the entertainment industry shift their movie release model entirely as a direct result of COVID. Travel ranging from airlines to the cruise industry as well as brick and mortar retail will continue to perform beneath expectations as a direct result of the challenges presented by the COVID environment.

LAST WEEK’S EARNINGS

Tuesday, December 1st

Zoom | Enterprise Information Technology Services

ZOOM – $ZM

Zoom has been on an absolute tear this year up, 500% YTD. The acceleration in business from Stay-at-Home orders and teleworking has increased Zoom’s revenue stream by over 300 percent this year. This is expected to continue into 2021 as there will not be enough vaccines for mass migration back to office spaces. Covid-19 has also proven that large swaths of employees do not need to be in the office to get work done. Companies will more than likely offer and integrate work-from-home jobs into their company structure to save on real estate expenses.

Zoom reported the following:

  • Third-quarter total revenue of $777.2 million, up 367% Y/Y

  • Number of customers contributing more than $100,000 in TTM revenue up 136% Y/Y

  • Approximately 433,700 customers with more than 10 employees, up 485% Y/Y

  • Expects to strengthen their market position as they finish the fiscal year with an increased total revenue outlook of approximately $2.575 billion to $2.580 billion for the fiscal year 2021, or approximately 314% increase Y/Y

  • Third-quarter, GAAP operating margin was 24.7% and non-GAAP operating margin was 37.4%

  • GAAP income from operations for the third quarter was $192.2 million, compared to GAAP loss from operations of $1.7 million Y/Y

  • Non-GAAP income from operations for the third quarter was $290.8 million, up from $21.3 million Y/Y

  • Net cash provided by operating activities was $411.5 million for the third quarter, compared to $61.9 million Y/Y

Takeaways: 

Zoom’s operating activities have soared with their increased customer base. They have approximately 433,700 customers with more than 10 employees, up 485% Y/Y. 1289 customers contributing more than $100,000 in trailing 12 months revenue, up 136% Y/Y. Zoom will continue to increase its market share as other companies lag in their integration and ergonomic capabilities with their platforms. Microsoft with its “Microsoft Teams” has large contracts with big corporations but lags in small businesses that don’t find their platform easy to use.

   

SALESFORCE – $CRM

Salesforce’s Customer 360 has been growing in demand for years, but the pandemic highlighted the need for different employee teams to communicate effectively when not in person. The ease of access to information and communication is imperative to that cause. Salesforce has used the pandemic to further deepen its revenue streams as the mass shift to stay-at-home took effect. Companies have begun to realize just how difficult it can be to talk with team members when not in person. Through Salesforce’s integration of multiple teams into one platform for all to communicate with each other and see what other teams are doing, they have placed themselves at the forefront of Customer Relationship Management services.

Salesforce reported the following:

  • Third Quarter Revenue of $5.42 Billion, up 20% Y/Y

  • Current Remaining Performance Obligation of Approximately $15.3 Billion, up 20% Y/Y

  • Third Quarter GAAP Operating Margin of 4.1% and Non-GAAP Operating Margin of 19.8%

  • Initiates Fourth Quarter FY21 Revenue Guidance of Approximately $5.665 Billion to $5.675 Billion, up Approximately 17% Y/Y

  • Raises FY21 Revenue Guidance to Approximately $21.10 Billion to $21.11 Billion, up Approximately 23% Y/Y

  • Initiates FY21 GAAP Operating Margin Guidance of Approximately 2.0%

  • Maintains FY21 Non-GAAP Operating Margin Guidance of Approximately 17.6%

  • Initiates First Quarter FY22 Revenue Guidance of Approximately $5.680 Billion to $5.715 Billion, up Approximately 17% Y/Y

Takeaways:

Salesforce sees further expansion of its products to more businesses into their 2022 fiscal year.

They see a $4 billion revenue increase to $25.5 billion for their FY22 guidance. This would be a 20 percent increase in their revenue driven by their Customer 360 Platform and the $600 million acquisition of Slack Technologies, Inc. President and CFO, Mark Hawkins, will retire as CFO on January 31, 202,  and move to an advisory role as their CFO Emeritus through October 2021. Amy Weaver, the current President and Chief Legal Officer, will become President and CFO on February 1, 2021.

DOCUSIGN – $DOCU

DocuSign’s ability to use and navigate the cloud efficiently and effectively is integral to their business practice. DocuSign’s easy integration into already existing systems and future systems for small businesses and large businesses is key. Small businesses can take advantage of mundane and expensive clerical work that will allow them to increase their margins. Corporations can also trim their bottom lines and compensate investors more or reinvest spare capital back into the corporation’s activities.

DocuSign reported the following:

  • Total revenue was $382.9 million, an increase of 53% Y/Y

  • Subscription revenue was $366.6 million, an increase of 54% Y/Y

  •  Professional services and other revenue was $16.3 million, an increase of 43% Y/Y

  • Billings were $440.4 million, an increase of 63% Y/Y

  • GAAP gross margin was 74% compared to 75% Y/Y

  • Non-GAAP gross margin was 79% Y/Y

  • GAAP net loss per basic and diluted share was $0.31 on 186 million shares outstanding compared to $0.26 on 178 million shares outstanding Y/Y

  • Non-GAAP net income per diluted share was $0.22 on 206 million shares outstanding compared to $0.11 on 191 million shares outstanding Y/Y

  • Net cash provided by operating activities was $57.4 million compared to $1.9 million net cash used in operating activities Y/Y

  • Free cash flow was $38.1 million compared to a negative $14.1 million Y/Y

  • Cash, cash equivalents, restricted cash, and investments were $675.6 million at the end of the quarter

Takeaways:

Increase of $50+ million in free cash flow Y/Y. DocuSign Analyzer introduction. DocuSign CLM+ and DocuSign Analyzer will allow organizations to automate many mundane and repetitive tasks freeing up employee time. It will also learn how you operate to better accommodate future tasks as well. DocuSign Monitor will help with anti-theft protection through advanced analytics and round-the-clock activity tracking. Expansion of the company will increase over time as businesses see the value in trimming the edges of clerical work from their balance sheets.

Smith & Wesson – $SWBI

Smith & Wesson shattered expectations, reporting a record-breaking earnings performance. Smith & Wesson is in a position where they can and have benefitted handsomely from the rise in demand for guns and munitions. According to an A&U study, Smith & Wesson sits at #1 in unaided awareness in the handgun industry which is likely why gun purchasers new and old are flocking to the industry leader.

Smith & Wesson reported the following:

  • Quarterly revenue of $249 million

  • Net Income of over $49 million 

  • Demand metric increased 57.5% from the year-ago period

Gross margin of 40.6% up, representing a 12.4% increase from last year

Takeaways:

Although Smith & Wesson neglected to issue guidance due to the rapidly changing marketplace that already exists coupled with the challenges COVID represents they appear to have a bright future on the horizon. Demand has increased impressively and quarterly revenue has more than doubled from a year-ago period. Continued demand for guns will see Smith & Wesson positioned to remain atop the industry moving forward.

UPCOMING WEEK 12/7 – 12/11
EARNINGS
TUESDAY:

Tax Preparation Services Company | H&R Block®

H&R Block (Pre-Market Open)

$HRB is doing well and seemingly unaffected by the challenges presented by COVID. Their expected EPS is $0.37 and revenue of $557.85 million, representing a 271% increase from a year-ago quarter. They have enhanced their digital capacity to support their remote working model and take advantage of the changes in the workspace.

WEDNESDAY:

Campbell's Logo transparent PNG - StickPNG

Campbell (Pre-Market Open)

$CPB is doing well and their projected earnings show that. Their expected EPS is $0.60 on $2.05 billion in revenue. They are uniquely positioned to be unaffected by challenges presented by COVID and more than anything benefit from their household recognition.

EVENTS & TALKS

Tuesday: API Crude Oil Stock Change at 4:30 p.m. EST

Thursday: Inflation Rate YoY at 8:30 a.m. EST

Friday: Fed Quarles speech at 12:40 p.m. EST

DISCORD RECAP