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With rapid e-commerce expansion, the upsurge in social media networking, and the emergence of new, advanced technologies, the internet industry is flourishing. Amid this, let’s analyze compelling factors that make internet stocks Alibaba (BABA) and Amazon (AMZN) ideal buys now. Continue reading….

The growing use of the internet worldwide shows no signs of slowing down. With widespread internet usage, an increasing number of individuals are immersing themselves in online activities, resulting in the surge of e-commerce, social media networking, online banking and financial management, streaming services, remote work and collaboration tools, and more.

Given this backdrop, it could be wise to invest in fundamentally sound internet stocks Amazon.com, Inc. (AMZN) and Alibaba Group Holding Limited (BABA) for potential gains.

In recent years, the internet industry has experienced a revolutionary transformation. Over the past decade, it has transformed from static web pages to an interactive platform encouraging user engagement and connections. The widespread adoption of the internet and the proliferation of digital technologies have reshaped the way we communicate, work, shop, and access information.

Internet users who visit social networks have spiked rapidly over the past years. As of 2019, 77.5% of internet users globally visited a social network and the corresponding figure for 2024 is expected to reach 82.3%.

China, with 1.05 billion users, and the United States, with 311 million users, are among the countries with the highest number of internet users. This growth of the internet is fuelled by various factors, including the affordability of smartphones and mobile data, along with the popularity of online activities such as e-commerce, streaming services, and online learning.

With the high internet usage, e-commerce traffic has also been surged. Mobile devices drive 65% of e-commerce traffic adding to the massive population quantum engaged in online services.

The e-commerce market size is estimated at $8.80 trillion in 2024. Further, it is anticipated to result in a market volume of $18.81 trillion by 2029, growing at a CAGR of 15.8% during the forecast period (2024-2029).

As per recent industry calculations, the United States is expected to rank top among 20 countries globally in retail e-commerce development from 2024 to 2028, with a CAGR of 11.8%. The U.S. e-commerce market is currently valued at $843 billion. By 2026, the U.S. online retail market value is projected to surpass the trillion-dollar mark.

Considering these conducive trends, let’s take a look at the fundamentals of the internet stocks: AMZN and BABA.

Amazon.com, Inc. (AMZN)

AMZN engages in the retail sale of consumer products, advertising, and subscription services through online and physical stores internationally. It operates through three segments: North America; International; and Amazon Web Services (AWS). It also manufactures and sells electronic devices, like Kindle, Fire tablets, Fire TVs, Echo, Ring, and Blink.

On March 4, 2024, AWS, an AMZN company, launched an infrastructure region in the Kingdom of Saudi Arabia. AWS region will allow customers to run workloads and securely store customer content in the Kingdom of Saudi Arabia while serving end users with even lower latency. AWS plans to invest more than $5.30 billion in the plan.

The announcement of the new region reflects AWS’ long-term commitment to meeting the high demand for cloud services in the Kingdom of Saudi Arabia and across the Middle East. It will offer a greater choice for running their applications and serving end users, from data centers to customers like developers, startups, entrepreneurs, and enterprises.

On February 26, AWS announced its collaboration with NTT DOCOMO, INC. (DOCOMO), Japan’s leading mobile operator with more than 89 million subscribers, to commercially deploy DOCOMO’s nationwide 5G Open Radio Access Network (RAN) in Japan. AWS also united with DOCOMO’s OREX initiative to promote the mobile industry’s Open RAN efforts globally.

AWS will deploy Amazon Elastic Kubernetes Service Anywhere (Amazon EKS Anywhere), a container management software, enabling the operator to run and optimize its 5G Open RAN easily. Amazon EKS Anywhere will also allow easier integration with other AWS services in AWS Regions, expanding AWS operations further.

AMZN’s trailing-12-month gross profit margin and EBIT margin of 46.98% and 14.88% are 31.2% and 37% higher than the respective industry averages of 35.80% and 10.86%. Similarly, the stock’s trailing-12-month net income margin of 5.29% is 11.1% higher than the industry average of 4.76%.

For the fourth quarter that ended December 31, 2023, AMZN’s total net sales increased 13.9% year-over-year to $691.96 billion, of which its net sales from North America were $105.51 billion, indicating growth of 13% year-over-year. The company’s operating income grew 382.6% from the year-ago value to $13.21 billion.

In addition, the company’s net income and EPS came in at $10.62 billion and $1, up 3721.6% and 3233.3% from the prior year’s quarter, respectively. Its total assets stood at $527.85 billion as of December 31, 2023, compared to $462.67 billion as of December 31, 2022.

As per the first quarter 2024 guidance, the company’s net sales are expected to be between $138 billion and $143.50 billion, or grow between 8% and 13% compared to the first quarter 2023. Its operating income is expected to range from $8 billion to $12 billion.

Analysts expect AMZN’s revenue and EPS for the first quarter (ending March 2024) to increase 11.9% and 171.5% year-over-year to $142.49 billion and $0.84, respectively. Further, the company has topped the consensus revenue and EPS estimates in all four trailing quarters, which is remarkable.

AMZN’s stock has gained 28.2% over the past six months and 85.1% over the past year to close the last trading session at $173.51.

AMZN’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

AMZN’s stock has an A grade for Growth and Sentiment and a B for Momentum and Quality. Within the B-rated Internet industry, AMZN is ranked #6 of 51 stocks.

Click here to access additional ratings of AMZN (Value and Stability).

Alibaba Group Holding Limited (BABA)

Based in Hangzhou, China, BABA provides technology infrastructure and marketing reach for better engagement between businesses and their customers worldwide. It operates through seven segments: China Commerce; International Commerce; Local Consumer Services; Cainiao; Cloud; Digital Media and Entertainment; and Innovation Initiatives and Others.

On February 5, 2024, it was announced that BABA would provide Tmall Global in China following receipt of the initial set of approvals to NextPlat Corp, a global e-commerce provider, for the launch of its exclusive OPKO Health-branded storefront. Initially, the new e-commerce storefront would support sales of up to 40 personal health and wellness products.

On January 9, BABA announced the launch of its latest Smart Assistant features powered by artificial intelligence (AI). The Smart Assistant, an AI-powered global sourcing tool, caters to both newcomers and seasoned entrepreneurs in the dynamic world of global commerce.

BABA’s trailing-12-month EBIT and net income margins of 13.74% and 10.81% are 82.8% and 127% higher than the respective industry averages of 7.51% and 4.76%. Likewise, the stock’s trailing-12-month levered FCF margin of 15.77% is considerably higher than the industry average of 5.53%.

BABA’s revenue for the third quarter that ended December 31, 2023, increased 5.1% year-over-year to $36.67 billion. Its non-GAAP net income and non-GAAP EPS came in at $6.75 billion and $0.33, respectively. The company’s adjusted EBITDA increased marginally year-over-year to $8.39 billion.

As of December 31, 2023, the company’s cash and cash equivalents came in at $35.89 billion.

Street expects BABA’s revenue for the fourth quarter (ending March 2024) to increase 3.1% year-over-year to $30.52 billion. Likewise, the company’s EPS for the current quarter is expected to grow 2.7% year-over-year to $1.56. Moreover, the company has surpassed consensus EPS estimates in three of the trailing four quarters.

BABA’s shares have gained 3.1% over the past three months to close the last trading session at $73.71.

BABA’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.

The stock has a B grade for Momentum, Value, and Quality. Within the China industry, BABA is ranked #14 of 40 stocks.

In addition to the POWR Ratings we’ve stated above, we also have BABA ratings for Growth, Sentiment, and Stability. Get all BABA ratings here.

What To Do Next?

Discover 10 widely held stocks that our proprietary model shows have tremendous downside potential. Please make sure none of these “death trap” stocks are lurking in your portfolio:

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AMZN shares were unchanged in premarket trading Thursday. Year-to-date, AMZN has gained 14.20%, versus a 7.25% rise in the benchmark S&P 500 index during the same period.

About the Author: Mangeet Kaur Bouns

Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.

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Following a slowdown in demand and destocking measures undertaken last year, the global steel industry is expected to see demand recover this year. Given this backdrop, investors could consider buying fundamentally strong steel stocks Companhia Siderúrgica (SID), Reliance (RS) and Acerinox (ANIOY). Read on.

Despite persistent headwinds, the steel industry is expected to expand due to rising demand from developing countries like India, favorable government policies that focus on infrastructure development, rapid urbanization, a recovery of demand in China, and technological advancements.

Given the industry’s bright prospects, it could be wise to consider investing in fundamentally solid steel stocks Companhia Siderúrgica Nacional (SID), Reliance, Inc. (RS) and Acerinox, S.A. (ANIOY).

Before diving deeper into the fundamentals of these stocks, let’s understand what’s shaping the steel industry’s prospects.

The steel industry is an essential component of the global economy, as steel is used in various applications, including construction, transportation, energy, and packaging. The global steel market is expected to grow at a 2.8% CAGR to reach $1.08 trillion by 2028.

The global steel market took a hit last year as China, the world’s biggest steel consumer, saw its economy struggle due to a property crisis. The steel market also suffered due to weaker growth in several large economies, leading to lower sales.

Destocking was one of the primary reasons steel companies saw their margins getting squeezed. According to the World Steel Association, world crude steel production was 148.1 million tonnes (Mt) in January 2024, a 1.6% decline from January 2023.

Major steel producer ArcelorMittal S.A. (MT) has said that although real demand for steel is likely to remain lackluster this year, apparent demand is showing signs of improvement as destocking reaches maturity. MT’s CEO Genuino Christino has said that world apparent steel demand, excluding China, is expected to grow by 3% to 4% year-over-year in 2024.

China’s economy is expected to continue its recovery with the range of stimulus measures announced by the government that is expected to support demand growth from infrastructure spending. Steel consumption in China is expected to grow between zero and 2%.

Fitch Ratings believes steel demand growth will continue in most regions, with global consumption rising by 20 million tonnes and 30 million tonnes this year compared to 2023. India will drive the demand growth, and Turkey will continue its strong recovery. Europe, the U.S., and Brazil will see demand grow at a moderate pace.

Furthermore, the steel industry is on the verge of a transformational period, propelled by advances in artificial intelligence (AI) and robotics. These technologies have the potential to transform the industry by increasing automation, boosting quality control, optimizing the supply chain, enabling predictive maintenance, and much more.

Steelmakers may use AI and robotics to improve efficiency, cut costs, and reduce downtime. Investors’ interest in steel stocks is evident from the VanEck Steel ETF’s (SLX) 17.5% returns over the past nine months.

With these favorable trends in mind, let’s delve into the fundamentals of the three Steel stock picks, beginning with the third choice.

Stock #3: Companhia Siderúrgica Nacional (SID)

Headquartered in São Paulo, SID is an integrated steel producer in Brazil and Latin America. It operates through five segments: Steel, Mining, Logistics, Energy, and Cement.

SID’s trailing-12-month CAPEX/Sales of 8.62% is 13.6% higher than the industry average of 7.59%.

For the fiscal third quarter that ended September 30, 2023, SID’s net sales revenue increased 2.1% year-over-year to R$11.13 billion ($2.24 billion). Its gross profit and adjusted EBITDA stood at R$2.81 billion ($565.76 million) and R$2.82 billion ($567.76 million), up 10.5% and 3.7% year-over-year, respectively.

For the same quarter, its net income stood at R$90.79 million ($18.31 million). As of September 30, 2023, SID’s current liabilities stood at R$20.68 billion ($4.17 billion), compared to R$21.39 billion ($4.31 billion) as of September 30, 2022.

Street expects SID’s EPS for the quarter ended December 31, 2023, to increase significantly year-over-year to $0.19. Its revenue is expected to increase 8.6% year-over-year to $2.35 billion for the same period. Over the past six months, the stock has gained 34% to close the last trading session at $3.31.

SID’s POWR Ratings reflect this promising outlook. It has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

It has a B grade for Growth and Stability. Within the A-rated Steel industry, it is ranked #15 out of 31 stocks. To see SID’s rating for Value, Momentum, Sentiment, and Quality, click here.

Stock #2: Reliance, Inc. (RS)

RS operates as a diversified metal solutions provider and metals service center company. The company distributes a line of approximately 100,000 metal products and provides metals processing services to general manufacturing, non-residential construction, transportation, aerospace, energy, electronics and semiconductor fabrication, and heavy industries.

On February 14, 2024, RS announced that it had signed a definitive agreement to acquire all of the outstanding equity interests and related real estate assets of American Alloy Steel, Inc., a leading distributor of specialty carbon and alloy steel plate and round bar, including PVQ material.

This acquisition will broaden RS’s product portfolio and market position in the specialty carbon and alloy steel industries. It is expected to improve RS’s capacity to service customers across a variety of industries, including energy, defense, and manufacturing.

RS’s trailing-12-month ROTA of 12.75% is 350.2% higher than the industry average of 2.83%. Its 12.03% trailing-12-month ROTC is 137% higher than the 5.08% industry average. Additionally, its 18.04% trailing-12-month ROCE is 190.9% higher than the 6.20% industry average.

RS’s net sales for the fiscal fourth quarter (ended December 31, 2023) stood at $3.34 billion, while its operating income came in at $325.10 million. The company’s non-GAAP net income attributable to RS and non-GAAP EPS stood at $274.40 million and $4.73, respectively.

Moreover, the company’s total current liabilities stood at $843.60 million as of December 31, 2023, compared to $1.38 billion as of December 31, 2022.

Over the past nine months, the stock has gained 33.8% to close the last trading session at $320.26.

It’s no surprise that RS has an overall B rating, equating to a Buy in our POWR Ratings system.

It has a B grade for Sentiment and Quality. It is ranked #14 in the same industry. Beyond what is stated above, we’ve also rated RS for Growth, Value, Momentum, and Stability. Get all RS ratings here.

Stock #1: Acerinox, S.A. (ANIOY)

Headquartered in Madrid, Spain, ANIOY manufactures, transforms, and markets stainless steel products. Its offerings include coil cold rollings, hot rolled coils, roughing materials, discs, billets, and plates.

On February 5, 2024, ANIOY announced that it has entered into a definitive agreement under which Acerinox’s wholly-owned U.S. subsidiary, North American Stainless (NAS), will acquire Haynes International, a leading developer, manufacturer, and marketer of technologically advanced high-performance alloys.

This acquisition will enable Acerinox to broaden its product offerings and improve its position in the high-performance alloys industry.

ANIOY’s trailing-12-month ROCE of 9.34% is 50.7% higher than the 6.20% industry average. Its trailing-12-month ROTA of 3.74% is 32.1% higher than the 2.83% industry average. Additionally, its 1.07x trailing-12-month asset turnover ratio is 56.4% higher than the 0.68x industry average.

ANIOY’s net sales amounted to €1.53 billion ($1.66 billion) in the fiscal fourth quarter that ended December 2023. The company’s EBITDA came in at €96 million ($104.37 million), up 6.7% year-over-year.

In addition, as of December 31, 2023, the company’s current liabilities stood at €1.90 billion ($2.07 billion), compared to €1.95 billion ($2.12 billion) as of December 31, 2022.

For the quarter ending June 30, 2024, ANIOY’s revenue is expected to increase 1.1% year-over-year to $1.95 billion. Over the past six months, the stock has gained 5.1% to close the last trading session at $5.20.

ANIOY’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.

It is ranked #2 in the Steel industry. It has a B grade for Value, Stability, and Quality. To see the additional ANIOY ratings for Growth, Momentum, and Sentiment, click here.

What To Do Next?

43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.

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RS shares were unchanged in premarket trading Wednesday. Year-to-date, RS has gained 14.51%, versus a 6.71% rise in the benchmark S&P 500 index during the same period.

About the Author: Rashmi Kumari

Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master’s degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.

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Broadcom Inc.’s (AVGO) strategic acquisitions and collaborations with industry leaders are undoubtedly laying a solid foundation for significant long-term growth. However, with earnings on the horizon, would it be prudent to invest in AVGO shares now? Let’s explore whether the company’s fundamentals support this potential….

Broadcom Inc. (AVGO) will announce its fiscal 2024 first-quarter earnings on March 7. Forecasts indicate a 31.8% year-over-year revenue surge to $11.75 billion. Moreover, analysts expect a slight uptick in the company’s EPS from the preceding year’s period to $10.39.

AVGO’s acquisition of VMware, completed on November 22, 2023, marks a significant step towards enhancing its investment in VMware Cloud Foundation. With VMware’s robust suite of services, including Tanzu for application deployment acceleration, AVGO is poised to bolster its cloud and edge offerings, catering to modernization demands.

Hock Tan, President and CEO of AVGO, emphasized the revolutionary impact of the acquisition during the latest earnings release. He said, “The acquisition of VMware is transformational. In fiscal year 2024 we expect semiconductor to sustain its mid to high single digit revenue growth rate, with the contribution of VMware driving consolidated revenue to $50 billion, and adjusted EBITDA to $30 billion.”

Moreover, the joint verification by SoftBank, NEC Corporation, and VMware, under AVGO’s ownership, validates the virtualization of the Radio Access Network (RAN), enabling the transition from traditional RAN to vRAN systems. The transition streamlines network operations, improving efficiency and scalability, which aligns well with AVGO’s strategic objectives for smart and efficient operations.

By adopting O-RAN architecture and optimizing for Telco Cloud, AVGO stands to benefit from open and unified operations throughout the network lifecycle. This approach should enhance operational efficiency and offer scalability and flexibility, further solidifying AVGO’s position as a leader in providing innovative solutions for telecommunications infrastructure.

Shares of AVGO have gained 60.8% over the past six months and 121.6% over the past year, closing the last trading session at $1,402.26.

Here are the financial aspects of AVGO that could influence its price performance in the near term:

Sound Financials

During fiscal 2023 fourth quarter that ended October 29, 2023, AVGO’s non-GAAP net revenue increased 4.1% year-over-year to $9.30 billion. Its adjusted EBITDA grew 5.7% from the year-ago value to $6.05 billion.

Moreover, the company’s non-GAAP net income and non-GAAP earnings per common share rose 5.9% and 5.8% from the prior year’s period to $4.81 billion and $11.06, respectively.

Mixed Growth Record

Over the past three years, AVGO’s revenue and EBITDA increased at a CAGR of 14.5% and 21.5%, respectively. Its net income and EPS grew at respective CAGRs of 68.2% and 73.4% during the period. However, the company’s total assets declined at a CAGR of 1.4% over the same time frame.

Optimistic Analyst Estimates

The consensus revenue estimate for the fiscal year ending October 2024 stands at $49.84 billion, signaling a 39.1% year-over-year increase. Likewise, the company’s EPS is anticipated to witness a 10.6% uptick from the previous year, reaching $46.72.

Looking ahead, analysts anticipate an 11% increase in revenue for the fiscal year ending October 2025, with projections reaching $55.34 billion. Similarly, EPS for the next year is expected to experience a growth of 19.6% from the prior year, settling at $55.90.

Robust Profitability

The stock’s trailing-12-month gross profit margin and trailing-12-month EBITDA margin of 74.11% and 56.40% are 51.6% and 494.3% higher than the industry averages of 48.87% and 9.49%, respectively.

Moreover, the company’s trailing-12-month levered FCF margin of 37.56% is 315.9% higher than the 9.03% industry average. Similarly, its trailing-12-month net income margin of 39.31% compares with the industry average of 2.56%.

Stretched Valuation

In terms of forward non-GAAP P/E, AVGO is trading at 29.86x, 18.3% higher than the industry average of 25.24x. Its forward EV/Sales of 13.52x is 361.2% higher than the 2.93x industry average.

Furthermore, the stock’s forward EV/EBITDA and forward Price/Sales of 22.64x and 13.01x are 46.6% and 336.1% higher than the industry average of 15.45x and 2.98x, respectively.

POWR Ratings Exhibit Mixed Prospects

AVGO’s outlook is apparent in its POWR Ratings. The stock has an overall rating of C, which translates to Neutral in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. AVGO’s A grade for Quality underscores its robust profitability, reflecting positively on its financial health. However, the stock has a C grade for Stability, mirroring its 24-month beta of 1.21, suggesting a degree of volatility in its stock performance.

Additionally, AVGO holds a D grade for Value, which is in sync with its elevated valuation relative to industry peers. The stock is ranked #22 out of 90 stocks in the Semiconductor & Wireless Chip industry. Click here to access AVGO’s Growth, Momentum, and Sentiment ratings.

Bottom Line

AVGO’s acquisition of VMware and partnerships with industry giants such as SoftBank and NEC highlight its dedication to advancing network infrastructure technology. These strategic initiatives position AVGO to offer holistic solutions, catering to the telecom sector’s dynamic demands and fostering market growth and competitiveness.

Despite such promising long-term prospects, the company’s current valuation, exceeding industry standards, coupled with instability, suggests that waiting for a better entry point in AVGO could be beneficial.

How Does Broadcom Inc. (AVGO) Stack Up Against Its Peers?

While AVGO has an overall grade of C, equating to a Neutral rating, you may check out these A (Strong Buy) and B (Buy) rated stocks within the Semiconductor & Wireless Chip industry: QUALCOMM Incorporated (QCOM), ChipMOS TECHNOLOGIES INC. (IMOS) and Everspin Technologies, Inc. (MRAM). To explore more Semiconductor & Wireless Chip stocks, click here.

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AVGO shares were unchanged in premarket trading Tuesday. Year-to-date, AVGO has gained 25.62%, versus a 7.78% rise in the benchmark S&P 500 index during the same period.

About the Author: Aanchal Sugandh

Aanchal’s passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor’s degree in finance and is pursuing the CFA program.She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.

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DocuSign (DOCU) is poised to unveil its fiscal 2024 fourth-quarter earnings on March 7. With a solid track record of surpassing analyst estimates and its bold strategic restructuring initiatives aimed at fortifying its operational efficiency, could owning DOCU’s shares be a potentially lucrative opportunity for investors ahead of its earnings? Keep reading to find out….

After a solid third-quarter performance, DocuSign, Inc. (DOCU), a pioneering force in e-signature technology and intelligent agreement management solutions, is gearing up to unveil its fourth-quarter (ended January 31, 2024) and full-year fiscal 2024 results on Thursday, March 7, 2024.

Wall Street predicts its fourth-quarter revenue to witness a 6% year-over-year rise, reaching $699.38 million, while its EPS for the same quarter is projected to drop marginally year-over-year to $0.65. However, despite the dimmed analyst sentiment, it’s worth noting that DOCU’s topline and bottom-line have consistently outperformed analyst estimates in each of the trailing four quarters.

Moreover, the company’s strides in product innovation showcase its dedication to expanding its market presence. In a groundbreaking move last year November, DOCU unveiled WhatsApp Delivery, revolutionizing its agreement process by leveraging the world’s leading messaging platform.

With DOCU’s eSignature’s WhatsApp integration, users receive instant, real-time notifications linking directly to agreements, ensuring swift and secure signings with unparalleled convenience.

On top of it, last month, DOCU revealed a restructuring blueprint aimed at fortifying the company’s financial and operational prowess. As part of the restructuring plan, the company anticipates a workforce reduction of around 6%, predominantly affecting roles within the Sales & Marketing departments.

This strategic move is expected to yield approximately $28 million to $32 million in one-time restructuring charges, covering various expenses such as employee transitions, severance packages, and related costs. Additionally, DOCU affirmed its anticipation of either meeting or surpassing the financial guidance outlined for the fourth quarter and fiscal year 2024.

In the fiscal fourth quarter, the company projects total revenue in the range of $696 million to $700 million. Meanwhile, its subscription revenue and non-GAAP gross margin for the same quarter are expected to land between $679 million and $683 million and 81% and 82%, respectively.

With the restructuring plans promising stronger financial and operational health, institutional investors are flocking to DOCU shares, with 339 holders ramping up their stakes, reaching a total of 22,966,274 shares. Moreover, 137 holders have jumped in with new positions, accumulating to 9,421,046 shares. This surge in institutional interest is a testament to growing confidence in the company’s prospects.

Over the past three months, DOCU’s shares have climbed 18.7% to close the last trading session at $54.58.

Here are the fundamental aspects of DOCU that could influence its performance in the near term:

Strong Financials

For the fiscal 2024 third quarter, which ended on October 31, 2023, DOCU’s total revenue increased 8.5% year-over-year to $700.42 million, while its gross profit grew 8.1% from the year-ago value to $557.78 million.

Moreover, the company’s non-GAAP net income came in at $163.80 million and $0.79 per share, representing increases of 38.7% and 38.6% from the prior-year quarter, respectively. As of October 31, 2023, DOCU’s cash and cash equivalents stood at $1.19 billion, up 64.7% compared to $721.90 million as of January 31, 2023.

Discounted Valuation

In terms of forward non-GAAP PEG, DOCU is trading at 0.68x, 67.3% lower than the industry average of 2.06x. Likewise, its forward EV/EBIT ratio of 14.98 is 26.1% lower than the industry average of 20.26x. Also, its forward Price/Cash Flow multiple of 13.32 is 42.9% lower than the industry average of 23.33x.

High Profitability

DOCU’s trailing-12-month gross profit margin of 79.38% is 61.4% higher than the 49.17% industry average. Likewise, its trailing-12-month levered FCF margin of 36.42% is 307.1% higher than the industry average of 8.94%. Furthermore, the stock’s trailing-12-month cash per share of $5.83 is 183.5% higher than the $2.06 industry average.

POWR Ratings Exhibit Solid Prospects

DOCU’s robust fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by accounting for 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. DOCU has an A grade for Growth, which is justified by its solid financial performance in the third quarter. Meanwhile, the stock’s B grade for Value is in sync with its lower-than-industry valuation metrics. Furthermore, its B grade for Quality is consistent with its high profitability metrics.

Within the B-rated Software – SAAS industry, DOCU is ranked #2 out of the 19 stocks.

Beyond what we’ve stated above, we have also rated the stock for Momentum, Stability, and Sentiment. Get all DOCU ratings here.

Bottom Line

Despite Wall Street’s conservative estimates for the fourth quarter, DOCU’s prospects shine brightly, fueled by its commitment to bolstering efficiency while prioritizing investments in innovative initiatives. Moreover, the company’s restructuring drive reflects DOCU’s capabilities to make critical adjustments within the company for the betterment of its shareholders and long-term success.

Apart from the aforementioned factors, DOCU’s strong financial performance in the third quarter, high profitability, and discounted valuation further enhance the stock’s appeal as an investment candidate. To that end, with further financial details about the restructuring plans expected to be revealed alongside its fourth-quarter results, it might be an opportune time to scoop up the company’s shares for potential gains.

How Does DocuSign, Inc. (DOCU) Stack Up Against Its Peers?

While DOCU has an overall grade of A, equating to a Strong Buy rating, you may also check out these other stocks within the Software – SAAS industry: Vimeo, Inc. (VMEO), Informatica Inc. (INFA), and MiX Telematics Limited (MIXT), carrying A (Strong Buy) or B (Buy) ratings. To explore more Software – SAAS stocks, click here.

What To Do Next?

Discover 10 widely held stocks that our proprietary model shows have tremendous downside potential. Please make sure none of these “death trap” stocks are lurking in your portfolio:

10 Stocks to SELL NOW! >

DOCU shares fell $0.04 (-0.07%) in premarket trading Monday. Year-to-date, DOCU has declined -8.19%, versus a 7.90% rise in the benchmark S&P 500 index during the same period.

About the Author: Anushka Mukherjee

Anushka’s ultimate aim is to equip investors with essential knowledge that empowers them to make well-informed investment choices and attain sustained financial prosperity in the long run.

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It’s easy to ignore bad news when the S&P 500 (SPY) is making new highs and our net worth is on the rise. Unfortunately it is often at these heights that the first signs of trouble appear…but are hard to see at first. That is why you need to read the latest insights from veteran investor, Steve Reitmeister, as he points to a disconnect between the fundamentals and current stock price action. Read on below for more.

The better than expected PCE inflation report on Thursday led to another rally pushing the S&P 500 (SPY) back towards the highs at 5,100. This represents a hearty 5% return in February. Even better, market breadth improved with smaller stocks coming along for the ride in the final days of the month.

I hate to be the bearer of bad news…but unfortunately the fundamentals are not totally supporting this rampant bullishness. Especially because I don’t believe things get that much better even after the Fed does finally start lowering rates.

Why is that?

And what does that mean for stocks in the weeks ahead?

Get the answers below with my updated outlook and trading plan.

Market Commentary

In my commentary earlier this week I shared the following insight:

We need to start the conversation with this provocative chart from FactSet comparing the movement of the forward S&P 500 EPS estimates versus the stock index:

You will discover that for most of the past 10 years the dark line for earnings is above the price action. Meaning the improvement in the earnings outlook propelled stocks higher. Yet each time we find the stock index climbing above the EPS outlook it comes back down to size like it did in 2022.

If the lessons of history hold true, then it points to 2 possible outcomes.

First, would be a correction for stock prices to be more in line with the true state of the earnings outlook. Something in the range of 10% should do the trick with some of the more inflated stocks enduring a stiffer 20%+ penalty.

On the other hand, stocks could level out for a while patiently waiting for rates to be lowered. This act is a well known catalyst for greater economic growth that should finally push earnings higher getting things back in equilibrium with the index price.

Yes, there is a 3^rd case where stocks just keep rallying because investors are not wholly rationale. Unfortunately, those periods of irrational exuberance led to much more painful corrections further down the road. So, let’s hope that will not be the case here.

(End of previous commentary)

However, here is what I left out of that conversation that needs to be added now. Even when the Fed finally starts lowering rates, it may not be as great of a catalyst for earnings growth and share price appreciation as investors currently believe.

Just consider what is happening now. GDP is humming along around normal levels and yet earnings growth is sub-par to non-existent year over year….why is that?

Because difficult times, like a recession, leads to more stringent cost cutting on the part of company management. This lower cost base = improved profit margins and higher growth when the economy expands once again. And yes, that is the prime catalyst for stock price advances.

But note…we didn’t have a recession. And unemployment remains strong. And thus, there was never the major cost cutting phase which ushers in the next cycle of impressive earnings growth which propels stock prices higher.

Or to put it another way, even when the Fed lowers rates…it may have a very modest impact on improved earnings growth because of what I just noted above. And this equates to less reason for stocks to ascend further.

No…this does not equate to the forming of another bear market. As noted earlier, perhaps a correction is in the offing. Or more likely that the overall market stays around current levels with a rotation out of growth stocks towards value stocks.

This is where we get to press our advantage with the POWR Ratings.

Yes, it reviews 118 factors in all for each stock finding those with the most upside potential. 31 of those factors are in the Value camp (the rest being spread across Growth, Momentum, Quality, Safety and Sentiment).

This value bias helps the POWR Ratings out every year leading to it’s average annual return of +28.56% a year going back to 1999. This year we might be able to press our advantage even more as growth prospects dim and the search for value takes center stage.

Read on in the next section for my favorite POWR Ratings value stocks to add to your portfolio at this time…

What To Do Next?

Discover my current portfolio of 12 stocks packed to the brim with the outperforming benefits found in our exclusive POWR Ratings model. (Nearly 4X better than the S&P 500 going back to 1999)

This includes 5 under the radar small caps recently added with tremendous upside potential.

Plus I have 1 special ETF that is incredibly well positioned to outpace the market in the weeks and months ahead.

This is all based on my 43 years of investing experience seeing bull markets…bear markets…and everything between.

If you are curious to learn more, and want to see these lucky 13 hand selected trades, then please click the link below to get started now.

Steve Reitmeister’s Trading Plan & Top Picks >

Wishing you a world of investment success!

Steve Reitmeister…but everyone calls me Reity (pronounced “Righty”)
CEO, StockNews.com and Editor, Reitmeister Total Return

SPY shares were trading at $512.85 per share on Friday afternoon, up $4.77 (+0.94%). Year-to-date, SPY has gained 7.90%, versus a % rise in the benchmark S&P 500 index during the same period.

About the Author: Steve Reitmeister

Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks.

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The Federal Reserve is expected to start cutting interest rates this year, but concerns over higher deposit costs, slower loan growth, higher funding costs, declining asset quality, and the potential of default on CRE loans continue to cloud the U.S. banking sector’s outlook. Therefore, let’s analyze whether one should buy, hold, or sell banking stocks JPMorgan Chase (JPM) and Wells Fargo & Company (WFC)….

The U.S. banking industry has faced several challenges over the past year, but several big banks were able to post improved profitability driven by higher net interest incomes. However, the Federal Reserve is expected to start cutting interest rates sometime this year.

Moreover, a sluggish economy, deterioration of asset quality, higher deposit costs, and the likelihood of default on commercial real estate (CRE) loans could put pressure on the U.S. banking system. Amid this uncertain backdrop, investors could wait for a better entry point in JPMorgan Chase & Co. (JPM) and Wells Fargo & Company (WFC).

Before diving deeper into the fundamentals of these stocks, let’s understand what’s shaping the banking industry’s prospects.

Following the collapse of three regional banks last year, the U.S. banking industry was subject to several challenges, including credit rating downgrades, deposit outflows, higher deposit costs, and stringent lending standards. However, the industry found its footing as banks benefitted from the higher interest rates, resulting in higher net interest income.

Many analysts are of the view that 2024 will turn out to be a weak year when it comes to net interest margins due to higher funding costs. The key risks that U.S. banks are facing are declines in deposits, funding cost pressures, unrealized loan losses, risk of default on commercial real estate (CRE) loans, and overall economic uncertainty.

S&P Global believes the profitability of U.S. banks will weaken with expenses rising moderately and revenues changing marginally, and it forecasts provisions in 2024 won’t change materially from 2023 levels. S&P believes the industry’s return on common equity will come between 10% and, down from the estimated 12% and 13% last year.

It also believes the credit quality will remain in good shape, but delinquencies and charge-offs will continue rising toward historical averages. Net interest income will likely fall as funding costs are expected to increase incrementally in the first half of 2024, and asset yields are likely to decline when the Fed starts cutting rates.

However, fee incomes from mortgage and investment banking are expected to rise when rates are cut, and trading revenues are also likely to remain relatively robust.

Considering this backdrop, let’s take a look at the fundamentals of the two Money Center Banks stocks, starting with the one ranked lower in our proprietary rating system.

Stock #2: JPMorgan Chase & Co. (JPM)

JPM operates as a financial services company worldwide. It operates through four segments: Consumer & Community Banking (CCB); Corporate & Investment Bank (CIB); Commercial Banking (CB); and Asset & Wealth Management (AWM).

In terms of trailing-12-month GAAP PEG, JPM’s 0.33x is 11.7% lower than the 0.38x industry average. However, in terms of forward Price/Sales, the stock’s 3.31x is 33.7% higher than the 2.48x industry average. Its 1.62x forward Price/Book is 58.1% higher than the 1.02x industry average.

JPM’s net income for the fourth quarter ended December 31, 2023, declined 15.5% year-over-year to $9.31 billion. In addition, its EPS came in at $3.04, representing a decrease of 14.8% year-over-year. Its return on common equity (ROE) was 12%, compared to 16% in the year-ago quarter.

On the other hand, the company’s total net revenue increased 11.7% year-over-year to $38.57 billion. Its net interest income rose 19.1% over the prior-year quarter to $24.05 billion. Its CET1 ratio was 15%, compared to 13.2% in the previous year’s quarter.

Analysts expect JPM’s EPS and revenue for the quarter ending March 31, 2024, to increase 3.2% and 8.8% year-over-year to $4.23 and $41.71 billion, respectively. Moreover, the company has surpassed the consensus EPS estimates in three of the trailing four quarters.

Over the past nine months, the stock has gained 35.9% to close the last trading session at $186.06.

JPM’s POWR Ratings are consistent with this mixed outlook. The stock has an overall rating of C, translating to Neutral in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

JPM is ranked #2 out of 10 stocks in the Money Center Banks industry. The stock has a C grade for Momentum, Sentiment, and Quality.

Click here to see JPM’s ratings for Growth, Value, and Stability.

Stock #1: Wells Fargo & Company (WFC)

WFC, a diversified financial services company, provides banking, investment, mortgage, and consumer and commercial finance products and services in the United States and internationally. It operates through four segments: Consumer Banking and Lending; Commercial Banking; Corporate and Investment Banking; and Wealth and Investment Management.

In terms of forward non-GAAP PEG, WFC’s 0.82x is 37.6% lower than the 1.31x industry average. But in terms of forward Price/Sales, the stock’s 2.48x is 0.1% higher than the 2.48x industry average. Also, its 1.12x forward Price/Book is 9.7% higher than the 1.02x industry average.

For the fourth quarter ended December 31, 2023, WFC’s total revenue increased 2.2% year-over-year to $20.48 billion. Its net income applicable to common stock rose 9.8% year-over-year to $3.16 billion. Its EPS came in at $0.86, up 14.7% year-over-year. Its ROE came in at 7.6%, compared to 7.1% in the prior-year quarter. In addition, its CET1 ratio came in at 11.4% compared to 10.6% in the year-ago period.

However, the company’s provision for credit losses rose 34% year-over-year to $1.28 billion. Also, its net interest income declined 4.9% year-over-year to $12.77 billion.

For the first quarter ending March 31, 2024, WFC’s revenue and EPS are expected to decrease 10.7% and 3% year-over-year to $1.10 and $20.11 billion, respectively. Furthermore, the company has topped the consensus EPS estimates in each of the trailing four quarters, which is impressive.

Shares of WFC have surged 34.8% over the past nine months to close the last trading session at $55.59.

WFC’s mixed prospects are reflected in its POWR Ratings. The stock has an overall rating of C, which translates to a Neutral in our proprietary rating system.

The stock has a C grade for Growth, Value, Momentum, Stability, Sentiment, and Quality. It is ranked first in the same industry. To see all the ratings of WFC, click here.

What To Do Next?

43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.

2024 Stock Market Outlook >

JPM shares were unchanged in premarket trading Friday. Year-to-date, JPM has gained 10.06%, versus a 6.89% rise in the benchmark S&P 500 index during the same period.

About the Author: Dipanjan Banchur

Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.

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