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Despite concerns over a possible economic slowdown or recession, Wall Street's first-quarter earnings season has offered a glimmer of relief as the results mostly revealed that things may not be as dire as initially feared.
With over 95% of S&P 500 companies having reported as of Wednesday morning, the numbers are in, and they tell a story of resilience. Impressively, 78% of these companies have surpassed earnings per share estimates, while an equally impressive 76% have exceeded revenue expectations.
This strong performance has narrowed the year-over-year decline in Q1 earnings to just -2.2%, a significantly smaller drop compared to the gloomy -6.7% projected on March 31.
As the dust settles, it’s time to look back and identify which companies have managed to weather the storm and which have struggled amid the challenging environment.
In this article, I will delve into the five notable winners and five notable losers of Wall Street's first-quarter earnings season.
Using the InvestingPro stock screener, I also examined the potential upside and downside for each name based on their Investing Pro ‘Fair Value’ models.
1. Meta Platforms
Meta Platforms (NASDAQ:META) reported surprisingly strong first quarter earnings on April 26 in which it delivered an unexpected increase in revenue after three straight quarterly declines. The Facebook parent company’s forecast for the second quarter also exceeded expectations.
Source: InvestingPro
Shares of the Mark Zuckerberg-led company have rallied along with the tech-heavy Nasdaq and are up a whopping 105% year-to-date, making META one of the best-performing stocks of the year.
It should be noted even after shares more than doubled since the start of the year, META remains extremely undervalued according to the quantitative models in InvestingPro, and could see an increase of 17.9% from Tuesday’s closing price of $246.74.
Source: InvestingPro
Palantir (NYSE:PLTR) released first-quarter earnings that blew past analysts’ estimates on both the top and bottom lines on May 8. CEO Alex Karp said the data-analytics software company expects to remain profitable “each quarter through the end of the year.”
Source: InvestingPro
Shares of the data mining specialist have bounced back this year and are up 96.9% thus far in 2023. Notwithstanding the recent turnaround, the stock remains approximately 70% below its January 2021 all-time high of $45.
Palantir’s stock appears to be overvalued according to a number of valuation models on InvestingPro. As of this writing, the average ‘Fair Value’ for PLTR stands at $9.25, a potential downside of nearly 27% from Tuesday’s closing price of $12.64.
Source: InvestingPro
3. Uber Technologies
Uber Technologies (NYSE:UBER) reported first-quarter results on May 2 that easily topped analysts’ expectations for earnings and revenue, with sales rising 29% year-over-year. In a prepared statement, CEO Dara Khosrowshahi said Uber is off to a “strong start” for the year.
Source: InvestingPro
Shares of the mobility-as-a-service specialist have run about 56% higher so far in 2023, far outpacing the comparable returns of major industry peer, Lyft (NASDAQ:LYFT), whose stock is down nearly 26% over the same timeframe.
Even with the recent upswing, UBER stock could see an increase of 11.3%, according to InvestingPro, bringing it closer to its ‘Fair Value’ of $43.02 per share.
Source: InvestingPro
4. DraftKings
DraftKings (NASDAQ:DKNG) delivered first-quarter earnings and revenue that soared past analyst forecasts on May 4. Revenue for the quarter surged 84% from a year ago to $769.7 million, driven primarily by its efficient acquisition of new customers.
Source: InvestingPro
DKNG shares are up 113% year-to-date as investors turned increasingly bullish on the online gambling specialist’s future prospects.
The average ‘Fair Value’ for DraftKing’s stock on InvestingPro according to a number of valuation models - including P/E, and P/S multiples - stands at $28.64, a potential upside of 18% from the current market value.
Source: InvestingPro
5. Chipotle Mexican Grill
Chipotle Mexican Grill (NYSE:CMG) reported better-than-expected first quarter earnings and revenue on April 25. Same-store sales rose 10.9%, blowing past consensus estimates of 8.6%. Looking ahead, Chipotle anticipated same-store sales growth in the mid-to-high single digits for the rest of the year.
Source: InvestingPro
Year-to-date, shares of the Newport Beach, California-based fast-casual Mexican chain have gained 47.5%, easily outpacing the S&P 500’s roughly 8% increase over the same timeframe.
With a ‘Fair Value’ of $1,971.56 as per the quantitative models in InvestingPro, CMG appears to be slightly overvalued at current levels, with a potential downside of about 4%.
Source: InvestingPro
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1. Tesla
Tesla (NASDAQ:TSLA) reported underwhelming first quarter earnings on April 19.
The Elon Musk-led EV pioneer said adjusted net income fell 24% to $2.51 billion, or $0.85 a share, from $3.32 billion, or $0.95 a share, a year ago. On the earnings call, Musk emphasized an “uncertain” macroeconomic environment that could impact people’s car-shopping plans.
Source: InvestingPro
Tesla’s stock has rallied 50.8% year-to-date. Notwithstanding the recent turnaround, the stock remains well below its November 2021 all-time high of $414.50.
Despite numerous near-term headwinds, InvestingPro currently has a ‘Fair Value’ price target of about $209 for TSLA shares, implying 12.6% upside ahead.
Source: InvestingPro
2. Snap
Snap (NYSE:SNAP) reported first quarter results on April 27 that badly missed analysts’ revenue expectations amid a weak performance in its core digital advertising business. Although the social media company failed to provide official guidance for the second quarter, it warned that its “internal forecast” for revenue would be $1.04 billion, representing a 6% year-over-year decline.
Source: InvestingPro
As could be expected, SNAP stock has trailed the year-to-date performance of some of its most notable peers, rising 9.5% so far in 2023.
Looking ahead, the average ‘Fair Value’ price for the shares on InvestingPro stands at $10.54, a potential upside of 7.5% from Tuesday’s closing price of $9.80.
Source: InvestingPro
3. Disney
Walt Disney (NYSE:DIS) posted a weaker-than-expected profit for its fiscal second quarter on May 10 and reported a shock decline of four million subscribers in its Disney+ streaming service as consumers become more cost-conscious about their media spending habits.
Source: InvestingPro
The entertainment company’s stock has underperformed the broader market by a wide margin so far in 2023, with DIS shares up just 3.4% year-to-date.
According to the InvestingPro model, Disney’s stock is still very undervalued and could see an increase of 30.2% from current levels, bringing it closer to its fair value of $116.95 per share.
Source: InvestingPro
4. AT&T
AT&T (NYSE:T) reported disappointing first-quarter financial results on April 20, revealing a sharp slowdown in both profit and sales growth amid the uncertain economic climate. Beyond the top and bottom-line figures, the telecommunications giant suffered an unexpected decline in subscriber growth for its postpaid phone plans.
Source: InvestingPro
Year-to-date, T is down 12.5%. Shares have sold off in recent weeks, with AT&T’s stock languishing near its lowest level since October 2022.
At a current price point of roughly $16 per share, T comes at a substantial discount according to the quantitative models in InvestingPro, which point to a ‘Fair Value’ upside of 23.9% in the stock over the next 12 months.
Source: InvestingPro
5. Tyson Foods
Tyson Foods (NYSE:TSN) posted a surprise loss for its fiscal second quarter on May 8, while revenue also came in below forecasts due to an underwhelming performance across its chicken business. The dismal results prompted the food production company to cut its revenue outlook for the year amid slowing consumer demand.
Source: InvestingPro
Shares of the meat and poultry products producer have tumbled 17% so far this year, with TSN stock recently touching a three-year low.
In spite of its massive downtrend, the average ‘Fair Value’ for TSN stock on InvestingPro implies nearly 34% upside from the current market value over the next 12 months.
Source: InvestingPro
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Disclosure: At the time of writing, I am short on the S&P 500 and Nasdaq 100 via the ProShares Short S&P 500 ETF (SH) and ProShares Short QQQ ETF (PSQ). I regularly rebalance my portfolio of individual stocks and ETFs based on ongoing risk assessment of both the macroeconomic environment and companies' financials.
The views discussed in this article are solely the opinion of the author and should not be taken as investment advice.
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