How Money Flow Impacted NVIDIA

Earnings season is drawing to a close, as about 97% of S&P 500 companies have released their latest results. This week, we heard from NVIDIA Corporation (NVDA), and it did not disappoint.

NVIDIA reported earnings for its first quarter in fiscal year 2023 on Wednesday, May 25. The company achieved record revenue thanks to record data center and gaming revenue. First-quarter revenue jumped 46% year-over-year to $8.29 billion, which topped estimates for $8.12 billion. Data center revenue accounted for $3.75 billion, or an 83% year-over-year increase, while gaming revenue accounted for $3.62 billion, or a 31% year-over-year increase. Laptops and chips for game consoles, like the Nintendo Switch, propelled gaming growth.

The company also reported first-quarter earnings of $3.44 billion, or $1.36 per share, up from $2.56 billion, or $0.91 per share, in the first quarter of fiscal year 2022. That translates to 49% year-over-year earnings growth. The analyst community expected earnings of $1.29 per share, so NVIDIA posted a 5.4% earnings surprise.

Looking forward to the second quarter in fiscal year 2023, NVIDIA took into account the lockdowns in China and the ongoing conflict in Ukraine, and it now expects revenue of about $8.1 billion. That’s lower than analysts’ current projections for revenue of $8.45 billion in the second quarter, so NVDA shares slipped 9% in after-hours trading on Wednesday.

Personally, I believe NVIDIA is being overly cautious given that China is easing up on its COVID-19 restrictions and Russia only accounts for about 2% of NVIDIA’s business. So, neither China’s nor Russia’s near-term issues should turn into long-term problems for NVIDIA. I think Wall Street realized this, too, which is why the stock snapped back and ended Thursday up 5%.

The rally in NVIDIA shares is another great example of money flow. As I discussed on Thursday, money flow is ultimately what determines if a stock will go up or down.

NVIDIA has seen a steady increase in money flow over the past few months. As a result, it held an A-rating in my Portfolio Grader heading into its earnings results on Wednesday.

Following NVIDIA’s surge this week, I anticipate that the increase in money flow will persist, making it a strong buy right now.

Now, money flow is an important concept to understand, because if you know how to “follow the money,” you stand to make a fortune. If you don’t follow the money, you could face big losses.

Case in point: Snap Inc. (SNAP).

Snap released its first-quarter earnings back in April. The company reported an earnings loss of $0.02 per share on revenue of $1.07 billion. Analysts were calling for earnings of $0.01 per share on revenue of $1.1 billion, so the company missed earnings estimates by a whopping 300% and revenue estimates by 2.7%.

SNAP shares actually rallied slightly despite the weaker-than-expected earnings results, but it was company management’s comments on Snap’s future this Monday that really set the shares spiraling nearly 40%.

On Monday, CEO Evan Spiegel issued a warning that the company’s original estimates for revenue and earnings does not look so accurate anymore.

“Today we filed an 8-k, sharing that the macro environment has deteriorated further and faster than we anticipated when we issued our quarterly guidance last month” Spiegel wrote in a note to employees. “As a result, while our revenue continues to grow year-over-year, it is growing more slowly than we expected at this time.”

Snap will also slow down its hiring. It expects to hire 500 new employees before the end of the year. For reference, 2,000 new hires were made over the last 12 months.

After its earnings report in April, Snap anticipated year-over-year revenue growth of 20% to 25%. Now the company says it will miss targets for both revenue and earnings and has not issued any new guidance. This is the first time Snap has issued a revenue warning.

Analysts now expect earnings of $0.00 per share on revenue of $1.17 billion for the next quarter, with 13 analysts having revised their estimates lower in the last 30 days.

SNAP stock fell 40% after the announcement Monday, and sent other social media stocks like Facebook, Twitter Inc. (TWTR) and Pinterest Inc. (PINS) lower by 7%, 4% and 43%, respectively.

Folks using my Portfolio Grader would have been able to foresee the disappointing news from SNAP.

As you can see in the Report Card above, SNAP earns a D-rating for its Quantitative Grade (its money flow) and a D-rating overall. So, it was a sell even before SNAP’s stunning selloff.

If you want to learn how to track money flow so you can invest in the winners and avoid the losers, you’ll want to check out the replay of my special event The Great American Wealth Shift. During this event, I explained just how I track the movement of stocks… and the types of stocks that can see incredible gains as a result of this tracking.

I also revealed one of the top stocks I see a lot of money about to flow into AND the No. 1 stock I see a lot of money flowing out of in the near future – the No. 1 stock to avoid (a stock I guarantee you know well). For full details, you can watch a replay of The Great American Wealth Shift here.

Sincerely,

Signed:

Louis Navellier

P.S. U.S. Markets and InvestorPlace offices – including customer service – will be closed Monday, May 30, in observance of Memorial Day.

Strong Dollar Leads to Profits in These Stocks

Last month I said if one word were to describe the first quarter of 2022 it would be chaos. The chaos has continued as we head into the last month of the second quarter…

The fact is, the S&P 500 has continued to oscillate after hitting a new low and bouncing back last Friday on improving trading volume. However, while we’re not out of the woods yet, things are looking up – especially for fundamentally superior companies that are prospering in the current environment. (More on that in a moment.)

One big drag on the S&P 500 right now is that a strong U.S. dollar combined with weak economies outside of the U.S. is hindering many multi-international companies.  Approximately, half of the S&P 500’s sales are outside of the U.S. A strong dollar is a drag on those companies being paid in eroding currencies.

In today’s Market360, I’m going to share a little bit more about the state of the U.S. dollar and what it means for the market. Then, I am going to reveal where I see the best opportunities in the current environment…

The Dollar’s Dominance

While inflation, still at 40-year highs, seems to have peaked in the U.S., the same can’t be said for other countries.

Like the U.S., the United Kingdom has been raising its key interest rates. There just hasn’t been the deflationary effect we’ve seen in the U.S.

Britain’s Office of National Statistics announced that consumer prices rose at a 9% annual pace in April, compared to a 7% annual pace in March – the highest the UK has seen in 40 years. Also, it hasn’t had any luck shoring up the British pound.

The euro isn’t doing any better. The euro (which still has negative key interest rates) has fallen over 13.5% compared to the U.S. dollar in the past year. So, inflation in the eurozone is also expected to rise.

The economic woes abroad are helping to reduce demand and put downward pressure on inflation. But unlike the UK and the European Union (EU), here in the U.S. we are blessed with the strong U.S. dollar.

The Wall Street Journal’s dollar index has risen an impressive 8% this year. I should add that The Wall Street Journal raised the possibility that the euro may hit parity with the U.S. dollar after recently hitting a low of $1.035 earlier this month. (In fact, I think the euro could hit 95 cents relative to the U.S. dollar in the upcoming months.)

The only “glitch” associated with a strong U.S. dollar is, like I said, that approximately half the S&P 500’s sales are outside of the U.S. So again, some multi-international companies may post slower sales growth from getting paid in weak currencies and operating in slowing economies around the world. As a result, domestic stocks are expected to continue to outperform some multi-international stocks for the foreseeable future.

The good news is my Growth Investor stocks are uniquely suited to profit from the current environment.

How to Profit U.S. Dollar Strength

In Growth Investor, the commodity inflation that we are prospering from is expected to persist because countries with weak currencies, such as Britain and Germany, are still experiencing hideous inflation.

Thanks to the Federal Reserve and a strong U.S. dollar, we’re experiencing a massive institutional shift in the components in the S&P 500 that will boost many of my Growth Investor stocks substantially higher for the foreseeable future.

The underlying fundamentals associated with my Growth Investor stocks are truly “out of the park” with 61.8% annual sales growth, 448% annual earnings growth, 82.6% annual dividend growth and median forecasted earnings of 10.6! It’s apparent that the energy, fertilizer and shipping stocks that dominate the Growth Investor Buy List are poised to continue to prosper.

That’s why today I’m adding six new energy and fertilizer stocks to the Growth Investor Buy List, which have represented a “sweet spot” in the current environment.

I will go further in detail in today’s Growth Investor Monthly Issue for June. It’s scheduled to post just moments from this email hitting your inbox.

Join me at Growth Investor today so you can read the issue while it’s still hot off the presses!

Sincerely,

Signed:

Louis Navellier

P.S. U.S. Markets and InvestorPlace offices – including customer service – will be closed Monday, May 30, in observance of Memorial Day.

The Tech Stocks to Buy Now

It’s been a brutal year for tech stocks. The stocks that led the market higher the last few years have been absolutely crushed.

The tech-heavy NASDAQ got off to a rough start in 2022. By the end of January, the index fell more than 10% from its highs. The weakness continued through February, and by early March, the index was down more than 20% and officially in a bear market.

Investors are panicked over what a higher interest-rate environment could do to tech stocks. The financial media talking heads would have you believe that higher interest rates hurt growth stocks…

But, as usual, you can’t depend on the mainstream media for the whole story.

Higher interest rates have virtually nothing to do with growth stocks. In fact, it’s financial sector stocks that get hurt, as their operating margins can get “squeezed.” If banks’ operating margins shrink, so does their profitability.

Now, there’s no denying that there is a leadership problem with the NASDAQ stocks. You may recall that the FAANG stocks – Meta Platforms, Inc. (FB), formally Facebook, Amazon.com, Inc. (AMZN), Apple, Inc. (AAPL), Netflix, Inc. (NFLX) and Alphabet, Inc. (GOOG), formally Google – make up nearly half of the NASDAQ.

However, some of the FAANG stocks got “de-fanged” following surprising earnings misses.

Does this mean that the tech stock growth story is done?

Check out the video below for my outlook on the future of tech stocks (and to reserve your spot for my upcoming The Great American Wealth Shift event):

Tech stocks aside, there are even better opportunities in another sector…

Opportunities I’ve found with my proprietary money flow monitor.

If you’re wondering what they are and how my money flow monitor works, you don’t have to wait long.

On Tuesday, May 24, at 4 p.m. Eastern time, I am hosting a special event called The Great American Wealth Shift.

During the event, I’ll discuss just how my money flow monitor works.

I’ll also cover:

  • The sector I predict is about to experience a mass exodus from Wall Street…
  • A rare demonstration of how my proprietary “money flow monitor” works. This monitor enables anyone to search up to 4,000 different stocks and see exactly which ones can make you the most money…
  • The No. 1 stock to avoid…
  • And the No. 1 stock to buy.

If you haven’t already, you can register for The Great American Wealth Shift event here.

We got live on Tuesday, May 24, at 4 p.m. Eastern time, so don’t forget to mark your calendar. It will last an hour… and I don’t want you to miss a single minute of it.

Be sure to sign up for the event here so you don’t miss out.

Sincerely,

Signed:

Louis Navellier

P.S. Remember, this coming Tuesday during The Great American Wealth Shift event I’ll be covering the No. 1 stock to buy – and the No. 1 stocks to avoid…

You’ll want to be in your seat at 4 p.m. Eastern time sharp.

Register for the event here.

Is a Recession on the Horizon?

The Commerce Department threw investors for a loop after it forecast GDP growth to shrink 1.4% in the first quarter.

Frankly, I was shocked!

Commerce cited inflation, trade imbalances and supply chain disruptions as the catalysts behind negative GDP growth. The supply chain disruption from China’s COVID-19 lockdowns, they say, could trigger a recession here at home.

Thanks to such fearmongering, I know folks are worried that a recession is on the horizon. But the reality is that there is no reason to worry… about a recession at least.

In the video below, I answer one of your questions about the possibility of a recession by sharing the signs that are pointing to a healthy U.S. economy. To see why I believe the U.S. will likely skirt a recession – and to sign up for my upcoming The Great American Wealth Shift special event – just click on the video below.

Even if a recession were on the horizon (which, again, it’s not), there would still be strong investment opportunities out there. As we talked about yesterday, it’s all a matter of following the money flows.

If you’re not sure how to, don’t worry. I’ve got you covered.

In next Tuesday’s The Great American Wealth Shift special event (sign up here), I’m going to dive into exactly what “money flow” is and the system I use to track it.

We go live on Tuesday, May 24, at 4 p.m. Eastern time.

If you haven’t already, you can register for the event here.

During the event, I’ll explain to you how to follow money flow… and how to find the types of stocks that can see incredible gains as a result of those flows.

I’ll also share one of the top stocks I see a lot of money about to flow into AND the No. 1 stock I see a lot of money flowing out of in the near future (one you’ll surely want to avoid).

The Great American Wealth Shift is scheduled for next Tuesday, May 24 as 4 p.m. Eastern time. You’ll want to block off an hour so you don’t miss a thing,

Click here to register for The Great American Wealth Shift event.

Sincerely,

Signed:

Louis Navellier

P.S. Remember: We go live at 4 p.m. Eastern time sharp next Tuesday with The Great American Wealth Shift event.

Sign up today so you don’t miss out.

The One Thing That Surprised Me This Earnings Season

Wall Street and many investors are in panic mode.

The NASDAQ is officially in a bear market (down 20% from its peak) and the S&P 500 is dangerously close to bear territory, too.

But I’m not worried.

I have earnings working in my favor.

Longtime followers know that earnings season is always my favorite time of year. This is when all publicly traded companies open up their books and show Wall Street if they’re still firing on all cylinders… or slamming on the brakes.

Typically, companies that report better-than-expected earnings results and positive future guidance are rewarded. Meanwhile, companies that post disappointing earnings results and/or weak future guidance get punished.

That’s held true this earnings season so far. Recall when Netflix, Inc. (NFLX) took it on the chin after reporting a dismal first quarter and guiding lower for the second quarter. On the other hand, Microsoft Corporation (MSFT) surged after topping analysts’ estimates on the top and bottom lines and providing a positive outlook for its next quarter.

What happened to the price of Netflix and Microsoft after their earnings reports is a great example of money flow. Essentially, Netflix shares dropped as huge amounts of institutional money – think pension funds and investment banks – flowed out of the stock and Microsoft shares popped as big money flowed into the stock. It’s what makes earnings season so exciting!

And this earnings season has been full of surprises. We’re seeing money flow in and out of sectors and stocks as companies report. Just look at retail earnings from earlier this week…

Retail giants Target Corporation (TGT) and Walmart, Inc. (WMT) reported yesterday and Tuesday, respectively. Walmart’s report was mediocre at best, with revenue of $141.57 billion for the first quarter of 2022, topping expectations for revenue of $138.94 billion. Moreover, earnings per share of $1.30 missed analysts’ estimates for earnings per share of $1.48 per share by 12.2%.

Target’s was an even bigger disappointment. While total revenue of $25.2 billion represents a 4% increase compared to last year, “The bottom line missed expectations, dramatically,” according to Forbes’ report.

As a result, Target’s shares dropped 25% on Wednesday, the stock’s largest single-day drop since 1987. As you well know, the market as a whole followed it down…

The reality is the financial media used Target’s weak earnings results as an excuse to say that consumers aren’t spending, when the fact is that Target’s margins were squeezed because of high shipping costs.

But my point here is that 25% selloff in Target shares is just another example of money flowing out when a company underperforms.

As I said, this front-row seat to the best game in town is what makes earnings season my favorite time as an investor…

And there is one thing about this earnings season that is a complete surprise!

To find out what – and to sign up for my upcoming The Great American Wealth Shift event – click on the video below:

Bottom line: If you know how to “follow the money,” you stand to make a fortune… and I’ve found a way to track these huge flows.

I’m sharing all the details in an upcoming event next Tuesday, May 24, at 4 p.m. Eastern time.

I’m calling it The Great American Wealth Shift. During the event, I’ll explain to you how to follow money flow… and how to find the types of stocks that can see incredible gains as a result of those flows.

Also during the event, I’m going to give away one of the top stocks I see a lot of money about to flow into AND the No. 1 stock I see a lot of money flowing out of in the near future. I can guarantee this is a stock you know well… and it’s one you’ll want to avoid at all costs.

If you haven’t already, you can register for the event here.

Remember, the upcoming event, The Great American Wealth Shift, will be held next Tuesday, May 24.

We’ll be starting at 4 p.m. on the dot. To make sure you don’t miss out, I encourage you to mark down the date and time in your calendar now.

Click here to register for The Great American Wealth Shift event.

I look forward to speaking with you then.

Sincerely,

Signed:

Louis Navellier

P.S.  Don’t forget to register for my event: The Great American Wealth Shift.

We go live on Tuesday, May 24, at 4 p.m. Eastern time.

During the event I will name one of the top stocks I see right now AND the No. 1 stock that you should avoid at all costs.

You won’t want to miss it.

Mark your calendar and sign up here.

The Best Way to Hedge Against Inflation

We’ve been talking about it a lot recently: Inflation is a problem for every American right now.

From groceries to gasoline to health care, Americans are facing rapid price increases the likes of which haven’t been seen in 40 years. It wasn’t until the April Consumer Price Index (CPI) and Producer Price Index (PPI) reports were released last week that inflation showed signs of peaking.

As I shared last week, the reports showed the CPI rose 8.3% year-over-year, down slightly from the 8.5% year-over-year increase in March, but above economists’ 8.1% forecast. Core CPI, which excludes food and energy, climbed 6.2% year-over-year, ahead of forecasts for a 6% increase.

The PPI climbed 11% year-over-year, which was down slightly from the 11.5% annual increase in March. Core PPI, which excludes food, energy and trade services, rose 6.9% year-over-year and 0.6% month-over-month.

While these reports are signs that inflation is cooling down slightly, it will likely remain elevated for the foreseeable future. And while it remains elevated, Americans are going to watch more and more of their hard-earned dollars disappear.

So, how can folks hedge against inflation?

If you want my answer, simply click on the video below…

In addition to hedging against inflation, there’s a lot more people can do to better position themselves to profit in the current market environment.

It’s why I’m holding The Great American Wealth Shift event on Tuesday, May 24, at 4 p.m. Eastern time.

During that event, I’ll share the system I’ve developed that can track “money flow,” and how I’ve used it to build incredible wealth – and how you can use it, too.

Also during this event, I will name one of the top stocks I see about to attract a ton of money… and the No. 1 stock I see a lot of money flowing out of in the near future. It’s a stock that you should avoid at all costs.

If you haven’t already, be sure to register for The Great American Wealth Shift event here.

I also recommend marking your calendar for Tuesday, May 24, at 4 p.m. Eastern time so you don’t miss it.

Click here to register for The Great American Wealth Shift event.

Sincerely,

Signed:

Louis Navellier

Editor, Market360

P.S. Don’t forget to register for The Great American Wealth Shift event here.

This video event will take place on Tuesday, May 24, at 4 p.m. Eastern time. You won’t want to miss it.

Mark your calendar and sign up here.

Quant Ratings Updated on 84 Stocks

The stock market posted a stunning reversal on Friday, boosting the S&P 500, Dow and NASDAQ up 2.4%, 1.5% and 3.8%, respectively. What’s interesting is that a rebound of this magnitude is unusual for a Friday. Plus, there was a lot of uncertainty heading into the weekend given the war between Russia and Ukraine. So, while the broader market’s surge was refreshing, it was also highly unprecedented.

That surge makes Friday’s rally a great example of “money flow.” That’s when money flows in and out of stocks.

Let’s consider Alphabet Inc. (GOOG) for a moment. As I discussed in April, Google’s parent company had been under pressure after reporting an earnings and revenue miss for its first quarter in fiscal year 2022. Despite the strength of its advertising and cloud businesses, Alphabet reported earnings of $24.62 per share on $68.01 billion in revenue, which missed estimates for earnings of $25.94 per share and revenue of $68.07 billion.

As a result, the stock slipped to a C-rating in my Portfolio Grader. The fact is Alphabet’s Quantitative Grade, which measures institutional buying pressure – i.e., money flow – fell to a C-rating. However, following the stock’s 3% surge on Friday, institutional buying pressure increased, which upped Alphabet’s Quantitative Grade back to a “B” and its Total Grade to a “B.” So, thanks to money flow, the stock flipped from a Hold to a Buy.

Of course, Alphabet wasn’t the only stock upgraded from a C-rating to a B-rating over the weekend. After examining the latest data on institutional buying pressure and each company’s fundamental health, I revised my Portfolio Grader recommendations for 84 blue-chip stocks – 31 of which now hold a B-rating in my Portfolio Grader.

Below, I list the first 10 stocks that were upgraded from a C-rating to a B-rating. For the full list of 84 and their Quantitative Grade and Fundamental Grade, click here. Chances are that you have at least one of these stocks in your portfolio, so you may want to give this list a skim and act accordingly.

Before we go, I wanted to let you know that I will be doing a special Q&A in my Market360 articles this week. I’ve received excellent questions about several big topics, like inflation, earnings season and the Federal Reserve. So, over the next few days I will be taking some time to answer these questions. The first question is on how to hedge against inflation, so keep an eye on your inbox for my answer tomorrow!

Then, next Tuesday, May 24, at 4 p.m. Eastern time, I will be putting on a Special Event called The Great American Wealth Shift to discuss my brand-new prediction. I’ll share more details on Wednesday, so please stay tuned. If you’d like to reserve your spot today, just click here.

Sincerely,

Signed:

Louis Navellier

This Week’s Earnings Losers: Coinbase, Peloton and Disney

We’re now about 87% through earnings season now, and so far, so good. According to FactSet, 79% of the S&P 500 companies that have reported their latest results topped earnings estimates and 74% of S&P 500 companies have announced revenue surprises.

As I’ve discussed throughout this earnings season, earnings are working. By this I mean that companies that report strong results are typically rewarded, i.e., their stocks are dropkicked and propelled higher. Meanwhile, companies that release disappointing results fall like rocks.

This week, there were three big “rocks”: Coinbase Global, Inc. (COIN), The Walt Disney Company (DIS) and Peloton Interactive, Inc. (PTON). For today’s Market360, let’s take a closer look at their numbers and I’ll share a way to tell if these stocks were good buys before earnings.

Coinbase Global, Inc. (COIN): Announced Q1 Fiscal 2022 Earnings on Tuesday, May 10

Coinbase Global’s earnings were a major swing and a miss for the first quarter. The company reported an earnings loss of $1.98 per share. Analysts were expecting earnings of $0.24 per share, so Coinbase posted a whopping 925% earnings miss. Revenue declined 27.5% year-over-year to $1.16 billion and fell short of analysts’ estimates for $1.48 billion in revenue.

Digging deeper into the numbers… Retail monthly transaction users (MTUs) slipped 19.3% quarter-over-quarter to 9.2 million, down from 11.4 million MTUs in the fourth quarter. Retail trading volume of $74 billion decreased 58% year-over-year from $120 billion in the first quarter of 2021. Total volume trading fell to $309 billion, down 44% from $547 billion in the fourth quarter. In addition, Institutional Trading Volume slipped 37% quarter-over-quarter to $235 billion, down from $215 billion in the fourth quarter of 2021.

Also in regard to cryptocurrency, Coinbase noted in its 10-Q SEC filing that “in the event of a bankruptcy, the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings and such customers could be treated as our general unsecured creditors.” In other words, users would be unable to retrieve their crypto assets if Coinbase went bankrupt.

In the wake of the disappointing results and bankruptcy concerns, COIN shares plummeted 26.4% on Wednesday. Year-to-date, COIN is down more than 70%. With a current market cap at about $18 billion, this is a far cry from Coinbase’s $100 billion market cap when it went public last year.

Unfortunately, I don’t expect COIN to bounce back any time soon because profits are forecast to continue to fall. For the second quarter, analysts anticipate COIN to report earnings of $0.15 per share on revenue of $1.23 billion, down from earnings of $6.42 per share on revenue of $1.78 billion. This translates to a 98% year-over-year earnings decline and 30.6% year-over-year revenue decline.

Peloton Interactive, Inc. (PTON): Announced Q3 Fiscal 2022 Earnings on Tuesday, May 10

Peloton’s third-quarter results for its fiscal year 2022 were also tough to swallow. For the third quarter, the company posted an earnings per share loss of $1.25. This was much wider than the expected earnings per share loss of $0.83 per share, so the company missed analysts’ expectations by 50.6%. Revenue fell 24% year-over-year to $964.3 million, down from revenue of $1.2 billion in the same quarter of last year, shy of revenue estimates for $972.9 million.

Diving further into the report… Connected Fitness revenue fell 42% year-over-year to $594.4 million. However, subscription revenue increased 55% year-over-year to $369.9 million. I should add that subscription revenue accounted for 38.4% of Peloton’s total revenues.

In its 10-Q SEC filing the company noted that it had a “triggering event.” This included “(i) softening demand; (ii) increased costs of inventory and logistics; and (iii) sustained decrease in stock price… During the three months ended March 31, 2022, the Company recognized a goodwill impairment charge of $181.9 million representing the entire amount of Goodwill related to the Connected Fitness Products reporting unit in the Connected Fitness Products Segment.”

However, what was particularly concerning to investors was Peloton CEO Barry McCarthy’s comment in his shareholder letter about Peloton’s capital and the company’s fourth-quarter outlook. Specifically, he said that the company is “thinly capitalized for a business of our scale.” Looking to the fourth quarter, the company is forecasting 2.98 million Connect Fitness subscribers. Total revenue is anticipated to be between $675 million and $700 million in the fourth quarter. This was lower than analysts’ projections for fourth-quarter revenue of $821.7 million.

Following the weak results, PTON fell nearly 9% on Tuesday. Year-to-date, the stock is down more than 55%. And given that analysts expect the company to continue to lose money in the next quarter, the odds of a big, sustainable rebound are low.

The Walt Disney Company (DIS): Announced Q2 Fiscal 2022 Earnings on May 11

Disney’s second-quarter earnings also didn’t pass muster on Wall Street. The entertainment company revealed that earnings increased 37% year-over-year to $1.08 per share. However, analysts were calling for earnings of $1.19 per share, so the company missed earnings estimates by about 9%. Revenue climbed 23% year-over-year to $19.2 billion, which was also below analysts’ projections for $20.1 billion.

Disney noted that the 23% year-over-year revenue growth came “despite a $1.0 billion reduction for the amount due to a customer to early terminate license agreements for film and television content delivered in previous years in order for the Company to use the content primarily on our direct-to-consumer services.”

As far as Disney’s streaming services are concerned, growth was mixed. Total Disney+ subscriber growth increased 33% year-over-year to 137.7 million subscribers, up from 103.6 million subscribers in the same quarter of last year. Analysts were projecting total Disney+ subscriber growth of 135 million. For the quarter, Disney+ brought in 7.9 million new subscribers,

A bright spot was Disney’s Disney Parks, Experiences and Products revenue. Revenue for the quarter climbed 109.4% year-over-year to $6.7 billion, up from $3.2 billion in the same quarter of last year. Segment operating results rose by $2.2 billion to income of $1.8 billion, up from a loss of $0.5 billion from the same quarter a year ago.

Unfortunately, the Disney+ subscriber growth wasn’t enough to save the stock. While DIS climbed 5% in after-hours trading, it opened down 2.2% and fell below $100 and back to pre-pandemic levels. Now, while DIS stock has held up better than PTON and COIN, it is still down more than 30% year-to-date.

Strong Sells Ahead of Earnings

Now, what do these three companies have in common? Well, aside from missing analysts’ estimates on the top and bottom lines, they are strong sells in my Portfolio Grader. As you can see in the Report Card below, COIN and DIS are D-rated and PTON is F-rated. So, those following my Portfolio Grader would’ve known to stay away from COIN, DIS and PTON well before their earnings were released this week.

As you can also see, they all have an F-rating for their Quantitative Grade, which means that institutional buying pressure has dried up. In other words, the big investors are fleeing these stocks.

So, it’s really no surprise that COIN, DIS and PTON sold off in the wake of their disappointing earnings results. The fact of the matter is when earnings are weak, the stock tends to weaken, too.

It’s why before I recommend a stock in Growth Investor (or in any of my newsletters), I always double check the fundamentals and institutional buying pressure. So, whenever you’re looking to add a new stock to your portfolio, I encourage you to use my Portfolio Grader to help make sure that you’re only investing fundamentally superior stocks with persistent institutional buying pressure. The fact of the matter is these stocks will have real staying power over the longer term.

Sincerely,

Signed:

Louis Navellier

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