Earnings Previews: Affirm, Dell, Marvell

The three major U.S. equity indexes closed mixed Tuesday. The Dow Jones industrials dropped 0.47%, the S&P 500 lost 0.22% and the Nasdaq closed flat. Seven of 11 sectors ended the day with losses, led by real estate (1.5%) and health care (1.4%). Energy stocks added 3.6% to lead the gainers. Yield on the 10-year Treasury note stayed above 3%. The three major indexes were trading mixed in Wednesday’s premarket session, with the S&P 500 up slightly and the others down slightly.

After markets closed Tuesday, Nordstrom reported earnings per share (EPS) that beat estimates by a penny and revenue 12% higher than in the prior-year quarter. The company expects gross margins to come under pressure in the second half of the year as it cleans up its inventory. That led to lowered revenue guidance and the stock traded down by around 13% in Wednesday’s premarket.

Toll Brothers missed the consensus revenue estimate but beat on profits. Deliveries were below guidance for the quarter, and the company also lowered full-year guidance on deliveries. The company also said that it saw a “significant” decline in demand during the quarter, but that demand appears to have improved in recent weeks. Shares traded down about 2.5%.

Urban Outfitters missed the consensus profit estimate and barely topped expected revenue. Higher markdowns lowered gross profit by nearly 6%. Shares traded down about 2.2%.

After markets close Wednesday, Nvidia, Salesforce, Snowflake and Splunk will report quarterly results, while Abercrombie & Fitch, Coty, Dollar Tree and Peloton step into the earnings spotlight before markets open on Thursday.

Here is what to expect when these three companies report results after U.S. markets close on Thursday.

Affirm

Since posting an annual high in early November, shares of Affirm Holdings Inc. (NASDAQ: AFRM) have dropped nearly 57%. Over the past 12 months, shares are down nearly 55%, and for the year to date, the stock has dropped almost 71%. Affirm, a buy-now-pay-later lender, posted its 52-week low after reporting first-quarter earnings, and investor sentiment on fintechs has not improved much since then and is especially weak going into the Fed’s Jackson Hole conference later this week.

Of 18 analysts covering the stock, eight have a Buy or Strong Buy rating and seven others rate the stock at Hold. At a recent price of around $29.30 per share, the implied gain based on a median price target of $32.50 is 10.9%. Based on the high price target of $80.00, the upside potential for the stock is 173%.

Analysts expect Affirm to report fiscal fourth-quarter revenue of $354.86 million, which would be flat sequentially and up 35.6% year over year. They also expect the company to report an adjusted loss per share of $0.73, worse than the prior quarter’s loss of $0.57 per share and the year-ago loss of $0.47 in the fourth quarter. For the full 2022 fiscal year ended in June, Affirm is expected to post a loss per share of $2.57, slightly better than last year’s loss of $2.59 per share, on revenue of $1.34 billion, up 53.9%.

Affirm is not expected to post a profit in 2022, 2023 or 2024. The enterprise value to sales multiple is expected to be 7.7 in 2022. Based on average estimated sales of $1.9 billion and $2.59 billion for 2023 and 2024, respectively, the multiple is 5.4 for the former and 4.0 for the latter. The stock’s 52-week trading range is $113.64 to $176.65. Affirm does not pay a dividend. Total shareholder return for the past year was negative 56.7%.

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