Disney’s Mixed Report, Stamps Implodes, and Astronics for the Radar, More Reports
—
In alphabetical order by ticker symbol: ATRO, DIS, ETSY, GDOT, NYT, PBPB, ROKU, STMP, SVMK, TPR, TVTY
—
Astronics (ATRO): We are strongly considering one of our favorite small-cap aerospace suppliers after a solid showing during its first quarter, results released May 8. If you may recall, Astronics was a winner in the Best Ideas Newsletter portfolio in the past, and even with Boeing on the skids given 737 MAX crashes, we’re not shying away from considering aerospace supply-chain exposure, given the massive backlogs at the airframe makers. Astronics’ sales advanced more than 16% in the quarter, and it registered its fifth consecutive quarter of record aerospace revenue. We plan to take a close look at our valuation model on account of its record backlog ($329.2 million). Readers should expect a fair value estimate bump. View Astronics’ stock page >>
—
Disney (DIS): Disney reported solid fiscal second-quarter results May 8. The entertainment giant’s revenue advanced 3% on a year-over-year basis, but segment operating income dipped 10% from last year’s mark. Operating cash flow and free cash flow were also down in the quarter, and are down 11% and 23%, respectively, through the first six months of the fiscal year. Management pointed to the “record-breaking success of Avengers: Endgame (one of the highest-grossing films of all time),” but the numbers are telling a different story. Its Studio Entertainment division is weighing heavily on performance. Though management pointed to difficult year-over-year comparisons due to the release of Black Panther and Star Wars in the prior-year quarter, such is the business at Disney. The Street seemed to like the results, but at best, we thought they were mixed. View Disney’s stock page >>
—
Etsy (ETSY): Etsy, an online marketplace for unique goods, has been a darling of a stock since it started trading in 2015, but the company’s first quarter results, released May 8, didn’t quite match the market’s expectations. Not only did revenue advance 40% in the quarter, but Etsy also lifted its 2019 sales guidance to the range of 30%-32% from 29%-32%, but it all was in vain as shares were sent tumbling after the report. Net income more than doubled, and adjusted EBITDA nearly doubled in the quarter, too. Could it have done better? The market could have been disappointed that it slowed marketing spending to test some of its other channels, but it is more likely just profit taking after a huge run in shares. Etsy holds a net cash position. We may look to add the company to our coverage. View Etsy’s stock page >>
—
Green Dot (GDOT): Green Dot surprised the market to the downside with reduced guidance for 2019. Though it expects non-GAAP total operating revenues to jump 10% on a year-over-year basis, it now expects full-year adjusted EBITDA to be between $255-$261 million, a year-over-year decline, and a far cry from the previous guidance of $315-$321 million. Non-GAAP earnings per share is targeted between $2.82-$2.91, also reduced significantly from the prior guidance range of $3.59-$3.67. The delta of the revision looks largely to be a $60 million investment into the business for future growth, something management expects to “deliver over one million incremental active accounts at the exit of 2019.” This could be value-creating investment, but the market doesn’t seem to think so. Looks like an overreaction. Green Dot’s stock page >>
—
New York Times (NYT): The New York Times is simply defying the odds with its continued success. The company’s shares are at decade-long highs, and its first-quarter results, released May 8, showed revenue advancing a healthy 6% and non-GAAP earnings per share surpassing the consensus forecast. Many are pointing to the President’s scuffles with the paper as the reason for the uptick in performance, but we’re saying fantastic digital initiatives and great journalism have been the key. The New York Times added 223,000 net new digital-only subscriptions in the quarter, and the company continues to innovate, spinning out NYT Cooking and Crossword products. Digital-only subscription revenue now accounts for more than a quarter of the company’s revenue. The New York Times has a net cash position. View the New York Times’ stock page >>
—
Potbelly (PBPB): The pain won’t let up in Potbelly’s shares. The stock has plummeted to the mid-single digits from north of $30 in late 2013. Its first-quarter results, released May 7, didn’t offer much hope. Revenue dropped 4.7% on a year-over-year basis, while the company’s non-GAAP earnings missed expectations. Comp sales fell by a similar margin, and Potbelly continues to close shops faster than it is opening them. Management blamed the “government shutdown and the unseasonably cold temperatures across (its) key markets,” but we don’t believe it. Potbelly is in a lot of trouble, and there might not be a clear path to a turnaround. This could be a good short-idea consideration, even after the big drop. View Potbelly’s stock page >>
—
Roku (ROKU): Here’s what we said about Roku recently – “the company is one for the radar, as much as Netflix is one to watch. Both companies are fast-growers, plays on next-generation entertainment, and not generally that profitable…The company could certainly be a strong performer in coming years, but we think the range of outcomes is still far too great for our taste. We’re putting this one in the “too hard” bucket for now. We may add coverage in the coming months, however.” Well, shares are soaring after strong first-quarter performance, report released May 8. With the company targeting a loss between $65-$75 million for fiscal 2019, however, it’s still too speculative for our taste. View Roku’s stock page >>
—
Stamps (STMP): Stamp.com’s shares were absolutely crushed after it reported first-quarter results May 8. Revenue advanced modestly and the company exceeded non-GAAP earnings expectations during the first quarter, but a substantial reduction in top- and bottom-line guidance for the year was quite disappointing. Revenue is now expected in the range of $510-$560 million (was $540-$570 million) for 2019, and earnings are expected in the range of $3.35-$4.85 (was $5.15-$6.15). We expect to cut our fair value estimate considerably on the news. Shares haven’t registered higher than a 5 since November 2017 (1=worst; 10=best), with their latest rating a 3 on the Valuentum Buying Index. View Stamps.com’s stock page >>
—
SurveyMonkey (SVMK): SurveyMonkey’s first-quarter report, released May 8, showed revenue advancing a healthy 17%+, but losses on both the GAAP and non-GAAP line for the period. The company hauled in free cash flow of $7.5 million, good enough for an 11% margin, but given the maturing survey landscape, we’re not too excited about shares, particularly given the company’s net debt position. We’d like to see much stronger earnings, a better free cash flow margin, and a net cash position at SurveyMonkey. The company is targeting 17%-20% top-line growth and a 17% free-cash-flow margin during 2019. View SurveyMonkey’s stock page >>
—
Tapestry (TPR): We still think shares of Tapestry are cheap. The company formerly known as Coach reported decent fiscal third-quarter results May 9 and announced a $1 billion buyback authorization. This, of course, is dividend-negative, albeit value creating, and only reinforces our prior opinion to have removed shares from the Dividend Growth Newsletter portfolio some time ago. We were excited to see gross margins improve in the period and positive comps at its Coach brand, but we don’t see a good fit for Tapestry’s shares in either the Best Ideas Newsletter portfolio or Dividend Growth Newsletter portfolio. View Tapestry’s stock page >>
—
Tivity Health (TVTY): Tivity Health reported mixed first-quarter results May 8 that showed revenue advancing considerably as a result of the Nutrisystem deal, but adjusted net income only increasing modestly, to $21.9 million (reported net income came in at $4.2 million). The company noted that “integration efforts are going well and (it is) on track to deliver the $9 million to $12 million of cost synergies for 2019.” Prior guidance for revenue and adjusted EBITDA were confirmed, but management is targeting adjusted earnings per diluted share in the range of $2.24-$2.52 (versus our prior forecast of ~$3.50). Our revenue expectations are largely unchanged, but free cash flow guidance for the year was reduced to the range of $70-$80 million from $95-$100 million previously on a pre-deal basis (we had been modeling in $173 million in free cash flow). We expect to reduce our fair value estimate as a result of the updated guidance. View Tivity Health’s stock page >>
—
—–
Valuentum members have access to our 16-page stock reports, Valuentum Buying Index ratings, Dividend Cushion ratios, fair value estimates and ranges, dividend reports and more. Not a member? Subscribe today. The first 14 days are free.
Brian Nelson does not own shares in any of the securities mentioned above. Some of the companies written about in this article may be included in Valuentum’s simulated newsletter portfolios. Contact Valuentum for more information about its editorial policies.