Money Week & Markets Ahead for the week of February 14, 2021: Shopify earnings and growth rate for IPO market.
This is a short week as the markets are closed Monday for the Presidents Day holiday.
Earnings are declining, and the face of IPO is even silent.
Here’s what to look for in the coming week on Wall Street:
On the face of IPO
First public offering (IPO) is not scheduled on the calendar this week.
However, there are three pieces of IPO news from last week in which I became interested.
It’s all related to the fact that companies are starting to raise the contract size of their IPOs ahead of pricing.
Here are three examples:
- CH Wheel Construction III (Nasdaq: ROCRU) – This is the third blank check company created by Roth Capital and Craig-Hallum. Last week, they lifted their IPO contract by increasing the number of shares they were offering. They aim to raise $ 150 million by offering 15 million shares at $ 10 per share. The first contract was for 10 million shares at the same price.
- NexImmune (Nasdaq: NEXI) – This company is specifically developing T-cell immunotherapies for cancer. Prior to their IPO last week, they raised the size of the deal by 25%. The first contract was to offer 4.7 million shares at a price range between $ 15 and $ 17. They modified it to offer 5.9 million shares – increasing the contract size to $ 94 million.
- Gamma AFC (Nasdaq: AFCG) – A commercial mortgage real estate investment trust (REIT) targeted the cannabis industry. He initially filed to offer 5.6 million shares at a range between $ 17 and $ 19 per share. These changed to offer 6.3 million shares at $ 19 – raising the contract to $ 119 million.
The approval rises come at a time when IPO profit for 2021 has already hit $ 21.1 billion – that’s more than 2016 as a whole and nearly half of the money raised in 2018 and 2019, according to Renaissance Capital.
IPO yields start strongly in 2021
There have already been 50 IPOs in 2021. To put that in context, there were a total of 218 prices in 2020.
The Renaissance Capital IPO Index shows a 12-month gain of 122% compared to an S&P 500 gain of around 19%.
IPO index on fire
The index monitors U.S. IPO prices on the market and shows just how strong IPOs have been since early 2020.
Deeper Diving: Earning Shopify (SHOP)
We’re in the home range of the quarterly earnings season, but some big companies are still reporting earnings this week:
- CVS Health Corp (NYSE: CVS).
- Corp Occidental Petroleum (NYSE: OXY).
- Shopify Inc. (NYSE: SHOP).
- Garmin Limited (Nasdaq: GRMN).
- Walmart Inc. (NYSE: WMT).
- Roku Inc. (Nasdaq: ROKU).
I’m going to focus on Shopify earnings.
The Canadian company is a cloud-based e-commerce platform that allows shoppers to set up and manage their “stores” through web, social media, brick-and-mortar and pop-up shops.
In the last quarter, Shopify blew away consensus estimates for both per-share earnings and revenue.
The company reported earnings of $ 1.13 per share at $ 767.4 million in revenue. Consensus estimates were earnings of $ 0.53 per share on revenue of $ 662.2 million.
SHOP EFFECTS Blowing previous consensus estimates
This was the fourth straight quarter the company beat the pants off Wall Street estimates.
Since May 2020, Shopify’s revenue has been steadily growing. In the second quarter of 2020, the company posted revenue of $ 470 million – yielding estimates of $ 443.2 million.
Revenue jumped to $ 714.3 million in the third quarter of 2020 and to $ 767.4 million in the fourth quarter.
Wall Street seemed to be getting smart about disparaging Shopify’s performance.
Consensus estimates for this quarter are for earnings of $ 1.18 per share on revenue of $ 906.4 million.
I suspect, even with a revised consensus, that Shopify’s earnings will again outperform Wall Street estimates.
The number at Earnings Whispers is at $ 2.17 per share. I don’t think it will be that high, but it could reach $ 2 per share.
Money Week & Markets Ahead: Dump data
The weekly data trash starts Wednesday; the market is closed for Presidents Day holidays.
The Bureau of Accounts will release its month-over-month and year-over-year sales figures on Wednesday.
The sales volume report measures the change in total sales value at the sales level. It is a major factor in consumer confidence.
Following an increase of as much as 5.68% in October 2020, retail sales have begun to decline.
Sales have declined in the last three months
In November, sales were only 4.1%. That uptick was even lower in December (2.9%).
Another recession could suggest that the economic recovery from the coronavirus pandemic continues to slow.
We’ll get a glimpse into how the year of building a new home got started on Thursday when the Census Bureau releases its housing start report in January.
Over the past three months, new home construction has steadily risen from 1.5 million in October 2020 to 1.66 million in December 2020.
The new home continued to grow in December 2020
Analysts start building a new home starting to fall just slightly – to 1.65 million – in January.
Finally, on Friday, IHS Markit will release a manufacturing purchasing manager’s index (PMI).
This PMI measures the level of activity of managers in the manufacturing sector. Any reading of the index above 50 indicates expansion. Below 50 indicates an abbreviation.
The index hit a bottom around 36 earlier in 2020 but has started to pick up.
It has read above 50 since August 2020.
PMI manufacturing follows Uptrend
In January 2021, the index read 59.2, the highest reading in a year.
PMI is projected to fall slightly to 56.5 as manufacturing companies are in the middle of a normal slowdown in the first quarter.
To complete the Money Week & Markets Ahead, here’s a look at some of the key earnings reports coming out this week:
Neptune Wellness Solutions Inc. (Nasdaq: NEPT)
Just Energy Group Inc. (NYSE: JE)
CVS Health Corp (NYSE: CVS)
International Organization of America Inc. (NYSE: AIG)
Corp Occidental Petroleum (NYSE: OXY)
Devon Power Corp. (NYSE: DVN)
Shopify Inc. (NYSE: SHOP)
Rio Tinto ADR (NYSE: RIO)
Trash Inc. Links (NYSE: WCN)
Garmin Limited (Nasdaq: GRMN)
Walmart Inc. (NYSE: WMT)
Roku Inc. (Nasdaq: ROKU)
Applied Products Inc. (Nasdaq: AMAT)
Corp Newmont (NYSE: NEM)
Deere & Co. (NYSE: DE)
Magna International Inc. (NYSE: MGA)
That’s all for this week.
Until next time…
Research Inspector, Money & Markets
Matt Clark is the research analyst for Money & Markets. He is a guest on a podcast, The Bull & the Bear, as well as the Marijuana Market Update. Prior to joining the team, he spent 25 years as a journalist and research editor – covering everything from politics to business.