Tag: first quarter

Target vs. Walmart: Which Retail Giant Offers Better Dividend Returns?

Posted on by The INO.com Team

Dividend investing is a cornerstone of many investors’ portfolios, providing a steady income stream and long-term growth potential. Blue-chip stocks are among the most stable and safest investments, but a select few companies excel in maintaining their financial growth and paying consistent, high-yield dividends to investors.

In the realm of blue-chip retail giants, Target Corporation (TGT) and Walmart Inc. (WMT) stand out as formidable players with excellent dividend growth histories. Through strategic investments and acquisitions, robust financial health, and a solid commitment to customer satisfaction, these companies have managed to thrive and offer reliable dividend payouts.

Let’s compare TGT and WMT’s dividend yields, growth rates, and overall financial health to help investors determine which stock offers better dividend potential.

Target Corporation (TGT)

With a $68.17 billion market cap, Target Corporation (TGT) is one of the leading retail corporations in the U.S. that offers a wide variety of products at competitive prices through its extensive network of stores and e-commerce platform, Target.com.

In March, the Minneapolis-based retailer announced plans to invest in its guest experience and long-term growth. The reintroduced Target Circle loyalty program will provide three new membership options, including a free-to-join option, allowing guests to choose how to shop and save. Target Circle has already become one of the largest loyalty programs in retail, with over 100 million members saving millions of dollars annually.

Also, this year, TGT plans to launch and expand its owned brands to offer various options across categories, products, and prices, such as dealworthy, up&up, and Gigglescape. Moreover, Target-owned brands offer quality, value, and innovation, driving more than $30 billion in sales in 2023. Further, the company will invest in the store-as-hubs model over the next decade, planning to build more than 300 new stores and enhance supply chain operations.

Despite significant investments in improving its customer experience and store presence, Target has shown resilience in maintaining a robust financial position. For the first quarter that ended May 4, 2024, TGT’s sales decreased 3.2% year-over-year to $24.14 billion. However, digital comparable sales rose 1.4% year-over-year, and same-day services grew about 9%, led by over 13% growth in Drive Up. It reported net earnings of $942 million, or $2.03 per share, respectively.

As of May 4, 2024, the company’s cash and cash equivalents were $3.60 billion, compared to $1.32 billion as of April 29, 2023.

“Looking ahead, our team will deliver for our guests through lower prices, a seasonally relevant assortment, ease and convenience, as we keep investing in our strategy and efficiency initiatives to get back to growth and deliver on our longer-term financial goals,” said Brian Cornell, chair and chief executive of Target Corporation.

For the second quarter of 2024, Target expects a 0-2% rise in its comparable sales and adjusted EPS of $1.95-$2.35. For the full year, the company projects a 0-2% increase in comparable sales and adjusted EPS of $8.60 to $9.60.

TGT’s solid financial performance and stability translate into attractive returns for investors. During the first quarter, the company paid dividends of $508 million, compared with $497 last year, an increase of 1.9% in the dividend per share.

On March 13, Target’s Board of Directors declared a quarterly dividend of $1.10 per common share, payable June 10, 2024, to shareholders of record at the close of business on May 15, 2024. This will be the company’s 227th consecutive dividend paid since October 1967, when it became publicly held.

TGT pays an annual dividend of $4.40, which translates to a yield of 2.92% at the current share price, which is quite attractive for income-focused investors, providing a solid return on investment. Its four-year average dividend yield is 2.18%. It maintains a payout ratio of around 50%, indicating that the company distributes half of its earnings as dividends, balancing shareholder returns with reinvestment in business growth.

Additionally, Target has a commendable history of consistently increasing its dividend payouts. The company’s dividend payouts have grown at a CAGR of 17.4% over the past three years and 11.4% over the past five years. Notably, TGT has raised its dividends for 55 consecutive years.

In addition to solid dividend growth, Target has demonstrated impressive performance in stock price appreciation. TGT’s stock has gained more than 10% over the past six months and nearly 12% over the past year.

Walmart Inc. (WMT)

With a market capitalization of $540.73 billion, Walmart Inc. (WMT) engages in retail and wholesale business, offering an assortment of apparel, footwear, general merchandise, and groceries at everyday low prices.

Walmart expanded its popular InHome delivery service to an additional 10 million U.S. households, including those in California. In addition to the San Bernardino market, the company expanded its service to include customers in Boston, Detroit, Minneapolis, and Philadelphia, bringing the total scale to more than 50 markets covering about 45 million U.S. homes.

In February, WMT announced an agreement to acquire VIZIO, a prominent American company known for manufacturing consumer electronics. The strategic acquisition of VIZIO and its SmartCast Operating System (OS) will allow Walmart to serve its customers in new ways, including through innovative television and in-home entertainment and media experiences.

Further, this combination is anticipated to boost Walmart’s media arm in the U.S., Walmart Connect, by integrating VIZIO's advertising solutions business with Walmart's extensive reach and capabilities.

WMT, the world’s largest retailer, boasts a robust financial position with steady revenue growth and a solid balance sheet. During the first quarter that ended April 30, 2024, the retailer’s total revenues increased 6% year-over-year to $161.50 billion. Moreover, its global e-commerce sales were up 21%, driven by store-fulfilled pickup & delivery and marketplace.

In addition, the company’s adjusted operating income was $7.10 billion, up 13.7% from the year-ago value, due to higher gross margins and growth in membership income. Its adjusted EPS rose 22.4% year-over-year to $0.60. As of April 20, 2024, WMT’s cash and cash equivalents were $9.40 billion.

Looking ahead, the company expects net sales to increase by 3.5% to 4.5% and operating income to rise by 3% to 4.5% in constant currency (cc) for the second quarter. For the full year, it anticipates to be at the high-end or slightly above its prior guidance (cc) for net sales growth of 3%-4% and operating income growth of 4%-6%.

Walmart’s extensive global footprint and solid financial health provide a stable foundation for continued, attractive dividend payouts. In February, WMT’s Board of Directors declared an annual cash dividend for the fiscal year 2025 of $0.83 per share on a post-stock split basis. It represents a nearly 9% increase from the $2.28 per share paid in fiscal 2024.

“Dividends continue to be a part of our diversified capital returns approach. We're proud to be increasing our annual dividend for the 51st consecutive year. This year’s 9 percent increase is the largest in over a decade, and a sign of our confidence in our growth potential and cash flow,” stated John David Rainey, executive vice president and chief financial officer at Walmart.

WMT’s annual dividend of $0.83 translates to a yield of 1.24% at the prevailing share price. While lower than Target’s yield, the company still provides a steady income stream for investors. Its four-year average dividend yield is 1.53%. Also, it maintains a payout ratio of 33.46%.

Moreover, the company’s dividend payouts have grown at a CAGR of 3% over the past three years and 2.6% over the past five years. Walmart has a consistent history of annual dividend increases, albeit at a slower growth rate than Target.

Shares of WMT have surged nearly 28% over the past six months and more than 34% over the past year.

Bottom Line

Both TGT and WMT represent formidable investment opportunities with robust dividend credentials and solid fundamentals, making them worthy considerations for income-focused investors seeking exposure to the retail sector. However, while comparing Target and Walmart’s dividend potential, Target emerges as the frontrunner, offering a higher dividend yield and a track record of robust dividend growth.

So, TGT is a relatively more attractive investment option for those seeking better dividend potential within the retail industry.

Intel's AI Ambitions: A Strategic Shift Toward Private Data Storage Solutions

Posted on by The INO.com Team

Intel Corporation (INTC), a titan in the world of semiconductors, is navigating a period of transformative change that is revolutionizing its corporate culture and product development. Traditionally, Intel’s core offerings have been microprocessors that serve as the brains of desktop PCs, laptops and tablets, and servers. These processors are silicon wafers embedded with millions or billions of transistors, each acting as binary switches that form the fundamental ‘ones and zeros’ of computer operations.

Today, the thirst for enhanced processing power is insatiable. The proliferation of Artificial Intelligence (AI), which has become integral to essential business operations across almost every sector, exponentially increases the need for robust computing capabilities. AI, particularly neural networks, necessitates enormous computing power and thrives on the collaborative efforts of multiple computing systems. The scope of these AI applications extends far beyond the PCs and servers that initially cemented INTC’s status as an industry leader.

The rapid advancement of AI has prompted Intel to rethink and innovate its chip designs and functionalities. As a result, the company is developing new software and designing interoperable chips while exploring external partnerships to accelerate its adaptation to the evolving computing environment.

Strategic Pivot Toward AI Ecosystem

At Computex 2024, INTC unveiled a series of groundbreaking AI-related announcements, showcasing the latest technologies that merge cutting-edge performance with power efficiency (especially in data centers and for AI on personal computers). The company aims to make AI cheaper and more accessible for everyone.

Intel CEO Pat Gelsinger emphasized how AI is changing the game, stating, “The magic of silicon is once again enabling exponential advancements in computing that will push the boundaries of human potential and power the global economy for years to come.”

In just six months, Intel achieved a lot, transitioning from launching 5th Gen Intel® Xeon® processors to introducing the pioneering Xeon 6 series. The company also previewed Gaudi AI accelerators, offering enterprise clients a cost-effective GenAI training and inference system. Furthermore, Intel has spearheaded the AI PC revolution by integrating Intel® Core™ Ultra processors in over 8 million devices while teasing the upcoming client architecture slated for release later this year.

These strides underscore Intel's commitment to accelerating execution and driving innovation at an unprecedented pace to democratize AI and catalyze industries.

Strategic Pricing and Availability of Its Gaudi AI Accelerators

Intel is gearing up to launch the third generation of its Gaudi AI accelerators later this year, aiming to address a backlog of around $2 billion related to AI chips. However, the company anticipates generating only about $500 million in Gaudi 3 sales in 2024, possibly due to supply constraints.

To broaden the availability of Gaudi 3 systems, Intel is expanding its network of system providers. The company is now collaborating with Asus, Foxconn, Gigabyte, Inventec, Quanta, and Wistron alongside existing partners like Dell Technologies Inc. (DELL), Hewlett Packard Enterprise Co (HPE), Lenovo Group (LNVGY), and Super Micro Computer, Inc. (SMCI), to ensure Gaudi 3 systems are available far and wide once they hit the market.

But what caught attention at Intel's announcement was the company's attractive pricing strategy. Kits featuring eight Gaudi 2 AI chips and a universal baseboard will cost $65,000, while the version with eight Gaudi 3 AI chips will be priced at $125,000. These prices are estimated to be one-third and two-thirds of the cost of comparable competitive platforms, respectively.

While undercutting Nvidia Corporation (NVDA) on price, INTC expects its chips to deliver impressive performance. According to their estimates, a cluster of 8,192 Gaudi 3 chips can train AI models up to 40% faster than NVDA's H100 chips. Additionally, Gaudi 3 offers up to double the AI inferencing performance of the H100 when running popular large language models (LLMs).

Intel Continues to Ride with 500+ Optimized Models on Core Ultra Processors

In May, INTC announced that over 500 AI models now run optimized on new Intel® Core™ Ultra processors. These processors, known for their advanced AI capabilities, immersive graphics, and optimal battery life, mark a significant milestone in Intel's AI PC transformation efforts.

This achievement stems from Intel's investments in client AI, framework optimizations, and tools like the OpenVINO™ toolkit. The 500+ AI models cover various applications, including large language models, super-resolution, object detection, and computer vision, and are available across popular industry platforms.

The Intel Core Ultra processor is the fastest-growing AI PC processor and the most robust platform for AI PC development. It supports a wide range of AI models, frameworks, and runtimes, making it ideal for AI-enhanced software features like object removal and image super-resolution. This milestone underscores Intel's commitment to advancing AI PC technology, offering users a broad range of AI-driven functionalities for enhanced computing experiences.

Robust Financial Performance and Outlook

Buoyed by solid innovation across its client, edge, and data center portfolios, the company delivered a solid financial performance, driving double-digit revenue growth in its products. Total Intel Products chalked up $11.90 billion in revenue for the first quarter of 2024 (ended March 30), resulting in a 17% year-over-year increase over the prior year’s period. Revenue from the Client Computing Group (CCG) rose 31% year-over-year.

INTC’s net revenue increased 8.6% year-over-year to $12.72 billion, primarily driven by growth in its personal computing, data center, and AI business. Intel’s Data Center and AI (DCAI) division, which offers server chips, saw sales uptick 5% to $3.04 billion.

Also, the company reported a non-GAAP operating income of $723 million, compared to an operating loss of $294 million in the prior year’s quarter. Further, its non-GAAP net income and non-GAAP earnings per share came in at $759 million and $0.18 versus a net loss and loss per share of $169 million and $0.04, respectively, in the same quarter last year.

For the second quarter, Intel expects its revenue to come between $12.5 billion and $13.5 billion, while its non-GAAP earnings per share is expected to be $0.10.

Bottom Line

Despite vital innovations and solid financial performance, INTC’s shares have lost nearly 40% year-to-date and more than 3% over the past 12 months. However, with over 5 million AI PCs shipped since the December 2023 launch of Intel Core Ultra processors, supported by over 100 software vendors, the company expects to exceed its forecast of 40 million AI PCs by the end of 2024.

With the growing demand for AI chips, INTC could see a significant increase in Gaudi chip sales next year as customers look for cost-effective alternatives to NVDA's market-leading products. Moreover, if Intel's reasonable pricing resonates with prospective customers, the company could capture significant market share from its competitors.

Investing in AI: Should You Bet on AMD, Broadcom, or NVIDIA?

Posted on by The INO.com Team

Is NVDA the Top Player in AI Stocks?

Initially famed for gaming GPUs, NVIDIA Corporation (NVDA) has evolved into a leader in data center hardware, spearheading AI advancement. The company’s Hopper GPUs are in high demand, accelerating AI applications from recommendation engines to natural language processing and generative AI large language models like ChatGPT on NVIDIA platforms. At this point, NVDA’s dominance in AI and data center markets is undeniable.

For the first quarter that ended April 28, 2024, Nvidia saw over 3x year-over-year increase to $26.04 billion, a new record level. NVIDIA’s Data Center Group (primarily connected to its AI operations) chalked up $22.60 billion in revenue, resulting in a 23% sequential gain and a massive 427% rise over the same period last year.

The chip giant’s operating income surged 690% from the year-ago value to $16.91 billion. NVIDIA’s non-GAAP net income amounted to $15.24 billion or $6.12 per share, compared to $2.71 billion or $1.09 per share in the previous year’s quarter, respectively.

Buoyed by a robust financial position, NVDA increased its quarterly dividend by 150% from $0.04 per share to $0.10 per share of common stock. The increased dividend is equivalent to $0.01 per share on a post-split basis and will be paid to its shareholders on June 28, 2024.

Moving forward, the company guided for a nice round of $28 billion in revenue for its second quarter of the fiscal year 2025, representing a projected 7.5% sequential gain. Its non-GAAP gross margin is expected to be 75.5%, plus or minus 50 basis points.

Analysts expect NVDA’s revenue for the fiscal 2025 second quarter (ending July 2024) to increase 109.7% year-over-year to $28.32 billion. The consensus EPS estimate of $6.35 for the current quarter indicates a 135.1% improvement year-over-year. Moreover, the company has an excellent earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters.

Nvidia’s comprehensive offerings, from chips to boards, systems, software, services, and supercomputing time, cater to expanding markets and diversify its revenue streams. Moreover, the chipmaker’s shares have surged more than 130% over the past six months and nearly 190% over the past year. NVIDIA's trajectory suggests an unstoppable momentum fueled by AI adoption mirroring a similar upward curve, promising a bright future.

Amid this, do AI stocks Broadcom Inc. (AVGO) and Advanced Micro Devices, Inc. (AMD) stand a chance to be as big as the industry leader, NVIDIA? Let’s fundamentally analyze them to find the answer.

Broadcom Inc. (AVGO)

Broadcom Inc. (AVGO) is emerging as one of Nvidia's toughest rivals in the race for networking revenue, especially as data centers undergo rapid transformation for the AI era. As a global tech leader, AVGO designs, develops, and supplies semiconductor and infrastructure software solutions. The company produces custom AI accelerators for major clients and recently projected $7 billion in sales from its two largest customers in 2024, who are widely believed to be Alphabet Inc. (GOOGL) and Meta Platforms, Inc. (META).

AVGO will announce its fiscal 2024 second-quarter earnings on June 12. Forecasts indicate a 37.4% year-over-year revenue surge to $12 billion, reflecting steady growth and financial resilience. Moreover, analysts expect a 5% uptick in the company’s EPS from the preceding year’s period to $10.84.

Broadcom has consistently exceeded consensus revenue and EPS estimates in each of the trailing four quarters, including the first quarter. Its net revenue increased 34% year-over-year to $11.96 billion, with a triple-digit revenue growth in the Infrastructure Software segment to $4.57 billion. AVGO’s gross margin grew 22.8% from the year-ago value to $7.37 billion.

On top of it, the company’s non-GAAP net income for the three months came in at $5.25 billion or $10.99 per share, up 17.2% and 6.4% year-over-year, respectively. Also, its adjusted EBITDA increased from the prior-year quarter to $7.16 billion.

Looking ahead, the company forecasts nearly $50 billion in revenues for fiscal year 2024, with adjusted EBITDA projected to be approximately 60% of its revenue. The company anticipates a 30% year-over-year surge in networking sales, driven by accelerated deployments of networking connectivity and the expansion of AI accelerators in hyperscalers. It also expects generative AI to account for 25% of semiconductor revenue.

The artificial intelligence megatrend is poised to significantly drive Broadcom's revenue and earnings growth in the upcoming decade. During a recent earnings call, Broadcom CEO Hock Tan emphasized, “Strong demand for our networking products in AI data centers, as well as custom AI accelerators from hyperscalers, are driving growth in our semiconductor segment.”

On May 20, 2024, AVGO announced its latest portfolio of highly scalable, high-performing, low-power 400G PCIe Gen 5.0 Ethernet adapters to revolutionize the data center ecosystem. These products offer an enhanced, open, standards-based Ethernet NIC and switching solution to resolve connectivity bottlenecks as XPU bandwidth and cluster sizes grow rapidly in AI data centers.

Patrick Moorhead, CEO & chief analyst at Moor Insights and Strategy, noted, “As the industry races to deliver generative AI at scale, the immense volumes of data that must be processed to train LLMs require even larger server clusters. Scalable high bandwidth, low latency connectivity is critical for maximizing the performance of these AI clusters.”

He added, “Ethernet presents a compelling case as the networking technology of choice for next-generation AI workloads. The 400G NICs offered by Broadcom, built on its success in delivering Ethernet at scale, offers open connectivity at an attractive TCO for power-hungry AI applications.”

With the company's expanding presence in the AI space, Broadcom stands out as a compelling alternative to major chip companies such as NVDA and AMD. Over the past six months, shares of AVGO have gained more than 42%, and nearly 63% over the past year, making it an attractive addition to your investment portfolio.

Advanced Micro Devices, Inc. (AMD)

Advanced Micro Devices, Inc. (AMD) has been at the forefront of innovation in high-performance computing, graphics, and visualization technologies for decades. While NVDA may be the first name that comes to mind in AI processor sales, AMD has established itself as a formidable competitor in the GPU space, particularly excelling in chips tailored for AI workloads.

However, AMD's influence doesn't stop in hardware; it has been actively expanding its AI software ecosystem. The company recently unveiled the groundbreaking AMD Ryzen™ AI 300 Series processors, featuring the world’s most powerful Neural Processing Unit (NPU). These processors are designed to bring AI capabilities directly to next-gen PCs, promising a future where AI-infused computing is seamlessly integrated into everyday tasks.

Additionally, the next-gen AMD Ryzen™ 9000 Series processors for desktops solidify AMD’s position as a leader in performance and efficiency for gamers, content creators, and prosumers alike.

Moreover, the company’s comprehensive roadmap for the Instinct accelerator series promises an annual cadence of cutting-edge AI performance and memory capabilities across each generation. Beginning with the imminent release of the AMD Instinct MI325X accelerator in Q4 2024, followed by the anticipated launch of the AMD Instinct MI350 series powered by the new AMD CDNA™ 4 architecture in 2025, AMD is poised to deliver up to a 35x increase in AI inference performance compared to its previous iterations.

In the first quarter that ended March 30, 2024, AMD’s non-GAAP revenue increased 2.2% year-over-year to $5.47 billion. Both its Data Center and Client segments experienced substantial growth, each exceeding 80% year-over-year, fueled by the uptake of MI300 AI accelerators and the popularity of Ryzen and EPYC processors.

Moreover, the company’s non-GAAP operating income grew 3.2% from the year-ago value to $1.13 billion. Its non-GAAP net income and earnings per share rose 4.4% and 3.3% from the prior-year quarter to $1.01 billion and $0.62, respectively.

AMD expects its revenue in the second quarter of 2024 to be around $5.7 billion, with a projected growth of 6% year-over-year and 4% sequentially. Meanwhile, its non-GAAP gross margin is expected to be around 53%.

Street expects AMD’s revenue for the second quarter (ending June 2024) to increase 6.7% year-over-year to $5.72 billion. Its EPS for the ongoing quarter is projected to reach $0.68, registering a 17% year-over-year growth. Moreover, the company surpassed the consensus revenue estimates in each of the trailing four quarters.

While Nvidia’s Data Center segment reported a sales run rate of $90 billion in the last quarter alone, experts predict that the company could surpass the $100 billion mark in Data Center sales with this momentum. In contrast, AMD's recent guidance forecasts sales of $3.5 billion for its MI300 AI chips in 2024. There’s still a sizable gap between NVIDIA and AMD in AI revenue. To put things into perspective, NVDA's networking revenue alone is approximately four times larger than AMD's total AI chip sales.

Nonetheless, AMD is poised to drive AI innovation across various domains with a diverse portfolio spanning cloud, edge, client, and beyond. The stock has gained more than 55% and 39% over the past nine months and a year, respectively.

Bottom Line

With the global artificial intelligence (AI) market projected to soar from $214.6 billion in 2024 to $1.34 trillion by 2030 (exhibiting a CAGR of 35.7%), leading chip companies, including NVIDIA, Broadcom, and Advanced Micro Devices, are rapidly expanding their market presence, vying for a piece of the pie.

Given their solid fundamentals and promising long-term outlooks, NVDA, AVGO, and AMD appear in good shape to thrive in the foreseeable future. Thus, investors can place their bets on these stocks to garner profitable returns and capitalize on the upward curve of AI.

The Impact of Amazon’s (AMZN) Price Cuts on Its Financial Performance

Posted on by The INO.com Team

As summer heats up, North America's largest retailers are diving into aggressive price-cutting campaigns to attract shoppers. Last week, an array of discounts emerged as retailers aimed to ease the financial strain on consumers. For instance, Target Corporation (TGT) announced that it would cut prices on 5,000 items, including diapers and pet food. This followed their February launch of the ‘dealworthy’ discount brand, introducing 400 household and essential products mostly priced under $10. Walmart Inc. (WMT) also revealed that it would lower costs on 7,000 items, marking a 45% increase in price rollbacks. Aldi and The Kroger Co. (KR) have also jumped on the bandwagon, aiming to reduce grocery prices.

In a move to stay competitive, Amazon Fresh, a subsidiary of Amazon.com, Inc. (AMZN), has entered the fray with a promise akin to Prime Day, offering substantial price cuts on 4,000 products, with new deals rotating weekly. The company announced that these price reductions will apply to items both online and at its Amazon Fresh brick-and-mortar grocery stores.

“Increasing our weekly deals across thousands of items and expanding the reach of Prime Savings at Amazon Fresh is just one way that we're continuing to invest in competitive pricing and savings for all of our customers,” said Claire Peters, Amazon Fresh's worldwide vice president.

As reported by CNN, Amazon's sweeping price cuts will cover a variety of categories, including meat, seafood, frozen foods, beverages, snacks, dairy, cheese, and pasta. The discounts will apply to both well-known brands and Amazon’s private-label products, such as the Aplenty grocery line. Additionally, Amazon Prime members will receive an extra 10% off additional items when they shop online.

These widespread price cuts come at a time when inflation has persistently raised grocery costs by 1.1% year-over-year as of April, a slight decrease from March's figures. With restaurant food prices up by 4.1% over the same period, these retailers have a window to draw in budget-conscious consumers looking for grocery deals.

The company’s strategic move to offer significant savings not only aims to draw more customers but also solidify its position in the highly competitive grocery market.

Unlimited Grocery Delivery Subscription, a Treat for your Wallet!

Last month, the online retail giant launched a new, low-cost grocery delivery subscription service exclusively for Prime members. Priced at $9.99 per month (with a discounted rate of $4.99 per month for SNAP/EBT cardholders), this subscription service promises unlimited delivery on orders exceeding $35.

What sets this service apart is its extensive coverage, spanning over 3,500 cities and towns across the United States. Initially trialed in three cities in 2023, the program has now expanded nationwide, showcasing Amazon's commitment to streamline and enhance the grocery shopping experience.

Customers enrolled in this subscription gain access to a vast selection of retailers, including Whole Foods Market, Amazon Fresh, and various local grocery and specialty retailers accessible through Amazon.com. By incorporating popular stores like Cardenas Markets, Save Mart, Bartell Drugs, Rite Aid, Pet Food Express, and Mission Wine & Spirits, Amazon is further solidifying its position as a go-to destination for all grocery needs.

Tony Hoggett, senior vice president of worldwide grocery stores at Amazon, said, “Our goal is to build a best-in-class grocery shopping experience — whether shopping in-store or online — where Amazon is the first choice for selection, value, and convenience. We have many different customers with many different needs, and we want to save them time and money every time they shop for groceries.”

In the context of Amazon's recent price cuts and initiatives to enhance its grocery offerings, this new subscription service adds another layer of convenience and affordability for customers.

How Did Amazon Perform in the March Quarter?

In the first quarter that ended March 31, 2024, net sales increased 12.5% year-over-year to $143.31 billion. Sales at AWS accelerated 17%, reaching $25 billion, topping Wall Street’s expectations of $24.5 billion. This uptick comes after a period of slower growth due to reduced cloud spending, with new demand for generative artificial intelligence boosting AWS's performance.

Operating income surged 200% in the period to $15.31 billion, which outpaced revenue growth and demonstrated the effectiveness of Amazon’s cost-cutting and efficiency strategies. AWS contributed 62% of the total operating profit. In addition, AMZN’s net income more than tripled to $10.43 billion, or $0.98 per share, up from $3.17 billion, or $0.31 per share, a year earlier, beating analysts' average EPS estimate of $0.83.

The impressive earnings growth has been driven by Amazon's widespread cost-cutting, adjustments to its fulfillment operations, and stabilization in cloud spending. CEO Andy Jassy has been implementing a disciplined approach to spending while expanding profitable segments like advertising, cloud computing, Prime memberships, and the third-party marketplace.

For the second quarter, Amazon expects continued profitability growth, projecting operating income between $10 billion and $14 billion, up from $7.7 billion a year earlier. Net sales are forecasted to range from $144 billion to $149 billion, representing growth of 7% to 11%.

Shares of the e-commerce and tech company climbed more than 52% over the past year and nearly 21% year-to-date.

Bottom Line

Amazon’s strategic price cuts are more than just an attempt to lure in customers with the allure of a good deal; they are a calculated move to enhance consumer satisfaction and loyalty. By rotating sales and offering substantial discounts, Amazon gives budget-conscious shoppers a reason to keep coming back, ultimately boosting sales volume and customer engagement.

These discounts cover a wide range of essential grocery and entertaining staples, from meat and seafood to dairy and snacks, with some items marked down by as much as 30%. This tactic ensures that Amazon remains a top choice for food purchases, in addition to household items.

"Amazon is committed to building a best-in-class grocery shopping experience, whether in-store or online, grounded in the values Amazon is famous for: price, selection, and convenience," the company stated in a press release.

This commitment was evident during the recent Memorial Day sale, where Amazon slashed prices on over 50 items, including its own brands and popular electronics from Apple and Sony. The company offered up to 50% off Amazon devices like Fire tablets and Blink cameras, and 32-inch Amazon Fire TVs were discounted by 40%.

Moreover, the launch of subscription service complements these price cuts and enhances its competitive edge in the grocery delivery market. As the e-commerce giant continues to innovate and expand its offerings, its commitment to competitive pricing and customer satisfaction is evident. These efforts are likely to enhance customer loyalty, drive sales growth, and ultimately have a positive impact on AMZN’s financial performance.

10 Reasons Why Duolingo (DUOL) Is a Top Growth Stock to Buy in 2024

Posted on by The INO.com Team

Duolingo, Inc. (DUOL), a standout in the consumer discretionary sector, leads the digital language learning market with its innovative and engaging approach. With its iconic green owl mascot, Duolingo has gamified language learning, turning vocabulary and grammar lessons into an addictive game-like experience. Leveraging a freemium model, the company offers lessons in over 40 languages and has seen rapid growth in both user base and paid subscriptions.

Duolingo’s secret sauce? A blend of cutting-edge technology and gamification. By applying AI to personalize the learning experience, Duolingo keeps its 97.6 million monthly active users hooked. Their lessons are accessible anytime, anywhere via smartphones, transforming idle moments into productive learning opportunities. This approach has not only pulled education out of the classroom but also placed it right at our fingertips.

Expanding User Base

DUOL’s strong user engagement is evident by its impressive growth in daily active users, which reached 31.4 million in the first quarter, a significant increase from 20.3 million the previous year. Moreover, the number of paid subscribers has soared by 54% year-over-year, totaling 7.4 million (with the proportion of paying users increasing from 8% to 8.6%). Clearly, learners are more than willing to pay for the premium experience.

Duolingo’s Innovations in Learning, Now With AI

Beyond language learning, Duolingo is expanding into new educational territories, including Mathematics and Music, using the same gamified, engaging format. Last year, Duolingo launched a multi-subject app experience, integrating a new Music course and an updated Math course into its flagship app. This allows learners on iOS to seamlessly switch between learning a language, honing their math skills, or diving into the world of music. This expansion not only adds value but also attracts a wider audience, increasing daily practice and user retention.

But it doesn’t stop there. Building on its commitment to innovation, Duolingo has recently introduced AI-driven features to enhance the learning experience. With the launch of its premium subscription tier, Duolingo Max, users gain access to two powerful AI tools designed to accelerate language proficiency.

One of them is Roleplay, an AI chatbot that facilitates conversational practice in the user’s chosen language by providing real-time feedback and guidance. Meanwhile, the other Explain My Answer offers personalized feedback on mistakes made in each lesson, enhancing comprehension and retention.

As the company continues to evolve its platform, we can expect more AI-based learning tools to enhance the user experience further and drive subscription growth. Further, these innovations mark just the beginning of Duolingo’s long-term growth potential.

Financial Performance

In the first quarter that ended March 31, 2024, DUOL’s net revenues increased 44.8% year-over-year to $167.55 million, with a 53% growth in its subscription revenue of $131.69 million. Its gross profit grew 45.4% from the year-ago value to $122.36 million.

The company’s operational performance also witnessed a significant turnaround, with income from operations amounting to $16.44 million compared to a loss of $8.52 million in the previous year. In the March quarter, DUOL achieved its highest quarterly adjusted EBITDA, which increased by $28.90 million year-over-year to $44.01 million.

Moreover, its net income was $26.96 million or $0.57 per share, compared to a net loss of $2.58 million or $0.06 per share in the previous year. The uptick in margins and profits signifies that Duolingo is capitalizing on economies of scale, attracting millions of new users and successfully converting them into paying subscribers.

As of March 31, 2024, its cash, cash equivalents, and restricted cash amounted to $832.45 million, reflecting a 29.8% increase from the prior-year period. Also, its free cash flow improved by 176.5% from the prior-year quarter to $79.62 million.

Furthermore, the company comprehensively surpassed Wall Street’s EPS and revenue estimates. For the first quarter, DUOL’s earnings per share was 119.2% above the consensus estimate, and its revenue was higher than the analysts’ estimates by $1.90 million.

Optimistic Outlook and Analysts Forecasts 

Duolingo is optimistic about its revenue and earnings growth in 2024, driven by strong user engagement and the rollout of new monetization strategies. Second-quarter revenues are projected between $175 million to $177.5 million, with adjusted EBITDA to be in the range of $36.8 million to $39.1 million.

For the full year, the company foresees revenues in the range of $726.5 million to $735.5 million, with adjusted EBITDA estimated between $167.1 million to $176.5 million. Additionally, total bookings are anticipated to reach highs of $181.5 million in the June quarter and $817.5 million for the year.

The consensus revenue estimate of $177.02 million for the fiscal second quarter (ending June 2024) represents a 39.6% increase year-over-year. The consensus EPS estimate of $0.28 for the current quarter indicates a 252.8% improvement year-over-year. The company has an excellent surprise history, surpassing the consensus revenue estimates in each of the trailing four quarters.

Looking ahead, analysts forecast a 38% and 344.2% year-over-year increase in DUOL’s revenue and EPS for the current year (ending December 2024), projecting figures of $732.95 million and $1.55, respectively. For the fiscal year 2025, revenue and EPS are forecasted to grow by 27.4% and 52.7% year-over-year, respectively.

Impressive Historical Growth

Duolingo stands out as a leading growth stock with a focus on innovation, efficient marketing strategies, and strong unit economics. Over the past three years, DUOL’s revenue has grown at a CAGR of 45.6%. In addition, the company’s total assets have grown at a CAGR of 82.1% over the same period, and its levered free cash flow has improved at a 79.9% CAGR.

Why Did Duolingo Plunge Post-Earnings? 

Despite an impressive performance in its recent earnings report, the company witnessed the steepest single-day decline, falling nearly 20%. Investors seemed spooked by a slight slowdown in the growth of daily active users, slipping from a robust 65% year-over-year surge in the previous quarter to a 54% uptick in the first quarter of 2024. Similarly, paid subscription growth softened from 57% to 54%.

Duolingo’s lofty valuation adds to the pressure, as its forward Price/Sales ratio stands at 10.50x, significantly above the industry average of 0.87x. Similarly, its forward EV/Sales ratio of 9.44x exceeds the industry norm by 671.8%, and its forward non-GAAP P/E ratio of 46.69x is 193.3% higher than the industry average of 15.92x.

Nonetheless, shares of DUOL have gained nearly 36% over the past nine months and more than 20% over the past year.

Bottom Line

Duolingo’s impressive user growth, revenue, and earnings underscore its dominance in the global learning market. As the market for digital language learning is poised to surpass $101.94 billion in 2032, the company’s revenue forecast for the year barely taps into its full potential. That means Duolingo has more room for growth. Moreover, with the anticipation of interest rates stabilizing or decreasing in the near future, Duolingo could become an attractive investment for growth-oriented investors again.

With a track record of innovation, efficient marketing, and strong profitability, Duolingo is well-positioned to seize opportunities in 2024 and beyond. Therefore, considering its strong fundamentals and growth prospects, investing in DUOL could be wise now.