Tag: second quarter

Bitcoin Flirts with $65,000, Consider These Tech Giants with Crypto Exposure

Posted on by The INO.com Team

Bitcoin recently touched the $65,000 mark, its highest in almost three weeks, driven by a surge in demand for U.S. exchange-traded funds (ETFs) and growing speculation that the Federal Reserve might soon ease its monetary policy. The world’s largest cryptocurrency briefly touched $65,050 during Sunday’s trading session before pulling back to just below $64,000 on Monday. Bitcoin has risen over 10% since the past week, the largest increase since mid-July.

The crypto market took notice after Fed Chair Jerome Powell hinted at the possibility of lowering benchmark interest rates from their current two-decade highs. This signaled a potentially more favorable liquidity environment for global markets, sparking optimism among investors. Following Powell’s comments, Bitcoin prices soared, and ETFs saw a net inflow of $252 million, the largest in over a month.

Bitcoin’s market cap currently stands at $1.242 trillion, with the cryptocurrency maintaining a 56.3% dominance in the market. While the short-term outlook may seem uncertain, the long-term trend for Bitcoin and the broader crypto market remains positive.

With Bitcoin prices still hovering around $60,000, the broader crypto market remains hot, keeping investor interest high. Buying Bitcoin directly is one option for those looking to ride the crypto wave. But if you’re seeking more conventional routes to gain exposure, tech giants like Block, Inc. (SQ) and PayPal Holdings, Inc. (PYPL) offer intriguing opportunities to tap into the cryptocurrency boom without diving headfirst into the volatility of digital currencies.

PayPal’s Digital Wallet Gets a Crypto Upgrade

PayPal is widely recognized as a leader in digital payments, with over 400 million users globally. Whether you’ve used it to shop online or send money to a friend, PayPal has become a trusted name in secure digital transactions. Beyond its core offerings, the company owns Xoom, an international money transfer business, and Venmo, a peer-to-peer money app.

In 2020, PayPal entered the crypto space, allowing users to buy, sell, and hold crypto assets. Initially, customers couldn’t move their holdings off the platform, but that changed as the company evolved its crypto services. Today, users can seamlessly buy, transfer, and sell cryptocurrencies like Bitcoin, Ethereum, Litecoin, and Bitcoin Cash within and outside of PayPal’s ecosystem. This move has firmly positioned PYPL as a crypto adopter among fintech giants.

While PayPal’s earnings reports don’t always spotlight its crypto activities, the numbers tell an impressive story. In the second quarter, PYPL reported revenue of $7.89 billion, surpassing expectations and reflecting a 9% increase year-over-year. The company’s peer-to-peer payments grew for the first time in three years, with Venmo leading the charge with an 8% increase.

Although PayPal doesn’t disclose specific crypto holdings, its total payment volume grew 11% to $416.8 billion, with non-GAAP net income rising 28% from the prior-year quarter to $1.24 billion. Also, the company’s non-GAAP EPS stood at$1.19, up 36% year-over-year.

Moreover, PayPal’s stablecoin, PYUSD, has gained significant traction, reaching a market capitalization of over $1 billion just a year after its launch. This impressive growth explains why the company isn’t shouting about its crypto ventures from the rooftops; its success in the space speaks for itself.

For investors, there’s more good news. PYPL has increased its planned share buybacks from $5 billion to at least $6 billion this year, a move likely to boost the value of remaining shares. With its massive scale and strong user base, PayPal is well-positioned to bridge the gap between traditional finance and the rapidly evolving crypto ecosystem.

As the company continues to integrate crypto into its offerings, there’s potential for shares to soar even higher. If you’re bullish on the intersection of fintech and crypto, PayPal is definitely a stock to watch.

Block, Inc. (SQ) Shows High Crypto Ambitions

Block, formerly known as Square, has established itself in the fintech space, and its crypto ambitions are front and center. The company, which operates through its Square platform and the peer-to-peer app Cash App, has fully embraced the blockchain revolution.

Cash App is SQ’s direct competitor to Venmo, allowing its 50 million users to engage in various crypto transactions. But Block isn’t stopping there. It’s leveraging its Square platform to accept cryptocurrency payments, offering merchants a seamless way to integrate digital assets into their transactions.

On top of that, the company is driving innovation through its TBD and Spiral divisions, which are focused on creating open-source tools to accelerate blockchain adoption. Even its music streaming service, Tidal, is exploring blockchain for copyright management, potentially transforming how the industry handles royalties.

Despite a 16% decline in stock price year-to-date, driven by concerns over revenue growth and macroeconomic pressures, the company remains focused on long-term crypto initiatives. SQ’s second quarter results were a mix of ups and downs, with revenue of $6.16 billion falling short of the Street’s estimate of $6.30 billion but an adjusted EPS surge of over 132% year-over-year to $0.93, far exceeding analysts’ forecasts.

The company reported a net income of $189.87 million compared to a loss of $105.38 million in the previous year. Block has also been actively returning capital to shareholders, announcing a $3 billion share buyback program and repurchasing over $390 million in the second quarter alone.

While Block’s top line has been inconsistent, its strong financial footing and deep involvement in Bitcoin initiatives make it a compelling option for long-term investors. If you believe in the growth of crypto, Block offers a unique and multifaceted exposure that few other stocks can match.

China's Naval Expansion: Why Defense Stocks Like NOC & LMT Are Poised for Growth

Posted on by The INO.com Team

In the first half of 2024, China's shipbuilding industry secured nearly 75% of new global orders, demonstrating the nation's expanding manufacturing power. Ship completions surged by 18.4% year-over-year to 25.02 million deadweight tons (dwt), which represents 55% of the global total during this period. Moreover, the industry's order backlogs increased by 38.6% to 171.55 million dwt. China’s dominance is no fluke, the country leads in 14 out of 18 major ship types for new orders.

But what’s driving this rapid ascent? It’s a mix of cutting-edge technology, surging global demand, and the unmatched efficiency of Chinese shipyards. By adopting advanced construction techniques and digital tools, China has managed to build ships faster and better, which has translated into booming profits. In fact, the industry’s profits for the first five months of 2024 came in at 16 billion yuan ($2.24 billion), up 187.5% year-over-year.

China's defense industry is rapidly advancing, producing increasingly larger and more capable warships at an impressive pace. For instance, the construction of the Yulan-class landing helicopter assault (LHA) ship, also known as the Type 076, at the Changxing Island Shipbuilding Base. This vessel is set to be a game-changer, poised to become the largest amphibious assault ship in the world.

Satellite images from July 4 show the vessel's flight deck spans over 13,500 square meters, which is nearly the size of three American football fields. That’s significantly larger than the U.S. America-class LHAs and Japan’s Izumo-class carriers and much bigger than its Chinese predecessor, the Type 075.

The Type 076 isn’t just about size; it’s about capability. With room for dozens of aircraft, drones, and amphibious landing craft, plus accommodations for over 1,000 marines, this ship is set to revolutionize the People’s Liberation Army’s (PLA) power projection. Its expansive flight deck and roomy internal hangar will offer enhanced capacity and flexibility, making it a formidable addition to China’s naval arsenal.

Images also reveal that the drydock where the new 076 class is being constructed opened only in October as part of a new port expansion. This rapid production is giving Beijing a significant edge, with the potential to outpace its rivals like the United States.

Since 2019, China has launched four Type 075 vessels, with two now combat-ready and four more on order. Although the U.S. Navy leads in total warship tonnage, China has surpassed the U.S. in the number of warships over 1,000 tons, and in combat logistics and support vessels.

The real worry for U.S. officials is China's shipbuilding capacity. According to U.S. Naval Intelligence, China’s shipbuilding capacity is now 632 times greater than the U.S., supported by a vast network of efficient shipyards.

In the past decade, China has launched 23 destroyers and eight guided-missile cruisers, while the U.S. has launched only 11 destroyers and none of the cruisers. This booming production capability, backed by a robust civilian shipbuilding industry, is raising serious concerns in Washington.

As nations respond to China’s expanding naval prowess, there is likely to be increased demand for advanced defense technologies and military solutions. This heightened demand could drive growth in defense stocks, reflecting the broader trends in global military strategy and procurement.

Therefore, investors and defense analysts are turning their attention to how companies like Lockheed Martin Corporation (LMT) and Northrop Grumman Corporation (NOC) are positioned to capitalize on these developments. With that in mind, let’s dig deeper into the fundamental strength of the featured stocks in detail.

Lockheed Martin Corporation (LMT)

Security and aerospace company LMT focuses on research, design, development, manufacture, integration, and sustainment of advanced technology systems, products, and services. It operates through four segments: Aeronautics; Missiles and Fire Control; Rotary and Mission Systems; and Space.

LMT’s net sales increased 8.6% year-over-year to $18.12 billion in the fiscal 2024 second quarter (ended June 30). Its consolidated operating profit grew marginally from the year-ago value to $2.04 billion, while its non-GAAP net earnings amounted to $1.64 billion in the same period. Also, the company’s EPS came in at $6.65, up 3.3% year-over-year.

While analysts predict a slight 4.6% drop in EPS for the year ending December 2024, its revenue is expected to grow by 5.5% year-over-year to $71.25 billion. For fiscal 2025, forecasts suggest revenue and EPS will hit $74.16 billion and $28.01, respectively.

Regarding rewarding shareholders, Lockheed Martin offers a stable dividend with a four-year average yield of 2.66% and a payout ratio of 44.3%. LMT’s current annual dividend of $12.60 translates to a 2.26% yield at the prevailing share price. Moreover, the company has increased its dividend payouts at a CAGR of 6.9% over the past three years.

In terms of price performance, the stock has gained nearly 30% over the past six months. As defense budgets rise globally, driven by geopolitical tensions, Lockheed Martin is well-positioned to benefit and deliver stable returns to your portfolio.

Northrop Grumman Corporation (NOC)

NOC operates as a global aerospace and defense technology company through four segments: Aeronautics Systems; Defense Systems; Mission Systems; and Space Systems. The company leads in satellite manufacturing and space technology, contributing to missions like NASA’s Artemis program.

Recently, the company declared a quarterly dividend of $2.06 per share on the common stock, in consistent with its 10% increase announced on May 14. This dividend is payable to its shareholders on September 18, 2024. With a forward annual dividend of $8.24 per share and a yield of 1.62%, Northrop not only rewards shareholders but also boasts 21 years of consecutive dividend growth.

Financially, NOC is on a solid footing. In the second quarter (ended June 30, 2024), its total sales increased 6.7% year-over-year to $10.22 billion, while its total operating income rose 12.7% from the year-ago value to $1.09 billion. Net earnings for the quarter came in at $940 million and $6.36 per share, reflecting an increase of 15.8% and 19.1% from the same period last year, respectively. Also, its free cash flow improved by 79.7% from the prior-year quarter to $1.10 billion.

Street expects NOC’s revenue to increase 5.2% year-over-year in the current year (ending December 2024) to $41.34 billion, while its EPS is expected to grow by 8.2% from the prior year to $25.20 in the same period. For the fiscal year 2025, its revenue and EPS are expected to reach $42.92 billion and $27.69, registering an increase of 3.8% and 9.8%, respectively.

Moreover, NOC’s shares have gained more than 16% over the past month and nearly 9% year-to-date, making it a compelling option in a rapidly evolving defense landscape.

eBay’s Revenue Boost: Will Dropping AmEx Lead to Lower Costs & Higher Margins?

Posted on by The INO.com Team

Imagine logging into eBay, excited to use your American Express card to grab that coveted item, only to find out eBay no longer accepts AmEx. This scenario became a reality on August 17, 2024, when eBay Inc. (EBAY) officially stopped accepting American Express Company’s (AXP) credit cards due to what they call “unacceptably high” processing fees.

eBay made this move after months of criticism over rising credit card transaction fees. According to eBay, despite technological advancements and increased investment in fraud protection, fees for processing transactions have only increased. They argue that this trend is due to a lack of competition among credit card issuers, which keeps costs high. This decision was made public over two months ago, giving users time to prepare for the switch.

With $10.11 billion in revenue last year, EBAY is pushing for stricter regulations to encourage competition and “help reduce transaction processing costs for merchants and their customers.” Credit card processing, or swipe fees, are what businesses pay every time a customer uses a card. These fees can range from just over 2% of each transaction to as high as 4% for premium cards. These fees are among the highest operating costs for businesses, often leading to higher consumer prices and reduced sales.

American Express is known for its high fees, which is why eBay decided to cut ties. EBAY’s decision came after negotiations between the two companies broke down. Despite the move, AXP downplayed the impact, stating that “eBay represents less than 0.2%” of its total network volume. They expressed disappointment but insisted that eBay’s decision limits customer payment options and “take away the service, security, and rewards that customers value when paying with American Express.”.

Is It a Big Hit to Either Company?

Surprisingly, while EBAY and AXP part ways, Amex isn’t too worried. The company’s fiscal 2024 first quarter report revealed that over 60% of new account openings came from Millennials and Gen Z, two demographics they’re keen to keep growing. But the big question is, are these youngsters spending their money on eBay?

Last month, eBay adjusted its sales forecast to $2.50-$2.56 billion, compared to $2.57 billion recorded in the second quarter (ended June 30, 2024), hinting that sales might be slipping. However, the company’s stock has been on an upward trend this year. EBAY shares have gained more than 35% year-to-date and nearly 12% over the past three months.

According to eBay, most customers are “willing to use alternative payment options,” like Visa, Mastercard, and Discover. So, while ditching Amex might be inconvenient for some, most eBay shoppers are likely to switch to another payment method without much fuss.

Despite inconsistent consumer spending, the company managed to squeeze out profits with a 1.2% year-over-year increase in its net revenue of $2.57 billion. It wasn’t a huge leap, but it was enough to exceed analyst expectations of $2.53 billion. Its gross merchandise volume (GMV) also inched up by just 1% from the prior year to $18.42 billion. In the earnings release, eBay cited “an uneven discretionary demand environment in our major markets” as a reason for the sluggish figures.

On the bottom line, EBAY reported a non-GAAP net income of $602 million and $1.18 per share, up 8.5% and 14.6% year-over-year, respectively. It also surpassed the consensus EPS estimate of $1.12 per share, which is impressive.

Analysts seem to expect this trend of modest revenue growth and stronger earnings to continue. They anticipate EBAY’s full-year revenue to increase by just 1.9% year-over-year to $10.31 billion. However, its earnings per share is forecasted to grow by 13.5% this year to $4.81 and 7% in 2025 to $5.14.

Could This Be a Tipping Point for Amex?

Amex has been riding high in 2024, but eBay’s decision to cut ties with the credit card giant could be a sign of a broader shift. That raises the question: Will other companies follow suit, or is this just a one-time loss?

For large retailers, credit card processing fees are significant, typically ranging from 1.5% to 3.5% per transaction. These fees quickly add up, turning into billions in profit for credit card companies each year. Amex, however, tends to charge about 1% more per transaction compared to competitors like Visa, Mastercard, or Discover. Because of this, some local businesses and select merchants have stopped accepting Amex cards altogether. That’s a bummer for loyal Amex users.

Shares of AXP took a hit recently after Bank of America Securities analysts raised concerns that the stock might be overvalued, with limited room for further growth. The investment firm downgraded Amex from a “Buy” to a “Neutral” rating, maintaining a price target of $263 per share, signaling caution about the company’s future potential.

eBay’s Cost-Saving Strategy in a Volatile Market

As the Federal Reserve considers lowering interchange fees, eBay’s decision to drop American Express highlights a broader effort to reduce costs amid economic uncertainties. With inconsistent consumer spending and inflationary pressures, particularly in markets like the U.K. and Germany, eBay is strategically reducing costs to bolster profitability.

By cutting high transaction fees, eBay could reduce overhead and better position itself in the fiercely competitive eCommerce market. While the initial reaction might include some pushback from loyal Amex users, the long-term impact on EBAY’s marketplace could be decidedly positive. As the payments landscape continues to evolve, this decision may signal the start of broader changes designed to create a more competitive, cost-effective, and user-friendly environment for both consumers and merchants.

 

 

Ford's Financial Crisis: What It Means for Investors

Posted on by The INO.com Team

The stock market has seen a significant downturn over the past few days, with many overvalued mega-cap tech companies leading the slide. At the top of this is Ford Motor Company (F), whose shares have plummeted by 22% in the past month, far outpacing the S&P 500's 4% decline.

But what’s behind Ford’s sharp decline? A growing consensus among investors is that Ford is struggling due to mismanagement, making it arguably the most poorly run major automaker in the world today. Since the worst of the COVID-19 pandemic, Ford has made a series of costly missteps, especially in its ambitious $30 billion plan to catch up to Tesla, Inc. (TSLA) in the electric vehicle (EV) market. Despite these efforts, Ford is losing an alarming $50,000 on each EV it sells, raising questions about the sustainability of its strategy.

To put things in perspective, Ford's stock was trading around $11 at the end of June 2022, just before the Federal Reserve began raising interest rates. While Ford and major automotive players were impacted by supply chain issues and the semiconductor shortage through much of 2022, high interest rates and relatively weak consumer confidence in the U.S. have all contributed to the company’s decline.

In the second quarter of 2024, which ended June 30, Ford reported a 6% year-over-year revenue growth, reaching $47.81 billion, thanks to a fresh lineup of vehicles, including the all-new F-150. However, this fell short of Wall Street’s expectations of $44.90 billion. The company’s adjusted earnings also missed estimates by $0.21, coming in at $0.47 per share due to higher warranty-related costs. Ford’s net income for the second quarter dropped 4.5% compared to the previous year to $1.83 billion, mainly because its combustion-engine unit posted a pretax loss driven by rising warranty and recall expenses.

This disappointment was enough to cause Ford’s stock to plunge in after-hours trading, wiping out nearly a year’s worth of gains. The company reported $2.30 billion in warranty and recall costs for the last quarter alone, $800 million more than the first quarter and $700 million higher than a year ago.

Ford Blue, the company’s internal combustion engine unit, earned $1.17 billion before taxes during the quarter, down $1.1 billion from the previous year. While investors had hoped for better guidance from Ford Blue, the company cut its outlook instead. On the other hand, Ford Pro, the commercial vehicle unit, posted a $2.56 billion profit, which was $173 million above 2023. Meanwhile, Model E, the EV unit, reported a $1.14 billion loss ($63 million worse than the previous year), further deepening the company’s financial woes.

Despite these setbacks, Ford maintained its guidance range for adjusted EBIT between $10 billion and $12 billion while raising expectations for adjusted free cash flow (FCF) by $1 billion to a range of $7.50 billion to $8.50 billion. Ford Pro's EBIT outlook for the full year has been adjusted upward to $9 billion to $10 billion, thanks to growth and a favorable product mix. However, Ford Blue's outlook has been revised downward to fall between $6 billion and $6.5 billion, reflecting higher-than-expected warranty costs.

The combination of a profit drop and escalating warranty costs from April through June did not sit well with investors and has shaken their confidence in the company. Shares of F are down more than 19% over the past year and nearly 16% year-to-date.

Ford CEO Jim Farley acknowledged the company’s growing pains, particularly in its EV strategy, which has faced significant challenges. Despite these hurdles, Farley expressed confidence in Ford’s ability to reduce losses and build a profitable EV business. The company plans to focus on producing “very differentiated” EVs priced under $40,000 and $30,000, targeting work and adventure segments. However, success in this area will require significant breakthroughs in cost reduction, a goal that remains uncertain.

A pressing concern for investors is whether Ford has enough cash to navigate the ongoing economic challenges. The company’s total debt, excluding its financing operations, is $20.40 billion, while its cash reserves are roughly $20 billion. Given the current macroeconomic environment, marked by high oil prices and interest rates, could Ford face a repeat of its struggles from 2022 and 2023 and underperform the S&P over the next 12 months? Or will it manage to make a strong comeback?

Ford has recently backed off on its ambitious EV goals, recognizing that gasoline-powered vehicles are the primary drivers of short-term profits and possibly will be for some time. The EV versions of its best-selling F-150 pickup and Mustang Mach-E have not met expectations, leading management to argue that the key to success lies in developing a profitable $25,000 EV. However, the path to achieving this remains unclear.

Bottom Line

In summary, Ford’s stock has taken a significant hit due to management’s missteps and the challenges facing its EV strategy. While the company’s leadership remains optimistic about its future, investors are understandably concerned about the road ahead. The Ford family and management have a difficult task ahead as they try to steer the company back on course. For investors, the question remains whether now is the right time to buy shares, with Ford’s stock near its lowest point in recent years, or whether more challenges lie ahead.

The Future of Lending: Upstart's AI Advantage

Posted on by The INO.com Team

Upstart Holdings, Inc. (UPST) was built on a simple yet revolutionary idea: What if advanced AI could assess creditworthiness better than traditional credit scores? That’s the core belief driving Upstart, now a leading AI-powered lending marketplace. Since its founding in 2012, UPST has connected millions of consumers with over 100 banks and credit unions. Their platform offers a range of products, including personal loans, auto refinancing, home equity lines of credit (HELOCs), and small-dollar loans.

The company was a market darling in 2020 and 2021, thanks to low interest rates and a strong demand for consumer lending. In 2021, the company’s revenue was up 264% year-over-year, with a net income of $135.44 million. The stock hit an all-time high of $390 in October 2021. However, as interest rates began to rise, demand for its services dropped, turning those profits into losses over the past two years.

Despite this downturn, Upstart is leveraging its AI capabilities to stay at the forefront of fintech innovation. Its AI model analyzes 1,600 variables to provide a more nuanced view of creditworthiness, offering a competitive edge in loan approvals while managing default risks. That's a winning combination because it could translate into higher revenue and profits.

In recent years, Upstart has expanded its network of lending partners and ventured into new loan products. Though 2022 was challenging due to cautious investor behavior, the company’s AI-driven approach remains strong, with recent loan originations reflecting solid growth.

While the road ahead may be challenging, there are signs that the worst is behind Upstart. Revenue has hit a low and is beginning to climb again, and cost-cutting measures have helped stabilize losses. Analysts are optimistic, forecasting a 10.9% year-over-year increase in revenue to $149.23 million, with further growth of 10.5% and 27.3% expected for fiscal years 2024 and 2025, respectively.

Navigating Financial Waters With AI-Driven Precision

Building on its AI-driven approach, UPST recently reported its financial results for the second quarter of 2024, revealing signs of sequential growth and a clear path toward EBITDA profitability. Central to this progress is the launch of the company's new credit pricing model, M18. This innovative model integrates the Annual Percentage Rate (APR) as a key feature, which is not typically seen in traditional risk models. By generating about 1 million predictions for each applicant (six times more than its previous model), M18 aims to fine-tune accuracy and enhance the loan approval process.

On the financial side, the company’s revenue amounted to $127.63 million in the quarter that ended June 2024, beating analysts' estimates of $124.53 million. For the first half of 2024, its revenue increased 7% year-over-year to $255.42 million, while total fee revenue grew 3% to $268.60 million. Moreover, UPST saw a 31% increase in loan transactions, reaching about 144,000 loans and welcoming over 89,000 new borrowers.

During its earnings call, management proudly shared that 91% of their core unsecured loans in Q2 were fully automated, which means no documents, phone calls, or human involvement is required. This automation rate was 73% just two years ago, and hitting 90% seemed out of reach. However, thanks to AI, they’ve not only achieved it but also kept fraud at bay, solidifying Upstart’s position as a leader in AI-driven lending.

Looking ahead, the company is optimistic. It forecasts $150 million in revenue for Q3 2024 and expects to achieve positive adjusted EBITDA in Q4. Moreover, it expects a fee revenue of $320 million for the second half of the year. With its innovative AI solutions and expanding product offerings, Upstart is well-positioned for continued growth in the evolving lending landscape.

Bottom Line

As Upstart continues to innovate with new AI-driven models like Model 18, it's clear that the future of lending is becoming more intelligent, accessible, and tailored to individual needs. The company’s efforts to integrate AI into every facet of its operations reshape the financial landscape, making credit more inclusive and efficiently managed.

Investors should recognize that the technology driving Upstart is more than just a trend; it’s a powerful tool with the potential to reshape a trillion-dollar market. With lending being such a crucial part of the economy, Upstart’s relatively modest market cap of $3.06 billion leaves room for significant growth if its technology continues to prove itself.

Despite some bumps in the road, the company's increase in loan volume and its anticipated positive EBITDA by the fourth quarter demonstrate a resilient and forward-looking business model. Its focus on refining technology and balancing growth with responsible management positions Upstart as a leader in the AI-driven transformation of the credit industry.

As the market’s perception shifts and conditions become more favorable, this could be a pivotal moment for investors to consider investing in UPST, especially as the company looks poised to return to a path of growth and success.