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We’re in the middle of earnings season, so it would be natural to assume that earnings reports are the biggest drivers of stocks during the season. But that isn’t the case with a bunch that soared yesterday, at least not for all of them.
First among them is the maker of the Impella heart pump Abiomed, Inc. , which is being acquired by Johnson & Johnson (JNJ - Free Report) . The stock soared nearly 50% on the news to $377.82, close to the offer price of $380 a share (total consideration $16.7 billion). Additionally, stock holders get to make another cool $35 a share if certain sales and development milestones are reached.
The solid premium that Johnson & Johnson is offering is a great exit for Abiomed shareholders and says something about JNJ’s medical technology ambitions. Abiomed also reported quarterly results, posting a 23.8% EPS beat on revenues that missed by 2.7% (impacted by currency, as nearly a fifth of revenue is generated overseas). Impella adoption continues to increase.
Next, we move to Carvana Co. (CVNA - Free Report) , which jumped nearly 13% on a JP Morgan upgrade that was more conciliatory than actual optimism. The main point to note was that Carvana has sufficient assets (even a slice of its $2 billion in real estate can tide over this difficult patch). Therefore, it wouldn’t need to go bankrupt as some were expecting.
However, this online retailer of used cars is in deep water because of increasing inventories, decreasing prices and a more cautious buyer given the level of inflation. The increase in borrowing costs also isn’t helping. The analysts warned that Carvana wasn’t “out of the woods.” The company has yet to make a profit. While the estimated per share loss for 2023 is lower than this year, it has increased in the last 7 days. It is slated to report tomorrow, so there could be further volatility in the shares.
The stock dropped sharply when the pandemic hit but then picked up in a V-shaped recovery, staying stable through most of 2021, as social distancing had more people buying cars. But they’re down 95% over the past year, as supply chain concerns and inflation took a toll.
Shares of Uber Technologies, Inc. (UBER - Free Report) gained nearly 13% after the company reported encouraging commentary.
Earnings missed estimates by a mile and then some while revenues were just around 3% ahead. Granted, the bar was set rather high given that revenues represented a 72% jump from last year. The increase in per share losses from 23 cents to 61 cents was attributed partly to its equity in Didi.
But management commentary sent the shares soaring. For one thing, ridership continued to increase, exceeding pre-pandemic levels, which means that while consumers are avoiding buying stuff, eating out and traveling remain relatively high on their priority lists, after the drought of the last two years. This must be music to investors’ ears.
Second, it isn’t just that riders are getting back in droves, but its efforts to lure drivers back appear to be paying off as well. Management said that Uber’s ride hailing driver base at the end of September was comparable with the pre-pandemic level in September 2019.
Third, Uber is now selling ads to its 124 million strong user base, promoting one brand per ride. With the third quarter runrate at $350 million, management confirmed their billion-dollar revenue target by 2024.
Uber’s diversification into other revenue streams (including food delivery and freight, which didn’t do anything exciting in the last quarter) is a big positive for its future profitability and cash flow.
Abiomed carries a Zacks Rank #2 (Buy), Uber a Zacks Rank #3 and Carvana a Zacks Rank #4 (Sell).
One-Month Price Performance
Image Source: Zacks Investment Research
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3 Stocks That Popped Yesterday
We’re in the middle of earnings season, so it would be natural to assume that earnings reports are the biggest drivers of stocks during the season. But that isn’t the case with a bunch that soared yesterday, at least not for all of them.
First among them is the maker of the Impella heart pump Abiomed, Inc. , which is being acquired by Johnson & Johnson (JNJ - Free Report) . The stock soared nearly 50% on the news to $377.82, close to the offer price of $380 a share (total consideration $16.7 billion). Additionally, stock holders get to make another cool $35 a share if certain sales and development milestones are reached.
The solid premium that Johnson & Johnson is offering is a great exit for Abiomed shareholders and says something about JNJ’s medical technology ambitions. Abiomed also reported quarterly results, posting a 23.8% EPS beat on revenues that missed by 2.7% (impacted by currency, as nearly a fifth of revenue is generated overseas). Impella adoption continues to increase.
Next, we move to Carvana Co. (CVNA - Free Report) , which jumped nearly 13% on a JP Morgan upgrade that was more conciliatory than actual optimism. The main point to note was that Carvana has sufficient assets (even a slice of its $2 billion in real estate can tide over this difficult patch). Therefore, it wouldn’t need to go bankrupt as some were expecting.
However, this online retailer of used cars is in deep water because of increasing inventories, decreasing prices and a more cautious buyer given the level of inflation. The increase in borrowing costs also isn’t helping. The analysts warned that Carvana wasn’t “out of the woods.” The company has yet to make a profit. While the estimated per share loss for 2023 is lower than this year, it has increased in the last 7 days. It is slated to report tomorrow, so there could be further volatility in the shares.
The stock dropped sharply when the pandemic hit but then picked up in a V-shaped recovery, staying stable through most of 2021, as social distancing had more people buying cars. But they’re down 95% over the past year, as supply chain concerns and inflation took a toll.
Shares of Uber Technologies, Inc. (UBER - Free Report) gained nearly 13% after the company reported encouraging commentary.
Earnings missed estimates by a mile and then some while revenues were just around 3% ahead. Granted, the bar was set rather high given that revenues represented a 72% jump from last year. The increase in per share losses from 23 cents to 61 cents was attributed partly to its equity in Didi.
But management commentary sent the shares soaring. For one thing, ridership continued to increase, exceeding pre-pandemic levels, which means that while consumers are avoiding buying stuff, eating out and traveling remain relatively high on their priority lists, after the drought of the last two years. This must be music to investors’ ears.
Second, it isn’t just that riders are getting back in droves, but its efforts to lure drivers back appear to be paying off as well. Management said that Uber’s ride hailing driver base at the end of September was comparable with the pre-pandemic level in September 2019.
Third, Uber is now selling ads to its 124 million strong user base, promoting one brand per ride. With the third quarter runrate at $350 million, management confirmed their billion-dollar revenue target by 2024.
Uber’s diversification into other revenue streams (including food delivery and freight, which didn’t do anything exciting in the last quarter) is a big positive for its future profitability and cash flow.
Abiomed carries a Zacks Rank #2 (Buy), Uber a Zacks Rank #3 and Carvana a Zacks Rank #4 (Sell).
One-Month Price Performance
Image Source: Zacks Investment Research