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American Express Navigates Economic Slowdown

Posted on October 19th, 2020

American Express Co. (AXP) has traveled a rocky path in 2020, with some growth spurts over the past six months. The stock has trailed the S&P 500, falling by about 15.7% compared to the S&P 500’s gain of about 7.8%. Despite American Express’s 2020 struggles, the leading provider of credit cards and card network services was added to the WhaleWisdom’s WhaleIndex on August 17, 2020.

American Express has been negatively impacted by the coronavirus pandemic and related economic slowdown and many other businesses. Pandemic related quarantines, business closures, travel restrictions, and an overall reduction in consumer spending means fewer fees collected from transaction processing, less American Express gift cards purchased, and a higher risk of loan defaults. Through this time, American Express has tried to support its cardholders, recently offering temporary relief that included waiving interest and late payment fees. The Federal stimulus plan has helped the company rebound to an extent, and continued easing of restrictions on business operations and travel offer the opportunity for a comeback.

Hedge Funds and Institutions Are Selling

American Express has lost some hedge fund fans. Looking at second-quarter activity by hedge funds, the aggregate 13F shares held decreased to about 148.2 million from 152.9 million, an overall decrease of approximately 3.1%. Of the hedge funds, 41 created new positions, 104 added to existing holdings, 37 exited, and 100 reduced their stakes. Similarly, institutions also decreased their aggregate holdings by about 0.3%, to approximately 681.6 million from 683.7 million.


Mixed Multi-Year Estimates

American Express has a projected 16.6% decline in revenue for the end of 2020, with an estimated revenue growth of approximately 11.1% for the fiscal year 2021, for $40.4 billion in revenue. Year over year growth predictions continues through to 2022 with year over year growth of about 11% bringing revenue to $44.6 billion. There is similar news for share value, expecting that earnings will initially decline to approximately $3.46 by December 2020, later to rise to $6.76 by 2021 and ultimately to $8.83 by 2022.

Analysts Share Concerns over Timing of Recovery

Bank of America Securities, LLC has turned bearish on American Express due to travel recovery’s slow pace. Bank of America’s analyst, Mihir Bhatia, downgraded the stock to Underperform from Neutral due to concerns over the decreased airline and lodging spending. The analyst estimates that it could take until 2024 for travel spending to rebound to pre-pandemic levels. Similar concerns are shared by JP Morgan Securities, Inc., which notes an unprecedented disconnect between unemployment and credit during the pandemic. Predicting that while some credit losses may be averted for companies like American Express, while others may only be delayed.

Long-Term Optimism

Despite a rocky 2020, the story’s not over for American Express, and investors may see a happier chapter to come. While the exact timing for an economic recovery is uncertain, analysts believe it is likely for things to improve for American Express in just a few years.

Moody’s Shows Continued Growth

Posted on October 12th, 2020

Moody’s Corp. (MCO) has seen positive returns over the past six months and has steadily been outperforming the S&P 500, rising by approximately 23.1% compared to the S&P 500’s gain of about 6.7%. Despite the growth, the financial services company recently slid on the HeatMap Index, landing on a ranking of 37, down from 29.

Moody’s is an American credit rating agency, a holding company for Moody’s Investor Service (MIS), and Moody’s Analytics (MA). The company is a financial software provider and services provider, providing economic-related research data and analytics tools. Moody’s has long been a leader in the credit rating market. Still, after a stellar performance in 2019, 2020 has proven more challenging. There’s no doubt that the coronavirus pandemic has impacted Moody’s business, as credit rating agencies are continually evaluating the pandemic’s impact on the credits they rate, trying to estimate economic implications, including nationwide business closures and high unemployment levels.


Hedge Funds and Institutions Take a Step Back

Looking at second-quarter activity by the top hedge funds and institutions, it seems that Moody’s has slipped out of favor. Hedge Funds appear to be applying similar caution to what Moody’s applied to the credits it rates. Of hedge funds, 36 created new positions, 62 added to an existing holding, 11 exited, and 64 reduced their stakes. Overall, hedge funds decreased aggregate holdings by about 4.5% to approximately 42.4 million from 44.4 million shares. Similarly, institutions were also selling, reducing their aggregate holdings by about 0.4% to approximately 168.7 million from 169.4 million shares.



Projected Earnings Increase Despite Hedge Funds Selling

Analysts anticipate that earnings will grow slowly over the next few years, increasing to $9.36 per share in 2020 and continuing an upward climb to an estimated $13.00 per share in 2024. Projections include earnings growth of an impressive 12.9% for December 2020. Revenue will see multiple years of growth, spanning from about 5.1 billion to 6.3 billion between 2020 and 2024.

Optimistic Long-Term Outlook

The coronavirus pandemic’s continued uncertainty, including pandemic influenced economic policies, creates challenges for Moody’s MIS and MA holdings. The pandemic duration is also a significant factor for the impact on credit conditions for debt issuers. However, Moody’s remains a leader in the credit rating market. The encouraging projections for earnings and revenue over the next few years is something to take note of, as is the need for patience from investors.

ServiceNow, Inc.’s (NOW) stock has climbed over the past five months, significantly outperforming the S&P500, rising by approximately 74.7% compared to the S&P’s gain of about 4.6%. However, hedge funds and institutions were actively selling the stock in the second quarter. It led to the shares slipping on the WhaleWisdom Heatmap, with a change in ranking to 33 from 23.

ServiceNow is an American software company that designs and produces computer software, offers cloud services and an information technology management platform. ServiceNow’s cloud computing platform helps companies manage digital workflows, which has become especially helpful during the coronavirus pandemic, as many businesses have responded to the pandemic by a shift to remote work. Also, ServiceNow has positioned its workflow applications and resources to assist businesses with their crisis response. While ServiceNow saw a brief dip in performance in March and April related to the pandemic, the equity has rebounded well in recent months.

Sellers Outnumber Buyers

During the second quarter, the total number of 13F shares held by institutions decreased by 1.5% to 173.3 million shares. The number of institutions selling the stock far outpaced the ones buying it. During the quarter, 188 institutions created new positions while 455 were adding to them, 68 liquated their holdings, and 297 reduced them. Hedge Funds showed a similar pattern of activity as aggregate 13F shared held decreased to approximately 33.3 million from 34.1 million, a decrease of approximately 2.4%. Of the hedge funds, 42 created new positions, 93 added, 26 exited, and 80 reduced their holdings.

(WhaleWisdom Heatmap)

Positive Multi-year Estimates

Analysts expect to see earnings increase over four consecutive years. Initially, ServiceNow is predicted to see year-over-year growth of 33.4% in 2020 to $4.43 per share. Growth is forecast to rise to $10.62 in 2023. Additionally, revenue is estimated to rise to approximately $8.6 billion in December 2023, up from about $4.4 billion for 2020.


Analysts Raise Price Targets

Analysts appear enthusiastic about ServiceNow’s potential and are raising price targets. Stifel Financial Corp.’s analyst, Tom Roderick, recently raised ServiceNow’s price target to $500 from $460, keeping a Buy rating on shares. Roderick notes that ServiceNow has taken a leadership role in strategic decisions surrounding workflows and broader information technology management. Wells Fargo Securities also raised ServiceNow’s price target, with analyst Phillip Winslow increasing it to $565 from $525 and maintaining an Overweight rating on shares. JMP Securities’ analyst, Patrick Walravens, raised the company’s price target to $534 from $460 with an Outperform rating, citing ServiceNow having its best quarter ever.

Favorable Outlook

ServiceNow is well-positioned to benefit from workplace shifts to telecommuting and cloud services, which increased due to the pandemic and are likely to continue in the future. The impressive stock gains, coupled with the expectation for healthy growth, and analysts’ price targets, could help gain the attention of investors over time and help push prices even higher.

Upwork Begins to Rebound as Hedge Funds Move In

Posted on September 28th, 2020

Upwork Global, Inc.’s (UPWK) stock has advanced sharply in 2020 after a rocky start. The provider of online recruitment services was recently added to the WhaleWisdom Whale Index on August 17, 2020. The addition was due to hedge funds that were actively buying the stock in the second quarter. As a result, Upwork has overall outperformed the S&P 500 year-to-date, rising by approximately 56.5% in comparison to the S&P’s gain of about 2.1%.

Upwork is an American freelancing platform that offers jobs spanning many careers, from website developers to accountants. The company appears to be moving beyond the negative impact of the coronavirus pandemic, which brought so many businesses to a temporary halt in the spring. Now Upwork has the potential to capitalize on a shift to a remote workforce, resulting from the pandemic.

Hedge Funds and Institutions Are Buying

Upwork has hedge fund managers and institutions taking notice. Looking at the second quarter activity by the top hedge funds, the aggregate 13F shares held jumped to about 27 million from 24.7 million, an increase of approximately 9.3%. Of the hedge funds, 23 created new positions, 11 added to an existing holding, 16 exited, and 19 reduced their stakes. Overall, institutions increased their aggregate holdings by about 13.7%, to approximately 71.9 million from 63.3 million.


Projected Losses Despite Revenue Growth

Analysts anticipate that earnings will narrow slightly over the next few years, rising from a loss of $0.32 per share in 2020 to a loss of $0.15 in 2023. However, revenue will see multiple years of growth, rising to $545.5 million in 2023 from $353.85 million in 2020.

Analysts Share Mixed Feelings

While overall, analysts appear to gravitate towards a Buy rating for Upwork, there are some mixed thoughts, especially after second-quarter results and a transition in leadership. Upwork welcomed a new CFO in August and a loss in earnings despite marketplace revenue being up approximately 19%. MKM Partners LLC’s analyst, Rohit Kulkharni, sees potential for Upwork, noting that the company has only begun to capitalize on an economy that’s more open to a workforce of remote and on-demand workers. MKM gives Upwork a Buy rating and a $20 price target. Meanwhile, Citigroup, Inc. downgraded Upwork from a Buy to Neutral rating, giving it a price target of $12.

Optimistic Outlook

The future holds promise for Upwork. The company continues to weather the pandemic and seize new opportunities from changing workforce preferences. Hedge funds and institutions are buying, while many analysts are optimistic on the long-term growth story. That may prove to be a winning formula for a higher stock price in future years.

Peloton’s Stock Rises Benefits Despite Pandemic

Posted on September 21st, 2020

Peloton Interactive Inc.’s (PTON) stock has experienced impressive growth over the past six months, after a brief dip in February 2020. Peloton has outperformed the S&P 500 easily, rising approximately 216% while the S&P 500 rose by about 2.75% as of September 18. The strong performance has landed Peloton on the WhaleWisdom Heat Map with a ranking of twenty and garnered the attention of hedge fund managers.

The exercise equipment and media company has faired very well during the coronavirus pandemic, despite the temporary forced closure of its retail stores and studio classes during the quarantine. While quarantine has been an inconvenience, it has led to many Americans telecommuting and seeking alternative exercise options outside of fitness centers.


Strong Results

Peloton is seeing favorable activity from hedge funds and institutions. Looking at second-quarter activity by the top hedge funds, the aggregate 13F shares held increased to approximately 52.1 million from 45.5 million, a jump of about 14.7%. Of the hedge funds, 39 created new positions, while 28 added to an existing one, as 11 exited, and 27 reduced their holdings. Institutions were also buying, and overall, institutions increased their aggregate holdings by about 43.5%, to approximately 168.7 million from 117.5 million.



Positive Estimates

Analysts project Peloton’s revenue will grow by approximately 97.2% in the fiscal year 2021, to $3.6 billion in revenue. Year over year revenue growth is forecast to continue at an annual pace of around 30% for 2022 and 2023. There is more good news for the shares, with an expectation that earnings will then rise to $0.30 by June 2021 and ultimately to $1.59 by June 2023.

Analysts Share Favorable Forecasts

Stifel Financial Corp.’s analyst, Scott Devitt, has a favorable outlook for Peloton, seeing it as the “Apple” of fitness, giving it a buy rating and a price target of $120. Most of Peloton’s revenue is generated from connected fitness products and product subscriptions. Needham & Co.’s analyst, Dan Medina, also gave the company a buy rating, recognizing the appeal of Peloton’s integration of hardware, software, and content. Oppenheimer & Co., Inc. increased its price target to $105, up from $50, maintaining an outperform rating. Goldman Sachs Group, Inc. expects strong performance and gives Peloton an impressive price target of $138, while Bank of America Corp. issued a price target of $116.

Bright Outlook

Peloton is positioned to continue to benefit from the pandemic’s influence on consumer fitness choices. The rising popularity of at-home workouts in place of traditional gyms has increased demand for Peloton’s fitness products and subscriptions, a trend that could continue beyond the pandemic. Analysts’ estimates for Peloton’s continued growth are appealing for investors of this stock and is likely why hedge funds and institutions have been moving into the shares.