Key Earnings Reports: Peleton (PTON), Roku (ROKU), Uber (UBER), Square (SQ) and General Motors (GM)

Thursday, November 5, 2020 8:16 AM | Neal Farmer

Earnings season continues this week. Now that the election is mostly over, investors can turn their attention to the many companies have yet to report third-quarter earnings.

Most of the biggest players have already reported but big names remain. Apart from just the biggest names, many smaller stocks that are rising in popularity among investors are reporting. These stocks of newer or smaller companies that have been very popular with investors can be very interesting to watch around earnings season, as this where we find out if those high valuations are justified.

Some of these reports can also provide context about how the entire economy is recovering. Many of these stocks are in cyclical businesses and performance is tied to how much people are either staying in or moving on from quarantine.

Peloton

Peloton (PTON) has been one of the biggest winners since coronavirus first hit due to the nature of thebusiness. With gyms closing and people forced to mostly stay inside, personal indoor exercise machines were bound to see increased demand. Many active people wanted to keep up with their fitness regime and Peloton bicycles and treadmills were a great way to do so.

Peloton's first quarterly profit was last quarter when it far surpassed analysts estimates. Peloton’s 2019 third quarter was a nightmare after analysts expected a loss of roughly -$0.36 per share but the company reported a -$1.29 loss per share. Since then, with the exception of a slight miss in the first quarter of 2020, it has been a much different story with Peloton surpassing estimates.  Last quarter, (first full COVID quarter) Peloton reported an EPS of $0.27 compared to estimates of $0.1.

Analysts are expecting an EPS of 0.13 this quarter which would be down from the second quarter, most likely under the assumption that most people likely to buy a Peloton machine as a result of COVID already have. This is a fair assumption but rising cases and talk of future shutdowns might have been enough to push some people to buy Peloton products that did not immediately purchase one back in April or May. This earnings should say a lot on Peloton’s outlook going forward without the short-term spike from COVID.

Roku

Roku (ROKU) is another stock that rebounded very strongly after the original COVID-19 crash back in February and March. ROKU is currently trading just above $200/share after having a share price of roughly $130 to start the year and bottoming out at $58.22 in mid March. Investors have been very bullish on the video streaming stock but earnings results have been less than great.

Many expected the streaming service to benefit tremendously from people staying indoors and likely watching more TV as a result. While people might be watching more shows and movies, they may not be using Roku devices  to do so.  Revenue and earnings increased from the first quarter to the second this year but estimates for thye third quarter have EPS falling to -$0.41 .Roku surpassed EPS estimates over the last four quarters. Both its revenue and earnings increased from Q1 to Q2 this year but estimates for its third quarter have EPS around -0.41. Roku will need to significantly outperform those estimates or have reason for strong guidance to justify the stock’s more than 35% increase in price over the past two and half months.

Uber

Uber (UBER) is among the more interesting stocks on this list as it gives tremendous insight into how much people are going out and about again. Uber is in an interesting place with regards to the coronavirus as demand for people using the service for transportation between places has fallen. However, with Uber Eats, more and more consumers are using Uber as a delivery service for hot meals from restaurants. Their main competitor in this field, GrubHub (GRUB), has seen its share price soar over the past eight months but earnings plummeted during the same time.

Uber stock on the other hand is barely up since the beginning of the year and only got close to the its February highs after a big post-election jump after a California ballot measure that will allow the company to continue treating workers as independent contractors passed. Uber’s EPS remained stable at -$0.64 from Q4 2019 to Q1 2020 but dropped all the way to -$1.02 last quarter. Estimates for the third quarter hover around -$0.59  currently. The company had consistently beaten expectations until last quarter. Uber's results should tell us something about how people have been willing to use the service and get outside the house since the shutdowns.

Square

Square (SQ) continues the trend of stocks that can help explain how the economy is currently healing from coronavirus and the resulting shutdowns. Many small businesses use Square as their primary payment processor and its ease of use with credit cards and phones has increased its popularity recently. However, with many small businesses either temporarily or permanently shutting down due to COVID, Square’s EPS fell from $0.07 to -$0.19 from Q4 2019 to Q1 2020. For Q2 2020 though, Square reported an EPS of -$0.02 against analysts estimates  -$0.23.

Investors should take note that Square has increased both its revenue and profits every quarter over the past year despite COVID-19. The company has typically beaten estimates but the last two quarters were wildly off in either direction. Square exceeded estimates last quarter but was much lower than expectations for the first quarter. SQ stock has been on a long and consistent bullish run since March with it really only falling over the past couple weeks as markets have been down across the board whole. SQ is still up over 390% from its low this year and its missed EPS estimates for the first quarter only resulted in the stock continuing to rise while its strong second quarter actually resulted in the share price falling a bit. Expect some volatility after earnings but the stock should continue its long-term trend.

General Motors

General Motors (GM) does not offer the same growth potential as the rest of these stocks but its earnings are significant for a massive part of the economy. General Motors and most automotive manufacturers saw a massive decline in revenue, profits, and EPS from this year’s first quarter to second. GM actually did see a slight increase in those numbers from the last quarter in 2019 to the first quarter of 2020 despite coronavirus affecting most of March.

Investors have reasons to be bullish on General Motors though as current EPS estimates for the third quarter are around $1.47 and GM has surpassed estimates over the past four quarters. The company has consistently beaten estimates. Last quarter it reported EPS of -$0.5 compared to the expected -$1.72. Additionally, GM stock has been slowly recovering from the market crash in February and is finally back to where it was at the beginning of the year. Automotive stocks don't typically offer much growth potential but high dividends and the rise of electric cars should have investors interested. General Motors' investment in electric cars through its own vehicles and stake in Nikola (NKLA) may pay off in big ways with the company's economies of scale giving an advantage over competitors such as Tesla (TSLA).

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