Making sense of the markets this week: February 6

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“Meta is down 20% in premarket trading after a decline in daily active users, a revenue warning and worries about its metaverse business. The selloff is erasing about $180M in market cap, nearly the whole market cap of Netflix.”

That bad aura started to spread to the rest of the market. Perhaps that aura even spread to the stock market in the metaverse. 😉 

The tech-heavy Nasdaq Index (QQQ) was down 3% on Thursday January 3, 2022. Below, you will see the one-month chart for S&P 500 (IVV) trying to fight back this earnings season. 

Canadian earnings help with the February blahs 

Thanks to Dan Kent, partner at Stocktrades.ca for this overview of a few key Canadian stocks. (All earnings are reported Canadian dollars.)

BCE (BCE) 

Bell reported strong earnings. Revenue of $6.2 billion was right in line with estimates, and earnings per share of $0.76 came in $0.03 higher than expected. It’s also not a surprise that the company came through with a 5.1% dividend raise for shareholders. The company achieved the best residential net subscriber performance in more than a decade. And its expansion efforts are going well, with the ability to now offer mobile 5G to over 70% of Canadians. Telecom earnings are far from exciting. Considering the economic moat and market share the Big Three (BCE, Rogers and Telus) have, it’s very rare to get something out of left field. It’s simply steady as it goes for BCE.

Aritzia (ATZ)

The company posted earnings per share of $0.61. That was well above analyst estimates of $0.404. The company also posted revenue of $453.32 million, exceeding expectations by 23%. Aritzia is the fastest-growing retailer in the country, seemingly finding the sweet spot when it comes to pricing and quality. On a trailing 12-month basis, the company posted top-line growth of 52.8% and increased net income seven-fold. It will be very interesting to see if it can keep this trajectory, primarily fueled by an expansion into the United States, a market that offers incredible growth potential. 

Lightspeed Commerce (LSPD) 

It reported earnings that topped estimates in terms of revenue, net income and earnings before interest, taxes, depreciation and amortization (EBITDA). Lightspeed Commerce has been heavily scrutinized by analysts and short-sellers. It not only grew revenue by 155% year over year, (70%~ of it being organic growth) but it also bumped its fiscal 2022 guidance. Losses as a percentage of revenue declined, and the company announced a new chief executive officer. Dax Da Silva steps down as CEO, taking a lower role but he will still be very involved with the company. Profitability has been an issue, and it looks like we’ll be getting some guidance on the path to it next quarter. Acquisitions will slow in 2022, and I will be interested to see how this one performs in the midst of a massive tech selloff.

CN Rail (CN) 

CN Rail posted earnings of $1.71 per share and revenue of $3.75 billion. Both topped estimates of $1.53 and $3.66 billion, respectively. More importantly, the company increased its operating ratio to 57.9%, a 3.5% increase from the previous quarter. And it delivered record free cash flow of $3.29 billion. This is likely why the company was able to come through with a 19% increase to the dividend. The company also appointed a new CEO and settled its long-standing dispute with TCI Fund Management. The company is targeting $4 billion in free cash flow over the next year.

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