Ticker Reports for May 30th
Pure Storage Stock Spikes and Analysts are Jumping on Board
Pure Storage Inc. (NYSE: PSTG) delivered a stellar first-quarter earnings report after the market closed on May 29, 2024. Not surprisingly, PSTG stock was up more than 2% the day after the report, and analysts are quickly expressing a bullish sentiment that may drive the stock even higher.
In the quarter, revenue of $693.48 million exceeded estimates for $680.91 by 1.85% and was 18% higher year-over-year (YOY). However, it was the earnings that really got investors excited. The 32 cents per share was 52% higher than the 21 cents per share that was expected. The company's annual recurring revenue continues to grow at an impressive YOY clip, 25% to be exact.
The company's forward guidance was also bullish, with estimates for 10.5% revenue growth and operating margin growth of 17% on a non-GAAP basis.
Where Does All That Data Go?
Even if you're new to technology, it's easy to grasp that training AI models requires data. And not just a small amount—these models need vast quantities of data, often on a massive scale.
So, a logical question is, where does all that data go? Pure Storage helps answer that question. The company offers flash memory-based server storage solutions with advanced management software that help companies access AI-driven insights.
Flash storage is becoming known as the next-gen data center. The technology offers faster access times, improved energy efficiency, greater storage density, and improved reliability compared to traditional data centers. However, the company's solutions can also work in tandem with a company's existing data centers.
Analysts Are Upgrading Their Price Targets
If the chip sector is the leading edge when it comes to investing in the future of AI, data storage won't be far behind. Analysts know it, and that's why they're getting behind PSTG stock in a big way.
Wedbush reiterated its Outperform rating for the stock the day before earnings and raised its price target from $50 to $70. Since then, the Pure Storage analyst ratings on MarketBeat show that four analysts have increased their price targets for PSTG stock. That list includes Northland Securities, which downgraded the stock from Outperform to Sector Perform but still raised the target price.
It's also significant to note that the lowest of these price targets is 19% higher than the current consensus price target.
Getting Involved with PSTG Stock
There are better options if you're looking for a pure-play among artificial intelligence stocks. But if you're looking for stocks critical to building out the AI infrastructure, there appears to be more upside in PSTG stock.
Pure Storage is up more than 76% in 2024, with much of that gain occuring after the company's fourth-quarter earnings report in February. At that time, the stock gapped up about 35%. But this is when you must return to the analyst's updates. The highest of the price targets is $80. That would be an increase of 28%, suggesting that a move of approximately the same magnitude could happen again.
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3 Penny Stocks Trading Abnormal Volume Today
As the overall market trades just 1.5% away from its all-time high and up over 4% on the month, there has been a noticeable increase in risk appetite and speculation in small-cap penny stocks by retail investors. This surge in interest follows the meme mania experienced earlier in the month. However, trading or investing in small-cap stocks has increased risks due to heightened volatility, small floats, low average volumes, and typically weak fundamentals.
Here are three penny stocks that have seen impressive abnormal volume and price surges today:
Smart for Life Inc.
Smart for Life (NASDAQ: SMFL) acquires, develops, manufactures, operates, markets, and sells nutraceutical and related products in the United States and internationally.
Today, the stock experienced a dramatic surge, trading 25 million shares compared to its average daily volume of just 800k. This increased trading activity propelled the stock price upwards by over 50%. The catalyst for this movement was the company's announcement of completing a comprehensive restructuring plan. The plan included several strategic changes such as recapitalization, selling non-performing assets, selling and leasing back its Doral manufacturing facility, selling 51% of Ceautamed Worldwide, and liquidating its senior debt facility with Diamond Creek Capital.
Despite the positive news, Smart for Life is still down 50% year-to-date and has a history of closing weak after volume surges. The stock’s volatility is amplified by its micro float of under 500k shares, maintaining an overall downtrend on a higher timeframe.
Momentus Inc.
Momentus (NASDAQ: MNTS) and its subsidiaries operate as a commercial space company, providing in-space transportation services.
The stock saw a significant increase in trading volume, with over 40 million shares traded today, far exceeding its average daily volume of 178k. This surge resulted in the stock price rising by over 11%. The driving force behind this increase was the announcement that Momentus secured a contract from the Defense Advanced Research Projects Agency (DARPA). This contract aims to support the design and in-space demonstration of technologies that will enable the construction of large-scale structures in space.
However, it's important to note that the stock has been in a significant downtrend, down over 60% year-to-date and nearly 90% on the year. The stock's small float of just 16 million shares contributes to its price volatility, making it a high-risk investment.
Sharps Technology, Inc.
Sharps Technology (NASDAQ: STSS) is a medical device company that researches, designs, develops, manufactures, distributes, and sells safety syringe products.
The stock broke its major downtrend this week and experienced a notable surge in volume, trading over 90 million shares today, compared to its average volume of 17 million shares. This activity pushed the stock up by almost 20% today and over 100% on the week. The recent surge was driven by the company's announcement of a 5-year, $200 million syringe sales agreement and an amendment to an asset purchase agreement to begin producing pre-fillable specialty copolymer syringes in the U.S.
Like the stocks mentioned above, even considering today's impressive surge, the stock remains well below its 52-week high, down almost 50% from that level. Investors should be cautious, as the company, like other small-cap stocks, might look to dilute shares to raise much-needed operational capital. This potential for share dilution is a significant risk to consider.
The Bottom Line
The broader market's momentum and impressive staying power, as well as the resurgence of risk appetite among retail investors, have led to significant interest in small-cap penny stocks. However, while many of these stocks have shown impressive volume and price surges, they come with substantial risks. It's crucial for investors to exercise caution and consider the potential for high volatility and the likelihood of share dilution when investing in these stocks. Being informed, conducting thorough due diligence, and being prepared is key to navigating penny stocks' unpredictable and uncertain world.
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As gold continues to soar, this ex-Goldman Sachs VP says DON'T buy bullion or mining stocks. Instead, he's just shared a "gold bank" that uses about $10 of your money to harness the power of two ounces of pure gold (worth about $4,200 right now).
Salesforce Falls 25% Into A Once in a Lifetime Opportunity
Salesforce (NYSE: CRM) stock went on sale following the Q1 release, providing investors a once-in-a-lifetime opportunity. It is not every day that a high-quality, industry-leading, blue-chip stock on track to deliver robust capital returns provides a 25% discount, so it likely won’t last long. This is the kind of opportunity investors dream about because the move is due to a reset of expectations, not any fundamental problem with the business.
Marketbeat.com tracked a dozen revisions within the first twenty-four hours of the release, and they were a primary factor in the decline in stock price. Many, but not all, lowered their price targets, with some as low as $250. However, the takeaway is that no analysts lowered their rating, the consensus is a Moderate Buy, and the consensus price target implies a 35% upside from the post-release price point. The price target is edging lower from the pre-release level but only marginally, putting a cap on the market but giving no reason for the steep decline.
The takeaways from the analyst chatter are encouraging. The company’s soft guidance caused a reset of expectations, but the forecasts are still robust. The analysts see Salesforce.com as focusing on profitable growth in the near term rather than growth at all costs and being undervalued relative to its peers. Disciplined spending and its position within the industry should help sustain margin improvements, and AI is a tailwind. Regarding the value, the post-release plunge puts the stock at 20X this year’s earnings and lower compared to next, a deep value compared to other blue-chip tech with similar growth.
Salesforce Has Solid Quarter: Guidance is Tepid
Salesforce had a solid quarter, but results were mixed relative to the analyst expectations, the only negative in the report. The top-line $9.13 billion is up 10.7% compared to last year on strength in subscription and support but fell short of forecasts. The analysts expected another 20 basis points in revenue and stronger guidance. Subscription and Support, the company’s largest segment, grew by 12%, driven by expanding client base, higher pricing, and penetration.
Margin is the brightest spot in this report. The company’s gross and operating margins widened significantly, with a quadruple-digit basis point gain in the generally accepted accounting principles (GAAP) operating margin and a 450 basis point gain in the adjusted margin. Adjusted operating margin widened to 32.1% and is expected to widen further over time. Adjusted earnings per share (EPS) is up 45%, aided by share repurchases, cash flow is up 39%, and free cash flow is up 43%. Free cash flow came in at $6.08 billion, leaving the capital return to free cash flow payout ratio at 42%.
Guidance is good but left the analysts cold because growth is weaker than expected and slowing from higher paces. The company forecasted a 7% to 8% revenue gain compared to the 8.5% gain expected by analysts, and the full-year outlook is equally tepid. Salesforce reiterated the revenue growth forecast but reduced the outlook for earnings growth. The salient point is that free cash flow (FCF) growth was reiterated, leaving the outlook for capital return unchanged.
Salesforce is a Budding Dividend Aristocrat
Salesforce has only paid dividends briefly, but investors can expect long-term value-building. The payout is worth a low 0.75% (annualized) today but beyond safe at 6.5% of the free cash flow. Dividends can be expected to continue and to grow over time, aided by repurchases. The cash flow and balance sheet allow for beneficial repurchases, which reduced the count by an average of 0.3% in Q1, providing some leverage regarding the dividend payment. The Q2 dividend declaration is expected soon.
Salesforce Falls to a Critical Support Level
Salesforce stock hit a top earlier this year, corrected by 15%, and added another 20% following the release. The move, driven more by sentiment and the impact of slowing growth, puts the market near a critical support level at $225. That level is consistent with previous support and a significant market reversal and should provide solid support now. In this scenario, CRM could begin to rebound as soon as the opening bell, and there are already signs of buying at the new lows. If not, CRM could fall below $225 and move to $200 or lower.
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