Ticker Reports for September 1^st

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Veeva's Stock Jumps on Stellar Q2 Results—Don't Miss Out

Shares of cloud-based software provider Veeva Systems Inc. (NYSE: VEEV) have been on a wild ride in the last year, surging by more than 40% from last November through March 2024 before giving up nearly all of those gains by June. The stock price floated toward the lower end of that range for most of the last three months, but this week's earnings report has helped to boost upward momentum once again.

As a $35-billion firm catering to healthcare and life sciences clients, Veeva is not among the most-talked-about software companies. Indeed, hardware makers like NVIDIA Corp. (NASDAQ: NVDA) have, as a group, largely outperformed software-focused peers in the last several quarters. Why is it, then, that Veeva shares have spiked by more than 13% in the last month?

Veeva's All-Around Strong Fiscal Q2 Performance and Guidance

Veeva's earnings report for the fiscal second quarter, which ended July 31, seems a likely catalyst for some of the recent share price advances. The company had an all-around excellent quarter, topping analyst forecasts and internal guidance on multiple fronts.

Second-quarter revenues of $676.2 million were up 15% year-over-year, while non-GAAP fully diluted net income per share was up just over a third to $1.62. Even more impressive was a 60% improvement over the prior-year quarter's operating income, as Veeva reported $166.5 million for the most recent quarter.

Digging deeper, key details of this strong fiscal performance include subscription service revenues and the relative pace of growth of top- and bottom-line figures. Veeva's subscription services include the bulk of its product offerings and have the benefit of generating recurring revenue over the long-term. Subscription-related revenue growth of 19% year-over-year outpaced overall revenue improvement, suggesting a strong core to Veeva's business.

Veeva's bottom line grew year over year at about twice the pace of its top line in the most recent quarter. It managed to do so in part because it reduced the professional services component of revenue costs as well as general and administrative expenses compared to this period last year. Should this be sustainable for future quarters, it could be an indication that Veeva is building efficiency by trimming excess costs.

Veeva is optimistic about the back half of its fiscal year. It raised forward full-year guidance for operating income by $10 million to $1,080 million and fully diluted net income per share to $6.22 from $6.16. It also boosted the lower-end of revenue expectations while leaving the upper-end unchanged from the previous report.

Both Large and Small-Scale Customer Wins

In prepared remarks, founder and CEO Peter Gassner highlighted that Veeva won a major contract with a top-20 biopharma company. Contracts with large companies like this one are a key component of Veeva's revenue. Importantly, though, it has also made efforts to boost its subscription business among small companies. In the second quarter, Veeva launched its Vault Basics suite of products specifically for emerging biotech firms with fewer than 200 employees and reported 12 early adopter contracts in the initial months after release.

Veeva: Watch For AI Developments

Like most other tech-focused firms, Veeva continues to navigate the rapidly shifting AI landscape. So far, the company has yet to settle on a strategy that has fundamentally transformed its business or contributed significantly to sales. However, Gassner did indicate two promising areas in development that investors may want to watch out for. First, Veeva's Vault Direct Data API is now used by some early customers to power AI applications. Additionally, Veeva's AI Partner Program continues to grow to about 30 use cases spanning more than 10 AI partners. To be sure, there remains significant space for expansion in this area, but Veeva has reiterated its commitment to a measured and long-term approach to developing AI tools.

Encouraging Results, Optimistic View

It may seem obvious that investors would react to Veeva's strong quarterly results with enthusiasm.

Reflecting on its May quarterly report, which was positive, it's evident that stability isn't guaranteed—subsequent results led to a brief, significant dip, marking Veeva's lowest share price in 2024.

The reaction immediately following this most recent report was markedly different, and the company's optimistic view of the future could help fuel further gains.

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The Solar Stock Battle: Is Daqo or JinkoSolar Your Next Big Win?

The U.S. added a record-breaking 32.4 gigawatts of solar electric generating capacity in 2023, evidence of the continued growth of the renewable energy industry thanks to strong customer demand, supportive government policies, and rapid advances in solar technology. A long-term shift in the energy sector toward decarbonization through green energy sources is well underway and likely to continue for years to come.

In addition to the environmental advantages of solar energy, there is potential for investors to capitalize on a secular shift in the make-up of the energy sector more broadly. Selecting from the large pool of solar stocks is a difficult prospect, though, particularly as the market continues shifting and companies strive for dominance.

First Solar Inc. (NASDAQ: FSLR) is one of the largest companies in the solar space at just under $24 billion in market value. With over $1 billion in sales and a net income of almost $350 million in the most recent quarter, First Solar provides a benchmark for smaller, up-and-coming solar companies seeking to emerge as major players. Two such firms—Daqo New Energy Corp. (NYSE: DQ) and JinkoSolar Holding Co., Ltd. (NYSE: JKS)—reported earnings in the last week of August, allowing for a direct comparison. Unfortunately, both of the smaller companies face significant challenges, as revealed in their recent financials.

Daqo New Energy: Losses, Declining Sales and Prices

Chinese polysilicon component maker Daqo New Energy primarily sells its products to other solar manufacturers. As such, when the broader solar industry faces external challenges like oversupply, Daqo is particularly impacted. Market prices across the industry fell in the second quarter due in part to an inventory glut, in some cases to levels below production costs—as a result, Daqo's inventory market value fell below book value, and it recorded an inventory impairment expense of $108 million.

The impact of this unique expense on Daqo's broader financials for the quarter was significant. For example, the company reported net loss attributable to shareholders of just under $120 million as a result, worse than analysts expected, as well as gross losses of $159 million compared with gross profit of $72 million in the first quarter of the year.

Despite the impact of the impairment in the latest quarter, Daqo's bottom-line struggles are persistent. The company has failed to beat consensus earnings per share estimates each quarter for the last year. And despite an average polysilicon selling price of $5.12 per kilogram, down more than $2.50 from this time last year, Daqo's sales volume declined by more than 20% over that time period as well. These figures suggest deeper issues that have likely been exacerbated by industry-wide challenges in recent months.

JinkoSolar: Revenue Sluggish, Shipments Grow

Like Daqo, JinkoSolar posted net losses for the second quarter as a result of oversupply and low prices across the industry. The firm reported net loss of almost $14 million, or diluted loss per American depositary share (ADS) of $0.29. Revenue growth was up 4.4% sequentially but down almost 22% year-over-year.

In contrast to Daqo, however, JinkoSolar's shipments and demand continue to surge. The company reported year-over-year module shipments growth of more than 34%, with total quarterly shipments up 36% over the same period. This rapid improvement made it possible for JinkoSolar to become, during the second quarter, the first solar module maker to deliver a total of 260 GW solar modules. Newly added installations in China helped to drive this growth, but the company also experienced substantial growth of around 20% year-over-year in its total solar module exports.

All of this suggests that JinkoSolar's product lineup and positioning may help to it rebound along with the broader industry more quickly than a rival like Daqo.

How do Daqo and JinkoSolar Stack Up?

Based on recent reports, neither Daqo nor JinkoSolar has approached the success of First Solar. The largest of the three companies maintained profitability at a time when smaller competitors were stuck navigating excess inventory and historically low prices. In the short term, First Solar may be the stock for investors to watch most closely. However, the rapid growth in demand for JinkoSolar's products makes it a worthwhile company to keep an eye on, and Daqo's position could quickly change if there is a broad increase in prices industry-wide.

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Are These Chinese Stocks a Buy? Michael Burry's Top Picks Say Yes

As several popular U.S.-listed Chinese stocks begin to show signs of a rebound, investors are left wondering whether now is the right time to jump back into the market or if these gains could be another value trap. The iShares China Large-Cap ETF (NYSE: FXI) has managed to buck its downtrend this year, trending nearly 10% higher year-to-date and consolidating above its 200-day SMA in a bullish pattern. However, with lingering concerns about the Chinese economy and regulatory environment, is it time to invest in these stocks, or should caution prevail? Let's take a closer look.

Can the Rebound in Chinese Stocks Sustain Itself?

Since the Lunar New Year, China's equity markets have shown signs of recovery, driven by better-than-expected GDP growth and positive development in the manufacturing and services sectors. Despite ongoing challenges such as a struggling property sector and geopolitical tensions, government measures like increased infrastructure investment and capital market reforms support the rebound.

China’s GDP grew 5.3% in Q1 2024, exceeding expectations and signaling a stronger-than-anticipated economic performance. This growth has contributed to the attractiveness of stock valuations, with the CSI300 and MSCI China indices trading below their historical averages. Looking ahead, earnings for 2024 and 2025 are expected to recover, particularly in sectors like industrials, utilities, and IT.

Analysts at Goldman noted that recent capital market reforms in China have also played a crucial role in this recovery. These reforms aim to balance market development and investor protection, focusing on improving IPO rules, enhancing disclosure, and supporting key areas such as technology and green investments. These measures are designed to foster a more robust and sustainable market environment.

While some obstacles remain, China's supportive policies and attractive valuations present a compelling opportunity for investors.

One investor who firmly believes in the rebound is Michael Burry, the investor made famous by the movie The Big Short. Let’s look at two U.S.-listed Chinese stocks that Burry holds in his portfolio, which might be a good option for investors seeking exposure to China.

Michael Burry’s Big Bet: Alibaba as His Top Portfolio Holding

Alibaba Group Holding Limited (NYSE: BABA) is a Chinese eCommerce and internet technology powerhouse. Its core platform, Alibaba.com, ranks as the world’s third-largest eCommerce platform by sales. The company boasts a market capitalization of $205 billion, a modest dividend yield of 1.21%, and a P/E ratio of 18.88.

Michael Burry has invested significantly in Alibaba, putting just over $11 million into the stock, making it the largest holding in his portfolio. This position, which he initiated in the first quarter, remains his top investment. After a mixed start to the year, Alibaba's shares have gained momentum, now up 5.4% year-to-date, and are solidly trading above key moving averages, including the 200-day SMA. The recent upward trend was bolstered by the company’s latest earnings report on August 15, where it exceeded EPS estimates by $0.20. For the full year, Alibaba is projecting earnings growth of 11.35% and is trading at an attractive forward P/E of 8.6.

Michael Burry Bets Big on Baidu Despite Recent Struggles

Baidu, Inc. (NASDAQ: BIDU) is a leading Chinese technology company specializing in internet-related services and artificial intelligence. Despite attractive valuation metrics, including a P/E ratio of 10.97 and a forward P/E of 7.24, which suggest the stock could be a potential value buy, BIDU has been caught in a steep and steady downtrend, with shares down nearly 30% year-to-date, proving to be a value trap.

Nonetheless, Michael Burry has increased his stake in Baidu by more than 30,000 shares, bringing his total position to 75,000 shares valued at nearly $6.5 million as of June 30. While the stock’s current trend and market sentiment appears bearish, analysts remain optimistic. Based on 16 ratings, Baidu holds a Moderate Buy rating with a consensus price target of $137.13, indicating a significant potential upside of 63%.

🌟 Are These Chinese Stocks a Buy? Michael Burry’s Top Picks Say Yes

Ticker Reports for September 1^st

Veeva's Stock Jumps on Stellar Q2 Results—Don't Miss Out