Developments in the Russia – Ukraine conflict continued to drive market sentiment last week. Commodities surged as the U.S. announced it would ban Russian imports, and stocks plunged as ceasefire talks between the two sides broke down. The Dow lost 1.9% while the S&P 500 sank deeper into correction with a 2.8% loss. The Nasdaq finished the week 3.5% lower and in bear market territory, 20% below its November high.
All eyes will be on the Fed next week as market watchers await a pivotal decision following the monthly FOMC meeting. We’ll hear from Federal Reserve Chairman Powell on Wednesday after the 2-day meeting. Although Fed Chair Powell previously stated he would support a quarter-percentage-point rate hike, he said the central bank would closely monitor the impacts of developments in Ukraine. Investors will also be watching for more clues on inflation with the release of the Producer Price Index (PPI) slated for Tuesday.
Volatility is expected to persist in the days ahead as many questions remain unanswered. This week our team has a few recommendations, including a promising petrol play as well as a high-growth name currently trading at a bargain price.
The world’s largest independent petroleum refiner and the second-largest producer of renewable fuels, Valero Energy (VLO) tops our list of stocks to watch this week based on escalating global demand for refining and increasing margins.
The company’s products include gasoline and kerosene, diesel oil, jet fuel, lubricating oils, as well as non-fuel petroleum derivatives like asphalt. Its Diamond Green Diesel joint venture is the world’s second-largest producer of sustainable renewable diesel, which gives the company a degree of protection from pricing and political pressures.
VLO’s share price has risen 46% since hitting its bottom in August last year, thanks to support from rising earnings and revenues. Most recently, Q4 revenues jumped 116% year-over-year, passing the $28.6 billion forecast to hit $35.9 billion. Adjusted earnings came in at $2.47 per share, the third quarter in a row of EPS profits and well above the year-ago quarter’s $1.06 EPS loss.
Valero rewarded shareholders with $401 million in dividends for Q4 and $1.6 billion for 2021, holding true to its nine-year history of increasing its dividend. For the full year, the payout was a sustainable 50% of net cash flow from operations. VLO’s current dividend payment of 98 cents per common share annualizes to $3.92 and gives a 4.5% yield.
Roblox Corp (RBLX) has been hit hard recently as investors have taken a pessimistic view of the company’s growth trajectory. The stock has lost nearly 50% over the past month since the company reported Q4 and 2021 results.
As per the company’s Q4 2021 earnings presentation, bookings increased by +20% year over year to $770.1 million. Notably, this was the slowest year-over-year growth in the company’s bookings in the past 11 quarters. For the sake of comparison, RBLX bookings increased 161% in Q1, 35% in Q2, and 28% in Q3.
The company could struggle to keep up as it laps its stellar performance from the first quarter of last year, but bookings growth seems likely to accelerate in the second half of 2022 as expansion in promising Asian markets is on track to offset weakness in U.S. markets. RBLX derived 23% of its total daily active users in Q4, up from 15% in Q4 2020. What’s more, daily active users in two key Asian markets, India and Japan, saw their respective daily active users increase by more than +100% year over year in Q4 2021.
The consensus forecasts currently call for Roblox to grow earnings by a respectable 32.5% in the first quarter of 2022 and to cut its losses in half (to $0.22 per share). The analysts offering recommendations for the stock rate it a Buy and give it an average price target of $77.42.
Leading global provider of space-based data, analytics, and services, Spire Global Inc. (SPIR), had been in business for nine years before the company went public via SPAC merger in 2021. After stumbling out of the gate and lowering guidance in its first quarter, the stock has fallen 85%, creating a possible buying opportunity for anyone looking to get in on a pure-play space company at a low price.
The space industry is still in its early stages of development, making space investing speculative and risky. As a pioneer, by the time SPIR made its way to the New York Stock Exchange, its global satellite infrastructure had been fully deployed for some time – and operating at a very high scale.
The company has more than 110 satellites currently in orbit, collecting powerful insights about Earth and sending them to Spire’s 72 antennas at ground stations in 16 countries. Terabytes of data are then processed and shipped to hundreds of customers worldwide, giving commercial and government organizations the competitive advantage they seek with insights from space.
Spire’s subscription-based business model provides predictable income for monetizing that data, where an annual subscription can cost anywhere between tens of thousands of dollars to the very high millions. As a result of their expanding network of subscribers, annual recurring revenue (ARR) in 2021 increased 96% year over year to $70.8 million.
For the fourth-quarter revenue was $15.0 million, an increase of 106% versus that of the prior-year period. Full-year 2021 revenue was $43.4 million, an increase of 52% versus that of the prior fiscal year. The company sees 2022 revenue of $85-$90 million. Well above the consensus forecast of $76.75 million, suggesting that Wall Street may be underestimating this small-cap’s potential.
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