News and analysis
Broadcom is an American semiconductor and infrastructure software development company. Soon it is expected to close a merger deal with VMware, a cloud computing and visualization company, that will open new cross-sales opportunities for Broadcom to boost its revenues. Broadcom stocks are now 25% off their peak values.
According to the Q3 FY 2022 financial report that ended July 31, consolidated revenues grew by 25% year-over-year to $8.46 billion, and EPS went up by 40% to $9.73 per share. The semiconductors segment, that added 32% year-over-year, was the primary driver for the company’s profit. The company’s free cash flows (FCF) topped $4.3 billion, allowing it to spend $1.7 billion on dividends and 1.5 billion on the shares repurchase program. The company is planning to continue spending at least 50% of FCF on dividends that added 43% every year on average since 2016.
According to the Q4 FY 2022 forward guidance, the company is expecting its revenues to go up by 20% year-over-year to $8.9 billion and for EDITDA to go up by 25% to $5.6 billion. Broadcom has great experience in expanding its product portfolio by M&A operations, and apparently it will continue on this way. The company is also expected to benefit greatly from the $52.7 billion CHIPS bill in the United States.
Avalanche
is ranked by Coinmarketcap at the 12th position by market cap with
$7.8 billion, which is 4% less than Ethereum’s market cap. AVAX prices dropped
by 82% of its peak values, allowing investors to buy it at early 2021 prices.
Avalanche’s infrastructure consists of three logically isolated networks, each
of these with their own processing, validators, and own set of rules.
This
platform is often compared to the existing internet web infrastructure with
core connection protocols like HTTP, surrounded by a huge number of networks to
their apps. Avalanche allow for the creation of public and private systems as a
blockchain or DAG (Directed Acyclic Graph) and for the use of different virtual
machines for apps, including EVM engine (Ethereum Virtual Machine) that allows
Enthereum network programs to be developed.
Avalanche
includes C-chain to create smart contracts that are processed on an advanced
EVM engine, P-Chain that coordinates validators that process transactions and also
allows for the creation and management of new subnetworks, and X-Chain which is
a directed acyclic graph regulating issuance and trade of cryptoassets. DAG
systems record new transactions on top of the old ones, allowing for processing
speed to be increased and for capacity substantially. It is quite different to
other blockchains, where transactions are compiled in blocks in order to be
processed.
The
advantage of Avalanche is that it provides anyone with the opportunity to
create his or her own isolated blockchain with its own set of parameters,
including access to apps and the programming language with which it will work.
Every subnetwork can process around 4,500 transactions per second compared to
14 processed by the Ethereum network.
Costco
Wholesale Corporation has presented quite disappointing earnings report for the
Fiscal Q1 2023. Revenues were reported up 8.1% year-on-year to $54.44 billion
missing expectations of $54.65 billion. This is obviously not the reason for
long-term investors to remove COST stocks from their portfolios as the company
is set to maintain strong financial discipline and cost structure, not to
stimulate high growth in the short term at any cost.
The operational
margin in financial Q1 2022 was at 3.4%, and in Q1 2023 it was 3.2%. Costco is
aiming to provide the most reasonable prices on their products to keep their
clients loyal. That is why the operational margin is suffering. Meanwhile, EPS
was up by 4.4% to $3.1, and membership fees rose by 6% year-on-year. So, the
strategy seems to be buying itself.
Inflation
in the United States is expected to return under control over the next year.
So, there will be no need to deliver various marketing activities like coupon
sales and others while loyal clients will be grateful for the support during
the period of uncertainty. Costco is planning to open 24 new stores in 2023,
increasing its potential to generate revenues.
ETH is a
native token for the Ethereum blockchain and is one of the two most reliable
digital assets in the market along with Bitcoin. Ethereum is the first platform
that became a hub for thousands of blockchain apps and other digital solutions.
The recovery of ETH prices to November 2021 peaks at $4,900 would bring
investors 190% profit.
Second
layer solutions (Layer2) were introduced to improve stability and effectiveness
of the Ethereum blockchain. These are blockchain network add-ons that are added
on top of the primary blockchain. The most popular add-ons are Arbitrum,
Loopring, Immutable X, and Polygon that have recently partnered with Meta
(Facebook owner). In other words, the Ethereum blockchain network has a much
broader use than the native blockchain itself.
Ethereum
developers promise to release a new Proof-of-Stake (PoS) consensus protocol in
late 2022. This protocol will allow miners to stake tokens to a special deposit
to mine blocks. Some networks within the Ethereum blockchain have moved to PoS
protocol this summer, while others are expected to move to this protocol in the
middle of September. This move will
allow for the increase of processing capacity of the network to almost 100,000
transactions a second from the existing 30 transactions and lower commissions.
This would also allow for ETH to switch to the deflation model when coins are
algorithmically burned, while some coins would be removed from circulation as
they would be blocked by staking - more than 13 million ETH or 10% of overall
coins in circulation are blocked by staking. The problem is that coins are
blocked for a long period of time and cannot be sold or exchanged for fiat
currency.
SAP stocks have
lost 30% since the beginning of 2022. The German tech company develops
enterprise software and solutions to manage business operations. For example,
one of its services can be used to
manage all business travel financial activities and related spending. In other
words, it is quite a routine company with a stable and strong cash flow. Once SAP
software is installed on a corporate level it is hard to do without it as it is
deeply integrated into the business core processes. Moreover, SAP is restructuring
its business model around its subscription base and this will allow for cash
flows to be even more predictable and balanced through the financial year. Such
a model is in favourable to Wall Streel investors.
The war in
Ukraine has a 300-million-euro negative effect on SAP business, and it is only
a marginal 1% of the overall revenue base for the company, while its dominance
in the ERP segment is secure. The revenues added 11% year-on-year to 7.08 euros
in Q1 2022. The revenues grew by 6% in Q4 2021.
The company
has made some successful M&A deals, acquiring Qualtrics, a cloud-based
subscription software platform, that delivered +48% revenue in Q1 2022. This
company had a gross margin above 90% in 2021 while SAP’s gross margin was at
70% for the same year.
SAP
management promised to triple its cloud-based business by 2025, and boost
revenues to 22 billion euros, while operational profit is forecasted to grow by
40% from the current 8.4 billion euros. This is a very extensive growth for the
company that has a high P/E ratio at 17. The company may not perform very high
growth rates as its younger tech sector peers, but it may certainly recover to
new all-time highs in the long-term perspective. However, the sector may
require several quarters to recover, and the recovery would be headed by such
reliable companies as SAP with a low risk profile.
