News and analysis

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.

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 12^th 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.