TMTB Morning Wrap
Good morning. QQQs +50bps; yields flattish; China flat; BTC -60bps. Not much news out there pointing to why market down so let’s get straight to it…
SAP +3.4%: Another solid beat with accel in Current Cloud Backlog and cloud revs, better margins, and upping FCF guide
CCB came in at 29% c/c (28% ex WalkMe) vs 28% last q; Cloud revs 27% c/c vs 25% last q and cloud ERP growth of 36% c/c vs 33% last q.
Margins came in a 26.1% vs stret closer to 23.5% due to big license beat (-14% vs street at -30%) and lower R&D
Guide for 2025 was raised by 400M at the midpt for cloud and sw revs and FCF range updated to 3.5-4B from just 3.5B. Message on the call was that Q4 CCB would be 28%.
In the release, SAP called out uncertain macro going forward, but they sounded good on the call saying whether its “the chemical industry or in the auto industry, we see no slowdown.” Mgmt pointed out several large S/4HANA Cloud customers went live globally this quarter, with notable examples in North America cited such as NVIDIA which took only 6 months to ramp, highlighting speed that companies can migrate to the cloud. AI developments are becoming a bigger part of SAP’s strategy, with 30% of deals encompassing an AI component to them. Large deals accounted for ~60% of order intake, pointing to the traction of Rise in the existing customer base. Mgmt talked up agents which will start shipping in Q4.
Street generally positive on results and raising PTs. Bulls will continue to point to a company that is accelerating growth with a FCF multiple (25x CY26 FCF) that is cheaper than MSFT/ORCL on both a growth adjusted and absolute basis. Not much pushback from bears other than SAP raised their cloud and sw revs and not cloud revs which implies its mainly maintenance & licenses, but all in all seems like co is being conservative in their guide.
LOGI -8%: Solid beat with better GMs but revised guide only in line with street and investors worried about sustainability of margins and inventory build into holiday season
Q2 EPS $1.20 vs. consensus $1.11;
Q2 revs $1.12B, in-line with consensus $1.12B;
GM 44.5% vs street at 41.9% driving 10% EBIT beat
Boosts FY25 revenue view to $4.39B-$4.47B from $4.34B-$4.43B
Raises FY25 operating income view to $720M-$750M from $700M-$730M.
Sell-through +4% yy and sell-in was +6%. Last quarter, sell-through was +3% and sell-in was +12%. Mgmt noted channel inventory well within range ahead of holidays
VZ: Looks inline with 2024 guide reiterated
Co will update us on its broadband strategy with expectation for an update on FWA targets & Fiber build pace. Call at 9am est.
Q3 Results
- Consumer postpaid 81k vs street at 86k; o/w +18k core vs street +15k
- Consumer Fios net adds +39k in loine with street
- FWA +209k vs street at +354k
- Operating revenue $33.3B vs. $33.3B y/y, EST $33.45B
- ADJ EPS $1.19 vs. $1.22 y/y, EST $1.18
- ADJ EBITDA $12.5B, +2.5% y/y, EST $12.44B
- Consumer revenue $25.4B, EST $25.5B
- Business revenue $7.4B, EST $7.38B
- Wireless Service revenue $19.8B, EST $19.88B
F/Y GUIDANCE
- Still sees ADJ EPS $4.50 to $4.70, EST $4.58
- Still sees wireless service revenue growth +2% to +3.5%
- Still sees ADJ EBITDA +1% to +3%
- Still sees capital expenditure $17B to $17.5B, EST $17.17B
3p Roundup:
PINS: Hearing Clev out neg calling out CPG pressures into Q4
SNOW: Hearing Clev downgraded this morning on limited new product adoption
CVNA: Hearing boutique saying units accel’d again in latest week to mid 50s. Yipit likely out tomorrow
CHWY/W: Hearing downtick in weekly Yip data…explains weakness yesterday in both names
COHR: Rosenblatt downgrades to Neutral
Rosenblatt downgrades after stock is up 126% year-to-date, which they attribute to leadership in Datacom transceivers for AI, a strong new CEO, and the potential for the Telecom and Industrial businesses to improve. While Rosenblatt believes COHR will be "a long-term AI winner," and think the stock looks good for investors with a three-year time horizon, it sees FY25 headwinds that "may disappoint more bullish expectations.”
AMD/NVDA/AVGO: Barclays deep dives into inference compute
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