Money & Markets Week Ahead for May 30, 2021: It’s a short trading week as the market is closed on Monday for the Memorial Day holiday. I look at the one IPO set to launch and dive into Canopy Growth earnings ahead of its quarterly report on Tuesday.
We’ll also get a peek at the state of manufacturing for May.
Here’s more of what to watch in the week ahead on Wall Street:
On the IPO Front
There is one initial public offering on the calendar this week.
dLocal Inc. plans to price its IPO on Wednesday. It will list on the Nasdaq under the ticker symbol DLO.
What it is: dLocal provides financial services to companies in emerging markets.
The company is based in Uruguay and develops technology that helps companies in Latin America, Africa and Asia to accept payments and other financial activities.
Its technologies include fraud management, marketplace services and a merchant dashboard.
In its F-1 filing with the Securities and Exchange Commission, dLocal said it works with more than 330 merchants in 29 countries with 2 billion total internet users reached.
The companies it lists as merchants include Amazon.com Inc. (Nasdaq: AMZN), Spotify Technologies SA (NYSE: SPOT) and Microsoft Corp. (Nasdaq: MSFT).
dLocal grew its total revenue from $136 million in 2016 to a record $2.1 billion in 2020.
In the first three months of 2021, the company reported total revenues of $40.2 million compared to $18 million reported in the same three months of 2020.
One of the reasons for the big jump in revenue is the company was able to get even more money from its list of customers. The company said its net revenue retention rate was 171% in 2020 — which is very high … and very good.
This indicates the sales team did a solid job at up-selling current clients.
Its total profit for Q1 2021 was $16.9 million compared to $553,000 in Q1 2020.
The offering: The company plans to sell 29.4 million shares at a price range of $16 to $18 per share.
The intent is to raise $500 million with the offering.
Primary investor Fidelity plans to purchase 20% of the shares when the offering is live.
According to Renaissance Capital, at a midpoint of $17 per share, dLocal would see a market value of $5 billion.
JPMorgan, Goldman Sachs, Citi, Morgan Stanley, Bank of America Securities, HSBC and UBS Investment Bank are all bookrunners on the deal.
The skinny: One big thing here is the company shows a lot of promise for growth.
Its total revenue from 2016 to 2020 is evidence of that.
It’s billed as a one-stop shop for payment processing in emerging markets, which means the competition isn’t that diluted … yet.
dLocal could be a good post-IPO bet as a play on both fintech and emerging markets.
It’s one to watch.
Deeper Dive: Canopy Growth Corp. Earnings
Cannabis market giant Canopy Growth Corp. (NYSE: CGC) will report its quarterly earnings this week.
Canopy is a Canadian-based company scheduled to report on Tuesday.
The company has been on an acquisition tear of late … recently announcing plans to buy Supreme Cannabis (OTC: SPRWF) for $435 million and AV Cannabis Inc. for an undisclosed amount.
It comes on the heels of its 2020 acquisition announcement to buy Acreage Holdings — a deal that went back and forth for more than a year — which is more of a partnership than a true acquisition.
Canopy Earnings Continue to Struggle
Canopy Growth's earnings per share have been in negative territory for the last two years.
In those two years, three quarters have surpassed nearly $2 per share in losses.
The problem is that cannabis companies bring in revenue, but they struggle to turn profits because of costs and lending restrictions — especially in the United States.
Canopy Growth has only beaten Wall Street expectations for earnings per share in four of the last 12 quarters.
Canopy Revenue Shows Upward Trajectory
Canopy Growth’s revenue has been consistently trending upward since before the COVID-19 crash in March 2020.
Cannabis sales moved up nicely during lockdowns as the industry was deemed essential, keeping dispensaries open in Canada and the United States.
In the fourth quarter of 2020, the company set a record for revenue with nearly $120 million in sales.
It has done a bit better beating Wall Street expectations for revenue — beating analysts in six of the last 12 quarters.
Wall Street is projecting the company to report earnings of minus-$0.20 per share on revenue of $124 million.
The skinny: Canopy Growth is one of the largest producers of cannabis in the world — by market capitalization.
However, the company continues to struggle to make profits.
Looking at Canopy Growth's earnings projections in this quarter, it is reasonable to expect EPS to be below expectations, with revenue being in line with projections.
Money & Markets Week Ahead: Data Dump
The Institute of Supply Management will release its manufacturing purchasing index for the month of May.
The index comes from a survey of manufacturing supply executives and measures new orders, backlog of orders, imports, exports, employment and prices.
The higher the index reading, the more confident industry insiders are for future growth expectations in the sector.
Manufacturing Index Slumped in April 2021
The index reached a 12-month high of 64.7 in March 2021 — reversing damage caused by the COVID-19 pandemic.
However, in April, the index lost ground and recorded its second-lowest reading of the year.
The April index was still higher than all of 2020.
It suggests confidence in the manufacturing industry remains better than all of 2020 but slightly lower than earlier in the year.
Analysts expect the index to tick up slightly to 60.8 for May.
Earnings Reports
To finish off the Money & Markets Week Ahead, here’s a look at some of the key earnings reports due out this week:
Monday
Memorial Day holiday — market closed
Tuesday
Zoom Video Communications Inc. (Nasdaq: ZM)
Bank of Nova Scotia (NYSE: BNS)
Hewlett Packard Enterprice Co. (NYSE: HPE)
Canopy Growth Corp. (NYSE: CGC)
Digital Turbine Inc. (Nasdaq: APPS)
Wednesday
NetApp Inc. (Nasdaq: NTAP)
Advance Auto Parts Inc. (NYSE: AAP)
Endeavor Group Holdings Inc. (NYSE: EDR)
Chesapeake Energy (Nasdaq: CHK)
Thursday
Broadcom Inc. (Nasdaq: AVGO)
Crowdstrike Holdings Inc. (Nasdaq: CRWD)
Lululemon Athletica Inc. (Nasdaq: LULU)
Docusign Inc. (Nasdaq: DOCU)
J.M. Smucker Co. (NYSE: SJM)
Friday
Phreesia Inc. (NYSE: PHR)
Uranium Energy Corp. (NYSE: UEC)
That’s all for this week.
Until next time…
Safe trading,
Matt Clark,
Research Analyst, Money & Markets
Matt Clark is the research analyst for Money & Markets. He’s the host of our podcast, The Bull & The Bear, as well as the Marijuana Market Update. Before joining the team, he spent 25 years as an investigative journalist and editor — covering everything from politics to business.
