Money & Markets Week Ahead for June 6, 2021: Coming off the shortened trading week, earnings season is starting to slow. I look at an IPO for a popular payments company and analyze the earnings of a recent meme stock.
We’ll also see how consumer prices fared in May. It should give us some insight into the state of U.S. inflation.
Here’s more of what to watch in the week ahead on Wall Street:
On the IPO Front
There several initial public offerings (IPOs) on the calendar this week.
Marqeta Inc. plans to price its IPO on Thursday. It will list on the Nasdaq under the ticker symbol MQ.
What it is: Marqeta provides customized credit cards for customers of companies like DoorDash Inc. (NYSE: DASH), Instacart and Square Inc. (NYSE: SQ).
In simple terms, the company developed a platform to create digital payments between businesses and its customers.
In its S-1 filing with the Securities and Exchange Commission, Marqeta works in 36 counties and has issued more than 320 million cards.
The company said it processed nearly 1.6 billion transactions around the world in 2020.
Marqeta grew its total revenue from $143 million in 2019 to a record $290 million in 2020.
In the first three months of 2021, the company reported total revenues of $107 million compared to $48 million reported in the same three months of 2020 — a 123% increase in top-line revenue.
In the first quarter of 2021, Marqeta’s gross margin was 46% compared to 38% for the first quarter of 2020.
Despite the gain in total revenue, Marqeta has experienced losses.
In 2020, the company reported net losses of $48 million. That loss was less than the $58.2 million in 2019.
During its fundraising rounds, the company collected nearly $502 million in equity investment from 83North, DFS Services, ICONIQ and Granite Ventures.
The offering: The company plans to sell 45.5 million shares at a price range of $20 to $24 per share.
The intent is to raise around $1 billion with the offering.
Presently, no current shareholders have plans to purchase shares at the IPO price.
According to Renaissance Capital, at a midpoint of $22 per share, Marqeta would see a market value of $12.4 billion.
JPMorgan, Goldman Sachs, Citi, Barclays, William Blair and KeyBanc Capital Markets are all bookrunners on the deal.
The skinny: I like this company.
I like how it has significantly grown its top-line revenue on a year-over-year basis.
It’s also done a very good job partnering with good-sized companies to work on its payment platform.
These are companies we use every day — like DoorDash and Square.
I think the potential mid-range price point is fair here. So, if you are looking for an IPO investment, you could do a lot worse than Marqeta.
Deeper Dive: GameStop Earnings
Popular meme stock company GameStop Corp. (NYSE: GME) will report its quarterly earnings this week.
The video game seller will report earnings on Wednesday.
The stock grew in popularity after users of the Reddit group r/wallstreetbets pushed to have its members buy the stock to squeeze short sellers.
GameStop stock has grown nearly 1,500% in value since January 1 of this year.
While the stock price has driven through the roof, the company’s financials have struggled.
GameStop Earnings Struggles For Consistency
In 2020, GameStop reported strong earnings-per-share losses of $1.60 and $1.40 in Q2 and Q3.
That was sandwiched between positive earnings of $1.30 per share in January 2020 and 2021.
GameStop’s earnings trend has been strong numbers in January, bolstered by holiday sales, followed by much weaker earnings in subsequent quarters.
GameStop has only beaten Wall Street expectations for earnings per share in nine of the last 16 quarters.
GameStop Quarterly Revenue Trends Down
GameStop’s past quarterly revenue shows a similar trend.
The quarterly highs have gotten lower since 2017.
It also mirrors the trend for earnings where the company has higher revenue reported in January of each year, compared to a drop in quarterly revenue in the other three quarters.
GameStop had a high of $3.1 billion in quarterly revenue in January 2018. It’s latest high was just $2.1 billion from January 2021.
It has done worse, beating Wall Street's expectations for revenue — beating analysts in just four of the last 16 quarters.
Wall Street is projecting the company to report a loss of $0.68 per share on revenue of $1.15 billion.
The skinny: While this meme stock has rocketed up in 2021, its fundamental analysis shows no support for that rise.
Just the opposite.
Fundamentally, this stock should be falling as its post-COVID-19 recovery has still not occurred.
Money & Markets Week Ahead: Data Dump
The U.S. Bureau of Labor Statistics will release its monthly core consumer price index for May on Thursday.
This index measures the changes in price for goods and services, excluding food and energy.
It is considering one of many benchmarks to study the rate of inflation in the U.S.
Core Consumer Price Index Jumps 0.9% in April 2021
In April, consumer prices jumped 0.9% — the largest month-over-month increase since before 2005.
Including food and energy, the index rose 0.8% from March to April and 3% year over year.
This indicates the prices of goods and services have been on the rise since February 2021.
Analysts expect the index to increase 0.5% for May.
To finish off the Money & Markets Week Ahead, here’s a look at some of the key earnings reports due out this week:
Marvell Technology Inc. (Nasdaq: MRVL)
Stitch Fix Inc. (Nasdaq: SFIX)
Casey’s General Stores Inc. (Nasdaq: CASY)
Thor Industries Inc. (NYSE: THO)
Academy Sports & Outdoors Inc. (Nasdaq: ASO)
JJill Inc. (NYSE: JILL)
GameStop Corp. (NYSE: GME)
Campbell Soup Co. (NYSE: CPB)
Verint Systems Inc. (Nasdaq: VRNT)
Neptune Wellness Solutions Inc. (Nasdaq: NEPT)
Chewy Inc. (NYSE: CHWY)
John Wiley & Sons (NYSE: JW.A)
Mission Produce Inc. (Nasdaq: AVO)
Dave & Buster’s Entertainment Inc. (Nasdaq: PLAY)
FuelCell Energy Inc. (Nasdaq: FCEL)
Nathan’s Famous Inc. (Nasdaq: NATH)
That’s all for this week.
Until next time…