Money & Markets Week Ahead for May 9, 2021: Is the housing market boom enough to invest in Enact Holdings’ IPO this week? More companies are reporting earnings this week, and I will focus on two newcomers to the market: Roblox Corp. and Coinbase Global Inc.
We’ll also see the outlook for energy.
Here’s more of what to look for in the week ahead on Wall Street:
On the IPO Front
There are a few initial public offerings on the calendar this week.
Let’s look at Enact Holdings Inc., which plans to price its IPO on Thursday. It intends to trade on the Nasdaq using the ticker symbol ACT.
What it is: This has been a private mortgage insurance company that is being spun out of Genworth Financial.
The company said it is active in all 50 states and the District of Columbia.
In its S-1 filing with the Securities and Exchange Commission, Enact said it provides credit protection to mortgage lenders and investors.
They focus their insurance to low-down payment loans.
In 2020, the company generated new insurance written of $99.9 billion — up from the $62.4 billion the company generated the year before.
But the company’s net income fell from $678 million in 2019 just $370 million in 2020.
The loss in net income was attributed to losses due to COVID-19, according to the prospectus.
In the first quarter of 2021, the company wrote $24.9 billion in new insurance compared to $17.9 billion written in the first quarter of 2020.
The offering: The company will offer 22.6 million secondary shares at a price range of between $20 and $24 per share.
It hopes to raise around $497 million with its IPO. The selling stockholder will receive all net proceeds and will reimburse the company for any expenses attributed to the sale.
Bayview Asset Management will purchase an additional 4 million shares in a concurrent private placement.
According to Renaissance Capital, at the midpoint of $22 per share, Enact could see a market value of around $3.6 billion.
JPMorgan, Goldman Sachs, Bank of America Securities and Credit Suisse are all bookrunners on the deal.
The skinny: The private mortgage insurance market took off in 2020.
According to HousingWire, the sector provided insurance for 2 million low down payment borrowers — up 53% from 2019.
While Enact benefitted greatly from that, their losses more than doubled last year.
It notched $215 million in operating expense losses on top of $379 million in general losses incurred.
That raises a red flag with me.
This was a company showing a consistent growth trend, but those losses in 2020 set it back.
Enact is a company I would wait before investing until the balance sheet looks a little better.
Deeper Dive: Big Newcomers COIN and RBLX Report Earnings
A couple of big market newcomers will report their earnings for the first time as public companies this week.
Video game developer Roblox Corp. (NYSE: RBLX) will announce earnings on Monday, while Coinbase Global Inc. (Nasdaq: COIN) releases earnings on Thursday.
Roblox launched its IPO in March with a price of $45 per share. It is now trading at more than $65 per share — a 44% increase.
The company’s earnings per share were negative in the first three quarters of 2020, but that all changed in the fourth quarter.
Its earnings topped at $0.32 per share — a $0.36-per-share switch.
Roblox’s revenue hit $642 million in the fourth quarter — up from $496 million the previous quarter.
Estimates are for Roblox to report earnings of $0.16 per share on revenue of $494.4 million.
Coinbase, a cryptocurrency exchange, launched its direct listing IPO in late March and reached a high share price of $342 in mid-April.
Since then, the stock has fallen off to around $253 per share — a 26% drop from its high.
Coinbase EPS Grows in 2020
Coinbase earnings started flat at $0.16 per share in 2020.
However, the late rise in the price of cryptocurrency pushed up Coinbase’s revenue, and its earnings went from $0.16 per share to $0.83 per share by the end of the year.
Expectations for Coinbase are for earnings of a whopping $3.01 per share on revenue of $1.81 billion in the first quarter.
The skinny: These are really new companies to the market whose stock prices have gone in vastly different directions.
Coinbase has settled back to its expected IPO price — $200 to $250 per share — whereas Roblox continues to climb.
As for expectations, I think projections for Coinbase are a little high while Roblox is pretty much on target.
Money & Markets Week Ahead: Data Dump
The U.S. Energy Information Administration (EIA) will release its short-term energy outlook for May on Tuesday.
This report shows the near-term perspective on energy markets along with forecasts through the end of the next calendar year.
In April, the EIA forecasted regular gasoline prices to average $2.78 per gallon from April to September — up from $2.07 per gallon in 2020.
That forecast stemmed from projected higher prices in crude oil, higher refining margins and higher consumption of gasoline during the summer months.
Crude Oil Prices Estimated Higher in 2021
West Texas Intermediate and Brent Crude oil prices hit lows during the COVID-19 pandemic.
Those prices are expected to rebound sharply in 2021 before paring back in 2022, according to the EIA.
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
JD.Com Inc. (Nasdaq: JD)
Duke Energy Corp. (NYSE: DUK)
Simon Property Group Inc. (NYSE: SPG)
Roblox Corp. (NYSE: RBLX)
Tuesday
Electronic Arts Inc. (Nasdaq: EA)
Palantir Technologies Inc. (NYSE: PLTR)
Plug Power Inc. (Nasdaq: PLUG)
Wednesday
Wix.Com Ltd. (Nasdaq: WIX)
NV5 Global Inc. (Nasdaq: NVEE)
Thursday
Alibaba Group Holding Ltd. (NYSE: BABA)
Walt Disney Co. (NYSE: DIS)
Airbnb Inc. (Nasdaq: ABNB)
Coinbase Global Inc. (Nasdaq: COIN)
Friday
Ageagle Aerial Systems Inc. (NYSE: UAVS)
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.