Verizon Communications Inc.

VZ Details

Verizon Communications Inc. (NYSE: VZ) is a company that makes and sells goods and services in communication, information, and entertainment. Its operating segments are 1) Verizon Consumer Group, which provides cellular and landline communications services to individual customers, and 2) Verizon Business Group, which provides business and government customers and wireline carriers with wireless services such as data, video, and conferencing, corporate networking solutions, security and managed network services, local and long-distance phone services, and others. As of December 21, 2021, the company’s market capitalization stood at USD 219.80 billion.

Latest News:

• Recent Partnership:  VZ announced on December 16, 2021, that it would expand its partnership with the Los Angeles Unified School District, the nation's second-largest school district, to provide eligible Nevada families and individuals with discounted mobile broadband, voice service, and equipment through Nevada state, local, and select non-profit institutions.
• Delivering 5G edge computing: VZ and Google Cloud collaborated on December 16, 2021, to bring the cloud's power closer to mobile and connected devices at the edge of VZ's network. VZ 5G Edge, in collaboration with Google Distributed Cloud Edge, aims to offer computing and storage capabilities to the network edge, enabling real-time enterprise applications.

Q3FY21 Results:

• Slight Growth in Topline: The company reported YoY growth of 4.35% in revenues to USD 32.92 billion during Q3FY21 (ended September 30, 2021) from USD 31.54 billion during Q3FY20, attributable to an increase in its consumer segment.
• Expansion of Net Income: The company's net income increased to USD 6.55 billion in Q3FY21 from USD 4.50 billion in Q3FY20.
• Cash and Debt Position: As of September 30, 2021, the company had cash and cash equivalents of USD 9.94 billion and total debt of USD 150.98 billion.

Key Risks:

• Vendor Concentration Risk: VZ's essential equipment requirements are met by a limited number of manufacturers and providers. Furthermore, the chipset utilized in manufacturing its smartphone and other devices is supplied by a single manufacturer. As a result, any breach of contract by these third parties could jeopardize the company's operations.

Outlook:

• FY21 Estimates: For FY21, VZ expects YoY growth of ~4% in its wireless service revenue, along with an adjusted EPS in the range of USD 5.35 – 5.40. It also expects to incur a capital expenditure of USD 17.5 – 18.5 billion in FY21.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

VZ Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

VZ's share price has fallen 11.28% in the past twelve months and is currently leaning towards the lower band of its 52-week range of USD 49.69 to USD 60.13. The stock is currently trading between its 50 and 200 DMA levels, and its RSI Index is at 59.88. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 63.36.

Considering the correction in the stock price in the past twelve months, encouraging outlook, and current valuation, we recommend a "Buy" rating on the stock at the closing price of USD 52.78, down 0.58% as of December 21, 2021.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

Palantir Technologies Inc.

PLTR Details

Palantir Technologies Inc. (NYSE: PLTR) helps businesses manage divergent data sets to acquire insight and improve operational outcomes. It has 203 customers as of September 30, 2021, including leading enterprises in various commercial sectors and government entities worldwide. PLTR makes money by selling subscriptions to its software with ongoing O&M services (Palantir Cloud), software subscriptions in its clients' environments with ongoing O&M services (On-Premises Software), and professional services.

 

Latest News:

• Collaboration with Dewpoint: PLTR and Dewpoint Therapeutics, a leading biomolecular condensates firm, established a partnership for its Foundry platform on December 20, 2021, to support Dewpoint's efforts to identify therapies and solutions for the most challenging diseases.
• Extension in Partnership: The U.S. Army's Program Executive Office for Enterprise Information Systems (PEO EIS) chose to execute the second option year of its collaboration with PLTR on the Army Vantage program on December 17, 2021, for USD 116.3 million.

9MFY21 Results:

• Progress in Topline: PLTR reported a 43.92% increase in revenues to USD 1.11 billion during 9MFY21 (ended September 30, 2021) from USD 0.77 billion during 9MFY20, due to the rise in revenues from both government and commercial customers.
• Decline in Losses: PLTR witnessed a decrease in net losses to USD 364.19 million during 9MFY21 from USD 1.02 billion during 9MFY20.
• Healthy Balance Sheet: The company's cash and cash equivalents were USD 2.48 billion as of September 30, 2021, with no outstanding debt.

Key Risks:

• Customer Concentration Risk: For FY20 and FY19, the top three PLTR clients collectively contributed 25% and 28% of its sales, respectively. Its revenue could plummet if it didn't keep or grow its client relationships or major customers cut back on their purchases.
• Seasonality Risk: Historically, sales have been lowered in the first quarter of each year. Sales have increased each quarter, with significant increases in the third and fourth quarters ending September 30 and December 31. The company anticipates this seasonality to affect billings, bookings, and other operational outcomes in the future as it continues to target larger enterprise customers.

Outlook:

• Q4FY21 Estimates: PLTR expects revenues of roughly USD 418 million and an adjusted operating margin of around 22% in the Q4FY21, as of November 09, 2021.

• FY21 Estimates: PLTR expects a 40% increase in revenue to USD 1.527 billion in FY21. It also predicts its adjusted free cash flow to exceed USD 400 million, up from USD 300 million.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

PLTR Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

PLTR's share price has fallen 29.94% in the past three months and is currently trading around the lower-band of the 52-week range of USD 17.06 to USD 45.00. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 39.26. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 22.65.

Considering the stock's significant correction in the past three months, recent collaboration, strong balance sheet, current valuation, and associated risks, we recommend a "Buy" rating on the stock at the current price of USD 18.65, up 3.90% as of December 21, 2021, 11:36 AM ET. 

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

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Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.