Stocks’ Details
 

Dell Technologies Inc.

 
Dell Withdrew FY21 Guidance Amid COVID-19 Outbreak: Dell Technologies Inc. (NYSE: DELL) is an information technology company, which is engaged in providing innovative technologies to corporates. On 27 March 2020, the company reportedly withdrew its FY21 outlook amid the rising uncertainty due to coronavirus outbreak.
 
4QFY20 Financial Highlights for the Period Ended 31 January 2020: DELL declared its 4QFY20 results, wherein the company reported total net revenue of $24,032 million, up 1% on y-o-y basis. Revenues were impacted by approximately 100 basis points from foreign exchange fluctuation rates. Deferred revenue during the quarter increased 16% and stood at $27.8 billion, aided by higher sales of software maintenance and services. In 4QFY20, the company’s non-GAAP operating income stood at $2.8 billion, a rise of 4% year over year. Non-GAAP net income for the quarter stood at $1.7 billion, with non-GAAP diluted earnings per share of $2.00. Adjusted EBITDA went up 6% year over year and came in at $3,201 million.
 

Income Statement Highlights (Source: Company Reports)
 
Valuation Methodology: Price to Earnings Based Relative Valuation

Price to Earnings based relative valuation (Source: Thomson Reuters)
 
Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: The stock of DELL closed at $36.9 with a market capitalization of ~$27.3 billion. The stock made a 52-week low and high of $25.51 and $70.55 and is currently trading at the lower band of its 52-week trading range. The stock has corrected by ~28.2% and ~38.94% in the last three months and one year, respectively. Going forward, the company will closely monitor the macroeconomic and IT spending environments, along with the current impact of COVID-19 on its sales and supply chain. Considering the aforesaid facts, current trading levels and business prospects, we have valued the stock using Price to Earnings based relative valuation method. For the purpose, we have considered peers like Hewlett Packard Enterprise Co (NYSE: HPE), HP Inc (NYSE: HPQ) and NetApp Inc (NASDAQ: NTAP). We have arrived at a target price with a lower-double upside (in % terms). Hence, we give a ‘Hold’ recommendation on the stock at the closing price of $36.90, down 6.7% as on 1 April 2020.
 

Expedia Group, Inc.

 
Recent Update on Rising Impact of COVID-19: Expedia Group, Inc. (NASDAQ: EXPE) is an online travel company which has its own travel platform and seeks to offer travel-details and travel related services to the consumers. On 13 March 2020, the company stated that it has withdrew its FY20 adjusted EBITDA outlook due to the rising impact from the coronavirus outbreak and the subsequent ambiguity on travel trends. Due to the rising impact of COVID-19, the company now expects first quarter to be negatively impacted in excess of the $30-$40 million range provided in its earnings call on February 13, 2020.
 
Q4FY19 Operational Highlights for the Period ended 31 December 2019:  Expedia Group, Inc. declared its quarterly results, wherein the company reported revenue of $2,630 million as compared to $2,439 million in Q4FY18, driven by 6% growth in gross bookings. Adjusted EBITDA increased 2% year over year and came in at $449 million, whereas adjusted net income declined by 4% on y-o-y basis and came in at $174 million. Selling and marketing expense stood at $1,283 million, up 6% on y-o-y basis, representing 46.7% of the total revenue. Technology and content expense came in at $459 million as compared to $417 million in previous corresponding period. For FY19, the company repurchased ~5.6 million shares worth $683 million.

 

Q4FY19 Income Statement Highlights (Source: Company Reports)
 
Balance Sheet Highlights: The company reported cash, cash equivalents, restricted cash and short-term investments at $4.62 billion as on December 31, 2019. Total long-term debt at the end of the period amounted to $ 4.19 billion.
 
Valuation Methodology: Price to Earnings Multiple Based Relative Valuation

Price to Earnings Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months
 
Stock Recommendation: The stock of EXPE closed at $52.00 with a market capitalization of ~$7.3 billion. The stock is currently quoting below the average of its 52-week high-low of $144 and $40.76. The stock has generated negative returns of 51.91% and 56.76% in the last three months and one year, respectively. The company remains focused on expanding its global presence by investments across technology, operations, brand building and supplier relationships. Considering the aforesaid facts, we have valued the stock using a relative valuation method, i.e., price to earnings multiple. For the matter, we have taken the peer group - Booking Holdings Inc (NASDAQ: BKNG), TripAdvisor Inc (NASDAQ: TRIP) and eBay Inc (NASDAQ: EBAY) and arrived at a target price of lower double-digit upside (in % terms). Hence, we recommend a “Buy” rating on the stock at the closing price of $52.00, down 7.59% as on 1 April 2020.
 
 

General Electric Company

 
GE Completes Divestment of BioPharma Business: General Electric Company (NYSE: GE) is a worldwide digital industrial company. It's products and services include jet engines, energy production solutions, power generation, medical imaging, industrial & financing products. On 1 April 2020, the company updated the market that it has completed the divestment of its BioPharma business to Danaher Corporation for a consideration of ~$20 billion of net proceeds.
 
GE Inks Deal with Ford Motor to Fight Against COVID-19: On March 24, 2020, the company announced that it is working with Ford Motor Company to aid clinicians, governments and the larger healthcare community to fight against the coronavirus outbreak by scaling the production of ventilators.
 
Updates on the Impact of COVID-19: On March 23, 2020, GE Aviation stated various steps to curb the impact of COVID-19, which involves reducing ~10% of its total U.S. workforce.  Additionally, David Joyce, vice chairman of GE, will waive half of his salary, commencing from April 1, 2020.  Considering these initiatives, the company expects to preserve $500 million to $1 billion in FY20.
 
GE to Sell its BioPharma Business to Danaher: On March 19, 2020, the company announced that it will sell its sell its BioPharma business to Danaher Corporation, under the consent verdict of the U.S. Federal Trade Commission (the “FTC”). GE will get a net proceed of ~ $20 billion and predicts to wrap the deal on March 31, 2020.
 
Updated FY20 Outlook: For FY20, the company restated its outlook and expects revenue to increase in the range of low single-digit on an organic basis. Adjusted Industrial profit margin is likely to grow organically between 0 to 75 basis points. GE predicts adjusted EPS in the range of $0.50 to $0.60 per share. Free cash flow is expected to be in the range of $2 billion to $4 billion.
 
 
Outlook (Source: Company Reports)
 
Valuation Methodology: P/E Multiple Based Relative Valuation

P/E Multiple Based Valuation (Source: Thomson Reuters)
 
Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: The stock closed at $7.04 with a market capitalization of ~$61.2 billion on 1 April 2020. Currently, the stock is trading close to its 52-week low level of $5.9. The stock has corrected by ~36.92% and ~30.3% in the last three months and one year, respectively. The company remains on track to boost its long-term growth prospects, lowering leverage and improving business prospects. Considering, the current trading levels, we have valued the stock using the P/E based relative valuation method. For this, we have taken peers like Honeywell International Inc (NYSE: HON), 3M Co (NYSE: MMM), Illinois Tool Works Inc (NYSE: ITW), to name few, and arrived at a target price of lower double-digit upside (in percentage terms). Hence, we recommend a ‘Buy’ rating on the stock at the current market price of $7.04, down 11.34% as on 1 April 2020.
 
 
Comparative Price Chart (Source: Thomson Reuters)

Disclaimer

The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. 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. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd 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 personalised advice.