The Strategist

Three shares to watch out this week

11/28/2017 - 13:33

Let’s talk about how much the number of Autodesk subscribers has grown, how Ambarella's innovations are developing and whether Kroger managed to catch up with competitors.

bfishadow via Flickr
bfishadow via Flickr
Last week, stock markets rose as mood of investors affected optimistic forecasts of retailers for the holiday season. The Dow Jones Industrial Average and the S&P 500 have updated historical highs and added significantly since the beginning of the year.

This week, Autodesk, Ambarella and Kroger reports will be the most expected. Here's what investors should pay special attention to:

Number of Autodesk’s subscribers

The developer of CAD systems is making its results public on Tuesday. This year, shares of Autodesk are significantly ahead of the market since investors believe in the prospect of the cloud services company. So, last quarter, the company had 270 thousand new subscribers, and revenue jumped by 94%, to $ 784 million. Currently, the share of subscriber revenues has increased to 91% of the sales base, compared to 69% a year earlier. This success gave the management additional confidence in the sales forecast for 2017. In late August, the company’s CEO Andrew Anagnost and his team said that the revenue will amount to $ 505-515 million in the third quarter. In fiscal year 2018, the company intends to attract up to 675,000 new users. Investors will be happy with this increase in the customer base, as it means faster and more stable revenue growth in the future.

Ambarella’s innovations

Currently, operational indicators of Ambarella are not that impressive The manufacturer of chips for high-resolution cameras is experiencing a slowdown in sales growth. The company faced an unexpected reduction in the drones market and weak demand for sports cameras. In the last quarter, revenue increased by only 10%, gross margin fell. Ambarella’s executives forecast a further decline in sales by the end of the year, but they note the wide opportunities offered by the long-term development strategy. Currently, the company is actively working on the first line of chips for image recognition and will soon enter the market of autonomous control systems for cars. Ambarella's sales can soar if its engineers succeed in promoting technology through innovation in capturing and processing images. On the other hand, revenue and profits may decrease if competitors offer more interesting solutions to camera manufacturers.

Kroger’s market share 

Three months ago, Kroger announced resumption of growth after three consecutive quarters of weak sales in comparable stores. Nevertheless, the company's shares fell, as the growth in market share was minimal, and profitability declined. In the first half of 2017, net profitability fell to 1.5% of sales from 2.6% in the same period last year.

The company’s CEO Rodney McMullen noted the increase in the number of customers and market share. He says that this allowed to strengthen the company's position in relation to competitors, such as Wal-Mart Stores. According to past management estimates, in the second half of 2017, sales in comparable stores will grow slightly less than 1%. It will be interesting to see how the forecasts change this week, given that Wal-Mart recently announced a 2.3% increase in sales in comparable stores due to the increase in the number of customers and the average purchase size. In addition, the Internet division of the company showed excellent results. To continue the successful 12-year battle with the titanium retail industry, Kroger will also have to demonstrate an improvement in each of these indicators.