Jun 2, 2023

GitHub, DocuSign May Further Temper AI Exuberance: US Earnings Week Ahead

Gabriel Sanchez, Redd Brown and Natalie Lung, Bloomberg News

A jar of J.M. Smucker Co. Smucker's Goober brand peanut butter and grape jelly stripes is arranged for a photograph in Tiskilwa, Illinois, U.S., on Tuesday, June 6, 2017. J.M. Smucker Co. is scheduled to release earnings figures on June 8. , Bloomberg

(Bloomberg) -- With sales and earnings that surprised on the upside, the majority of S&P 500 companies’ results have so far defied investor anxiety over the economy. But notwithstanding the travel rebound that Trip.com and Vail Resorts are set to report, next week’s earnings are likely to offer a more sobering read of business prospects for the rest of the year.

Investors are starting to temper exuberance over artificial intelligence sparked off last month by Nvidia’s blowout revenue forecast, with some companies already flagged as possibly at risk of losing business as a result of generative technology such as OpenAI’s ChatGPT. Among these is software developer GitLab, which has been included in Bank of America’s index of 27 companies most imperiled by generative applications.

Meanwhile, tightened spending by both consumers and businesses should show up in the top-line numbers for the likes of Campbell Soup, Smucker’s and DocuSign.

To subscribe to earnings coverage across your portfolio or other earnings analysis, run NSUB EARNINGS
Click to see the highlights to watch this week from earnings reports in Europe and Asia

Monday: GitLab (GTLB US) is set to post a 35% rise in quarterly revenue, a significant slowdown from 58% in the prior period, according to consensus. The company had provided first-quarter and full-year guidance in March that came in below estimates, and continues to be impacted by the slowdown in business expenditure on technology. With competitors refining and adding AI capabilities to their products, GitLab may need to spend more on R&D, Bloomberg Intelligence notes. The company reports after the close.

Tuesday: JM Smucker (SJM US), along with packaged-food peers such Campbell Soup (CPB US) reporting Wednesday, continues to grapple with elevated costs. At the same time, the ability of these companies to raise prices remains constrained; this won’t change anytime soon particularly as Walmart (WMT US) — accounting for 34% of Smucker’s revenue and 22% of Campbell’s — has indicated that it might seek to reduce supplier prices.

Stitch Fix (SFIX US) is projected to see a 21% drop in quarterly revenue, in what would be its fourth consecutive double-digit decline. Per Barclays analysts, sales and Ebitda at the online personal-styling platform remain pressured. Stitch Fix has yet to announce a permanent replacement for Elizabeth Spaulding, who stepped down as CEO in January, and the resignation of CFO Dan Jedda in March has intensified speculation over further turnover among the company’s leadership ranks.

Wednesday: Pent-up travel demand following the easing of China’s Covid-19 protocols is continuing to provide a windfall for Trip.com (TCOM US). With demand for Chinese domestic travel set to return to 2019 levels and spending per traveler projected higher than before, the Shanghai-based firm should be able to capitalize on its dominance in transportation ticketing with cross sales, BI says. Still, Trip.com’s international travel segment is not seen rebounding as quickly, given issues with capacity and manpower at Chinese airlines, and outbound travel is likely to reach 65% of pre-pandemic levels in the fourth quarter this year.

Thursday: Vail Resorts (MTN US), reporting post-market, is on track to show record third-quarter sales and skier visits thanks to favorable weather conditions resulting in an extended ski season at key resorts. Focus will turn to its full-year outlook and season-ticket sales. The resort operator’s northeastern market has seen particularly strong growth, though management’s recent commentary on ski-pass sales was “positive but vague,” Truist analysts said. Getting customers to commit to ski passes in advance remains key for Vail, which cut its full-year outlook in March after a bout of severe weather.

Expectations for DocuSign (DOCU US), due after market, have been revised down after the company gave a weaker-than-expected forecast in March for its first-quarter billings. Analysts have flagged margins and the recent CFO departure as concerns, along with the tough demand environment. The company’s main electronic-signature product remains its key source of top-line growth and the growing digitalization of processes together with international expansion should present DocuSign with “ample” longer-term growth potential, Bloomberg Intelligence says.

Friday: Nio Inc.’s (NIO US) quarterly gross margin from vehicle sales should sequentially improve for the first time in a year, thanks to easing battery prices. To reinvigorate sales, Nio revamped its premium SUV model and cut prices. Still, profitability remains elusive in the near term with losses set to worsen as R&D investment is prioritized, Bloomberg Intelligence says. Nio’s first-quarter report, expected pre-market, should also reveal how profit has been impacted by vehicle discounts and the expiration of government subsidies. The company could also give more color on its plans in Europe, where it has delivered its first batch of its smart electric SUVs.

--With assistance from Ignacio Gonzalez.

(Updates section on Nio to include European deliveries. A previous version corrected GitLab’s name in the headline.)