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A Look at ABM Industries’ Risk Factors Amid Able Services Acquisition

ABM Industries (ABM) provides facility solutions. It serves clients across a broad range of industries, including aviation, education, and healthcare….

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This article was originally published by TipRanks

ABM Industries (ABM) provides facility solutions. It serves clients across a broad range of industries, including aviation, education, and healthcare.

Let’s take a look at the company’s latest financial performance, corporate developments, and risk factors.

ABM Industries' Fiscal Q3 Financial Results and FY21 Outlook

Revenue increased 10.7% year-over-year to $1.54 billion in Fiscal Q3 ended July 31 and exceeded the consensus revenue estimate of $1.5 billion. The company said that revenue surged across all of its business segments. Adjusted EPS of $0.90 jumped 20% year-over-year and beat the consensus estimate of $0.81. (See ABM Industries stock charts on TipRanks).

ABM plans to distribute a quarterly cash dividend of $0.19 per share on November 1. The company ended Q3 with $505.4 million in cash and $811.6 million in debt.

For Fiscal 2021, the company raised its EPS outlook to a range of $3.45 - $3.55. It previously guided for EPS in the band of $3.30 - $3.50.

ABM Industries’ Corporate Developments

In August 2021, ABM signed an agreement to acquire Able Services for $830 million in cash. San Francisco-headquartered Able Services is a provider of engineering and janitorial services. It generates $1.1 billion in revenue. The transaction is expected to close by the end of September.

In other developments, ABM has been selected to provide the infrastructure solution for the electric bus in New York City. The company will install overhead electric vehicle chargers in bus depots in Brooklyn and Manhattan. It will also provide maintenance services on the charging equipment.

ABM Industries’ Risk Factors

The new TipRanks Risk Factors tool shows 27 risk factors for ABM Industries. Since Q4 2020, the company has updated its risk profile with six additional risk factors, all under the Finance and Corporate category.

ABM Industries tells investors that it plans to borrow money to complete the acquisition of Able Services. It cautions that servicing the debt could cause liquidity challenges. For example, it could face cash shortages for working capital or the funding capital of expenditures.

The company tells investors that there is no guarantee it will complete the Able acquisition, and that closing the transaction is subject to obtaining regulatory approvals, which are beyond its control. Also, the terms of the agreement include a clause that the deal will collapse if not completed by May 25, 2022. ABM cautions that failure to complete the acquisition could adversely impact its financial results and stock price.

Furthermore, ABM tells investors that even if it succeeds to acquire Able Services, there is no guarantee that it will achieve the anticipated benefits from the acquisition. It warns that its results from operations and stock price could be adversely affected as a result.

Finance and Corporate is ABM’s top risk category, accounting for 44% of the total risks. That is above the sector average of 37%. ABM’s shares have gained about 22% since the beginning of 2021.

Analysts’ Take

Following ABM Industries’ Fiscal Q3 report, Maxim Group analyst Tate Sullivan reiterated a Hold rating on ABM stock without assigning it a price target.

Consensus among analysts is a Moderate Buy based on 1 Buy and 2 Holds. The average ABM Industries price target of $48 implies 3.76% upside potential to current levels.

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Energy & Critical Metals

Why Nio Stock Needs Some Help When It Comes to the Charts

The electric vehicle (EV) trade has finally cooled off, which is a good thing given how far it had run. It would be hard for Tesla (NASDAQ:TSLA) to justify…

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The electric vehicle (EV) trade has finally cooled off, which is a good thing given how far it had run. It would be hard for Tesla (NASDAQ:TSLA) to justify a trillion dollar market capitalization or for these revenue-less SPAC stocks to keep soaring higher. Meanwhile, Nio (NYSE:NIO) is somewhere in between, with NIO stock performing quite well but not exactly on Tesla’s level.

Source: Robert Way / Shutterstock.com

At least, not yet.

In order to get there, the company will need to continue its domestic expansion in China and work on expanding globally. Tesla has been trading pretty well lately as it works on consolidating its massive gains over the last 18 months.

For Nio, though, the charts aren’t all that great right now. Combined with a high valuation, that has me on guard with the stock. For Nio, it needs the technicals to work in its favor in order for the stock to be attractive.

Trading Nio Stock

Daily chart of Nio stock
Click to Enlarge
Source: Chart courtesy of TrendSpider

A look at the chart highlights the recent struggles for Nio stock. Shares bottomed in early May along with most other growth stocks, as the bear market in this group came to end.

Nio ripped back toward $55 and the 61.8% retracement, but ultimately failed to hold those gains. It later failed to hold its major moving averages, while giving us an “ABC” correction down to the weekly VWAP measure.

This measure had been decent support throughout 2021.

However, after its rally back to the 21-day and 21-week moving averages, NIO stock gave us the “D” leg of that correction, resulting in the recent flush lower. We now see the stock below the weekly VWAP reading, as bulls scramble to see whether Nio can find its footing

If it can, we need to see Nio stock reclaim the August low at $36.24, as well as the weekly VWAP level. As of now, it’s currently undergoing a “monthly-down rotation” so long as it’s below $36.24. Back above those measures, and the high $30s could be in play.

On the downside, though, it’s possible we see the $31 to $32 area again. This area has been support twice amid two nasty corrections in Nio stock this year.

As a whole, Nio stock has been a leader amid growth stocks when the group is hot. But it has not done too well lately and it shows on the charts. So if the overall market struggles, this stock may too.

Breaking Down Nio

So many people will point to the fundamentals of a company like Nio without taking into consideration the valuation. Granted, I don’t put a lot of weight in the valuation either. At one point, valuations played a much larger role in the way that stocks behaved.

However, I think a few things have altered some of that Benjamin Graham thinking.

First, tech stocks blew the market wide open. No longer were companies having to follow traditional paths with only decent margins. Now software companies can routinely generate massive profit margins, while the tangible addressable markets (TAM) are significantly larger.

That’s allowed valuations to expand as well.

Second, the Fed’s low-rate and easy-money policies have forced investors to plow funds into equities. The returns in bonds (particularly internationally) and fixed income have dried up, forcing investors to chase returns in growth stocks — like Nio.

Is it healthy? Not necessarily, but this has been our reality for quite some time and it will likely remain that way for the foreseeable future.

I’m not calling for some great reckoning. A stock like Nio can continue to go up as long as it continues to deliver. But that remains a question mark.

While the company reported solid quarterly results last month, Nio’s July and August monthly auto deliveries disappointed investors. Furthermore, Nio was forced to trim its third-quarter delivery expectations.

Throw in Nio’s plan to raise $2 billion in stock, and it creates even more pressure on the stock price.

The Bottom Line on NIO Stock

It’s not that I have any specific gripe against Nio, but the facts are simple. For an automaker, the stock commands a high valuation and the company doesn’t have enough momentum in its underlying business right now. Thus, we need to see beat-and-raise quarters and delivery results in order to spur the stock higher. In line and disappointing results aren’t going to cut it.

Second, the charts don’t look very good. Back above $36.25 and my tone will change a bit. Otherwise, I remain defensive on Nio stock for the time being.

On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.

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Energy & Critical Metals

ChargePoint Stock Deserves to Double from Here

Even with the electric vehicle revolution in full swing, not everyone sees the bull thesis for ChargePoint (NYSE:CHPT). Indeed, CHPT stock was cut in…

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Even with the electric vehicle revolution in full swing, not everyone sees the bull thesis for ChargePoint (NYSE:CHPT). Indeed, CHPT stock was cut in half from the the beginning of 2021 to mid-September, so clearly investor sentiment is at a low point.

Source: YuniqueB / Shutterstock.com

This could present an opportunity for folks with a tolerance for volatility. After all, the essence of contrarian investing is to get excited when others are fearful.

Could the pessimism surrounding CHPT stock be misplaced? The answer is probably yes, since the U.S. government is leaning toward policies that should benefit ChargePoint.

That, along with the company’s impressive revenue growth, indicate the share price is lower than it ought to be. Over the long run, this situation should correct itself, leading to excellent returns for patient shareholders.

A Closer Look at CHPT Stock

There’s something about the $20 price point — it’s like a magnet for CHPT stock in 2021.

Without a doubt, this must be frustrating for the long-term stockholders. As you may recall, ChargePoint shares propelled as high as $44.50 in January of this year.

The sentiment was riding high, but it wasn’t the best time to take a long position. CHPT stock slipped to $20 in March.

Believe it or not, the stock rose and fell back to that same $20 level in April, and then again in May, and once more in August. As of Sept. 23, it was back to $20 and change yet again.

At least we can say there’s strong support at that level.

The sellers can’t expect to fend the buyers off forever. $30 and eventually $40 are reasonable price targets — CHPT has been there before, and the bulls can anticipate a revisit of these price levels.

ChargePoint Can Electrify the Nation

One great thing about investing in ChargePoint is that it allows you to be brand-agnostic.

To put it another way, you can hold the stock and be part of the vehicle electrification movement without betting on any specific automaker.

Yet you’d still have to believe in the future of electric vehicles. It’s a reasonable sector to invest in — at least, Bank of America analyst Martyn Briggs seems to think so.

As you may be aware, President Joe Biden’s administration aims to have 50% of vehicles produced in the U.S. be electric by 2030.

To achieve this ambitious goal, according to Briggs, “you’re going to need to see a lot of up– of supply-chain shifts. Obviously a lot of manufacturing capacity, huge amounts of battery manufacturing in particular to achieve that that we can come to.”

It’s not difficult to connect the dots and see how an electric vehicle charger maker like ChargePoint would benefit from this.

Briggs makes no bones about it: “Net-zero targets are real, and they’re not going away.” And if the government is going to enforce a transition to zero-carbon, zero-emission mobility, Briggs considers vehicle electrification “an obvious low-hanging fruit.”

More Ports, More Revenues for CHPT Stock

Speaking of low-hanging fruit, the CHPT stock bulls can simply point to ChargePoint’s outstanding second-quarter 2021 fiscal data. In a time when the government hopes to advance vehicle electrification, ChargePoint is making strides on the financial front.

For the second fiscal quarter, ChargePoint grew its revenue by 61% year-over-year. Plus, for the full year, the company raised its revenue guidance by 15% to a range of $225 million to $235 million.

Moreover, ChargePoint’s network of charging stations is expanding quickly. The company’s count of activated ports exceeded 118,000 as of July 31. And by the by, this is a global phenomenon — ChargePoint counted more than 5,400 of its charging ports in Europe.

It looks like the Biden administration is going to push hard for vehicle electrification. This should provide a long-term tailwind for ChargePoint. Is this a guarantee that CHPT stock will rally in the short term? Definitely not, as near-term price fluctuations are bound to happen.

But as Briggs said, the net-zero targets are real. They’re not going away, so investors must adjust their strategies accordingly. Given the company’s impressive fiscal data, an informed investor’s strategy could certainly include a position in ChargePoint.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.

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Energy & Critical Metals

Rocket Lab Stock Worth Considering Despite Being Slow to Launch

Special purpose acquisition companies (SPACs) went from red hot to ice cold in record time. With the sector in a huge bust, investors have seemingly given…

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Special purpose acquisition companies (SPACs) went from red hot to ice cold in record time. With the sector in a huge bust, investors have seemingly given up on any and all SPACs, and some exciting firms are getting lost in the shuffle. Rocket Lab (NASDAQ:RKLB) is one such example.

Source: 3Dsculptor / Shutterstock.com

The launch and space systems company went public on Aug. 25 through a reverse merger with special purpose acquisition company Vector Acquisition. RKLB stock dropped nearly 10% on its first day of trading to $10.43. However, shares briefly popped above $20 in early September following the release of Rocket Lab’s first earnings report as a publicly traded company. Today, shares sit around $14.

For a company as promising as Rocket Lab, traders probably expected a more auspicious start. Hot SPAC deals such as electric vehicle startup Lucid Group (NASDAQ:LCID), for instance, got a much warmer reception from investors.

Although RKLB stock hasn’t rocketed to the stars just yet, shareholders have reason to be optimistic. This fascinating firm could become a major player in the space industry.

Rocket Lab’s Place in the Sector

Space may be infinite, but the space stock arena is quickly becoming crowded.

Virgin Galactic (NYSE:SPCE) was one of the pioneers in making both SPACs and space companies popular with retail investors. It went public in 2019 through a merger with Chamath Palihapitiya’s SPAC, Social Capital Hedosophia. Since then, we’ve seen a variety of companies related to satellites, launch vehicles and space-based cellular broadband go public. The floodgates are truly bursting wide open, and Rocket Lab is one of the latest to join the party.

Rocket Lab has been described as “a mini SpaceX,” as both companies have developed successful launch-services businesses. Rocket Lab is the leader in the small-launch marketplace with its reusable Electron rocket that has already sent more than 100 satellites in low-Earth orbit. And it is developing the Neutron rocket, which will compete with SpaceX’s Falcon 9.

Rocket Lab is far more than a mini SpaceX, though. The company is attacking the space market on several fronts, describing itself as an “end-to-end space company delivering reliable launch services, spacecraft, satellite components and on-orbit management.” In other words, Rocket Lab is a broad-based company serving almost all parts of the total addressable space-related market.

According to the company, its current customer breakdown is 50% commercial, 30% defense and 20% civil. It counts the National Aeronautics and Space Administration (NASA) and Defense Advanced Research Projects Agency (DARPA) among its clients, along with numerous corporations.

RKLB Stock Has a Potential Valuation Problem

Rocket Lab’s story is compelling, but its valuation could be a concern. InvestorPlace contributor Mark Hake recently made the argument for why RKLB stock isn’t worth chasing at its current price.

The problem Hake points out is a common one for SPACs: There simply isn’t enough current revenue to back up the share price. Rocket Lab is forecast to generate just $54 million in sales in 2021. That’s fine as it’s just getting going as a public company.

In 2022 and 2023, analysts expect $179 million and $268 million in revenues, respectively. That makes for an eye-catching growth rate, assuming management can hit those targets, even if the actual figures are still fairly underwhelming.

However, with a current market cap above $6 billion, investors are paying well above 20 times projected 2023 revenues for RKLB stock. And, as we’ve seen with other SPACs, revenue often falls short of initial expectations.

Turning to earnings, Rocket Lab is projected to run large losses this year and in 2022. In 2023, analysts expect the firm to roughly break even. That’d be a promising development, particularly in combination with a healthy revenue growth rate. The company’s large cash position also helps support the bull case. Still, there’s a lot of market capitalization riding on this firm at an early stage in its overall development.

RKLB Stock Verdict

While RKLB stock hasn’t soared, it has outpaced most of its SPAC rivals in recent weeks. And there will no doubt be a lot of interest in space investments as SpaceX, Blue Origin and others continue to push the boundaries of what’s possible.

Rocket Lab and RKLB stock should have a significant part in that story as the industry continues to evolve.

On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek. 

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