Wall Street had a celebration on Wednesday, but it wasn't clear how much more momentum the latest move from the Federal Reserve would bring to the stock market. Even after massive gains of around 3% for major market benchmarks, Thursday morning's futures market moves showed a distinct lack of follow-through. As of 8 a.m., futures on the Dow Jones Industrial Average (^DJI 0.67%) were down 165 points to 33,804. S&P 500 (^GSPC 0.87%) futures had dropped 29 points to 4,267, while Nasdaq Composite (^IXIC 1.11%) futures had fallen 116 points to 13,415.
Part of the problem stock market investors face is that the news from various companies looks much different depending on the sector and the quality of financial results. That was evident from a pair of companies reporting their latest earnings, as Albemarle (ALB 0.12%) soared while DigitalOcean Holdings (DOCN 0.06%) posted substantial declines.
Albemarle lights up on lithium
Shares of Albemarle were up more than 14% in premarket trading on Thursday. The company has benefited greatly from extremely strong conditions in the lithium market, and given the ongoing demand from the electric vehicle industry, it seems like the good times are likely to last for quite a while.
Image source: Getty Images.
Albemarle's first-quarter numbers were extremely strong. Net sales climbed 36% to $1.13 billion, even with downward pressure from the company's decision to divest its fine chemistry services division last summer. Net income jumped to more than $253 million, and adjusted earnings of $2.38 more than doubled year over year.
Moreover, Albemarle dramatically increased its guidance for the rest of 2022. The company now anticipates that sales will rise between 60% and 70% over the remainder of the year to between $5.2 billion and $5.6 billion. Adjusted pre-tax operating earnings should see even bigger gains, rising 100% to 140% from 2021 levels. Adjusted earnings could come in between $9.25 and $12.25 per share, which certainly puts a different perspective on the stock's valuation.
Indeed, even after the share price's jump, Albemarle currently trades at a forward valuation of roughly 20 times its highest projection for adjusted earnings. That raises the obvious question of whether the current boom in lithium is sustainable, but with so much demand for electric vehicles and the batteries that currently rely on lithium supplies for production, Albemarle appears to be in an extremely strong position going forward.
DigitalOcean keeps facing storm clouds
On the other side of the coin, shares of DigitalOcean Holdings were down more than 8%. The cloud platform provider continued to see solid growth, but it pointed to uncertainties in the macroeconomic environment that could weigh on its future prospects.
DigitalOcean's first-quarter results sustained an impressive pace of gains. Revenue climbed 36% year over year to $127 million. The run rate for the company's recurring revenue finished at an annualized $524 million, up 35% from year-ago levels, and net dollar retention rates improved by 10 percentage points to 117%. DigitalOcean saw its customer count jump 6% to 623,000, with average revenue per customer jumping 28% to $68.90.
However, profitability remained somewhat muted. Losses under generally accepted accounting principles (GAAP) widened to $18.1 million, and even on an adjusted basis, the doubling of earnings to $0.07 per share seemed not to be enough to give investors a ton of confidence about the longer-term trajectory of the company's bottom line.
Looking ahead, DigitalOcean expects second-quarter revenue of $133 million to $135 million, with full-year sales of $564 million to $568 million and adjusted earnings of $0.70 to $0.71 per share. That makes the stock's valuation look increasingly attractive, but only if you're convinced that the company's projections won't prove to be overly optimistic in the currently challenging environment for cloud computing stocks more broadly.
