Market Snapshot
briefing.com
| Dow | 35307.09 | -7.31 | (-0.02%) | | Nasdaq | 13805.97 | -78.75 | (-0.57%) | | SP 500 | 4492.94 | -7.71 | (-0.17%) | | 10-yr Note | +2/32 | 4.01 |
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| | NYSE | Adv 1253 | Dec 12573 | Vol 829 mln | | Nasdaq | Adv 12607 | Dec 2713 | Vol 5.6 bln |
Industry Watch
| Strong: Energy, Utilities, Consumer Staples, Health Care |
| | Weak: Information Technology, Consumer Discretionary, Communication Services, Financials, Materials, Industrials |
Moving the Market
-- Weak mega cap stocks, which are being pressured by consolidation efforts, are having an disproportionate influence on index losses
-- S&P 500 bouncing off today's low of 4,461, which was close to yesterday's low of 4,464
-- S&P 500 failing to break above 4,500 precipitated late selling interest
-- Wait-and-see ahead of CPI report tomorrow
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Closing Summary
09-Aug-23 16:30 ET
Dow -191.13 at 35123.27, Nasdaq -162.31 at 13722.41, S&P -31.67 at 4468.98
[BRIEFING.COM] The stock market closed with losses again today. The major indices had been following a similar form to yesterday's trade and looked poised to close on an upswing after rebounding from their lows. The market turned sharply lower ahead of the close, however, and settled near the worst levels of the day.
On Tuesday, the S&P 500 traded down to 4,464 before reversing and finishing the session at 4,499. Today, the S&P 500 traded down to 4,461 before reversing and stopping short of the 4,500 level, which precipitated the late selling interest. The deterioration was broad and orderly with many stocks participating, but mega cap losses had an outsized impact on index performance.
The Invesco S&P 500 Equal Weight ETF (RSP) was up 0.3% around 3:00 p.m. ET, but closed with a 0.3% loss; the Vanguard Mega Cap Growth ETF (MGK) was down 0.5% around 3:00 p.m. ET, but closed with a 1.1% loss; and the market-cap weighted S&P 500 was down 0.1% around 3:00 p.m. ET, but closed with a 0.7% loss.
The S&P 500 energy sector (+1.2%) was the top performer by a decent margin. The information technology sector (-1.5%), meanwhile, closed with the steepest loss.
Outsized moves were generally reserved for stocks with news catalysts. Twilio (TWLO 59.69, +1.29, +2.2%), Duolingo (DUOL 144.91, +8.91, +6.6%), and Akamai Tech (AKAM 102.99, +8.04, +8.5%) were standouts after reporting earnings while Penn Entertainment (PENN 27.10, +2.26, +9.1%) struck a 10-year exclusive U.S. online sports betting agreement with ESPN, Inc. and ESPN Enterprises.
Treasuries settled mixed ahead of tomorrow's release of the July Consumer Price Index. The 2-yr note yield rose five basis points to 4.80% and the 10-yr note yield fell one basis point to 4.01%.
- Nasdaq Composite: +31.1% YTD
- S&P 500: +16.4% YTD
- Russell 2000: +9.6% YTD
- S&P Midcap 400: +9.7% YTD
- Dow Jones Industrial Average: +6.0% YTD
Reviewing today's economic data:
- The weekly MBA Mortgage Applications Index declined 3.1% with purchase applications falling 3.0% and refinance applications dropping 4.0%.
- The weekly EIA crude oil inventories showed a build of 5.85 million barrels following last week's draw of 17.1 million barrels.
The economic calendar tomorrow includes:
- 8:30 a.m. ET: July CPI (Briefing.com consensus 0.2%; prior 0.2%) and Core CPI (Briefing.com consensus 0.2%; prior 0.2%); weekly Initial Claims (Briefing.com consensus 230,000; prior 227,000) and Continuing Claims (prior 1.700 mln)
- 10:30 a.m. ET: Weekly natural gas inventories (prior +14 bcf)
- 2:00 p.m. ET: and July Treasury Budget (prior -$227.80 bln)
Treasuries settle mixed in front of CPI tomorrow
09-Aug-23 15:30 ET
Dow -32.41 at 35281.99, Nasdaq -96.65 at 13788.07, S&P -11.03 at 4489.62
[BRIEFING.COM] The major indices drifted slightly lower over the last half hour.
Treasuries settled mixed ahead of tomorrow's release of the July Consumer Price Index. The 2-yr note yield rose five basis points to 4.80% and the 10-yr note yield fell one basis point to 4.01%.
The economic calendar also includes:
- 8:30 a.m. ET: weekly Initial Claims (Briefing.com consensus 230,000; prior 227,000), and Continuing Claims (prior 1.700 mln)
- 10:30 a.m. ET: Weekly natural gas inventories (prior +14 bcf)
- 2:00 p.m. ET: and July Treasury Budget (prior -$227.80 bln)
After the close today, Disney (DIS), Wynn Resorts (WYNN), Illumina (ILMN), Viasat (VSAT), AppLovin (APP), and The Trade Desk (TTD) are among the more influence names reporting earnings.
Market climbs after S&P 500 slipped below yesterday's low
09-Aug-23 15:05 ET
Dow -7.31 at 35307.09, Nasdaq -78.75 at 13805.97, S&P -7.71 at 4492.94
[BRIEFING.COM] Like yesterday, the major indices have climbed off their lows as the session has progressed. Notably, the low for the S&P 500 was 4,464 on Tuesday and the low today was 4,461 before the market saw a similar bounce. The S&P 500 is stuck right below the 4,500 level now.
Many mega caps are still sporting losses, but the broader market has built up some strength. The Vanguard Mega Cap Growth ETF (MGK) is down 0.5% while the Invesco S&P 500 Equal Weight ETF (RSP) trades up 0.2%.
Market breadth is more mixed now compared to earlier in the session. Advancers have an 11-to-10 lead over decliners at the NYSE while decliners have a 4-to-3 lead over advancers at the Nasdaq.
Axon, FleetCor among earnings gainers in S&P 500
09-Aug-23 14:30 ET
Dow +2.85 at 35317.25, Nasdaq -59.83 at 13824.89, S&P -3.45 at 4497.20
[BRIEFING.COM] The major averages have come a long way from today's bottom, the S&P 500 (-0.08%) having been down about -0.85% at one point this morning.
S&P 500 constituents Axon (AXON 200.92, +25.19, +14.33%), FleetCor (FLT 260.77, +16.23, +6.64%), and Charles River (CRL 217.43, +11.19, +5.43%) pepper the top of the index. AXON was added to Needham's Conviction List after last night's beat and raise, while FLT and CRL also perform well after earnings.
Meanwhile, media giant Paramount Global (PARA 15.82, -0.53, -3.24%) is one of today's worst performers, giving back all and then some of yesterday's post-earnings gains.
Gold slips to four-week lows
09-Aug-23 14:05 ET
Dow -61.06 at 35253.34, Nasdaq -96.28 at 13788.44, S&P -13.45 at 4487.20
[BRIEFING.COM] With about two hours to go on Wednesday afternoon the tech-heavy Nasdaq Composite (-0.69%) is still the top laggard.
Gold futures settled $9.30 lower (-0.5%) $1,950.60/oz, falling to its lowest levels since the beginning of July, extending losses to -2.47% month-to-date.
Meanwhile, the U.S. Dollar Index is down about -0.1% to $102.44.
Coupang surges on another quarter of profitability and accelerating sales growth in Q2 (CPNG)
South Korea-based e-commerce giant Coupang (CPNG +7%) is rocketing today after delivering decent earnings and revenue upside in Q2 on accelerating active customer growth. Like many e-commerce firms, after the brisk tailwinds from the pandemic started to die down, sales growth took a back seat as CPNG shifted into profitability mode to better survive the rapid shift in market conditions.
Although shares have struggled since their March 2021 IPO, giving up over half their value, CPNG's moves have started to bear fruit, evidenced by its fourth-straight quarter of profitability, igniting a +30% jump in its stock price this year. Management commented that its sustained profitability provided further confidence in its ability to achieve its long-term adjusted EBITDA margin outlook of over 10%, double the figure posted in Q2.
- CPNG registered EPS of $0.08 in Q2, a stark improvement over the $(0.04) posted in the year-ago period, as gross margins edged 320 bps higher yr/yr to 26.1%. Meanwhile, sales grew 15.9% yr/yr to $5.84 bln, accelerating from +13.4% in Q1 and +4.9% in 4Q22.
- Active customer growth also picked up momentum in Q2, expanding 10% yr/yr, up nicely from +5% in Q1 and +1% in 4Q22. CPNG noted that its customer cohorts continued increasing their spending and the number of categories they shopped on the platform, reflecting CPNG's competitive edge as the retail market remained plagued by high prices and limited selection.
- The extra categories CPNG has added over the past several quarters are enjoying positive momentum, with newer assortments like fashion and beauty growing sales significantly faster than the overall business. Meanwhile, alongside first-party sales growth, third-party sales are expanding at a multiple of the broader retail landscape, underscoring merchants' increasing desire to list their products on CPNG's site.
- Another positive standout from Q2 was Eats, CPNG's food delivery service, which gained over 500 bps of market share in regions where the company offered a 10% discount. Eats has been a successful door-opener for CPNG, with customers on Eats spending significantly more on e-commerce.
CPNG's Q2 report was an eye-grabbing combination of continuous profitability, accelerating revenue, and improving active customer growth. As we saw from Amazon (AMZN) and MercadoLibre (MELI), e-commerce is proving to be a haven of value for customers seeking ways to deal with sticky inflationary pressures. This trend played out nicely for CPNG, evidenced by increased spending across a higher number of categories during the quarter. With CPNG commanding just a single-digit retail market share, it is positioning itself for substantial long-term growth.
Wendy's trades flat following earnings; breakfast and late night doing well (WEN)
Wendy's (WEN) is trading roughly flat after reporting Q2 results this morning. It was the typical Wendy's report with a small EPS beat. WEN tends to be hit-or-miss on revenue and it was a slight miss this quarter. The burger chain also reaffirmed FY23 adjusted EPS at $0.95-1.00 and system wide sales guidance at +6-8%, which is not comparable to consensus.
- Probably the key metric was same-restaurant comps. Global comps were +5.1% and US comps were +4.9%. Despite pretty decent comps, we think investors wanted to see better results. The Q2 comps came in below Q1's comp results: Global +8.0%, US +7.2%. Also, WEN was lapping pretty easy year ago results at +3.7% Global and +2.3% for US. Furthermore, McDonald's (MCD) posted Q2 US comps at a robust +10.3%.
- Wendy's says it benefitted from strategic pricing actions and positive mix, resulting from the evolution of its value platforms. Also, the launch of The Ghost Pepper Ranch Chicken Sandwich and the return of the strawberry Frosty alongside continued success of the Biggie Bag lineup all contributed to Q2 growth.
- Its breakfast and late-night dayparts delivered outsized growth in Q2. For breakfast, Wendy's sees significant growth ahead. In the US, WEN achieved its highest quarterly breakfast sales volumes of all-time supported by its $3 Croissant promotion resulting in mid-single digit sales growth. The company expects to continue building on this breakfast momentum with its recently launched Frosty Cream Cold Brew, which combines cold brewed coffee with its Frosty creamer.
- In terms of late night, Wendy's recently made a push into this daypart and it paid off in Q2 with double digit sales growth sequentially and yr/yr. WEN continues to see room to grow in late night relative to its QSR peers. WEN expects this daypart will expand even further as customers become aware that Wendy's is reliably open late night. This also helped its US digital performance, which benefited from its late-night advertising and expanded hours.
Overall, investors' reaction to WEN's Q2 report is: meh. We like the growth we are seeing in breakfast and late night. WEN has also been good lately at rolling out new products. Nevertheless, the small EPS beat and reaffirm were not a lot to get excited about. Also, we think investors wanted to see better comps given the easy hurdle from last year and in light of robust US comps from McDonald's. Jack In The Box (JACK) also reported this morning. Its results/comps were also better than Wendy's.
Lyft riding lower as profitability concerns overshadow upside Q2 report (LYFT)
At first glance, Lyft's (LYFT) Q2 earnings report looks solid as the rideshare company easily surpassed EPS and adjusted EBITDA expectations, while also issuing better-than-expected guidance for Q3. In fact, the stock initially jumped higher after the earnings report was released, before eventually reversing course to trade with sizable losses.
- Shares were up by more than 5% yesterday, suggesting that market participants were anticipating stronger results from the struggling company. While the headline numbers and outlook do reflect some improvements, a closer look under the hood reveals that LYFT is still far in the distance in Uber's (UBER) rearview mirror.
- In order to gain ground, LYFT intends to remain competitive on pricing, which could impact its profitability down the road. That realization, combined with LYFT generating its slowest top-line growth since 1Q21 at 3%, prompted some investors to lock in gains.
- When CEO David Risher took the reins in late March, his primary mission was to improve LYFT's competitiveness against UBER by reaccelerating the company's active rider growth, leading to market share gains.
- In that regard, he has had some success as active riders increased by 8.2% yr/yr in Q2 to 21.5 mln, which is also up from last quarter's total of 19.5 mln.
- In Q1, active riders declined by nearly 2.0 mln from Q4's total of 20.4 mln, mainly due to higher rideshare prices relative to UBER.
However, the active rider gains are coming at a cost.
- Specifically, revenue per active rider decreased by 5% to $47.51 in Q2, causing LYFT's contribution margin to fall by 18 bps yr/yr on an adjusted basis.
- Thanks to the company's cost-cutting measures -- operating expenses were 40% of revenue compared to 54% a year earlier -- it was able to deliver adjusted EBITDA of $41.0 mln, well above its guidance of $20-$30 mln. The concern, though, is that LYFT won't be able to keep cutting its way to profitability as it continues with its rideshare pricing strategy.
The good news is that driver supply is at a very healthy level as LYFT ended the quarter with the highest number of drivers since the start of the pandemic.
- Another aspect of Mr. Risher's strategy is to make LYFT the preferred choice for drivers by adding new innovations and features. For example, the company made the "stay within area" filter more precise, allowing drivers to better pinpoint where they want to drive within a five-mile radius.
- Technology improvements like these require capital, and LYFT is using its cost-savings to make these investments in its platform to win back drivers and riders. Although that's certainly a viable plan, the issue is that the investments are another headwind to profitability.
From a big picture point of view, LYFT is trailing UBER by a substantial amount in regard to adjusted EBITDA at $41 mln versus $916 mln in Q2. With LYFT fighting an uphill battle to recapture lost market share that's also pressuring its profitability, it becomes difficult to make the case to investors that it's a better investment choice than UBER.
Twilio pushes higher on stabilizing volumes and sustained profitability in Q2 (TWLO)
Twilio (TWLO +1%) is pushing higher today on positive headline Q2 figures. The real-time communication software provider, whose APIs are used to alert consumers via text, phone, and email, among other applications, registered its third-straight quarter of impressive bottom-line performance, reflecting its successful pivot toward profitability amid macroeconomic choppiness. A minor weak point from TWLO's Q2 report yesterday after the close was its mixed Q3 outlook. Earnings are expected to remain buoyant, exceeding analyst expectations. However, TWLO projected flat sales growth yr/yr in Q3, underpinning stubborn economic headwinds.
Nonetheless, unlike last quarter, management was more confident about a potential trough, noting that within its core Communications segment (91% of Q2 revs), it was encouraged by continued signs of stabilization across its customer base. Meanwhile, in Data & Applications, CEO Jeff Lawson was optimistic that its bookings would improve toward the end of 2023, with revenue growth reaccelerating during 2024.
- In the meantime, profitability remains TWLO's brightest highlight, reducing its GAAP loss from operations by over half yr/yr by executing its workforce reduction and business streamlining plans, paving the way for one of its best quarters of bottom-line performance, swinging a profit of $0.54 per share from $(0.11) in the year-ago period. Meanwhile, non-GAAP gross margins expanded by 130 bps yr/yr to 52.2%.
- Revenue growth of 10% yr/yr to $1.04 bln, surpassing TWLO's $980-990 mln forecast, was also a notable area of strength. Active customers edged 10.5% higher yr/yr and 1.3% sequentially to over 304,000, although this marked a continual deceleration from the previous quarter when active accounts expanded by 13.3% yr/yr and 3.4% sequentially.
- TWLO conceded that it continued seeing an uneven macroeconomy, reducing near-term visibility. Volumes did grow across several verticals, but pronounced weakness remains in other areas, such as social & messaging and crypto. In fact, if not for the particular vulnerability in the crypto industry, TWLO's Q2 sales growth would have been 4 pts higher. The company expects similar headwinds to seep into Q3, after which the adverse impact will moderate.
- As a result, TWLO's Q3 revenue outlook was mild, forecasting $980-990 mln, consistent with its Q2 prediction. President of Twilio Communications Khozema Shipchandler commented that while volumes have stabilized, the company has not seen them creep back up, forcing a prudent near-term outlook. Still, showcasing a successful shift to profitability, TWLO anticipates adjusted EPS of $0.33-0.37 in Q3, a marked improvement from the $(0.27) in the year-ago period. The company also lifted its FY23 non-GAAP income from operations to $350-400 mln from $275-350 mln.
After investors fled from TWLO last quarter following management's lack of conviction in calling a bottom, we noted that despite the upbeat profitability metrics, shares may not receive the kindling needed until further clarity is provided. Although the near term remains cloudy, after solid Q2 numbers, management sounded more confident about the remainder of the year and was excited about reaccelerating sales growth in 2024. As a result, TWLO's profitability is garnering more attention, helping fuel today's pop.
Palantir Technologies pulls back on a mild Q2 report; still amid a favorable AI tailwind (PLTR)
After an over +180% gain on the year as of yesterday's close, Palantir Technologies (PLTR -4%) shares are taking a breather today on in-line Q2 results and narrowed FY23 sales guidance. The data analytics firm deeply rooted in AI did post its third-straight quarter of GAAP profitability, reiterating profitability for the rest of FY23, making it eligible for inclusion in the S&P 500 following Q3. PLTR also authorized up to $1.0 bln for share repurchases.
So why are shares dropping? For starters, Q2 results were mild, registering earnings and sales consistent with analyst forecasts. Additionally, PLTR's U.S. government business delivered disappointing performance, with revs slipping by 4% sequentially. International commercial sales also lagged, as growth among European commercial enterprises remained muted. Also, although PLTR's FY23 revenue forecast of $2.212 bln was slightly ahead of consensus, it represented just a $2.0 mln bump from the midpoint of its prior forecast of $2.185-2.235 bln. After shares nearly tripled in value leading into PLTR's Q2 results, giving it a forward P/E multiple of 84x, these results are not cutting it.
Still, the stock did see a minor gain immediately following Q2 numbers, underscoring several highlights from the quarter.
- PLTR achieved a significant revenue milestone in Q2, surpassing $2.0 bln in TTM revenue for the first time. PLTR's top 20 customers partly fueled this milestone, with TTM revenue growing 15% yr/yr to $53 mln per customer.
- U.S. commercial revenue growth of 20% yr/yr, doubling total commercial sales growth, was also a contributor. PLTR noted that 54% of its U.S. commercial sales stemmed from customers that signed on in 2021, a testament to the company's competitive edge and the stickiness of its software. Furthermore, U.S. commercial customers expanded by 4% sequentially to 161, marking the 10th consecutive quarter of sequential growth.
- While U.S. Government performance underperformed PLTR's expectations, International government sales shined, improving by 31% yr/yr, an excellent acceleration from the +11% growth posted last quarter. The reacceleration was driven by the U.K., with work done across the NHS and the U.K. Ministry of Defense.
Overall, PLTR's Q2 results were mild, insufficient to extend its current rally. Nonetheless, the stock is holding up relatively well, and we view today's drop as a healthy pullback. PLTR is amid several tailwinds, especially surrounding its Artificial Intelligence Platform or AIP. Without getting too deep into the weeds, management noted that AIP will be transformational for its customers as it takes advantage of large language models (LLMs), like Chat-GPT, and pairs it with algorithmic tools to calculate profitability, lead times, and other important workflows that LLMs cannot do alone. Even if the AI craze starts to cool, PLTR is cementing itself as a gold standard in this space, positioning itself for long-term success.
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