| | | Market Snapshot
| Dow | 38203.25 | +299.96 | (0.79%) | | Nasdaq | 15836.71 | +231.23 | (1.48%) | | SP 500 | 5062.58 | +44.19 | (0.88%) | | 10-yr Note | +4/32 | 4.581 |
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| | NYSE | Adv 2235 | Dec 526 | Vol 440 mln | | Nasdaq | Adv 2962 | Dec 1191 | Vol 3.6 bln |
Industry Watch
| Strong: Information Technology, Consumer Discretionary, Real Estate, Consumer Staples, Energy, Communication Services |
| | Weak: Materials, Health Care |
Moving the Market
-- Strength in mega cap stocks
-- Semiconductor stocks also showing strength after QCOM earnings
-- Muted response to this morning's economic releases
-- Relief that the Fed is not likely to raise rates after Fed Chair Powell's press conference yesterday, yet ongoing uncertainty about how long rates will remain high
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Earnings this afternoon and tomorrow morning
02-May-24 15:35 ET
Dow +299.96 at 38203.25, Nasdaq +231.23 at 15836.71, S&P +44.19 at 5062.58
[BRIEFING.COM] The major indices are hanging out near session highs heading into the close.
In addition to Apple (AAPL), Amgen (AMGN), EOG Resources (EOG), Block (SQ), Pioneer Natural Resources (PXD), U.S. Steel (X), Live Nation (LYV), DaVita (DVA), Expedia Group (EXPE), Motorola Solutions (MSI), Monster Beverage (MNST), Fortinet (FTNT), DraftKings (DKNG), Floor & Decor (FND), GoDaddy (GDDY), Opendoor Technologies (OPEN), Illumina (ILMN), Cloudflare (NET), and others report earnings this afternoon.
Fluor (FLR), Cheniere Energy (LNG), Hershey Foods (HSY), and others report earnings in front of tomorrow's open.
AAPL up ahead of earnings; Stocks reach highs while yields decline
02-May-24 15:00 ET
Dow +365.56 at 38268.85, Nasdaq +241.57 at 15847.05, S&P +21.13 at 5039.52
[BRIEFING.COM] Stocks reached new session highs over the last half hour.
The upside moves coincided with Treasuries hitting intraday low yields. The 10-yr note yield is at 4.57% and the 2-yr note yield is at 4.88%.
The equal-weighted S&P 500 is up 0.8% versus a 1.0% gain in the market-cap weighted S&P 500. Apple (AAPL 172.95, +3.65, +2.2%) is up 2.0% in front of its earnings report after the close.
Howmet Aerospace, Moderna ride earnings to top of S&P 500
02-May-24 14:30 ET
Dow +283.31 at 38186.60, Nasdaq +208.27 at 15813.75, S&P +40.02 at 5058.41
[BRIEFING.COM] The S&P 500 (+0.80%) is in second place on Thursday afternoon, up about 40 points.
Elsewhere, S&P 500 constituents Howmet Aerospace (HWM 76.93, +10.15, +15.20%), Paramount Global (PARA 13.76, +1.50, +12.23%), and Moderna (MRNA 125.05, +13.59, +12.19%) dot the top of today's standings. HWM and MRNA outperform on earnings, while PARA gets another pop higher after the latest press story about interest from Sony (SONY 84.44, +1.55, +1.87%) and Apollo (APO 111.99, 4.22, +3.92%).
Meanwhile, military shipbuilders Huntington Ingalls (HII 246.05, -31.01, -11.19%) are one of today's worst laggards following its Q1 beat as investors scrutinized underwhelming profit margins.
Gold modestly lower on Thursday
02-May-24 14:00 ET
Dow +258.05 at 38161.34, Nasdaq +187.26 at 15792.74, S&P +35.46 at 5053.85
[BRIEFING.COM] The major average have consolidated near levels from the prior half hour, the Nasdaq Composite (+1.20%) still comfortably in the lead.
Gold futures settled $1.40 lower (-0.1%) to $2,309.60/oz, even as both bond yields and the dollar show modest weakness.
Meanwhile, the U.S. Dollar Index is down about -0.3% to $105.46.
Boeing, Nike outperforming in DJIA on Thursday
02-May-24 13:30 ET
Dow +257.23 at 38160.52, Nasdaq +192.51 at 15797.99, S&P +37.31 at 5055.70
[BRIEFING.COM] The Dow Jones Industrial Average (+0.68%) is at HoDs in recent trading, though at the bottom of the standings among the major averages.
A look inside the DJIA shows that Boeing (BA 177.69, +6.23, +3.63%), Nike (NKE 91.95, +1.61, +1.78%), and UnitedHealth (UNH 491.50, +7.39, +1.53%) are among today's top gain getters.
Meanwhile, 3M (MMM 97.10, -1.34, -1.36%) is underperforming.
The DJIA is now only down about -0.21% week-to-date.
Etsy tumbles after sticky economic headwinds keep GMS from bottoming in Q1 (ETSY)
Etsy (ETSY -14%) is tumbling today, moving toward April 2020 levels after projecting potentially worsening gross merchandise sales (GMS) in Q2, inconsistent with its forecast last quarter. In February, the online marketplace platform offering used and homemade goods expressed confidence that Q1 would mark the low point in GMS for the year. Unfortunately, economic headwinds are proving stickier than previously thought.
- In Q1, consolidated GMS fell by 3.7% yr/yr to $3.0 bln, a deterioration from the 0.7% drop last quarter but consistent with ETSY's low-single-digit forecast. As ETSY expected, revenue did outpace GMS growth, edging 0.8% higher yr/yr to $646 mln, matching analyst expectations.
- While these figures were weak, it may have been sufficient in moving the needle today if not for economic challenges keeping a boot on ETSY's near-term outlook. The company no longer anticipates Q1 to mark a bottom, projecting Q2 GMS growth to potentially languish compared to Q1, forecasting a mid-single-digit to low single-digit decline. For the year, ETSY admitted there is a range of possible outcomes, but it currently expects a mild acceleration in yr/yr consolidated GMS growth during 2H24.
- What changed from last quarter? Buyers continue to spend less on ETSY's marketplace, with GMS per buyer down 3.5% in Q1, underscoring a persistently depressed consumer sentiment. Management remarked that wallets remain squeezed, leaving little discretionary income left. These macroeconomic headwinds, which ETSY is not expecting to abate anytime soon, are proving as powerful in ETSY's other top markets outside the U.S., including the U.K. and Germany.
- This is a more discouraging sign for ETSY compared to some of its competitors as few essentials are offered on its site, while eBay (EBAY) and Amazon (AMZN), alongside retail giants like Walmart (WMT) and Target (TGT), host a variety of products spanning a wider range of demand elasticities.
It was not all bad news. ETSY's active buyers held up, staying flat from last quarter at 91.6 mln, suggesting that the current demand environment is more cyclical than structural. The company has made strides in marketing itself as a gifting destination, launching Gift Mode earlier this year and boasting a low single-digit jump in gift GMS yr/yr in Q1. ETSY also continued cleaning up its site, removing handmade sellers that violate policies, which, although resulted in a 50 bp headwind to annualized GMS, should make the marketplace more attractive to the typical e-commerce shopper.
Still, these silver linings appear dull against the backdrop of a stubbornly unfavorable discretionary demand environment. Toward the end of last year, the prospect of falling interest rates kicked off a massive rally for ETSY, moving nearly +40% higher from November to mid-December. However, with interest rates potentially going nowhere this year, inflation remaining elevated, and consumer sentiment withering, ETSY is in a difficult position, which could make it challenging to turn things around this year.
Qualcomm rallies in wake of solid earnings as new AI tech on smartphones drives demand (QCOM)
The smartphone market may not be booming overall, but in markets where chip maker Qualcomm (QCOM) excels, such as higher end 5G Android phones, demand is strong as AI-enabled applications and features continue to roll out. This is especially the case in China, QCOM's largest market at approximately 60% of total revenue, where the company's revenue to smartphone OEMs jumped by 40% in 1H24.
Along with increasing contributions from the automotive business, which achieved its third consecutive quarter of record revenue, this strength at Chinese handset makers fueled QCOM's upside Q2 results and solid outlook for Q3. That outlook, which calls for EPS of $2.15-$2.35 and revenue of $8.8-$9.6 bln, was ahead of expectations at the midpoints of their respective ranges.
- Total Handset revenue edged higher by just 1% to $6.18 bln, down sharply from last quarter's growth of 16%. The slowdown is in line with what other leading semiconductor companies have noted and are expecting for the smartphone market. For instance, when Micron (MU) reported Q2 earnings in late March, it forecasted tepid smartphone unit volume growth in the low-to-mid single digits for 2024.
- Similarly, last night QCOM maintained its CY24 forecast for global handset unit growth of flat to slightly higher on a yr/yr basis. However, as AI expands from the cloud to devices, consumers are looking to upgrade their smartphones to have the latest technology, such as chatbots and other gen AI programs. QCOM's Snapdragon processors power those AI applications.
- QCOM's better-than-expected report is a positive sign for Apple (AAPL), too, which is one of QCOM's largest customers. One caveat, though, is that the strength seen across Chinese smartphone makers, such as Xiaomi, suggests that AAPL may be losing some market share in that country. AAPL is scheduled to report Q2 earnings after the close tonight and is currently trading moderately higher on the session.
- Turning to Automotive, the inventory glut that other chip makers have highlighted in this market, including Taiwan Semi Manufacturing (TSM) and Mobileye Global (MBLY), isn't having much of an impact on demand for QCOM's Snapdragon chassis. After jumping by 31% last quarter, Automotive revenue growth accelerated to 35% in Q2 to $603 mln, setting a new quarterly record. During the earnings call, CEO Cristiano Amon noted that the Automotive business is on track to deliver more than $4 bln in revenue in FY26.
- Like last quarter, the one weak spot was the Internet of Things (IOT) market, which saw revenue decrease by 11% to $1.24 bln. This business is feeling the effects of an inventory correction, but there are a couple silver linings. For instance, on a qtr/qtr basis, revenue was up by 9%, and Mr. Amon stated that the company is seeing a gradual recovery take shape in the industry and is looking forward to a normalization of demand exiting FY24.
The main takeaway is that QCOM's strong market positioning in the 5G handset market in China paid dividends in Q2, while the company is also well-positioned to deliver stronger growth in the quarters ahead as smartphone makers continue to launch new AI technologies on devices.
Wayfair investors feel comfortable snatching up shares after continuous market share gains in Q1 (W)
Investors are shrugging off Wayfair's (W +13%) narrow earnings miss in Q1 today after the online furniture and home décor retailer delivered accelerating yr/yr active customer growth and outlined several encouraging trends, setting the stage for a dramatically improved year ahead. As has become typical for several quarters in a row, Wayfair shares are gapping significantly higher today. However, following such an extended sell-off during April, the stock is merely back to last week's price levels.
Wayfair reiterated during its earnings call today that Q1 marked the low point for gross margins this year and forecasted adjusted EBITDA margins to be solidly in the mid-single-digit range in Q2, the precise figure needed to launch the company toward its Investor Day target of 10%+ margins. At the same time, Wayfair projected a healthy year of free cash flow generation in FY24 following its aggressive cost-cutting plans -- laying off 13% of its global workforce earlier this year -- laying the foundation from which the company can start deleveraging its balance sheet.
- Wayfair maintained its promising momentum in Q1, generating positive adjusted EBITDA of $75 mln and improving free cash flow for the fourth straight quarter despite operating in a tumultuous environment that has kept the home furnishings category under immense pressure. This was apparent across the board lately, with peers RH (RH), Williams-Sonoma (WSM), and MillerKnoll (MLKN) warning of sluggish near-term demand.
- Wayfair was also clipped by category declines, delivering a 1.6% dip in revs yr/yr to $2.73 bln. However, this mild drop outshined the industry, which fell by low double digits in Q1, resulting in the company's sixth consecutive quarter of outperformance and market share gains. Furthermore, Wayfair tacked on 2.8% more active customers yr/yr to 22.3 mln, underscoring an attractive competitive edge. Wayfair's range of prices, bountiful options, and simplistic online interface continue to help differentiate it from a highly fragmented industry.
- Also worth mentioning was Wayfair's orders per customer and average order value of 1.84 and $285, respectively, which remained relatively consistent with year-ago figures.
- Looking ahead, investors are willing to brush aside a persistently depressed furniture market, given Wayfair's advancements toward becoming a more sustainably profitable organization and continuing to capture market share. Alongside uplifting adjusted EBITDA margin and cash flow targets, Wayfair anticipates flat revenue growth in Q2, a decent improvement from Q1 and well above several peers' recent outlooks. The company also expects further market share gains this year and noted that its profitability gains firmly align with its long-term plan.
By demonstrating that it can not only take strides toward increasing profitability but also outpace category declines in Q1, Wayfair is sitting pretty today. When zooming out, shares still trade far below one-year highs, let alone all-time highs near $400.00 during the pandemic, illuminating how challenging the demand backdrop continues to be. However, Wayfair is setting in motion the properties required to reignite more meaningful growth once industry conditions begin to turn.
DoorDash is dashing lower despite strong results; increased spend weighing on shares (DASH)
DoorDash (DASH -12%) is dashing lower following its Q1 report last night. The food delivery service giant reported a larger GAAP loss than expected. The top line growth was good at +23.5% to $2.51 bln, which was better than expected. Total orders rose 21% yr/yr to 620 mln while Q1 Marketplace GOV rose 21% yr/yr to $19.2 bln, which was above the $18.5-18.9 bln prior guidance.
- Since DASH does not provide adjusted EPS, we think it is important for investors to focus more on adjusted EBITDA as the better metric for profitability because it's a clean adjusted number and DASH provides guidance for it. And on the score, DASH did well, growing 82% yr/yr to $371 mln, at the higher end of $320-380 mln prior guidance. Also, Adjusted EBITDA as a % of Marketplace GOV rose to 1.9% from 1.3% a year ago.
- The guidance was a bright spot as well with DASH expecting Q2 adjusted EBITDA of $325-425 mln. However, DASH did caution investors that its outlook also anticipates significant levels of ongoing investment in new categories and international markets. It also cautioned that consumer spending could deteriorate relative to its outlook.
- DASH noted that order frequency continues to be at an all-time high. DashPass subscribers continue to be at record highs as well. In terms of new verticals, DASH noted that grocery has doubled yr/yr for three quarters in a row and its international business is growing quite nicely. DASH expects its strategy of having multiple categories in multiple countries is going to allow it to really drive strong growth for many years to come.
- The company was also positive on its advertising business. DASH does not break out ad revenue but it is growing fast and contributing to both revenue as well as EBITDA. Its ads effort is about 2.5 years old, but the first year and a half was really setting DASH up for pull from the restaurant side. However, DASH notes that its grocery and retail sectors have been growing on the marketplace. DASH is seeing increasing pull from CPG advertisers.
- DASH was actually a little more positive on the macro environment than we thought it would be. Basically, DASH is not seeing signs of strain on the consumer. However, that may be related to the subsegment where it operates, which is digital and delivery. DASH did concede there are some headwinds that certain merchants face when it comes to in-store traffic. But when it comes to all things digital, DASH is not seeing those same signs of strains. For example, in the US restaurants business, growth has been pretty consistent over the last six quarters. Even in grocery, despite high inflation, DASH tends to see pretty strong demand on the digital side.
Overall, we think investors are reacting to DASH's comments about significant levels of investment as it expands in new categories and international markets. DASH also said it will be adding to headcount, adding engineers to help improve the product. The concern may be about margins later this year.
Also, investors may be nervous that yr/yr order growth has been declining in recent quarters: +21% in Q1, following +23% in Q4, +24% in Q3, +25% in Q2 and +27% in Q1 last year. Marketplace GOV yr/yr growth is following a similar trend. Finally, while DASH may not be experiencing it directly, there has been a reduction in restaurant traffic generally as consumers watch spend and eat at home more, as we saw in reports this week from MCD, SBUX this week.
Pinterest tacking on some huge gains today following beat-and-raise report (PINS)
Pinterests' (PINS) strong beat-and-raise Q1 earnings report showed that the social media company has carved out its own niche in the digital marketing space, easing concerns that it will be squeezed out by tech giants Google (GOOG) and Meta Platforms (META) as those companies pour billions into AI. That niche is a Gen Z demographic, which now accounts for over 40% of PINS' users, that's seeking out a shoppable social media platform that's more positive and friendlier than other sites.
- While PINS' capex budget pales in comparison to GOOG's or META's, both of which are significantly ramping up their investments this year, PINS is seeing plenty of bang for its buck in terms of its own AI investments. In 2H22, PINS began moving aggressively to integrate large language models and generative AI into its platform. To support this effort, the company transitioned from CPUs to GPUs, enabling it to develop and deploy more complex features that improve relevancy and personalization for users.
- At the same time, PINS has enhanced its eCommerce capabilities, transitioning from a site that was mainly used to generate ideas to one that's more actionable from a shopping standpoint. This has been accomplished through a few key factors, including its AI advancements which are providing users with more relevant products and driving advertisers' ROI higher.
- Furthermore, the company completed its rollout of direct links in Q1, significantly reducing friction and improving actionability since they take users directly to an advertiser's product page. On a yr/yr basis, clicks to advertisers have more than doubled yr/yr, helping to nearly doubled PINS' overall revenue growth rate from Q4 to +23%.
- Finally, PINS continues to scale its business with third party partners such as Amazon (AMZN) and, to a lesser extent, GOOG. In Q1, revenue contributions from third parties accelerated and PINS anticipates that will remain the case for the remainder of FY24.
- The acceleration in revenue and MAU growth (+12% to 518 mln) certainly stands out, but PINS progress on the bottom-line is also very notable. Adjusted EPS more than doubled yr/yr to $0.20, while adjusted EBITDA margin soared by 1,100 bps to 15%. This was driven by PINS revenue outperformance and disciplined spending with non-GAAP operating expenses up 10% compared to revenue growth of 23%.
- Unlike last quarter, when PINS issued downside Q1 revenue guidance, the company's Q3 revenue forecast of $830-$850 mln is comfortably ahead of expectations. The bullish outlook is underpinned by direct links value capture and an increasing contribution from third party partners. Similar to GOOG, the company is seeing continued strength in the retail vertical, and it expects that strength to continue as more sophisticated advertisers turn to its platform.
Overall, this earnings report is a significant improvement over last quarter's performance, bullishly shifting the narrative to PINS' unique competitive advantages.
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