Market Snapshot
| Dow | 39056.39 | +172.13 | (0.44%) | | Nasdaq | 16302.76 | -29.80 | (-0.18%) | | SP 500 | 5187.67 | -0.03 | (0.00%) | | 10-yr Note | -2/32 | 4.49 |
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| | NYSE | Adv 1247 | Dec 1541 | Vol 954 mln | | Nasdaq | Adv 1918 | Dec 2278 | Vol 4.5 bln |
Industry Watch
| Strong: Utilities, Financials, Information Technology, Industrials |
| | Weak: Real Estate, Consumer Discretionary, Communication Services, Materials |
Moving the Market
-- Jump in market rates
-- Consolidation after recent gains
-- Mixed action in mega cap stocks limiting movement for broader market
-- S&P 500 hitting resistance at 5,200 yesterday
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Closing Summary
08-May-24 16:25 ET
Dow +172.13 at 39056.39, Nasdaq -29.80 at 16302.76, S&P -0.03 at 5187.67
[BRIEFING.COM] The S&P 500 closed little changed from yesterday, the Nasdaq Composite registered a 0.2% decline, and the Russell 2000 underperformed with a 0.5% loss. Meanwhile, the Dow Jones Industrial Average logged a 0.4% gain and closed 172 points higher than yesterday.
The major indices traded in relatively narrow ranges through most of the session after climbing off opening lows. The overall vibe in today's trade was slightly negative despite the index level improvement and gain in the DJIA. Decliners led advancers by a 4-to-3 margin at the NYSE and by an 11-to-10 margin at the Nasdaq.
The downside bias was related to normal consolidation efforts after recent gains. Also, the 5,200 level was an overhang for the S&P 500 after the index stalled out at that point yesterday.
Uber (UBER 66.40, -4.03, -5.7%) was among the worst performing stocks in the S&P 500 after reporting below-consensus earnings. The S&P 500 industrial sector still eked out a fractional gain despite the movement in shares of Uber.
The information technology (+0.2%), financials (+0.4%), and utilities (+1.1%) sectors also closed with gains. The real estate (-0.9%) and materials (-0.4%) sectors registered the largest declines.
Some other stocks that reported earnings received positive responses from investors. Lyft (LYFT 17.78, +1.18, +7.1%), Arista Networks (ANET 291.67, +17.68, +6.5%), Reddit (RDDT 51.40, +2.00, +4.1%), and Anheuser-Busch InBev (BUD 62.99, +2.42, +4.0%) were among the winning standouts in that respect.
The price action in Treasuries contributed to the muted action in stocks. The 10-yr note yield settled three basis points higher at 4.49% and the 2-yr note yield settled one basis point higher at 4.84%. This followed today's $42 billion 10-yr note sale, which met weaker demand than yesterday's 3-yr note auction.
- S&P 500:+8.8% YTD
- Nasdaq Composite: +8.6% YTD
- S&P Midcap 400: +6.7% YTD
- Dow Jones Industrial Average: +3.6% YTD
- Russell 2000: +1.4% YTD
Reviewing today's economic data:
- The weekly MBA Mortgage Applications Index rose 2.6% versus last week's 2.3% decline
- Wholesale Inventories fell 0.4% in March (Briefing.com consensus -0.4%) following a revised 0.2% increase in February (from 0.5%).
- The weekly EIA Crude Oil Inventories showed a draw of 1.36 million barrels following last week's build of 7.27 million barrels
Looking ahead, Thursday's economic calendar features:
- 8:30 ET: Weekly Initial Claims (Briefing.com consensus 213,000; prior 208,000) and Continuing Claims (prior 1.774 mln)
- 10:30 ET: Weekly natural gas inventories (prior +59 bcf)
Stocks move slightly higher
08-May-24 15:35 ET
Dow +173.55 at 39057.81, Nasdaq -30.23 at 16302.33, S&P +0.83 at 5188.53
[BRIEFING.COM] Stocks moved slightly higher, leading the S&P 500 to trade above its prior close.
The 10-yr note yield settled three basis points higher at 4.49% and the 2-yr note yield settled one basis point higher at 4.84%. This followed today's $42 billion 10-yr note sale, which met weaker demand than yesterday's 3-yr note auction.
Looking ahead, Thursday's economic calendar features:
- 8:30 ET: Weekly Initial Claims (Briefing.com consensus 213,000; prior 208,000) and Continuing Claims (prior 1.774 mln)
- 10:30 ET: Weekly natural gas inventories (prior +59 bcf)
Treasuries remain near intraday high yields
08-May-24 15:00 ET
Dow +131.56 at 39015.82, Nasdaq -43.15 at 16289.41, S&P -3.64 at 5184.06
[BRIEFING.COM] Stocks continue to hold steady. The S&P 500 is down just 0.1% and the equal-weighted S&P 500 is down 0.1% also.
Airbnb (ABNB), Celanese (CE), AppLovin (APP), AMC Entertainment (AMC), and others report earnings after today's close. Warner Bros. Discovery (WBD), US Foods (USFD), Constellation Energy (CEG), Tapestry (TPR), Roblox (RBLX), Papa John's (PZZA), Krispy Kreme (DNUT), and others report earnings in front of Thursday's open.
Treasuries are near intraday high yields. The 10-yr note yield is at 4.49%.
S&P 500 back-and-forth as earnings movers dominate the standings
08-May-24 14:25 ET
Dow +144.75 at 39029.01, Nasdaq -29.17 at 16303.39, S&P -0.69 at 5187.01
[BRIEFING.COM] The S&P 500 (-0.01%) is narrowly lower on Wednesday afternoon, retreating into the red despite holding modest gains for a time in the last half hour.
Elsewhere, S&P 500 constituents Arista Networks (ANET 290.09, +16.10, +5.88%), Charter (CHTR 280.00, +12.00, +4.48%), and Emerson (EMR 111.52, +4.12, +3.84%) pepper the top of today's standings. ANET and EMR move higher following earnings, while CHTR finds sympathy gains after Fox's (FOXA 33.19, +0.87, +2.69%) Q3 beat this morning.
Meanwhile, NY-based fintech firm Broadridge Financial (BR 190.13, -11.23, -5.58%) is one of today's worst-performing constituents following this morning's Q3 miss.
Gold modestly lower at midweek
08-May-24 14:00 ET
Dow +122.60 at 39006.86, Nasdaq -37.28 at 16295.28, S&P -1.93 at 5185.77
[BRIEFING.COM] With about two hours to go on Wednesday the tech-heavy Nasdaq Composite (-0.2%) is today's top lagging index, albeit modestly higher over the past half hour.
Gold futures settled $1.90 lower (-0.1%) to $2,322.30/oz, pressured modestly by slight gains in both the dollar and treasury yields.
Meanwhile, the U.S. Dollar Index is up about +0.1% to $105.56.
Toast pops once again on excellent quarterly results, rapid success from cost-cutting actions (TOST)
There is seemingly nothing that can take a bite out of Toast's (TOST +13%) ongoing rally, as shares reach multi-year highs today following the company's upbeat revenue growth in Q1 and impressive adjusted EBITDA turnaround. The restaurant management software provider announced sweeping restructuring actions last quarter, eliminating 10% of its workforce, to return to GAAP profitability by the first half of 2025.
In just a few months since initiating its restructuring plan, TOST is already enjoying the fruits of its labor, growing adjusted EBITDA by $74 mln yr/yr to return to a positive figure in Q1 at $57 mln, well ahead of its $15-25 mln forecast. At the same time, TOST hiked its FY24 adjusted EBITDA guidance by $50 mln, reflecting a healthy start to the year. Furthermore, TOST now expects to be close to breakeven on GAAP operating income by the end of this year.
TOST's rapid success from its cost-cutting actions is taking investors by surprise today, resulting in a quick pop to highs not seen since early 2022.
- As a testament to its competitive edge, TOST's net new location signings held relatively steady from last quarter, adding 6,000 in Q1. Constantly adding a stream of new restaurants activates a flywheel effect for TOST, generating higher rep productivity, faster market share gains, and ultimately leading to sustained location growth.
- TOST is not focused purely on the U.S., either, gaining momentum across the first three overseas markets it launched in, including the U.K., Canada, and Ireland. During Q1, TOST expanded its platform in these markets which it expects will expand average revenue per user (ARPU) over time.
- Location growth helped TOST counter diminished pandemic-induced tailwind in away-from-home consumption. As such, revenue growth, albeit slowing, has stayed relatively healthy, climbing by 31.3% yr/yr in Q1 to $1.07 bln. Additionally, annualized recurring revs grew 32% yr/yr, supported by a 5% uptick in Software-as-a-Service (SaaS) ARPU. Gross Payment Volume (GPV) increased at a similar pace, while GPV per location ticked 2% lower due to unfavorable weather in January.
- Reshaping its cost structure was the most notable standout from TOST during Q1. Following the company's initial success in bringing its costs lower, it now expects slightly higher annualized run-rate savings during 2024.
Overall, TOST's Q1 report underscored further progress toward carving out a more expansive economic moat as restaurants continue embedding the company's mission-critical software. Given inflationary pressures and a dynamic economic backdrop, TOST will likely still encounter headwinds over the near term. However, we continue to like the company's long-term prospects as it hunkers down on enhancing its profitability and selling to new locations, positioning it to reemerge stronger than it was during the pandemic once demand begins picking up more meaningfully.
Uber's ride to profitability takes a detour in Q1, as gross bookings outlook also disappoints (UBER)
Uber's (UBER) recent turn to profitability took a surprising detour in Q1 as unrealized losses on equity investments and litigation costs dragged EPS lower to ($0.32), badly missing expectations, while its Q2 gross bookings outlook also came up a bit short. In a role reversal, it was Lyft (LYFT) this time that beat quarterly estimates across the board and provided upside Q2 gross bookings and adjusted EBITDA guidance, signaling that its efforts to increase its driver supply, lower ride costs, and improve wait times are paying dividends.
Shorter ride wait times, minimum wage guarantees for drivers, new app functionalities, and cost-cutting actions have enabled LYFT to more fully capitalize on strong rideshare demand, halting the share gains that UBER had been racking up on the company.
- The healthy rideshare industry trends drove UBER's Q1 Mobility Gross Bookings higher by 26% (constant currency) to $18.7 bln, but that total was slightly below expectations. During the earnings call, CFO Prashanth Mahendra-Rajah noted that last year, UBER saw stronger demand in Brazil around Carnival and the company didn't see that occur in Q1 this year. There also was a timing-related headwind in Q1 with Easter and Ramadan shifting between quarters.
- Mobility revenue margin improved, though, expanding by 130 bps yr/yr to 30.2%, and UBER continued to keep a tight lid on expenses. Non-GAAP sales and marketing expense represented 2.4% of Gross Bookings, compared to 3.9% in the year-ago period. These two items helped push UBER's adjusted EBITDA higher by 82% yr/yr to $1.4 bln, beating its guidance of $1.26-$1.34 bln.
- In the Delivery segment, Gross Bookings grew 17% to $17.7 bln, edging past analysts' estimates, as new user growth and increased order frequency provided a boost. While the Delivery business continues to benefit from the substantial customer gains experienced during the pandemic, UBER is now looking to augment Delivery's growth through a new partnership with Instacart (CART). Yesterday, UBER and CART announced a partnership in which Uber Eats restaurant delivery service will be available to CART customers through CART's app.
- Despite Delivery's resiliency, the new partnership with CART, and ongoing strength in airport rides for Mobility, UBER's Q2 gross bookings guidance of $38.75-$40.25 bln was modestly below expectations. Furthermore, the company stated that it expects Mobility's adjusted EBITDA to decrease slightly qtr/qtr in Q2 as it ramps up some investments after scaling back on spending in Q1. Overall, UBER guided for Q2 adjusted EBITDA of $1.45-$1.53 bln, representing estimated growth of 58-67%.
The main takeaway is that UBER's Q1 report was a notable step back from its recent performances, particularly on the bottom-line, where the company slid back into the red. From a demand standpoint, business is still healthy in both Mobility and Delivery, but UBER's more tepid Q2 guidance indicates that the momentum it had coming out of its Q4 earnings report in early February has lost a little steam.
Cirrus Logic is cruising higher following stronger-than-expected MarQ results (CRUS)
Cirrus Logic (CRUS +10%) is cruising higher following its Q4 (Mar) results last night. CRUS reported a huge EPS beat. Analysts had been expecting a large yr/yr revenue decline, but revenue was basically flat, at -0.3% yr/yr to $371.8 mln due to stronger than anticipated demand for smartphone products. Also, the mid-point of its Q1 (Jun) revenue guidance was much better than expected.
- CRUS's largest customer by far is Apple (AAPL), which represented 83% of FY23 sales, so there is a high correlation between the two companies. CRUS primarily focuses on chips (ICs, codecs, ADCs) for audio and voice signal processing applications. However, CRUS has also been branching into the mixed-signal category with power being its largest growth opportunity. Notably, CRUS is expanding into the wired and wireless fast-charging space from its recent Lion Semiconductor acquisition.
- Earlier this week, Apple reported that MarQ iPhone revenue fell 10.5% yr/yr to $45.96 bln. Keep in mind that last year's MarQ benefitted from Apple's ability to replenish iPhone channel inventory and fulfill significant pent-up demand from DecQ COVID-related supply disruptions on the iPhone 14 Pro. However, with Apple such a major customer for CRUS, we were a little nervous going into this report.
- CRUS noted that shipments remained robust throughout MarQ. Revenue was down 40% sequentially, due primarily to a reduction in smartphone volumes, but that followed a stronger than seasonal DecQ. Margins were another bright spot as non-GAAP gross margin was 51.9%, above the high end of guidance due mostly to supply chain efficiencies and lower freight expense. JunQ guidance is 49-51%.
- The company says it continues to make progress on its three growth strategies: maintain leadership in its core flagship smartphone audio business; expand into areas of high-performance mixed-signal functionality in smartphones; and leverage its audio and high-performance mixed-signal capabilities to penetrate new markets.
- In FY24, on its first goal, CRUS delivered a boosted amplifier and a smart codec. Both products are expected to launch in devices this fall. Beyond audio, CRUS also made significant investments in certain HPMS areas (camera controllers) where its mixed signal design and signal processing expertise can enhance its customers' products.
Overall, this was an impressive way to wrap up FY24 for Cirrus Logic and provides good momentum heading into FY25. We were expecting a pretty quiet quarter, but smartphone demand was stronger than expected. This strong report and guidance has pushed the stock back above $100 for the first time since April 2023.
Arista Networks gaps higher on raised FY24 sales guidance following broad-based demand in Q1 (ANET)
Arista Networks (ANET +7%) was dialed in during Q1, surpassing earnings and revenue estimates with ease, supported by broad-based growth in cloud, AI, and enterprise. The cloud networking firm, competing against several prominent tech firms, including Cisco (CSCO), Dell (DELL), and Hewlett Packard Enterprise (HPE), also projected relatively uplifting Q2 revenue guidance, with the midpoint exceeding analyst forecasts. Additionally, ANET authorized a new $1.2 bln share buyback program, representing slightly over 1% of its market cap.
Perhaps having the most positive influence on today's price action was ANET raising its FY24 sales growth outlook by 2 pts to +12-14%. It is important to note that ANET seldom increases its full-year guidance this early into the fiscal year. As such, its increased forecast signals confidence, albeit with a hint of caution given the fluid demand backdrop, in current tailwinds persisting throughout the remainder of FY24.
- AI is becoming ANET's most powerful tailwind. CEO Jayshree Ullal touched on the critical components of how AI has been and will continue to lift the company's financial performance, noting that AI requires building the proper networking to ensure the technology encounters limited slowdown. Jayshree Ullal continued, stating that the industry is at an inflection point surrounding AI networking, which he anticipates will continue throughout the next decade, helping increase the company's confidence in achieving its AI revenue target of $750 mln in 2025.
- While merely in the early stages of growth, AI was a component of ANET's uplifting Q1 results, delivering adjusted EPS of $1.99, a 39% jump yr/yr, on top-line growth of 16% to $1.57 bln, exceeding the company's $1.52-1.56 bln guidance. Management is observing strong revenue growth in the U.S., particularly among Cloud Titan (companies with the potential to attain over 1 mln installed compute services) and Enterprise customers.
- It is worth mentioning that nearly half of ANET's revenue stems from Microsoft (MSFT) and Meta Platforms (META), comprising 39% of its FY23 revenue collectively. These two organizations are investing heavily in AI infrastructure, with META announcing a $4.0 bln hike to its FY24 CapEx guidance last month.
- Looking ahead, ANET's more bullish FY24 revenue outlook starts with an upbeat Q2, projecting $1.62-1.65 bln. The company commented that the activity in Q1 alone was well beyond what it initially anticipated. However, Jayshree Ullall followed this up by noting that he is cautiously confident, reflecting a lingering concern over a volatile economy, one that recently hurt ANET's quarterly numbers throughout 2022.
For a company that commands a solid track record surrounding earnings reports, ANET typically needs to go a step beyond delivering just in-line results. It did just that in Q1, supporting its shares' recent upward momentum. The stock is filling the gap from early April, which kicked off a quick pullback erasing 2024 gains. With organizations continuing to pour capital into bolstering their AI infrastructure, ANET remains well-positioned for continued upside.
Kenvue delivers some pain relief to investors with EPS beat and cost-cutting initiative (KVUE)
Just over one year ago, Johnson & Johnson (JNJ) spun off its consumer health business in an IPO, which is now known as Kenvue (KVUE), and it's been a rough ride for both stocks since then. Today, however, KVUE shareholders are enjoying a nice rally after the company beat Q1 EPS expectations, reaffirmed its FY24 guidance, and announced a reduction of its workforce of approximately 4%. The job cuts are expected to result in annualized pre-tax gross savings of about $350 mln, most of which will be realized in FY26, enabling KVUE to reinvest the savings into its fifteen priority brands.
- Those fifteen priority brands are mainly concentrated in KVUE's Self-Care segment, account for roughly two-thirds of the company's growth, and include names like Tylenol, Benadryl, Motrin, and Zyrtec. In Q1, the Self Care segment generated net sales of $1.70 bln, up 3.5% yr/yr, entirely driven by favorable price/mix as volume decreased by 1.4%. In fact, volumes were down in each of KVUE's three segments (Self Care, Skin Health & Beauty, Essential Health), decreasing by 3.1% on a consolidated basis.
- Approximately two points of that volume decrease was related to retailer inventory buildups in the year-ago period and the effects of associated inventory drawdowns in this quarter. Unfortunately, the company expects these inventory reduction efforts to continue through 2Q24.
- The good news, though, is that supply chain improvements, some easing of cost inflation, and pricing are enabling KVUE to mitigate the negative effect of the volume contraction. These factors drove adjusted gross profit margin higher by 290 bps yr/yr to 60.2%.
- We also believe that investors were relieved to see KVUE reaffirm its FY24 EPS guidance of $1.10-$1.20, revenue guidance of $15.59-$15.90, and organic growth forecast of 2-4%. These guidance ranges were below analysts' expectations last quarter, so it would have been especially discouraging if KVUE had cut its guidance this time around.
By no means did KVUE knock it out of the park with its Q1 results and outlook, and the volume declines across each of its segments leaves much to be desired. Expectations remained muted to say the least, though, with shares down by 25% versus its IPO opening price, setting the stage for a rebound on a better-than-feared performance. KVUE delivered just that, while tacking on a cost-savings initiative, providing the stock with a much-needed boost.
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