| | | Market Snapshot
| Dow | 39387.76 | +331.37 | (0.85%) | | Nasdaq | 16346.27 | +43.51 | (0.27%) | | SP 500 | 5214.08 | +26.41 | (0.51%) | | 10-yr Note | +1/32 | 4.45 |
|
| | NYSE | Adv 1982 | Dec 784 | Vol 890 mln | | Nasdaq | Adv 2602 | Dec 1594 | Vol 4.5 bln |
Industry Watch
| Strong: Real Estate, Energy, Consumer Staples, Materials, Industrials, Consumer Discretionary, Health Care |
| | Weak: Information Technology |
Moving the Market
-- Weakness in mega caps and chipmakers weighing on broader market
-- Drop in Treasury yields in response to weekly jobless claims report
-- Mixed responses to earnings news since yesterday's close
-- S&P 500 trading above 5,200, which acted as resistance on Tuesday
|
Closing Summary
09-May-24 16:30 ET
Dow +331.37 at 39387.76, Nasdaq +43.51 at 16346.27, S&P +26.41 at 5214.08
[BRIEFING.COM] Stocks had a solid showing today. The major indices all registered gains ranging from 0.3% to 0.9%. The S&P 500 closed above the 5,200 level, which acted as resistance on Tuesday, for the first time since April 9.
Many stocks participated in upside moves. Advancers lead decliners by a 5-to-2 margin at the NYSE and by a 3-to-2 margin at the Nasdaq.
Equinix (EQIX 772.43, +79+72, +11.5%), NRG Energy (NRG 81.76, +5.94, +7.8%), and Steris (STE 225.99, +15.90, +7.6%) were the top performing stocks in the S&P 500 following pleasing earnings and/or guidance. Meanwhile, EPAM Systems (EPAM 181.93, -67.27, -27.0%) was the worst performing stock in the S&P 500 by a decent margin following its earnings results and guidance.
EPAM also contributed to the underperformance of the S&P 500 information technology sector (-0.3%), which was the lone laggard in negative territory at the close despite gains in Apple (AAPL 184.57, +1.83, +1.0%) and Microsoft (MSFT 412.32, +1.78, +0.4%). Shares of NVIDIA (NVDA 887.47, -16.65, -1.8%) settled lower, along with other semiconductor-related names.
The weakness in semiconductor shares followed quarterly results from Arm Holdings (ARM 103.59, -2.48, -2.3%), which provided only in-line guidance for FY25. The PHLX Semiconductor Index (SOX) declined 0.6%.
The other ten S&P 500 sectors aside from info tech logged gains ranging from 0.4% to 2.3%. The real estate sector was the top performer, followed by the utilities (+1.5%) and energy (+1.4%) sectors.
The price action in Treasuries acted as support for the stock market. The 2-yr note yield settled three basis points lower at 4.81% and the 10-yr note yield declined four basis points to 4.45%. This followed a weaker-than-expected weekly jobless claims report and a $25 billion 30-yr bond auction, which met solid demand.
- S&P 500:+9.3% YTD
- Nasdaq Composite: +8.9% YTD
- S&P Midcap 400: +7.7% YTD
- Dow Jones Industrial Average: +4.5% YTD
- Russell 2000: +2.3% YTD
Reviewing today's economic data:
- Weekly Initial Claims 231K (Briefing.com consensus 213K); Prior was revised to 209K from 208K; Weekly Continuing Claims 1.785 mln; Prior was revised to 1.768 mln from 1.774 mln
- The key takeaway from the report is the jump in initial claims, which will be construed as a sign of softening in the labor market. That view, in turn, will be construed as a possible trigger for a Fed rate cut in coming months.
Looking ahead, market participants will receive the following economic data today:
- 10:00 ET: Preliminary May University of Michigan Consumer Sentiment (Briefing.com consensus 76.5; prior 77.2)
- 14:00 ET: April Treasury Budget (prior -$236.5 bln)
Stocks holding steady at session highs
09-May-24 15:35 ET
Dow +332.10 at 39388.49, Nasdaq +45.25 at 16348.01, S&P +24.87 at 5212.54
[BRIEFING.COM] The major indices trade near their best levels of the session heading into the close.
The 2-yr note yield settled three basis points lower at 4.81% and the 10-yr note yield declined four basis points to 4.45%.
Looking ahead, market participants will receive the following economic data today:
- 10:00 ET: Preliminary May University of Michigan Consumer Sentiment (Briefing.com consensus 76.5; prior 77.2)
- 14:00 ET: April Treasury Budget (prior -$236.5 bln)
Treasuries remain near low yields; stocks trade near session highs
09-May-24 15:05 ET
Dow +326.26 at 39382.65, Nasdaq +58.22 at 16360.98, S&P +25.80 at 5213.47
[BRIEFING.COM] The major indices trade at or near session highs.
A short time ago, San Francisco Fed President Mary Daly (voting FOMC member) said restrictive policy will need additional time to work, according to Bloomberg.
Treasuries are near intraday low yields. The 10-yr note yield is at 4.45% and the 2-yr note yield is at 4.81%.
Equinix, Steris ride earnings to top of the S&P 500
09-May-24 14:25 ET
Dow +242.80 at 39299.19, Nasdaq +23.67 at 16326.43, S&P +16.00 at 5203.67
[BRIEFING.COM] The S&P 500 (+0.31%) is in second place once again on Thursday afternoon, up about 16 points.
Elsewhere, S&P 500 constituents Equinix (EQIX 769.25, +76.54, +11.05%), NRG Energy (NRG 81.24, +5.42, +7.15%), and Steris (STE 223.50, 13.41, +6.38%) dot the top of the standings. EQIX and STE gain following earnings, while NRG is outperforming on general strength in utilities.
Meanwhile, Pennsylvania-based software engineering firm EPAM Systems (EPAM 183.72, -65.48, -26.28%) is the worst laggard, slipping after light guidance overshadowed a modest Q1 beat.
Gold strong following jobs data
09-May-24 14:00 ET
Dow +250.07 at 39306.46, Nasdaq +35.72 at 16338.48, S&P +18.30 at 5205.97
[BRIEFING.COM] The tech-heavy Nasdaq Composite (+0.22%) is up about 35 points this afternoon, slotting the average in last place with about two hours to go.
Gold futures settled $18.00 higher (+0.8%) to $2,340.30/oz, stronger today following this morning's weaker-than-expected jobs data.
Meanwhile, the U.S. Dollar Index is down about -0.3% to $105.26.
Arm Holdings plc pulls back as in-line FY25 guidance stokes concerns over slowing AI demand (ARM)
Arm Holdings plc (ARM -2%) could use a hand today even as its shares bounce back after starting the session off down over -7.0% following Q4 (Mar) results. The initial sell-off was triggered by underwhelming FY25 guidance, with the midpoints of ARM's earnings and revenue projections aligning with analyst expectations. Given how explosive AI-related demand has been, with companies in and well outside the technology sector discussing their excitement over large-language models and Generative AI, ARM's outlook was viewed as a weak spot, reflecting a potential cooldown in demand.
However, after the quick pullback today, investors are slowly warming back up to ARM, focusing on the several unwavering positive developments from Q4.
- AI continues to open numerous doors for ARM, supporting its 37% jump in royalty revenue yr/yr and 60% pop in licensing revenue. Accelerating adoption of Armv9, ARM's newest architecture in a decade, constantly fuels its buoyant royalty revenue. In fact, because companies are putting more CPUs inside their chips based on v9, it compounds ARM's royalty revs.
- Meanwhile, AI is propelling licensing revs higher as the software-based technology continues moving faster than the hardware. As a result, companies must rapidly upgrade their hardware designs to capture the needs of AI workloads, benefiting ARM tremendously.
- These trends are accelerating overall revenue growth. ARM delivered total revs of $928 mln in Q4, a 47% improvement yr/yr and well ahead of its $850-900 mln forecast. For the year, ARM generated over 20% revenue growth and expects FY25 to be even better, projecting $3.8-4.1 bln in sales, translating to +22% growth yr/yr at the midpoint.
Even though shares have snapped back from earlier, ARM's in-line FY25 guidance still raises a red flag. While the company does not have much history as a publicly-listed organization, ARM's previous guidance, projecting Q4 numbers so far above and beyond analyst expectations, made its initial FY25 outlook appear quite dull by comparison. It also does not align with management's upbeat tone surrounding AI. ARM has consistently discussed rampant adoption of its architecture, from Google (GOOG) to Microsoft (MSFT) leveraging Arm in their latest data center chips, citing AI as the underlying factor. As such, it was crucial for ARM's guidance to reflect these trends.
Without a more uplifting outlook, ARM is amid a similar dynamic it experienced following its first earnings report as a public company. That is, encouraging developments mean very little when guidance fails to illuminate these tailwinds. While NVIDIA's (NVDA) AprQ report slated for May 22 after the close could ignite a powerful rally for ARM if its guidance illustrates a strengthening in AI-related demand, ARM's outlook still acts as a warning sign that perhaps companies are slowing their AI build-outs, focusing on monetizing or extracting productivity improvements from their existing infrastructure before pouring more capital into it.
Instacart delivers better-than-expected Q1 results, but Q2 GTV outlook disappoints (CART)
Grocery delivery company Instacart (CART) reported better-than-expected Q1 results with Gross Transaction Value (GTV) growth accelerating to 11% from 7% in Q4, but the stock isn't being rewarded for the upside performance. The relative weakness is related to the fact that CART's Q1 results benefited from a pair of one-time factors, including severe winter weather and the leap day in February, neither of which will repeat in Q2. Relatedly, the company's Q2 GTV guidance of $8.0-$8.15 fell below Q1's GTV of $8.30 bln, creating some disappointment.
- In addition to reporting earnings, CART also introduced Emily Reuter as the company's new CFO during the earnings call. Ms. Reuter, who previously served as CFO of Uber's (UBER) Mobility segment, is replacing Nick Giovanni, who is retiring. She has already been with CART for about six months, though, acting as the company's Vice President of Finance.
- Jumpstarting the company's top-line growth, while continuing to improve profitability, is the main challenge facing Ms. Reuter. CART can no longer rely on the strong tailwinds that fueled its business during the pandemic and its immediate aftermath, so it's looking for other avenues to drive growth.
- One such area where CART is branching out is advertising. In Q1, Advertising & Other revenue increased by 9% to $217 mln and CART said that it expects growth in this business to remain consistent with what it has experienced over the past two quarters.
- Forging new partnerships is another key piece of the puzzle. On Tuesday, the company had big news to share in this regard, announcing a partnership with UBER in which Uber Eats restaurant delivery service will be available on the CART app. That news sent shares sharply higher on Tuesday, but CART threw a little cold water on investors' expectations, stating last night that it doesn't expect the partnership to materially impact its financials in Q2.
- Still, CART's financials are indeed improving, and this is most clearly seen in its adjusted EBITDA. Thanks to its improving operating expense leverage, adjusted EBITDA increased 17% yr/yr to $198 mln, easily beating its guidance of $150-$160 mln. For Q2, the company is forecasting adjusted EBITDA of $180-$190 mln, which is also ahead of expectations.
The main takeaway is that CART's Q1 results were solid, albeit, partly due to a couple one-time factors that won't repeat in Q2. Accordingly, CART's Q2 GTV outlook was a bit disappointing, but the company's improving profitability as measured by adjusted EBITDA is a significant positive.
Airbnb encounters turbulence following lighter-than-expected Q2 guidance (ABNB)
Investors are checking out of Airbnb (ABNB -6%) today despite the alternative accommodations platform delivering better-than-expected earnings and sales figures in Q1. ABNB's bookings growth, which it refers to as Nights and Experiences Booked, of 9.5% yr/yr was also in line with its previous forecast, which called for moderation compared to the +12.0% posted in Q4. Furthermore, following multiple periods of moderating bookings growth, ABNB anticipates stabilization in Q2, projecting a yr/yr growth rate similar to Q1.
So why are shares pulling back to multi-month lows today?
- While the market braced for a return to normalization in travel demand this year, ABNB's guidance was weaker than expected. The company targeted Q2 revs of $2.68-2.74 bln, the midpoint falling short of analyst expectations. While ABNB does not have a strong track record when it comes to quarterly guidance, this was not going to cut it after rival Expedia Group (EXPE) admitted last week that its Vrbo platform was losing market share to ABNB and Booking Holdings (BKNG).
- Meanwhile, Nights and Experiences Booked growth was mildly underwhelming. Investors may have anticipated a more robust figure after BKNG delivered significantly better-than-expected gross bookings growth in Q1.
There were still positive standouts from Q1.
- ABNB made significant progress across its three main priorities: improving hosting, enhancing its platform, and expanding to additional markets. On the first point, ABNB cleaned up its platform, removing listings that failed to meet expectations, which can hinder booking growth in the near term. Still, when removing the deleted listings, ABNB's active listings grew by 17% yr/yr. Continuing to bolster supply is vital to maintaining healthy demand and keeping ABNB at the forefront of consumers' minds over the long term.
- ABNB's core service continues to improve, leading to a substantial uptick in mobile app downloads during Q1. Management remarked that in the U.S., app downloads surged by 60% yr/yr, with bookings on the app representing 54% of ABNB's total, up 5 pts versus the year-ago period.
- During Q1, ABNB stayed aggressive in investing in some of its underpenetrated markets, driving gross bookings growth in the company's expansion markets to double the pace of growth in its core markets. Expanding beyond the U.S. is crucial for ABNB, especially given the recent robust demand overseas. For instance, BKNG's bookings growth outside the U.S. supported its upbeat Q1 results.
Bottom line, ABNB's Q1 performance was mixed. On the one hand, its moderating growth matched what the company and its peers have warned about for several months. However, on the other hand, after lackluster results from EXPE, which reflected shifting consumer tastes toward its competitors, as well as better-than-expected bookings growth from BKNG, investors had higher expectations ahead of ABNB's report. Still, there are reasons to remain bullish on ABNB over the long term as it constantly enhances its platform, expands supply, and branches to additional overseas markets.
The Trade Desk ticks higher as it snaps back with a nice Q1 beat, led by CTV segment (TTD)
The Trade Desk (TTD +2%) is trading modestly higher following its Q1 earnings beat last night. This operator of a cloud-based online advertising-buying platform bounced back from an in-line EPS result in Q4 to get back to a normal-sized beat for TTD in Q1. Revenue also grew at a healthy clip, up 28.3% yr/yr to $491.25 mln, which was better than expected. TTD also guided Q2 revs above analyst expectations.
- A key theme on the call was continued growth in CTV. Even with its considerable size, TTD said that CTV continues to be its fastest-growing channel. Over the past few months, industry giants like Disney, NBCU, Walmart, Amazon, and now Roku and LG Electronics have all made deeper pivots into CTV. And many are in partnership with The Trade Desk.
- TTD notes that it offers the largest CTV inventory marketplace in the industry, giving advertisers access to premium content across major networks and ad-supported streaming services around the world. TTD also said that, because it does not compete in content or supply, it has built lasting relationships with premium publishers to help brands engage their audiences. Of note, Disney recently expanded its partnership with TTD for Disney Advertising's Real-Time Ad Exchange (DRAX). Also, NBCUniversal announced that, for the first time, the 2024 Paris Olympic Games inventory on Peacock will be available to buy programmatically via The Trade Desk.
- The company argues that the role of CTV should not be understated. For many people, movie, TV and audio consumption is a very important part of their daily lives. Consumers tend to spend significant amounts of time watching premium content. That is very different from how consumers engage with social media content, which is often short-form UGC video, such as cat videos. People spend much more time with premium content, such as streaming TV, than they do with UGC.
- TTD also said it's building support for Unified ID 2.0 (UID2), which provides targeting and measurement for an internet that's becoming more privacy-conscious. UID2 is an upgrade and alternative to third-party cookies. TTD noted that Times Internet, India's most prominent digital media conglomerate has become the first digital partner in India to adopt UID2. In January, DISH Media announced adoption of UID2 across its suite of traditional TV and OTT services.
Overall, this was another good quarter for The Trade Desk, led by its CTV segment. We are a little surprised the stock is not reacting too much despite the good results. It may be that the stock has been in a nice uptrend since mid-January, so a good result may have been priced in already. This has been a mixed earnings season for online advertising names, with META lower, but SNAP, PINS traded higher on earnings. Also, TTD's peer MGNI is up big today following earnings.
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.
|
|
