| | | Market Snapshot
| Dow | 39806.77 | -196.82 | (-0.49%) | | Nasdaq | 16794.88 | +108.91 | (0.65%) | | SP 500 | 5308.13 | +4.86 | (0.09%) | | 10-yr Note | -1/32 | 4.44 |
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| | NYSE | Adv 1405 | Dec 1355 | Vol 813 mln | | Nasdaq | Adv 2151 | Dec 2083 | Vol 6.8 bln |
Industry Watch
| Strong: Information Technology, Communication Services, Industrials |
| | Weak: Financials, Consumer Discretionary, Consumer Staples, Energy, Materials, Health Care |
Moving the Market
-- Upside momentum fueling further buying activity
-- Gains in mega cap stocks supporting positive bias; NVDA up 2.5% in front of earnings after Wednesday's close
-- Market rates slightly higher, acting as limiting factor for equities |
Closing Summary
20-May-24 16:25 ET
Dow -196.82 at 39806.77, Nasdaq +108.91 at 16794.88, S&P +4.86 at 5308.13
[BRIEFING.COM] The Nasdaq Composite (+0.7%) logged another record closing high, support by gains in mega caps and semiconductor-related names. The S&P 500 (+0.2%) and Russell 2000 (+0.8%) also closed with gains and the Dow Jones Industrial Average (-0.5%) fell nearly 200 points.
The upside bias was driven by carryover momentum following last week's solid gains in addition to the strength in mega caps and chipmakers. The PHLX Semiconductor Index (SOX) jumped 2.2% and the Vanguard Mega Cap Growth ETF (MGK) logged a 0.7% gain.
NVIDIA (NVDA 947.80, +23.01, +2.5%) was a winning standout from both spaces after several analysts raised their price targets in front of NVDA's earnings report Wednesday afternoon. Microsoft (MSFT 425.34, +5.13, +1.2%) also logged a decent gain after introducing Co Pilot+ PCs and in front of its Build Developers Conference, which starts tomorrow.
The S&P 500 information technology sector (+1.3%) led the index by a wide margin, benefitting from price action in its semiconductor and mega cap components.
The heavily-weighted financial sector logged the largest loss, falling 1.2%. This price action was due in part to a sizable loss in JPMorgan Chase (JPM 195.58, -9.21, -4.5%) after turning lower in response to CEO Dimon saying at its Investor Day that the company is not expecting to buy back a lot of stock at these levels.
The consumer discretionary sector (-0.7%) was the next worst performer due to losses in Amazon.com (AMZN 183.54, -1.16, -0.6%) and Tesla (TSLA 174.95, -2.51, -1.4%). Declines in retailer components also contributed to the underperformance of the consumer discretionary sector in front of earnings report from some influential names in the space this week.
Market rates settled slightly higher, acting as a limiting factor for equities. The 10-yr note yield settled two basis points higher at 4.44% and the 2-yr note yield rose two basis points to 4.84%.
There was no US economic data of note today and will be none tomorrow. The Minutes from the April 30-May 1 FOMC meeting and the Existing Home Sales report for April will be released Wednesday, the weekly jobless claims report and New Home Sales report for April will be released Thursday, and the Durable Goods Orders for April will be released Friday.
- S&P 500:+11.3% YTD
- Nasdaq Composite: +11.9% YTD
- S&P Midcap 400: +8.6% YTD
- Dow Jones Industrial Average: +5.6% YTD
- Russell 2000: +3.7% YTD
Treasuries settle with losses; retailers report earnings tomorrow
20-May-24 15:35 ET
Dow -191.25 at 39812.34, Nasdaq +120.95 at 16806.92, S&P +7.98 at 5311.25
[BRIEFING.COM] Things are little changed at the index level over the last half hour.
The 10-yr note yield settled two basis points higher at 4.44% and the 2-yr note yield rose two basis points to 4.84%.
Looking ahead, retailers Lowe's (LOW), Macy's (M), and AutoZone (AZO) report earnings in front of Tuesday's open.
There is no US economic data of note on Tuesday's calendar.
Stocks remain near session lows
20-May-24 15:05 ET
Dow -181.56 at 39822.03, Nasdaq +104.50 at 16790.47, S&P +5.81 at 5309.08
[BRIEFING.COM] The major indices are near session lows, but the S&P 500 (+0.2%) and Nasdaq Composite (+0.6%) are still trading higher.
Market breadth was positive earlier, but decliners have an 11-to-10 lead over advancers at the NYSE. Advancers still lead decliners by a slim margin at the Nasdaq.
Mega cap stocks continue to support the major indices. The Vanguard Mega Cap Growth ETF (MGK) is up 0.6%.
Jabil higher in S&P 500 after CEO news/guidance, Chubb gives up some of last week's Berkshire gains
20-May-24 14:30 ET
Dow -147.87 at 39855.72, Nasdaq +105.52 at 16791.49, S&P +8.25 at 5311.52
[BRIEFING.COM] The S&P 500 (+0.16%) is modestly higher, having hit afternoon lows in the last half hour but bouncing back a bit as we currently sit about an hour and a half from the close.
Elsewhere, S&P 500 constituents Jabil (JBL 123.92, +8.90, +7.74%), Norwegian Cruise Line (NCLH 16.88, +1.13, +7.17%), and Moderna (MRNA 139.77, +6.87, +5.17%) are outperforming. Investors are pushing JBL higher after this morning's CEO transition/guidance, NCLH jumps after upbeat guidance and commentary at its Investor Day, while MRNA extends its patent-related gains from Friday.
Meanwhile, New Jersey-based insurance firm Chubb (CB 265.30, -8.98, -3.27%) slides giving up a bit of last week's Berkshire stake related gains.
Gold hits another high as rate cut sentiment grows
20-May-24 14:00 ET
Dow -124.49 at 39879.10, Nasdaq +101.01 at 16786.98, S&P +8.93 at 5312.20
[BRIEFING.COM] The tech-heavy Nasdaq Composite (+0.61%) is now up about 101 points with about two hours to go on Monday.
Gold futures settled $21.10 higher (+0.9%) to $2,438.50/oz, propelled higher by increasing rate cut optimism.
Meanwhile, the U.S. Dollar Index is up about +0.1% to $104.55.
Jabil pushed higher after announcing a new CEO and reaffirming its FY24 guidance (JBL)
Jabil (JBL +7%) is enjoying a lift today after a string of announcements, including a new CEO, reaffirmed Q3 (May) and FY24 (Aug) guidance, and removed FY25 guidance. JBL, an electronic circuit board manufacturer, has encountered some turbulence recently. Shortly after projecting bearish Q3 and FY24 guidance in late March, JBL's former CEO Kenneth Wilson was placed on paid leave pending an investigation into corporate policies. These events resulted in a sharp turn in the stock, tumbling by over 25% from all-time highs as of yesterday's close.
However, JBL did not sit idly by as market conditions and internal strife weighed on its stock performance. In a month since Mr. Wilson was replaced with interim CEO Michael Dastoor, who served as CFO, JBL named Mr. Dastoor the permanent CEO. Furthermore, even as the economic backdrop remains volatile, JBL has established some stability, reiterating its quarterly and full-year forecasts, including Q3 EPS of $1.65-2.05 and revs of $6.2-6.8 bln and FY24 EPS of $8.40.
While the cloudy macroeconomic environment coinciding with an abrupt CEO change led JBL to withdraw its FY25 EPS outlook of $10.65, investors are forgiving of this blemish given JBL's ability to steer through a significant internal setback by remaining on target to meet its near-term guidance. However, with a new CEO leading JBL, the question is whether it can resume its broader upward trend.
- Much of this will depend on Apple (AAPL). While decreasing, sales to AAPL comprise a decent chunk of JBL's annual revenue, totaling 17% in FY23. Fortunately for JBL, AAPL registered a relatively decent MarQ performance, headlined by a colossal share repurchase program. However, iPhone sales have stagnated recently, remaining flat yr/yr on an adjusted basis in MarQ. Meanwhile, weak demand in China has forced AAPL to lower prices. If AAPL continues to face tepid demand, JBL could struggle to return to positive yr/yr revenue growth.
- A turnaround in JBL's 5G and renewables businesses will also be critical for JBL to snap its streak of declining sales growth. Toward the end of Q2 (Feb), JBL endured an unexpected drop-off in demand within these end markets, leading to a rare top-line miss and margin compression.
- On the plus side, AI has been providing a partially offsetting tailwind. Last quarter, management observed a spike in demand for its services related to AI, which it remarked was resulting in tangible results. For example, during the first half of FY24, JBL's AI GPU volume was 200 times above its level in all of 2023. This development could be the differentiating factor when JBL likely outlines its FY25 guidance next month.
Even though JBL withdrew its FY25 guidance, its ability to remain on track toward achieving its FY24 outlook demonstrated management's ability to overcome an unanticipated obstacle connected to its former CEO. With the overhang of how JBL will manage an unanticipated CEO shakeup cleared, it can focus on continuing to execute a series of accelerated buybacks this year and exiting FY24 on a positive note.
JPMorgan Chase banks on fewer rate cuts to push NII higher as shares hover around record highs (JPM)
At its annual Investor Day, JPMorgan Chase (JPM) raised its FY24 net interest income (NII) guidance to approximately $91 bln (excluding Markets) from its prior outlook of about $89 bln due to its expectation of fewer interest rate cuts this year. More specifically, the country's largest bank now anticipates two rate cuts instead of the six that it was previously expecting.
- The upwardly revised forecast comes after the stock hit all-time highs last Friday with shares surging by more than 50% since the end of last October. In other words, some profit-taking could be in play today, helping to explain the muted reaction in the stock.
- Additionally, JPM bumped its FY24 expense guidance higher by $1.0 bln to approximately $92 bln to reflect a $1.0 bln Foundation contribution, while CEO Jamie Dimon also continued to express caution regarding macroeconomic factors and the banking industry overall. He stated that the environment is changing and that tailwinds from 2023 could turn into headwinds.
- Last week, Mr. Dimon commented during a Bloomberg interview that "there are a lot of inflationary forces in front of us", which followed some cautious comments during the Q1 earnings call on April 12. While he was generally positive about the health of the consumer, he characterized the global geopolitical landscape as volitive and unsettling, adding that the full effect of quantitative tightening hasn't completely played out.
Still, the slightly stronger FY24 NII outlook is good news for JPM.
- Recall that in Q1, the bank's NII declined by 4% sequentially, primarily driven by margin compression and lower deposit balances. This was an industry-wide issue as higher interest rates caused customers to migrate out of checking accounts and to seek out higher yielding products, such as CDs. This deposit migration put pressure on JPM's NII and margins, so the improved NII forecast eases concerns that this trend is creating stronger headwinds in Q2.
The main takeaway is that JPM's increased NII guidance represents a modest positive for the stock, which may be in need of a breather following its huge rally to record highs. Meanwhile, Mr. Dimon continues to walk a tight rope between touting the strength in JPM's business and reminding investors about the macroeconomic risks and uncertainties that remain present.
Wix.com trades sharply higher to new 52-wk high on Q1 upside and 2H bookings guidance increase (WIX)
Wix.com (WIX +21%) is trading sharply higher after reporting big EPS upside with its Q1 report this morning. This operator of an online platform to assist customers with building their websites also beat on revs but the upside was more modest.
- WIX described its start in 2024 as fantastic as users increasingly choose Wix as the go-to platform to achieve their goals online. While the Q1 upside was impressive, probably the biggest concern was Q2 revenue guidance being a bit light of analyst expectations. However, investors seem to be focusing more on its healthy bookings outlook.
- In particular, Wix said its suite of AI-powered products is performing extremely well. Notably, this quarter Wix released its highly anticipated AI Website Builder, its cornerstone AI product. It leveraged 10+ years of web creation expertise and user behavior data to create a conversational AI chat experience. Basically, users describe their intent and goals and Wix's AI technology then creates a professional website with personalized layout, themes, text, images, and e-commerce.
- The AI-built websites are fully optimized with Wix's reliable infrastructure as well as built-in marketing, SEO, CRM, and analytic tools. Wix says there is truly nothing like this on the market. Feedback on the AI Website Builder has been incredible. In just a few short months since launch, hundreds of thousands of sites have already being created using this tool. Then in April, Wix released a suite of AI-powered image enhancement tools.
- In terms of specific metrics, total bookings in Q1 rose 10% yr/yr to $457.3 mln, which was better than expected and above Q4's +6% growth. The strong Q1 bookings caused Wix to raise its bookings, revenue and FCF outlook for the year. A tailwind to bookings has been better than expected dynamics around its Q1 price increase as retention of existing users has been higher than expected.
- Bookings growth is now expected to accelerate to 16% yr/yr in 2H, driven by accelerating growth in both its Self Creators (propelled by AI products driving higher conversion) and Partners businesses, as a result of Studio ramping and contributing more meaningfully through the year than initially planned. This improved bookings trend is expected to translate into strong revenue growth acceleration in 2025.
Overall, investors like what they see with Wix's Q1 report. The Q1 upside was nice to see, but the bookings number and guidance are what really stands out to us. Specifically, investors are focusing on the bookings acceleration expected in 2H24. Wix is very excited about its AI Website Builder and how it can help customers build websites using AI chat. The bookings guidance raise is good evidence of management's confidence in this new product.
Global-E Online rings up solid gains as raised FY24 guidance signals possible turnaround (GLBE)
Global-E Online (GLBE +9%) is ringing up solid gains today after exceeding Q1 numbers and raising its FY24 revenue, gross merchandise volume (GMV), and adjusted EBITDA forecasts. Heading into its Q1 report, shares of GLBE were in a clear downward trend, sliding by nearly 25% on the year, with much of the decline sparked by lackluster Q4 results in late February.
What does GLBE do? The company operates as a cross-border e-commerce service provider, working with direct-to-consumer (DTC) online retailers to facilitate sales internationally. The demand for GLBE's services emerges from its ability to take payments from around the world, regardless of the currency, compute local taxes, and take control of the delivery and return process. GLBE also allows customers to create their own website that adheres to local regulations -- one of its partners is Wix.com (WIX). Furthermore, GLBE operates as a delivery agent, managing cross-border fulfilment for merchants. GLBE's annual revenue is split fairly evenly between these two businesses.
GLBE has hit a few speedbumps recently. Toward the end of last year, shares tanked after the company projected another quarter of weak revenue growth. GLBE was caught in the crosshairs of an industry-wide inventory glut by having meaningful exposure to the apparel retail market. Shortly thereafter, investors expressed frustration with GLBE's underwhelming FY24 guidance. However, GLBE is beginning to witness some encouraging trends that have supported its uplifting Q1 performance, potentially resulting in a long-awaited turnaround.
- For the first time in nearly a year, GLBE exceeded top and bottom-line estimates in Q1 while also delivering GMV growth of 32%, above the high-end of its previous forecast. Adjusted EPS remained negative at $(0.19). However, this marked an improvement over the $(0.26) posted in the year-ago period. Meanwhile, revenue climbed by 24.1% yr/yr to $145.9 mln, a decent increase given the challenging +54.1% comparison from 1Q23.
- Management's tone was markedly more upbeat than in previous quarters. CEO Amir Schlachet expressed confidence in the company's ability to exhibit long-term, durable growth. Part of this exuberance stemmed from GLBE's strategic partnership with Shopify (SHOP). GLBE's Market Pro offering allows SHOP merchants to easily leverage GLBE's cross-border technology. The company is observing rising adoption of its Markets Pro offering, paving the way for substantial revenue growth potential.
- As a result, GLBE predicts elevated volume contribution during 2H24 driven by large merchant launches. Given this backdrop, GLBE felt confident raising its FY24 outlook, projecting revs of $733-773 mln, up from $731-771 and GMV of $4.625-4.865 bln, up from $4.590-4.830 bln.
The main takeaway from GLBE's Q1 report was that trends are starting to turn in the company's favor. Investors have been waiting for GLBE's SHOP partnership to add material gains to its quarterly results since launching Markets Pro in the U.S. in September 2023. With retailers looking to grow overseas to help boost their top lines, GLBE brings a meaningful technological advantage to the table. As such, current prices offer a compelling entry point to capitalize on a potential turnaround unfolding at GLBE.
Doximity has the right prescription for posting some big gains as company beats Q4 estimates (DOCS)
Doximity (DOCS), a provider of a digital platform for healthcare professionals, is rocketing higher after reporting a top and bottom line beat for Q4, driven by strong demand from its largest and most sophisticated customers.
- Renewal rates also remained strong, as indicated by DOCS' net revenue retention rate of 114%, but the company also stated that it's seeing less expansion in new business from its health system customers. Therefore, DOCS' FY25 revenue guidance of $506-$518 mln came up a bit light, although investors are focusing on the many positives that emerged from this earnings report -- including a newly announced $500 mln share repurchase program.
- That repurchase program is a product of DOCS' robust cash flow generation and profitability. More specifically, free cash flow grew by 37% yr/yr to $62 mln in Q4, and in FY24, adjusted EBITDA increased 25% to $230 mln. DOCS' margins also stood out with Q4 adjusted EBITDA margin coming in at 48%, which is 10% above the high end of its guidance.
- At the core of the company's impressive results is the ongoing strength in its large customer base. For DOCS' top twenty customers, the net revenue retention rate was even higher than the overall rate at 122%. Furthermore, the number of customers contributing $500,000 or more in subscription-based revenue on a trailing 12-month basis increased by 23% yr/yr to 98.
- DOCS is also making a pitch to be viewed as another AI play. Along with the aforementioned share repurchases, the company is ramping up its investments in R&D and AI. During the earnings call, CEO Jeffrey Tangney highlighted DOCS' new HIPAA compliant medical writing assistant and announced a new platform integration with Perplexity. Perplexity is an AI answer engine for physicians that can provide the latest guideline changes with a quick link to the Medical Society website where the full guideline is published.
- These new AI capabilities should help build upon the momentum that's already in place for DOCS' platform. To that end, in FY24, the company added over 400,000 registered health care professionals to the platform, which was the second largest increase in its history. The only year that saw more additions was 2021, when COVID-19 fueled a surge in new users.
The main takeaway is that while DOCS isn't completely immune to the macroeconomic headwinds, its business is healthy and it's well-positioned to capitalize on the healthcare sector's ongoing digital transformation as AI becomes a larger factor.
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