Market Snapshot
| Dow | 44293.13 | +304.14 | (0.69%) | | Nasdaq | 19298.76 | +11.99 | (0.06%) | | SP 500 | 6001.36 | +5.81 | (0.10%) | | 10-yr Note |
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| | NYSE | Adv 1490 | Dec 1191 | Vol 968 mln | | Nasdaq | Adv 2443 | Dec 1813 | Vol 8.1 bln |
Industry Watch
| Strong: Financials, Consumer Discretionary, Industrials, Energy, Utilities |
| | Weak: Information Technology, Materials, Health Care, Consumer Staples |
Moving the Market
-- Momentum following last week's election
-- Fear of missing out after big gains of late
-- Weakness in semiconductor shares and mega caps weighing down major indices
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Closing Summary
11-Nov-24 16:25 ET
Dow +304.14 at 44293.13, Nasdaq +11.99 at 19298.76, S&P +5.81 at 6001.36
[BRIEFING.COM] The S&P 500 closed above 6,000 for the first time, up 0.1% from Friday's record close. The Nasdaq Composite rose 0.1% and the Dow Jones Industrial Average logged a 0.7% gain while the Russell 2000 outperformed, jumping 1.4%.
Small cap stocks, along with other areas of the market that were favored last week, benefitted from ongoing optimism around the economy and equity market under the incoming administration and Congress. Buying activity today was also related to a fear of missing out on further gains.
Many stocks participated in upside moves. Advancers led decliners by a roughly 3-to-2 margin at the NYSE and at the Nasdaq. The Invesco S&P 500 Equal Weight ETF (RSP) settled 0.5% higher and six S&P 500 sectors logged gains.
The consumer discretionary sector led the pack, closing 1.8% higher, thanks to a big move in Tesla (TSLA 350.00, +28.78, +9.0%). The financial sector (+1.4%) also had a solid showing, building on last week's election-related gain.
On the flip side, the information technology sector registered a 0.9% decline due to weakness in mega caps and chipmakers.
There wasn't any US economic data today, but this week's calendar features the October CPI Report on Wednesday, the October PPI Report on Thursday, and the October Retail Sales Report on Friday. Tuesday's data is limited to the October NFIB Small Business Optimism survey at 6:00 ET.
- Nasdaq Composite: +28.6%
- S&P 500: +25.8%
- S&P Midcap 400: +19.6%
- Dow Jones Industrial Average: +17.5%
- Russell 2000: +20.1%
Small caps lead, mega caps lag
11-Nov-24 15:30 ET
Dow +288.45 at 44277.44, Nasdaq -8.93 at 19277.84, S&P +1.83 at 5997.38
[BRIEFING.COM] Stocks are holding steady ahead of the close. The S&P 500 is flirting with the 6,000 level with about 30 minutes left in the session.
Small cap stocks continue to outperform the broader equity market. The Russell 2000 is up 1.5% compared to Friday's close.
On the flip side, mega caps remain under pressure ahead of the close. The Vanguard Mega Cap Growth ETF (MGK) shows a 0.1% decline.
Earnings and economic data out on Tuesday
11-Nov-24 15:05 ET
Dow +311.73 at 44300.72, Nasdaq -22.58 at 19264.19, S&P +2.24 at 5997.79
[BRIEFING.COM] The major indices moved mostly sideways over the last half hour.
Looking ahead to Tuesday, Home Depot (HD), Tyson Foods (TSN), Live Nation (LYV), Tencent Music (TME), Sea Limited (SE), Hertz Global (HTZ), and others report earnings ahead of the open. Suncor Energy (SU), Occidental Petro (OXY), Spotify (SPOT), Topgolf Callaway Brands (MODG), Instacart (CART), and others report earnings after Tuesday's close.
Tuesday's economic data is limited to the October NFIB Small Business Optimism survey at 6:00 ET.
Bristol-Myers, Albemarle outperforming in S&P 500 on Monday
11-Nov-24 14:30 ET
Dow +338.89 at 44327.88, Nasdaq -28.63 at 19258.14, S&P +2.34 at 5997.89
[BRIEFING.COM] The S&P 500 (+0.04%) is in second place on Monday afternoon, clinging to narrow gains.
Elsewhere, S&P 500 constituents Bristol-Myers (BMY 60.42, +6.28, +11.60%), Albemarle (ALB 111.04, +10.20, +10.12%), and Cigna (CI 344.84, +25.07, +7.84%) pepper the top of the standings. BMY gains after AbbVie's (ABBV 174.61, -24.89, -12.48%) Schizophrenia drug study failure, while ALB jumps to near five-month highs as a standout in the materials sector, and CI confirmed that it is not pursuing a combination with Humana (HUM 282.60, -5.52, -1.92%).
Meanwhile, Monolithic Power (MPWR 616.12, -145.18, -19.07%) is today's top laggard after cautious sell side analyst commentary.
Gold falls as dollar rises on Monday
11-Nov-24 14:00 ET
Dow +333.35 at 44322.34, Nasdaq -11.11 at 19275.66, S&P +5.25 at 6000.80
[BRIEFING.COM] With about two hours to go on Monday the tech-heavy Nasdaq Composite (-0.06%) clings to modest losses, though stands decently off session lows of -0.48%.
Gold futures settled $77.10 lower (-2.9%) to $2,617.70/oz, pressured as the dollar notched a four-month high today as global currencies weakened amid rising yields and increased tariff concerns.
Meanwhile, the U.S. Dollar Index is up about +0.5% to $105.57.
Taiwan Semiconductor Manufacturing dips on reports it must halt AI chip shipments to China (TSM)
Taiwan Semi (TSM -4%) endures moderate selling pressure today after Reuters reported that the U.S. ordered the world's largest chip manufacturer to cease shipments of advanced semiconductors to China-based customers. The restriction centers on chips used in AI applications destined for China.
TSM already has a history of ensuring that its products are not used in Chinese devices. For instance, Huawei, a China-based tech firm whose products were placed on a U.S. trade restriction list five years ago, has been known to leverage TSM's chips, with Reuters noting three weeks ago that TSM notified the U.S. of one of its chips being used in the Huawei Ascend 910B, the company's popular AI processor.
While TSM derives only around an eighth of its annual revenue from China, it is still its second-largest region behind the U.S. Also, the impact of today's news is unclear; Reuters added that TSM notified its affected clients that it would halt shipments. However, the story underscores a lingering concern over the uncertainty surrounding China due to the tensions between its government and the U.S.
- Like ASML (ASML) is dealing with, trade restrictions could profoundly impact TSM's future performance. ASML sunk to one-year lows last month, a roughly 40% correction from July highs after it issued alarming guidance. An underlying factor was uncertainty surrounding additional export restrictions. ASML noted that this unknown drove it to be much more cautious regarding China.
- On the bright side, TSM has stated that current export curbs on advanced chips -- first announced in October 2023 -- have a limited and manageable impact on its overall business. Not much has been mentioned on the topic since by TSM. Still, it is worth noting that management was unsure of the longer-term impact of the export restrictions. If more curbs follow, both the near and long term could encounter meaningful headwinds, especially as AI continues to comprise a greater percentage of TSM's overall revenue.
- In Q3, AI underpinned TSM's energetic report and Q4 guidance. The company anticipated the unwavering AI-related demand to result in the technology's revenue contribution to triple yr/yr, accounting for a mid-teen percentage of FY24 revs. Given the momentum of AI, this percentage may continue to expand in 2025. If the U.S. cracks down further on AI chips to China, TSM, which supplies to much of the tech industry, from NVIDIA (NVDA) and Advanced Micro (AMD) to Google (GOOG) and Apple (AAPL), could be dealing with a critical roadblock.
The suspension of AI chip shipments to China presents a minor setback for TSM. However, the report underscores a potentially more pressing issue TSM must face in the near future. Additional export curbs on big tech, such as NVDA's highly sought-after AI GPUs, could drastically impact TSM's future growth, bottlenecking its fastest-growing business, which has quickly become a crucial component of its annual revenue.
Monday.com succumbs to profit-taking pullback as Q4 guidance points to slowdown in growth (MNDY)
Coming off back-to-back beat-and-raise performances in Q1 and Q2, work and project management software provider Monday.com (MNDY) was facing a high bar to hurdle this morning when it released its Q3 earnings report. Reflecting those lofty expectations, the stock had surged by about 45% since MNDY posted Q2 results on August 12, taking shares to their highest levels since December 2021. An impressive earnings report from competitor Atlassian (TEAM) on October 31 only served to ratchet those expectations higher.
- As anticipated, MNDY did indeed deliver strong Q3 results, comfortably beating EPS and revenue expectations on improving net dollar retention rates. The strength on the large enterprise side especially stands out with the net dollar retention rate for customers with over $100,000 in ARR ticking up to 115% from 114% last quarter. These larger enterprises are better equipped than SMBs to absorb macroeconomic headwinds, and many have been turning to platforms like MNDY's and TEAM's to improve productivity and efficiency amid a challenging demand backdrop.
- However, unlike the prior two quarters, MNDY didn't issue upside revenue guidance for the current quarter. The company's Q4 revenue forecast of $260-$262 mln was merely in line with expectations while the midpoint of that range equates to a sharp slowdown in growth to 29% from nearly 50% this quarter. Although many companies would gladly accept that level of growth, the deceleration, combined with a pricey 1-year P/S of roughly 11x, provided the spark to ignite this profit-taking pullback.
- MNDY's slowing growth is likely related to some softness in SMBs. When TEAM reported earnings in October, the company noted that SMBs were continuing to scrutinize their spending budgets. Earlier this year, MNDY pushed through a price increase that may be disproportionately affecting its SMB customers.
- Probably not helping matters is the fact that MNDY also announced an executive shake-up in this morning's earnings press release. Specifically, the company announced that Chief Revenue Officer Yoni Osherov has decided to step down from his position at the end of December 2024. The move doesn't inspire confidence because one would naturally assume that if momentum were still on MNDY's side, an executive wouldn't be looking to leave. MNDY also announced the appointment of Adi Dar as its new Chief Operating Officer, who previously served as CEO of ELOP, a subsidiary of Elbit Systems (ESLT).
The main takeaway is that while MNDY once again turned in strong quarterly results -- the company has exceeded EPS estimates in each quarter over the past five years, while missing on revenue just once -- its disappointing Q4 revenue outlook has investors taking gains off the table. Business is still healthy overall for MNDY, but the combination of slowing growth and a rich valuation is creating strong selling pressure.
RadNet looking pretty rad to investors; stock at new all-time high on earnings and GEHC deal (RDNT)
RadNet (RDNT +21%) is looking pretty rad to investors today. Shares of this diagnostic imaging company are surging today to a new all-time high following its Q3 report. After a slight EPS miss in Q2, RadNet bounced back with a modest EPS beat in Q3. Adjusted EPS jumped 38.5% yr/yr to $0.18. Revenue was also a standout, growing 14.7% yr/yr to $461.1 mln, which was well above analyst expectations. In addition to earnings, RadNet announced an AI-focused collaboration with GE HealthCare (GEHC).
- RadNet is benefitting from high demand for its services and notable patient backlogs in many markets. As a result, it continues to expand capacity through the construction of new imaging centers. It currently operates a network of nearly 400 RadNet outpatient imaging centers. Since the start of the year, RadNet has opened five new centers with another three expected before year end. Furthermore, it intends to open 15 more during 2025.
- When we dug into the story, it is pretty interesting. RadNet is the largest owner/operator of diagnostic imaging centers in the US. It has quadrupled in size over the last 15 years. It's unique in its industry because about 37% of its centers are held within joint ventures with some of the largest hospital systems, so it gets lot of referrals. RadNet also benefits from having ancillary revenue streams, particularly in digital health, including AI and radiology software.
- Right now, RadNet explains that about half of imaging gets performed at hospitals and half outside of hospitals, the vast majority of which are ambulatory outpatient imaging centers like RadNet. However, RadNet says it is not uncommon for hospitals to charge between 200-500% of what RadNet charges. As such, insurance companies are focused on shifting this business out of the hospitals into lower cost sites. This trend is benefitting RadNet.
- RadNet is making a concerted effort to make it easier for consumers to get imaging done. RadNet has partnered with Walmart to make mammogram screenings more accessible by piloting programs that offer these routine screenings at Walmart via its MammogramNow service. Radnet has also been focusing more on AI, through its DeepHealth segment, which helps make radiologists more efficient and this helps to reduce biopsies, which are more intrusive.
- Quickly on the GE HealthCare collaboration, the goal is to further innovation and adoption of AI in imaging. This new SmartTechnology will seek to combine GE HealthCare's imaging expertise and scale, RadNet's deep experience in care delivery, and DeepHealth's AI-powered health informatics portfolio.
Overall, this was an impressive quarter for RadNet, especially the growth in EPS and the top line. The industry is really moving in RadNet's direction as payors are pushing patients to lower cost options for imaging. We also think the GE Healthcare collaboration is adding some juice to the stock today. Partnering with a big name like that provides a lot of credibility for RadNet's capabilities. We think the name is getting on more radar screens today.
Aramark hits record highs today on appetizing Q4 results; volumes healthy as inflation eases (ARMK)
Aramark (ARMK +2%) reaches record highs today after delivering Q4 (Sep) results that hit the spot, exceeding earnings estimates, authorizing $500 mln for share buybacks (roughly 5% of its market cap), and hiking its dividend by 11% (a 1.1% annual yield). ARMK is a food and facilities services provider that serves educational institutions, healthcare facilities, businesses, and sporting events. The company purchases most of its products through foodservice distribution firms, including Sysco (SYY), US Foods (USFD), and Performance Food Group (PFGC), among other regional distributors.
ARMK has enjoyed a substantial recovery since October 2023 lows, with shares climbing over +60% following today's move despite slowing revenue growth and stubborn inflationary pressures. These trends remained active in Q4. However, signs of improvement have unfolded throughout 2024. While revenue continues to decelerate, inflation has eased. Meanwhile, ARMK continues to expand its relationships, optimize its supply chain, and realize profitability gains, all helping fuel and sustain its shares' impressive rally.
- ARMK ended FY24 with adjusted operating income margins 50 bps higher than in FY23, supporting its fourth consecutive earnings beat in Q4 even as total revenue growth slowed to 5.2% yr/yr to $4.42 bln from +8.0% in Q3 (Jun). On an organic basis, revenue jumped by 7.0% from higher base business volume and favorable inflationary trends.
- Management remarked that inflation continued to ease across its global portfolio, with Europe, North America, and Asia improving, while Latin America remains a laggard. ARMK anticipates this trend to persist into FY25, with the business returning to historic inflation levels between 2-3%.
- AI has played a role in ARMK's sturdy base business growth, high retention, and new business. The company's recently launched Hospitality IQ, an AI hub, has allowed clients to receive real-time supply chain data tailored to their locations. Additionally, Culinary Co-Pilot, another AI resource, gives customers real-time menu recommendations, helping ARMK differentiate its business from prominent competitors like Compass Group (CMPGY) and regional players.
- A note on the competition, Sodexo (SDXAY) was reportedly interested in acquiring ARMK in September. Not many additional details have surfaced since. ARMK stated today that there are ongoing discussions but added that it is unlikely any significant consolidation among large organizations in the industry will materialize.
- Looking ahead, ARMK projected FY25 earnings growth of +23-28%, a minor slowdown from the +35% posted in FY24 on organic revenue growth of +7.5-9.5%, similar to the +10% delivered this year. Given ARMK's forecasts, margins are expected to expand by less than in FY24. Management mentioned that this is largely due to a one-off scenario surrounding a leadership change at a significant client, which caused ARMK to reverse course with plans already in motion.
ARMK has done a tremendous job navigating a sticky inflationary environment this year and differentiating its services to steadily win new business. With the wind at its back heading into FY25, ARMK is building off a rock-solid foundation, positioned to extract further gains, especially if inflation continues to ease.
The Trade Desk encounters profit-taking over a projected minor slowdown in Q4 revenue growth (TTD)
After gapping to all-time highs yesterday, investors are securing some profits today following The Trade Desk's (TTD -5%) upbeat Q3 report. The online ad-buying platform surpassed analyst earnings and sales expectations and issued energetic Q4 revenue guidance, all reflecting healthy ad buying throughout the quarter. The headliner remained CTV, or Connected TV, which includes smart TVs, streaming devices, and many other electronics connected to the internet. TTD is excited over the secular shift toward CTV and the outsized growth potential it offers.
So why are shares encountering selling pressure today? Valuation is an underlying factor. TTD reached a forward earnings multiple of 72x yesterday, placing it in priced-to-perfection territory. As a result, TTD's Q3 report was placed under a microscope, which revealed a few minor blemishes. For instance, the company's earnings beat was a penny below its Q2 upside. Additionally, and more importantly, TTD's Q4 revenue guidance of at least $756 mln translates to +25% yr/yr growth, a slight slowdown from the +27% delivered in Q3. Management expressed cautious optimism about Q4, encouraged by its current momentum, but concerned that some brands are not overly interested in advertising during a polarized political landscape, creating a different dynamic in 4Q24 compared to past fourth quarters.
Despite these nitpickings, TTD's Q3 report carried over many uplifting trends seen throughout this year.
- CTV remains TTD's fastest-growing channel and shows no signs of slowing. The company's partners, like Disney, Walmart, Roku, and Netflix, are strengthening their ties with TTD due to an expanding CTV opportunity. Legacy cable continues to fade while streaming services are constantly gaining momentum, a trend that should propel CTV-related gains even higher over the long term.
- A sturdy support beam for CTV is ad-supported streaming. Companies like Netflix (NFLX) and Amazon (AMZN) have launched ad-supported video streaming in recent years to attract more eyes and extract more revenue. NFLX mentioned last month that its ad-tier plan accounted for over half of its sign-ups in countries where it is offered, boasting a 35% jump in membership sequentially. Meanwhile, AMZN noted last week that Prime Video ads have been a recent growth area.
- Overall advertising was healthy during Q3. TTD commented that most of its verticals exhibited strength, particularly medical health, home and garden, and pets. Political spending was also strong in Q3, as expected. International spending growth outstripped North America for the seventh consecutive quarter in Q3. However, international spending represents only around 12% of TTD's total revenue, with North America comprising the remainder. Still, TTD sees meaningful growth opportunities across the EMEA and Asia Pacific.
TTD delivered a solid Q3 report that gave investors little to complain about. CTV continues to carve out additional growth opportunities for the company while overseas markets offer further upside potential. However, following such a sizeable gap-up yesterday, an over +100% improvement over January lows that gave TTD a frothy valuation, the market is not overly thrilled by TTD's cautious optimism surrounding Q4, spurring a sell-the-news reaction today.
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