| | | Market Snapshot
| Dow | 43958.19 | +47.21 | (0.11%) | | Nasdaq | 19230.74 | -50.66 | (-0.26%) | | SP 500 | 5985.39 | +1.39 | (0.02%) | | 10-yr Note | -1/32 | 4.45 |
|
| | NYSE | Adv 1089 | Dec 1620 | Vol 968 mln | | Nasdaq | Adv 1452 | Dec 2800 | Vol 9.6 bln |
Industry Watch
| Strong: Consumer Discretionary, Real Estate, Industrials, Energy, Consumer Staples |
| | Weak: Communication Services, Information Technology, Utilities, Health Care |
Moving the Market
-- Turnaround action in mega caps boosting index gains
-- Losses in chipmakers acting as limiting factor
-- Monitoring price action in Treasuries after this morning's CPI data, which stoked worries about inflation remaining above the Fed's 2% target
|
Closing Summary
13-Nov-24 16:25 ET
Dow +47.21 at 43958.19, Nasdaq -50.66 at 19230.74, S&P +1.39 at 5985.39
[BRIEFING.COM] The stock market had a mixed showing today. There wasn't a lot of conviction on either side of the tape due in part to the major indices sitting near all-time highs. The S&P 500, which settled little changed from yesterday, is about 16 points off its record closing high.
The equal-weighted S&P 500 closed fractionally higher, but market breadth was negative. Decliners led advancers by a 3-to-2 margin at the NYSE and by a 2-to-1 margin at the Nasdaq.
Participants were digesting this morning's release of the October Consumer Price Index, which also garnered a mixed response from Treasuries. Total CPI was up 2.6% year-over-year, versus 2.4% in September, and core CPI up 3.3% year-over-year, unchanged from September, stoking worries about inflation persisting above the Fed's 2.0% target.
The 10-yr yield, which is most sensitive to inflation expectations, settled two basis points higher at 4.45%. The 2-yr yield, which is most sensitive to changes in the fed funds rate, settled four basis points lower at 4.28%.
Rate cut expectations increased slightly in response to the CPI print. The fed funds futures market now sees a 82.3% probability of a 25 basis points rate cut at the December FOMC meeting, up form 58.7% yesterday, according to the CME FedWatch tool.
Semiconductor stocks were a pocket of weakness, leading the PHLX Semiconductor Index (SOX) to close 2.0% lower. This price action also weighed down the S&P 500 information technology sector, which fell 0.3% despite gains in Microsoft (MSFT 425.20, +2.17, +0.5%) and Apple (AAPL 225.12, +0.89, +0.4%).
- Nasdaq Composite: +28.1%
- S&P 500: +25.5%
- S&P Midcap 400: +17.7%
- Russell 2000: +16.9%
- Dow Jones Industrial Average: +16.6%
Reviewing today's economic data:
- Weekly MBA Mortgage Applications Index 0.5% ; Prior -10.8%
- October CPI 0.2% (Briefing.com consensus 0.2%); Prior 0.2%, October Core CPI 0.3% (Briefing.com consensus 0.3%); Prior 0.3%
- The key takeaway from the report -- and perhaps calming influence -- is the understanding that the shelter index accounted for more than 65% of the total 12-month increase in core CPI, so the market is watering down the headline inflation print as not being as comprehensively inflationary as it seems. The unadjusted change in the all items less shelter index was just 1.3% year-over-year.
- The Treasury Budget for October showed a deficit of $257.4 billion compared to a deficit of $66.6 billion in the same period a year ago. The October deficit resulted from outlays ($584.2 billion) exceeding receipts ($326.8 billion). The Treasury Budget data is not seasonally adjusted so the October deficit cannot be compared to the September surplus.
- The key takeaway from the report is that the net interest outlay is running close to $1 trillion on an annualized basis.
Thursday's economic data features:
- 8:30 ET: October PPI (Briefing.com consensus 0.2%; prior 0.0%) and Core PPI (Briefing.com consensus 0.3%; prior 0.2%), Weekly Initial Claims (Briefing.com consensus 220,000; prior 221,000), and Continuing Claims (prior 1.892 mln)
- 10:30 ET: weekly natural gas inventories (prior +69 bcf)
- 11:00 ET: Weekly crude oil inventories (prior +2.15 mln)
Treasuries settle mixed
13-Nov-24 15:40 ET
Dow +104.70 at 44015.68, Nasdaq +1.24 at 19282.64, S&P +13.84 at 5997.84
[BRIEFING.COM] The major indices are in a sideways flow ahead of the close.
Treasuries settled mixed after a choppy response to the CPI report for October, which showed in-line headline (0.2%) and core (0.3%) readings. The 10-yr yield, which is most sensitive to inflation expectations, settled two basis points higher at 4.45%. The 2-yr yield, which is most sensitive to changes in the fed funds rate, settled four basis points lower at 4.28%.
Thursday's economic data features:
- 8:30 ET: October PPI (Briefing.com consensus 0.2%; prior 0.0%) and Core PPI (Briefing.com consensus 0.3%; prior 0.2%), Weekly Initial Claims (Briefing.com consensus 220,000; prior 221,000), and Continuing Claims (prior 1.892 mln)
- 10:30 ET: weekly natural gas inventories (prior +69 bcf)
- 11:00 ET: Weekly crude oil inventories (prior +2.15 mln)
CSCO, DIS trade up ahead of earnings
13-Nov-24 15:05 ET
Dow +15.43 at 43926.41, Nasdaq -46.61 at 19234.79, S&P -0.98 at 5983.02
[BRIEFING.COM] The major indices are drifting lower in recent trading. There is no specific news item to account for the downside moves, buying interest is just dissipating.
Cisco (CSCO 58.87, +0.17, +0.3%) headlines the earnings reports after today's close. Walt Disney (DIS 102.61, +1.62, +1.6%) is among the headliners ahead of the Thursday's open.
A short time ago, Republicans officially won control of the House of Representatives, completing the GOP sweep, according to NBC News.
Stocks move slightly lower; Key takeaway from Treasury budget
13-Nov-24 14:35 ET
Dow +88.53 at 43999.51, Nasdaq +6.75 at 19288.15, S&P +9.90 at 5993.90
[BRIEFING.COM] The major indices moved slightly lower over the last half hour with no specific catalyst.
The Treasury Budget for October showed a deficit of $257.4 billion compared to a deficit of $66.6 billion in the same period a year ago. The October deficit resulted from outlays ($584.2 billion) exceeding receipts ($326.8 billion). The Treasury Budget data is not seasonally adjusted so the October deficit cannot be compared to the September surplus.
The key takeaway from the report is that the net interest outlay is running close to $1 trillion on an annualized basis.
10-yr note yield climbs to 4.46%
13-Nov-24 13:55 ET
Dow +160.49 at 44071.47, Nasdaq +73.91 at 19355.31, S&P +23.00 at 6007.00
[BRIEFING.COM] The major indices are clinging tightly to modest gains, although the Russell 2000 has lost some of its grip on earlier gains. It had been up 1.0%, but it is now up just 0.3%.
That move has coincided with the 10-yr note yield climbing to its highs for the session (4.46%) after hitting 4.36% in the immediate wake of the October Consumer Price Index that was released at 8:30 a.m. ET.
The action in the Treasury market today can be characterized as a curve-steepening trade. The 2-yr note, content to think the Fed is still on track for a December rate cut, even though core-CPI was up 3.3% year-over-year, is down four basis points to 4.28%, leaving the 2s10s spread at 18 basis points versus nine basis points yesterday.
In related news, the probability of a 25-basis points rate cut at the December FOMC meeting is at 82.3% today versus 58.7% yesterday, according to the CME FedWatch Tool.
St. Louis Fed President Musalem (2025 FOMC voter) said a short time ago that, "Further easing toward a neutral policy stance will be appropriate to support employment if inflation continues to converge toward 2%. Shifting from my baseline to alternative scenarios, recent information suggests to me that the risk of inflation ceasing to converge toward 2%, or moving higher, has risen, while the risk of an unwelcome deterioration in the labor market has remained unchanged or possibly fallen."
ZoomInfo down sharply on Q3 results; headwinds connected to SMBs expected to persist (ZI)
ZoomInfo (ZI -17%) wipes out its gains from the month today despite delivering decent Q3 numbers, including a top and bottom-line beat as well as Q4 guidance consistent with analyst estimates. Shares of ZI zipped over +60% higher from early August lows ahead of its report yesterday after the close, raising expectations and increasing the risk of a sharp pullback on possible weak points.
The central issue for ZI, which develops analytics software to complement customer relationship management platforms, remains a stubbornly challenged environment for small and medium-sized businesses (SMBs). Last quarter, ZI plummeted on alarming Q3 and FY24 guidance, which branched from elevated write-offs largely surrounding SMBs. Underpinning this issue is that in 2022 and 2023, ZI extended credit to a higher mix of SMB customers whose non-payment rates jumped throughout the past few quarters. ZI acted quickly to mitigate the issue, implementing initiatives to flag riskier customers.
This move led to a meaningful uptick in small business disqualifications, which will pose a headwind to the optics of ZI's growth over the coming quarters. Even though management added that it noticed stabilization related to write-offs and net retention rates during Q3, its warning over the problem hindering future growth is dampening investor sentiment today.
- Aside from the nagging write-off issue, ZI delivered meaningful improvements in Q3. Adjusted EPS of $0.28 represented a substantial 65% jump sequentially. Likewise, revenue of $303.6 mln was a 4% improvement from Q2.
- ZoomInfo Copilot, the company's AI-powered offering that provides B2B insights for sales teams, performed better than expected. This tool may be helping fuel meaningful mid-market and enterprise growth, given that ZI expanded its $100K and $1 mln-plus customer cohorts sequentially in Q3. Revenue from the $100K cohort now comprises 44% of ZI's total annual contract value (ACV).
- As ZI continues to grow enterprise customers, benefit from a turnaround in mid-market, and remove riskier businesses from its platform, SMBs will become a smaller percentage of its overall business. This trend will then support a more favorable mix of revenue and set ZI up for more durable levels of growth.
To start 2024, investors were excited about ZI potentially finding a bottom soon, especially as more businesses turned to AI. However, the year has unfolded much differently than ZI may have hoped. With the demand environment essentially unchanged from last quarter, particularly regarding SMBs, while write-offs remain a headwind to future growth, the next few quarters could remain volatile, preventing ZI from mounting a more meaningful turnaround until later in 2025.
Instacart delivers strong Q3 results, but forecast for slower GTV growth in Q4 sinks shares (CART)
With shares surging by more than 40% since early September, Instacart (CART) faced a high bar to hurdle last night when the grocery delivery platform provider reported Q3 results. Following in the footsteps of fellow food delivery company DoorDash (DASH), which posted better-than-expected Q3 results on October 30, CART issued strong quarterly results that exceeded expectations across the board. However, the impressive Q3 performance is being clouded over by a disappointing Q4 outlook that includes a projected slowdown in Gross Transaction Value (GTV) growth and an adjusted EBITDA forecast that came up a bit short of analysts' expectations.
- Similar to DASH and Uber (UBER) Eats, CART became a mainstay during the pandemic and many of the users that flocked to its platform at that time are now using it habitually. Still, the grocery market remains vastly underpenetrated online, and CART is steadily expanding its reach and adding capabilities to help mitigate delivery fees. For instance, it provides EBT SNAP, loyalty, and flyers that are integrated with its top twenty retailers, and it also announced a new partnership with digital coupon/promotion company Ibotta (IBTA) in which CART customers will receive access to IBTA coupons.
- These factors helped drive GTV higher by 11% in Q3 to $8.3 bln, exceeding the high end of CART's $8.10-$8.25 bln guidance range. Most of the growth was due to a 10% increase in orders to 72.9 mln, while Average Order Value (AOV) edged higher by just 1% as consumers continue to keep a tight lid on costs.
- CART is keeping a tight lid on its own costs, illustrated by adjusted total operating expenses representing 5.1% of GTV compared to 5.6% in the year-earlier period. Reduced headcount and a decrease in R&D expenses related to employee cash/equity elections pushed expenses as a percentage of GTV lower.
- A key component of CART's growth strategy is to expand its higher-margin advertising business. In Q3, advertising revenue grew by 11% to $246 mln, matching last quarter's growth, as CART continues to make progress on diversifying its ad customers and the different sites where its ad appears. During the earnings call, CART noted that it's seeing strength among emerging brands, helping to offset some ongoing softness from large consumer packaged goods companies.
- This combination of healthy ad revenue growth and cost containment efforts led to a 39% yr/yr increase in adjusted EBITDA to $227 mln, beating its guidance of $205-$215 mln. However, CART's Q4 adjusted EBITDA guidance of $230-$240 mln came in below expectations.
- While the company's Q4 GTV guidance of $8.50-$8.65 bln was slightly ahead of estimates at the midpoint, it does suggest a slowdown in growth to 8-10%. CART attributes the deceleration to a difficult yr/yr comparison against last year's strong holiday season, and to a recent web outage at one of its retail partners, Royal Ahold Delhaize, which owns grocery chain brands such as Food Lion, Stop & Shop, and Giant.
The main takeaway is that CART delivered another strong earnings report, reflecting the resiliency and stickiness of its business, but with shares soaring to all-time highs this past week, the company needed to knock it out of the park to avoid a sell-the-news reaction. Although CART's Q3 results may have met that lofty standard, its Q4 guidance did not, resulting in a steep profit-taking pullback.
CAVA higher on huge Q3; sees itself as a clear leader in America's next major cultural cuisine(CAVA)
CAVA Group (CAVA +11%) is up sharply today following its Q3 results last night. This Mediterranean fast-casual restaurant chain beat on EPS and revenue. CAVA also increased its FY24 adjusted EBITDA outlook to $121-126 mln from $109-114 mln and raised FY24 comp guidance substantially to +12-13% from +8.5-9.5%. It also boosted its FY24 outlook for new openings to 56-58 from 54-57.
- What really jumped off the page were its huge comps of +18.1%, which were even better than Q2's +14.4%. Comps were driven by a +12.9% increase from guest traffic and a +5.2% increase from menu price and product mix. We always like to see comps driven by traffic rather than just price hikes because that means customers keep coming back. What's more, CAVA said it's seeing strong comps in every geography, suburban, urban, and all income cohorts.
- CAVA continues to see strong incidence in steak more than four months after its nationwide launch. It also launched its first ever new flavor variation on its beloved pita chip. Also, CAVA recently launched a reimagined loyalty rewards program, which launched earlier than planned. The program has been well-received. CAVA is also benefitting from increasing brand awareness, which is up 8 percentage points since the IPO and growing with each new launch.
- CAVA opened 11 net new restaurants during Q3 bringing its count to 352. On the heels of its successful market entry into Chicago, CAVA announced last night that it expects to enter South Florida early next year and expand its Midwest presence with at least two additional new markets in 2025. Its 2024 new restaurants are outperforming expectations and giving CAVA even more confidence about the portability of its category-defining brand.
Taking a step back, CAVA sees itself as the clear leader in Mediterranean cuisine. It sees itself as defining what is now emerging as America's next major cultural cuisine category. Modern consumers crave bold, adventurous flavors while also being increasingly mindful of their wellbeing. CAVA believes the category is at a tipping point as evidenced by its accelerating growth in each market and with every restaurant it opens.
What strikes us is that huge Q3 result was almost an exact repeat of what we saw in Q2 -- upside EPS/revs, huge comps, increased guidance for EBITDA and comps. Many other restaurant chains are struggling and are increasingly relying on value. However, CAVA seems to be bucking this trend as it boasts huge comps among all income cohorts. CAVA reminds us a bit as an early stage Chipotle (CMG). However, the stock does look over extended in the near term.
Spotify exceeds MAU and premium subscriber targets in Q3; sends shares to new record highs (SPOT)
By exceeding monthly active user (MAU) and premium subscriber targets, Spotify's (SPOT +8%) Q3 report hit the spot today, sending its shares to new record highs. The impressive MAU and premium sub numbers also outshined the music, podcast, and audiobook streaming platform's earnings miss, snapping a streak of four consecutive beats. Likewise, SPOT's MAU and premium subscriber projections for Q4 were uplifting enough for investors to look past downbeat revenue guidance, which emanated primarily from ongoing foreign exchange fluctuations, a headwind that also partly led to Q3 revenue falling slightly short of estimates.
- While EPS of €1.45 missed the mark, SPOT remains on track for its first full year of profitability, a milestone that followed several quarters of adjusting from pure growth to cost efficiency. SPOT ran into troubling headwinds last year as challenging macroeconomic conditions carried over from 2022, prompting its decision to begin reigning in certain investments, such as within its podcast division. Impressively, SPOT was able to change gears while still expanding into audiobooks in Europe, launching new subscription tiers, and enhancing its core platform.
- SPOT referred to 2024 as its year of monetization, which continues to bear fruit. Premium subscribers maintained double-digit gains yr/yr, expanding by 12% to 252 mln, 1 mln higher than its projection. This outperformance occurred despite SPOT implementing price hikes across its developed markets. As a result, premium average revenue per user (ARPU) growth accelerated by 146 bps compared to last quarter. Meanwhile, SPOT added 26 mln ad-supported subs yr/yr, a 12% improvement.
- Total MAUs jumped by 11% yr/yr and 2% sequentially to 640 mln, exceeding SPOT's 639 mln outlook. Most of these users take advantage of SPOT's ad-supported tier. Unfortunately for SPOT, the advertising market is softening, with ad revenue growing slower than MAUs. This softness, combined with FX headwinds, led to Q3 revs growing a hair lighter than analysts expected at 18.8% yr/yr to €3.99 bln
- . These obstacles are expected to linger, causing Q4 revenue guidance to fall short of expectations. SPOT estimates €4.1 bln next quarter, translating to +12% yr/yr growth. Currency fluctuations are expected to clip around 350 bps off yr/yr growth. Also, SPOT will be lapping last year's price hikes, leading to an approximately 400 bp moderation of yr/yr ARPU growth, also impacting total sales growth.
- Still, on the bright side, SPOT anticipates upbeat MAU and premium subscriber growth in Q4, predicting 665 mln and 260 mln, respectively.
By consistently attracting premium and ad-supported users to its platform while boosting profitability, SPOT is making the right moves to maintain a strong connection with investors. While shares trade at record highs, giving SPOT a 51x forward earnings multiple, the company continues to demonstrate its competitive advantage over the numerous alternative streaming services, such as those from Apple (AAPL) and Amazon (AMZN), as well as Sirius XM (SIRI), which owns Pandora, giving it ample runway for further upside.
Shopify soars as eCommerce platform provider continues to defy macroeconomic headwinds (SHOP)
Shopify (SHOP), a provider of an eCommerce platform for entrepreneurs, SMBs, and corporations, has been on a role, defying the macroeconomic headwinds and that momentum only gained steam in Q3. On the heels of a strong Q2 earnings report in which SHOP beat top and bottom-line expectations on Gross Merchandise Volume (GMV) growth of 22%, expectations were high ahead of this morning's print, as reflected in the stock's 15% surge since the end of October. The high hurdle proved to be no match for SHOP, though, as the company exceeded revenue expectations, generated even stronger GMV growth of 24%, and issued upside revenue guidance for Q4.
- That Q4 revenue outlook, which calls for mid-to-high twenty percent growth, represents a further acceleration in top-line growth at the high end of the range, indicating that SHOP is anticipating a robust holiday shopping season for its platform. In Q3, revenue jumped by 26% yr/yr, driven by GMV strength, especially in SHOP's international markets such as Germany and France, where the company is growing its market share.
- Given the sluggish consumer spending trends, it may seem quite surprising that SHOP is achieving these impressive results. There are a few key factors that are enabling SHOP to generate such strong growth despite the macro-related pressures, including an ongoing trend towards entrepreneurism and the company's increasing share in that market.
- Additionally, while SHOP is mostly known for catering to sole proprietors and SMBs, it continues to gain traction with larger enterprises. For example, in Q3, SHOP signed Reebok, Hanes Brands (HBI), Vera Bradley (VRA), and Lionsgate Entertainment (LGF.A) as new customers.
- Investing in AI and launching new tools that help streamline time-consuming tasks for business owners is providing SHOP with competitive advantages and generating strong merchant growth. Shopify Flow, which allows merchants to easily create custom automations to help them run their businesses more efficiently, and Shopify Tax, are two merchant automation tool that are seeing strong adoption. The company also recently launched Sidekick, an AI-powered adviser for merchants that generates new backgrounds and product descriptions.
- Lastly, Shopify Payments, which allows merchants to accept payments without a third-party payments provider, continues to experience healthy growth. In Q3, Shopify Payments penetration increased to 62% and facilitated $17.0 bln in GMV, representing 42% growth.
The main takeaway is that SHOP is continuing to buck the macro-related headwinds as its eCommerce platform becomes the go-to destination not only for entrepreneurs and SMBS, but also increasingly for larger enterprises. With this strengthening momentum behind it, SHOP is poised for a very strong holiday shopping season.
|
|
