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To: Return to Sender who wrote (94634)	6/30/2025 9:23:10 AM
From: Sam	1 Recommendation Recommended By Return to Sender Read Replies (2) \| Respond to of 95342

Monday Morning Outlook covering its butt--remain cautious but we're going higher but Be Careful Out There (as the Sarge on Hill Street Blues used to say)! I can't say I blame him for that position! Traders Should Remain Cautious Near This Key S&P 500 Level Equity markets are well-positioned to keep moving higher Matthew Timpane CMT, Senior Market Strategist Jun 30, 2025 at 8:40 AM Last week, one of the two bounce scenarios I outlined played out nearly perfectly. The SPDR S&P 500 ETF (SPY – 614.91) bottomed out on Monday as it neared the 590-strike and ultimately held that critical 595-strike put level. It even managed to close back above the 600-strike call level that I highlighted as a potential squeeze trigger. Sure enough, the very next day we gapped higher, as tensions eased in the Middle East on reports — later confirmed — of a ceasefire between Israel and Iran. Looking a little deeper, the current SPY open interest for this week shows a large concentration at the 595-strike put — nearly spot on with Friday’s close. If that level breaks, it could trigger a delta hedge unwind, pushing the market toward the 579–580 put strikes. That zone is notable, too, as it lines up with the 200-day moving average, the Election Day close, and would likely be the next spot where bulls attempt to step in if 595 or 590 fail to hold. Overhead, we’re still capped by the 600-strike peak call, which also serves as a balance point for open interest and is right near the flattening 10-day moving average. That’s your level to watch for any upside breakout. If cleared, a test of previous all-time highs becomes more likely, with established resistance in the 608–613 zone. - Monday Morning Outlook, June 23, 2025 From there, the breakout picked up steam. The S&P 500 Index (SPX – 6,173.07), Nasdaq Composite (IXIC – 20,273.46), and Vanguard Total World Stock Index (VT – 128.00) all pushed to fresh all-time highs. The latter had already pulled back and retested its breakout level successfully, which is a healthy sign of strength moving forward. It’s hard to ignore the resilience of global equities here, rallying in the face of geopolitical risk, political uncertainty at home, and generally cautious positioning — particularly among institutional investors. We’re now in clear blue-sky territory, and when that’s the case, price tends to climb the wall of worry. Considering where this move may ultimately extend, I prefer to keep it simple and anchor to the 161.8% Fibonacci extension. Using the defined move from the February high to the April low, this projects an SPX upside objective near 6,958. And while the third year of a bull market is historically more choppy than the first two years, I don’t think it’s unreasonable to believe we could reach that 6,958 milestone before year-end, barring a major negative macro catalyst that disrupts the trend. A re-escalation in the Middle East, renewed tariff pressures, another round of sticky inflation, or a left-field catalyst could always change the equation. But you can’t trade on “maybes” — you follow price. Strategists, meanwhile, might need to play catch-up. Many were forced to downgrade targets following the initial White House tariff announcement, but the rollback has thrown them offside. Goldman Sachs still has a 5,700 year-end target, even though it raised its 3-month view to 5,900 — which the market blew through. Barclays trimmed to 5,900, Oppenheimer cut from 7,100 to 5,950, RBC went down to 5,500, and UBS dropped to 5,800. The rollback has left them flat-footed, and unless this breakout fails soon, the only move left for them is to chase. If the trend holds, we’re likely to see a wave of upward target revisions heading this summer. That said, if this breakout fails, a move back below 6,147 is where I’d start to get cautious — at least in the short term — as it would likely open the door for a retest of the 20 or 30-day moving average. And as we know, failed moves often lead to fast moves, and a breakdown below that level could serve as an early warning sign of a potential deeper move lower. Seasonally, we now enter what is — believe it or not — the most bullish month of the year. Since 1928, July has overtaken December for that title, thanks in part to last year’s gains. I know I probably sound like a broken record every time I fill in around this time, but seasonality matters — not just because it tells us when to lean in, but because when it fails, it can leave a lot of traders offsides and scrambling. Early July is particularly strong. Since 1928, the S&P has averaged a +1.28% gain through July 15th. After mid-month, the pace tends to flatten, with the full-month average at +1.25% per LSEG Eikon data. But in more recent history, the 10-year average mean gain for July is a solid +2.91%. Still, it’s worth noting that post-OPEX tends to be a bit more volatile and choppy. Now let’s take a look at the current open interest setup heading into July OPEX. The SPY shows a balanced zone around the 600 level, with a peak put at the 590-strike and a peak call at 620. SPY closed Friday just below 615. If we break through the 620-call wall, the next key level to watch is 630, which is more prominent post-OPEX, though open interest at that strike could start to build in the July standard expiration if price continues to push higher. Also worth noting: the 620-strike call is the largest for this week’s expiration, making it a short-term pivot to monitor if reached. On the downside, the loss of the 590-strike put support after OPEX is something to keep an eye on — especially if sentiment shifts and we don’t see put open interest begin to stack at higher strikes. As it stands, positioning looks supportive into mid-month, but more cautious beyond July 15th. Not much has changed on the sentiment front, but two signals stood out. First, the 10-day buy-to-open put/call ratio has turned lower after peaking near 0.6. While it never reached full-blown fear levels, the recent rollover suggests bears may be backing off — creating a potential near-term tailwind for equities. Second, the Advance-Decline Line for the S&P 500 broke out to new highs back in April — well ahead of the index itself. After consolidating since mid-May, it cleared that range heading into this past weekend and has now pushed to fresh highs once again. When the A/D Line is breaking out alongside price, it’s hard to get too bearish — and until that relationship reverses, the broader trend remains to the upside. In all, equity markets are positioned to push higher into mid-July. Short-term trades worked well last week for those targeting the key support levels that were mentioned. Hedges should have been disposed of on the breakout above SPY 600 and the 10-day moving average. Price action once again dictated the path — and for now, that path remains higher. Yes, unknowns always linger in the background. But if bulls can defend this breakout, animal spirits could stay alive into OPEX. If we lose it? Then it’s time to reassess. Until then — stay tactical, stay aware, and I’ll catch you next time. Matthew Timpane is Schaeffer's Senior Market Strategist Continue Reading: The Week Ahead: July 4th Week Packed with Economic Data Indicator of the Week: Best and Worst Stocks to Own Over July 4th Week schaeffersresearch.com

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6/30/2025 10:06:00 PM

From: Return to Sender

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Market Snapshot

Dow	44094.77	+275.50	(0.63%)
Nasdaq	20369.75	+96.28	(0.47%)
SP 500	6204.95	+31.88	(0.52%)
10-yr Note

NYSE	Adv 1567	Dec 1207	Vol 1.48 bln
Nasdaq	Adv 2637	Dec 1887	Vol 8.32 bln

Industry Watch

Strong: Technology, Financials, Health Care, Real Estate

Weak: Consumer Discretionary, Energy,

Moving the Market

End of quarter flows

Positive results of Fed Stress Test

Canada rescinds Digital Services Tax to encourage continued negotiations with the U.S.

Senate nearing vote on reconciliation bill

Apple considers outside AI help to fix Siri -Bloomberg

Closing Stock Market Summary
30-Jun-25 16:25 ET

Dow +275.50 at 44094.77, Nasdaq +96.28 at 20369.75, S&P +31.88 at 6204.95
[BRIEFING.COM] The S&P 500 and Nasdaq Composite set record highs on Friday, and there was no stopping them from extending their reach into record territory today. For a moment, it looked like there might be some interference in that effort, yet a rush of buying interest in Apple (AAPL 205.17, +4.09, +2.03%) occurred in the afternoon session following a Bloomberg report that the company is considering using outside AI help to drive its new version of Siri.

Apple was trading just shy of $200 per share when that news hit but traded as high as $207.39 in its wake. That was a hefty load of market cap weight that ultimately fueled a move above 6,200 for the S&P 500 on the last trading day of a remarkable second quarter that saw the S&P 500 increase 10.6% and the Nasdaq Composite gain 17.8%. Those gains, though, don't even tell half the story. From their lows on April 7, the S&P 500 and Nasdaq Composite are up 28% and 38%, respectively.

Prior to the Apple news, today's session was filled with political news that was generally interpreted in a positive light.

The Senate passed a procedural vote over the weekend that paved the way for a full Senate vote late tonight or early tomorrow on its version of the "One Big, Beautiful Bill." That bill, among other things, will extend the 2017 tax cuts for all income levels and make those cuts permanent; it starts Medicaid work requirements beginning in December 2026, phases out solar and wind tax credits beginning in December 2026, raises the SALT deduction cap to $40,000 for people making $500,000 or less for a 5-year period, after which it reverts to $10,000, and increases the debt ceiling by $5 trillion.

If the Senate passes the bill, which the CBO estimates will add $3.3 trillion to the deficit over the next decade, it will head to the House for review and set up the possibility of it being on the president's desk for signing by July 4. The comforting point for the stock market in all this was that the Treasury market didn't revolt over the CBO estimate. In fact, the Treasury market staged a minor rally that saw gains across the curve led by longer-dated maturities.

The 2-yr note yield dipped two basis points to 3.72%, and the 10-yr note yield dropped six basis points to 4.23%. Running alongside the developments pertaining to the "One Big, Beautiful Bill" were reports highlighting Canada's efforts to renew negotiations with the U.S. by dropping its digital services tax and speculation that other trade deals, including the possibility of one with the EU, could be announced soon.

Separately, it was welcome news for the capital markets to hear that the largest banks all passed the Federal Reserve's stress test. That news was released after Friday's close, and it paves the way for banks to announce capital return plans.

The investment banks, led by Dow component Goldman Sachs (GS 707.75, +16.94, +2.45%) reaching a record high of its own, paced the gains in the financials sector (+0.9%). The only other sector performing better than the financials sector today was information technology (+1.0%), which rallied around Apple and the AI trade tied to encouraging commentary out of Oracle (ORCL 218.63, +8.39, +3.99%) for its cloud business. For the quarter, the information technology sector gained 23.5%.

Most sectors ended higher today. The only two laggards were the consumer discretionary (-0.9%) and energy (-0.7%) sectors.

S&P 500: +5.5% YTD
Nasdaq: +5.5% YTD
DJIA: +3.6% YTD
S&P 400: -0.6% YTD
Russell 2000: -2.5% YTD

Reviewing today's data:

June Chicago PMI (Actual 40.4; Briefing.com consensus 43.4; prior 40.5)

Apple helps carry market to new high
30-Jun-25 15:35 ET

Dow +243.61 at 44062.88, Nasdaq +111.27 at 20384.74, S&P +31.15 at 6204.22
[BRIEFING.COM] The S&P 500 (+0.5%) is once again in new record high territory, having now eclipsed the 6,200 level, after a sharp rebound from session lows in the past hour.

The advance follows a Bloomberg report that Apple (AAPL 204.99, +3.91, +1.94%) is considering using AI from Anthropic or Open AI to revise its intelligent assistant Siri.The news has given then the technology sector (+1.2%) a boost that has pushed it past financials (+0.7%) as the best performing sector of the day, after spending most of the session tracking the major averages. Apple was a notable laggard for the majority of today's trading, as it hovered around unchanged levels and prevented further gains this morning from a technology sector that featured strong performances from the likes of Palantir Technologies (PLTR 135.81, +5.07, +3.88%) and Oracle (ORCL 220.78, +10.54, +5.01%).

Financials lead surge towards session highs
30-Jun-25 15:05 ET

Dow +173.69 at 43992.96, Nasdaq +53.23 at 20326.70, S&P +18.36 at 6191.43
[BRIEFING.COM] The major averages are once again advancing to their session highs from this morning as the S&P 500 is now up 0.4%.

Financials (+0.7%) still lead the way as news of all 22 tested institutions passing the Fed's stress test and hopes of eased future regulations have the sector advancing on the final trading session of the quarter.

The consumer discretionary sector (-0.8%) continues to underperform today with notable declines in top components Amazon (AMZN 219.65, -3.65, -1.64%) and Tesla (TSLA 318.06, -5.57, -1.72%). NIKE (NKE 70.61, -1.43, -1.99%) has also seen some profit taking after shares surged 15% last week following a positive earnings report.

S&P 500 edges higher as Mosaic, Allstate, Ulta lead; Albemarle sinks
30-Jun-25 14:30 ET

Dow +132.73 at 43952.00, Nasdaq +35.12 at 20308.59, S&P +11.12 at 6184.19
[BRIEFING.COM] The S&P 500 (+0.18%) has squeaked into second place in recent trading, up about 11 points.

Briefly, S&P 500 constituents Mosaic (MOS 36.27, +0.95, +2.69%), Allstate (ALL 200.51, +4.75, +2.43%), and Ulta Beauty (ULTA 468.60, +10.33, +2.25%) dot the top of the standings despite a dearth of corporate news.

Meanwhile, Albemarle (ALB 63.13, -1.82, -2.80%) is among the top 5 worst laggards on Monday.

Gold gains 0.6% to $3,307.70 as dollar weakens, Fed cut bets build
30-Jun-25 14:00 ET

Dow +120.83 at 43940.10, Nasdaq +39.25 at 20312.72, S&P +9.79 at 6182.86
[BRIEFING.COM] The tech-heavy Nasdaq Composite (+0.19%) is in second place on Monday afternoon, up about 40 points.

Gold futures settled $20.10 higher (+0.6%) at $3,307.70/oz, supported by a weaker U.S. dollar and easing geopolitical tensions, particularly in the Middle East and between the U.S. and China. The move also reflects investor positioning ahead of potential Fed rate cuts, which enhance the appeal of non-yielding assets like gold.

Meanwhile, the U.S. Dollar Index is down about -0.4% to $96.97.

Home Depot's SRS to acquire GMS for $4.3 bln, strengthening professional contractor segment (HD)
Through its wholly owned subsidiary, SRS Distribution, Home Depot (HD) announced that it will acquire GMS Inc. (GMS) for approximately $4.3 bln, with SRS commencing a tender offer to purchase all outstanding shares of GMS at $110/share in cash. The news has driven GMS shares sharply higher, with the acquisition price representing a 14% premium to last Friday's closing price. On June 19, the Wall Street Journal broke a story that HD was aiming to make an offer for GMS, which sent the stock rocketing higher.

This acquisition also follows reports of a competitive bidding environment, with QXO Inc. (QXO) previously offering $95.20/per share, valuing GMS at $5 bln, and unconfirmed speculation of an earlier HD bid.

GMS is a specialty distributor of building products, focusing on wallboard, ceilings, steel framing, and complementary construction products, operating over 320 distribution centers and nearly 100 tool sales, rental, and service centers across the United States and Canada. Its primary end markets include commercial and residential construction, serving contractors, builders, and professional remodelers. GMS’s business aligns seamlessly with SRS Distribution’s portfolio, which specializes in roofing, siding, and other exterior building products for professional contractors.
The acquisition enhances SRS’s product offerings by adding GMS’s interior-focused product lines, creating a more comprehensive platform for professional customers. For HD, this bolsters its fast-growing professional business, which has been a strategic priority since the $18.25 bln acquisition of SRS in 2024. By integrating GMS’s network and expertise, HD strengthens its position in the $950 bln professional contractor market, diversifying beyond its core retail business and capturing higher-margin, recurring revenue from professional clients.
GMS reported FY25 net sales of $5.5 bln, with a marginal yr/yr increase, though organic sales declined 5.4% on a same-day basis. At a P/E ratio of 34.3x, the acquisition price is significantly above GMS’s historical averages, suggesting a lofty valuation. However, the 9.7x trailing twelve-month EBITDA multiple (based on QXO’s $5 bln offer) is reasonable within the context of strategic acquisitions in the specialty distribution sector. Given GMS’s stable cash flows and market position, the premium appears justified to secure a leading player in a fragmented market, though it may reflect competitive bidding pressure from QXO.
For HD, the immediate financial impact of the GMS acquisition is unlikely to significantly move the revenue needle, given its massive $153 bln in trailing twelve-month revenue. GMS’s $5.5 bln in sales represents roughly 3.6% of HD’s top line, suggesting a modest contribution to overall revenue. The deal’s impact on earnings accretion remains uncertain, as potential margin dilution due to GMS’s lower-margin profile compared to HD’s core operations could create a headwind.

Overall, the acquisition aligns with HD’s strategy of expanding its professional contractor ecosystem, following prior acquisitions like HD Supply and SRS, which could drive long-term synergies through cross-selling opportunities and operational efficiencies. The addition of GMS strategically strengthens its professional contractor business by adding a leading distributor of interior building products, enhancing its competitive position. While near-term earnings accretion may be limited, the deal enhances HD’s scale in the professional segment, potentially boosting profitability over time as integration matures.

Oracle trades to new all-time high on bullish comments from its CEO (ORCL)

Oracle (ORCL +6%) is trading sharply higher to a new all-time high today. The catalyst is the company stating in an 8-K filing that CEO Safra Catz plans to meet with other Oracle colleagues later today and provide some positive commentary. Also, Stifel upgraded the stock this morning, which is likely helping as well.

Specifically, Ms. Catz is expected to say, "Oracle is off to a strong start in FY26. Our MultiCloud database revenue continues to grow at over 100%, and we signed multiple large cloud services agreements including one that is expected to contribute more than $30 billion in annual revenue starting in FY28." This is on par with the bullish commentary we heard on Oracle's Q4 (May) call on June 11.
To reiterate, its Q4 report was its largest EPS beat in two years and it followed misses in three of the four prior quarters. Oracle also posted its first double-digit revenue growth quarter in two years. That is really important. Despite its large size, Oracle seems to be accelerating its top line growth. And based on its bullish comments, it sounds like the next few years will see acceleration also.
RPO is a key metric, it grew 41% yr/yr to $138 bln in Q4, not quite the +62% growth we saw in Q3 (Feb), but Q3 was Oracle's strongest booking quarter ever by a huge margin. This RPO number was still very good and it grew 6% sequentially. And Oracle said the best is still yet to come. Oracle said it's still in a position where its supply is not meeting demand. Oracle is actually still waiving off customers or scheduling them out into the future until it has enough supply to meet demand. Oracle said this is a situation that it has never seen in its history.
A key potential growth catalyst for Oracle is being a partner in the Stargate Project, a massive AI infrastructure initiative that also includes OpenAI, SoftBank, and MGX. The goal is to deploy a number of large data centers across the US to develop and deploy AI technology on a large scale. Oracle noted that, if Stargate turns out to be everything as advertised, then Oracle has understated its RPO growth.

Oracle seems to really turning a corner. It was just a few years ago that Oracle was seen as late to the party in terms of transitioning from hardware/on-premises to the cloud. It is now much more software and cloud-focused and it deserves credit for that. Management stated on June 11 that it expects it will exceed the revenue growth target previously provided for FY27. And beyond FY27, it's even more confident in its ability to meet and likely exceed prior targets for FY29. Oracle is a large company and companies this size rarely talk about revenue growth accelerating two years out. This result bodes well for other tech names set to start reporting next month.

Apogee Enterprises gains on beat-and-raise Q1 report as UW Solutions acquisition fuels growth (APOG)
Apogee Enterprises (APOG) is trading sharply higher after delivering 1Q26 earnings that exceeded expectations, while also raising its FY26 EPS and revenue expectations. Management’s confidence in a stronger second half of the year, driven by operational momentum and strategic initiatives, fueled the positive market reaction. The recent $242 mln acquisition of UW Solutions, completed in November 2024, played a pivotal role in the upside, contributing $22.0 mln in inorganic revenue to Q1 sales and bolstering the Performance Surfaces segment, while also supporting the company’s raised FY26 guidance.

Despite the strong topline performance, with net sales rising 4.6% yr/yr to $346.6 mln, tariffs posed a significant headwind, particularly impacting the Architectural Services segment, where adjusted EBITDA margin contracted sharply to 9.9% from 15.9% in the prior-year quarter. The company estimates tariffs will reduce FY26 EPS by $0.35–$0.45, with the brunt felt in the first half.
To counter this, APOG is executing mitigation strategies, including optimizing supply chain logistics to source materials from less tariff-impacted regions, renegotiating supplier contracts to reduce costs, and passing select cost increases to customers where feasible. Management expects these actions to substantially offset tariff impacts in the second half, reflecting proactive cost management and pricing discipline.
The Performance Surfaces segment emerged as a standout, with net sales soaring 99.3% to $42.3 mln from $21.2 mln in the year-ago quarter, driven primarily by the UW Solutions acquisition’s $22.0 mln contribution. This acquisition expanded APOG’s Large-Scale Optical segment into high-performance coated substrates, creating a scalable growth platform. However, the integration of UW Solutions diluted the segment’s adjusted EBITDA margin to 18.8% from 23.3%, reflecting higher interest and amortization expenses and operational integration costs.
In contrast, the Architectural Metals and Architectural Glass segments faced yr/yr revenue declines. Architectural Glass saw a 15.5% sales drop due to reduced end-market demand, particularly in commercial construction, where economic uncertainty and higher interest rates have curtailed project activity. Architectural Metals, despite higher volumes, experienced a less favorable product mix, with lower-margin projects weighing on net sales. These headwinds reflect broader market challenges, including cost inflation and cautious customer spending, though Architectural Metals showed sequential improvement, suggesting potential stabilization if demand trends recover.

APOG's’ Q1 results and raised FY26 guidance underscore the transformative impact of the UW Solutions acquisition, which has fortified the Performance Surfaces segment and diversified revenue streams. The company’s proactive tariff mitigation efforts, including supply chain optimization and strategic pricing, position it to navigate near-term challenges and deliver a stronger second half, supporting a bullish outlook for FY26.

NIKE soars as Q1 guidance and encouraging commentary signal turnaround momentum after tough Q4 (NKE)
NIKE's (NKE) 4Q25 results surpassed rock-bottom expectations and that low bar to hurdle was reflected by the stock's 34% year-to-date decline prior to today's gains. NKE reiterated that Q4 absorbed the largest financial impact from its "Win Now" turnaround strategy, as previously forecasted, with CFO Matthew Friend emphasizing that headwinds are expected to moderate moving forward. The company’s 1Q26 revenue guidance, projecting a mid-single-digit decline (versus a 7% drop expected by analysts), suggests that the worst of the financial strain is now behind NKE, fostering cautious optimism among investors.

The Q4 results underscored a predictably challenging period, with revenues declining 11.9% yr/yr to $11.1 bln, driven by an 11% drop in North America and a 20% plunge in Greater China on a currency-neutral basis. Key headwinds include intensified competition from innovative brands like On Running (ONON) and Hoka, which have captured market share in performance footwear with fresh designs, and NKE’s prior over-reliance on flagship products like Air Force 1s and Dunks, coupled with an aggressive push into direct-to-consumer channels (DTC) under former CEO John Donahoe.
This DTC focus, while initially boosting margins during the pandemic, led to inventory overhangs and weakened wholesale relationships, contributing to a 14% decline in NIKE Direct sales (including a 26% drop in NIKE Digital) and a 9% drop in wholesale revenues in Q4. Softer consumer demand, particularly in China due to competitive pressures and nationalistic sentiment, further exacerbated the downturn.
Tariffs emerged as a significant new challenge, with NKE estimating a $1 bln cost impact in FY26 before price increases and supply chain adjustments. Rising input costs, compounded by heavy promotional activities to clear excess inventory, severely pressured profitability, with Q4 gross margin contracting 440 bps yr/yr to 40.3%. NKE’s Q1 guidance projects further gross margin compression of 350-425 bps, including approximately 100 bps directly attributable to tariff-related pressures, reflecting the company’s vulnerability to trade policy changes given its reliance on Asian manufacturing.
To mitigate tariff impacts, NKE has been proactively diversifying its manufacturing base, reducing its footwear production in China to 16% last year from 29% in 2016, with increased sourcing from countries like Vietnam and Indonesia. Management’s confidence in fully offsetting tariff headwinds through price adjustments and supply chain efficiencies signals a long-term commitment to restoring margin stability, though near-term pressures will likely persist.
On the innovation front, NKE is showing signs of progress under CEO Elliott Hill’s "Win Now" strategy, with recent launches like the Pegasus Premium and Vomero 18 gaining traction among runners and signaling a renewed focus on performance-oriented products. A high-profile collaboration with Kim Kardashian’s Skims brand has also bolstered NKE’s appeal in the women’s apparel segment, addressing competitive pressure from brands like Lululemon (LULU) and Alo Yoga.
Additionally, NKE is rebuilding wholesale partnerships with key retailers like Dick’s Sporting Goods (DKS), Foot Locker (recently acquired by Dick’s), and Macy’s (M), reversing the prior DTC-heavy approach that strained these relationships.

NKE’s Q4 results were undeniably weak, aligning with expectations of significant pressure from its turnaround efforts, but the Q1 revenue guidance of a mid-single-digit decline -- less severe than Q4’s 11.9% drop -- signals a potential inflection point. Management’s reiterated outlook that headwinds will moderate, coupled with early progress in innovation and wholesale relationships, has driven a strong rally in NKE shares, reflecting renewed investor confidence in the company’s recovery trajectory.

Concentrix rallies back to a small gain after post-earnings drop last night (CNXC)

Concentrix (CNXC +1%) is trading modestly higher despite a disappointing Q2 (May) earnings report last night. Following $0.20+ EPS beats the last two quarters, this CX (Customer Experience) company missed on EPS. Revenue rose only modestly, by 1.5% yr/yr to $2.42 bln, but that was slightly better than expected. The Q3 (Aug) guidance was mixed with upside revs but the mid-point of EPS guidance was a bit soft. CNXC raised FY25 guidance by a good amount.

Revenue growth was well-balanced across verticals. Revenue from retail, travel, and e-commerce clients grew 3%, led by growth with travel clients. Media and communications also grew 3%, after this vertical has been flat to down in the past few years. Revenue from banking, financial services and insurance clients grew 2%, while its tech vertical and healthcare vertical were both relatively flat, reflecting offshore movement.
The main problem in Q2 is that margins took a hit due to tariff concerns/confusion. Some clients paused programs as they sorted through the impact of tariffs on their business. During this time, CNXC kept their programs stable with the expectation that these programs would start to resume in May and they have.
Concentrix could have laid people off in April during this pause. However, it maintained labor so that the company would be well-positioned to benefit from what should be a stronger second half to the fiscal year. And that was prudent because, by the end of May, CNXC exited the month with margin trending more favorably. Also, CNXC expects meaningful sequential margin improvement in Q3 and Q4.
Despite the pause by some clients in Q2, Concentrix launched iX Hero, its agentic AI-powered application. This complements its autonomous AI assistant product, iX Hello, giving clients an array of AI options to meet their needs for both full automation and human augmentation. CNXC is delighted with the early market traction and its pipeline of integrated product deals is strong.
A benefit for CNXC is that it's a large player in the CX space and can offer a wide breadth of services. On this point, Concentrix noted that clients are centralizing spend with partners that have scale, breadth, and expertise to deliver large-scale programs that combine consulting, IT integration, CX expertise, and AI.

What stands out to us is that this stock was down 9% after the close yesterday, but we think the call last night calmed some nerves. The EPS miss was due to a temporary pause by clients, but it sounds like they are moving again on projects. And it was wise for CNXC to not scale back its workforce. The stock has been recovering nicely in early trading today as investors more fully understand this dynamic. We also think CNXC's decision to increase FY25 guidance despite the Q2 miss really soothed some investor nerves.