Traders Market Weekly: Memorial Weekend a Time for Reflection

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  • #37469
    Truman
    Participant

    Eurozone’s April M3 Money Supply 6.0% (expected 6.3%; last 6.3%)
    Spain’s April Retail Sales 1.5% yr/yr (expected -1.9%; last -4.1%)

    #37470
    Truman
    Participant

    The PCE Price Index increased 0.2% in April while the core reading, which excludes food and energy, increased 0.3% (consensus +0.3%). Year-over-year, the PCE Price Index was up 6.3% (versus 6.6% in March) while the core PCE Index was up 4.9% (versus 5.2% in March).

    Personal income increased 0.4% in April (consensus +0.5%) following a 0.5% increase in March. Personal spending increased 0.9% in April (Briefing.com consensus +0.6%) following a revised 1.4% increase (from +1.1%) in March.

    The Advance report for International Trade in Goods for April showed a deficit of $105.9 billion, versus a revised $125.9 billion (from $125.3 billion) in March. The Advance report for Retail Inventories for April rose 0.7%, and the Advance report for Wholesale Inventories for April rose 2.1%.

    #37471
    Truman
    Participant

    S&P futures vs fair value: +32.00. Nasdaq futures vs fair value: +143.30.

    The futures for the major indices are all up before the open. The major indices have been strong this week as they look to break seven week losing streaks (eight weeks for the Dow).

    #37472
    Truman
    Participant

    A final reading for the University of Michigan Index of Consumer Sentiment for May decreased to 58.4 (consensus 59.1) from the preliminary reading of 59.1.

    The final April reading was 65.2.

    #37473
    Truman
    Participant

    Several retailers fell in the pre-market after less-than-ideal quarterly earnings; however, a lot of the early weakness has been reversed.

    Costco (COST 468.07, +2.58, +0.6%) has already seen positive trending price action on par with Dick’s Sporting Goods (DKS 83.37, -1.22, -1.4%) and NVIDIA (NVDA 184.76, -6.39, -3.6%) earlier this week.

    Market participants will want to keep an eye on American Eagle Outfitters (AEO 13.40, -0.64, -4.5%), Gap (GSP 10.71, -0.41, -3.6%), and Big Lots (BIG 26.86, -3.79, -12.37%) to see if they can also stage a comeback this session.

    #37474
    Truman
    Participant

    Redbox (RDBX) is perhaps the most intriguing.

    The company is being acquired in a deal that currently values its shares at less than a $1.00 a share. However, the stock is currently trading just under $8.00 and is up as much as 73% this week.

    The acquisition of RDBX by Chicken Soup for the Soul (CSSE) has an exchange ratio of 0.087 CSSE shares for each share of RDBX. With CSSE currently trading at $6.22, RDBX shares would be valued at just $0.54 per share. Yet, they currently trade at $7.55, and are up another 4% in pre-mkt to $7.86.

    The stock is seeing pre-market gains despite B. Riley coming out this morning with a downgrade to Sell from Neutral and reducing its price target to $1.00 from $3.00. “While we acknowledge that heightened retail investor interest and “meme” speculative trading around RDBX shares could lead to significant volatility in the coming months (that could even push RDBX shares higher from here), we believe the valuation will ultimately correct itself heading into the expected transaction close during 2H22,” comments B. Riley.

    #37475
    Truman
    Participant

    Ulta Beauty (ULTA +10%) shares are looking to “makeup” ground lost during the past few weeks after succumbing to the crossfire of a broad sell-off in retail that followed earnings releases from Walmart (WMT) and Target (TGT).

    The beauty retailer outperformed on numerous metrics, achieving sizable beats on its top and bottom lines and delivering same-store sales growth that more than doubled what consensus predicted. Additionally, ULTA upped its FY23 earnings, revs, and comparable sales forecasts. The company now expects EPS of $19.20-20.10, about 6% higher at the midpoint from its prior range, and comp growth of +6-8%, a solid jump from prior targets of +3-4%.

    ULTA grew its adjusted earnings over 50% yr/yr to $6.30 per share as operating margins reached a record 18.7% in Q1. Meanwhile, revs jumped 21% yr/yr to $2.35 bln, and same-store sales grew +18%. ULTA’s comps are made more notable given that the company was lapping comps of +65.9% last year, giving it an excellent two-year figure of +48.6%.

    Over the past couple of weeks, there were a few clues that the beauty industry could be better shielded than other retail niches from the inflationary pressures that bottlenecked headline results from companies like WMT, TGT, and Kohl’s (KSS).

    For instance, one of the few bright spots in KSS’s otherwise disappointing AprQ earnings report was the offering it provides through its partnership with beauty retailer Sephora, which comped positively in the quarter while KSS posted -5.2% comps overall.
    Also, TGT, within which ULTA continues to open additional shop-in-shops, benefited from double-digit comp growth in its beauty category, reflecting its expanded ties with ULTA.

    Furthermore, despite rising inflation, beauty manufacturer Coty (COTY) raised its FY22 earnings guidance earlier this month. The company noted that demand for its products remains resilient, particularly for the more premium brands.

    Still, one beauty retailer, Bath & Body Works (BBWI), increased the fear that ULTA could have experienced weakness in Q1. Last week, BBWI guided JulQ earnings below consensus and trimmed its FY23 EPS outlook. The company commented that macro factors such as inflation would impact its FY23 results, possibly causing the year to vary from its longer-term growth algorithm.

    Although ULTA raised its FY23 guidance nicely, rampant price inflation still created enough uncertainty that ULTA chose to keep its longer-term targets unchanged. Also, even given Q1’s double-digit supply chain cost increases yr/yr, ULTA anticipates even higher input costs going forward, meaning that its record Q1 operating margins likely to be more of a one-off situation, as it guides for FY23 margins of 14.1-14.4%.

    Overall, the market may have underestimated the strength and resilience of the beauty industry, which is demonstrating its ability to outperform despite unabated inflationary forces. These headwinds are still creating issues for ULTA, as evidenced by its decision to not touch its long-term goals. However, ULTA’s excellent Q1 results are a good sign that it can continue to deliver outperformance even as prices continue to rise.

    #37497
    TradersCom
    Keymaster

    German Chancellor Scholz:

    German Chancellor Scholz is on the wires saying that
    Germany will support Ukraine until Russia stop the attacks
    He will continue to talk to Russian Pres. Putin

    #37500
    TradersCom
    Keymaster

    Mondays @CME Schedule for Memorial Day Weekend
    Note Stocks closed.

    #37501
    TradersCom
    Keymaster

    Have a great weekend all

    Lest We Forget

    #37510

    Dow 33,212.96 575.77 1.76%
    S&P 500 4,158.24 100.40 2.47%
    Nasdaq 12,131.13 390.48 3.33%
    GlobalDow 3,911.27 101.27 2.66%
    Gold 1,850.60 -0.70 -0.04%
    Oil 115.07 0.98 0.86%

    #37135
    TradersCom
    Keymaster

    May 29 – June 4, 2022 FEAR NOT Brave Investors Where have we been and where are we going? Join our weekly market thread on Traders Community… Image:
    [See the full post at: Traders Market Weekly: Memorial Weekend a Time for Reflection]

    • This topic was modified 6 months, 3 weeks ago by TradersCom.
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    • This topic was modified 6 months, 2 weeks ago by CautiousInvestor.
    • This topic was modified 6 months, 2 weeks ago by TradersCom.
    • This topic was modified 6 months, 2 weeks ago by TradersCom.
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