What Happened In The Stock Market This Week?
This was an eventful week in the stock market. Arguably the biggest news of the week was Jerome Powell speaking at the conclusion of the latest Federal Open Market Committee (FOMC) meeting and announcing the Federal Reserve would be holding rates steady but did indicate that multiple rate cuts would be coming later this year.
The other big news event of the week tech giant, Apple, Inc. ($AAPL) having a lawsuit filed against them by the United States Department of Justice (DOJ). The DOJ is alleging that Apple has violated antitrust laws under the Sherman Act, and said that the company has created a monopoly over the smartphone market which has led to their "astronomical valuation".
We saw a handful of large companies release earnings this week. This included Nike, Inc. ($NKE), FedEx Corporation ($FDX), lululemon athletica inc. ($LULU), and Academy Sports and Outdoors, Inc. ($ASO), only one of which posted solid earnings coupled with optimistic guidance, while the rest fell on lackluster earnings and/or pessimistic guidance for full-year 2024. We'll also discuss some news that was released regarding department store, Nordstrom, Inc. ($JWN), and their alleged desire to go private.
We'll discuss two emerging brands, one of which IPO'd (Initial Public Offering) on Thursday afternoon, which was Reddit, Inc. ($RDDT). The other is an up-and-coming hopeful in the technology sector and is benefiting from the AI boom that's occurred over the last year. This company is Micron Technology, Inc. ($MU).
Lastly, we'll discuss the small-cap highlights of the week, including EV manufacturer, Canoo, Inc. ($GOEV), golf simulator manufacturer and retailer, TruGolf Holdings, Inc. ($TRUG), and bioscience company, Yield10 Bioscience, Inc. ($YTEN).
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SPDR S&P 500 ETF ($SPY):
We'll start with arguably the biggest news of the week, which was the remarks made by Fed Chair, Jerome Powell, at the conclusion of the most recent Federal Open Market Committee (FOMC) meeting, and how the broader market responded to the takeaways. One of the major indexes that tracks the S&P 500, $SPY, traded higher by more than 1% on Wednesday afternoon, after the remarks made by Fed Chair, Jerome Powell, at the conclusion of the latest Federal Open Market Committee meeting (FOMC). In no surprise to market participants, the Federal Reserve remained firm in their decision to hold rates steady for the fifth consecutive meeting as the central bank awaits more data to determine exactly when to cut rates. A majority of Fed policymakers continue to expect a total of three rate cuts this year, but see fewer in 2025 and 2026, a blow to investors who were hoping to return to pre rate-hike level of interest rates. Even though the Federal Reserve is leaning towards cutting interest rates, with many on Wall Street expecting that to come this summer, the monetary and fiscal policy body said that they expect "core" inflation to be higher this year than previously expected. Core inflation is a measure that removes food and energy prices due to their volatility. Jerome Powell said, "We continue to make good progress in bringing inflation down, but it has become evident that there are some persistent price pressures in housing and the services sector.". Economic growth in the first quarter is expected to register at a healthy 2.1%. The job market is also in good shape as the unemployment rate is at 3.9%, and has remained below 4% for more than two years now.
Apple, Inc. ($AAPL):
Shares of $AAPL fell by nearly 4% during the market session on Thursday after news broke that the United States Department of Justice (DOJ) would be suing the tech giant, alleging that the company has violated antitrust statutes and created a monopoly over the phone industry. The DOJ said the its (Apple's) iPhone ecosystem is a monopoly that drove its "astronomical valuation" at the expense of consumers, developers and rival phone makers. The government has not ruled out breaking up one of the largest companies in the world, with a DOJ official saying on a briefing call that "structural relief" was on the table if the U.S. government were to win the lawsuit. The lawsuit also claims Apple's anti-competitive practices extend beyond the iPhone and Apple Watch businesses, citing Apple's advertising, browser, FaceTime and news offerings. The DOJ stated in their lawsuit, "Each step in Apple's course of conduct built and reinforced the moat around its smartphone monopoly.". A company breakup hasn't been done since 1982, under the Sherman Act, when it happened to Bell Systems. The DOJ said that to keep consumers buying iPhones, Apple moved to block cross-platform messaging apps, limited third-party wallet and smartwatch compatibility, and disrupted non-App Store programs and cloud streaming services. Apple says that complying with regulations costs it money, could prevent it from introducing new products or services, and could hurt consumer demand. United States Attorney General, Merrick Garland said in a news conference regarding the lawsuit that the Supreme Court defines monopoly power as "the power to control prices or exclude competition...As set in our complaint, Apple has that power in the smartphone market, if left unchallenged, Apple will only continue to strengthen its smartphone monopoly." Apple said in a statement, regarding the DOJ lawsuit, "This lawsuit threatens who we are and the principles that set Apple products apart in fiercely competitive markets. If successful, it would hinder our ability to create the kind of technology people expect from Apple-where hardware, software, and services intersect...it would also set a dangerous precedent, empowering government to take a heavy hand in designing people's technology."
Nike, Inc. ($NKE):
Shares of $NKE fell by more than 7% during the morning session on Friday after the release of the company's latest earnings report during the post-market session from the previous day. Although Nike reported revenue and profit for Q3 that beat expectations, the company issued pessimistic guidance regarding revenue in fiscal 2025. Company CFO, Matthew Friend, said in the latest earnings call that the company's expectation for fiscal 2024 is that revenue will be up roughly 1%, but are projecting a low single-digit decline in revenue for the first half of fiscal 2025. He went on to say, "This reflects near-term headwinds from lifecycle management of our key product franchises, more than offsetting the scaling of new products, as we shift our product portfolio toward newness and innovation...This also continues to reflect the subdued macro outlook around the world." Nike last reported earnings in December of 2023, and cited weaknes in overseas markets and their plan to scale back growth in 2024. The weakness in overseas markets is currently in China, Europe, the Middle East, and African businesses. They also announced plans to cut $2B in costs over the next three years (2024. 2025, & 2026). The company stated that the upcoming Summer Olympic Games are crucial. Nike said that they are planning several product launches and marketing campaigns around the event. Company CEO, John Donahoe, said about the upcoming Olympic games, "Our brand storytelling will leverage our athletes and sports moments to become sharper and bolder, beginning with the Olympics this summer." With company focus on the launch of new products, Nike is reducing the supply of classic footwear such as the Air Force 1 and Pegasus shoes. The company is down roughly 14% YTD.
FedEx Corporation ($FDX):
Shares of $FDX rose by more than 7% during the morning session on Friday after the release of the company's latest earnings report during the post-market session from the previous day. FedEx reported revenue in Q3 of fiscal 2024 of $21.7B, down from $22.2B in the same period in fiscal 2023. However, all other key metrics were up. Operating income for Q3 of 2024 was up to $1.24B, compared to $1.04B during the prior year. Net income was up to $879 million for Q3 of 2024, compared to $771 million during Q3 from the prior year, and Adjusted Diluted EPS (earnings per share) were up to $3.86 for Q3 of fiscal 2024, compared to $3.41 during the same period from the year prior. The company said that Q3 income and margin improved despite lower revenue, primarily due to execution of the company's DRIVE program and the continued focus on revenue quality. Company President and CEO, Raj Subramaniam, said in a letter to shareholders, "FedEx delivered another quarter of improved profitability in what remains a difficult demand environment, reflecting outstanding service and continued benefits from DRIVE...We are making meaningful progress on our transformation, while strengthening our value proposition and improving the customer experience. I've never been more confident in our path ahead as we build a more flexible, efficient, and intelligent network." The company also completed a $1B accelerated share repurchase transaction during the latest quarter, which increased the diluted EPS figure by $0.09 per share. The company expects to repurchase an additional $500 million of common stock during the the current quarter, which will bring the total fiscal 2024 buyback amount to $2.5B. Cash-on-hand for FedEx as of the end of February, was $5.6B.
lululemon athletica inc. ($LULU):
Shares of $LULU fell more than 17% during the morning session on Friday after the release of the company's latest earnings report during the post-market session from the previous day. Lululemon reported holiday earnings that topped expectations, but issued pessimistic guidance that fell below estimates as their North American business segment is showing signs of stagnating growth. In Q4, the company reported EPS (earnings per share) of $5.29 beating expectations of $5 per share. The company reported revenue of $3.21B, beating analyst expectations of $3.19B. The company reported net income for Q4 of $669.5 million, compared to $119.8 million during the same quarter from the year prior; up roughly 458%. Sales also rose to $3.21B, up roughly 16% from $2.77B during the same quarter from the previous year. Just like many within the apparel industry, Lululemon is struggling with uncertain demand and a slowdown in discretionary spending that's hit the apparel space particularly hard. North America is its largest business segment, slow a slowdown in this region could spell trouble for the retailer. The company noted that they are now contending with consumers who are choosing experiences over goods like clothes and shoes. During the most recent quarter, sales in North America rose 9% compared to 29% from the same quarter during the previous year. Inversely, international sales grew 54%, with sales in China growing 78%. For the full-year of 2024, the company expects sales to be between $10.7B and $10.8B, falling short of expectations of $10.9B. Company CEO, Calvin McDonald said on the most recent earnings call, "...there has been a shift in the U.S. consumer behavior of late and we're navigating what has been a slower start to the year in this market....We view this as an opportunity to keep playing offense as we lean into investments that will continue our growth trajectory. Outside the U.S., our business remains strong, and all our international markets in Canada.". It should be noted that new entrants into their market, Alo Yoga, and Vuori have been picking at Lululemon's market share. The retailer has been working to grow out its footwear offering and expand its men's business.
Academy Sports and Outdoors, Inc. ($ASO):
Shares of $ASO fell roughly 8% during the market session on Tuesday after the release of the company's latest earnings report, after the sporting goods retailer missed on net sales in 2023 and issued weak guidance for the year ahead. Net sales fell 3.7% to $6.16B, down from $6.4B in 2022. Net income for 2023 was $519.2 million, down 17.3% from $628 million during the prior year. The company said that it opened seven new stores during Q4 for a total of 14 new stores in 2023, and the company plans to open 15 to 17 new stores this year. Company CEO, Steve Lawrence, said in regards to the latest earnings report, "I am proud of the progress we have made and the resiliency that the team has shown, and we have navigated through many challenges over the past year...We have been working through a choppy macro-economic backdrop while putting in place the building blocks for our future.". Even though the company did not have a good full-year 2023, they did state that they are pleased with the trajectory change in Q4 in which sales increased by 2.8% to $1.79B up from $1.75 during the same period from the previous year. Company CFO, Carl Ford said, "In 2024, we are focused on our long-range strategy of growing the company by opening new stores, growing omnichannel sales, customer data acquisition and utilization, and improving our supply chain...Utilizing our strong balance sheet, we will invest in each of these strategic areas while we navigate the current consumer landscape because we believe that these initiatives will drive our long-term success.". For 2024, Academy expects net sales between $6.07B and $6.35B, which ranges from a 1.5% loss to a 3% gain.
Nordstrom, Inc. ($JWN):
Shares of $JWN rose roughly 10% Tuesday morning after news broke that the department store retailer was looking to go private. According to the report, the retailer's founding family is working with Morgan Stanley and investment bank Centerview Partners to determine if private equity firms have interest in a deal. It should be noted that Morgan Stanley declined to comment on the matter. Reuter's noted that a deal might not happen though, and cited that the company had previously looked to go private back in 2018 but was unable to do so as the effort "fizzled out". Nordstrom has struggled in the market for quite some time now and is down roughly 70% since 2018. The company has struggled to drive sales in a highly competitive retail landscape where a large swath of consumers have been squeezed by inflation, and exercise increased caution when spending money on discretionary goods, especially high-priced discretionary goods, which is a large portion of Nordstrom's inventory. Just this month, company leadership missed on earnings and have a pessimistic outlook for sales in the current year of 2024. The company said it expects revenue to decline by roughly 1% to 2%.
Micron Technology, Inc. ($MU):
Shares of $MU soared roughly 15% during the morning session on Thursday after the release of the company's latest earnings report in the post-market session from the previous day. The company, which designs, develops, manufactures, and sells memory and storage products worldwide, said it benefitted from the recent AI boom. The company reported EPS (earnings per share) of $0.42 vs. analyst expectations of a loss of $0.25 per share, and reported revenue of $5.82B vs. expectations of $5.35B. The company also reported a net income of $793 million for the most recent quarter compared to a net loss of $2.3B during the same period for the previous year. For the upcoming quarter, the company issued optimistic guidance and said that they expect revenue to rise to $6.6B, beating analyst expectations of $6.2B. Company CEO, Sanjay Mehrotra said, "We believe Micron is one of the biggest beneficiaries in the semiconductor industry of the multi-year opportunity enabled by AI." According to Ashley Capoot, of CNBC, "While NVIDIA has grabbed much of the spotlight for its graphics processing units that run AI, companies like Micron benefit by providing the memory and storage for those systems. The company is up more than 100% since the start of 2023.
Reddit, Inc. ($RDDT):
Reddit, a forum website that organizes digital communities based on specific interests by allowing users to engage in conversations, sharing experiences, submitting links, and uploading images and videos entered the market yesterday and set their IPO (initial public offering) price at $34 per share. Trading of the company began yesterday afternoon and started off with a bang, rising more than 45% in that same day. However, as of Friday morning, share prices have fallen to roughly $45. This was the first IPO of a major social media company since Pinterest ($PINS) went public in 2019. It's IPO price had the company valued at $6.5B, significantly less than its private valuation in 2021 of $10B. Reddit's annual sales for 2023 rose 20% to $804 million, compared to $666.7 million for the prior year. The company reported a net loss of $90.8 million last year, down from its net loss the prior year of $158.6 million. Based on its revenue over the past four quarters, Reddit's market cap at IPO gave it a price-to-sales ratio of roughly 8. To give you some perspective, Google ratio is 6.1, Meta's ratio is 9.7, Pinterest is 7.5, and Snapchat is 3.9. The company also listed X, Discord, Wikipedia, and Twitch as competitors in its prospectus. Reddit was founded in 2005 by Alexis Ohanian and current CEO, Steve Huffman. The company is betting that data licensing could become a major source of revenue. Google has entered into a partnership with Reddit, allowing the company to obtain increased access to Reddit data to train AI models and improve its products. OpenAI CEO, Sam Altman is one of Reddit's largest shareholders, holding $400 million worth of shares at IPO. Altman was also a member of the company's board from 2015 to 2022.
Canoo, Inc. ($GOEV):
Kicking off our small-cap highlights of the week, we'll begin with up-and-coming hopeful in the EV manufacturing space, Canoo, Inc. ($GOEV). Shares of Canoo soared more than 70% during the morning session alone on Monday. The rise in share price came after news broke that the EV manufacturer had its Oklahoma City facility designated as a Foreign Trade Zone by the United States Department of Commerce. The company believes this designation will accelerate their "Made in America" manufacturing strategy, improve unit profitability, and enable a faster path to breakeven for the company. The company's Oklahoma City facility currently employs more than 100 employees. Having the designation as an FTZ (Foreign Trade Zone) should significantly enhance profitability by lowering vehicle costs up to 5% on parts imported from the rest of the world. Currently, Canoo, Inc. sources more than 90% of its parts from the United States and allied nations. In terms of making domestic sales more profitable, the FTZ designation improves working capital for the company by millions of dollars by deferring customs, duties, and tariffs related to imports from the time of port-of-entry of the parts until the vehicle is delivered to its customers. Additionally, Canoo anticipates cost savings and benefits from the FTZ designation through a simplified customs process, a streamlined supply chain, and overall enhancements to its site security. Company CEO, Tony Aquila, said regarding the designation, "This FTZ will generate economic growth, American jobs, and have a long-term permanent financial benefit to working capital and cost of materials." Shares of $GOEV were trading higher than $4 per share as of Friday morning.
TruGolf Holdings, Inc. ($TRUG):
Shares of $TRUG rose by more than 75% during the morning session alone on Wednesday. The rise in share price came after news broke that the company, a developer and seller of indoor golf simulators for residential and commercial markets in the United States, had announced it partnered with mlSpatial, an AI and machine learning engineering firm. TruGolf said the collaboration aims to enhance the 9-axis spin accuracy for the company's new APOGEE launch monitor. The company's Chief Growth Officer, Brenner Adams, said about the news, "The collaboration with mlSpatial marks an exciting chapter in TruGolf's journey towards perfection in launch monitor accuracy...By leveraging AI technology, we are empowering players to enjoy indoor golfing like never before, with enhanced accuracy, ease of use, and immersive gameplay.". The company believes this partnership will help strengthen their position in the golf simulation market, which is currently valued at $1.31B, but is expected to reach $3.41B by the end of 2030. Shares of $TRUG were trading at roughly $1.60 per share as of Friday morning.
Yield10 Bioscience, Inc. ($YTEN):
Shares of $YTEN soared more than 125% during the market session on Thursday. This came after news broke that the agricultural bioscience company, announced that the their "Camelina" varieties developed using genetic engineering to produce omega-3 fatty acids are not subject to regulations under 7 CFR part 340, and may be grown and bred in the United States. The markets for omega-3 fatty acids include aquafeed used for salmon and trout farming, pet feed, baby formula, and pharmaceutical products. Most omega-3 fatty acids are produced from ocean-caught fish. Production constraints and supply volatility of traditional fish oil sources are creating gaps in supply chains and driving the growing demand for new sources of omega-3. The company's Chief Science Officer, Kristi Snell Ph.D., said regarding the news, "This regulatory milestone represents a critical step for enabling the ramp-up of Camelina planting to commercial scale in the U.S. for producing omega-3 oil for key markets including aquafeed and human nutrition.".
Lightspeed Financial Services Group LLC is not affiliated with these third-party market commentators/educators or service providers. Data, information, and material (“Content”) are provided for informational and educational purposes only. This content neither is, nor should be construed as an offer, solicitation, or recommendation to buy or sell any securities or contracts. Any investment decisions made by the user through the use of such content are solely based on the user's independent analysis taking into consideration your financial circumstances, investment objectives, and risk tolerance. Lightspeed Financial Services Group LLC does not endorse, offer or recommend any of the services or commentary provided by any of the market commentators/educators or service providers, and any information used to execute any trading strategies are solely based on the independent analysis of the user.
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Resources:
$SPY:
https://www.cnn.com/2024/03/20/economy/what-to-expect-from-the-fed-meeting/index.html
$AAPL:
https://www.cnbc.com/2024/03/21/doj-sues-apple-over-iphone-monopoly.html
$NKE:
https://www.investopedia.com/nike-fy2024-q3-earnings-8613010
$FDX:
$LULU:
https://www.cnbc.com/2024/03/21/lululemon-lulu-earnings-q4-2023.html
$ASO:
https://finance.yahoo.com/news/academy-sports-shares-dip-despite-153912536.html
$JWN:
https://www.cnbc.com/2024/03/19/nordstrom-reportedly-trying-to-go-private.html
$MU:
https://finance.yahoo.com/quote/MU/profile/
$RDDT:
https://www.cnbc.com/2024/03/21/reddit-ipo-rddt-starts-trading-on-nyse.html
https://finance.yahoo.com/quote/RDDT/profile/
$GOEV:
https://finance.yahoo.com/news/canoo-oklahoma-city-manufacturing-facility-100000353.html
$TRUG:
https://ir.trugolf.com/press-releases/
$YTEN:
https://finance.yahoo.com/news/usda-aphis-determines-yield10-bioscience-122900857.html
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