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Happy Sunday, everyone.
Before we begin, here’s three callouts that I believe are worth your while:
1) I’ll be doing a free webinar on Tuesday with Katie Stockton. She’s the brilliant Managing Partner of Fairlead Strategies and is a regular guest on CNBC. She is a technical analysis wizard and we’ll be breaking down the outlook on a few of my favorite stocks. Feel free to sign up for free by clicking here!
2) If you’re looking for a new job and you’re interested in the creator economy / how people make money online — be sure to check out Stan. I was an early investor in the company and have been a long-time user. They are hiring for a lot of roles, so I wanted to share with you all! Click here to check out Stan’s job board!
3) Lastly, we’re still running our HUGE 75% off discount for annual memberships. Click here to sign up!
Portfolio Updates:
No changes to share as it relates to buying / selling within the stock portion of my portfolio. The Fed cutting rates catalyzed a welcomed bump in stock prices, allowing some of my largest “Long Risky” positions to hit new 52-week-highs.
In particular, Monday.com (MNDY) is now trading at $280 / share — the second largest “Long Risky” position. Nothing makes me happier than seeing a well-researched investment thesis come to life. Another name in the portfolio that enjoyed some gains this week was Crowdstrike after their management team reiterated some of their long-term financial targets (36% free cash flow margin by 2029 + $10B in ARR by 2030).
As it related to the cryptocurrency portfolio, I started buying Ethereum again. I have a feel we’re going to experience a bottom in the ETH / BTC pairing for this bull run cycle between now and the end of the year — and as someone who can’t time the market, I’ll be dollar cost averaging into ETH instead.
I plan to accumulate 10s of thousands of dollars worth of ETH between now and the end of Q1 2025.
Week in Review — Too Long, Didn’t Read:
Wall Street doesn’t believe FedEx’s management team, Olive Garden just partnered with Uber, Lennar is having trouble building new communities, BlackRock published a report encouraging investors to diversify their portfolios with Bitcoin, investors loved Nike’s CEO change, Salesforce introduced major updates at the biggest (non-Fed) event of the week, Qualcomm might try to acquire Intel, Jerome Powell cut interest rates by -50 basis points, and retail sales had a surprising (yet small) beat.
Key Earnings Announcements:
Wall Street doesn’t believe FedEx’s management team, Olive Garden just partnered with Uber, and Lennar is having trouble building new communities.
FedEx (FDX)
Key Metrics
Revenue: $21.6 billion, compared to $21.7 billion last year
Operating Income: $1.1 billion, compared to $1.5 billion last year
Profits: $794.0 million, compared to $1.1 billion last year
Earnings Release Callout
“Despite a challenging quarter, we remain focused on transforming our network, improving our efficiency, lowering our cost-to-serve, and enhancing our ability to adapt with speed to evolving market dynamics.
Overall, I remain confident in the valuecreation opportunities ahead as we focus on reducing our structural cost, growing revenue profitably, and leveraging the insights from our vast collection of data as we continue to build the world’s most flexible, efficient and intelligent network.”
My Takeaway
FedEx reported quarterly earnings that were more than 25% below expectations on lower-than-expected operating margins. Consolidated adj. operating income declined -$380M, and their Federal Express segment came in at the lowest level in 18-months — despite having realized over $1.8B in drive-related costs since.
The company’s EPS of $3.60 came in well-below Wall Street’s expectations of $4.85 — catalyzed by a total operating margin of only 5.6% (compared to the 7.6% expected by Wall Street). With that being said, Wall Street now does not believe FedEx will be able to deliver upon the low-end of their EPS guidance ($20.00), and instead lowered their expectations to only $19.00 in earnings per share.
With that being said, management reiterated that their DRIVE initiative should deliver an incremental $2.2B of cost savings during calendar year 2025 — while also catalyzing +$800M in operating income growth.
I have no position in this company, but what management is telling investors and what Wall Street is modeling are two completely difference things. If management is correct, there could be significant upside potential with this company’s stock over the next 18-24 months. If Wall Street is correct, I’d expect the stock price to continue to crab sideways for a few quarters.
I have no position, and don’t plan to open one anytime soon.
Darden Restaurants (DRI)
Key Metrics
Revenue: $2.7 billion, compared to $2.7 billion last year
Operating Income: $269.2 million, an increase of +6% YoY
Profits: $207.2 million, an increase of +6% YoY
Earnings Release Callout
“While we fell short of our expectations for the first quarter, I firmly believe in the strength of our business. I am confident in the actions all our brand teams are taking to address their guests' needs, which do not compromise the long-term health of our business for short-term benefits.”
My Takeaway
Despite Darden Restaurants’ earnings coming in lower-than-expected, the stock rallied +8% on stronger quarter-to-date trends (catalyzed by Olive Garden’s never ending pasta) and optimism that Olive Garden’s launch of “first party” deliver with Uber can provide a tangible life in comparable sales in 2026 (rollout by end of 2025).
On the earnings call, management noted a renewed focus on product innovation across several brands, and service enhancements (opportunity to better accommodate time-strapped customers).
Under the multi-year, “first party” delivery partnership with Uber set to begin rolling out in 2024, customers will be able to order deliver on Olive Garden’s app or website with delivery handled by Uber’s network. Olive Garden will maintain ownership of their customer data, menu pricing, and the cost of delivery will be at $5 + 5% of order size + driver tip.
Wall Street estimates this new channel would provide a lift of mid-single-digit lift to sales over time.
As shown above, DRI stock price trades at 16X forward price-to-earnings — which seems to be priced to perfection after the recent rally. I won’t be a buyer at these levels, but I’ll certainly add this company to my watchlist and consider buying any weakness stock price (if we experience it). It seems like the stock price follows EPS growth pretty closely (the blue line), and it’s obvious where Wall Street expects that to trend toward over the next few years.
Lennar Corp (LEN)
Key Metrics
Revenue: $9.4 billion, an increase of +8% YoY
Operating Income: $1.5 billion, an increase of +4% YoY
Profits: $1.2 billion, an increase of +5% YoY
Earnings Release Callout
“This week, the Fed decreased interest rates which should start to enhance affordability and accelerate the already strong demand for both new and existing homes.
While strong demand, enabled by incentives and mortgage rate buydowns, has driven the new home market over the past two years, we fully expect an even stronger, and more broad-based demand cycle, as rates move lower. Lower rates and controlled inflation will likely boost confidence."
My Takeaway
Lennar’s EPS of $3.90 came in well-above Wall Street’s expectations of $3.60 — while their homebuilding gross margin of 22.5% came in -1.9% below Wall Street’s expectations. This margin compression was caused by a few variables — including an increased amount of “mortgage rate buy downs” as these cost the company -4% of gross margin per home sold.
Despite the margin compression, their homebuilding business segment experienced a $290M beat driven by stronger deliveries — this was before the recent -0.9% drop in mortgage rates over the last few weeks. I’d imagine the recent drop in interest rates will more than offset any future promotional incentives i.e. mortgage rate buy downs.
Additionally, management stated they’ve have trouble opening up new communities in certain markets due to permitting issues and other delays. As a result, Lennar is increasing absorption in currently active communities to offset a delay in replacement communities. Management stated their community count should rise from Q3 to Q4 but did not indicate whether this growth would solve their “gapping out” issue.
The company repurchased $519M (3.4M shares) of company stock during the quarter.
As I don’t plan to purchase shares of Lennar stock directly, I do plan to open a position in the iShares US Home Construction ETF (ITB) over the coming weeks. I’m sure that ETF has substantial exposure to this company.
Investor Events / Global Affairs:
BlackRock published a report encouraging investors to diversify their portfolios with Bitcoin, investors loved Nike’s CEO change, Salesforce introduced major updates at the biggest (non-Fed) event of the week, and Qualcomm might try to acquire Intel.
BlackRock (BLK) Picks Bitcoin to Combat $35 Trillion of American Debt
It took the United States ~200 years to accumulate our first trillion dollars of federal debt — now we’re adding that much every 100 days.
BlackRock — the world’s largest asset manager — is using Bitcoin as a way to counteract the growing debt. This looming financial instability has led to heightened institutional interest in Bitcoin as a hedge.
After the Fed’s 50 basis point interest rate cut, Bitcoin surged above $63,000 — which has helped spark optimism surrounding a “fresh liquidity cycle.” BlackRock views Bitcoin as a “unique diversifier” due to its unique scarcity and core differences when compared to traditional assets. In fact, the iShares Bitcoin Trust (operated by BlackRock) recently overtook Grayscale’s Bitcoin Trust as the largest in the world — with inflows exceeding $21 billion.
Regardless of what happens tomorrow, next week, or next year… it’s clear that BlackRock is “in it for the long-run” with Bitcoin (and digital assets as a whole). We highly encourage you to check out the report linked here.
Bitcoin (BTC) Price Performance, 5-Year Chart, Seeking Alpha
BlackRock (BLK) Stock Performance, 5-Year Chart, Seeking Alpha
"While bitcoin has shown instances of short-term co-movements with equities and other 'risk assets,' over the longer term its fundamental drivers are starkly different, and in many cases inverted, versus most traditional investment assets.”
Nike (NKE) Rallies After CEO Change
Source: LinkedIn
As you can tell from the image above — Nike’s newest leader has been around for quite some time.
Nike CEO John Donahoe is stepping down on October 13, 2024 and will be succeeded by company veteran Elliott Hill — who worked at Nike for 32 years before retiring in 2020.
That’s right folks… this guy went from intern to CEO at one of the most legendary brands known to man.
Donahoe, who took over as CEO in January 2020, will stay on as an advisor until the end of January 2025. Hill’s return comes as Nike faces challenges, including a -25% stock drop this year and a broader restructuring plan. Hill, known for his deep understanding of Nike’s culture, aims to guide the company through its next phase — focusing on innovation and reconnecting with employees.
Nike's stock surged +8% immediately on the news.
Nike (NKE) Stock Performance, 5-Year Chart, Seeking Alpha
“Leadership changes are never easy, they test you, they challenge you, but this transition has been handled with remarkable thoughtfulness and an unwavering commitment to Nike…
Looking forward, I couldn’t be more excited to welcome Elliott back to the team. His experience, understanding of Nike and leadership is exactly what’s needed at this moment. We’ve got a lot of work to do but I’m looking forward to seeing Nike back on its pace.”
Takeaways from the Salesforce (CRM) “Dreamforce” Conference
Nvidia (NVDA) CEO Jensen Huang & Salesforce (CRM) CEO Marc Benioff at Dreamforce 2024. Source: Justin Sullivan / Getty Images
At Dreamforce 2024 — Salesforce introduced several key innovations aimed at enhancing AI-driven solutions:
The Agentforce Partner Network was launched, enabling partners like Accenture and AWS to deliver AI agents.
Salesforce and IBM (IBM) expanded their partnership, bringing pre-built AI agents to improve productivity across industries using Watsonx and Agentforce technologies.
A new collaboration between Salesforce and Google Cloud (GOOG) will allow for custom AI agents integrated with Google Workspace and BigQuery.
Salesforce also unveiled updates to its Data Cloud, enhancing real-time data capabilities, security, and AI-driven personalization.
Slack (owned by Salesforce) advancements include third-party AI agents and enhanced search and collaboration tools, with Agentforce integration coming soon.
Lastly, Salesforce and Nvidia (NVDA) announced a partnership to develop AI-powered avatars for real-time customer and employee interactions.
Salesforce (CRM) Stock Performance, 5-Year Chart, Seeking Alpha
“Ultimately, Benioff envisions one billion AI agents in service by the end of fiscal year 2026.
Salesforce plans to monetize its new tool by charging per conversation, utilizing a consumption-based model. The unwrapping of Agentforce comes as Salesforce aims to get back in the good graces of Wall Street following a stock price drubbing in late May amid a more challenging outlook than expected.”
Qualcomm (QCOM) Approached Intel (INTC) About Takeover
Source: The Verge
Qualcomm recently approached Intel about a potential takeover, with Intel valued at approximately $87 billion. Intel — once the world’s most valuable chip company — has seen its shares plummet -60% this year, sparking interest from Qualcomm.
While no deal is certain, such a transaction would likely face antitrust scrutiny but could be viewed as a boost to the U.S. semiconductor industry. Qualcomm, valued at $185 billion, might sell parts of Intel to facilitate the deal.
BofA analyst, Vivek Arya, published the following pros and cons list over the weekend — we thought we’d share it with you.
Pros:
Greater scale for Qualcomm with $90B now in combined annual sales
Leadership across PC, Mobile, and server CPU
The opportunity to leverage Intel’s large fab footprint for further scale
Cons:
Tough regulatory environment, especially in China as history tells us even small to mid-sized deals take years to close
Intel’s weak financials and large annual cash burn including $53B in debt and large CapEx intensity needed to support their large fab footprint
Qualcomm’s existing relationship with ARM and TSMC make it tough to competing products to market
Intel Corp. (INTC) Stock Performance, 5-Year Chart, Seeking Alpha
Qualcomm Inc. (QCOM) Stock Performance, 5-Year Chart, Seeking Alpha
“Qualcomm had tried to purchase NXP in the past, a deal that was not materialized due to regulatory challenges, and we believe this acquisition could face similar challenges.”
Major Economic Events:
Jerome Powell moved the markets in a MAJOR way and retail sales had a surprising (yet small) beat.
Breaking Down the Fed’s Decision
The Federal Reserve cut interest rates by 50 basis points, lowering its key rate to a range of 4.75%-5% — and marking its first rate reduction since the pandemic.
This aggressive cut signals the Fed’s attempt to strike a balance between cooling inflation and a softening labor market. The decision was supported by vote of 11-1 in the FOMC.
The Fed’s “dot plot” indicates expectations of an additional 50 basis points in cuts by year-end, with another full percentage point decrease projected by 2025. Despite this move, the Fed maintained its quantitative tightening program, reducing its balance sheet to $7.2 trillion.
Chair Jerome Powell emphasized that the Fed aims to restore price stability without triggering significant unemployment increases. Markets reacted with initial volatility, and while the Dow jumped 375 points post-announcement, stocks ultimately ended the day slightly lower. Then Thursday morning rolled around — and the markets RIPPED:
The Fed's decision comes as inflation is expected to hit 2.3% by year-end, with unemployment rising to 4.4%. It’s questionable that the Fed was so eager to drop rates when Jerome Powell consistently said that the “economy is strong” — but we’ll see if this time will truly be different for the markets:
“This is not the beginning of a series of 50 basis point cuts.
The market was thinking to itself, if you go 50, another 50 has a high likelihood. But I think [Powell] really dashed that idea to some extent… It’s not that he thinks that’s not going to happen, it’s that he’s not he’s not pre-committing to that to happen. That is the right call.”
Retail Sales Gave Economists a Positive Surprise
US retail sales unexpectedly rose +0.1% in August — beating estimates of a -0.2% decline — driven by a +1.4% increase in e-commerce sales.
Electronics, clothing, and furniture saw declines, while control-group sales — which exclude volatile categories like autos and gas — rose +0.3% for the fourth straight month.
The control group's +5.7% annualized growth over the last three months is the fastest since August 2023.
Gas station receipts fell due to lower pump prices, while restaurant and bar spending remained flat.
Source: Bloomberg
“The details suggest consumers have grown more frugal, going online to search for deals and discounts on essentials and back-to-school items. With the savings rate falling to 2.9% in July amid a cooling labor market, consumers have little choice but to tighten their budgets — posing the risk of a broader slowdown and arguing for the larger FOMC cut this week.”
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