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- Target Hits The Bullseye
Good Morning! 👋
Happy Tuesday! Let’s see what is moving markets:
👉 Target earnings are in
👉 Apple struggles in China
👉 Spirit and JetBlue merger
TARGET: Earnings Are In
Target reported earnings and revenue for the holiday quarter that exceeded expectations despite predicting continued weak sales. The retailer's stock rose 8% in premarket trading due to improved profits and margins, even though comparable sales dropped for the third straight quarter by 4.4%. Target expects a 3% to 5% fall in comparable sales next quarter and forecasts its full-year 2024 sales to be flat to 2% higher, with adjusted earnings per share between $8.60 and $9.60.
Source: AP
Despite challenges like reduced discretionary spending and backlash from its Pride Month collection, Target noted in-store and website traffic improvements. The rise in profits came from better inventory management and reduced supply chain costs. The retailer has focused on value, launching a new low-priced brand called Dealworthy and promoting budget-friendly holiday offerings. Target's net income increased nearly 58% to $1.38 billion, or $2.98 per share, with a healthier operating income margin than the previous year. Total revenue grew nearly 2% to $30.98 billion in the quarter.
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APPLE: Huge China Concerns
Apple iPhone sales in China dropped by 24% early this year, highlighting concerns over demand for the product. Apple faced tough competition, particularly from budget-friendly brand Vivo, which led to rare discounts on Apple's products. Apple was overtaken by Microsoft in market value and removed from top investment recommendations by Goldman Sachs and Evercore ISI.
Source: WSJ
Assembly partner Hon Hai Precision also saw an 18% sales drop, impacting Apple's revenue, which relies heavily on the iPhone. Huawei's new Mate 60 Pro boosted its market share, further challenging Apple, which saw its market share decrease from 19% to below 16%. Honor Device Co. was the only competitor to report growth in sales.
MERGER: Bad News
JetBlue Airways and Spirit Airlines announced they're canceling their merger after a federal court blocked the deal, citing it would hurt consumers by reducing low-cost travel options.
Source: Investopedia
The decision came after the Justice Department opposed the merger to protect competitive airfares. Following the news, Spirit's stock fell sharply, while JetBlue's shares rose. The merger was initially seen as a way for the airlines to better compete with larger carriers. Now, Spirit will face its financial challenges alone but remains optimistic about its path to profitability.
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