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- 👉 The Investing Week Ahead: 8/21/23
👉 The Investing Week Ahead: 8/21/23
"A China slump could trigger an exodus of investors..."
Welcome to your new week.
In yesterday’s post, we discussed the laundry list of worries surrounding China. Over the last week — it’s become clear that numerous conditions are deteriorating.
So who in the United States has the most exposure? Well — Bank of America asked the same thing earlier this year:
Companies like Apple (AAPL), Intel (INTC), Ford (F), and Tesla (TSLA) all have large manufacturing ties to the country.
Others, like Starbucks (SBUX) and Nike (NKE), rely on Chinese consumers.
Tesla, Intel, Nvidia (NVDA), and MGM Resorts (MGM) were also among the 25 S&P 500 companies with the most exposure to China.
“The $18 trillion economy is decelerating, consumers are downbeat, exports are struggling, prices are falling and more than one in five young people are out of work.” — Bloomberg
Key Earnings Announcements:
Snowflake and Dick’s Sporting Goods are in focus.
Monday (8/21): Nordson, Zoom Video
Tuesday (8/22): Baidu, BJ’s, Canadian Solar, Coty, Dick’s Sporting Goods, La-Z-Boy, Lowe’s, Macy’s, Medtronic, Toll Brothers, Urban Outfitters
Wednesday (8/23): Abercrombie & Fitch, Advance Auto Parts, Analog Devices, Autodesk, Bath & Body Works, Dycom, Foot Locker, Kohl’s, Peloton, Nvidia, Splunk, Snowflake, William-Sonoma
Thursday (8/24): Affirm, Burlington, Dollar Tree, Futu Holdings, Gap, Intuit, Marvell, RBC, Nordstrom, Petco, TD Bank, Ulta, Workday
Friday (8/25): N/A
What We’re Watching:
With a market cap of over $48 billion, and revenue expectations of $663 million — Snowflake seems like it’s always (and deservedly) under the gun when earnings roll around. Barclays just cut its price target from $203 to $190 ahead of the event.
During its last report — Snowflake beat on revenue expectations, but missed on earnings per share. Bulls want a big beat, given the market’s increasing lack of confidence in the macro landscape.
Dick’s Sporting Goods is at an interesting inflection point in its history. It’s in the process of shutting down all remaining Field & Stream storefronts — while doubling down on its “House of Sport” locations. These are DKS megastores — that feature interactive spaces like climbing walls, batting cages, golf simulators, and more.
The company plans to have ~12 of these stores fully open by the end of the year — with some current locations in Rochester, NY; Knoxville, TN; and Minnetonka, MN.
“House of Sport will be a significant part of our future growth story” — Dick’s CEO Lauren Hobart
Investor Events / Global Affairs:
Checking in on fast food, and Disney continues taking some serious heat.
Fast Food Landscape
In honor of Chick-fil-A releasing a new chicken sandwich for the first time in almost a decade….. let’s talk fast food.
Chick-fil-A continues to be an absolute anomaly — with nearly $7M of average revenue per restaurant, despite having less storefronts than 10+ major brands.
McDonald’s (MCD) continues to reside in the sweet spot of the fast food landscape — with nearly 15,000 US storefronts, and ~$4M of average revenue per restaurant.
Yum! Brands (YUM) — parent company of KFC, Taco Bell, & Pizza Hut — recently fell short of revenue expectations, but saw KFC same-store sales explode +13% during the last quarter alone. KFC’s biggest market? China — with 5,600+ storefronts (more than we have in the USA).
As food inflation decreases, menu prices may not follow suit:
"If the current level of food basket deflation that happened in Q2 continues ... we should continue to see material upside on the food basket as we go through the balance of the year… This makes a huge difference to profitability of our franchisee. And I think that helps repair some of the pressure that they took last year in their profitability.”
Disney (DIS) Under the Microscope
Disney recently announced that it will be raising the prices of ad-free Disney+ subscriptions to $13.99 per month (a +27% increase) and ad-free Hulu to $17.99 per month (a +20% increase).
These changes will take place beginning in October — and follow a trend of investors becoming unsure that Disney can meaningfully grow over time in the streaming space. As shown above, many analysts believe that Disney+, Hulu, and ESPN+ could be reaching saturation much quicker than the company anticipated.
Not to mention — this summer, Disney World had one of its slowest July 4th holiday weekends of the past decade. While hot weather can be to blame, there’s a palpable sentiment growing that Disney parks are providing less-and-less of a bang for your buck.
Both MarketWatch and the Wall Street Journal have been monitoring the activity of Disney parks — effectively suggesting that you can’t just “raise the prices at parks to solve your other issues.”
Major Economic Events:
Jackson Hole, Wyoming is the most important place in the country this week.
Monday (8/21): N/A
Tuesday (8/22): Existing Home Sales
Wednesday (8/23): New Home Sales, S&P Global Manufacturing PMI (Flash), S&P Global Services PMI (Flash)
Thursday (8/24): Durable Goods, Fed Officials Interviews from the Jackson Hole Economic Symposium
Friday (8/25): Speech by Powell at Jackson Hole, UMich Consumer Sentiment (Final)
What We’re Watching:
Last year’s Jackson Hole conference solidified a downtrend in the market after Powell was more hawkish than anticipated. Will it happen again?
It’s also worth noting — inflation is expected to rise, as some bulls expect rate cuts to come in as soon as a few month’s time.
If that ends up happening — we are officially stuck between a rock and a hard place. It very well could be “higher for longer” with rates.
Events-Driven Winners:
Which stocks moved the most last week.
Our friends at LevelFields scrub through thousands of data points each week to determine how events impact stock prices.
We would have never known about Starboard Value — a reputable hedge fund — taking more than a 5% stake in Bloomin’ Brands (BLMN). The parent of Outback Steakhouse, Carrabba’s, Bonefish Grill, and more has risen by +12% over the last few days off the news.
Be sure to check out LevelFields and at least sign up for their free newsletter!
If you’re starting your investing journey or are interested in buying T-bills yielding 5% or more, consider visiting Public.com.
Disclaimer: This is not financial advice or recommendation for any investment. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.
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