Catalysts anchors Brad Smith and Alexandra Canal bring investors into the first full trading hour of the day, breaking down a variety of economic data and top trending stocks.
US pending home sales fell 5.5% month-over-month in July against expectations of a 0.2% growth, according to the National Association of Realtors (NAR). In addition, contract signings declined in all four US regions in the month.
Buy now, pay later service Affirm Holdings (AFRM) shares skyrocketed by over 30% on Thursday after topping fiscal fourth quarter revenue estimates and posting narrower-than-expected losses per share.
Nutanix (NTNX) CEO Rajiv Ramaswami comes onto the program to discuss the cloud company’s latest earnings beat and its plans to become “the company” for running generative AI applications on.
Shares of Birkenstock (BIRK) fell on Thursday despite showing strong sales growth compared to the previous year. Stifel managing director and equity research analyst Jim Duffy joins the show to break down the sandal maker’s recent performance — along with a variety of other premier retail brands — and how they can operate amongst a discerning consumer.
For more expert insight and the latest market action, click here.
This post was written by Nicholas Jacobino
Video Transcript
Welcome to Catalyst everyone.
I’m Brad Smith alongside Alexandra Canal.
We are 30 minutes into the trading day.
We’re watching Three Catalysts today.
The investor reaction to invidious results, possible rotation out of tech and consumer spending first.
Great is no longer good enough for video investors.
The company topping estimates and raising guidance once again, but we expectations just too high of a hurdle for the company to cli will dive into that next and and video seems to be the only one feeling the pain right now.
Stocks are higher after fresh data showed the economy grew at a faster pace than expected in the second quarter.
But with video under pressure, can the rally hold or will investors rotate out of tech names and into value things plus of the consumer is still spending but they are being more choosy and some retailers are taking a hit because of it.
We dive into what the health of the consumer means for the economy and the markets.
But first, we have some breaking pending home sales, pending home sales falling 5.5% a month over month.
And economists were expecting a 2/10 of a percent rise for the month here.
Some additional data here and color on this according to the Nar National Association of Realtors, chief economist Lawrence Yun, good friend of the show here, sales recovery did not occur in midsummer.
The positive impact of job growth and higher inventory could not overcome affordability and some degree of wait and see related to the upcoming US presidential election here.
Some additional just context on this as we think about where the regions were really operating here.
All four regions of the US posted monthly losses and transactions year over year, the northeast actually rose while the Midwest, the South and the West registered declines in this most recent reading.
A lot of potential home buyers here clear, waiting to see what the Federal Reserve is going to do when it comes to interest rates.
There is a cut that is expected to come in September, we could see increase cutting throughout the end of the year.
Obviously, whatever the FED does with interest rates that’s going to flow through through mortgage rates and an impact some of this home buying activity.
Also the inventory levels that something that we consistently heard from, experts that inventory, you know, the supply has just been very tight right now, especially with those home buyers that were locked into those ultra low interest rates.
They don’t want to go anywhere at this point.
So just something that we’re going to have to continue to track to see if we can eventually see a rebound in housing.
Absolutely turning now to the big story of the day here in video, the stock still under pressure reversing some of those earlier losses.
But is this just a blip for NVIDIA or are there cracks showing in the A I space?
Here, here’s what we’ve heard from analysts so far on this report.
These are very good results for NVIDIA and they’re very good results for the cottage industry that have has developed around data center construction.
What it’s not that good of a news for is the rest of the technology complex.
A I has taken the oxygen out of the room for a lot of software companies.
NVIDIA had a great report.
The valuation is stretched.
We do believe we will see uh NVIDIA trade lower A and, and we plan to pounce.
So I would say by our message has always been by on the dips and that continues to be my message for more.
We have Andrew Chang, he is the technology director at S and P Global Ratings here.
Andrew, you heard what some analysts are already saying in reaction to this report, we heard from company executives on the call last night.
I wanna get your read through.
Yeah, I at S MP we felt that this was a very strong second quarter, uh it met and exceeded our expectations um especially the data center computer revenue, which is essentially GP us up 100 and 62%.
Your reader.
So massive growth there.
But uh I, I guess it fell a bit short on the third quarter guy.
Uh 32.5 billion is strong, but I think the street whisper numbers were more north of 33 perhaps even 34 billion.
So a bit shy on that front.
Uh at the same time, uh what I was most focused on was the Blackwell progress and that was the main concern going into earnings.
And I think Jensen put that to rest.
Uh Blackwell assembling now uh started volume production.
Shipping in the fourth quarter will have billions of revenues this fiscal year.
All positive sign.
Uh Meanwhile, hopper demand is still very strong.
Uh so the so called delay in Blackwell, I think sets up the company nicely frankly for calendar 25 and, and you have a aa negative credit rating on in video for those not familiar with the definitions of these credit ratings.
What does that mean?
And why did you sign that one to in video?
Sure.
Uh First of all, the credit rating is aa minus with a stable outlook.
Uh We upgraded the company back in April and to put it plainly, uh NVIDIA is the highest rated semiconductor company globally along with TS MC in Taiwan and Samsung Electronics in Korea.
So the highest rating from the semi perspective, um we really like the tech lead that the company has and a strong product execution thus far.
Um And, and, and we view NVIDIA, unlike other sign of companies as a platform company, meaning it’s not only a GP U company, but it has a full rack scale solution along with software which no one has and frankly, a D’s acquisition or announced acquisition last week, speaks to this unique strategy that NVIDIA has fostered and frankly has dominated over the past five years or so.
So from a credit perspective, high profitability, high cash flow, really strong balance sheet, we’ll continue to hear from tech execs that there’s a far greater risk of under investing in A I right now.
But at what point, if we didn’t see the return on these investments actually come to fruition, would it start to impact some of their credit ratings knowing that there’s so much money that would have been going towards these expenditures and out the door essentially to bring this to life?
Yeah, I think, I think that’s the main risk from the credit perspective, uh which is the potential for short term swings in demand despite the long term massive growth potential.
So this is not going to be the uh and up into the right every quarter.
Um hyper stealers, as you mentioned, they can’t spend fast enough.
But if the ro I on their investments aren’t up to par, you could easily see uh Amazon’s and Microsoft’s pausing purchases for multiple quarters.
They’ve done that before with general servers.
So they can clearly do that uh with A I servers and when that day comes, um you know, numbers will be uh I mean, I can’t predict when it could not for at least a couple of quarters.
But over the, over the next, let’s say calendar 25 I could see a scenario where uh the hyperscale spending uh declines meaningfully and that could cause some panic among investors.
But we have to remember that this is a long term growth story that we should not be so fixated on short term swings.
So it’s possible to see that deceleration of growth at least from the hyper scale or spending on these products in 2025.
I know you said it could come in the next few quarters there.
But will there be signs that investors can look for that that is approaching?
Yeah, I mean, the the easiest sign you can look for is obviously all the commentaries from Amazon Google, Microsoft, et cetera and the commentaries have been nothing but strong.
Uh They’re collectively uh from a hyperscale Capex perspective, probably growing 50 60% in calendar 24.
We don’t have a good read on what that will be in 25 but we’re fairly certain that’ll be growing next year.
I would say growing 10% 15% is a good likely scenario and probably priced into the market if you start seeing commentaries regarding, hey, uh we’re starting to slow down or our, our, our cap spend next quarter will be flat versus the prior quarter.
That should be sort of a signal to investors that yes, uh Microsoft is now concerned about, about the return on investment on all these A I servers you mentioned at the top of our discussion here that NVIDIA has one of if not the strongest credit rating among some of the A I and tech companies on the street right now.
Where are you hearing companies talk about A I though and saying, ok, they may be talking about it but their credit rating doesn’t suggest that they’re actually in good standing enough to be able to pull off some of these massive investments.
Yeah, I, I would say the overall software sector which I know has underperformed this year are talking about A I, but we’re not seeing tangible revenues yet, perhaps with the exception of, let’s say Microsoft or Service now, but there are many companies out there.
Uh, you know, um, Adobe uh sales force, uh these companies again, semi uh software spending has been somewhat of a, a lagging, uh lagging behind uh a hardware spending.
But our, our view is that the A I hardware spending will over time translate into better spending on the software side and on any and also on the it services side.
So ratings impact for software has been limited thus far.
But I could see, uh maybe, uh you know, 2 to 4 quarters from now where software spending does pick up on the I side.
Andrew Chang, the technology director at S and P Global Ratings.
Thank you so much for your time today.
Great.
Thank you.
The Department of Labor is out with new initial jobless claims this morning showing a seasonally adjusted 231,000 new applications for the week ending August 24th.
That’s down slightly from the 233,000 claims the week before meantime, employers added 818,000 fewer jobs in the 12 months ending March 2024 than were originally reported.
So how much stock should investors put into these numbers as a catalyst for future fed rate decisions here to discuss is David Miller, he is had a fund co founder, Chief investment officer and senior portfolio manager.
Lots of catalyst going on in the show very appropriate for today.
But you know, you just heard that we see jobless claims coming in roughly flat upward revisions to GDP.
How much, how can you trust this state at this point?
Well, I guess that revision that we had in the BLS data taking the number uh down by 800,000 in new jobs created.
Uh who really implies that you can’t trust the data uh to some extent.
Although I think some of those revisions were more based on undocumented immigration and jobs surrounding those uh that are hard to get to you know, what is the real number for new jobs created?
So I think they’re reasonably accurate, you know, I think that revision was kind of overstated relative to, to the reality.
But, you know, we’re, we’re in a pretty healthy economy.
So you mentioned something key and this came up in our last hour as well.
How much is supply actually skewing the unemployment rate at this juncture because of immigration, because more citizens coming into the US and, and adding to the broader kind of labor force, possible participation rate.
It’s a good question.
So, I mean, look, you’re, you’re definitely adding to the supply, but there was always plenty of demand, especially for uh lower income uh labor which uh you know, a lot of Americans have been here for a long time, aren’t willing to uh do for, for lower rates.
Uh So I think it’s pretty healthy for the economy.
I think it’s contributing to GDP growth.
I think it’s helping, you know, with this GDP print that, that we saw today.
Uh So, so I think you’re seeing kind of more of a balancing effect.
There was really a need for that incremental labor and you just said the economy is in a pretty healthy state, but you do see weak GDP growth in the fourth quarter between 1 to 1.5%.
What’s the main driver behind that weak forecast?
And how do you see that playing out into 2025?
Sure.
So, I mean, I, I think it’s just the lagging effects of higher interest rates and, you know, those higher borrowing costs, uh, for, for companies, I think when you see rates start to come down, you know, feds expected to cut in September, there’ll probably be another cut after that.
I think you can probably get back to like, uh, 2 3% uh type of GDP growth uh thereafter.
And I think we can see more of a matching effect uh between what the Fed was hoping for, you know, 2% type uh inflation combined with, you know, 2 to 3% GDP growth.
What is your portfolio playbook look like going into the Fed’s cutting cycle?
Sure.
So if you look at uh where we’re positioned now, we’re, we’re long bonds.
Uh We’re, we’re also long equities.
Both of those uh should benefit uh from, from the cutting cycle.
Uh We’re playing calendar spreads when it comes to commodities.
So we’re not betting on the direction of commodity prices, but we’re trying to earn the storage costs associated with those.
And then we’re also trying to pick up uh the differentials between yields in different countries.
So, you know, if you can borrow in Switzerland or close to zero in London, uh the US or Australia, close to five, those could be a pretty good trades as well.
So we’re trying to play it as diversified as we can as to, you know, where we’re picking up our, our return streams.
And speaking of the feds easing cycle, you said in your notes here, that a big question for the fed is not whether they will cut interest rates by 25 basis points or 50 basis points.
But what the path and actions will be after that?
Are you referring to the pace of cuts and what’s your base case there?
Sure.
So.
Well, I mean, I think they’re, you know, going to cut in September that, that’s almost a given, they’re probably gonna cut at least one more time after that.
It’s much more data dependent as to whether they’ll keep cutting after those first two cuts.
But I think those first two are kind of in the bag and then, you know, we’ll probably be in a bit of an equilibrium thereafter.
Rates won’t be, you know, higher, higher for longer, but they’ll still be a little bit higher.
They’re not going back to Zerp uh anytime soon.
And so with that in mind, I mean, some of the top sectors that are really catching your attention right now.
I mean, we know that technology when EZ A is money or money policies become a little bit easier, technology stands to benefit, what are some of the other areas of the market that might catch your attention at this juncture?
So I just really like all the really high margin uh monopolistic type businesses that have really strong tail winds.
So obviously, uh technology is a great example of that.
You look at these companies like Microsoft and uh Google and NVIDIA and companies that don’t want to be called monopolies, by the way.
Right.
Right.
The companies that don’t want to be called monopolies but are whether they, they, I’m sure they like it, they just don’t want to be called monopolies.
Uh But then, you know, you look at the Visas and Mastercards of the world, if you combine inflation uh with more money coming through the system combined with, you know, taking a little cut off the top of every transaction.
Uh Th those are phenomenal businesses uh as well.
If you look at media companies, you know, you certainly also see uh some inflation in ad rates and that can flow nicely down to the bottom line.
I, I think it’s just tough for these companies that are in more uh cyclical commodity type businesses, but any of these companies that, you know, have e bit margins of 30% plus and natural growth, those types of numbers compound really nicely over the long run and we have an election coming up in November, any election risks to the market that investors should be aware of.
Sure.
Well, I mean, you have the one really big one which is, you know, what are they going to do with corporate tax rates?
And, you know, Trump’s made it pretty clear he wants to keep the, the tax cuts that he’s made, uh, you know, when he was in office and, uh, the, the Dems have made it pretty clear that they want to go back to, to higher taxes.
Uh, and then you have some things that, uh, the Dems have talked about.
Uh, but I think are a little bit more political than things that are likely to pass.
Like, uh, you know, God forbid if they had a tax on unearned capital gains, uh or unrealized capital gains, I mean, that would certainly be uh catastrophic to the market, but I don’t think anything like that would actually pass even if they would, you know, carry that as a policy on their agenda.
And of course, it comes down to what the makeup in Congress looks like as well here.
Certainly because the market certainly do love a little bit of log jam in DC.
David.
Thanks so much for taking the time here with us.
Thank you, David Miller, Catalyst Funds, co founder, chief investment officer and senior portfolio manager.
Everyone coming up, we’ve got much more of your market’s action.
Straight ahead.
Stay tuned.
You’re watching Catalysts.
More retail names are out this morning giving us an inside look at the state of the consumer here.
Dollar General and Birkenstock moving lower.
Both citing a discerning consumer who is being more selective with their purchases while best buy has investors optimistic that it reached the point of stabilization here with more.
We’ve got Yahoo finances.
Brooke the palma.
Hey, hey, good morning to you both.
This continues to be a story of a very choosy consumer one that’s really looking to buy somewhere and then not somewhere else and to kick things off.
We saw that with Dollar General.
What we saw in their report is a core customer who feels financially constrained.
We saw positive traffic trends overall at Dollar General, but that was partially offset by negative ticket.
We’re seeing consumers there flock to groceries but they’re not necessarily spending on bigger ticket items like home, home, seasonal and apparel.
They actually lower their fiscal 2024 outlook.
Same source, they are expected to grow between 1 to 1 point 6% down from the previously expected range of 2 to 2.7 and moving along to a specialty I guess consumer facing company Birkenstock, you have that shoe company saying that the demand is there but consumers are being increasingly selective and more intentional with their spending and with that demand here in the America as they call it, they did see growth decelerate to f up 15%.
But that’s down from the previous quarter when growth was up 21% and moving along to best buy.
This has been a attempt at a turnaround story here, investors are excited about that stabilization.
They did see their slightest same source sales decline since Q four of 2022 same source sales were down 2.3% and what they’re seeing there is a consumer who is value oriented and innovation, replacement oriented.
That’s what Ceo Cory Barry said on the call.
They now expect their earnings outlook to come in between $6.10 to $6.35.
That’s higher from their previous guidance.
And they do anticipate that better than expected profitability to really boost in the back half of the year.
But something to watch out here for as consumers look to replace the goods that they got during the pandemic.
A I will play a part in that they’re really thinking about.
Ok. Do I want to wait for the next A I I to come into concept to really replace?
And so when I, when young and spoke to the CEO this morning, she said that the actual co pilot plus new concept came out during the quarter.
So it was a relatively small percent of a lift.
But as these new A I technology comes on board, it will then create a halo effect.
You’ll see price points sort of play out.
Maybe people won’t flock to the newest highest cost item, but maybe they’ll go to that second tier item that has that technology but not as high as the new one perhaps.
So A I potential tail end for best Buy, but really, you just laid out a very mixed picture here, right?
So for you, you’ve been covering this space closely, what’s the take away here as we wrap up earning season about, you know, we keep saying the state of the consumer, I mean, is it just a bifurcated environment that we’re dealing with?
What’s the takeaway for you?
Yeah, I think we continue to chat about this is you see a consumer going to Wal Mart, but then again, investors wanted more from Abercrombie and Fitch.
And so it’s a consumer who being very discerning with their dollars being really choosy.
And now really looking for value, you saw target cut prices on those household item goods that tended to work.
You see consumers still focus on grocery but also willing to splurge if they think that the cost is worth it.
Um Maybe that specialty item good.
And so it’ll be interesting to see how this plays out.
Of course, I if interest rates come down, if you know, mortgage rates change, we we heard from Best Buy that appliances continues to do poorly for them.
But should the whole housing market improve then that could be a potential boost for them.
We’ll see how the consumer can hold up to the end of the year.
Brook De Palma.
Thank you so much for that breakdown.
And in legal news, Yelp has filed an antitrust lawsuit against search engine giant Google claiming the company has a monopoly on local search and local search ads.
This coming just weeks after a federal judge ruled Google violated and I trust laws and monopolized the search market.
So the timing here I think is what stands out here, especially for a company like Yelp, that is now willing to speak up, willing to fight back against a big giant like Google and what they say are anti competitive practices.
It is David versus Goliath situation and it’s something that I feel like we’ve been seeing more of recently, even in different industries, I think back to FO TV and how it’s fighting against venue sports, which is that joint sports venture between Disney Warner Brothers, Discovery and Fox, a judge, they are granting a preliminary injunction, delaying the roll out of that service.
So it seems like we’re in this environment and we’ll see what happens with the election coming up too where antitrust is just being looked at again more closely.
Yeah, for Yelp’s case here, I mean, they’re trying to make sure that number one at the top of this, they’re looking for more consumer choice, fair competition, more helpful Google search experience.
And in this filing of the antitrust lawsuit, their case is, is essentially about this walled garden that Google has created and trying to keep consumers into saying that they abused the monopoly in general search to dominate local search here and being the dominant gatekeeper.
And that they allege in general search with approximately 90% share of the market here.
And one of the things that they call out within this filing as well as actually FTC economist findings, 32% of Google’s so called reviews are not actually reviews at all and really just consist of star ratings with no text knowing that users find reviews without text to be less helpful.
Google burying those ratings below its text reviews for a given business yet still includes them in the overall review count to inflate the credibility with consumers looking for trustworthy ratings here.
And so that is the entire business for you possession, you know, add in some photos and some pictures here and there.
I I mean, look if the food does not look good, I’m not gonna go there.
I need the photo with the stars and the text for reviews for myself.
Full picture here.
Also our final trending ticker here that we’re tracking on the day payment network affirm surging after crushing Wall Street estimates here, Ceo Max Levchin calling it a killer quarter, announcing an expected top line growth of 33% for fiscal 2025.
And the leadership change with Michael Linford becoming chief operating office, sir.
Plus Rob o’hare joining S CFO.
We’ve had an opportunity to speak with all of those execs here.
So we’ll see what more the company can prove to Wall Street within the broader outlook that they’ve provided post earnings here coming up.
Lieutenant shares soaring after its fourth quarter earnings, we dive into the report with the company’s CEO.
There you see him on the screen.
Rajiv Ramaswami here.
On catalyst.
Next Rajeev.
How you doing?
Doing well, I didn’t mean I didn’t mean to interrupt your drink.
Take a sip, take a sip of water.
No worries.
I’m done.
Yeah.
Gotta get the golden pipes lubricated, you know.
Absolutely.
How have you been?
Great to be with you all on?
Good to be with you too.
Awesome.
Hi, Ra, I’m Ali.
I’m filling in.
Nice to meet you.
Hi, nice to meet you.
I’m filling in for Shaw in today.
Yeah, great, great to meet you guys.
We’re excited for this chat.
Absolutely.
Looking forward to it.
Yeah, Cher is doing well today.
Yes.
Yes, indeed.
I mean, what happens when you have a beat in the race?
So I’m happy about it.
That’s the name of the game now beat and raise greater.
We, we’ll dive in in a hot second, Rajeev.
Sure.
All right.
Thanks.
Shares of cloud computing company.
New Tennis are surging today up about 19% of its fourth quarter earnings and full year guidance, top analysts expectations.
Wall Street is responding with a slew of price target hikes.
Raymond James Barclay is Morgan Stanley and more.
Now seeing up for new stock, we have Rama Swami the CEO of New on for more this morning.
Congratulations on the quarter and the stock clearly doing well.
Investors liking what they’re seeing.
You guys also reported your first full year of positive gap operating income.
What do you credit for that?
Yeah, I mean, we had a strong finish to the year overall and the last quarter as well.
Uh Our A RR grew 22% of free cash flow generation was 5 98 million, which is almost three times last year.
And uh overall, uh we hit a rule of 40 score of 43.
Now, the reason for all of these are that fundamentally, we have a platform uh that is great for running critical applications for customers around the world.
Uh Companies are looking to us in a difficult macro environment for helping them reduce their TCO enable them to transform themselves and we feel good about the year here in terms of the progress we were able to achieve.
The platform is great for large customers such as Wells Fargo investing in our platform as a key partner and customer.
Uh We’ve made significant innovation in terms of our platform, our modern applications and and generative A I and more recently, significant go to market leverage through partners, a big partners such as Cisco and more recently Dell.
So all of this is contributing uh helped us uh beat our uh uh guided estimates for the year and and for the quarter and also came in uh about consensus for our next full fiscal year guide.
What type of uptick have you seen in generative A I applications that are relying on New 10 X right now to, to make sure that they can continue to have solid user experience or, or just uh putting into market, what is expected of some of these applications very early days.
Yes, indeed, it is.
As you said, Brad, very early days for companies actually using generative A I in production and a lot of important things to be figured out.
First, they need a simple platform to run this.
They need to be able to run this in a secure way, maintain their IP and also run it wherever their data is located and data these days is located everywhere.
Some of it is a public cloud, but a lot of sensitive enterprise data is sitting inside data center and their edges.
And so we provide a platform that helps all of this run in a very simple way.
Now, companies I would say are still in the early stages of deploying generative A I, they’re looking at use cases such as document search and analysis, co ploting for their developers, customer support, enhanced fraud detection.
And what I will say is that it’s very broad based.
Uh We see companies across financial services, healthcare, public sector defense.
All now thinking about how they can actually use generative A I in a secure private way and partnerships.
A clear stand out in your fiscal 2024 results, new 10 signing new or enhanced agreements with Cisco in video Dell.
Can you explain the significance of those partnerships and how that ultimately helps customers?
All of these are great market leaders and we are thrilled to be able to partner with them.
Uh in terms of Cisco and Dell, both of them are actually taking our solutions to market.
Cisco is reselling our product.
They have been for most of the last year.
Dell is our most recent uh edition and they are also now in the market with our product.
And as you can imagine, they have a huge presence in the industry in terms of their footprint and they are a market leader and it’s great that they are now taking our products to market.
It is a sign that we are truly the platform uh for companies to run their application.
And that’s why we’re seeing all these folks partner with us and within media specifically, it’s around really making enterprise A I available for companies to use in a secure way.
Do you want new tenants to be thought of as an A I company?
What, what is the profile that you would like investors to have in their mind as they’re figuring out exactly what that growth profile and trajectory that you’ve talked about on the call yesterday?
What that really looks like going forward?
Yeah, I think the the one liner here would be that we want to be the leading platform for companies to run all their applications and manage their data anywhere.
And if you look at that set of applications, perhaps the most modern of all applications, there is generative A I and so we want to be the platform for companies to run generative A I applications as well, but all applications in the enterprise and one of your prior competitors VM Ware recently purchased by Broadcom.
Are you open to M and A opportunities either as a buyer or a seller?
And do you expect in the software space at large?
We’re going to see more M and A pick up.
Yeah.
First of all, I think in terms of uh us acquiring companies, I mean, for us technology tins we do as a matter of course, we did some this last year as well.
Uh We acquired a company called D two IQ which gave us the foundation for modern applications here.
Uh Now, in terms of us as a stand alone company, as you can see here, we’re doing pretty well in the market and we continue to grow.
We continue to be a key partner to some very large companies like Wells Fargo and others in the in the market.
So we are on a great path in terms of an organic path and continue to drive growth, continue to drive sustainable profitable growth both on the top line durably and also continue to drive bottom line leverage.
So we are in a pretty happy place right now as a company and continuing to focus on our customers and uh driving innovation, I mean multi cloud infrastructure is not cheap or j when you think about the the deal cycle that you’re seeing right now.
Uh Some of the themes that we’ve heard over the course of this earnings season from other enterprise software or cloud companies has been elongated deal cycles or more deal scrutiny.
What is that looking like for new tenants right now?
Indeed, Brad, you hit the nail on the head there.
We’ve been talking about this for the last several quarters.
Uh We have seen some elongation in deep cycles and that’s partly because companies want to be more clear about what they’re getting in return for their investments and companies are not deprioritizing.
In fact, they are prioritizing their technology investments and, but what they’re looking for is strong return on investment and therefore the approval levels are further up in the food chain and that’s where we shine.
I mean, once they deploy our platform and they replace legacy platforms, they companies generally get a huge amount of total cost of ownership benefits.
Uh And that’s what’s playing out right now for us in the market.
It sounds like a lot more travel for you Rajeev to, to really make sure that you could seal the deal on some of these major partnerships here.
We appreciate you taking some time here with us to discuss the earnings as always, Rajeev, Ramaswamy, CEO of Newton X.
Thanks.
Thank you, Brad and Ali.
Absolutely Ali, I’ll toss things on over to you.
Hey, we want to take a look at this day in history.
On August 29th, 1997 Netflix was born, Read Hastings and Mark Randolph founded the company after coming up with the idea to sell and rent DVD S online and mailing them to customers homes while car pooling together to work by September.
1999 the company introduced the monthly subscription model allowing them to charge a flat fee for unlimited rentals without late fee, shipping and handling these or poor title rental fees.
Then as DVD sales exploded in the early two thousands, Netflix began to see massive growth which spurred the company to go public.
Netflix listed on the NASDAQ in September 2002 for just 15 bucks a share.
And after helping guide the company through the process, Mark Randolph, he stepped away selling his shares in 2003, 4 years later though.
And 10 years after its initial inception, Netflix embarked on its streaming journey with just 1000 titles.
At the time, subscribers of the DVD rental business were able to stream for no extra cost by 2010.
The company completely pivoted strategy to focus on streaming at the time.
CEO Reed Hastings said three years ago, we were a DVD by mail company that offered some streaming.
We are now a streaming company which also offers DVD by mail.
Netflix deals to stream films from Paramount Lions Gate MGM and acquired the rights to massive hit shows like breaking bad soon after it began to create original content with popular shows like House of Cards and Orange is the New Black.
Since then, we seen Netflix grow quarter after quarter and today it has nearly 280 billion global subscribers.
It’s growing.
It’s a support and shares are currently hovering around all time highs.
If we look at the max chart for Netflix, the stock is up over 69,000% from that $15 share price in 2002.
So if you invested $1000 in Netflix in 2002 and just left it there, you’d have about $690,000 today.
So, happy birthday, Netflix, my couch is certainly happy that you were born and you know, I Netflix is just one of those companies that we constantly talk about on this show and we have seen a significant out performance recently, especially as the company looks to further its presence in ad supported along with live sports.
All right.
Happy birthday, Netflix.
Thanks so much.
Appreciate it guys coming up, Lulu Lemon will report their earnings after the bell today.
What should you expect to hear from the athletic gear brand with the wishbone that is next.
Now, taking a look at shares of Lululemon, they’re up right now by about 1.2% the athletic wear company going to be reporting its Q two earnings after the bell today.
Investors are gonna be looking for further guidance here as cautious consumers and more competition have led to shares falling almost 50% year to date for more.
Let’s welcome in Jim Duffy.
Good friend of the show.
He’s Steve Fs, managing director of Equity Research and analyst for sports and lifestyle brands.
Jim, great to have you back on here.
So let’s, I mean, let’s tee it up here for Lou Lemon.
We’ve already been looking across the retail environment and trying to figure out what a more cost conscious consumer and a consumer that’s looking for.
Value Act will spell out for this company.
What’s your estimation?
What’s your anticipation here?
Yeah.
Hey, Brad.
Uh thanks for having me back on the program.
Um Super interesting quarter that Lou Lemon is about to report.
Uh As you mentioned, the stock down about 50% year to date.
They’ve had a product which they had to pull from the shelves, a product line called Breeze Through which creates a hole in the merchandizing assortment.
So we think it’s broadly expected that there’s going to be a reset to the outlook.
We however want to buy the stock ahead of that.
This is the best economic model in my coverage universe.
We are believers in the global trend of uh greater concern for health wellness, fitness, self actualization.
Lululemon uniquely positioned to lead that trend.
The prevailing narrative here is that Lululemon is done growing in uh the US market uh due to competition some other factors, but we don’t believe that’s the case.
Uh And we think this is a good opportunity in shares.
So you’re very bullish.
It sounds like on Lulu now personally, I’m, I’m a customer.
I have gone and I purchased products from Lulu.
However, I always know how expensive their brands are and how you can often find very similar types of clothing and other cheaper retailers out there.
So when we talk about this, this cost conscious consumer that Brad was just alluding to is the pricing too high for Lulu is, is a competitive environment, too great at this point.
And one of the biggest risks in your view.
Well, first off, I’m glad to hear you’re a customer, Alexandra.
Uh the pricing like that’s been a concern on Lulu and competition has been a concern on Lulu for as long as I’ve been following the stock.
The key for Lulu and the key to their success is innovation and the quality of the product which distinguishes it from alternatives in the marketplace.
And we believe they still have that what we see from consumers is a willingness to pay up for quality, a willingness to pay up for innovation and a willingness to pay up for newness and where Lulu may be lacking some now uh is on the Newness front, but that’s a fixable problem.
We expect they can’t address that in the merchandise assortment in coming quarters.
It’s really interesting that that’s come up for a few different brands here.
Not just for Lululemon.
Newness is what I’m talking about here, that’s come up for one of their biggest competitors as well.
Nike, they came out with their earnings and of course, we’ve been, uh tracking Nat Steel recently released their back to school sneaker survey.
What can you tell us about Nike’s market share in that department here is we’re gonna be tracking Lou Lemon up against what we had already heard earlier, uh, and kind of precursor to the earnings season if you will from Nike.
Yes.
Uh Last week, my team and I conducted the steel annual back to school survey.
Uh We have over 20 years of data, uh tracking trends between different product categories and different brands.
And uh the good news is that marketplace is generally healthy.
There’s a lot of newness uh in the assortment that consumers are responding to.
Uh our checks are showing traffic healthy and inventory balances at retail healthy.
Um The bad news for Nike, however, is there are some other brands that are bringing newness and getting momentum.
Um Nike’s share of popularity fell from 88% last year to 61% this year.
Uh So quite a steep decline on a year to year basis, they are of course still the most popular brand in the assortment, but we saw strong gains from new balance and also strong gains from Adidas for new balance.
They’re 16% of most popular shoe references is the highest that uh that brand has ever registered.
And Jim, you currently have a whole rating on Nike, but you did lower your price target to $79 a share below where shares are currently trading.
What’s the pivot here for Nike to regain that dominance?
Yeah, it’s a great question.
Um The reason for adjusting the price target lower was based on these checks and the momentum we’re seeing from competitors.
We think a turnaround is going to take longer to execute than is currently reflected in the consensus estimates the path to recovery here.
Um Nunes has to play an important role in that.
Uh What has made Nike great for years is uh innovating and designing exciting new product and then having compelling marketing that gets consumers excited to engage with that product.
And we think they’ve had a bit of an air pocket in that uh execution in the near term, right from uh sneakers here to clogs.
That is, that’s what we’re focused in on here as well here, closing out with Birkenstock.
I mean, Ali, you’ve been tracking this one, you were talking about this one this morning, right?
Yeah, shares are down about 14% right now.
So Jim, you know, their profits fell short of estimates last quarter.
What can they do to get back on track?
Is it new innovation?
Uh What, what, what’s the go forward strategy?
Sure.
I don’t necessarily believe they’re off track.
The stock was priced for pers for perfection.
Um And expectations were high going into the quarter myself and others expected them to over deliver on the quarter and raise the guidance.
Uh Indeed, they did over deliver on the EBITA line, but they did see some deceleration on a sequential basis relative to the fiscal second quarter.
Uh All indicators in the marketplace are that appetite for the product remains strong.
Uh inventories in the marketplace are well managed.
Uh I think it’s just a temporary setback in the stock.
So all of these things considered, I mean, we’ve been talking a lot about everything from ath leisure to what is a little bit and far more leisure in Birkenstock, at least who is best positioned right now.
From your perspective, Jim to navigate a very uncertain consumer environment, even as we get into the back half of the year where we’ve heard from Foot Locker that there could be some heavy promotional pressure that needs to come forward.
Yeah.
Um Well, I, we keep bringing up the subject of newness and innovation, but it’s those brands that are really bringing compelling and exciting new product that’s driving consumer engagement.
As we think about the consumer macro backdrop.
You know, the consumer is becoming more discerning.
We do you think they still have good capacity to spend in discretionary categories?
They’re just being more selective about where they’re allocating those dollars.
Those companies uh like an on running, um like uh uh Birkenstock that are bringing uh excitement to the marketplace.
We think they can continue to drive growth.
Jim Duffy, who is Steel’s managing director, equity research analyst for sports and lifestyle brands.
Thank you so much for joining us.
Thank you all your markets action.
Straight ahead.
Stay tuned.
You’re watching Catalysts.
We’re taking a closer look at some trending stories on Yahoo Finance first, we gotta get to this one starting with bad news for the messaging app.
Telegram, the company’s Ceo Pavel Dav is being charged in France, prosecutors accusing him of enabling organized criminals to carry out unlawful transactions on the platform here.
And we do know that this was issued Wednesday just after um well, coming into custody police there.
But you have to remember the platform itself.
Telegram has been used because of its encryption and that is actually unfortunately, making it a little bit more of especially internationally here a use case for cyber crime and that’s where there has been more of the allegations that have led to these preliminary charges as well.
Yeah, Telegram did post a statement on the platform saying in part quote, it is absurd to claim that a platform or its owner a responsible for abuse of that platform.
Almost a billion users globally use telegram as a means of communication and as a source of vital information.
They’re waiting for a prompt resolution of the situation.
Meanwhile, French authorities noted almost total lack of response from telegram to legal requests here.
So I think when we think about the future of this company, this is definitely a significant overhang, I mean, the moderation on the platform minimal at best.
Um And even as you think about where uh the response is going to be from the company, of course, it’s gonna double down on what its platform is used for.
But I think more broadly here, Europe, we’ve got to remember has some of the strictest internet use laws in the world.
I mean, uh of course, you could put and bring uh CCP back into conversation there.
But all those things considered to be interesting where these proceedings play out how they play out.
And if there’s anything from a settlement all the way back to now, a severe criminal charge for as well, we’ll see exactly what those proceedings.
Something we’ll be watching closely here.
Another story that we’re keeping an eye on is open A I it’s reportedly a new talks for a new funding round that would value the company at $100 billion.
That’s according to the Wall Street Journal, thrive capital is reportedly planning to lead the round with a billion dollar investment.
And of course, Microsoft is expected to put more money in here.
Now, Microsoft invested 10 billion into the start up in January 2023.
It previously had invested 13 billion into the firm since 2019.
Now, we have Microsoft holding about a 49% stake in this company.
So, you know, this would be the largest injection of capital that open A I would see.
And when you think about the valuation numbers here, the fact that we could be at over $100 billion valuation for this company.
That’s, that’s a crazy number to wrap your mind around it.
Hectic status.
We could be looking at the fifth Hectic Horn company, you know, as of November 2023 there were really only four Bytedance and Groups spacex Sheen.
And so we were talking about what IP OS would look like for those names.
We could potentially have 1/5 hectic corn for those who are really interested in mythical creatures related to the stock market or just the uh broader business landscape as a whole here.
Uh So this $100 billion market or, or actually funding valuation, uh if they were to come public in any near term, which I mean, they seem very well capitalized, doesn’t seem like they’ll need to go public and they’ve already got some very uh great publicly traded companies that are involved within this funding over the years as well.
Microsoft, of course, being one of the namesakes there and they were privately fund valued at around 86 billion according to the journal.
So significant jump up with this funding around 100%.
Well, NVIDIA, we’re also trying that here today and video earnings have become like a Thursday night football game with some investors throwing, watch parties at bars here.
And I mean, this is what’s next.
A lot of people who wanna know what to do with their money perhaps watching, yeah, tell your local bar to just fire up.
Yahoo Finance.
Why not?
Yeah, they had C NBC Bloomberg.
They had all these different financial outlets out there.
Uh, and people were chatting about their investment positions.
There was this Roy, when the earnings report dropped, it just speaks to the enthusiasm that the A I boom has really driven across the sector here.
And, and I think this is something that we’re going to see more and more of over the years.
Well, I mean, look, we better, we better because I mean, more gen Z millennials, we’ve got access to content at our fingertips and everybody does out there.
But as long as you’re kind of consuming and taking in some of the video realm, well, I mean, you don’t have to purchase a Sunday ticket to watch this.
So, you know, just tell him to throw on Yahoo Finance and we’re good to go.
They’re on Yahoo Finance for Get NFL season.
It’s, it’s earning season baby.
That’s, that’s the new NFL.
But, but Fly Eagles, fly.
Fly Eagles Fly.
Yeah, Brad this pump there because we’re both there coming up.
Wealth is next.
It’s dedicated to your personal financial needs.
Brad Smith right over here.
How you, for the next hour?
Stay tuned.
Wait, that’s the end of catalyst already.
Alrighty.
Article Source
https://ca.finance.yahoo.com/video/us-pending-home-sales-nutanix-172622296.html
