Nvidia Results Sizzle Bulls & Bears
Stocks snapped their recent winning streak, with Nvidia’s lackluster earnings report unable to help bulls get back on track. Let’s see what else you missed.
Today’s issue covers Nvidia reporting mixed results, a retailer earnings roundup, and regulators’ crackdown on crypto continuing.
Here’s today’s heat map:
4 of 11 sectors closed green. Healthcare (+0.59%) led, & technology (-0.82%) lagged.
U.S. existing home sales fell 4.1% MoM and 14.6% YoY in October, with the median sale price of $391,800 rising 3.4% since last year. First-time homebuyers remain at a historically low 28% of all purchases, as low inventory, high rates, and high prices keep the market stagnant.
Markets didn’t react much to the October 31-November 1 FOMC Minutes, which showed all members agreed to “proceed carefully” with future interest rate decisions. Meanwhile, the October Chicago Fed activity index fell again as manufacturing activity remains mixed.
Symbotic shares jumped 40% after the warehouse automation company reported a 98% YoY revenue increase and significant margin improvements.
Software provider Palantir Technologies pulled back 7% after the $414 million, seven-year U.K. NHS contract it won was worth less than anticipated.
Other symbols active on the streams:
$BKKT(+18.98%), $FSR (-14.89%), $DLO (-13.24%)
Here are the closing prices:
| S&P 500 | 4,538 | -0.20% |
| Nasdaq | 14,200 | -0.59% |
| Russell 2000 | 1,783 | -1.32% |
| Dow Jones | 35,088 | -0.18% |
Regulators’ Crypto Crackdown Continues
We don’t typically touch on crypto news, but several events from today were worth noting.
The first significant development is that Binance’s Changpeng Zhao is reportedly sacrificing himself to save the company. The Wall Street Journalindicated that the founder and CEO plans to step down and plead guilty to violating criminal U.S. anti-money-laundering laws. Binance will also plead guilty to a criminal charge and pay $4.3b in fines to settle civil allegations.
The deal would end long-running investigations into Binance but also allow Zhao to retain his majority ownership in the world’s largest cryptocurrency exchange. Additionally, Binance would be placed under federal monitor supervision to oversee its exit from U.S. markets.
It is important to note this potential settlement wouldn’t resolve its issues with the U.S. SEC, which sued both parties for allegedly violating U.S. investor-protection laws. However, it did resolve a lawsuit by the Commodity Futures Trading Commission (CFTC) earlier this year, alleging Binance and Zhao deliberately circumvented regulations to allow U.S. customers to use its services.
Meanwhile, the U.S. crypto exchange Kraken is the latest Securities and Exchange Commission (SEC) target. The regulator has accused it of operating an unregistered platform and improperly commingling customer funds with its own corporate assets. The suit’s claims are similar to those the SEC has targeted Binance and Coinbase with as it looks to shut the exchanges down.
The news put pressure on Binance Coin as crypto investors assess what the deal means for the exchange’s (and industry’s) future.
Nvidia Fails To Impress
Chipmaker Nvidia’s earnings were definitely this week’s most highly anticipated event. And as always, the market did its best to frustrate both bulls and bears after the report.
The company reported adjusted earnings per share of $4.02 on $18.12 billion in revenues. That topped expectations of $3.37 and $16.18 billion.
As for the breakdown, its data center revenue rose 279% YoY to $14.51 billion. Analysts had expected $12.97 billion. Executives said half the revenue came from cloud infrastructure providers like Amazon, while the other half came from consumer internet entities and large companies.
Meanwhile, its gaming segment’s revenues rose 81% YoY to $2.86 billion, beating the $2.68 billion expected. The professional visualization segment saw 108% YoY growth to $416 million, while its automotive segment rose just 4% YoY to $261 million.
While all of its segments are important, investors primarily focus on its data center business, given its role in supporting future technologies like artificial intelligence (AI).
Founder and CEO Jensen Huang said, “Our strong growth reflects the broad industry platform transition from general-purpose to accelerated computing and generative AI … NVIDIA GPUs, CPUs, networking, AI foundry services, and NVIDIA AI Enterprise software are all growth engines in full-throttle. The era of generative AI is taking off.”
As a result of the era taking off, Nvidia expects $20 billion in fourth-quarter revenue, implying a 231% YoY growth rate.
Despite the solid results and guidance, investors remain concerned about the potential implications of the U.S.’s export restrictions to organizations in China and other countries. Nvidia’s CFO Colette Kress said, “We expect that our sales to these destinations will decline significantly in the fourth quarter of fiscal 2024, though we believe the decline will be more than offset by strong growth in other regions.”
That matches similar commentary from Nvidia and others in the industry. For now, demand for high-tech chips remains so robust that it’s likely to outweigh supply for the foreseeable future. Geopolitical tensions remain a longer-term risk, but there are more than enough buyers for the company’s products in the short term.
As for investors’ initial reaction, the bulls say this report and guidance validate the company’s massive growth potential. However, bears say the stock’s enormous runup since last year and sky-high valuation shows the business’ growth potential is already priced in.
Time will tell who is ultimately right long-term. But for now, only options premium sellers are happy, as $NVDA shares trade essentially flat after the bell.
Retail Earnings Roundup
There were many retailer earnings today, so let’s recap each with one or two lines.
Off-price retailer Burlington Stores saw third-quarter earnings, revenue, and margins top expectations as consumers traded down to cheaper brands. Its guidance was also strong, with executives citing strong “back to school” shopping and a great start to the holiday shopping season this November. $BURL +21%.
Executives of athletic goods retailer Dick’s Sporting Goods said they’re “excited” for the holiday shopping season. A strong “back to school” shopping season drove a third-quarter earnings and revenue beat. It remains cautious of consumer trends but provided an upbeat outlook and guidance for the holiday quarter. $DKS +2.17%.
Home improvement retailer Lowe’s saw weaker-than-expected spending from its do-it-yourself customers drive a third-quarter earnings and revenue miss. The company also reduced its full-year guidance, remaining cautious on consumer spending and the housing market. $LOW -3.12%.
Mall retailer Abercrombie & Fitch posted a 20% jump in sales thanks to a strong “back to school” shopping season and growth at its namesake and Hollister brands. Revenue and earnings both topped expectations, with margins also improving significantly. Executives said they have seen an “encouraging” start to the holiday shopping season. $ANF +2.41%.
American Eagle Outfitters earnings and revenue beat expectations slightly, as did its full-year guidance update. However, its holiday forecast failed to impress investors as the company remains cautious about consumer trends. $AEO -15.80%.
Department store Kohl’s cost-cutting efforts allowed it to beat earnings expectations, but its sales fell short of analyst estimates. It’s struggling to drive any semblance of sales growth and has lowered its 2023 revenue forecast, expecting sales to fall 2.8% to 4% YoY. $KSS -8.57%.
Consumer electronics retailer Best Buy beat earningsexpectations but missed on revenues. Like home improvement retailers, the company is seeing demand moderate as consumers continue to focus discretionary spending on experiences rather than goods. Executives cut their full-year sales guidance, saying they expect shoppers to primarily be driven by holiday promos. $BBY -0.72%.
Mall retailer Guess also failed to impress Wall Street, cutting its revenue and profit outlook amid weaker-than-expected demand. CEO Carlos Alberini said, “We are navigating through an uncertain shopping environment in many parts of the world impacted by geopolitical issues and lower consumer confidence.”$GES -16.00%.
Bullets From The Day:
◀️ Ford to scale back plans for battery plant as EV demand disappoints. The automaker’s decision comes as it deals with consumers’ slower-than-expected shift to electric vehicles and rising labor costs. Ford will cut production capacity at the $3.5 billion plant by roughly 43% to 20 gigawatt hours per year and reduce expected employment from 2,500 to 1,700 jobs. It’s not the first global automaker to pull back its efforts and won’t be the last if current auto market conditions continue. CNBC has more.
👀 Ken Griffin is eyeing the Miami Dolphins and F1 to beef up his sports portfolio. The billionaire hedge fund manager is in talks with Dolphins’ owner Stephen Ross to purchase part of the National Football League (NFL) team and stakes in the Hard Rock Stadium and the F1 Miami Grand Prix. The billionaire real estate developer may use the proceeds to invest in other sports ventures, adding to his holding of soccer commercial rights agency, Relevant Sports Group. More from Yahoo Finance.
🏟️ Las Vegas is looking to dominate sports. Over the weekend, the city closed out its first Formula One Grand Prix in four decades, marking the latest sign of its desire to become the “sports and entertainment capital of the world.” However, with eight more facilities planned or proposed, bringing more sports to the city is expected to bring more headaches, given the significant infrastructure implications. However, the 2018 Supreme Court ruling overturning the ban on national sports betting has unlocked a wave of momentum that will be hard to stop. Axios has more.
💊 Merck to buy Caraway Biotech for $610 million.The pharmaceutical giant is purchasing the Massachusetts-based company, which bills itself as “a leader in the cutting-edge science of activating autophagy, the cellular recycling processes to clear toxic materials and defective cellular components.” The purchase will give Merck access to a significant preclinical pipeline that includes a selection of programs aimed at Parkinson’s disease, among others. More from Fierce Biotech.
❌ Tech CEO’s bid to buy Forbes fails. Luminar founder and CEO Austin Russell’s bid to buy Forbes Global Media Holdings ended after he could not secure the investors needed to close the deal. He announced plans back in May to buy 82% of the company, valuing it at nearly $800 million. However, the deal fell apart after Indian investment firm Sun Group and others didn’t wire their hundreds of millions in committed funds. Although Russell was granted an extension to the November 1st deadline, the new terms were untenable, causing the parties to agree to a contract termination. TechCrunch has more.