Consumer Discretionary

Lululemon Athletica’s Fiscal Q1 US Sales Will Surprise to Upside, Trigger Stock Rerating Off Lows, Morgan Stanley Says

/ / Consumer Discretionary /

Lululemon Athletica’s (LULU) fiscal Q1 US sales likely grew at a high single-digit rate, which will surprise to the upside and is a potential catalyst for stock valuation rerating higher, Morgan Stanley said in a report Wednesday. The focus is expected to be on the company’s US sales when it releases its quarterly results on June 5, with a revenue-driven earnings per share growth upside and a fiscal 2024 EPS guidance raise in the cards, the firm said. “While our conversations suggest investors anticipate a US sales result as low as [roughly flat year on year], our high frequency demand/sales data argues an outcome as high as [low double digit-low-teens percentage] isn’t out of the question,” it said. “In a base case, we assume a more conservative [high single-digit percentage] US growth rate, and believe this result would not only surprise to the upside, but also deter the bear thesis […]

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American Airlines Stock Falls After Slashing Second-Quarter Outlook; Chief Commercial Officer to Leave in June

/ / Consumer Discretionary /

American Airlines (AAL) shares dropped early Wednesday after lowering its outlook for the second quarter, while the air carrier said its chief commercial officer will depart next month. The company now expects per-share adjusted earnings to be in a range of $1 to $1.15 for the ongoing three-month period, down from its prior guidance for $1.15 to $1.45, it said in a late Tuesday filing with the Securities and Exchange Commission. The consensus on Capital IQ is for normalized EPS of $1.21. The stock fell more than 6% in recent premarket activity. Total revenue per available seat mile, which is commonly used in the airline industry to measure efficiency, is now pegged to decline by roughly 5% to 6% on a yearly basis. The carrier previously forecast the metric to be down about 1% to 3% in the second quarter. Cost per available seat mile, excluding fuel, is set to

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American Airlines Revenue Challenged by Low-Cost Rivals

/ / Consumer Discretionary /

American Airlines has lowered guidance for the current quarter, and the carrier’s revenue challenges are probably going to persist past the summer given how many low- and ultra-low-cost rivals are now popping up at American’s top hubs, Seaport analyst David McKenzie says in a research note. Spirit Airlines and Frontier Airlines are shifting growth to Dallas Fort-Worth and Charlotte, American’s top two hubs, and pricing is starting to soften industrywide, the analyst says. “In short, AAL’s plans for high-single-digit growth this summer are running into challenges and proving premature,” he says, downgrading the stock to neutral. Shares fall 15% to $11.45.

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American Airlines Makes Changes, Cuts Guidance

/ / Consumer Discretionary /

American Airlines is one of the most mentioned companies in the U.S. across all news items in the past 12 hours, according to Factiva data. The airline carrier cut its second-quarter adjusted profit forecast to $1 to $1.15 a share, down from a previous range of $1.15 to $1.45 a share. Also, American said it would part ways with Vasu Raja, chief commercial officer. Raja was the executive behind Americans pivot away from selling tickets through agencies and prioritizing direct sales via the airlines app and website. The moves helped American cut expenses but cost the airline some market share among lucrative corporate travelers. Dow Jones & Co. owns Factiva.

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Airbnb’s Upside Potential Offers Attractive Buying Opportunity, Wedbush Says

/ / Consumer Discretionary /

Airbnb’s (ABNB) upside potential following a conservative second-quarter guidance makes the stock an attractive buying opportunity amid recent underperformance, Wedbush Securities said in a note on Tuesday. The brokerage upgraded the stock to outperform from neutral and increased its price target to $165 from $160. Shares of Airbnb were up 2% in Tuesday trade. The stock has declined 8.5% since the vacation rental company’s first-quarter earnings report earlier this month, compared with gains reported by the Nasdaq and Booking Holdings (BKNG), according to Wedbush. “We think investors should take advantage of this period of relative weakness and see potential upside to near-term estimates following disappointing (second-quarter) guidance that we view as conservative given positive travel data points” so far in the quarter, a group of analysts including Scott Devitt said. Travel demand appears resilient through the near term, according to Devitt. Recent industry commentary has indicated healthy demand for the

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Airbnb Keeps Leading Position Amid Strong Travel Demand, Wedbush Says in Upgrade

/ / Consumer Discretionary /

Airbnb’s (ABNB) stock price declined recently, but it’s a good time to buy because travel demand is strong and the company continues to hold a leading competitive position in the alternative accommodation segment, Wedbush said in a note Tuesday. “We think investors should take advantage of this period of relative weakness and see potential upside to near-term estimates following disappointing [Q2] guidance that we view as conservative given positive travel data points thus far in [Q2],” Wedbush said, adding that the company’s long-term growth potential remains strong, with promising opportunities as it expands beyond its core business, Wedbush added. Near-term travel demand looks strong, boosted by events like the Paris Olympics from July 26 to Aug. 11, and Euro Cup from June 14 to July 14, according to the note. Positive engagement data and rising alternative accommodation demand suggest potential for Airbnb to exceed Q2 expectations, it added. Wedbush is

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Costco Stock Will Only Look Hotter as Elections Near

/ / Consumer Discretionary /

Costco Wholesale shares are looking very attractive to investors as retail spending remains tight, and that sentiment is probably going to intensify as spending becomes even more volatile heading into election season, UBS analysts say in a research note. “As this takes place, Costco’s share gains will look even more compelling and the stock will sustain its premium valuation,” the analysts say. The market currently has little appetite for market share losers, and Costco is positioned to keep scooping up market share as macroeconomic strains have more consumers seeking out warehouse memberships to maximize their spending power, the analysts say.

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Costco Wholesale’s Fiscal Q3 Results to Highlight Strong Business Model, UBS Says

/ / Consumer Discretionary /

Costco Wholesale’s (COST) upcoming fiscal Q3 financial results are expected to emphasize the strength of its warehouse club business model, UBS Securities said in a note. The firm noted that Costco has consistently increased foot traffic by mid-single digits regardless of the macroeconomic backdrop. “With such strong and consistent growth in footsteps, [Costco] offers exactly what the market is looking for right now, given that retail investors have very little appetite to be exposed to market share losers and are increasingly favoring market share winners,” UBS said in its note Monday. UBS said new member growth, increasing traffic and new store openings likely helped the company grow its net sales by 8%, while earnings per share are estimated at $3.75, above the $3.71 consensus, for fiscal Q3, the firm added. Costco is scheduled to release fiscal Q3 results Thursday. “We believe [Costco] can continue to appeal to a cash strapped

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McDonald’s Struggles With Lowest Sales Growth Since 2020, Sluggish Trends to Continue in Q2, BofA Says

/ / Consumer Discretionary /

McDonald’s (MCD) saw its lowest quarterly same-store sales growth in Q1 since H1 of 2020 and real-time spending data indicate the slow trend will continue in Q2, BofA Securities said in a note Tuesday. The company has been facing declining customer traffic since Q3 2023 and is now lagging peers like Burger King and Wendy’s (WEN), highlighting issues with difficult comparisons and missed execution, BofA said. McDonald’s $5 combo deal aims to address the lack of a national value menu, but overall prices also need to moderate as the company’s cumulative price increase of 20% since 2022 surpasses both Burger King and Wendy’s, the analysts said. BofA said it sees the $5 combo as an urgent move and a temporary measure before introducing a more permanent value offer. The firm lowered the price objective on McDonald’s stock to $288 from $302 and reiterated its neutral rating.

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Nike Now Tracking Toward Fiscal Fourth-Quarter Revenue Growth, RBC Says

/ / Consumer Discretionary /

Nike (NKE) is now positioned for slight fiscal fourth-quarter revenue growth while its fiscal 2025 guidance may imply a back-half acceleration in sales, RBC Capital Markets said Friday. The brokerage is guiding for sales of $13.01 billion, implying growth of 1% on a reported basis and 2% at constant currencies. That’s up from RBC’s prior sales estimate of $12.53 billion, which implied a decline from the $12.83 billion Nike reported the year earlier. The average analyst estimate in a Capital IQ survey is for $12.91 billion. Direct-to-consumer sales are expected to rise 1% in constant currency terms to $5.67 billion while wholesale revenue is seen climbing 3% to $7.21 billion, according to the report. Wholesale should benefit from a “significant easing” of year-over-year comparisons, according to RBC analyst Piral Dadhani. For fiscal 2024, RBC is forecasting revenue of $51.76 billion, up from its prior view of $51.28 billion and above

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Nike’s Underperformance Linked to Earnings Downgrades, Future Strategy Crucial, RBC Says

/ / Consumer Discretionary /

Nike’s (NKE) stock has underperformed peers due to earnings downgrades and lower valuations, and relies on a return to positive revenue growth, which is not expected until early 2025, RBC Capital Markets said in an earnings preview Friday. The firm said Nike’s current valuation is more attractive and will remain stable until management reveals the company’s future product plans and strategies. Further details of product range transition, including timing, new products and category strategy, will be important, according to RBC. RBC said it expects revenue to grow 1% to $13 billion and diluted earnings per share of $0.72 for fiscal Q4, the results of which are scheduled for release in late June. For fiscal year 2024, RBC said it now expects a 1% revenue growth because of foreign exchange translation. For fiscal year 2025 organic revenue guidance, RBC said it lowered its estimate to 2% growth from 4%. “Nike’s de-rating

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