Consumer Discretionary

Airbnb Reports ‘Tough’ Q2 Results Amid Slower Demand, Increased Marketing Expenses, RBC Says

/ / Consumer Discretionary /

Airbnb’s (ABNB) Q2 earnings performance was “tough” due to slower demand and increased marketing expenses, RBC Capital Markets said in a note Wednesday. “We believe the company is facing a textbook multiple compression situation driven by higher marketing spend into slowing demand,” RBC said in the note. Airbnb on Tuesday posted Q2 earnings of $0.86 per share on revenue of $2.75 billion. Analysts polled by Capital IQ expected EPS of $0.91 on revenue of $2.74 billion. Management’s focus on “product cycle opportunities as a way to reignite growth was constructive” and a significant opportunity could exist, RBC said. However, the “marketing to counter deceleration” tactic led to a lowering of estimates, the brokerage said. RBC cut its price target on Airbnb’s stock to $120 from $150 and maintained sector perform rating. Airbnb shares were down by nearly 13% in recent trading.

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Delta’s ‘Willful Misconduct’ Claim Against CrowdStrike Over Tech Outage Difficult to Prove, Wedbush Says

/ / Consumer Discretionary /

Delta Air Lines’ (DAL) claim that CrowdStrike (CRWD) engaged in “gross negligence” and “willful misconduct” related to the July global tech outage would be difficult to prove, Wedbush Securities said in a Friday client note. CrowdStrike’s legal counsel, Michael Carlinsky, said in a July 29 letter to David Boies, who is representing Delta, that any liability by CrowdStrike is contractually capped at an amount in the single-digit millions. Boies rejected that cap in a Thursday letter. “The contract does not cap liability or damages for gross negligence or willful misconduct,” according to Boies’ letter. Proving an entity engaged in gross negligence and willful misconduct has a high bar, according to Wedbush, citing discussions with legal experts. “That said, the situation remains fluid,” analysts led by Taz Koujalgi wrote in the note. Wedbush has an outperform rating on CrowdStrike’s stock with a 12-month price target of $315.

Delta’s ‘Willful Misconduct’ Claim Against CrowdStrike Over Tech Outage Difficult to Prove, Wedbush Says Read Post »

Walmart Likely to Post In-line Q2 Earnings, US Comps, Morgan Stanley Says

/ / Consumer Discretionary /

Walmart (WMT) is expected to report in-line Q2 earnings per share and US comparable sales despite a weak consumer/retail backdrop and moderating expectations for the company, Morgan Stanley said in an earnings preview Thursday. The firm said it does not see any risk to Walmart’s valuation “even with an in-line quarter” as long as it keeps a consistent market share compared with peers and relative to Amazon.com (AMZN), and growth of its US earnings before interest and taxes exceeds sales growth driven by “fast-growing higher margin alternative revenue.” Alternative profits, including digital media, 3P marketplace, and membership growth alongside supply chain savings, are expected to drive US margin expansion in Q2, according to the note. International growth will fall behind Q1 due to fewer holiday contributions, the firm said. “Given slow July retail data, the risks of a consumer slowdown rising and an upcoming election in [H2], we think retaining

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Delta Air Says It’ll Take $380 Million ‘Direct’ Revenue Hit From CrowdStrike Outage

/ / Consumer Discretionary /

Airline expects total costs of at least $500 million Delta Air Lines Inc. late Thursday detailed the half-billion-dollar price tag it has put on flight cancellations and other problems caused by last month’s CrowdStrike Holdings Inc. (CRWD) software outage. Delta (DAL) said in a filing that it will see a “direct” revenue impact of around $380 million in the third quarter due to the incident, mostly related to refunds for cancelled flights and to providing customer compensation in cash and miles. Its fuel expenses were lowered by some $50 million as a result of those canceled flights, Delta said. Delta had to cancel about 7,000 flights as it ran into problems with reservations and crew scheduling. The airline chalked up another $170 million in non-fuel costs, mostly related to customer-expense reimbursements and crew-related expenses, it said. Total costs will reach at least $500 million, the airline said in the filing,

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Amazon’s Long-Term Prospects Outshine Short-Term Pain

/ / Consumer Discretionary /

Amazon sinks 10% after mixed 2Q results, lower North American segment margin and modestly weaker-than-expected advertising growth, but Wedbush analysts say they’d be buyers. The long-term thesis of the company is unchanged, they say. Amazon’s revenue mix is shifting toward higher-margin Amazon Web Services and advertising is structural and should contribute billions of dollars to incremental profit each year, the analysts say. That shift in business mix should combine with ongoing cost efficiencies in the core retail business to sustain operating margin expansion, they say.

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Amazon’s Margin Growth May Have to Take a Breather

/ / Consumer Discretionary /

The timing of several elements of Amazon’s forward guidance are conspiring to slow the upward trajectory of its margin expansion, Benchmark analyst Daniel Kurnos says in a research note. Management has pointed out several near-term headwinds, including a drop in the useful-life estimate tailwinds for AWS servers, an investment in the buildout of AWS, and incremental investments in a subsidiary’s Project Kuiper mission to get thousands of satellites off the ground in 4Q, the analyst says. The resulting downward margin pressure in the next couple quarters may blunt some prior momentum and put a sharper focus on revenu at a time when the macro environment looks unstable, Kurnos says. Shares slide 10% to $165.63.

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Amazon.com’s Q2 Results Fell Short of Expectations; AI, AWS Trends on Rise, BofA Says

/ / Consumer Discretionary /

Amazon.com (AMZN) reported “mixed” Q2 results versus higher expectations as retail margins failed to exceed by as much as expected, advertising growth slowed, the Amazon Web Services backlog declined and the revenue outlook for retail was “soft,” BofA Securities said in a note Friday. For Q2, the company reported revenue slightly below expectations. Retail revenues fell short due to lower sales per unit, but margins were better than expected due to improved efficiency. Amazon Web Services growth was 19%, surpassing the 17% forecast, and AWS earned $9.3 billion in profit with a 36% margin, higher than the 32% estimate, the analysts said. The midpoint of the company’s Q3 revenue forecast is $154 billion to 158.5 billion, however, Amazon typically exceeds its guidance, so if profits hit the high end of the range, it will grow quarter-over-quarter despite margin pressure from Prime Day and added retail capacity, which is a positive

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Domino’s Pizza Q2 Earnings, Revenue Increases

/ / Consumer Discretionary /

Domino’s Pizza (DPZ) reported fiscal Q2 earnings Thursday of $4.03 per diluted share, up from $3.08 a year earlier. Analysts polled by Capital IQ expected $3.68 per share. Revenue for the quarter ended June 16 was $1.1 billion, compared with $1.02 billion a year earlier. Analysts surveyed by Capital IQ expected $1.1 billion. The pizza chain’s US same-store sales grew 4.8% in fiscal Q2, while international same-store sales, excluding foreign currency impact, grew 2.1%. The company also said it expects to miss its 2024 goal of more than 925 net international stores by 175 to 275 stores due to challenges faced by its master franchisee, Domino’s Pizza Enterprises. Domino’s also suspended its guidance of more than 1,100 global net stores until the full impact of the franchisee’s situation is understood, the company said. Shares of the company were down more than 14% in recent premarket activity.

Domino’s Pizza Q2 Earnings, Revenue Increases Read Post »

Domino’s Pizza Takes On Value Wars

/ / Consumer Discretionary /

Value wars have broken out at McDonald’s, Burger King and other U.S. chains offering discounts on meals to try and lure customers back, but Domino’s Pizza thinks its approach to everyday value “breaks through the sea of sameness.” The world’s largest pizza chain says in a 2Q call that a loyalty program delivering rewards more quickly is paying off with consumers seeking deals, as are promotions through Uber Eats. Domino’s reported a U.S. same-store sales increase of 4.8% for 2Q, and many analysts were hoping the company would report a bigger lift in domestic sales. Domino’s sinks 10% in early trading.

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Domino’s Expects To Fall Short Of International Store Growth Goal

/ / Consumer Discretionary /

Domino’s Pizza expects to fall 175 to 275 stores below its 2024 goal of adding 925+ new stores internationally, primarily because of challenges in both openings and closings faced by one of its master franchisees. The franchisee, Domino’s Pizza Enterprises, is partnering closely with Domino’s to work through the process. Domino’s says it will have more updates once it can get more visibility into the effect these challenges will have on net store growth numbers. For now though, the company says it is temporarily suspending guidance for 1,100+ global net stores until the full effect of DPE’s store opens and closures on international net store growth are known. In the U.S., the company still expects to add 175+ net stores annually for 2024 to 2028. Domino’s falls 12% in premarket trading.

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Domino’s Pizza Continues to Grow Sales as Peers Struggle

/ / Consumer Discretionary /

Domino’s Pizza’s grew revenue by 7.1% in the second quarter even as other restaurant chains struggled. The pizza chain also posted earnings early Thursday that beat Wall Street forecasts because of one-time gains. For the three months ended in June, the company grew earnings by 30.8% from a year ago to $4.03 per share. Analysts polled by FactSet had expected $3.68. Total revenue came at $1.1 billion, slightly below analyst expectations. The earnings gain was primarily due to a change in pretax unrealized gains and losses associated with the company’s investment in DPC Dash, its exclusive franchisee in the China region, according to Domino’s. “For the second straight quarter we drove U.S. comp performance in the healthiest way possible, through profitable order count growth,” said CEO Russell Weiner in a statement, noting that the firm has seen positive order counts in both its delivery and carryout businesses across all income

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Nike’s Corporate Plan Step in Right Direction, but Challenges Mount

/ / Consumer Discretionary /

Nike has named company veteran Thomas Clarke as a senior adviser to CEO John Donahoe, and John Hoke as president of innovation, according to Bloomberg. But there remains an ample amount of wood to chop for this executive team, Jefferies analysts say in a research note. This is a step in the right direction for the sneaker and apparel company, but it will most likely continue to face headwinds as it works to control its current product assortment and wholesale partnerships. This should lead to a pressured topline performance amid increased competition and softer customer reception to new product, the analysts add. Jefferies cuts its target price to $80 from $90 previously. Shares fall 0.2% to $73.28

Nike’s Corporate Plan Step in Right Direction, but Challenges Mount Read Post »

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