Investing

Everything You Need To Know For The Week Ahead - 9/5

market & industry analysis Sep 05, 2021

 This week we're bringing you all the news you need to know for the upcoming week. This report contains news on the key earnings & economic events. Once the IPO market picks back up soon, we'll be releasing our analysis on that as well. Additionally, we've also included a wrap up of what happened last week!

 

Most Important Companies Reporting Earnings This Week:

Lululemon (LULU), September 8th: 

Last we wrote about LULU, the stock was trading at $331 and today the stock has risen up to ~$388. If you're wondering what our updated stance on the stock is - check it out 👇

  • We are still overweight the company as we believe they are yet another brand dominating the DTC market.

If you haven't read our recent write-ups, there's a strong cohort of retail stocks who are outperforming their peers this year due to their shifting business models from traditional brick & mortar sales to DTC (direct-to-consumer) sales. Companies like Dick's Sporting Goods, Nike, PVH Corp and LULU are benefiting greatly from this change.

While we believe the trend will continue, their upcoming earnings report should help shed more light on their business model. The key numbers we're looking at are:

  • Revenue by channel, geography and category
  • Same Store Sales (SSS)
  • Revenue & Margin Growth
If LULU is able to beat expectations on these numbers as well as provide solid forward looking guidance then we believe the stock will continue to trend higher over the next 6+ months.

We are looking very closely into this and will update you next week with the outcome and significance of the event!

 

Gamestop (GME), September 8th:

Is there any stock more controversial than Gamestop? The original meme stock is up over 1,000% this year after three strong runs. While Gamestop's financials are far from strong, the stock has clearly proven (with help from Wall Street Bets) that it can explode upwards at any point. Could this earnings event be the catalyst needed for a 4th move upwards?

We'd be lying to you if we said that we or anyone else had a clue. But either way it is extremely interesting to watch. Last time they reported however, the stock did have a large "pop" upwards but since has been on a downward slope thereafter. In any case, as long term investors, we're staying far away, kicking up our feet, making some popcorn and watching the action from afar.

 

Oracle (ORCL), September 9th:

With the stock up ~20% YTD, many investors are left scratching their heads as to how this is even possible. The reason is because revenues have been flat for the last several years and their TikTok acquisition fell apart. The likely answer is that they've been able to ride the wave upwards with the S&P 500, as their performance is very closely linked to the index.

While Oracle is likely not going away anytime soon, there are other tech stocks with similar risk profiles for significantly higher reward. We also do not think this earning's call will likely spur their stock's movement in either direction. The key takeaway here is that even with under/over performance this week, the stock likely stays flat.

Therefore, while outliers may happen, we are choosing to not invest ahead of their earnings call this week.

 


 

The Key Economic Event in Focus This Week:

Producer Price Index, September 10th:

For those of you who have never heard of the producer price index (PPI) it is an index that measures the average changes in prices received by domestic producers for their output. Unlike the CPI (consumer price index) the PPI includes consumption of items that are not just paid for by consumers.

If we lost you, let us explain. CPI & PPI are core indicators of inflation. Remember the market dips earlier this summer when everyone was freaking out about inflation? A portion of the worry was due to the numbers here which summarizes the current prices of goods in our economy. With prices rising significantly since last year, we expect this number to continue to trend upwards. Unless there is a massive spike, this should continue to fly under the radar especially with the shortened holiday week.

 


 

A Review of Last Week's Earnings:

Want to know how all the events we spoke of last week, did this week? Let's break it down below!

Zoom (ZM), Earnings Release:

Last week we mentioned that Zoom's valuation has gotten so ridiculously out of control and even if they outperformed, we were staying away. The result of their earnings this week was a sharp move downwards as the stock slipped over 12% for the week!

While the numbers are strong and we do like Zoom's business, the combination of a return to normalcy, paired with valuation metrics, caused a large sell-off. We're continuing to stay on the sidelines until the valuation reaches something that makes sense. We'll keep you posted on any updates!

Chewy (CHWY), Earnings Release:

Last week we wrote, "We like Chewy over the long term, but believe there are some upcoming headwinds we'd like to see play out before jumping into the stock."

Post earnings, as the stock is down 13% in the last five days, our stance on them has not changed at all.

The reason their stock dropped was largely due to weaker sales as people slowed down buying pets and also started using local stores more. We see this as a short term headwind but continue to like their business over the longer term! We will be publishing an analysis on them soon.

DocuSign (DOCU), Earnings Release:

DocuSign beat estimate EPS at  47 cents per share vs 39 cents per share. This represents a 21% surprise upwards! This continues DOCU on their path upwards and the stock responded favorably. Over the last four quarters, the company has surpassed consensus EPS each time. With the stock up over 35% this year, we are watching closely to see if the trend continues. DOCU should have a strong 2022!

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