Stocks & Crypto News - What to know this week: Will Nike Beat Earnings? IPO's in review, Crypto Volatility & More!Dec 20, 2021
Published on December 20th, 2021
We're bringing you all the stocks and crypto news you need to know for this week. This report contains news on the crypto world, stock market & earnings news. We've highlighted the most important topics in each section!
We're skipping the IPO's for the rest of the month, because the end of the year will be quiet. Once January starts, IPO season will be back in play!
As always below is our Youtube video version where we spill even more juicy details on Nike's earnings report!
Most Important Companies Reporting Earnings This Week:
Nike (NKE), December 20th:
Going quietly into the end of the year, Nike is by far the most important company reporting earnings this week. Why is that?
It is due to exactly what we talked about last week regarding retail sales & personal income growth (see it here)
If you want the high level -> Retail sales growth has been outpacing personal income growth.
To spare you the boring details for the last 20+ years growth in retail sales has grown lockstep with the growth in personal income. Aka you make more money, you spend it.
But over the last year that gap has widened and people have spent more money on retail items than they have historically because of the savings they accumulated during the pandemic in addition to added stimulus checks.
Looking at the graph above, we can see this happening in real time as the green line (sales) has spike relative to the red line (income).
Now if you're wondering, "Why is this important? I thought we were talking about Nike?"
Let us finally get to the point -- it is because this divergence is due to narrow.
If the gap does narrow, that means that companies like Nike (aka retail companies) could see a strong pullback in demand in 2022.
Therefore during this earnings report we need to hear pay attention to three things from Nike:
- While we expect demand to increase last quarter we need to see if that came at a decreasing rate -- AKA did Nike grow revenues but not as fast as the quarter before. We don't expect this to happen yet, once it does, this could be the golden sign that revenues will be impacted going forward. Therefore during this quarter's earnings reports and next quarter's earnings report, we need to stay hyper aware of this figure.
- Management's expectations for 2022. Management team's are incentivized to give justified & conservative outlooks going forward. If Nike not only acknowledges this but cautions investors going forward, this event will not only be contained to Nike -- this could be a contagion spread to the rest of the industry. No one is looking at this under such a close lens, but this could be the start of a massive pullback across retail stocks. Make sure you pay attention to this!
- Lastly we need some specific updates as it relates to their relationship with China and the cotton controversy. Seeing that a huge portion of Nike's revenues come from China, the athletic wear giant needs to make sure that their relationship with the country stays solid. We will very closely be paying attention to any updates coming from their team on this front!
Braze (BRZE), December 15th:
Last month we covered a tech company called Braze (see it here).
Braze is a SaaS platform that connects customer CRMs with consumer data. Braze then takes this data and personalizes experiences for consumers interacting with the brands they work with.
A huge medium for them is email where they help brands convert users on their email list (aka help these companies get people to buy their stuff).
While Braze is an awesome company that is growing fast, we said we were avoiding their IPO last month because the stock valuation was extremely expensive. Fast forward to today and the stock is down over 33%!
While the valuation has come down a bit since their IPO - thus making it more affordable - we're actually continuing to avoid it unless absolutely monster numbers come out this quarter or next.
Should these numbers change we may reproach our take on the small cap growth company. Those numbers are:
- Revenue growth
- Gross margins
- Profit margins
While revenue growth hasn't been the problem, margins has been -- with margins decreasing since last year.
We're not expecting a turnaround anytime soon, but with retail surging (expected to reverse) this could happen!
Therefore, while we want to invest, right now is just not the time. We will likely enter a position at some point but recommend you all to stay away from this hot IPO for now!
CarMax (KMX), December 16th:
CarMax has been one of our favorite stocks since the start of the year (see the most recent research here).
With the market for used cars surging, CarMax has been one of the stronger beneficiaries of the global trend towards purchasing second hand cars online.
With the stock however down 6% in the last month, yet up a ton of the year, CarMax is entering into a period where the stock could inflect. Therefore this earnings call is crucial.
Two earnings calls ago they were successful due to increases in revenue from their lending division (for auto financiers), unit sales and retail GPU.
This time around we think these numbers will outperform again but the macro is what will drive this stock going forward!
We therefore see more choppy waters ahead for CarMax but fundamentally still fully believe in the stock over the long term.
Long story short: use any major weaknesses in the stock to buy more, but know 2022 will be a tough for year for many stocks like this!
The Crypto Markets Stay Volatile
Volatility continued for the crypto market last week, so much so that there really isn't much of an update this week. There's still a lot to determine before we know if this is a regular dip, or the start of a broader bear market but it is interesting to see that the markets tanking has set crypto on a spiral downwards too. This may be proof that there is more correlation than people think. In a risk-off atmosphere it is natural to see people wanting to exit positions in crypto!
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