The stock market rally came under more pressure, as the Nasdaq fell below its 50-day moving average. Tame inflation data failed to help, as Treasury yields rebounded. AI-related stocks such as Palantir, Super Micro Computer and Datadog plunged on results or guidance. Novo Nordisk and Eli Lilly surged on a big heart-health benefit from Novo's weight loss drug. Energy drink maker Celsius spiked on high-octane earnings. Weak China economic data and property market concerns weighed on the market.
Market Rally Isn't Broken Yet
The major indexes were mixed in the last week, but the overall picture was negative. The Nasdaq composite fell below its 50-day moving average on Wednesday. Nvidia also undercut that key level with a number of AI stocks plunging. Thursday's attempted rebound fizzled for the market and NVDA stock. The S&P 500 edged lower, not far from its 50-day. The Dow Jones rose slightly, holding its 21-day. Crude oil hit a 2023 high, but pared gains. The 10-year Treasury yield reversed higher for a small gain.
Economic Data
The headline CPI inflation rate rose slightly in July, but less than expected, while core inflation unexpectedly ticked lower. The three-month annualized gain continued to cool. Producer prices came in slightly higher than expected. But core PPI was flat vs. June. Jobless claims rose more than expected, though still relatively low at 248,000. The reports reinforced expectations that the Fed will leave rates steady at the late September meeting and likely beyond. The IBD/TIPP Economic Optimism Index fell to a one-year low in August, with investors turning slightly pessimistic.
Novartis, Eli Lilly Rally On Weight-Loss Drug News
Novo Nordisk and Eli Lilly stocks bounded higher after the former said its obesity treatment, Wegovy, reduced the likelihood of heart attack, stroke or cardiovascular death by 20% over five years. The company tested Wegovy in overweight adults or those with obesity and cardiovascular disease, but not diabetes. Analysts say the results could help make the case for broader insurance coverage of weight-loss drugs. But Novo stock slipped Thursday after the Danish drug giant reported light second-quarter sales due largely to a decline for its insulins in North America. Still, sales soared 42.5% to about $8 billion. Adjusted earnings leapt 80%, easily beating. Earlier, Lilly crushed forecasts with adjusted EPS up 69% with sales climbing 28% to $8.31 billion. Both companies raised their outlook for the year.
Super Micro Dives On Outlook
Super Micro Computer plunged after its fiscal 2024 outlook disappointed some analysts amid buzz over artificial intelligence stocks. For fiscal 2024, which starts with the current September-ending quarter, the company forecast revenue of $10 billion, 1% above analyst estimates of $9.88 billion. For the period ending June 30, SMCI earnings rose 34% to $3.51 per share while sales climbed 32% to $2.18 billion. Both easily beat.
Software Earnings
A number of software plays reported, with many suffering big losses.
Datadog crashed after guiding low on Q3 and full-year revenue, despite upbeat EPS guidance. Q2 EPS rose 50% while sales advanced 25% to $509 million. Datadog operates a monitoring and analytics platform for software developers and information-technology departments.
Palantir Technologies plunged on in-line Q2 results. EPS of 5 cents was up from a 1-cent loss a year earlier. Revenue rose 13% to $533 million, but growth has been trending lower for several quarters. Palantir sees Q3 revenue of $555 million, just above views. The data analytics software maker also announced a $1 billion stock buyback. But PLTR stock, which has soared amid AI buzz, sold off.
Akamai Technologies reported Q2 EPS up 10% with revenue rising 4% to $936 million, modestly beating. Security revenue grew 14%, picking up from Q1's 9%. Akamai is the biggest provider of content delivery network services that also increase the speed of e-commerce transactions and business software downloads. AKAM gapped higher.
RingCentral reported Q2 EPS jumped 84% with revenue up 11% to $539.3 million. The cloud-based business communications software maker said founder Vlad Shmunis will step down as CEO on Aug. 28. Hewlett Packard Enterprise CFO Tarek Robbiati, a RingCentral board member, will take over. RNG fell sharply.
Global-e Online reported a Q2 loss of 22 cents, narrowing from a 31-cent loss a year earlier. Revenue rose 53% to $133.3 million. Both topped views, but Global-e tumbled on guidance.
Teradata modestly topped estimates, with EPS rising 45% and sales 7%. The database software firm's full-year EPS guidance may have been a little light given the Q2 beat. TDC stock plunged after recently hitting a 52-week high.
Lucid, Rivian Production Guidance Update
Lucid reported a wider-than-expected Q2 loss while a 55% revenue gain to $150.9 million missed badly, after EV deliveries disappointed. The startup reaffirmed a lowered production target of more than 10,000 luxury EVs in 2023, just days after slashing prices for the Lucid Air sedan. Rivian had a smaller-than-forecast loss while revenue surged 208% to $1.12 billion, beating. It raised its 2023 production target slightly, now aiming to make 52,000 vehicles, more than double last year's mark. LCID rose modestly, but isn't that far from two-year lows. RIVN stock tumbled, extending a slide after more than doubling from late June to late July.
Li Auto Crushes Views, Sees Strong Deliveries
Li Auto reported Q2 EPS of 36 cents vs. a 3-cent loss a year earlier. Revenue soared 209% to $3.983 billion. The China EV startup expects to deliver 100,000-103,000 premium EVs in Q3, up from 86,533 vehicles in Q2. Li said the Mega minivan, its first all-electric model, will be unveiled in Q4. Shares tumbled following earnings after nearly setting a record high.
Building Materials Firms
Atkore, which makes electric and mechanical products for nonresidential and industrial markets, reported a 6% EPS decline, easily beating. Revenue slumped 13%, slightly missing. But ATKR stock rebounded from its 50-day line and near a buy point. Architectural glass maker Tecnoglass delivered a 62% EPS gain with revenue up 33% to $225.3 million, both beating. It raised guidance, but perhaps not enough. TGLS stock plunged. Azek, which makes fake wood decking products, modestly beat fiscal Q3 views with a 3% EPS gain and 2% sales dip. Shares popped on solid guidance.
Heavy Construction
Primoris Services reported a 50% EPS gain with revenue up 38%, both modestly beating Q2 views. Sterling Infrastructure beat views with a 37% EPS gain and revenue up 13%, both picking up from Q1. Aecom reported an in-line 11% EPS gain while revenue climbed 13%, beating forecasts. PRIM stock and Sterling hit 52-week highs. ACM stock fell, but came off lows.
Disney To Hike Disney+ Rates
Disney reported a 6% EPS decline, but that beat fiscal Q3 views. Revenue rose 4% to $22.33 billion, just missing. Streaming losses narrowed, but Disney+ subscribers fell far more than expected, to 146.1 million from 157.8 million in Q2. The Dow Jones entertainment giant announced its second set of major price increases in less than a year, including more than 20% hikes to ad-free versions of Disney+ and Hulu. It also aims to crack down on password sharing in 2024. DIS stock jumped on results. Paramount Global saw EPS plunge 84% with revenue dipping 2% to $7.62 billion, both beating Q2 views. Paramount+ added 700,000 subscribers to 60.7 million and streaming revenue jumped 47% to $1.22 billion. The entertainment giant agreed to sell its Simon & Schuster publishing company to private equity firm KKR in a $1.62 billion deal announced Aug. 7. PARA rose on earnings but fell slightly for the week.
TransDigm Earnings, Guidance Strong
Aerospace and defense components maker TransDigm topped fiscal Q3 estimates with a 49% EPS gain with revenue rising 25% to $1.74 billion. TransDigm upped is full-year outlook and noted further progress in the commercial aerospace market recovery. TDG stock jumped to a record high, but reversed lower, falling below a buy point.
News In Brief
Manitowoc easily beat Q2 views, with EPS surging 257% and sales up 21%. The maker of cranes and related equipment whipsawed on earnings.
Disney's ESPN will team up with Penn Entertainment on a sports betting deal. Penn will pay $1.5 billion as it rebrands its online sportsbook as ESPN Bet. PENN jumped on the deal. Online sports betting specialist DraftKings fell sharply after soaring in 2023.
Alibaba easily beat profit views with a 37% EPS gain. Revenue rose modestly, ending a string of year-over-year declines, with international e-commerce and local services among the growth drivers. BABA stock rose on results, but was little changed for the week amid China economic concerns.
Duolingo, the language-learning platform, reported a 121% EPS spike as revenue grew 44%, while also guiding slightly higher. DUOL stock jumped.
Coach owner Tapestry will buy Capri, which owns Michael Kors, Jimmy Choo and Versace, with CPRI holders getting $57 a share in cash, a 65% premium to the Aug. 9 close. The deal has an enterprise value of $8.5 billion. TPR raised its dividend by 17%.
Zoetis jumped after the animal health company reported adjusted earnings per share rose 18% with sales up 6% to $2.18 billion. Zoetis trimmed its full-year sales outlook, but raised its profit guidance.
Shockwave Medical reported rising profits that missed views. Sales climbed 12% to $180.2 million, topping. But SWAV tumbled on mixed results and then added to losses later on a debt offering.
Trade Desk earnings rose 40% to 28 cents, with revenue up 23% to $464 million as internet TV ads drove growth. Those modestly beat views. The digital advertising firm guided slightly higher on Q3. TTD tumbled.
UPS reported mixed second-quarter financials Tuesday and guided low on some full-year metrics citing the impact of a tentative new labor deal. Q2 EPS slumped 23%, slightly beating, while revenue fell short with an 11% decline to $22.05 billion.
Copa reported Q2 profit skyrocketed 1,125%. Revenue grew 17% to $809 million, beating some estimates but missing others. The Panama-based carrier tumbled on earnings, extending a long losing streak after a big ascent. Meanwhile, Brazil-based airline Azul surged around 10% Thursday following Q2 results, bouncing from a two-month low.
Tidewater reported EPS of 46 cents vs. a year-earlier loss while revenue grew 32% to $215 million, with growth decelerating for a third straight quarter. Both fell short of views for the marine oil transport company. TDW stock initially plunged Tuesday morning, but rebounded as management touted the best "long-term market backdrop for our business as we have ever seen." Rising crude prices also helped. Tidewater hit a record high Wednesday but closed the week modestly lower.
