- THE STREET SHEET
- Posts
- 👃 The Unlikely Winner of Return-To-Office
👃 The Unlikely Winner of Return-To-Office
Plus, bulls think this legacy automaker is a sleeping EV giant and one analysts CROX call.
Happy Sunday to everyone on The Street.
Can we ask you a slightly personal question? During the pandemic lockdowns when many of you might have been working from home, did you happen to "forget" to put on deodorant? Maybe you didn't forget at all, and you just didn't do it?
If so, you're not alone. In fact, it sounds like a ton of people got a little lazy with their personal hygiene. Times have changed, however. Now, with workers trickling back to the office, deodorant has returned to the mix and people are putting it back under their pits.
That's right, according to Unilever, the company reported a 15% increase in the sales of deodorant in its most recent earnings report. “Many people didn’t use deodorant as much when they were in lockdown and working from home and some recovery in that is coming through,” Graeme Pitkethly, the company’s finance director, told the Guardian.
Unilever wasn't alone. Procter & Gamble, the maker of Old Spice and Secret brands of deodorant, posted a 9% sales spike of grooming products and a 5% increase in beauty products in the first quarter of fiscal year 2024.
The return to office debate is still an interesting one. But, if people are taking better care of themselves, aka taking two seconds to swipe some deodorant on, we're going to chalk that up as a win.
Before we dive in, we just have to ask the question below (results are anonymous unless you want to leave us a comment):
Did you wear deodorant when you were working from home? |
PRESENTED BY IMMUNOPRECISE ANTIBODIES
ImmunoPrecise Antibodies (IPA) is a leading Contract Research Organization in biopharmaceuticals, renowned for its integration of biotherapeutic innovation and knowledge combined with Artificial Intelligence (AI) through Vertical AI. This approach is aimed at the development of precise therapies, enhancing patient outcomes by predicting safer and more effective drugs.
IPA is also developing a comprehensive intelligence platform focused on Vertical SaaS (VSaaS), committed to expand its influence in the pharmaceutical industry. This model facilitates seamless AI integration into existing workflows, positioning IPA to capitalize on the global immunotherapy drug market size of $1,013 billion by 2032, becoming a leader in antibodies.
Review
U.S. stocks were mixed on Friday as markets digested a new round of earnings and the latest inflation data. The Federal Reserve's favorite inflation gauge – core PCE – showed prices rose 0.3% in September, the most since May.
Looking at the longer-term, however, inflation is indeed cooling, or at least not getting worse: Year-over-year, core prices rose 3.7%, the lowest level since May 2021, while overall inflation rose 3.4%. Personal incomes increased 0.3%, less than expected, while personal spending rose 0.7% in September, exceeding market expectations and the previous month’s 0.4% rise.
The Dow Jones Industrial Average fell 1.1%, or 366 points, the S&P 500 shed 0.5%, and the Nasdaq Composite finished 0.4% higher. However, for the week, all the indices finished sharply lower, with the Nasdaq solidly in correction territory, more than 10% off its highs from July.
In earnings news, Amazon shares rose 6.8% after announcing it more than tripled its year-over-year profits, as consumers continued to support e-commerce, and the company’s cost cutting measures took effect. Its key Amazon Web Services business grew less than expected.
Elsewhere, Ford shares continued to sell off, falling 12.3%, following the company’s earnings on Thursday. The legacy automaker relayed that the UAW strike has cost it $1.3 billion, leading it to withdraw its full-year guidance.
ExxonMobil shares fell 1.9% after announcing a 54% year-over-year decline in profits. However, the oil giant also reported its cash reserves increased 10% to $33 billion, and said it was on track for $17.5 billion in stock buybacks this year.
Intel shares jumped 9.3% after vowing to cut costs by roughly $3 billion. The chipmaker saw revenue and earnings decline year-over-year, but still beat estimates.
Lastly, Colgate shares beat top and bottom line estimates and raised its full-year earnings guidance, attributed to a 9.5% increase to prices. Still, its shares finished 1.8% lower.
Preview
The week will start off with the Dallas Fed Manufacturing Index. Although production rebounded, the index indicated a decline in overall business conditions last month.
On Tuesday, we’ll get a look into the housing market with the Case-Shiller Home Price Index. Last month, this 20-city index showed the first year-over-year increase in housing prices in five months.
On Wednesday, aside from ADP numbers, and the Fed, we’ll also get an update to the 30-year fixed-rate mortgage, the latest ISM Manufacturing data, and September job openings.
As usual, Thursday will feature initial jobless claims numbers, and we’ll get preliminary quarterly labor productivity data.
Finally, the week will conclude with the jobs report, and ISM services data for October will also be released.
Earning Spotlight
It’s another busy one for earnings. McDonald’s (MCD), ON Semiconductor (ON), and Pinterest (PINS) will kick off the earnings week.
On Tuesday, we’ll get reports from BP (BP), Pfizer (PFE), and the world's largest broadline food distributor, Sysco (SYY). Pfizer recently lowered its earnings and revenue guidance for the year as demand for its Covid products wanes.
Wednesday will be the busiest earnings day of the week with reports expected from CVS (CVS), Kraft Heinz (KHC), Cheesecake Factory (CAKE), DoorDash (DASH), Etsy (ETSY), Paypal (PYPL), Qualcomm (QCOM), Roku (ROKU), Zillow (ZG), and Airbnb (ABNB). Recently, Airbnb CEO Brian Chesky acknowledged the company was "fundamentally broken" due to a lack of foundation, but added he has plans to fix it.
Thursday will be another eventful day, with reports coming in from Eli Lilly (LLY), Ferrari (RACE), Marriott (MAR), Pelton (PTON), Shopify (SHOP), DraftKings (DKNG), Novo Nordisk’s (NVO) and Yelp (YELP). With the growing popularity of Novo Nordisk’s Ozempic, its competitor Eli Lilly has prioritized getting its diabetes drug Mounjaro cleared to treat obesity as well.
Dominion Energy (D) and Cinemark (CNK) will conclude the earnings week. The former is in the process of constructing a $9.8 billion wind project off the coast of Virginia, estimated to power 660,000 homes upon completion.
BMW Bulls Think Automaker is Sleeping EV Giant
Old Dog, New Tricks
German automaker BMW (BMWYY) has been producing luxury vehicles for years, becoming one of the most recognizable car manufacturers in the world.
BMW is known for their upscale luxury vehicles, not EVs. But analysts believe they have positioned themselves to become one of the hottest electric vehicle stocks.
They have done so largely by taking their already well-known and beloved models and simply making them electric. This differs from competitors who typically create all new models for their EVs.
Using this strategy, BMW has quietly delivered more battery-operated electric vehicles in 2023 Q3 than three major competitors combined: General Motors (GM), Ford (F), and Rivian (RIVN).
The Future Is Electric
Wall Street is predicting demand for gas powered vehicles will be cut in half by 2030. As BMW continues to prove that it can thrive in the EV space, some investors are getting less worried that demand for their products will decline.
BEV’s accounted for 15% of BMW’s Q3 sales, a 6% increase from the year prior. On top of this, in 2022 BMW purchased a majority stake in a Chinese EV joint venture, giving the company access to the world’s largest EV market.
Strong Numbers
At present, BMW is flush with cash. In fact, the company’s cash exceeds its debt by $20 billion.
The automaker is expected to invest around 6% of its earnings over the next several years (almost $30 billion) back into their business. They are also expected to use some of their extra cash to pay dividends to shareholders.
The company is strategically pivoting for the future and spending its cash wisely, which leads Jefferies analysts to believe the stock could rise 41% to $143 in the coming years. Of course, this is no guarantee, but it will be interesting to watch this auto-incumbent attempt to pivot and potentially even dominate a new, electric-powered world.
Are you bullish or bearish on BMW (BMWYY) stock over the next 12 months? |
Trading Jeans for Leggings
Wall Street Believes This Trend Has Staying Power
Forget business casual. Leggings and hoodies have become a bigger part of office attire. Now this lasting trend is generating bigger profits for companies in the athleisure space.
Wall Street targets Lululemon (LULU) as the main player in the space. And while Lulu’s leggings may be legendary, that doesn’t mean there aren’t plenty of other contenders competing to stay ahead of the activewear game.
Lulu has greatly benefited from athleisure fashion trends, with the stock nearly doubling since March 2020, when the pandemic shifted how (and where) many people worked. Analysts bullish on the stock point to consistent, healthy revenue growth and data which shows the company doubled its market share from 2016 to 2022.
But bears believe Lululemon will struggle as inflation-wary consumers shy away from $100 pants.
More Than Just Athleisure
Outside of Lululemon, the Street likes stocks with a wider scope than purely athleisure.
While Nike (NKE) is down over 16% in 2023, Barron’s taps it as one of its stock picks thanks to the brand’s power.
American Eagle Outfitters (AEO) also gets the nod from Barron’s, which named it a 2022 pick. The magazine points to impressive growth from the Aerie division.
On Holding (ONON) is another contender in the space. The stock is up about 43%, with some analysts seeing more green ahead as the company expands its apparel offerings.
Private Athleisure Companies To Watch
Beyond the stock market, investors are looking for the next Lululemon, which went public in 2007 and has returned nearly 3,000% since then.
Vuori has athleisure offerings that mirror Lulu, including expensive tights. Analysts see potential for an IPO after it was valued at $4 billion in a 2021 funding round.
Alo Yoga has also built a strong following with its offerings, which include pricey sports bras. The Street views it as another company that could go public soon.
As we mentioned in our intro, more people are heading back to the office, which has been good for deodorant sales. But what they’re choosing to wear in the cube has changed, which makes the names above interesting to have on the radar.
Which stock will have the most growth in 2024? |
PRESENTED BY IMMUNOPRECISE ANTIBODIES
ImmunoPrecise Antibodies (IPA) is a leading Contract Research Organization in biopharmaceuticals, renowned for its integration of biotherapeutic innovation and knowledge combined with Artificial Intelligence (AI) through Vertical AI. This approach is aimed at the development of precise therapies, enhancing patient outcomes by predicting safer and more effective drugs.
IPA is also developing a comprehensive intelligence platform focused on Vertical SaaS (VSaaS), committed to expand its influence in the pharmaceutical industry. This model facilitates seamless AI integration into existing workflows, positioning IPA to capitalize on the global immunotherapy drug market size of $1,013 billion by 2032, becoming a leader in antibodies.
From Oversold To Outperform: Analyst Highlights Crocs' Alluring Valuation and Robust Margins
💩 Croc of Gold or Croc of ...
This Thursday, November 2, one of America’s most controversial shoe companies will report its latest results. You guessed it, we’re talking about Crocs (CROX). It’s been a tough stretch for the king of rubber clogs. Year-to-date, the stock is down over 20%.
In both April and July, the namesake brand performed well. However, weak guidance and hesitation around its HEYDUDE acquisition seemed to weigh on shares.
That being said, one analyst thinks Crocs’ stock is oversold, slapping a new price target on the closed-toed loafers.
Raymond to the Rescue?
Raymond James analyst Rick B. Patel upgraded the shares of Crocs (CROX) from Market Perform to Outperform and announced a price target of $110. For context, shares closed at $85.98 on Friday.
The analyst says the stock is oversold (CROX -31% vs S&P Retail -11% over the last 3 months), and risk/reward is now favorable given a highly discounted P/E of about 6.5x (5-year average 16x) and EV/ EBITDA of ~6x (5-year average 11.5x).
Crocs surprised to the upside in 1H and the analyst sees further momentum including attractive overseas opportunity. Despite recent challenges, CROX maintains excellent operating margins that likely have upside potential, noted the analyst.
HEYDUDE, Don't Make It Bad
The Crocs brand remains strong, and the HEYDUDE brand affinity is holding up despite near-term challenges, according to Patel.
The analyst says valuation is very attractive relative to peers who have similar growth expectations but lower margin profiles versus CROX.
Moreover, the analyst noted that Crocs’ strong free cash flow enables accretive buybacks and debt paydown. The price target is based on a P/E of 8.5x on the analyst’s 2024E EPS of $13.04.
Time will tell if Patel’s Crocs prophecy will hold true.
Are you bullish or bearish on Crocs over the next 12 months? |
Last Week's Poll Results
Last Week’s Polls
Are you bullish or bearish on McKesson (MCK) over the next 12 months?
🟩🟩🟩🟩🟩🟩 🐂 Bullish
🟨🟨⬜️⬜️⬜️⬜️ 🐻 Bearish
Which stock would you want to own for the next decade?
🟩🟩🟩🟩🟩🟩 Nestlé
🟨⬜️⬜️⬜️⬜️⬜️ Danone
🟨🟨🟨⬜️⬜️⬜️ Fresenius
Join the conversation