- THE STREET SHEET
- Posts
- 🎰 Who Won: Portnoy or Penn?
🎰 Who Won: Portnoy or Penn?
Plus, does Wall Street care about the new aspartame warning and how to get exposure to a growing fashion trend.
Happy Sunday to everyone on The Street.
$1, everyone knows the rules. What a wild week it was for both the media space and the sports betting industry.
ICYMI: David Portnoy, the founder of Barstool Sports, bought back his media brand from Penn Entertainment for yes, $1.
Now, there are some non-competes and Penn will have the right to 50% of the gross proceeds received by Portnoy in any subsequent sale, but the figure is still striking. For context, Barstool Sports was valued at $606 million in February, when Penn bought the rest of the company it didn’t already own.
Penn sold Barstool while simultaneously announcing an online sports betting deal with Disney-owned ESPN. The Barstool Sportsbook app will be rebranded as ESPN Bet, which will be in place for a 10-year term.
Who won here? Portnoy or Penn? Or was it Iger? We need to hear your thoughts before we dive in. Cast your vote below and we'll highlight the results next week.
Who got the better end of the deal? |
PRESENTED BY MAGNIFI
Get up to $210 in free shares with AI investing
Meet Magnifi, the AI that CNBC calls “ChatGPT meets Robinhood.”
Magnifi is the AI assistant designed specifically to help you find, buy, and manage your investments.
With conversational AI to give you guidance, help plan for goals, uncover excess fees, research and build portfolios, Magnifi is your co-pilot. Put it to work on existing investing accounts like TD and E*trade, or buy and sell right in Magnifi’s commission-free brokerage.
Sign up today and get up to $210 in free shares.
Offer valid for a limited time, for new Magnifi members.
Review
US stocks were mixed Friday after a hotter-than-expected inflation report. The producer price index, which measures inflation at the wholesale level, increased to 0.30% in July from a 0%, flat reading in June. This was above market forecasts of 0.2% and the biggest increase since January.
Meanwhile, US mortgage delinquency rates fell to 3.37% at the end of the second quarter, reaching the lowest since the Mortgage Bankers Association began collecting data in 1979.
Despite the aggressive rise in interest rates, the job market remains strong and most homeowners are still paying interest rates well below current levels due to an abundance of 30-year fixed-rate mortgages.
In company-specific news, the Department of Energy is investing $1.2 billion to support the development of large-scale carbon removal vacuums to combat global warming.
The initial funding will create two carbon removal hubs in Louisiana and Texas, run by carbon capture startup Climeworks and oil company Occidental. The government anticipates funding two additional hubs next year, committing a total of $3.5 billion to this technology.
Finally, Telesat, a Canadian satellite communications company, made the decision to change its internet satellite suppliers in a move to save $2 billion in costs. The company switched from its original supplier, Thales Alenia Space, to Boeing and SpaceX. Telesat aims to launch its first Lightspeed satellites to provide global broadband coverage in mid-2026.
In total for the week, the Dow Jones Industrial Average finished 0.62% higher, while the S&P 500 shed 0.31%. The Nasdaq Composite fell 1.90%.
Preview
Tuesday, investors can expect a trio of economic reports including retail sales, the NAHB Housing Market Index, and an update on business inventories. Notably, the housing market index increased to 56 in July, a sign that demand for new homes remains solid amid elevated construction costs and limited lot availability.
On Wednesday, minutes from the Federal Open Market Committee’s meeting last week will be released. This should give investors more insight into the central bank’s current stance regarding interest rates. Additionally, investors will get an update to the 30-year fixed-rate mortgage, which currently sits just above 7%.
On Thursday, investors will get an update on the state of the job market, with reports for both initial and continuing jobless claims. For the week that ended July 29, the number of Americans filing for unemployment benefits hit 227,000, up from 221,000 the previous week.
Earnings Spotlight
Appropriately, Monday.com (MNDY) will kick off the earnings week tomorrow. Investors will be eager to see if the project management software company can build off its strong previous quarter, in which it reported revenue of $162.26 million, up nearly 50% annually.
Tomorrow, Home Depot (HD) and H&R Block (HRB) will both give updates on their latest quarters. Notably, Home Depot shareholders will want to hear about the construction supplier’s struggle against organized retail theft, which is eating into profits.
On Wednesday, TJX Companies (TJX) and Target (TGT) will keep the retail reports flowing. Target shareholders will tune in to hear more about its plan to allow customers to add Starbucks (SBUX) drinks to their online orders. It’s part of the big-box retailer’s push to turn things around, after sales dipped 19% on a quarterly basis last quarter.
On Thursday, Walmart (WMT), Ross (ROST), and Tapestry (TPR) will offer an update on their businesses. Tapestry, the owner of Coach and Kate Spade, will surely discuss the company’s recent $8.5 billion acquisition of Jimmy Choo and Michael Kors parent company Capri Holdings (CPRI).
On Friday, Deere & Company (DE) will update investors on its most recent quarter and expand on its plan to cut carbon emissions by 30% by 2026. Cybersecurity company Palo Alto Networks (PANW) and the Chinese EV company Xpeng (XPEV) will turn in quarterly reports as well.
Nike Won’t Be In Last For Long
Stock Poised for a Comeback
Nike’s (NKE) losing streak may be coming to an end. Plagued by excess inventory, lackluster demand, a slowing economy in China, and competition from startups like Hoka, investors have run for the hills. This has pushed shares, down 8% so far this year, into the bottom quintile of all S&P 500 stocks in 2023 to date.
Still, there’s reason to believe Nike can win the race. Shipping issues brought on by pandemic-era pressures have been resolved, excess inventory is dwindling, and Nike is refocused on innovation. As China recovers and price reductions in the US fade, sales growth should pick up and margins should improve.
“Our view is that as soon as the market starts to sense [the] sales growth rate and margin improvement, the stock will start moving higher,” wrote UBS analyst Jay Sole in a recent research report. “This could happen when Nike reports...earnings in late September or even sooner.”
Margin Improvement
In fact, Sole believes that Nike could be approaching the higher teen margins on earnings they had projected in 2021.
By accounting for online sales and factoring out shipping costs, excessive inventory, and rising input prices - the analyst believes that margins could improve to 18% from the 11.5% in fiscal year 2023 and the 12.3% projected in the current fiscal year.
Direct-to-Consumer Play
Nike’s direct-to-consumer, or DTC, business is seen as a significant driver of growth. By cutting out the middleman, Nike holds onto the entire sale price, leading to higher margins. The company is also making active efforts to reach more customers, online via its website and app, and in-person at its network of stores.
Over the long haul, Nike's goal is to push its DTC sales from its current 45% to a formidable 60%. Some investors are taking Nike’s recent return to Macy’s (M) as a sign that DTC isn’t taking off. But analysts aren’t worried.
“Their DTC business is much better developed than most others,” says Oppenheimer analyst Brian Nagel. “Behind all this noise, the Nike model is frankly in great shape.”
Are you bullish or bearish on Nike over the next 24 months? |
How To Get Exposure To A Growing Fashion Trend: “Athleisure”
Joggers Get To Work
Leggings and joggers aren’t only for the gym. Women and men are donning them to the office, the bar, and, perhaps, the trading floor as well.
Athleisure wear took off during the pandemic and has since become a mainstay for people seeking comfy and casual attire — not to mention a boon for the brands that make them and the retailers that sell them.
The success of comfortable clothing and shoes presents an in-vogue opportunity for investors. There are several companies capitalizing on the athleisure craze that may warrant some attention, including ON Holdings (ONON), Deckers (DECK), Lululemon (LULU), and Nike (NKE).
Running Shoe Startups Cross the Finish Line
For starters, take On, the maker of a line of super comfy sneakers called Cloud running shoes. Wall Street likes the company because it has been able to successfully blur the lines between work and home with its shoes. KeyBanc analyst Ashley Owens, who rates On overweight, said the company has plenty of multi-year growth opportunities ahead, including international expansion, the launch of new products, increasing brand awareness, and wider distribution.
Then there’s Deckers, the company behind Hoka, another popular running sneaker company. While Deckers also boasts the Uggs and Teva brands in its portfolio, Hoka has Wall Street giddy. Bulls view the brand as Decker’s primary growth driver.
Since 2016, shares of Decker have climbed every year.
Leggings Remain All the Rage
Beyond the two sneaker startups, analysts point to Lululemon and Nike as stocks that should benefit from this newfound but lasting trend. Lululemon was all the rage last year — and demand is still strong. Traditional retailers catering to this space could also benefit.
You might prefer to keep your own wardrobe business casual. But like it or not athleisure wear at the office and beyond appears to be here to stay. Investors looking to capitalize might get their reps in with any of these casual and comfy apparel makers.
Which company do you think will outperform over the next 12 months? |
PRESENTED BY MAGNIFI
Get up to $210 in free shares with AI investing
Meet Magnifi, the AI that CNBC calls “ChatGPT meets Robinhood.”
Magnifi is the AI assistant designed specifically to help you find, buy, and manage your investments.
With conversational AI to give you guidance, help plan for goals, uncover excess fees, research and build portfolios, Magnifi is your co-pilot. Put it to work on existing investing accounts like TD and E*trade, or buy and sell right in Magnifi’s commission-free brokerage.
Sign up today and get up to $210 in free shares.
Offer valid for a limited time, for new Magnifi members.
WHO, Me Worry? Analysts Shrug Off New Diet-Soda Label
New Label? Non-Event
A key diet soda ingredient, aspartame, was just labeled a potential carcinogen by the World Health Organization, or WHO. Should investors be panicking?
They don’t appear to be. There are several reasons why Wall Street isn’t worried, even if Coca-Cola (KO), Pepsi (PEP), and other beverage makers use aspartame in their products.
For starters, take the new label, which went into effect in July. Last month, the Food and Drug Administration, or FDA, issued a statement disagreeing with the WHO's findings. FDA scientists assert there are no concerns if the additive is used under the correct conditions.
The WHO’s Label Lacks Teeth
Despite the new label, the WHO didn’t overhaul the consumption limit on products with aspartame — meaning, according to the WHO, you can still drink a lot of diet soda and be safe.
How much? Up to 14 cans a day!
“I think in general, consumers are maybe a little bit more aware, but this doesn’t seem like much of a game changer,” Citi analyst Filippo Falorni said in a recent interview. “I was getting a few investor questions when the news came out, [but] then it quieted down very quickly.” So far in 2023, Pepsi shares are up 3.8% and Coca-Cola is down 3.2%. That compares to a 17% rally in the S&P 500 in 2023.
Sell-off Overdone?
Not even the soda companies themselves appear concerned about the new label’s impact on sales. In their most recent quarterly earnings report, both Pepsi and Coca-Cola beat Wall Street’s estimates. In fact, both upped guidance for the remainder of the year.
That’s not to say it will stay like this forever. If the new label continues to permeate into the cultural consciousness, it may land more squarely on consumers’ radars and lead to a revolt against aspartame and other additives.
But, for now, any sell-off due to the WHO designation may be overdone.
Last Week's Poll Results
Are you bullish or bearish on Disney over the next 24 months?
🟩🟩🟩🟩🟩🟩 🐂 Bullish
🟨🟨🟨🟨🟨⬜️ 🐻 Bearish
Are you bullish or bearish on India over the next decade?
🟩🟩🟩🟩🟩🟩 🐂 Bullish
🟨⬜️⬜️⬜️⬜️⬜️ 🐻 Bearish
Which stock do you think will outperform over the next 12 months?
🟩🟩🟩🟩🟩🟩 Lockheed Martin (LMT)
🟨⬜️⬜️⬜️⬜️⬜️ General Dynamics (GD)
🟨🟨⬜️⬜️⬜️⬜️ Boeing (BA)
Join the conversation