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- BABBEL | March 6th, 2024
BABBEL | March 6th, 2024
Today’s report is brought to you by Babbel, the world’s first language-learning app and also the best-selling. Its intuitive lessons have led to over 10 million subscriptions being sold, centering on learning a language through real-life conversations.
[ good morning ]
Here’s everything you need to know today
Of course, the markets are going to bounce back after yesterday's sharp selloff. How else would you expect The Street to act? Everywhere, markets are bouncing back after crashing down from record highs. Yesterday, we witnessed an $8,000 price whipsaw in Bitcoin after the token plummeted into a liquidity trap after crossing all-time highs. When the dust settled—the token got back on track immediately. BTC is now relatively stable at ~$66,000 per token.
Meanwhile, major indexes also bounced back after Apple led a sharp selloff in the NASDAQ and S&P, allowing bear sentiment to take complete control of the market. Whenever markets run a little hot like this, we're going to see volatile swings in either direction until clearer signals emerge. Jerome Powell's testimony before Congress today will only add to those volatile swings. Next week's CPI is going to be the major catalyst that helps the market pick a direction in the short term. At least it's the catalyst folks can actually predict.
But for today—the market is a zero-sum game where losers take a massive haircut while the efficient shops hoard all the alpha. Let's examine the major players in today's price action and try to find some signal in all this noise.
Markets at a Glance
*Market data based on standard trading hours and calculated close to close
[ software ]
Crowdstrike Sparks Cybersecurity Rally With Earnings
An astounding revenue beat is just the start for CrowdStrike
BREAKING NEWS
The Street just added over $15 billion to CrowdStrike's market capitalization on the heels of a massive earnings report. The entire Cybersecurity industry is rallying thanks to renewed hopes that demand is here to stay.
WHAT HAPPENED
CrowdStrike generated a $0.95 EPS from $845 million in revenue for Q4 2023. Sure, both of those beat expectations, but it's the scale of the beat that's driving this rally. Crowdstrike went from a $48 million net loss in 2022 to an astounding $54 million net income from their operations in this most recent quarter. Investors were concerned that CrowdStrike's profitability wouldn't stick—but it's just accelerated.
EFFICIENCY ROCKET
Net Income nearly doubled in 3 months at CrowdStrike—with the firm 'only' making $26 million in Q3. With their more profitable model proven, CrowdStrike supercharged these results by projecting more gains in 2024. CrowdStrike guided for Q1 revenue as high as $901 million while maintaining a similar level of net income. Finally, a cybersecurity stock with a confident outlook for 2024.
WHY IT MATTERS
A lot of the big tech winners of 2023 have stumbled hard to start off 2024 thanks to more conservative projections. The Street was starting to develop concerns that we would see an industry-wide pullback in demand that could crush cybersecurity growth. With CrowdStrike confidently predicting better growth this year, investors are flooding back into the wider industry. CrowdStrike is the big winner today as investors pile on and push the stock over 22% higher in early trading. However, every major security player also got a little lift thanks to this news.
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Sectors at a Glance
| Sector | Day | Month | Year |
|---|---|---|---|
| Communications | -0.81% | -1.21% | 42.39% |
| Consumer Disc. | -1.24% | 2.71% | 24.29% |
| Consumer Stap. | 0.24% | 0.69% | 2.69% |
| Energy | 0.74% | 4.63% | 0.08% |
| Financials | 0.02% | 4.23% | 12.57% |
| Health Care | -0.75% | 1.78% | 12.10% |
| Industrials | -0.82% | 5.07% | 16.88% |
| Materials | -0.53% | 8.40% | 6.28% |
| Real Estate | -1.28% | 4.36% | 2.28% |
| Technology | -2.46% | 1.24% | 46.11% |
| Utilities | -0.29% | 2.78% | -6.08% |
*Market data based on standard trading hours and calculated close to close
[ retail ]
Nordstrom Falls on Grim 2024 Outlook
Discounting may be the retailer's only salvation
BREAKING NEWS
Despite beating expectations for Q4 sales, Nordstrom stock is in free fall with the company projecting muted growth for the rest of 2024.
WHAT HAPPENED
Nordstrom generated a respectable $0.96 EPS from $4.42 billion in revenue. These beat expectations and demonstrated that Nordstrom is slowly getting their inventory under control and making operations more efficient. However, Nordstrom still projects that their revenue could actually decline in 2024—and that was simply too much for the market.
TOO LITTLE TOO LATE
Nordstrom is taking a lot longer to optimize their inventory woes than their peers, and those inventory issues forced the brand to discount a lot harder in Q4. That kind of operational sloppiness kills confidence. Meanwhile, Nordstrom Rack is surging with a 14% rise in sales. With more Rack locations opening in 2024, management is hoping that the discount shop can turn into a growth driver for the brand as consumers become more and more cost-conscious. Nordstrom's projections for Rack simply aren't enough though.
WHY IT MATTERS
Efficiency is critical in this market moment. Nordstrom is on the right path, but not making changes fast enough for fickle investors. While they have a great path to victory via Nordstrom Rack, other retail players are compounding more efficient operations already. There's a strong chance Nordstrom can just get left behind at this point, so investors are choosing to leave the stock. Nordstrom fell over 10% in early trading.
[ e-commerce ]
JD Soars as Chinese Consumers Hunt For Deals
The bargain bin is all the rage on Wall Street
BREAKING NEWS
After losing a ton of market share to their rival PDD, JD.com has made a huge comeback thanks to a smart discounting strategy. Their stock is soaring as optimism about Chinese growth is starting to bud again.
WHAT HAPPENED
JD is one of the top e-commerce players in China. They've recently been overshadowed by Alibaba and Temu owner PDD. Now, JD is in the spotlight after they made a huge gamble on discount offerings. JD generated a massive ~$0.74 EPS from $~42.4 billion in revenue for Q4. This crushed expectations. This is massive because JD relied on lower price points to bring shoppers back to their platform. The market is ecstatic that this didn't negatively impact margins.
ONLY GETTING STRONGER
JD also announced they would add a dividend to their stock and kick off a share buyback initiative. This adds to market confidence that JD can maintain margin growth without needing to over-invest or over-discount their items.
WHY IT MATTERS
With China's recovery still in question, investors have been afraid of collapsing consumer spending in the Chinese market. JD has just demonstrated that there's a lot to gain from well-designed discounting initiatives. The ball is now in PDD's court—can they match JD's efficiency and growth here? For now, JD stock popped over 10% in early trading.
Extra Moby Snacks
Foot Locker was forced to discount too much during the holiday shopping season, causing a revenue shortfall that threw their stock into free fall. Foot Locker fell over 15% in early trading.
The exact opposite story played out at Abercrombie and Fitch. The retailer fell a little in early trading before rising after another astounding revenue beat. This caps off a brilliant year of rising sales and margins. Abercrombie stock may be flatter now, but this comes after a 400% surge in the last year.
TOGETHER WITH
Today’s report is brought to you by Babbel, the world’s first language-learning app and also the best-selling. Its intuitive lessons have led to over 10 million subscriptions being sold, centering on learning a language through real-life conversations.
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