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- Masterworks | February 26th, 2024
Masterworks | February 26th, 2024
TOGETHER WITH
Today’s report is brought to you by Masterworks, the only platform that lets you invest in multi-million dollar works of art by artists like Basquiat, Picasso, Banksy, and more.
[ good morning ]
Here’s everything you need to know today
Once again—enough companies are showing stronger-than-expected results to keep this rally going outside of the tech boom.
The efficiency transformation we’re seeing in this economy is working really well for companies that can pull it off while the market completely abandons firms that can’t raise the bar.
But somehow, those forces tip more toward the bullish side of the market despite widespread concerns about inflation and weakening growth. This week will be another big test for this rally as more retailers and food brands post earnings. These names have been more sensitive to inflation and slower consumer spending—so The Street is hoping for a few more critical beats to prove the rally.
So, let’s take a look at some of the more long-term trends reverberating across the market as we rush through the back half of Q1 and into the real test period for 2024.
Markets at a Glance
*Market data based on standard trading hours and calculated close to close
[ metal ]
Alcoa Acquires Australian Aluminum Empire
America’s bauxite king just made a massive bet on the future of metal demand
BREAKING NEWS
Alcoa—one of America’s biggest Aluminum players just went all-in on creating a global mining empire with an offer to buy their Australian partner Alumina for $2.2 billion dollars.
WHAT HAPPENED
The all-stock deal on the table here is more of a merger than anything. Alcoa only has a market capitalization of $4.7 billion after a 44% decline in the last year. Frankly, Alcoa has struggled since aluminum prices peaked in early 2022—but this huge acquisition is a strong signal that the brass at Alcoa is confident about an aluminum turnaround.
ROCK HOUNDS
Alumina is an Australian mining empire that partners with Alcoa in various mines in Australia and Brazil. Together, the two companies mine bauxite and another mineral that’s also called alumina. Both of these minerals are extremely important origin points of Aluminum in the world commodities market, and this acquisition can give Alcoa some strong control in a market that has been pretty dominated by Chinese firms.
WHY IT MATTERS
Aluminum is going to be increasingly important as more developed economies make a transition to green energy and growing economies like India and Vietnam continue an industrial boom. This deal is very expensive and therefore the market sees it as Alcoa management calling the bottom in aluminum prices. Still—investors are worried that Alcoa is overpaying here, so the stock fell 4% in early trading while Alumina shares soared 6% on Australian exchanges.
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Sectors at a Glance
| Sector | Day | Month | Year |
|---|---|---|---|
| Communications | -0.25% | 2.68% | 48.65% |
| Consumer Disc. | -0.45% | 5.38% | 24.61% |
| Consumer Stap. | 0.31% | 2.68% | 2.35% |
| Energy | -0.66% | 2.19% | 1.33% |
| Financials | 0.50% | 4.59% | 11.98% |
| Health Care | 0.48% | 6.07% | 14.43% |
| Industrials | 0.53% | 6.09% | 18.42% |
| Materials | 0.59% | 5.31% | 6.27% |
| Real Estate | 0.13% | 0.62% | 0.13% |
| Technology | -0.23% | 1.63% | 49.35% |
| Utilities | 0.72% | 1.16% | -7.44% |
*Market data based on standard trading hours and calculated close to close
[ fast food ]
Domino’s Pizza Beats the Odds With Strong Profits
Pizza’s comeback king is finally putting it all together
BREAKING NEWS
After a huge realignment in 2023, Domino’s Pizza posted flat profits that managed to crush the market’s expectations. Why is the stock soaring when there’s no real growth?
WHAT HAPPENED
This market is all about expectations—and Domino’s is in the middle of a very expensive-looking transformation. Domino’s is blitzing the pizza market by relaunching their rewards campaign and opening 1,100 new stores worldwide across the next 4 years. As Domino’s accelerates these changes—investors were bracing for a pretty bad earnings shortfall.
Instead, Domino’s managed to drive a defiant $4.48 EPS from $1.4 billion in revenue. Both of those are mild boosts from 2022—but their revenue numbers came in slightly cooler than expected. The main factor here is that The Street expected EPS to decline from last year—so a strong increase in profitability during a very expensive set of changes is a great sign moving forward.
GO BIG OR GO HOME
Gross margin at Domino’s still declined from last year—but the company is still encouraged by all these results because same-store sales surged 2.8%. Basically, Domino’s new investments are already paying off in the U.S. The company revamped their loyalty program, driving up costs—but those incentives are more than paying off. More importantly, Domino’s new partnership with Uber Eats is driving much better sales and should help accelerate the brand’s international expansion. All signs point to efficient growth, and so the market is piling onto the stock in early trading.
WHY IT MATTERS
Domino’s has been one of those big food players that got crushed as supply chains broke down and costs erupted worldwide. Their logistical transformation here is breathing new life into growth at the company and the market is really starting to buy into this new global vision. Investors are also betting on lower rates this year driving down the strength of the U.S. dollar—which will supercharge Domino’s revenue growth by relieving foreign exchange pressure. For now, Domino’s stock surged over 5% in early trading.
[ electric vehicles ]
Li Auto Stuns With Revenue Beat
Maybe EV demand concerns have been a little overblown
BREAKING NEWS
Li Auto stunned the EV market this morning by doubling their revenue from last year and demolishing profit expectations. Li just proved that car demand is alive and well in the EV business.
WHAT HAPPENED
This time last year, the Chinese EV maker barely broke even on $2.5 billion in revenue. In today’s earnings report, Li generated a staggering $0.60 EPS from $5.8 billion in sales. That crushed The Street’s expectations and is causing a wave of bull sentiment to crash across the wider EV industry—as their revenue numbers suggest higher EV demand worldwide than investors have been projecting.
INFLECTION POINT
This is a well-documented event in the lifecycle of most EV companies. Li Auto is having their ‘Tesla moment’ wherein the inherent efficiencies of EV production take over and growth skyrockets. Li Auto is generating huge profit gains as incremental improvements to their production process really start compounding. While EV motors are hard to build—they’re ultimately much simpler to assemble than internal combustion engines. Li Auto has also responded to how competitive the EV market is in China by pushing even more of those efficiencies—and that’s starting to pay off.
WHY IT MATTERS
Li Auto’s results are kicking off a buying spree market-wide after the company also projected they would deliver over 100,000 cars in Q1 of 2024. Li only made 53,000 deliveries in the same time period last year, and most investors were expecting 85,000. Deliveries are more important than cars produced—as that’s a function of wider demand rather than manufacturing processes the company has more control over. EV mania just might be coming back, folks. Li Auto surged 12% in early trading and is now within striking distance of their 2023 highs.
Extra Moby Snacks
The Moon giveth and the moon taketh away, I guess. Intuitive Machines stock has come crashing back to earth after news broke that their Odysseus lunar lander actually tipped over onto its side after a successful landing last week. The lander is still communicating with mission control, but will lose power and cease functioning sometime in the next 24-36 hours. Intuitive Machines has another moon landing slated for later in the year. LUNR stock fell over 20% as markets digested the news.
Not satisfied with unseating Tesla as the world’s biggest EV maker—BYD has unveiled a $233,000 supercar to tackle the luxury market. With brands like Ferrari surging in China—BYD is hoping to lock in their own share of this extremely lucrative segment.
TOGETHER WITH
Today’s report is brought to you by Masterworks, the only platform that lets you invest in multi-million dollar works of art by artists like Basquiat, Picasso, Banksy, and more.
Past performance is not indicative of future returns. Investing involves risk. See Important disclosures at www.masterworks.com/cd