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- Regain | February 8th, 2024
Regain | February 8th, 2024
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[ good morning ]
Here’s everything you need to know today
With the S&P 500 knocking on the door of an unprecedented 5,000 level—it looks like earnings season is tilting more toward a bullish 2024.
We’re seeing massive moves from some of our economy’s biggest players—and strong businesses are managing to contain costs enough to keep earnings hope alive.
At the same time, fear about a wider conflict in the Middle East is pushing oil prices higher again while bond yields stay resolutely above 4%. This is the best of times. This also can feel like the worst of times.
So, let’s unpack the duality of investing through 2024 and see how companies are thriving by standing tall against immense challenges—or how weaker teams can completely crumble in the face of all this pressure.
Markets at a Glance
*Market data based on standard trading hours and calculated close to close
[ media ]
Disney Defies Activists With Complete Transformation
The stock is erupting after an earnings report for the ages
BREAKING NEWS
Weighed down by activist pressure, Bob Iger and Disney management have announced a complete transformation of their operations in their latest quarterly earnings. Disney stock is ascendant on wave after wave of positive shifts.
WHAT HAPPENED
First of all—Disney crushed earnings expectations by generating a $1.22 EPS when The Street didn’t expect even a dollar. Revenue numbers fell just short of analyst expectations, but Disney’s cost controls came in clutch to completely offset that miss.
The big highlight here is Disney’s streaming operations. This time last year, Disney lost a full $1 billion from operating their various streaming platforms. This quarter—streaming costs got all the way down to $216 million, a huge win for Iger and management.
MORE LIKE SMELLSON PELTZ
This earnings call was all about standing tall against a renewed wave of activist pressure being brought by Nelson Peltz and his Trian Partners firm. Disney outlined a path to boost profits 20% above what analysts were expecting in 2024. Furthermore, Disney also confirmed they will meet or exceed their goals to cut $7.5 billion worth of costs by the end of their fiscal 2024 year.
This earnings report also included news about a massive $1.5 billion stake Disney is buying in Epic Games. Disney will partner with Epic to create new games and experiences around Fortnite and Disney characters. While details are still light—this is a big move to give Disney new paths to revenue.
WHY IT MATTERS
After a 6-month slump, Bob Iger looked like he might be forced to capitulate to the activist pressure facing Disney’s board. This earnings report outlined a bold new vision for Disney that essentially addresses all of Nelson Peltz’s concerns and then some. Despite a slump in Disney+ subscribers, the House of Mouse has a coherent and compelling vision for growth in 2024. Investors loved the new vision here—adding 6% to Disney’s market cap in early trading.
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Sectors at a Glance
| Sector | Day | Month | Year |
|---|---|---|---|
| Communications | 0.51% | 8.20% | 36.70% |
| Consumer Disc. | 1.12% | 2.05% | 17.80% |
| Consumer Stap. | -0.09% | 2.13% | 1.42% |
| Energy | 0.20% | -0.07% | -5.13% |
| Financials | 0.75% | 3.52% | 6.51% |
| Health Care | 0.27% | 2.97% | 9.11% |
| Industrials | 0.66% | 4.80% | 14.02% |
| Materials | 0.80% | -1.30% | -0.11% |
| Real Estate | -0.05% | -3.59% | -5.65% |
| Technology | 1.32% | 9.16% | 42.15% |
| Utilities | 0.07% | -6.48% | -11.15% |
*Market data based on standard trading hours and calculated close to close
[ semiconductors ]
ARM Surges On New AI Lift
Demand for AI and automotive chips is skyrocketing
BREAKING NEWS
ARM defied bear narratives by crushing The Street’s revenue estimates and setting the stage for a blockbuster Q1. Their stock is skyrocketing.
WHAT HAPPENED
ARM managed to generate a respectable $0.29 EPS from $824 million in revenue. Considering that analysts were calling for revenue more in the $700 million range—ARM has stunned the market with this result.
More importantly, ARM has delivered far more chips than expected and projecting an incredible finish to their fiscal year in Q1—with revenue hitting as high as $900 million for the quarter. In an era where analysts were calling for a demand crunch—where is all this revenue coming from?
GETTING BY WITH YOUR FRIENDS
Incredibly—ARM is drafting off of data center demand as their Neoverse V2 processor cores are a critical component in Nvidia’s Grace Hopper AI Chip. With companies looking to deploy AI outside of the cloud, customers like Dell and Super Micro Computer are driving up orders for the DGX GH200 AI Supercomputer that requires Arm Neoverse cores.
Meanwhile, Automotive demand has also popped thanks to increased processing needs in that industry. Combined, these two sectors outperformed hard enough to offset a decline in Smartphone demand. At the same time, Smartphone demand began to recover in Q4—pushing shipments all the way up to 7.7 billion. While this is a slight decline YoY, it signals a complete recovery in demand.
WHY IT MATTERS
After months of skeptical analysts panning the ARM IPO as a joyless cash grab by SoftBank—this is a stunning result. ARM has brilliantly positioned themselves as a critical supplier for dozens of key product lines that are powering the deployed AI revolution. This further proves the growing narrative that chip demand is back in a big way and that AI development is bringing a lot of money to the table. The market is a big believer in the ARM narrative now—and their stock shot up over 20% in early trading.
[ automotive ]
PayPal Slumps as 2024 Growth Looks Flat
A strong profit beat isn’t enough when the future looks bleak
BREAKING NEWS
PayPal managed to beat their revenue and earnings expectations for Q4. But, with the market really needing to see more of a growth narrative—their guidance moving forward looks pretty bleak. Investors are dumping the stock en masse in early trading.
WHAT HAPPENED
PayPal is in a pretty tough situation. After basically establishing the digital payments industry, their niche has been eaten away by the likes of Google Pay, Apple Pay, and practically a dozen other competitors.
Despite being attacked from all sides, PayPal managed to beat expectations on both sides of the balance sheet by generating a $1.29 EPS from $8 billion in revenue. While that’s great—PayPal’s outlook soured any optimism that came from those numbers as it looks like they just can’t sustain this growth.
GRIM PROJECTIONS
Even though PayPal has some really strong tailwinds that should have boosted profitability—every conceivable projection for earnings and profits fell well short of The Street’s expectations. Revenue figures don’t look great either. With PayPal’s core checkout business basically eroding away—investors simply don’t know how to value this stock anymore.
WHY IT MATTERS
PayPal is in a tough situation where investors simply cannot decide the company’s overall direction. After a volatile year, PayPal ended 2023 down over 20%. Despite some small recovery to start the year—PayPal has basically confirmed the bear narratives haunting their price action. PayPal stock slumped hard in early trading as investors dumped over 7% of the firm’s market cap.
Extra Moby Snacks
Wynn Resorts managed to beat estimates and ride the travel boom to new heights. Thanks to improved guidance—Wynn stock got a solid 3% lift in early trading. Travel is so back, folks.
Oscar Health surged after their earnings report projected a massive revenue beat north of $8.4 billion for the full year. Investors anticipated revenue lower than $7 billion—so this guidance pushed Oscar health stock over 20% higher in early trading.
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