Consumer Sentiment Drops, Unemployment Claims Surge and Mortgage Rates Influence Refinance Applications: Portafolio Capital Markets Recap for Week Ending 05/10/2024
Consumer sentiment in the United States has fallen to a six-month low, primarily driven by ongoing concerns about inflation and the fear of rising unemployment rates according to the latest University of Michigan consumer sentiment survey released. Revealing a 13% drop in overall sentiment during the month of May. The index reading came in at 67.4, its lowest level in six months and well below economist expectations of 76.2. Recent surveys indicate that Americans are increasingly worried that the inflation rate, which has remained persistently high, could continue to impact their purchasing power. Moreover, there is growing apprehension regarding job stability, as potential economic slowdowns loom on the horizon. This decline in sentiment underscores the challenges facing U.S. households as they navigate the complexities of an uncertain economic environment.
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The number of Americans filing new claims for unemployment benefits surged to 231,000 last week, marking the highest level recorded since August. This increase suggests a potential softening in the labor market. Economists are closely monitoring these figures as they can indicate broader economic trends. Typically, rising jobless claims may point to an increase in layoffs, possibly reflecting companies' response to changing economic conditions.
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Mortgage rates experienced a slight decrease this week, leading to a 5% increase in refinance applications. This uptick reflects consumers' responsiveness to even minor fluctuations in borrowing costs amidst broader economic conditions. Analysts emphasize the importance of these shifts as potential indicators of both consumer sentiment and future housing market activity. The rise in refinance demand suggests homeowners are seizing opportunities to reduce costs as rate changes occur.
Sweetgreen's shares surged following the company's announcement that it surpassed revenue expectations. The healthy fast-casual chain reported strong quarterly results, indicating growth and increased investor confidence. This marks a substantial rebound for Sweetgreen, highlighting its recovery and expansion in a competitive food industry. 2024 Q1 Revenue reached $157.85 million, up 26.2% year-over-year, surpassing analysts' expectations of $152.02 million. However, their earnings per share (EPS) of -$0.23 fell short of the forecasted -$0.21 by $0.02.
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Warner Bros. Discovery faced a challenging first quarter, failing to meet financial expectations despite witnessing growth in its streaming services. The company reported underwhelming revenue and profit figures, indicating a need for strategic adjustments to boost performance. This shortfall occurred even as their digital platforms experienced an increase in user engagement and subscription numbers. 2024 Q1 Net Loss: $966 million, marking an improvement from the prior year, yet it exceeded the forecasted loss of $631.37 million. Q1 Revenue: $9,958 million vs. anticipated $10,230.83 million. EPS $0.40 this quarter, higher than the expected loss per share of $0.24.
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Robinhood, the popular trading platform, announced earnings for the first quarter. The company's financial success was attributed to increased trading activity and an expansion in its customer base, signaling a potential turnaround from its previous struggles in the stock market. Robinhood reported a 40% increase in revenue from the previous year, reaching $618 million. This growth was fueled by a 59% increase in transaction-based revenues, which totaled $329 million. Additionally, the company experienced a 232% surge in cryptocurrency revenue, aligning with approximately a 60% increase in the price of bitcoin during the first quarter.
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Airbnb reported stronger-than-anticipated earnings for the first quarter, surpassing Wall Street predictions. However, the company provided guidance for the upcoming quarter that fell below analysts' expectations, causing concern among investors. Revenue rose to $2.1 billion, an 18% increase year-over-year, driven by strong Nights and Experiences Booked, a slight rise in Average Daily Rate (ADR), and the early Easter timing. Net income soared 126% to $264 million, with the net income margin reaching a record 12%, up from 6% last year, reflecting robust revenue growth, interest income, and cost discipline. Adjusted EBITDA climbed 62% to $424 million, indicating effective cost management with an Adjusted EBITDA Margin of 20%. Free Cash Flow was $1.9 billion, boosted by the increased net income, with a trailing twelve months FCF Margin of 41%.
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ARM Holdings reported its most recent earnings on May 8, 2024, with an earnings per share (EPS) of $0.36, which exceeded analysts' expectations by $0.06. The company's revenue for the quarter was $928 million, also surpassing analyst estimates of $865.94 million. This revenue represents a significant 46.6% year-over-year growth. Over the last fiscal year ending March 31, 2024, ARM's total revenue reached $3.23 billion, marking a 20.68% increase from the previous year
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Shopify's stock took a significant dive following the announcement of lower-than-expected growth projections for the second quarter. The e-commerce giant attributed the decline to a slowdown in online sales as global markets begin to stabilize and consumer behavior shifts post-pandemic. Revenue for the first quarter of 2024 increased by 23%, or 29% when adjusting for the sale of Shopify's logistics businesses. Shopify's revenues for the three months ended March 31, 2024, were $1,861 million, compared to $1,508 million for the same period in 2023.
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Reddit's stock saw a significant increase following its first quarterly results since going public, surpassing Wall Street expectations. The platform not only reported strong revenue growth but also provided an optimistic outlook for the second quarter, indicating potential continued financial success. Investors responded positively, reflecting confidence in Reddit's business model and growth strategies. Reddit's revenue for Q1 2024 was $243.0 million, with a 48% increase compared to Q1 2023. User traffic (DAUq) increased by 37% to 82.7 million in Q1 2024. Reddit had its first profitable Q1 with Adjusted EBITDA of $10.0 million. Operating cash flow improved by $28.0 million compared to the prior year, reaching $32.1 million. Gross margin improved to 88.6% in Q1 2024, a 500 basis point improvement from the prior year.
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Ferrari reported an increase in first-quarter earnings, affirming its financial forecasts for 2024. The renowned carmaker, known for its luxury vehicles, expressed confidence in achieving its previously set targets. This update highlights Ferrari's robust performance and strategic optimism in the face of economic fluctuations. Ferrari reported revenues of €1,584.6 million, up 10.9% year-over-year, with a net profit of €352.2 million compared to €296.9 million in Q1 2023. Earnings per share increased to €1.95 from €1.63. The growth was primarily driven by robust car and spare parts sales, which totaled €1,382 million.
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Shares of Novavax surged following the announcement of a pivotal deal with pharmaceutical giant Sanofi. This strategic partnership, which aims to commercialize Novavax's COVID-19 vaccine, marks what the company calls a "new chapter" in its evolution. Investors responded positively, seeing this collaboration as a significant step forward in establishing Novavax as a key player in the vaccine industry.
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McDonald's is introducing a new $5 meal deal in an effort to attract more customers into its stores. The promotion includes some of the chain's most popular items, catering to budget-conscious consumers. This strategic move reflects the company's adaptation to the competitive fast-food landscape and evolving consumer preferences.
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Jim Simons, the billionaire who revolutionized Wall Street with his quantitative approach to investing, has died at the age of 86. Simons, a former codebreaker and mathematician, founded Renaissance Technologies which is renowned for its Medallion Fund, one of the most successful hedge funds in history. His pioneering strategies have left a lasting impact on the finance industry, transforming the way investment management operations are conducted through advanced mathematical models.
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