The week ahead 02/27/2023
Happy Monday, everyone.
We’re excited to announce a new podcast for you to add to your rotation! I’m very lucky to co-host the Rich Habits podcast alongside Robert Croak.
Do you remember Silly Bandz?
He founded the company over a decade ago, scaled it from $10K / year to $100M / year in revenue — and is personally worth in excess of $15M.
The theme of the show?
A business veteran that has already “made it” gives guidance to me — the young gun who’s just trying to make the right decisions in his 20s.
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Key Earnings Announcements:
Target, Snowflake, and Hims & Hers are in focus. Other major players reporting include: Costco, Coupang, Lowe’s, Macy’s. Salesforce, and Zoom Video.
Monday (2/27): fuboTV, Hims & Hers, LI Auto, Occidental Petroleum, Workday, Zoom Video
Tuesday (2/28): AutoZone, Builders FirstSource, Coupang, J.M. Smucker, Novavax, Rivian Automotive, Target
Wednesday (3/1): Celsius Holdings, Dollar Tree, Kohl’s, Lowe’s, NIO, Salesforce, Snowflake, Splunk
Thursday (3/2): Anheuser-Busch, Best Buy, Big Lots, Broadcom, C3.AI, Clear Secure, Costco, Dell, HP, Kroger, Macy’s, Marvell Technology, Nordstrom, ZScaler
Friday (3/3): Hibbett
What We’re Watching:
Analysts are expecting:
Revenue to hold up — coming in at around $30.65 billion, down -1.1% from a year prior. Same-store sales are expected to fall -1.7% YoY for the first time since Q2’17.
Another major decline in earnings — with net income for Q4’22 estimated to be ~$650 million according to FactSet. This would be a sharp drop from the $1.54 billion a year ago.
Analysts are expecting:
Substantial revenue growth — nearly +50% for FQ4, with an adjusted EBIT margin of 1.7%.
Indications of significant operating leverage — with an FY23 adjusted EBIT margin of 3.5% (relative to FY22’s -2.6%).
Hims & Hers (HIMS)
Analysts are sharing:
A consensus EPS Estimate is -$0.02.
A consensus Revenue Estimate is $161.18M (+90.3% Y/Y).
Jefferies recently lowered their FY2023 EPS estimates for HIMS. I remain an excited shareholder of this stock.
Investor Events / Global Affairs:
Buffett wrote you a letter, Elon Musk prepared for another giga-party, and Pfizer ponders a massive acquisition.
Warren Buffett’s 2023 Letter to Shareholders
Each year, Warren Buffett releases the Berkshire Hathaway (BRK) Annual Report — including his personal letter to shareholders.
Overall earnings (Q4’22) — dropped to $18.164 billion, a -54% decline YoY. These earnings reflect Berkshire’s fluctuating equity investments.
Overall earnings (FY22) — tumbled -125% to a loss of -$22.819 billion in 2022, down from earnings of +$89.795 billion in 2021. The company reported a -$53.6 billion loss from investments and derivatives.
Operating earnings (Q4’22) — totaled +$6.7 billion, down -7.9% YoY while profits totaled +$7.3 billion. Operating earnings refers to the total profits made from the businesses owned by the conglomerate.
Takeaways from Buffett’s Letter:
“In August 1994 – yes, 1994 – Berkshire completed its seven-year purchase of the 400 million shares of Coca-Cola we now own. The total cost was $1.3 billion – then a very meaningful sum at Berkshire. The cash dividend we received from Coke in 1994 was $75 million. By 2022, the dividend had increased to $704 million. Growth occurred every year, just as certain as birthdays. All Charlie and I were required to do was cash Coke’s quarterly dividend checks. We expect that those checks are highly likely to grow.”
“Our job is to manage Berkshire’s operations and finances in a manner that will achieve an acceptable result over time and that will preserve the company’s unmatched staying power when financial panics or severe worldwide recessions occur. Berkshire also offers some modest protection from runaway inflation, but this attribute is far from perfect. Huge and entrenched fiscal deficits have consequences.”
“As for the future, Berkshire will always hold a boatload of cash and U.S. Treasury bills along with a wide array of businesses. We will also avoid behavior that could result in any uncomfortable cash needs at inconvenient times, including financial panics and unprecedented insurance losses”
Tesla (TSLA) Investor Day
On Wednesday (3/1), Elon Musk will be hosting Tesla’s newest Investor Day at its Gigafactory in Austin, Texas.
The main theme of the event is the third iteration of Tesla’s Master Plan. The man with, debatably, the world’s most eyeballs on him has taken substantial heat for not living up to past promises (i.e. the timeline of the Tesla Cybertruck).
“Master Plan 3, the path to a fully sustainable energy future for Earth will be presented on March 1. The future is bright!” — Elon Musk, February 7th, 2023
Given the quote above, investors speculate that Musk may be forthcoming in announcing some sort of convergences between two of his other companies — The Boring Company and SpaceX.
In September of 2021, Musk stated that the Tesla Roadster — which would be the most premier of all Tesla sports car offerings — “should ship in 2023.” Investors will also be looking for him to address that fleeting promise.
On the more practical side of things — analysts are hoping to hear about improved cost-reduction efforts. The company shook up the EV pricing landscape when it dramatically dropped prices at the beginning of 2023. Will Tesla production projections and demand encourage Musk to continue dropping them further?
Pfizer (PFE) Attempting to Acquire Seagen for $30 Billion
Over the weekend, it was announced that Pfizer (PFE) is in talks to acquire Seagen (SGEN) for a figure well north of $30 billion. Last year, Seagen was in talks with Merck & Co. (MRK) to be acquired for more than $40 billion — but the two sides failed to reach an agreement.
According to the Wall Street Journal — a deal would help Pfizer, one of the world’s biggest pharmaceutical companies with $100 billion in sales last year, add to its lineup of cancer treatments. Seagen produces a class of agents that have shown promise working with so-called immunotherapies against some of the most prevalent tumors.
Funny enough, this news came during the same weekend in which the U.S. Energy Department admitted that the Covid pandemic likely started from a Wuhan lab leak. Pfizer sold $37.8 billion of its Covid vaccine in 2022, as well as $18.9 billion of Paxlovid — its new antiviral pill released in response to the pandemic.
Major Economic Events:
With inflation fears reignited, economists are looking toward Housing, Manufacturing, and Services for some signs of light.
Monday (2/27): Core Orders, Dallas Fed Manufacturing Activity, Durable Goods Orders, Pending Home Sales, Speech by Fed Gov. Jefferson
Tuesday (2/28): Chicago Business Barometer, Consumer Confidence, FHFA House Price Index, S&P Case Shiller Home Price Index, Retail Inventories (Advance), Richmond Fed Business Conditions, Richmond Fed Manufacturing Index, Speech by Chicago Fed President Goolsbee, Trade Balance in Goods (Advance), Wholesale Inventories (Advance)
Wednesday (3/1): Auto Sales, Construction Spending, ISM Manufacturing PMI, MBA Mortgage Applications, Speech by Minneapolis Fed President Kashkari, Ward Vehicle Sales
Thursday (3/2): Productivity (Revision), Speeches by Fed Gov. Waller & Minneapolis Fed President Kashkari, Unit Labor Costs
Friday (3/3): ISM Services PMI, Speeches by Fed Gov. Bowman & Dallas Fed President Logan
What We’re Watching:
Core Orders & Durable Goods Orders
Early Monday morning, the Commerce Department announced that orders placed with U.S. factories for business equipment increased in January by the most in five month. This suggests that businesses are continuing to make long-term capital investments — despite brutal borrowing costs and economic woes.
Durable goods orders — items that are intended to last at least three years — dropped -4.5% in January. This marked the sharpest decrease since April 2020.
Excluding transportation equipment — durable goods orders increased +0.7% MoM. The primary differentiator appears to be a strong pullback in bookings for commercial aircraft (-54.6% MoM).
ISM Manufacturing PMI
The manufacturing sector has yielded some of the weakest metrics over the past year or so. The Manufacturing PMI’s latest reading for January fell to 47.4 — the lowest since May 2020 during the heigh of the pandemic.
We’ll find out this week if U.S. manufacturing will continue to linger in contraction.
ISM Services PMI
The services sector of the U.S. is at a pivotal point. In January, the Services PMI came in at 55.2 — blowing past expectations of 50.4. The Institute for Supply Management (ISM) noted that “respondents indicated that capacity and logistics performance continue to improve… business is trending in a positive direction.”
Economists will be looking to see if the services sector can remain head-and-shoulders about the ‘contraction territory’ of sub-50.
Which stocks moved the most last week.
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