The week ahead 05/15/2023
To the hundreds of mothers that read our updates each week — we hope you enjoyed a day dedicated entirely to you this weekend.
Before we dive into the full update — you know that we love calling out random goodies. Today’s version is the unbelievable concentration of wealth that the Federal Reserve projects to be held by Baby Boomers.
What’s the call to action?
The first step is understanding that Boomers are currently undergoing a relatively rapid (and somewhat awkward) transfer of wealth to younger generations.
The next would be thinking about how you can best take advantage of the transition. And no — we’re not just talking about trust fund babies.
Boomers will be offloading billions upon billions of dollars worth of small businesses as they reach their retirement / final days. Our suggestion would be to always keep your ear to the ground as to how you could gain ownership or revenue from an existing “Boring Boomer Business.”
Here’s a link to a solid book on the subject — The HBR Guide to Buying a Small Business. (not sponsored)
Key Earnings Announcements:
Retail giants are ready to put on a show.
Monday (5/15): Monday.com, Navitas Semiconductor, Nu Holdings, Rumble, Tower Semiconductor, Workhorse
Tuesday (5/16): Baidu, Doximity, Home Depot, On Holding, Paysafe, Sea Limited, Star Bulk Carriers, Tencent Music Entertainment, The Container Store
Wednesday (5/17): Arcos Dorados, Dynatrace, Cisco, Dlocal, Jack in the Box, SQM, Target, TJ Maxx, Wix
Thursday (5/18): Alibaba, Applied Materials, Bath & Body Works, Canadian Solar, Farfetch, Ross, Walmart
Friday (5/19): Foot Locker, John Deere
What We’re Watching:
Target’s last earnings report saw its CFO note that they “expect our business to generate first quarter comparable sales in a wide range, from a low single-digit decline to a low single-digit increase. This reflects our expectation for continued strength in our frequency businesses, offset by softness in discretionary categories.”
Analysts expect $1.77 EPS on Revenue of $25.3 billion.
You can explore the most recent TGT earnings report here.
Alibaba is expected to speak much more in-depth about the division of the company into six businesses. China will also be releasing a barrage of economic data this week, which could have an additional impact on the stock around earnings time.
Analysts expect $9.51 EPS on Revenue of $208.8 billion.
You can explore the most recent BABA earnings report here.
Walmart’s last earnings report bragged about +7.3% Revenue Growth, +8.3% Walmart U.S. Comp Sales, Over 20% Global Ads Business Growth, and +$16.0B Returns to Shareholders YTD. Shareholders of WMT are looking for improvement to Q4’s -5.5% Operating Income (-21.3% for the last full year.)
Analysts expect $1.31 EPS on Revenue of $148.7 billion.
You can explore the most recent WMT earnings report here.
Home Depot (HD)
Home Depot’s last earnings report featured forecasts of sales growth and comparable sales growth being approximately flat in 2023 (as compared to fiscal 2022).
Meanwhile — largely due to a $1 billion investment in frontline workers — a guide for a 14.5% operating margin in 2023 came in lighter than the 15.1% consensus.
Analysts expect $3.80 EPS on Revenue of $38.3 billion.
You can explore the most recent HD earnings report here.
Investor Events / Global Affairs:
The Debt Ceiling standoff and Microsoft’s acquisition of Activision Blizzard gets a box checked.
U.S. Debt Ceiling
As of Monday morning, President Biden has signaled optimism that a deal will be reached with Republicans to raise or suspend the debt limit by the end of the month.
However, House Leader McCarthy noted that “I still think we’re far apart.”
McCarthy has been critical of President Biden’s plans to travel to Japan for the G-7 Summit, when he previously said that he would attend virtually if the debt limit negotiations were not complete.
McCarthy noted that “we’ve gotta have a deal done by this weekend” and that the president “hasn’t taken it seriously.”
You can learn more about the full situation by reading the beginning of this post.
Microsoft (MSFT) Acquisition of Activision Blizzard (ATVI) Gets EU Approval
The European Union has officially approved Microsoft’s proposed $69 billion acquisition of gaming giant Activision Blizzard.
In order to get the green light — Microsoft “offered remedies in the nascent area of cloud gaming” which would allow “users to stream Activision games that they purchase on any cloud streaming platform.”
The EU decision comes after the United Kingdom Competition and Markets Authority (CMA) blocked the deal last month due to concerns that it would reduce competition in the gaming market.
“They would replace a free, open and competitive market with one subject to ongoing regulation of the games Microsoft sells, the platforms to which it sells them, and the conditions of sale. This is one of the reasons the CMA’s independent panel group rejected Microsoft’s proposals and prevented this deal.” — CMA CEO Sarah Cardell
Here’s a link to our past write-up about this situation, which we remain cautiously optimistic on. There is certainly doubt and uncertainty, but the EU approval is a big win.
Here’s a link to a Tweet from our friend Lulu — Activision Blizzard’s Chief Communications Officer — with more details.
Major Economic Events:
Leading Economic Indicators, Home Sales, and Powell steps back into the spotlight.
Monday (5/15): Empire State Manufacturing Survey, Speeches by Fed Presidents Goolsbee (CHI) & Kashkari (MN)
Tuesday (5/16): Business Inventories, Capacity Utilization, Home Builder Confidence Index, Industrial Production, Retail Sales, Speeches by Fed Presidents Bostic (ATL), Mester (CLV), Goolsbee (CHI), Williams (NY), & Barkin (RVA)
Wednesday (5/17): Building Permits, Housing Starts
Thursday (5/18): Existing Home Sales, Philadelphia Fed Factor Survey, Speech by Fed Gov. Jefferson, U.S. Leading Economic Indicators
Friday (5/19): Panel by Fed Chairman Powell & Former Fed Chairman Bernanke, Speech by Fed Fed President Williams (NY)
What We’re Watching:
The Conference Board returns to the headlines this Thursday, releasing the newest edition of its Leading Economic Indicators.
Existing Home Sales
In March, existing-home sales retreated -2.4% to a seasonally adjusted annual rate of 4.44 million. Sales declined -22.0% from one year ago.
The inventory of unsold existing homes rose +1.0% from the prior month to 980,000 at the end of March, or the equivalent of 2.6 months’ supply at the current monthly sales pace.
“The housing market has started to recover, and this is a problem for the Fed because more demand for housing will boost home prices and rents, and with housing having a weight of 40% in the CPI, this will make it more difficult to get inflation down from currently 5% to the Fed’s 2% inflation target.” — Torsten Sløk, Apollo Chief Economist
Powell & Bernanke
The history books recall Paul Volcker (1979-1987) as the Fed Chair that crushed inflation, and Ben Bernanke (2006-2014) as the Fed Chair that fought off crisis after crisis.
Now the question has arrived — can Jerome Powell (2017-present) do both?
We’ll learn more from a closely-watched conversation between Bernanke and Powell later this week.
Which stocks moved the most last week.
Our friends at LevelFields scrub through thousands of data points each week to determine how events impact stock prices.
Palantir (PLTR) stock is up +47% YTD, but is littered with question marks.
Bulls argue that products targeting both commercial and government clients will lead to growing revenue streams over time. They’re also excited about the use of A.I. to bolster sales growth.
Bears note that Palantir’s long road to GAAP profitability and the total addressable market isn’t large enough to reach colossal growth.
If you’re starting your investing journey or are interested in buying T-bills yielding 5% or more, consider visiting Public.com.
Disclaimer: This is not financial advice or recommendation for any investment. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.