Notizie e analisi

Walmart quarterly numbers quite predictably beat even the crowd's lofty expectations in both revenue and profit opening the way to new price peaks. During the first 5 minutes after the release, the market response was an immediate taking off and soaring by 6.6%, from $68.66 to $73.20 per share. The previous high for Walmart stock was detected at $71.33 on July 19, so that means entering into a new price area for the US largest chain of economy class hypermarkets. Even before the report, many investment houses formed their consensus opinion that Walmart was still in Overweight position, with their price targets well above $80. And now the whole situation not only looks better, but bullish prospects for the stock are also easier to understand. Walmart announced its quarterly EPS of $0.67, just a $0.03 better than the analyst estimate of $0.64, yet this number set an absolute record on a 9.2% surplus YoY, of course if the whole date series for years would be retroactively adjusted for the 1:3 stock split, which has been accomplished at the end of February. Moreover, the current achievement is shown despite its revenue record still not exceeded, pointing at smart and profitable pricing policy in a challenging environment. Walmart's revenue for the last quarter came out at $169.3 billion, which can be called weaker only when compared with $173.4 billion in the Christmas quarter. We can agree this would not be an exactly valid comparison with an all-time record for the sale-off season. Besides, its YoY growth is 4.7% in sales, with the consensus estimate for Q2 being at $168.52 billion, against $161.6 billion in Q2 2023.

The further pace of the rally in Walmart could be limited by the company's moderately shying forward guidance as it sees Q3 EPS of $0.51-$0.52 vs analyst poll consensus of $0.54 and a $2.35-$2.43 range for its annual EPS for the financial year or 2025 average analyst bets on $2.43. However, this would barely derail the upside move as Walmart investors knew from their previous experience that their favourite company's management prefers to understate expectations and later beat them. Again, Walmart's own prior forecast was "at the high end of a range of $2.23 to $2.37 per share", and so an actual raising of its profit forecasts happened. Its fiscal 2025 net sales growth is foreseen in between 3.75% and 4.75% from a prior range of 3% to 4% growth. The number of transactions, which indicates store visits, rose 3.6% in U.S. stores and online orders. The average ticket, which means how much Walmart visitors are spending per one visit, is 0.6% up YoY.

Surely, rising sales of inexpensive essentials, with an already beginning deterioration in the labour market, helps discounter chains compared to the average consumer activity in other shops. Walmart accounts for $1 of every $5 spent on groceries in the United States. But Walmart's reputation as a destination for upper-income shoppers has expanded for the last several years, because of mighty merchandise upgrades and investments in curbside pickup and delivery. This is why online sales in Walmart added 22% YoY. Anyway, Walmart's report ahead of the opening bell on August 15, being a major market bellwether of the week, also sets the positive mood for nearest days, revealing some further upside potential for the rest of the consumer segment at least.

The US S&P 500 broad market barometer continued to crawl out of the underground area when the price twice touched the levels below 5,200 points during the previous week. The crowd climbed a 5,400 wall just the day before and then edged to nearly 5,450 on today's consumer prices (CPI) data. The further growth still looks slower and erratic as the US July CPI was actually low but unsurprising. And so, this is a natural action after the sudden fright, even though recession signs seem to have receded. As expected, expert opinions began to vie with each other that it is premature to talk about the economy slipping into recession, as the process should be characterized by a persisting decline in consumption, which has not been noticed or confirmed yet. Meanwhile, inflation pressure scaled back to support optimistic scenarios for the Federal Reserve's rate cut this autumn.

The US CPI rose by 2.9%, as of the latest governmental release to slightly moderate the pace vs 3.0% one month ago, while the polls projected the number would be kept intact at 3.0%. Better than nothing, even taking into consideration that prices added another 0.2% MoM, both in the headline and underlying inflation slices, compared to falling/rising within 0.1% in mid-summer. The so-called "core" CPI also came out at 3.2% in the twelve months to July, which was below average forecasts of 3.3%. The PPI (producer price index) release on Tuesday showed the "core" inflation was cooling as the PPI, excluding most unstable food and energy components, was flat on the month and narrowed the annual indications to 2.4% from a widely estimated range of 2.5% to 2.7%. This means a rate reduction cycle is just around the corner, which may contribute to the recovery mood.

Immediate price increases need not necessarily to take place on Wall Street, yet step-by-step climbing on the path to the top with buying dips on the tech segment bellwethers, and more selectively on broader markets as well, are most likely. More or less risky developments, including a retest of 5,250 to 5,300 on the S&P 500, cannot be excluded. However, appearing at new market lows of August in the AI-related or most consumer stocks is not highly plausible anymore.

I told you before that I strongly believe in Starbucks' ability to get out of whatever jam it was temporarily in. Today life proved they could keep the coffee dry enough to resurface at any moment.

This week is probably all about inflation data, with US CPI is scheduled for Wednesday, and retailers, starting with Home Depot's quarterly report on Tuesday (was not very bright, but not disappointing at least) and the major Walmart report on Thursday. However, Starbucks news was hosed ahead of the race with a sudden management miracle. It named now-the-former CEO of extremely successful Chipotle Mexican Grill as Starbucks' new CEO, effective since September 9. This important leadership change immediately pushed Starbucks share price more than 20% up, which may be too much for the particular moment, but looks promising for improving the coffee chain's sales in North America and China. Therefore, I personally feel that any price retracement to the levels below $90 could become a golden Buy opportunity. IMHO, even $85 is possible as a short-time episode, but sliding to $75 again would be nearly unbelievable.

Brian Niccol is credited with the splendid thriving of his company since he took the helm in 2018. He doubled Chipotle's revenue and provided its stock price ride to the moon, adding somewhat 700% or 800%, not only because people love burritos so much but also due to his focus on brand culture, menu innovation as well as digital transformation of Chipotle's service. I bet you at least a thousand bucks that Starbucks would become the same kind of riding-to-the-moon-and-stars company very soon, as Niccol is a the Manager to recover the brand's global influence. His leadership expanded from P&G and Taco Bell to Pizza Hut, and he also served on the board of directors for Walmart and even held positions on the boards of Harley-Davidson. For me, it's a kind of miracle-making coach, like Guus Hiddink was in football, so that he pushed even Australians, South Koreans and even slow Russians to play the game. Howard Schultz, the legendary Starbucks founder and chairman emeritus, also expressed his admiration for Niccol's "impact on retail excellence", particularly his ability to "lead a culture and values-driven enterprise."

Well, let's just hold and see. Hope, with a view to repeating July 2021 with its above $120 records, for the beginning.

After three weeks of a severe technical retracement from an all-time high at $966 on July 15 to fresh dips below $750 in early August, Eli Lilly revealed itself once again as the most attractive company for mass. The company's new and popular weight loss treatment Mounjaro statistically results in a more remarkable growing thin effect than rivals' obesity drugs, in a real-world comparison across other benchmarks, including Novo Nordisk's obesity drug named Wegovy or Ozempic, which are actually two different brand names for the same injectable drug, semaglutide, AMA Internal Medicine journal reported about a month ago. Patients taking Mounjaro were 76% more likely to lose at least 5% of their body weight, more than twice as likely to lose at least 10%, and more than three times as likely to lose at least 15%, compared to patients taking the second place drug, researchers found after analysing weight loss trajectories in 9,193 patients. Mounjaro sales reached $3.1 billion, with best growth pace in the UK, UAE and Saudi Arabia markets, and now Eli Lilly additionally reports robust, and better than expected, financial growth.

Its quarterly EPS (equity per share) just came out at $3.92 on $11.3 billion of total sales vs nearly $2.75 per share on about $10 billion in consensus estimates, and also against $2.54 per share on $8.77 billion in the previously record quarter, meaning a 42.5% QoQ and a 85.2% YoY surplus in EPS. What a wonderful margin performance in a very challenging environment! Eli Lilly's CEOs revised their annual revenue outlook upwards to forecast it between $45.4 billion and $46.6 billion for 2024, following a 36% increase in revenue YoY so far and "with operating margins in the mid- to high-30s range". Revenue in Europe added 20% in constant currency, 15% in Japan and 61% in the "rest of the world" (outside the US. and the EU).

Eli Lilly's share price quickly soared to $875 to $905 resistance area before the weekend, while a rather sceptical Deutsche Bank immediately upgraded the stock from Hold to Buy with a 15% of additional upside potential to $1,025 at least and BMO Capital Markets provided its rosy path assessment with a new price target at $1,101 from $1,001. Even average expert poll projections are shifted to a $4.28 of EPS at nearly $12 billion of sales for Q3. And so, we do agree with a more optimistic outlook, feeling that the most prominent manufacturing expansion in the biopharma industry since the pandemic time should be given not only a praise but also monetary rewards. Its current supply capacity is 1.5 times above the level which was measured only 1.5 ago.

The company continues to invest heavily in its manufacturing and expansion, with over $18 billion committed to facilities and announced plans to put an extra $5.3 billion in its manufacturing sites in Indiana. It is ready to acquire Morphic Therapeutic as well to better withstand chronic diseases. It achieved "the approval of Kisunla, the brand name for donanemab in the US for the treatment of Alzheimer's disease, the approval of Jaypirca in Japan for people with relapsed or refractory mantle cell lymphoma, the submission of tirzepatide in the U.S. and the EU for the treatment of moderate to severe obstructive sleep apnoea in adults with obesity and the positive top line results from the SUMMIT Phase 3 trial evaluating tirzepatide in adults with heart failure with preserved injection fraction and obesity", according to last earnings call's materials. This is an impressive list of achievements to generate both more healthy life profits. Besides, Eli Lilly raises its dividend payment for 9 consecutive years. It now equals to $1.3 per share, maybe not much compared to the stock's price growth but is also a pleasant indication of the company's self-confidence.