Passport to Wall Street

Amazon Q2 Earnings Preview: Analyst Expects Strong Growth In Sales, Cloud Services, But Cautious On Q3 Profit Guidance

Benzinga News — Fri, 26 Jul 2024 14:52:06 -0400

As Amazon.com Inc (AMZN ) gears up to announce its Q2 earnings on Thursday after the market close, anticipation is building around what could be a remarkable performance.

With just six days to go, BofA Securities' analyst Justin Post has painted an optimistic picture for the e-commerce and cloud giant, with a $220 price target (a potential 22.3% upside) and maintaining a Buy rating.

Aiming For A Q2 Beat: $149 Billion Revenue In Sight

Post forecasts Amazon's Q2 revenues to hit $149 billion, 40 basis points above Wall Street's expectations. AWS is expected to grow at 18% year-over-year, beating the Street's 17% estimate.

With a projected operating profit of $14 billion, Amazon might surprise investors by exceeding expectations, potentially reaching as high as $15-$16 billion due to favorable factors like third-party fees and Prime advertising growth.

Retail Sales, Cloud Powering Growth At Amazon

Data trends suggest a promising Q2 for Amazon. Online spending growth has accelerated, according to BofA's aggregated card data and Bloomberg Second Measure, contradicting the Street's prediction of a more significant decline.

According to Post, AWS is set to benefit from robust backlog growth and increasing consumption spending, especially in AI model training. Additionally, Google's recent positive results signal limited pricing pressure for AWS, indicating a one-point quarterly acceleration and margin improvement.

Cautious Q3 Outlook Amidst Margin Concerns

Despite the upbeat Q2 outlook, Post advises caution for Q3 profit guidance, citing high expectations and rising freight costs as potential risks.

Historically, Amazon's Q3 guidance tends to be conservative, often falling short of the Street's estimates, only to outperform by an average of 33% over the past three years. Post projects Q3 revenue guidance between $155.5 billion and $160.5 billion, suggesting a 5% quarter-on-quarter growth, with GAAP operating profit ranging from $12 billion to $15.5 billion.

Still Room for Growth Despite Expanded Multiples

Amazon's stock may be valued at 12.8x EV/EBITDA, below its 10-year average of 17x, but Post sees ample room for multiple expansions in 2024.

With expanding retail margins supported by Prime ad growth and AWS acceleration, Amazon is poised for further gains. Post emphasizes that improving margins justify a more traditional P/E valuation framework. The 30.7x Street '25 GAAP EPS is seen as reasonable, given the expected 27% two-year GAAP earnings growth CAGR.

As Amazon approaches its Q2 earnings release, all eyes are on the e-commerce giant to deliver another strong performance. With solid revenue estimates, cloud growth, and an optimistic outlook for the remainder of 2024, Amazon remains a compelling investment opportunity with a potential 22.3% upside, according to Post.

Will Jeff Bezos' brainchild continue to defy expectations and deliver another knockout quarter? We'll find out soon enough.

General Motors' Cruise Aims To Resume Driverless Rides This Year: Report

Benzinga News — Fri, 26 Jul 2024 14:52:00 -0400

Cruise, the self-driving vehicle unit primarily owned by General Motors Company (GM ), reportedly aims to resume fully autonomous rides later this year and may start charging fares by early 2025.

The San Francisco-based company has been working to regain momentum after halting its fleet in October due to previous management's handling of a pedestrian collision, reported Bloomberg.

One of Cruise's vehicles hit and dragged a pedestrian, who required months of hospitalization. California regulators revoked Cruise's driverless license, claiming the company was not transparent about the incident.

Since then, Cruise has been rebuilding by replacing top management, including appointing a new CEO and repairing relationships with regulators.

With a new team in place, the company aims to resume fully autonomous driving by year-end and may start charging fares early next year, the report noted, citing people familiar with the discussions.

On the company's earnings conference call, CEO Mary Barra stated that Cruise's technology has advanced, is meeting stricter safety standards, and is progressing towards resuming operations with safety drivers.

"The technology is much more advanced to be better than a role model driver," Barra said on a call with investors. "I'm very confident as we now have the vehicles operating and we're on the path very quickly to get back to driverless with much safer technology," Bloomberg added.

Cruise, which has yet to generate revenue, lost $1.2 billion in the second quarter and $1.8 billion in the first half of the year, the report noted. This loss includes $583 million in restructuring costs related to discontinuing its Origin autonomous shuttle.

Price Action: GM shares are trading higher by 0.31% to $44.26 at last check Friday.

TikTok Vs. Reels Vs. Shorts: Analyst Sizes Up Short-Form Video Platforms On Valuation And Monetization

Benzinga News — Fri, 26 Jul 2024 14:51:54 -0400

ByteDance's TikTok, Meta Platforms Inc's (META ) Instagram Reels and Alphabet Inc's (GOOG ) (GOOGL ) YouTube Shorts are the three largest short-form video platforms.

The META Analyst: Needham analyst Laura Martin reiterated an Underperform rating for Meta in a note published Friday.

Martin also compared Meta's Instagram Reels platform to industry competitors and reached valuations for each:

TikTok, $218 billion.
Instagram Reels, $203 billion.
YouTube Shorts t $206 billion.

Martin reached the figures by multiplying revenue, monthly active users and engagement by valuation multiples and averaging the three.

TikTok excels at revenue generation and engagement while Reels has the most monthly users. Shorts has a high user engagement similar to TikTok.

Monetization Takeaways: Per a survey of businesses advertising on the platforms, Instagram Reels is the most successful at driving sales followed by Shorts. TikTok is in third.

TikTok has the most advertising formats with Instagram/Facebook Reels in second and Shorts in third.

Ad buyers identify young demographics, interactive features and virality potential as positives in advertising on TikTok. Negatives include the advertising learning curve and a potential U.S. government ban.

Ad buyers like that Reels has the widest demographic base of users and more precise targeting and analytics as advantages. Advertisers feel like the ads are less interactive on Reels than TikTok. They remain concerned that advertising is too expensive given that nearly all advertisers use Meta.

Shorts has a diverse user base and easy targeting and analytics tools. Additionally, Shorts is integrated well with the entire YouTube ecosystem. Shorts is seemingly less popular among users.

User Feedback Takeaways: Users perceive TikTok as being the original short-form video platform and Reels and Shorts as being "imitations." Users also like TikTok's catered algorithm and frenetic pace compared to Reels and Shorts.

Apple Joins Meta And Google, Pledges Support For Biden's AI Regulations

Benzinga News — Fri, 26 Jul 2024 14:51:48 -0400

In a recent development, Apple Inc. (AAPL ) has committed to the voluntary artificial intelligence (AI) safeguards set by President Joe Biden's administration.

What Happened: Along with Apple Inc., other industry giants such as OpenAI Inc., Amazon.com Inc. (AMZN ), Alphabet Inc. (GOOG ) (GOOGL ), Meta Platforms Inc. (META ), and Microsoft Corp. (MSFT ) have also pledged to test their AI systems for potential discriminatory tendencies, security flaws, or national security risks, Bloomberg reported on Friday.

This commitment by Apple comes at a time when the company is gearing up to integrate OpenAI's chatbot application, ChatGPT, into its voice-command assistant on iPhones. This decision has stirred up a controversy with Tesla Inc. (TSLA ) CEO Elon Musk, who has expressed concerns over security and threatened to ban Apple devices from his companies if the AI software is integrated at the operating system level.

Why It Matters: Apple's AI offerings, including the ChatGPT integration, are expected to roll out gradually, with some features not anticipated until 2025.

Apple plans to integrate its A18 chip into its upcoming entry-level iPhones and iPads to enable them to run Apple Intelligence, the company's suite of AI features.

6 Stocks Going For Gold During 2024 Summer Olympics: 'Biggest Event' in Company History

Benzinga News — Fri, 26 Jul 2024 14:51:33 -0400

Millions of eyes will be glued to televisions over the next two weeks, with the 2024 Summer Olympics kicking off in Paris on July 26.

Here's a look at six companies that could experience a boost in interest and their financials from the 2024 Summer Olympics.

Comcast Corporation (CMCSA ): The media company has the rights to the Summer Olympics and will focus heavily on its Peacock streaming platform during the two weeks. All events will be streamed on Peacock with NBC also having network coverage in primetime.

The Summer Olympics includes top events across swimming, track and field, gymnastics, men's basketball and more that American viewers love watching. Given the time difference between the U.S. and host country France, sports fans and Olympics viewers may shell out the extra money to subscribe to Peacock to get real-time coverage instead of taking the risk of having event results spoiled ahead of Primetime replays.

"This is going to be a defining moment for Peacock," Peacock President Kelly Campbell said.

Airbnb Inc (ABNB ): The travel company could benefit from the Olympics, where it is housing hundreds of thousands of people during the two-week event. In June, the company shared that its Paris region listings had increased by 40% and nights booked in the region during the Olympic Games were up 400% year-over-year.

Airbnb shared at the time that over 50% of its guests booking trips during the Olympics were families or groups of three or more people, which could highlight the value of booking a home or apartment through the company.

In a recent interview with CNBC, Airbnb CEO and co-founder Brian Chesky highlighted the importance of the company's Icons program on display at the Summer Olympics. The CEO said the Icons program is about branding and highlights that Airbnb is not just a place to stay, "it's about experiences."

"This is the biggest event in Airbnb history," Chesky said.

Chesky reminded CNBC that Airbnb "was designed for events" when the company was founded. The estimated overall economic impact of the guests coming to the Summer Olympics through Airbnb is around $1 billion, Chesky added.

Anheuser-Busch InBev (BUD ): The beer company, still trying to get over a boycott of its Bud Light brand, could see an Olympics sponsorship boost several of its brands. The company's Michelob Ultra brand is the official sponsor for Team USA at the Olympic and Paralympic Games in 2024, 2026 and 2028. AB InBev is also a Worldwide Olympic Partner through 2028.

"Beer and sports are better together. This partnership illustrates the opportunity for the beer category to positively impact and engage with billions of fans around the world, ushering in a new era of Olympic spirt as we cheer for our favorite national teams as they go for gold," AB InBev CEO Michael Doukeris said.

Michelob Ultra is among the fastest growing beer brands in recent years and has partnered with the NBA, WNBA, PGA, U.S. Soccer, Copa America and other sporting events.

Anheuser-Busch InBev is also promoting its non-alcoholic Corona Cero during the Olympics. The beer is listed as a global beer sponsor of the Olympic Games.

The beer company will focus heavily on two of the fastest growing categories in the sector, non-alcoholic and low-calorie, a move that could pay off in future market share and financials.

Genius Sports (GENI ): As the provider of sports betting data and results to media partners and sportsbooks, Genius Sports could be busy during the Summer Olympics. The company also has a potential catalyst that could bring its data to millions of people around the world. Social media platform X recently launched Trend Genius with Genius Sports. The new product will leverage "real-time conversations to accelerate ad attention in moments that matter."

The platform was launched ahead of the Summer Olympics and the games could serve as a test to the popularity and usage of the data from Genius Sports. The platform will allow advertisers to target topics that have risen in popularity during sporting events.

X owner Elon Musk and X CEO Linda Yaccarino have already begun posting about how prevalent coverage of the Olympics will be on the social media platform over the next two weeks. Expect the Olympics to gain plenty of attention on X, with Genius Sports potentially kicking off the new product with a huge early result.

DraftKings Inc (DKNG ) and Flutter Entertainment (FLUT ): The sports betting companies have the two biggest platforms by market share in the United States. Betting on Olympic events has increased in recent years, with more events being offered across more states than in the previous Summer Olympics.

Top sports like soccer, men's basketball are drawing increased attention from bettors during the games. A total of 38 states plus Washington D.C. offer legal sports betting in the U.S. compared to 22 states back during the 2020 Summer Olympics, the Washington Post reported.

The time difference between Paris and New York is six hours, whereas the difference between Tokyo and New York is 13 hours. The smaller time difference with Paris could potentially increase betting activity in the U.S.

The United States is the favorite to win the most medals and gold medals at the 2024 Summer Olympics, with numerous stars participating in events. This will likely attract bettors eager to profit from their bets while supporting their country's athletes.

Disney, AMC, And IMAX Stocks Surge After "Deadpool & Wolverine" Breaks Box Office Records

Benzinga News — Fri, 26 Jul 2024 14:51:25 -0400

Marvel Studios and Walt Disney Co's (DIS ) "Deadpool & Wolverine" earned $38.5 million in Thursday previews, marking the highest ever for an R-rated film.

The film joins an elite group, including installments from significant franchises like Avengers, Star Wars, Spider-Man, and the final Harry Potter film.

Disney and movie theatre stocks AMC Entertainment Holdings, Inc (AMC ) and Imax Corp (IMAX ) stocks are already soaring Friday following the box office reports.

"Deadpool & Wolverine" marks the official MCU debut of Ryan Reynolds's Merc With a Mouth and Hugh Jackman's be-clawed X-Men character.

The Thursday haul is the biggest of the year so far, easily surpassing Disney's animated family hit "Inside Out 2," which made $13 million last month, Variety reports.

It's also the highest preview gross ever for an R-rated movie. The first "Deadpool" made $12.7 million in Thursday night previews back in 2016, and its 2018 sequel topped that with $18.6 million, which held the R-rated record until now.

Internationally, where "Deadpool & Wolverine" is open in every primary market except China, the film has earned $64.8 million. The movie will begin screening in China on Friday.

Industry analysts expect "Deadpool & Wolverine" to continue breaking records as the weekend progresses.

Disney, AMC Entertainment, and Imax analysts had bullish predictions on their prospects based on "Deadpool & Wolverine" as the industry recuperated from Hollywood strikes.

On Thursday, AMC Entertainment automatically got a boost from Imax's upbeat second-quarter results. Both companies voiced their optimistic outlook for 2024 and 2025, backed by their robust pipelines.

Price Actions: DIS shares traded higher by 0.98% at $90.08 at the last check on Friday. AMC is up 1.36% at $5.21, and IMAX is up 2.37% at $19.86.

Homebuilder Stocks Rally To Record Highs On Rate-Cut Frenzy But Housing Sales Still Struggle

Benzinga News — Fri, 26 Jul 2024 14:51:05 -0400

Homebuilder stocks surged to record highs on Friday, driven by a positive inflation report that cemented expectations for interest rate cuts in September.

The Personal Consumption Expenditure (PCE) price index - commonly referred to as the Fed's favorite inflation measure - fell from 2.6% year-on-year to 2.5% in June 2024, matching expectations.

The iShares U.S. Home Construction ETF (ITB ), a key basket tracking U.S. homebuilder equity performances, jumped 3.8%, marking its third consecutive week of gains.

Over the past three weeks, U.S. homebuilder stocks have surged by more than 20%, spurred by the anticipation of lower interest rates benefiting rate-sensitive sectors like home construction.

Market participants are now fully pricing in a Federal Reserve rate cut in September, with expectations for at least one more reduction by December 2024.

"Homebuilders are trading at the high-end of the historical valuation range, which we think is justified by higher return-on-equity (ROE). On average, we forecast 22% return-on-equity compared to the 2019 level of 20%," Bank of America analyst Rafe Jadrosich wrote in a recent report.

Historically, similar valuation levels in 2018 and 2021 led to sharp pullbacks as the Fed raised rates, Bank of America highlighted. However, the investment bank believes the scenario is different in the second half of 2024, with the Fed likely to begin cutting rates.

On Friday, Bank of America double-upgraded Mohawk Industries, Inc. (MHK ) from Underperform to Buy and raised their price target from $120 to $177, following better-than-expected Q2 2024 earnings.

Top-Performing Homebuilder Stocks In July 2024

The top ten best-performing stocks in the U.S. Home Construction ETF this month are:

NamePrice/ Chg. % (MTD)

Mohawk Industries, Inc./ 37.16%
M/l Homes, Inc. (MHO )/ 35.92%
Green Brick Partners, Inc. (GRBK )/ 31.50%
American Woodmark Corporation (AMWD )/ 28.44%
Dream Finders Homes, Inc. (DFH )/ 27.42%
JELD-WEN Holding, Inc. (JELD )/ 26.80%
Installed Building Products, Inc. (IBP )/ 26.65%
D.R. Horton, Inc. (DHI )/ 26.29%
Tri Pointe Homes, Inc. (TPH )/ 26.26%
Century Communities, Inc. (CCS )/ 26.05%

As of July 26, 2024

Latest Mortgage Rates, Housing Market Data

The Mortgage Bankers Association recently reported that the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $766,550 or less dropped by 5 basis points to 6.62% for the week ending July 19, 2024.

Despite the easing in borrowing costs, other housing market indicators remain bleak.

Homebuilder confidence dipped to 42 in July, its lowest reading year-to-date, according to Bank of America.

Jeffrey Roach, chief economist for LPL Financial, commented on the situation, stating, "The low supply of homes and high interest rates have depressed affordability to near-term lows."

The National Association of Realtors reported a significant 5.4% decline in existing home sales for June, marking the worst monthly drop since 2022.

Additionally, the U.S. Census Bureau revealed that new single-family home sales fell 0.6% month-over-month to a seasonally adjusted annual rate of 617,000 in June 2024, the lowest in seven months and below forecasts of 640,000, as high prices continued to affect affordability.

The median sales price of existing homes rose 4.1% year-over-year, setting a new record high.

Not Lovin' It: McDonald's Stock Faces Bearish Headwinds Ahead Of Q2 Earnings

Benzinga News — Fri, 26 Jul 2024 14:50:58 -0400

McDonald's Corp (MCD ) will be reporting its second-quarter earnings on Monday. Wall Street expects $3.09 in EPS and $6.6 billion in revenues as the company reports before market hours.

The stock is down 13.33% over the past year, and is trading 14.55% lower YTD.

Let's look at what the charts indicate for McDonald's stock, and how the stock currently maps against Wall Street estimates.

Bearish Indicators For McDonald's Stock Ahead Of Q2 Earnings

McDonald's stock is currently exhibiting bearish signals as it approaches its Q2 earnings announcement, with the share price at $251.46 positioned below the 5-day, 20-day, and 50-day exponential moving averages. This indicates strong selling pressure and the risk of further bearish movement.

The 8-day simple moving average (SMA) is at $255.96, while the 20-day SMA is at $253.15, both of which suggest bearish momentum as the stock price sits below these key averages.

Additionally, the 50-day and 200-day SMAs are at $256.62 and $274.43, respectively, reinforcing the bearish sentiment given the stock's significant gap below these longer-term trends.

The Moving Average Convergence Divergence (MACD) indicator is at 0.67, underscoring the bearish outlook, although the Relative Strength Index (RSI) of 44.41 (treading downwards) indicates that McDonald's is nearing oversold territory but still lacks the bullish momentum needed for a reversal.

Furthermore, the Bollinger Bands range from $245.67 to $262.83, with the stock price near the lower band, suggesting limited upside potential and continued selling interest.

Overall, McDonald's stock faces a challenging technical environment, indicating the possibility of continued weakness ahead of its earnings release.

McDonald's Analysts Consensus Ratings

Ratings & Consensus Estimates: The consensus analyst rating on McDonald's stock stands at a Buy, with a price target of $307.62. Stifel, Wedbush, and TD Cowen's recent ratings suggest McDonald's stock has an 11.37% upside, with a $281.67 average target.

Price Action: McDonald's stock was up 0.71% to $253.24 at the time of publication Friday.

JPMorgan Unveils In-House Chatbot To Enhance Research Capabilities: Report

Benzinga News — Fri, 26 Jul 2024 14:50:52 -0400

JPMorgan Chase & Co. (JPM ) shares are trading higher today. The bank has reportedly started deploying its generative AI tool, informing employees that its proprietary version of OpenAI's ChatGPT can perform the tasks of a research analyst.

The U.S. bank has provided its asset and wealth management employees with access to a large language model named LLM Suite, reported Financial Times.

Jamie Dimon told investors in May that AI was "going to change every job. It may eliminate some jobs. Some of it may create additional jobs. But you can't envision one app, one database, or one job where it's not going to help, aid or abet."

Executives informed staff that LLM Suite can assist with writing, idea generation, and document summarization.

The memo, signed by Mary Erdoes, head of asset and wealth management; Teresa Heitsenrether, chief data and analytics officer; and Mike Urciuoli, CIO of the asset and wealth management unit, described LLM Suite as a tool akin to a research analyst that can provide information, solutions, and advice on various topics.

They described LLM Suite as a "ChatGPT-like product" designed for "general-purpose productivity," intended to complement other apps like Connect Coach and SpectrumGPT, which manage sensitive financial data.

According to the report, JPMorgan began rolling out LLM Suite earlier this year, and about 50,000 employees, or roughly 15% of its workforce, now have access to it. The company has not revealed the number of research analysts it employs.

This rollout, which hasn't been previously reported, is one of the largest Wall Street implementations of an in-house developed large language model (LLM).

This month, JPM reported that second-quarter revenue rose 22% year over year to $50.2 billion, beating the consensus of $42.3 billion, and adjusted EPS of $4.40, exceeding the consensus of $4.19.

Investors can gain exposure to the stock via IShares U.S. Financial Services ETF (IYG ) and SPDR Select Sector Fund - Financial (XLF ).

Price Action: JPM shares are up 1.49% at $211.77 at the last check Friday.

Fed's Favorite Inflation Gauge Keeps Falling But Fed Wants 'Durable Downward Trend,' Economist Says

Benzinga News — Fri, 26 Jul 2024 14:50:45 -0400

The Personal Consumption Expenditure (PCE) price index keeps falling. This reaffirms the possibility that the Federal Reserve will cut the key interest rate by September.

The PCE, the Fed's favored inflation indicator which tracks U.S. consumer spending, rose 2.5% on an annual basis in June, down from a 2.6% jump in May.

Excluding food and energy, the core PCE index remained at 2.6% last month and from a year ago, missing an expected decline to 2.5%.

The index rose by 0.2% on a monthly basis, up from a 0.1% increase in May, beating forecasts.

Personal income rose 0.2% from May but fell shy of the prior 0.4% month-over-month increase and the estimated 0.4%.

Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, said the Fed should be able to stick to its plan to cut rates in September and December as long as inflation data keeps coming in like it has - "not too hot and not too cold."

"The Fed has indicated that they've wanted to cut rates all year long and the inflation data in Q1 prevented them from lowering rates sooner, but for the past few months the inflation data have been cooperating and this morning's results won't leave anyone alarmed at a resurgence in inflation," he said.

The market has recently become more fearful of slowing economic growth rather than sticky inflation, but the economy should be able to expand and the inflation rate should very slowly head lower to the Fed's target of 2%.

"This backdrop is a good one for both equity and fixed-income investors and volatility will be an opportunity to accumulate good quality assets at prices off their peak levels," he said.

Quincy Krosby, chief global strategist for LPL Financial, said the lower two-year and 10-year Treasury yields ensure that Friday's PCE report will confirm for the Fed's Federal Open Market Committee that inflation will maintain a downward trend.

"Similarly, equity futures remain in the green suggesting that the market - decidedly oversold on a short-term basis - could edge higher into the close," she said.

"Still, next week's earnings reports from a heavy package of mega-cap tech names, will be a crucial test for a market that is trying to find direction amid mixed economic data and underpinned by a historically negative seasonal pattern."

Jeffrey Roach, chief economist for LPL Financial, noted that inflation continues to slowly approach the Fed's target rate. The Fed should point to the slowdown in hiring as a reason to cut rates at the September meeting.

"As it relates to business activity, real disposable income per capita continues to rise, giving consumers the ability to keep spending despite high price levels. So, we are paying more but we are getting paid more," he said.

Bill Adams, chief economist for Comerica Bank, said the June PCE report met the Fed's expectations on inflation's downward trend. Still, the Fed has repeatedly said that it is looking for inflation to fall more into a "durable downward trend" before it decides to lower rates.

"This report looks pretty similar to the last few, and so the Fed will see it as adding to the evidence that inflation is slowing," he said.

"The Fed won't see a glaring reason to immediately cut interest rates in this report. But at their meeting next week, they will likely signal a quarter-percentage-point rate cut at the following decision in September. Another quarter percentage point cut is likely in December."

CrowdStrike CEO George Kurtz Announces Over 97% Of Windows Sensors Back Online After Global Outage

Benzinga News — Fri, 26 Jul 2024 14:50:31 -0400

CrowdStrike Holdings Inc. (CRWD ) CEO George Kurtz has confirmed that more than 97% of the company's Windows sensors are back online following a global outage.

What Happened: The outage was caused by a faulty software update from the cybersecurity firm, which led to a global system crash on Microsoft Corp.'s (MSFT ) Windows operating system. The incident occurred last week, affecting over 8.5 million Windows devices.

Kurtz, however, has announced that the recovery process has been significantly improved, thanks to the development of automatic recovery techniques and the mobilization of all resources to support affected customers.

"Our recovery efforts have been enhanced thanks to the development of automatic recovery techniques and by mobilizing all our resources to support our customers," Kurtz said in a post on LinkedIn.

Why It Matters: The outage, which began on Jul. 19, was attributed to a flawed security update from CrowdStrike's Falcon platform. The issue originated from the Rapid Response Content, a dynamic protection mechanism, which inadvertently caused a system crash due to an undetected error in the update.

CrowdStrike has since reverted the defective update and emphasized that Mac and Linux hosts remained unaffected.

In response to the disruption, CrowdStrike offered a $10 Uber Eats gift card to its partners as an apology. However, some users reported issues redeeming the vouchers, which were flagged as fraud due to high usage rates.

Interestingly, less than two months ago, Jim Cramer, the host of CNBC's "Mad Money," had praised CrowdStrike, expressing confidence in the company's stability. However, the recent events have shown the unpredictability of the stock market, even for seasoned experts.

The faulty update not only disrupted everyday operations but also significantly impacted critical infrastructure globally, including major airlines, financial institutions, and emergency services. U.S. airlines experienced groundings and over 1,500 flight cancellations. Similar issues occurred in Germany and Spain.

Price Action: CrowdStrike's stock closed at $254.15 on Thursday, down 1.55% for the day. In after-hours trading, the stock increased 0.30%. Year to date, the stock has risen by 2.94%, according to data from Benzinga Pro.

Boston Beer Company: Hard Mountain Dew Is Still A Catalyst, 3 Analysts Cut Forecasts After Q2 Results

Benzinga News — Fri, 26 Jul 2024 14:50:06 -0400

Shares of Boston Beer Company Inc (SAM ) were climbing in early trading on Friday, after the company reported its second-quarter results.

The results came amid an exciting earnings season. Here are some key analyst takeaways.

Goldman Sachs analyst Bonnie Herzog reiterated a Sell rating, while reducing the price target from $210 to $230.
RBC Capital Markets analyst Nik Modi maintained a Sector Perform rating, while cutting the price target from $332 to $318.
Piper Sandler analyst Michael Lavery reaffirmed an Overweight rating, while slashing the price target from $344 to $325.

Goldman Sachs: Boston Beer Company reported its quarterly earnings at $4.39 per share, significantly missing the consensus of $5.01 per share, due to softer-than-expected depletions and shipments as well as ongoing costs that resulted in disappointing gross margins, Herzog said in a note.

Management lowered the high end of their full-year depletion and shipment guidance ranges to reflect low-single-digit declines in both, the analyst stated. "While mgmt sounded confident that their wholesaler partners need more inventory to restore service levels, we have some concern, especially considering SAM's depletions were down -2% YTD thru June, suggesting distributors may want to structurally carry less inventory to meet slowing demand," he further wrote.

RBC Capital Markets: "As expected, category pressures were too much to overcome in the near term and resulted in a more muted volume outlook for the year," Modi said. He added, however, that management suggested a bottoming in April.

"Despite the topline pressure, SAM was able to maintain gross margin and EPS guidance in part due to improvements in productivity initiatives across procurement savings, waste and network optimization, and brewery performance," the analyst wrote. However, the gross margin guidance will likely be viewed as "less prudent relative to last quarter," he further wrote.

Piper Sandler: Boston Beer revenue was roughly in-line with expectations. EBIT margins came in lower due to higher costs, even before marketing spending increases in the back half of 2-24, Lavery said.

"We see upside to SAM's gross margin as it further brings production in-house," he added.

Hard Mountain Dew started transitioning to the company's distributor network in May, "with a full transition to new states likely lasting into early 2025," the analyst stated. "We still expect Hard Mtn Dew can be a catalyst in 2025, with shipments to some big new states expected to give a volume boost in 4Q24 ahead of early 2025 sales."

SAM Price Action: Shares of Boston Beer Company had risen by 4.93% to $283.87 at the time of publication on Friday.

Goldman Sachs Sees Encouraging Demand, Margin Trends For Toy Maker Hasbro

Benzinga News — Fri, 26 Jul 2024 14:50:01 -0400

Goldman Sachs analyst Stephen Laszczyk reiterated a Neutral rating on the shares of Hasbro Inc (HAS ) and raised the price target from $62 to $65. The raised price target is based on 15.0x second-twelve-month EPS.

Hasbro reported 2Q24 results that featured a beat across revenue, adjusted EBITDA, and adjusted EPS.

The beat to revenue was driven primarily by better-than-expected Wizards of the Coast revenues and adjusted operating profit, said the analyst.

The analyst is encouraged by the demand and margin trends within Hasbro's Consumer Products segment coming out of 2Q24.

Heading into the back-to-school shopping season, the retailer would garner support from a healthier retail ecosystem and new product innovation, noted the analyst.

Meanwhile, the analyst is more cautious on the trajectory of WOTC as Hasbro guided to Monopoly Go revenues below expectations (~$30 million/quarter vs ~$40 million GSe), and updated WOTC guidance implied a larger than expected 2H24 decline in tabletop revenue.

The analyst increased the estimates for revenues, EPS and free cash flow largely to reflect the strength in consumer products.

The analyst sees three main levers Hasbro can pull to achieve $750 million in gross cost savings by YE2025, which includes headcount reduction (immediate), supply chain optimization (short-term/ongoing), and architecting new toys/products around a more efficient go-to-market strategy (medium-term).

On the Consumer Products side, Hasbro is encouraged by early signs of demand it is seeing for its Beyblade, Deadpool, and Transformers lines and the management expects this to result in low single-digit percentage declines in CP revenue in the third quarter before returning to growth in the fourth quarter, added the analyst.

For Baldur's Gate III, Hasbro now expects ~$30 million of revenue for the full year, major chunk of which was achieved in the first half, noted the analyst.

While the second quarter figure of $40 million revenue in Monopoly Go was well above the analyst's expectation of ~$10-15 million, the analyst considers this was partially a pull-forward of pre-earnings full-year MGO revenue expectation of ~$100 million in 2024.

Price Action: HAS shares are trading higher by 3.17% at $63.47 at last check Friday.

Walmart Considers $200M Bet On Self-Driving Forklifts To Boost Automation

Benzinga News — Fri, 26 Jul 2024 14:49:45 -0400

Walmart Inc (WMT ) is likely to invest $200 million in self-driving forklifts to automate more of its warehouse operations.

The world's largest retailer plans to buy potentially hundreds of autonomous forklifts from Fox Robotics, with whom it has already invested $25 million, reported Reuters citing sources.

This move is part of Walmart's broader strategy to increase automation and compete with Amazon.com Inc (AMZN ).

Walmart's plan includes exclusive deals with robotics vendors like Fox Robotics and Symbotic Inc (SYM ). These agreements will also restrict Walmart's competitors from using the technology.

Walmart spokesperson Camille Dunn confirmed that the company is piloting the technology with 19 FoxBots in four facilities.

In recent years, Walmart has focused on robotics to manage costs and keep product prices low. Analysts from Jefferies estimate that Walmart could add $20 billion to its profit before interest and taxes by fiscal 2029 due to automation and AI efforts.

Walmart's deal with Symbotic, announced in 2022, involves implementing automation in 42 distribution centers, where Walmart owns more than 13% of Symbotic stock.

FoxBots, tested for over a year, can unload pallets and integrate them into Symbotic's automated system. Fox Robotics claims a single operator can manage up to six autonomous forklifts, reducing labor costs by 40%.

Walmart stock has gained more than 29% in the last 12 months. Investors can gain access to the stock via the Consumer Staples Select Sector SPDR Fund (XLP ) and Vanguard Consumer Staples ETF (VDC ).

Price Action: WMT shares are trading lower by 0.91% at $69.38 at last check Friday.

Boeing's CEO Search Intensifies As Stephanie Pope Takes Center Stage At Farnborough International Airshow

Benzinga News — Fri, 26 Jul 2024 14:49:29 -0400

Amid Boeing Co.'s (BA ) ongoing CEO search, Stephanie Pope, the internal favorite for the position, has taken the spotlight at the Farnborough International Airshow.

What Happened: Pope, who currently heads Boeing's commercial airplane unit, has been actively engaging with customers and journalists at the airshow, Bloomberg reported on Thursday. This move has been seen as an attempt to bolster her case for the top job at the embattled aerospace company.

Boeing is currently grappling with a series of crises, including financial instability, and trust issues with regulators and the public. The company's board is under pressure to appoint a leader who can navigate these challenges.

Pope, 52, has been working to stabilize Boeing's factory operations in Seattle, where the majority of the company's manufacturing activities are based. She was appointed to lead the planemaking unit in March, coinciding with the announcement of current CEO Dave Calhoun's impending departure.

Despite her background in finance and relatively short tenure in manufacturing, Pope has been endorsed by Calhoun as his natural successor. Her proactive approach at the airshow, including meeting with customers to address their concerns about delayed aircraft deliveries, has been well-received.

"I'm impressed with her, I think she's a quick learner," said John Plueger, the CEO of Air Lease Corp.

"I'll restate that 24/7 I'm focused on the BCA recovery," Pope said. BCA is an acronym for Boeing's commercial airplane business. "That is my priority and that is my focus."

Pat Shanahan, CEO of Spirit AeroSystems Holdings Inc. (SPR ), and a former Boeing executive is a leading candidate as the planemaker looks to consolidate its former aerostructures division. According to the report, directors have been intently reviewing other external candidates as well.

Why It Matters: The Farnborough Airshow appearance comes at a crucial time for Boeing. Recently, Boeing resumed 737 MAX deliveries to China after a regulatory delay, marking a significant step in restoring its global operations. This comes after a prolonged halt due to a review of the batteries powering the cockpit voice recorder.

Boeing's Commercial Market Outlook predicted a 3% increase in airplane deliveries over the next 20 years, estimating a need for nearly 44,000 new commercial airplanes by 2043. This forecast highlights the potential growth in the aviation sector, driven by emerging markets and single-aisle market demand.

However, Boeing also faces internal challenges. Last week, Washington state factory workers voted overwhelmingly in favor of a strike mandate, demanding a 40% raise during their first full negotiation with Boeing in 16 years. This mandate, with over 99% approval, underscores the workers' determination but also adds pressure on the company's management.

Price Action: Boeing stock closed at $184.35 on Thursday, up 2.38% for the day. In pre-market trading, the stock rose 0.46%. However, the stock is down $67.41, or 26.78%, year to date, according to data from Benzinga Pro.

Disney and Warner Bros Offer Discounted Bundle To Reduce Churn Rate: Report

Benzinga News — Fri, 26 Jul 2024 14:49:24 -0400

Walt Disney Co (DIS ), Disney Entertainment, and Warner Bros. Discovery Inc (WBD ) have launched a new streaming bundle in the U.S., combining Disney+, Hulu, and Max.

The bundle is available for purchase on any of the three streaming platforms' websites.

The bundle costs $16.99/month with ads and $29.99/month without ads, offering up to 38% savings compared to purchasing the services separately, Variety reports.

The new offering combines three popular streaming services into one monthly subscription, providing a broad range of content from top entertainment brands, including ABC, CNN, DC, Discovery, Disney, Food Network, FX, HBO, HGTV, Hulu, Marvel, Pixar, Searchlight, Star Wars, and Warner Bros.

This bundle gives subscribers access to franchises like Family Guy, Bob's Burgers, Disney's Frozen, The Avengers, Star Wars, Toy Story, Batman, Game of Thrones, Lord of the Rings, and Harry Potter.

This ad-supported bundle offers savings of up to 38.8% compared to purchasing the services separately.

The individual prices are Disney+ Basic at $7.99, Hulu with ads at $7.99, and Max With Ads at $9.99. The no-ads bundle saves nearly 35% compared to the standalone prices, with Disney+ Premium at $13.99, Hulu no-ads at $17.99, and Max Ad-Free at $16.99.

The strategy behind this partnership aims to increase engagement and reduce churn rates. Additionally, bundles can lower customer acquisition costs.

The partnership is crucial for Warner Bros. Discovery, which just lost its long-standing NBA broadcasting rights to Disney, Comcast Corp (CMCSA ), and Amazon.Com Inc (AMZN ).

Warner Bros Discovery stock has lost over 37% in the last 12 months. Disney gained 4% in the last 12 months.

On July 25, Macquarie downgraded Warner Bros. Discovery from Outperform to Neutral with a $9 price target.

Price Actions: WBD shares traded higher by 4.13% at $8.12 at the last check on Friday. DIS is up 0.66% at $89.80.

Market Update: Dow Jumps 650 Points on Positive Earnings, Inflation Data

Rachel Hemple — Fri, 26 Jul 2024 10:35:11 -0400

Stocks soared higher on Friday as Wall Street looked to end the week on a positive note following in-line inflation data and widespread sentiment that the Federal Reserve will begin interest rate cuts in the near-term. The Dow Jones Industrial Average jumped over 650 points, while the S&P 500 Index and Nasdaq Composite rose about 1.1% and 1%, respectively.

Here's how the market settled to close out the week:

S&P 500 Index (SPY ): +1.11% or +59.88 points to 5,459.10

Dow Jones Industrial Average (DIA ): +1.64% or +654.27 points to 40,589.34

Nasdaq Composite Index (QQQ ): +1.03% or +176.16 points to 17,357.88

Moving Markets:

The Personal Consumption Expenditures price index eased slightly year-over-year, boosting investor optimism that the Fed will issue an interest rate cut in September.

The Fed's key inflation gauge increase 2.5% from a year ago and 0.1% month-to-month, the Commerce Department reported Friday. May's annual again was 2.6%, while its monthly print was unchanged. Core inflation, which excludes food and energy prices, rose 0.2% on the month and 2.6% annually, both also coming in-line with expectations.

"Overall, it's been a good week for the Fed. The economy appears to be on solid ground, the PCE inflation essentially remained steady," said Chris Larkin, managing director of trading and investing at E-Trade Morgan Stanley, quoted by CNBC. "But a rate cut next week remains a longshot. And while there's plenty of time for the economic picture to change before the September FOMC meeting, the numbers have been trending in the Fed's direction."

Other Economic News:

Consumer Sentiment ticked slightly lower in July, the University of Michigan's Survey of Consumers showed on Friday, but inflation outlooks decreased to its lowest level in more than three years. Headline sentiment dipped to 66.4, coming in ahead of economist estimates but below June's final print of 68.2.

For outlooks, the one-year outlook showed the expectations for 2.9%, marking its lowest level since December 2020, while the five-year outlook remained at 3% for the fourth consecutive month.

"Sentiment has lifted 33% above the June 2022 historic low, but it remains guarded as high prices continue to drag down attitudes, particularly for those with lower incomes," said Joanne Hsu, director of the Surveys of Consumers, in a statement. "Labor market expectations remain relatively stable, providing continued support to consumer spending. However, continued election uncertainty is likely to generate volatility in economic attitudes in the months ahead."

On the Earnings Front:

3M (MMM ) shares jumped over 20% after the consumer and commercial products market reported strong second-quarter earnings and raised its outlook on Friday. This was the first quarter results under CEO Bill Brown, who succeeded Mike Roman on May 1. The company now expects its full-year adjusted earnings per share to range from $7.00 to $7.30, up from its previous estimates of $6.80 to $7.30. This was the first

Colgate-Palmolive (CL ) also topped Wall Street expectations on Friday, with the consumer products giant citing a "healthy balance" of volume growth and higher prices as some of the key drivers behind its second-quarter results. The company also raised its full-year organic sales growth outlook to a range of 6% to 8%, up from its previous forecast of 5% to 7%. Net sales are still expected to increase by 2% to 5% in 2024.

Bristol Myers Squibb (BMY ) also topped expectations for second-quarter earnings and revenue on Friday and raised its full-year guidance on Friday. The pharmaceutical giant now expects its full-year revenue to increase in the "upper end" of the low single-digit range, compared with its previous guidance of low single-digit growth. Its full-year adjusted earnings guidance was also raised to a range of $0.60 to $0.90 per share, up from $0.40 to $0.70 per share.

Fed's Favorite Inflation Gauge Set To Drop To Lowest Level In Over 3 Years: Is July Rate Cut Possible?

Benzinga News — Thu, 25 Jul 2024 12:12:30 -0400

Investors are eagerly awaiting Friday's announcement of the Personal Consumption Expenditure (PCE) price index, known as the Fed's preferred inflation measure, as it could reinforce expectations of Fed rate cuts and provide relief to risky assets after this week's sharp declines.

The Bureau of Economic Analysis is set to release key inflation data, along with figures on personal income and spending.

The U.S. economy grew at an annualized rate of 2.8% in the second quarter, up from 1.4% and exceeding the 2% forecast, advance estimates revealed Thursday.

Notably, the PCE price index indicated a 2.6% annualized growth for the quarter, down from 3.4%, suggesting easing inflation pressures.

Markets fully price in a September rate cut by the Federal Reserve. Market-implied odds for next week's meeting show a 93% chance of no change in interest rates.

It's highly unlikely the Fed will lower interest rates this month, even in the case of a cooler PCE data, as policymakers seek more confidence and time to reach the 2% target.

June PCE Report: What Do Economists Expect

The headline PCE is expected to decrease from 2.6% year-over-year in May 2024 to 2.5% in June, marking its lowest point since February 2021, a level also previously seen in January and February 2024.
On a monthly basis, the PCE price index is projected to rise by 0.1%, following a previous flat reading.
The Core PCE is anticipated to decline from 2.6% year-over-year in May 2024 to 2.5% in June, reaching its lowest point since March 2021.
On a monthly basis, the core PCE price index is expected to increase by 0.1%, consistent with the previous month's reading.

How Did Markets React To The Prior PCE Report?

The cooler-than-expected May PCE report, released on June 28, triggered mixed market reactions, with both large-cap stocks and bonds falling during the session.

The S&P 500, as tracked by the SPDR S&P 500 ETF Trust (SPY ), fell 0.4%, while the tech-heavy Invesco QQQ Trust (QQQ ), slipped 0.5%.

Small caps outperformed large-cap stocks, with the iShares Russell 2000 ETF (IWM ) closing 0.4% higher.

Bonds tumbled, with the iShares 20+ Year Treasury Bond ETF (TLT ), falling 1.9%.

U.S. major averages are down this week, with the Nasdaq 100 recording the worst session since December 2022 on Wednesday.

Southwest Bids Farewell To Open Seating After Customer Feedback, Poor Earnings

Benzinga News — Thu, 25 Jul 2024 12:12:15 -0400

Southwest Airlines Co (LUV ) has stubbornly held on to its first-come-first-serve seating policy for over 50 years.

The air carrier will now shed its famous open seating policy after a change in consumer preferences and poor second-quarter earnings.

The Dallas, Texas-based company cited how 80% of its customers and 86% of potential customers prefer assigned seats to open seating.

Southwest also found that when customers switch to competitors, open seating is the most commonly cited reason.

The change in seating policy will also allow Southwest to offer premium seating for the first time. Customers prefer having the option to pay more for additional legroom, feedback shows.

The company expects that one-third of seating will be designated premium.

"Moving to assigned seating and offering premium legroom options will be a transformational change that cuts across almost all aspects of the Company," Southwest CEO Bob Jordan said.

Delta Air Lines Inc (DAL ), a competitor of Southwest, has performed better than most industry peers in recent years. Experts have pointed to Delta's premium identity as a means of insulation against unfavorable economic trends. Southwest's introduction of premium seating could help the company regain customers seeking a premium experience.

Price Action: Southwest's share price has fallen over 20% in the past year.

At the time of writing, the company's stock is worth $27.45, up 3.16%.

Stellantis CEO: Earnings 'Fell Short Of Expectations,' Expect 20 New Vehicles This Year

Benzinga News — Thu, 25 Jul 2024 12:12:09 -0400

Stellantis NV (STLA ) stock plunged after the automaker reported dismal financial results for the first half of 2024 on Thursday.

Net revenue was 85 billion euros ($91.53 billion), down 14% year over year, primarily due to the decline in volume and mix.
First half net profit came in at 5.6 billion euros ($6.07 billion). That's down 48% compared to the first half of 2023.
Adjusted EPS declined by 35% Y/Y to 2.36 euros.
Combined shipments declined by 12% year over year to 2.93 million units.
Consolidated shipment decreased by 10% year over year to 2.87 million units.
Adjusted operating income (AOI) declined by 40% year over year to 8.5 billion euros, primarily due to decreases in North America. The margin declined by 440 bps to 10%.
Total inventory was reduced by 3% to 1,408 thousand units.
The company used 392 million euros in Industrial free cash flows.

Stellantis CEO Carlos Tavares noted that the first half of 2024 "fell short of our expectations."

The Auburn Hills, Michigan-based company plans to launch "no fewer than 20 new vehicles" this year, he added.

What's Next: Stellantis aims to address weak margins and is prepared to eliminate underperforming brands.

"If they don't make money, we'll shut them down," Tavares told reporters. Following a new cooperation agreement, Stellantis now also counts China's Leapmotor as its 15th brand.

Outlook: Stellantis reiterated financial guidance of double-digit AOI margin in 2024 and positive Industrial free cash flow.

Price Action: STLA shares traded lower by 8.37% at $17.96 premarket at last check Thursday.

Viking Therapeutics Stock Surges As Company Advances Weight Loss Drug To Late-Stage Trial: What Investors Need To Know

Benzinga News — Thu, 25 Jul 2024 12:11:40 -0400

Viking Therapeutics Inc (VKTX ) shares are rising Thursday after the biotech company announced plans to advance its experimental weight loss drug to late-stage trials.

What Happened: After the market close on Wednesday, Viking Therapeutics reported financial results for the second quarter that included an update on VK2735, the lead candidate of the company's unique series of novel dual agonists of the glucagon-like peptide 1 (GLP-1) and glucose-dependent insulinotropic polypeptide (GIP) receptors for the potential treatment of obesity.

Viking said earlier this year that it expected to start another mid-stage trial for VK2735, but announced late Wednesday that it would move the weekly injection into a Phase 3 trial. Viking shares popped on the news, while shares of Eli Lilly And Co (LLY ) and Novo Nordisk A/S (NVO ) fell. Viking is one of several companies racing to capture market share in the GLP-1 market, currently being led by Lilly and Novo Nordisk.

Viking said it received feedback from the U.S. Food and Drug Administration (FDA) based on a Type C meeting packet it submitted to the agency earlier this year. After reviewing the feedback, the company decided to advance VK2735 into late-stage trials for obesity.

"The Phase 2 VENTURE study of VK2735 in obesity demonstrated up to an approximately 15% reduction in body weight from baseline following 13 weeks of dosing, as well as promising safety and tolerability. Following receipt of written feedback from an FDA Type C meeting, we are advancing this compound into Phase 3 development," said Brian Lian, CEO of Viking Therapeutics.

Viking expects to schedule an end-of-Phase 2 meeting with the FDA later this year. The company noted that details on the Phase 3 trial design and timing will be disclosed following the end-of-Phase 2 meeting.

On the conference call late Wednesday, Lian said the company plans to test VK2735 as a monthly injection in future studies. The company also said the oral tablet version of VK2735 demonstrated encouraging signs in early trials, with up to 5.3% weight loss after 28 days. Viking expects to initiate a Phase 2 trial for the oral program later this year.

Viking reported an earnings loss of 20 cents per share for the second quarter, beating analyst estimates for a loss of 27 cents per share. Analysts at HC Wainwright reiterated Buy on Thursday with a price target of $90, while Raymond James maintained a Strong Buy and lifted its target to $118.

VKTX Price Action: Viking Therapeutics shares were up 30% at $65.68 at the time of publication, according to Benzinga Pro.

IBM's AI Bookings To Drive Share Gains, Though 'Revenue Contribution Of AI Is Currently Small'

Benzinga News — Thu, 25 Jul 2024 11:52:57 -0400

IBM (IBM ) shares were climbing in early trading on Thursday after the company reported its second-quarter results.

The results came amid an exciting earnings season. Here are some key analyst takeaways.

Goldman Sachs On IBM

Analyst James Schneider reiterated a Buy rating while raising the price target from $200 to $205.

IBM reported revenues of $15.77 billion, slightly higher than consensus of $15.63 billion, with total revenue from continuing operations up 3.8% in constant currency terms, Schneider said in a note. "Software and Infrastructure revenue were above the Street, but Consulting came in below," he added.

The company's earnings from continuing operations came in at $2.43 per share, surpassing Street's $2.18 per share, the analyst stated. Strong AI bookings performance is likely to be "an incremental positive that should help drive share gains in the Consulting business in the medium term," he further wrote.

RBC Capital Markets On IBM

Analyst Matthew Swanson maintained an Outperform rating while lifting the price target from $200 to $211.

Results in the quarter were better than expected across most metrics, including outperformance in revenues of $15.8 billion and free cash flows of $2.6 billion versus consensus of $15.6 billion and $2.4 billion, respectively, Swanson said. Management maintained its full-year guidance for revenue, while raising the free cash flow forecast to above $12 billion, he added.

The company doubled its GenAI book of business sequentially to $2 billion, the analyst stated. "While bookings remain strong, the Red Hat re-acceleration took a pause, but management is optimistic on 2H growth," he further wrote.

Stifel On IBM

Analyst David Grossman reaffirmed a Buy rating while raising the price target from $190 to $205.

Although IBM delivered a "solid" quarter, this is unlikely to be a catalyst, Grossman said. The "bigger driver is market recognition of 2025 growth set-up including improving software growth, mainframe cycle and stabilizing consulting fundamentals," he added.

"AI-related bookings nearly doubled q/q to ~$2bn, 75% services, more indicative of momentum than near-term revenue," the analyst wrote. Although management was bullish about longer-term opportunities, the revenue contribution of AI is currently small, he further stated.

BofA Securities On IBM

Analyst Wamsi Mohan maintained a Buy rating and price target to $209.

IBM's quarterly results were mixed, with upside being "partly driven by strong Transaction Processing revenues while areas like RedHat were weaker," Mohan said. Despite a weak macro, "the portfolio is delivering on mid-single y/y rev growth in the aggregate," he added.

The company guided to full-year revenue growth "in-line with its mid-single digit model," the analyst stated. "IBM's book of business in AI stands at $2bn inception-to-date with 75% from consulting signings and 25% in software," he further wrote.

IBM Price Action: Shares of IBM had risen by 5.49% to $194.06 at the time of publication on Thursday.

Chipotle Addresses Negative Feedback On Portions, 9 Analysts Still Cut Forecasts After Better-Than-Expected Earnings Results

Benzinga News — Thu, 25 Jul 2024 11:52:52 -0400

Shares of Chipotle Mexican Grill, Inc. (CMG ) tanked in early trading on Thursday, after the company reported its second-quarter results.

The results came amid an exciting earnings season. Here are some key analyst takeaways.

Goldman Sachs analyst Christine Cho reiterated a Buy rating, while slashing the price target from $74 to $67.
TD Cowen analyst Andrew Charles maintained a Buy rating, while cutting the price target from $72 to $65.
KeyBanc analyst Eric Gonzalez reaffirmed an Overweight rating, while reducing the price target from $68 to $66.
Wedbush analyst Nick Setyan reiterated a Neutral rating, while slashing the price target from $64 to $54.
Piper Sandler analyst Brian Mullan maintained a Neutral rating, while cutting the price target from $61 to $56.
Stephens analyst Jim Salera reaffirmed an Equal-Weight rating, while reducing the price target from $64 to $61.
Oppenheimer analyst Brian Bittner reiterated an Outperform rating, while slashing the price target from $70 to $65.
Truist analyst Jake Bartlett maintained a Buy rating, while cutting the price target from $74 to $69.
Stifel analyst Chris O'Cull reaffirmed a Buy rating and price target of $70.

Goldman Sachs: Chipotle Mexican Grill reported adjusted earnings of 34 cents per share, beating consensus of 31 cents per share, driven by stronger traffic, Cho said in a note. The company's total revenues of $2.97 billion also came in ahead, "despite new unit growth falling short of estimates," he added.

Despite better-than-expected revenues, "management opted to hold annual guidance unchanged for SSSG (at MSD-HSD), noting sequential deceleration during the quarter and the underlying trend in 3QTD in the c.6% range," the analyst stated.

TD Cowen: The company maintained its full-year guidance, despite a challenging restaurant industry sales backdrop, Charles said.

"We appreciate mgmt's attention to improving publicity surrounding portion sizes via operational changes at affected restaurants (10% of fleet) and margin investment to ensure more consistent portioning," the analyst wrote. "We believe the issue can resolve and that 7% full year comps will be achieved, aided by demonstrable progress with 1H24 speed of service," he added.

KeyBanc Capital Markets: Chipotle Mexican Grill's second-quarter same-store sales growth of 11.1% came in higher than consensus of 9.2% and included an 8.7% increase in traffic and a 2.4% increase in average check, Gonzalez.

"However, SSS growth normalized to around 6% in June and July, and the Company sees some NT margin pressure from dairy/avocados, a mix shift from promotional items (e.g., from Chicken al Pastor to Smoked Brisket) this fall, and investments to ensure portion sizes remain generous/uniform across the system (40-60 bps drag)," the analyst wrote.

Wedbush: Menu pricing was around 3.3%, with 8.7% transaction growth, partially offset by a negative mix, Setyan said. The company's underlying margins of 28.9% was above consensus of 28.5%, "driven by sales leverage," he added.

While Chipotle Mexican Grill should be able to sustain market share gains amid a more challenging macro backdrop for restaurants, "commentary indicated that despite a very healthy April, trends slowed as the quarter progressed," the analyst wrote.

Piper Sandler: "Notably, transaction growth was +8.7% in the quarter; which is remarkable in any environment, not to mention in the difficult one the industry is operating in right now," Mullan wrote in a note. He added, however, that same-store sales decelerated in June and July looks similar so far, "which we note is below the pre-print consensus SSS estimate of +7.2% for 3Q24e."

"While we think the sales deceleration was largely expected by the buy-side investment community, it was the margin commentary on the call that likely comes as a bigger surprise; and which should result in some downward estimate revisions exiting the quarter," the analyst further stated.

Stephens: Chipotle reported better-than-expected results "across almost all major line items driven by strong traffic of +8.7% (while showing increased frequency among all income cohorts)," Salera said. "The one exception came from a unit miss vs. consensus," he added.

The company outperformed the restaurant industry, driven by industry-leading traffic growth, the analyst stated. Although Chipotle has among the "clearest lines of sight (in restaurants) to delivering positive traffic for FY24," this belief was impacted by management's commentary around near-term pressure on margins, he further said.

Oppenheimer: "Since mid-June, CMG is down -24.5% (vs. S&P -1.1%) as the market braced for moderating SSS in 2H24 vs. peak double-digit trends experienced in 2Q24," Bittner wrote. While comps in the third quarter have normalized to around 6%, "this includes best-in-class traffic and remains close to consensus," he added.

Management guided to restaurant margins below Street forecasts over the next few quarters, the analyst stated. "Our analysis following our call with CMG suggests this margin reset could enable an improving setup for shares moving forward, particularly considering the stock's recent pullback," he further wrote.

Truist Securities: Chipotle's traffic growth of 8.7% was the highest since 2021, demonstrating the company's strong positioning in a challenging environment, Bartlett said. "While traffic decelerated in June (+3.0-3.5%), trends remain stable in July with sales drivers ahead," he added.

The implied margin guidance for the back half of the year is lower than expected "but largely by choice as management focuses on traffic," the analyst stated. "CMG remains well positioned to sustain strong sales growth, despite recent SSS deceleration," he further wrote.

Stifel: Chipotle's traffic performance is likely to improve sequentially, "given the disruptions to the start of 3Q and with the popular Smoked Brisket LTO launching later this quarter," O'Cull said. He added, however, that margin expectations were reset lower due to "a higher cost outlook and a low probability of additional pricing."

The analyst reduced the earnings estimates for 2024 and 2025 from $1.12 per share to $1.10 per share and from $1.32 per share to $1.27 per share, respectively.

CMG Price Action: Shares of Chipotle Mexican Grill had declined by 2.14% to $50.67 at the time of publication on Thursday.

Lululemon Hits Brakes On New Collection: JPMorgan Lowers Estimates After Innovation Setback

Benzinga News — Thu, 25 Jul 2024 11:51:17 -0400

Lululemon Athletica Inc. (LULU ) is hitting the brakes on its latest innovation, the Breezethrough collection.

JPMorgan analyst Matthew R. Boss has slashed his 2024 earnings estimates and removed the stock from his Analyst Focus List. The company's stock, currently priced at $272.06, faces a revised price target of $338.00 for December 2025, down from a previous $457.00.

Lululemon has pulled its Breezethrough collection from both online and in-store sales just weeks after its launch. The Breezethrough collection, aimed at hot, low-impact workouts, faced criticism over its design, with a 3.1-star rating from 112 reviews highlighting issues like unflattering seams and discomfort.

Lululemon's Innovation 'Pause' Raises Concerns

Lululemon's Breezethrough collection, launched on July 9, is experiencing significant pushback.

According to Boss's fieldwork, "LULU has now paused sales on the recently launched Breezethrough collection" after receiving "guest feedback" that highlighted design flaws.

The collection, intended for hot, low-impact workouts, has been criticized for its "V" shaped back seam and "U" shaped front seam, which customers found unflattering.

'Execution Concerns'

The Breezethrough line was expected to drive growth in Lululemon's women's leggings category through the second half of 2024.

However, the pause in sales "compounds recent in-stock/color palette 'execution' concerns," Boss notes.

The innovation was a key driver behind the company's revenue growth expectations for the latter part of the year. As a result, JPMorgan has lowered its 2H24 revenue growth estimate to 8%, below the street's forecast of 13%.

Op Margins Expected To Drop

The halted innovation has led to a revision in earnings projections. Boss now models a decrease in 2H24 U.S. revenue growth to flat year-over-year, with international growth expected to moderate. This adjustment contributes to a lowered full-year EPS forecast of $13.90, versus the street's $14.34.

The firm's operating margins are anticipated to drop to 22.8%, reflecting a fixed cost deleverage.

While Lululemon's stock has seen strong performance, current challenges with product innovation and execution issues are weighing on its growth prospects. Investors should brace for volatility as the company adjusts its strategies.

Unilever Boasts Improved Profitability: 'Power Brands Led Gross Margin Expansion,' CEO Says

Benzinga News — Thu, 25 Jul 2024 11:51:10 -0400

On Thursday, Unilever plc (UL ) reported first-half adjusted EPS of 1.67 euros ($1.74), up from 1.39 euros a year ago.

The British multinational fast-moving consumer goods company reported sales of 31.12 billion euros ($33.7 billion), up 2.3% year-over-year (underlying growth of 4.1%).

Unilever's underlying price growth for the first half was 1.6%, with underlying volume sales growth of 2.6%.

Second quarter sales increased 2.2% to 16.09 billion euros.
Unilever's underlying price growth for the quarter was 1%, with underlying volume sales growth of 2.9%.
The consumer products giant reported an underlying operating profit of 6.1 billion euros, up 17.1%, with a margin of 19.6%, up 250 bps.
Financial Times noted that the margin came in ahead of an expected 18%.
Beauty & Wellbeing sales increased 5.1% to 6.5 billion euros (underlying growth of 7.1%).
Personal Care segment sales were up 0.6% to 7 billion euros (+5.6%).
Home Care revenues were up 2% to 6.3 billion euros (+3.3%).
Nutrition sales were up 1.3% to 6.7 billion euros (+3.2%)
Ice Cream sales were up 2.8% to 4.6 billion euros (+0.6%).

"We are focused on driving high-quality sales growth and gross margin expansion, led by our Power Brands. Over the first half, we made progress on those ambitions," said Hein Schumacher, CEO.

In March, Unilever announced the separation of Ice Cream and the launch of a major productivity program to improve efficiency and effectiveness. Separation activity is underway and on track to be completed by the end of 2025.

Guidance: Unilever continues to expect underlying sales growth for 2024 to be within 3% to 5%, with most of the growth driven by volume.

The underlying operating margin for the full year is expected to be at least 18%, with increasing investment behind brands. The company expects the year-on-year margin progression in the second half to be smaller than in the first half.

"There is much to do, but we remain focused on transforming Unilever into a consistently higher-performing business," Schumacher added.

Unilever owns over 400 brands, including Ben & Jerry's, Dove soap, TRESemmé hair products, and Wish-Bone salad dressing.

Price Action: Unilever stock is up 6.3% at $60.10 at last check Thursday.

American Airlines Q2 Earnings: Mixed Performance Amid Cost Pressures, Lowers Annual Profit Outlook

Benzinga News — Thu, 25 Jul 2024 11:50:41 -0400

American Airlines Group Inc. (AAL ) reported second-quarter 2024 financial results and lowered its 2024 EPS outlook.

The airline reported second quarter total operating revenue growth of 2% year-over-year to $14.334 billion, missing the consensus of $14.36 billion.

The adjusted operating margin stood at 9.7% in the second quarter, compared to 15.4% a year ago. Operating expenses increased by 8.9% year over year to $12.95 billion.

The company reported an adjusted EPS of $1.09, down from $1.92 a year ago and above the consensus $1.05.

In the second quarter, the company generated an operating cash flow of ~$1.1 billion and a free cash flow of ~$850 million.

American Airlines ended the quarter with ~$11.7 billion of total liquidity and reduced its total debt by nearly $680 million in the second quarter. The company is now more than $13 billion, or approximately 87%, toward its goal of reducing total debt by $15 billion by the end of 2025.

Revenue passenger miles increased 8.5%, Available seat miles (ASM) was up 8%, and passenger load factor for the quarter was 86.6% compared to 86.2% in the same quarter last year. Total revenue per available seat miles for the quarter declined 5.6%.

The average aircraft fuel price, including related taxes (dollars per gallon), rose 3.3% YoY to $2.70, and the operating cost per ASM increased 0.8%.

"American has a fleet, network and product built to deliver results, but during the second quarter, we did not perform to our initial expectations due to our prior sales and distribution strategy and an imbalance of domestic supply and demand," commented American's CEO Robert Isom.

Third-quarter Guidance: American Airlines expects adjusted EPS to be ~breakeven and adjusted operating margin of ~ 2% to 4%.

Total capacity is expected to increase by 2% to 4%, TRASM to decline by 2.5% to 4.5%, and CASM-ex to increase by 1% to 3%.

2024 Guidance: American now expects an adjusted EPS of $0.70 to $1.30 (prior $2.25 to $3.25) versus the consensus of $1.81. It expects 2024 operating margin of 3.5% to 5.5%.

Price Action: AAL shares are trading higher by 2.41% at $10.42 at the last check Thursday.

Tesla Faces A Tough Road Ahead As Stock Closes Down 12% After Declining Revenue And Disappointing Earnings Results

Benzinga News — Thu, 25 Jul 2024 11:42:27 -0400

Tesla Inc's (TSLA ) stock took a big hit, dropping over 8% in pre-market trading after the release of its second-quarter earnings, which disappointed analysts. The expected earnings per share were $0.62, but the actual figure was only $0.52.

This led to a swift reaction from investors and a drop in Tesla's share value. A major concern in the earnings report was a 7% decline in automotive revenue, totaling $19.9 billion compared to last year.

Additionally, Tesla's adjusted profit margin decreased, raising worries about the company's profitability in a competitive market.

To combat falling sales and increased competition, especially from the Chinese market, Tesla has had to cut prices and offer discounts, highlighting the challenges the electric vehicle maker faces.

Although Tesla remains the top electric vehicle seller in the U.S., it is slowly losing market share to competitors. This decline is partly due to its aging product lineup, which hasn't seen significant updates or new models recently.

The situation is further complicated by CEO Elon Musk's controversial political comments, which have divided consumer opinions and shaken investor confidence.

During the recent earnings call, Elon Musk quickly shifted the discussion to future growth opportunities, including plans for a new mass-market vehicle expected to launch in the latter half of next year.

He also revisited the idea of robotaxis, which aims to turn Tesla vehicles into a network of autonomous ride-hailing services. This vision could make Tesla cars income-generating assets for owners, supporting a new model of urban transportation.

However, investors remain concerned about Musk's history of ambitious promises often falling behind schedule.

Wednesday ended on a tough note for Tesla, with the stock dropping 12%, which is sharper than its opening price. This decline has brought attention to the $200 level, a key psychological point that aligns with the daily 200 simple moving average.

If the stock keeps falling, this level could act as an important support point and might lead to a rebound if it holds. Tesla's stock has been quite volatile this year, peaking with a 36% increase in July but now showing just a 10% gain for the month.

Overall, the company has seen a 12% decline this year, highlighting the challenges it faces. As Tesla prepares to launch new models and technologies, how the market reacts will be crucial for its financial future.

After the closing bell on Wednesday, July 24, the stock closed at $215.99, trading down by 12.33%.

Meta Platforms AI Ambitions Soar With Llama 3.1: An 'Inflection Point In The Industry'

Benzinga News — Thu, 25 Jul 2024 11:32:54 -0400

Meta Platforms Inc (META ) is making waves again, this time with its latest AI advancements.

JPMorgan analyst Doug Anmuth highlights Meta's release of Llama 3.1 and its expanding AI initiatives as a clear indicator of the company's soaring ambitions in the artificial intelligence landscape.

As Meta gears up for its earnings next week, all eyes are on its capex plans and AI trajectory.

Llama 3.1: Meta's Game-Changing Open Source Model

Meta's bold move to launch Llama 3.1, "the largest open-source model," marks a significant milestone.

The model promises to be a game-changer, with Meta anticipating it will be an "inflection point in the industry toward open source models." The open-source nature allows developers to run Llama 3.1 at around 50% of the cost compared to closed models like GPT-4o, a move that not only democratizes AI access but also challenges the giants in the space.

Meta AI on Track to Dominate

Anmuth notes, "Meta AI is on track to become the most-used AI assistant by year-end-or even a few months earlier," emphasizing its rapid scale and integration into Meta's massive ecosystem of over 4 billion users.

The AI is now available in seven new languages and Latin American countries, featuring enhancements like "Imagine me" for AI-generated images and creative editing functions.

Open Source Strategy: A Shot at Innovation

The push towards open-source AI reflects a strategic pivot, aligning with Meta's philosophy against the restrictive nature of "closed platforms," which Anmuth states can "stifle innovation." This move underscores Meta's intent to avoid the constraints it has faced with mobile platforms, notably from giants like Apple Inc. (AAPL ).

Llama 4 and Beyond: Planning for the Future

Looking ahead, Meta is not resting on its laurels. Llama 4 is already on the horizon, with the company planning "compute clusters and data trajectories" for future iterations up to Llama 7.

Such foresight ensures Meta remains at the forefront of AI innovation, and investors are keenly aware of the "heavy investments needed to support AI ambitions over the long term." Meta's capex intensity could see a leap, with potential guidance for 2024-2025 possibly reaching $50 billion.

Meta's Vision: Custom AI for Everyone

Meta's ultimate vision is for every small business, creator, and user to create custom AI agents, aiming for a future where hundreds of millions of assistants are just a few clicks away. By leveraging AI to enhance engagement, ad targeting, and creative tools, Meta seeks not just to keep pace but to redefine the future of AI.

Rating: Overweight

As Meta heads into earnings on July 31, Anmuth's insights suggest that the tech giant's AI ambitions, embodied by Llama 3.1, are more than just another venture-it's Meta's declaration of leadership in the AI realm.

The company's commitment to open source could be the catalyst that not only boosts its stock but also reshapes the industry's landscape.

US Economy Expands 2.8% In Q2, Tops Estimates; Weekly Jobless Claim Fall

Benzinga News — Thu, 25 Jul 2024 11:32:40 -0400

The U.S. economic output experienced stronger-than-expected expansion in the second quarter of the year, highlighting the resilience that has long characterized the economy despite the burden of high interest rates.

The annualized growth rate of the real gross domestic product (GDP) was 2.8% in the second quarter, marking a robust acceleration from the 1.4% growth seen in the first quarter of 2024, according to the advance reading Thursday from the Bureau of Economic Analysis.

Q2 GDP Report Key Highlights

The 2.8% growth rate positively surprised economist expectations of a 2% growth, as tracked by Tradingeconomics.
The Personal Consumption Expenditure (PCE) price index slowed from 3.4% in the first quarter to 2.6% in the second quarter, indicating falling price pressures.
The Core PCE price index, which excludes energy and food items, eased from 3.7% in the first quarter to 2.9% in the quarter ending June, above the expected 2.6%.
The acceleration in real GDP in the second quarter primarily reflected an upturn in private inventory investment and an acceleration in consumer spending.
Looking at the major contributions to growth, consumer spending grew at 2.3% annualized rate, accelerating from 1.5% in the previous quarter.

Weekly Unemployment Claims Report

Simultaneously, the Labor Department reported a drop in weekly unemployment claims for the week ending July 20. Initial claims fell from 245,000 to 235,000, below the predicted decline to 238,000.

The four-week average of weekly jobless claims - which smooths out week-on-week volatility - held broadly steady.

Continuing claims inched down from 1.86 million to 1.851 million.

Market Reactions

The U.S. dollar index, as tracked by the Invesco DB USD Index Bullish Fund ETF (UUP ), rose 0.1% minutes after the economic data releases Thursday.

Prior to the data, markets had assigned a full likelihood of Fed interest rate cut in September.

Futures on major U.S. indices trimmed losses after the GDP data. Contracts on the Nasdaq 100 were flat by 8:36 a.m. ET, while those on the S&P 500 were 0.1% higher.

On Wednesday, the tech-heavy index, as tracked by the Invesco QQQ Trust (QQQ ) suffered its worst day since October 2022.

Royal Caribbean Cruises Ahead: Q2 Earnings Surge, Dividends Return, Solid Vacations Demand & More

Benzinga News — Thu, 25 Jul 2024 11:32:12 -0400

Royal Caribbean Cruises Ltd (RCL ) reported second-quarter FY24 sales growth of 16.6% year-on-year to $4.11 billion, beating the analyst consensus estimate of $4.041 billion.

Passenger ticket revenues rose 18.1% Y/Y to $2.89 billion compared to last year. Total cruise operating expenses were $2.15 billion versus $1.96 billion a year ago.

Gross Cruise Costs per Available Passenger Cruise Days (APCD) increased 4.9%. Gross margin yields increased 24.2% as-reported, and net yields increased 13.3% in constant currency.

Operating income for the quarter jumped 42.5% to $1.01 billion, with an operating margin of 26.7%. The occupancy rate in the quarter was 108.2% versus 105% last year.

Adjusted EBITDA for the quarter was $1.55 billion, with a margin of 37.8%. Adjusted EPS of $3.21 beat the consensus estimate of $2.75.

As of June 30, the group's customer deposit balance was $6.2 billion. Royal Caribbean held $391 million in cash and equivalents as of June-end.

The company's board of directors declared a quarterly dividend of $0.40 per share payable on October 11 to shareholders of record at the close of business on September 20

Royal Caribbean CEO Jason Liberty said, "Our momentum continues! We met our financial targets 18 months earlier than expected, have our balance sheet in a strong position, reinstated our dividend, and ... we are just getting started."

"Exceptional demand for our vacation experiences has accelerated our performance by generating significant yield growth over the past several years."

Outlook: Royal Caribbean raised FY24 net yields growth outlook from 9% - 10% to 10.4% - 10.9% in constant currency.

RCL raised its FY24 adjusted EPS guidance from $10.70 - $10.90 to $11.35 - $11.45 against the consensus of $11.08.

The company sees third-quarter net yields to increase 6.5% to 7% in constant currency. RCL sees adjusted EPS of $4.90 - $5.00 against the estimate of $4.76.

Price Action: RCL shares are trading lower by 0.31% at $164 in premarket at the last check Thursday.

Southwest Airlines' Q2 Earnings Plummet, CEO Promises Transformational Changes

Benzinga News — Thu, 25 Jul 2024 11:31:19 -0400

Southwest Airlines Co (LUV ) shares are trading lower after the airlines reported second-quarter 2024 results.

LUV reported operating revenue increase of 4.5% year-over-year to $7.354 billion, beating the consensus of $7.32 billion.

Bob Jordan, President, Chief Executive Officer, & Vice Chairman of the Board of Directors, stated, "Our second quarter performance was impacted by both external and internal factors and fell short of what we believe we are capable of delivering."

Adjusted EPS was $0.58, down from $1.19 last year, above the consensus $0.51.

The airline's adjusted operating income fell 54.5% to $405 million, operating expenses increased by 13% YoY to $6.95 billion.

LUV's unit revenue declined 3.8% YoY, driven primarily by industry-wide domestic capacity growth outpacing demand.

Revenue passenger miles increased 7.6% Y/Y, Available seat miles were up 8.6% Y/Y, and load factor was 82.6% compared to 83.4% last year.

CASM-X increases by 6% Y/Y, attributable to anticipated cost increases, most notably market-driven rate inflation in salaries, wages, and benefits, and higher maintenance expenses.

Fuel costs were $2.76 per gallon (+6.2% Y/Y), which aligned with the company's expectation and included $0.087 per gallon in premium expenses and $0.04 per gallon in favorable cash settlements. Fuel efficiency improved by 1.1% Y/Y.

The Dallas-based company had a net cash position of $2 billion and an adjusted debt-to-invested capital ratio of 46% as of June-end. LUV's liquidity stood at $11 billion, more than the debt outstanding of $8 billion.

Southwest Airlines' cash used in operating activities for the quarter stood at $(23) million, compared to cash provided of $1.416 billion a year ago.

"We are taking urgent and deliberate steps to mitigate near-term revenue challenges and implement longer-term transformational initiatives that are designed to drive meaningful top and bottom-line growth," Bob Jordan, President, Chief Executive Officer, & Vice Chairman of the Board of Directors, stated.

"As we announced this morning, our implementation of assigned and premium seating is part of an ongoing and comprehensive upgrade to the Customer Experience, one that research shows Customers overwhelmingly prefer," added Jordan.

Third-quarter 2024 Guidance: Southwest sees RASM flat to down 2% YoY; ASMs up ~2%; CASM-X up 11% to 13% and Economic fuel costs per gallon of $2.60 to $2.70.

The company continues to refine its new revenue management system and optimize network capacity for better long-term performance.

Reaffirmed 2024 Guidance: Southwest sees ASMs up ~4%; CASM-X up 7% to 8%; economic fuel costs per gallon of $2.70-$2.80; and capital spending of ~$2.5 billion.

Price Action: LUV shares are trading lower by 4.59% at $25.39 premarket at the last check Thursday.

Apple Reiterates Privacy As Core 'Human Right' Amid Growing Concerns About AI Integration And Mark Zuckerberg Accusing iPhone-Maker Of Wanting To Put Meta 'In A Box'

Benzinga News — Thu, 25 Jul 2024 11:30:32 -0400

Privacy executives at Apple Inc. (AAPL ) have reiterated the tech giant's commitment to user privacy, terming it as a "fundamental human right."

What Happened: In an interview with YouTuber Andru Edwards that was posted on his channel on Wednesday, two Apple executives Katie Skinner and Sandy Parakilas discussed the company's strategies for preserving user privacy.

The conversation spanned a variety of topics, including Apple's balancing act between privacy and the development of advanced features, and the role of Apple Intelligence in this regard.

While the interview did not reveal any new information, it provided a comprehensive overview of Apple's privacy protection measures and beliefs. The Apple privacy team members offered detailed responses to all queries, upholding the company's long-standing stance on privacy.

At the beginning of the interview, Parakilas said, "The way we think about privacy at Apple is we think it is a fundamental human right." He added that they think companies should always ask users for permission before using their data and be transparent about their intentions.

Apple is gearing up to launch its new operating systems, including iOS 18, this fall. These systems will introduce new privacy features such as the ability to hide apps, a new Passwords app, and per-app Contacts permissions similar to Photos.

Why It Matters: This reaffirmation of Apple's commitment to privacy comes in the wake of recent controversies. In June, at the WWDC 2024 keynote, Apple announced a partnership with Microsoft Corp.(MSFT )-backed OpenAI to integrate ChatGPT into iOS 18, iPadOS 18, and macOS 15 Sequoia.

Soon after the announcement, Tesla Inc. (TSLA ) CEO Elon Musk criticized the partnership saying that he would prohibit Apple devices in his companies if the tech giant integrated OpenAI at the operating system level.

Later during the same month, it was reported that Apple rejected a proposal from Meta to integrate its AI chatbot, Llama, into the iPhone, citing concerns over the company's privacy practices.

This decision led to a public spat with Meta's CEO Mark Zuckerberg, who has now criticized Apple's "soul-crushing" tactics in an interview posted earlier this week.

Zuckerberg said, "It is somewhat soul-crushing to go build something that you think is going to be good and then just get told by Apple you can't ship it because they wanted to put us in a box because they view us as competitive."

Ford Stock Falls After Q2 Earnings Miss, Rising Costs: Analysts Cautious With 'Core To Future Transition Underway'

Benzinga News — Thu, 25 Jul 2024 11:30:17 -0400

Ford Motor Company (F ) analysts are praising the company's Ford Pro segment while the electric vehicle segment sees some concerns, after the company reported second-quarter financial results.

The Ford Analysts:

Bank of America analyst John Murphy reiterated a Buy rating and lowered the price target from $22 to $20.
Goldman Sachs analyst Mark Delaney maintained a Neutral rating and lowered the price target from $14 to $12.
RBC Capital analyst Tom Narayan maintained a Sector Perform rating and a $13 price target.
Piper Sandler analyst Alexander Potter reiterated a Neutral rating and a $13 price target.

Bank of America on Ford: The company's Ford Pro segment "continued to shine" and helped offset weakness for Ford Blue, Murphy said in a new investor note.

"Ford's Core to Future transition underway," Murphy said. "Despite the miss, management continued to paint a positive picture for Ford's recent progress."

The analyst said Ford Pro is the core of the company and the priority for capital allocation, illustrated by an announcement to increased production capacity of Super Duty in Canada.

For electric vehicles, the analyst said company commentary points to investments continuing for the segment.

"There is some time to go before all the new investments Ford is making materialize."

Goldman Sachs on Ford: Higher costs for the Ford Blue division came from higher warranty costs and were a key focus from the earnings report for Delaney.

The analyst said lower costs have been an opportunity for Ford to narrow its EBIT margin versus competitors.

"We believe the report will be considered disappointing by some investors given that costs were higher," Delaney said.

The analyst said Ford is taking "good steps" at improving the long-term of the business.

"We maintain our Neutral rating on the stock, with our positive view on the steps Ford is taking to improve its business (especially with software & services and Pro)."

RBC Capital on Ford: The impact of higher costs for Ford Blue may have impacted the company raising guidance, an item expected by investors according to Narayan.

"We expect a sharp negative reaction to shares," he said.

The analyst noted that Ford's new guidance shows an upswing for the Ford Blue segment EBIT, but a downshift for the Ford Pro and Model e segments.

Higher costs hurt the Blue and Pro segment in the quarter, with the Model e segment seeing some improved costs, the analyst added.

"Model E was actually better by $400M."

The analyst highlighted that assessing the improvement in Model E's costs is crucial for the company's future prospects.

Piper Sandler on Ford: The automotive company's second quarter had "lots to like," Potter said in a new investor note.

The unwelcomed warranty headwinds could continue to send shares lower, the analyst said.

"The company is shouldering a higher-than-expected warranty burden," Potter said.

The analyst said Ford saw its EBIT flat quarter-over-quarter in Q2 while revenue was up 12% quarter-over-quarter.

"We are cutting our 2024 EPS estimate as a result."

The analyst said they're less certain that the high end of the EBIT guidance range can be hit after the second quarter results.

"Ford Pro is a unique asset with recurring revenue and persistently high EBIT margin, but this is balanced against nagging quality issues and losses exceeding $1B/quarter in the Model e segment."

F Price Action: Ford shares are down 17% to $11.41 on Thursday versus a 52-week trading range of $9.49 to $14.85. Ford stock is now down 6% year-to-date in 2024.

Market Update: Dow Rises 80 Points as Market Rebound Falters

Rachel Hemple — Thu, 25 Jul 2024 10:27:59 -0400

Stocks gave up some earlier session gains on Thursday as a morning market rebound failed to secure footing ahead of closing bell. The Dow Jones Industrial Average rose over 80 points after being up as much as 585 points at session highs, while the S&P 500 Index and Nasdaq Composite declined 0.5% and 0.9%, respectively, despite rising nearly 1% each intraday.

Here's how the market settled on Thursday:

S&P 500 Index (SPY ): -0.51% or -27.91 points to 5,399.22

Dow Jones Industrial Average (DIA ): +0.20% or +81.20 points to 39,935.07

Nasdaq Composite Index (QQQ ): -0.93% or -160.69 points to 17,181.72

Making Headlines:

Viking Therapeutics (VKTX ) shares soared over 30% on Thursday after the biotech announced on Wednesday plans to advanced its weight loss injection candidate into a late-stage clinical trial ahead of its previous timeline. Viking is one of several drugmakers hoping to tap into the potential $150 billion GLP-1 market currently led by Novo Nordisk (NVO ) and Eli Lilly (LLY ).

In Economic News:

Economic Activity rose at a higher-than-expected pace in the second quarter, according to the Commerce Department's initial estimate reported Thursday, as consumer spending remained strong amid long-term inflationary pressures.

Real gross domestic product (GDP), which measures all goods and services produced throughout April to June, increased at a 2.8% annualized pace when adjusted for inflation and seasonality, adding to the first quarter's increase of 1.4%.

On the Earnings Front:

Ford (F ) shares slipped lower on Thursday after the Detroit automaker's second-quarter earnings came in below expectations due to longtime warranty costs, affecting profitability. The company maintained its full year earnings outlook, expecting adjusted earnings before interest and taxes between $10 billion and $12 billion.

"We are absolutely a different company than we were three years ago," CEO Jim Farley told analysts on Wednesday during the company's earnings call regarding its restructuring plan, added that the "remaking of Ford is not without growing pains."

Stellantis (STLA ) reported a 48% decline in first-half net profit on Thursday as reduced volumes and temporary production issues impacted its market share in North America. The automaker's U.S. sales declined by 16% in the first half of the year and its North American market share ticked down 1.8 percentage points to 8.2%. Still, the company reaffirmed its 2024 guidance of a double-digit adjusted operating income margin, positive industrial free cash flow and at least 7.7 billion euros worth of dividends and buybacks for investors.

Hasbro (HAS ) reported strong second-quarter earnings on Thursday, driven by gains in the company's digital gaming segment. CEO Chris Cooks highlighted during the company's earnings call that it will continue to bolster its digital gaming portfolio, saying "we're going all in on becoming a digital play company."

Honeywell International (HON ) shares were under pressure on Thursday after the industrial sector bellwether issued lackluster forward guidance following its strong second-quarter results. The company expects third-quarter earnings per share in a range of $2.45 and $2.55, missing analysts forecasts for at least $2.58 per share.

American Airlines (AAL ) shares also fell Thursday after the company slashed its full-year profit outlook due to industry oversupply and a failed sales strategy. The airline expects to earn an adjusted $0.70 to $1.30 per share in 2024, well below the $2.25 to $3.25 range it issued in April. American also estimated its unit revenue could fall as much as 4.5% in the third quarter as demand fails to meet supply.

"As we take a look into the fourth quarter and then beyond, we're going to react to the marketplace and making sure that we're competitive, but at the same time, doing what's right for profitability," CEO Robert Isom told analysts during the company's Thursday earnings call.

Southwest Airlines (LUV ) saw a similar profit slump in its second-quarter as the oversupplied U.S. market led the carrier to issue discounted seats during the busy start of the summer travel season. THe company warned that unit revenue for its third-quarter could decline as much as 2% year-over-year and non-fuel costs could increase to as much as 13%.

"Our second quarter performance was impacted by both external and internal factors and fell short of what we believe we are capable of delivering," CEO Bob Jordan said in a release.

Keurig Dr. Pepper (KDP ) reported in-line second-quarter results on Thursday as U.S. soda sales benefited from increased prices. Net sales rose 3.5% during the quarter to $3.92 billion, while volume increased 1.8% and prices advanced by 1.6% year-over-year.

For Friday:

Market participants will turn their attention towards June's personal consumption expenditures reading due out Friday morning, as well as earnings reports from companies including Colgate-Palmolive (CL ), 3M (MMM ) and Bristol-Myers Squibb (BMY ) to close out a busy week of earnings.

Market Update: Dow Falls 500 Points, S&P 500, Nasdaq Sink Lower

Rachel Hemple — Wed, 24 Jul 2024 15:10:04 -0400

Investors staged a broader market sell-off on Wednesday as underwhelming earnings reports from Alphabet and Tesla pulled the S&P 500 Index and Nasdaq Composite down to their worst performances since 2022. The broader market index fell over 2%, while the tech-heavy Nasdaq dropped over 3.6%. Meanwhile, the Dow Jones Industrial Average lost over 500 points as investors questioned the true valuations across the market.

Here's how the market settled on Wednesday:

S&P 500 Index (SPY ): -2.31% or -128.61 points to 5,427.13

Dow Jones Industrial Average (DIA ): -1.25% or -504.22 points to 39,853.87

Nasdaq Composite Index (QQQ ): -3.64% or -654.94 points to 17,342.41

On the Earnings Front:

Tesla (TSLA ) reported weaker-than-expected second-quarter earnings after market on Tuesday as the electric vehicle maker's auto sales fell for a the second straight quarter. Still, the company posted $25.5 billion in quarterly revenue, which came in ahead of the analyst expectations.

Notably, CEO Elon Musk said during the company's earnings call that Tesla will host its highly anticipated robotaxi event on Oct. 10 (it was originally meant to take place on Aug. 8), adding that he would be "shocked" if the company cannot launch its first robotaxi ride "next year."

Alphabet (GOOG ) (GOOGL ) posted second-quarter revenue and earnings that were in-line with analyst expectations, but its key advertising revenue for YouTube disappointed. Notably, the Google-parent's revenue rose 14% year-over-year, driven by its Cloud revenue that surpassed $10 billion in revenue and $1 billion in operating profit for the first time.

"Our strong performance this quarter highlights ongoing strength in Search and momentum in Cloud," CEO Sundar Pichai said in the company's earnings release. "We are innovating at every layer of the AI stack. Our longstanding infrastructure leadership and in-house research teams position us well as technology evolves and as we pursue the many opportunities ahead."

AT&T (T ) reported strong second-quarter earnings on Wednesday as the telecom's wireless subscriber additions topped estimates. The company added 419,000 monthly bill-paying wireless phone subscribers during the quarter, compared with estimates of 284,800 additions according to FactSet.

Lamb Weston (LW ) shares dropped over 28% in the french fry producer's worst single day performance since its IPO in 2016 as the company posted disappointing fiscal fourth-quarter earnings and issued weak forward guidance.

"The operating environment has changed rapidly over the past twelve months as global restaurant traffic and frozen potato demand softened due to menu price inflation continuing to negatively affect global restaurant traffic," CEO Tom Werner said in a release.

In Economic News:

New U.S. Home Sales continued recent housing market trends, reaching a 7-month low as high mortgage rates squeezed some would-be buyers out of the market in June. Sales of new single-family homes came in at a seasonally adjusted annual pace of 617,000 in June, according to the Census Bureau's report released Wednesday, representing a 0.6% decline from May and a 7.4% drop year-over-year.

U.S. Manufacturing unexpectedly contracted in July as new orders, production and inventories weighed on the sector, according to the S&P Global flash reading of purchasing managers on Wednesday. The U.S. PMI flash manufacturing output index fell to 49.5, down to a six month low from June's slightly expansionary reading of 52.1.

U.S. Services, meanwhile, rose to a 28-month high in July, according to the S&P Global's flash reading. The U.S. PMI flash services business activity rose to an expansionary reading of 56.0 from June's print of 55.3.

"The flash PMI data signal a 'Goldilocks' scenario at the start of the third quarter, with the economy growing at a robust pace while inflation moderates," said Chris Williamson, chief business economist at S&P Global Market Intelligence, in a statement. "However, both manufacturers and service providers are reporting heightened uncertainty around the election, which is dampening investment and hiring."

For Thursday:

Market participants will react to another series of quarterly earnings reports from companies including IBM (IBM ), Chipotle Mexican Grill (CMG ), Ford (F ), Honeywell International (HON ), Astrazeneca (AZN ), Unilever (UL ), Royal Caribbean Cruise (RCL ) and Stellantis (STLA ).

8 Tesla Analysts Size Up Margins, FSD, Robotaxis, New EVs As Stock Tanks: 'The Realities Of Today Vs. The Dreams Of Tomorrow'

Benzinga News — Wed, 24 Jul 2024 12:43:55 -0400

Tesla Inc (TSLA )'s automotive gross margins are the headline takeaway from the electric automaker's second-quarter financial results for Street analysts.

Here's what analysts said about margins and upcoming catalysts.

The Tesla Analysts:

Bank of America analyst John Murphy reiterated a Buy rating on Tesla and lowered the price target from $260 to $255.
Needham analyst Chris Pierce maintained a Hold rating.
Goldman Sachs analyst Mark Delaney maintained a Neutral rating and lowered the price target from $248 to $230.
Stifel analyst Stephen Gengaro reiterated a Buy rating and $265 price target.
Piper Sandler analyst Alexander Potter reiterated an Overweight rating and raised the price target from $205 to $300.
Cantor Fitzgerald analyst Andrew Sheppard reiterated an Overweight rating and $230 price target.
RBC Capital analyst Tom Narayan reiterated an Outperform rating and $227 price target.
Guggenheim analyst Ronald Jewsikow reiterated a Sell rating and $134 price target.

Bank of America On Tesla: The electric vehicle company has several catalysts ahead after the second-quarter earnings report, Murphy said.

Among the key upcoming events are the Robotaxi Day in October, new product launches, potential licensing of FSD and realized cost savings, the analyst said.

"Unsurprisingly, TSLA Noted that 2024 unit growth is likely to be much slower than the 38% YoY growth in 2023 as the development of its next gen vehicle," Murphy said.

The analyst said the message for Tesla going forward is clear: the company has enough capital for its product roadmap and continues to focus on reducing costs through manufacturing and operations.

Needham On Tesla: Electric vehicle adoption is showing improved growth and optimism, Pierce said in a new investor note.

"We remain lukewarm on TSLA-specific demand given consistent financial sacrifices being made to drive unit growth, with our auto gross margins ex regulatory credits estimates moving lower post results," the analyst said.

Tesla's second half of 2024 could see modest growth for delivery figures given increased competition and difficult comparables from last year, he said.

"Lower-priced offerings in 1H25 will drive a return to higher growth rates."

Tesla stock trades at a high valuation given optimism for FSD and Optimus, Pierce said.

"TSLA's valuation premium was easier to justify when looking at its margins on an absolute level vs. peers."

Goldman Sachs On Tesla: Margins were a key item in the quarter that led to Delaney maintaining a Neutral rating and lowering Goldman's price target.

"The underlying gross margin in Tesla's auto business was weaker than we had expected and below consensus, with headwinds from both price/incentives and cost qoq," Delaney said.

Tesla's automotive non-GAAP gross margin was 14.6% in the quarter, below consensus estimates in the 16% range and below 16.4% in the first quarter and 18.1% in the second quarter of 2023.

"Until Tesla is able to begin production of new lower cost models, which the company expects in 1H25, we believe pricing/incentives could remain a key demand lever weighing on margins."

Stifel On Tesla: The company's second quarter had a mixed bag of positives and negatives and shares could continue trading lower after recent strength, Gengaro said in an investor note.

The big negative in the quarter that bears will focus on is automotive margins that were hurt by lower selling prices and new financing efforts, the analyst said.

Positives in the quarter for the analyst were strong energy generation and storage revenue, continued progress on Full Self Driving and plans for lower priced models being on track for the first half of 2025.

"We reiterate our belief that TSLA remains very well positioned longer term, and FSD and Robotaxi impact will be critical value drivers," Gengaro said.

The analyst said Tesla is well positioned for "robust multi-year growth" in 2024 through 2027 and beyond.

Piper Sandler On Tesla: While automotive gross margins get the headlines, Potter said they shouldn't matter in the context of Tesla's wider ambitions of self-driving software and artificial intelligence.

"TSLA's after-hours weakness likely reflects and unexpectedly large q/q decline in automotive gross margin," Potter said.

The analyst raised the price target due to full-self driving comments being positive and the timeline accelerated.

"Though we're boosting our FSD forecast, we're nowhere close to as bullish as Elon Musk."

Cantor Fitzgerald On Tesla: Robotaxis, FSD and new vehicle models were key items from the quarter for Sheppard.

The analyst doesn't expect robotaxis to launch until 2027 or after, but highlighted the importance of the segment.

"We do expect it to be a meaningful business segment for the company over the long term," Sheppard said.

Sheppard said revenues from FSD and robotaxis are fundamental to the bullish thesis on Tesla for the long term.

"We continue to believe Tesla benefits from future upside from its Full Self-Driving software (plus upcoming Robotaxi segment), the introduction of lower-priced models, a global manufacturing footprint with economies-of-scale, and the industry's largest Charging Infrastructure."

RBC On Tesla: The electric vehicle company's discounts on EV models during the quarter pressured automotive margins, Narayan said.

"We would expect shares to trade lower on the Auto gross margin ex-credits, especially considering the tremendous run the stock has had in the past month," the analyst said.

The analyst said commentary on robotaxis by Tesla management was "high level in nature." Narayan said he worries about Tesla being able to secure regulatory approvals for the segment, adding that the timeline is potentially unrealistic.

Guggenheim On Tesla: The second quarter had several key negatives and some forward-looking positives, Jewsikow said, noting "the realities of today vs. the dreams of tomorrow" for Tesla.

The headline negative was weak gross margins, the analyst said. Other negatives highlighted by the analyst are EU tariffs, the Model 3 refresh backlog being exhausted and negative demand in the second quarter.

"We expect more discounting to be required to hold deliveries flat vs. 2Q as demand elasticity trends continue to skew negative," Jewsikow said.

Tesla's new affordable models being on track for 2025 could be "the dreams of tomorrow," Jewsikow said.

"We believe a reveal alongside the Robotaxi event is possible."

TSLA Price Action: Tesla shares are down 10.2% to $221.26 on Wednesday versus a 52-week trading range of $138.80 to $278.98.

Delta Air Lines Faces $500M Financial Hit As IT Outage Causes Thousands Of Cancellations

Benzinga News — Wed, 24 Jul 2024 12:43:48 -0400

Delta Air Lines Inc (DAL ) is about to face significant financial repercussions this quarter due to a recent system failure that resulted in thousands of flight cancellations and triggered a federal investigation into the airline's response.

Citigroup Inc (C ) reduced its estimates for Delta's third-quarter adjusted earnings by 60 cents per share to $1.37, citing increased operational expenses and potential customer compensation costs, reported Bloomberg.

Analyst Stephen Trent also cut two profit metrics by approximately $500 million each.

The financial setback adds to Delta's woes as flight disruptions start to subside. Delta CEO Ed Bastian stated on Wednesday cancellations were expected to be minimal, with normal operations resuming by Thursday.

As of 9:30 a.m. in New York, Delta had canceled 168 flights, the fewest since the disruptions began, according to FlightAware.com.

Conor Cunningham of Melius Research estimated a $350 million impact on operating profit and a potential fine from the Department of Transportation, which is investigating Delta's handling of passengers.

The system failure has also damaged Delta's reputation for reliable service. Cunningham noted that future bookings might be affected due to the operational issues.

Delta has experienced the most severe impact among U.S. airlines following a Friday outage caused by CrowdStrike Holdings Inc (CRWD ), which disrupted multiple industries globally.

The outage rendered about 60% of Delta's critical applications, which are based on Microsoft Windows, inoperable.

While other airlines recovered over the weekend, Delta canceled 511 flights on Tuesday, bringing the total to 5,469 cancellations since the breakdown began.

Price Action: DAL shares are trading up 0.046% at $43.63 at last check Wednesday.

Spotify Smashes Gross Margin Guidance, Analysts Expect 'Continued Momentum'

Benzinga News — Wed, 24 Jul 2024 12:43:32 -0400

Shares of Spotify Technology SA (SPOT ) climbed in early trading on Wednesday, after the company reported its second-quarter results.

The results came amid an exciting earnings season. Here are some key analyst takeaways.

Bank of America analyst Jessica Reif Ehrlich reiterated a Buy rating, while raising the price target from $380 to $430.
Goldman Sachs analyst Eric Sheridan upgraded the rating from Neutral to Buy, while lifting the price target from $320 to $425.
JPMorgan analyst Doug Anmuth reiterated an Overweight rating, while raising the price target from $375 to $425.
Rosenblatt Securities analyst Barton Crockett maintained a Buy rating, while lifting the price target from $396 to $399.

BofA Securities: Spotify reported its gross margins, operating income and free cash flows higher than expectations, although revenue was in-line and MAUs below, Reif Ehrlich said in a note. The lower MAUs of 626 million was due to "some deceleration in developing markets, along with advertising which is ramping slower than anticipated," she added.

"Encouragingly, it does not appear decelerating MAUs are having a material impact on premium subscribers, and SPOT is taking corrective measures to improve the MAU trajectory," the analyst stated. The quarterly results and guidance indicate "continued momentum in gross margin and operating income trajectory."

Goldman Sachs: Spotify's second-quarter earnings reflected "an overall solid report," driven by higher premium subscriber adds, in-line revenues and gross margin beating the guidance by around 110 basis points, Sheridan said in the upgrade note. Management guided to operating momentum in premium subscribers, gross margin and operating profit in the third quarter, he added.

"SPOT is the clear global audio platform leader, which we expect to translate into elements of scaled compounded user growth, rising engagement across multiple format structure & pricing power for our operating forecast period," the analyst further wrote.

JPMorgan: The company exhibited continued operating discipline and "further signs that it can be a strong business, and not just a great product," Anmuth said. "Importantly, SPOT's 3Q outlook touches the low end of its medium-term financial targets of 30-40% Gross Margin & 10%+ Operating Margin," he added.

Although MAU growth slowed in the quarter, net adds could accelerate in the back half of 2024 and into 2025, driven by marketing and product enhancements, the analyst stated. He expressed confidence in the company delivering "accelerating revenue growth in 2024 while meaningfully increasing profitability."

Rosenblatt Securities: Spotify's revenues matched guidance but grew by merely 21% year-on-year in constant currency terms, Crockett said. Premium subscribers rose by 7 million to 246 million, 1 million above guidance, while ARPUs grew by 10% year-on-year in constant currency terms, he added.

"Gross margin of 29.2% smashed the guide for 28.1%," the analyst wrote. "Spotify cited weakness in brand advertising, and said it plans next year to pivots more to programmatic and self-serve direct response ads," he further stated.

SPOT Price Action: Shares of Spotify had risen by 2.69% to $339.68 at the time of publication on Wednesday.

Google Analysts See Upside For Alphabet Stock Following Q2 Earnings As Generative AI Drives Accelerated Search Growth

Benzinga News — Wed, 24 Jul 2024 12:43:26 -0400

Alphabet Inc (GOOG ) (GOOGL ) analysts remain largely positive on the tech giant despite the stock selling off on second-quarter earnings. Multiple analysts maintained positive ratings following the print, highlighting generative AI-related strength in Search.

What Happened: Alphabet reported financial results for the second quarter after the market close on Tuesday. The company delivered revenue of $84.742 billion and earnings of $1.89 per share, beating analyst estimates.

Total revenue was up 14% year-over-year, driven by ongoing strength in Search and momentum in Cloud, which is what analysts are highlighting Wednesday morning.

BMO Capital Markets analyst Brian Pitz reiterated an Outperform rating and price target of $222, citing accelerating Search and Cloud revenue on the back of AI-related contributions.

The BMO analyst noted Search revenue accelerated 20 basis points quarter-over-quarter on more difficult comparisons, implying that advertisers see improved AI-related return on ad spend. The analyst further highlighted Alphabet's cost to serve AI overviews was flat quarter-over-quarter despite a doubling of model size.

"The combination of higher query volume and lower incremental costs implies that AI benefits to Search will be a multi-year event," Pitz said in a note to clients.

RBC Capital Markets analyst Brad Erickson also highlighted the continued emphasis on expanded volume and higher quality of queries with generative search and suggested there could be further upside from the rollout of ads above and below the AI overview box.

"However, we expect investors to take the Q3 margin commentary as slightly worse as AI-related depreciation begins to roll through the model," the analyst said.

RBC Capital "modestly" raised its earnings estimates for 2026 and took its 12-month price target up to $204 from $200, while maintaining an Outperform rating.

"With Search continuing to outperform, the company is giving more evidence of being an AI winner rather than loser with improving operating leverage, compounding earnings and rising capital return," Erickson said.

JMP Securities analyst Andrew Boone also raised estimates "slightly" and maintained an Outperform rating on Alphabet shares as he sees benefits from AI in the early stages.

Boone believes Search growth is sustainable on the back of AI-related improvements. The analyst expects ongoing cost discipline to drive margin expansion moving forward.

"Google noted that over the past quarter it doubled the model size for AI Overviews while improving latency and keeping cost per AI Overview flat as we expect AI compute costs to continue to come down given efficiency optimization, likely unlocking more AI use cases across Google," Boone said, echoing commentary from other analysts.

JMP Securities has a price target of $200 on Alphabet stock based on a 24x multiple on its 2025 earnings expectations. The firm said Alphabet's vast total addressable market, scale across search, video, cloud and high profitability justify its price target.

GOOG Price Action: Alphabet shares were down 4.52% at $175.21 at the time of publication Wednesday, according to Benzinga Pro.

Netflix To Launch Over 80 Games, Promises New Releases Monthly

Benzinga News — Wed, 24 Jul 2024 12:43:08 -0400

Netflix Inc (NFLX ) announced plans to release a new game to subscribers every month starting in July 2024.

This ambitious strategy was unveiled during the company's latest earnings call, where co-CEO and President Gregory K. Peters declared Netflix's commitment to expanding its gaming portfolio, GamesIndustry.Biz reported.

A Growing Focus On Gaming

Peters stressed the potential of the gaming market, noting that it generated "almost $150 billion, excluding China and Russia" without relying on advertisement revenue.

"We're getting close to three years into our gaming initiative, and we're happy with the progress that we've seen," Peters said. "We've had set ourselves pretty aggressive engagement growth targets. And we've met those, exceeded those in many cases. In 2023, we tripled that engagement. We're looking good in our engagement growth in '24, and we've set even more aggressive growth goals for '25 and '26."

Despite these successes, Peters acknowledged engagement with Netflix's gaming content is still relatively small. He also pointed out that the spending on gaming is modest compared to the company's overall content expenditure.

Netflix's Future Plans

Netflix already launched more than 100 games, and Peters revealed the company had over 80 in development. The focus, he explained, is on refining their offerings based on what has proven successful.

"We've seen what works, what doesn't work," Peters added. "We're refining our program to do more of what is working with the 80-plus games that we currently have in development. And one of those things that really is working is connecting our members with games based on specific Netflix IP that they love."

One area where Netflix has seen particular success is in interactive narrative games. These games, which are integrated into a narrative hub called Netflix Stories, are easier to build and offer engaging experiences based on popular Netflix shows.

Between April and June 2024, Netflix launched games based on "Virgin River" and "Perfect Match." Starting in July, the company plans to release "about one new title per month," with many more diverse games expected in the coming quarters and years.

Enthusiasm From Leadership

Co-CEO and president Theodore A. Sarandos expressed excitement about the potential of gaming to deepen fan engagement.

"I think our opportunity here to serve super fandom with games is really fun and remarkable," Sarandos said. "I think the idea of being able to take a show and give the superfan a place to be in between seasons and even beyond that, to be able to use the game platform to introduce new characters and new storylines or new plot twist events [...] I'm really excited to see where this goes."

Magnificent 7 Still Comprise Over 30% Of S&P 500 Despite Tech Correction

Benzinga News — Wed, 24 Jul 2024 12:42:48 -0400

Despite a market rebalancing away from large tech companies, reflected by an over 10% correction in the Roundhill Magnificent Seven ETF (MAGS ) in the past two weeks, the so-called "Magnificent Seven" companies still comprise an outsized portion of the S&P 500.

The Data: The Magnificent 7 comprises seven of the largest U.S. technology companies weighted heavily in the SPDR S&P 500 ETF Trust (SPY ).

Apple Inc (AAPL ), 6.93% of the index.
Microsoft Corp (MSFT ), 6.66% of the index.
NVIDIA Corp (NVDA ), 5.95% of the index.
Alphabet Inc (GOOG ) (GOOGL ), 4.45% of the index.
Amazon.com Inc (AMZN ), 3.94% of the index.
Meta Platforms Inc (META ), 2.45% of the index.
Tesla Inc (TSLA ), 1.4% of the index.

(Figures taken at the time of writing)

All components have been in the red over the past 10 market sessions at a higher magnitude than the nearly 3% drop seen in the overall S&P 500. The small-cap Russell 2000 index is up nearly 10% in that period.

Still, the Magnificent 7 collectively comprise around 32% of the S&P 500.

Why it Matters: The data reflects a persistent market bullishness in artificial intelligence and Big Tech.

The current correction has lessened Magnificent 7's year-to-date performance to a degree, but the Roundhill ETF, which tracks the seven companies, is still up over 35% in 2024.

Several experts have predicted a larger market correction, describing the valuations of NVIDIA and other heavily weighted stocks as "bubble-ish."

Tesla Aims At Profitability For Cybertruck By 2024-End With Production Ramp And Cost Savings With Dry Cathode 4680 Cells

Benzinga News — Wed, 24 Jul 2024 12:42:10 -0400

Tesla Inc's (TSLA ) Cybertruck production is on track to achieve profitability by the end of the year, the company said on Tuesday, thanks to an increase in production and attempts at reducing costs.

Ramping Up Production: Cybertruck production more than tripled sequentially in the second quarter and the stainless steel truck became the best-selling EV pickup in the U.S., Tesla said on Tuesday in its second-quarter earnings report

According to Kelley Blue Book estimates, Tesla sold 8,755 Cybertrucks in the quarter in the U.S., as compared to just 2,803 in the first quarter. The second best-selling EV truck in the quarter was the F-150 Lightning, of which Ford sold just 7,902 units.

The company is currently attempting to further ramp up production with the aim of delivering 250,000 units annually starting in 2025. Tesla has touched a weekly production rate of 1,300 Cybertrucks, Musk said at Tesla's annual shareholder meeting in early June. The company is looking to increase it further this year to touch 2,500 units by year-end, he added.

Cost-Reduction Attempts: In addition to scaling production, Tesla is also attempting to bring down costs.

The company started testing its prototype Cybertruck produced with in-house "dry" cathode 4680 cells in July. Once ramped, the use of in-house dry cathode 4680 cells would enable major cost reduction, the company said.

The launch of production Cybertrucks with dry cathode 4680 cells is expected in Q4, Tesla's Vice President of Vehicle Engineering Lars Moravy said on the company's earnings call.

Tesla already produces 4680 cells for use in the Cybertruck but with cathodes manufactured using a more conventional "wet" process involving the use of a toxic solvent. In the second quarter, Tesla produced 50% more 4680 cells than the first quarter, the company said.

Why It Matters: Tesla started delivering its stainless steel Cybertruck in late November. The vehicle is aimed at more premium EV customers with the higher-end Cyberbeast variant starting at an estimated $99,990.

However, Musk has previously said that production, and not demand, is the biggest hurdle in ramping up Cybertruck deliveries. The company eventually intends to make the truck a common sight on American roads.

As Google Search's Growth Outpaces That Of YouTube, Alphabet CFO Says 'Really Pleased' With Platform: Here's Why

Benzinga News — Wed, 24 Jul 2024 12:41:54 -0400

Alphabet Inc. (GOOG ) (GOOGL ) reported second-quarter earnings results on Tuesday, and while the tech giant met analyst estimates and expectations, it fell short on YouTube advertising revenue.

What Happened: During the earnings call, Michael Nathanson from Moffett questioned the faster growth of Google Search compared to YouTube. In the second quarter, YouTube's year-on-year revenue growth experienced a deceleration compared to the first quarter.

In response, Alphabet's CFO, Ruth Porat, expressed satisfaction with YouTube's performance. She attributed the slowdown to a challenging comparison with the first quarter of the last year when YouTube was rebounding from a period of negative year-on-year growth.

"We're really pleased with YouTube, the YouTube team, all that was done. It was driven by the brand followed by direct response. And they have very strong ongoing operating metrics," she stated.

Porat also said that YouTube's revenue growth in the second quarter faced several headwinds compared to the first quarter. Foreign exchange fluctuations also impacted results, she said.

Alphabet CEO Sundar Pichai also chimed in, discussing the ongoing development of multimodal models and their future relevance to YouTube.

"In terms of getting real generative audio, video experience is working well. I think there is still - it's going to take some time. But over time, obviously, it will be deeply relevant to YouTube. And so, it's an area I'm excited about in the future," he said.

Why It Matters: Despite not meeting estimates, YouTube's ad revenue still grew, reaching $8.66 billion, up from $7.66 billion in the same quarter last year.

Alphabet's second-quarter revenue was $84.742 billion, surpassing the consensus estimate of $84.202 billion. The tech giant's quarterly earnings of $1.89 per share also beat analyst estimates of $1.85 per share.

This marks the sixth consecutive quarter that Alphabet has outperformed analyst estimates on both the top and bottom lines, according to data from Benzinga Pro.

Price Action: As of the latest update, Alphabet's Class A shares declined by 2.19% in after-hours trading, settling at $177.80, while the Class C shares fell by 2.18%, reaching $179.59.

Apple App Store Practices Under Scrutiny In Spain For Anti-Competitive Behavior

Benzinga News — Wed, 24 Jul 2024 12:41:37 -0400

Apple Inc. (AAPL ) shares are trading lower Wednesday. The National Commission for Markets and Competition (CNMC) is investigating Apple for possible violations of Spanish and EU competition laws.

Apple is under investigation for potentially imposing unfair trading conditions on developers using its App Store.

The investigation, which was initiated due to the growing significance of app store activities in Spain, has a maximum duration of 24 months.

If confirmed, Apple's conduct could breach Article 2 of the Defense of Competition (LDC) and Article 102 of the Treaty on the Functioning of the European Union (TFEU), potentially resulting in fines of up to 10% of the companies' global turnover from the previous year.

In March this year, a case filed in the Northern District of California claimed that Apple is imposing "surgical" restrictions that prevent customers from effectively using any service except its iCloud storage system.

On Tuesday, Apple said that it is planning to integrate its A18 chip into its upcoming entry-level iPhones and iPads in order to make them capable of running Apple Intelligence, the company's suite of AI features.

AAPL stock gained over 15% in the last twelve months. Investors can gain exposure to the stock via ETF Opportunities Trust T-Rex 2X Long Apple Daily Target ETF (AAPX ) and Fidelity MSCI Information Technology Index ETF (FTEC ).

Price Action: AAPL shares are down 2.96% at $218.36 at the last check Wednesday.

AT&T Expected to Rise on Strong Phone Net Additions and Robust Guidance: Analyst

Benzinga News — Wed, 24 Jul 2024 12:41:29 -0400

Goldman Sachs analyst James Schneider reiterated a Buy rating on AT&T Inc (T ) with a price target of $22.

AT&T reported fiscal 2024 second-quarter revenue of $29.8 billion - just below Goldman Sachs's and the Stret's estimate of $30 billion.

Adjusted EBITDA of $11.34 billion was in line with Goldman Sachs's estimate of $11.37 billion and the Street's estimate of $11.31 billion.
Free cash flow of $4.6 billion was above Goldman Sachs's estimate at $4.3 billion and the Street at $4.3 billion on lower capital investment.
Wireless service revenue of $16.3 billion was in line with Goldman Sachs's estimate at $16.2 billion, and the Street at $16.2 billion.
Postpaid phone net adds came in at over 419,000, which was well ahead of Goldman Sachs at more than 275,000 and the Street at more than 266,000.
Wireless EBITDA of $9.20 billion was in line with Goldman Sachs's estimate at $9.29 billion and the Street at $9.18 billion.
Fiber net additions of 239,000-plus were below Goldman Sachs's at +260k and the Street's at more than 255,000.
Wireless service revenue growth stands at +3% versus Goldman Sachs's estimate of +3.2% and the Street at +3.1%.
Adjusted EPS remains at $2.15-$2.25 versus Goldman Sachs's estimate at $2.24 and the Street at $2.20.

Schneider expects the stock to trade modestly higher following results given more robust phone net additions, in light of lowered expectations following a Verizon Communications Inc (VZ ) report.

Price Action: AT&T stock gained 27% in the last 12 months. Investors can gain exposure to the stock through Vanguard High Dividend Yield ETF (VYM ) and Vanguard Value ETF (VTV ). T shares traded higher by 4.26% at $18.98 at the last check on Wednesday.

US Services Activity Hits 28-Month Peak, Price Pressures Continue To Ease: Economist Calls It 'A Goldilocks Scenario'

Benzinga News — Wed, 24 Jul 2024 12:40:30 -0400

U.S. private sector activity displayed stronger-than-anticipated growth in July, driven primarily by a robust services sector, despite manufacturing slipping into contraction for the first time in six months.

The preliminary Composite Purchasing Managers' Index (PMI) edged up from 54.8 in June to 55 in July, reaching its highest level since April 2022.

Services PMI increased from 55.3 to 56, surpassing expectations of 55 and marking a 28-month high.

Conversely, the Manufacturing PMI fell from 51.6 to 49.7, missing the anticipated 51.7 and returning to contractionary territory after two months of expansion.

Key Highlights From July PMI Reports

The service sector has outperformed manufacturing for the fourth consecutive month, with the divergence between the two sectors widening to its largest since June of the previous year.
Employment growth slowed, while business confidence declined for the second month, partly due to rising political uncertainty ahead of the presidential election.
Declines in new orders, production, and inventories contributed to the dip in the Manufacturing PMI.
Good news came from inflation. Average prices for goods and services rose at the slowest rate since January, and the second-slowest rate since October 2020. Service prices increased at their slowest pace in almost four years.
Despite this, firms reported higher prices for various raw materials, with energy and logistics prices rising, partly due to increased freight and shipping rates.

Economist Takeaways

Chris Williamson, chief business economist at S&P Global Market Intelligence, said, "The flash PMI data signal a 'Goldilocks' scenario at the start of the third quarter, with the economy growing at a robust pace while inflation moderates."

Williamson noted that output across manufacturing and services expanded at the strongest rate in over two years in July, with survey data suggesting GDP is rising at an annualized rate of 2.5%, following a 2.0% gain in the second quarter.

The economist welcomed the moderation in price increases, indicating that the rate of increase of average prices charged for goods and services has slowed further, aligning with the Fed's 2% target.

However, he also expressed concern over the uneven nature of growth, noting that while the service sector gains strength, manufacturing is contracting. Furthermore, he stressed that both manufacturers and service providers are experiencing heightened uncertainty due to the upcoming election.

The July survey also noted rising input costs, driven by higher raw material, shipping, and labor costs.

"These higher costs could feed through to higher selling prices if sustained, or cause a squeeze on margins," he said.

Market Reactions

The S&P 500 index, as tracked by the SPDR S&P 500 ETF Trust (SPY ), extended its declines for the session, down 1.5% by 10:15 a.m. in New York.

Tesla Inc. (TSLA ) was the worst performer among mega caps, down over 11%, on track for its largest 1-day drop since late January 2024. Chipmakers resumed the selloff, with Nvidia Corp. (NVDA ) down over 3%.

The tech-heavy Nasdaq 100, as replicated by the Invesco QQQ Trust (QQQ ), fell 2.2%.

Small caps, as monitored through the iShares Russell 2000 ETF (IWM ), eased 0.8%.

Bank Of America Raises Projections For Cruise Line Stocks: 'More Insulated From The Airline Trends'

Benzinga News — Wed, 24 Jul 2024 12:39:25 -0400

Bank of America analysts have expressed optimism about the cruise line industry ahead of upcoming earnings reports, forecasting potential stock price increases.

The analysts highlighted that U.S. airlines are facing pricing challenges due to overcapacity and demand concerns, as noted by Ryanair in their latest earnings report.

"We view cruise as more insulated from the airline trends given longer booking curves (9+ months vs 3 months) and different supply dynamics," Andrew G. Didora, CFA, wrote in a note published Tuesday.

The expert sees minimal risk to near-term earnings and expects cruise companies to continue reporting strong fundamentals this earnings season, similar to Carnival Corp.'s (CCL ) recent solid results and raised guidance at the end of June.

Bank of America Raised Royal Caribbean, Norwegian Cruise Price Targets

Royal Caribbean Cruise Ltd. (RCL ) is set to announce its Q2 2024 earnings this Thursday, July 25.

"We believe our current RCL estimates are reasonable ahead of results," Didora said. Bank of America estimates a net yield of +11.0% in Q2 2024, slightly above the high end of guidance at +10-10.5%.

Given the strong trends anticipated in the cruise sector, Bank of America has raised the price objective for Royal Caribbean Cruise Ltd. to $172, while maintaining a Neutral rating.

Norwegian Cruise Line Holdings (NCLH ) hosted an investor day at the end of May, and Bank of America anticipates similar messaging in the July 31 earnings call: focusing on deleveraging, keeping unit costs below inflation, and achieving mid-single digit net yield growth.

Bank of America's full-year 2024 estimated EBITDA is $2.3 billion (aligning with the Street and slightly above the guidance of $2.25 billion), with their Q2 2024 EPS estimate slightly ahead of guidance at 33 cents compared to the guidance of 32 cents (Street 34 cents).

For Q3 2024, they forecast net yields of +5.9% versus the Street's +5%, with EPS of 94 cents compared to the Street's 90 cents.

Bank of America has raised the price objective to $23 as they increase their target multiple, reflecting the continued strong industry trends, while maintaining a Neutral rating.

Alphabet Commits To Another $5B Investment In Waymo: Tesla CEO Elon Musk Takes Jibe At Cash Burn In Unit

Benzinga News — Wed, 24 Jul 2024 12:39:17 -0400

Alphabet Inc (GOOG ) (GOOGL ) has committed to a new multiyear investment of $5 billion into its autonomous driving technology unit Waymo, company CFO Ruth Porat said on Tuesday.

What Happened: The new round of funding, Porat said during the company's second-quarter earnings call, is consistent with recent annual investment levels and will enable the company to "continue to build the world's leading autonomous driving technology company."

"Alphabet has committed up to $5B to Waymo. We are grateful for their immense vote of confidence in our team and recognizing the amazing progress we've made with our technology, product, and commercialization efforts, Waymo co-CEO Tekedra N Mawakana wrote in a post on X.

Tekedra N Mawakana@TechTekedraAlphabet has committed up to $5B to @Waymo. We are grateful for their immense vote of confidence in our team and recognizing the amazing progress we've made with our technology, product, and commercialization efforts.

More details on the investment will be revealed in the company's 10-Q form which is yet to be filed, Porat said.

Elon Musk Responds: Tesla CEO Elon Musk laughed at Alphabet's new investment into Waymo on social media platform X with a short, "Waymo money."

The CEO was seemingly making a jibe at how the venture is costing the parent company way more money, owing to its significant cash burn.

Elon Musk@elonmuskReplying to @SawyerMerrittWaymo money

Musk's Tesla is also trying to achieve vehicle autonomy with its full self-driving (FSD) driver assistance software. However, the technology is still in the development phase and requires active driver supervision.

The company also intends to unveil a dedicated Robotaxi product later this year.

Why It Matters: "In Other Bets (segment), I'm really pleased with the progress Waymo is making, a real leader in space and getting rave reviews from users," Alphabet CEO Sundar Pichai said on Tuesday. Waymo is currently delivering well over 50,000 paid trips per week to customers, he added.

Anyone in San Francisco and Phoenix can currently download the Waymo One app and hail an autonomous ride in an all-electric Jaguar I-PACE.

In Los Angeles, Waymo offers rides to select individuals who signed up to ride with the company and joined its waitlist. The company also recently started operations in Austin, Texas, where it provides autonomous rides to its employees.

Visa Faces Continued Softer Macro Trends: These 7 Analysts Dive Into Q3 Results

Benzinga News — Wed, 24 Jul 2024 12:37:15 -0400

Visa Inc (V ) shares tanked in early trading on Wednesday, after the company reported its fiscal third-quarter results.

The results came amid an exciting earnings season. Here are some key analyst takeaways.

Piper Sandler On Visa

Analyst Arvind Ramnani maintained an Overweight rating while cutting the price target from $322 to $319.

Visa reported quarterly revenues at $8.9 billion, slightly missing the Street expectations, while non-GAAP earnings of $2.42 per share surpassed expectations, Ramnani said.

"Service and Other revenue both exceeded Street expectations, while International Transaction and Data Processing revenue lagged slightly below modeled estimates," the analyst stated. "We are encouraged by momentum within Value-Added Services and expect VAS to continue to be a growth driver," he further wrote.

BofA Securities On Visa

Analyst Jason Kupferberg reiterated a Neutral rating while reducing the price target from $297 to $279.

Visa's quarterly results were "worse than expected," which could continue exerting pressure on the stock, Kupferberg said.

"The quarter could also spark louder debates about the growth outlook for V's core business, which we estimate slowed to ~3% in F3Q," the analyst wrote. The company's core business appears "somewhat soft," with weakness in lower-income US cohorts and a further deceleration in APAC, he added.

Goldman Sachs On Visa

Analyst Will Nance reaffirmed a Buy rating while cutting the price target from $334 to $317.

Visa recorded weaker volumes in the quarter, "particularly in APAC, driven by softer macro trends," Nance said. "This was largely offset by below-the-line items, driving in-line EPS," he added.

Although management reiterated the full-year guidance, they sounded "incrementally more cautious on the macro environment, with incremental weakness in the U.S. low end consumer adding to continued softness in Asia," the analyst wrote. There is a sequential decline in July spending trends, he further stated.

JPMorgan On Visa

Analyst Tien-tsin Huang maintained an Overweight rating while cutting the price target from $300 to $290.

Visa reported 10% revenue growth for the second consecutive quarter, with upside being driven by "incentives and acceleration in new flows despite slightly weaker volume primarily out of Asia," Huang said. Management reiterated the guidance, "implying modest acceleration for F4Q, which we view as a victory for the stock considering perception of building headwinds," he added.

"Consistent with our expectations, Visa framed consumer health as generally stable while acknowledging some softness among lower-end consumers and macro pressures in mainland China," the analyst further wrote.

KeyBanc Capital Markets On Visa

Analyst Alex Markgraf reiterated an Overweight rating and price target of $300.

Visa's payments volume rose by 7% year-on-year, while cross-border volumes climbed 14%, Markgraf said.

"Through the first three weeks of July, U.S. payment volumes have risen by 4% year-on-year, with debit up 4% and credit 3%, primarily due to "a combination of factors such as weather, Prime Day timing and the CrowdStrike / Windows outage," the analyst stated.

BMO Capital Markets On Visa

Analyst Rufus Hone reaffirmed an Outperform rating and price target of $300.

Despite an in-line quarterly performance and broadly unchanged full-year guidance, "Investors will likely remain cautious on V near term given the slight deceleration QoQ across payment volume, transactions and cross-border volumes," Hone wrote in a note.

While Visa continues to generate around 10% revenue growth, driven by strong trends in Value-Added Services and accelerating New Flows growth, "investors worry about the sustainability of double-digit top-line growth in FY25," he added.

RBC Capital Markets On Visa

Analyst Daniel Perlin maintained an Outperform rating and price target of $315.

Visa's full-year guidance indicates "high single-digit to low double-digit net revenue growth on a nominal-dollar basis, while on an adjusted constant-dollar basis, net revenue growth is expected to be in the low-double digits," Perlin said.

For the fiscal fourth quarter, the company guided to "low double-digit adj. constant-dollar net revenue growth, high single-digit operating expense growth, and adj. EPS growth in the high end of low double-digits," he added.

V Price Action: Shares of Visa had declined by 3.96% to $254.30 at the time of publication on Wednesday.

CrowdStrike Blames Error With Test Software For Taking Down 8.5M Windows Computers Globally, Says A New Check Process Is In The Works

Benzinga News — Wed, 24 Jul 2024 12:36:24 -0400

In a recent statement, CrowdStrike Holdings Inc. (CRWD ) disclosed details concerning the outage affecting Microsoft Corp's (MSFT ) Windows users, attributed to a flawed security update.

What Happened: As per their press release on Wednesday, the issue originated from the Falcon platform's Rapid Response Content, a dynamic protection mechanism to detect novel threat techniques, which inadvertently caused a system crash due to an undetected error in the update. CrowdStrike noted that the affected systems were those running Windows sensor version 7.11 and above, which were online during the brief window between 04:09 UTC and 05:27 UTC on the day of the incident.

CrowdStrike has since reverted the defective update, mitigating the issue for systems coming online post-05:27 UTC or those that had not received the problematic update. The company emphasized that Mac and Linux hosts remained unaffected.

In their preliminary Post Incident Review, CrowdStrike outlined their ongoing efforts to prevent such disruptions in the future. This includes enhancing the testing and validation processes for Rapid Response Content and implementing a staggered deployment strategy to better monitor system responses during updates.

George Kurtz, CrowdStrike's CEO, extended a personal apology to customers and partners while assuring that the team is working with the affected users.

"We know that adversaries and bad actors will try to exploit events like this. I encourage everyone to remain vigilant and ensure that you're engaging with official CrowdStrike representatives. Our blog and technical support will continue to be the official channels for the latest updates," Kurtz added.

The full details of the incident will be elaborated in a forthcoming Root Cause Analysis, which CrowdStrike plans to release publicly to provide greater insight into the issue and its corrective measures.

CrowdStrike assures its users that despite the hiccup, their Falcon platform is functioning normally, and all other services, including Falcon Complete and Falcon OverWatch, have not been disrupted. The company has taken additional steps to classify the problematic channel file as known-bad in their systems to prevent future occurrences.

Why It Matters: The outage caused by CrowdStrike has had significant global implications. The CEO, George Kurtz, has been summoned by a U.S. congressional panel to testify on the global tech outage. The faulty update affected less than 1% of Windows users globally, which equates to approximately 8.5 million machines, as revealed by Microsoft.

Analysts predict that the recent global tech outage could cost over $1 billion. There are expectations of demands for remuneration and possibly lawsuits. As tech analyst Dan Ives of Wedbush Securities noted, "If you're a lawyer for CrowdStrike, you're probably not going to enjoy the rest of your summer."

Price Action: On Wednesday, Crowdstrike was trading 1.16% higher in the pre-market since its close of $268.88 on Tuesday while Microsoft was trading 0.91% lower than its previous day's close of $444.85, according to Benzinga Pro.