Market Overview
The market exhibited mixed action again. The major indices traded in tight ranges through the morning trade before selling picked up in the afternoon. The Nasdaq Composite registered a 0.2% decline, the S&P 500 logged a 0.3% loss, and the Dow Jones Industrial Average closed 0.5% lower.
Influencing Factors
This morning's muted price action had a similar feel to other sessions this week. A wait-and-see mindset in front of NVIDIA's (NVDA, Financial) earnings after Wednesday's close kept the broader market in check. Selling picked up in response to the Minutes for the April 30-May 1 FOMC meeting. The minutes did not contain anything too surprising and largely echoed Fed commentary since the meeting. The minutes drew attention to asset valuations, which likely fueled some profit-taking activity.
Stock Performance
- Target (TGT) slid 8.0% after disappointing earnings and outlook.
- Analog Devices (ADI) rose 10.9% after reporting earnings.
- First Solar (FSLR, Financial) traded up 18.7% on a Bloomberg report that China's solar industry body wants an end to the price war.
S&P 500 Sector Performance
Only three S&P 500 sectors closed with gains while three sectors declined more than 1.0%.
Bond Market
The 10-yr note yield settled two basis points higher at 4.43% and the 2-yr note yield rose five basis points to 4.88%. This price action was in response to the minutes and a hotter-than-expected April CPI report from the U.K., along with a weaker-than-expected Existing Home Sales report for April.
Year-to-Date Performance
- Nasdaq Composite: +11.9% YTD
- S&P 500: +11.3% YTD
- S&P Midcap 400: +7.5% YTD
- Dow Jones Industrial Average: +5.3% YTD
- Russell 2000: +2.7% YTD
Economic Data Review
- Weekly MBA Mortgage Applications Index 1.9%; Prior 0.5%
- April Existing Home Sales 4.14 million (consensus 4.20 million); Prior was revised to 4.22 million from 4.19 million
The key takeaway from the report is that sales activity was much stronger in the upper-end of the market (homes priced $1 million or more), with inventory up 34% year-over-year and sales up 40% year-over-year. This underscores the idea that there is pent-up demand that can be unleashed when more inventory for lower-priced homes becomes available.
Today's News
Nvidia (NVDA, Financial) reported an impressive Q1 with Non-GAAP EPS of $6.12, surpassing estimates by $0.54. The company also achieved a record quarterly Data Center revenue of $22.6 billion, a 23% increase from Q4 and a 427% rise year-over-year. Revenue for the quarter was $26.04 billion, beating expectations by $1.45 billion. Nvidia announced a ten-for-one forward stock split effective June 7, 2024, and raised its quarterly cash dividend by 150% to $0.01 per share on a post-split basis. For Q2, Nvidia expects revenue of $28.0 billion, plus or minus 2%, with GAAP and non-GAAP gross margins around 75%, and full-year operating expenses are projected to grow in the low-40% range.
Snowflake (SNOW, Financial) reported Q1 Non-GAAP EPS of $0.14, which missed by $0.03. However, the company posted revenue of $828.71 million, a 32.9% year-over-year increase, beating estimates by $42.82 million. Product revenue grew 34% to $789.6 million. Snowflake has 485 customers with trailing 12-month product revenue greater than $1 million and 709 Forbes Global 2000 customers. The company’s remaining performance obligations reached $5.0 billion, representing a 46% year-over-year growth. For Q2, Snowflake forecasts product revenue between $805 million and $810 million, and for 2025, it projects product revenue of $3.3 billion with an operating income margin of 3% and an adjusted free cash flow margin of 26%.
e.l.f. Beauty (ELF, Financial) posted Q4 Non-GAAP EPS of $0.53, surpassing estimates by $0.20. The company’s revenue for the quarter was $321.1 million, a 71.3% increase year-over-year, beating expectations by $28.74 million. For the full fiscal year 2024, e.l.f. Beauty reported net sales of $1.023.9 billion, a 77% increase driven by strong performance across retail and e-commerce channels. The company’s net income on a GAAP basis was $127.7 million, with adjusted net income at $183.8 million. Diluted earnings per share were $2.21 on a GAAP basis, and adjusted diluted earnings per share were $3.18.
V.F. Corporation (VFC, Financial) reported a 13% year-over-year decline in revenue to $2.4 billion, slightly missing consensus expectations. The North Face business saw a 5% drop, while the Vans business recorded a 26% decline, attributed to efforts to right-size inventories in the wholesale channel. Timberland and Dickies businesses also saw revenue drops of 14% and 15%, respectively. All geographic regions experienced revenue declines, with the Americas leading with a 22% drop. Despite a favorable mix benefiting adjusted gross margins by 180 basis points, unfavorable rates and promotional activities offset these gains by 300 basis points.
First Solar (FSLR, Financial) soared 16.8% to its highest in nearly 16 years after China’s solar industry body called for an end to a price war. SunPower (SPWR, Financial) also saw a significant boost, rising 19.7% following an announced deal with Tesla to offer its Powerwall 3 stationary battery. Other solar and alternative energy companies, including Maxeon Solar Technologies (MAXN, Financial), Daqo New Energy (DQ, Financial), and FuelCell Energy (FCEL, Financial), experienced broad gains.
GigaCloud Technology (GCT, Financial) dropped 11% following a short report by Grizzly Research. The report raised concerns over the Chinese e-commerce company, leading to significant volatility. GigaCloud’s short interest stands at 17.5% of its free float.
Meta Platforms (META, Financial) is in early discussions with media publishers to pay for using their content to train its AI models. This move follows similar deals made by OpenAI, backed by Microsoft (MSFT, Financial), with various media companies. Meta's potential deals could involve news articles, photos, and video content to enhance its AI offerings.
GuruFocus Stock Analysis
- Starbucks: The Quality Remains by Evin Rohrbaugh
- Take Advantage of Shopify's Dip by James Foord
- Amazon Is Flying High, but Is It Now Overvalued? by Parker Schwartz, CFA
- Stanley Black & Decker: A Dividend Aristocrat With Value Potential by Hoang Quoc Anh
