Nvidia Delivers As Bonds Stabilize

Expectations for Nvidia’s earnings results were extremely high going in, with its market capitalization topping $1 trillion. And yet, somehow, the company continues to deliver. 😮

The semiconductor giant’s second-quarter results blew away estimates. Adjusted earnings per share of $2.70 on revenues of $13.51 topped the expected $2.09 and $11.22 billion.

Second-quarter revenues jumped 88% QoQ, driven by data center revenue of $10.32 billion (+171% YoY). Strength in its data centers also drove its adjusted gross margin up 25.3 percentage points to 71.2%. The gaming division revenue rose 22% YoY, but its high-end graphics applications business shrunk 24% YoY. And lastly, automotive growth grew 15% YoY. 📈

From the numbers, it’s clear that data centers are the key to Nvidia’s success. CEO Jensen Huang said, “The world has something along the lines of about a trillion dollars worth of data centers installed, in the cloud, enterprise, and otherwise. That trillion dollars of data centers is in the process of transitioning into accelerated computing and generative AI.” 💾

Nvidia’s A100 and H100 AI chips will play a major role in that transition, but geopolitical concerns remain. While the company does not anticipate being impacted by chip export restrictions, it warned that additional export restrictions on its data center GPUs would have an immediate, material impact on its financial results. Time will tell there. 🤷

Looking ahead, executives expect third-quarter revenue of $16 billion, 27% higher than Wall Street’s $12.61 billion expected. That guidance also indicates 170% YoY growth, which is massive, to say the least. It’s the company’s game to lose at this point with these high expectations. 

$NVDA shares were up as much as 10% after the bell. As investors digest the news, we’ll see if they can stay above $500 per share tomorrow. 🤩

When Peloton’s instructor said to “break it down,” we’re not sure he meant the stock. But that’s what it did today, falling to new lows after reporting weak results. 👎

The company’s fourth-quarter loss per share of $0.68 on revenues of $642.1 million was mixed vs. the $0.38 loss on revenues of $639.9 million expected. 

Summer is typically slow for Peloton and other fitness retailers, so much so that CEO Barry McCarthy warned in May that this quarter would be highly challenging. He even projected a decline in subscribers. But the slowdown appears slightly worse than many anticipated. 😬

Its 3.08 million subscribers were up 4% YoY but down by 29,000 quarter over quarter. The company’s Bike Post recall contributed to greater-than-expected churn amid its seasonally-anticipated slowdown in hardware sales. The company estimates that 15,000 to 20,000 people paused their monthly subscriptions while waiting to replace their bike seats, pushing churn up to 1.4%. 🔺

The two factors combined were a tough cocktail for investors to swallow. And while the company experienced positive free cash flow on an adjusted basis, executives don’t expect that to continue in the coming two quarters due to various factors.

In the long term, Peloton continues to explore growth opportunities ranging from B2B partnerships to offering individuals a rental program and “certified refurbished” purchase option. It says the efforts are showing promise, but investors remain unconvinced that it can successfully become the “fitness company for all” it’s trying to be. 🧐

Time will tell, as always. But for now, $PTON shares are making new all-time lows after breaking through their Q4 and year-to-date lows. 📉

It was another mixed day for retailers, with several stocks moving sharply. Let’s see what happened.

First up is Foot Locker, which has been unable to find its footing lately. 😬

The shoe retailer reported earnings per share of $0.04, which met expectations. However, revenues of $1.86 billion were light of the $1.88 billion consensus estimate, and same-store sales fell 9.4% YoY.🔻

In addition to declining sales by 9.9% YoY, margins continue to shrink due to higher promotional activity and shrinkage (theft & operational issues). The company continues to diversify away from Nike but pointed to “ongoing consumer softness” and changes to its vendor mix as contributors to its current weakness. 

And the company doesn’t see things improving anytime soon. Instead, executives reduced the guidance introduced just five months ago. They now see full-year sales declines of 8%-9% (up from 6.5%-8.5%) and same-store sales declines of 9%-10% (up from 7.5%-9%). To add insult to injury, the company also suspended its quarterly dividend to preserve cash. ✂️

$FL shares fell 28% to thirteen-year lows on the news. It also pushed $NKE shares down to their tenth consecutive daily decline (a new record).  ✂️

However, on the positive side, Abercrombie & Fitch continues its turnaround.

The retailer surprised Wall Street with $1.10 in earnings per share on revenues of $935.3 million. That topped estimates of $0.17 and $842.4 million. As for what’s driving the strength? Executives point to their years-long effort to diversify away from being a “jeans and T-shirt brand” and more into a “lifestyle brand.” 🛍️

And those efforts appear to be hitting with consumers. Comparable sales rose 13% YoY, with Abercrombie leading the charge up 23% and Hollister lagging at +5% YoY. Inventory was down 30% YoY as the company worked through existing stock. That’s also helped margins improve, especially as the costs of shipping and raw materials pull back. 🔺

Executives expect the company to continue bucking industry weakness. They now see net sales rising 10% for the full fiscal year, up from previous guidance of 2%-4%. And operating margins should be in the 8%-9% range vs. the 5%-6% previously anticipated. 🔮

$ANF shares surged 24% today to ten-year highs, pushing back to the upper end of its longer-term trading range as a public company. ☝️

And lastly, Williams Sonoma continues to rebound despite a slowdown in the housing market. 🏡

Second-quarter earnings per share of $3.12 on revenues of $1.86 billion were mixed compared to estimates of $2.71 and $1.96 billion. Sales remain lackluster, falling 13% YoY, but margins improved and should buoy earnings. Executives now expect a full-year operating margin of 15% to 16%, up one percentage point from previous guidance.

$WSM shares rose more than 13% on the news. 🍳