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Coty's (COTY) recent slide in stock value follows a slight earnings miss for Q4 (Jun), coupled with a conservative FY24 EPS outlook. The cosmetic manufacturer's shares have dipped over 15% since reaching mid-July highs, mirroring the broader retail sector and its peers, except for e.l.f. Beauty, which achieved new 52-week highs due to its lower-priced products' popularity. Adjusted EPS for Q4 swung from a loss of $(0.01) in the previous year to $0.01, but fell short of the $0.06 and $0.22 reported in Q3 (Mar) and Q2 (Dec) respectively. Coty's strategy of implementing price hikes has helped maintain operational profitability, with adjusted gross margins improving by 70 basis points YoY to 62.8%, despite elevated input costs. Coty revealed plans to continue these pricing actions into FY24, aiming for a mid-single-digit increase across much of its product lineup in Q1 (Sep). The company acknowledged that inflation would persist next year, testing its brand loyalty. Despite two years of price hikes, Coty expressed confidence in its ability to navigate such increases without significant backlash, combining the hikes with added value.

Coty's revenue grew 15.7% YoY to $1.35 billion, aligning with the upper end of its initial $1.20-1.40 billion forecast. This return to double-digit growth, reminiscent of 2021 and 2022, was driven by positive momentum in both the Prestige and Consumer Beauty segments, with like-for-like (LFL) revenue growth reaching 21% and 10% YoY, respectively. Coty noted the fragrance category's resilience within the Prestige segment despite macroeconomic pressures, and Consumer Beauty's benefit from strong demand across core brands, including CoverGirl. The quarter saw robust LFL growth across all geographies, with the Americas, EMEA, and Asia Pacific all increasing by at least 10%.

Looking forward, Coty's FY24 adjusted EPS guidance fell slightly short of analyst expectations, projecting a range of $0.44-0.47. Nevertheless, this outlook implies a solid 56.9% YoY increase at the midpoint, demonstrating Coty's confidence in offsetting persistent cost inflation with its pricing strategy. While Coty's Q4 performance was relatively moderate, leading to subdued price movement, the beauty category remains resilient, driven by ELF's recent success and Coty's steady figures for Q4. Coty's long-term focus revolves around targeting younger generations, particularly Gen X, whom management regards as loyal customers. Additionally, the company's entry into the Brazilian market, estimated as a $4.0 billion opportunity, underscores its strategic expansion efforts.

Fabrinet (FN) is experiencing significant positive momentum following the release of its Q4 (Jun) earnings report. The Thailand-based company, which provides optical and electronic manufacturing services to original equipment manufacturers (OEMs), exceeded analyst expectations by a considerable margin. Moreover, its Q1 (Sep) guidance midpoint outperformed projections. The company's strong performance in its artificial intelligence (AI) business is likely contributing to the stock's surge. Monitoring firms like Fabrinet is crucial for insights into the tech and electronics production sector. The company's focus on optical components, automotive parts, medical devices, industrial lasers, and sensors provides a lens into various aspects of this industry. In FY23, Fabrinet's four largest customers were Cisco, Lumentum, NVIDIA, and Infinera, contributing to 16%, 15%, 13%, and 12% of revenues, respectively. The past year presented challenges for Fabrinet, involving supply chain disruptions in the first half followed by inventory adjustments in the second half. Breaking down Q4 results by segment, Fabrinet's larger optical communications (OC) segment, constituting 77% of revenues, witnessed an 8% YoY revenue increase but remained flat sequentially at $502.1 million. Within OC, telecom revenue experienced a 17% YoY and 19% sequential decline to $309.6 million, mainly due to inventory adjustments at both Fabrinet's customers and their clients. However, this decrease was counterbalanced by record revenue growth in datacom, which surged by 107% YoY and 57% sequentially to $192.5 million. Notably, the substantial growth in datacom was largely attributed to an 800-gigabyte program catering to AI applications.

Looking ahead, Fabrinet anticipates the short-term inventory correction in the telecom sector to continue into Q1. Despite this, the strong datacom performance in Q4 is expected to largely offset the inventory-related challenges. The company maintains an optimistic outlook for its overall market position, including potential growth in AI-related programs. In its non-OC business, representing a smaller portion (23% of revenues), revenue increased by 25% YoY but decreased by 5% sequentially to $153.8 million. The automotive subsegment within the non-OC area exhibited notable growth, with auto revenue rising by 66% YoY to $92.9 million due to improved component availability. Industrial laser revenue was $28 million, down by 10% from Q3, while other non-OC revenues reached $32.9 million, marking a 10% YoY increase.

The substantial rise in Fabrinet's stock can be attributed to multiple factors. The company's positive headline figures, particularly the favorable guidance at the midpoint, have generated investor satisfaction. The record AI revenue is likely a significant driver behind the stock surge, capturing attention on a day when few other companies reported earnings. Fabrinet's AI success seems to be drawing parallels with the AI-driven success of NVIDIA, a substantial customer for FN. With NVIDIA reporting the following day, Fabrinet might be considered a potential secondary play in this context.

In a significant departure from its double-digit beat in the previous quarter, Dick's Sporting Goods (DKS) experienced a substantial miss in bottom-line estimates for Q2 (Jul), marking the first such occurrence since the COVID-related restrictions began in 2020. The sporting goods retailer also failed to meet analysts' sales projections and lowered its FY24 (Jan) EPS forecast by around 11% at the midpoint. However, the company maintained its FY24 same-store sales growth estimate at a range of flat to +2%. Simultaneously, DKS introduced a new business optimization strategy, involving the elimination of customer support roles and other positions, constituting about 1% of its workforce. Despite these measures, DKS did not anticipate substantial cost savings, as investments in talent were expected to offset the effects. The decline in adjusted EPS by 23% YoY to $2.82 was attributed by CEO Lauren Hobart to elevated inventory shrink, which encompasses the loss of inventory due to factors such as theft, administrative errors, or vendor fraud. This issue has been acknowledged by several prominent retailers recently, including Walmart, Target, and Home Depot. The relatively subdued discretionary spending environment contributed to modest sales growth of only 3.6% to $3.22 billion. Notably, DKS deals with a range of price points, but its products like sporting goods and camping gear often fall into the "big-ticket" category, which might be adversely affected by the current spending climate. Consequently, DKS revised its FY24 outlook downward, forecasting adjusted earnings within the range of $11.50 to $12.30, down from the previous estimate of $12.90 to $13.80. Despite the challenging circumstances, some positive aspects emerged from the quarter. DKS observed a 2.8% rise in transactions and continued to capture market share. The company's strategy of reformatting its stores seems to be progressing well, with the introduction of new House of Sport locations that offer enhanced in-store experiences. Around 75 to 100 House of Sport sites are expected to open by 2027. Additionally, sales gained momentum in July, boding well for the crucial back-to-school season in Q3 (Oct).

With DKS shares retracing all gains made this year and returning to late December 2022 levels, the outlook appears somewhat bleak. The immediate demand landscape does not appear favorable, particularly as DKS faces competition from e-commerce platforms that offer comparable prices along with the convenience of online shopping. This has prompted the company to emphasize enhancing the in-store experience, a move that seems appropriate given the nature of its products, which often benefit from trial before purchase. Nonetheless, unless a significant catalyst emerges, DKS may continue to experience selling pressure in the coming months.

Despite a sluggish environment for do-it-yourself (DIY) projects and a more than 9% drop in revenue – its largest decline in over five years – home improvement retailer Lowe's (LOW) still managed to slightly surpass Q2 earnings per share (EPS) estimates, showcasing its strong operational performance. Employing measures such as cost containment and share buybacks, LOW achieved an earnings upside even as it confronted challenges posed by the decline in revenue. Notably, LOW's reaffirmation of its FY24 revenue, comparable sales, and EPS guidance is of utmost significance, indicating that demand has stabilized and is not expected to deteriorate further.

Anticipations were subdued ahead of LOW's earnings release, evident in the stock's 8% decline since the end of July. Concerns that a slowdown in consumer discretionary spending could impact the company's results were exacerbated following its competitor Home Depot's (HD) Q2 earnings report last week. While HD managed to exceed expectations in both revenue and earnings, the DIY segment remained weak, particularly in sales of higher-ticket items such as appliances and grills.

As projected, LOW encountered challenges in its DIY business, which accounts for roughly 75% of total sales, in Q2, with decreasing lumber prices exacerbating the pressure. Despite this, the 1.6% decline in comparable sales was better than anticipated due to stronger performance in LOW's expanding Pro business. In comparison, HD experienced a 2.0% decline in comps during Q2.

A cautious approach to managing the business expenses has also played a significant role in LOW's earnings outperformance. In Q2, Selling, General, and Administrative costs decreased by around 8% year over year to $4.09 billion. Additionally, the company's share buyback initiative, which resulted in approximately 10.1 million shares repurchased during the quarter, contributed to bolstering EPS. Consequently, even with the company facing its most substantial year-over-year sales decline in many years, the EPS only contracted by 2%.

While Q2 proved to be another challenging quarter for LOW, given its substantial exposure to the DIY market, the company's results outperformed expectations. Investors are finding relief as LOW, following in the footsteps of HD, reaffirmed its FY24 outlook. This affirmation, coupled with the results, has triggered a relief rally following a difficult start to August.

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Goldman Sachs (GS) is in the process of evaluating a potential sale of its investment advisory business named Personal Financial Management, following a challenging quarter marked by missed Q2 earnings expectations and a substantial drop in investment banking revenue. This proposed divestiture is part of GS's strategy to offload underperforming assets that have been adversely affecting its performance. The move aligns with previous actions, including the sale of personal loans from its Marcus unit and the search for buyers for its acquired Fintech company GreenSky, which faced setbacks due to decreased consumer spending amid rising interest rates and inflation. The decision to potentially divest Personal Financial Management comes after GS's acquisition of the company in 2019 as part of a plan to broaden its client base and revenue streams. Although the acquisition, amounting to $750 million, aimed to replicate the diversification strategy executed by other financial giants like Morgan Stanley (MS), GS's attempts have yet to yield similar positive results. As GS sheds non-core assets, it will likely intensify its focus on institutional and high net worth clients, leading to increased reliance on its investment banking and trading operations. The stock's recent decline of approximately 10% in August underscores investors' diminishing confidence in GS's short-term prospects. However, this weakness combined with a potential rebound in the IPO and M&A markets and improved earnings resulting from the asset shedding could set the stage for a turnaround in the stock's performance.

Palo Alto Networks (PANW) has seen a notable surge in its stock price following its Q4 (Jul) earnings report, which revealed an EPS beat and in-line revenue. Despite mixed guidance, with upside EPS but downside revenue projections for both Q1 (Oct) and FY24, the market's reaction suggests that investors are finding value in the details of the report. An unusual scheduling choice for the earnings release, setting it for a Friday after the close, led to speculation that PANW might have been attempting to downplay negative news. However, while the numbers didn't surpass expectations, they were better than anticipated given the scheduling decision. Notable highlights from the report include substantial margin expansion, attributed to a higher software mix and scale synergies, which contributed to strong EPS performance. Additionally, PANW demonstrated solid billings growth and acknowledged the increased scrutiny and postponement of deals within the industry, a challenge it has proactively addressed through strategic sales team adjustments. Although the intensified deal scrutiny and increased use of deferred payments have raised some concerns, PANW's overall performance in the quarter has been viewed positively, particularly in light of the cybersecurity sector's mixed earnings season. The market's reaction, driven partly by initial skepticism due to the unusual scheduling, reflects investors' recognition of the company's efforts to navigate challenges and capitalize on growth opportunities.

Acushnet (GOLF), the parent company of Titleist and FootJoy, has experienced a notable uptrend this year, with its shares appreciating by over 25%. The stock received an additional boost after Jefferies upgraded it from "Hold" to "Buy." Particularly when compared to competitors like Callaway and NIKE, which have faced YTD share price declines, Acushnet's positive performance stands out. Operating in a highly competitive sector, Acushnet's solid competitive edge is highlighted by its consistent results, even amid an environment marked by inflation. The success of the Titleist brand underscores Acushnet's competitive advantage. Titleist golf balls, fueled by the successful launch of the Pro V1, saw a 20% sales increase YoY in Q2. While Callaway experienced even more significant growth in Q1, with over 30% improvement in golf ball sales, it anticipates a slowdown in the latter half of the year. In contrast, Acushnet expects its positive momentum in golf ball sales to continue through H2 2023, despite supply chain limitations affecting the Pro V1 lineup's availability. This upbeat trajectory contributed to Acushnet's upgraded FY23 revenue guidance of $2.35-2.40 billion, a contrast to Callaway's reaffirmed reduced outlook. Acushnet's strength also extends to its club offerings. Despite economic conditions impacting discretionary spending, Q2 golf club sales surged by 16% YoY, surpassing Callaway's 7% dip in the same period. Acushnet's success is particularly evident in its putters and drivers, driving Q2 sales, while wedges and irons met expectations. However, the company's golf apparel subsidiary, FootJoy, faced challenges. FootJoy's sales dropped by 10% YoY in Q2, consistent with the broader footwear industry's slowdown. Acushnet revised its FY23 outlook for FootJoy due to elevated inventories and increased promotional activity. In contrast, Callaway offered limited insight into its apparel business's performance for H2 2023. Despite golfers' return to pre-COVID activities, the golf industry remains healthy due to shifting consumer preferences and sticky inflation, maintaining double-digit growth in Acushnet's club and ball sales. Acushnet's competitive advantage is underscored by its outperformance compared to key rivals, potentially leading to increased market share. Unlike Callaway, Acushnet's projected sustained momentum in Titleist golf balls for the rest of the year positions the company for further market share gains, solidifying its leadership position in the golf industry.

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Applied Materials (AMAT) is currently experiencing a relief rally, as its stock price has risen by 3% today. This uptick follows the company's positive performance in the third quarter (July) and its optimistic guidance for the fourth quarter (October). The company, a major player in the semiconductor equipment industry, had been under pressure from significant selling recently, with its stock declining almost 10% this month. This decline was primarily attributed to a shift in investor sentiment triggered by a Fitch downgrade at the beginning of the month, rather than any internal issues within Applied Materials.

In the July quarter, Applied Materials reported relatively stable year-over-year adjusted earnings per share (EPS) of $1.90. However, its revenues of $6.42 billion represented a 1.5% year-over-year decline, marking the company's first quarterly drop since the fourth quarter of 2019. The segments related to foundry, logic, and flash memory (NAND), which collectively contribute about 80% of the company's sales, underperformed during the quarter, leading to negative top-line growth. Despite this, in the first half of the year, the company's revenues from DRAM (dynamic random-access memory) surpassed the combined revenues of its two closest competitors. Additionally, Applied Global Services (AGS) achieved record revenues of over $1.46 billion in the same quarter.

During a conference call, Applied Materials discussed two key factors influencing its current and future performance: AI (artificial intelligence) and ICAPS (IoT, Communication, Automotive, Power, and Sensor). The company's management expressed optimism about these themes, emphasizing how they are interconnected, as consumer devices, vehicles, and infrastructure increasingly rely on AI for greater intelligence. The company sees promising long-term effects from this trend.

Meanwhile, the semiconductor industry is undergoing a significant shift towards regionalization. Governments have recognized the risks of outsourcing chip production, particularly highlighted during the pandemic. Applied Materials anticipates that countries will aim to establish local capacity to ensure industry resilience across various sectors. As a result, governments are expected to provide substantial incentives over the next five years to support this shift.

Looking ahead, Applied Materials is enthusiastic about the next quarter, projecting adjusted EPS in the range of $1.82 to $2.18 and revenues ranging from $6.11 billion to $6.91 billion, both of which surpass estimates. Despite the current soft demand for chips, particularly in personal electronics, the market has driven Applied Materials' stock higher, factoring in expectations of a trough in wafer fabrication equipment spending. This sentiment aligns with statements made by Micron, Lam Research, and KLA Corp in recent months. Moreover, the excitement surrounding AI's potential impact continues to fuel optimism.

While today's response is relatively subdued compared to last month's market action, there are compelling reasons to maintain a positive outlook on Applied Materials' long-term prospects. The ongoing regionalization of chip production could serve as an under-discussed catalyst for substantial growth in the latter half of the decade. Furthermore, the increasing incorporation of chips in various applications, alongside advancements in AI and smart technologies, is expected to provide enduring support for the company's growth.

Ross Stores (ROST) is experiencing a substantial uptick, with its stock rising by 6% following the release of its Q2 (July) report last night. The company delivered impressive results, exceeding expectations for both earnings per share (EPS) and revenue. Notably, its comparable store sales (comps) performed significantly better than anticipated. Although Ross Stores typically provides conservative guidance, it has presented an optimistic outlook for the next two quarters, which carries significant implications. The positive surprise in EPS surpasses the gains witnessed in the past two quarters. However, the most noteworthy aspect is the EPS guidance for two specific reasons:

First, the in-line EPS guidance for Q3 (October) might appear unremarkable at a glance. However, for those closely tracking Ross Stores like us, the on-target guidance came as a pleasant surprise. The company traditionally sets low expectations in its guidance, only to exceed them upon reporting. This on-par guidance signals a higher level of confidence in its immediate performance. Moreover, the midpoint of the Q3 EPS projection exceeds analyst predictions, resembling a guidance increase, which is a rare occurrence and quite delightful.

Second, Ross Stores has not only provided guidance for one upcoming quarter but for two. While this move mirrors last year's approach when the company reported Q2 results in August 2022, this time, the Q4 (January) EPS guidance surpasses analyst forecasts. This demonstrates Ross Stores' assurance regarding the forthcoming holiday season.

The second quarter saw a strong +5% increase in same store comps, significantly outperforming the prior expectation of "relatively flat" performance. The rise in comps was primarily propelled by heightened customer foot traffic. Notably, the categories of cosmetics and accessories displayed robust growth, with home goods also achieving above-average results. The positive performance was spread across various geographical regions. Furthermore, Ross Stores has elevated its comp guidance for the latter half of 2023. Whereas the company initially anticipated flat comps for the entire year, it now foresees Q3 comps of +2-3% and Q4 comps of +1-2%.

Operating margin for Q2 remained consistent year-over-year at 11.3%, notably surpassing the earlier guidance range of 9.8-10.1%. The company benefited from reduced costs related to ocean and domestic freight. The operating margin projection for Q3 stands at 10.3-10.5%. Another encouraging metric is the 15% year-over-year decline in consolidated inventories. Many retailers faced an inventory glut in 2022 amidst consumer spending pullback, making this progress commendable.

In summation, Ross Stores' performance and guidance have left a favorable impression. Although TJX also reported favorable figures, there were concerns given that a significant portion of Ross Stores' merchandise falls within the discretionary spending category, which has witnessed a decline due to weakened consumer expenditure. Ross Stores predominantly specializes in apparel and home goods, areas that consumers might cut back on during tight financial situations. Moreover, the absence of grocery sales, which served as a boon for Walmart in recent quarters, distinguishes Ross Stores. Additionally, its core customer base consists of lower-income individuals who are most impacted by inflation. The surprise here is Ross Stores' ability to deliver these results, especially the robust +5% comps.

The surge in customer foot traffic suggests that Ross Stores might be attracting higher-income consumers aiming to save money, which is a positive development. Looking ahead, this report serves as a positive sign for other value and dollar store retailers scheduled to report soon, including Burlington (August 24), Big Lots (August 29), and Ollie's Bargain Outlet (August 31). Dollar stores such as Dollar Tree (August 24), Dollar General (August 31), and Five Below (August 30) are also on the horizon, and this report sets a promising tone for their upcoming announcements.

Deere's (DE) Q3 (July) report, featuring an earnings beat and upward guidance revision, has failed to yield positive stock gains as concerns over slowing sales growth and the potential impact of higher interest rates on long-term demand lead to a 4% decline in the stock (DE). This response mirrors the market's reaction following the solid Q2 (April) results in mid-May, where worries about future demand persisted despite strong performance. However, it's worth noting that the stock's decline after the April results was short-lived.

During the July quarter, Deere posted impressive earnings growth, with a remarkable 65.6% year-over-year increase to $10.20 per share. This marks the company's most significant earnings beat in over five years. Operating margins in Deere's core segments also surged, primarily due to favorable pricing. Despite experiencing over +20% growth in equipment sales for four consecutive quarters, growth tapered to a single-digit increase of 9.9%, reaching $14.28 billion. Anticipated revenue growth in the upcoming quarters is likely to be less exuberant as Deere faces the challenge of surpassing quarters with over +30% growth rates.

A potential concern for future growth lies in crop prices, as rising consumer costs intersect with Deere's strategy of gradually raising prices to counter inflationary pressures. Currently, this concern has not materialized; the Production & Precision Ag (43% of revenue) and Construction & Forestry (24%) segments enjoyed double-digit growth in sales due to higher price realization and shipment volumes, partially aided by weather-induced yield pressures that maintained elevated prices. Nonetheless, deflation in some commodities, as observed in sectors like Tyson Foods, could gain prominence in the upcoming quarters.

One minor setback in the July quarter was the modest 3% year-over-year increase in sales for the Small Ag & Turf segment (24% of revenue). Reduced shipment volumes in this category reflect a hesitation among smaller farm and business owners to accept higher prices. However, the subdued performance of Small Ag & Turf sales might have been anticipated given retailers like Tractor Supply and Home Depot reported sluggish demand for discretionary items. Tractor Supply even acknowledged more challenging conditions than initially expected in the midst of inflation concerns.

Deere remains optimistic about the second half of the year, projecting a net income range of $9.75 billion to $10.00 billion, up from the previous range of $9.25 billion to $9.50 billion. The company anticipates a year-over-year sales growth of +20% for its Production & Precision Ag business. Management emphasizes the stabilization of their supply chain, favorable market conditions, and an improving operating environment.

The key takeaway from the Q3 report is that impressive headline figures may not suffice when overall market sentiment is declining. Minor setbacks, such as lagging Small Ag sales, become more pronounced, particularly if macroeconomic conditions weaken and overshadow solid equipment sales growth. A similar pattern was observed in the previous quarter, and this trend could continue to exert selling pressure on Deere in the short term.

Nevertheless, Deere's focus on smart farming equipment offers promising prospects for steady margin expansion over the long run. The company's dominance in the farming equipment market remains strong. Additionally, as supply chain disruptions continue to alleviate, Deere is well-positioned for sustained growth.

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Experiencing a series of setbacks, CVS Health (CVS) finds itself grappling with another blow as its stock plunges by 8%, marking its lowest point since November 2020. The reason for this decline stems from the news that Blue Shield of California, a prominent health insurance company catering to more than 4.0 million members, has opted to sever most ties with CVS. Instead, Blue Shield has chosen to collaborate with Cost Plus Drug, an enterprise associated with Mark Cuban, and Amazon Pharmacy. This development is significant not only due to the substantial loss of customers but also because of the potential wider implications it carries. This move by Blue Shield raises concerns that other health insurance providers, whether nonprofit or for-profit, might also distance themselves from CVS and other pharmacy benefit managers (PBMs) such as Express Scripts, causing significant disruption within the traditional PBM landscape.

For CVS, the termination of its contract with Blue Shield comes at an inopportune juncture. The company is already grappling with challenges related to the impending partial termination of its agreement with Centene (CNC) in 2024. CVS's troubles began when CNC decided to shift its business to Express Scripts late in 2022. This decision placed additional strain on CVS's already uncertain outlook for 2024, further compounded by the fact that CVS's Star Rating had been downgraded from 4.5 to 3.5 in October. This rating cut unnerved investors and initiated a significant downward trajectory for the company's shares. In response, CVS has outlined strategies to mitigate the financial impact of this lower rating, including diversifying its contracts and implementing operational initiatives. The company has even announced a sizable layoff of approximately 5,000 employees before its Q2 report. However, despite these efforts, CVS cautioned that these measures might not fully offset the gap resulting from the rating cut.

Adding to these challenges are CVS's ambitious merger and acquisition endeavors. The company recently finalized acquisitions of Signify Health and Oak Street Health for $8.0 billion and $10.6 billion respectively earlier this year, potentially exerting further pressure on its profitability. Moreover, CVS's medical benefit ratio saw a year-over-year increase of 350 basis points to 86.2%, indicating rising outpatient costs.

In essence, the loss of the contract with Blue Shield poses a worrisome scenario for CVS. With PBMs constituting a significant portion of CVS's total sales, accounting for approximately half, the company's future performance could be substantially impacted. Notably, CVS withdrew its adjusted EPS target of $10.00 for FY25 earlier this month, subsequently revising its FY24 target to a range of $8.50 to $8.70 from the previous $9.00 target. This adjustment translates to flat year-over-year growth. Management has signaled that it will provide further clarity on its longer-term earnings growth outlook in December, although prospects for substantial improvement in the aftermath of these recent developments appear uncertain.

Cisco Systems (CSCO) pleasantly surprised the market with an unexpectedly robust performance as it concluded FY23 on a highly positive note. The company delivered a notably substantial earnings per share (EPS) beat, which stood out as the largest such beat since the third quarter of 2020. This marked departure from Cisco's typically modest EPS beats was particularly noteworthy this quarter. Impressively, revenues also climbed by 16% year over year, reaching $15.20 billion, surpassing expectations. Looking forward, Cisco's guidance for the first quarter of FY24 exceeded analyst projections, and its outlook for the entire FY24 remains in line with expectations. Notably, Cisco highlighted that its sales for FY23 reached a significant milestone of $57 billion, representing an 11% increase from FY22. This growth rate in revenue is the highest Cisco has experienced in over a decade. The company emphasized that customer demand remained robust overall. Cisco's positive outlook is rooted in the strength of its backlog, annual recurring revenue (ARR), and remaining performance obligations (RPO), which contribute to solid visibility and predictability. Q4 marked a historic quarter for Cisco, as it achieved record-high figures for revenue, non-GAAP operating margin, EPS, and operating cash flow. Remarkably, Q4 saw over 30% sequential growth in total product orders, the second-highest such growth rate in two decades, with double-digit gains across all customer segments. Product revenue experienced a significant uptick of 20%, while service revenue grew by 4%. Geographically, revenue distribution showed the Americas experiencing a 21% increase, EMEA up by 10%, and APJC up by 7%. Notable areas of product revenue growth included Secure, Agile Networks (up 33%), Optimized Application Experiences (up 15%), and Internet for the Future (up 3%), although Collaboration saw a decline of 12%, and End-to-End Security remained flat.

A particularly noteworthy metric was the non-GAAP operating margin, which saw a significant improvement to 35.4% from last year's 32.4%, surpassing the upper end of the previously guided 34-35% range. Cisco attributed this progress to favorable pricing, a favorable product mix, and the benefits from actions taken in the previous fiscal year. These actions included productivity enhancements that led to reduced freight and logistics, component, and other costs. For the upcoming Q1, Cisco foresees a non-GAAP operating margin in the range of 34-35%.

Additionally, Cisco highlighted the resolution of its backlog, which led to corresponding market share gains. During the first quarter of the calendar year (Q1), Cisco achieved over a 3-percentage-point increase in market share year over year in its three largest networking markets: campus switching, wireless LAN, and SP routing. The company anticipates further market share gains in these segments when Q2 market share data becomes available.

In summary, Cisco's performance in this quarter has been remarkably strong, deviating from its usual pattern of conservative EPS beats and cautious guidance. The company's significant EPS beat and optimistic guidance for the coming quarter come as a departure from its recent challenges related to supply chain disruptions. The normalization of lead times has greatly contributed to Cisco's improved product shipments and overall results compared to the previous year.

Tapestry (TPR), the company that owns luxury clothing brands like Coach, Kate Spade, and Stuart Weitzman, experienced a rather subdued response from the market today, hovering around a relatively unchanged position. This comes after the company released its earnings report for the fourth quarter of its fiscal year (Jun), which fell short of consensus expectations, along with providing a cautious outlook for the fiscal year 2024 (Jun). Despite the recent acquisition of Capri Holdings (CPRI), a move that involved purchasing the parent company of brands like Versace and Jimmy Choo at a considerable premium, TPR's stock experienced a decline of about 17% over a span of five trading days. This decline was attributed not only to the substantial cost associated with the CPRI acquisition but also to TPR's decision to temporarily halt its share buyback program in order to finance the deal. Digging into the details of the JunQ results, TPR reported earnings of $0.95 per share, reflecting a noteworthy year-over-year improvement of 21.8%. However, this figure fell short of analysts' expectations. The company's gross margins also exhibited growth, expanding by 120 basis points compared to the previous year. This increase was driven by relatively successful price realization, as consumers displayed a willingness to accept higher price points, especially considering the luxury positioning of TPR's brands. On the revenue front, TPR's JunQ revenues totaled $1.62 billion, marking a slight 0.3% decline compared to the previous year, which was below the anticipated figures. Notably, TPR's North American market underperformed expectations, experiencing an 8% decline in sales—much worse than the company's projection of a mid-single-digit decrease. Given that two-thirds of TPR's total sales originate from North America, the weaker consumer environment in the region significantly impacted the company's overall revenue performance, overshadowing pockets of strength observed in other global regions. In China, TPR's second-largest market, the company achieved a 50% growth in revenue, consistent with its earlier forecasts. This growth was in line with the favorable numbers from the prior year, which had been affected by the COVID-19 pandemic. Meanwhile, sales in Japan and "Other Asia" regions increased by 12% and 7% respectively, indicating continued positive traction among local consumers. In contrast, TPR faced challenges in Europe, with revenues declining by 13% as the company compared to the previous year's impressive 50% gains.

An important factor influencing TPR's quarterly performance is travel demand. While the company observed a year-over-year improvement in sales to tourists, these figures remain below pre-pandemic levels, revealing a minor setback considering that travel-oriented companies like Airbnb and Expedia have reported demand surpassing pre-pandemic levels.

Looking ahead, TPR's guidance for the fiscal year 2024 (FY24) was less optimistic, with expectations set at earnings per share (EPS) of $4.10 to $4.15 and revenues nearing $6.9 billion. This guidance reflects the company's focus on maintaining margins rather than pursuing volume expansion, which explains the relatively modest revenue projection. However, the cautious EPS forecast came as a bit of a disappointment. TPR anticipates gross margins to expand during the year, primarily due to an easing of freight costs.

The performance of TPR in the JunQ did not provide significant optimism about the state of luxury apparel. Anticipatory signals were evident leading up to TPR's report, notably from Ralph Lauren (RL) last week, which highlighted ongoing challenges in North America as consumers continue to prioritize value-conscious spending. Furthermore, in late July, Louis Vuitton (LVMUY) reported that American consumers demonstrated notable softness in comparison to their Western counterparts during Q2. In conclusion, TPR's JunQ report did not offer a wealth of positive indicators for the future, and the implications of the CPRI acquisition could continue to influence the company's performance moving forward.

Walmart (WMT) is experiencing a slight decline in its stock price following the release of its Q2 (Jul) earnings report this morning. What particularly catches our attention is the stark contrast between Walmart's results and those of Target (TGT), which reported its results yesterday. While both companies achieved positive earnings per share (EPS) outcomes, Walmart surpassed expectations not only in terms of revenue but also in reporting positive comparable store sales (comps). The most notable disparity is that Walmart increased its full-year EPS guidance, while Target lowered its EPS guidance—a clear divergence in their trajectories. During Q2, Walmart's comparable store sales (excluding fuel) for Walmart US exhibited a robust growth of +6.4%. This performance stands in stark contrast to Target's comp decline of -5.4%. Although Walmart's comps saw a slight decline from Q1's +7.4%, Q4's +8.3%, and Q3's +8.2%, the context is crucial; investors appear satisfied, especially given that Walmart was competing against a formidable +6.5% comp from the previous year—a more challenging benchmark than Q1 comps faced. It's worth noting that this positive comp occurred despite the moderation of grocery inflation by over 400 basis points compared to Q1 levels. Walmart's US comps were unsurprisingly propelled by its grocery and health & wellness segments, while general merchandise sales experienced a mild decline. Notably, food remained a strength, and the company's call highlighted its "encouragement" by the performance of general merchandise comps, which exceeded internal expectations for the quarter. This tone was notably more positive than what was conveyed during the Q1 call. Additionally, eCommerce, pickup & delivery, and advertising demonstrated strong performance. Although Walmart no longer offers specific comp guidance, it did mention that back-to-school sales are ahead of the plan. Sam's Club also exhibited strong comparable store sales (excluding fuel) at +5.5%, although this was a dip from Q1's +7.0%, Q4's +12.2%, and Q3's +10.0%. Nevertheless, this performance is commendable given the challenging comparison with robust +9.5% comps from the previous year. Sam's Club's comps were led by food, consumables, healthcare, and positive overall unit growth.

Regarding its general outlook, Walmart noted a reasonable level of economic uncertainty for the rest of the year. Despite moderating inflation and stable employment levels, credit markets have tightened, energy prices have risen, and some customers will face the resumption of student loan payments in October. Given these factors, Walmart's decision to raise its full-year EPS guidance is particularly noteworthy.

In summary, while this report from Walmart is decent, the market response has been relatively subdued. Noteworthy aspects include the commendable comps performance, especially considering the challenging year-ago result and inflation moderation. It's evident that higher grocery prices provided a tailwind for comps in recent quarters, although this momentum is waning slightly. The comparative analysis with last quarter's comps performance might be contributing to investors' cautious stance. Additionally, Walmart's cautious macroeconomic outlook stands out.

A key distinction is that Walmart is significantly outperforming Target, and the differentiating factor can be summed up in one word: groceries. Approximately 59% of Walmart's US sales stem from groceries, while Target's Food & Beverage segment only accounts for 21% of its revenues. This substantial discrepancy explains much of the relative outperformance. In essence, Walmart's extensive exposure to the grocery sector is proving to be a significant advantage.

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Despite beating earnings per share (EPS) estimates, Brinker International (EAT) is experiencing a decline in its stock price by 3.5% after releasing its Q4 (Jun) earnings results. Brinker, which operates restaurants like Chili's and Maggiano's, reported EPS that surpassed expectations while its revenue aligned with projections. The company also provided guidance for FY24 EPS and revenue that fell in line with expectations. While the same restaurant comparables (comps) showed decent growth, they were not as robust as the previous quarter. The Q4 comps stood at +6.6% (Chili's +6.3%; Maggiano's +9.1%), marking a decrease from +10.8% (Chili's +9.6%, Maggiano's +21.6%) in Q3 (Mar). For the entire FY23, comps were at +8.1% (Chili's +7.0%; Maggiano's +17.3%). The driving factors for the Q4 comps growth were higher menu prices and a favorable item mix. The slight disappointment in the comps is partly attributed to Brinker benefiting from higher menu prices and also facing relatively easier comps from the previous year, particularly at the Chili's unit. Brinker managed to increase its restaurant operating margin (non-GAAP) to 13.4% from 12.5% in the same period last year. Throughout FY23, the company underwent significant strategic shifts to enhance its core dining channel business and improve margins. This included reducing discounting, scaling back investment in virtual brands, simplifying operations, investing in labor to reduce manager turnover, and reintroducing national advertising after a three-year hiatus. These efforts yielded positive progress in the Q4 results.

Considering the prevailing macroeconomic challenges, the Q4 results are viewed as decent. However, the comps were somewhat underwhelming due to the easier comparison. The company's strategy to move away from aggressive promotions and adjust menu prices accordingly is seen as favorable, allowing for more appropriate pricing and premium options. It's noted that Brinker's stock has maintained a range of $34-42 throughout 2023, and while this report might not trigger a significant change, the stock's current position at the lower end of the range raises some concerns.

JD.com is experiencing a drop in its stock price by 2% despite reporting favorable Q2 results, underscoring the prevailing concerns surrounding China's economic situation. The China-based e-commerce giant, a competitor of Alibaba's online shopping platforms, has shown decent growth in both its top and bottom lines during the second quarter. However, JD.com has faced challenges throughout this year, leading to a nearly 40% decline in its share price. This contrasts with Alibaba, which has maintained a relatively steady performance in comparison. The ongoing downward trend of JD's stock is especially disappointing when compared to Alibaba's recent turnaround story. Investors' hesitance toward JD might stem from several factors. Alibaba's Q2 results presented a more optimistic narrative of recovery. Additionally, Alibaba has faced more significant setbacks due to Chinese government regulations, which have not impacted JD to the same extent. While JD was dealing with less favorable year-over-year figures in Q2, its metrics did not reach the level seen with Alibaba. Moreover, JD's EPS beat in Q2 was less significant than its Q1 performance, which contrasts with Alibaba's Q2 beat. There could also be excitement surrounding Alibaba's AI-related ventures, given its substantial cloud business.

Despite these challenges, JD did achieve notable highlights in Q2. It recorded accelerated revenue growth of 7.6% year-over-year, reaching RMB 287.93, a significant improvement from the +1.4% growth in the previous quarter. JD, like Alibaba, benefited from third-party growth, primarily driven by strong advertising demand. Consequently, third-party marketplace GMV growth saw an acceleration for the second consecutive time in Q2.

JD experienced a 3% rise in product revenue year-over-year, driven by a remarkable 11% sales growth in electronics and home appliances. This upturn was particularly encouraging considering a few quarters of dampened demand in these sectors. However, general merchandise revenues decreased by 9% year-over-year in Q2, primarily due to underperforming supermarkets, a contrast to the COVID-induced gains experienced previously.

Despite the overall 5% year-over-year growth in JD Retail revenues in Q2, profitability was affected due to challenging year-over-year comparisons and investments in user experience enhancements. This led to a 90 basis point year-over-year slip in Non-GAAP operating margins, landing at 3.0%.

JD did not provide specific guidance but did remark on the uncertain macroeconomic and industrial conditions. Despite these uncertainties, the company remains confident in China's long-term economic development. The main takeaway from JD's Q2 report is the relatively healthy spending, particularly in core electronics and home appliances products. Nevertheless, broader fears stemming from economic data in China overshadow JD's Q2 achievements, and its performance may continue to be challenged unless a substantial post-COVID turnaround occurs in the Chinese economy.

Target (TGT) is experiencing a positive trading response following the release of its Q2 (Jul) results. Despite exceeding earnings per share (EPS) expectations, the company has now fallen short of revenue estimates for two consecutive quarters. While there were concerns about the guidance provided by TGT, it guided Q3 (Oct) EPS below consensus. However, TGT's recent trend of issuing conservative EPS guidance seems to be better understood by investors, who are not penalizing the company for it. TGT also revised its full-year adjusted EPS guidance downwards to a range of $7.00-8.00 from the earlier range of $7.75-8.75.

After experiencing three consecutive significant EPS misses, Target has now managed three consecutive robust EPS beats. In the first half of 2022, the company had excessive inventory, which clashed with a reduction in consumer spending on non-essential items. This inventory excess led to EPS challenges last year. However, TGT reported that it started this fiscal year with a much improved inventory position. The Q2 ending inventory was 17% lower year-over-year, with discretionary categories experiencing a 25% decrease. This outcome reflects the company's cautious planning strategy and the benefits of an enhanced global supply chain.

The same store comparable sales showed a decline of -5.4% (in-store -4.3%; digital -10.5%) in Q2. Although slightly worse than the previous guidance of a low-single digit decline, TGT emphasized its expectation of a wide range of possibilities. While discretionary categories experienced declines, TGT saw continued growth in frequency businesses such as Essentials & Beauty and Food & Beverage. For Q3, TGT predicts comps within a broad range, centered around a mid-single digit decline.

Compared to the beginning of the quarter, comp trends in Q2 weakened in the latter part of May through June, followed by a substantial recovery in both traffic and comps in July. The inflation in essential categories like Food & Beverage is causing these segments to consume a larger portion of consumers' budgets. Moreover, consumers are allocating more funds towards services like leisure travel, entertainment, and dining out, which is impacting discretionary product sales. Reductions in pandemic-related stimulus are also playing a role.

Another key metric to observe is operating margin, which soared to 4.8% in Q2 from 1.2% the previous year. This was consistent with guidance that predicted a sequential decline from the 5.2% margin achieved in Q1. Margin improvement compared to the previous year resulted from factors such as reduced markdowns, lower freight costs, and price increases, partially offset by higher inventory shrink due to theft and organized retail crime.

The positive stock movement can be attributed to TGT's substantial EPS beat and its report that July comps were significantly better than those in June. Investors often appreciate strong quarter-end comps. Additionally, TGT's reports of a favorable start to the back-to-school season have likely contributed to the positive sentiment. Investors might also be factoring in the company's tendency to provide conservative guidance in recent quarters.

A comparison between Walmart (WMT) and Target's stock performance may raise questions. Walmart's trading at new highs while Target remains closer to its lows can be attributed to one word: groceries. Walmart's US operations noted that groceries accounted for 59% of FY22 revenues, whereas Target reported that Food & Beverage contributed only 21% of FY22 revenues. This stark difference indicates that TGT has higher exposure to discretionary items, an area where consumer spending is currently constrained. On the other hand, Walmart's significant exposure to groceries has contributed to its stronger performance.

TJX (TJX) is set to maximize its gains today after surpassing expectations in various aspects of its Q2 (Jul) performance. The off-price retailer, which owns well-known banners such as HomeGoods, Marshalls, Sierra, and Homesense, achieved beats in earnings, revenue, and same-store sales estimates. Furthermore, TJX significantly raised its FY24 (Jan) outlook. TJX achieved a 23.2% year-over-year growth in its bottom line, reporting earnings of $0.85 per share. This marked a comfortable surpassing of its projected range of $0.72-0.75, representing its most substantial beat since 1Q23 (Apr). The company's top line also demonstrated robust expansion, rising by 7.7% to reach $12.76 billion. Impressively, same-store sales exhibited remarkable growth, surging by +6%, a notable deviation from TJX's earlier prediction of +2-3%. The core Marmaxx segment notably stood out with an +8% comp growth. Management commented that improved traffic patterns had particularly boosted categories like accessories and apparel. Notably, after a series of quarters with declining comp growth at HomeGoods, TJX managed to steer the banner back into positive territory with a +4% comp growth in Q2. This outcome aligned with expectations that Q2 could witness the revival of positive comp growth at HomeGoods, which was further supported by the positive performance of home furnishings e-commerce leader Wayfair (W) earlier in the month. On a related note, HomeGoods' performance bodes well for upcoming earnings reports from home furnishings retailers such as La-Z-Boy (LZB) and Williams-Sonoma (WSM) next week. TJX's international comps remained positive, with TJX Canada up +1% and TJX International (Europe and Australia) up +3%. Similar to the U.S., increased traffic also contributed to growth in TJX's overseas markets. Following a downward revision of its FY24 outlook in the previous quarter, TJX took a different stance in Q2. The company now aims for FY24 EPS in the range of $3.66-3.72, a significant increase from the previous estimate of $3.39-3.48. Additionally, it anticipates comps of +3-4%, up from +2-3%. Despite July's retail sales data surpassing expectations, TJX is operating in a period marked by heightened consumer budget constraints. Apparel companies like PVH (PVH) and Under Armour (UAA), both of which have a presence in TJX locations, have indicated challenges in the retail environment. However, as an off-price retailer, TJX can navigate economic difficulties by acquiring excess inventory at favorable prices, thus enhancing its merchandise margins. This strategy is reflected in the impressive Q2 pre-tax profit margins, which surged by 120 basis points year-over-year to 10.4%, far exceeding TJX's projected range of 9.3-9.5%.

Overall, TJX's Q2 results highlight consumers' growing inclination towards value-seeking amid the prevailing inflationary environment. The off-price retail sector remains a promising space, particularly as inflationary trends, although moderating, continue to exert their influence. Lastly, TJX's positive performance serves as a promising sign for upcoming reports from its peers, including Ross Stores (ROST), Dollar Tree (DLTR), Burlington Stores (BURL), and Five Below (FIVE).

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Cardinal Health (CAH) is experiencing a decline in its stock price after reporting its Q4 (Jun) results. Although the stock initially saw gains and set a new 52-week high, it retreated from these highs. The company, which distributes pharmaceuticals and medical supplies, did manage to beat expectations for both earnings per share (EPS) and revenue. However, the extent of the EPS beat was smaller than in recent quarters, marking a departure from its trend of achieving double-digit EPS beats over the last three quarters. The dominant segment for CAH is its Pharma segment, and this segment played a significant role in driving the positive results. In the June quarter, the segment's revenue surged by 15% to reach $49.7 billion, fueled by growth in brand and specialty pharmaceutical sales from existing customers. CAH reported strong demand across various pharmaceutical categories, including brand, specialty, consumer health, and generics, along with robust performance from its major customers. The Medical segment, on the other hand, saw stagnant year-over-year sales at $3.8 billion. While this isn't an impressive outcome, it does signify an improvement from the segment's decline of 5% year-over-year in the previous quarter (Q3 - Mar). The Medical segment's performance was affected by lower volumes and pricing in the Products and Distribution subcategory, although this was partially offset by growth in at-Home Solutions.

In its outlook for FY24, CAH anticipates a growth rate of 10-12% in Pharma segment revenue, a decrease from the 15% growth achieved in FY23. The company expects growth from its generics program, with volume expansion and consistent market dynamics playing a role. In terms of the Medical segment, CAH acknowledges the need for ongoing efforts to boost demand and enhance cost performance. For FY24, the company projects a return to growth, reaffirming its expectation of 3% revenue growth for the Medical segment. While this growth projection may seem modest, it follows a decline of 5% in FY23.

All in all, Cardinal Health delivered a reasonably solid quarter. The Pharma segment remains a standout performer, while FY23 posed challenges for the Medical segment. There is a positive note for the upcoming FY24 as progress is anticipated in the Medical segment. The dip in the share price today is likely a result of the combination of a smaller-than-expected EPS beat and the general weakness in the overall market.

Sea Limited (SE) is facing a setback, as its stock price has fallen sharply by 28%, nearing its lowest point in 2023. This drop comes after SE fell short of both earnings and sales expectations in Q2. The company, known for its operations in e-commerce, gaming, and digital payments, mainly in the Asia Pacific region (Indonesia, Thailand, Vietnam, etc.), decided to pivot back to a growth-focused strategy, disappointing investors who were hoping for sustained profitability. SE's management was confident that the company is now better positioned than in 2022 to emphasize growth. They pointed to factors such as a resilient local economy, ongoing efforts to control costs, and favorable trends in gaming. However, Q2 results disappointed, leading to concerns that the shift to growth might be premature. Despite maintaining positive earnings, which improved from $(1.03) per share in the same period last year to $0.54 in Q2, the figures still fell short of expectations. Moreover, revenue growth remained modest, rising by only 5.2% year-over-year to $3.1 billion. This continuation of single-digit growth over the last two quarters was below analysts' predictions. SE's Q2 results are notably weaker when compared to global e-commerce giants like Amazon (AMZN), MercadoLibre (MELI), and Coupang (CPNG), all of which reported robust Q2 figures. While SE's e-commerce platform, Shopee, saw a 10% sequential increase in gross orders and decent growth in Gross Merchandise Volume (GMV), contributing to a 20.6% surge in revenue to $2.1 billion, its Value-Added Services (VAS) revenue faced a decline of 6.6% sequentially. This decline was mainly attributed to SE's strategy of offering free shipping across more products as part of its renewed focus on growth. SE's Digital Entertainment segment, largely based on gaming revenue, continued to lag, experiencing a 41.2% year-over-year decline to $529.4 million. Bookings also dropped by 38.2%. On a positive note, the number of Quarterly Active Users (QAU) increased by 10.8% sequentially, suggesting potential stabilization. However, management remained cautious about interpreting these trends as indications of broader, long-term stabilization.

In contrast, Digital Financial Services remained a bright spot, with revenue growing by 53.4% year-over-year to $427.9 million, driven by SE's credit business. Given that many individuals in SE's markets lack access to banking services, SE's digital payment offerings continue to gain traction. Importantly, non-performing loans overdue by over 90 days remained at around 2% of SE's total gross loan receivables.

The recent sell-off in SE's stock was triggered by disappointment over two consecutive quarters of missing earnings estimates and delivering revenue growth that met or fell below expectations. Investors were not anticipating SE's shift back to growth mode, leading to this significant decline. While some positive aspects emerged from the quarter, such as resilient e-commerce trends and potential stabilization in the gaming division, macroeconomic challenges remain a significant concern. The inherent volatility in SE's core markets adds to these uncertainties. If SE successfully reignites growth, its stock could experience significant gains. However, another quarter of disappointing headline results may continue to put pressure on the stock.

Switzerland-based footwear company On Holding (ONON) is experiencing a significant decline in its stock price, dropping by 13% after its Q2 earnings report. Despite surpassing revenue expectations and raising its FY23 revenue guidance, the company's adjusted EPS fell short of analysts' predictions. On the positive side, its sales surged by 52.3% year-over-year to CHF 444.3 million, driven by a remarkable growth in the direct-to-consumer (DTC) channel, which saw a 54.7% year-over-year increase. This segment achieved a quarterly record with CHF 163.5 million in Q2 sales, surpassing even the strong results during the previous holiday season. Additionally, On reported record online traffic, up 75% year-over-year. The wholesale channel also performed well, rising by 51% year-over-year to CHF 280.8 million, supported by strong sell-out numbers and reorders from partners. On's success can be attributed to its innovation strategy, launching six new performance shoes in just 24 months, with four becoming major franchises. Notably, its Cloudmonsters, Cloudrunners, Cloudghosts, and Cloudsurfers are popular among runners. The Cloudboom Echo 3, designed for long-distance running and worn by top athletes, has also garnered attention. The company's expansion isn't limited to runners; its new kids' shoe line is seen as a potential significant growth area. However, the stock decline can be attributed to the missed adjusted EPS, which dropped from CHF 0.14 to CHF 0.04 year-over-year. Foreign exchange (FX) factors seem to have contributed to this shortfall, as the strength of the Swiss franc against other global currencies affected the company's performance. ONON also cited slightly elevated distribution expenses due to a warehouse automation project and temporary warehouse space requirements. The stock's decline may also be linked to the company's limited increase in FY23 revenue outlook to CHF 1.76 billion from CHF 1.74 billion. FX dynamics play a role here, as FX headwinds for 2H23 are anticipated to be higher, and FX rates were more favorable when the earlier guidance was given.

Despite the negative reaction to the EPS miss, the company's overall performance seems solid. Demand remains robust, sales are strong, adjusted EBITDA nearly doubled, and margins increased. The start of Q3 also appears promising. The impact of FX fluctuations is worth considering, and the stock's decline might be an overreaction. Given its rising popularity and success in the footwear market, On Holding remains noteworthy for investors, especially after the dust settles from this report.

Home Depot (HD) managed to recover from an initial negative market response, as its shares are now making gains based on its strong Q2 (July) results. The home improvement retailer reported favorable performance in both revenue and earnings, while also reiterating its fiscal year 2024 (January) targets. In addition, the company's Board authorized a new $15.0 billion share repurchase program, replacing the prior authorization announced in August 2022. Initially, investors showed a negative reaction due to concerns in certain segments. The Pro segment, accounting for approximately half of HD's total revenue, experienced negative sales growth, impacting the company's overall performance. Consumers seemed cautious about larger home improvement projects due to persistent inflation, affecting an important market segment for professionals. Nonetheless, the Pro segment still outperformed the DIY sales, showcasing positive comparable performance in various categories. Interestingly, this could be a prelude to rival Lowe's (LOW) upcoming Q2 earnings. HD also highlighted that Pro backlogs remain healthy, exceeding historical norms. Similar to the previous quarter, HD faced challenges such as falling lumber prices and adverse weather conditions, particularly on the West Coast. These factors contributed to a year-over-year 110 basis points contraction in operating margins to 15.4%. Unfavorable weather disrupted crucial selling seasons, including outdoor items like grills and patio furniture. Despite the softer economy and anticipated headwinds, HD managed to deliver solid results. The company's earnings per share contracted by only 7.9% year-over-year, surpassing analysts' expectations. Revenue experienced a minor decline of 2.0% to reach $42.92 billion. Comparable sales decreased by 2%, aligning with HD's FY24 guidance forecast of a 2-5% decline. HD maintained its FY24 guidance, expecting a 7-13% decline in earnings per share and a 2-5% decrease in revenue year-over-year. While the immediate future remains uncertain, the company's management remains optimistic about the medium-to-long-term outlook for the home improvement industry. In conclusion, Home Depot faced challenges in Q2, including consumer preferences for smaller projects and external factors affecting seasonal products. Larger home improvement projects seem to be deferred due to the ongoing inflationary environment, which could continue impacting HD's Pro business. Elevated interest rates are also likely to impact the supply of used homes, influencing repair demand. Despite these hurdles, there were positive signs from Q2, particularly regarding a potential recovery in the Pro segment.

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Tesla (TSLA) is facing a setback today as it reportedly reduces prices in China, leading to a 1% decline in its stock value. The company has lowered the prices of its Long Range and Performance Model Y by approximately $1,900, along with extending an insurance subsidy for the base Model 3 until the end of September. These price cuts are seen as a response to the sluggish recovery efforts in the Chinese market. This isn't the first instance of Tesla adjusting its pricing strategy in China. In the previous month, the company decreased the prices of its Model S and X vehicles by roughly $4,825, following a decision made a month earlier to offer cash subsidies to specific Model 3 purchasers. Throughout 2022, Tesla had consistently been reducing prices, which raised concerns among investors due to the growing competitive pressures in the Chinese market. Tesla's latest price adjustments mirror the actions of other electric vehicle (EV) manufacturers based in China. Li Auto, for instance, reduced its average selling price during Q2 to stimulate more robust delivery growth. Nio also lowered prices by over $4,000, despite actively avoiding a price war in June. XPeng, set to reveal its Q2 results soon, had previously reduced prices for its base models earlier this year to better contend with a challenging demand environment. The ongoing price competition among EV makers in China poses challenges not only for Tesla but also for its competitors. This situation compounds Tesla's existing concerns regarding the price cuts it implemented across various markets, including the U.S. and Europe, and the adverse impact on its profit margins. In the previous month, Tesla's stock suffered a 10% drop following a disappointing Q2 report, which highlighted a significant year-over-year decline in GAAP gross margins, falling over 680 basis points to 18.2%. The market had likely expected more stability in margins before the Q2 results were released. Despite this substantial contraction, CEO Elon Musk signaled that margin pressure is likely to persist in the near term. Although Tesla doesn't provide a breakdown of its deliveries by region, it's unclear to what extent the price cuts in China contributed to the company's record delivery figures in Q2. However, given the increased deliveries experienced by its Chinese rivals like XPEV and BYD, as well as other global OEMs such as Volkswagen Group, during Q2, these price cuts likely significantly boosted Tesla's Q2 delivery numbers. Considering Musk's recent statements about prioritizing volume over margin, the trend of price cuts is expected to continue as long as global economic conditions remain relatively weak, ensuring positive delivery reports. Furthermore, Musk indicated during the Q2 earnings call that the company is responsive to public sentiment. While the price war rages on in China, Tesla faces challenges in stabilizing its profit margins. While the decline in commodity costs like nickel, cobalt, and graphite can have a positive impact on vehicle costs, Tesla's shares might struggle to rebound until prices, and subsequently margins, find a more stable footing after the Q2 earnings.

There was significant merger and acquisition (M&A) news in the steel sector recently as Cleveland-Cliffs (CLF) made a bid to acquire US Steel (X), causing a notable market reaction. Cleveland-Cliffs' proposal involved a combination of cash and stock, offering $17.50 in cash plus 1.023 shares of CLF for each US Steel share. This proposed deal amounted to a total consideration of $35 per share, indicating a substantial 43% premium over US Steel's closing price on the preceding Friday. However, US Steel declined the offer, explaining that it required additional time to thoroughly assess the value of Cleveland-Cliffs. Almost half of the offer comprised CLF shares, prompting US Steel to request a non-disclosure agreement (NDA) to delve into Cleveland-Cliffs' financials and conduct due diligence to determine the feasibility of the deal. US Steel stated that CLF declined to finalize the NDA unless the economic terms of the proposal were agreed upon beforehand. Despite rejecting the offer, US Steel didn't entirely dismiss the possibility of a collaboration with Cleveland-Cliffs. Instead, it extended an invitation to CLF to participate in US Steel's ongoing strategic review process. US Steel had already disclosed its initiation of a formal review, aided by external financial and legal advisors, to evaluate strategic alternatives after receiving multiple unsolicited proposals, encompassing potential acquisition of specific production assets to considerations for the entire company. Cleveland-Cliffs has demonstrated significant M&A activity in recent years, acquiring AK Steel in March 2020 for $1.1 billion and ArcelorMittal USA in December 2020 for $1.4 billion. These acquisitions positioned CLF as the leading flat-rolled steel producer and iron ore pellet producer in North America, with notable exposure to the automotive sector. A potential deal with US Steel holds considerable significance, given its $6.4 billion market capitalization, surpassing the combined size of the AK Steel and ArcelorMittal USA transactions. Such a deal would be transformative for Cleveland-Cliffs, which boasts a $7.5 billion market cap. The steel industry operates through two primary methods: integrated producers (like CLF and X) manufacture steel from raw materials through blast furnaces, while mini-mills (such as CMC, NUE, STLD) use electric arc furnaces to melt scrap for steel production. Mini-mills are generally more flexible due to their ability to adapt to demand fluctuations and often employ non-union labor. Cleveland-Cliffs appears to be consolidating its presence in the integrated producer side through its recent M&A actions.

The developments in the steel sector are poised to attract attention, particularly considering US Steel's cautious approach to due diligence due to the substantial equity component of Cleveland-Cliffs' proposal. Additionally, the underperformance of CLF shares since March has factored into the situation. Although US Steel rejected the current offer, its openness to potential deals, whether with Cleveland-Cliffs or another prospective suitor, has contributed to the positive movement in US Steel's stock. Future negotiations may focus on adjusting the balance between cash and equity in potential proposals.

Monday.com (MNDY) has displayed robust performance, delivering a substantial beat-and-raise outcome for Q2 despite challenging economic conditions. Despite a soft-demand environment with reduced spending by IT departments, the work management platform has achieved positive results. This achievement is notable as other companies, such as ZoomInfo (ZI), have recently revised their sales outlook downward due to weak demand, emphasizing a shift toward profitability over growth, particularly in the software sector. This revision, along with a Fitch downgrade, led to a 12% decline in MNDY's stock by the end of the previous week. The positive response from the market is due to MNDY's ability to navigate these lighter demand conditions during Q2, sustaining the positive momentum it gained in Q1. Earnings per share (EPS) moved from negative territory in the same period last year to $0.41 per share, highlighting MNDY's swift pivot towards profitability. This shift aligns with MNDY's earlier announcement of achieving non-GAAP operating profitability ahead of schedule, which remains on track for this year. Despite a slowdown compared to Q1, sales growth remained strong, rising by 42% year over year to $175.7 million. The number of MNDY's customers with annualized recurring revenue (ARR) exceeding $50,000 increased by 63% year over year, following a 75% increase in Q1. Net dollar retention (NDR), which gauges existing customer spending, stood at just over 110% for the quarter, a slight dip from over 115% in Q1. MNDY acknowledges that NDR might face some pressure due to ongoing macroeconomic challenges in FY23. However, with the release of mondayDB 1.0 earlier this year, followed by planned iterations in the latter half of FY23 and versions 2.0 and 3.0 scheduled for 2024 and 2025, respectively, MNDY anticipates NDR to remain above 100%, even in the face of economic hurdles. Additionally, MNDY's CRM product continues to surpass expectations, attracting a healthy flow of customers. After Q2's strong performance and steady demand resembling the previous quarter, MNDY confidently revised its FY23 revenue guidance upwards to $713-717 million, from the earlier range of $702-706 million. While longer sales cycles and increased deal scrutiny remain concerns, MNDY observes robust demand from new customers and stabilizing NDR. Considering Q2's report, some metrics decelerated compared to the previous quarter, potentially reflecting an ongoing challenging macroeconomic climate. Nevertheless, the overall positive aspects of MNDY's Q2 results outweigh the negatives, particularly given the current economic conditions. The necessity of its product suite is evident even as spending patterns relax, highlighting its importance for sales teams during periods of slowed growth. Lastly, MNDY's Q2 figures provide an encouraging outlook in anticipation of upcoming July quarter reports from competitors like Salesforce (CRM) on August 30, Asana (ASAN) on September 5, and Smartsheet (SMAR) on September 7.

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Quantum computer developer IonQ (IONQ) is experiencing significant stock gains today, driven by its raised FY23 bookings guidance and positive commentary. Despite missing Q2 earnings estimates, IonQ's stock has surged by more than 400% this year. While quantum computing's widespread commercialization is still considered years away, its potential for solving intricate problems across various sectors is attracting attention. IonQ offers access to its quantum computers through partnerships with cloud providers like Amazon Web Services, Microsoft Azure, and Google Cloud, positioning itself in the quantum-computing-as-a-service (QCaaS) space. Although currently incurring substantial operating losses, IonQ's fortunes took a turn in June when it partnered with QuantumBasel to bring its systems to Europe. This partnership bolstered its Q2 sales growth to 111.5% and YTD bookings to $32 million, prompting the company to increase its FY23 bookings and revenue targets. CEO Peter Chapman expressed optimism about growing demand and projected sales. Despite the remarkable stock surge and potential market fluctuations, IonQ's position in the burgeoning field of quantum computing makes it a noteworthy prospect.

Spectrum Brands (SPB), a company specializing in home essentials across home and garden and pet care markets, is experiencing a surge in its stock, reaching new 52-week highs. This surge follows a Q3 earnings report that outperformed pessimistic expectations, focusing on margins and profitability. Crucially, SPB upheld its FY23 revenue guidance, mitigating concerns about the impact of reduced consumer spending and retail partners' inventory reduction efforts on demand. Despite this, Q3 sales dropped by 10% to $735.5 million, falling significantly short of analysts' predictions. All three of the company's operating segments witnessed declines in net sales, with the Home & Personal Care (HPC) business experiencing the most substantial drop, plummeting by 53% to $276.6 million. Weakness was notably pronounced in kitchen appliances, particularly in North America, due to the slowdown in consumer expenditure. The other two segments, Home & Garden (H&G) and Global Pet Care (GPC), demonstrated more resilience with net sales decreasing by 12% and 18% respectively. Challenges included retailers continuing to reduce their inventory and unfavorable weather impacting pest control orders in the H&G segment. Additionally, the demand for cleaning products remained subdued in the wake of the pandemic. While SPB is not enjoying robust growth, certain factors are capturing the attention of market participants. Notably, the company's adjusted EPS surged by 39% year-on-year, and adjusted EBITDA margin expanded by 360 basis points year-on-year, despite the dip in net sales. These improvements stem from pricing actions taken earlier in response to inflation and cost-saving measures, including a significant workforce reduction in August of the prior year.

A more crucial factor is the anticipation among market participants of SPB's financial performance further improving after the sale of its Hardware and Home Improvement segment. This transaction, initially impeded by the Department of Justice, generated $4.3 billion in cash proceeds after its completion on June 20 with ASSA ABLOY. These proceeds enabled SPB to fully clear its debt, reinforcing its financial position as it shifts toward a higher-margin, fast-growing model focused solely on Global Pet Care and Home & Garden. In conclusion, although SPB is still grappling with significant challenges, which are expected to persist into Q4, the outlook is gradually becoming more optimistic for this streamlined company.

Flowers Foods (FLO), the parent company behind well-known bread and cake brands such as Nature's Own, Wonder, and Tastykake, is experiencing a rise in its stock today due to favorable Q2 results. Following a disappointing Q1 report in May that led to a downward revision of its FY23 targets due to weaker retail sales, FLO's shares declined around 13% by yesterday's closing. However, Q2 brought about positive developments that suggest a potential turning point, prompting cautious optimism among investors regarding FLO's potential turnaround. In contrast to the previous quarter's earnings in line with expectations but sales falling short, Q2 witnessed an earnings beat. FLO achieved an 8.8% year-on-year sales growth, reaching $1.23 billion, narrowly surpassing analyst predictions. FLO's CEO, Ryals McMullian, noted that while the Branded Retail business still saw consumers shifting to private labels, this trend was moderating, positively impacting the company's top line. Additionally, the company's Other segment utilized price increases, implemented earlier than competitors, to counter inflationary pressures, effectively offsetting cost rises and contributing to adjusted EBITDA margins that saw a 20 basis point increase year-on-year to 10.8%. FLO's strategy of implementing price hikes prior to the inflationary cycle has been well-documented. Although this initially impacted financial figures, it might be contributing to a reduction in consumer resistance. During Q2, McMullian observed early indications that consumers were adapting to higher prices and reverting to their previous purchasing patterns. Capitalizing on this shift, FLO is focusing on research and development to introduce new products to the market, such as Dave's Killer Bread Snack Bars, which is on track for a nationwide launch in 2024. The solid Q2 performance instilled confidence to raise the lower end of FLO's FY23 guidance. The company is now aiming for EPS of $1.18-1.25, an increase of $0.03 at the lower end, and revenue of $5.095-5.141 billion, up by $9 million. While the bread industry may not be inherently exciting and the era of Wonder Bread's popularity has passed, along with store-bought dessert cakes, FLO is still on a journey of improvement. Margins remain relatively stagnant and may persist this way if the company accelerates its R&D spending. FLO is also undergoing restructuring, divesting from lower-margin businesses, which could have short-term volume implications.

Yet, this does not signify a complete halt in future growth. The Dave's Killer Bread brand is favored by health-conscious consumers due to its organic options, a segment where FLO has established a solid presence. The company's ability to offer bread at different price points allows it to navigate diverse economic landscapes. Furthermore, even if private labels gain traction due to persistent inflation, major consumer staple companies like General Mills and Conagra have indicated that the trade-down effect is not significantly affecting sales, indicating the lasting appeal certain brands gained during the pandemic.

Savers Value Village (SVV), the largest operator of for-profit thrift stores in the U.S. and Canada, has recently released its inaugural earnings report after a successful IPO on June 29, and the outcomes are notably impressive. The company not only surpassed both revenue and profit expectations but also demonstrated substantial comparable sales growth of 5.5%, underscoring the resonance of its low-price strategy, with items averaging below $5, in the midst of current inflationary conditions. Encouragingly, CEO Mark Walsh emphasized that SVV experienced consistent and unwavering demand throughout the quarter, a positive indicator for future prospects. SVV is optimistic about the continued trend towards thrifting and the escalating growth in the reuse economy, which augurs well for the expansion of its market reach. This sentiment is echoed in the company's FY23 guidance, which anticipates a 5.0% growth in comparable store sales and a 6% rise in adjusted EBITDA, reaching $320 million. On the demand side, SVV is benefiting from a more budget-conscious consumer mindset, coupled with the allure of the "treasure-hunting" shopping experience within its stores. Moreover, the company has introduced strategic initiatives that enhance its market prominence in a retail landscape that has generally lacked innovation. For instance, SVV has implemented self-checkout kiosks across all its stores, revamped store layouts and signage to optimize merchandising and customer service, and expanded its green drop mobile donation locations, bolstering its inventory.

In a bid for operational efficiency, SVV is capitalizing on data analytics to integrate the supply processing, retail, and wholesale aspects of its business. This approach has translated into consistent year-on-year adjusted EBITDA margins of 23.5% and sustained profitability.

Looking ahead, SVV's growth strategy hinges on the opening of new stores. With roughly 320 stores currently in operation, SVV has identified about 2,200 potential new locations across the U.S. and Canada. For 2023, the company is targeting the establishment of 12 new stores, and this number is set to rise to 20 or more store openings from 2024 to 2026.

In essence, SVV's dominant position within the thrift store domain positions it favorably to capitalize on the growing trend of thrifting, as consumers seek cost-cutting measures and embrace environmentally conscious habits.

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Tapestry (TPR), the luxury handbag manufacturer renowned for its ownership of Coach and Kate Spade brands, has made a substantial move by acquiring Capri Holdings (CPRI) at a price of $57 per share in cash. This acquisition parallels the exclusive and high-end nature of Tapestry's products, yet the premium price of CPRI has raised eyebrows with a 64% increase over the previous day's closing price. The entirety of the deal totals $8.5 billion, encompassing CPRI's notable fashion labels such as Michael Kors, Versace, and Jimmy Choo. However, this significant purchase has not been met without concerns, evident in the negative market response and a sharp drop in Tapestry's stock prices. While the $8.5 billion valuation appears justifiable with a multiple of 9x based on the adjusted EBITDA of the past twelve months, closer scrutiny of CPRI's recent financial performance reveals the challenge of justifying the substantial premium Tapestry is paying. CPRI's Q4 results slightly surpassed modest analyst projections for earnings per share and revenue, but their guidance for Q1 fell significantly short of expectations, along with a slightly underwhelming revenue outlook. Disappointingly, each of CPRI's three brands experienced year-over-year revenue decline due to sluggish discretionary spending in the U.S., impacting sales within department stores.

The disappointment of CPRI's earnings report followed a more distressing Q3 report in February, where CPRI significantly missed earnings expectations and provided a downbeat forecast for both Q4 and FY24. Consequently, CPRI's shares plummeted by nearly 50% since the bleak Q3 earnings report, hovering around multi-year lows prior to Tapestry's acquisition offer.

Adding to the complexity of the situation, Tapestry is taking on additional debt to fund the acquisition, coupled with the inclusion of CPRI's existing long-term debt balance of $3.6 billion onto Tapestry's financial sheet. Particularly in a high-interest rate environment, the notion of accumulating more debt appears less appealing, especially considering economic uncertainties. Tapestry has outlined its intention to prioritize debt reduction moving forward, aiming for a debt/EBITDA leverage ratio below 2.5x within 24 months of finalizing the acquisition. However, this would require the suspension of share repurchase activities, which might raise concerns since Tapestry has been notably active in repurchasing shares, spending $500 million to buy back 13.1 million common stock shares during the first nine months of FY23.

From Tapestry's perspective, the inclusion of CPRI will elevate the company into a dominant force within the handbag market, enhancing its competitive stance within the EMEA market that is currently under the sway of Gucci's parent company, Kering, and LVMH, the owner of Tiffany. The strategic significance of this deal might largely lie in China, where Tapestry draws around 15% of its revenue compared to CPRI's approximate 5%. In contrast to CPRI, Tapestry has exhibited robust performance this year, largely due to its higher exposure to China and the impressive recovery in sales following the easing of COVID-19 restrictions by the Chinese government. Tapestry's established retail and distribution network in China could potentially drive higher sales for CPRI.

On the whole, the rationale behind this substantial deal is understandable, as it broadens Tapestry's global footprint and adds over $12 billion in annual sales. Nevertheless, despite the deal's anticipated immediate positive impact, there is a sense of apprehension among market participants concerning the considerable price premium, the significant escalation in debt, and the intricacies of integrating such a major acquisition within a volatile macroeconomic environment.

US Foods (USFD), a nationwide food distributor competing primarily with Sysco (SYY) and Performance Food Group (PFGC), continues to experience a decline in its stock value after failing to meet analysts' sales predictions in Q2. Despite achieving a subdued 2.1% year-over-year sales growth amounting to $9.01 billion, USFD managed to surpass its bottom-line expectations, resulting in a slight rise from intraday lows of nearly -6% and an upward adjustment of the lower end of its FY23 adjusted EPS outlook by $0.10, reflecting a solid performance in the initial half of the year. USFD's failure to meet top-line estimates can be attributed to a deceleration in total case volume growth during Q2, which dropped from +5.7% in Q1 to +2.7%. This was primarily due to a systems conversion at CHEF'STORE, a restaurant equipment and supplies warehouse, which hindered case growth by 70 basis points. Additionally, less favorable comparisons against Q1, which faced the adverse effects of Omicron, contributed to the shortfall. The positive aspect is that the majority of the systems conversion at CHEF'STORE has been completed, implying that adverse impacts are not likely to significantly affect Q3. Moreover, independent restaurant case growth remained robust at 5%, and specific sectors such as healthcare and hospitality observed even higher growth rates of 7%.

Another favorable development in the quarter was the presence of modest year-over-year trends in product cost deflation, coinciding with stable grocery prices. These trends supported an enhancement in USFD's margins. The company's efforts in cost management also played a role in a 60 basis points year-over-year expansion in adjusted EBITDA margin. Consequently, USFD achieved an EPS of $0.79, marking an 18% year-over-year improvement and sufficient for a moderate beat.

Looking forward, USFD adjusted its FY23 EPS projection, raising it from $2.45-2.65 to $2.55-2.65, citing the strong performance in the first half of the year and ongoing momentum. However, this upward revision only amounts to a $0.05 increase at the midpoint compared to its previous target. Given that the company's shares had already risen by over 20% by the close of the previous day, the minor boost in FY23 earnings guidance doesn't generate significant enthusiasm.

Although USFD's Q2 report exhibited a certain level of dullness, it did contain a few more positive aspects compared to SYY's report for the same period. Notably, SYY's report included disappointing FY24 earnings guidance. Despite these differences, the overall case volume trends were similar to those seen in SYY. Moreover, while management expressed optimism regarding July's performance, the updated FY23 outlook for USFD doesn't strongly support a substantial improvement in case growth during the latter part of the year. This raises concerns about the potential adverse effects of persistent inflation. As USFD and SYY have already reported their Q2 results, PFGC faces a less challenging benchmark as it prepares to release its Q2 figures on August 16.

Disney's (DIS) third-quarter results were far from enchanting, reflecting the complexities of the company's transformation and its efforts to enhance profitability in the Direct-to-Consumer (DTC) segment. As often emphasized by Disney's CEO Bob Iger, this journey is anything but linear. This sentiment was particularly evident in the recent mixed Q3 earnings report, underscoring Disney's ongoing transition after a significant reorganization and its shift towards a streaming-centric model. The endeavor to strike the right balance between DTC segment growth and profitability has proven more challenging than initially anticipated. Under the leadership of former CEO Bob Chapek, the primary focus was on rapidly increasing subscriber numbers for Disney+. This led to remarkable success, with Disney+ garnering over 164 million worldwide subscribers by 4Q22, Chapek's final quarter as CEO before Bob Iger reassumed the position. However, to achieve this rapid subscriber surge, Disney kept subscription prices for Disney+ low and invested substantially in content, resulting in substantial operating losses for the DTC segment. In the same period, DTC's operating loss surged by $800 million year-over-year to $1.5 billion, and Disney's EPS declined by 19% year-over-year.

Upon Bob Iger's return as CEO in November 2022, a swift shift in strategy began. Within a month, Disney announced its first-ever price increase for Disney+. This was followed by a significant restructuring plan a few months later, involving a reduction of 7,000 jobs and a goal of $5.5 billion in cost savings. Concurrently, content spending for FY23 was projected to be around $30 billion, maintaining a year-over-year flat trajectory.

The impact of these strategic actions was substantial; DTC's operating loss in 3Q23 decreased by $600 million year-over-year to $500 million. During an earnings call, Iger reiterated the company's commitment to achieving DTC profitability by the end of FY24. Additional price hikes for streaming services, including a 20%+ increase for ad-free versions of Disney+ and Hulu, set to take effect in October, are expected to contribute to this goal. Furthermore, Disney lowered its FY23 content spending projection to $27 billion, providing an additional boost to profitability.

In the pursuit of DTC profitability, Iger and his team have been willing to trade off subscriber growth for Disney+. Following a 4.0 million subscriber decrease in the previous quarter, domestic Disney+ subscribers declined by 1% in Q3, totaling 46.0 million. Although this growth deceleration raised investor concerns, Disney predicted a rebound in Disney+ Core subscriptions in Q4, indicating progress in finding the right equilibrium between growth and profits.

A rising possibility that Disney will divest or spin off its struggling Linear Networks segment is also positively impacting the company's stock. Iger reiterated that Disney is exploring strategic options for this unit, which witnessed another significant drop in operating income, falling by 23% to $1.9 billion, due to the ongoing trend of cord-cutting. Disney intends to part ways with ABC, FX, and National Geographic, while seeking partners to transition its ESPN network to a streaming-oriented platform.

In essence, optimism surrounding these streamlining measures and the improving profitability outlook for DTC is alleviating some of the concerns arising from Disney's Q3 report. This sentiment helps offset certain drawbacks, including Disney's anticipation of a slowdown in domestic theme parks for the remainder of the year, attributed to the persistent dissipation of pent-up demand.

The Trade Desk (TTD) is experiencing a decline in its stock value following the release of its Q2 earnings report. The company operates a cloud-based platform for online advertising purchasing and has managed to perform well despite the challenging macroeconomic conditions in the industry. Our concerns leading up to this report were rooted in the tendency of advertisers to reduce their spending during times of macro headwinds. Additionally, considering the stock had surged by 90% year-to-date, questions arose about sustaining this growth trajectory. However, the company demonstrated strong performance. TTD reported results exceeding expectations in terms of both earnings per share (EPS) and revenue. Nevertheless, the level of upside was notably smaller compared to the previous quarter (Q1). Adjusted EBITDA increased by 29% year-over-year to reach $180 million, surpassing the prior guidance of $160 million. TTD's projections for Q3 revenue also signaled an upward trend, anticipated to be over $485 million, along with an expected healthy sequential rise in adjusted EBITDA for Q3, reaching approximately $185 million. Throughout the quarter, TTD highlighted an improvement in visibility and advertiser sentiment, leading to its continued market share growth. The company's advantageous position results from the trend of ad budgets shifting towards connected TV (CTV) and the growing utilization of retail data. TTD witnessed growth spanning various channels, sectors, and geographical regions during Q2. Notably, CTV played a pivotal role in driving growth at a considerable scale. TTD also experienced considerable momentum in retail media, facilitated by new retail integrations and increased shopper marketing budgets. In terms of revenue distribution by channel, Video, including CTV, accounted for a share in the mid-40s, while Mobile held a mid-30s share. Display maintained a low-double digit share, and Audio rounded out the distribution at around 5%.

TTD acknowledged that while certain macro indicators are showing improvement, advertisers are still grappling with a sense of unpredictability within the environment. Advertisers are becoming more cautious with their spending, yet they are increasingly drawn to TTD's platform due to the belief that data-driven precision can introduce an element of certainty to their advertising endeavors. This recognition has enabled TTD to outperform the digital advertising industry notably over recent quarters. International expenditure gained momentum in Q2 following a strong performance in Q1, particularly in the CTV sector. TTD also expressed enthusiasm for its upcoming launch of Kokai in June 2023, foreseeing its benefits to align with an improved advertiser sentiment in the latter half of 2023 and into 2024. All in all, TTD's Q2 report is considered commendable, especially in the midst of the uncertain macro environment. While it may not have matched the exceptional outcomes witnessed in Q1, it remains promising, particularly when contrasted against the recent lackluster reports from companies reliant on online advertising, such as Pinterest (PINS) and Snap (SNAP). Furthermore, the struggling quarters experienced by ad agencies OMC and IPG generated apprehension. TTD's performance and guidance are particularly noteworthy when considering the struggles faced by advertising counterpart Magnite (MGNI), which witnessed a stock sell-off due to disappointing guidance.

Alibaba's (BABA) Q1 (Jun) earnings and revenue performance has captured investor attention with a 5% stock increase today. The prominent Chinese e-commerce and cloud company, owner of well-known brands like Taobao, Tmall, and AliExpress, might not have returned to its pre-pandemic sales levels when growth was consistently above +30%. Nevertheless, Alibaba has achieved a significant milestone by registering double-digit top-line growth for the first time since 2Q21 (Sep), suggesting a long-awaited rebound after facing multiple growth hindrances. These challenges encompassed a forceful crackdown by the Chinese government against anti-competitive practices, the withdrawal of Ant Group's planned IPO, a normalization of cloud demand after pandemic restrictions lifted, and sluggish economic recovery efforts this year. The company's revenue increased by 13.9% year-over-year to reach RMB 234.16 billion, surpassing expectations of high-single-digit growth, driving an expansion of 48.1% in EPS, amounting to RMB 17.37. Alibaba's core apps, Taobao and Tmall, witnessed a consistent monthly growth of at least 6% in average daily active users (DAUs) during Q1. July showed even more promising momentum, as DAUs surged by over 7%. On the merchant side, the daily average number of merchants engaging in advertising increased by more than 20% year-over-year in Q1. This growth was partly attributed to Alibaba's AI tools facilitating store openings, product launches, and marketing campaigns. Consequently, Taobao and Tmall Group achieved a 10% improvement in Customer Management Revenue (CMR), constituting the largest portion of Alibaba's overall sales.

Alibaba International Commerce Group (AIDC), encompassing AliExpress, outpaced total sales growth, soaring by 31% year-over-year, with the retail aspect achieving a 25% growth rate. Management noted the emergence of economies of scale in the international retail business, attributed to efforts enhancing monetization and operational efficiency, leading to a 17% reduction in adjusted EBITDA losses year-over-year. Alibaba Cloud remained a relative underperformer, recording a sales growth of just 4% year-over-year in Q1. The normalization of cloud demand post-pandemic and the lingering impact of a significant customer phasing out their cloud service continued to weigh on the segment. However, Alibaba expressed enthusiasm for the considerable potential of AI, considering it a herald of a new era. Other segments, such as Local Services Group, Cainiao Smart Logistics Network Limited, and Digital Media and Entertainment Group, collectively accounting for nearly a fifth of total sales, experienced robust top-line growth, expanding by 30%, 34%, and 36% year-over-year, respectively. Management briefly addressed the company's substantial restructuring plans, which involve segregating its six business groups into distinct entities. CEO Daniel Zhang mentioned that each group has already commenced operations under their respective boards' leadership. Similar to other e-commerce leaders like Amazon (AMZN), MercadoLibre (MELI), and Coupang (CPNG) in their respective markets, where consumers prioritize value, e-commerce becomes paramount. Alibaba's platforms also mirrored this trend, propelling total sales growth into the double-digit realm for the first time in nearly two years. Although lingering concerns related to regulatory matters remain, Alibaba's Q1 report may signal a turning point for the company.

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Coupang (CPNG), the South Korea-based e-commerce giant, has experienced a surge in its stock price by 7% following its Q2 earnings report, which showcased another profitable quarter and a notable acceleration in sales growth. As the initial momentum from the pandemic waned, Coupang, like many e-commerce companies, shifted its focus to profitability to adapt to changing market conditions. Despite its shares facing challenges since its IPO in March 2021, with a significant drop in value, the company's strategic shifts have started to yield positive results. This is evidenced by its fourth consecutive profitable quarter, propelling its stock price by 30% this year. Management's assertion of sustained profitability has boosted confidence in its ability to achieve its long-term adjusted EBITDA margin goal of over 10%, doubling the Q2 figure. During Q2, Coupang demonstrated marked improvement in earnings per share (EPS) at $0.08, a significant contrast to the $(0.04) reported in the same period the previous year. Gross margins also saw a robust increase, rising 320 basis points year-over-year to 26.1%. The company's sales grew by 15.9% compared to the previous year, amounting to $5.84 billion, with this growth rate accelerating from +13.4% in Q1 and +4.9% in Q4 of the previous year. Moreover, the growth in active customers gained momentum in Q2, expanding by 10% year-over-year. This growth was a substantial improvement from the +5% in Q1 and +1% in Q4 of the previous year. Coupang highlighted that its customer groups increased both their spending and the range of categories they engaged with on the platform. This growth highlighted Coupang's competitive advantage, especially considering the persistently high prices and limited choices in the retail market.

The expansion of Coupang's offerings over recent quarters, including categories like fashion and beauty, is demonstrating promising growth, with these new assortments experiencing significantly faster sales growth compared to the overall business. Notably, third-party sales on the platform are outpacing the broader retail landscape, indicating that merchants are increasingly inclined to list their products on Coupang's site. Another positive highlight from Q2 was the success of Eats, Coupang's food delivery service, which saw a market share increase of over 500 basis points in regions where the company offered a 10% discount. Eats has not only proven successful in itself but has also served as an entry point for customers to spend more on e-commerce.

Coupang's Q2 report showcased a compelling combination of consistent profitability, rapidly accelerating revenue, and improving active customer growth. This trend aligns with what we've seen from other e-commerce giants like Amazon and MercadoLibre, where e-commerce is emerging as a refuge for consumers grappling with inflationary pressures. Coupang's ability to attract increased spending across a wider array of categories during the quarter underscores this trend. With Coupang holding a relatively modest retail market share, its strategic positioning positions it well for substantial growth in the long term.

Following its Q2 earnings report, Wendy's (WEN) stock has remained relatively unchanged. The report showed a typical pattern for Wendy's, with a minor beat in earnings per share (EPS) but a slight miss in revenue. The company reiterated its full-year adjusted EPS guidance of $0.95 to $1.00 and system-wide sales growth of 6-8%, a figure not comparable to consensus estimates. An important metric was the same-restaurant comparable sales, which were +5.1% globally and +4.9% in the US. While these figures were decent, investors might have expected stronger results given the Q2 comparable sales were lower than Q1's results of +8.0% globally and +7.2% in the US. Additionally, Wendy's was comparing against relatively easy year-ago results of +3.7% globally and +2.3% in the US. Despite this, the company highlighted that its strategic pricing actions, positive mix, and new product launches like The Ghost Pepper Ranch Chicken Sandwich contributed to Q2 growth. Notably, Wendy's breakfast and late-night offerings saw significant growth, with breakfast showing promise for the future and late-night sales benefiting from extended hours and advertising.

On the other hand, Lyft's (LYFT) Q2 earnings report initially appeared positive, surpassing EPS and adjusted EBITDA expectations, and offering favorable guidance for Q3. However, the stock's initial upward movement reversed, leading to significant losses. While the headline numbers suggested improvements, a closer look revealed that Lyft still trails Uber (UBER) considerably. In order to enhance competitiveness, Lyft plans to focus on pricing, potentially impacting profitability. This realization, combined with Lyft's slowest top-line growth since 1Q21 at 3%, prompted investors to take profits. Despite CEO David Risher's efforts to accelerate rider growth and regain market share, active riders increased by 8.2% year-over-year in Q2 to 21.5 million. However, this growth came at a cost, as revenue per active rider decreased by 5% to $47.51, affecting Lyft's contribution margin. While Lyft's cost-cutting measures allowed it to surpass adjusted EBITDA guidance, concerns arise over its ability to sustain profitability while adhering to its rideshare pricing strategy. Amid these challenges, Lyft aims to attract drivers and riders through innovations but faces profitability headwinds due to these investments. Overall, Lyft's path to profitability and market share recovery appears challenging compared to Uber's strong performance.

Twilio (TWLO) is experiencing upward momentum in response to its positive Q2 results. The provider of real-time communication software, known for its APIs used in various applications like text, phone, and email alerts, has achieved its third consecutive quarter of strong profitability. This shift towards profitability has been a successful strategy amid economic uncertainties. While there was a minor drawback in TWLO's Q2 report, specifically its mixed Q3 outlook, the company anticipates robust earnings that surpass analyst predictions. However, a flat year-over-year sales growth projection for Q3 reflects persistent economic challenges. In contrast to the previous quarter, the management is now more optimistic about a potential turning point. They are encouraged by signs of stability within their core Communications segment (accounting for 91% of Q2 revenues) and are hopeful for improving bookings and revenue growth in the Data & Applications segment by the end of 2023 and into 2024. TWLO's remarkable highlight remains its profitability, achieved by implementing workforce reductions and streamlining its operations. This has led to significant improvement in its bottom-line performance, shifting from a loss of $0.11 per share in the previous year to a profit of $0.54 per share. Additionally, non-GAAP gross margins expanded to 52.2%, marking a 130 basis points increase year-over-year. The company demonstrated strength in revenue growth, reaching $1.04 billion, a 10% increase year-over-year, surpassing its projected range of $980-990 million. Despite a 10.5% year-over-year and 1.3% sequential increase in active customers to over 304,000, the growth rate has slowed compared to the previous quarter. TWLO acknowledges the uneven macroeconomic landscape, with growth in certain areas counterbalanced by weaknesses in others, such as social & messaging and crypto sectors. The crypto industry's vulnerability had a notable impact on Q2's sales growth, subtracting 4 percentage points. While these challenges are expected to persist into Q3, TWLO foresees a gradual improvement afterward.

Although the immediate outlook remains uncertain, TWLO's shift to profitability and positive sentiment about the rest of the year have contributed to the recent stock surge. The company's focus on profitability and anticipation of improved sales growth in 2024 has garnered increased attention from investors, bolstering the current positive trend.

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Palantir Technologies (PLTR) is witnessing a temporary halt in its impressive upward trajectory following a robust year with gains exceeding 180%. The company's shares have undergone a 4% dip due to Q2 results aligning with expectations and a more conservative sales outlook for FY23. With a core focus on AI-infused data analytics, Palantir has attained its third consecutive quarter of GAAP profitability and confirmed its profitability for the remainder of FY23, positioning itself for potential inclusion in the S&P 500 after Q3. Moreover, the company has greenlit share repurchases of up to $1.0 billion.

The question arises as to why there has been a decline in shares. Principally, the Q2 outcomes have been termed as moderate, coinciding with anticipated results for earnings and sales. One of the contributing factors is the underperformance of PLTR's U.S. government sector, where revenues have decreased by 4% sequentially. Additionally, international commercial sales have lagged due to restrained growth among European commercial enterprises. Although the FY23 revenue projection of $2.212 billion slightly surpassed consensus estimates, this increment was minimal compared to the midpoint of the previous forecast range, which stood at $2.185 billion to $2.235 billion. This moderation in results follows a substantial surge in share value leading up to the Q2 announcement, resulting in a forward P/E ratio of 84x. Consequently, these outcomes have not resonated as strongly as anticipated.

However, the stock witnessed a minor resurgence right after the Q2 disclosure, shedding light on several positive aspects from the quarter. Palantir accomplished a notable milestone by exceeding $2.0 billion in trailing twelve-month (TTM) revenue during Q2, attributed in part to the contribution of the top 20 customers, propelling TTM revenue growth by 15% year over year, translating to $53 million per customer. U.S. commercial revenue growth played a role in this resurgence as well, achieving a 20% year-over-year increase, which was twice the growth rate of total commercial sales. Of note, 54% of the company's U.S. commercial sales could be traced back to customers acquired in 2021, accentuating the company's competitive edge and the enduring appeal of its software. Furthermore, the U.S. commercial customer base expanded by 4% sequentially, marking the 10th consecutive quarter of sequential growth.

Though PLTR's performance within the U.S. Government segment fell short of expectations, international government sales exhibited commendable progress, demonstrating a 31% year-over-year growth, signifying a substantial acceleration compared to the 11% growth reported in the preceding quarter. This resurgence can be attributed to the U.K. market, driven by projects undertaken within the NHS and the U.K. Ministry of Defense.

On the whole, Palantir's Q2 outcomes were moderate, lacking the impetus to sustain its earlier upward trend. Nevertheless, the stock remains resilient, with the current setback being construed as a healthy correction. Palantir is well-positioned due to several favorable factors, particularly its Artificial Intelligence Platform (AIP). Company management envisions AIP as transformative for clients, harnessing the potential of large language models (LLMs) like Chat-GPT, coupled with algorithmic tools to execute tasks such as profit calculations and lead time estimations, which LLMs alone may not accomplish. Even in the face of potential waning enthusiasm around AI, Palantir is solidifying its status as a benchmark in this arena, positioning itself for sustained success in the long run.

Datadog (DDOG) is experiencing a decline due to a slowdown in spending by major customers, impacting its outlook. The sentiment was initially positive as the company approached its Q2 earnings report, buoyed by the acquisition of competitor New Relic (NEWR) on July 31 and positive remarks from Amazon (AMZN) about Amazon Web Services (AWS) during its recent earnings call. While the stabilization of AWS growth, a significant partner for DDOG, contributed to favorable Q2 results, it did not translate into a strong revenue forecast. The company's Q3 top-line guidance of $521-$525 million fell below expectations, and its FY23 projection of $2.05-$2.06 billion was slightly under its previous guidance of $2.08-$2.10 billion. This soft revenue outlook is particularly concerning considering the stock's relatively high price-to-sales (P/S) ratio of around 19x, intensifying the ongoing sell-off. The repercussions of DDOG's disappointing forecast are extending to other data analytics and monitoring companies, with shares of Snowflake (SNOW), Splunk (SPLK), and MongoDB (MDB) also experiencing significant declines. A notable concern is the statement from DDOG CEO Olivier Pomel, highlighting that certain larger cloud-native customers are increasingly scrutinizing costs, leading to greater pressure on usage rates within this group. Similar to other data analytics companies, including SNOW and AWS, DDOG charges based on usage, so when businesses exercise caution due to economic uncertainty, they tend to reduce their usage, thereby negatively impacting DDOG's and its peers' revenues.

Fortunately, the company reports signs of stabilization among customers who began optimizing their cloud and observability usage a year ago. Additionally, DDOG continues to attract new customers successfully, achieving its strongest Q2 in terms of new customer bookings. Over time, these new customers are likely to become substantial accounts as they adopt more of DDOG's products. In Q2, approximately 82% of the company's customers were utilizing two or more products, compared to 79% the previous year. Furthermore, 45% of customers were employing four or more products, up from 37% the previous year, indicating the continued effectiveness of DDOG's strategy despite challenges related to broader economic conditions. Looking ahead, DDOG's growth prospects could receive a boost from its new AI offerings, such as LLM Observability and Bits AI assistant, as well as its AI-related integrations. However, for the foreseeable future, the company is likely to face a more cautious spending approach from its major cloud customers, impacting its growth trajectory.

Skyworks Solutions (SWKS) is experiencing a decline in its stock following the release of its Q3 (Jun) earnings report. As a supplier of semiconductors for wireless connectivity across various sectors including smartphones, tablets, IoT devices, automotive, and medical devices, the company exceeded earnings per share (EPS) expectations but achieved revenue in line with predictions. The outlook for Q4 (Sep) demonstrated promising aspects, with higher-than-expected EPS and revenue in line with forecasts. This guidance is seen as encouraging, especially considering the previous downward guidance. Additionally, SWKS announced a 10% dividend increase, resulting in a current yield of 2.6%. Initial concerns stemmed from SWKS's reliance on Apple (AAPL), which accounts for 58% of FY22 revenue. Apple's recent iPhone performance fell below expectations. Furthermore, SWKS has been undergoing a multi-quarter inventory correction that has impacted profit margins due to underutilization. Given these factors, the Q3 results are generally considered satisfactory. Mobile revenue constituted approximately 59% of JunQ revenue, experiencing overall growth across its primary customer product lineup (presumably Apple). However, this was offset by ongoing demand weakness from the Android ecosystem as Original Equipment Manufacturers (OEMs) continue to trim their inventories. The remaining 41% of revenue came from SWKS's "Broad Markets" segment, which witnessed substantial contributions from the automotive, infrastructure, and industrial sectors.

Notably, the non-GAAP gross margin declined from 51.2% to 47.5% compared to the previous year, aligning with expectations. This reduction was primarily attributed to temporary underutilization of manufacturing facilities as the company seeks to optimize its inventory levels. The company's projected gross margin for SepQ ranges between 47-48%, reflecting the ongoing efforts to reduce internal inventory. While Skyworks historically maintains gross margins in the low 50s, current macroeconomic challenges and softer demand, particularly in the Android market, have prompted customers to scale back their internal inventories. SWKS anticipates a recovery in the Android market eventually, leading to a return to normalized internal inventory levels. This, in turn, would enable increased factory utilization and a gradual rise in gross margins, ultimately targeting a model of 53%.

During the earnings call, SWKS offered positive news regarding the inventory correction, expressing the belief that the bottom has been reached for most of the markets it serves, anticipating improved financial performance moving forward. This positivity was reflected in the SepQ guidance, characterized by SWKS as relatively strong compared to its peers. While acknowledging the challenging cycle in the semiconductor and tech industries, SWKS's current outlook is more optimistic than in the previous quarter.

In summary, SWKS's recent quarter results are moderately favorable. Despite initial concerns, particularly the guidance, the likely launch of the iPhone 15 in the upcoming fall season appears to be bolstering the outlook. However, the ongoing inventory correction continues to exert pressure on profit margins. While the company believes it has reached the bottom, it foresees margin challenges in the next few quarters. Optimism for the upcoming SepQ call remains hopeful, as SWKS navigates the evolving landscape.

Eli Lilly (LLY) is experiencing a surge to record highs following an exceptional Q2 report that showcased its most substantial top-line growth in over five years. The pharmaceutical company's remarkable performance, characterized by exceeding expectations and raising forecasts, was primarily driven by select drugs within its portfolio, with Mounjaro particularly standing out. Mounjaro, approved in May 2022 for treating type 2 diabetes in adults, has gained significant popularity as a weight-loss medication, akin to Novo Nordisk's Ozempic. While Mounjaro's FDA approval to target obesity specifically is still pending, potentially arriving by late 2023, its sales have soared, reaching nearly $980 million in Q2. If this anticipated approval materializes, Mounjaro will compete with LLY's Trulicity, an injectable diabetes treatment, for the company's highest-selling drug.

Mounjaro's sales success has been significant. Back in 3Q22, CFO Anat Ashkenazi referred to the early demand for Mounjaro as "unprecedented," and the drug has indeed become a blockbuster. Nevertheless, it wasn't the sole contributor to LLY's impressive results. Verzenio, a medication for metastatic breast cancer, experienced a 57% growth in sales, reaching $926.8 million, while Jardiance, a type 1 diabetes drug, achieved a 45% growth to $668.3 million. Taltz, a treatment for Plaque Psoriasis, contributed with sales of $704 million, marking a 16% year-over-year increase.

LLY's revised FY23 guidance indicates an expectation of sales momentum for its growth products (Verzenio, Jardiance, Taltz) and new products (Mounjaro). What's noteworthy about this guidance is that it surpasses a mere adjustment, significantly raising the forecast. The company now anticipates EPS of $9.20-$9.40 compared to the previous guidance of $8.65-$8.85, and revenue of $33.4-$33.9 billion in contrast to the former projection of $31.2-$31.7 billion.

Investors might not have to wait long for LLY's next multi-billion-dollar drug to enter the market. By year-end, the company anticipates regulatory action from the FDA concerning donanemab, its Alzheimer's disease treatment. Last November, LLY reported successful results in Phase 3 trials, showing that the drug met all primary and secondary endpoints and reduced brain amyloid plaque levels by 65.2% compared to baseline. Given its similarity to Biogen's Leqembi, which received FDA approval on July 7, donanemab is expected to gain approval.

Overall, LLY's strong Q2 results and optimistic outlook underscore its position as a top-performing growth stock in the healthcare sector. With Mounjaro still in the early stages of its growth curve and the anticipated approval of donanemab on the horizon, Eli Lilly's future looks promising.