TFT #77: NVIDIA's Innovation Plan, Square's Growth Strategy, Toast's Restructuring, and More
Hello Reader,
In this issue, we cover NVIDIA's visionary innovation plan, Square's ambitious growth strategy, Toast's structural realignment, and more.
Let’s get into it.
Walmart Bolsters Advertising Strategy with Vizio Acquisition
During its earnings call, Walmart ($WMT), America's largest employer and retail giant, revealed a strategic focus on advertising
With a keen eye on expanding revenue streams
Walmart's emphasis on advertising is strategic, given its higher profit margins compared to its core retail business. With plans for a 3-for-1 stock split and a 9% dividend increase, Walmart is poised for growth, buoyed by its foray into the lucrative advertising sector. The acquisition underscores Walmart's commitment to innovation and diversification in an ever-evolving retail landscape.
Roku, a competitor of Vizio, saw its stock plummet by 30% over five days following disappointing earnings. The decline worsened with Walmart's acquisition of Vizio, sparking concerns about increased competition. Despite Roku's strong performance in Q4, a wary outlook subdued investor confidence, hinting at potential hurdles ahead.
Cybersecurity Stocks Tumble Amidst Palo Alto Networks' Guidance Cut
Tuesday’s after-hours trading witnessed a significant sell-off in cybersecurity stocks, triggered by Palo Alto Networks' ($PANW) disappointing earnings report. The industry giant's adjusted earnings per share of $1.46 on revenues of $1.98 billion initially offered a glimmer of hope. However, concerns quickly mounted as the company highlighted challenges in its top-spending customer segment, citing fatigue in cybersecurity budgets.
Palo Alto Networks' downward revision of its full-year total billings forecast to $10.10 to $10.20 billion, down from $10.70 to $10.80 billion, sent shockwaves through the market. CEO Nikesh Arora's acknowledgment of a strategic shift to accelerate growth and AI leadership failed to assuage investor concerns, especially with an anticipated difficult customer landscape ahead.
The disappointment rippled across the sector, with Palo Alto Networks' shares plummeting by 20% after-hours. As cybersecurity stocks retreat from recent highs, investors brace for potential challenges amidst evolving market dynamics and shifting customer demands.
Since then, PANW stock price has found stability above $260, indicating a potential bounce. Should the price surpass Wednesday's high around $276 and hold above it, there's a likelihood of it aiming to close the upper gap (fully or partially). This move could test resistance levels at $289, $303, $315, and potentially reach the 50 SMA around $324.
(Disclaimer:?PANW?is one of the stocks/ETFs we are currently trading/investing)
NVIDIA Hits Record Highs on Strong Quarterly Performance
NVIDIA's ($NVDA) shares soared to unprecedented levels following the release of its stellar Q4 (Jan) results, indicating a resurgence in investor confidence. Despite initial apprehensions, NVDA witnessed a remarkable surge of 13% post-earnings, reflecting robust demand for its AI-focused GPU technology across diverse sectors. The company's revenue skyrocketed to $22.1 billion, marking a staggering 265.3% year-over-year increase, surpassing both expectations and its own predictions.
The Data Center segment emerged as a key driver of growth, with revenues expanding by 409% year-over-year to $18.4 billion. CEO Jensen Huang highlighted the pivotal role of accelerated computing and generative AI, signaling a significant market shift. However, challenges persisted in the Chinese market due to export restrictions, leading to a notable decline in revenue from the region.
Despite headwinds, NVDA's overall performance remained robust, with segments like Gaming and Professional Visualization witnessing substantial year-over-year growth. Looking ahead, NVDA anticipates continued momentum, projecting revenue of $23.52-24.48 billion for Q1, fueled by sustained demand across Data Center and ProViz, albeit with expected seasonal softness in Gaming.
With an optimistic outlook and strong financials, NVDA maintains its position as a leader in the AI landscape, poised for continued success in the quarters to come.
NVIDIA's bullish momentum persists, propelling prices upward. With the current bullish pressure, we anticipate price testing the next resistance levels at $852, $894, $985, and $1029, potentially reaching as high as $1082, marking the channel top.
(Disclaimer:?NVDA?is one of the stocks/ETFs we are currently trading/investing)
Teladoc Shares Plummet 25% Amid Disappointing Q4 Results and Bleak Outlook
Teladoc Health ($TDOC) faced a tumultuous trading day as its shares tumbled by 25.0% following the revelation of lackluster fourth-quarter revenue growth and a pessimistic outlook, leaving investors unnerved. The stock, now trading at $15.37, witnessed significant selling pressure attributed to its underperformance in key segments, notably the BetterHelp division, an online therapy service.
The company's top-line growth fell short of expectations, with BetterHelp failing to meet internal targets, primarily due to diminished returns on marketing investments. Teladoc traditionally leverages social media for advertising, which had previously yielded favorable results, but the fourth quarter saw a departure from this trend.
Additionally, Teladoc's guidance for the upcoming quarter forecasts a modest decrease in earnings per share compared to the previous year, marking a deviation from its recent profitability-focused strategy. Although the company anticipates higher earnings for fiscal year 2024 than analysts' estimates, persistent challenges in the BetterHelp segment are expected to weigh on overall revenue growth, leading to a projection below consensus.
Despite management's optimism regarding long-term prospects, underscored by advancements in international business-to-business operations and potential margin expansion in the Integrated Care segment, near-term market sentiment remains cautious amid ongoing challenges at BetterHelp. Teladoc's shares now hover close to historic lows, signaling a testing period ahead as the company navigates through its current predicament.
Carvana Surges 31% Following Record EBITDA and Bullish Q1 Guidance
Carvana ($CVNA) witnessed a remarkable upswing, soaring 31% in response to its robust performance in the fourth quarter of 2023, where it reported record earnings before interest, taxes, depreciation, and amortization (EBITDA), and offered optimistic guidance for the first quarter. Despite a larger-than-expected loss and revenue miss in Q4, Carvana demonstrated resilience, posting a record full-year net income of $150 million and achieving an all-time high adjusted EBITDA of $339 million. Impressively, the company has marked three consecutive quarters of positive adjusted EBITDA, with the fourth quarter expected to follow suit.
Carvana's buoyant outlook for Q1 anticipates adjusted EBITDA significantly surpassing $100 million, a stark contrast from the $24 million loss incurred a year ago and the $60 million in Q4. This guidance comes amidst challenges such as declining used vehicle prices and industry volumes below pre-pandemic levels, coupled with substantial costs associated with expanding future capacity.
The notable achievements in 2023 were not propelled by revenue growth but rather by enhanced operational efficiency. By strategically reducing staffing, inventory, and advertising expenditures, Carvana effectively aligned itself with prevailing macroeconomic conditions, slashing over $1.1 billion in annualized expenses by the second quarter of 2023. Additionally, the company undertook debt restructuring measures.
While Carvana initially faced challenges stemming from its ambitious vehicle acquisitions during the pandemic, subsequent adjustments, including debt renegotiation and inventory management, have positioned the company for sustained growth. Investors' renewed confidence in Carvana's long-term prospects, coupled with a potential short squeeze, contributed to the significant surge in its stock price, which now stands at $68.57, marking a monumental 600% increase over the past year.
Block Surges 19% on Surprise Profit Announcement
Block ($SQ) experienced a remarkable 19% surge in its stock price following the revelation of its fourth-quarter earnings report, which surpassed analyst estimates and showcased robust growth in both Square and Cash App revenue. Despite missing Q4 EPS expectations, Block demonstrated substantial profit growth, prompting an upward revision of its guidance for FY24.
The company reported $5.77 billion in revenue for the quarter, with $2.03 billion in gross profit, marking a 22% increase from the previous year. Notably, its Cash App business recorded $1.18 billion in gross profit, reflecting a significant 25% year-over-year rise.
Block's CEO, Jack Dorsey, emphasized the company's strategy to streamline operations, with a focus on reducing costs and enhancing efficiency. The workforce has been capped at 12,000 employees, with further layoffs reported in recent months to align with this target.
Despite a $132 million impairment on its investment in Tidal, Block's strong quarterly results and optimistic outlook prompted favorable reactions from Wall Street analysts. Wells Fargo upgraded Block to overweight, while Seaport Research Partners raised its rating to a buy, citing the company's impressive progress in driving profitable growth.
Overall, Block's profitability surge, coupled with its strategic initiatives, has instilled confidence among investors and analysts alike, signaling promising prospects for the future.
(Disclaimer:?SQ?is one of the stocks/ETFs we are currently trading/investing)
Etsy's Mixed Q4 Results Spark Caution Amid Tough Economic Climate
Etsy ($ETSY) encountered a mixed bag of results in its fourth-quarter earnings report, prompting a cautious outlook amidst a challenging economic backdrop. While the e-commerce platform surpassed revenue expectations with $842.3 million, its earnings of $0.62 per share fell short of estimates at $0.78. Gross merchandise sales (GMS) amounted to $4.01 billion, aligning closely with forecasts.
Despite a solid performance during the Q4 holiday season, Etsy faces headwinds in consumer discretionary spending, particularly evident in the Home & Living category amid heightened competition and discounting pressures. The company reported a modest 0.7% decline in GMS year-over-year, outperforming earlier guidance.
Etsy's cautious guidance for Q1 and FY24 reflects ongoing economic uncertainties, with a projected low single-digit decline in consolidated GMS for Q1. The company remains optimistic about its long-term growth prospects, highlighting sustained buyer base expansion and increased buyer engagement.
However, Etsy acknowledges the challenges posed by intensifying competition and consumer sentiment dampened by inflation and rising interest rates. As it navigates through this tough environment, Etsy aims to differentiate itself by offering unique products and experiences, emphasizing its core strengths amidst market commoditization.
Despite the initial market reaction to the downside, Etsy remains focused on strategic investments and operational enhancements to weather the current economic storm and position itself for future growth opportunities.
Toast Rises on Strong Q4 Sales Beat and Restructuring Plan
Toast ($TOST) is quietly digesting investor enthusiasm following its impressive performance in Q4, marked by a significant sales beat, a $250 million repurchase plan, and strategic restructuring efforts
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Despite economic challenges posed by inflation, Toast showcased resilience with a 34.7% year-over-year revenue increase to $1.04 billion, surpassing estimates. With over 6,500 net locations added in Q4, totaling approximately 106,000, the company demonstrated robust growth momentum.
Toast's software-as-a-service (SaaS) annualized recurring revenue (ARR) expanded by 43% year-over-year, supported by a healthy 7% increase in average revenue per user (ARPU) and strong net retention at 117%. Additionally, Toast Capital, offering loan access to customers, experienced steady demand.
Focused on profitability, Toast aims for $210 million in adjusted EBITDA for FY24, with a trajectory toward GAAP profitability by the first half of 2025. The company's commitment to shareholder value is evident through its repurchase authorization, signaling confidence in its undervalued shares.
As signs of a dining out resurgence emerge, Toast's mission-critical software positions it for sustained growth and profitability, enhancing its economic moat and readiness to capitalize on future demand rebounds.
The TOST share price is currently holding steady above both the 8 EMA and the breakout point of approximately $20.60 from last Thursday. If these levels continue to hold and the price manages to surpass Friday's high around $22.70, it is likely to target higher resistance levels at $24.77, $26.65, and $28.55.
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