Thursday, July 11, 2024

Waiting for Good Data

  • This is a confidence game.
  • Adidas tops Nike.
  • You can’t time these things.
Senior Editor, StockPick Daily
MARKETS

Another Day of Data Dependence

This one should just about do it…

It doesn’t get any more “incoming” than this.
Consumer Price Index data for June and initial claims for unemployment insurance data for the week ended July 6 will be released at the same time this morning, 8:30 a.m. ET.
The probability of a September rate cut has already surged to better than 70 percent from 45 percent after Federal Reserve Chair Jerome Powell told the Senate Banking Committee on Tuesday that “elevated inflation is not the only risk we face” and that “the labor market has cooled really significantly across so many measures.”
It’s possible today’s incoming data will provide the incremental confidence our central bankers need before they decide to trim the federal funds target range.
Pretty remarkable the landing Powell & Co. appear to have managed here.
But not one of them will declare any sort of victory.

The S&P 500 has closed higher for seven consecutive days through Wednesday, July 10, 2024, its longest winning streak since November 2023.
Indeed, the Fed Chair told members of the House Financial Services Committee that he’s still waiting for “more good data.”
He again hesitated to share a timeline, but he does “have some confidence” inflation is moving toward the 2 percent target.
Inflation is still a thing, according to Powell, but he’s also focused on “considerable softening in the labor market.”
The target range for the benchmark federal funds rate has been 5.25 percent to 5.50 percent for almost a year now.
Something to consider is the Fed’s growing concern about growth.
Stocks continue to make new all-time highs on expectations good times will continue to roll. 
We’ll get a good read on that optimism and whether it’s well founded beginning with earnings reports on Friday from JP Morgan Chase & Co $JPM, Wells Fargo and Company $WFC, and Citigroup $C.
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July 11, 2024
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DEEP DIVE

Adidas Is Just Doing It

Nike is struggling to compete right now.

When talk turns to the great rivalries in history, of course it makes sense to start with Athens and Sparta. The Peloponnesian Wars are literally the stuff of legend.
Of more recent if less bloody vintage is the now-centuries old conflict between the New York Yankees and the Boston Red Sox.
Further into sport and with a little bit of commerce we have Nike $NKE and Adidas $ADDYY.
Sparta eventually prevailed over Athens; there’s no going back on that one. But the Red Sox have closed a yawning gap with the Yankees in the 21st century. 
And, in the other of our continuing sagas, Adidas has reemerged in the global sportswear battle with its longstanding rival.
Driven by strong sales for its iconic Gazelle and Samba sneakers, analysts expect the Germany-based firm to report its biggest profit margin in three years.

Adidas $ADDYY is up nearly 18 percent in 2024, while Nike $NKE is down more than 33 percent.
Nike, on the other hand, is expected to report an annual decline in revenue. The share price plunged more than 20 percent on that news.
ADDYY generally trades in sympathy with NKE. But it didn’t slide this time, a sign investors could be making some new distinctions in a competitive market.
Adidas sure seems to be overtaking Nike in the public consciousness: Online searches for its Samba line have surged globally over the trailing 12 months, while searches for Nike’s Air Force One have sagged.
And the field is only getting more crowded and competitive, with Hoka, Lululemon, and On Running collectively grabbing 35 percent of the global sportswear market in 2023, up from 20 percent in 2020.
Analysts expect Adidas to report a profit margin of 51.4 percent for the second quarter on revenue growth of 4.5 percent.
ADDYY is up nearly 20 percent in 2024, while NKE is down more than 30 percent.
FROM THE RESEARCH DESK

Have No Fear of Missing Out

The time to start participating is now.

The time to start participating is now.Here’s a basic truth investors like you and me often struggle with: It’s impossible to time the stock market.
But something else we know is that over the long term the stock market is the greatest wealth-creation mechanism ever devised.
You know, up and to the right, and we happen to be experiencing more and more of that right now.
The S&P 500 and the Nasdaq Composite closed at new all-time highs again on Wednesday, and stocks are enjoying their longest winning streak since November.
If you fear you’ve missed out, you’re wrong.
And Oppenheimer & Co. has a couple of ideas where you can put fresh capital to good work and grab big chunks of major gains.

Braze $BRZE is down more than 28 percent in 2024.
Oppenheimer analyst Brian Schwartz has identified two software stocks, Braze $BRZE and Clearwater Analytics $CWAN, that offer some value at current levels with some upside as the current rally continues.
Braze is a data platform for marketers with more than 2,100 customers and 6 billion monthly active users supporting a steady stream of recurring revenue.
BRZE is down more than 28 percent this year, the share price suffering under the weight of soft guidance in its fiscal 2025 first-quarter earnings report.
Schwartz says it’s a matter of time before management turns things around, with a helpful hand from AI.
The analyst highlighted Braze’s “growing international sales capacity, platform innovation and extensibility, and strong leadership team are laying a foundation for durable growth and improved profitability.”
Schwartz rates BRZE a “buy” with a 12-month price target of $61; that’s upside of more than 61 percent from here.
All 18 analysts who cover the stock rate it a buy, with a consensus upside of 64 percent.

Clearwater Analytics $CWAN is down 11.41 percent year to date.
Clearwater Analytics makes investment and accounting software for finance professionals. It generated more than $100 million of revenue for the first quarter.
Schwartz upped his rating on CWAN from “hold” to “buy,” noting raised expectations following stellar results and anticipation growth will accelerate next year.
The analyst sees the stock trading at $25 in 12 months, 40 percent upside from here.
Wall Street is generally bullish on CWAN, with seven analysts rating it a “buy,” three rating it a “hold,” and one rating it a “sell.”

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