CNBC’s Jim Cramer on Friday told investors what to pay attention to next week on Wall Street, highlighting the nonfarm payroll report and earnings from GitlLab and CrowdStrike.
“To those of you who want the Fed to cut so badly that you’re staying on the sidelines until they do,” he said, “you’d better hope we get some weakness in the employment numbers next Friday.”
GitLab will report on Monday. Cramer said he’s waiting to see how the company will perform because some in the enterprise software sector see issues with sales. He noted that GitLab’s last quarter was disappointing. It seemed to him as a one-off situation at the time, but maybe the report was a precursor of trouble to come in the industry, he said.
Tuesday brings quarterly results from CrowdStrike, and Cramer said the cybersecurity company has been doing better than many of its peers.
Hewlett Packard Enterprise, Ferguson and PVH also report Tuesday. Cramer will be waiting to see how HPE stacks up against competitors like Dell. According to Cramer, Ferguson is a great way to invest in infrastructure. He’ll also be watching PVH, known from brands like Calvin Klein and Tommy Hilfiger, but said he prefers Ralph Lauren in the apparel space.
Dollar Tree, Campbell Soup, Jack Daniels maker Brown-Forman and Lululemon will report on Wednesday. Cramer said he wonders if Brown-Forman will be able to explain what’s hurting liquor sales, as well as whether a difficult and crowded market for athleisure is already “baked into” Lululemon’s stock.
On Thursday, JM Smucker and DocuSign are due to report. Cramer said JM Smucker needs to find something to make the company grow faster, and he wondered how DocuSign will figure out how to turn its business around.
Friday brings perhaps the most important event of the week, according to Cramer, the Labor Department’s nonfarm payroll report for the month of May. He stressed the Federal Reserve won’t be inclined to cut rates until the unemployment rate reaches 4%. In April, the jobless rate inched up to 3.9% from 3.8% the previous month.
U.S. stocks closed higher Friday, with the Dow Jones Industrial Average scoring its longest weekly winning streak since February 2019, as investors digested the latest job report.
How stock indexes traded
The Dow Jones Industrial Average DJIA
rose 130.49 points, or 0.4%, to close at 36,247.87, its highest closing value since Jan. 12, 2022.
The S&P 500 SPX
gained 18.78 points, or 0.4%, to finish at 4,604.37, marking its highest close since March 29, 2022.
The Nasdaq Composite COMP
climbed 63.98 points, or 0.4%, to end at 14,403. 97, scoring its highest closing value since April 4, 2022.
For the week, the Dow eked out a gain of less than 0.1%, the S&P 500 edged up 0.2% and the Nasdaq advanced 0.7%. All three major indexes rose for a sixth straight week, according to Dow Jones Market Data.
What drove markets
U.S. stocks ended higher Friday as investors parsed a stronger-than-expected job report.
The U.S. Bureau of Labor Statistics said Friday that the economy added 199,000 jobs in November, while the unemployment rate fell to 3.7% from 3.9%. Economists polled by the Wall Street Journal had forecast that 190,000 jobs would be added in the month.
“It’s nice to see that a soft landing still can take place,” Yung-Yu Ma, chief investment officer at BMO Wealth Management, said by phone Friday. But the market had been getting “too optimistic” about potential interest-rate cuts by the Federal Reserve in the early part of next year, he added.
The job report is “perhaps a wash” for markets as “average hourly earnings growth came in a little on the high side,” Ma said. That could contribute to inflationary pressures and push a Fed pivot on rate cuts further out in 2024 than markets were expecting.
“The Fed can probably be patient for a while,” he said. Fed Chair Jerome Powell may “strike a bit more of a hawkish tone” after the central bank’s monetary-policy meeting next week, potentially pushing back against some of the enthusiasm for earlier rate cuts, Ma said.
Average hourly earnings rose 0.4% in November, up 4% year over year, the job report shows.
“Even though the headline 199,000 new jobs created is just slightly above consensus estimates for 190,000 new positions, the lower unemployment rate of 3.7%, coupled with higher-than-expected average hourly earnings, caused a jump higher in Treasury yields,” Quincy Krosby, chief global strategist at LPL Financial, said in emailed comments.
The yield on the 10-year Treasury note BX:TMUBMUSD10Y
climbed 11.5 basis points Friday to 4.244%, according to Dow Jones Market Data. That’s below its high this year of about 5% in October.
Meanwhile, the stock market’s so-called fear gauge remained low, with the CBOE Volatility Index VIX
declining to 12.35 on Friday, FactSet data show.
In other economic data released Friday, the University of Michigan’s gauge of consumer sentiment rose to a preliminary reading of 69.4 in December, its first increase in five months. Inflation expectations also moderated, the university’s survey of consumer sentiment showed.
Such a big swing for a single reading of the survey is unusual, said Claudia Sahm, a former Federal Reserve economist who now runs a consulting business. “These data usually don’t move like that,” she said during a phone interview with MarketWatch.
Next week’s economic calendar will include a reading on U. S. inflation from the consumer-price index as well as the outcome of the Fed’s two-day policy meeting, scheduled to conclude Dec. 13.
Meanwhile, the S&P 500 notched a sixth straight week of gains, its longest such winning streak since the stretch ending Nov. 15, 2019, according to Dow Jones Market Data. The Dow Jones Industrial Average logged its longest stretch of weekly gains since February 2019.
Companies in focus
Lululemon Athletica Inc. shares LULU, +5.37%
jumped 5.4% after the company late Thursday called for lower-than-expected holiday-quarter figures, saying that is navigating an “uncertain” economy.
Mullen Automotive Inc. shares MULN, -5.13%
dropped 5.1% after the electric-vehicle maker filed a lawsuit against a group of investors for allegedly using “spoofing” to manipulate its share price.
A photo taken on November 23, 2023 shows the logo of the ChatGPT application developed by US artificial intelligence research organization OpenAI on a smartphone screen (left) and the letters AI on a laptop screen in Frankfurt am Main, western Germany.
Kirill Kudryavtsev | Afp | Getty Images
This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
Google’s answer to ChatGPT Google owner Alphabet’sshares jumped 5% Thursday, a day after the company announced its latest artificial intelligence model, Gemini, that will compete with OpenAI, Microsoft and Meta offerings. The company will start licensing Gemini to customers through Google Cloud later this month — it remained unclear whether Google plans to monetize Gemini through all of its products in the long term.
AMD ups the ante AMDlaunched new artificial intelligence chips on Wednesdaythat will compete against Nvidia to power AI applications. Shares of the chipmaker surged 9.9% Thursday to close at $128.37, marking its best day since May and the highest close since June. Nvidia has dominated the AI chip market for the past year, but cloud providers and technology companies have been searching for a flexible alternative to save costs.
No yoga pants this Christmas Lululemon, known for its yoga pants and belt bags, issued a tepid fourth-quarter outlook. The retailer said it was expecting sales between $3.14 billion and $3.17 billion during the quarter, just shy of analysts’ estimate of $3.18 billion, according to LSEG. This despite the company seeing strong third-quarter demand and a positive start to the holiday shopping season.
[PRO] These global stocks may be overbought U.S. stocks aren’t they only ones doing well — global markets have also rallied in the past month. These are a few global stocks that may have been overbought but analysts still like them — giving one nearly 40% upside.
Oxford's word of the year is "rizz", which it defines as pertaining to someone's ability to attract another person through style, charm, or attractiveness and is derived from the middle part of the word 'charisma'. On Wall Street, it might as well be "AI".
Wall Street resumed its rally after a three-day break as technology giants intensified their AI arms race, lifting tech stocks.
When you have Google launching a new AI model and AMD eying a slice of the scorching AI chip pie, there are few surer ways to turn investors frowns upside down. Artificial intelligence, which perhaps wasn't even part of our daily vocabulary five years ago, is now becoming more and more integrated with our day-to-day functioning.
But it is left to be seen if these gains could shine through Friday's session that will be guided by fresh evidence on the strength of the U.S. labor market, which has been a key focus this week amid a series of mixed data releases that have left traders scratching their heads.
Weekly jobless claims released Thursday missed economists' expectations, signaling the pace of layoffs hasn't increased, while private payrolls data on Wednesday showed that employers added fewer-than-expected positions.
Meanwhile, the volume of job openings in October fell to its lowest level since March 2021, according to the Labor Department.
Friday's official jobs report is expected to show 190,000 jobs were added in November, according to economists polled by Dow Jones. Higher than the prior month.
Investors would be watching for analysts' commentary on whether the latest data releases will allow the Federal Reserve to keep interest rates on pause at its meeting next week.
Check out the companies making headlines before the bell: Coinbase — Crypto-related assets surged after Bitcoin topped $40,000 for the first time this year. Coinbase jumped 7%, MicroStrategy gained 7% and Marathon Digital climbed 13%. Uber Technologies — The ride-hailing stock rose 4% after S & P Dow Jones Indices on Friday said it will enter the S & P 500, along with Jabil and Builders FirstSource . The three will replace Sealed Air , Alaska Air Group and SolarEdge Technologies . Shares of Jabil and Builders FirstSource were each higher by more than 2%. General Motors — Shares of the Cadillac and Chevrolet maker added 1.3% after an upgrade from Mizuho Securities, which said GM has bottomed and is poised for growth, particularly after the labor settlement with the United Auto Workers. Spotify Technology — Spotify rose more than 1% before the bell after the music streamer said it’s laying off 17% of its workforce as it looks to trim costs amid slower growth. The cuts total about 1,500 jobs, according to a CNBC source familiar with the matter. Spotify was 129% higher for the year as of Friday’s close. Alaska Air Group — The Seattle-based carrier slid 12% after agreeing to acquire Hawaiian Airlines for $1.9 billion. Alaska Air, which would pay $18 a share, would take on $900 million in debt as part of the deal. Hawaiian Holdings, Hawaiian Air’s parent, soared 182%. Alaska Air is also coming out of the S & P 500 index. Lululemon Athletica — Shares slipped 2.1% after Wells Fargo downgraded the athleisure company to equal weight from overweight. The bank said Lululemon’s positive catalysts have already played out, and forecasts more muted growth in 2024. Carvana — Shares jumped more than 5% after JPMorgan upgraded Carvana to neutral from underweight. The Wall Street firm said the online car retailer has bolstered productivity and made progress cutting costs. — CNBC’s Michelle Fox, Hakyung Kim, Pia Singh and Samantha Subin contributed reporting
YICHANG, CHINA – OCTOBER 29, 2023 – Customers experience Mi 14 series phones at a Xiaomi store in Yichang, Hubei province, China, Oct 29, 2023. (Photo by Costfoto/NurPhoto via Getty Images)
Nurphoto | Nurphoto | Getty Images
BEIJING — Chinese smartphone and consumer electronics company Xiaomi claimed record sales across platforms during the Singles Day shopping festival.
From Oct. 23 to the end of day on Nov. 11, Xiaomi said it sold more than 22.4 billion yuan ($3.11 billion) worth of products on platforms such as Alibaba’s Tmall and Taobao, JD.com, Pinduoduo and Douyin.
Xiaomi shares were up more than 1% in Hong Kong trade Monday morning. Locally traded shares of Alibaba and JD.com also traded about 1% higher.
For a second-straight year, the two online shopping giants declined to share total figures for the Singles Day shopping festival.
JD only said transaction and order volume reached record highs. Alibaba said that gross merchandise value, order numbers and participating merchants grew from a year ago. GMV measures sales over time.
Lululemon, a relatively new brand to the China market, saw transaction volume on JD increase 260% during the shopping festival from a year ago, the Chinese retailer said.
Alibaba did not share much detail on sales by product or brand for the entire shopping festival period.
Xiaomi claimed its newly released Xiaomi 14 smartphone was the top-seller on Alibaba’s Tmall from Nov. 4 to 11. The company also claimed first place in different categories of Chinese brands’ smartphone sales across other online shopping platforms.
“Much better-than-expected Mi14 sales creates earnings accretion and potential valuation re-rating ahead,” HSBC analysts wrote in a Nov. 6 report.
“We raise our smartphone shipment forecasts for Xiaomi by 7% in 2023e to c150m units and by 6% in 2024e to 160m units,” the analysts said.
Over the past decade, Singles Day has expanded from a one-day shopping festival into a multi-week period of shopping promotions across different online platforms in China.
In 2022, during the Covid-19 pandemic, Alibaba had said its Singles Day sales were “in line” with the prior year, which had recorded the equivalent of $84.54 billion GMV at the time.
Uncertainty about future income has weighed on retail sales in China over the last few years.
Ahead of this year’s shopping festival, a survey by Bain and Company found that 77% of consumers in China did not plan to increase spending.
Livestreaming and short videos on platforms such as Alibaba’s Taobao and ByteDance’s Douyin remained a growing sales channel.
GMV from livestreaming rose by 19% during the shopping festival this year, according to estimates from data company Syntun and Morningstar senior equity analyst Chelsey Tam.
Tmall accounted for the bulk of sales, or 60%, in a category that Syntun called “comprehensive e-commerce platforms,” Tam said in a note.
JD accounted for 28%, while Pinduoduo had a 7% share, the report said.
Kuaishou, a short video and livestreaming app, said orders grew by nearly 50% during the Singles Day shopping period.
More details on Singles Day results and Chinese consumer trends could come out during corporate earnings calls later this week. JD.com is due to report quarterly results Wednesday evening, while Alibaba is set to release earnings Thursday evening Beijing time.
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Jen Van Santvoord rides her Peloton exercise bike at her home in San Anselmo, California.
Ezra Shaw | Getty Images
Peloton shares spiked Wednesday after the company announced a five-year partnership to develop digital fitness content for Lululemon.
As part of the agreement, Lululemon will become Peloton’s primary athletic apparel provider.
Peloton’s stock jumped more than 15% in extended trading. Shares of Lululemon — which has a roughly $48 billion market cap compared to Peloton’s $1.7 billion — were flat in after-hours trading.
Lululemon said it will stop selling the Studio Mirror, which allows users to stream workout classes, by the end of the year. It will still offer service and support for existing Mirror equipment.
The news comes a day after Peloton announced co-founder and Chief Product Officer Tom Cortese is leaving the company. Peloton has shifted its strategy to focus more on subscriptions and less on its pricey exercise equipment.
This is breaking news. Please check back for updates.
What the heck really did happen on Friday, when the Dow jumped 700 points on a strong jobs reading ? Why such a viscerally positive reaction to an employment number that was hotter than expected? Was it because wages didn’t spike? Was it all that perfect — a Goldilocks report? Here’s my take on Friday’s rally. Going into the debt ceiling crisis, there was a belief that House Speaker Kevin McCarthy couldn’t control his own Republican party. Senate Majority Leader Charles Schumer wasn’t much better off with the Democrats. Both had lost control of their parties to the extremists. That meant the United States would default on its debt. It seemed pretty logical. I truly believe the extremists never believed a default would mean more than a few weeks of setbacks and more brinkmanship. Who can blame them? President Joe Biden lamely floated that he could invoke the 14th Amendment to avoid this and any future debt limit fights; the amendment includes a clause that some legal scholars say overrides the statutory borrowing limit set by Congress. No matter what, it was pretty clear that chaos was our destiny. But when McCarthy and Biden agreed to temporarily suspend the debt ceiling and cap some federal spending in order to prevent a default, we got a deal that was even less contentious than the 2011 bargain . (The coming together brought to mind the legendary coalition of President Ronald Reagan and House Speaker Tip O’Neil in the 1980s, memorialized in Chris Matthews’ “Tip and the Gipper: When Politics Worked.”) It was the compromise debt limit deal — not the employment number — that caused the market to rally. Sure, the jobs report showed wage inflation was cooling, which is good news in the Federal Reserve’s fight against inflation. But the job creation in May and the revisions were insanely strong. What matters most is that Fed Chair Jerome Powell, who is far more powerful than the independents on the Fed’s board who have such a hard time keeping their mouths shut, is reasonable. He seems to understand that it’s time to wait a bit on any more rate hikes. Not because he thinks things are cooler, but because he actually doesn’t even know. We have a young workforce coming into the market akin to when I got out of school in 1977 — nary a job to be had anywhere. This is potentially a monumental moment. The new debt limit legislation sets the date for resuming federal student loan repayments, which have been on hold since March 2020. We have the end of Supplemental Nutrition Assistance Program (SNAP) benefits and other pandemic breaks. Why not wait two months to see if unemployment naturally goes up and wages come down? To sum things up: We came into Friday shocked that there was a shocker of a deal and a not-red-hot employment number (at least one that didn’t send rates higher). This is what triggered the long-awaited buying of stocks outside of the Magnificent Seven that have led the market all year: Microsoft (MSFT), Amazon (AMZN), Alphabet (GOOGL), Tesla (TSLA), Meta Platforms (META), Apple (AAPL), and Nvidia , which briefly joined the $1 trillion valuation club. We each have our own way of monitoring these things. I used Club name Caterpillar (CAT) as my judge. On Thursday afternoon, CEO Jim Umpleby went into the lion’s den of Sanford Bernstein and told a tale about de-cyclization. Shares of the heavy equipment maker had a tiny snap back. One day later and armed with the budget deal and the employment number, CAT shot up seventeen points — an unheard-of short squeeze. This took the stock back to when it reported a good number that was converted into a bad number by bearish analysts still unwilling to admit that the company had changed its bi-polar ways. Of course, the bears would say that it only went up because of one more silly stimulus by China, this time to adjust rents. I say Caterpillar went up because it was overly shorted, like so much of the market, including retail, health care, financials, other industrials including the commodities (the oils!). We even saw the imperfect chipmakers and heavily challenged enterprise software stocks come alive. The shorts were correct to press their bets if there was no debt deal and we got an employment number that was a steamer. But they were wrong on both counts. This plus a rare wave of new money coming in and massive buybacks by companies capable of plundering after their reports, caused the broadening that had been bemoaned as non-existent as recently as the day before. You could argue it was a short squeeze of monumental proportions. A short squeeze happens when short sellers having to buy stocks to cover their short positions, pushing prices higher. But every time there has been a broadening since FANG, it’s always been called a short squeeze. That’s just how things work, although it’s never been acknowledged by anybody. Which brings us up to date for Monday. We have a blackout of the Fed speakers. We have no real macroeconomic data. We have no landmines of earnings. And no Fed meeting until mid-June. A true interregnum. We are going to have to take more things off the table if we get a rally into an overbought setting. Yes, we have some real stinkers — Disney (DIS), Foot Locker (FL), Emerson Electric (EMR), Estee Lauder (EL) — and we can battle them. But the important thing is that we have so many winners that we have to ring the register on some stocks if all goes our way. Of course I obsess on the losers. I didn’t think that Fabrizio Freda at Estee Lauder and Mary Dillon at Foot Locker could both blow it that badly. I had reason to dislike the Emerson team, but it still gave me more than I can handle. I have no idea how Disney’s stock could be this weak in a long-on-money-short-on-time moment. I am furious at myself for not seeing around any of these corners. But I am not going to throw good money after bad and I see no good on these names — yet. This leaves us with the big question: Which winners to trim? As long as we are not subsidizing losers, we aren’t breaking protocol. But we have two tasks. One is to come up with a new name that hasn’t moved that we actually like. And two is to trim into strength as we get overbought. I want both resolved by our next Club meeting on June 14. That’s what I am working on right now. Do we need so much Salesforce (CRM), even as it reported a good quarter all things considering? Do we even need Advanced Micro Devices (AMD) when it has nothing to rival Nvidia? I just don’t know. I want the market to tell me what to do. I think it will. Where does this leave us? In a sanguine week that will allow us to see if the short squeeze continues. If it does and continues to broaden, we can both peel some winners. See which caterpillars can develop into, well, Caterpillars. Maybe add Take-Two (TTWO), which gave us a two-year outlook, possibly aided by a new Grand Theft Auto game and better Nvidia cards. Just one of many ideas. But one Jeff Marks and I are trying to get our arms around. Some who read might ask: “Shouldn’t there be more of a thesis behind a bullish move?” I say no, no more than you needed in 2011, when the debt ceiling deal led to a fantastic rally because Armageddon was avoided. We cannot sit back and relax. But what we can do is accept that it is a better moment than we thought not that long ago. There are cracks. The Dollar General (DG) call was a compendium of weakness for the lower middle class and the Macy’s (M) call was a confusion of negativity. But who is to say that these companies just don’t have the “it” of Five Below (FIVE) or Lululemon (LULU). We are close enough to the infrastructure money wave to handle another rate hike if we need it. But Powell recognizes the futility of another rate hike right now because it lowers mortgage rates, making his job even harder. What we can do is watch and wait as battlegrounds get resolved — like CAT did on Friday. We can anticipate better things from a Johnson & Johnson (JNJ) — especially with a 3M (MMM) deal — and from GE Healthcare (GEHC). We can lick our Estee and Foot Locker wounds. And we can be glad that we got through the debt deal and wax in the wave of new money that will at last be coming in. No, we can’t be complacent. Too many needs for the shorts to save themselves. They have been run over in so many places that they have to make a comeback somewhere. Their number didn’t get so strong before the debt ceiling deal that they can’t all cover at once. Nevertheless, we have enough money to put to work if we want to in a new name that hasn’t moved and has a special situation thesis. But I do not want to be so relieved as to think there is no woods, just that we are out of it for now. Personally, the last few weeks have been hard ones, ameliorated by members who have made money with the club. Some mistakenly believe that we missed this entirely rally. It galls me because I gave up being a hedge fund manager years ago and I know the truth: This may be the best we’ve ever been, and this time it is for you, not the entitled class. I thank you all for letting us have the floor to help and not be tools of the traders who have infiltrated our ranks. So let’s take and make some gains and be ready for the next storm after the calm, wherever it might be coming from. Rest up. We have gotten past the systemic chaos into business as usual, where we can glow in a world where stock picking matters. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
US President Joe Biden, accompanied by Speaker of the House Kevin McCarthy, Republican of California, arrives for the annual Friends of Ireland luncheon on St. Patrick’s Day at the US Capitol in Washington, DC, on March 17, 2023.
Saul Loeb | AFP | Getty Images
What the heck really did happen on Friday, when the Dow jumped 700 points on a strong jobs reading? Why such a viscerally positive reaction to an employment number that was hotter than expected? Was it because wages didn’t spike? Was it all that perfect — a Goldilocks report?
Here’s my take on Friday’s rally. Going into the debt ceiling crisis, there was a belief that House Speaker Kevin McCarthy couldn’t control his own Republican party. Senate Majority Leader Charles Schumer wasn’t much better off with the Democrats. Both had lost control of their parties to the extremists. That meant the United States would default on its debt. It seemed pretty logical.
I truly believe the extremists never believed a default would mean more than a few weeks of setbacks and more brinkmanship. Who can blame them? President Joe Biden lamely floated that he could invoke the 14th Amendment to avoid this and any future debt limit fights; the amendment includes a clause that some legal scholars say overrides the statutory borrowing limit set by Congress.
No matter what, it was pretty clear that chaos was our destiny. But when McCarthy and Biden agreed to temporarily suspend the debt ceiling and cap some federal spending in order to prevent a default, we got a deal that was even less contentious than the 2011 bargain. (The coming together brought to mind the legendary coalition of President Ronald Reagan and House Speaker Tip O’Neil in the 1980s, memorialized in Chris Matthews’ “Tip and the Gipper: When Politics Worked.”)
Lululemon’s plant-based nylon shirt launches on its website on Tuesday.
Photo courtesy Lululemon
Lululemon has started to sell shirts that are made partly with nylon created from plant-based sources, instead of raw materials that come from the petrochemical industry, according to an announcement on Tuesday.
The shirts are the result of a 2021 partnership born from Lululemon’s equity investment in biotechnology company Geno.
The short-sleeved shirts are made from at least 50% biologically sourced nylon, at least 40% recycled polyester and 3% elastane (itself made with 30% plant-based content). The shirts cost the same as the conventionally sourced version: $78 for the men’s version, and $68 for the women’s.
As part of a goal to make 100% of its products with sustainable materials by 2030, Lululemon has partnerships with other companies that make materials in novel and sustainable ways. For example, in February 2022, Lululemon launched two products — a meditation and yoga mat bag and the Lululemon barrel duffel bag — made out of the mycelium-based leather from Mylo.
Conventionally, nylon is mostly made from ingredients sourced from fossil fuels like coal, natural gas or crude oil.
The petrochemicals used to make nylon are adipic acid and hexamethylene diamine, and the climate impact of making adipic acid is particularly damaging, Stephen Wallace, a professor of biotechnology at the University of Edinburgh, told CNBC.
Conventional adipic acid manufacturing processes releases nitrous oxide, a greenhouse gas that is as much as 200 times more potent than carbon dioxide, Wallace told CNBC. “It’s been estimated that 8 to 10 percent of all human-associated nitrous oxide emissions come from this single industrial process” to make adipic acid, Wallace told CNBC.
To make the nylon precursor used in the Lululemon shirts, Geno uses biological organisms instead of chemicals from fossil fuels.
“As with all of the products that are produced with Geno technologies, we utilize biotechnology to convert plant-based sugars into the products we target,” Christophe Schilling, the CEO and founder of Geno, told CNBC.
Here is a look at Geno’s laboratory where it does its fermentation development in 2-liter reactors before moving to larger systems.
Photo courtesy Geno
“Plants take up CO2 from the air, and with sunlight providing energy, convert that into sugars, which can be collected and then fed into a Geno process.” That biomanufacturing process uses fermentation to create the same nylon precursor ingredient, Schilling said.
A preliminary life cycle analysis suggests that the bio-nylon will offer at least a 50% reduction in carbon emissions, said Sasha Calder, the head of Impact at Geno.
Remaking supply chains that have depended on fossil fuel-based ingredients is generally a hot topic right now, according to Christopher Reddy, an environmental chemist and a senior scientist at the Woods Hole Oceanographic Institution who studies how plastics break down in the environment.
Many of the synthetic products used in modern, everyday life, including nylon, are made from the leftovers at an oil refinery after a product is made.
The Lululemon shirt made in partnership with Geno, a biotechnology company, is made by in part nylon made from plant based sources.
Photo courtesy Lululemon
“Most of the plastics are made up of carbon and some small other elements,” Reddy told CNBC in a phone conversation on Friday. “So the big push right now is: Can we use another source of carbon — like from plants or kelp or food waste — and can we use that as the starting material and maybe still keep making nylon?”
(Reddy was speaking about plastics supply chains more broadly, as the Lululemon-Geno product announcement was not public yet.)
“Because nylon, like it or not, has a lot of good value,” Reddy told CNBC. “There’s lots of reasons why plastics are bad to the environment, but at the end of the day, plastics, nylons are part of our everyday life.”
There’s already a long history of making plastics from petrochemicals — nylon itself was invented in the 1930s — and so reimagining those infrastructures takes both time and money, Reddy said.
An effective replacement product has to work well and be cost-effective, too. “Look at those first-generation replacement straws — they didn’t work, and everybody’s annoyed,” Reddy told CNBC. “So, when you go and make these changes for a cleaner, better environment, you better make sure they work.”
Geno is acutely aware of these challenges.
“Across our portfolio, we review each technology before it goes to market to ensure that the carbon profile offers significant sustainability benefits, while also being cost-competitive and of similar or better performance as the incumbent source it’s replacing,” Geno’s Schilling told CNBC.
People walk past a store of the sporting goods retailer Nike Inc at a shopping complex in Beijing, China March 25, 2021.
Florence Lo | Reuters
Investors seem to be caught amid the chaos caused by the recent banking crisis, persistent macro headwinds and a potential recession. Looking at stocks with appealing long-term potential could help in these times.
Here are five stocks chosen by Wall Street’s top analysts, according to TipRanks, a platform that ranks analysts based on their past performance.
At the recently held GTC event, chip giant Nvidia (NVDA) discussed its partnerships with leading businesses to advance new artificial intelligence (AI), simulation, and collaboration capabilities across various industries.
Based on the event, Mizuho analyst Vijay Rakesh inferred that demand for Nvidia’s AI solutions strengthened in the past month, driven by the continued momentum for OpenAI’s ChatGPT and large language models (LLMs) processing. Rakesh highlighted Nvidia’s two new products – L4 tensor core GPU and H100 NVL, which are “focused on improving throughput and power as well as expanding inference.”
Rakesh expects Nvidia’s DGX Cloud AI supercomputing service to drive additional sales. He also mentioned a “key win” for Nvidia in the auto space, with leading new energy vehicle company BYD expanding the use of the Nvidia Drive Orin platform to a wider range of vehicles. This, along with collaborations with other EV makers, represents a $14 billion automotive design win pipeline for Nvidia.
Calling Nvidia his top pick, Rakesh reiterated a buy rating and raised his price target to $290 from $230. He sees Nvidia as a “leader in fast-emerging generative AI training and inference as well as dominating gaming and broader AI/accelerated compute, despite near-term investor concerns over consumer and data center slowdown into 2023E.”
Rakesh holds the 94th position among more than 8,000 analysts followed on TipRanks. His ratings have been profitable 58% of the time, with each rating delivering an average return of 17.3%. (See Nvidia Stock Chart on TipRanks)
From semiconductors, we jump to athletic apparel and footwear maker Nike (NKE). The company recently reported better-than-expected results for its fiscal third quarter (ended Feb. 28). However, Nike’s gross margin contracted significantly due to higher markdowns, which were made to liquidate elevated inventory levels. The margin was also affected by increased input costs and a rise in freight expenses.
Baird analyst Jonathan Komp, who ranks 290th out of more than 8,300 analysts followed on TipRanks, noted that, while Nike’s inventory was up 16% year over year in the quarter third quarter, it declined about 5% sequentially. He highlighted that the company is now targeting “steeper” liquidation in the fiscal fourth quarter.
Komp also noted management’s commentary about the recovery in greater China. The analyst sees strong margin expansion in the next fiscal year helped by an expected recovery from the “transitory impacts” on gross margin and expansion of the direct-to-consumer mix.
Komp reiterated a buy rating on Nike and increased his price target to $138 from $130. “NKE remains attractive given positive brand momentum and competitive positioning, high operating margin (low earnings sensitivity), and reasonable valuation (NTM P/E premium vs. S&P +82% compared to +71% five-year average),” the analyst wrote.
Komp has a success rate of 54%, and each of his ratings has returned 14.1% on average. (See Nike Insider Trading Activity on TipRanks)
Another athletic play on our list is Lululemon (LULU).This week, the company impressed investors with upbeat results for the fourth quarter of fiscal 2022 (ended January 29, 2023) and solid guidance. However, the quarter’s margins were impacted by markdowns.
Nonetheless, management expects inventory growth to continue to moderate in the first quarter of fiscal 2023 and to deliver robust gross margin expansion fueled by lower airfreight. (See Lululemon Hedge Fund Trading Activity on TipRanks)
Following the print, Guggenheim analyst Robert Drbul increased his price target for Lululemon stock to $440 from $400 and reiterated a buy rating, saying the company remains his “favorite growth story in 2023.” The analyst thinks demand for Lululemon’s merchandise remains solid, noting that concerns about competitive pressures from emerging athletic brands seem “overestimated.”
The analyst expects Lululemon to benefit from China reopening. He anticipates the significant growth potential in the region to help the company achieve its target to quadruple international revenues by 2026. He also highlighted limited seasonality in Lululemon’s offerings, “virtually no wholesale exposure,” and a strong e-commerce business.
“We also see ample runway for growth in men’s, digital, and international, while LULU continues to deliver strong growth in its “core” (women’s, stores, and North America),” said Drbul. The analyst ranks 439th among more than 8,000 analysts followed on TipRanks. Additionally, 61% of his ratings have been profitable, with an average return of 7.4%.
Casino operator Wynn Resorts (WYNN) has “healthily outperformed” the gaming sector and broader market so far in 2023, noted Deutsche Bank analyst Carlo Santarelli. The analyst remains bullish on the stock and raised his price target to $134 from $128, as he continues to see a “meaningful upside.”
The drivers behind Santarelli’s bullish view include an “inexpensive” valuation, continued sequential increase in Macao visitation and stronger-than-anticipated Macao margins due to expense reductions and a favorable gaming floor revenue mix. (See Wynn Blogger Opinions & Sentiment on TipRanks)
Santarelli is also optimistic about the prospects of the company’s UAE project — an integrated resort that will be located on the man-made Al Marjan Island in Ras Al Khaimah, UAE. The analyst expects the company to provide more details about this project in the coming months, driving investors’ attention to the new growth opportunity.
Santarelli raised his estimates for Wynn, citing “Macau QTD trends, continued strength in Las Vegas, and steady performance at Encore Boston Harbor.” Santarelli holds the 27th position among more than 8,000 analysts on TipRanks. He has a success rate of 64%, with each of his ratings generating an average return of 20.6%.
Restaurant and entertainment chain Dave & Buster’s (PLAY) delivered strong fiscal 2022 fourth-quarter (ended Jan. 29) results, driven by robust comparable walk-in sales growth and the continued recovery in the special events business.
Management stated that quarter-to-date comparable store sales for the fiscal 2023 first quarter were in the flat to very low-single-digit negative range. Jefferies analyst Andy Barish feels that this trend reflects “some noise” due to the post-Omicron demand surge seen in the prior-year quarter and a spring break shift.
Nonetheless, Barish noted that the underlying momentum experienced in January has continued and sales trends are higher compared to the pre-pandemic period. The analyst expects strength over the near term, as “consumer appetite for experiences” looks solid, driven by modest pricing compared to the industry average, promotional offers and other factors.
Barish reiterated a buy rating on Dave & Buster’s with a price target of $60, concluding, “PLAY remains among best positioned to drive upside and accel growth the next few years, even in a recession.”
Barish is ranked No. 465 among more than 8,000 analysts followed on TipRanks. His ratings have been profitable 58% of the time, with each rating delivering an average return of 9%. (See PLAY Financial Statements on TipRanks)
Lululemon Athletica Inc. LULU, +1.02%
revised its fourth-quarter guidance on Monday by raising its revenue guidance. tweaking its per-share earnings guidance to a tighter range and lowering margin guidance. The yoga wear company now expects revenue to range from $2.660 billion to $2.700 billion, up from prior guidance of $2.605 billion to $2.655 billion. It expects EPS of $4.22 to $4.27 compared with prior guidance of $4.20 to $4.30. The company expects gross margins to decline 90 basis points to 110 basis points, compared with prior guidance of a rise of 10 basis points to 20 basis points. “However, the company now expects that it will further leverage selling, general and administrative expenses 100-120 basis points compared to its previous expectation of 30-50 basis points of leverage,” the company said in a statement released ahead of an investor conference. Lululemon stock slid 12% premarket, and is down 7% in the last 12 months through Friday’s close, while the S&P 500 SPX, +2.28%
has fallen 17%. Under Armour stock UA, +3.70%
and Nike Inc. NKE, +3.24%
fell in sympathy, The former was down 2.6% premarket and Nike was down 1.5%.
Lululemon Athletica Inc. stock fell more than 10% in the extended session Thursday after the athleisure-wear maker reported mixed quarterly results and saw inventories soar.
Lululemon LULU, +0.59%
earned $735 million, or $2 a share, in the third quarter, compared with $541 million, or $1.44 a share, in the same quarter last year. Adjusted for one-time items, Lululemon LULU, +0.59%
earned $1.62 a share.
Revenue rose 28% to $1.9 billion, the company said. Same-store sales were up 22%.
Analysts polled by FactSet expected Lululemon to earn $1.97 a share on revenue of $1.81 billion. Same-store sales were expected to rise 19.1%.
“We are proud to have delivered another quarter of strong sales and earnings growth, despite an operating environment that remains dynamic,” Chief Financial Officer Meghan Frank said in a statement.
The retailer said inventories ended the quarter up 85% to $1.7 billion, compared with $900 million at the end of the third quarter of 2021.
“The company believes its inventories are well-positioned to support its expected revenue growth in the fourth quarter,” it said.
Lululemon guided for fourth-quarter revenue between $2.605 billion and $2.655 billion, and adjusted EPS between $4.20 and $4.30.
For the full year, the company expects revenue between $7.944 billion and $7.994 billion, and adjusted EPS between $9.87 and $9.97. FactSet consensus calls for EPS of $9.92 on sales of $7.935 billion.
Analysts were relatively upbeat about Lululemon heading into the results, saying the company was able to keep its prices higher, even as other retailers cut their prices.
Retailers have slashed prices on clothing in an effort to clear shelves and entice customers, following an inflation-induced shift in consumer spending to necessities. But Raymond James analysts, in a note this week, said they found that Lululemon “didn’t have broad-based promotions” in the third quarter, or the fourth quarter so far.
They said that the company leaned on its “We Made Too Much” section to iron out its inventories. And they noted a jump in downloads for Lululemon’s app. However, they said business in China “could be a curveball” amid that nation’s COVID-19 restrictions.
Piper Sandler analysts, in October, also said that Lululemon remained more insulated than other clothing retailers from big markdowns.
Lululemon stock is down 4% so far this year. The S&P 500 Index SPX, +0.75%,
by comparison, has slid 17% over that time.
Claudia Assis in San Francisco contributed to this report.
People line up to enter a store during Black Friday shopping at Fashion Outlets of Chicago in Rosemont of Greater Chicago Area, Illinois, the United States, on Nov. 26, 2021.
Joel Lerner | Xinhua News Agency | Getty Images
Lululemon on Thursday reported sales and profit that topped estimates, but the company offered softer guidance than expected for the fourth quarter.
Shares of the company fell more than 8% after hours.
Here’s what the company reported for the three-month period compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:
Earnings per share: $2, adjusted, vs. $1.97 expected
Revenue: $1.86 billion vs. $1.81 billion expected
The athletic apparel retailer is a popular mall destination that’s known for its trendy — and pricey — workout apparel and loungewear. Even as inflation hits Americans’ wallets and people dress up again, investors have bet that the brand can keep drawing shoppers and getting them to spend.
Lululemon’s third-quarter net income rose to $255.5 million, or $2 per share, from $187.8 million, or $1.44 per share a year ago.
The company’s guidance for the holiday quarter came in weaker than analysts had projected. Lululemon sees fourth quarter per-share earnings of $4.20 to $4.30, compared to estimates of $4.30. It expects revenue of between $2.605 billion to $2.655 billion, versus a projected $2.649 billion.
The retailer raised its forecast in September, saying it expects 2022 revenue of between $7.865 billion and $7.940 billion, up from the range of $7.610 billion to $7.710 billion it stated last quarter. It also raised its adjusted earnings per share outlook to a range of $9.75 to $9.90, from last quarter’s guidance of $9.35 to $9.50 adjusted.
Shares of the company are down more than 4% so far this year. The stock has outperformed the S&P 500 Index, which is down about 17% during the same period. It closed Thursday at $374.51, bringing the market cap to $47.75 billion.
