☕ Caffeine is the New Oil

Good morning Investor! "For those of us climbing to the top of the food chain, there can be no mercy. There is but one rule: hunt or be hunted."

— Frank Underwood, House of Cards

MARKET UPDATE

Shares of Nintendo (NTDOY) rallied over 2.4% on news that the Japanese conglomerate will be announcing its switch successor in this calendar year.

TODAY’S BIG HEADLINES

• Caffeine is the New Oil

• Ferrari’s Pricing Power is Unmatched

• Disney’s Streaming Services Gets Closer to Profits

• Crocs Kicks Expectations to The Curb

CONSUMER DISCRETIONARIES

Caffeine is the New Oil☕

Fizzing Rivalry: Celsius (CELH), the rising star in the energy drink cosmos, seems to be guzzling down the market share of its main adversary, Monster Beverage (MNST), like a thirsty marathon runner. Despite a revenue hiccup that fell short of estimates by over 10%, Celsius’s earnings report, released before Tuesday’s market bell, was a veritable fireworks display. Revenue growth, however, has cooled from a sizzling 95% last year to a more lukewarm 37% this quarter on a YoY basis.

Juicing the Details: Let’s peel back the layers of this earnings report like an overzealous fruit vendor:

• Revenue rolled in at $355.7 million, up 37% YoY, but shy of the analyst estimates of $389.86 million.

• Net income of $77.8 million, soaring above the clouds of expectations set at $45.39 million.

• Diluted EPS of $0.27, up a whopping 108% YoY and above the expectations of $0.19. Profits are rising faster than a soufflé in a French patisserie!

• Celsius now commands an 11.5% market share of the energy drink sector in North America, a jump from 9.6% a year ago. It’s worth noting that sugar-free sales account for about half of all energy drink sales, a sweet fact indeed.

A Tale of Two Markets: The expansion of margins was the primary horsepower behind the growth in profitability, with the gross margin revving up by 740 basis points from 43.8% to 51.2%. International sales rose 43% to $16.2 million, while North American sales increased 37% to $339.5 million, making up the lion’s share of the company’s sales. This paints a stark contrast to Monster Beverages (MNST), who, like a globe-trotting backpacker, derive a significant portion of sales from regions outside of North America and have thus been wrestling with the currency exchange gremlins.

Global Conquest: Celsius also reported that sales began in Canada during Q1 of 2024, with demand outstripping even their own sky-high expectations. The management team also unveiled their ambition to expand sales into regions such as Australia, France, Ireland, New Zealand, and the UK in 2024. Yet, despite these stellar results, shares of Celsius actually traded down almost 4% in pre-market trading, leaving a bitter aftertaste in investors’ mouths, much like a can of flat cola.

LUXURY SECTOR

Ferrari’s Pricing Power is Unmatched🏎️

The Prancing Horse: In the timeless words of Enzo Ferrari, “Ferrari will always deliver one less car than the market demands.” With this company mantra in mind, luxury sports car maker Ferrari (RACE) reported their quarterly earnings before Tuesday’s market bell, beating on both the top and bottom line, but underwhelming shipments led to a 4.5% decline in share price.

Start Your Engines: The Italian automaker reported results that didn’t exactly set investors’ hearts racing, but at the same time, didn’t cause any alarm bells to ring. Here’s the pit stop rundown:

• Revenue came in at €1.58 billion, up 10.5% YoY against expectations of €1.55 billion.

• Adjusted EBITDA came in at €605 million, up 13% YoY and in-line with analyst expectations.

• EPS of €1.95, up 20.37% YoY and against expectations of €1.85.

• These robust results were driven by pricing and more shipments in the higher-margin Americas region.

• The big takeaway? China is impacting everyone with shipments falling by seven units to 3,560, dragged by a 20% drop in the China, Hong Kong and Taiwan region.

The Aftermath: Management confirmed their full-year guidance, failing to set off any investor fireworks. Bernstein noted, “The fall in the stock price in the immediate aftermath of the earnings probably reflects some disappointment that Ferrari did not raise FY24 guidance, but historically Ferrari never does this at the 1Q stage.” Despite this lack of investor adrenaline, UBS, Bernstein, and RBC all either upgraded or maintained the stock’s rating as a “BUY”.

The Fast Lane Ahead: One upcoming catalyst for the stock will be the arrival of seven-time Formula One world champion, Lewis Hamilton, who will be joining the Ferrari racing team for the 2025 season. Given the recent uptick in form for the team, it’s likely we could see Lewis going wheel-to-wheel with Max Verstappen for the world driver’s championship once again, which will likely achieve viewership levels never seen before, with Ferrari at the center stage. This, in our view, will ultimately drive an increase in demand, particularly in Europe and America, for their cars.

STREAMING & MEDIA

Disney’s Streaming Services Gets Closer to Profits📺

To Infinity and Beyond: Disney (DIS) the mastermind behind countless children’s fantasy films, reported quarterly earnings before Tuesday’s opening bell. Disney+, Hulu, and ESPN+ all reported significantly lower losses than in the year prior. However, shares of the stock tumbled further into the depths of irrelevance, much like the plot to Toy Story 3.

You’ve Got a Friend in Me: The streaming titan posted earnings results which beat on both the top and bottom line. The results were as follows:

• Revenue of $22.1 billion, up 1.37% YoY, and above expectations of $20.53 billion. A pace that would make a sloth yawn.

• Diluted EPS came in at $1.21, up 30.1% YoY and exceeding analyst estimates of $1.02.

• Operating income for Disney+ and Hulu came in at a loss of $47 million, a dramatic improvement over the prior year’s loss of $587 million.

• ESPN+ was the big mover this quarter, reporting a loss of $18 million, a giant leap for mankind given that the loss in the prior year was $659 million.

• Disney’s Experiences division which includes theme parks and merchandise, grew revenue by 10% to $8.4 billion, and operating profit grew 12% to almost $2.3 billion.

Unwrapping the Magic: Disney+ managed to acquire an additional 6.3 million “core” subscribers, with the total tally now sitting at 117.6 million. In addition to the growth, the service’s average revenue per user (ARPU) increased by $0.44 quarter-over-quarter. Although it wasn’t mentioned, the growth in users could have something to do with the company launching an ad-supported tier for $7.99 per month back at the end of 2022. It’s like finding an extra present under the Christmas tree!

CONSUMER DISCRETIONARIES

Crocs Kicks Expectations to The Curb👞

Clog Conquerors: Crocs (CROX), the creator of those viral clogs and jibbits that have taken the world by storm, reported their quarterly earnings before Tuesday’s market bell, sparking a share price rally of almost 10%. The instigator? A quadruple beat. It’s like a scene straight out of an Avengers movie, we know.

Hole-Punched Profits: The footwear phenom reported some numbers that would make even a mathematician’s head spin. Let’s lace up and sprint through the highlights:

• Revenue came in at $938.6 million, kicking expectations of $884.7 million to the curb and growing 6.2% YoY. This has led to an annualized growth rate over the past five years of 29.5%.

  • Crocs revenue was $743.8 million, stomping on expectations of $697.1 million, an 18.3% increase.

  • HEYDUDE revenue was $194.8 million, outpacing expectations of $184.8 million. The only downside is that this represents a decline of 17.2%.

• EPS came in at $3.02, up 15.7% YoY and exceeding estimates of $2.25. Management provided EPS guidance for Q2 of $3.47 at the midpoint of the range, with full year guidance being raised to $12.25-$12.73.

• Gross Margin expanded from 53.9% to 55.6%.

Rubber Riches: Crocs have certainly proven themselves to be more than just a fleeting trend, demonstrating resilience and strong brand power. The share price has rewarded its investors handsomely, achieving a five-year return of 494%.

MORE NEWS

Additional market-moving events🌎

• Robinhood Are Next: The SEC have issued Robinhood with a Wells notice, indicating that Its crypto business faces a lawsuit. (Yahoo)

• The Cost of Immortality: High-end fitness chain Equinox will be launching a $40,000 membership which will help you live longer. (CNBC)

• Take Our Advice: Aldi’s US arm have urged its suppliers to cut costs and go green. (Reuters)

• AI-Integrations: Ebay and Etsy have both began rolling out AI-powered personalization and recommendation features and tools to help sellers auto-generate captions. (TechCrunch)

REFERRAL PROGRAM

Get a Birthday Shoutout!🎁

You can get Free Stuff for referring friends & family to our newsletter 👇️ 

{{rp_personalized_text}}

Or copy & paste this link: {{rp_refer_url}}

Note: you’ll need to tell us your name & birthday by clicking here.

EARNINGS

This Week’s Earnings Calendar📅

OUR PICKS

Our selections performance👾

On Monday the 11th of March, we released our “two superperformers” stock picks which we believe will provide significant outperformance compared to the S&P 500.

Here’s how the two stocks have performed since then:

• Evolution AB: 1,226.00 SEK (📉-6.58%)

• Hims & Hers Health: $12.68 (📉-12.37%)

Make sure that you’re subscribed so that you don’t miss our next stock picking research report!