🛍️ Shopify Reveals Economic Secrets

MARKET UPDATE

Good Morning Investor! On Wednesday, Danish drugmaker Novo Nordisk ($NVO) best known for its popular GLP-1 drugs Ozempic and Wegovy saw its shares plummet over 8% after reporting a miss on earnings expectations, along with fueling concerns among investors that Novo would face continued competition from rival GLP-1 manufacturer Eli Lilly as well as emerging foes Roche, Viking Therapeutics and Zealand Pharma.

Meanwhile, film and streaming giant Disney ($DIS) saw its share price fall after earnings (as usual), dropping over 2% on Disney+ finally reaching profitablity, but warning investors of a slowdown in theme park demand.

TODAY’S BIG HEADLINES

Fortinet Proves to be a Cybersecurity Outlier

Shopify is Becoming a Behemoth in Ecommerce

New York City’s Controversial “Mansion Tax”

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CYBERSECURITY

Fortinet Proves to be a Cybersecurity Outlier 👨‍💻

The Cyber Cinderella Story: While shares of cybersecurity companies have been taking a beating harder than a hacker's keyboard during the second quarter - especially given the Crowdstrike ($CRWD) software update debacle. Fortinet ($FTNT) has been playing a different game. Its share price had dropped 24% from its March high, joining the pity party like a reluctant guest. However, unlike its peers who continued to wallow in digital despair, Fortinet managed to flip the script with its stock rocketing up 22% after reporting earnings that were hotter than a overclocked CPU in pre-market hours on Wednesday morning.

The Holy Trinity of Tech Titillation: Fortinet reported results that could make even the hardiest of tech geeks blush redder than a server room on fire. The Sunnyvale, California-based firm pulled off a triple beat - revenue, earnings, and billings - a feat so rare in tech earnings, it's like finding a bug-free software release. Let's dissect this shiny report:

• Revenue came in at $1.43 billion, up 11% year-over-year, and above what analysts were modeling — that being $1.40 billion. Billings also came in strong despite being flatter than a pancake year-over year. It amounted to $1.54 billion, ahead of the $1.52 billion that analysts were looking for.

• Fortinet posted net income of $379.8 million, or $0.49 per share, up from $266.3 million, or $0.33 per share, in the year-earlier period, representing a whopping 48% growth rate on a per share basis. On an adjusted basis, EPS came in at $0.57 per share, while analysts had been expecting just $0.41 per share.

Forecasting Sunny Skies in Cyberspace: Much like many companies that have had a positive share price reaction to earnings this season (we're looking at you, tech darlings), Fortinet increased its annual guidance with more enthusiasm than a cat discovering catnip. The firm now expects revenue for the year in the range of $5.8-$5.9 billion, up from the earlier range of $5.75-$5.85 billion, as companies increase spending on safety from cyberattacks. Earnings saw a big revision higher, with management now forecasting adjusted EPS in the range of $2-$2.04 per share vs the $1.73-$1.79 per share previously forecasted. It seems Fortinet is determined to fortify not just networks, but investor portfolios as well!

SOFTWARE & CONSUMER DISCRETIONARIES

Shopify is Becoming a Behemoth in Ecommerce🛍️

Shopify's Saucy Surge: While companies in the travel, restaurant, retail, and luxury industries are experiencing a consumer spending crunch tighter than a shopaholic's wallet on payday, Shopify is defying the odds with more gusto than a cat in a room full of cucumbers. Much like Uber ($UBER) and DoorDash ($DASH), Shopify ($SHOP) vastly exceeded expectations in the second quarter, making investors' blushes turn redder than a sunburnt lobster. The company's share price rocketed to the moon — soaring 24% higher on Wednesday.

Maple Syrup for Your E-commerce: The Canadian-based e-commerce platform reported numbers sweeter than a stack of pancakes dripping with their national treasure, beating on the top and bottom-line, while the firm’s guidance implies a significantly better profit outlook. Let's unbox this report like it's Christmas morning:

• Revenue growth of 21% year-over-year to $2.05 billion — 25% after adjusting for the sale of its logistics businesses, which beat the analyst consensus estimate of $2.01 billion.

• The e-commerce platform reported an adjusted EPS of $0.26, which beat analyst consensus estimate of $0.20. That's spectacular considering the company reported a loss in the prior year. From red to black faster than a goth's wardrobe change!

• Gross merchandise volume (GMV) increased 22% year-over-year to $67.2 billion, resulting in an expanded gross margin which now sits at 51.1% compared to 49.3% a year ago. This juicy growth was driven primarily by the lack of the dilutive impact of the logistics businesses and changes in pricing plans.

Growing like Jack’s Beanstalk: A real positive from this quarter was the company's sensational free cash flow growth, with the firm reporting $333 million, up a shopping bag-dropping 243% year-over-year from $97 million. In order to counter slowing revenue growth, the CEO has committed to substantial marketing investments, even if it affects profit margins. Looks like they're not afraid to spend money to make money - a strategy as old as commerce itself.

• Third quarter guidance includes revenue growth of around 22.5% at the midpoint of the guided range, gross margins up 0.5 percentage points from the quarter just ended, and operating costs at 41-42% of revenue.

LEGISLATION & TAXES

New York City’s Controversial “Mansion Tax”💰

New York's Mansion Mania: Common sense might suggest that a one-bedroom apartment in the heart of the Big Apple is just standard living quarters, but to New York's tax collectors, it's a "mansion" if the price tag exceeds $1 million. Talk about champagne taste on a beer budget! The latest comedy of errors coming out of New York City's policy circus is that the Metropolitan Transportation Authority (MTA) plans to raise $2 billion via real estate bonds, backed by the so-called mansion tax, to pay for much-needed infrastructure upgrades. Because nothing says "fixing the subway" like taxing glorified closets, right?

MTA's Financial Steeplechase: The MTA is still struggling to leap over the financial stability hurdle with all the grace of a drunken gazelle. Their woes stem largely from real estate troubles and fare-dodgers - a dynamic duo of fiscal frustration. To clarify, the MTA typically gets funding from mortgage recording taxes and taxes on commercial real estate sales. However, this well has run drier than a prehistoric waterbed in an environment of elevated interest rates, where home sales have fallen off a cliff steeper than a Midtown skyscraper - down 17% year-over-year in June, if we're being specific.

• This financial faceplant has been compounded by the dramatic collapse of commercial real estate valuations, along with roughly half of bus riders and 14% of subway riders pulling a vanishing act when it comes to paying their fares. Apparently, "free rides" has taken on a whole new meaning in the city that never sleeps (or pays, apparently).

MTA's Cosmic Cash Crisis: Last week, the MTA also revealed it's staring down potential deficits that would make even a Wall Street banker blush: $428 million in 2027 and $469 million in 2028. They're projecting $790 million less in income from real estate taxes and $811 million less from fares between this year and 2027. At this rate, they might need to start accepting monopoly money.

• The agency plans to cut expenses by $400 million this year and $500 million in 2025 (probably by replacing all the trains with very fast joggers), and intends to hike fares and tolls by 4% in both 2025 and 2027, because nothing says "public transportation" like making it less affordable for the public.

• The $2 billion expected to be raised from mansion tax bonds will go toward the Capital Program by borrowing against revenue from an additional levy on the transfer of residential properties worth $2 million or more. The first tier of the mansion tax kicks in at $1 million, proving once and for all that in New York, even broom closets can be mansions if you believe hard enough.

MORE NEWS

Additional market-moving events🌎

X Goes on the Offensive: X is suing a group of advertisers, claiming they violated antitrust laws by organizing a "massive boycott" of the social media company. (CNBC)

Freight Shipping Boom: No sign of U.S. recession in freight demand, CEO of shipping giant Maersk says. (CNBC)

Cement Industry: Cement maker Cemex (CX) said it would sell off its Dominican Republic operations to Guatemalan company Cementos Progreso for approximately $950 million. (Reuters)

Google Axes Chromecast: Google ($GOOG) announced it will discontinue its Chromecast line as it transitions to the new Google TV Streamer, which features a faster processor. (The Verge)

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Our selections performance👾

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Here’s how the stocks have performed since:

• Hims & Hers Health: $16.04 (📈+10.85%)

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