🦅 This Stock Can't Stop Soaring!

Good morning Investor! “Success in investing comes not from being right but from being wrong less often than everyone else.”

— Aswath Damodaran, The Little Book of Valuation

MARKET UPDATE

Shares of CVS Health plummeted 18% as the health company cut its profit forecasts due to increasing medical costs. The rest of the market rallied into the close after Fed chairman Jerome Powell said that the Fed’s next move is unlikely to be a rate hike.

TODAY’S BIG HEADLINES

• Wingstop is becoming a fast-food juggernaut

• Mastercard lagging behind its peers

• The return of Estee Lauder?

• Qualcomm hints at smartphone recovery

EARNINGS RESULTS

Wingstop is becoming a fast-food juggernaut🦅

Flying Wings: In the grand theatre of the stock market, where McDonald’s (MCD) and Starbucks (SBUX) played the tragic heroes earlier this week by reporting some lacklustre results, Wingstop (WING) emerged as the unexpected protagonist. It soared above the mundane, nestling itself comfortably in the winner’s circle alongside Chipotle (CMG), after its Q1 earnings results took a Red Bull and sprouted wings.

The Wingstop Scoop: Wingstop’s earnings were as spectacular as a chicken doing the moonwalk:

• Revenue clucked in at $145.8 million, up 34.13% YoY, pecking analyst expectations of $135.92 million.

• EPS of $0.98 per share, representing 88.46% growth YoY and exceeding analyst expectations of $0.76

• Wingstop achieved a significant 21.6% growth in total domestic store comparable sales, nearly double the expected 11.8%.

• Total locations also saw a sizable uptick of 2.9%, reaching 2,279 which also exceeded estimates. This eagle isn’t just soaring, it’s doing loop-de-loops!

The Oracle’s Crystal Ball: Management, in their infinite wisdom, increased guidance for the full fiscal year, forecasting low double-digit growth in domestic same-store sales. They also plan to add between 275 to 295 global net new location units. On the expenses side of things, they’re expecting SG&A costs of $111 million and stock-based compensation (SBC) to be $20 million. They also noted their ambition to scale Wingstop into a top 10 global restaurant brand. Ambitious? Yes. Delicious? Absolutely.

Wall Street Whispers: Shares of Wingstop soared into the clouds over 3% in pre-market trading, leaving the stock as a colossal winner over the past twelve months, up a staggering 93%! As the age-old adage goes, if it makes money, it makes clucks… I mean, sense.

EARNINGS RESULTS

Mastercard lagging behind its peers🏃‍♂️

The Disappointment: On Wednesday morning before the market opened, payments titan Mastercard (MA) reported quarterly earnings. The results left investors feeling as underwhelmed as a kid who asked for a Spider-man birthday cake and got a plain vanilla one instead. In a nutshell, the company reported lower revenue than expected, as well as a lower operating margin. It was like biting into a seemingly juicy apple, only to find it’s all core! A rather fitting analogy given tech giant Apple’s (AAPL) current predicament.

The Numbers: Mastercard reported revenue of $6.35 billion, which is up 10% YoY but fell short of the $6.43 billion mark. It’s like scoring 90 on a test when you were expecting 95 - good, but not quite there. On a brighter note, EPS came in at $3.31, flexing an 18% growth rate YoY and exceeding analyst expectations of $3.24 per share. One segment of the business, the Cross-border payments, saw volume growth of 18%. It’s looking stronger than Arnold Schwarzenegger in his prime! We also love to see that Mastercard continued returning capital to its shareholders through paying out $616 million in dividends and repurchasing $2 billion worth of its own shares outstanding. This explains the EPS growth of 18% being higher than the net income growth of 16%.

The Ugly: The real party pooper of the report was the suppressed operating margin of 56.8%, well below the forecasted 58.3%. Additionally, Gross Dollar Volume also missed the mark, reporting $2.29 trillion versus the $2.32 trillion expected. It’s like ordering a large pizza and getting a medium one - still good, but not quite what you had in mind. Guidance for Q2 is like a fortune cookie’s message - cryptic but hopeful. Revenue growth is expected in the high-single-digits, while for the full year, revenue will grow at the low end of low-double-digits. The payments industry is also gearing up in anticipation of Capital One’s acquisition of Discover Financial.

Wall Street Whispers: Shares of Mastercard traded down over 3% in pre-market trading. Given this slide, the stock is now only up a meager 3.5% year-to-date. But hey, as they say in the stock market, what goes down, must come up… or at least we hope so, right?

EARNINGS RESULTS

The return of Estee Lauder?💄

Rising From the Ashes: In the beauty pageant of the stock market, where Ulta Beauty (ULTA) and Estee Lauder (EL) had been more wallflowers than belles of the ball, Estee Lauder decided to ditch the wall and take center stage. With their quarterly earnings on Wednesday morning, they didn’t just knock it out of the park, they sent it into orbit! Beating on both the top and bottom line, while also raising profit forecasts for the year.

The Figures: Estee reported revenue of $3.94 billion, up 5% YoY and above expectations of $3.91 billion. Giving shareholders an entire rose garden rather than just a bouquet of roses. Net income of $330 million was a dramatic comeback from a loss of $33 million in the prior year, resulting in an EPS of $0.97, up 125% YoY and above expectations of $0.50 per share. These results were largely driven by double-digit growth in Europe and stronger sales in Asia travel retail. Estee has now beaten earnings expectations four quarters in a row. Talk about a winning streak!

Sweetened Forecasts: Management have increased their guidance for 2024, expecting earnings per share of between $2.14-$2.24 which is an increase from the previous range of $2.08-$2.23. On a more somber note, the company expects net sales to fall 1%-2% for the year. CEO Fabrizio Freda left us with this, “operating margin in the second half of fiscal 2024 to not only be stronger than the first half but also to expand from the year-ago period,“.

Wall Street Whispers: Shares of Estee Lauder initially rose in pre-market hours, like a phoenix rising from the ashes, only to capitulate when the market opened, dropping over 5%, leaving the stock down over 44% over the past twelve months.

EARNINGS RESULTS

Qualcomm hints at smartphone recovery📱

Chip Off the Old Block: Despite fellow chipmakers including Skyworks solutions (SKWS) and Super Micro Computer (SMCI) serving up underwhelming results like a bad batch of fries, Qualcomm (QCOM) has emerged as the unexpected hero. Not only did they beat expectations for both profits and sales, but they also provided forward guidance that was more upbeat than a cheerleader on game day.

Snapdragon Roars: The maker of the famed Snapdragon processor series reported the following:

• The chipmaker reported revenue of $9.39 billion, representing a YoY growth rate that, while only 1%, still managed to leap over analyst estimates of $9.35 billion for the quarter like an Olympic hurdler.

• EPS came in at $2.44, up 13% YoY and above expectations of $2.32. This figure also exceeded the high end of the company’s previous guidance, proving that Qualcomm isn’t just making chips, they’re making moves.

• Earnings before tax as a percentage of revenue also increased from 27% to 29%, showing that Qualcomm knows how to squeeze every last drop of profit from their revenue.

The Fine Print: Qualcomm’s revenue is split into three segments. Handsets, which make up the majority of their sales with $6.18 billion, up 1%, signaling that the smartphone market may be recovering. Meanwhile, their second-largest segment, IoT, reported revenue of $1.24 billion, down 11%. Lastly, Automotive, which reported $603 million with a staggering 35% growth YoY, despite the recent slump in the EV markets.

Misty Future: Qualcomm provided revenue guidance for the upcoming quarter of $8.8-$9.6 billion and earnings per share of $2.15-$2.35. Both of these were above what analysts were anticipating, proving that Qualcomm isn’t afraid to aim high.

Wall Street Whispers: Shares of Qualcomm rallied almost 3% in after-hours trading after a rather choppy end to a volatile day. The stock is now up almost 20% year-to-date, making it the Wall Street equivalent of a hot stock tip.

MORE NEWS

Additional market-moving events🌎

• Reversion to the Mean: Popular dating app Bumble (BMBL), have changed course on its "women message first" rule, introducing an "opening moves" feature which is aimed at boosting user engagement. Despite losing $1.9 million in 2023, its forecasting a return to profits with a $12 million profit in Q1 and user growth of 14%. (CNN)

• European Power: Europe’s ‘GRANOLAS’ overtake US ‘Magnificent Seven’ in performance. This group of 11 stocks includes LVMH, Novo Nordisk, ASML and L’Oreal among others. (Stoxx)

• Environmental Funding: Climate change-related insurance startup Arbol have raised $60 million in a private round of funding, as weather catastrophes worsen. (Bloomberg)

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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: 1,232.00 SEK (📉-6.13%)

• Hims & Hers Health: $13.10 (📉-9.54%)

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