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Monday, February 28, 2022
Corporate America is launching two of its own birds into Putin’s backyard for his invasion into Ukraine. Not airplanes, but one finger from each hand.
Here are the first round of actions from a host of multinational companies that began to trickle in over the weekend:
Transport giants FedEx and UPS have suspended shipments into Russia.
BP is divesting its 19.75% stake in Russian controlled oil company Rosneft. The move will come with a hefty $25 billion charge. BP has done business in Russia for three decades.
Intel and AMD have reportedly suspended chip shipments into Russia. A spokesperson for AMD was unable to comment to Yahoo Finance on the report. A spokesperson for Intel didn’t immediately return Yahoo Finance’s request for comment.
Expect more penalizing announcements from global companies in the week ahead, which no doubt will have a major impact on the Russian economy and way of life for its citizens.
But while this response and economic fallout unfolds, the market remains in a confused state (as seen in last week’s wild swings) as Wall Street offers up conflicting takes on what could happen next.
On the one hand, there are strategists such as BTIG’s Jonathan Krinsky who are unconvinced the lows are in despite last week’s late rally:
“The SPX undercut its January lows, something we have been looking for. However, it didn’t quite get down to 4,000, nor have we seen a 90% downside volume day this year. In the last 25 years the only time the SPX had a -10% decline without at least one 90% downside volume day was in the fall of 1999. Therefore, while it’s possible we have seen ‘the’ low for the market, it’s more probable that we have only seen ‘a’ low. As far as areas to buy, we find that groups exhibiting relative strength (Metals & Mining, Agriculture, Shippers, Select Healthcare) tend to be more fruitful going forward than trying to bottom fish in downtrends.”
Then there is the more hopeful bunch, including Goldman Sachs strategist David Kostin:
“S&P 500 this week troughed 12% below its peak before rallying 4%. History shows buying the market after a 10% decline generates a 15% average one-year return if the economy does not enter a recession. Our 4,900 year-end [S&P 500] index forecast assumes 8% EPS growth, $100 oil, higher rates, and no U.S. recession.”
As they say, a market is made up of differing opinions. Choose your opinion wisely at this juncture in the markets.
And as always, Happy trading!
Odds and ends
Corporate America speaks out on Ukraine-Russia situation: If CEOs have learned anything from the last two-plus years of major events such as Black Lives Matter and the COVID-19 pandemic, it’s that the world wants to hear from them. Fortune has a nice roundup of execs who have spoken out on Russia’s invasion of Ukraine. Below are a few others I came across. Etsy CEO Josh Silverman said this about the situation on Yahoo Finance Live:
“It’s obviously an incredibly sad moment for all of us with really far-reaching effects. And we absolutely have sellers in Ukraine and in Russia. In fact, about 2% of sales on Etsy come from Ukrainian sellers, another 1% from Russian sellers. They do a great job delivering artisanal products. We just received a set of bowls from Ukraine and they are beautiful. We want to do everything we can to support our sellers in that region who are just trying to make a living and provide for their family like anyone else. Of course, we will respect sanctions from the U.S. and Europe. and do everything we need to do to comply with the law.”
Golf boom lasts: Channeling my inner Peter Lynch here (buy what you know … though I no longer make stock recommendations as that was my role in a prior life and I don’t own stocks), one stock to watch is Callaway Golf. First, I rolled up this past weekend to a new TopGolf that opened nearby me. I have never seen one of these in person (see pic below). It was damn impressive. Imagine if a Dave & Buster’s and the coolest driving range you ever saw got married and had a baby. That would be TopGolf, which Callaway bought for $2 billion in 2020 (here’s my recent chat with Callaway Golf CEO Chip Brewer). I walk up to the front desk and ask for a stall (which would have set me back about $50 for an hour compared to $20 for my local driving range). The customer service person looked at me like I was insane, and then proceeded to say it’s a three-hour wait. Yep. Made sense though, the place was a madhouse. On the way home, I understood even more why TopGolf is likely to boost Callaway’s future earnings.
Then, I spent the weekend eyeing new golf clothes and irons. A lot of the top stuff (which is what I buy because to play your best you need confidence) was on back order. It also came with a heavy dose of sticker shock price wise (ugh inflation). Overall, this spring/summer is shaping up to be another boom period for the golf industry as the pandemic has brought in scores of new golfers and resurrected the careers of others who were nearing retirement (such as me … I got burnt out from golf after serving as a caddy for 11 years).
Callaway’s stock isn’t cheap per se — it trades at about 54 times forward earnings on a P/E basis. But the stock is off roughly 35% from its late May 2021 record highs, and that may be an opening for a long-term minded investor. The company is dominating in a lot of areas right now from club technology to apparel to making smart bets on next-gen experience venues such as TopGolf.
“New product and disruptive brand marketing will lead to [market] share gains and mid-to-high single digit organic top-line growth in core golf categories over the next 3-5 years,” said Jefferies analyst Randy Konik, who has a $60 price target on Callaway (estimates a 160% surge in value). it makes sense to this two-time club championship caddy (I carried the bag for the women’s club champion if you must know).
Drop me a line on Twitter @BrianSozzi if you have been to a TopGolf. Curious to hear your hot takes.
AARK: Cathie Wood’s Ark Innovation ETF (AARK) finally got some love at the end of last week, as it rallied 17% from Thursday’s intraday lows (it’s still down 50% in the past year). Interestingly, the move wasn’t led by top holding Tesla but rather Roku — shares exploded 23% last week in the wake of an earnings meltdown the week before (as Julie Hyman dissected on Yahoo Finance Live, Roku’s latest quarter and outlook “stunk”). But for those thinking the bottom is in for Wood’s flagship ETF, BTIG’s Jonathan Krinsky offers up a dose of reality. There have been six other rallies of at least 15% for ARRK in the past year, none of which produced a “durable” bottom correctly, notes Krinsky.
A gem of a chart: I noticed my former colleague Sam Ro just changed his Twitter profile pic to a snapshot of his latest appearance on Yahoo Finance Live. (You must follow him.) That got me to scrolling his Twitter feed, where I stumbled upon the below gem of a chart. The forward price-to-earnings multiple on the S&P 500 hasn’t been at these levels since the second quarter of 2020. Notice I didn’t say “cheapest” as the pullback in multiples likely reflects several factors. For one, stock prices are off their highs due to Russia-Ukraine fears and the threat of rising interest rates. And two, analyst estimates are under siege from inflationary concerns. Keep this in mind from FactSet: 62 S&P 500 companies have issued negative earnings guidance for the first quarter.
What to watch today
8:30 a.m. ET: Advanced Goods Trade Balance, January (-$99.3 billion expected, -$101.0 billion during prior month, downwardly revised to -$100.5 billion)
8:30 a.m. ET: Wholesale Inventories, month-over-month, January preliminary (1.2% expected, 2.2% during prior month)
8:30 a.m. ET: Retail Inventories, month-over-month, January (4.4% during prior month)
9:45 a.m. ET: MNI Chicago PMI, February (62.0 expected, 65.3 during prior month)
10:30 a.m. ET: Dallas Fed Manufacturing Activity, February (3.5 expected, 2.0 during prior month)
7:30 a.m. ET: Jones Lang LaSalle (JLL) is expected to report adjusted earnings of $6.84 per share on revenue of $2.67 billion
Nielsen (NLSN) is expected to report adjusted earnings of $0.33 per share on revenue of $898.13 million
Party City (PRTY) is expected to report adjusted earnings of $0.41 per share on revenue of $697.5 million
Lordstown Motor (RIDE) is expected to report an adjusted loss of $0.77 per share
Tegna (TGNA) is expected to report adjusted earnings of $0.55 per share on revenue of $772.57 million
Viatris (VTRS) is expected to report adjusted earnings of $0.83 per share on revenue of $4.34 billion
Workday (WDAY) is expected to report adjusted earnings of $0.72 per share on revenue of $1.35 billion
Ambarella (AMBA) is expected to report adjusted earnings of $0.42 per share on revenue of $90.19 million
Lucid Group (LCID) is expected to report an adjusted loss of $0.35 per share on revenue of $36.7 million
HP Inc. (HPQ) is expected to report adjusted earnings of $1.02 per share on revenue of $445.93 million
Zoom Video Communications (ZM) is expected to report adjusted earnings of $1.07 per share on revenue of $1.05 billion
GoodRx (GDRX) is expected to report adjusted earnings of $0.10 per share on revenue of $217.67 million
Vroom (VRM) is expected to report an adjusted loss of $0.76 per share on revenue of $902 million
Novavax (NVAX) is expected to report an adjusted loss of $4.33 per share on revenue of $129 million
Oneok (OKE) is expected to report adjusted earnings of $0.89 per share on revenue of $4.46 billion
President Biden has meetings at the White House to discuss the latest situation in Ukraine as he prepares for his first State of the Union address tomorrow.
The Supreme Court will hear arguments at 10:00 a.m. ET in the case of North American Coal Corporation v. Environmental Protection Agency and other linked cases that center around the EPA.’s authority to regulate greenhouse gas emissions for business.
European stocks tumble as oil soars and rouble crashes [Yahoo Finance UK]
Yahoo Finance Highlights