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The Week Ahead & A Look Back: June 10-14

As we enter the second week of June, several notable companies are set to report their quarterly earnings. Investors will be closely monitoring these reports for insights into consumer spending, enterprise technology adoption, entertainment trends, and the state of creative software.

Let's dive into what to watch for with Academy Sports + Outdoors (ASO), Oracle (ORCL), Dave & Buster's Entertainment (PLAY), and Adobe (ADBE).

The Week Ahead

Tuesday, June 11th

Academy Sports + Outdoors (ASO): As a leading sporting goods and outdoor recreation retailer, ASO's earnings will provide a glimpse into consumer spending on discretionary items.

Key metrics to watch:

  • Same-store sales growth: This will indicate whether ASO is maintaining its customer base amidst economic pressures.

  • E-commerce sales: With the ongoing shift to online shopping, growth here could offset any decline in physical store traffic.

  • Gross margins: This will show if ASO is managing inventory effectively or if discounting is impacting profitability.

  • Guidance: Comments on full-year outlook will reflect management's confidence in consumer resilience and outdoor/sports participation trends.

Oracle (ORCL): As a tech giant offering cloud services, databases, and enterprise software, Oracle's report will shed light on corporate tech spending.

Watch for:

  • Cloud services revenue: Growth in this segment, especially Oracle Cloud Infrastructure (OCI), is crucial as Oracle competes with AWS, Azure, and Google Cloud.

  • Database and license updates: These are Oracle's bread and butter; steady growth indicates customer retention.

  • Operating margins: Higher margins suggest efficient operations and successful cost management.

  • Autonomous database adoption: This AI-driven offering is a differentiator for Oracle; high adoption rates could signal a competitive edge.

Wednesday, June 12th

Dave & Buster's Entertainment (PLAY): As a restaurant and entertainment venue, PLAY's performance will indicate consumer willingness to spend on dining out and gaming.

Key points:

  • Same-store sales: This will show if patrons are returning to pre-pandemic levels of entertainment spending.

  • Food and beverage vs. amusement revenue: A balance suggests PLAY is successfully driving both dining and gaming.

  • EBITDA margins: Higher margins indicate effective cost control, especially labor costs.

  • New store openings and performance: Expansion plans and new store productivity will hint at PLAY's growth trajectory.

Thursday, June 13th

Adobe (ADBE): As a leader in creative, marketing, and document cloud software, Adobe's report will reflect demand for digital tools.

Focus on:

  • Creative Cloud revenue: Growth here, especially in key products like Photoshop and Premiere, indicates the health of the creative industry.

  • Digital Experience segment: This includes marketing tools; growth suggests businesses are investing in digital customer engagement.

  • Subscription revenue and ARR (Annual Recurring Revenue): These metrics show Adobe's success in retaining customers and upselling.

  • AI integration: Adobe has been integrating AI into its products; comments on adoption and impact will be telling.

A Look Back

  • Spotify Hits Play on Another Price Hike, Investors Love This Song

Spotify (SPOT) - ★★★★ - Ranked #37 in Q2 2024 Large Cap Equity Rankings

Spotify Technology (SPOT) announced another round of price increases for its premium subscription service on Monday, less than a year after hiking rates last July. Despite the potential for pushback from customers, investors responded favorably to the news, sending Spotify's stock up 5% in trading to close at $313.49.

The new pricing sees Spotify's individual premium plan jump $1 to $11.99 per month in the United States. This follows an increase last summer that took the monthly cost from $9.99 to $10.99. The latest price hike will go into effect for subscriber billing cycles starting next month.

In an email being sent to customers, Spotify explained that the higher prices will allow the company to "continue to invest in and innovate on product features that provide the very best experience for listeners everywhere." The streaming giant has been aggressively expanding into podcasts and other new content offerings beyond its core music service.

Investors seemed to approve of the move to extract more revenue from Spotify's premium subscriber base of over 180 million users. Shares closed Monday's session just shy of Spotify's 52-week high of $319.30, capping a remarkable run that has seen the stock surge 66% so far in 2024 and more than double over the past year.

The pricing power demonstrated by raising subscription fees twice in roughly a year underscores Spotify's dominant position in the streaming audio market. With competitors like Apple Music also increasing prices recently, consumers have limited lower-cost alternatives for premium ad-free streaming.

While the company risks some customer churn from the higher rates, Spotify is likely betting that its massive catalog of music, podcasts, and other content will keep the vast majority of premium users on board even at $11.99 per month.

  • Instacart's $500M Buyback Sparks 9% Rally, Options Traders Reap 230% Gains

Maplebear [Instacart] (CART) - ★★ - Ranked #75 in our Q2 2024 SMID Equity Rankings

In a significant boost to investor confidence, shares of Maplebear Inc., the parent company of grocery delivery giant Instacart, soared 9% on Thursday following the announcement of a new share repurchase program. The company's board approved an additional $500 million for share buybacks on June 2, as revealed in a regulatory filing.

The move comes after Instacart successfully completed two previous rounds of authorized buybacks totaling $1 billion, equivalent to approximately 34 million shares outstanding. The average price of these buybacks was $29.41 per share, which is notably lower than Thursday's midday trading price of $33.68, representing a 15% increase.

Share repurchase programs are often interpreted as a signal of management's confidence in a company's growth prospects and stock performance.

The company's robust financial health is evident from its balance sheet, which showed approximately $1.7 billion in cash and equivalents at the end of the latest quarter. This strong cash position easily covers the newly authorized $500 million repurchase program.

In March, our Q2 2024 SMID Equity Rankings assigned Instacart a ★★ ranking with a Negative short term outlook and a twelve-month price target of $44.00. Despite this cautious outlook, the recent share price jump has been a boon for bullish options traders. July 19 2024, $35 strike price call options saw a staggering 230% increase in one day, closing at $1.22 ($122) per contract, up from the previous day's close of $0.36 ($36).

As Instacart continues to dominate the online grocery delivery space, investors will be closely watching how this latest share repurchase program impacts the company's stock performance and long-term growth strategies.

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The information provided in this report is for general informational purposes only and does not constitute investment advice or a recommendation to buy or sell any securities. The opinions expressed in the report are our own and are subject to change without notice. We may have a position in the securities mentioned in the report, and we may buy or sell such securities without notice. Any investment decisions made based on the information in this report are solely the responsibility of the recipient. We do not accept any liability for any direct, indirect, or consequential loss arising from any use of this report or its contents.


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