In today’s briefing:
- Softbank Group – ARM Suing a Key Customer Is Not the Summer News We Expected
- Mitsubishi Heavy Industries (7011) | Green Transition Bonds
- Electronic Arts Inc: Market Position & Evolution & Other Drivers
- Home Depot: B2B Platform Enhancements For Pros & Other Drivers
- Declining Business Short Candidates: Corsair Gaming, Sinclair Broadcasting, Overstock, Ziff Davis
- Microchip Technology: Excellent Base of Intangibles & Other Drivers
- Lowe’s Companies: Major Drivers
Softbank Group – ARM Suing a Key Customer Is Not the Summer News We Expected
- ARM is suing Qualcomm for breach of license and trademark infringement for its acquisition of (fellow ARM licensee) Nuvia last year
- This is surprising on a number of levels as having Qualcomm inside the tent is better for sales, market share and its neutral-player reputation
- ARM’s valuation benefits from perceptions of an expanding addressable market so this is not a good look. Meanwhile, Softbank’s discount to NAV is widening again as tech valuations fall
Mitsubishi Heavy Industries (7011) | Green Transition Bonds
- MHI has a roadmap for becoming carbon neutral by 2040. The transition to a decarbonized society will be funded by green/transition bonds
- MHI has issued its first green/transition bond amounting to 10 billion yen
- We remain bullish on MHI and believe it is a key beneficiary of decarbonization trends in Japan
Electronic Arts Inc: Market Position & Evolution & Other Drivers
- Electronic Arts’ solid results were driven by its extensive IP portfolio and expanding network of players that are actively involved in its live services.
- These distinctive structural advantages helped the company deliver an all-around beat despite the fact that it navigates the macro environment’s volatility.
- Their business’s durability and longevity are still fueled by their collection of sports and owned IP properties.
Home Depot: B2B Platform Enhancements For Pros & Other Drivers
- Home Depot had a surprisingly good quarter unlike its rival, Lowe’s and delivered and all-around beat.
- All of the merchandizing departments of Home Depot posted positive comps; hardware, paint, millwork, plumbing, and building materials were all above average.
- Home Depot launched new capabilities on its B2B website to enhance the interconnected quoting and shopping business for its Pros.
Declining Business Short Candidates: Corsair Gaming, Sinclair Broadcasting, Overstock, Ziff Davis
- Sales declines, margin compression, cuts in SG&A and cuts in guidance and estimates feature in our Declining Businesses model.
- Declining business shorts tend to be lower beta, have longer time horizons, and tend to produce steadier (although slower) short returns.
- Today we are flagging Corsair Gaming, Sinclair Broadcasting, Overstock, Ziff Davis.
Microchip Technology: Excellent Base of Intangibles & Other Drivers
- Microchip’s results for the quarter were solid and the company’s revenue increased by 6.5% sequentially and 25.1% annually to $1.96 billion surpassing Wall Street expectations.
- The management has signed into multiyear long-term supply agreements with several significant clients, effectively granting them reserved capacity in exchange for assured purchases, often lasting five years.
- We also have a dedicated analysis of the company’s Environmental, Social, and Governance (ESG) risk scores in order to evaluate the sustainability risk.
Lowe’s Companies: Major Drivers
- Lowe’s had a disappointing quarter and saw a decline in its total revenues.
- Pro sales remained strong for the quarter.
- The trends of underlying home improvements during the quarter remained strong in the quarter, but the sales of DIY have been lower.
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