In today’s briefing:
- Reminder: Earnings Quality Short Candidates: Moderna, Sonos, Knowles, Juniper Tech
- Starbucks Opens its 6,000th Store in China
- The FTX Collapse: A Market Analysis
- Qualcomm Inc: Collaboration With Renault & Other Developments
- ASRT: Asserting a Low Valuation
- Estee Lauder: The Balmain Partnership & Other Drivers
- eBay Inc: Acquisition of TCGplayer & Other Drivers
- Comcast Inc: New Broadband Initiative & Other Drivers
- Yum Brands: Major Drivers
Reminder: Earnings Quality Short Candidates: Moderna, Sonos, Knowles, Juniper Tech
- This model seeks short-sale candidates among companies that use aggressive accounting and/or exhibit deteriorating quality of earnings.
- They are typically highly idiosyncratic shorts and require thoughtful analyses of upcoming catalysts. When the company’s issues become well-known, there is often multiple compression as well as a rerating.
- These shorts can have high or low betas, valuations based on artificial earnings and exhibit good short responses to subsequently disappointing earnings. This week: Moderna, Sonos, Knowles, Juniper Tech
Starbucks Opens its 6,000th Store in China
- While the world moves on from the events of 2020 and the pandemic fades through the rear-view mirror, a cluster of fallout still clings to Starbucks, the world’s largest coffee retailer.
- The operational stress of the pandemic, as well as concerns over in-store safety1 , catalysed demand for unionisation in the company’s most integral market, the United States.
- Since the first store won its union vote in Buffalo, New York, in December 2021, over 330 stores in 38 states have filed for an election, yielding more than 250 successfully unionised stores.
The FTX Collapse: A Market Analysis
- First came the Terra collapse. Then the bankruptcies of the centralized lenders.
- And now the (almost certain) insolvency of FTX, one of the largest cryptocurrency exchanges in the world.
- FTX’s collapse has shaken the industry to its core, in part because it is a fundamentally different type of business than a crypto lender like Celsius.
Qualcomm Inc: Collaboration With Renault & Other Developments
- Qualcomm delivered a mixed set of results as its revenues were higher than the market expectations as a result of a solid chipset business performance and good execution of its diversification and expansion plan.
- The management is working towards transforming Qualcomm from a wireless communications provider for the mobile industry to a provider of linked processors for the intelligent edge.
- In this report, we have carried out a fundamental analysis of the historical financial statements of the company.
ASRT: Asserting a Low Valuation
- ASRT reported third quarter revenue that were down from the second quarter due to ASRT deciding to remove Indocin from the Government’s voluntary 340b pricing program
- The addition of Sympazan gives ASRT a new asset in growing revenue and adjusted EBITDA in 2023
- ASRT reported third quarter revenue of $34.2 million compared to our estimate of $31.6 million. We were expecting ASRT’s commentary related to Indocin would yield lower revenue than it did.
Estee Lauder: The Balmain Partnership & Other Drivers
- Estee Lauder has shown some reversal in the past few days despite delivering a mixed set of results.
- Besides, 13 brands had organic growth, growing by high single digits to account for more than half of their organic sales.
- Overall, we remain neutral on Estee Lauder and maintain our ‘Hold’ rating with a revised target price.
eBay Inc: Acquisition of TCGplayer & Other Drivers
- eBay had a solid third quarter and delivered an all-around beat.
- The company also completed the tech-led re-imagination in the quarter and met its short-term commitments.
- Additionally, eBay is attempting to improve the standard and volume of the supply of components and accessories.
Comcast Inc: New Broadband Initiative & Other Drivers
- Comcast delivered an all-around beat in its recent results and its performance in its Cable Communications business in the third quarter remained impressive.
- However, it operates in a turbulent business environment in terms of increased competition from the new entrants as well as depressed move activity.
- Comcast has recently unveiled an ambitious broadband initiative promising to pass 50 million businesses and homes with the combination of Wi-Fi and 10G-enabled broadband by 2025.
Yum Brands: Major Drivers
- Yum Brands’ stock has been on a solid upward trajectory off-late after the company reported an impressive top-line growth this quarter.
- Even though it missed out on earnings, the company achieved a 10% system sales increase, supported by 6% unit growth and 5% same-store sales growth which did drive positive sentiment in the markets.
- KFC did an excellent job of accelerating transaction growth through its omnichannel strategy, which helped to improve comps sequentially from the previous quarter.
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