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Market Moves Yesterday

S&P 500 @ 5,240.03 ( ⬆️ 1.04%)

Nasdaq Composite @ 16,366.85 ( ⬆️ 1.03%)

Bitcoin @ $57,046.52 ( ⬆️ 2.01%)

Hey Scoopers,

Happy Wednesday! Are you ready to tackle the midweek hustle?

👉 Airbnb tanks post Q2 results

👉 Super Micro in a downward spiral on earnings miss

👉 China looms over consumer stocks

So, let’s go 🚀

Market Wrap 📉

Equities jumped on Tuesday, recovering some losses from the previous three trading sessions as investors took a breather from recession fears. All 11 sectors of the S&P 500 index were positive for the day, led by the rally in big tech stocks such as Nvidia and Meta Platforms.

A rebound in Japanese stocks helped investor sentiment. The Nikkei 225 posted its best day since October 2008, gaining over 10%, soon after the benchmark suffered its worst session since 1987, losing 12.4%.

Experts believe the unwinding of the yen trade will result in short-term volatility. While the sell-off is worrying, investors should note that the market has experienced a pullback of at least 5% in 94% of the years since 1928.

On average, stocks experience a pullback of over 5% more than three times a year and a correction of at least 10% once every year, even in positive years.

Meanwhile, earnings season continues in earnest, with Disney, CVS Health, and Shopify reporting quarterly results today.

Trending Stocks 🔥

Reddit - Shares of the social media company are down 1.6% in pre-market despite beating estimates in Q2. It also forecast sales between $290 million and $310 million in Q3, higher than estimates of $279 million.

Wynn Resorts - The resort and casino operator added 2.6% after it reported adjusted earnings of $1.12 per share and revenue of $1.73 billion, compared to estimates of $1.14 per share and $1.75 billion, respectively.

Lumen Technologies - The telecom company added 93% and is up almost 40% in pre-market after it secured $5 billion in new business driven by AI demand for connectivity.

Airbnb Disappoints Wall Street

Airbnb shares are down over 15% in pre-market after it missed consensus earnings amid slowing demand among U.S. customers. In Q2, Airbnb reported:

👉 Revenue of $2.75 billion vs. estimates of $2.74 billion

👉 Earnings per share of $0.86 vs. estimates of $0.92

Airbnb increased sales by 11% while net income fell by 15% to $650 million in the June quarter.

The vacation rental company guided Q3 sales between $3.67 billion and $3.73 billion as it expects the key “Nights and Experiences” category to moderate in the next two quarters.

Valued at $75 billion by market cap, Airbnb stock is down 20% in the last 12 months, trailing the broader markets.

Super Micro Computer Misses Estimates

Shares of server company Super Micro Computer are down 12% in pre-market after it announced fiscal Q4 earnings that missed analyst expectations. It also announced a 10-for-1 stock split and will begin trading on a split-adjusted basis on October 1.

In fiscal Q4, it reported:

👉 Revenue of $5.31 billion vs. estimates of $5.30 billion

👉 Earnings per share of $6.25 vs. estimates of $8.07

Super Micro’s gross margins narrowed to 11.2% from 17% in the last 12 months, and it reported a GAAP net income of $352.7 million or $5.51 per share, up from $193.5 million or $3.43 per share last year.

While the company is making less profit on each product, it forecasts fiscal Q1 of 2025 (ending in September) sales between $6 billion and $7 billion, much higher than estimates of $5.46 billion.

However, its midpoint earnings forecast of $7.48 per share was below estimates of $7.58 per share.

Super Micro competes with companies such as Dell and Hewlett Packard Enterprise and has delivered stellar returns to shareholders. The stock has more than tripled since the start of 2023 as it remains an essential server vendor to Nvidia, whose graphics cards are powering the AI boom.

China Drags Corporate Earnings Lower

An interesting theme is emerging in the ongoing earnings season. The Chinese economy, which is four times larger than the U.S. in terms of population, has attracted multinational corporations in the past three decades due to its strong economic growth. However, sluggish growth, rising competition, and tensions with the U.S. are now weighing on corporate earnings.

Here are some interesting figures that you should closely watch:

• Nationwide retail sales in China grew just 2% year over year in June

• Apple’s Greater China sales were down 6.5% in the June quarter

• General Mills, which owns Wanchai Ferry, warned of lower store traffic in China as net sales in the region fell by double digits in Q2

• Procter and Gamble said China sales for the June quarter fell by 9%

• Hotel operator Marriott International cut its revenue per available room outlook due to slower sales in China

• Coca-Cola noted subdued consumer confidence in China

• Starbucks reported that same-store sales in China fell by 14%

• Luckin Coffee reported a 20.9% drop in same-store sales in China

However, there were some bright spots as consumer brands such as Canada Goose, Nike, Skechers, and Adidas reported an uptick in sales.

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Headlines You Can't Miss!

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Chart of The Day

An easy way to identify winning stocks is to buy shares of companies with a widening base of free cash flow.

A company that is positioned to expand its cash flows consistently has the flexibility to reinvest in growth projects, target accretive acquisitions, and lower balance sheet debt.

Airbnb’s free cash flow has been around $4.3 billion in the last four quarters, which is higher than the year-ago period.

The ongoing pullback provides Airbnb investors with an opportunity to buy the dip and benefit from outsized gains when market sentiment improves.

Meme of the Day

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DISCLAIMER: None of this is financial advice. The newsletter is strictly educational and is not investment advice or a solicitation to buy or sell assets or make financial decisions. Please be careful and do your own research.