Week in Review: 6/19/22
Recapping the year's WORST week in the markets.
It’s a bloodbath.
And as explained here, we’re likely not close to a bottom. If you’re feeling rough from seeing crypto take a tumble this week, remember that negative moves in the stock market almost always result Bitcoin’s drop as well.
Considering Bitcoin was created after the Great Recession, the cryptocurrency has never seen a recession. We don’t know how it’s going to behave — however, we have seen plenty of “Crypto Winters” in the past.
My plan? Continue to dollar cost averaging into the backbone of decentralized finance and blockchain adoption as a whole, Chainlink. More info here.
Do we think the stock market will go lower?
Yes. Why? Read this post:
Remember — we believe that at some point in the coming months we’re going to be presented with one of the best buying opportunities of our earning lives. Can we expect to perfectly identify the bottom? Heck no, but by tracking the potential improvements of the 15 reasons outlined above — we can try to get a gauge of how many negative factors remain in play.
Do yourself a favor a read this post, seriously. Having a clear plan and completely understanding your future (20+ years ahead) makes weeks like this more bearable.
Week in Review — Too Long, Didn’t Read:
Oracle finally strikes a deal with TikTok, margin concerns continue to impact retailers and grocery stores like Kroger, the key contributors to crypto’s collapse, layoffs, Revlon files for bankruptcy, retailer inventories are a big issue, buying a house now vs. six months ago, President Biden vs. Big Oil, producer prices are worse than consumer prices, and retail sales finally pull back.
Key Earnings Announcements:
The three earnings calls of interest this week were Oracle, Adobe, and Kroger.
Revenue: $11.8 billion, an increase of +5% YoY
Operating Income: $4.5 billion, an increase of +38% YoY
Profits: $3.2 billion, an increase of +27% YoY
Earnings Release Callout
“This Q4, we also experienced a major increase in demand in our infrastructure cloud business—which grew 39% in constant currency. We believe that this revenue growth spike indicates that our infrastructure business has now entered a hyper-growth phase. Couple a high growth rate in our cloud infrastructure business with the newly acquired Cerner applications business—and Oracle finds itself in position to deliver stellar revenue growth over the next several quarters."
Wow! +39% growth in infrastructure cloud — what a stellar callout by the Oracle team. For added color, the Cerner application business their CEO mentioned is a healthcare information system — more here.
This is a really interesting time for Oracle — the company already has a very diversified revenue stream (infrastructure cloud, ERP cloud, NetSuite cloud, etc.) and is now claiming their acquisition of Cerner is going to help catalyze +20% in revenue growth in the coming year. This is particularly interesting to me because, as you all know, we’re headed toward a recession. It’s one thing to provide enterprises with a product, it’s another thing to provide recession-proof enterprises (healthcare companies) with a product.
Oracle’s CTO claimed that healthcare is “clearly going to be our largest business.” We’ve seen countless C-suite execs temper expectations by used hushed tones — but Oracle’s CEO instead is saying their company has entered a hyper-growth phase.
I’m really interested in learning more about this company and digging deeper. Expect a deep-dive stock pitch of this company in the coming months.
Revenue: $4.4 billion, an increase of +15% YoY
Operating Income: $1.5 billion, an increase of +9% YoY
Profits: $1.2 billion, an increase of +6% YoY
Earnings Release Callout
“Adobe achieved record Q2 revenue with strong demand across Creative Cloud, Document Cloud and Experience Cloud. We delivered another quarter of strong financial results, with greater than $2 billion in operating cash flows demonstrating the strength of Adobe’s growing revenue streams and financial discipline.”
I think it’s important to take a step back and see just how far a company has come — despite multiple recessions. Adobe remains a stable, long-term compounder that has an incredible ability to generate free cash flow for their shareholders.
Adobe has been able to increase their FCF margin by +25% since the turn of the century — with it now hovering around 40%. As quoted above, Adobe has absolute dominance in supporting the digital economy, which will continue to grow over the coming years.
Revenue: $44.6 billion, an increase of +8% YoY
Operating Income: $1.5 billion, an increase of +87% YoY
Profits: $664.0 million, an increase of +374% YoY
Earnings Release Callout
“Our relentless focus on executing our strategy and sustained food at home trends led to a strong first quarter. The Kroger team is effectively navigating a dynamic retail environment. Our diverse and resilient business model gives us confidence to raise our full-year guidance. We now expect identical sales without fuel to be in the range of 2.5% to 3.5%, adjusted FIFO operating profit of $4.3 billion to $4.4 billion, and adjusted net earnings per diluted share to be in the range of $3.85 to $3.95. We remain confident in our ability to deliver sustainable earnings growth and total shareholder returns of 8-11% over time.”