Happy Sunday.
I hope everyone had a restful and restorative weekend.
I wanted to remind yâall to give Mind the Business: Small Business Success Stories a listen! Itâs an iHeartMedia podcast I co-host â we interview successful solopreneurs and small business owners about the ups and the downs of building cash flowing businesses from scratch.
To explore the entire catalog, click here!
Another quick reminder for you â never leave âboringâ businesses our of your portfolios. Caleb Franzen recently shared this tweet illustrating Visa and Mastercardâs incredible 10-year track record.
If itâs Visa, Mastercard, Costco or even Home Depot â owning equity in companies whose products / services are the backbone of the American economy is always a great idea.
Portfolio Updates:
No major updates to share this week â Iâve deployed all of Marchâs capital strictly into my cryptocurrency portfolio as we experienced quite the correction. For those of you who arenât exactly accustomed to the volatile price action of cryptocurrency â we usually experience violent rallies to the upside, and healthy corrections to the downside.
Seeing Bitcoinâs price correct by -15% should be thought of as an opportunity, in my opinion. If youâre like me and have a keen sense as to where things should be headed over the next 18-months, youâre happily buying the dips as well.
Above is an interesting chart I found posted by TechDev on X.com â illustrating the correlation between Bitcoinâs price action 3-months after the monthly volatility indicator (RVI) hit 75.
As you can see above, the three previous times this purple line crossed above 75, Bitcoinâs price skyrocketed over the next 3-months or so â before peaking at 1.618 Fibonacci. If this was to happen, weâd see Bitcoinâs price run incredibly hard over the summer.
In my opinion, this would just be âtoo easy.â I believe weâll see continued price appreciation with Bitcoin, but certainly not a 2X from here in only 3-months. Again, Iâm targeting a late-2025 âmania peakâ of $140-200K. Iâll keep you all posted.
Week in Review â Too Long, Didnât Read:
Lululemon has officially saturated the US, Nike canât seem to grow their business, Micron is finally seeing some AI-specific revenue, recapping Nvidiaâs star-studded event, Reddit finally goes public, ESPNâs issues are back under the spotlight, Boeing has had a sketchy 2024, Experts now expect three rate cuts, and existing home sales pick up the pace.
Key Earnings Announcements:
Lululemon has officially saturated the US, Nike canât seem to grow their business, and Micron is finally seeing some AI-specific revenue.
Lululemon (LULU)
Key Metrics
Revenue: $3.2 billion, an increase of +15% YoY
Operating Income: $913.8 million, an increase of +190% YoY
Profits: $669.4 million, an increase of +463% YoY
Earnings Release Callout
âWe are pleased with the strong finish to our 2023 fiscal year and continue to be ahead of our Power of Three Ă2 strategy. During the fourth quarter, we saw continued momentum across our channels, geographies, and merchandise categories, driven by our teams around the world.
As we step into 2024, we are focused on the significant opportunities ahead for lululemon as we navigate the dynamic retail environment and deliver for guests through innovative new products and brand activations.
My Takeaway
The company is guiding to +10% growth in 2024, materially below their +15% long-term target. This slow down in growth is attributed to the brandâs saturating in the United States. Theyâre expecting to add 35-40 net new stores around the world in 2024 â which the company is expecting to see an uptick in traffic in given their new marketing efforts.
At the mid-point of their guidance, weâre looking at an -8% deceleration is year-over-year growth â which caused their stock price to sell-off dramatically. In my opinion, this all makes sense. The US consumer remains âstrongâ in the eyes of the headline news (retail sales continue to trend higher), but this âstrengthâ is entirely supported by debt (as credit card debt in the US hits all-time-highs).
With that being said, LULU has a long track record of beating expectations (15 quarters consecutively). Because of this, I have reason to believe their management team is âsand baggingâ their guidance lower than hoped for, giving them optionality if 2024 turns out to be another year of strength for the US economy.
Iâll continue to dollar cost average into LULU. Nothing about this quarter alarmed me enough to want to exit my position. They remain a household name with continued strength in their menâs line, while simultaneously introducing new products + color options for all customers.
Nike (NKE)
Key Metrics
Revenue: $12.4 billion, flat YoY
Operating Income: $1.4 billion, compared to $1.5 billion last year
Profits: $1.2 billion, compared to $1.3 billion last year
Earnings Release Callout
âOur teams are focused on what matters most to return to strong growth. We are taking action to build a faster, more efficient NIKE and maximize the impact of our new innovation cycle.â
My Takeaway
If you care to read their earnings report, the only management comments made are alluding to the lack of growth the company is experiencing â obviously their main focus moving forward.
During the earnings call Management didnât comment on the companyâs profitability â simply focused on growth initiatives. They know they need to re-accelerate growth and drive market share gain in 2024 and beyond.
They mentioned three things specifically that give me concern:
The overall environment for the company right now seems promotional. Theyâre unable to move product at retail prices.
Digital and international sales were weaker than expected
The company is accelerating the growth of their franchise management team â meaning theyâre hiring more and more people to open and run their âoutletâ stores around the country. These stores provide lower margins for the company at scale.
Nike has done a wonderful job managing their bloat in inventory over the last 12-months, with Wall Street claiming their overall inventory declined by -14% during the quarter. With that being said, it doesnât seem to be enough. Iâll continue to bet on Lululemon as my athleisure pick.
Micron (MU)
Key Metrics
Revenue: $5.8 billion, an increase of +58% YoY
Operating Income: $191.0 million, compared to a -$2.3 billion loss
Profits: $793.0 million, compared to a -$2.3 billion loss
Earnings Release Callout
âMicron delivered fiscal Q2 results with revenue, gross margin and EPS well above the high-end of our guidance range â a testament to our teamâs excellent execution on pricing, products and operations.
Our preeminent product portfolio positions us well to deliver a strong fiscal second half of 2024. We believe Micron is one of the biggest beneficiaries in the semiconductor industry of the multi-year opportunity enabled by AI.â
My Takeaway
Micronâs earnings beat expectations across the board, and their guidance left Wall Street very excited for the rest of 2024. The exceptional guidance was catalyzed by pricing power and volume â in addition to their progress with their AI-specific HBM product. The acceleration in AI-specific products is also helping support high profit margins.
Management indicated all of 2025âs HBM products have already sold out, potentially adding $2 in earnings-per-share (EPS) to the companyâs income statement. Because of this, Wall Street believes the stock deserves a higher trading multiple â closer to $120 / share.
Wall Street is expecting the HBM market to grow from $3B in 2023 to over $16B in 2025 â adding that $2 in EPS assuming a 20% market share capture.
Perhaps itâs time I do more research into Micron Technologies? I donât hold a position as the moment â but Iâm certainly intrigued by their growth and profitability.
Investor Events / Global Affairs:
Nvidiaâs star-studded event, Reddit finally goes public, ESPNâs issues are back under the spotlight, and Boeing has had a sketchy 2024.