A survey of North American equities heading in both directions
On the rise
Shares of Lululemon Athletica (LULU-Q) closed 0.2 per cent higher in volatile trading after cutting its annual sales and profit forecasts, as demand for its pricey leggings and tank tops slowed in North America amid selective consumer spending.
Its shares swung between heavy losses and gains as the athleisure wear maker’s profit beat estimates and it promised to speed up efforts to improve the product mix.
Full reaction from the Street: Friday's analyst upgrades and downgrades
The company has seen a slow start to 2024 after years of strong growth as persistent inflation led to selective spending by shoppers.
Its women’s business has taken a hit from slower innovation in seasonal apparel, lower stock of smaller sizes and color and product missteps.
Lululemon had to pull its “Breezethrough” leggings from stores and website within weeks of its July launch as customers complained about the fit, material and seams, resulting in fewer new options for women’s bottom wears.
“For 2025, we are fast-tracking new styles within performance, shorts, tops, and track suits,” CEO Calvin McDonald said on a post earnings call.
“We are optimistic that we will begin to see the benefits of these strategies over the upcoming quarter.”
Lower promotions and a tight check on costs aided gross margin which 80 basis points in the quarter.
The company’s shares have declined about 14 per cent in the last three months as investors braced for a forecast cut. They have lost nearly half of their value this year.
Comparable sales rose 2 per cent, but missed expectations of a 6.05-per-cent increase, driven by a 3-per-cent decline in sales in Americas. Comparable sale surged 21 per cent in China.
“Athleisure spending continues to wane overall, but we have also seen Alo and Vuori continue to gain share against Lulu,” Jefferies analyst Randy Konik said.
The company expects fiscal 2024 net revenue in the range of US$10.38-billion to US$10.48-billion compared with a prior forecast of $10.70 billion to $10.80 billion.
It expects to earn US$13.95 to US$14.15 per share compared with its previous forecast of between US$14.27 to US$14.47.
In the second quarter, it earned US$3.15 per share, better than LSEG estimates of US$2.93.
CWB Financial Group (CWB-T) increased 0.3 per cent after it reported its third-quarter profit fell compared with a year ago as it saw the amount it set aside for bad loans climb higher.
The company behind Canadian Western Bank, which agreed in June to be acquired by National Bank of Canada, says its common shareholders’ net income amounted to $41.4-million or 43 cents per diluted share for the quarter ended July 31.
The result was down from a profit of $83.1-million or 86 cents per diluted share in the same quarter last year.
Revenue for the quarter totalled $298.5-million, up from $283.5-million a year earlier, while the bank’s total provision for credit losses amounted to $55.0-million in its latest quarter, up from $15.0-million a year ago.
On an adjusted basis, CWB says it earned 60 cents per share in its latest quarter, down from an adjusted profit of 88 cents per share in the same quarter last year.
Analysts on average had expected an adjusted profit of 86 cents per share, according to LSEG Data & Analytics.
“Our third-quarter performance was negatively impacted by a significant increase in the provision for credit losses on impaired loans,” CWB chief executive Chris Fowler said in a statement.
“The increase primarily related to two loans where borrower-specific circumstances resulted in unusually large provisions for these specific exposures. We anticipate credit losses will trend back towards our normal historical range next quarter.”
Dell Technologies (DELL-N) rose 4.3 per cent on Friday, after robust demand for its artificial intelligence-powered servers propelled the company to raise its full-year earnings and revenue forecasts.
Dell, which supplies servers and related infrastructure to enterprises, bolstered its AI push through a partnership with chip giant Nvidia (NVDA-Q) earlier this year. With Nvidia’s tech stack, Dell is attracting mid-sized customers to upgrade their servers with AI capabilities.
“Dell’s beat was entirely due to AI servers, with storage and PC revenues both coming in below consensus,” Bernstein analysts wrote in a note.
They said 80 per cent to 90 per cent of the company’s server customers appear to be tier 2 cloud services providers and new deal opportunities appear to be competitive bids against Super Micro Computer (SMCI-Q).
Revenue from Dell’s infrastructure solution group, which includes sale of servers, rose 38 per cent over the year earlier in the second quarter. Demand for AI-optimized servers, including the flagship PowerEdge XE9680, rose 23 per cent sequentially to US$3.2-billion, the company said on Thursday.
Its AI pipeline now appears to be US$11-billion to US$13-billion, up from an estimated US$8-billion to US$10-billion in the first quarter, according to Bernstein.
Overall, Dell earned US$1.89 per share on an adjusted basis and posted revenue of US$25.03-billion, both exceeding LSEG estimates.
At least three brokerages raised their price targets after Dell’s results. The stock has a median target price of US$155, with 19 of the 22 analysts rating it “buy” or higher, according to LSEG data.
At US$117.29, Dell shares are down 35 per cent since their all-time high in May.
Intel’s (INTC-Q) shares increased 9.5 per cent on Friday, as a report of the struggling chipmaker exploring options that could include a merger or a split induced some investor enthusiasm after one of the stock’s worst slumps in decades.
The company is working with investment bankers and considering various options such as separating its flagship product business from its money-losing manufacturing unit, Bloomberg News reported on Thursday.
Intel is also discussing potentially scrapping some factory projects, the report said.
Building and expanding chip production sites is at the core of Intel’s turnaround efforts focused on becoming a contract manufacturer for other chip firms - a capital intensive undertaking that has strained the company’s finances.
The report provided some relief to investors, many of whom see Intel splitting its business as an ideal option as the company trudges through the AI era and trails chipmakers like Nvidia and AMD.
Intel’s shares have fallen about 60 per cent so far this year, compared with a less than 2 per cent year-to-date drop for AMD (AMD-Q). Nvidia’s shares have more than doubled in value this year.
Intel’s disappointing quarterly report earlier in August, coupled with the company pausing its dividend and announcing layoffs impacting 15 per cent of its workforce, have deepened the stock’s slump.
The stock trades at about 24 times expected earnings, compared with a price-to-earnings ratio of 30.6 for AMD. Nvidia trades at 33.7 times expected earnings.
Chipmaker Marvell Technology (MRVL-Q) surpassed expectations for quarterly revenue and forecast third-quarter results above Wall Street estimates on Thursday, on the back of strong demand for its electro-optics products and an increase in custom AI programs.
The company’s shares enjoyed steep gains, finishing over 9 per cent higher, in Friday trading.
Increased investments by big tech companies in generative AI applications are driving cloud customers to develop new data centers. This trend is fueling the demand for cloud-optimized silicon solutions, such as those offered by Marvell.
“Marvell’s results and outlook clearly indicated the worse is now behind the company. While demand remained robust in the datacenter market, there are now early signs of demand recovery in the carrier and enterprise end-markets,” Kinngai Chan, senior research analyst at Summit Insights, said.
Revenue for the company’s data center segment, which includes its custom AI chip business and electro-optics portfolio, rose 92 per cent to US$880.9-million in the second quarter, compared with analysts’ estimates of US$865.2-million, according to LSEG data.
For the third quarter, Marvell forecast revenue to be US$1.45-billion, plus or minus 5 per cent, compared with an estimate of US$1.40-billion.
On an adjusted basis, it expects income per share of 40 US cents, plus or minus 5 US cents, compared with estimates of 38 US cents.
“Next quarter, we expect our combined enterprise networking and carrier end markets to return to growth, while our data center end market growth accelerates,” CEO Matt Murphy said.
Marvell, in April, announced it has won new business contracts to assist large U.S.-based cloud computing companies in designing custom chips for artificial intelligence.
The company counts major corporations such as Amazon among its clients, aiding in the development of custom chips for their cloud operations.
U.S.-listed shares of Alibaba Group (BABA-N) gained ground after China’s State Administration of Market Regulation issued a statement on Friday saying it had completed three years “rectification” following a fine levied in 2021 for monopolistic behavior.
In 2021, the regulator slapped a record US$2.75-billion fine on the e-commerce giant for abusing its market position by forcing merchants on its platforms not to work with rival platforms.
The regulator’s statement said Alibaba’s rectification work had achieved “good results” and that it would continue to “guide” Alibaba to continue to “regulate its operations and improve its compliance and quality.”
The fine levied on Alibaba in 2021 came during a period of intense scrutiny for the business empire founded by billionaire Jack Ma. A $37 billion IPO by the finance arm he founded, Ant Group, was also scuttled following Ma’s public critique of the country’s regulatory system in late 2020.
Alibaba, in its own statement, described the regulator’s announcement on Friday as a “new starting point for development” and said it would continue to “promote the healthy development of the platform economy and create more value for society.”
On the decline
Laurentian Bank of Canada (LB-T) slipped 4.3 per cent after saying it earned $34.1-million in its third quarter, down from $49.3-million in the same quarter last year.
The Montreal-based bank says the profit amounted to 67 cents per diluted share for the quarter ended July 31 compared with a profit of $1.03 per diluted share a year earlier.
A breakdown of the big banks’ third-quarter earnings
Revenue for the quarter totalled $256.5-million, down from $260.8-million in the same quarter last year.
The bank’s provision for credit losses amounted to $16.3-million for the quarter, up from $13.3-million a year ago.
On an adjusted basis, Laurentian says it earned 88 cents per diluted share in its latest quarter compared with an adjusted profit of $1.22 per diluted share in the same quarter last year.
Analysts on average had expected an adjusted profit of 86 cents per share, according to LSEG Data & Analytics.
Lithium Americas (LAC-T) gave back early gains and closed down over 5 per cent in the wake of saying on Friday automaker General Motors (GM-N) has delayed the second tranche of investment, worth US$330-million, in the miner until the end of the year.
GM had announced an investment of US$650-million, in two tranches, in Lithium Americas last year to help it develop the Thacker Pass lithium mining project in Nevada, which holds enough of the battery metal to build 1 million electric vehicles annually.
The lithium miner said it is exploring alternative structures for the investment and extended the date for deal closure to Dec. 20. In case, the deal is not closed on their end by that date, Lithium Americas will have to grant additional rights to the automaker.
The investment conditions for the second tranche included the successful execution of a US$2.26-billion loan agreement with the U.S. Energy Department, which the company is rushing to finish by the end of the year amid uncertainties regarding the results of the U.S. presidential election.
Given Donald Trump’s pledge to “end the electric vehicle mandate” and plans laid out by former Trump administration officials in the Project 2025 document to shutter the Loans Program Office, mining companies and others are rushing to close loan agreements before Joe Biden leaves office in five months.
With files from staff and wires