Price Check Please, CPI Tomorrow 🛒

Good afternoon! Travel is hitting new highs, but not every destination is thrilled about it. On July 7th, a record-breaking 3 million U.S. passengers took to the skies. However, Barcelona isn’t as welcoming, with locals taking a stand against the influx of tourists.

• In a dramatic protest, 3,000 residents armed with water guns shouted, “Tourists go home!” as they grapple with accommodating over 4 million summer visitors in a city of 1.6 million.

• With rents skyrocketing by 68% over the past decade, many locals can no longer afford to live in their own city. In response, Barcelona’s mayor plans to ban Airbnb-style short-term rentals by 2028.

MARKETS

• The S&P 500 climbed above 5,600 for the first time, just days after surpassing 5,500, marking a new record for seven consecutive trading sessions. The Nasdaq also had a strong day, driven by tech stocks, while the Dow ended the session positively.

• Bond yields remained stable as investors awaited tomorrow's key CPI reading.

• Gold prices increased as investors anticipated a favorable CPI report that might prompt the Fed to consider further rate cuts. Oil prices rose due to a stronger-than-expected global demand outlook from OPEC.

STOCK
Winners & Losers

What’s up 📈

• Smart Global Holdings ($SGH) rose 26.27% thanks to earnings that beat Wall Street expectations in the third quarter and a strong outlook for the rest of the year

• Aehr Test Systems ($AEHR) rocketed 24.01% after the semiconductor testing equipment maker raised earnings guidance due to strong AI demand

• CarMax ($KMX) jumped 6.42% in sympathy with Carvana

• Carvana ($CVNA) drove 4.21% higher after Needham analysts upgraded the stock from “hold” to “buy” due to new features at checkout highlighting EVs

• Advanced Micro Devices ($AMD) popped 3.87% on the news it is acquiring Silo AI, the largest private artificial intelligence lab in Europe, for $665 million

• Taiwan Semiconductor ($TSMC) rose 3.54% after reporting a 10% month-over-month revenue decline but a roughly 33% year-over-year sales increase

What’s down 📉

• LegalZoom ($LZ) plummeted 25.35% to a new all-time low after the company cut its outlook and its CEO stepped down

• Ziff Davis ($ZD) fell 10.32% after the digital media company pre-announced that second-quarter earnings will fall below analyst expectations

• HubSpot ($HUBS) sank 12.24% on a report that Alphabet is no longer interested in acquiring the company

• Deckers Outdoor ($DECK) dropped 4.86% after M Science analysts published a note cautioning that sales for key brands UGG and HOKA fell in June

• Intuit ($INTU) dropped 2.57% on the news that the tax prep company is cutting 10% of its workforce

• Fast-casual restaurant stocks continued to sink today as investors grow more concerned about lower consumer spending and higher valuations. CAVA Group ($CAVA) fell 5.47%, Sweetgreen ($SG) dropped 1.72%, and Dutch Bros ($BROS) fell 4.34%.

ECONOMY
Price Check Please: CPI's Big Reveal Tomorrow

Tomorrow’s the big day: The Consumer Price Index (CPI) is about to drop, and all eyes are on it. CPI measures the price changes of goods and services over time, giving us a clear picture of inflation. The Fed loves Core CPI, which strips out the volatile food and energy prices for a clearer look at inflation trends.

In May, CPI held steady month-over-month, surprising everyone by coming in below the expected 0.1% increase. Core CPI also rose just 0.2%, under the 0.3% economists had predicted. After some unexpectedly hot readings in the first quarter, Wall Street is crossing its fingers for more of the same cooling trend in June. The consensus is that CPI will tick up 0.1% month-over-month, with Core CPI up 0.2% since May.

If the pros are right, we could see the annual inflation rate drop from 3.3% to 3.1%. That’s a far cry from the 9.1% peak back in 2022 and could give the Federal Reserve the confidence to start cutting rates this year.

NEWS
Market Movements

• Samsung Launches AI-Powered Galaxy Flip 6 and Fold 6

• Microsoft and Apple have both decided to drop plans to take board roles at OpenAI.

• Boeing sold just 14 new jets last month and most were fighters. Only three were passenger planes and one barely counts — it was a replacement 737 for Alaska Airlines, which returned its famous January door-blowout plane

• The FTC has taken aim at pharmacy benefit managers, accusing them of inflating drug prices. Additionally, the commission has banned the anonymous messaging app NGL from allowing underage users on its platform.

• For the first time, Tesla's share of the US electric car market has fallen below 50% in Q2

• In a move to compete with YouTube, Spotify is adding comment sections to its podcast episode pages.

• Disney announced a new cruise ship setting sail from Tokyo in 2029, part of a $60 billion, 10-year expansion of parks and cruises

• Intuit plans to cut around 1,800 jobs, with intentions to rehire in key strategic areas.

PRIVATE COMPANY
Athletic Brewing Surfs the Nonalcoholic Wave to an $800M Valuation

Athletic Brewing, the nonalcoholic beer brand that's redefining hangouts with the boys, is set to appear on even more drink menus. According to the Wall Street Journal, the company just closed a funding round that pegs its value at a cool $800 million, all thanks to its trendy branding and sub-0.5% ABV offerings.

This new valuation, which has doubled since 2022, comes on the heels of a $50 million investment led by private equity heavyweight General Atlantic. The fresh capital will fuel Athletic’s expansion into more retailers and ramp up its production.

With a vibe as smooth as its surfing-inspired branding, Athletic is making serious waves:

• It’s the top-selling nonalcoholic brand in US grocery stores and ranks among the top 20 US breweries by barrels sold.

• The company raked in $90 million in revenue in 2023 and expects to surpass that in 2024.

• Athletic brewed over 258,000 barrels in 2023, a huge leap from just a few hundred barrels in 2018.

• It holds a 19% share of the US nonalcoholic beer market and drives 32% of the category's growth, per NielsenIQ data.

Shifting Tides: Nonalcoholic beer is the fastest-growing segment in the beer market, driven by over 40% of Americans aiming to cut back on alcohol. Interestingly, Athletic notes that 80% of their customers still enjoy regular beer but opt for Athletic's brews when they need a break.

Zooming Out: Athletic Brewing isn't the only brand riding the consumer shift toward healthier drinks, partly spurred by the rise of weight-loss medications. Liquid Death, the water-in-a-can sensation, hit a $1.4 billion valuation in March, and “healthy soda” brand Olipop is also nearing an $800 million valuation.

Calendar
On The Horizon

Tomorrow

8:30 AM:

• Initial Jobless Claims:

  • Date: July 6

  • Actual: 236,000

  • Expected: 238,000

• Consumer Price Index (CPI):

  • Period: June

  • Actual: 0.1%

  • Expected: 0.0%

• CPI Year Over Year:

  • Actual: 3.1%

  • Expected: 3.3%

• Core CPI:

  • Period: June

  • Actual: 0.2%

  • Expected: 0.2%

• Core CPI Year Over Year:

  • Actual: 3.4%

  • Expected: 3.4%

Earnings

1. PepsiCo ($PEP) will report its Q2 earnings tomorrow before the market opens. Last quarter, the company met revenue expectations with $18.25 billion, up 2.3% year-over-year, though it missed on gross margin estimates. For this quarter, analysts expect a 1.3% year-over-year revenue growth to $22.62 billion, with adjusted earnings projected at $2.16 per share. Despite recent market volatility, PepsiCo's stock has dipped just 2% in the last month, heading into earnings with an average analyst price target of $183.7, compared to the current share price of $161.8.

   In the broader consumer staples sector, Constellation Brands and McCormick have set a mixed precedent, with Constellation showing 5.8% revenue growth and McCormick reporting flat revenues. PepsiCo's peers' performances provide hints of what to expect, as the company looks to continue its trend of mostly meeting or exceeding Wall Street's expectations over the past two years.

2. Investors will get a glimpse into the travel industry's performance as Delta Air Lines ($DAL) reports its Q2. With the busy summer travel season underway, other major carriers like American Airlines ($AAL) and United Airlines ($UAL) will follow with their reports later this month.

   Analysts expect Delta’s Q2 sales to rise 4% to $16.28 billion, despite tough comparisons to last year's quarter. However, earnings are projected to dip 11% to $2.38 per share. Notably, Delta has exceeded top and bottom-line expectations for four consecutive quarters, averaging a 12.72% earnings surprise. While Delta shares have risen 15% this year, outperforming United’s 13% and significantly outpacing American’s -20%, they are still trading at a modest 6.9x forward earnings, a discount compared to the S&P 500’s 23.5x.

   Overall, Delta’s total sales are expected to increase by 5% in fiscal 2024 and another 2% in FY25 to $62.21 billion. Annual earnings are projected to rise 5% this year and 14% in FY25 to $7.49 per share. With a Zacks Rank #3 (Hold), Delta's future performance hinges on meeting or exceeding Q2 expectations and providing positive guidance to support its promising outlook.