In a week shortened by the Juneteenth holiday, stocks continued their ascent, with the S&P 500 notching up its 31st all-time high in 2024.
The macroeconomic focus was retail sales data (18 June) for May which came in below forecasts, rising 0.1% month-on-month compared with 0.2% expected by economists. This follows a downward revision to April’s reading suggesting retail spending was lacklustre in the second quarter.
Within the broad stock market strength, the technology heavy Nasdaq Composite index and small cap Russell 2000 indices lagged the S&P 500.
Despite the disparity at the index level, semiconductor stock Super Micro Computer (SMCI:NASDAQ) was the best performer in the S&P 500 over the week, gaining over 18%.
AI was again in sharp focus as chip-maker Nvidia (NVDA:NASDAQ) overtook Microsoft (MSFT:NASDAQ) as the world’s most valuable company on Tuesday as its share price scaled a new all-time high. It’s market capitalisation reached $3.39 trillion following a 214% gain in the shares over the last 12-months.
ACCENTURE
Having caught the market off-guard in March by missing second-quarter sales and earnings forecasts and lowering its full-year guidance, IT services and consulting firm Accenture (ACN:NYSE) had a lot of ground to make up with investors with this week’s third-quarter trading update.
In the event, sales and EPS (earnings per share) narrowly missed analysts’ estimates again but the shares rallied sharply on the absence of a further downgrade and evidence of a growing order book thanks to demand for generative AI (artificial intelligence).
‘We achieved strong new bookings of over $21 billion, up 22% on last year, and continued to accelerate our strategy to be the reinvention partner of choice’, said chief executive Julie Sweet, as AI bookings year-to-date hit the $2 billion mark.
For the fourth quarter to the end of August, Accenture predicted sales of between $16 billion to $16.65 billion, whereas analysts are forecasting sales in the region of $16.5 billion, towards the top end of the firm’s guidance.
KROGER
Food retailer Kroger’s (KR:NYSE) stock popped in pre-market trading following forecast beating first quarter earnings (20 June) before cheapening 3.3% to $50.3 as investors digested the impact promotions and lower prices will have on the supermarket operator’s margins.
Sales grew 0.2% year-on-year to $45.3 billion in the quarter to 25 May amid robust demand for the downtown Cincinnati-based retailer’s cut-price groceries as cash-strapped consumers grapple with sticky inflation. Adjusted earnings per share of $1.43 came in below the previous year’s $1.51 but above the $1.35 Wall Street was looking for.
Confounding expectations of a guidance cut Kroger, whose planned $24.6 billion merger with smaller rival Albertsons (ACI:NYSE) remains under antitrust review, reaffirmed its full year same store sales and profit forecasts.
‘Kroger is off to a solid start in 2024 led by better than expected performance of our grocery business,’ said CEO Rodney McMullen, who insisted that his charge is delivering ‘exceptional value at a time when many customers need it more than ever, by providing affordable prices with personalised promotions’.
CHEGG
When a business seems locked into a terminal tailspin, grand plans to turn it round are likely to get cheered, and so it was at Chegg (CHGG:NYSE) over the past week. Having slumped 74% this year, the education technology firm announced a restructuring plan and a new vision for growth.
Monday’s (17 Jun) 20% share price surge was a clear indication that investors want change, and change they’ll get. The Santa Clara, California-based company plans to axe 23% of its staff, with most of the cuts falling in content management teams in India and Israel, as well as its own US backyard.
Chegg’s new chief executive Nathan Schultz said the reason for the plan was to ‘focus’ on their core student audience and make the company ‘more efficient.’ Time will tell.
The education technology firm has had to face concerns that more students are turning to ChatGPT and elsewhere for help with homework and general learning, and it’s a big challenge. Chegg’s subscriber numbers fell 8% in the last quarter to 4.7 million and the company said at the time it will take some time to ‘bring these [subscriber] numbers back.’
