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⌚ Going Short on Watches
Plus, this fast-casual food stock fell after CEO and insiders sold shares...
Happy Tuesday afternoon to everyone on The Street. Here's a snapshot of where markets ended the trading session, plus tomorrow's trade idea delivered to you today.
🟩 | US stocks rose on Tuesday. The S&P 500 increased 0.2%, the Nasdaq gained 0.2%, and the Dow held steady after hitting a record high on Monday. Investors are eagerly awaiting Nvidia's earnings report, due after Wednesday's market close.
📈 | One Notable Gainer: Chinese E-Commerce giant JD.com’s shares gained 2% after its board approved a new $5 billion share repurchase program.
📉 | One Notable Decliner: Paramount Global’s stock dropped 7% on mews Edgar Bronfman Jr. withdrew his takeover bid, allowing Skydance to proceed with its $8 billion acquisition.
⌚ | Tomorrow's Trade: Going Short on Watches. Scroll down for more.
S&P 500 Heatmap. Credit: Finviz
All Stock Heatmap. Credit: Finviz
Global ADR snapshot. Credit: Finviz
MARKET MOVERS
CAVA (-6%) Cava Stock Tumbles As CEO, Key Insiders Sell Shares (Investor’s Business Daily)
NVDA (+1%) Wall Street climbs as investors focus on Nvidia results (Reuters)
NFLX (+1%) Netflix stock target lifted at Evercore on bullish survey results (Investing.com)
HSY (-3%) Hershey Stock Downgraded on Cocoa Inflation (Schaeffer’s Investment Research)
TCOM (+9%) Trip.com surges as strong demand for cross-border travel reflects in Q2 earnings (Seeking Alpha)
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OVERHEARD ON THE STREET
CNBC: Eli Lilly has released a cheaper version of Zepbound to improve access for uninsured patients and boost supply amid high demand.
MarketWatch: Apple CFO Luca Maestri will step down on January 1 but stay on to lead corporate services.
CNBC: Exxon predicts that oil demand will stabilize at over 100 million barrels per day through 2050, even if all new cars sold in 2035 are electric.
Axios: The FTC and Kroger began arguments in an antitrust trial that could impact food prices nationwide.
CBS News: U.S. labor board prosecutors found merit in the union's claim that Chipotle Mexican Grill unlawfully withheld raises from unionized workers.
TOMORROW’S TRADE IDEA, TODAY
Going Short on Watches
Faceless Weakness
Luxury conglomerate LVMH (LVMUY) — parent company of high-end brands like Louis Vuitton, Veuve Clicquot, and Hublot — is popular with analysts, who give it a consensus rating of Overweight. The stock also has an average analyst price target of $178, roughly 17% upside from Monday’s close.
But the business may have one hidden weakness: Watch sales.
According to LVMH, its watches and jewelry sales dropped 4% in the last quarter, for a couple of notable reasons.
Demand Is Winding Down
Demand in the luxury watch industry isn’t exactly self-winding. Like a battery-powered timepiece, there are several sources that juice demand — but lately, they’re running low on power.
For one thing, consumers who used excess funds during the pandemic have cut back on buying luxury items in favor of spending on things like travel, which they weren’t previously able to do.
On top of that, speculator spending is also fading. There was a time when the predominant trend was to use expensive watches as an investment to diversify portfolios. But this strategy has also cooled off significantly since its peak in 2022.
Watch Out
Available inventory on watch resale websites has skyrocketed over the past year or so. Watches that used to sell in a matter of weeks are now sitting on the market for months at a time.
Waiting lists to buy certain models have also dried up. While some ultra-sought-after watches such as Patek Philippe have an extensive order backlog to keep them afloat, LVMH’s portfolio of high-end watch brands — which includes TAG Heuer and Hublot — does not have the same luxury.
LVMH’s overall business may appear strong. But with cracks starting to show, investors may be wise to watch closely.
Are you bullish or bearish on LVMH (LVMUY) over the next 12 months? |
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ON OUR RADAR
WSJ: NFL stars Jason and Travis Kelce landed a $100 million deal with Amazon's Wondery for their podcast “New Heights.”
CNBC: Mark Zuckerberg claimed that while Meta decided to remove Covid-19 content, he believes the Biden admin’s pressure to censor it was inappropriate.
CNN: Stop & Shop will stop selling cigarettes and tobacco products this month, following other major chains that have already done so.
QZ: Elon Musk supports a California bill aimed at regulating the artificial intelligence industry, a move that has split opinions in Silicon Valley.
CNN: The NRF expects 2024's back-to-school spending to reach $38.8 billion, or $874.68 per household, making it the second-highest on record.
YESTERDAY’S POLL RESULTS
🟩🟩🟩🟩🟩🟩 🐂 Bullish
🟨⬜️⬜️⬜️⬜️⬜️ 🐻 Bearish
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