Happy Sunday to everyone on The Street.

Two weeks ago, U.S. GDP came in at a 4.9% annualized pace in the third quarter, ahead of the 4.7% estimate. “All is well,” a blowout reading like this might seem to suggest. Not quite.

The American consumer is showing signs of financial strain, as delinquency rates on loans are on the rise, according to the New York Fed. Despite a healthy economy, credit card delinquency rates have notably increased. About 8% of credit card balances became delinquent by September's end, up from 5.7% in 2020. 

All loan types, except for student loans and home equity lines of credit, saw increased delinquencies. Student loan debt actually fell $27.8 billion in the third quarter, the biggest decrease on record. But that was for policy and pandemic reasons.

Millennials, particularly those with auto or student loans, are experiencing higher delinquency rates, surpassing pre-pandemic levels. We just wrote about which stocks might be impacted by this trend last week.

Delinquency rates are growing fastest among low-income areas, but they're also elevated in more affluent regions. What does all this mean?

We think people are overextending themselves. Chances are, this overextension will continue into the holiday season. Parties must be hosted and presents must be bought. At some point in 2024, we’re going to see boats and RVs up for sale. Toys will be returned or sold as spenders come back down to earth. For now, let’s dive in.

PRESENTED BY STARTENGINE

40,000+ investors put up $75MM to take on Venture Capital

Now through Nov. 15, you can invest directly in StartEngine — aka one of the largest sites in the US for startup investing through equity crowdfunding — advised by you-know-who ↑¹

A new funding paradigm: While new VC deals have dropped a stunning 46% from the highs of just two years ago, new deals in the equity crowdfunding space have actually increased by 10% in that same period.

Why 40,000+ everyday investors have already invested $75MM in StartEngine²:

• StartEngine was ranked by Inc. Magazine as top 1% of US private businesses by revenue growth, and fastest growing private companies two years in a row (2022 & 2023)³

• They recently acquired their competitor’s assets, SeedInvest, including an investor community that’s funded over $470 million – combined with our own community, collectively committed $1.1 billion⁴

• Led by legendary CEO Howard Marks (you’ve probably heard of the last company he co-founded, Activision, which was recently acquired by Microsoft for $68 billion), with Strategic Advisor Kevin O’Leary of Shark Tank¹

Your window to invest in this round closes in a little over a week — don’t miss your chance to join 40,000 investors before this offering closes for good.

Invest and earn up to 20% bonus shares.

Review

U.S. stocks rose sharply on Friday, rebounding from the prior day’s losses that snapped the longest winning streak in two years for the S&P 500 and Nasdaq Composite.

The Dow Jones Industrial Average jumped 1.2% or 391 points, while the S&P 500 added 1.6%. The Nasdaq Composite surged 2.1%. The Nasdaq ultimately ended the week 2.4% higher, while the S&P 500 was up 1.3%. The Dow Jones rose 0.7% on the week.

In earnings news, despite beating expectations, shares of the digital ad company The Trade Desk fell 16.7% following weak guidance. The company joined the likes of Meta, Pinterest, and Snap to caution against weaker ad spend since the start of the Israel-Hamas war.

Shares of Las Vegas casino Wynn Resorts dropped 5.7% after announcing a tentative agreement with the Culinary Workers and Bartenders Union. The new deal covers 5,000 employees and comes after similar announcements from rivals MGM and Caesars.

Elsewhere, shares of hydrogen fuel cell developer Plug Power plummeted 40.3% after warning it may not be able to continue operations.

In economic data, consumer sentiment declined for the fourth month in a row, according to early November data from the University of Michigan, as Americans worry about economic conditions and higher inflation going forward.

Preview

The week will kick off with the New York Fed’s consumer inflation expectations for October. Expectations for price increases have risen over the prior two months, after reaching a more than two-year low of 3.5% in July.

On Wednesday, wholesale inflation will round out the week’s price index data. We’ll also get October retail sales data. Despite tighter monetary policy, consumer spending has increased for the past six months after a brief dip in March. The 30-year fixed-rate mortgage will also get its weekly update, after tumbling more than 20 basis points to 7.61% last week.

On Thursday, we’ll get a weekly update on jobless claims, and the NAHB housing market index will provide insight into the homebuilder market.

We’ll conclude the week with more housing data: Building permits and housing starts.

Earnings Spotlight

Tyson Foods (TSN) and, fittingly, Monday.com (MNDY) will kick off the earnings week. The world’s second-largest meat processor has had a tough few months. In August, Tyson Foods announced it was closing a 1,500-worker plant in Missouri, and last week, it recalled 30,000 pounds of chicken nuggets after some consumers found pieces of metal in the patties.

On Tuesday, Home Depot (HD), and Chinese music streamer Tencent Music (TME) will report

Wednesday, more consumer companies will report, with big box retailers Target (TGT) and TJX Companies (TJX). Last quarter, TJX Companies said its discount stores like T.J. Maxx, Marshalls, and HomeGoods saw high customer traffic as inflation-weary consumers turned to their lower priced merchandise. We’ll also get a quarterly update from the tech company Cisco (CSCO).

Thursday will be the busiest earnings day of the week with reports from Alibaba (BABA), Bath & Body Works (BBWI), Macy’s (M), Gap (GPS), and Walmart (WMT). Walmart shares recently reached an all-time high in anticipation of the big-box retailer attracting more price-sensitive shoppers this holiday season.

On Friday, BJ’s Wholesale (BJ) will round the week.

Uniform Provider Is Single and Ready to Mingle

The Most Boring Business Ready to Boom?

Uniform rental company Vestis (VSTS) was born from Aramark (ARMK) last month. As parent company Aramark looks to hone in on its food services business, Vestis is now independent and looking to grow in a market full of opportunity.

Analysts believe that Vestis has the potential to double its share price over the next few years. 

Vestis specializes in cleaning and maintaining uniforms for companies large and small across the country. Laundering standardized uniforms is no small task, and many companies are more than happy to outsource this operation to third parties like Vestis.

The Path Forward

Vestis is drawing upon a tried-and-true growth strategy for its future: bringing in new customers and doing more business with existing ones. 

At present, Vestis clients are utilizing approximately 40% of the company’s available services. By simply upselling one product to each current customer, Vestis could see growth of up to $900 million. Not to mention the costs saved with this “route density,” as the company calls it.

Analysts are counting on this initiative, coupled with the company’s commitment to enhance logistics and cut debt, to help provide a nice return for early investors.

The company's largest competitors are Cintas (CTAS) and UniFirst (UNF). But the three largest uniform laundering companies currently control only 25% of the market, leaving a sizable piece of the pie for Vestis to gobble up.

The Ceiling Is High

More good news: Vestis already has recurring revenue, which is a huge head start for any newly public company. 

With over half of its revenue coming from supplying everything from aprons to bathroom supplies, Vestis has diversified its offerings and bolstered its earnings. This serves to insulate them from potential pain during times of high unemployment.

According to Stifel analyst Shlomo Rosenbaum, the stock could be up as high as $41 per share in 2027, a whopping 145% gain from its current price.

Only time will tell if these goals will materialize, but the opportunity is certainly present for new investors.

Time-Out Is Over For Chevron

Barron’s Taps Chevron (CVX) as a Portfolio Add

It’s time to fill up on Chevron stock. At least, that’s what Barron’s is telling readers.

The publication has tapped the energy giant as a stock pick, arguing investors are being too hard on the company. 

Chevron has fallen by around 17% this year with a large chunk of the decline coming last month. 

A lackluster quarterly earnings report with news of a delayed development timeline and an announcement to buy rival energy firm Hess Corp. (HES) both contributed to investor’s recent distaste for the stock. 

Exxon (XOM) also disappointed with its latest earnings release, but it’s only down around 2% this year. And while Chevron shareholders have been stuck with hefty losses, the Energy Select Sector SPDR (XLE) is relatively unchanged in 2023.

Barron’s Says Investors Should Be Looking at Chevron’s Opportunities

Barron’s argues that the energy behemoth has strategic, important developments all over the world. 

Some on the Street agree. An analyst at Mizuho Securities believes key assets in Kazakhstan, Australia, and the Permian have Chevron positioned for long term growth. The analyst has a $215 price target on the stock which currently sits under $150. 

The Hess acquisition will also provide a boost for oil production with assets in Guyana. An energy analyst believes the Guyana stake will greatly help Chevron in its goal to boost output by 3% annually for the next 4 years.

2 for 2?

Barron’s believes Chevron offers investors an opportunity to scoop up a quality name at a cheaper valuation.

The magazine highlights the hefty balance sheet and a CEO with recent success as two simple reasons why the stock could get back on track. A dividend payout of over 4%, which is expected to grow in 2024, could lure investors too. 

Chevron’s returns have also easily beat competitors across the pond over the last five years. CVX is up more than 20% over that time while BP (BP) is down over 10% and Shell is largely unchanged. 

Barron’s recently nailed a call to buy Treasuries, could it go 2-for-2 with its Chevron call?

PRESENTED BY STARTENGINE

40,000+ investors put up $75MM to take on Venture Capital

Now through Nov. 15, you can invest directly in StartEngine — aka one of the largest sites in the US for startup investing through equity crowdfunding — advised by you-know-who ↑¹

A new funding paradigm: While new VC deals have dropped a stunning 46% from the highs of just two years ago, new deals in the equity crowdfunding space have actually increased by 10% in that same period.

Why 40,000+ everyday investors have already invested $75MM in StartEngine²:

• StartEngine was ranked by Inc. Magazine as top 1% of US private businesses by revenue growth, and fastest growing private companies two years in a row (2022 & 2023)³

• They recently acquired their competitor’s assets, SeedInvest, including an investor community that’s funded over $470 million – combined with our own community, collectively committed $1.1 billion⁴

• Led by legendary CEO Howard Marks (you’ve probably heard of the last company he co-founded, Activision, which was recently acquired by Microsoft for $68 billion), with Strategic Advisor Kevin O’Leary of Shark Tank¹

Your window to invest in this round closes in a little over a week — don’t miss your chance to join 40,000 investors before this offering closes for good.

Invest and earn up to 20% bonus shares.

Speedier Shipping and Cheaper Costs Have Retailers Feeling the Joy

With Supply Problems Largely Gone, Businesses Aim for Better Margins

A smooth supply chain and faster delivery times are bringing holiday cheer to retailers in the U.S.

Businesses got it wrong in 2021 and 2022 when it came to stocking shelves for year-end shopping, but the Grinch wasn’t to blame. 

Two years ago, pandemic bottlenecks lengthened shipping times from China to the U.S. Retailers were understocked when customers went to do their holiday shopping.

In 2022, companies ordered too much and were left with an inventory glut.

Analysts say shipping times across the Pacific are now more reliable, meaning retailers can get it right in 2023. 

Transit costs have also plummeted, further padding margins. According to Goldman Sachs, container-shipping rates from China to America are down over 40% compared to October of 2022.

Some Retailers Are Trying To Get off the Naughty List

Companies historically struggling with inventory have been punished by Wall Street.

Inventory at Target (TGT) ballooned in 2022, and investors have reacted by dumping the stock. It’s fallen by over 50% from its pandemic highs. A trade group reports inventory at the retailer is down close to 20% over the last year which could be an encouraging sign that they’re getting back on track.

The Gap (GPS) is also trying to get on the nice list. The stock has fallen from $34 in 2021 to around $13 today. Analysts have noted that inventory fell 29% in the last quarter which could be an encouraging sign for investors.

The Street Expects Holiday Cheer From Popular Brands

With cheaper shipping costs and faster delivery times, there could be big rewards ahead for retailers who nail it this holiday season.

Citi put out a report eyeing companies with sales growing faster than their inventory. The list includes Abercrombie & Fitch (ANF) and Urban Outfitters (URBN). ANF has jumped over 150% this year. Urban is only up a modest 43%. 

The National Retail Federation forecasts holiday shopping to grow by around 4% this year. 

Companies that find the sweet spot could see greater gains and will certainly have themselves a Merry Little Christmas.

Last Week's Poll Results

Which artist’s catalog would you want to own?

🟨🟨🟨⬜️⬜️⬜️ Katy Perry

🟨⬜️⬜️⬜️⬜️⬜️ Justin Bieber

🟨🟨🟨⬜️⬜️⬜️ Stevie Nicks

🟩🟩🟩🟩🟩🟩 Bruce Springsteen

Which city’s transportation system has the brightest future?

🟩🟩🟩🟩🟩🟩 New York City

🟨🟨⬜️⬜️⬜️⬜️ San Francisco

🟨🟨⬜️⬜️⬜️⬜️ Washington D.C.

DISCLAIMERS

StartEngine disclosures: Reg A+ offering made available through StartEngine Crowdfunding, Inc. No broker-dealer or intermediary involved in offering. This investment is speculative, illiquid, and involves a high degree of risk, including the possible loss of your entire investment. Please see the most recent supplement, offering circular, and selected risks.
1. Kevin O’Leary is a paid spokesperson for StartEngine. See his 17(b) disclosure, https://www.startengine.com/17b.
2. StartEngine’s investor count and investment amount includes the total number of investors and funds raised over multiple offerings and at different terms.
3. As measured by revenue growth over a three-year period. Inc 5000 source. Includes investors over multiple offerings and at different terms.
4. Includes $760M in funds raised as of May 9, 2023 via Reg. CF and Reg. A+ combined through StartEngine’s funding portal and broker dealer, StartEngine Capital, LLC and StartEngine Primary, LLC respectively, as well as StartEngine’s own raises. Also includes $470M in funds raised previously through offerings conducted on www.seedinvest.com outside of the StartEngine platform. In May 2023, StartEngine acquired assets of SeedInvest, including email lists for SeedInvest’s users, investors and founders seeking to raise funds. StartEngine Community: Count of 1.8 million is determined as the number of unique email addresses in StartEngine’s database as of 10-6-2023.

This communication from The Street Sheet is for informational purposes only. It is not intended to serve as a recommendation to buy, sell, or hold any security and is not an offer or sale of a security. Information contained within should not be perceived as a research report and is not intended to serve as the basis for any investment decision. Any third-party views reflected herein do not reflect the opinion of The Street Sheet. All investments involve risk and the past performance of a security does not guarantee future results or returns. There is always the potential for financial loss when investing in securities or other financial products. Investors should consider their investment objectives and risks before investing. The Street Sheet is reader-supported. When you buy through links on our site, we may earn an affiliate commission.