NVIDIA Tanks, Salesforce Rebounds

Good morning. It's August 29th, and today we’ll look at how NVIDIA’s shares are tanking despite excellent earnings, plus Salesforce’s stunning turnaround and a tiny biotech stock that is rallying by more than 150%.

Previous Close 📈

The dip in NVIDIA shares prior to the release of its earnings pressured the major indices yesterday, with the tech-heavy Nasdaq bearing the highest brunt.

Futures

Stock futures are moving up today as investors seek to recover from the previous day's declines.

What to Watch

There’s a lot to watch out for today as Dollar General (NYSE: DG), Best Buy Co (NYSE: BBY), and Burlington Stores (NYSE: BURL) release their quarterly earnings reports during the premarket session.

Major tech stocks like Dell Technologies (NYSE: DELL), MongoDB (NASDAQ: MDB), and Autodesk (NASDAQ: ADSK) will report their earnings after the closing bell, as well as Lululemon Athletica (NASDAQ: LULU) and Ulta Beauty (NASDAQ: ULTA).

On the economic data front, watch out for the Initial Jobless Claims for August and the second revision of GDP for Quarter 2 at 8:30 a.m., followed by Pending Home Sales Data for July at 10:00 a.m. and Atlanta Fed President Raphael Bostic’s speech at 3:30 p.m.

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Technology

NVIDIA Stock Slips Amid High Expectations, Despite 122% Revenue Growth

NVIDIA shares are falling by 2.55% in premarket trade today, continuing from its decline by 2.10% yesterday despite posting strong fiscal second-quarter results that surpassed Wall Street's expectations.

NVIDIA reported revenue of over $30 billion for the July quarter, a 122% increase year-on-year that marks its fourth consecutive quarter of triple-digit revenue growth. However, this exceptional growth rate is starting to face tougher annual comparisons, leading to more tempered expectations.

The company also issued guidance for its fiscal third-quarter revenue at $32.5 billion, representing an 80% year-on-year increase but indicating a deceleration from the previous quarter.

Analysts noted that NVIDIA’s gross margins are expected to be in the "mid-70% range" for the full year, slightly below the anticipated 76.4%, contributing to the stock's dip.

NVIDIA also announced a significant $50 billion stock buyback program. However, the company's shares have already surged over 150% this year, buoyed by the growing demand for its graphics processing units (GPUs) to support artificial intelligence development.

The stock's decline also impacted other semiconductor companies, with shares of major firms like Samsung and Taiwan Semiconductor Manufacturing Company trending lower on Thursday.

Technology

Salesforce Shares Surge on Strong Q2 Results and Optimistic Margin Outlook

Salesforce experienced a strong bounce back in its latest quarter. The software giant outperformed Wall Street estimates on sales, operating margins, and earnings, recovering from a surprising sales miss three months prior.

Today, its shares are trading at nearly 6% over its closing yesterday.

On a constant currency basis, the company's revenue grew 11% in Europe and 16% in Asia-Pacific, while sales in the Americas increased 8%.

Salesforce CEO Marc Benioff expressed confidence in future profitability and announced ambitious targets for operating margins and cash flow. He also hinted at the launch of "AgentForce," an AI-driven sales agent service, during the upcoming Dreamforce conference, emphasizing its high-margin potential.

Analysts welcomed the focus on profitability, with Salesforce raising its full-year operating margin guidance to 32.8%, above the previous estimate of 32.5%.

Despite steadying full-year sales guidance at $37.7 billion to $38 billion, the company maintained its optimistic outlook on growth through its AI initiatives, which could boost revenue by $4 billion annually by 2025, according to Wedbush analyst Dan Ives.

Key financial highlights from the quarter included net sales of $9.33 billion, an 8% year-over-year increase, and adjusted operating margins of 33.7%, both exceeding expectations. Diluted earnings per share were $2.56, up 21% year-over-year and ahead of the forecasted $2.35.

Footwear

Birkenstock Shares Drop as Q3 Profit Falls Short of Expectations

Birkenstock's stock is falling by nearly 10% in premarket trading after below-expected third-quarter profit results. The firm attributed the lower profits to costs associated with its global expansion and increased production investments.

The German sandal maker, known for its enduring popularity, is experiencing strong global demand but faces short-term margin pressures as it seeks to expand worldwide.

The company reported an adjusted earnings per share of €0.49 ($0.54), falling short of the estimated €0.52. Gross profit margin declined by 220 basis points to 59.5% in the quarter, mainly due to the temporary impact of expanding its production capacity to meet rising demand and maintaining product supply across different markets.

However, Birkenstock’s revenue increased by 15% in the Americas and 19% in Europe during the third quarter. However, growth in both regions slowed compared to the previous quarter, indicating a potential pullback in consumer spending. The company’s total revenue rose 19.3% to €564.8 million, slightly missing analyst forecasts of €565.2 million.

Birkenstock is actively expanding its direct-to-consumer channels, where products are sold at full price, and increasing its market share among key retailers like Nordstrom and Foot Locker. Despite the current margin pressures, the company remains optimistic, maintaining its annual sales and adjusted EBITDA forecasts.

Retail

Best Buy Shares Surge as Profit Outlook Improves Amid Cost Reductions

Best Buy raised its profit forecast for fiscal year 2025, citing tighter cost controls that helped counterbalance the impact of increased discounts and promotions.

The electronics retailer now expects adjusted earnings per share to range between $6.10 and $6.35, up from the previous estimate of $5.75 to $6.20 per share.

Best Buy shares are rallying by 8% in premarket trading, continuing an upward trend that has seen the stock increase by about 14% this year.

The company has implemented several cost-saving measures, including a revamped membership program and job cuts as part of a broader restructuring to bolster margins amid weaker consumer demand.

Best Buy also reported a smaller-than-expected 2.3% decline in second-quarter comparable sales, better than the 3.2% drop analysts had anticipated.

The retailer benefited from consumers looking to upgrade laptops and tablets, as well as from demand for new technologies like Microsoft’s AI-powered Copilot+ PCs.

Retail

Dollar General Shares Drop 23% After Cutting Sales and Profit Outlook

Dollar General (DG) revised its annual forecast for same-store sales and profit downward, citing reduced consumer spending on non-essential, higher-margin items as customers focus on necessities like groceries.

This announcement is causing the company’s shares to plummet by about 23% in premarket trading today.

The discount retailer has experienced sluggish demand for higher-priced categories, including home goods, electronics, toys, and apparel, as customers increasingly prioritize essential purchases.

Even though supply chain costs have decreased from their peak levels, Dollar General's margins remain under pressure due to persistent labor costs, increased markdowns, and inventory damages.

The company now expects fiscal 2024 same-store sales growth to range from 1.0% to 1.6%, down from the previous estimate of a 2% to 2.7% increase.

Additionally, Dollar General revised its annual earnings per share guidance to between $5.50 and $6.20, significantly lower than the earlier forecast of $6.80 to $7.55 per share.

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BioCardia, Inc. [BCDA] - Last Close: $2.20

BioCardia's stock is surging 150% in premarket trading after the FDA approved a protocol amendment for its CardiAMP Heart Failure II Trial, enabling more patients to receive treatment using a personalized dosing approach based on the CardiAMP Cell Population Analysis.

This change expands patient eligibility and enhances the clinical experience for those with ischemic heart failure with reduced ejection fraction (HFrEF).

Autozi Internet Technology (Global) Ltd. [AZI] - Last Close: $2.62

Autozi Internet Technology shares are up 50% immediately after its initial public offering (IPO).

The company, a leading automotive service provider in China, offered 2,500,000 Class A ordinary shares at $4 per share, aiming to raise approximately $10 million before expenses. The shares were listed under the ticker AZI yesterday.

The stock closed at $2.62 yesterday.

Affirm Holdings, Inc. [AFRM] - Last Close: $31.58

Affirm Holdings is trading 24% higher in the premarket session.

The company reported strong fourth-quarter earnings and positive first-quarter guidance yesterday.

It posted a quarterly loss of 14 cents per share, beating the expected loss of 51 cents per share. Revenue for the quarter reached $659 million, also exceeding analyst estimates by 9.17%.

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Everything Else

• Xi called for positive U.S.-China relations during a meeting with Sullivan.

• Pavel Durov faces charges in France for inadequate content moderation on Telegram.

• Big Lots is exploring bankruptcy and seeking investors after sharp sales decline.

• Turkey, Iraq, Qatar, and the UAE are discussing a major regional transport project.

• The ECB is anticipating a sharp deceleration in pay increases over the next two years.

• Irish betting giant Flutter is disputing a $330 million judgment in Georgia.

• Campbell’s is expecting stronger annual sales amid sustained demand.

That’s all for today. Thank you for reading. If you have any feedback, please reply to this email.

Best Regards,

— Adam Garcia
Elite Trade Club

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