Stock Market Commentary for 3/31/2021:
- + President Biden is expected to reveal his $3 trillion infrastructure plan today.
+ The March Consumer Confidence number far exceeded expectations, surging to 109.7. Classic reopening plays such as airlines, rallied after the data release.
– The 10-Year Treasury Yield jumped to its highest level in 14 months. This lead to a selloff in technology shares.
– Trading could remain volatile in the first half of the week, as fund managers adjust their positions at the end of the first quarter.
- Stock Talk:
The Winner of the Day: Plug Power
For the month of March, the stock is down more than 35%. That downtrend took a breather Tuesday morning, after the company announced plans for a new hydrogen production facility.What’s Moving Pre-Market: Chewy
Chewy rallied 9.24% in after-hours trading, after beating earnings and setting guidance ahead of expectations.
The Loser of the Day: Ubiquiti
Ubiquiti plunged as Rosen Law Firm, a global investor rights law firm, announced it is investigating potential securities claims on behalf of shareholders.
- The Data Room:
– Per the CDC, 96 million Americans have received their first round of vaccinations.
– By Raymond Kanyo
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Top Investment Story #1: Lulu Earnings
What is Happening?
Options traders were optimistic going into Lululemon’s ($LULU) earnings after-hours on Tuesday. Contracts for out-of-the-money, short-term calls with strikes of $340, $360, and $380, were highly active midday. Let’s see how the earnings went.
Why does this Matter?
Lulu posted a slight earnings beat after-hours on Tuesday. On an adjusted EPS basis, the firm reported results of $2.58 per share, against expectations of $2.49 per share.
What impressed investors, and could start a potential rally, is the firm’s direct-to-consumer sales growth. Direct-to-consumer sales accounted for 52% of the firm’s total revenues for the quarter, up from 33% over the same time frame last year. This was a key metric for investors, and Lululemon executives noted that they are only in the “early innings” of the firm’s growth for that particular metric. Furthermore, there was excitement in segmented sales metrics. Women’s sales increased 19% year over year, and men’s sales grew by 17%. International sales was a hot topic during the call, as $LULU reported 52% growth during the quarter, compared to 33% the year prior.
These results corresponded with an instant 2% gain after-hours for the stock. However, the firm’s forward guidance was not so optimistic. The firm called for between $5.55B – $5.65B in total revenues for 2021, resulting in an adjusted EPS between $6.30 and $6.45 per share. These estimates were more in line with current analyst sentiment, and didn’t spark the level of excitement options traders were hoping for.
$LULU shares are down 8% year to date, disappointing investors who have ridden the firm’s hyper-growth wave of the last couple of years. While earnings certainly did not flop, it may not be wise to hold our breath on those short-term $380 strikes.
– By Jack Dunne
Meet the Authors
Top Investment Story #2: Space is Falling
What is Happening?
The time has come where Space seems to be the final frontier of investing, but is it worth buying just yet? The ARK Space Exploration & Innovation ETF’s (“Fund”) $ARKX, began trading on Tuesday, and opened with a loss.
Why Does This Matter?
The composition of the fund has received scrutiny from the public on media platforms such as Twitter. However, Ark Invest analyst Sam Korus boldly told CNBC’s Morgan Brennan, he believes space is already playing a massive role in the worldwide economy, and is only going to expand.
Korus goes on to add, “The fact that people are dismissing this out of hand is very reassuring to us, and kind of demonstrates the type of research that we’re doing and how we can be unique.” He claims ARK is essentially “choosing winners long term,” particularly in aerospace – where many companies face massive obstacles and go bust.
$ARKX is an actively-managed ETF that will invest primarily (at least 80% of its assets) in domestic and foreign equity securities of companies that are engaged in the Fund’s “theme” of space exploration and innovation. The Fund consists of 39 stocks, including Iridium and Virgin Galactic, as well as defense and aerospace giants Kratos, L3Harris, Lockh
Included in the selection are also a number of companies not traditionally included in space talk, such as Chinese e-commerce firms JD.com and Alibaba, and agriculture businesses like Trimble and Deere.
It is important to note that many emerging space companies got passed over in $ARKX. Cathie Wood, Founder of ARK Investment Management, and $ARKX have also struggled this year despite their popularity.
Investors should keep an eye on $ARKX, but avoid getting trigger happy just yet. Many other Space centered ETFs, like UFO, have surged in response to the announcement of $ARKX’s launch.