“The bottom-line is that this deal is not material to Ulta in FY21 but does give it another growth channel. A bigger question is why do this? Clearly, it reflects the lack of store opportunity for Ulta in the U.S.,” writes Zolidis in note on Target’s deal with Ulta.
Covid numbers & stimulus dynamic matter much more, in our opinion. Over the next few weeks, we expect to be inundated with articles on discussing each candidate’s respective platform and the potential ramification for stock prices. However, the reality is that not much will change, regardless of who wins, at least in the foreseeable future. Both candidates will continue the Fed’s stimulative policies with trillion-dollar packages likely, and neither will make coronavirus go away. Get ready for a few weeks of handwringing and anxiety which will eventually cumulate in the unsatisfying sensation of being exhausted from running in place.
Even as Lululemon stock eases from record highs, John Zolidis, president of Quo Vadis Capital, said in a research note before the earnings that he believed Wall Street “does not appreciate the material structural benefit from revenues shifting to the digital channel.”
Following last week’s setback equity markets (the S&P500) are still up 6% YTD and more than 50% above than the depths of corona-panic levels in March. We anticipate it getting more difficult over the near-term. The recovery in sectors hurt by Covid19 is decelerating. Meanwhile, many companies that have benefited from the pandemic have their best results behind them. The Fed remains supportive, but more than 10 million people are still without a job compared to last year. It took five years to create 10 million jobs in the period leading up to 2020. Next up, a two-month countdown to a Presidential election in an era of simmering social tension.
Distortion from coronavirus has aided, not hurt, large technology firms, and these continue to lead the market higher. The debate around the valuation of Big Tech is not new but has reached a new level of anxiety with the top five names valued at $6.6 trillion and comprising more than 20% of the S&P500. We are not particularly concerned. We remain bullish regarding the long-term outlook and prospects for exceptional companies including Big Tech to create value.
John Zolidis, analyst at Quo Vadis capital, said other analysts were overlooking the positives of the management change and saw other benefits for Sprouts Farmers Market stock.
“Analysts appear (in our opinion) to be ignoring a complete turnover in the executive suite and accelerated investments in digital engagement and the rollout of delivery and pickup,” he said in a research note on Tuesday. “We believe the near-term benefit of these efforts is not reflected in forecasts, setting up very substantial upward revisions to earnings.”
Stock prices may be disconnected from media negativity and risks related to a still-untamed coronavirus pandemic, but this can be understood and is normal, in our opinion. In this newsletter we argue that uncertainty and possibly scary valuations do not mean you should run away from equities. Our view is unchanged. We remain bullish regarding the long-term outlook and prospects for exceptional companies to create value.
Dire forecasts for the end of the world have not come to pass. The resurgence reflects 1) investor anticipation of things getting better at some distant point in the future, 2) the fact that some companies have actually seen business improve during the Crisis, and 3) a broad-based shift in sentiment to optimism from fear. We remain bullish on the long-term potential for the U.S. economy and for exceptional companies to do well.
“These businesses do very well when times are tough,” said Quo Vadis’ Zolidis. “Accordingly, we would expect these companies to continue to see a traffic and (possibly) profit boost for the foreseeable future. We would be buyers of both Dollar Tree and Dollar General today.”
“It was just explosive, humongous growth, and those numbers were very seductive to a lot of investors,” said John Zolidis, a restaurant-industry analyst and president of Quo Vadis Capital, which said it has never bought or sold Luckin stock.