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Please enjoy this updated version of weekly commentary from the Reitmeister Total Return newsletter. Steve Reitmeister is the CEO of StockNews.com and Editor of the Reitmeister Total Return.Click Here to learn more about Reitmeister Total Return

SPY – The recent sell off is over for the stock market…but are stocks really ready to make new highs above 4,600 for the S&P 500 (SPY)? 43 year investment veteran Steve Reitmeister shares his latest market outlook, trading plan and top picks in this fresh commentary below…

It’s been a couple weeks since my last commentary thanks to a much enjoyed vacation. Gladly most of that time stocks were in the plus column as the market rightfully bounced from recent weakness.
This fits in with my theory that we will be playing around in a trading range for a while. 4,600 for the S&P 500 (SPY) being the top end of the range and 100 day moving average (currently at 4,337) framing the bottom.
How long will we be in the range?
And what will be the catalyst to finally break out of the range?
And what are the best trades for this market environment?
Those key questions and more will be explored in this week’s Reitmeister Total Return commentary.
Market Commentary
As expected, the early August downturn was nothing more than a healthy round of profit taking after the tremendous bull run that started in March. Thus, after seeing a fairly customary 5% pullback investors were ready to hit the buy button again pushing stocks the S&P 500 higher.

Moving Averages: 50 Day (yellow), 100 Day (orange), 200 Day (red)
The recent bounce is nice…but are investors truly ready to break out of the range and make news highs above 4,600?
I believe the answer lies in a review of the recent slate of economic events. This should tell us if we have the proper catalysts in place to race to new heights:
8/25 Jay Powell @ Jackson Hole:  Remember that last time in 2022 Powell scared the pants off investors with his hawkish rhetoric. The key line being to expect economic pain (recession and job loss) before their war on inflation was over. This led to stocks going on a severe two month sell off to bear market lows in October 2022.
This time around Powell gave the usual sound bites. Inflation is too high…more work to do…may need to raise rates.
At first, investors were still in correction mode and hung on the words about “may need to raise rates”. This initially put some red arrows on the board. But as the day progressed investors realized that it was truly no different than any speech given by the Fed in the last several months. From there stocks leapt higher and have not looked back.
9/1 Government Employment Situation: Pretty much right on the money at 187K jobs added. The big surprise was how the unemployment rate unexpectedly jumped from 3.5% to 3.8% as the participation rate also went up. The best part of the report was that wage inflation continues to moderate with a lower than expected +0.2% month over month increase (that is only about 2.4% annualized…not far off the Fed’s target).
This all fits in with the narrative that the Fed is making serious headway with inflation and that more rate hikes are likely not needed. The bigger question is when rates can start to head lower. They say that is a 2024 issue…perhaps true. But it is still possible to start in late 2023. Either way it was welcome news to stocks that rallied hard on this news to end a strong week of price action.
Note that back on 8/29 the JOLTs report gave clues that the jobs market is softening with fewer and fewer job openings (see chart below). This trend also speaks to the likelihood of moderating wage growth which is one of the stickier parts of the inflation picture.

9/1 ISM Manufacturing: This has been the weakest part of the economic picture with 9 straight readings under 50. Make that 10 months now with the 47.6 reading. Gladly that is the 2nd straight month of improvement. Note the PMI version of this monthly report was even more optimistic.
And now a glimpse of the key reports that lie ahead:
9/6 ISM Services: This is the larger, and healthier part of the economy where we got a 52.7 reading last month. Right now expectations call for a fairly similar reading of 52.4. Yet I suspect the strength of the most recent Retail Sales report may say there is some upside to that number.
9/13 Consumer Price Index (CPI): Investors like to focus on this inflation report even though the Fed has consistently said they find the Core PCE reading to be the much more reliable inflation indicator. Regardless, this has been trending nicely lower and mostly coming in under expectations for the past several months.
Too much focus is given to the year over the year # which has a lot to do with inflation many months ago. That is why experts like to drill down to the month over month readings which gives a sense of the current pace of things. That is expected to modulate to +0.2% which again is getting much closer to the Fed’s 2% annualized target. And will have folks readjusting odds for what happens  on the next item…
9/20 Fed Rate Announcement: Right now it’s a forgone conclusion the Fed will stay put on rates at this meeting. What is not as certain is whether they have one more rate hike up their sleeves…and when they finally start lowering rates as the longer they leave these restrictive policies in place…the more they risk a recession forming.
Right now the CME calculates 40% odds of 1 more hike by the end of the year (either at November or December meeting). Honestly, with the facts in hand, I don’t see that happening. The nails are already in the inflation coffin. Just better to apply some patience to see it through as Fed policy typically has 6+ months of lagged effects.
Expectations & Trading Plan
We are in a young bull market…but still not out 100% out of the woods. Meaning the Fed has a history of going too far with their policies thereby creating a recession.
I sense this group is wiser than some of their predecessors and will manage the soft landing from which they can lower rates…which will be an elixir for economic growth…earnings growth…and share price growth.
So for as positive as recent economic news has been, for right now I expect a bit more time in the aforementioned trading range (4,337 to 4,600). And that time will likely be volatile with no seeming direction. That is the very nature of trading ranges.
All you have to do is keep your eyes on the long term horizon which is bullish which gives you ample reason to load up on the best stocks now for WHENVER the catalysts come to push them higher. Meaning don’t stay on the sidelines any longer. The time to get on the bull train is now.
The next section will discuss a bit more about which are the best investments to stay a step ahead of the pack.
What To Do Next?
Discover my current portfolio of 7 stocks packed to the brim with the outperforming benefits found in our POWR Ratings model.
Plus I have added 4 ETFs that are all in sectors well positioned to outpace the market in the weeks and months ahead.
This is all based on my 43 years of investing experience seeing bull markets…bear markets…and everything between.
If you are curious to learn more, and want to see these 11 hand selected trades, then please click the link below to get started now.
Steve Reitmeister’s Trading Plan & Top Picks >
Wishing you a world of investment success!

SPY shares . Year-to-date, SPY has gained 18.36%, versus a % rise in the benchmark S&P 500 index during the same period.

About the Author

Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks.

Gannett Co., Inc. (GCI) was recently hit with a lawsuit alleging that its efforts to diversify its newsrooms led to discrimination against white employees. GCI is the largest media company by print audience and one of the largest by digital audience. The company has over 218 daily publications with several hundred weeklies.
Five current and former employees claimed they were either fired or ignored for promotions in favor of lesser-qualified women and people of color. The plaintiffs said these decisions were driven by the company’s Reverse Race Discrimination Policy in 2020 to make its workforce as diverse as the country by 2025.
The plaintiffs alleged that the policy discriminated against non-minorities based on their race. The lawsuit read, “Gannett executed their reverse race discrimination policy with a callous indifference towards civil rights laws or the welfare of the workers, and prospective works, whose lives would be upended by it.” According to the lawsuit, GCI had tied executive bonuses and promotions to achieve the goals indicated in the policy.
The suit cites the Supreme Court’s decision to eliminate race-based college admissions. The court rejected practices that allowed race to be sometimes a deciding factor in a person’s admission to a college. Chief Justice John Roberts remarked, “eliminating racial discrimination means eliminating all of it.”
In a statement, GCI’s chief legal counsel, Polly Grunfeld Sack, said, “Gannett always seeks to recruit and retain the most qualified individuals for all roles within the company. We will vigorously defend our practice of ensuring equal opportunities for all our valued employees against this meritless lawsuit.”
The plaintiffs and class are seeking an order to eliminate GCI’s Reverse Race Discrimination Policy and lost wages, back pay, including lost fringe benefits. GCI is not the first company to be sued for its diversity programs. However, unlike other cases brought by conservative groups, GCI is being sued by its former and current employees.
GCI’s stock doesn’t appear to have reacted to the news, as it has gained 6.6% over the past month.
Here’s what could influence GCI’s performance in the upcoming months:
Mixed Financials
GCI’s total operating revenues for the second quarter ended June 30, 2023, declined 10.2% year-over-year to $672.36 million. Its same-store total revenues decreased 8.6% over the prior-year quarter to $673.26 million. The company’s adjusted net loss attributable to GCI narrowed 85.3% year-over-year to $5.98 million.
On the other hand, its adjusted EBITDA rose 39.9% over the prior-year quarter to $71.15 million. Its non-GAAP free cash flow came in at $38.42 million, compared to a negative non-GAAP free cash flow of $43.27 million.
Mixed Analyst Estimates
Analysts expect GCI’s EPS for fiscal 2023 to increase 131.6% year-over-year to $0.18. On the other hand, its EPS for fiscal 2024 is expected to decline 44.4% year-over-year to $0.10. Its fiscal 2023 and 2024 revenue is expected to decrease 7.7% and 2.3% year-over-year to $2.72 billion and $2.65 billion.Discounted Valuation
In terms of forward EV/Sales, GCI’s 0.62x is 65.9% lower than the 1.81x industry average. Its 5.63x forward EV/EBITDA is 33.4% lower than the 8.45x industry average. Likewise, its 14.02x forward EV/EBIT is 9.9% lower than the 15.57x industry average.
Mixed Profitability
In terms of the trailing-12-month Return on Total Capital, GCI’s 4.15% is 18.8% higher than the 3.49% industry average. Likewise, its 1.12x trailing-12-month asset turnover ratio is 132.1% higher than the industry average of 0.48x.
On the other hand, GCI’s 9.95% trailing-12-month EBITDA margin is 45.9% lower than the 18.38% industry average. Likewise, its 4.37% trailing-12-month EBIT margin is 48.7% lower than the 8.50% industry average. Furthermore, the stock’s 4.12% trailing-12-month levered FCF margin is 48.6% lower than the industry average of 8.01%.
Bottom Line
Although GCI has been sued by workers over its Reverse Race Discrimination Policy, the company’s workforce comprises more than 70% white. Moreover, more than 80% of leadership positions are held by white individuals. However, if the lawsuit against GCI is successful, the company may have to overturn its reverse race discrimination policy and compensate the plaintiffs and the class.
Amid this potential uncertainty arising from this legal challenge and its mined financials, it could be wise to wait for a better entry point in the stock.

With the pandemic firmly in the rear-view mirror, consumers are ever keener to redeem their pile of airline miles on other travel rewards on their credit cards for new experiences through “revenge travel.” Revenge travel has its origins in “baofuxing xiaofei” or “revenge spending,” an economic trend that originated in 1980s China when a growing middle class had an insatiable appetite for foreign luxury goods.
Since e-commerce, albeit with a few hiccups in the supply chain, was able to satiate the appetite for goods through the pandemic, Americans are now going above and beyond to compensate for the years spent indoors trying to substitute real experiences with virtual ones.
The trend is expected to gain further momentum with the relaxation of restrictions on international travel that were put in place by China as part of its strict and controversial “Zero-Covid” policy. Consequently, air traffic between the U.S. and China is expected to double in volume by the end of October.
According to an order by the U.S. Transportation Department, each country will gain an additional six weekly round-trip flights as of September 1, up from the current 12, with the total number of flights for each nation planned to rise to 24 by October 29.
In this context, here are three U.S airlines that stand to benefit the most from the persistent tailwind:
On July 13, Delta Air Lines, Inc. (DAL) reported record revenues and earnings for the fiscal second quarter driven by strong demand for international travel, premium seals, and a 22% decline in fuel expenses. The Atlanta-based airline’s adjusted revenue and EPS came in at $14.61 billion and $2.68, compared to consensus estimates of $14.49 billion and $2.40, respectively.
Given that airlines conduct the bulk of their business in the second and third quarters, DAL hiked its 2023 earnings forecast to an adjusted $6 to $7 a share, up from its previous estimate at the high end of a $5 to $6 per share range.
United Airlines Holdings, Inc. (UAL) has also been on a purple patch which has seen the carrier posting record quarterly earnings and forecast a strong third quarter amid an unprecedented domestic and international travel boom.
The carrier’s total revenue came in at $14.18 billion, compared to consensus estimates of $13.91 billion. Its net income came in at $1.08 billion, which resulted in an adjusted EPS of $5.03 for the quarter that surpassed Street expectations of $4.03.
International flights made up 40% of the revenue, but the segment is growing faster than domestic ones amid the overdue relaxation of strict Covid restrictions overseas. 
Despite ten consecutive interest-rate hikes by the Federal Reserve, it isn’t difficult to connect the dots and understand why American Airlines Group Inc. (AAL) has had to turn to bigger airplanes, even on shorter routes, and jumbo-jets, such as the Boeing 747 and the Airbus A380, are being brought back to help ease airport congestion and work around pilot shortages.
As a result of this tailwind, AAL’s revenue for the fiscal second quarter topped analyst estimates to come in at a record $14.06 billion, up 4.7% year-over-year. With the airline’s executives bullish on travel demand, particularly for international trips, the operator has raised its earnings outlook for the fiscal year 2023.
Dark Clouds Around the Silver Lining
“If something cannot go on forever, it will stop.” The obviousness of this observation made by Herb Stein was what made it famous.
Amid widespread convictions that pent-up demand for travel will be a multi-year demand set, it is easy to get carried away by the “pent-up demand” and “revenge travel” narrative.
However, the rise of remote work and virtual teams, facilitated by contemporary collaboration and productivity tools, seems to have become an immune and immutable remnant of the cultural sea-change our work and lives had to adopt and adapt to during the pandemic, new reports give us reasons to doubt whether business travel is ever going back to normal.
In such a situation, with traveling for leisure being an occasional indulgence in most of our lives, there are risks that the pent-up demand might not be enough to sustain the momentum that is propelling the growth performance of DAL and other airlines, which are primarily in the business of ferrying passengers.
Moreover, with ticket prices at all-time highs and the stash of pandemic stimulus cash, fueling the leisure travel boom expected to run out over this quarter, it is unsurprising to find tricks and trends, such as ‘skip-lagging’ and consumers trading down on travel being on the rise.
Across the Pacific, with the Chinese economy currently battling triple threats of deflation, chronically high youth unemployment, and an ever-intensifying real-estate debt crisis, it could be unrealistic to expect any appreciable recovery in overseas travel demand among the aging, shrinking, and deurbanizing Chinese population that’s holding on to its savings for dear life amid macro-economic uncertainties that could bring about a lost decade.
Moreover, geopolitical relations between the U.S. and China have been souring because of differences regarding the latter’s territorial claims. The trade war between the two superpowers is intensifying amid restrictions on exports of semiconductor chips and investments in other cutting-edge technology by the former, and the latter upping the ante won’t help matters either as far as civil aviation between the two countries is concerned.
Bottomline
While U.S. air carriers and their Chinese peers would want nothing more than for passenger demand to stay strong and, perhaps, keep growing, the most likely case would be a return to seasonality and cyclicality, as is typical of the airline industry.
However, the possibility of passenger demand falling off a cliff and investors rushing for the exits only to find that the clock struck midnight and the chariot turned back to a pumpkin can’t be completely ruled out.
Either way, every flight that takes off has to land at some point. However, amid widespread tail risks, investors, both current and prospective, would be wise to fasten their seatbelts because the skies ahead are anything but clear.

Please enjoy this updated version of weekly commentary from the Reitmeister Total Return newsletter. Steve Reitmeister is the CEO of StockNews.com and Editor of the Reitmeister Total Return.Click Here to learn more about Reitmeister Total Return

SPY – The big early 2023 bull rally for the S&P 500 (SPY) is now officially over. What comes next? How best to trade this more difficult environment? And what are the best picks for the months ahead? Steve Reitmeister answers those questions and more as you read on below…

Yes, a nearly 20% rally to start 2023 is a lot more fun for investors than the current pullback. Unfortunately, those kind of rallies are never built to last.
Now may not be as much fun…but it is more realistic.
So let’s focus on the current realities, and what happens next for the stock market in this week’s Reitmeister Total Return commentary…
Market Commentary
After a long bull run we are enduring a classic pullback to digest previous gains. My belief is that we will emerge into a new trading range where we will hang out for a while before the next leg higher.

Moving Averages: 50 Day (yellow), 100 Day (orange), 200 Day (red)
4,600 for the S&P 500 (SPY) appears to be the top end of the range. Now we are trying to find the bottom.
As you can see Tuesday was the first test of the 50 day moving average since late May where we closed about 10 points below. Quite possible that support is found shortly and stocks bounce higher…but what if that is not the case?
I suspect that 4,400 could be ample area of support just 1% below the Tuesday close. That gives stocks a comfy 5% trading range to play in as we await the next catalyst.
Unfortunately, anything is possible and we could keep cutting lower to really clear out some of the complacency that comes with extended bull rallies. Yet, I don’t think that a test of the 200 day at 4,122 is in the cards. We would need some seriously negative events to emerge, like increased recession risk, to give that idea credence.
I suspect that 4,400 is likely as low as we need to go on this pullback. But if worse comes to worst, maybe a more serious washout down to the 100 day moving average at 4,284 is in the offing. That would not be so terrible given that the year started just a notch above 3,800.
Trading ranges are a time when investors have not fully made up their mind on what to do next. This makes stock prices very susceptible to the future crop of headlines.
Meaning that more positive/bullish events will have stocks bolting higher. Whereas more negative/bearish events will have the reverse effect, pushing stocks further lower.
This makes it important for us to review the upcoming events calendar to see what could be the next big move catalyst:
First, a backdrop that the last GDP reading was +2.4% for Q2. And the current Atlanta GDP Now estimate stands at +5.0% for the Q3. There is no way it will end up that high. Yet it does explain why the long term outlook is primarily bullish.
Point being that right now the view of the economy is positive. Thus, these upcoming announcements could either further bolster that notion…or call that rosy outlook into question.
8/16 FOMC Minutes: The Fed did finally start their “dovish tilt” at the late July meeting. Now investors will pour through the minutes for more clues of the likelihood of future rate hikes. Right now investors are betting on much greater likelihood they are done raising rates. The key question being when they start lowering rates. That event will be a bright green light for stock investors.
8/23 PMI Flash: This report rarely makes headlines, but is a strong leading indicator of the trends found in the next round of ISM Manufacturing & Services reports the first week of the new month. Thus, always beneficial to review this announcement to appreciate if odds of recession are going higher or lower.
9/1 Government Employment Situation: This continues to ebb lower as the Fed rate hikes slow down the economy. But gladly has not tipped over into negative territory that would raise the unemployment rate…and risk of recession. Right now the forecast calls for 180,000 jobs added which would be a very “Goldilocks” outcome where the unemployment rate would stay low. On the other hand, not so many jobs created as to heat up wage inflation that would concern the Fed.
9/1 ISM Manufacturing: This has been the weakest part of the economic picture with 9 straight readings in contraction territory (below 50). Right now, it seems that June may be the worst of these readings with July a notch higher…and the August reading on 9/1 expected to be another step in the right direction.
9/6 ISM Services: This is the larger, and healthier part of the economy leading to the positive GDP readings. It is currently expected to be somewhat in line with last month’s 52.7 reading, which is modestly in expansion territory. However, Tuesday’s impressive Retail Sales report may have estimates for this report moving higher in the days ahead.
9/13 Consumer Price Index (CPI): Inflation reports are the most telling of what the Fed will do with future rate hike decisions. Gladly this key inflation report has been moderating faster than expected for quite some time. Thus, that positive trend staying in place will be key to reignite bullish sentiment.
Trading Plan
As shared above, I think we are enduring a long overdue pullback to take the ripe early 2023 profits off the table. The main question is how low we need to go to find the bottom?
From the outset I had my eyes set on 4,400 as a logical bottom…but who says the stock market is logical?
The point is that I am using this pullback to stock up on the best trades for the eventual rise back to the top of the range…and likely flirting with the all time highs of 4,818 by the time we close the books on 2023.
One always feels foolish buying stocks early in a pullback as these new trades will just show red arrows for a while. But since this pullback is only temporary before the next leg higher…and perfect timing is nearly impossible…then it’s better to be too early, than too late.
Meaning that now is as good of a time as any to load up on the best stocks. Which are those? That is what the next section will discuss…
What To Do Next?
Discover my current portfolio of 6 stocks packed to the brim with the outperforming benefits found in our POWR Ratings model.
Plus I have added 4 ETFs that are all in sectors well positioned to outpace the market in the weeks and months ahead.
This is all based on my 43 years of investing experience seeing bull markets…bear markets…and everything between.
If you are curious to learn more, and want to see these 10 hand selected trades, then please click the link below to get started now.
Steve Reitmeister’s Trading Plan & Top Picks >
Wishing you a world of investment success!

SPY shares rose $0.03 (+0.01%) in after-hours trading Tuesday. Year-to-date, SPY has gained 16.68%, versus a % rise in the benchmark S&P 500 index during the same period.

About the Author

Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks.

In our June 3 post, we concluded that the resurgent Intel Corporation (INTC), which had weathered back-to-back quarterly losses amid softening PC demand, consequent surplus inventory, and realignment toward GPU-heavy and AI-centered enterprise demand, could be worth more than what was being suggested by its market price at that time.
By announcing its return to profitability during last week’s earnings release, the pioneer of modern computing lived up to our expectations while exceeding the ones on the Street. INTC posted a net income of $1.5 billion, compared to a net loss of $454 million during the previous-year quarter. Its adjusted EPS came in at $0.13 compared to an adjusted loss of $0.3 per share expected by Wall Street.
While the Market greeted the news with a 7% surge in the stock price in extended trading and a further 5% gain the following morning, INTC’s revenue, despite exceeding low expectations, declined 15.7% year-over-year to $12.9 billion, marking the sixth consecutive quarter of sales decline.In view of a subdued topline, much of the outperformance in the quarterly results can be attributed to the progress INTC had made in cutting $3 billion in costs this year.
In addition to exiting nine lines of business since CEO Pat Gelsinger rejoined INTC to achieve a combined annual savings of more than $1.7 billion, the company slashed its dividend and announced plans to save $10 billion per year by 2025, including through layoffs.
With INTC’s cloud computing group, which includes the company’s laptop and desktop processor shipments, and server chip division, which is reported as Data Center and AI, reporting year-over-year declines of 12% and 15%, respectively, Pat Gelsinger forecasted “persistent weakness” in all segments of its business through year-end, and that server chip sales won’t recover until the fourth quarter.
With upside through cost optimization capped and customers prioritizing GPUs over CPUs to handle ever-increasing AI/ML workloads, INTC is eager to join the race currently being led by NVIDIA Corporation (NVDA) and Advanced Micro Devices, Inc. (AMD). The company is working on the manufacturing front, for which it significantly depends on Taiwan Semiconductor Manufacturing Company Ltd. (TSM).
By doubling down on the fab business, INTC aims to match TSM’s chip-manufacturing capabilities by 2026, enabling it to bid to make the most advanced mobile processors for other companies, a strategy the company calls “five nodes in four years.”
To that end, INTC is pursuing an aggressive IDM 2.0 road map with new manufacturing facilities in Oregon, New Mexico, Arizona, Ireland, and Israel in the pipeline to augment the capabilities of 15 fabs worldwide and facilities to assemble and test the manufactured chips in Vietnam, Malaysia, Costa Rica, China, and the U.S.
Among those, Arizona’s new facilities would be manufacturing chips for the company and customers such as Amazon, Qualcomm, and others as part of Intel Foundry Services. While the company still depends on TSMC for 5nm chips used for AI applications, it aims to take a quantum leap in that direction with even smaller 18 A chips.
While companies such as Amazon.com, Inc. (AMZN) are resorting to chips designed in-house to support their cloud infrastructure, INTC, in addition to being the manufacturer of both wafers and packaging of AI accelerators, is also present with its Gaudi chips.
The company’s efforts are also receiving much-needed political encouragement in the form of the Chips and Science Act, which is aimed at on-shoring and de-risking semiconductor manufacturing in the interest of national security.
Recently, Pat and his team at INTC upped the ante by unveiling its new ambitious plans to incorporate AI into every product it creates. This announcement comes as the company’s upcoming Meteor Lake chips are rumored to feature a built-in neural processor specifically designed for handling machine learning tasks.
With an objective to “democratize AI,” Pat was loud and clear about INTC’s plans to make it a ubiquitous and integral feature of its products designed to cater to all segments of the computing ecosystem, including “at the edge in the Client, in the enterprise, as well as in the cloud.”The upbeat CEO forecasted that AI would permeate all business domains, including the client-facing consumer electronics market, enterprise data centers, and even manufacturing, and make its way into personal devices, such as hearing aids and personal computers. AI is already present as a co-pilot for Windows 11, allowing users to type questions and perform specific actions, and it could play a significant role in the next iteration of Windows.
Bottom Line
For the third quarter of the fiscal, INTC expects adjusted earnings of 20 cents per share on $13.4 billion revenue at the midpoint.Whether or not INTC manages to meet or exceed the above target could go a long way in helping investors determine if its ambitious turnaround is on track to restore the company to its former glory.

Last week, at the Amazon Web Services (AWS) Summit in New York, San Francisco-based cloud communication and customer engagement platform Twilio Inc. (TWLO) announced its strategic partnership with technology giant Amazon.com, Inc. (AMZN). Right on cue, the market welcomed the announcement with more than a 5% intraday gain in the former’s share price while surging by as much as 11.7% during the trading session.
The Partner
As a dominant player in the CPaaS (Communications-Platform-as-a-Service) market, TWLO provides businesses with the tools to integrate voice calls, text messages, and security verification tools into their software and apps to drive customer engagement by facilitating seamless and personalized interactions on demand. This empowers businesses to expand their customer base and communicate with clients across the globe.
While potential growth avenues for TWLO include expanding its CPaaS offerings and forging partnerships with other major tech companies, competition from established tech giants could impact the company’s operations and revenue generation. However, that concern seems to have been mitigated by TWLO’s artificial intelligence (AI)-fueled strategic partnership with AMZN.
The Partnership
The renewal of vows and strengthening of ties, which seeks to enhance the company’s predictive AI proficiency, has closely followed a vote of confidence from the tech giant in which AMZN announced that it has acquired 1% stake in TWLO earlier in the week with its ownership of 1.77 million shares worth more than $108 million.
The association between the two businesses started back in 2016 when TWLO began serving as a Marketplace partner for AWS, which had become the world’s largest cloud infrastructure platform. It signed two deals with AMZN to directly integrate its communication tools into AWS, which enabled developers to easily add TWLO’s voice calls, text messages, audio clips, and other features to their mobile apps.
Fast forward to June 2022, and TWLO revealed its CustomerAI, which adds a technology layer that integrates generative AI and predictive AI tools into the company’s customer engagement platform.
According to Twilio CEO Jeff Lawson, who was employed with AMZN between 2004 and 2005, “With generative and predictive intelligence, Twilio’s high-quality interaction data, and Segment profiles working together, every experience can be highly personalized and tuned with a level of sophistication that was previously only attainable by the tech giants. With Twilio CustomerAI, brands can transform their customer relationships and unlock their full potential.”
The Heavyweight
Coincidentally, also in June 2023, AWS, in response to the recent noise around AI being made by frontrunner Microsoft Corporation (MSFT) and challenger Alphabet Inc. – Class A (GOOGL), announced an allocation of $100 million for a center to help companies use generative AI. This technology has captivated the public imagination and shaped the business narrative since OpenAI unleashed ChatGPT.
While $100 million might be an apparent drop in the bucket for a company with $64 billion in cash and half a trillion dollars a year in operating expenses, the investment acknowledges the significance of generative AI and the importance of being a part of the conversation.AWS CEO Adam Selipsky insists that the AI trend is real. For AMZN, that momentum applies to its Bedrock generative AI service and its Titan models, as well as the new innovation center.
While it might seem that the company, which got a head start of no less than seven years over MSFT and GOOGL in the business of renting out servers and data storage to companies and other organizations, might be late to the generative AI game, Selipsky, echoing Amazon founder and longtime CEO Jeff Bezos, said the company has succeeded by listening to customers.
In fact, AMZN’s leadership in the cloud infrastructure market could give the company heft and mileage in the generative AI race. “AI is going to be this next wave of innovation in the cloud,” Selipsky said. “It’s going to be the next big thing that pushes even more customers to want to be in the cloud. Really, you need the cloud for generative AI.”
Moreover, according to Selipsky, AWS provides a measure of credibility in offering generative AI that eludes others in the space. He emphasized, “I can’t tell you how many Fortune 500 companies I’ve talked to who banned ChatGPT in the enterprise. Because at least the initial versions of it just didn’t have that concept of enterprise security.”
Bottom line
TWLO Senior Director of Product Alex Millet expressed his optimism around the company’s partnership with AMZN, “With AWS’ predictive AI technologies, we are rapidly developing AI-native features and APIs.” He further added, “We believe our tools will change the way marketers, contact centers, developers, and data teams deliver these world-class customer experiences.”
Hence, while the OpenAI-MSFT alliance is garnering attention and reaping the first-mover advantage with GOOGL scrambling to play catchup, the coalition of AMZN and TWLO has the potential to emerge as the dark horse in what AWS CEO has termed as a “10K race.”

Last week, in line with broad expectations on the Street, Federal Reserve Chair Jerome Powell announced the unanimous decision by the FOMC to raise key interest rates by another 25 bps. With this move, the central bank has raised the benchmark borrowing cost to 5.25%-5.50%, ratcheting it up from nearly 0% in about 16 months.
With a 2.6% rise in inflation, down from a 4.1% rise in Q1 and well below the estimate for an increase of 3.2%, and an annualized increase of 2.4% in the gross domestic product in the second quarter, topping the 2% estimate, there is increasing belief in the Market that Jerome Powell and his team at the Federal Reserve may be on the cusp of achieving the elusive “soft landing.”
In Mr. Powell’s words, “The staff now has a noticeable slowdown in growth starting later this year in the forecast, but given the resilience of the economy recently, they are no longer forecasting a recession.”
However, ECB raised interest rates by a quarter percentage point shortly after, citing persistent inflation. In such a scenario, despite increased optimism, businesses are expected to remain weighed down by high borrowing costs, and economic activity is expected to remain stifled due to relatively scarce credit.
Hence, there is still a significant probability that in order to overcompensate for the infamous “transitory” call that caused the Fed to arrive (really) late in its fight against demand-driven inflation, the central bank may be sowing the seeds of economic stagflation.
Moreover, with every increase in benchmark interest rates, a selloff of long-duration fixed-income instruments, such as the 10-year treasury notes, gets triggered, which causes a slump in their market value and a consequent increase in their yields. This also increases the benchmark 30-year mortgage rates, thereby depressing demand and deepening the crisis in which real estate has lately been finding itself.
After benchmark 10-year yields jumped by as much as 15 basis points above the key 4% level, Peter Schiff, CEO and chief economist at Euro Pacific Asset Management, warned of a crash in Treasuries. He has also predicted the benchmark 30-year mortgage rates to soon hit 8%, a level last seen in 2000.Mr. Schiff’s apprehensions have also been echoed by David Rubenstein, co-founder of The Carlyle Group, who expressed his concern regarding the fate of commercial real estate as millions of people stay home and companies try to figure out what to do with empty offices.
An increase in borrowing costs would not just raise the cost of servicing the $32.7 trillion national debt; significant markdowns prices of legacy bonds and an inability by borrowers to service them due to economic slowdown could crush the loan portfolios of struggling banks and make them go the way of the dodo, such as the Silicon Valley Bank and the First Republic Bank.
With the Bank of Japan’s policy tweak of loosening its yield curve control sparking widespread shock in the markets that have been teetering on the brink of collapse, there is a material risk that an apparently resilient economy could find itself regressing into a full-blown recession just as Jerome Powell’s colleagues at the Federal Reserve have stopped forecasting it.
With HSBC Asset Management’s warning that a U.S. recession is coming this year, with Europe to follow in 2024, gaining credibility with each passing day, investors increasing their stakes in fundamentally strong businesses could be a time-tested method to navigate Mr. Market’s wild mood swings between unbridled euphoria and manic depression.
Here are a few stocks that are worth considering amid this backdrop:
Apple Inc. (AAPL)
According to a recent note from Fairlead Strategies, the technology and consumer electronics giant could witness a major upside in its stock. According to the agency, the stock could jump to $254 by the end of 2024.
AAPL, which has a history of revolutionizing products like the personal computer, smartphone, and tablet, has begun scripting the next key chapter in its success story with the announcement of its first product in the AR/VR market, the Apple Vision headset, which will sell for $3,499 when it is released early next year.
Regardless of any near-term and temporary softness and slowdown, a compounding machine such as AAPL, which boasts a sticky user base with a retention rate of over 90%, assures the company of adequate cash flow through repeat purchases and upgrades.
Moreover, AAPL’s board authorized $90 billion in share repurchases and dividends. It spent $23 billion in buybacks and dividends in the March quarter and raised its dividend by 4% to 24 cents per share.
Through relentless share repurchases, AAPL increased the existing shareholders’ stake by decreasing its float, thereby increasing the remaining shares’ intrinsic value (and consequently the price) without a proportional rise in market capitalization.
Johnson & Johnson (JNJ)
JNJ has been around for 135 years and is a worldwide researcher, developer, manufacturer, and seller of various healthcare products. The company operates through three segments: Consumer Health; Pharmaceuticals; and MedTech.
Over the past three years, which have been turbulent, to say the least, JNJ’s revenue has grown at a 6.7% CAGR. During the same period, the company also registered EBITDA and total asset growth of 7.7% and 8.1%, respectively.
Despite flagging sales of Covid 19 Vaccines, JNJ’s reported sales during the fiscal year 2023 second quarter increased by 6.3% year-over-year to $25.53 billion. During the same period, the company’s adjusted net earnings increased by 6.5% and 8.1% year-over-year to $7.36 billion and $2.80 per share, respectively.
In addition to its robust financials, the relative immunity of its demand and margins to potential economic downturns make it an attractive investment option for solid risk-adjusted returns.
Walmart Inc. (WMT)
In a previous discussion, we deliberated on how, despite inflationary pressures and online retail altering brick-and-mortar stores in today’s economy, budget retailers, such as WMT, have been relatively immune to the seismic shifts in the consumption ecosystem.
In fact, WMT has attracted new and more frequent shoppers, including younger and wealthier customers, who are turning to Walmart for both convenience and value. Consequently, according to its earnings release for the first quarter of the fiscal year 2024, the big-box retailer surpassed expectations for both earnings and revenue, with sales rising by nearly 8%.
Encouraged by the strong performance, WMT also raised its full-year guidance. It anticipates consolidated net sales to rise about 3.5% in the fiscal year. It expects adjusted earnings per share for the full year will be between $6.10 and $6.20.
WMT’s sales have reflected the shift toward groceries and essentials, with the former accounting for nearly 60% of the annual U.S. sales for the nation’s largest grocer. In fact, WMT’s grocery business helped to offset weaker sales of clothing and electronics, as sales of general merchandise in the U.S. declined mid-single-digits, while sales of food and consumables increased low double-digits.
Another bright spot for the retail giant has been growth in online sales, which jumped 27% and 19% year-over-year for Walmart U.S. and Sam’s Club, respectively. According to Rainey, curbside pickup and home delivery of online purchases fueled the growth.
Far from being complacent, WMT has been doubling down on initiatives, such as reducing and optimizing packaging and leveraging AI/ML to increase the efficiency of its operations.
Duke Energy Corporation (DUK)
As an energy company, DUK operates through two segments: Electric Utilities and Infrastructure (EU&I) and Gas Utilities and Infrastructure (GU&I).Over the past three years, DUK’s revenue increased at a 5.4% CAGR, while its EBITDA has increased by 4.2% CAGR over the same time horizon.
On July 13, DUK announced its quarterly cash dividend of $1.025 per share of common stock, an increase of $0.02, and $359.375 per share on its Series A preferred stock, equivalent to $0.359375 per depositary share, payable on Sept.18, 2023, to shareholders of record at the close of business on Aug.18, 2023.
DUK currently pays $4.10 per share of common stock as annual dividends, which have grown for the past 11 years and at 2.5% CAGR over the past five years. Through the consistent return of capital, DUK provides adequate income generation opportunities for investors to help them tide over economic uncertainty.On July 6, at Amazon Air Hub, DUK unveils Kentucky’s largest utility-scale rooftop solar site, consisting of over 5,600 photovoltaic panels. It will feed up to 2 megawatts of solar power directly onto the electric distribution grid.
Utility companies such as DUK provide essential services that remain relevant and in demand regardless of economic inconsistencies.

After an eventful year, corporate America’s crème de la crème is set to kick off the second-quarter earnings season.
The performance of banking majors, such as JP Morgan Chase & Co. (JPM), Wells Fargo & Company (WFC), and Citigroup, Inc. (C), which are scheduled to report on Friday, July 14, would be indicative of the overall health of the economy. Their numbers, specifically deposit flows and loan growth, might impact the share prices of regional banks, which attracted much-unwanted attention earlier in the year.
As the economy seems to be finding its way into calmer waters with a greater-than-expected moderation of inflation, before we discuss the outlook for the trio of major banks ahead of their earnings release, for the uninitiated, here’s a brief recap of upheavals they had to live through and work their way around over the past year.
How We Got Here?
As the “transitory” inflation in the aftermath of the beginning of the armed conflict in Ukraine morphed into a not-so-transitory and vicious feedback loop that resulted in decades-high inflation, the Federal Reserve and other major central banks chose to respond with aggressive interest-rate hikes.
While the increased borrowing costs took the wind out of the sails of an overheating economy, it resulted in significant markdowns in the “ultra-safe” long-term U.S. Treasury securities in which many of the regional banks had invested their mushrooming deposits of cash, mostly received as stimulus during the pandemic.
However, as the going got tough for various businesses amid increased borrowing costs, the banks’ clients began to dip into their deposits. In such a scenario, to meet its payment obligations, the banks’ mark-to-market losses rapidly crystallized into realized ones.
Consequently, Silicon Valley Bank (SBV) announced that it booked a $1.8 billion loss, and the chaos and panic triggered by its failure wiped out a combined $52 billion in the market value of JP Morgan Chase & Co. (JPM), Bank of America Corporation (BAC), Wells Fargo & Company (WFC), and Citigroup, Inc. (C).
Credit Suisse and First Republic Bank became two other casualties, which JPM and UBS proactively absorbed.
The banking turmoil proved to be teasers to a similar, but orders of magnitude larger, scare. As the U.S. Treasury looked set to exhaust its ‘extraordinary measures’ to manage the national debt by June 5, the world’s richest economy, which also issues the global reserve currency, was projected to run out of cash and fail to meet its obligations, until the self-imposed debt ceiling was raised or suspended.
With the extent to which the U.S. and global economy could be undermined if the default comes to pass deemed by treasury secretary Janet Yellen an “economic catastrophe,” it is not difficult to understand why business leaders, such as JPM Chief Jamie Dimon, convened a ‘war room’ over the debt ceiling standoff.
However, calmer and more rational heads prevailed in Washington, D.C., albeit at the eleventh hour. President Joe Biden and House Speaker Kevin McCarthy reached an agreement to suspend the current $31.4 trillion statutory debt ceiling until January 1, 2025, in exchange for discretionary spending caps for six years.
Where Are We Now?
Post the shakeups, all 23 banks successfully weathered the Federal Reserve’s annual stress test toward the end of the last month. Even in a severe recession scenario simulated in the test, the banks were able to maintain minimum capital levels, despite $541 billion in projected losses for the group while continuing to provide credit to the economy.
Given the endurance and resilience that was successfully displayed, an indication of lighter capital requirement resulted in banks, such as JPM, WFC, The Goldman Sachs Group, Inc. (GS), and Morgan Stanley (MS), using resources freed up to payout higher dividends to their shareholders.
JPM will lift its quarterly dividend to $1.05 a share from $1, while WFC will hike dividends to $0.35 from $0.30. Moreover, both banks have said that they have the capacity to repurchase shares. Despite an increase in minimum capital requirement from 12% of risk-weighted assets last year to 12.3% after this year’s test, C’s board has also approved a dividend increase from $0.51 per share to $0.53.
The stocks have gained over the past month, given the demonstrated staying power and the potential windfall for the shareholders.
The (Probable) Road Ahead
For the second quarter of the fiscal year:
JPM’s revenue and EPS are expected to increase by 32.1% and 37.7% year-over-year to $39.12 billion and $3.80, respectively.
WFC’s revenue and EPS are expected to increase by 22% and 39% year-over-year to $20.07 billion and $1.14, respectively.
C’s revenue is expected to increase by 8.3% year-over-year to $19.35 billion. However, its EPS is expected to decline by 38.7% over the prior-year period to $1.41.
While the outlook seems largely optimistic, some analysts have warned that large banks’ earnings have peaked with continued declines in net interest incomes, normalization of credit costs, and increased expenses due to inflation.

Last month, we gauged the prospects of two semiconductor giants, NVIDIA Corporation (NVDA) and Intel Corporation (INTC), which have carved out their niches and cornered a significant share of the GPU and CPU domains, respectively. In this article, we have talked about another chip company and its agile efforts to grab the best of both worlds while creating a widespread following of its own.
Founded in 1968 by a group of 8 men led by the larger-than-life Jerry Sanders, Advanced Micro Devices, Inc. (AMD) released its first product in 1970 and went public in 1972. Despite starting life as a supplier for INTC, AMD parted ways with its client in the mid-80s, and by the late 80s, it reverse-engineered INTC’s products to make its own chips that were compatible with INTC’s software.
AMD existed as both a chip designer and manufacturer, at least until 2009. However, significant capex requirements associated with manufacturing, amid financial troubles in the wake of the Great Recession, compelled the company to demerge and spin off its fab to form GlobalFoundries Inc. (GFS), which has been focused on manufacturing low-end chips ever since.
With the acquisition of ATI, a major fabless chip company, in 2006, AMD began shifting its focus toward chip designing and turned to Taiwan Semiconductor Manufacturing Company Ltd. (TSM) as its exclusive chip manufacturer.
With manufacturing no longer weighing it down, AMD started catching INTC with its Zen line of CPUs. Earlier this year, the former made history by surpassing the latter’s market cap for the first time ever. Chair and CEO Dr. Lisa Su is widely credited with the turnaround and transition from being widely dismissed due to performance issues and delayed releases to being the only company in the world to design both CPUs and GPUs at scale.
We look at how Dr. Su and her team’s unwavering focus on great products, customer relations, and simplifying the company’s structure to respond to the dynamic business with agility are shaping AMD’s offerings in each product category.
CPU Portfolio
Despite a conservative outlook, AMD believes its Genoa CPU processors are superior to competitive offerings in terms of performance and efficiency across diverse workloads, including AI. During the recent AMD Data Center & AI Tech Premiere, the company expanded its EPYC server CPU portfolio by launching the highly anticipated Bergamo EPYC CPUs optimized for cloud environments.
Given the focus on single-threaded performance and energy efficiency, Meta Platforms, Inc. (META), which has collaborated with AMD to customize the design of the Bergamo server, reported seeing 2.5 times greater performance than AMD’s previous generation Milan CPUs and notable improvements in total cost of ownership (TCO).
In addition, AMD also introduced Genoa-X as another workload-optimized alternative to Genoa for faster general-purpose computing and optimal technical computing tasks. The company also updated that its upcoming server CPU product, Turin, has shown promising initial results and remains on schedule for a 2024 release.
Data Center Portfolio
According to Dr. Su, Data Center is the most strategic piece of business as far as high-performance computing is concerned. AMD underscored this commitment with the recent acquisition of data center optimization startup Pensando for $1.9 billion.
At the premiere, AMD’s ambitions to capitalize on the AI boom were loud and clear, with the launch of MI300X (a GPU-only chip) as a direct competitor to NVDA’s H100. The chip includes 8 GPUs (5nm GPUs with 6nm I/O) with 192GB of HBM3 and 5.2TB/s of memory bandwidth.
AMD believes this will allow LLMs’ inference workloads that require substantial memory to be run using fewer GPUs, which could improve the TCO compared to the H100.
Lastly, the company aims to address the growing AI accelerator market, projected to be over $30 billion in 2023 and potentially exceed $150 billion in 2027.Gaming and Other Applications.
While INTC and NVDA control most of the CPU and GPU market, respectively, AMD dominates gaming by designing 83% of gaming console processors.
The recently launched AMD Ryzen 5 5600X3D is equipped with AMD’s revolutionary 3D V-Cache technology. Despite being close to both the Ryzen 7 5800X3D and the non-3D Ryzen 5 5600X in terms of specifications, it comes with a lot of L3 cache, giving it an edge over the latter, thereby improving gaming performance.
Moreover, with Moore’s Law, which is the core of computer chip advancement, showing visible signs of a slowdown and the 5-decade-old x86 architecture gradually but surely being replaced by ARM, general-purpose computing using CPUs is making way for more customized solutions.
That has prompted AMD to acquire Xilinx for $49 billion to close one of the biggest acquisitions in semiconductor history. The investee is known for its reprogrammable adaptive chips called Field-Programmable Gate Arrays or FPGAs, which have diverse applications, such as robotics, telecommunications, agriculture, and space exploration.
As a result, AMD is expanding its footprint from PCs and supercomputers to Teslas and Mars Land Rover.
Road Ahead
Despite its future readiness, geopolitical tensions between the U.S. and China could turn out to be the Achilles heel for AMD since all of its chips are made in China and Taiwan. Also, Mainland China accounts for roughly 30% of the company’s revenues.
Dr. Su also serves on President Biden’s council of advertisers on science and technology, which pushed hard for the recent passage of the Chips and Science Act, aimed at on-shoring and de-risking semiconductor manufacturing in the interest of national security by setting aside $52 billion to incentivize companies to manufacture semiconductors domestically.
Geographical diversification, as a result of this Act, could act as a hedge against geopolitical tensions for AMD by reducing reliance on Asian manufacturing.
Bottom Line
As AMD continues to advance its x86 core computing chips along with diversifying to accommodate high-performance and customized computing, its more than 70% increase in stock price since the beginning of the year (and coincidentally during the AI wave) could be indicative of a company that is poised to gain market share and capitalize on the expanding demand for AI technology in various industries.

After months of scrambling for survival and frantic efforts to stage a turnaround, the struggling omnichannel retailer of domestic merchandise and various juvenile products, Bed Bath & Beyond Inc. (BBBYQ), succumbed to gravity earlier this year. Despite securing a financing deal on February 7, it filed for Chapter 11 bankruptcy protection on April 23.
With Holly Etlin, a longtime retail turnaround expert and a partner and managing director with advisory group AlixPartners, at the helm, BBBYQ set about liquidating assets by committing to close all of its Harmon FaceValue stores while keeping 360 namesake stores and 120 Buy Buy Baby locations open and filing motions in New Jersey bankruptcy court asking permission to auction the two brands.
However, since Buy Buy Baby, often considered a crown jewel of BBBYQ’s portfolio, was garnering the most attention and interest to unlock maximum value, BBBYQ, in a rare move, chose to run separate sale processes for its two chains. According to the company, a different method was selected to find a bidder willing to keep the banner’s stores open without the headache of taking on the assets of the namesake stores.
On June 21, online retailer Overstock.com, Inc. (OSTK) won the auction and agreed to buy Bed Bath’s intellectual property and digital assets for $21.5 million. However, the deal does not include keeping the chain’s brick-and-mortar presence alive.
Moreover, the sale price is the same as OSTK’s stalking horse bid on June 13, indicating Bed Bath didn’t receive higher or more attractive bids.
On the other hand, Buy Buy Baby, which sells baby clothes, furniture, and other goods, had courted attention from buyers even before BBBYQ threw in the towel. Consequently, since the sale began, the chain had interested buyers, such as retail investment firm Go Global and online registry platform Babylist, with the former even considering keeping its physical footprint alive.
However, given the rising costs (including leases, overhead costs, and salaries) and waning interest in keeping Buy Buy Baby’s stores open, BBBYQ decided to split the auction process further to secure a higher bid price.
On June 29, Dream on Me, a little-known baby retailer based in Piscataway, New Jersey, which sells cribs, strollers, and other baby goods through a host of retail partners, tentatively won the auction with a bid price of $15.5 million for the intellectual property, business data, internet properties, and mobile platform.
The Aftermath
OSTK, which acquired Bad Bath’s intellectual property assets but opted out of acquiring stores and inventories, has decided to change its website name by moving under the Bed Bath & Beyond domain name in the coming weeks.
The website, post its rebranding, has been relaunched in Canada. This is expected to be followed by a rollout of a website, mobile app, and loyalty program in the U.S. “weeks later.”
OSTK has also been suffering from a shift in consumer spending from discretionary household purchases to out-of-home experiences, such as traveling and dining out. According to its earnings release for the first quarter of the fiscal year, the online retailer reported revenue of $381 million and a net loss of $10 million.
However, given that OSTK has still managed to surpass estimates and the rebranding post the Bed Bath & Beyond acquisition is expected to lift its sagging sales, the stock has popped nearly 5% after it won the auction. As a result, the stock has gained 33.1% over the past month and 55.5% year-to-date.According to OSTK CEO Jonathan Johnson, “The combination of our winning asset-light business model and the high awareness and loyalty of the Bed Bath & Beyond brand will improve the customer experience and position the Company for accelerated market share growth.”
Regarding Buy Buy Baby, Dream on Me’s win for the former’s intellectual property is only tentative. However, the cancellation of the July 7 auction for the chain owing to the failure to secure a buyer willing to keep its stores running means that Dream on Me Industries is in the pole position to secure its ownership.
Road Ahead for BBBYQ
BBBYQ has been the victim of inflationary pressures and online retail altering brick-and-mortar stores in today’s economy, resulting in widespread store closures, as we discussed in our posts on May 25 and June 14.
According to Neil Saunders, a retail analyst and consultant who works as managing director of GlobalData, “If there is a single point of failure of Bed Bath and Beyond, it’s that the company stopped being relevant to consumers. Arguably, this goes back a long way, thanks to the rise of online and the improvement of home offers at rivals like Target. Against this increased competition, Bed Bath and Beyond’s approach to retail – which lacked inspiration – was found wanting.”
After the acquisition of both its brands and associated intellectual property, which were together valued at $13.4 million but have individually fetched more than double the amount, BBBYQ is left with its employees, empty stores, leases, and leftover inventory.
Any firm willing to take over will likely have to shut the stores down for a couple of months to restock and get them back up and running. Hence, without qualified and interested buyers, the leftovers appear to be more liabilities than assets.
Moreover, BBBYQ had loans with TJP Morgan Chase & Co. (JPM) and Sixth Street that were reduced in late March after its second stock offering was announced. At the time, its total revolving commitment decreased from $565 million to $300 million, and its revolving credit facility was reduced from $225 million to $175 million.
Bottomline
OSTK seems to have derived the maximum value from a distressed sale of an iconic brand.However, with significantly greater debt to service than proceeds from the sale and its once-instrumental physical assets still weighing it down, BBBYQ seems to have got the short stick in the bargain and is unlikely to have any residual value that could make holding on to the stock worthwhile for its shareholders.