Top US Stocks: Levi Strauss, Tilray and Costco

Levi Strauss

Levi Strauss smashed expectations with third quarter earnings late yesterday and raised expectations for the full year despite the increasingly challenging environment amid the pressure being applied to supply chains.

Net revenue rose 41% year-on-year to $1.5 billion, which was also 3% above pre-pandemic levels in 2019. That was the results of double-digit growth from its direct-to-consumer and wholesale division, with both benefiting from the reopening of retail stores whilst online demand remains strong, accounting for one-fifth of all sales. Adjusted diluted EPS – its headline profit figure – rose to $0.48 from just $0.08 the year before. That came in ahead of the $1.47 billion in revenue and $0.37 in EPS forecast by analysts.

Levi Strauss said it is expecting to deliver 20% to 21% year-on-year revenue growth in the fourth quarter, with adjusted EPS of $0.38 to $0.40. If achieved, annual EPS will come in between $1.43 and $1.45, which would be a significant improvement from the $0.21 booked in the last financial year.

‘We delivered a strong quarter with revenue growth versus pre-pandemic 2019 levels, despite a more difficult macro-environment than we expected,’ said CEO Chip Bergh. ‘These results reflect the strength of the Levi's brand, improving momentum in our direct-to-consumer business and the scale and agility of our supply chain network where we have executed against macro-headwinds exceptionally well.’

Tilray

Cannabis cultivator and seller Tilray missed expectations in the first quarter but said it has retained its market leading position in Canada and Germany and continued to remain profitable at the adjusted Ebitda level.

Net revenue rose 43% in the first quarter to $168 million and the firm posted a net loss of $34.6 million. That was disappointing considering analysts had forecast revenue of $172.6 million and a loss of $25.3 million. Still, Tilray said it has now generated 10 consecutive quarters of positive adjusted Ebitda.

Retail stores in Canada only started to reopen in June after having to close due to lockdown restrictions, possibly explaining the softer-than-expected results.

Costco

Costco said sales grew 15.8% year-on-year in September, driven by strong double-digit growth in comparable sales across all geographies.

Net sales rose to $19.5 billion in September from $16.84 billion the year before. Comparable sales grew 14.3%, comprised of a 14.6% rise in the US, a 14.9% increase in Canada and a 12% lift in its international markets. Ecommerce comparable sales were up 10.6% from last year.

Conagra Brands

Conagra Brands beat expectations in the first quarter of its financial year despite its top-and-bottom lines declining following the boom in demand seen last year, and said it remains on course to hit its targets despite the challenging environment.

Sales were down 1% in the quarter and organic net sales declined 0.4%, but both remained well above pre-pandemic levels. Adjusted EPS fell almost 29% to $0.50, coming in 7.8% above 2019 levels. Revenue came in higher than expected while EPS was just ahead of the $0.49 forecast by Wall Street.

Conagra Brands reaffirmed its full year targets as it acknowledged the inflationary pressures it is facing.

IAC and Meredith Corp

IAC’s Dotdash digital publishing unit has agreed to acquire Merdith Corp’s Digital and Magazine unit for $42.18 per share in cash, valuing the business at around $2.7 billion.

The new combined business will be named Dotdash Meredith and led by Dotdash CEO Neil Vogel. It will create one of the largest publishers in the US and bring together major digital and magazine brands spanning a wealth of industries from home and health to food and finance. The deal is expected to close before the end of 2021.

Merck

Merck has signed a supply and purchase agreement with the health ministry of Singapore for its experimental Covid-19 pill, according to media reports.

Singapore has confirmed the order but has not disclosed details on the size or value. Data on the drug, molnupiravir, showed it can cut the risk of being hospitalised or killed by Covid-19 in half but it is not yet approved to be used anywhere. Still, that has not stopped a flurry of countries in Asia from ordering the drug in anticipation it could prove a new method of fighting the virus, with all existing treatments currently requiring people to visit a medical facility.

Reports suggest Australia has also purchased the pill, with Thailand, South Korea, Taiwan and Malaysia touted to be interested.

Moderna

Moderna said it plans to spend $500 million to build a state-of-the-art mRNA facility in Africa with the ambition of manufacturing up to 500 million vaccine doses each year.

That is a significant investment considering Moderna has supplied 500 million doses of its Covid-19 vaccine worldwide to date, demonstrating the size of the new facility. It said it will start to make a decision on what country to build it in shortly.

‘While we are still working to increase capacity in our current network to deliver vaccines for the ongoing pandemic in 2022, we believe it is important to invest in the future. We expect to manufacture our COVID-19 vaccine as well as additional products within our mRNA vaccine portfolio at this facility,’ said Moderna CEO Stephane Bancel.

Twitter and AppLovin

Twitter has agreed to sell MoPub to AppLovin for $1.05 billion in cash.

Twitter said the sale allows it to downsize its focus as it looks to at least double annual revenue to $7.5 billion by 2023 from just $3.7 billion in 2020. ‘The sale of MoPub is all about increased focus, redirecting our resources and delivering faster growth in a number of key areas including performance-based ads, SMB and commerce,’ said Twitter’s revenue product lead Bruce Falck.

MoPub generated $188 million in revenue in 2020 and is used by 45,000 mobile apps to manage their monetisation. AppLovin said it plans to integrate it into its existing platform to maximise the opportunity.

Amazon

Amazon’s esports streaming platform Twitch suffered a data breach yesterday which it blamed on ‘an error in a Twitch server configuration change that was subsequently accessed by a malicious third party.’

Media reports suggested an anonymous hacker had leaked the Twitch data online surrounding information about source codes, clients and unreleased games. The firm said there was ‘no indication that login credentials have been exposed’ or that credit card numbers had been leaked.

Two-and-a-half hours after acknowledging the event, Twitch said it had reset all stream keys ‘out of an abundance of caution’.

Notably, the major outage that hit Facebook earlier this week was also blamed on a ‘faulty configuration change’ that took its service, including Instagram and Whatsapp, offline for almost six hours on Monday.

Apple

Regulators in the Netherlands have found Apple’s rules that lock software developers into using its in-app payment network are anti-competitive and have ordered the firm to make changes, according to reports from Reuters.

Apple currently charges commissions of 15% to 30% on payments, irking developers. The report said the Netherlands’ Authority for Consumers & Markets informed Apple last month that it was abusing its position in the market and has pushed for it to make changes to its in-app payment system rather than levy a fine at the giant.

Alphabet

A number of search engines have written a letter to European Parliament lawmakers urging them to take action against Alphabet’s Google after failing to see any benefit from the antitrust ruling made against the business back in 2018.

DuckDuckGo, Ecosia, Qwant and Lilo have sent a letter urging lawmakers to use new rules drafted for the tech industry under the Digital Markets Act. ‘Despite recent changes, we do not believe it will move market share significantly due to its persisting limitations,’ the letter said.

Reports suggest Google has now allowed other search engines to compete to be the default on Android phones, but its rivals have complained that there is no preference menu or enough options to prevent Google from becoming the default. The European Commission levelled a huge $4.2 billion fine against Google back in 2018 for unfairly flexing Android to build its position for its search engine.

Rocket Lab USA

Rocket Lab USA has been selected to launch NASA’s advanced composite solar sail system named ACS3 on the Electron launch vehicle.

ACS3 uses composite materials and acts like a sail on a boat, with solar sails using pressure of sunlight for propulsion. Rocket Lab said ASC3 will launch as part of a rideshare mission that is due to lift-off from the company’s complex in the middle of 2022.

‘The ability of the Electron launch vehicle’s Kick Stage to deploy individual satellites to unique orbits, even when flying as part of a rideshare, was a key factor in Rocket Lab being selected as the launch provider,’ said the company.

Analyst Recommendations

Disney had its price target raised to $230 from $220 by JPMorgan, citing the strong progress being made with its streaming platform and to strike a bullish tone ahead of its fourth quarter results.

Exxon Mobil had its price target raised to $73 from $69 by Credit Suisse, citing higher gas prices and improved refining margins.

UIPath had its price target cut to $65 from $74 by RBC, claiming its expansion ambitions rely too heavily on the appetite of its technology partners to automate their operations.

Warner Music Group had its price target raised to $50 from $42 by JPMorgan on expectations of faster growth in the streaming market.

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