Weekly Financial Market Insights 📈
Trading Week 37 ... Alarming Inflation Data, Twilio Layoffs, Ethereum PoS Merge, Inflation Relief Spending in Canada, Adobe Acquires Figma, and Oracle + Adobe Earnings
Sunday Morning Markets ☕
Your weekly financial markets update, in less than 10 minutes.
Last Week ⏪
It was all smooth sailing until the CPI inflation report on Tuesday came in hotter than expected. Equities followed up with a hard sell-off, as the market priced in an even more hawkish Fed and higher treasury yields. According to CME’s FedWatch tool, there is approximately an 80% chance of a 75bps hike, and a 20% chance of a 100bps hike at the FOMC meeting this upcoming Wednesday - something to keep your eye on.
Adobe acquires design tool Figma for $20B, Twilio lays off 11% of its workforce, Queen Elizabeth passes away, Canada lands a large inflation relief package, Ethereum completes the merge to its PoS blockchain — all that and more on this week of Sunday Morning Markets…
US Markets 🇺🇸
CPI inflation was worse than expected in August as prices rose 0.1% during the month, higher than the 0.1% drop expected. Costs were driven by increases in food and shelter, offsetting a sharp decline in gasoline prices. Core CPI jumped 0.6% during the month and 6.3% during the year.
Wholesale prices fell 0.1% in August, in line with expectations. On a year-over-year basis, the index increased 8.7%, the lowest increase since August 2021. Core PPI increased 0.2% during the month and 5.6% during the year.
Twilio lays off 11% of its workforce in part of a major restructuring plan. Twilio CEO, Jeff Lawson, said the company aims to improve operating margins, create a better selling capacity and reduce operating costs.
Adobe to acquire design platform Figma for $20B in a part cash, part stock deal. This acquisition agreement values Figma at ~50x 2023 ARR. Shares of Adobe plunged on Thursday following the announcement.
Markets are pricing in an 18% chance of 100bps hike at the time of writing after the August CPI print came in hotter than expected. A 100bps hike would bring the Fed Funds Rate to 3.25% - 3.5%.
Twitter has serious security flaws stated Twitter’s former security chief, Peiter “Mudge” Zatko, in his testimony to a Senate panel. “It’s not far-fetched to say that an employee inside the company could take over the accounts of all of the senators in this room.”
Rest of World 🌏
Queen Elizabeth passes away at the age of 96. Her 70-year reign spanned the aftermath of WWII, the winding down of Britain’s vast empire, Brexit, and a global pandemic. She is succeeded by her eldest son, who was proclaimed King Charles III hours after her death.
Trudeau announces C$4.5B inflation relief package for low-income earners. The bill will temporarily double GST payments for six months and will also provide low-income renters with a one-time $500 top-up to the Canada Housing Benefit.
Google faces $25.4B in damage claims in UK, Dutch courts over adtech practices. Google's adtech has recently drawn scrutiny from antitrust regulators following complaints from publishers.
Sea Ltd shuts down operations in some LATAM countries and lays off as much as 15% of their Shanghai workforce. The company’s e-commerce arm, Shopee, will exit Argentina and shut down local operations in Chile, Colombia, and Mexico.
Crypto ⚡
The Ethereum merge to PoS is complete, marking a very important day for the second largest blockchain. The shift away from PoW offers a more energy-efficient system after years of development and delay.
Starbucks to offer an NFT-based loyalty program provided by Polygon. Odyssey will allow customers to purchase digital collectible stamps as NFTs that offer benefits and immersive experiences. Customers can now join a waitlist to gain access.
White House publishes a crypto mining report detailing the pros and cons of the industry’s impact on the environment and energy grids, calling for more research so that federal agencies can come up with standards to minimize harm.
South Korea issues arrest warrant for Terra founder, Do Kwon as well as five additional individuals, citing a text message from the prosecutors' office. They are charged with violating the Capital Markets Act.
Citadel, Schwab, and Fidelity to launch crypto exchange named ‘EDX Markets’. The exchange will be led by CEO Jamil Nazarali, formerly a senior executive at Citadel Securities. Other high-profile backers include Virtu Financial, Sequoia Capital, and Paradigm.
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Earnings Reports 💰
Oracle ($ORCL)
Revenue: $11.4B vs $11.4B expected and $9.4B year ago (+18% YoY)
Non-GAAP EPS: $1.03 vs $1.07 expected and $1.03 year ago (0% YoY)
Segment Breakdown:
Cloud Services: $8.4B, +14% YoY, 73% of total revenue
Cloud License: $0.9B, +11% YoY, 8% of total revenue
Hardware: $0.8B, +0% YoY, 7% of total revenue
Services: $1.4B, +74% YoY, 12% of total revenue
Guidance: No guidance provided.
Important Notes: Declared a quarterly cash dividend of $0.32 per share. Operating income down 23% YoY to $2.6B, as operating margin falls to 23% from 35%.
Market Reaction (24hrs after report): -2%
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Braze ($BRZE)
Revenue: $86.1m vs $81.2m expected and $55.8m year ago (+55% YoY)
Non-GAAP EPS: ($0.16) loss vs ($0.20) expected and ($0.32) year ago (+50% YoY)
Customers: 1,599 vs 1,119 year ago (+43% YoY)
Guidance:
Q3: Revenue of $90m - 91m and non-GAAP EPS of ($0.22) - ($0.23)
FY: Revenue of $347m - $350m and non-GAAP EPS of ($0.77) - ($0.79)
Important Notes: Dollar-based net retention was 126%. Remaining performance obligations of $410.5m, of which $274.2m is current. Stock-based compensation = 20% of revenue, 29% of gross margin.
Market Reaction (24hrs after report): -19%
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Adobe ($ADBE)
Revenue: $4.43B vs $4.44B expected and $3.94B year ago (+12% YoY)
Non-GAAP EPS: $3.40 vs $3.35 expected and $3.11 year ago (+9% YoY)
Operating Cash Flow: $1.7B vs $1.42B year ago (+20% YoY)
Segment Breakdown:
Subscription: $4.13B, +13% YoY, 93% of total revenue
Product: $0.13B, +6% YoY, 3% of total revenue
Services: $0.18B, +13% YoY, 4% of total revenue
Guidance for Q4: $4.52B in sales, $3.50 non-GAAP EPS
Important Notes: Announced plans to acquire Figma for $20B in a half-cash, half-stock deal. Figma will finish the year with ~$400m in ARR. Adobe repurchased ~5.1m shares during the quarter. Remaining Performance Obligations of $14.1B.
Market Reaction (24hrs after report): -17%
Week Ahead 📅
Monday
NAHB Housing Market Index (Sept) 🇺🇸
Earnings Reports: AutoZone ($AZO) 💰
Tuesday
Building Permits (Aug) 🇺🇸
Housing Starts (Aug) 🇺🇸
Canada CPI Inflation (Aug) 🇨🇦
Wednesday
FOMC Interest Rate Decision 🇺🇸
Fed Chair Jerome Powell FOMC Press Conference 🇺🇸
Existing Home Sales (Aug) 🇺🇸
Earnings Reports: General Mills ($GIS), Lennar Corporation ($LEN), Trip.com Group ($TCOM)💰
Thursday
Jobless Claims 🇺🇸
CB Leading Economic Indicators (Aug) 🇺🇸
SNB Interest Rate Decision🇨🇭
BoE Interest Rate Decision 🇬🇧
Earnings Reports: Costco ($COST), Accenture ($ACN), FedEx ($FDX), FactSet ($FDS)💰
Friday
S&P US Manf. PMI (Sept) 🇺🇸
S&P US Services PMI (Sept) 🇺🇸
S&P German Manf. PMI (Sept) 🇩🇪
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Until next Sunday…