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Target post-earnings (0:20) More retail earnings (1:45). Reddit volatility (3:15). CoreWeave momentum and the AI trade (4:50). Nvidia’s important data point (8:40). Moody’s downgrade and bonds (9:30).
Transcript
Rena Sherbill: Welcome back to Wall Street Roundup with our Director of news here at Seeking Alpha, the illustrious Brian Stewart. Welcome back to another week.
Brian Stewart: Great to be here. Thanks a lot.
RS: Target (TGT) released earnings this week. I think that will say a lot about what’s happening or what’s been happening in the retail picture, some concerns around Target. What have you seen out of Target and what has been the market’s response?
BS: So Target fell about 5% after its earnings were released yesterday. However, it’s rebounding about 3% so far. Today, we’re recording this on Thursday. So all in all, you take the two days together, not much of a move even though the news out of the company was pretty disappointing.
Disappointing quarter lowered guidance, companies losing market share to places like Walmart (WMT) and Costco (COST). There’s also a cloud hanging over the company.
There’s been a boycott based on its changing DEI policies. Not clear how much of that is part of the problem or whether it’s more macro concerns, but the company lost ground earlier this year.
So I think the general take coming out of it is bad, but not worse than had already been baked into the stock. So still need to find the pivot point for a turnaround and certainly not there yet.
RS: And other earnings that you’ve seen this week, what would you put at the top of that list in terms of interesting and pertinent and valuable for investors to know about?
BS: Well, playing off of Target, Williams Sonoma (WSM) was down after its earnings as well. It was down about 9% earlier today on those results.
However, it’s rebounded somewhat. It’s now down about 5%. So in a way, the same reaction as Target, an initial downturn after disappointing report, and then stabilization from there. So I think a lot of the bad news in retail has been been baked into the cake somewhat.
The question then becomes on the macro level, is the economy stabilizing or is it getting worse?
One standout in the retail space worth looking at is Gap (GAP). It’s gonna report earnings next week. It’s up about 59% since mid April. That includes a 6% rise this week.
And it’s getting to the point where it’s challenging fifty two week highs that were reached almost a full year ago, more than eleven months. That’s a company that the tariff relief rally has really come on strong. The idea that tariffs are not going to be as heinous as people had feared, and so that’s a a stock that’s rallying there.
So you’re gonna see winners and losers in the retail space, and the question is just where is the economy going?
RS: Another stock in the news that we saw this week was and we’ve been talking about the internet sector over the last couple weeks and what we’ve seen out of those names. But we saw some movement this week from them was Reddit (NYSE:RDDT).
What’s your sense out of Reddit and how the market’s reflecting that?
BS: So trading on Reddit has been really interesting. It’s been extremely volatile. So this week has been a very bad week for the stock. It’s down 24% from the close last Wednesday to the close this Wednesday.
That followed 11% rally last Wednesday, but then dropped 9% the following session, and then continued to fall for five days in a row, including another 9% drop yesterday, Wednesday as we’re recording this.
However, all told, the the stock has basically just come to return where it was before the volatility set in around where it was when the earnings came out. So in the past month, it’s basically flat.
The issue is a debate around whether or not changing search habits generated by AI are going to dislocate the way users use Reddit. So Google (GOOG) (GOOGL) is inputting a lot of AI assists into its search so people aren’t clicking as much.
They don’t need to because the AI generates the answer they’re looking for. And so the question for a company like Reddit is, is that traffic going to undermine its business?
It did report earnings relatively recently and those earnings were extremely strong. So for instance, the company reported 61% rise in revenues, a 31% rise in daily active users.
So all signs are that things are going well at the company, but the question is, is the environment surrounding it changing so fast that those numbers don’t really mean anything?
RS: CoreWeave (CRWV) is another stock that’s been in the news this week as a stock mover.
I believe I mentioned last week that Sara Awad from Tech Contrarians was on our Investing Experts podcast talking about her bullishness on the recent IPO’d stock. What are you seeing out of CoreWeave this week and in general?
BS: One of the major themes that you and I have been discussing all year is how the AI trade has been moving through the market.
If we count NVIDIA (NVDA) as patient zero for the AI rally now that’s spreading out to different players. And one of the marks, especially as AI became.
Prominent in investors’ minds was whether or not the IPO market would catch up, whether new players would come online that were tied to the trade were a little bit more pure play than some of the established companies and whether they would start to sop up some of that investor demand.
And CoreWeave is a great example of that. They’re a cloud service provider. The big catalyst lately has been, they disclosed a deal with OpenAI that’ll pay it up to $4,000,000,000 through April 2029 for cloud computing capability.
So this is a company that’s taking advantage of the infrastructure that needs to be put in place to run these AI businesses. CoreWeave came public in March. It came with relatively little fanfare in the sense of investor demand on the day it started trading. It basically ended flat, came public at $40 per share, and that’s where it ended its first day trading.
So there wasn’t a huge pop early in its time as a public company, but that’s certainly changed lately. It’s now up about 80% since that IPO. That includes a 22% rise last Friday when it reported earnings.
Earnings included a 420% year over year increase in revenue. And so now on Thursday, it’s up five sessions in a row, including another 19% rise yesterday and a 6% rise as we’re talking now on Thursday.
So not only did it get a bump from the earnings, which certainly put a spotlight on the stock, but has followed through dramatically over the last few days. So I think it’s coming on the radar of a lot of investors.
And the question becomes whether or not it’s overplayed its hand in the near term or whether this is just the beginning, whether it’s going to start to get even a larger following as people notice how quickly it’s shot up.
RS: And is this adding anything to the conversation around AI? We’ve been talking the past few months about AI spending and AI guidance and the changes there. Is this adding anything to that conversation or is this mostly about CoreWeave?
BS: I think it adds to the conversation in the sense that that $4,000,000,000 deal with OpenAI is just another indication that companies are continuing to spend to roll out their AI capabilities.
Earlier this year, there was concern that that’s that spending would pull back both for the the macroeconomic reasons that were coming into view earlier this year, possible economic slowdown, tariffs, those kind of factors.
Also the idea that things like DeepSeek and cheaper, less, infrastructure reliance, competitors were going to come online that were going to make the infrastructure spending not as dramatic as people had baked in.
But all the signs recently are companies are continuing to spend OpenAI in this CoreWeave deal. Meta (META) announced in their earnings that they were going to do a lot of spending going forward. That’s something to keep an eye on going forward.
It’s important to note that NVIDIA (NVDA) is announcing earnings next week. In general, earning season has slowed down lately. It’s basically over. And so NVIDIA is the last major player in this round of earnings really to announce, and we’re gonna get a lot of guidance from them.
Well, we hopefully will get a lot of guidance from them.
It’s not clear that the company will how much information we’ll actually provide, but that’ll be a huge data point in terms of determining the current diet for new AI spending.
RS: We had a guest on Investing Experts this week, not to overplug the podcast, but he was saying in this new investing economic world, he’s become a tariff expert, a foreign policy expert, a bond trader. He’s never bought a bond.
We saw Moody’s remove its triple a rating. What would you say about the bond market these days?
BS: So the main action in the bond market after that announcement was in the thirty year. The thirty year is currently trading a little above 5%. It was at about 4. 7%. This is the treasury yield.
At the April it was about 4. 7%. It was below 4% last September, so you’ve seen a pretty large move in the thirty year. That’s because the lower the credit rating for US treasuries, the higher the borrowing costs are likely to be.
So that’s just responding to that. The thirty years also threatening today, during today’s trading, to close at its its highest mark since 2007.
So you’re talking decades long. It’s been a while since we’ve seen this kind of, Treasury yield in the thirty year. There’s no clear indication of why that would come down in the near term. They just passed a new budget.
The house just passed a new budget. Still needs to go to the senate, but that budget does nothing to alleviate the concerns that Moody’s raised, specifically rising national debt, continuing fiscal deficits.
In the current environment, the the situation that Moody’s flagged is likely only to either stay the same or get worse.
So the treasury markets, especially on the long end, might see further action.
RS: And what else are you seeing macro wise? What are you seeing out of the White House? What are you seeing from government policy?
BS: I feel this week has been a relatively inactive week as compared to what we’ve been going through, so far during the Trump administration in terms of just headline shock, both up and down.
I think that we’re still waiting for the tariff situation to resolve itself. We got a big pop recently from the idea that we were doing a ninety day pause in the Chinese tariffs, but that clock is ticking. So we’ll see how that plays out.
I think we’re kind of in a waiting zone for there. I think the main focus of investors on the macro level will probably be incoming economic data.
The PCE, the Fed’s favorite inflation gauge is coming out next week, so that’ll be a good place to to start talking about inflation and the the broader economic situation.
Looking ahead to next week, we mentioned Nvidia. That’s gonna be the big headliner. We talked retailers. Costco (COST) is coming out late next week with its earnings. As discussed, Target is losing rounds to Walmart and Costco, so it’ll be interesting to see where Costco sits in that.
If Target gave disappointing results, is Costco gonna follow suit, or is Costco the one that’s causing Target to have those those bad results? So that’ll be interesting there.
Noteworthy tech players, Salesforce (CRM) coming out next week, also Hewlett Packard (HPE) and Dell (DELL). So get a good glimpse of the PC market from Hewlett Packard and Dell, and then, Salesforce is obviously a huge player in business to business.
Get an idea of a broader economic picture from what they have to say about their sales situation.
RS: How do companies decide when they report? Is it based on something? Is it random?
BS: Most companies are on a pretty regular schedule. So once you kind of set a precedent, you stick to it. And it causes a situation where companies will get sort of clustered together, like Meta and Microsoft are always the same day for whatever reason.
And I’m sure that’s not any sort of conspiracy. You know, I don’t think they’re figuring that out. I just think that they happen to be on the same sales cycle.
You’ll see your retailers are about a month after the main peak of the earning cycle. That’s mostly because their fiscal years end January instead of December because they want time to compute the Christmas sales. Like, it would be a real crunch to try and have Christmas on December 25 and then close your books six days later, seven days later.
They tend to cluster together just because they’re in the same business and they’re following the same calendar. So it’s not random so much as it is the individual business dynamics that make it so a company decides one end date versus another.
The amount of factors that go into it are pretty I don’t know, complicated is not the right word, but there are multiple factors that go into it. So for instance, if a company is headquartered in California, they’re gonna report after the close just because for them, it’s in the middle of the day rather than at the end of the day.
RS: Like, lots of practical matters figure into this?
BS: Yeah. Exactly. It’s really a practical decision. And like I said, once you’re locked into a certain rhythm, you’re pretty much stuck doing that. Like, it would take some doing for a large company to change the rhythm of their accounting structure.
I’ve been doing this for twenty five years and a lot of these companies I can still predict generally when they’ll report based on when they reported fifteen years ago or whatever. It’s not random in the sense that each company is predictable, but everybody’s on a slightly different schedule, slightly different rhythm.
And so it works out that you get the peak of running season, but then you get stragglers for whatever reason kind of through that lull.
RS: I wanted to make mention that Monday, as most people probably already know, the markets will be closed for Memorial Day. I do wanna take a minute. This is an investing podcast, but there’s a lot going on in the world.
Perhaps there’s always a lot of terrible things going on in the world as we know and as your perspective broadens, but certainly a lot of terrible things going on.
So for those who have people in the military, for those who have lost people, for those who are wanting to pay their respects, I encourage everybody to take a minute out of their day and reflect on the blessings that we have.
