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The Hidden Hero Fueling Soft-Landing Hopes
Federal Reserve Chair Jerome Powell has shifted his stance, indicating that the central bank may not need to worry about stronger growth causing higher prices. The U.S. economy's potential growth has temporarily increased due to easing bottlenecks, a boost in the workforce, and potentially higher productivity. Powell played down concerns of accelerating price pressures despite robust growth, emphasizing that growth above the long-run trend of 2% is acceptable in the short term. He highlighted the distinction between long-run trend growth and short-run potential growth, with the latter influenced by factors like labor supply and productivity. Powell's narrative suggests that the economy's capacity to supply goods and services is catching up after pandemic-induced disruptions. The recent improvements in supply, boosted by factors like increased immigration and workforce participation, have brightened prospects for bringing down inflation without a severe downturn. However, uncertainties remain about the sustainability of supply gains and potential future challenges, impacting the Fed's confidence in lowering interest rates from their current 22-year highs.1
"Potential might be higher or lower than the long-run trend depending on the supply of labor and productivity. And that means you could be growing at 2% this year and still be growing below the increase in the potential output of the economy." - Fed Chair Jerome Powell
Recent Highlights From The Earnings Reports
Bath & Body Works BBWI 0.00%↑ reported $0.48 EPS, beating the estimates by 33.33%.
Ross Stores ROST 0.00%↑ reported $1.33 EPS, beating the estimates by 9.92%.
Applied Materials AMAT 0.00%↑ reported $2.12 EPS, beating the estimates by 7.07%.
Recent Signals From Our Quant Trading Bots
Buy signal on LLY 0.00%↑ on Friday
What To Watch Today
October Leading Indicators (prior -0.7%) at 10:00 ET
Forecasts
🕵Discovering hidden treasures.🕵
1) Long-Term Double Bottom Formation On ETSY 0.00%↑.
ETSY 0.00%↑ Price is starting to increase after gradually finding support around these levels and forming a long-term double bottom after the recent Earnings report (1st Nov).
The pattern takes the shape of a textbook example for a double bottom, where the second leg alone has taken more than 2 months to gradually build up support.
The pattern has been forming over the span of more than 16 months, to be precise around 518 days, making it significant.
Volume has gradually increased in the last week, confirming support and heightened interest in the stock at these levels.
If support keeps on holding with high volume, then it would be confirming the trend reversal. A potential push higher may be on the horizon up to the zone of the most recent high first to around $100 and next target $150.
On 3rd November Goldman Sachs - Confirmed its grade on ETSY 0.00%↑.
From: Buy
To: Buy
On 3rd November Guggenheim - Confirmed its grade on ETSY 0.00%↑.
From: Buy
To: Buy
Price is slightly breaking above the 2-month average.
Revenue grew by 7% to $636 million, with an impressive adjusted EBITDA margin of 28.6%.
Adjusted EBITDA reached $182 million, up nearly 9% from the third quarter of the previous year.
Recent Earnings have taken ETSY 0.00%↑ back into “growth” mode with the Price-to-Earnings ratio spiking to around 30.
However, when we take a look at Price-to-FreeCashFlow ratio, ETSY have never been cheaper.
ETSY 0.00%↑ Recent Earnings Call Summary (Future potential, implied by management vision):
Financial Position and Stock Repurchase:
Reported $1.1 billion in cash, cash equivalents, and short- and long-term investments as of September 30.
Discussed the repurchase of $297 million in stock during the third quarter, contributing to a total of $484 million repurchased in 2023.
Marketplace Growth:
Highlighted positive trends, including a 1% growth in GMS, a new record of 92 million active buyers, and a 6% increase in buyer additions year-over-year.
Noted sequential improvements in international growth and GMS per buyer, along with flat performance in habitual buyers.
Revenue and Take Rate:
Consolidated marketplace revenue growing 4% year-over-year.
Services revenue, particularly from Etsy Ads, contributed significantly to the 16% year-over-year growth.
Maintained a consolidated take rate of 20.9%, in line with guidance.
Profitability and Efficiency:
Noted a 40 basis points expansion in consolidated EBITDA margin to 28.6%, exceeding guidance.
Discussed leverage in product development spend and disciplined ROI-focused investments.
Balanced the impact of subsidiaries, representing a 300 to 400 basis point headwind to consolidated adjusted EBITDA margin.
Product Development and Marketing:
Highlighted a 5% year-over-year increase in product development spend to $114 million, gaining leverage due to lower costs.
Discussed a 9% year-over-year increase in consolidated marketing spend to $161 million.
Balanced CPC increases in a competitive environment with a disciplined ROI-focused strategy.
Marketplace Metrics and Buyer Trends:
Shared Etsy Marketplace GMS metrics, with a 1% year-over-year increase to $2.7 billion.
Discussed buyer metrics, including an all-time high of 92 million active buyers and sequential acceleration in growth.
Addressed challenges in GMS trends towards the end of September and October, influenced by macroeconomic conditions and a competitive retail environment.
Outlook and Guidance:
Provided insight into challenges for growth in the upcoming holiday season, citing headwinds and a competitive advertising landscape.
Anticipated a decline in consolidated Q4 GMS in the low single-digit range year-over-year, with potential variations based on trends.
Expected Q4 take rate to be approximately 20.8%, with a guidance range for consolidated adjusted EBITDA margin at 26% to 27%.
Disclaimer: Please note that the information provided in this article is for general informational purposes only and does not constitute financial, legal, or professional advice. The information provided should not be relied upon as a substitute for financial, legal, or professional advice. Before making any decision, it is important to consider all relevant information and consult with a professional who can provide personalized advice based on your specific circumstances. The author and publisher of this article cannot be held liable for any actions taken based on the information provided. This is not a recommendation to buy or sell any specific securities or financial instruments.
Summary from a piece written by Nick Timiraos for The Wall Street Journal.