August 6th Pre-Market Brief

Good Morning

I keep waiting for a good chip report to actually get rewarded and it keeps not happening. Western Digital grew profit elevenfold last night and it's one of the worst stocks in the premarket.

The Dow is going for another record and gold is at a seven week high, so there's plenty working outside of tech right now.

Let's dig in...

Today's Big Picture

1. The Memory Bid Changed Hands In July
Western Digital grew quarterly profit elevenfold and guided above consensus, and Sandisk guided above consensus too. Both are down hard, and Asia sold them harder overnight, with Korea's market having its worst day in months. Nothing is wrong with the numbers. JPMorgan says tech hedge funds had an unprecedented losing July on forced memory selling, so the buyer who used to pay up for a beat is out of room.

2. The Oil Story Moved Off The Water
The draft deal gives Iran oversight of ships entering the Gulf but no right to charge tolls, and Deutsche Bank says whether Iran wins that right later is still open. Brent is higher this morning regardless, because Ukraine hit two Russian refineries overnight, including one that processes 15 million tons of crude a year. Transit through the strait is the risk everyone priced for months. Refining capacity is the one nobody did.

3. SpaceX's Earnings Triggered Its Own Unlock
Tuesday's earnings report triggered a provision letting insiders sell a fifth of their locked shares, which works out to 911.5 million shares worth roughly $100 billion. That more than doubles the stock available to trade, and it arrives the same week the shares fell below the $135 offering price on a sixfold jump in capital spending. Retail has bought every single session since the June debut without one net selling day. Today is the first time that bid meets real supply.

Market Overview

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Stock Spotlight (pre-market)

Datadog $DDOG ( ▼ 1.73% )  
lower after second quarter results with no guidance cut attached. This is holders taking gains off a big year, not a change in the business. Atlassian, Adobe and Zscaler are lower with it, so the software group is being repriced together.

AppLovin $APP ( ▼ 16.52% )  
lower because the top of its third quarter guide sits below consensus. Adjusted EBITDA is guided to $1.71 to $1.74 billion against $1.75 billion expected. When the high end misses, every model comes down today.

Peloton $PTON ( ▼ 1.36% )  
lower on a guide below the low end of the range. Fiscal 2027 sales are guided to $2.3 to $2.4 billion against $2.42 billion expected, so estimates get cut on the morning the company posted its first profitable year. The $63.2 million of net income came from last fall's price increases, and subscribers fell.

Celsius Holdings $CELH ( ▼ 1.32% )  
lower on a double miss with margin damage underneath. Adjusted earnings of 36 cents against 43 expected, revenue $817.9 million against $886 million, gross margin down to 48.1 from 51.5 on heavier promotional spending. Alani Nu did $364.4 million while the flagship Celsius brand shrank. The acquisitions are covering for the core.

Papa John's $PZZA ( ▼ 3.16% )  
lower after ending an eighteen-month strategic review with no sale. Management is sticking with the turnaround and suspending the quarterly dividend to fund it. North American same-store sales fell 8.3 percent.

Diageo $DEO ( ▲ 0.68% )  
higher on a savings plan, not on results. Full-year sales and profit both fell. The $1 billion of cuts costs $1.2 billion in restructuring, and management says savings start this fiscal year and run through 2028.

What to Watch

Upcoming IPO’s?
MarketBeat did an excellent job on this free IPO guide on IPO’s happening this year.

Fed's Musalem Speaks (Today)
Chairman Kevin Warsh has said nothing on forward guidance. That leaves the St. Louis Fed president as the only official voice between now and payrolls. He lands into a market with no anchor, which makes a small remark move more than it should.

Gold's Buyers
Gold is up more than five percent in a handful of August sessions, its best run since January, and it is at a seven-week high. The drivers are not traders chasing fear. Central bank demand picked up in the second quarter after a weak start to the year, and Tether added fourteen tons to reserves. That is the kind of buying that does not sell on a peace headline.

- John

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