- Stock Market Nerd
- Posts
- Remaining News of the Week (February 24-28, 2025)
Remaining News of the Week (February 24-28, 2025)
Brad Freeman
March 01, 2025 • Estimated Reading Time: 14 minutes
Most of this week’s content has already been sent. In case you missed it:
Table of Contents
1. Earnings snapshots – Salesforce, Axon, Workday & Dell
a. Salesforce (CRM)
Demand:
Missed revenue estimates by 0.5%.
Slightly beat Current Remaining Performance Obligation (cRPO) estimates by 0.2%.
Profits & Margins:
Slightly beat EBIT estimates.
Beat FCF estimates by 9%.
Beat $1.61 GAAP EPS estimates by $0.14.
Beat $2.61 EPS estimates by $0.17.
Balance Sheet:
$14B in cash & equivalents.
$4.85B in strategic investments
$8.43B in debt.
Diluted share count fell by 1% Y/Y.
Paid out $1.54B in dividends for the year vs. $0 Y/Y.
Guidance & Valuation:
Annual revenue guidance missed by 1.6%.
Annual EBIT guidance missed by 1.4%.
Annual EPS guidance of $11.13 missed by $0.08.
Annual 10.5% operating cash flow guidance beat 9.5% growth estimates.
Q1 guidance was similarly light across the board for revenue, EBIT and EPS.
CRM trades for 26x forward EPS. EPS is expected to grow by 10% this year and by 13% next year.
b. Axon (AXON)
Demand:
Revenue beat by 1.5%
Taser revenue beat by 4%.
Cloud & services revenue beat by 3%.
Sensors & other revenue missed by 6.5%.
Profits & Margins:
Beat 72% GPM estimates by 120 bps (chart below is GAAP GPM).
Beat EBITDA estimates by 6%.
Beat $1.40 EPS estimates by $0.68.
Beat FCF estimates by 85%.
Balance Sheet:
Nearly $1B in cash, equivalents & investments.
$680M in convertible notes.
No traditional debt.
Guidance & Valuation:
Annual revenue guidance beat by 1.8%.
Annual EBITDA guidance beat by 3.6%.
Axon trades for 60x 2025 EBITDA. EBITDA is expected to compound at a 26% clip for the next two years.
c. Workday (WDAY)
Demand:
Revenue beat by 1.5%.
Subscription revenue beat by 0.9%.
Subscription backlog beat estimates by 1.7%.
Profits & Margins:
Beat EBIT estimates by 6.5%.
Beat $1.78 EPS estimates by $0.14.
Beat FCF estimates by 15%
Balance Sheet:
Roughly $8B in cash & equivalents.
$3B in total debt.
Diluted share count rose by 0.4%.
Guidance & Valuation:
Annual revenue guidance slightly missed estimates by 0.2%.
Annual subscription revenue guidance met estimates.
Operating margin was slightly ahead of estimates, implying EBIT dollar guidance about as expected.
Annual FCF guidance missed by 2%.
WDAY trades for 31x forward EPS. EPS is expected to grow by 17% this year and by 18% next year.
d. Dell (DELL)
Demand:
Revenue missed estimates by 2.9%.
Infrastructure revenue missed estimates by 4%.
Client revenue missed estimates by 1%.
Profits:
Beat 23% gross margin estimates by 130 bps.
Beat EBIT estimates by 5.4%.
Beat $2.53 estimates by $0.15.
Balance Sheet:
$3.63B in cash & equivalents. $1.5B in long-term investments.
$5.3B in financed receivables vs. $4.6B Y/Y.
$6.7B in inventory vs. $3.6B Y/Y.
$24.6B in total debt.
Dividends rose by 19% Y/Y for the full year.
Guidance & Valuation:
Full year $23B revenue guidance met estimates. Q1 revenue guidance missed by 2%.
Full year $9.30 EPS guidance beat estimates by $0.05. Q1 EPS guidance missed $1.76 estimates by $0.11.
2. Amazon (AMZN) – Various News
Amazon launched Alexa+ as a large, agentic AI upgrade to its Alexa chatbot. The product will cost $19.99 per month on its own, but is also included at no added cost for Prime Members. To date, Alexa has been very basic in terms of task and querying capabilities. Now, with the help of Anthropic, other partners and Amazon’s own foundational models, Amazon will enable more complex multi-step task completion through Alexa+. For example, Alexa+ can now generate handyman recommendations, contact the person upon your approval and book an appointment. This also features a software development kit (SDK) for partners and enterprises to plug into and customize on top of.
“It’s not just that she's really smart and can be conversational. She can also do something that you just don’t really see today with these chat bots, which is take real actions and get real things done.” – Amazon CEO Andy Jassy
In other news, as discussed on the last earnings call, Amazon plans to invest a lot more into robotics going forward. It has budgeted $25 billion, with plans for automation-fostering innovation to potentially save them $10 billion per year by 2030. Whatever Amazon can do to pull costs out of its fulfillment network will mean better margin, and also expanding categories that are economically rational to offer. Everyday essentials has been the example they’ve talked about over the last few quarters. This week, they spoke about expanding their low-cost “Haul” app to Europe. Initiatives like this robotics push have a lot to do with making that doable. Whether it’s fulfillment localization, inventory algorithm optimization, its flex driver program or robotics, Amazon continues to make its world-class footprint even more productive and unlock more possibilities of what it can provide.
Next, Amazon introduced its first quantum chip prototype called Ocelot. For review, while traditional computers use “bits” as their building blocks, quantum computers use Qubits. This method of computing deploys “quantum mechanics” to exponentially accelerate the ability to solve problems. Vital concepts such as superposition, meaning qubits can exist in multiple states instead of just 0 or 1, potentially expedite pace of work. Quantum entanglement, which remotely links qubits so they act as one, potentially allows for more compute scalability. The issue facing commercial ubiquity of this technology is that it can’t yet solve problems better than traditional computers without soaring error rates and exploding costs. Because qubits quickly and chaotically exchange information, it’s hard to gate the data needed for a specific problem. This means qubits routinely use the wrong data and fail to solve problems. Until Alphabet’s breakthrough with Willow, more qubits had meant higher error rates and too much cost inflation to rationally build anything at scale. It packed over 100 qubits into a single chip while maintaining attractive error rates, which is key for the field.
What Amazon’s chip aims to accomplish is a bit different. While companies like IBM primarily use Transmon Qubits (building blocks for quantum computing), Ocelot mixes those with a different kind of qubit called Cat Qubits, which are designed to improve quantum error correction rates. This means the same amount of qubits can deliver more compute power without error rates rising to unattractive levels. According to the company, this chip can reduce expenses related to quantum errors by 90%. Pairing Alphabet’s scaling-based innovation with Amazon’s cost-based innovation should mean progress in the journey to commercially viable applications.
In interviews this week, CEO Andy Jassy reiterated that AWS is chip and power constrained.
Amazon Prime Video will exclusively offer 21 Yankees games this year.
3. Portfolio Update Coming Monday
I plan to invest the remaining proceeds from my Celsius sale into Trade Desk on Monday Morning. This will represent a 21% boost to my current stake. I continue to view last quarter as a hiccup rather than a sign of structural decay. I continue to think this will be a blip on the radar and want to take advantage of an elite business like this trading around 29x EBITDA and 40x FCF. I was tempted to take some profits on Disney to make this an even larger addition, but decided against it for now. This will happen at 9:30 on Monday Morning. Nothing else about my portfolio will change. I have an emergency fund cushion worth about 7% of total holdings that I am willing to deploy if things get very messy. That has not happened yet. Always possible.
4. Market Headlines
Alphabet’s Waymo is doing 200,000 rides per week (about 30 million for Uber for context) and continues to grow rapidly. YouTube reached 1 billion podcast viewers per month. Google Cloud won a $2.5 billion cloud contract with Salesforce to beat out Azure and Oracle. Salesforce will also launch Gemini models for Agentforce as part of the expanding relationship. Next, Apple will likely integrate Gemini for Apple Intelligence. And finally, Google will cut some jobs in its cloud and HR businesses.
Deutsche Bank upgraded Coupang to a buy with a $28.50 price target.
Starbucks will likely cut 1,100 corporate jobs. KKR is also reportedly interested in buying a stake in the firm’s struggling China business. Niccol has talked a lot about needing to change things up there since taking over.
It’s looking increasingly likely that Disney’s ESPN Bet could be shut down next year. It’s not making very much traction or generating much revenue. This could be a great opportunity for a DraftKings or Flutter partnership in the new direct to consumer ESPN app that is expected to integrate betting.
“When we announced our partnership with ESPN in the summer of 2023, both sides of this partnership made it very clear that we expected to compete for a seat at the podium. And we’re not on pace right now to do that.” – Penn CEO Jay Snowden
Meta is looking to raise $35 billion in debt to fund more data center CapEx. Meta has $48 billion in net cash. The company is also experimenting with the idea of launching Reels as a separate app.
UBS channel checks points to a positive Zscaler quarter.
Netflix is expanding programmatic ad buying to Europe with Alphabet and The Trade Desk as buy-side partners after a successful North American launch.
5. Macro
Output Data:
The Atlanta Fed’s GDPNow forecast fell to -1.4% for Q1 2025 vs. 2.3% previously. This has a lot to do with a spike in imports ahead of tariffs.
Durable Goods Orders M/M for January rose by 3.1% vs. 2% expected and -1.8% last month.
Core Durable Goods Orders M/M for January rose by 0% vs. 0.2% expected and 0.1% last month.
The most recent reading for Q4 GDP is 2.3% vs. 2.3% expected and 1.9% previously.
The Chicago Purchasing Managers Index (PMI) for February was 45.5 vs. 40.5 expected and 39.5 last month.
Consumer & Employment:
Conference Board Consumer Confidence for February was 98.3 vs. 102.7 expected and 105.3 last month.
New Home Sales for January were 657,000 vs. 679,000 expected and 734,000 last month.
Continuing Jobless Claims were 1.862M vs. 1.87M expected and 1.867M last month.
Initial Jobless Claims were 242,000 vs. 222,000 expected and 220,000 previously.
Personal Spending for January fell by 0.2% M/M vs. 0.2% growth expected and 0.8% growth last month.
Inflation:
The Personal Consumption Expenditures (PCE) for January rose by 0.3% M/M as expected and vs. 0.3% last month.
The Core PCE for January rose by 0.3% as expected and vs. 0.2% last month.
The Core PCE for January rose by 2.6% as expected and vs. 2.9% last month.
Reply