The market today is like fertilizer for grey hair. In theory, it should be stronger than it has been. After all, this morning’s manufacturing data showed prices continue to come down (i.e., supply/demand balance getting better) while new orders remain stable. We also see oil prices down. So, inflation pressures seem to be easing (still) but growth isn’t tanking (yet).
The market doesn’t care. Today is the first day of September and the beginning of the ramp up in the Fed’s quantitative tightening process (doubling balance sheet shrinkage to $95 billion/month). This is likely the main reason for the market being down (the 10-year yield popped by over 4% today, to 3.26%).
Tomorrow, we get employment numbers, and next week we get July CPI data on Wednesday. Expect the market to keep those grey hairs growing.
We have a few updates on late-reporting companies. The results were good. But in the short term the market couldn’t care less.
Here’s what we learned.
SentinelOne (S) beat expectations yesterday delivering revenue growth of 124% to $102.5 million ($6.9 million ahead of consensus) and EPS of -$0.20 ($0.05 ahead of consensus). Net retention hit a record of 137% as cross-selling success continues. Management’s updated full-year guidance ($416 million) is $10 million ahead of consensus. So all’s good right? Well, the stock is down 8% and has fallen below its 50-day line. With the business looking as good as expected (if not better) but the market in a funk, we’ll hang in there with SentinelOne. Analysts continue to like the stock. BUY
Samsara (IOT) also reported and beat expectations. The stock is down about 11% (was worse earlier). Revenue of $153.5 million (+52%) beat by $10.5 million while EPS of -$0.04 beat by $0.03. Full-year guidance of $612 million implies 43% growth. The company had a huge hiring quarter in Q2 which will weigh on profits in the near term, but big picture, Samsara continues to march toward profitability year over year. It’s worth noting that around 53% of revenue comes from transportation, retail/wholesale trade and construction, which could be challenged markets if we get a recession. That said, IOT’s products help these companies save money, so it would seem logical that Samsara would be somewhat insulated from any softness, should it occur. We continue to have a buy-a-half rating on IOT and that seem appropriate right now. BUY HALF
CrowdStrike (CRWD) is retreating after reporting (along with most stocks this week) a beat-and-raise quarter. Revenue of $535 million (+51%) beat by $18.7 million while EPS of $0.36 (+227%) beat by $0.09. International growth was 70% (about 30% of total revenue), and management says they’re seeing more demand for identity protection and cloud security offerings. Total customer count was up 51% (1,741 new customers). Like most management teams, this one is being conservative as nobody really knows where the economy is going to go. We’re holding a quarter position and will stick with that. HOLD A QUARTER
