Horrible Guidance From Estee Lauder Backs This Portfolio Decision (original) (raw)

After "simply horrible" guidance from the beauty company, we're confident in a recent decision to exit a portfolio holding.

*A slow start to an increasingly busy week of retail earnings, Fed meeting minutes and Powell comments

*Horrible guidance for Estee Lauder reaffirms our recent Coty exit

*AMD bulks up in data center, Goldman reiterates buy rating on Nvidia

Good morning and happy Monday. We have another slow start to what will be a week filled with retailer earnings (Tuesday), Fed meeting minutes (Wednesday) and potentially, fresh comments from Fed Chair Powell (Friday).

As we discussed in Friday’s Weekly Roundup, we could see lighter-than-usual trading volumes as folks squeeze in that last bit of summer vacation. Even so, we’ll keep our eyes on the market multiple that has rebounded near recent peak levels as we digest the next wave of retailer earnings that could foster another round of downward consensus 2024 EPS revisions for the S&P 500.

Setting the stage for that, Estee Lauder (EL) delivered simply horrible guidance for the current quarter with EPS of 0.01to0.01 to 0.01to-0.02 compared to the $0.63 consensus. It’s guidance like that and the potential for Coty’s guidance to underwhelm the market which led us to close out our position in shares last week. Adding to that decision, Estee Lauder’s fragrance business rose just 1% during the June quarter.

Other news we’re catching this morning includes AMD undefined acquiring AI infrastructure provider ZT Systems in a cash and stock deal worth about $4.9 billion, a move that looks to shore up its position in data center and AI against our own Nvidia (NVDA) and Marvell (MRVL) .

Privately held ZT has approximately 1,000 design and customer headcount and 1,000 manufacturing headcount and AMD expects the transaction, which isn’t expected to close until 1H 2025, to be accretive on a non-GAAP basis by the end of 2025. In other words, it's not going to impact any EPS expectations for the next few quarters.

As we digest that, we also see that Goldman Sachs (GS) reiterated its buy rating on its conviction list resident NVDA shares with a $135 target.

“While the reported delay in Blackwell could lead to some near-term volatility in fundamentals, management commentary, coupled with supply chain data points over the coming weeks, should lead to higher conviction in Nvidia's earnings power in 2025.”

We are not going to disagree one iota with that, especially given our $148 price target.

Coming up, we’ll share an updated table of consensus EPS expectations for the portfolio and discuss a few panic point adjustments as well.

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At the time of publication, TheStreet Pro Portfolio was long NVDA and MRVL.