Daily Brief - June’s Winners and Losers

TLDR: June's arrival has brought a new set of opportunities and challenges in the financial markets. Let's see how the historically best and worst performers could fare.

Starting with the winner, GNRC has consistently outperformed in June, boasting an impressive 16.96% average return. Generac’s Q1 2024 earnings not only beat expectations but also saw margin expansion and strong cash flow.

From residential generators to smart home energy solutions, Generac’s broad product line is its backbone. Climate change and power outages are driving up demand for Generac’s products. With strong financial health and strategic initiatives, Generac seems well-positioned for the upcoming month.

On the flip side, Royal Caribbean has a one-month forward seasonality value of -7.31%. Cruises are a luxury many might forego during economic downturns, and current economic uncertainties don’t help. The debt piled up during the pandemic is a heavy anchor, with high operational costs adding to the burden.

Despite these hurdles, there are some sunny spots. Increased bookings and strategic initiatives to enhance customer experience could offer a lifeline if economic conditions stabilize. But for now, a cautious stance is warranted.

Market Movers: More winners & losers

Here are more winners and losers according to their 1 month seasonality:

Winners:

• Tesla Inc. (TSLA) - Seasonality Value: 13.79%
• Signature Bank (SBNY) - Seasonality Value: 13.17%
• DexCom Inc. (DXCM) - Seasonality Value: 12.23%

Losers:

• Organon & Co. (OGN) - Seasonality Value: -6.52%
• Altria Group Inc. (MO) - Seasonality Value: -5.43%
• Capital One Financial Corp. (COF) - Seasonality Value: -4.54%

Scenario Spotlight: Can Tesla live up to the hype?

The chart above indicates that when Tesla's seasonality has been 13% or higher, the stock has tended to experience a risk of negative returns in the following month.

Earnings Spotlight: Lululemon reports tomorrow

Lululemon is expected to report Q1 sales of $2.20 billion, up 10% year-over-year, but this growth is slower than the 16% increase in Q4 2023. Earnings per share are projected at $2.40, a 5.3% rise compared to a 20% jump in the previous quarter.

Store traffic trends, promotions, and product innovation suggest a slow start to 2024. Increased promotional activities to boost volume growth may impact Lululemon's margins and EPS, posing challenges for sustaining growth.