Amazon Rises on Earnings while Expedia Falls on Earnings
Last week, the Opportunity Equity Strategy's representative account declined -4.38%, underperforming the S&P 500’s -2.26% fall. (Exhibit 1). The strategy ended the week up 27.23% YTD, 948 basis points ahead of the S&P 500.
Exhibit 1: Performance of Opportunity Equity Representative Account Net of Fees, Versus S&P 500, Through 8/4/231
|Time Period||Opportunity Equity Representative Account||S&P 500|
|Last Week (7/28 - 8/4)||-4.38%||-2.26%|
|Inception (annualized since 6/26/00)||6.71%||7.01%|
Source: Bloomberg, Patient Capital Management.
Amazon.com, Inc. (AMZN) rose after the company reported better than expected 2Q results and 3Q guidance. Revenue of $134.4B and EBIT of $7.7B beat consensus estimates of $131.6B and $4.8B, respectively. The company guided for 4Q revenue of $138B-143B ahead of consensus at $138.3B, with EBIT of $5.5B-$8.5B vs. consensus of $5.4B. Credit Suisse raised its price target to $189 from $176 (35% upside), while Truist raised its price target to $176 from $144 (26% upside).
Ovintiv Inc. (OVV) followed oil prices higher over the course of the week. TD Cowen raised its price target to $58 from $54 (21% upside), while Citi raised its price target to $48 from $40 (0% upside).
RBC raised its price target on OneMain Holdings, Inc. (OMF) to $55 from $50 (23% upside).
Chesapeake Energy Corporation (CHK) rose after reporting solid 2Q earnings. Natural gas production came in at 3,505 MMcf/day vs. expectations for 3,469 MMcf/day. Revenue came in at $1.9B vs. $1.2B expected, while EBITDAX came in-line at $524M. Chesapeake guided for natural gas production of 3,350 MMcf/day at the midpoint in 3Q vs. 3,374 MMcf/day for consensus, with total Capex of $395M below consensus of $442M. The company reiterated its FY23 guidance of 3,645 MMcf/day at the midpoint in-line with consensus, and total CapEx of $1.8B at the midpoint below consensus of $2.0B. During the quarter, the company repurchased $125M shares (1.1% of shares outstanding). Truist raised its price target to $102 from $100 (19% upside), while Benchmark lowered its price target to $93 from $107 (9% upside).
Exhibit 2: Significant2 Contributors to Opportunity Equity Representative Account Performance, 7/28/23 - 8/4/23
|OneMain Holdings, Inc.||Equity||0.6%|
|Chesapeake Energy Corporation||Equity||1.1%|
Source: Patient Capital Management. See below for additional information.
Expedia Group, Inc. (EXPE) fell through the 50-day moving average despite reporting in-line Q2 results. Revenue of $3.4B was in-line with consensus and EBITDA of $747M exceeded consensus of $681M. FCF also beat at $923M vs. $903M expected. Year to date, Expedia has repurchased 12M shares for $1.2B (8.2% of shares outstanding). TD Cowen lowered its price target to $110 from $125 (7% upside), while Credit Suisse raised its price target to $174 from $172 (69% upside).
Norwegian Cruise Line Holdings Ltd. (NCLH) fell through the 50-day moving average after announcing 3Q guidance that fell short of consensus expectations. The company reported revenue of $2.21B above consensus of $2.16B while adjusted EBITDA of $515M was better than expectations at $491M leading to an EPS beat of $0.30 vs $0.25 for the street. 3Q 2023 profitability guidance fell short at $0.70 in adjusted EPS vs. $0.79 expected, while EBITDA fell short at $730M vs. $753M for consensus. For the full year, Norwegian narrowed guidance for EBITDA of $1.85B-$1.95B from $1.80B at the low end in-line with consensus of $1.88B, and reiterated EPS of $0.80 vs. $0.78 for the street. Stifel raised its price target to $26 from $22 (45% upside), while Citi raised its price target to $20 from $16 (11% upside).
Canada Goose Holdings Inc. (GOOS) fell through the 50 and 100-day moving averages after reporting 1Q FY2024 earnings that exceeded expectations but issuing 2Q guidance that disappointed. Net sales came in at C$85M vs consensus of C$75M with adjusted EBIT of C$(91)M well ahead of consensus of C$(109)M. The company reaffirmed FY24 guidance with net sales of C$1.400-1.500B, with operating margins of 15-16% and adjusted EPS of C$1.20-1.48. Canada Goose issued 2Q FY2024 revenue guidance of C$280M at the midpoint below consensus of C$296M, and adjusted EBIT of C$(25)M vs C$17M for consensus. Barclays lowered its price target to $18 from $20 (-7% downside), while Williams Trading lowered its price target to C$21 from C$25 (-6% downside).
PureTech Health PLC (PRTC LN) fell below the 50 and 100-day moving averages. The company announced that it had been awarded up to $11.4M from the United States Department of Defense to advance its therapeutic candidate, LYT-300, for the treatment of Fragile X-associated Tremor Ataxia Syndrome (FXTAS).
Exhibit 3: Significant2 Detractors from Opportunity Equity Representative Account Performance, 7/28/23 - 8/4/23
|Expedia Group, Inc.||Equity||-13.6%|
|Norwegian Cruise Line Holdings Ltd.||Equity||-16.7%|
|Canada Goose Holdings Inc.||Equity||-8.2%|
|PureTech Health PLC||Equity||-10.5%|
Source: Patient Capital Management. See below for additional information.
As of prior week's market close unless otherwise stated.
1The performance figures for the representative Opportunity Equity account reflect the deduction investment management fees and certain other expenses. Returns greater than 1 year are annualized.
Patient Capital Management, LLC completed its acquisition of the Opportunity Equity Strategy from Miller Value Partners, LLC on May 26, 2023. Patient Capital Management served as the investment adviser to the Opportunity Equity Strategy for the majority of the week referenced herein. Additionally, prior versions of this weekly blog posting refer to Miller Value Partners as investment adviser to the Opportunity Equity Strategy.
For additional information about Opportunity Equity Strategy performance, please click on the Opportunity Equity Strategy Composite Performance Disclosure. Past performance is no guarantee of future results.
2Significant Contributors and Detractors are based on holdings that had the greatest effect on representative account performance for the week. Holdings that have been in the portfolio since the end of the most recent calendar quarter are identified by name. The net return shown above for each individual security represents the change in market price of the security during the week, according to a third-party pricing service, or for the partial period held in the portfolio during the week. Net returns also include any purchases or sales that were made during the week. For information on how Contributor/Detractor data were calculated and a list showing the contribution to the Strategy’s weekly performance of each investment held at such quarter end, contact us.
Any views expressed are subject to change at any time, and Patient Capital Management disclaims any responsibility to update such views. There is no guarantee that market trends discussed herein will continue. The information presented should not be considered a recommendation to purchase or sell any security and should not be relied upon as investment advice. It should not be assumed that any purchase or sale decisions will be profitable or will equal the performance of any security mentioned. Past performance is no guarantee of future results, and there is no guarantee dividends will be paid or continued. References to specific securities are for illustrative purposes only. Portfolio composition is shown as of a point in time and is subject to change without notice. Content may not be reprinted, republished or used in any manner without written consent from Patient Capital Management.
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