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3 Stocks (On The Move and Why).

CAVA Q2 Results: 35.2% Revenue Growth, Raises 2024 Outlook

What's new: CAVA Group reported strong Q2 2024 results with 35.2% revenue growth and raised its full-year 2024 guidance.

Why it matters: CAVA's performance demonstrates the strength of its fast-casual Mediterranean restaurant concept and its ability to expand rapidly while maintaining profitability.

By the numbers:

• Revenue: $231.4 million, up 35.2% year-over-year

• Same Restaurant Sales Growth: 14.4%, including 9.5% traffic growth

• Net New Restaurant Openings: 18, bringing total to 341

• Restaurant-Level Profit Margin: 26.5%

• Net Income: $19.7 million, up from $6.5 million in Q2 2023

The big picture: CAVA's growth is driven by new restaurant openings, increased traffic, and successful menu innovations like the new grilled steak option.

What's next: CAVA raised its 2024 guidance:

• Net New Restaurant Openings: 54 to 57 (up from 50 to 54)

• Same Restaurant Sales Growth: 8.5% to 9.5% (up from 4.5% to 6.5%)

• Adjusted EBITDA: $109.0 to $114.0 million (up from $100.0 to $105.0 million)

The bottom line: CAVA's Q2 results show strong momentum in both expansion and profitability, positioning the company for continued growth in the fast-casual restaurant sector.

Mortgage Payments Drop, Homebuyer Interest Rises as Rates Stabilize

What's new: The median U.S. monthly mortgage payment decreased 0.1% year-over-year, the first annual decline since 2020, as mortgage rates stabilize at a 15-month low.

Why it matters: This shift signals a potential thaw in the housing market, with early indicators of homebuying demand showing signs of life.

By the numbers:

• Median monthly mortgage payment: $2,587 (down 0.1% YoY)

• Average 30-year fixed mortgage rate: 6.49% (down from 7.09% YoY)

• Median sale price: $390,000 (up 3.6% YoY)

• Pending sales: Down 5.3% YoY

• New listings: Up 3.4% YoY

• Active listings: Up 18% YoY

The big picture: Lower mortgage rates are bringing some buyers back to the market, but the impact on sales is not yet evident.

What's happening:

• Redfin's Homebuyer Demand Index up 4% in the last week

• Home tours increasing

• Mortgage purchase applications down 8% YoY

Between the lines: The stabilization of mortgage rates around 6.5% is encouraging some buyers who had been waiting for further rate drops to enter the market.

What to watch:

• Potential increase in listings following the NAR settlement

• Impact of possible Fed interest rate cut in September

The bottom line: Early signs of increased homebuyer interest are emerging, but it's too soon to tell if this will translate into more sales.

Peloton Q4: Revenue Growth Returns, Profitability Improves, Challenges Ahead

What's new: Peloton achieved modest revenue growth and improved profitability in Q4 FY2024, but faces challenges in subscriber growth and hardware sales.

Why it matters: This marks a turning point for Peloton as it shifts focus from rapid expansion to sustainable, profitable growth.

By the numbers:

• Total revenue: $644 million (up 0.2% Y/Y)

• Subscription revenue: $431 million (up 2.3% Y/Y)

• Adjusted EBITDA: $70 million (up $105 million Y/Y)

• Free Cash Flow: $26 million (up $100 million Y/Y)

• Ending Paid Connected Fitness Subscriptions: 2.98 million (down 75,000 Q/Q)

• Ending Paid App Subscriptions: 615,000 (down 59,000 Q/Q)

The big picture: Peloton is making progress on profitability but struggling with subscriber growth and hardware sales.

What's working:

• Cost-cutting measures delivering savings

• Subscription gross margin up to 68.2%

• Tread business growing (Connected Fitness revenue up 42% Y/Y)

• Precor business turnaround (revenue up 20% Y/Y)

Challenges ahead:

• Declining hardware sales expected in FY2025

• Churn rates expected to increase modestly

• Reducing media spend while working on product improvements

What's next:

• FY2025 outlook:

  • Revenue: $2.4-$2.5 billion (down 9% Y/Y at midpoint)

  • Adjusted EBITDA: $200-$250 million

  • Free Cash Flow: At least $75 million

• Focus on improving profitability and free cash flow

• Continued investment in content and product development

The bottom line: Peloton is stabilizing its finances but faces a challenging road to reignite growth while maintaining profitability.

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1 Actionable Tip.

Investing boiled down to three simple steps:

1. Value the business

2. Value the bet you are making.

3. Execute the plan of action.