Futures lower, Canada GDP, CoreWeave IPO, Lululemon plunges, Dollarama upgraded
Normally when I write this newsletter it is a race against the clock and there is no time to eat or drink. But yesterday my mom was over to help with the kids and she brought up fresh waffles she made from scratch and a cup of tea while she also got my children ready for school. Proof that no matter your age, it’s always nice to have your mom take care of you.
I sat down with Jordan Zinberg of Bedford Park Capital for the latest edition of In the Money with Amber Kanwar. He shared his knack for big returns from a small corner of the market—his fund soared nearly 60% last year. Watch the full episode!
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Heavy: Futures are soggy this morning after a weak session yesterday. Tariffs have taken a bite out of performance in the US with the S&P 500 on track to post its first quarterly loss in 6 quarters. The TSX could eke out a modest gain, but that’s on a knifes edge and we will see what the last trading day looks like next week. For the first quarter of the year, European markets and the Hang Seng (Hong Kong) have been the star performers as investors look outside the US for big wins. This morning we got a read of the Fed’s preferred measure of inflation (PCE) which showed inflation remains stubbornly elevated (core inflation +2.8%) while spending plunged. Importantly we will get a read of consumer sentiment later in the morning (University of Michigan consumer sentiment at 10am). Watch for inflation expectations after the last reading came in at the highest level since 2022.
GDP: Canada’s economy grew more than expected to start the year according to Statistics Canada. GDP for January increased 0.4% from December and 2.2% from the same time last year. The gains were driven by strength in oil & gas. However, Stats Can is predicting that growth in February stalled out. The data might as well be from 10 years ago because a lot has changed since January. We are now in a trade war with our closest ally and biggest market for Canadian goods and services. Oil prices have plunged since January. It is against this backdrop that Canadians will be headed to the polls in exactly one month. For the Conservatives, a lot has changed since January as well. Where they once enjoyed a comfortable lead against the Liberals, that has narrowed dramatically after Trudeau’s resignation. The campaign manager for Ontario Premier Doug Ford gave a talk at the Empire Club yesterday warning that Poilievre is on track to lose the federal election according to reporting by the Globe and Mail. Meanwhile, Prime Minister Mark Carney says Canada can no longer rely on the US. While it may be possible to restore “some” trust, there will be no turning back.
Downsize: CoreWeave will be testing the IPO market and demand looks soft. The provider AI computing power backed by Nvidia raised $1.5 billion ahead of its IPO, which is well below their original target of $2.7 billion. The stock will begin trading today, priced at $40/share. This is well below the $47-55/share range previously expected. The dampened appetite comes despite the fact that revenue grew 700% in 2024, although it is a money losing enterprise with a loss of more than $860 million. It is also tangled up with Nvidia in many ways. Nvidia is a major shareholder, but also represents about 15% of CoreWeave’s revenue, while CoreWeave is also a customer of Nvidia’s buying their chips. It will be a test of investor appetite for AI infrastructure in the wake of cheaper models flooding in from China.
Downward dog: Shares of Lululemon are plunging 12% in the pre-market after sales growth stalled in the US and the yoga-apparel maker warned that sales and profit would be lower than investors expected in the coming year. While the reported quarter came out better than expected the, CEO Calvin McDonald called out a “cautious consumer” which has affected traffic trends. Raymond James is downgrading Lululemon following the results. “…Despite favorable initial reads from recent product launches (improvement in conversion, average order value, units per transaction), the U.S. remains challenged and is only planned to grow modestly in FY25,” wrote Raymond James’ Rick Patel, “We expected more robust U.S. growth and a return to positive comps in FY25 after last year’s product missteps, but we no longer have high confidence on this outcome.”
Notable calls: Dollarama is getting upgraded at National Bank following its announced acquisition of The Reject Shop. The stock reacted favourably to the deal and while it is trading at near all-time highs, National Bank’s Vishal Shreedhar put a street-high price target of $166/share implying 10% upside from here. “Our upgrade and higher multiple reflects improved clarity on (Dollarama’s) growth vectors (including greater international potential) and an uncertain macroeconomic backdrop that favours value retailers with a steady track record of growth,” wrote Shreedhar. Piper Sandler is floating the idea of a merger between Etsy and eBay to solve their growth problems. The analyst says it would combine Etsy’s unique platform with eBay’s scale and data. Barclays is upgrading Ferrari calling it a tariff-resistant stock. The analyst notes that the maker of iconic luxury cars has reiterated its full-year financial forecasts despite 25% tariffs. “Yesterday’s guidance confirmation underscores unique (relative) safe-haven status and is a strong sign of confidence amid great uncertainty in EU Autos,” wrote the analyst.
