Nike missed revenue estimates by 2%. It also missed its slower revenue growth guidance, with -1.7% Y/Y growth posted. Foreign exchange (FX) headwinds were a bit stronger than expected, but that was not the only source of the miss. 

U.S. revenue fell 1% Y/Y; Europe revenue fell 2% Y/Y; China revenue rose 3% Y/Y. Equipment growth was the strongest across all of these markets. Apparel growth was slow, yet positive. Footwear growth was negative (aside from slow growth in China).

Nike’s effective tax rate was 13.1% vs. 17.3% Y/Y. Without this help, net income margin would have been 11.3% instead of 11.8%. EPS would have been $0.94 vs. $0.66 Y/Y instead of $0.99 vs. $0.66 Y/Y without this help. Also note that net income margin last quarter ex-restructuring charges was 13.0%. 

SG&A expenses fell 7% Y/Y due to flat demand creation expenses and lower operational overhead costs.

In Nike’s last quarter, it previewed fiscal year (FY) 2025 guidance by telling us that revenue and earnings would grow. Between “revised timelines” to product launches, management of classic footwear supply, macro (especially China) and some other issues discussed later on, it now sees revenue falling at a mid-single-digit clip for the full year. It also sees 20 bps of GPM expansion and positive SG&A cost growth for the year too. Analysts wanted 50 bps of GPM expansion and more EBIT margin expansion than this guidance implies. It was a miss across the board.

Nike likely trades for roughly 21x forward earnings. There’s no earnings growth expected this year.

Last quarter, Nike spoke on an evolving organizational and go-to-market focus to address weakening trends. It restructured its organization, removed middle-management layers for better communication and innovation velocity. It launched a multi-year product innovation cycle, accelerated the sunsetting of several legacy brands, and re-committed to perfecting impactful storytelling – with a renewed focus on sport. It also set out to improve brand distinction across its 3rd party brick-and-mortar retailer partners. Between the disruption from these changes, worsening macroeconomics, a highly promotional environment in China and a tired product assortment, we’re left with the sharp guidance reductions outlined above.

It’s not all bad news. Nike has effectively reduced small parcel fulfillment, consolidated supply chain partners, optimized spend and streamlined the organization to improve the shape of its operations. This will allow it to invest about $1 billion in savings for fiscal year 2025 to drive growth. Earmarked areas for this $1 billion in savings include “ramping ground game in key cities” and more product development budget. It will also understandably lean heavily into Olympics-related marketing. While it’s encouraging that Nike can control costs to help the bottom line, there's only so much cutting a company can do before needing revenue growth to kick in to drive profit growth.

Nike still sees its new product revenue contribution doubling in FY 2025 vs. 2024 to help offset some (not all) of the declines from its existing products.

Nike’s leadership focused on the early signs of performance (training/sport) segment improvements. The segment rose double digits Y/Y, with growth across most sports. Basketball enjoyed double digit growth across all categories, with the Sabrina 1 lineup helping it take 2 points of U.S. basketball market share. A key piece of this early progress is Nike’s new “Speed Lane.” As a reminder, its “Express Lane” was implemented a few years ago, which shortened product delivery time through “hype-rlocalized design and replenishment.” Speed Lane is essentially a new iteration of this idea, which Nike thinks will deliver incremental gains on the same performance indicators. Some items under this new approach include expediting the product innovation cycle through  manufacturing partners. With the help of Speed Lane, it has now “accelerated half a dozen new models,” with more coming in the second half of FY 2025. 

In fitness, which it considers its largest market share opportunity, it enjoyed double digit apparel growth and broad-based health for this specific subsection.

In running, it called the environment a “competitive battlefield.” Hoka and some other players are proving to be formidable competitors. Fashion cycles have a way of making trendy new entrants go away; we’ll see how Hoka and On Running can fare. Nike thinks it has “realigned resources” to take this competitive “challenge head-on with confidence.” As a reminder, it has intentionally pulled back on older models under its Pegasus shoe line to lean into new releases (which rose 20% Y/Y). One of these new releases, the Pegasus 41, is enjoying strong early reviews and will be supported by “Nike’s most comprehensive running campaign in years.” So far, sell-through of these new models among wholesale partners and Nike Direct was called better than expected. More launches are coming within this model and several others.

Looking ahead, double-digit growth in order books for North American running (for the holidays and next spring) is bolstering the team’s confidence in this segment’s continued strength. As you can see, there are pieces of the business growing nicely. These pieces are just not large or powerful enough to offset overall declines.

Things are not brightening within the lifestyle category. Revenue fell across all segments and geographies, which offset performance growth. The result missed its expectations due to “softer traffic, more promotional needs and lower footwear sales.” Weakness was the worst in April and May, but still prevalent in June. Softness was the most aggressive within its digital business, with revenue declining by 10% Y/Y. Nike thinks it needs to do a better job on reacting to changing consumer preferences. It will also prioritize full price sales more strongly to protect the long term value of its franchises and marketplace.

Amplifying this current pain is its decision to accelerate the timeline of “tightening total supply of certain footwear franchises across channels.” This will “create several points of fiscal year 2025 revenue headwinds.” The team took us through some previous history that hints at these moves may bear fruit. For example, in 2018 it “recalibrated supply for some Jordan Brand franchises” and rapidly saw growth return to positive territory. That’s when Jordan “started a multi-year run of strong double digit growth.” 

One of the bright sports for this category was its retro running segment. This is where, like Disney, Nike can utilize its deep vault of iconic franchises to bring old offerings back to life with lower added cost and risk. Its Y2K shoe portfolio is enjoying rapid growth and will help its retro running business triple (small revenue base) next year.

Nike does think macro weakness is adding to the soft sales that it’s currently seeing. Some of the challenges are self-inflicted, but some are not. We’ve seen many, many consumer discretionary brands like this one struggle in recent quarters. To help combat this obstacle, Nike is launching a refreshed lineup of sub-$100 shoes. This follows Target, Walmart, Starbucks, McDonald’s and many other companies pushing to cater to increasingly price sensitive customers.

China revenue did rise 7% Y/Y FX neutral (FXN) (3% overall), but there’s more context needed. Tmall’s earlier 618 shopping event added several points to this growth rate. Without this event, Nike “fell short” of its expectations and saw broad-based traffic weakness across all Chinese channels. Nike thinks some Chinese market weakness will persist, but like Starbucks, it remains highly confident in the long term growth potential of that market. The geography remains “highly promotional,” and Nike continues to try its best to navigate through it.

Tough times for Nike. Macro and micro-level headwinds are raging in harmony and its results are certainly reflecting that. I don’t see the innovation issues as easily fixed as I do throughput issues at Starbucks or out-of-stock issues at Lululemon. To me, this seems like a matter of a tired product assortment and missing consumer preferences. With that said, Nike is an iconic brand and I’m confident that this iconic brand is not dead. It needs some better leadership, better execution and perhaps better macro to see results brighten.

Datadog debuted a slew of new products at its user conference this past week. Here, we’ll cover the highlights. First, Datadog debuted a new Agent Experience for OpenTelemetry. OpenTelemetrary (OTEL) allows companies to utilize data across various cloud apps and databases for better product interoperability. Now, customers will be able to use Datadog’s product suite and tools within the OTEL framework to power broader observability. OTEL is an open means for developers to scrape and collect insight on how apps and products are performing.

Next, Datadog introduced “Live Debugger.” This allows developers to easily sift through and uncover code that has already been deployed to runtime. This can be done without any app downtime to combine easy editing and great customer service. Alternatives require significant disruptions to operations just to debug a simple coding blunder. This means significant developer and user friction has been removed with Datadog. It also means faster time to remediation. Live Debugger isolates and pulls the misconfigured code with a direct developer environment integration for low-stress mending of errors. There are GenAI tools infused into this product to automate the testing of bugs and fixes.

Thirdly, Datadog added new security tools to augment its observability platform’s reliability. These include agentless scanning of cloud environments to uncover any misconfigurations or poor hygiene. Releases here also include new data and code security products specifically for Amazon customers. The code security tool will also be helpful for the aforementioned Live Debugger tool. Importantly, these data and code security tools also include a new large language model (LLM) observability tool to monitor and secure these valuable assets. This LLM observability tool offers “out-of-the-box evaluation and sensitive data scanning” for LLMs. It can rank the quality of model inference and response accuracy rates and helps optimize cost across most major LLM providers too.

Kubernetes clusters are batches of compute power that help run an app. This helps with timing of when apps are in runtime and flexible scaling of compute capacity based on dynamic needs. Datadog introduced Kubernetes Autoscaling to help customers optimize cost across their Kubernetes capacity needs. It highlights redundant, misused and unnecessary workloads to be addressed. Next, Datadog introduced “Datadog On-call.” This combines Datadog observability with incident response management, ranks vulnerabilities and helps expedite remediation with more direct context. Lastly, the company announced Log Workspaces to drive better interoperability within a company. This allows teams to work more closely together on identifying issues and creating cross-department workflows for remediation.

In the world of enterprise software, you’re only as good as your latest and greatest innovation, the conjoining utility of your overarching platform and your go-to-market. This shows Datadog’s fixation on staying ahead on those first two items.

Nu made an interesting acquisition of a USA-based firm called Hyperplane. This is a 2-year-old company with $6 million in venture funding to date. The acquisition is likely very small (actual terms not disclosed) and will not be directly material to results. So why do we care? Glad you asked.

Hyperplane is a data intelligence platform with a series of foundational models that assist clients in building and powering highly customized and personalized financial services. It helps banking clients train and deploy custom models with their own, secured first party data at impressive scale. With Hyperplane, customers can tap into its managed infrastructure to build more relevant, light-weight products. Its models span use cases like interface, risk, collections and marketing.

For Nu, this will simply deepen the granularity of its existing suite. It will allow Nu to nudge customers with promotions; it will allow Nu to dynamically toggle home screen presentations, based on a customer’s individual preferences; it will allow Nu to gain an even better sense of what its consumers want and when. It will help in many, many ways. Nu is already ushering in a “new era of faster, personal finance products.” This merely builds on that.

Nu has made great efforts to position itself to ingest and handle large swaths of data for AI-based leveraging. Thanks to this, it will immediately be able to take advantage of Hyperplane’s model-building prowess. And? Hyperplane will get an immediate injection of data, to accelerate the model seasoning specifically for Nu product improvement. Hyperplane will “power core machine learning capabilities'' to extend the consumer experience lead that Nu already enjoys in its markets.

It’s clear that Hyperplane will be a tool to improve Nu’s consumer-facing suite. Still, Hyperplane was born as a business-to-business company to enable legacy and next-gen financial institutions to modernize their banking cores. Will Nu look to package and license these tools itself to sell to competition? It’s possible. I candidly hope they don’t decide to do this. The firm’s consumer experience lead in its geographies is massive. I don’t think the added revenue opportunity tied to this potential licensing is worth potentially eroding its competitive edge. 

Secondly, it’s interesting to note that Hyperplane is based in Silicon Valley. There are 63 million people of Latin American descent in the United States. That’s more than a quarter of the population of Brazil. Nu could partner or secure needed licensing to jump-start a business for under-served customers. Partnering is the realistic avenue, but who knows if they can figure out how to get a charter here. Competition in the U.S. is much more fierce; regulation is more strict; but the opportunity could still be a compelling one as Nu inevitably expands beyond its 3 nation footprint.

My Nu deep dive will be published on Monday.

There was a short report published on Hims this past week. The piece centered on the company’s push into GLP-1 weight loss drugs. The broad issues highlighted were its ease of prescribing these medications and the quality of its supply chain partners. It cited some patients who had grown ill from taking its prescribed medications, but as many pointed out, it neglected to mention these consumers took impermissible dosages. It’s disingenuous that this tidbit wasn’t included by the publisher and I do think the short report was intellectually dishonest. Still, it did highlight some of the issues that I see with the HIMS bull case that I wanted to discuss.

Regulation will remain a key risk for Hims. Current FDA loopholes allow for GLP-1 knockoffs to be manufactured and produced, but that could quickly change if regulators see any issues with this and/or are motivated to do so. GLP-1 is a key piece of its future growth engine. Not the only piece… but the most incremental piece by far. It’s worth noting that GLP-1 producers like Eli Lilly are very deep-pocketed, have deep benches of lobbyists and will naturally try to block players like Hims from selling alternatives. This has not yet resulted in Hims or other knock-off players pausing sales. It’s still possible.

At the same time, I still think Amazon is the biggest threat to what I view as a moat-less business. At the end of the day, this company sells men’s and women’s health medicines online. It doesn’t do anything that Amazon Pharmacy can’t eventually do; it doesn’t boast the logistics network that Amazon does; it doesn’t have countless other value-add products to cross-sell into an overarching subscription to drive differentiation. It has none of that. Amazon has essentially killed once powerful pharmacy chains (check out the price chart on Walgreens WBA). It has effectively killed Teladoc and other telehealth players too. These companies had larger subscriber networks, more data, larger revenue bases and larger budgets than Hims. I think it’s somewhat likely for Amazon to dismantle this business model too.

I hope I’m wrong. I hope shareholders can tell me “I told you so” in a few years. I’m just not confident in this playing out. There are better places to invest, in my opinion. Based on highly popular demand, I will begin covering these earnings reports going forward. 

Founder/CEO Jensen Huang’s portion of the meeting was a carbon copy of his recent Computex presentation. He spoke about the historic revolution taking place within computing, which Nvidia is leading by a mile. He spoke on the firm’s full suite of products powering accelerated computing data centers, or “AI factories.” This suite includes best-in-class GPUs, switches, and SpectrumX networking technology to vastly bolster the number of connections Nvidia can blaze amongst its GPUs. This setup is augmented by its Cuda software suite and Nvidia Inference Microservices (NIMs) to create end-to-end tools for standing up, seasoning and deploying industry-specific GenAI applications. This all powers superior efficiency, bandwidth, performance and total cost of ownership (TCO). That's 30,000 ft. view. I dove into things a bit more in my coverage of the Computex chat, which can be found here.

There were a few new nuggets from his chat. The main item was his brief commentary on the new Blackwell platform. This is its latest GPU superchip, which will replace Hopper and begin shipments later this year. Blackwell offers a 25x TCO edge over Hopper, which was the TCO leader before this new platform was introduced. Demand levels, adoption and bookings activity from Blackwell all convincingly point to this being its most successful product ever. 

That’s encouraging to hear for any company. It’s especially encouraging to hear in light of Hopper’s amazing success (and Grace before that). Continued supply constraints, tech edges and coinciding pricing power are not going away in the near future. This commentary points to the GenAI chip boom still having legs, with Nvidia in the lead to capture that incremental opportunity.

Two things are obvious: First, Nvidia is leading the GenAI chip boom. Second, this chip boom will not last forever. The bet that investors are making today is that the current wave will continue for some time. Blackwell commentary this week bodes well for that bet. This is the formula that MUST remain intact for Nvidia to keep working as an investment. With this scenario in place, 25x sales still means well under 40x EBIT and a 1x EBIT growth multiple. It must maintain its tech lead and must maintain pricing power for 25x sales not to eventually mean 100x+ EBIT and less attractive risk/reward. 

Note that Micron is especially cyclical within the violently fluctuating semiconductor space. DRAM and NAND are both commoditized and lower differentiation products vs. custom chipsets. This is why the firm generally trades for such low earnings multiples. This is not a structural growth story but will track the A.I. cycle. Q3 2023 was a poor demand environment for its products. Q3 2022 boasted a stronger backdrop for the firm. Q3 2024 was somewhere in between those two periods. With this context, you can see how drastically the backdrop impacts this firm’s results.

For the 4th quarter, Micron’s revenue guidance was roughly in line. It also guided to a 34.5% non-GAAP GPM, which ever-so-slightly missed estimates. We could call the miss a rounding error. Conversely, its $1.08 Q4 EPS guidance beat $1.02 estimates by $0.06.

It sees a significant revenue record in FY 2025. This implies at least 23% Y/Y growth, although the sell-side wants closer to 50% Y/Y growth.

Other guidance items:

Micron trades for 17x next 12-month EPS and 14x fiscal year 2025 EPS. EPS is rapidly recovering from deeply negative territory last year.

Its HBM offering is ideal for high-performance computing. It offers more capacity for data transfer vs. competing DRAM products. It also boasts better energy efficiency, and so lower TCO vs. alternatives. Interestingly, per Micron, HBM deploys vertical “stacking” of DRAM hardware, which shrinks the needed footprint and improves performance and efficiency. The firm’s latest HBM product (HBM3E) offers 30% lower power consumption vs. competition. Shipments on this product began during the quarter and led to $100 million in revenue already. That will ramp to billions for FY 2025.

Micron’s Dual In-Line Memory Modules (DIMMs) are another type of memory product for servers (or overarching AI factories as Jensen Huang calls them) needing massive amounts of energy. Micron’s ability to deliver these needs in a more cost-effective manner is highly relevant in today’s GenAI and cost conscious world. These are often less expensive than its HBM product on a per unit basis, but boast inferior latency and bandwidth. If a use case demands optimal speed and efficiency, with lower cost sensitivity, HBM is better.

Next, Micron’s Data Center Solid State Drive (DC SSD) is also finding great success in the current environment. DC SSD is non-volatile. This can often be the most expensive per unit means of storage (as it stores everything even after a device or server is turned off). It stores everything so that products like DIMMs can more easily and effectively query needed data on command. These products are complementary.

“Data center SSD is in the midst of a strong demand recovery as customers have worked through their 2023 inventory. Demand is improving due to AI infrastructure, and supplemented by the start of a recovery of traditional compute and storage infrastructure demand. Micron is gaining share.”

CEO Sanjay Mehrotra

The products discussed above are the centerpieces driving Micron’s success in AI and high-performance computing. Supply scarcity continues to foster a favorable pricing environment within memory, which should last at least through the next few quarters. 80% of its DRAM production is now on its leading-edge (or most advanced) fabrication technology, with 90% of its NAND production on leading-edge technology too. Its newest process using extreme ultraviolet lithography is on track for scaled production next year. Newer technology and better supply utilization are helping Micron drive material DRAM and NAND cost reductions for 2024. In the hyper-commoditized memory chip world, input cost edges are everything.

Data center revenue rose by 50% Q/Q thanks to GenAI demand, with this growth being highly accretive to overall margins. That was wonderful context from the team, as we’ve seen complementary players like Dell selling their AI servers for razor thin margins due to high competition. Micron expects a continued mix shift towards these products, driving more operating leverage into next year as it continues to take more share.

“AI will require training ever-increasing model sizes with trillions of parameters and sophisticated servers for inferencing…. This trend will drive significant growth in the demand for DRAM and NAND… Micron will [likely] be one of the biggest beneficiaries.”

CEO Sanjay Mehrotra

Micron secured preliminary terms for a $6.1 billion grant under the CHIPS and Science Act. This will help fund its manufacturing capacity expansion in Idaho and New York. Between these incentives, technological cost edges, more R&D and eliminating redundant location costs, Micron sees itself leading in memory manufacturing efficiency. It also sees Idaho and New York as foundational investments to support the next several cycles of growth.

Micron’s PC and smartphone customers have built more inventory amid rising prices. They are also aware of the risk of DRAM and NAND scarcity as datacenter demand diminishes supply availability. Micron is seeing many customers respond to this by locking in longer term agreements through 2025 and securing access to its leading-edge chips. This is why Micron is so confident in a significant revenue record for the next fiscal year. It is not normal for it to offer guidance that far out.

Data center architecture has stolen the show in the semiconductor space since the GenAI explosion commenced. Still, data centers will certainly not be the only use case going forward. Planned AI PCs will use 40% to 80% more DRAM than current models. For this reason, Micron expects AI PCs to support accelerating growth next year and feels poised to capture that demand. Smartphones are on track to grow in the low-to-mid single digit percentage range for the year.

This was not at all a bad quarter. Nvidia is the issue. When a company delivers such a historic rise in growth and margin profile due to GenAI, it leads many others to believe “who else can enjoy some of the fun?” Whether it’s AMD, Marvel, Qualcomm or Micron, the resulting financial impacts have simply been far more normal than for Nvidia. Earnings reactions are a byproduct of results and positioning vs. baked-in expectations. Nvidia led to those baked-in expectations becoming perhaps a tad unrealistic for other players in the space. Micron’s stock was on a tear, the multiple was well ahead of multi-year averages, outperformance for the quarter was modest and the guidance was in-line. If you were a long term believer heading into this report, nothing in these results should be overly alarming. If you’re a trader, the short-term weakness does make some sense. 

Amazon is building a low-cost marketplace to rival Chinese competitors such as Temu and Shein. This will be a subsection of its current marketplace and will target international consumers, while utilizing Chinese fulfillment capacity to meet demand. It will start onboarding merchants this summer. Like Temu and Shein, Amazon will tap into a tariff loophole that will allow it to sidestep this tax for any package under $800 (so all of them).

Next, Project Kuiper is nearing commercial viability. Under this program, Amazon will reportedly ship its first broadband satellites in the coming months for a Q4 launch. Finally, Amazon is reportedly building a ChatGPT competitor. This should complement its other GenAI applications such as its code writing products (Q and CodeWhisperer), its shopper companion (Rufus) and its planned GenAI Alexa subscription. When combining this batch of products with its powerful Bedrock foundational model, its work on training and inference chipsets and its large Anthropic investment, Amazon is certainly holding its own in the world of GenAI. I’m excited to see what kind of financial impact its GenAI apps will have on its current subscriptions and new offerings. The GenAI monetization wave will shift from hardware to software in the coming quarters and years. Amazon will be ready to benefit.

Amazon broke out to new highs this past week. Since I started the position 12.5 months ago, the stock has rallied by more than 70% and I wanted to update Max readers on my updated view of the risk/reward here. Simply put, I’m not at all interested in trimming my large position. Why? The company is still near 10 year lows for forward EV/EBIT at 33x. This is why tracking forward profit estimates is far more valuable than tracking share price. The stock went up. The multiple went down.

It’s also expected to compound EBIT at a 27% clip for the next three years, and a 1.2 EBIT growth multiple is far from unreasonable here.

But I don’t even think 1.2 is accurate. This company is the margin puppet master. It has built a world-leading revenue base over the last few decades, without much focus on profit. That focus shifted about a year ago, and we’ve seen explosive profit upside and revisions play out since then. While that has led to the fun stock run that we’ve seen, I still don’t think sell-side estimates have caught up to reality. I don’t think they’ve come close. The shifted focus leaves us with many, many margin accretion levers for Amazon to continue pulling.

Third party selling proliferation is continuing (which is margin accretive). Supply chain localization continues to cut price per package fulfillment, with more room to run. Its push to local fulfillment centers is still playing out. It continues to create more and more services out of its world-class supply chain to better utilize excess capacity and trim deadweight loss. Its flex driver program is giving it more labor hours on more favorable terms. Its thriving ads business is highly supportive of margins, as Amazon uses existing digital real estate to harvest more profit. Its nascent work on fulfillment center robotics is showing signs of bearing real fruit. Its Kuiper program and other new bets still have not begun to meaningfully monetize. Growth for its cloud computing and e-commerce businesses is bottoming to deliver more value from those fixed cost bases. The list goes on… and on… and on in terms of how many profit tailwinds this company is currently enjoying. 

Yes, CapEx will rise in 2025. But that’s fully known and fully reflected in estimates. What isn’t fully known or reflected is everything else we’ve just covered. It’s very hard to model sharp changes in operational philosophy and margin inflections. Analysts are usually a bit timid to stick their necks out when things are difficult to forecast. None of us want to look silly. As these tailwinds continue to play out, I see analysts continuing to become emboldened and continuing to raise estimates. Up & to the right.

Apple’s cross-app data sharing restrictions threw a large wrench in Meta’s business and all other social media players. It forced the company to embark on a painful multi-year investment cycle to address the signaling gap. And it pushed Meta to embrace the Quest hardware headset in its pursuit of controlling the next computing platform. Many think this move from Apple, which was brilliantly masked as a privacy ploy, was targeted at Meta specifically. I tend to agree. That’s why I was surprised to read about Apple and Meta AI exploring a partnership for Apple’s planned AI hardware. 

A few things here. First, talks are still preliminary and some are reporting that they’ve already fizzled out. Secondly, Apple has explicitly told us about its plans to work with many, many model providers. That’s what makes sense; that’s its plan. Regardless, I can’t help but find it a tad encouraging that these bellwethers are even willing to come to the table to discuss something like this. Large corporate enemies breed market inefficiency. Just get along.

Shopify added Target + as a new selling channel partner for its merchants. Now, Shopify merchants can seamlessly apply to post products right on the retailer’s online store. In an endless journey to help its merchants sell anywhere and everywhere from one single, cross-channel admin, this is yet another important step. Between Amazon, YouTube, JD.com etc. Shopify is truly living up to this merchant promise.

Twice a year, Shopify posts a review of its product introductions from the last several months. Consistent readers know that we update you on these launches in a much more real time manner. To avoid redundancy, I will briefly review and summarize the announcements from this round of Shopify Editions.

Progyny has no debt, is buying back shares and is investing heavily in organic growth. It has excess cash and a pristine balance sheet. That creates flexibility, which Progyny exercised this week. 

The company is purchasing Apryl in Germany to extend its fertility benefits program across the pond. Apryl’s product approach and structure closely mimic Progyny’s in the states. They aim to drive better outcomes through more custom treatment, superior education and direct integrations with carriers and employers. Progyny has already offered some basic educational services outside of North America, but this will mark its formal entrance into fertility treatment in Europe. Apryl actually operates across Europe with 3,000 clinics and 1,000 specialists and provides menopause service too, which Progyny is trying to expand into. It calls itself the “top fertility benefits provider in the UK and Europe.

“We are now able to work with global employers to provide family building benefits in over 100 countries, supporting patients in over 225 languages.”

Progyny CEO Pete Anevski

I love this decision. Progyny now has its foot in the door to many, many more fertility markets. And in Europe, Assisted Reproductive Treatment (ART) plans are structured in a way that allows 10% of live births to be via ART vs. just 2% in the USA. The path of resistance is easier outside of the USA, where Progyny has already delivered great success and a large market share lead. It’s worth noting that the smaller relative inefficiency means players like Progyny and Apryl can’t quite provide as much unique value as in the USA. Still, there’s plenty of value to add and plenty of incremental business to collect.

If I had to guess, Progyny probably just wanted the licensing and plan design knowledge from this company. I would expect it to emulate the treatment plan design that works so well in the states with Apryl’s footprint and to merge potential best practices to perhaps uplift design a tad further. It was getting a tad frustrating seeing Progyny’s cash pile continue to build with no plans on using the dry powder. This is the most ideal way I think they could have used these funds. Apryl raised $4 million in 2022, which likely means this was a very small purchase.

Meta’s Europe business and Soundcloud are customers of Apryl (Meta is Progyny’s customer in the USA).

Morgan Stanley channel checks point to more revenue growth slowing for Celsius in Q2. Analysts were already looking for Y/Y revenue growth to slow from Q1 to Q2, but 2025 revenue estimates did tick a bit lower this week.

UBS sees Disney meeting its path to profitability, sports ad trends staying strong, its parks business enjoying easier comps and box office success as reasons for optimism. It set a $130 price target this week. 

CrowdStrike added a batch of selling partners in Latin America to bolster its presence in that region.

Jefferies remains the biggest Lululemon bear on the street by far. It’s talking up the same channel checks and share losses that it cited last quarter, which didn’t lead to any earnings underperformance. They’ve hated this name for years. Disagreement makes markets.

Uber and Lyft settled with Massachusetts on wages and benefits to conclude multiple years of litigation. Drivers will earn $32.50/hour with some benefits and the companies will pay $175 million in fines. This was largely seen as a positive outcome for both companies in a “this could have been a lot worse” takeaway. Both were trying to avoid the full breadth of full-time employee benefits.