Weekend Update #217
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The S&P 500 ended the week just a hair below the January 23rd all-time high as investors digest earnings and take advantage of momentum in the underlying economy. The market gains come even as President Trump signed an order on reciprocal tariffs this week. Although the U.S. is moving forward with broad tariffs on U.S. trade partners, the market took a positive view on President Trump directing the Commerce Department to analyze optimal levels on a country-by-country basis by April 1st. This sets up implementation of those tariffs shortly after, but it gives time for thoughtful analysis and for discussions between the U.S. and those partners to take place. Rising egg prices took up much of the media narrative this week, soaring 10% this week to $7.34, near an all-time high.
In economic data for the week, January’s CPI report surpassed estimates across all key categories, rising 0.5% month-over-month and 3.0% year-over-year compared to the 0.3% and 2.9% estimates. PPI followed similar trends with an upside surprise, rising 0.4% month-over-month and 3.5% year-over-year compared to 0.3% and 3.3% estimates. For further analysis on January’s CPI and PPI reports, see the Blue Room team’s analysis in the Weekend Update. The NFIB’s small business optimism Index showed sentiment falling in January as uncertainty around tariffs was cited as a key business overhang. Initial jobless claims for the week ended February 8th stepped down slightly to 213,000 compared to the 216,000 estimate, while continuing claims also showed a downside surprise at 1.850 million vs. the 1.882 million estimate. Friday’s retail sales report for January showed spending falling the most since February 2023, down 0.9% month-over-month. This reading was impacted by both wildfires in Los Angeles as well as winter weather, so the underlying trend may not be as negative.
Earlier this week, Fed Chair Jerome Powell maintained that the FOMC is in no rush to cut rates and that rate decisions will be driven by incoming data. With the lack of progress seen in inflation data, a slightly more hawkish FOMC, and uncertainty around inflationary impacts of tariffs, the market is now contemplating the outlook if interest rates are on an extended pause or even have to revert to a hike later this year. The probability of a rate hike this year is only around 15%, so market participants will look to incoming data to determine the risks of this.
Key earnings this week included VRTX, SHOP, DE, COIN, and ROKU. In other company-specific news, Meta announced plans to develop humanoid robots to accomplish household tasks, seeking to rival Tesla’s Optimus bot. Apple also reached an agreement to utilize Alibaba’s AI technology in iPhones in China, as the company hopes to strengthen its local ties during a more volatile geopolitical period.
Friday’s Close (Weekly Performance)
S&P 500 6,114.63 (+1.47%)
Nasdaq 20,026.77 (+2.58%)
Dow Jones 44,546.08 (+0.55%)
Thank you Blue Room Senior Analyst JARED FENLEY
CPI in January 2025 posted the highest monthly pace of inflation since August 2023.
This included impacts from egg prices up 15% from December and up 53% from January 2025 — the highest increase seen in 10 years.
In addition to a hot MoM headline CPI, core CPI MoM at 0.4% rose at its hottest monthly pace since April 2023.
This marks the 4th consecutive month that headline CPI has risen on an annual basis. The 3.0% YoY figure compares to the most recent low of 2.4% YoY in September 2024.
Out of each key indicator, core CPI YoY has been the most stable reading, remaining within a narrow range since June 2024. Core CPI is generally viewed by economists as a better indicator of underlying inflation as it strips out the more volatile food and energy components.
Accounting for seasonal adjustment factors could also be causing a particularly hot reading as companies use January to reset pricing in the new year, so some of the monthly data was cited by economists as not being as worrying going forward.
For example, the January 2024 CPI report posted hot readings across headline, core, and supercore CPI but that pressure did not continue to accelerate beyond January.
Certain supply side shocks, such as the price of eggs, also could have contributed to a particularly hot pace of inflation readings this month.
The latest Producer Price Index (PPI) report reveals that inflationary pressures remain persistent, with the year-over-year increase reaching its highest level since March 2024 and complicating the Federal Reserve’s path forward on interest rates. This follows an unexpectedly strong Consumer Price Index (CPI) report released Wednesday. The data suggests that inflation progress has stalled—or may even be reversing. Combined with a solid labor market, these figures have significantly reduced the odds of multiple Fed rate cuts in 2025. Some economists now expect no rate cuts at all, particularly given the inflationary impact of higher import duties. However, several components of inflation that feed into the Fed’s preferred measure—the Personal Consumption Expenditures (PCE) price index—were more favorable last month, as healthcare prices and airfare declined.
In January, headline PPI rose 0.4% month-over-month, slightly above the 0.3% expected by economists, following a 0.5% increase in December and a 0.2% gain in November. On an annual basis, PPI climbed to 3.5%, up from 3.3% in December. The increase was largely driven by services inflation, with final demand services rising 0.3%. Traveler accommodation services surged 5.7%, while fuel and lubricant retailing margins fell 9.8%. Final demand goods rose 0.6%, with energy prices acting as a primary driver. Diesel fuel prices jumped 10.4%, while chicken eggs soared 44.0% and beef/veal rose 6.0%. Meanwhile, fresh and dry vegetables saw a sharp 22.3% decline, illustrating continued volatility in food prices.
EXECUTIVE SUMMARY
Roku delivered strong Q4 2024 results, with revenue increasing 22% Y/Y to $1.2 billion, surpassing the consensus estimate of $1.15 billion by 4.6%. Platform revenue grew 24.9% Y/Y to $1.04 billion, exceeding the $953 million consensus estimate by 8.7%, while player revenue rose 6.5% Y/Y to $166 million, missing the $196 million consensus estimate by 15.4% due to a weaker-than-expected holiday season. Adjusted EBITDA surged 62.3% Y/Y to $77.5 million, more than doubling the consensus estimate of $34.9 million (+121.9%). Net loss improved to ($35.5) million from ($78.3) million a year ago, coming in better than the consensus estimate of ($60.1) million by 40.8%. Diluted EPS of ($0.24) also beat the consensus estimate of ($0.40) by 39.8%. As the company looks to ramp up new advertising products and monetize international regions, ROKU shares are poised to appreciate on accelerating platform growth and margin expansion.
CORPORATE PROFILE
Roku, Inc. designs and manufactures consumer electronics products. The Company offers wireless enabled devices that stream audio and video content from the internet to home entertainment systems. Roku serves customers globally. The company makes TV streaming affordable by offering a lineup of stand-alone streaming players that connect to a user’s TV. In addition, the company also licenses the Roku OS and its streaming player designs, as well as provides ongoing technology and support services, to certain international pay TV and telco service operators that distribute co-branded players to their subscribers in their markets.
Executive Summary
Coinbase delivered a strong Q4 2024, with revenue surging 138% Y/Y to $2.27B, significantly surpassing consensus estimates of $1.87B. Transaction revenue grew 194% Y/Y to $1.56B, exceeding forecasts by 25.5%, while services revenue increased 71% Y/Y to $641M, slightly above expectations,as the firm reached an all-time high for both US spot and global derivatives market-share in Q4. Profitability saw substantial improvement, with operating income reaching $1.03B (+794% Y/Y) and adjusted EBITDA at $1.18B (+298% Y/Y), both well ahead of consensus projections. Diluted EPS more than quadrupled to $4.68, beating estimates by 106%. Spot trading volume jumped 185% Y/Y to $439B, modestly exceeding consensus forecasts, while assets on platform stood at $404B, 5% above expectations. As an industry leader, COIN shares are well-positioned to rise in 2025 as the company expands its platform and presence amid improving crypto regulations and accelerating global adoption.
Corporate Profile
Coinbase, Inc. was founded in 2012. The Company operates globally and is a leading provider of end-to-end financial infrastructure and technology for the cryptoeconomy. The Company offers retail users the primary financial account for the cryptoeconomy, institutions a state of the art marketplace with a deep pool of liquidity for transacting in crypto assets, and ecosystem partners technology and services that enable them to build crypto-based applications and securely accept crypto assets as payment. In May 2021, the Company became a remote-first company. Accordingly, the Company does not maintain a headquarters.
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