The Call @ Hedgeye | Thursday, September 21, 2023 [REPLAY]

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TICKERS DISCUSSED LONGS: DRI, GO, LW, CELH, MNST, MGM, FL, RH, PINS SHORTS: LOVE, WSM, RDNT, TXG, IRM

Broadcast Summary

Restaurants: Howard Penney - 00:00:59

• Long Bench – Darden Restaurants, Inc. (DRI): Reported $1.78 and beat by 4 cents; revenue beat by $20 million; looks like a high-quality quarter despite slowing trends in the industry; company has a conference call at 8:30am; DRI remains on the long bench  

Consumer Staples: Daniel Biolsi - 00:04:28

• Grocery Traffic: Traffic in the grocery industry has slowed; Grocery Outlet Holding Corp. (GO) continues to be a notable outlier with the only traffic gains YoY; we raised higher GO higher on our active long list; we also moved Lamb Weston Holdings, Inc. (LW) & Celsius Holdings, Inc. (CELH) higher on the long list; Monster Beverage Corporation (MNST) moved down a bit

Gaming, Lodging & Leisure: Todd Jordan - 00:09:24

• Long – MGM Resorts International (MGM): Finally resolved issues around the cyber-attack; hotel reservation system is back online; MGM remains a long

Retail: Brian McGough - 00:10:30

• Long – Foot Locker, Inc. (FL): JD Sports is the company that bought the Finish Line; they put out numbers this morning; numbers looked good, and they reiterated guidance; Nike is giving them more product which is in line with why we think FL’s numbers are also going to go up; FL remains a long
• Home Furnishing: Traffic and visits just don’t look good; Williams-Sonoma, Inc. (WSM) traffic trending down; Pottery Barn looks really bad; this is 50% of the company; The Lovesac Company (LOVE) numbers are trending down; people are not buying this mid-priced furniture; RH is more insulated here; FL & RH (RH) remain longs and LOVE & WSM remain shorts

Healthcare: Tom Tobin - 00:19:35

• Short – RadNet, Inc. (RDNT): We brought the trackers presented in our black book up to date including the cellphone data from Placer.ai; the anecdote (“volume started slowing in July”) lines up really well with the foot traffic into the sample of RDNT facilities we see with the data; RDNT remains a short
• Short – 10x Genomics, Inc. (TXG): News around funding and lab space becoming more available; this relates marginally to TXG, we have been updating the NIH grant series; have to really stretch to get to the consensus Q3 number; we think numbers will slow in the back half of next year for TXG which remains a short

Healthcare Policy: Emily Evans - 00:23:43

• COVID: White House announced they will make more free COVID tests available to Americans as they did in 2021; there are stockpiles of Paxlovid that need to be cleared

REITs: Rob Simone - 00:29:02

• New Short – Iron Mountain Incorporated (IRM): We’ve had IRM on the long side before; this company has several issues; it is a melting ice cube document storage business that doesn’t grow volume anymore; 90% of their business that is documents storage is 100% driven by pricing; had started to pass through price increases with some of their contracts but leverage is high, and they are using their documents storage business as a cash cow ATM to fund a data center buildout; IRM is now a best idea short

Technology: Ami Joseph - 00:38:25

• Tech IPOs: The IPO market has had 3 tech IPOs in the last few weeks; none of these stock prices are doing that well; banks are all trying to support these stocks; don’t trade very much in the first week or two
• Strategic M&A: Giant M&A deal this morning; Cisco buying Splunk for $28 billion; this deal has been rumored to happen for like 9 years; we don’t think this is going to help Cisco become a growth company; don’t think this is a great deal and not a bullish sign for the industry

Communications: Billy Zegras - 00:49:26

• Long – Pinterest, Inc. (PINS): Up 3% yesterday after a strong investor day; we came away from investor day more confident in our long thesis; improvement to the guidance; plans to roll out a full suite of advertising tools; we think long-term goals for revenue growth are attainable; PINS remains a long

China: Felix Wang - 00:51:40

• Consumer Confidence: According to a 3rd party survey, Chinese sentiment improved month-over-month in September; China's express delivery business volumes grew 18% YoY in August - an acceleration from July's 12% growth; September's comp is slightly easier; on a quarterly basis, express volume growth in Q3-to-date (15%) is slower than Q2's (21%); this could have some implication on PDD given its tight relationship with China Post

Telecom-Media Policy: Paul Glenchur - 00:57:11

• Amazon.com: FTC bringing a case against Amazon; claim that Amazon tricks people into signing up for Amazon Prime and make it difficult for people to cancel
• Budget: Progress being made on moving the Defense Appropriations Bill; still trying to get the CR done; running out of time; could see increased pressure from the Senate side

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