Group 1 - The bank anticipates a slowdown in revenue growth in 2026 [1]

Core Insights - e.l.f. Beauty's shares dropped 39.4% in 2025, reflecting slowing growth and high earnings multiples, leading to poor stock performance [1] - The stock is down 60% from its all-time highs, indicating significant market challenges [1] Revenue Growth - e.l.f. Beauty has historically gained market share in beauty categories, but revenue growth began to stagnate in 2025 [2] - The company expects to generate $200 million in revenue from its acquisition of Rhode in the 2026 fiscal year, projecting overall growth of 18%-20%. However, organic revenue growth is anticipated to be only 3%-4% this fiscal year, a notable slowdown [3] Profitability and Margins - The gross margin for e.l.f. Beauty has decreased from 68% to 66%, suggesting the need for inventory discounts to stimulate sales, which is a negative indicator for the business [4] - Despite a 14% revenue growth last quarter, operating income fell to $7.7 million due to increased marketing expenses, highlighting declining earnings amid slowing revenue growth [6] Valuation and Debt - e.l.f. Beauty's price-to-earnings (P/E) ratio remains high at 62, even after a significant stock price drop, raising concerns about its valuation given the slowing organic revenue growth [6] - The company has incurred $600 million in debt to finance the $1 billion acquisition of Rhode, with only $100 million in free cash flow, indicating a long repayment timeline [7]

Core Viewpoint - PDD Holdings experienced a significant decline in share price due to disappointing earnings, with revenue growth slowing and increasing cost pressures from competition [1][4][5]. Group 1: Company Performance - PDD Holdings has generated nearly $60 billion in revenue over the past twelve months, marking substantial growth since its inception 10 years ago [3]. - In the most recent quarter, revenue increased by 9% year-over-year to $15.2 billion, a notable slowdown compared to a 44% year-over-year growth in the same quarter the previous year [4]. - Operating profit grew only 3% year-over-year, with the operating margin decreasing from 28% at the beginning of the year to 22% over the past twelve months [5]. Group 2: Competitive Landscape - The company faces rising competition, particularly in the U.S. market where its Temu platform competes with Amazon, which is enhancing its product offerings and delivery speeds [5]. - Increased spending on marketing and merchant benefits due to competitive pressures is impacting profit margins [5]. Group 3: Investment Considerations - Following the recent stock drop, PDD Holdings' price-to-earnings ratio has fallen below 12, making it appear cheap compared to the S&P 500 Index average of around 30 [9]. - Despite the attractive valuation, the company operates in a highly competitive and complex Chinese retail market, which poses risks for investors [10].

Core Viewpoint - Lululemon is experiencing a slowdown in annual revenue growth, leading to stock volatility and a year-to-date decline of 48% [2] Financial Performance - Net income for the first six months of fiscal 2025 decreased by 4% year over year to $685.47 million, with diluted earnings per share remaining flat and declining by 1.5% to $3.10 in the second quarter [3] - Full-year earnings per diluted share are projected to be between $12.77 and $12.97, representing an 11.4% decline from fiscal 2024's earnings of $14.64 per diluted share [6] Sales Performance - Comparable sales increased by only 1% in the fiscal second quarter, with a significant decline of 4% in the Americas, which is the primary revenue source for the company [4][5] - International sales, however, rose by 15%, contributing to the overall 1% gain in total comparable sales [5] Market Position and Competition - Lululemon faces intense competition from brands like Nike, Adidas, and Athleta, which may offer better pricing, making it challenging for Lululemon to maintain its market position [7] - The current economic environment, characterized by higher consumer prices due to inflation and tariffs, poses additional challenges for Lululemon's premium pricing strategy [8] Valuation - Lululemon's shares are trading at a forward P/E ratio of 13.18, significantly lower than the average P/E ratio of 42.31 over the past decade, indicating a substantial discount relative to historical valuations [6][7]