i2c - The Credit Economy June 2023

Porch Rally Leads CE 100 Index Higher Again as Q3 Earnings Season Winds Down

Headed into a holiday-shortened trading week, the CE 100 Index was 4.3% higher as investors snapped up shares and earnings season drew near its close to cap the look back at the September quarter.

All pillars surged for the week, led by the 6.7% rally in the Live segment, followed by Pay and be Paid Name, which gained 6.3%, and then by the Banking group, which gathered 5.7%.

Porch Group Leads Again 

Porch Group’s 35.6% jump through the week was among the most notable standouts in the crowded field of gainers. The company continues to ride a wave of positive sentiment in the wake of earnings reported earlier in the month.

As reported here, Porch’s $129.6 million represents a 67% increase compared to the same period last year. CEO Matt Ehrlichman said that “we continue to focus on ongoing profitability, with underwriting actions including premium per policy increases, non-renewing policies where our data suggests they are higher risk and deductible increases in our insurance business,” and where revenue gains were driven by the insurance segment, which saw a 195% year-over-year growth.

Peloton followed Porch with a 21.9% rally, reversing some of the volatility that had been seen after earnings.

Tencent was at the forefront of the Pay and Be Paid segment, having tacked on 13.8%. Third-quarter revenues were up 10% and stood at 154.6 billion yuan ($21.4 billion). The company said that video subscriptions declined 3% year-on-year but grew 1% quarter-on-quarter to 117 million, the company said. The release also noted that music subscriptions rose 21% year-on-year to 103 million, while ARPU increased 17% year-on-year, per company materials.

Block shares were 13% higher. We reported here in the wake of earnings in early November that Square for Restaurants and Square for Retail were up 29% year over year, per the company’s results. Gross profit from banking products, which include Square Loans, Instant Transfer and Square Debit Card, was up 20% year over year. The company’s buy now, pay later (BNPL) platform contributed $129 million in revenue and $94 million in gross profit to Square in the quarter.

BNPL Boosts Affirm 

BNPL also helped underpin the outlook and the stock price of Affirm, which helped to boost the Pay and Be Paid segment. Affirm shares were up 10.5%. The company said this past week that, as CFO Michael Linford told The Wall Street Journal, there is an increase in demand for its short-term consumer loans if interest rates remain high for an extended period. He said that consumers focus more on the monthly payment amount than the interest rates.

As Linford noted, Affirm’s nonrevolving accounts simplify the decision-making process for consumers, as they only need to consider the cost of the item and the associated interest. During the most recent earnings report, the company reported a 28% increase in gross merchandise volume, reaching $5.6 billion compared to the previous year. Revenue also increased by 37% to $496.5 million.

Elsewhere, Walmart gave up 6.5%, as management struck a cautious tone on consumers’ willingness to open their wallets into the holiday shopping season.

Chief Financial Officer John D. Rainey noted during a conference call with analysts that “recently, we’ve experienced a higher degree of variability in weekly performance in between holiday events in the U.S., including seeing a softening in the back half of October. It was off trend to the rest of the quarter.”

And, he added, “sales have been somewhat uneven, and this gives us reason to think slightly more cautiously about the consumer versus 90 days ago.”

Sales growth will moderate into the fourth quarter, per company forecasts. During the September quarter, comp sales grew by 4.9%, with strength in grocery and health and wellness categories. That strength, Walmart revealed, was partially offset by softness in general merchandise. eCommerce sales surged by 24%.