In our view, this continues to be the case as it can better navigate tariffs/macro due to the nature of its marketplace, and be more price competitive. But Wayfair is also seeing structural improvements like more adoption (and new channels) for Castlegate, stronger growth in its higher- market brands and B2B, and physical retail.
While the housing market has not been supportive, better trends, lower rates, and a refresh cycle can all support too. The one area we are concerned on is pull-forward dynamics we may not be seeing and if macro deteriorates.
Penske Automotive (PAG.N) - Rebound, Repurchase, Relief, Reopened
Dealer stocks have sold off in each of the last five earnings seasons by an average of 5%, only to rebound 11% in the two weeks following. Between July 14th (LAD pre-announced 2Q earnings) and July 29th (PAG’s release), PAG stock traded down 8%, and we believe it is positioned for post-earnings rebound. We are putting PAG on a 30-day catalyst watch, reflecting our view that the typical earnings season sell-off has created an opportunity.
Fundamentally, we increase our 2025 and 2026 estimates coming off the release, we increase our price target to $200 from $195, and PAG is a winner from the Big Beautiful Bill as well as the prospect for lower interest rates. In addition, progress on the trade front has reopened the flow of prospective M&A, and a rate cut in September would be positive for the auto sector.
Lithia Motors, Inc. (LAD.N) - Opening 30-day Positive Catalyst Watch
Dealer stocks have sold off in each of the last five earnings seasons by an average of 5%, only to rebound 11% in the two weeks following. LAD’s stock is down 19% since the company pre-released 2Q earnings on July 14th. In our view, the decline is an overreaction. We are putting LAD on a 30-day Catalyst Watch reflecting our view that the typical earnings season sell-off has created an opportunity.
In our view, there were three positive read-throughs for LAD in 2Q: variable gross improved versus the three preceding periods, SG&A costs were down YOY and sequentially, despite expansion in UK, and Driveway Finance reported income of $20 million and is on track to contribute $80 million this year. In the near term, the trade agreements seem to be lifting the lid on potential M&A and a September cut in interest rates is positive for the total auto sector.
Abbott Laboratories (ABT.N) - HSKT Call Series: A Constant Drumbeat of Milestones
We hosted our Head, Shoulders, Knees & Toes (HSKT) conference call series with Lisa Earnhardt, EVP of Medical Devices at Abbott. She views this as a “transformational time” in MedTech, with robust procedure volumes being driven by consistent innovation, with Abbott an important participant. While most investor attention has focused on its electrophysiology (EP) and Diabetes franchises, we discussed several new and upcoming products across many areas of the portfolio, including Structural Heart, Cardiac Rhythm Management (CRM), and Neuromodulation.
The company continues to focus on innovation, with artificial intelligence “ever present”, with internal and external investments focused on high growth end markets. Overall, while much has been accomplished already, there is much to look forward to, with a “constant drumbeat of milestones” innovating products covering the range from sick care to health care, that should help sustain momentum in its MedTech franchise. We reiterate our Buy on ABT.
US Natural Resources & ClimateTech - The Great Energy Expansion Over Aug. 12-14th, we will host Citi’s 2025 Natural Resources Conference in Las Vegas, featuring over 100 companies from across the value chain. The primary mega-theme in the market, the growth of AI, faces a key constraint—power. How this mega-trend is shaping strategies across Utilities, Renewables/Nuclear, Gas Pipelines and Gas Producers will be distilled at the conference. Multiple additional themes—including key regulatory changes, the trend in upstream capital efficiency and the next round of industry consolidation—will likely to common topics of discussion.
Metal Matters - Upgrading gold to $3,500/oz near term, new all-time highs now expected with $3,300-3,600/oz range over next 3 months After two-years of being bullish gold up to almost $3,500/oz (intraday) in April, we have for the past three months ‘range traded’ gold and toggled our near-term price forecast between $3,150/oz and $3,500/oz, which has worked out well (please see Figure 1).
In this note we upgrading our 0-3 month gold price forecast to $3,500/oz (from $3,300/oz), and we raise our expected range for gold to $3,300- 3,600/oz over the next 3 months (from $3,100-$3,500/oz), as the near-term US cyclical growth and inflation outlook has worsened of late (higher tariffs than we expected are likely to result in higher US inflation, the US labor market continues to weaken, and Fed/data independence concerns have risen, with dollar bearishness our FX team’s base case as a result).
