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Grimace

McDonald’s $5 meal deal is an admission of self-inflicted wounds

5/10/24 5:06PM

The golden arches of history are long, but they bend back towards offering Americans cheap food.

Shares of McDonald’s rose 2.6%, their best session since January 2023, after Bloomberg reported that the fast food chain plans to offer a $5 meal deal in the US. Shares of competitors in the quick service restaurant industry broadly fell in response.

This news comes on the heels of McDonald’s April 30 earnings call, where CEO Chris Kempczinski bemoaned the state of the consumer, saying “it is clear that broad-based consumer pressures persist around the world.”

“The macro headwinds have been more significant than I think we even anticipated coming into the year,” added CFO Ian Borden.

But most economic data we’ve received this year, particularly in the US, doesn’t suggest the consumer is in dire straits. And industry peers weren’t sounding as dour as McDonald’s during their earnings calls. So what’s the deal?

“McDonald’s raised prices significantly, and consumers are finding other places to spend,” writes Samuel Rines, macro strategist at WisdomTree, in a May 9 note.

This was at a rest stop, but these McDonald's prices are nuts right??? pic.twitter.com/0qq8Ima3ZA
— Sam Learner (@sam_learner) July 18, 2023

Chris Turner, CFO at Yum! Brands Inc, talked up same store sales growth at Taco Bell that was above the industry average in the first quarter of 2024, and flagged a pick-up in same store sales growth so far in the second quarter. Part of the success, in his eyes? The Cravings Value Menu introduced in January to better appeal to price-centric consumers.

“We think Taco Bell is incredibly well-positioned for what I would describe as a more normal consumer environment today,” he said. “Consumers care more about value in the US.”

Over at Domino’s, CFO Sandeep Reddy discussed the conscious decision to avoid pushing too many price increases through in 2023, and how this contributed to same store sales growth of 5.6% in the US during the first quarter.

A key focus was on “making sure customer value was maintained,” he said.

McDonald’s is trying to recapture and articulate its value niche (which may or may not be successful with customers and franchisees), while its competitors already have evidence that their tactics are working.

“Domino’s and Taco Bell talked about maintaining their value-oriented propositions,” added Rines. “Meanwhile, that is only now entering the formula for McDonald’s.”

Which raises the question… how did we get to a place where McDonald’s wasn’t offering a clear and obvious value proposition to their customers? Where competitors metaphorically ate McDonald’s lunch as consumers ate a cheaper option?

This may be a part of why those companies — particularly Domino’s — are handily outperforming McDonald’s in the stock market so far this year.

Luke Kawa1h

Arm Holdings surges after reporting a doubling of demand for its AI CPUs since late March

Arm Holdings is jumping in postmarket trading despite posting a relatively ho-hum set of fiscal Q4 2026 results and Q1 2027 guidance.

The reason: a deluge of demand for its data center CPUs, which were launched in late March.

“We now have more than $2 billion of customer demand across fiscal 2027 and fiscal 2028, more than double what we stated at launch,” according to the press release. “Soon the data center will be Arm’s largest business.”

The company says it already has 50% market share for CPU compute among top hyperscalers.

AMD’s results showed just how central CPUs are to the AI boom, and Arm’s comments are underlining that message in bold.

Matt Phillips1h

FanDuel parent Flutter rises after reporting better-than-expected Q1 sales and earnings

Flutter Entertainment rose in aftermarket trading Wednesday after reporting better-than-expected Q1 earnings and revenue. The rally recouped losses during regular trading hours that followed a CNBC report on the departure of Amy Howe, the CEO of Flutter’s FanDuel sports betting unit.

Flutter reported:

Q1 revenue of $4.30 billion vs. Wall Street expectations for $4.24 billion.
Adjusted earnings per share of $1.22 vs. the $1.09 forecast, per FactSet.
Adjusted EBITDA of $631 million vs. expectations for $610.9 million.
Full-year sales guidance of $18.31 billion at the midpoint vs. its previous estimate of $18.40 billion and analyst expectations for $18.35 billion.
Full-year adjusted EBITDA guidance of $2.865 billion vs. its previous midpoint estimate of $2.97 billion.

While FanDuel is the leader in the US online sports betting market, it’s considered something of a laggard in prediction markets, an area of fast growth for the industry, in part because it’s exposed to relatively lighter regulation.

(For instance, in most states, gaming commissions limit sports betting to those 21 and older, whereas sports-based events contracts typically have lower age restrictions, thus expanding their potential universe of customers.)

Flutter’s inability to come up with a prediction markets product that investors find convincing has contributed to its falling share price, which is down roughly 50% since the start of the year. Rival DraftKings is down a relatively better 30% over that period.

Paige Oamek2h

Axon beats Q1 revenue expectations, raises guidance

It might be a great time to be a surveillance company. Axon, a maker of police body cameras, Tasers, and AI intelligence tools, is ticking lower postmarket after the company reported revenue exceeding expectations in its Q1 earnings report and upbeat guidance for the year.

Here are the numbers:

Revenue of $807.3 million (compared to analyst estimates of $779.2 million).
Adjusted EBITDA of $202 million (estimate: $183.8 million).

For the full year, Axon boosted its target for revenue growth to a range of 30% to 32%, up from a quarter ago, when it forecast 27% to 30% growth.

Previously, the stock had been sliding despite increasing revenue. It was trading down more than 32% since the beginning of the year, suffering the same fate as many software-as-a-service stocks thanks to AI-related anxieties.

But for the year ahead, Axon says the company entered the year with “strong momentum, delivering record quarterly revenue,” marking its ninth consecutive quarter of more than 30% growth thanks to its suite of technologies, including artificial intelligence and counter-drone offensive products.

Axon told investors it’s targeting $6 billion in annual revenue by 2028, which would be more than double 2025’s results. The company plans to get there by growing globally (Axon says it’s currently “deployed” in 85 countries) and continuing to partner with federal agencies including the Department of Homeland Security, as well as reaching out to the business community.

The company also noted that the federal government’s Safer Skies Act, passed in December’s National Defense Authorization Act, earmarks $250 million in federal grants for local agencies to further “track and mitigate drone threats.” Again, more good news for Axon, which grew that segment of its business 300% year over year.

Luke Kawa2h

Beyond Meat Q2 sales guidance falls short of estimates

Beyond Meat is slipping in postmarket trading after releasing Q1 sales that managed to come in short of low expectations and a Q2 revenue guide below Wall Street’s consensus estimate.

For Q1, the faux meat seller reported:

Net revenues of $58.2 million (compared to estimates of $58.5 million and guidance for $57 million to $59 million).
Adjusted EBITDA of -$27.8 million (estimate: -$23.8 million).

For Q2, management anticipates sales of $60 million to $65 million, while analysts had penciled in $66.7 million.

Ahead of this earnings report, Beyond bulls were extremely happy that it was taking place as scheduled, touting this as a positive sign. The company had been releasing unscheduled preliminary results and often delaying the formal release of its quarterly report in recent months.

After releasing an underwhelming Q1 sales outlook in March, CEO Ethan Brown blamed the “surround sound of pseudoscientific jargon and positioning and promotion” in American society for the company’s operational struggles.

Back in Q4, a finfluencer who said they owned 4% of Beyond kicked off a wave of retail interest in the name. But when all was said and done, the refinancing efforts that combined with retail optimism to spur a parabolic move in the shares ultimately resulted in the elimination of about $800 million in debt, but also a 60% decline in its stock price.

Luke Kawa2h

AppLovin soars after Q1 results and Q2 guidance exceed estimates

AppLovin is soaring in postmarket trading after delivering better-than-expected Q1 results with a Q2 outlook to match.

For Q1, the ad tech company reported:

Revenue of $1.84 billion (compared to analyst estimates of $1.77 billion and guidance for $1.75 billion to $1.78 billion).
Adjusted EBITDA of $1.56 billion (estimate: $1.49 billion, guidance for $1.47 billion to $1.5 billion).

For Q2, management said to expect sales in a range of $1.92 billion to $1.95 billion (estimate: $1.89 billion) with adjusted EBITDA between $1.62 billion and $1.65 billion (estimate: $1.59 billion).

The rise of AI tools as a competitive threat has been overshadowed by AppLovin’s claims of being able to integrate the technology to the betterment of its business as well as the initial rollout of its self-service ad portal in Q4.

As a software company, it faces the existential AI overhang that is common to the space; as an ad tech company, it’s been plagued by fears of Meta taking market share on iOS.

AppLovin is well off its year-to-date lows, but was still down about 30% in 2026 heading into earnings.