Shares of Costco have been consolidating following its most recent earnings report. The big-box retailer reported 6% revenue growth and continued its trend of a 2.9% profit margin. At last close of 950.95, shares traded around 326 times their profit margin of 2.9%. The trailing 3-year average price-to-profit margin for COST was around ~249x (plus or minus 58). An actionable bottom for Costco Wholesale (COST) appears to be around 850 to 900.
Netflix reported results for the month ending June 2025. TTM revenues of 41.6B were 15% higher than a year ago. UCAN and EMEA region revenues increased by 14% and 17%, respectively, compared to 23% in the APAC region. The streaming firm reported a 25% profit margin, 7% and 8% better than the trailing 3Y and 5Y averages of 18% and 17%, respectively. Profit Margin of 25% was two standard deviations better than the trailing 3-year average of 18% (plus or minus 4%). What grabbed my attention from the company’s commentary on its results was the emphasis placed on international, i.e, non-English content. The company noted that its “local for local” strategy of “developing shows and films that deeply connect with audiences in their home countries” has translated to non-English language series and films representing “more than one-third of all Netflix viewing in the first half of the year.” At the last close of 1209.24, shares traded ~49 times the price-to-profit margin, two standard deviations away from the trailing 3-year average of ~30 times (plus or minus 9). An actionable bottom for Netflix (NFLX) appears to be 1000.
Headline YoY CPI for June 2025 was 2.7% compared to 2.9%, 0.7% and 0.2%, a year, five, and ten years ago, respectively. Taking a different perspective, the Median CPI and Sticky CPI measures provided by the Federal Reserve of Cleveland and Atlanta, respectively, suggest YoY readings of 3.6% and 3.3%. The Median CPI published by the Cleveland Fed excludes “all price changes except for the one in the center of the distribution of price changes, where the price changes are ranked from lowest to highest.” The Sticky CPI from the Atlanta Fed breaks down the various components of the Consumer Price Index into sticky and flexible categories, whereby the Sticky CPI index only includes “price changes for a particular CPI component occur less often, on average, than every 4.3 months.” By comparing the larger dataset against a refined one, it allows for the removal of noisy data points. In general, the Median and Sticky CPI suggest a certain inelasticity in prices.
The Vix so far has been relatively sanguine after a brief jolt from intense tarrif newsflow. At ~16, the VIX is below is 52 week average of ~19 suggesting that there is relatively less fear amongst market participants. 3 years ago, the VIX trended in the 25-30 range.
Santa Clara neighbors Palo Alto(PANW) and ServiceNow(NOW) currently trade near their long term averages. Compared to the SP500, these California-based tech firms have gained ~60%. Considering the AI trend is repeated and reinforced in the market narrative, PANW and NOW do stand a chance to pick up their momentum one more time. ServiceNow(NOW) closed at 961.78, whereas Palo Alto(PANW) closed at 190.72 on 7/14/25.
Scottsdale, Arizona-based Construction Materials and Weatherproofing Technologies firm Carlisle Companies Inc(CSL) is down 4% on a 52-week basis, closing at 412.69. Not that long ago, the stock traded below its 100D and 200D moving averages. So far in 2025, the company completed the purchase of Bonded Logic and ThermaFoam, made new appointments to its Board of Directors, and restructured its leadership team. The stock appears to be on the move, and I find it interesting because it plays into the narrative that the “imminent” Fed rate cuts can “positively affect the construction industry,” as “lower borrowing costs make it cheaper for developers to finance new projects.” A company like Carlisle(CSL) can benefit from this conceivable trend.
Considering the company maintains a profit margin of 20-25% and the market rewards the stock with a 17-24x multiple, the stock can trade between 350 and 580.
As paraphrased by my favorite financial presenter, Tom Keene of Bloomberg Radio, it’s not the prices of assets that spook investors, but rather the rate of change.
Every day during the trading week, Mr. Keene’s “good morning, good morning, good morning” at 7:00 a.m. serves as a personal point of focus. It offers an opportunity to listen to a well-respected market observer and commentator who is hyperattentive towards the pedigree of the market participants in discussion and focuses on the whispers rather than the noise of the crowd. By blending economics, investment, finance, and most importantly, international relations, Mr. Keene’s observations of the market are pretty insightful and informative. What started as an opportunity to learn the English language evolved into a habit, as behind the curtain of market analysis and news, was a well-informed market education.