Yeti raises outlook, Wayfair retains pandemic sales growth, Fastly outage hurts Q2 earnings

Myles Udland and Brian Sozzi break down more earnings, including Wayfair maintaining the sales growth it gained during the pandemic to top earnings estimates, Yeti beating on Q2 as summer continues to drive purchases, Fastly’s stock tanking after the company’s platform outage hurts its quarterly earnings.

Video transcript

MYLES UDLAND: Made a half hour into today's program, haven't yet mentioned the latest data we got initial jobless claims. This coming, of course, ahead of tomorrow's non-farm payroll report. And we see that claims-- continuing claims here coming in at around 2.93 million, obviously still elevated relative to where we were before the pandemic. But still seeing a slight decline in claims here, coming in a little bit ahead of where the Street had been expecting. We see 385,000 on the weekly initial jobless claims. All right, let's say on the earnings here, Brian Sozzi.

BRIAN SOZZI: Sure.

MYLES UDLAND: You want to do Yeti?

BRIAN SOZZI: Let's do Yeti.

MYLES UDLAND: Your friends over at Yeti?

BRIAN SOZZI: Yeah. Let's pull up the Yeti chart. Yeti-- this is a name that you and I have talked a lot about through the years. I remember when they went public and you come over, you're like, Yeti, Yeti, Yeti.

MYLES UDLAND: Yeti's big.

BRIAN SOZZI: I'm like, I don't get it. The has is gone up straight and to the right--

MYLES UDLAND: Straight line.

BRIAN SOZZI: --since then, Myles, I'm just saying.

MYLES UDLAND: That's right, should of bought it.

BRIAN SOZZI: We're seeing it down in the premarket a little bit, despite a very strong quarter again from this company. Drinkware sales, that is basically cups are up 69%--

MYLES UDLAND: A very nice quarter.

BRIAN SOZZI: --in the most recent quarter.

MYLES UDLAND: Yeah.

BRIAN SOZZI: Coolers up 23%. Again, that is another nice quarter. Gross profit margins up 280 basis points and that is really, really good when you're seeing significant inflation out of everything that is used to make their cups and their coolers. If there's any slight disappointment in this quarter, it is maybe cooler sales, but all in all, this was a good quarter, they raised their outlook. This is a stock that I would be surprised that will get defended by the Street over the next day or two.

MYLES UDLAND: Yeah, I mean, the company comes out, raises its top line guidance, so looking for sales to increase 26% to 28%, had been looking for a 20% to 22% increase for its fiscal 2020, but its operating income-- or, yeah, its operating income as a percent of those net sales, so margins basically, it's holding steady, even with that sales increase. So maybe there's the lack of enthusiasm from the Street today. You know, I look at a company, like a Yeti, and I know where my mind goes. I feel like you're thinking the same thing, company just came public, similar model, similar idea.

BRIAN SOZZI: I said it at the time and I'll say it again, they are the Apple of outdoor gear.

MYLES UDLAND: No, I'm thinking Traeger.

BRIAN SOZZI: Oh, Traeger.

MYLES UDLAND: I'm thinking in terms of a company's journey that you as a management team look at and say, I'd like to be like them. I think Traeger should look at Yeti and say, you know, synergies here.

BRIAN SOZZI: Well, Traeger just needs some hipster apparel. I mean to fill out that whole look, that whole Traeger hood life.

MYLES UDLAND: Yeah, well, it's-- you know, so it's been a very busy week for the private equity firms. They've all come out with their results. "Wall Street Journal," the big story this morning about how good times are for shareholders', equity shareholders in these companies obviously, limited partners have done very well for a long time. Maybe you take some of that dry powder, go out, put them together. Mash them together.

BRIAN SOZZI: Speaking of dry charcoal, there's Weber right there.

MYLES UDLAND: Weber. We're going to talk to the CEO coming up in the 10:00 hour, I believe, right around 10:100 or so. Weber ringing the opening bell here on this Thursday morning. Company--

BRIAN SOZZI: Connected grill maker. Connected grillmaker.

MYLES UDLAND: Connected grillmaker. I have an unconnected Weber, it's great. Love it. Love everything about it. And I especially love that I don't use the app. So this really rounds out. So it's only August-- what, it's August the 5? So we still have a couple of weeks of summer here in the Northeast, about a month before school starts. But I feel like the Weber IPO brings to an end the summer of grills for investors.

BRIAN SOZZI: Well, August 5.

MYLES UDLAND: With BBQGuys, with Traeger, now with Weber come coming to the podium.

BRIAN SOZZI: Well, this is, I guess, a nice opportunity to wish my dad a happy birthday. I just realized--

MYLES UDLAND: Oh.

BRIAN SOZZI: --today was August 5. Big grill guy, got me involved in grilling, so happy--

MYLES UDLAND: Look at that.

BRIAN SOZZI: Happy birthday to Andrew down in Florida, doing his thing.

MYLES UDLAND: Happy birthday.

BRIAN SOZZI: And maybe he's grilling right now, maybe he's on a golf course. I have absolutely no clue. I haven't talked to him in a while. Anyway, so you have Yeti and you also have Wayfair. You looking at Wayfair results too. And I'm surprised to see the market reaction here to Wayfair. It's one of those loans stay at home type trades that is getting embraced for its quarter here and I can understand why.

The number of active customers for Wayfair reached 31.1 million in the most recent quarter. That was up 19.6% year-over-year. I suspect that is the number the Street is trading off here, especially stacked up against the likes of an Etsy or Roku, which are coming out over this morning really with not a good quarter, and not good earnings calls.

MYLES UDLAND: Yeah, Wayfair coming out and talking about their run rate lapping the height of the pandemic, saying that the macro environment still doesn't give them a whole lot of certainty. But I think maybe the read through here on the Street-- and you look at the stock price over the last year and there's obviously been a lot of growth baked into it-- but maybe this is one of the more definitive, OK, they did get set on a new trajectory and longer term now, the opportunity for a Wayfair to gain share in the home furnishings market, in a now growing market or a faster growing market, you know, it looks better today than it did maybe let's call it 10 quarters ago.

BRIAN SOZZI: I always find this metric when they put it out there, orders per customer 1.96 compared to 1.89 last year. How do you order 1.89 of anything? It's either two or one. And I always laugh.

MYLES UDLAND: It's always nice when companies divide a metric by something that obviously has to be a full number.

BRIAN SOZZI: Yeah. [LAUGHS]

MYLES UDLAND: Take streaming hours for example. Streaming hours can obviously be any fraction of the hour, because anyone can always come and go for streaming. But like, for riders, it couldn't be like, oh, someone took 2.6 rides per Uber, which I know is a number that's in there that you could obviously do the division on.

BRIAN SOZZI: I hopped out of the car mid-ride.

MYLES UDLAND: [LAUGHS] Exactly.

BRIAN SOZZI: They just cut my ride short.

MYLES UDLAND: So it's funny to think about that. And it's funny to think about a 0.07-- so let's see, a 0.07 increase in the number of purchases from the user. But obviously, the user can only make one or two, so there you go.

BRIAN SOZZI: Average order value for Wayfair, $278, that's a big purchase. It's a big purchase.

MYLES UDLAND: Have I ever spent more than 278 on Wayfair? I feel like that's the right number.

BRIAN SOZZI: That's the right number.

MYLES UDLAND: Maybe if anything, a little bit less than that. If anything, a little bit less than that. All right. Let's keep going through some earnings here, because last night-- as we mentioned earlier on in the program, after the bell yesterday it was an ugly scene for a number of companies. We've already talked about the sell off that we saw in Uber. We saw a sell off in Roku. We saw a sell off in Etsy. And we also saw a decline in Fastly, which is a company no one really thinks all that much about except when the internet went down a couple of weeks ago and everyone said, oh, it was Fastly's problem.

Company comes out here, slight miss on the top line, slightly smaller than expected loss, but you go through the shareholder letter-- let me just find it here in the tabs-- you go through the shareholder letter and clearly, you've got some major problems here with the Fastly model. Now, this was a stock that at the time-- Sozzi, I don't know if you remember-- everyone was like, oh, Fastly could take down the whole internet. They must be worth more than the, I think, $5 or $6 billion they were worth at the time.

Now, with a 22% haircut on today's stock price, the company is now worth $4 billion. And some commentary here from Josh Bixby, the company's CEO, within that shareholder letter talking about the outage, saying it resulted from an undiscovered bah, blah, blah, blah. We saw traffic volumes decrease and issued credits to customers following the incident. Given the usage-based nature of our business model, this resulted in impact to our 2Q results. And we expect to see a downstream impact on revenue from the outage in the near to medium term as we work with our customers to bring back their traffic to normal levels.

Everybody loves the SaaS model, usage-base. You use it more, the net dollar retention for Fastly in the quarter is 126. Basically, we have customers and our customers increase their spend at a rate that is more than all of the churn that we saw from anybody who came on and came off the system. This is why the companies all trade at 10, 20, 30 times revenue. But when you have a usage-based model and then your service doesn't work, and then you say customers are still getting credits and they're not sure how much they want to use this going forward, it's not great.

BRIAN SOZZI: Well, let me get--

MYLES UDLAND: That's why the stock's down 21%.

BRIAN SOZZI: Absolutely. And let me give you my earnings analysis on this one. It's nothing, because I can care less about Fastly. I'm more concerned--

MYLES UDLAND: I think we should care about Fastly.

BRIAN SOZZI: Eh.

MYLES UDLAND: I think the takeaway from the outage is that we should care more about Fastly.

BRIAN SOZZI: We should, but maybe not their earnings report. I'm more excited about Yeti.

MYLES UDLAND: I care.

BRIAN SOZZI: Yeti, that's what--

MYLES UDLAND: I care about Fastly.

BRIAN SOZZI: All right. Fair enough.

MYLES UDLAND: You see, the stock is now down 40% this year. I mean, this-- again, I think it also-- and I'm just going on and on here about Fastly, no one really cares about--

BRIAN SOZZI: On Weber IPO day, I don't care about Fastly.

MYLES UDLAND: I'm just saying, it's also caught up in this trade of everything that has a SaaS model on it, they all trade at 20 times future revenues. It's all going to be great. Well, now, we've seen the company run into a derating in the sector, that was the decline back in the spring. Then they had the issue with the outage, now they have a bad earnings report. So the story for Fastly is certainly challenging.