Three Things (11/6)

Let’s talk about Taco Bell

Yo quiero better sales …Yum! Brands (YUM), the parent company of KFC, Taco Bell, and Pizza Hut, just missed Wall Street’s expectations for third-quarter sales. Taco Bell continued to shine, with U.S. sales up 4%, but this growth couldn’t compensate for declining numbers at KFC and Pizza Hut. Overall, Yum!’s same-store sales dropped by 2%, but the market wasn’t too phased. The stock took a hit in premarket trading but closed the day up 1.5%.

Taco Bell’s staying power comes from its smart mix of affordable options, like the $7 “cravings box,” paired with fan favorites like the Cheesy Chalupa. This combination seems to appeal to everyone looking for a blend of value and flavor. On the other hand, KFC saw a third straight quarterly sales drop, while Pizza Hut also lagged. Analysts say inflation and changing consumer habits are making things tough for these brands, which haven’t been as quick to adapt.

Yum!’s CEO David Gibbs admits they’re feeling the pressure as consumers rethink dining out with prices on the rise. McDonald’s (MCD) and others are also seeing these trends, as many customers decide home meals might be the better deal for now. Yum!’s stock has only risen 1.6% this year, far behind the S&P 500’s 20% gain, reflecting the cautious mood among investors.

More drama at Super Micro

Server saga … Super Micro Computer (SMCI), a California-based server maker, is feeling the heat after missing earnings targets and dealing with the sudden exit of its auditor. Preliminary numbers from the company’s recent quarter show estimated sales of $5.9 to $6 billion, falling short of the $6.45 billion analysts had expected. Earnings per share are also lagging, coming in at 56 to 65 cents instead of the anticipated 83 cents.

The financial miss is just one part of a bigger story. Last week, Ernst & Young (EY) resigned as Super Micro’s auditor over “integrity” concerns, raising questions about the company’s internal controls and ethical practices. Super Micro quickly set up a special committee to investigate. After three months, the committee says it has found no fraud, but the company acknowledged it’s taking steps to improve governance and avoid getting delisted from the Nasdaq.

Super Micro plays a crucial role in the AI space, supplying high-performance servers to big names like Nvidia (NVDA) and CoreWeave for AI-driven cloud computing. But this recent shake-up has taken a toll on its stock, which has plunged dramatically since March. With investors now wondering if a delisting is on the horizon, there’s concern that nervous customers could start rethinking orders, giving rivals like Dell (DELL) and HP (HP) a chance to gain ground.

Alex Karp really said that

New ink … AI software company Palantir (PLTR) crushed its third-quarter earnings on a 30% revenue gain propelled mostly by government contracts. 

Palantir builds advanced data analytics and AI software that helps organizations process vast amounts of information to make critical decisions, especially in areas like defense, security, and intelligence. The company famously only works with the United States and its allies, avoiding contracts with China and Russia.

Revenue from Uncle Sam grew 40% year-over-year to $408 million, making up over half of Palantir’s total income this quarter. A big part of this increase came from the Department of Defense, which recently awarded Palantir a $100 million contract. While government sales impressed, commercial revenue came in lower than expected, sparking some caution among analysts about the company’s future growth outside the public sector. Still, the stock jumped 23% by market close. 

Palantir’s mercurial founder and CEO, Alex Karp, was his usual self during the call commentary—which is to say he was … animated.

A few fresh Karpisms: 

One more thing: Trump Media (DJT), which operates Truth Social, surprise-posted its third-quarter results yesterday afternoon. The company lost $19.2 million for the period and has generated just $2.6 million in total revenue so far this year. CEO Devin Nunes called it an “extraordinary quarter.”

Disclosures:

As of writing, NVDA is a holding in Titan's Flagship strategy.

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