The stock market got off to a strong start Thursday morning, as major stock market benchmarks climbed as much as 1% at the open. Investors were generally pleased as year-over-year consumer inflation levels continued to move lower, reaching just 3.2% as of the latest reading from July that the Bureau of Labor Statistics just released. Even though that's still above the 2% target that the Federal Reserve continues to pursue, most market participants are content that favorable trends remain in place.
The biggest stock movers Thursday morning had company-specific news lifting their shares. Capri (CPRI +0.00%) and AppLovin (APP +10.17%) enjoyed big share-price gains early Thursday, and at least in one case, investors have high hopes for what the future will bring. Here are the details about both companies.
Tapestry looks to Capri for the perfect ensemble
Shares of Capri Holdings soared 58% shortly after the open on Thursday morning. The parent company of Michael Kors got a buyout bid from fellow luxury fashion company Tapestry (TPR +1.69%), which is the parent of Coach.
Tapestry and Capri announced that they had come to an agreement under which Capri shareholders will receive $57 per share in cash for their stock. The acquisition will create a massive luxury brand empire, bringing together Tapestry brands Coach, Kate Spade, and Stuart Weitzman with Capri brands Michael Kors, Versace, and Jimmy Choo. The deal assigns an enterprise value of $8.5 billion to Capri.
NYSE: CPRI
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After the merger, Tapestry anticipates having complementary brands producing annual sales of more than $12 billion and adjusted operating profit of nearly $2 billion. With Tapestry's expertise in direct-to-consumer retail, the company hopes to improve Capri's execution and squeeze more sales and profits from its luxury product lines.
For longtime Capri shareholders, the news is bittersweet, as the stock had traded at almost double the buyout price a decade ago. Nevertheless, it'll be interesting to see whether Tapestry can use its expansion to get its stock back to its own early-2010s highs.
Investors are lovin' AppLovin
Elsewhere, shares of AppLovin jumped 24% just after the market opened Thursday morning. The marketing software platform provider released second-quarter financial results that impressed its shareholders and pointed to further growth in the future.
AppLovin's quarterly financial numbers were mixed, reflecting an ongoing shift toward recurring platform revenue. Overall sales were down 3% year over year to $750 million, but software platform revenue jumped 28% from year-ago levels to $406 million. That helped offset a steep 25% decline in what had been AppLovin's core apps segment. Net income of $80 million reversed a year-ago loss, and adjusted pre-tax operating earnings were higher by 24% from year-ago levels.
NASDAQ: APP
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AppLovin attributed the success of the software platform segment to its investments in artificial intelligence. In particular, the rollout of the latest version of its machine learning engine, dubbed Axon, led to more clients installing and using AppLovin's software. With high margins for that part of the business, AppLovin sees increased efficiency and better return on advertising spending as positive factors that should contribute to its growth well into the future.
AppLovin struggled in 2022 as marketing technology companies largely faced headwinds. However, the stock has already bounced back considerably in 2023, and if the company's projections are accurate, then AppLovin could deserve even more love in the months and years to come.
