Wednesday Morning Rebel Brief — Spotify Earnings Continues the “Mixed Bag”
Source: Spotify
Good morning Rebels! The indices are up heavily this morning ahead of the FOMC meeting, led by the Nasdaq which is currently higher by more than 1.5%. That’s pretty rare going into a Fed day. Are you feeling bullish yet? We’re still at the crux of the most important week for the stock market in months (potentially the most important week all year depending on who you ask), so it’s tough to draw any firm conclusions yet, but if you were judging by these earnings reactions, you’d have to say investors are starting to look up. What do we mean?
GOOGL, MSFT, and V: The Raw Numbers
Spotify Earnings:
Revenue: $2.91B v $2.89B Expected (Beat)
EPS: -$0.85 v -$0.68 Expected (Miss)
Monthly Active Users (MAU): 433M v 429.4M Expected
Forecasts Q3 MAU 450M v 444M Expected
Forecasts Q3 Revenue $3.04B v $3.0B Estimated
Reducing Hiring Growth By 25% For Second Half Of 2022
Alphabet Earnings:
Revenue: $69.68B v $69.80B Expected (Miss)
EPS: $1.21 v $1.27 Expected (Miss)
Operating Margin: 28% v 31% y/y
Cloud revenue: $6.3B v $4.6B y/y
Search & Other Revenue: $40.7B v $35.8B y/y
Microsoft Earnings:
Revenue: $51.9B v $52.3B Expected
EPS: $2.23 v $2.29 Expected
Intelligent Cloud: $20.9 billion v $21.1 billion Expected
Operating expenses increased 14%, driven by investments in cloud engineering, LinkedIn, and Nuance
Gaming revenue: -7% y/y
Visa Earnings:
Revenue: $7.30B v $7.06B Expected (Beat)
EPS: $1.98 v $1.74 Expected (Beat)
July 27 Earnings Summary: No Punishment for Missed Earnings
Last quarter, in the thick of the bear run, companies that missed slightly or on a single metric were largely punished with outsized bearish stock reactions. Conversely, last night was much more forgiving.
Tuesday saw earnings reports from Microsoft (which missed on the top and bottom line, and is currently sitting on 3.6% premarket gains), Chipotle (which soared 9% after hours despite missed on revenue and only slightly beat on EPS), Alphabet (which missed on the top and bottom line but still rose 3.8% after hours).
In fact, if you look across the board at stocks that reported earnings last night (V, SKX, TXN, ENPH), it’s hard to find something that’s in the red. And sure, behind each of the earnings misses there were positive notes. Google ad spend and cloud revenue are both up. . Chipotle’s profit margins continue to rise. But the fact remains that last quarter, the market didn’t care about “bullish segments behind an earnings miss”. The fact that investors are now looking past the bad and focusing on the good bodes very well for sentiment going forward.
Of course, as we said, we’ve still got to get through tomorrow’s GDP, earnings from Apple (AAPL), Meta (META) and Amazon (AMZN), and today’s big 2PM event…
July 27 FOMC Meeting
On the back of another CPI Report that indicated another 40-year inflationary high, investors are looking to this meeting for guidance from Fed Chair Jerome Powell. They’ll want to know Powell’s thoughts on:
- Future rate hikes
- The possibility of recession and Thursday’s US GDP
- The continued strength of the labor market
- Declining housing prices
- Falling commodity prices
- Whether inflation is showing signs of having peaked
- The status of quantitative tightening and the balance sheet
And more. Investors are also expecting a 75bps rate hike. However at the last meeting investors were expecting 50bps, only to receive an upside surprise — so anything is possible.
More Brief Market Headlines
- Paypal (PYPL) soars 6% after hours on news of new stake by activist investor.
- McDonalds (MCD) CFO expects food and paper inflation to be 12-14% this year
- Walmart (WMT) reiterated with Overweight rating at Wells Fargo, price target lowered from $150 to $130
- Shopify (SHOP) CEO says he was wrong to expect pandemic e-commerce boom to last — company prepares to lay off 1,000 employees.
As usual, you’ll want to keep an eye on the companies that have yet to report:
Week-Ending July 29th Earnings Calendar
Source: Earnings Whispers
For more quick takes on this morning’s market-moving news, check out 60 Seconds With Jon Najarian!
