Stocks – FB, AMZN, MSFT, GILD, AAPL, 700
Macro – SPY, QQQ, EWJ,
Stocks are rising following the “strong” quarterly results last night. But the results in some cases were misleading because expectations had been reduced so greatly. For example, Facebook delivered better than expected revenue and earnings, but revenue growth was just 11%, their slowest growth rate in many quarters. At the same time, Analysts had been looking for revenue in the first quarter of $20.3 billion at the beginning of March, and it declined to $17.4 billion, a drop of 14.2%.
Meanwhile, Apple saw its revenue estimates drop from about $59.8 billion to $52.2 at the end of March, a drop of 11.1%. Simply put, both companies beat severely reduced expectations, and without providing any guidance, it, in my opinion, dilutes the appearance of what are strong results. Not to mention Apple had more iPad and Mac sales this quarter then they did in many quarters. Is it repeatable? Probably not, everyone was running out and getting their kids iPads and Laptops in April when they were ordered to home school. I had to buy two laptops.
The only one of the four that delivered strong results, sort of, was Amazon, because analysts were actually raising their revenue numbers into the results, and Amazon still beat those numbers. But then again, AWS’s revenue growth fell to 29% its slowest growth rate ever.
So while Microsoft delivered blockbuster results, the stock has suffered because Azure grew below 50%, at 49%, and since reporting results, the shares have fallen by 5%. Microsoft was even punished for giving mostly inline guidance. But yet, Apple and Facebook provided no guidance, and the stocks are rising? Makes no sense to me. The bottom line, I’d be careful with this setup this morning and would be curious to see where they close. Probably lower, then where they start.
Remember Tesla? So be careful. Again, 81% of S&P 500 companies have smashed their estimates in the second quarter, and that is because these massive beats are coming on watered-down results from companies that gave no guidance. If anything, it tells you just how bad analysts are at forecasting results without guidance.
Look, I own Apple and Alphabet, but I also so own Tesla and Microsoft, so are the big moves frustrating for me to see. Yes.
I would watch Amazon closely; it needs to push through 3,275 this morning.
Facebook will need to close above $250 today.
Meanwhile, the Nikkei didn’t care much about the big tech’s significant results. The index was smoked down 2.8% and fell below some essential support at 21,980. A strong yen is not going to be helpful for Japanese equities.
Even Tencent didn’t get a boost, falling by 20 bps.
S&P 500 (SPY)
Meanwhile, we will see if the S&P 500 futures can push through resistance at 3,272.
Meanwhile, the NASDAQ 100 futures are failing to make a new high, and topping out at the lower high they made last week.
Anyway, poor Gilead is trading lower because it missed estimates all around. But then again it didn’t get the same love when it came to reductions, only with revenue estimates falling to $5.3 billion from $5.6 billion, a reduction of just 7%. Man, if they had only gotten the same love as Facebook. They could have crushed it too. Anyway, now the stock is likely on its way to $67.
Nobody ever said investing was fair.
Originally Posted on July 31, 2020 – Stocks Are Rising On The Appearance of Massive Earnings “Beats”
MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWNS AAPL AND MSFT
Mott Capital Management is the portfolio manager for one portfolio offered by Interactive Advisors. Interactive Advisors is part of the Interactive Brokers Group, and all brokerage transactions in Interactive Advisors client accounts are made through Interactive Brokers LLC, an Interactive Advisors affiliate, which is a conflict of interest because Interactive Brokers makes commissions on its advisory affiliate’s trading. Interactive Advisors clients do not invest directly with the Portfolio Managers like Mott Capital Management, and the Managers do not have discretionary trading authority over Interactive Advisors client accounts. The Portfolio Managers on the Interactive Advisors platform simply license their trade data to Interactive Advisors, which then allows its clients to have the same strategy and trading decisions mirrored in their accounts if the Portfolio is in line with their risk score. Portfolio Managers like Mott Capital Management implement their trading philosophy and strategy without knowing the identity of Interactive Advisors’ clients or taking into account these clients’ individualized circumstances.
Disclosure: Interactive Advisors
This material is not intended as investment advice. Interactive Advisors or portfolio managers on its marketplace may hold long or short positions in the companies mentioned through stocks, options or other securities.
Pursuant to the Investment Management Agreement between Interactive Advisors and its clients, all brokerage transactions occur through Interactive Brokers LLC, an affiliate of Interactive Advisors. Interactive Advisors does not offer services through any other broker-dealer. The use of an affiliate for brokerage services represents a conflict of interest. Interactive Advisors clients acknowledge this conflict of interest and authorize Interactive Advisors to execute transactions through Interactive Brokers LLC when they open an Interactive Advisors account. Clients should consider the commissions and other expenses, execution, clearance, and settlement capabilities of Interactive Brokers LLC as a factor in their decision to invest in an Interactive Advisors Portfolio. Interactive Advisors believes it can meet its best execution obligation by trading its clients’ trades through Interactive Brokers LLC. While there can be no assurance that it will in fact achieve best execution, Interactive Advisors does periodically monitor the execution quality of transactions to ensure that clients receive the best overall trade execution pursuant to regulatory requirements.
Disclosure: Interactive Brokers
Information posted on IBKR Traders’ Insight that is provided by third-parties and not by Interactive Brokers does NOT constitute a recommendation by Interactive Brokers that you should contract for the services of that third party. Third-party participants who contribute to IBKR Traders’ Insight are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.
This material is from Interactive Advisors, an affiliate of Interactive Brokers LLC, and is being posted with permission from Interactive Advisors. The views expressed in this material are solely those of the author and/or Interactive Advisors and IBKR is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
Disclosure: Futures Trading
Futures are not suitable for all investors. The amount you may lose may be greater than your initial investment. Before trading futures, please read the CFTC Risk Disclosure. A copy and additional information are available at ibkr.com.