THE WEEK THAT WAS

US markets ended Friday flat, despite some genuine muscle memory performances from our friends in high places like Amazon (AMZN), Apple (APPL) and Netflix (NFLX), which were beaten down badly earlier in the year.

Still, all three US major averages finished the week in the red.

Among the big names making moves, a true to form Cathie Wood who turned up this week loving Tesla (TSLA) with even more passion and displaying an appetite for disruption bin bargains.

The founder and CEO of Ark Invest watched Tesla shares drop and analysts rewrite their expectations, and like the last 500 or so quarters she went all contrary and said she reckoned Tesla would be worth about US$2k in a few years, and then added heavily to her existing stake.

Wood also did the same for Roku (NASDAQ: ROKU), and Ginkgo Bioworks (NYSE: DNA).

WHAT A WEEK FOR…

Watching some huge mega giant first quarter earnings drop on Wall Street.

There’s very big American names reporting across every sector, with one in three of all the companies in the S&P 500 Index to drop Q1 data this  week.

Some of the key reports include updates from Credit Suisse (CS) Coca-Cola (NYSE:KO), Microsoft (MSFT), Alphabet (GOOG) and Amazon.

The reporting season is already chugging along quite nicely Stateside, with about 80% of the S&P 500 companies beating Wall St expectations thus far.

In fact Q1 is off to a better start than hoped for,  especially when held up to the dim light of the last few quarters.

The market’s 7% rise so far in 2023 suggests there is some optimism even amid recessionary fears.

There’s always a but, with the volume of companies reporting positive Earnings Per Share (EPS) surprise beats, and then the size of said earnings surprises lingering well below their five-year averages.

Overall, we have Factset data suggesting 18% of the companies in the S&P 500 have reported actual results for Q1 2023 to date. Of these companies, 76% have reported actual EPS above estimates, which is below the five-year average of 77% but above the 10-year average of 73%. In aggregate, companies are reporting earnings that are 5.8% above estimates, which is below the five-year average of 8.4% and below the 10-year average of 6.4%.

Meantime UBS has the Nasdaq quietly back trading at 25x one-year Forward P/E after its best first quarter performance since 1998 – and a full standard deviation above its long-term average. The Nasdaq, having ridden some extraordinary highs and lows in the last few years, is suddenly back to square one and trading at its pre-COVID highs.

And if you thought the mega tech names were taking a well-earned breather then think again. Just five stocks — Apple, Microsoft, Nvidia, Meta and Amazon — have been responsible for two-thirds of the S&P 500’s advance this year.

KEEP AN EYE OUT FOR

Chile is moving to boost state control over its lithium industry as it seeks to diversify from mining into batteries and other areas, spooking investors in the country’s dominant miners, SQM and Albemarle, which fell about 20% and 10% respectively.

Punters Down Under reckon this is likely to be viewed positively for a few local stocks with PLS and IGO the faves for UBS.

ELON WATCH

Tony Sycamore at IG Markets notes Tesla extended its post-earnings slide last week to circa 10% at US$162.99, its lowest close in three months.

Shares of Tesla (TSLA) crashed on Wednesday after cheap cars and high costs did what they do to margins. Elon says TSLA is all about sales growth and not profit for now, due to the EV price war and a shaky economy.

“This is an extremely important point,” Elon said after the numbers dropped. “We’re like laying the groundwork here, and it’s better to ship a large number of cars at a lower margin, and subsequently, harvest that margin in the future as we perfect autonomy.”

Tesla reported a net income crash of more than 20% from the prior year on narrowing margins. TSLA shares are not quite 30km up, but they did a good spiral themselves on the news.

Meanwhile, US$1.5 billion of Tesla’s (TSLA) heavy-hitting institutional shareholders wrote, cursed and then sent an open letter of corporate fury to the company’s board over the “over-committed” status of said CEO Elon Musk on Friday.

Via… well, It’s an open letter, so…

The missive – obviously not via Twitter –  followed swiftly on the heels of that radical 30km in the air spiral detonation of Musk’s giant SpaceX Starship in its first test flight Thursday.

 

The Economic Calendar
Monday April 24 – Friday April 28

Sources: S&P Global, Nasdaq.com, Trading Economics 

 

There’s plenty on the menu this week to suggest what flavour Fed officials will be serving us for the main dish at the end of their May 2 policy meet. For now officials will be staying mum as they enter the blackout period.

Starting things off is the consumer confidence index for April on Tuesday along with March new home sales. Durable goods orders will follow on Wednesday, but the first top tier release will land on Thursday with the advance estimate of Q1 GDP.

The go-get-’em US economy is expected to have expanded by an annualised pace of circa 2%, which kinda rules out a recession, one’d hazard.

TUESDAY
US Redbook, YoY
US S&P/Case-Shiller Home Price, MoM
US House Price Index

WEDNESDAY
CB Consumer Confidence
US New Home Sales
US Richmond Fed Services Index

THURSDAY
CN Industrial Profits (YTD)
US GDP Growth Rate QoQ
US Initial Jobless Claims AP
US Real Consumer Spending

FRIDAY
JP Bank of Japan 10-year bond yield
US Pending Home Sales
US Core PCE Price Index YoY

 

Wall Street Earnings
Monday April 24 – Friday April 28

It’s still never-ending business time in New York with March quarter US earnings results and, well, nothing really broken yet, other than anything Elon touches.

“AT&T (ATT) was also in the hurt locker, falling 10.41% after its earnings reports missed the spot,” Tony adds.

We can expect so much more earnings fireworks this week, with reports set to drop from (again looks at notes) some companies called Alphabet (GOOGL)Meta (META)Microsoft (MSFT), and Amazon (AMZN), as well as Coca-Cola, PepsiCo, McDonald’s, Boeing, Exxon, and Chevron… and so on.

 

Monday

The Coca-Cola Company Q1, Credit Suisse Q1, First Republic Bank Q1, Philips Q1, Vivendi Q1 revenues.

Tuesday

ABB Q1, Alphabet Q1, Associated British Foods H1, Akzo Nobel Q1, Brown & Brown Q1, Card Factory FY, Carrefour Q1 sales, Corning Q1, General Electric Q1, General Motors Q1, Halliburton Q1, McDonald’s Q1, Microsoft Q3, Moody’s Q1, Nestlé, Novartis Q1, PepsiCo Q1, Randstad Q1, Santander Q1, Travis Perkins Q1 trading update, UBS Q1, Verizon Q1, Visa Q2.

Wednesday
Boeing Q1, Bunzl Q1 trading statement, Danone Q1 sales, Deutsche Börse Q1, eBay Q1, GSK Q1, Heathrow Q1, Hilton Worldwide Holdings Q1, Man Group Q1 trading statement, Meta Q1, Michelin Q1 sales, Roche Q1 sales.

Thursday
Aker BP Q1, Amazon.com Q1, American Airlines Q1, AstraZeneca Q1, Barclays Q1, Carlsberg Q1 trading statement, Caterpillar Q1, Comcast Q1, Deutsche Bank Q1, Domino’s Pizza Q1, Eli Lilly Q1, Finnair Q1, Hasbro Q1, Hershey Q1, Intel Q1, Merck Q1, Mondelēz International Q1, Northrop Grumman Q1, Sainsbury’s FY, Samsung Q1,  Southwest Airlines Q1,  Unilever Q1.

Friday
Aon Q1, Chevron Q1, Colgate-Palmolive Q1, Electrolux Q1, ExxonMobil Q1, NatWest Q1, Smurfit Kappa Q1, Sony FY.

 

Quickie previews: Microsoft

The stock is up about 40% since it bottomed out in October and with the company reportedly ahead on helping artificial intelligence mess with our lives, traders are queuing up for these numbers as they drop on Tuesday after the bell in NY.

Will the numbers add more fuel to the share’s latest uptrend?

I say yes. Probably.

Wall St says earnings per share (EPS) should rise 0.5% from last year to US$2.23 from US$2.22.

Revenue to find +3.4% to US$51.025 billion – largely due to its rocking cloud services arm, amid a Q2 decline in personal computing.

I could do more, but we asked XM’s CEO Peter McGuire to do the heavy lifting earlier this week. It’s worth it.

 

Quickie: Meta

Meta reports Q1 earnings after the market closes on Wednesday, the 26th of April, 2023.

IG Markets Tony Sycamore has an astonishingly nimble and precise preview:

“Last quarter, Meta reported a revenue beat of US$32.17 billion vs US$31.53 expected and announced a US$40bn share buyback sending its shares soaring, putting behind it a year to forget.

Meta said it expected Q1 2023 total revenue to be in the range of US$26-28.5 billion. Meta CEO Zucker-B said that 2023 would be the ‘Year of Efficiency’ and we’re focused on becoming a stronger and more nimble organization.”

The company also said that it expected total expenses in 2023 to be in a range of US$89-95 billion – less than previously forecast due to “slower anticipated growth in payroll expenses and cost of revenue”.

The forecast reduction in expenses alleviated concerns that the company’s massive investment in building the metaverse would continue to blow out costs. Its attention to costs saw the company announce another round of job cuts this week, estimated to be around 10,000 heads on top of 11,000 departures announced in November.

Restructuring charges for its Family of Apps (FoA) segment and Reality Labs (RL) unit of US$3.76 billion and US$440m, respectively, made for a difficult comparison at an EPS level.

However, excluding these charges, Meta’s operating margin would have been 13 percentage points higher, and its diluted EPS would have been US$1.24 higher for Q4.

While the company’s focus on controlling expenses has met with shareholder approval and will boost the company’s bottom line, there are concerns that softer advertiser demand, partly from the recent banking crisis, will weigh.

There will be interest to see if Meta’s improved targeting using first-party data will help improve ad pricing.

Comments on the Reality Labs segment will also attract attention as it so far has been immune from recent cost-cutting measures.”

Meta’s last quarter turnaround

  • Facebook daily active users (DAUs) – DAUs were 2 billion on average for December 2022, an increase of 4% 1 year-over-year.
  • Facebook monthly active users (MAUs) – MAUs were 2.96 billion as of December 31, 2022, an increase of 2% year-over-year
  • Revenue – Revenue was US$32.17 billion and US$116.61 billion, a decrease of 4% and 1% year-over-year for the fourth quarter and full year 2022, respectively.

 

Quickie: Amazon (AMZN)

Wall Street expects Amazon to earn 22 cents per share on revenue of $124.53 billion. This compares to the year-ago loss of 38 cents per share on revenue of $116.44 billion.

What to watch: With a gain of 23% year to date, besting the 7% rise in the S&P 500 index, Amazon stock has been one of the better performing names within the tech sector.