In one of the most exciting earnings seasons in a while, thanks largely to a pandemic that has added several high-level twists, big tech is tearing it up, but that’s still not managed to keep the markets from falling Friday.
The Dow had shed 284 points by 12:39pm EST Friday, while the S&P 500 lost around 0.7%, but the tech-heavy NASDAQ initially defied protocol with blow-out tech earnings pushing it up around 0.4% before trending downward by about 0.14% by midday.
For the non-tech stocks, the economic data is the downward-driving force, particularly as unemployment benefits expire today and no agreement on a new stimulus plan is in place. Also boosting negative traction is data on declining consumer sentiment and a rise in COVID cases that puts everything in limbo.
But for tech, the results are clear: Their lead in the market isn’t without cause.
These are the highlights from this week that everyone should be paying attention to:
#1 Soaring Apple and a Pending Stock Split
In after-hours trading Thursday, Apple shares rose 5% on high-than-expected earnings and revenue for the tech giant’s third quarter. By 11:35am EST Friday, Apple stocks were looking at another ~6.8% boost.
Apple reported earnings of $2.58 per share on revenues of $59.69 billion, soundly beating analysts expectations of $2.04 per share on revenues of $52.25 billion.
iPhone revenues were up 2% from last year to $26.4 billion, again beating expectations. The launch of the cheaper iPhone SE earlier this year boosted those revenues nicely. iPad sales were also up 22%, with iMac sales up 31%. The Apple services segment--which is really what the new Apple is all about going forward, saw revenues of $13.2 billion, up 15% from last year.
But maybe you don’t have $400 to buy a share of Apple. No worries. Apple is democratic. It just announced its fifth stock split, which will be a four-for-one split that goes into effect on August 24th. The split is being applauded left and right because it will make the stock far more attractive to bigger numbers of retail investors.
#2 Alphabet’s First-Ever Revenue Decline
This is where we have to start paying attention to ad revenue. For the first time in history, Alphabet, the parent company of Google, reported a revenue decline, even though it beat expectations for both earnings and revenue. The company reported Q2 earnings of $10.13 per share on revenues of $48.30 billion, compared to expectations of $8.21 per share on revenues of $37.37 billion Net income dropped to $6.9 billion, from $9.9 billion a year ago, while revenue for Search was at $21.3 billion, down from $23.6 billion. Those numbers add up to a 2% decline from Q2 2019.
Youtube ad revenue was up, making for some good news in this mix, as was revenue for Google Cloud.
The first-ever revenue decline was pushing Alphabet down by around 4.6% Friday afternoon:
#3 Kodak: From Cameras to ‘Defense’ as Stocks Get Hyper Volatile
It’s not tech--and it’s not even related to cameras anymore, it would seem. Kodak got a major new lease on life by Trump and the Defense Protection Act. Now, it’s being reinvented to produce materials for the pharma industry on the front lines of the COVID-19 pandemic, with a $765-million government loan.
By Thursday, Kodak saw its stock gain a massive 1,780% since its close last Friday.
While it’s paired nearly half its gains in afternoon trading Friday, this stock went from $2.15 on July 27th, to a high of $46.03 on Wednesday.
This was one where you would have had to jump in on the buying frenzy and then take your profits and run. By now, it’s paired back to a more reasonable hedge on whether this will truly be a new lease on life for the old-fashioned camera company.
#4 Ford Wins on Super Low Expectations
For the auto world, the key was how big the cash burn was going to be amid a pandemic that is crushing industry on a WWII level. So, with very low expectations coming into earnings season, Ford ended up being a winner.
The company lost 35 cents per share in Q2, but analysts were expecting far greater losses of $1.17 per share. Not only that, but Ford now looks positioned to have enough cash on hand for the rest of this year, so should be able to weather either a continued fall in demand or even potential factory shut-downs.
That was enough for a boost in after hours trading, but by Friday afternoon, after investors had more time to digest the situation, Ford was trading down.
By Michael Kern for Safehaven.com
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