All eyes were on Big Tech this week, between their respective earnings and congressional hearings, so there’s plenty to discuss on Wall Street
The Quick Fix
#BigTechGoesToWashington — The biggest names in tech received a grilling on Capitol Hill this week when antitrust regulators came knocking.
#FourForOne — We had the pick of the litter in regards to highlighting a company’s earnings this week, but Apple’s (NASDAQ: AAPL) stock split announcement just gave it an edge.
#OhSnap — Who would have thought that failing camera company Kodak (NYSE: KODK) would get its second chance thanks to the coronavirus?
#DontForgetTheRest — I don’t recall a busier earnings week since I started writing the Five On Friday over a year ago, so we’ve got plenty to discuss.
#AndFinally — Tesla (NASDAQ: TSLA) CEO Elon Musk wants to fight everyone it seems. That’s it, can’t explain it any better than that.
Before they even had a chance to report their Q2 earnings on Thursday, Apple, Amazon (NASDAQ: AMZN), Alphabet (NASDAQ: GOOG), and Facebook (NASDAQ: FB) had to submit for questioning over possible antitrust breaches.
So, is Big Tech breaking up?
Not yet anyway. If we used every five this Friday we still couldn’t cover the entirety of the six-hour-long hearing, but overall, Facebook’s Mark Zuckerberg and Alphabet’s Sundar Pichai received the most heated grilling while Apple’s Tim Cook received the coolest — and Jeff Bezos just took it all in; this is his first congressional hearing after all. While the topic was ostensibly antitrust and anti-competitive behavior, Facebook came under fire for its alleged ‘suppression of free speech’. There was plenty of damning evidence provided that pointed towards anti-competitive behavior from each company but in general, the committee members used their time to make speeches and accusations, and frequently interrupted the witnesses before they had a chance to finish answering their questions. Investors seemed unperturbed by the hearings with each company seeing their stocks rising on Thursday. In truth, it was an unfocused and rambling hearing, giving us little indication of what antitrust officials plan to do moving forward.
Bet you didn’t know
The four CEOs attending this hearing were worth a combined $265.8 billion on July 29 — more than Portugal’s GDP, or the market cap of Disney’s (NYSE: DIS) entire business.
I’m sure Amazon will feel hard done for not having their own feature in this week’s Five On Friday, especially after its blowout earnings, but Apple’s news just pipped it.
What’s happening with Apple stock?
Even the most fanatic Apple bull would not have expected the blowout quarter that the iPhone maker reported on Thursday night. Despite widespread retail closures, the company reported revenue of $59.7 billion — 11% growth — and double-digit growth in its other product segments. Services soared 14.85% from the year prior, nudging the company past its internal goal of $50 billion in annual services sales — six months early… And that wasn’t even the biggest news of the night as Apple then announced that its board had approved a four-for-one stock split. Since Apple stock currently trades above $380, it means investors should expect to have a chance to buy shares for around $100, depending on where the stock trades at the end of August. If that all wasn’t enough, Apple also reported $193.82 billion cash on hand, meaning that it could technically buy Nike and still have plenty to spare…
Bet you didn’t know
As of January this year, Apple has a confirmed 1.5 billion active devices worldwide. However, total devices sold is likely much higher.
I almost had nothing but Big Tech to talk about this week, that is until camera-maker Kodak came along and saw its stock soar 1,900% in 2 days.
Can stocks even go that high?
Before its rally began on Tuesday, Kodak’s stock was as dead as, well, the very cameras it produces I guess… Needless to say that Kodak has seen better days, and with a top of the range camera now built into almost every smartphone, it’s no surprise to see that its stock was down 84% over the past 5 years. Then it secured a $765 million government loan to produce drug ingredients in response to the coronavirus pandemic. Queue investors doing their ‘thing’, and suddenly Kodak tripled in a day, rose 570% the day after, and just kept rising. As of Friday morning, it is up 1,287% this week. With this loan, Kodak will now launch a pharmaceutical division to make essential drug components during a “chronic national shortage.”, with CEO Jim Coninenza telling the Wall Street Journal that the division could account for 30% to 40% of the company’s total revenue moving forward.
Bet you didn’t know
Back in 1997, Kodak dominated the photographic-film industry, but the rise of the digital camera saw it eventually file for bankruptcy in 2012. Talk about a second chance?
I’m going to need a bigger section here with all these earnings, but at least there’s more than enough content for The Good, The (Not So) Bad, and The Ugly.
How did these stocks do in Q2?
The Good ?
The only word is wow, as the e-commerce giant was the clear earnings winner this week after reporting a record $5.2 billion in quarterly profits, or $10.30 per share. Its e-commerce business grew 47.8% YoY and its cloud revenue soared to $10.8 billion, with growth across the board.
Despite his grilling from Congress, Facebook CEO Mark Zuckerberg will be happy with his company’s Q2 net income of $5.18 billion, or $1.80 a share. Revenue soared 11% for the quarter despite major ad boycotts, while monthly active users grew to 2.7 billion.
Despite the closure of its factories in Q2, Ford (NYSE: F) reported an adjusted pretax loss of $1.9 billion – more than $3 billion better than expected. A faster-than-expected recovery in sales, as well as “operational execution” contributed to the company’s second-quarter performance.
When nobody wants to touch physical cash, it helps to be part of the online transaction boom, as proven by PayPal’s (NASDAQ: PYPL) earnings of $1.53 billion, or $1.29 per share in Q2. The company is optimistic about Q3 too, producing guidance of 25% growth in revenue.
It was a solid quarter for social media site Pinterest (NYSE: PINS), which reported monthly active user growth of 39% to 416 million. Losses per share of $0.07 on revenue of $272.5 million beat analyst estimates, while net losses narrowed to $100.75 million or $0.17 per share.
Automative software maker ServiceNow (NASDAQ: NOW) produced an earnings surprise of 20.6% in Q2, reporting EPS of $1.23 per share on revenue of $1.07 billion. This marks the fourth quarter in four that ServiceNow has topped consensus estimates.
Watch out Amazon, Shopify (NYSE: SHOP) is gunning for that e-commerce crown after smashing Q2 earnings with EPS of $1.05 on revenue of $714 million — up 97% YoY. Despite the threat of coronavirus on its small and medium-sized clients, gross merchandise volume still soared 119%.
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The (Not So) Bad ?
The Google-parent company reported its first-ever revenue decline as a public company, with revenue of $38.30 billion and EPS of $10.13. Despite this, the data giant did beat expectations across the board with the exception of its cloud division, which reported $3.01 billion in revenue.
Mastercard (NYSE: MA) proved its mettle on Thursday after posting net income of $1.4 billion, or $1.41 per share and beating Wall Street expectations. Despite these optimistic results, the company still saw second-quarter net revenue drop to $3.34 billion from $4.11 billion a year before.
In a quarter that still wasn’t quite as bad as its coffee — sorry, not sorry — Starbucks (NASDAQ: SBUX) swung to a heavy loss as same-store sales plunged 40% due to COVID-19. Losses per share of $0.46 on $4.22 billion in revenue still beat expectations as the company opened 130 net new stores.
Telemedicine leader Teladoc (NASDAQ: TDOC) missed on EPS on Wednesday, reporting losses per share of $0.34 on revenue of $241.03 million. However, the company’s reported net loss of $25.68 million was still 12.4% narrower than the same time last year.
It’s a sorry sign of the times for Under Armour (NASDAQ: UAA) when a 41% drop in revenue YoY actually beat analyst expectations. With 80% of its stores closed due to the coronavirus in Q2, e-commerce sales helped bolster revenue which came in $707.6 million, or $-0.31 per share.
The Ugly ?
Not even Baby Yoda could help Hasbro (NYSE: HAS) as the toymaker reported a Q2 miss with losses per share of $0.25, or a net loss of $33.9 million. CEO Brian Goldner was optimistic though: “We expect the environment to improve in the third quarter and set us up for a good holiday season.”
It looks like Joe Rogan can’t fix all your problems as Spotify (NYSE: SPOT) missed expectations in Q2 with a net loss of 356 million euros, or 1.91 euros per share for the Swedish company. Worryingly, there was a 29% dip in ad revenue as COVID-19 forces businesses into conservative spending.
Bet you didn’t know
Hasbro’s Mr. Potato Head was the first toy ever advertised on television, and from 1952 – 1964, parents had to supply a real potato before the plastic body was introduced.
If you ever wanted to see legendary investor Warren Buffett join forces with Johnny Depp in a cage fight against Elon Musk, then you should be grateful that you live in this era of history. Ok, so as unlikely as this might be, Tesla CEO Musk has thrown barbs at both the Berkshire Hathaway (NYSE: BRK.B) CEO and the ‘Pirates of the Caribbean’ actor this week… Let’s just say I’m not ruling anything out! Anyway, while Musk challenged Depp to a cage fight over the actor’s ongoing libel trial, he then turned around and said that Buffett is not the “kindly grandfather” he’s cracked up to be — hold the gasp! The two ‘top-tenners’ in the world’s richest people list are not exactly on friendly terms, with Buffett recently admitting that he would never invest in Tesla, while Musk has openly stated that he’s not the Oracle of Omaha’s biggest fan. However, Musk might be having the last laugh this year with Tesla stock up more than 240% YTD and Berkshire down almost 15%.
So, what’s going to happen now?
I told you, don’t rule out a cage fight. I’d pay good money to see Warren Buffett getting tagged in by Johnny Depp as the pair try to take down the SpaceX and Tesla CEO. Buffett’s 89 years, 1.78 m height, and 183 lbs make him an underdog against Musk’s 1.88 m and 205 lbs. Even with Johnny Depp thrown in, I’m putting -300 odds on Musk coming out the victor, it’s a no-brainer.
Bet you didn’t know
According to Musk, as a child, he trained in Kyokushin karate, taekwondo, judo, and Brazilian jiu-jitsu briefly. But he definitely doesn’t have the same experience as Buffett…
The Week In Numbers
S&P 500 (NYSEARCA: VOO) companies reported earnings this week alone.
total subscribers now use Spotify according to the company’s Q2 earnings report this week.
$2.4 billion in losses was recorded by the world’s largest aircraft manufacturer, Boeing (NYSE: BA).
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