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“What happened to all the iPhones? Don’t tell me people are buying Androids now…” – Jason

 

Markets mounted a comeback yesterday.

And we’re talking tech earnings.

Keep raging,

 

The other four letter word…

After a busy day on (virtual) Capitol Hill, tech CEO companies returned to the comfort of their own dial-in lines yesterday. The FAAATs reported quarterly earnings after the bell Thursday. Unfortunately for them, in the words of my most recent adult co-ed sleepover companion, the results were “underwhelming.”

 

Let’s break it down

Sometimes the pre-game at Dooley’s is a lot more fun than the party. Which is exactly what happened on Thursday. Tech shares rose throughout the day ahead of Apple, Amazon, Facebook, Alphabet, and yes, Twitter’s quarterly reports…

 

What happened when the sun went down?

Alphabet shares jumped 6.5% after it reported revenue of $46.17B and earnings of $16.40 per share compared to analysts estimates of $42.9B and $11.29 per share. But that’s about where the good news ends…

Facebook’s shares tumbled 2.65% after the closing bell despite an earnings beat. Both revenue and earnings topped analysts expectations, but lower user growth in the US and Canada was a total buzzkill.

Jeffery Commerce ($AMZN) reported revenue of $96.15B and EPS of $12.37, dwarfing Wall Street’s expectations of $92.7B and $7.41 per share.

But despite absolutely crushing Q3 earnings like you do a bag of Totino’s Pizza Rolls after pounding six vodka sodas on a *checks quarantine calendar* Tuesday night, Amazon’s stock dropped after it reported earnings. Because if there’s one thing investors hate more than Robinhood crashing, it’s incredibly vague Q4 guidance.

 

Bad apples

If you thought those were bad, just wait until you get a load of Twitter and Apple.

Apple’s stock fell more than 4% after it reported a 20% drop in iPhone revenue. Tim Cook said business in China took a 28% hit. Even worse, the company didn’t provide guidance for its upcoming quarter end in December. But, hey, at least the iPhone 12 has 5G capabilities.

And then there’s Twitter. Oh @Jack, my boy. It’s now clear why Jack Dorsey currently looks like Rasputin. Been a rough quarter. Twitter’s stock dropped more than 17.5% after it reported a daily user base of 187M, less than the 195M expected.

 

The bottom line…

Not all earnings are created equal.

Despite all the FAAATs reporting revenue and EPS that beat expectations, the devil was ultimately in the details…

With sky-high valuations that need justification and nearly 90% of S&P 500 company’s beating earnings so far this year, anything short of a flawless 10Q was going to pummel tech stocks. 

 

 

☑️Weaning off. Juul’s valuation is dropping quicker than your black market supply of mango pods amid regulatory changes, lawsuits, and investigations into its marketing practices. Not to mention a Juul will never look as cool as a smooth, refreshing heater. Teens know this. 

Now, Juul has slashed its valuation down to $10B from its most recent $13B internal valuation.

To put things in perspective, two years ago, Altria purchased a 35% stake in the e-cig startup that valued it at $38B. Or, roughly what you’d spend on Juul pods annually if you have a mean nic addiction.

In the first half of 2020, Juul reported a $423M loss on sales of $764M. The company also cut more than half its workforce in a restructuring move designed to save money. Aren’t they all? Keep an eye out for investors to jump ship until that restructuring pans out.

 

☑️Walmart pulled a gun. Actually, it pulled all of them. And ammo. At least from the sales floors. In order to cut down on negative interactions in-store amid a rise in social unrest, Walmart is heading looters off at the pass in the event that a store is broken into. Looters with guns, what could go wrong?

Walmart sells guns at around half its 4.7k US locations, and customers can still exercise their right to buy arms but only on request. Walmart said the move comes out of an “abundance of caution.” If you buy guns at Walmart, caution is very low on your list of priorities, that’s for sure.

 

☑️Drying up. Exxon Mobil is cutting costs in the form of salaries, announcing that by 2022 15% of its global workforce will be forced to seek other employment. North America’s largest oil producer has never made cuts like this, and more than 1.9k employees, mostly in Houston, will be affected. Europe and Australia will also see a rise in unemployment. 

Exxon Mobil has been feeling the heat for a while now, suffering the worst string of quarterly losses since Exxon took over Mobil in 1999. Despite that, Exxon rose 3.7% on the day, making it the highest performing oil exploration stock in the S&P. Ah, capitalism.

 

☑️We’re back. Even though everybody was home with nothing else to do, Spotify took a nosedive at the beginning of the pandemic. But the back half of the year has been more kind to the Swedish streamers. During the quarter ended September 30th, Spotify had 320M monthly active users, much higher than analyst estimates. WTF, analysts?

Paying subscribers, the company’s bread and butter, climbed to 144M, the high end of Spotify’s own forecasts. Average revenue per user for subscribers dropped to $4.92 due to Spotify’s propensity for offering discounted paid plans and lower prices in new markets like India and Russia. But the rising price of Spotify’s family plan in seven markets more than made up the difference. It probably doesn’t hurt that Spotify pays artists pennies on the dollar for their tasty licks.

Author:
Jeff Bishop

One of the best traders anywhere, over the past 20 years Jeff’s made multi-millions trading stocks, ETFs, and options. He is renowned as an incredible trader with a deep insight and a sensitive pulse on the markets and the economy. Jeff Bishop is CEO and Co-Founder of RagingBull.com.

Even greater than his prowess as a trader is his skill and passion in teaching others how to trade and rake in profits while managing risk.

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