The stock market rally suffered heavy losses this past week, with the Dow Jones, S&P 500 and Nasdaq composite all down hard, breaking decisively below their 50-day lines, along with many leading stocks. New coronavirus cases hit record highs in the U.S., while France and Germany are moving into partial lockdowns. Apple (AAPL), Microsoft (MSFT), Facebook (FB), Shopify (SHOP) and Amazon.com (AMZN) sold off after earnings, while Google parent Alphabet (GOOGL) rallied and Pinterest (PINS) skyrocketed.
Stock Market Rally Tumbles
Investors judge a stock market rally on the major indexes and leading stocks. Well, the Dow Jones, S&P 500 and Nasdaq plunged through their 50-day lines and kept falling. As of Friday afternoon, the Nasdaq had tumbled 5.7%, the S&P 500 5.9% and the Dow 6.9% for the week. Leading stocks broke decisively through key support, either round-tripping solid gains or tumbling through 50-day lines.
Apple Beats Views, But Falls On China Woes, No Guidance
Apple (AAPL) reported a 4% EPS decline with revenue up 1% to $64.7 billion in its fiscal Q4. Mac and iPad sales were strong, but iPhone revenue fell 21% as customers held off buying new handsets ahead of the iPhone 12 launch in October. Sales rose in all regions of the world except China, where sales tumbled 29%. Apple declined to give guidance for the key holiday quarter. Apple stock fell sharply Friday.
Microsoft Smashes Targets, But Guides Low
Microsoft (MSFT) earnings rose 32% per share with revenue up 12% to $37.15 billion, beating the fiscal Q1 consensus. The Dow Jones tech titan cited strong demand for its cloud computing products. In the December quarter, Microsoft expects to generate sales of $39.95 billion, slightly below views for $40.4 billion.
Amazon (AMZN) and Etsy (ETSY) both beat estimates by wide margins. Amazon revenue jumped 37% to $96.1 billion while EPS of $12.37 per share were far beyond views for $7.48. Amazon gave Q4 revenue guidance above estimates. But its operating income target came in below some forecasts. Shares fell modestly Friday, extending weekly losses. Etsy revenue soared 128% as gross merchandise sales jumped 119% to $2.6 billion. Etsy stock, which has tripled in 2020, fell after earnings.
Pinterest Skyrockets; Facebook, Twitter Fall On Results
Pinterest (PINS) reported blowout earnings and user gains, with revenue growth accelerating. The image-based social site gapped to a new high. Facebook (FB) came in well above profit estimates as revenue jumped 22% to $21.5 billion. Daily active users climbed 12% to 1.82 billion. However, active users in North America “declined slightly” from Q2, which was elevated by the pandemic, Facebook said. It expects this trend to continue. Twitter (TWTR) crushed analyst estimates on the top and bottom lines but fell short on user growth. Facebook and Twitter, which rallied on Pinterest, sold off Friday.
Facebook (FB) and Twitter (TWTR) reported quarterly results. Facebook came in well above estimates as revenue jumped 22% to $21.5 billion. Daily active users climbed 12% to 1.82 billion. However, daily and monthly active users in the U.S. and Canada “declined slightly” from the previous quarter, which was elevated by the pandemic, Facebook said. It expects this trend to continue. Twitter crushed analyst estimates on the top and bottom lines but fell short on user growth. It reported having 187 million users vs. 195 million expected.
Google Earnings Surge
Google parent Alphabet (GOOGL) reported third-quarter earnings rose 62% as revenue grew 14% to $46.17 billion, as Google’s search advertising business rebounded. Both beat views, with key sectors outperforming. Google Properties revenue — which includes core internet search, the Play store and YouTube — rose 10% to $31.38 billion. Cloud revenue climbed 45% to $3.44 billion. Google will disclose cloud profitability starting in Q4. YouTube advertising revenue rose 32% to $5.04 billion.
Data Centers Driving Chip Mergers
Two recent semiconductor industry mergers are targeting the lucrative data center market. Advanced Micro Devices (AMD) announced a $35 billion all-stock deal to buy Xilinx (XLNX). Marvell Technology (MRVL) followed with plans to buy Inphi (IPHI) in a cash-and-stock deal worth about $10 billion.
Chip Earnings Mostly Positive
Upbeat earnings reports outnumbered those that disappointed among semiconductor stocks in the past week. Chipmakers posting beat-and-raise third-quarter reports included AMD, Lattice Semiconductor (LSCC), Monolithic Power Systems (MPWR), NXP Semiconductors (NXPI) and Power Integrations (POWI). Companies posting in-line or mixed results included Cree (CREE), Impinj (PI) and Silicon Laboratories (SLAB). Among semiconductor equipment firms, FormFactor (FORM), KLA (KLAC) and MKS Instruments (MKSI) delivered beat-and-raise quarterly results.
A slew of top software makers reported earnings this past week.
Shopify (SHOP) reported EPS of $1.13 a share vs. a year earlier loss, while revenue leapt 96% to $767.4 million. Gross merchandise volume jumped 109% to $30.9 billion, though that growth is down from 119% in Q2. Earlier in the week, Shopify forged a marketing pact with mobile video app TikTok. But shares sold off hard for the week.
Twilio (TWLO) earned a profit, defying views, while revenue jumped 52% to $448 million. The communications software maker guided up December-quarter revenue, but sees an adjusted loss vs. views for a slim profit. Shares fell sharply.
ServiceNow (NOW) earnings rose 22% while revenue climbed 30% to $1.15 billion. The business software leader sees Q4 subscription billings in line to slightly above views. Shares jumped on earnings but fell for the week.
Dynatrace (DT) tripled EPS vs. a year earlier, while revenue climbed 30% to $168.6 million amid the work-from-home and cloud-computing shift. For the current quarter, Dynatrace sees EPS of 12-13 cents vs. views for 13 cents. Shares dived.
Fortinet (FTNT) reported Q3 adjusted earnings up 31% from a year earlier, while revenue climbed 19% to $651.1 million, both beating. The cybersecurity firm guided up for Q4. But shares tumbled on earnings and for the week.
Atlassian (TEAM) reported better-than-expected fiscal Q1 earnings and revenue. But the collaboration software maker guided low for the current quarter. Shares tumbled Friday.
Mastercard, Visa Earnings
Mastercard (MA) reported a 26% EPS decline with revenue off 8% to $3.84 billion, both bigger declines than expected. Visa earnings fell 24% to $1.12 a share, while revenue fell 17% to $5.1 billion, both beating. Both card giants fell for the week, though Visa rallied on earnings.
Solar energy stocks shined. First Solar (FSLR) and Enphase (ENPH) both reported better-than-expected Q3 earnings on Tuesday. First Solar EPS surged 400% to $1.45, with revenue up 70% to $928 million. Enphase EPS were flat at 30 cents, while revenue fell 1% to $178.5 million. SunPower (SPWR) and Sunnova (NOVA) reported smaller-than-expected losses.
Digital education company Chegg (CHGG) topped Q3 forecasts and gave strong guidance for the rest of 2020 and 2021. EPS fell 6% as revenue leapt 64% to $154 million. Subscribers jumped 69% to 3.7 million. But shares retreated.
Big Pharma Earnings
Merck (MRK) earnings and sales topped easily, and the Dow drug giant hiked guidance modestly. Both Pfizer (PFE) and Novartis (NVS) beat on the bottom line but missed on the top line. Pfizer said it’s nearly completed enrolling its ongoing final-stage test for its Covid-19 vaccine candidate. But it won’t release interim Phase 3 data before the election, though it may still seek emergency authorization by late November if all goes well. Eli Lilly (LLY) missed on EPS and sales. It maintained its outlook but said the high end of its sales guidance will require “modest revenue” from as-yet unapproved Covid-19 treatment drugs.
Boeing Beats Views, Cuts Jobs
Boeing (BA) topped Q3 forecasts but deepened job cuts as the coronavirus pandemic and 737 Max grounding drag on. The aerospace giant now doesn’t expect to deliver most of the 737 Max jets in storage until 2022 vs. a prior estimate for 2021 and executives don’t see the company returning to a positive cash flow until 2022. Boeing also warned that it doesn’t see any increase in global defense spending in the near term as governments shift spending toward their Covid-19 responses.
News In Brief
Idexx Labs (IDXX) reported a 36% EPS gain as sales rose 19% to $672.5 million, both well above views. Shares jumped to a new high.
Teladoc Health (TDOC) and Livongo Health (LVGO) late Wednesday both reported better than expected results and sales that more than doubled, ahead of their merger slated to close this quarter. But Teladoc said it now expects to lose 33-36 cents this quarter, more than expected earlier, and both stocks fell.
Comcast (CMCSA) Q3 earnings fell nearly 18% but topped estimates as its signed up a record 633,000 broadband customers. Revenue slipped 4.9% to $25.53 billion, slightly missing. Comcast said it has signed up 22 million consumers for its new Peacock-branded, advertising-supported video streaming service. It had 10 million after Q2.
Ultragenyx Pharmaceutical (RARE) easily topped with Q3 results on Wednesday, a day after posting positive preliminary data on yet another possible drug to treat an ultrarare disease. Shares hit a new high Friday even after falling Thursday on a $400 million secondary stock offering.
Dexcom (DXCM) fell to a five-month low Thursday after the maker of glucose monitors for diabetes patients posted a solid Q3 earnings beat that nevertheless was more modest than some earlier beats. Shares fell hard Wednesday as Dexcom preannounced strong revenue but said its top sales executive is leaving.
Moderna (MRNA) Q3 revenue soared more than 800% thanks to deposits for its Covid-19 vaccine candidate, crushing views, but its R&D costs tripled. It per-share loss exceeded analyst estimates.
Alexion Pharmaceuticals (ALXN) reported adjusted EPS rose 16% while sales soared 26% to $1.59 billion, both beating. The biotech hiked full-year guidance, as it said it would.
Caterpillar (CAT) earnings and sales fell sharply, with equipment and services sales down significantly across all major business segments and geographies. The Dow Jones industrials giant beat views. But the bellwether for the global economy continued to withhold guidance as the pandemic lingers.
Raytheon (RTX) posted a 54% EPS drop on sales of $14.7 billion. The jet-engine giant will slash 20,000 jobs after Q3 sales plunged 34% at Pratt & Whitney and Collins Aerospace. A day later, Raytheon disclosed a Justice Department criminal probe of accounting and controls issues in its Missile & Defense business going back as far as 2009. Shares tumbled on earnings and the probe.
Ford (F) posted a 91% jump in EPS to 65 cents vs. expectations for a decline. Revenue of $34.7 billion also beat, on the back of rebounding truck and SUV sales.
General Electric (GE) saw EPS fall 60% to 6 cents a share, beating views for a 6-cent per share loss. Sales sank 17% to $19.4 billion. GE generated $514 million in free cash flow and said the closely watched metric continues to improve.
Chewy (CHWY) jumped as the online provider of pet food and other pet products broadly expanded a telehealth service that provides continuous veterinarian care during the pandemic. Users of the service can log on to their Chewy account to express concerns about their pet. Chewy will connect them with a licensed veterinarian online.
Las Vegas Sands (LVS) is considering selling its hotel-casino properties on the Las Vegas Strip. Sale of the Venetian Resort, the Palazzo and the Sands Expo Convention Center could net $6 billion. Shares fell.
Specialty footwear company Crocs (CROX) jumped as third-quarter EPS leapt 65%, with revenue up nearly 16% to $361.7 million. Same-store sales rose 16.2%.
Ugg footwear maker Deckers (DECK) crushed views with fiscal Q2 EPS up 32% and revenue rising 15% to $623.5 million. Shares rose.
Starbucks (SBUX) beat fourth-quarter estimates, helped by a “faster-than-expected recovery” from the coronavirus pandemic. But same-store sales in China came up short. The coffee chain also gave mixed guidance for the year ahead, with its Q1 profit target and full-year sales outlook below expectations.
Activision Blizzard (ATVI) delivered better-than-expected Q3 results but the video game publisher’s holiday-quarter guidance was only slightly above views, disappointing investors.
Spotify Technology (SPOT) added 6 million new streaming music subscribers in the third quarter, giving it a total of 144 million worldwide. It missed views on sales and earnings.
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