Earnings season: Another record-breaking quarter for Apple

Apple smashes yet another quarterly earnings season – but the stock price takes a hit.

Apple earnings

Apple’s headline stats

Apple beats Wall Street expectations once again. This was its strongest June quarter report on record, with sales of all major Apple product lines up 12% across the board.

Overall revenues were up 36% year-on-year for a total of $81.41 billion. When broken into key categories, Apple’s latest quarterly revenues look something like this:

  • Total Revenue – $81.41 billion – 36% y-o-y growth
  • iPhone revenue – $39.57 billion – 49.78% y-o-y growth
  • Services revenue – $17.48 billion – 33% y-o-y growth
  • Other Products revenue – $8.76 billion – 40% y-o-y growth
  • Mac revenue – $8.24 billion – 16% y-o-y growth
  • iPad revenue – $7.37 billion – 12% y-o-y growth
  • Gross margin – 43.3% y-o-y growth

It’s of course iPhones that represent the largest chunk of Apple’s quarterly revenues. The California brand launched its latest iteration in October last year. Since then, it’s place as the centrepiece in the Apple crown has gone undisputed.

As we can see from the above, other Apple products, including Macs and iPads, also remain extremely popular with consumers.

“Our record June quarter operating performance included new revenue records in each of our geographic segments, double-digit growth in each of our product categories, and a new all-time high for our installed base of active devices,” said Luca Maestri, Apple’s CFO, in a statement released on Tuesday.

“We generated $21 billion of operating cash flow, returned nearly $29 billion to our shareholders during the quarter, and continued to make significant investments across our business to support our long-term growth plans.”

In terms of guidance, Maestri said the company is forecasting double-digit year-on-year growth into the next quarter, although this is expected to slow in September.

Apple stock still takes a knock

Despite these huge gains, Apple shares reacted poorly to Maestri’s September forecasts. The stock fell 2% after the announcement and is currently trading down roughly 0.7%.

This comes even after earnings per share rose from the estimated $1.01 to $1.30.

So, why the dip? It’s the same thing that affected Tesla this year, and indeed most tech companies involved in physical hardware: supply side issues.

There is currently a global chip shortage. A shortage of silicon used to manufacturer chipsets necessary for building Apple products has caused supply and manufacturing issues. The most affect products were Macs and iPads, which use “legacy nodes”, i.e., older chip models, unlike the iPhone which runs on more current chipsets.

“We had predicted the shortages to total $3 to $4 billion,” Apple CEO Tim Cook told CNBC. “But we were actually able to mitigate some of that, and we came in at the lower than the low end part of that range.”

The drop in Apple share price may then have been caused by consternation around the coming quarters’ performance until the end of 2021. Will supply shortages stymie growth? Likely so, but Apple has proven it can mitigate these and still come out on top. However, it’s how much growth slows across the rest of the year, if it does, that may have caused concern for investors.

Apple analyst sentiment

Even with stock down, sentiment appears to be fairly strong. According to the Analyst consensus tool on the Marketsx platform, Apple holds a buy rating according to 25 market observers’ opinions:

Analyst consensus for Apple on 28.07.2021.

Sentiment is also veering towards the bullish:

Apple news sentiment for 28.07.2021.

So, another massive quarter for the world’s foremost tech brand. Now, it’s up to Cook, Maestri and the rest of the team to navigate Apple through a world where commodities and raw materials are in short supply. Can it deliver? Watch this space.

To see which large caps are still due to report on Wall Street this season, make sure you check out our earnings calendar.

Adelanto semanal: reunión de la Fed ante el aumento de la inflación

La Fed se reúne esta semana con la inflación cada vez más presente en la economía estadounidense. ¿Promulgarán cambios importantes Powell y compañía? También estaremos pendientes del PIB de EE. UU., del que se prevé que registre otro crecimiento trimestral histórico. Entretanto, y sin salir de EE. UU., Tesla aprieta el acelerador en la semana de publicación de resultados más apretada en lo que llevamos de trimestre.

Además de los informes de resultados, otro de los grandes acontecimientos de esta semana es la reunión de julio del FOMC.

La inflación y el acelerado crecimiento de la economía probablemente sean los principales temas de conversación en julio. Hace poco, el presidente Powell prometió un «fuerte respaldo» a la economía estadounidense posterior a la pandemia con el aumento de la inflación como telón de fondo.

Según Powell, el actual aumento de los precios al consumo se debe a la reapertura del país y que se aplacará. En su testimonio ante la Cámara de Representantes de EE. UU., Powell se aferró al argumento del empleo y señaló que aún no se han recuperado 7,5 millones de puestos de trabajo de la economía estadounidense previa a la pandemia.

Powell considera que aún falta mucho para reducir los estímulos. El programa de compras de bonos de 120 000 millones de dólares mensuales de la Fed probablemente se mantenga. Como ya hemos mencionado, este programa está ligado al comportamiento del mercado laboral. La compra de bonos y el respaldo de la Fed probablemente sigan en pie hasta que se recuperen los puestos de trabajo destruidos.

Como muy pronto hasta 2023 no se prevé que se suban los tipos.

Sin embargo, a pesar de que la Fed ha afirmado que la inflación tiene una base generalizada y que se deriva de una mayor actividad económica, a muchas personas no les convence el plan de dejar que la economía siga creciendo a un ritmo tan acelerado.

El IPC general de junio del 5,4 % fue el dato más alto en casi 13 años. Analistas tanto del bando demócrata como republicano esperan que esta situación se pueda controlar relativamente pronto.

Powell se ha comprometido a que, si la inflación se descontrola, «utilizaremos nuestras herramientas para reducir la inflación».

Sin embargo, «sería un error actuar de forma prematura».

También en EE. UU., conoceremos los primeros datos del PIB del 2T el jueves.

De momento, las predicciones son halagüeñas. Según Deloitte, los avances tecnológicos podrían ayudar a que EE. UU. registre otro excelente trimestre, superando los niveles de crecimiento previos a la pandemia.

The Conference Board (TCB) ha pronosticado que la tasa de crecimiento anualizada de la economía de EE. UU. será de un 9 % en el segundo trimestre de 2021.

«Conforme se desarrolla la plena reapertura de la economía y la confianza de los consumidores continúa aumentando, esperamos que el gasto de los consumidores contribuye a impulsar el avance del crecimiento, sobre todo con el gasto en servicios en persona», apunta TCB. «Estos gastos se verán favorecidos por un mercado laboral fortalecido y un ingente ahorro derivado de las tres rondas de cheques del estímulo fiscal que se repartieron el pasado año».

Asimismo, como ya hemos visto en anteriores publicaciones del PMI, los sectores manufacturero y servicios siguen siendo la base del crecimiento en junio, tras unos sólidos meses de abril y mayo. Estos tres meses de buen comportamiento del PMI deberían contribuir a impulsar el crecimiento del PIB en EE. UU. este trimestre.

Sin embargo, una vez más, la explosión de la demanda contenida es la responsable del actual aumento del índice de precios al consumo subyacente en EE. UU. Asimismo, varios informes afirman que los elevados precios de materiales de producción están empezando a perjudicar también a la producción manufacturera. De hecho, el PMI manufacturero de junio fue ligeramente inferior al de mayo.

Sin embargo, si las predicciones están en lo cierto, EE. UU. está a punto de experimentar uno de los mayores crecimientos trimestrales desde la Segunda Guerra Mundial.

Dejando a un lado los datos, en lo que a publicación de resultados trimestrales se refiere, estamos ante la semana con más novedades hasta ahora.

Casi 40 empresas de gran capitalización estadounidenses darán a conocer sus resultados del 2T esta semana. Entre ellas se incluye algunas empresas del grupo de las FAANG (Facebook, Amazon, Apple, Netflix y Google). Netflix presentó sus resultados la semana pasada, pero esta semana conoceremos los de los gigantes tecnológicos Alphabet (Google), Amazon, Facebook y Apple.

Por su parte, Tesla romperá el hielo este lunes con su resumen de resultados tras el cierre de los mercados en EE. UU.

El momento de publicar sus resultados es muy oportuno: entre mayo de 2020 y mayo de 2021, la cotización de Tesla se ha disparado un 330 % y, por lo general, las cotizaciones tienden a subir antes de las publicaciones de resultados de Tesla. De media, las acciones de Tesla han aumentado un 1,6 % antes de dar a conocer sus resultados trimestrales durante los últimos tres años.

La empresa de Elon Musk tiene mucho que celebrar este trimestre: ha suministrado 200 000 vehículos en un trimestre por primera vez en su historia. Asimismo, Tesla ha lanzado una gama de nuevos servicios de automatización con una suscripción mensual de 199 $.

Las predicciones para estos resultados son muy optimistas, pero sabremos más el lunes.

Descubre qué empresas de gran capitalización que publicarán sus resultados esta semana en nuestro calendario de resultados estadounidenses.

Principales datos económicos

Date Time (GMT+1) Asset Event
Mon 26-Jul 9.00am EUR German ifo Business Climate
 
Tue 27-Jul 3.00pm USD US Consumer Confidence
 
Wed 28-Jul 2.30am AUD CPI q/q
  2.30am AUD Trimmed Mean CPI q/q
  1.30pm CAD CPI m/m
  3.30pm OIL US Crude Oil Inventories
  7.00pm USD FOMC Statement
  7.00pm USD Federal Funds Rate
  7.30pm USD FOMC Press Conference
 
Thu 29-Jul 1.30pm USD Advanced GDP q/q
  3.30pm GAS US Natural Gas Inventories
 
Fr 30-Jul 9.00am EUR Germany Preliminary GDP q/q
  1.30pm CAD GDP m/m
  1.30pm USD Core PCE Price Index m/m

 

Principales informes de resultados

Mon 26 Jul Tue 27 Jul Wed 28 Jul Thu 29 Jul Fri 30 Jul
Tesla 3M Automatic Data Processing CME AbbVie
General Electric Boeing Keurig Dr Pepper Aon
Advanced Micro Devices McDonald’s Mastercard Caterpillar
Alphabet (Google) Pfizer Merck Chevron
Apple Shopify Amazon Exxon Mobil
Microsoft Spotify Gilead Procter & Gamble
Mondelez Facebook Liberty Global Takeda Pharmaceutical
Starbucks Ford Pinterest Berkshire Hathaway
Teladoc Health PayPal Twilio
Visa Qualcomm

 

Thematic investing: investing in technology

Our next instalment in the thematic investment series looks at which tech stocks to buy. Investing in technology can pay dividends – but it can also prove tricky too. 

Thematic investing: tech stocks 

Investing in technology: what you need to know 

Technology is an all-encompassing term. It covers an enormous range of sectors. Everything from your smartphone to electric vehicles to productivity, and more besides sits within the technology sphere. Even companies like Disney, with its Disney+ streaming service, or Amazon with its Amazon Web Services offer, are considered tech stocks. 

The best tech stocks to buy will be entirely up to you and what your investing or trading goals are. Be aware that, because of the sector’s diversity, there are many different types of company with differing compositions, market caps and characteristics within the technology space. 

Some might be multi-billion-dollar behemoths like the FAANG stocks (Facebook, Apple, Amazon, Netflix and Google). Others might be market disruptors like Uber or Spotify. Some firms will be well established with vast cash reserves. Others might up-and-comers might be burning through capital but with rapid share appreciation to match.  

That said, tech stocks are amongst some of the best performers. Indices dedicated solely to technology and related firms offer some considerable potential returns for instance. The Nasdaq 100, listing the top 100 US tech stocks for example, is up over 43.8% as of May 25th 2021. The Dow Jones US Technology Index is also showing similar numbers, up 47.92% year-to-date. 

Remember the risks when searching for tech stocks to buy 

Technology is all about innovation. It never stands still. Because of that, even the best tech stocks can be a risky investment. Huge capital investment is needed to ensure a company’s solutions and products remain at the head of the pack. A company can disappear completely if a rival develops a product or service consumers and the market prefer. 

Some tech firms’ valuations have been questioned too. We mentioned Uber earlier. That’s a company that has admitted it may never be profitable. Is that worth the risk for investors?  

Then there are general economic patterns to consider. When times are tough, luxury items like brand new smartphones may not sell well. Thus, the manufacturer’s share price may fall, along with companies supply components and raw materials needed to build a new smartphone.  

When times are good, and consumers have more cash to spend, there might be higher demand.  

Inflation woes play a part too. As recently as late May 2021, we’ve seen tech-sell offs generated by fears that inflation may bite into tech manufacturers and providers’ profitability. This was triggered by a spike in bond yields and general uncertainty around the economic picture caused by the global Covid-19 pandemic. 

All investing and trading is risky. Investing in technology can prove doubly so. Only invest or trade if you are comfortable with any potential losses. Do your research and understand how to pick stocks before committing any capital.  

What are some of the best tech stocks to watch? 

Again, what is the best stock will depend entirely on your individual budget and circumstances. Consider a wide range of different sectors and industries covered under the tech umbrella.  

Diversification, i.e., getting exposure to several different industries, stocks, and sectors, is used by investors to mitigate risk. If one stock performs badly, the theory goes, the other stocks or assets in your portfolio can help protect against that by performing well. 

With that in mind, the below may be tech stocks to buy if they meet your individual criteria. 

AMD 

AMD makes semiconductors and micro-components used to build everyday essentials like phones, laptops and so on. Its main product line covers graphics cards, microprocessors and motherboard chipsets.  

As of May 25th, 2021, AMD stock was up just over 47%. It also looks like it has a bright future. Latest quarterly earnings saw AMD revenues expand 93% year-on-year, reaching $3.45 billion. Operating income for the quarter was $662 million while net income was $555 million – a 243% increase from the prior year. 

We mentioned earlier how technology companies must invest heavily to keep up with the pace of innovation. In the case of AMD, its investments are a form of protection. Due to intense demand, chipset raw materials are at a premium right now. To avoid shortages, AMD recently inked a $1.6bn wafer supply deal with GlobalFoundaries.  

GlobalFoundaries will be supply necessary components between 2022 and 2024 under the terms of the deal. AMD is now developing second and third generation Epyc server chips – a product of high interest to AMD customers. 

According to the Analyst Recommendations tool on the Marketsx trading platform AMD is rated as a buy by 52.9% of analysts. 

Apple 

Apple is one of the most recognisable brands on the planet. As tech companies go, they don’t come bigger than the Californian company. Its clean-cut branding combined with a reputation for innovation and useability make its products hot property. Because of that, Apple often makes an appearance amongst the best tech stocks. 

Apple’s latest round of earnings, coming in April 2021, saw the company enjoy yet another blowout quarter. Companywide sales were up 54% y-o-y. iPhone sales shot up 65.5% during this period, spurred on by the launch of the new iPhone 12. Mac and iPad sales outperformed even Apple’s flagship product, notching impressive 70.1% and 79% annualised growth. 

In monetary terms, total revenues were up 53.7%, totalling $89.58 billion. Earnings per share (EPS) beat expectations at $1.40 vs. the estimated $0.99. 

Apple stock is up across the year. It was trading for around $80 in May 2020. Flash forward to May 2021, and AAPL is exchanging hands for about $126. Analyst forecast is bullish with analyst consensus heavily weighted towards buy. 

Xero 

ASX-listed Xero is carving out a position as a global leader in cloud accounting.  

In its 2021 financial year, the Wellington, New Zealand-based software supplier, managed to expand its subscriber base by 20% to 2.74 million worldwide. Stand out geographies included: 

  • 17% growth in UK customers – 720,000 subscribers 
  • 18% growth in US customers – 285,000 subscribers 
  • 40% growth in Rest of the World customers – 175,000 subscribers 

Growth is carefully pared with stock performance. It’s something to consider when investing in technology stocks. Xero’s average annual 25.1%, which ranks better than 85% of the companies in Software industry, according to analysts GuruFocus.  

The 3-year average Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) growth is 86% – better than 97% of software companies profiled by GuruFocus. Taxes, Depreciation, and Amortization 

Xero’s future is entirely focussed on expansion. It regularly tells investors it has a preference to re-invest cash generated to drive long-term shareholder value. But because it reinvests so much, Xero may not have major profitability going forward. Something to consider. 

Investing in technology: reiterating the risks 

When looking at tech stocks to buy or trade, consider the risks. While you can make money, there is a risk of capital loss. Do your research before committing any capital and only invest if you are comfortable with any potential losses. 

 

Fed sticks to its guns, Apple and Facebook earnings blowout

The Federal Reserve remains resolutely firm. Jay Powell reiterated that the central bank is not even close to talking about tapering bond purchases, a move that would begin to unwind some of the extraordinary accommodation delivered in the wake of the pandemic. The Fed chair said the US economy is still a long way from achieving the progress required to dial back stimulus – over 8m jobs are still lost and that means we need several blowout jobs reports to get there. Powell also stressed that policymakers are not worried about inflation and think any price pressures will prove temporary.  The Fed is doubling down here and sticking to its guns. Advance GDP numbers due to today should show the US economy roaring back. 

 

All this should be a green light for stocks, but the markets are wary right now as they tread record highs and all this stimulus is priced in and the macro outlook well understood. The US 10-year bond yield moved to test the 1.65% level. US stock markets closed marginally lower, though the small cap Russell 2000 managed to eke out a small gain. Futures point to solid gains for Wall Street later today when the cash equities open. European stock markets are largely higher in early trade today, with the FTSE 100 popping its head above 7,000 again on a raft of largely positive corporate updates.

 

Apple reported another stunning quarter, with sales soaring from last year and a fresh round of buybacks. The company raised the dividend by 7% to $0.22 per share and announced $90 billion in share buybacks. Apple revenues grew more than 50% year-on-year, with total sales of $89.58bn vs around $77bn expected. EPS came in at $1.40 vs $1.00 expected. At all levels, we can see Apple outperforming even the most bullish expectations. The core iPhone business saw sales up 65% to $47.94 billion vs. $41.43 billion estimated. This was stunning – the iPhone remains the golden goose and way in which consumers become part of the Apple ecosystem. Services – a higher margin business that includes things like the Cloud, App Store, Apple Music – grew revenues by 26.7%. Revenues in China rose 87% – albeit this was in comparison to a quarter last year in which China was most affected by the pandemic. Shares rose 2% in the after-hours market. A really exceptional quarter – it’s not a surprise that it exceeded quite a low bar, but noteworthy just by how much.

 

Facebook shares advanced 6% in after-hours trading as the company reported posted forecast-beating revenues and earnings. However, the company warned investors that growth could slow as new Apple privacy policies would make it harder to targe ads on social media. I’m fairly used to Facebook using earnings calls to warn that rates of growth could slow in future, and I think investors are too. Earnings per share came in at $3.30 vs $2.37 expected on revenues of $26.17bn, which were about $3bn more than expected and up 48% on a year before. Net income rose 94% to $9.5bn. Average revenues per user came in at $9.27 vs. $8.40 expected. 

 

BT confirmed it is looking to sell its TV business.  This has been a long time coming – the vast sums BT paid to secure football rights was always at odds with the core business. In a statement responding to press speculation, the company says “early discussions are being held with a number of select strategic partners, to explore ways to generate investment, strengthen our sports business, and help take it to the next stage in its growth”. Whilst clearly the pandemic has badly hit sport, BT has never set too well in the content space; there are many with deeper pockets who do content. Ballooning costs left BT paying a hefty bill for sports that wasn’t being covered. It’s further evidence of chief executive Philip Jansen ripping up the Gavin Patterson era playbook to focus squarely on the Openreach rollout and modernise BT. 

 

Shell raised its dividend after beating expectations thanks to higher oil prices and improved margins in its chemicals business. Adjusted net income rose 13% from a year before. Net debt fell $4bn. Meanwhile French firm Total said profits are back to pre-pandemic levels as adjusted net income hit $3bn, higher than the pre-crisis first quarter of 2019. 

 

Unilever shares rose over 2% as the company announced it will commence a €3bn share buyback scheme next month after a 5.7% jump in sales in the first quarter. Most (4.7%) came from higher volume, with just 1% from stronger pricing. For 2021 Unilever stuck to its target of underlying sales growth to be within 3-5%, with the first half at around the top of this range. Management also pointed to additional supply chain costs, with rising commodity and freight prices a factor as margins are seen declining a touch in the first half before picking up later in the year. Ongoing covid restrictions in some areas of the world continued to support in-home sales, whilst the slackening of restrictions in some geographies boosted out of home sales. Mayonnaise and ice cream were strong sellers. India and China both posted strong double-digit growth against a backdrop of strict lockdown measures which impacted the prior year. 

 

NatWest reported Q1 2021 operating profit before tax of £946 million and an attributable profit of £620 million. This was boosted by the reversal of provisions for bad loans as government support schemes reduced the amount of loan delinquency banks had anticipated. NatWest booked at net impairment credit of £102m. But shares fell as the total income was a slight miss, coming in at £2.66bn vs £2.7bn expected. Net interest margin fell 2bps to 1.64%. Shares declined more than 3% in early trade. Standard Chartered continued the run of positive news from the large banks as it recorded underlying pre-tax profit rising 18% to $1.4bn as lower impairment charges and strong cyclical recovery in the global economy offsetting lower interest margins. Return on tangible equity rose 220bps to 10.8% and management reaffirmed their view that income will start growing again in the second half of the year and for impairment charges to reduce significantly.

 

Smith & Nephew shares rose 6% to the top of the FTSE 100 after reporting Q1 revenue up 6.2% on an underlying basis (11.5% reported) to $1.264bn. This included 3.4% from foreign exchange and 1.9% from acquisitions, whilst the quarter also included two more trading days than the equivalent 2020 period. 

Apple earnings preview: not crunch time yet

So far it looks very much like profit margins are holding up, earnings are rising fast at most companies and earnings expectations are doing fine. Wednesday sees the big one: Apple.

Shares in Apple are up just 1.5% YTD but the stock has nevertheless enjoyed a stellar run up in the last 12 months and in the last month has rallied from a trough around $116 to $134 by Tuesday to get back close to the all-time high. The pandemic has been good for Apple but the value rotation has crimped gains this year. But this remains a go-to stock with immense potential and expectations are not too high for once, albeit with the stock trading at about 36x trailing 12-month earnings it’s looking pretty rich. Here are a few things to look out for from Wednesday’s Apple earnings.

Apple is seen reporting EPS of $1 on $77.30bn in revenues. Last quarter it blew past expectations posting all-time record revenue of $111.4 billion, up 21% year over year, and quarterly earnings per diluted share of $1.68, up 35%.

Guidance: Apple has declined to offer guidance since the pandemic struck, so investors will be keen for this to change now that the clouds of the coronavirus are lifting. The capital return programme (see below) update is usually made alongside the March quarter and so now would be a reasonable time to star offering some guidance for the coming quarters.

iPhone: Still the golden goose, but there are concerns about a softening in demand as well as lower demand in China. Demand will be decent, with about a third of the iPhone installed base up for renewal, albeit we likely see some moderation from the last quarter. Overall, the Street may underappreciate the resilience in iPhone demand from the delayed launch last year and picks up market share thanks to stimulus cheques.

Mac and iPad: Can very strong demand for home computing products like Macs and iPads hold up the pandemic abates? Whilst vaccinations are driving a lifting of lockdowns, I still see a strong demand from WFH and home education trends globally.

Ecosystem: Revenues from Services remains a central plank of the investment thesis and with a growing installed base this should continue to deliver. Last quarter Services growth reached +24% with the first quarter of Apple One subscription bundles helping to lift the category.

Returns: I think this quarter will underline just how strong the free cash flow is and investors are going to start to see more cash coming their way after a record year for sales. Apple could aggressively add to share buybacks and increase the dividend to as much as $0.90, implying a 10% increase.

Last quarter’s summary: Apple shares fell in the aftermath of its January earnings report covering the holiday quarter. Revenues hit a record $111.4bn, well ahead of forecasts and representing 21% year-on-year growth thanks to broad-based gains across its product suite. The iPhone 12 launch quarter was exceptionally strong, with sales +17% in iPhone, taking the installed base for iPhones to 1bn from 900m. Mac revenues rose 21% yoy, whilst iPad sales jumped 41%. As noted in our preview, growth in personal computer sales driven by pandemic trends such as work from/stay at home was always likely to boost Mac and iPad sales. Growth in Other Products – devices like the Apple Watch and AirPods, climbed to 29% yoy. Services growth reached +24% with the first quarter of Apple One subscription bundles helping to lift the category. The growing installed iPhone user base should further support Services growth in the coming quarters, we noted at the time. We also noted very strong international sales (now 64% of total sales vs 61% a year ago), whilst revenues from Greater China rose 57%. The confidence in Apple fiscal first quarter earnings was well justified and the slight pause in the shares reflects a little profit taking after a strong run in 2020 whilst the lack of guidance for the second quarter was a thorn. A record-breaking quarter but it should not be seen as a high watermark for Apple.

Forecasts

Apple Q1 2021 earnings forecast.

Analysts

Apple Q1 2021 analyst sentiment.

5g stocks to watch

5g is the next stage in mobile communications. It’s about to kick off a revolutionary worldwide smartphone upgrade – and that makes 5g stocks some of the hottest picks to watch this year.

Want to invest in 5g? Check out these stocks

Barclays reports that 525 million 5g equipped smartphones will be sold in 2021, and 700m in 2020. China will the main market, other geographies like the US and Europe will be doing their part increase 5g penetration.

PCs and tablets too will soon be outfitted with this latest generation of mobile internet. It’s going to be big business. Very big business. It won’t just be smartphone manufacturers that will benefit. The entire infrastructure, from mobile networks to component and technology suppliers, will be driving the 5g economy from 2021 onwards.

The 5g stocks we’ve picked here represent that wider spectrum of firms that can potentially come away as champions for this next-generation tech. Take a look below.

Apple

Whenever there’s a revolution in technology, Apple is never far away. In many ways, it’s jumped the gun by launching the latest iteration of the iPhone, fully primed with 5g. the iPhone 12 is expected trigger an upgrade super-cycle, essentially an avalanche of smartphone shopping as consumers change up to the new model.

That’s what appears to be happening. Apple just reported its best ever single quarter with sales passing $110 billion and saw the highest number of iPhone upgrades ever too, according to CEO Tim Cook.

Wall Street expectations were blown away on the news, with AAPL EPS coming in at $1.68 – well above the projected $1.41. Q1 2021 revenues broke $100bn too. Essentially, Apple is reaping the 5g whirlwind in typical Apple fashion.

With 5g infrastructure rolling out in rapid order across Apple’s two key markets, the US and China, expect solid share performance as the upgrade cycle gains even more traction. AAPL is looking like one of the key 5g stocks to watch.

Marvell Technology Group

Without components, however, 5g is a lame duck. It’s companies like superconductor manufacturer Marvell Technology Group that are equipping smartphone and device manufacturers with the micro components they need to succeed.

Marvell has been busy on the acquisition front, picking up Inphi for a cool $10bn back in October 2020 in a move that will significantly boost its 5g capabilities. It’s also partnering with some big players to move the 5g rock along, such as Analogue Devices on multi-antenna radio units and with Samsung on multi-radio access technology.

In its latest earnings call, Marvell was reporting some good news, with CEO Matt Murphy commenting: “Overall revenue increased 13% year on year, driven by our networking business, which grew revenue 35% year on year. Strong 5G and Cloud product ramps are fuelling our ongoing success in these strategic growth markets.”

Stocks are looking healthy. MRVL has more than doubled in value in the past 12 months. Basing its expansion strategy around the 5g sphere could pay off with the continued global rollout of the mobile tech. It may be one to watch for those who want to invest in 5g.

Analog Devices

Communications forms 20% of Analog Devices revenue, and the superconductor manufacturer sees 5g as a cornerstone of its growth strategy. According to its latest earnings report, Analog Devices predicts it can expand revenues from 5g-related tech and projects 19% year-on-year going forward.

We’ve mentioned above it has partnered with Marvell to develop radio-based technologies to help empower 5g communications. Marvell is using Analog’s transceivers in a massive multiple-input, multiple-output (MIMO) radio units – critical for the functioning of 5G networks.

According to research from Allied Market Research, the global massive MIMO market might enjoy a CAGR of 35% through 2027, hitting nearly $16 billion in revenue.

Analog’s revenues dipped 6% in 2020. However, analysts forecast that, thanks to rapid worldwide 5g adoption, its revenues may be about to skyrocket, with double digit growth forecast for 2021.

QUALCOMM

QUALCOMM is a chipmaker bridging the gap between iOS and Android. Consumers can be brand snobs, but component suppliers really don’t care if there’s business to be had and a communications revolution If you know your Android tech, then you might know the vast majority of Android-powered smartphones run using QUALCOMM Snapdragon processors. Crucially, it also supplies radios in the uber-popular iPhone 12s.

Long-term, there maybe more competition in the microprocessor space QUALCOMM currently dominates. Samsung, for instance, is developing its own Snapdragon rival, while China’s Mediatek has introduced its own line of 5g mobile processors for use in low-cost smartphones.

Then there is the issue of Apple. It probably wouldn’t be that much of a surprise if the world’s most famous tech company, and pusher of proprietary technology, designed its own 5g modems once its QUALCOMM deal expires in 2025.

For short-term plays though, it may be an idea to look at QUALCOMM. The above aren’t threats to its position right now. In fact, QCOM stock enjoyed a 76% rise across the last year, and it might be able to sustain its upward trajectory across 2021.

T-Mobile

Following its merger with Sprint, T-Mobile has been pulled ahead in the US 5g race. Putting its heft deployment capability into practice, T-Mobile claims its 5g network now covers a 1.6m square miles, providing coverage to 280m people. Its Ultra Capacity 5g, i.e. its high-speed 5g service, covers additional 106m people cities in more than 1,000 US towns and cities.

In its last quarter, T-Mobile reported record-high total additions and record post-paid net additions, passing 100m. It appears surging ahead with its desire to invest in 5g is paying off. Customers are probably responding to the fact that T-Mobile offers the fastest 5g download speeds against rival US networks too, verified by Opensignal independent testing.

TMU stock has risen alongside its 5g investment, growing 62%. It could be one of the key 5g stocks to watch in 2021, but if other competitors can step up their 5g capabilities, T-Mobile may see its position as top dog challenged.

European stocks rally, Rolls-Royce shares slide

European equity markets traded higher on Tuesday, recovering the losses of Monday’s soft session after a largely positive, though choppy, day on Wall Street. Tech stocks led by Apple dragged the broader US market higher ahead of an expected strong earnings season, whilst small caps were weaker. Asian shares traded broadly weaker overnight.

Joe Biden’s stimulus plans appear to face being watered down to appease lawmakers on the Republican side, with the president saying he’s open to narrowing eligibility for the $1,400 stimulus cheques for every American that form the centrepiece of the package. This should help the deal get through Congress, but the timing is becoming the issue – more delays on delays in the vaccine rollout are not supportive of risk appetite. Moreover, it’s becoming clear that governments are not going to lift restrictions as quickly as they might due to fears about mutations and vaccine delays.

The EU has levelled criticism at AstraZeneca over vaccine supply shortages and Brussels is tightening exports of vaccines produced in the bloc. The UK Minister for Covid Vaccine Deployment Nadhim Zahawi said on Tuesday that vaccine supplies were «tight». EU health commissioner Stella Kyriakides said the EU would «take any action required to protect its citizens».  Spats over vaccine supply and delivery take the place of fishing quotas and level playing fields, underlining the new rivalry that exists between Britain and Europe.

Despite a report indicating that global trade volumes have recovered to pre-pandemic levels, the rotation-reopening plays are unwinding. Airline shares are down another 2-3% this morning. US 10-year yields retreated to 3-week lows and the dollar is finding bid again. Gold remains steady in the range around the $1,850/oz region. The problem is that investors have loaded up pretty heavily on the re-opening bets in the wake of the vaccine announcements last November, so concerns about the pace of the rollout of vaccines, the easing of restrictions and a return to normality could see a further unwind of this trade in the near-term. As I said last week, whilst monetary policy support, pro-cyclical stimulus and vaccines create tailwinds for global markets, a 5%-10% correction in equity indices is not out of the question in Q1.

Don’t stop me now: GameStop shares went on a gamma and short squeezing rollercoaster yesterday. Shares, which had jumped 51% to $65 on Friday, opened at about $85 and then surged to $160 before closing up 18% for the day at $76. A wild ride, and there will be others like it, if the Reddit /r/wallstreetbets message board is anything to go by. After-hours trading indicates it will open up another +15% higher, but who knows where this stock is heading now.  The rally came despite a double-downgrade from Telsey Advisory Group, which slashed its rating on the stock to underperform from outperform, noting a basic disconnect between fundamentals and valuation. “The sudden, sharp surge in GameStop’s share price and valuation likely has been fuelled by a short squeeze, given the high short interest, and, to a lesser degree, speculation by retail investors on forecasts for the new gaming cycle and the involvement of activist RC Ventures,” the analyst note said.

Rolls-Royce said expected cash outflows this year would be £2bn, more than double consensus forecasts. Full-year 2020 free cash outflow was in line with previous guidance, whilst year-end liquidity stood at around £9 billion, at the upper end of the previously guided range, with £1bn cash cost savings from ‘mitigating actions’. Shares fell over 9% in early trade. Rolls has been battered by the pandemic as civil aviation activity has been smashed, but management expect to turn cash flow positive in the second half of the year as widebody flying hours pick up. The question is whether the pace of vaccine rollout and government easing of restrictions matches their expectations.

JD Sports confirmed it is looking at funding options to exploit opportunities in the retail space created by the pandemic. Following a Sky News report indicating the company is looking at a £400m share sale, the board confirmed this morning that it is exploring ‘additional funding options with a view to increasing its flexibility to invest in future strategic opportunities and that this may involve a non-pre-emptive equity placing’. Recent high street troubles have shown there are opportunities to build out scale – e.g. the recent bidding for the carcasses of Arcadia, Debenhams. Meanwhile, JD Sports has shown an appetite for deals with its recent acquisition of US retailer Shoe Palace.

Travel stocks slip on lockdown ad infinitum + Apple, Tesla earnings previews

European stock markets are a flattish, unexciting mixed bag in early trade on Monday as they continue to tread the range of the last fortnight without too much conviction. Shares in Frankfurt nudged up as London slipped a fraction. US stocks closed down on Friday after a choppy week. Asian shares were broadly higher overnight.

Democrats are hopeful of making swift progress on stimulus, but the impeachment proceedings of Donald Trump could see bipartisan support struggle. The pandemic continues to eat away at confidence – now the British government is said to be considering extending lockdown for another 3 months beyond Easter. This is to get the second dose of vaccines to all over-50s, but just extends the pain for everyone, particularly travel stocks as it’s starting to appear as though as another peak summer season will be affected by Covid restrictions. IAG, Ryanair and EasyJet declined 6-7% in early trade. It’s lockdown ad infinitum: the government continues to act as the executive branch of the NHS. I’m reminded of a Malcolm X quote, which goes something like ‘nobody can give you freedom, you take it’.

Physical stores are not included: Boohoo is acquiring the intellectual property of Debenhams for £55m. A once-mighty high street reduced to a carcass being picked over by some of the worst in fast fashion is an ignominious end. Shares in Boohoo rose over 3% in early trade with the acquisition of the Debenhams name likely to increase the retailer’s online footprint and customer base. Meanwhile, Asos shares also climbed more than 3% as it confirmed it is talks with Arcadia over the acquisition of the Topshop, Topman, Miss Selfridge and HIIT brands. Hardly a new point, but the pandemic is accelerating the collapse in the high street and massive consolidation in the sector.

Elsewhere, the dollar is on the back foot again after staging a meek rally on Friday. GBPUSD advanced beyond 1.37 again but has yet to make a dent at the 3-year highs hit last week. Gold is reasonably steady in the middle of the recent range at $1,850 with the 50-day SMA at $1,860 acting as near-term resistance after the failure to clear the 21-day SMA at $1,875 last week. Key support converges in the $1,800-$1,820 area, with a break here calling for retest of the $1,764 lows and Fib level. Bitcoin trades higher at $33k after testing lows under $29k on Friday after a horror show of a week.

Earnings season shifts into top gear this week with several large cap tech giants reporting alongside a number of Dow components. So far, Bank earnings have been positive with trading revenues and lower provisions for bad loans boosting EPS. Meanwhile, a stunning rally for Netflix shares as net subscriber additions topping estimates for the fourth quarter drove the Nasdaq to a new record. All three major indices have hit record highs off the back of a good string of earnings and hopes for a major stimulus package from Washington.   

Apple preview

Look for Apple to beat fairly low estimates with holiday spending on the new iPhone and other devices likely to support a decent Q1. Chinese demand is holding up and shares had come into earnings season a little off the Dec peaks, though they are now at fresh records on expectations of a strong quarter. Earnings per share expected at $1.40 based on 30 analyst estimates, whilst Apple seems set to deliver its first $100bn quarter in sales. Consensus revenue estimates sit at $102.6bn, which would imply 12% year-over-year growth, the fastest in two and a half years.

Q4 earnings missed expectations but we’ve got two big firsts to look at in Q1: the first full quarter of iPhone 12 sales and Apple One subscription services. The iPhone 12 launch quarter will be probably the best for a new iPhone in several years off the back of consumer interest in 5G. On the whole, I’d expect consumer discretionary income trends to be supportive with consumers in Europe, North America and elsewhere foregoing travel/experiences for tech devices.

Look for more growth in the Services division, which expanded 16% in 2020. In addition to being the first full period reflecting iPhone 12 sales, the fiscal Q1 earnings will be the first to really test the power of the Apple One bundles. Growth in personal computer sales driven by pandemic trends such as work from/stay at home is set to boost Mac and iPad sales. I’d also anticipate strength in the Wearables, Home and Accessories division due to pandemic consumer trends.

Morgan Stanley, in a note raising its price target on the stock to $152 from $144, wrote that it is adding to positions “ahead of a likely record quarter,” as it notes likely “strength across its portfolio of Products & Services”. MS expects a “strong launch quarter” for the new iPhone 12 and continued strength from work from home trends and App store engagement. Having rerated over the last two years the stock now trades more in line with tech peers at around x33 2021 earnings. Material upside for the stock now seems more earnings dependent but EPS can continue to outperform and Services revenues can continue to support the multiple expansion that has taken place.

Tesla preview

Tesla comes into its fourth quarter earnings with a lot to live up to after the stock price exploded in the last two months. Shares have more than doubled in value from ~$400 to ~$850 since November amid a colossal momentum trade that means TSLA carries a market cap of $800bn. Revenue is expected at $10.3bn with EPS estimated at $1.01. Whilst investors are increasingly confident Tesla will continue to generate profits and free cash flow is going to improve, justifying these kind of valuation multiples is tough and will depend on a lot more than vehicle sales – ongoing software subscription revenue streams – some of which are potentially 100% margin – will be key.

Earlier this month, Tesla reported Q4 deliveries hit 180,750 units, which brought 2020 total deliveries to 500k, exceeding some rather conservative estimates by analysts and hitting Elon Musk’s target. Meanwhile, reports indicated that Tesla has commenced deliveries of its locally-made Model Y crossover in China. Investors will be looking at guidance on deliveries for 2021 – current consensus envisages ~50% growth to 780,000 units. Tesla also announced an equity distribution agreement to sell up to $5bn in common stock in future through an ‘at the market’ programme. Tesla did something similar in September this latest announcement suggests the company will continue to use its high share price to raise fresh capital via low-cost equity offerings to fund growth in a kind of virtuous circle.

However, traditional OEMs are catching up. We note the recent rallies for Ford and GM as EV enthusiasm among the old-world carmakers picks up. And market share remains a problem for Tesla – its Model 3 was the fourth-best selling pure EV in Europe in November, with Renault, VW and Hyundai outstripping the company for sales in the continent. November saw a 198% rise in hybrid and pure EV registrations vs a 14% decline overall for new car registrations. But while the market is expanding, local OEMs are holding the line against Tesla despite all the hype.

US earnings Calendar

Mon 25 Jan Tue 26 Jan Wed 27 Jan Thu 28 Jan Fri 29 Jan
  3M Co (MMM) AT&T (T) Mastercard (MA) Caterpillar Inc (CAT)
  American Express (AXP) Automatic Data Processing (ADP) McDonald’s Corp (MCD) Chevron (CVX)
  General Electric (GE) Boeing (BA) Mondelez (MDLZ)  
  Johnson & Johnson (JNJ) Apple Inc (AAPL) Visa Inc (V)  
  Verizon Communications Inc (VZ) Facebook (FB)    
  Advanced Micro Devices (AMD) Tesla Inc (TSLA)    
  Microsoft Corp (MSFT)      
  Starbucks Corp (SBUX)      

Adelanto semanal: reunión de la Fed, PIB estadounidense y resultados de los gigantes tecnológicos

En la semana entrante, la Reserva Federal celebrará su primera reunión de este año, con muchas caras nuevas, pero con un improbable cambio importante en su política. También se publicará el PIB del país relativo al 4T de 2020. Según se deduce de los pronósticos, las perspectivas en torno a este dato no son unánimes, pero sí optimistas. Por último, los gigantes tecnológicos (también conocidos como «big techs») abanderarán a las empresas de gran capitalización en la nueva tanda de publicaciones de la temporada de ganancias.

Reunión y conferencia de prensa del FOMC

La primera reunión de 2021 de la Reserva Federal tendrá lugar la semana que viene marcada por los planes de mayor estímulo del recién investido presidente Joe Biden, así como por el llamamiento de la nueva Secretaria del Tesoro, Janet Yellen, para se «piense a lo grande» en cuanto a la política fiscal. La cifra a la que se calcula que ascenderá el estímulo económico adicional es de 1,9 billones de dólares, mientras EE. UU. intenta apuntalar su economía frente al continuo azote de la Covid-19.

Este mes de enero, se ha producido la rotación de votos con cuatro nuevos presidentes regionales de la Fed con derecho a voto, una rotación que podría apuntar a un sesgo más acomodaticio en 2021. En esta rotación, los presidentes Mester (conservadora), Kashkari (moderado), Kaplan y Harker (neutrales) cederán sus derechos de voto a Evans, Bostic (ambos moderados), Daly y Barkin (neutrales).

Aunque los nuevos miembros despiertan cierto interés, la Fed no virará de rumbo: su presidente, Jay Powell, dejó claro que no es el momento de hablar de reducir las compras de bonos, aunque algunos legisladores apuntan a que sí se podría abordar a finales de 2021.

Según las actas de la reunión de la Fed del pasado diciembre, los legisladores consideran que los tipos se mantendrán en el rango objetivo actual de entre el 0 y el 0,25 % hasta 2022, con una estimación a largo plazo del 2,5 %. No se prevé un aumento de los tipos este año; parece más probable que se mantenga el statu quo. Según el presidente de la Fed de Atlanta, Bostic, mucho tendría que ocurrir para que se dé ese escenario.

Existe la posibilidad de que aumenten los tipos en 2023 o, como muy pronto, en el segundo semestre de 2022. Se contemplarán tres puntos principales: la salud de las pequeñas empresas; el efecto de los programas de préstamos de la Fed —la mayoría de los cuales se cerraron a finales de 2020—; y las pérdidas de puestos de trabajo temporales frente a los fijos. No obstante, por encima de estos aspectos prevalecerá la respuesta continuada ante la pandemia de Covid-19.

A día de hoy, parece que la Fed fundamentalmente seguirá el mismo rumbo y se comprometerá a seguir la política promulgada durante 2020.

Publicación de los últimos datos del PIB estadounidense

Al igual que la práctica totalidad de las economías desarrolladas de todo el mundo, la pandemia de Covid-19 ha vapuleado a EE. UU. El próximo jueves, conoceremos la lectura previa de las estadísticas del PIB del 4T y el panorama es, cuando menos, caótico: hay tantas valoraciones del PIB como modelos de predicción.

Según el modelo de predicción GDPNow de la Fed de Atlanta, en su publicación del 15 de enero, el crecimiento anualizado del PIB es del 7,4 % en el 4T, aunque este dato surgió tras la revisión a la baja de la previsión del 8,7 % del 8 de enero. El modelo Nowcast de la Fed de Nueva York apunta a un crecimiento del 2,5 %.

El crecimiento del PIB dependerá por completo de qué sectores económicos puedan recuperarse antes. El Departamento de Comercio de EE. UU. declaró recientemente que el consumo privado —el principal motor económico del país— se había revisado ligeramente al alza, junto con las inversiones en capital fijo de las empresas. Sin embargo, estos datos se vieron atenuados por la caída de las exportaciones. El sector servicios —que acumula el 61 % del consumo privado— se contrajo un 17 % interanual en el 3T de 2020, ¿se recuperará? Lo sabremos con el tiempo.

Temporada de ganancias: Apple, Microsoft y Facebook abanderan las empresas de gran capitalización

La temporada de ganancias continúa en Wall Street. Esta semana, los protagonistas son los gigantes tecnológicos. Según parece, estas empresas no cesan de crecer, ya que los confinamientos han ayudado al sector. ¿Los resultados confirmarán este escenario?

Este podría ser el primer trimestre de los 100 000 millones de dólares para Apple, con el BPA del consenso aumentando un 12 % interanual hasta los 1,40 $. La temporada de compras navideñas entra de lleno en el periodo del informe de resultados del 1T de Apple y, con una multitud de iPhone 12 en el mercado —suficiente para justificar el aumento del 30 % en la producción este trimestre—, los indicadores que apuntan a unos extraordinarios beneficios de los gigantes tecnológicos de California son bastante sólidos.

Microsoft se ha erigido como ganador: si usted trabaja desde casa, es probable que haya tenido que lidiar con Microsoft Teams, actualmente el software de comunicación de facto preferido por empresas de todo el mundo.

Las soluciones de informática en la nube están ayudando a Microsoft a alcanzar ingresos trimestrales históricos. Gracias a la mayor consolidación de productos como Azure, GitHub, SQL Server o Windows Server, los servicios comerciales en la nube han generado un 31 % más de ingresos interanuales en el último trimestre, alcanzando los 15 200 millones de dólares. Si además tenemos en cuenta el resto de su software orientado a la productividad (a saber, Office, Teams, etc.), probablemente los ingresos de Microsoft asciendan a los 40 200 millones de dólares en el 1T de 2021.

La reputación de Facebook se ha visto ligeramente mermada en los últimos meses. La difusión de fake news y discursos de odio en la plataforma es una de las principales quejas que se han elevado a la empresa.

A pesar de ello, Facebook afirmó que el número de usuarios activos diarios creció un 12 % en el último trimestre hasta los 1820 millones, mientras que los mensuales aumentaron en la misma proporción hasta los 2740 millones, o lo que es lo mismo, poco más de una cuarta parte de la población mundial. Asimismo, los ingresos de publicidad han repuntado un 22 % interanual, aun con el boicot por parte de un millar de importantes anunciantes que sufrió la empresa.

A continuación, encontrará toda la información acerca de los resultados de las empresas de gran capitalización que se publican esta semana.

Major Economic Data 

Date  Time (GMT)  Currency  Event 
Mon Jan 25       
       
Tue Jan 26  7.00am  GBP  Unemployment Claims 
       
  3.00pm  USD  CB Consumer Confidence 
       
Wed Jan 27  12.30am  AUD  CPI q/q 
       
  3.30pm  USD  US Crude Oil Inventories 
       
  7.00pm  USD  FOMC Statement 
       
  7.00pm  USD  Federal Funds Rate 
       
  7.30pm  USD  FOMC Press Conference 
       
Thu Jan 28  1.30pm  USD  Advanced GDP q/q 
       
  1.30pm  USD  Advanced GDP Price Index q/q 
       
  3.00pm  USD  CB Leading Index m/m 
       
  3.30pm  USD  US Natural Gas Inventories 
       
Fri Jan 29  8.00pm  CHF  KOF Economic Barometer 
       
  1.30pm  CAD  GDP m/m 
       
  2.45pm  USD  Chicago PMI 
       
  3.00pm  USD  Pending Home Sales m/m 

 

Key Earnings Data 

Date  Company 
Mon 25 Jan  NIDEC  
  Philips 
  Kimberely-Clark 
  ADM 
  Graco Inc. 
  Brown & Brown 
  Equity Lifestyle Properties 
   
Tue 26 Jan  Microsoft 
  Visa 
  Johnson & Johnson 
  LVMH 
  Verizon 
  Novartis 
  NextEra Energy 
  Texas Instruments 
  Starbucks 
  AMD 
  United Technologies 
  American Express 
  General Electric 
  3M 
  Lockheed Martin 
  Canadian National Railway Co. 
  UBS 
  Capital One 
  Prologis 
  Rockwell Automation 
  PACCAR 
  D.R. Horton 
  Maxim Integrated Products 
  Epiroc 
  LG Household & Health Care 
  EQT AB 
  SGS SA 
  Varian 
  Boston Properties 
  Jacobs 
  Nitto Denko Corp. 
  Metro Inc. 
  C.H. Robinson 
  Disco Corp. 
  F5 Networks 
  W.R. Berkley 
  OBIC 
   
Wed 27 Jan  Apple 
  Tesla 
  Facebook 
  AT&T 
  Abbott Laboratories 
  Boeing 
  ServiceNow 
  Stryker 
  Lam Research 
  Anthem 
  Shin-Etsu Chemical Co. 
  Blackstone 
  Automatic Data Processing Inc. 
  Crown Castle 
  Norfolk Southern Corp. 
  Edward Lifesciences Corp. 
  FANUC CORPORATION 
  MediaTek 
  Lonza AG 
  CPR 
  General Dynamics 
  TE Connectivity Ltd 
  Las Vegas Sands Corp. 
  Amphenol Corp. 
  ITC Ltd. 
  Xilinx Inc. 
  V.F Corp 
  Corning Inc. 
  Axis Bank 
  Ameriprise Financial Inc. 
  Hormel Foods Corp. 
  Teradyne 
  Nasdaq Inc. 
  Nomura Research Institute 
  Essity AB 
  Cheil Industries 
  MarketAxess Holdings 
  Hologic 
  Omron  
  United Rentals 
  Rollins Inc. 
  PTC Inc 
  Duke Realty 
  Teledyne Technologies 
  Raymond James Financial 
  Cree Inc. 
  Packaging Corp. of America 
  Whirlpool 
  Textron 
  MKS Instruments 
  Hess Corp. 
   
Thu 28 Jan  Samsung 
  Mastercard 
  Comcast 
  Danaher 
  McDonald’s 
  Diageo 
  Mondelez 
  Altria 
  Sherwin-Williams 
  Air Products & Chemicals 
  Atlassian 
  Northrop Grumman 
  HOYA 
  Dow 
  Walgreens Boots Alliance 
  T. Rowe 
  Xcel Energy 
  ResMed 
  Fujitsu 
  Hyundai 
  Stanley Black & Decker 
  Southwest Airlines 
  Skyworks Solutions 
  McCormick & Co. 
  Rogers Communications 
  Arthur J. Gallagher & Co. 
  Canon 
  UPM-Kymmene 
  Dover Corp. 
  Advantest 
  Nucor 
  Western Digital 
  Celanese Corp. 
  NVR Inc. 
  Principal 
  Eastman 
  PulteGroup 
  WestRock Co. 
   
Fri 29 Jan  Eli Lilly 
  SAP 
  Honeywell 
  Keyence 
  Charter Communications 
  Caterpillar 
  SK Hynix 
  Colgate-Palmolive 
  M3 
  Atlas Copco 
  Ericsson 
  Johnson Controls 
  H&M 
  Phillips 66 
  BBVA 
  Simon Property Group 
  Astellas Pharmacy 
  Simens Gamsea 
  Komatsu 
  LyondellBasell 
  WeyerHauser 
  LG Electronics 
  Synchrony Financial 
  Church & Dwight Co. 
  Sun Pharmaceutical 
  SG Holdings 
  Telia 
  CAIXABANK 
  NEC 
  Svenska Cellulosa AB 
  Booz Allen Hamilton 

 

 

 

Big tech weighs, Natwest rounds off solid quarter for UK banks

European shares once again fell and then tried to come off the flatline in early trade on Friday after another down day in the previous session, but the mood is pessimistic.

The FTSE 100 is trading above 5,500 but with little support under 5,400 we could yet see a retest of the March lows at 5,000-4,800.

Wall Street rallied as the bulls put in a solid defence with the S&P 500 recovering 3,300. Big tech earnings beat expectations yet shares fell after hours and this weighed on the futures, which are pointing to a weak open for the US market. Bear in mind also month-end flows which are helping muddy the waters.

The US dollar surged with US yields moving higher yesterday. DXY advanced to near-term resistance at the top of the October range at 94. WTI (Dec) sank amid the broad risk-off tone yesterday and demand fears were to the fore.

US jobless claims fell and GDP in the world’s largest economy rebounded a little more than expected in the third quarter, but none of this matters much since the market is entirely focused on the spread of new cases and lockdown measures.

The annualized 33.1% bounce in the third quarter masks the fact the economy is 15% smaller than it was before the pandemic hit. The pace of the recovery is slowing in the fourth quarter albeit it remains on a sure enough footing compared to Europe (lockdowns to blame there), whilst the glow from the $600-a-week stimulus cheques (which stopped at the end of July) is dimming quickly. And whilst we believe new stimulus measures are coming over the hill, the longer the delay the tougher it becomes for Main Street.

The European Central Bank (ECB) didn’t do anything but sounded more dovish and signalled it is ready to act in December by pumping up its emergency quantitative easing programme.

In fact, there was overall a surprisingly strong pre-commitment to taking additional easing measures in December. It’s all but a down deal now that France and Germany have locked down and the economy is heading for another recession.

The euro fell, weighed down by the dollar’s advance but also because of the ECB’s stance. Christine Lagarde said staff were working on recalibrating all instruments, which means even interest rates could be cut further in addition to expanding QE envelopes.

EURUSD dropped to take a 1.16 handle but found support at the 100-day SMA at 1.1650. Cable traded weaker, briefly taking a 1.28 handle but caught some bid around the 1.29 level to steady the ship. 100-day SMA at 1.2877 offers the near-term support under here.

More upbeat numbers from the high street banks with Natwest this morning reporting Q3 operating profit more than twice market estimates at £355m vs ~£130m expected.

Impairments were half the market expectations at £254m vs over £550m expected. CET1 very strong at 18.2%, net interest margin down 2bps to 1.65%. A good set of numbers to round off a strong performance by the UK banks but doubts remain about a potential increase in impairments down the road, weak economic growth in the UK, Brexit challenges, and the threat of negative rates eating away at margins.

Big tech reported earnings that showed its resilience to the virus but also betrayed just how richly priced these stocks are in the wake of the pandemic. With the exception of Google parent Alphabet, shares fell across the board after hours, which weighed on US futures overnight.

Alphabet shares rose over 6% in after-hours trading as earnings indicated a bounce back in the search business. EPS of $16.40 beat the $11.29 expected, on revenues of $46.17bn. Advertising revenue rose to $37.10bn, compared to $33.80 bn in the year-ago quarter. YouTube +32% was notably strong. Alphabet will start breaking out its cloud earnings performance from the next quarter.

Amazon posted a blowout third quarter of revenue growth and is poised to capitalise on a record Christmas shopping season. Net income rose to $6.3bn vs $2.1bn in the same quarter a year before despite spending significant amounts on coping with the virus.

In total, Amazon has incurred more than $7.5bn in incremental Covid-related costs in the first three quarters of 2020, and expects to incur approximately $4bn in Q4, CFO Brian Olsavsky said. AWS net sales rose 29% to $11.bn. Shars slipped almost 2% in the after-hours market.

Facebook shares fell 3% after-market as it posted a decline in North American users and signalled more uncertainty ahead. Revenue +22% to $21.47bn was a beat to expectations, whilst net income was +29% to $7.85bn. Whilst the shift offline to online among business and retail is a powerful tailwind for the advertising earnings, shares priced for lots of growth are just as sensitive to user numbers and the drop in core US/Canada users is a concern.

Similarly, Twitter shares got whacked after hours as it too posted a disappointing user growth story. Revenues rose 14% to $936m in the quarter, but the +1m gain on daily active users to 187m was short of the 195m expected.

Finally, Apple shares fell 5% after hours as a 20% decline in iPhone revenues weighed on the stock, whilst the lack of any guidance for 2021 was taken as a negative.

Whilst Mac and iPad sales rose strongly over the company’s fiscal fourth quarter, it was not enough to offset the drop in iPhone sales. However, with the quarter covering the period immediately before the launch of the iPhone 12, we would think that weakness in iPhones will prove fleeting.

Mac revenues +28% to $9bn and iPad sales +46% to $6.8bn partially offset iPhone’s –20.7% to $26.44bn. EPS of $0.73 beat the $0.70 expected, whilst overall group revenues rose 1%. Services continues to do well, with revenues +16.3% to $14.55bn.

Uncertainty around the virus means Apple continues to not offer guidance, however Tim Cook said he was optimistic about the iPhone 12 and is ‘confident’ Apple will grow in Q1 2021. Ecosystem is still the biggest draw and should support the multiple expansion.

CySEC (UE)

  • Los fondos de los clientes se conservan en cuentas bancarias separadas
  • Programa de Indemnización (FSCS) de hasta 20.000 EUR
  • Cobertura del seguro de 1.000.000€**
  • Protección de saldo negativo

Productos

  • Las operaciones con pares de divisas y CFD conllevan un gran riesgo de sufrir pérdidas
  • Gestión de acciones
  • Quantranks

Markets.com está administrada por Safecap Investments Limited. Autorizada por la CySEC con número de licencia 092/08 y por la FSCA con número de licencia 43906.

FSC (RESTO DEL MUNDO)

  • Los fondos de los clientes se conservan en cuentas bancarias separadas
  • Verificación electrónica
  • Protección de saldo negativo
  • Cobertura del seguro de 1.000.000$**

Productos

  • Las operaciones con pares de divisas y CFD conllevan un gran riesgo de sufrir pérdidas
  • Creador de estrategias

Markets.com, administrada por Finalto (BVI) Limited (“Finalto BVI”) Regulated by the BVI Financial Services Commission (‘FSC’) under licence no. SIBA/L/14/1067.

FCA (Reino Unido)

  • Los fondos de los clientes se conservan en cuentas bancarias separadas
  • Programa de Indemnización para los Inversores (ICF) de hasta 85.000 GBP
    * en función e los criterios y la idoneidad
  • Cobertura del seguro de 1.000.000£**
  • Protección de saldo negativo

Productos

  • Las operaciones con pares de divisas y CFD conllevan un gran riesgo de sufrir pérdidas
  • Cotizaciones de spread
  • Creador de estrategias

Markets.com, administrada por Finalto Trading Limited Regulada por la Autoridad de Conducta Financiera («FCA») con número de licencia 607305.

ASIC (Australia)

  • Los fondos de los clientes se conservan en cuentas bancarias separadas
  • Verificación electrónica
  • Protección de saldo negativo
  • Cobertura del seguro de 1.000.000$**

Productos

  • CFD

Markets.com, administrada por Finalto (Australia) Pty Limited. Tiene el número de Licencia de Servicios Financieros Australianos 424008 y está autorizada para prestar servicios financieros por la comisión del Mercado de Valores de Australia («ASIC”).

Al seleccionar uno de estos reguladores, se mostrará la información correspondiente en todo el sitio web. Si desea ver información para otro regulador, selecciónelo. Para obtener más información, haga clic aquí.

**Sujeto a los Términos y condiciones correspondientes. Consulte la política completa para obtener más información.

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Share Dealing in the Markets Group is only offered by Safecap Investments Limited regulated by CySEC under license number 092/08. We are now re-directing you to Safecap’s website.

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