Meta & Microsoft fail to impress, Peloton pops, oil stocks in focus, the China problem
Happy Halloween! Kids were so excited they woke up three times last night. So I’ve got a jump start on my walking dead costume this morning.
Spooky: Futures are down sharply this morning after tech earning fail to impress (more on that below). We just got a read of the Fed’s preferred inflation gauge which showed that core inflation didn’t decelerate as expected. The consumer remains strong with personal spending coming in above expectations. Tomorrow we get jobs. Then the election in the US on Tuesday. Followed by the Fed’s rate decision Thursday. What a calendar. Tonight we get Apple and Amazon
Trick: Shares of Meta and Microsoft are down despite beating earnings expectations. For Meta this disappointment is around decelerating revenue growth and continued spending plans. Evercore’s Mark Mahaney says the sell off is nothing more than “mild expectations correction.” The stock is trading near all-time highs and Mahaney said there is a lot to like. “We believe META was able to provide several key datapoints on how AI deployments were boosting its business – 8% increase in time spent on Facebook thanks to improvements in AI-driven recommendation,” he wrote. Microsoft is also slipping despite besting expectations and growing its Azure cloud business more than expected (+34%). The concern is the forecast. Microsoft says Azure growth will *only* be 31-32%. So investors being a bit nitpicky here. Uber is getting caught up in the fracas, shares are down more than 5%. Profit hit a record high, but investors don’t like the muted holiday forecast. eBay is also getting whacked (-7%) as its forecast was weaker.
Treat: It’s not all bad out there. Shares of Booking.com are popping after earnings. The owner of Priceline and OpenTable had higher than expected bookings and is poised to open at a record high. Peloton is up 12% right now after tapping a Ford executive to help lead a turnaround. I love a turnaround story as much as the next gal but I have to wonder what a car executive knows about selling an elliptical with an iPad on it. Also, Ford has been a massive underperformer so it’s not like we are moving from success to success. I digress. Peloton has a healthy short position and is a shell of itself from the pandemic. Sometimes that is when the best money is made, just look at Carvana. In Canada, Agnico Eagle could get a bid after profit came in better than expected on higher gold prices and lower costs. The stock is trading at record highs and TD says this is deservedly so. “Agnico remains the lowest cost large cap producer in our coverage universe, with gross margins reaching 63% in Q3,” TD’s Steven Green wrote. I’ll also watch the owner of the Toronto stock exchange. TMX Group put in better results on higher revenue and lower expense growth.
Energized: A bunch of energy stocks are reporting results and it will be interesting to watch the reaction by investors given oil prices are trading below $70/bl and were at $80/bl a couple of months ago. Shares of Conoco Phillips are up in the pre-market after beating profit expectations, raising its dividend, and boosting its buyback. Canadian Natural Resources bested expectations as well helped by strong production and record margins. Cenovus may come under pressure this morning as funds from operations missed expectations on weak Canadian and US downstream margins. Veren, meanwhile, put out another disappointing quarter. Not only did financial metrics miss, but the company also cut its production forecast well below what analysts were modeling.
China problem: Estee Lauder is getting hammered, plunging more than 20% right now. The beauty company is pulling its forecast for the year in part because of weak demand in China. They aren’t the only ones having problems in China. Starbucks, which reported last night, saw sales drop 14% in China. It shows how dire things are, particularly on the high end. Makes me wonder about how successful a company like Lululemon can be in China. It’s their next big growth market, but its hard to find anyone winning there right now.
