Futures hit by tech weakness, Alphabet falls, AMD tumbles, Uber down, Disney fizzle
The full interview with Barry Schwartz of Baskin Wealth is up on YouTube. He mounts a great defense of Alphabet which is under pressure this morning. Tomorrow we’ve got Martin Pelletier of TriVest Wealth on the show. To see who is coming up click here and submit your questions.
Pain points: Futures are weighed down by disappointing tech earnings and negative headlines around China. Shares of Google, AMD and Uber are all lower in the pre-market after earnings disappointed (more on that below). Meanwhile, Apple is down 3% in the pre-market as Bloomberg is reporting it could face an antitrust probe by China into its App Store practices and fees. It is another sign the temperature is increasing between China and the US. Who knows how much of this is just bluster, I read that China was also preparing antitrust claims against Alphabet even though Google hasn’t been available there since 2010! The TSX managed to eke out a modest gain yesterday and could find support as all these tensions are supporting gold prices. Gold is hitting another fresh record high. This morning we have 36 S&P 500 companies reporting including Disney and Uber (more on that below) and four companies on the TSX including Suncor tonight. In Canada, we will watch for reaction to Allied Properties earnings (missed), ATS (missed), Canaccord (miss on elevated one-time expenses) and Dynamite (which pre-announced 9.5% sales growth vs 7.6% expected).
Tech wreck: Shares of Alphabet (-7.5%) are sharply lower after revenue missed expectations while expense growth came in way above expectations. The results themselves were not too shabby. Search growth reaccelerated and cloud growth increased 30%. However, cloud growth decelerated from the last quarter and was lower than expected. Investors appear concerned about the plans to spend $75 billion this year compared to $60 billion expected. Citi says this shouldn’t bother investors because it will help to grow the slowing cloud business. “But perhaps the key here is that management guided ’25 capex to ~$75B (and $16-$18B in 1Q) driven by ongoing tech infrastructure investments (servers, data centers, and networking) to alleviate capacity constraints as Google builds capacity to satisfy growing demand (which likely led to Cloud’s decelerating growth in 4Q),” wrote Citi’s Ronald Josey.
Distant second: AMD is getting whacked in the pre-market (-10%) despite better profit than expected. The rub is that data centre revenue came in softer. AMD is viewed as a distant second to Nvidia so the fact that the part of their business that should be benefitting from AI decelerated is giving investors pause. Morningstar and Citi’s Christopher Danely downgraded AMD. Danely’s downgrade is due to slowing AI growth. AMD has massively underperformed Nvidia which might make for an awkward family reunion as the CEOs of the companies are distant cousins.
Road to nowhere: Shares of Uber are down 10% even as the CEO boasts this was the “strongest quarter ever.” Sales increased 20% which was more than expected but operating income disappointed and its forecast for the next quarter was a bit light. Shares of Uber have been stalled, barely up 1% over the past year. Dan Ives at Wedbush says this is the opportunity. “…We view the recent dislocation in shares as unwarranted for a company demonstrating strong fundamentals, with top-line growth in the mid-teens and adj. EBITDA set to grow over +30% Y/Y in each of the next two years,” he wrote in a note to clients.
Tough crowd: Shares of Disney are actually dipping in the pre-market despite quarterly results coming in higher than expected. The media conglomerate and peddler of childhood dreams reported better than expected profit driven by the box office smash hit Moana 2. The wrinkle in the results is that Disney+ subscribers fell modestly and the company said it expects a modest dip in subscribers in the second quarter as well. Clearly a troubling trend when Netflix just reported a monster gain in subscribers.
