Stock Futures Lower After Amazon Earnings Disappoint
U.S. stock futures edged lower as earnings from Amazon (NASDAQ: AMZN) were soft in what is otherwise a strong second-quarter earnings season. Despite the Commerce Department saying economic growth in the U.S. decelerated somewhat in the second quarter, the stock market held up on Thursday.
“The economic data today was not bad. It was in between that not too good, not too hot in order to bring the Fed to the table,” Meghan Horneman, director of portfolio strategy at Verdence Capital Advisors. “But when you look at it, with over 6% economic growth, that’s fantastic. That’s a very good number.”
From the stock futures, investors could expect stocks to take a breather in the stock market today. The recent direction of the stock market might suggest an uptrend in line, but it’s still prone to choppy behavior. Also, China’s crackdown continues to unsettle many investors, looking at the earlier trading in Hong Kong today. The Dow, S&P 500, and Nasdaq 100 futures were all in the negative territory, moving 0.27% and 0.63% and 1.06% lower respectively at 6:25 a.m. ET.
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Amazon Q2 Revenue Falls Short of Estimates
Amazon.com stock is trading more than 6% lower in pre-market trading today after the company fell short of revenue estimates. From the latest earnings report, Amazon’s revenue came in 27% higher year-over-year to $113.08 billion. While that’s an impressive number, it is still a significant slowdown from the same period in the previous year. Adding salt to the injury is the weak third-quarter guidance from the company.
For the third quarter, the e-commerce giant said it expects to book sales between $106 billion and $112 billion. That represents a growth of 10% to 16% compared to the same period last year. That’s well below consensus estimates of $119.2 billion. In addition, the company also said its operating profit in the coming quarter will be in the range of $2.5 billion and $6 billion. The guidance came after similar warnings from Facebook (NASDAQ: FB) and Apple (NASDAQ: AAPL), whereby both companies said revenue growth rates would decelerate from pandemic highs.
While Amazon’s second-quarter sales disappointed, earnings trounced expectations, helped by its non-e-commerce segments. Notably, Amazon Web Services (AWS) grew its revenue by 37% in the second quarter. That’s much faster than the 32% growth recorded in the first quarter. Following the highly profitable cloud computing segment, Amazon’s “other” unit, which includes advertising and other services, grew revenue 87% year-over-year during the period.
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Pinterest Gets Pinned
Pinterest (NYSE: PINS) stock is trading more than 19% lower in pre-market trading today after the company reported its second-quarter results. The social media platform posted 454 million monthly active users, down more than 5% from the 478 million the company reported in April. The image-sharing platform said that as of July 27, its U.S. monthly active users (MAUs) have declined by approximately 7% year-to-year. But global MAUs have grown approximately 5% over the same period.
“Since mid-March, however, we believe engagement on Pinterest was disproportionately lower as people began spending more time socializing with friends outside their homes, eating in restaurants, and generally participating in activities that are not our core use cases,” the company said in a letter to shareholders.
Social media stocks such as Twitter (NYSE: TWTR) and Snap (NYSE: SNAP) saw a surge in digital ad spending and user growth as lockdowns accelerated the shift to e-commerce. Just like with Pinterest, analysts are also concerned if those gains are here to stay. Could this present an opportunity to buy on dips?
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Robinhood (HOOD) Stock Price Falls After IPO
Robinhood (NASDAQ: HOOD) stock closed down more than 8% in its debut on Thursday, after pricing near the low end of its initial public offering (IPO) range. Clearly, the company wanted to make history with its IPO, and now it has, but for the wrong reason. For companies who raised as much or more cash as Robinhood, it was a disappointing debut. After all, we are talking about the company that brought the markets to the masses.
Vlad Tenev, who co-founded Robinhood, took the decline on the chin. He argued that market gyrations can make stocks go up or down. He said “We’re building a long-term business, so you have to ignore these short-term fluctuations… We feel very well-positioned with this company to keep delivering value to our customers.”
The Silicon Valley startup allocated more than a third of its shares to its users. Robinhood priced its initial public offering at $38 per piece, at the low end of expectations. The company sold 52.4 million shares, raising close to $2 billion. Unlike many recent IPOs, Robinhood was actually profitable last year. The online brokerage generated a net income of $7.45 million on net revenue of $959 million in 2020. That compares with a loss of $107 million in revenue of $278 million in 2019.
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Oil Majors Report Q2 Earnings Today
After a barrack of tech earnings earlier this week, a lot of the attention today will be on the energy and industrial sectors. Admittedly, some major tech companies have warned about a possible slowdown in growth. Nevertheless, most of the earnings reported so far have topped estimates. According to FactSet data, 88% of S&P 500 companies have reported a positive EPS surprise, while 86% have reported a positive revenue surprise. While this is good news for growth investors, there is better news for oil and gas investors.
The long-suffering sector is on course for a repeat of a stellar first quarter by posting blowout earnings. That is in large part due to an increase in oil and gas prices. Therefore, it will be interesting to see the numbers in the earnings reports from ExxonMobil (NYSE: XOM) and Chevron (NYSE: CVX) this morning. There are also notable names from other sectors that are reporting today. They include Procter & Gamble (NYSE: PG), Caterpillar (NYSE: CAT), and Abbvie (NYSE: ABBV), just to name a few.
There is no doubt that growth concerns remain with the Delta variant continuing to be on the minds of many. When the broad stock market took a brief hit, many were quick to blame the virus. However, the vast majority of companies have posted second-quarter earnings results that topped estimates. These results, in tandem with ongoing support from monetary policymakers, should help keep the stock market chugging along.
