Stock Futures Mixed Ahead Of More Earnings
U.S. stock futures appear to be moving sideways after closing higher during the regular trading day on Tuesday. The strong earnings reports from a myriad companies have helped buoy stocks in the stock market despite the ongoing concerns over the coronavirus. But the spread of the Delta variant and a slowdown in the rate of vaccinations are prompting some concern that authorities may tighten restrictions. And that in turn will have an impact on economic reopening.
“Certainly when it comes to the Delta variant, that has been a driver of rates moving lower. And certainly concerns around China have also been a headwind. We do think those are largely driven outside the U.S., so when it comes to domestic factors, domestic growth actually looks fairly solid…. We expect over the long run domestic factors should win out and rates should move higher.“- Stephanie Roth, JPMorgan private bank senior markets economist
The strong earnings from Alibaba (NYSE: BABA) and Lyft (NASDAQ: LYFT) have continued to support the stock market. The real question is, should investors take comfort in the fact that the fundamentals continue to justify these stock prices? Looking at the earnings numbers purely, one can make the argument that the stock market today is not in a bubble. And the profitability shown in the higher growth subset of the tech sector is an encouraging sign. As of 6.34 a.m. ET, Nasdaq futures were moving 0.10% higher. Meanwhile, the Dow and S&P 500, were in the negative territory, moving 0.07% and 0.04% lower respectively.
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Robinhood Stock Skyrockets Higher After Its Soft IPO Debut
There’s no doubt Robinhood Markets (NASDAQ: HOOD) is certainly one of the highly anticipated IPO stocks in the stock market this year. The zero-commission trading platform made its public debut on Nasdaq last week, opening at $38 per share. But what many didn’t expect was that HOOD stock tumbled shortly after trading kicked off. It fell more than 10% during its intraday trading on the day of its listing.
Since then, Robinhood stock struggled to surpass its IPO price, until yesterday. Robinhood stock surged more than 24% on Tuesday and closed at $46.8 per share, with no apparent major news coming out from the company. However, according to Reddit’s wallstreetbets, Robinhood stock has been the second-most discussed name on the popular forum over the past 24 hours. Robinhood Markets has certainly profited off the meme stock movement. The question is, could it turn into a meme stock itself?
“Although we have come to expect 40% surges on the first day of trading, Robinhood talked to a wider swath of investors, including significant retail to push the boundaries on pricing,” Greg Martin of Rainmaker Securities said. “I believe now, the long-term investors who see the incredible long-term value of Robinhood are moving the stock, as the short-term investors have largely fled the stock.”
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Roku Earnings On Tap
Leading streaming-device manufacturer Roku (NASDAQ: ROKU) is slated to report second-quarter earnings after the closing bell today. Investors who are keen on the streaming and advertising spaces would be looking at Roku’s earnings report closely. The company received a fair bit of coverage from analysts due to its expansive software platform. For the uninitiated, Roku’s platform generates most of its revenue from ads and content partnerships.
Not only did its software platform attract viewers, advertisers, and content partners, it also boosted its gross margins. This would allow Roku to sell its devices at lower prices to maintain its competitiveness. Also, the economic reopening also allows the company to benefit from the resumption of video ad campaigns from categories such as travel and restaurants.
The acceleration in growth during the pandemic has certainly pushed ROKU stock sharply higher. And now many analysts are also increasingly optimistic that it will double again in the coming few years. From the first quarter, the number of streaming hours on its platform totaled 18.3 billion. That’s up 49% over the year-ago quarter. One important metric to look at when the company reports today is Roku’s entry into original content. With the company finding ways to increase user engagement, it’s interesting to see if the investment in Roku Originals could eventually pay off.
Lyft Reported Strong Earnings, Uber’s Next
Lyft reported second-quarter earnings on Tuesday, easily topping the top and bottom-line estimates. Revenue for the company came in 125% higher year-over-year to $765 million. Following the revenue beat, the company provided healthy guidance with revenue to come in between $850 million and $860 million. The company said it saw strong demand from riders in July despite an increase in COVID-19 cases. Even though the company hasn’t fully recovered to pre-pandemic levels, the rebound in its ridership is still a positive development for investors.
“It’s a significant milestone for a business and for our industry,” CEO Logan Green said on the company’s earnings call. “Going forward we expect to maintain adjusted EBITDA profitability.”
Uber Technologies (NYSE: UBER) is due to report its earnings after the closing bell today. Judging from Lyft’s quarterly performance, the recovery in the ride-sharing business is picking up steam with the reopening of the economy. But can Uber achieve a similar feat? UBER stocks are down 3% as the company heads toward its second-quarter earnings amid a driver shortage. Analysts are expecting revenue to come in around $3.7 billion with adjusted loss per share around $0.54.
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More Earnings Underway
Expectations for the corporate earnings season are sky-high amid the slew of strong earnings thus far. Admittedly, some major tech companies have warned about a possible slowdown in growth. Nevertheless, most of the earnings reported so far have topped estimates. Some of the notable stocks reporting this morning include CVS Health (NYSE: CVS), Royal Caribbean Cruises (NYSE: RCL), and Clovis Oncology (NASDAQ: CLVS).
There are notable tech stocks reporting today and they include Roku, Uber, Etsy (NASDAQ: ETSY), and Fastly (NYSE: FSLY). These will come on the heels of an already strong second-quarter earnings season. More clues on the economic growth trajectory for the U.S. are set to emerge in the coming days. A slew of reports on the labor market is due over the course of the rest of the week. There is no doubt that growth concerns remain with the Delta variant continuing to be on the minds of many. It seems that a strong earnings season would be able to put some of those concerns to rest.
