Stock Market Futures Ticked Lower After Disappointing Tech Earnings
Stock market futures edged lower in early morning Friday as earnings from Amazon (NASDAQ: AMZN) and Apple (NASDAQ: AAPL) disappointed. The news was a bummer for investors counting on them to finish the year strongly. The disappointing earnings may wipe out more than $200 billion in combined market valuation when the stock market opens today. Besides, investors appear to be digesting the latest GDP data. That data showed U.S. growth slowed more than expected, hampered by supply chain problems and a surge in COVID-19 cases.
Apart from these two tech heavyweights, the stock market has actually been raking in records amid solid earnings. To illustrate, about half of the S&P 500 have reported quarterly results and more than 80% of them beat earnings estimates from Wall Street. Meanwhile, September’s personal consumption expenditure price index, an indicator of inflation, is due at 8.30 a.m. ET. At the same time, a lot of the attention will also be on the personal income and spending figures coming from the Commerce Department. As of 6:58 a.m. ET, the Dow, S&P 500, and Nasdaq futures are declining by 0.15%, 0.52%, and 0.92% respectively.
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Facebook Changed Its Name To Meta As It Dives Deep Into Metaverse
As Facebook (NASDAQ: FB) plans to go all in on the metaverse, it announced that it has changed its company name to Meta. For starters, metaverse is a virtual reality space where users can interact with each other virtually. The new name reflects the company’s growing ambitions beyond social media. The company also said that it will change its stock ticker from ‘FB’ to “MVRS’, effective on December 1.
“Today, we’re seen as a social media company. But in our DNA, we’re a company that builds technology to connect people, and the metaverse is the next frontier, just like social networking was when we got started. From now on, we’re going to be metaverse first, not Facebook first. That means that over time, you won’t need to use Facebook to use our other services as our new brand starts showing up in our products. I hope that people come to know the Meta brand and the future that we stand for.“– Facebook CEO Mark Zuckerberg
Facebook announced that it will spend around $10 billion over the next year building the technologies required to make the metaverse a reality. In addition to metaverse, the company also announced a new virtual reality headset named Project Cambria, which will be released next year. Separately, the company also announced its first fully AR- capable smart glasses known as Project Nazare. Unlike the headset, the glasses are “still a few years out”. With Facebook’s metaverse plan kicking into high gear, would you jump on the bandwagon in the stock market today?
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Apple’s Revenue Miss Sent Stock Down
Apple reported a rare revenue miss, its first time since the December quarter of 2018. Apple posted quarterly sales of $83.4 billion, slightly lower than analysts had anticipated. For the most part, Apple has attributed the slowdown with the larger-than-expected supply constraints on iPhones, iPads, and Macs. Adjusted earnings per share (EPS) came in at $1.24, ahead of analysts’ prediction of $1.21. On the flip side, Apple’s services segment continues to report revenue that exceeded many analysts’ expectations. The tech giant reported services revenue of $18.3 billion in comparison with the $17.6 billion Wall Street predicted.
“We had a very strong performance despite larger than expected supply constraints, which we estimate to be around $6 billion,” Cook told CNBC’s Josh Lipton. “The supply constraints were driven by the industry wide chip shortages that have been talked about a lot, and COVID-related manufacturing disruptions in Southeast Asia.”
If anything, the services revenue is increasingly important to Apple’s financial future. That’s because profit margins on services sales are significantly higher than its hardware profits. As the company’s sticky ecosystem continues to incentivize the purchasing of its full spectrum of devices, Apple is expected to post bigger profits once the supply chain problem is over. Even though the supply constraints might be larger in the current quarter, Apple is still seeing robust demand for its products. With supply chain problems looking to be a temporary one, will investors consider buying AAPL stock on the post-earnings dip?
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Amazon Earnings Suffer As Growth Slows; Warns Of Additional Costs In Q4
E-commerce juggernaut Amazon reported its third-quarter financials that missed Wall Street’s estimates. The deceleration in growth reflects global supply chain challenges or is perhaps partially a result of more consumers going back to physical stores. Amazon stock fell as much as 4% in the extended trading. Earnings per share fell below expectations by a significant margin and were down 50.5% compared to the prior year quarter. The company’s profits declined by the largest percentage in more than four years. This came as the e-commerce giant said it has spent heavily on coping with the pandemic.
“In the fourth quarter, we expect to incur several billion dollars of additional costs in our consumer business as we manage through labor supply shortages, increased wage costs, global supply chain issues, and increased freight and shipping costs – all while doing whatever it takes to minimize the impact on customers and selling partners this holiday season. It’ll be expensive for us in the short term, but it’s the right prioritization for our customers and partners.”- Andy Jassy, CEO of Amazon
What’s interesting is that the revenue from Amazon services surpassed its retail sales for the first time in history. Net product sales were $54.9 billion in the quarter. Meanwhile, revenue from Amazon Web Services, advertising, third-party seller services and Prime subscriptions added up to $55.9 billion. Given all this, it is increasingly apparent that Amazon is becoming a services company. Without the profits from the services section, Amazon would have recorded a loss in the quarter.
Pre-Market Earnings To Note In The Stock Market Today
With the closing of this week of the earnings season, investors remain as busy as ever. For those keen to catch companies reporting before the opening bell, there is no shortage of names to note. The list includes ExxonMobil (NYSE: XOM), Chevron (NYSE: CVX), AbbVie (NYSE: ABBV), Phillips 66 (NYSE: PSX), Huntsman (NYSE: HUN), and Royal Caribbean (NYSE: RCL), just to name a few. By and large, it seems like investors can expect another interesting day of earnings ahead, to say the least.
