Markets Gassed Up:
The S&P 500 neared another all time high on Friday on investor hopes of a trade deal and another FED rate cut on Wednesday. Sounds like the same bull case we’ve been hearing for a year or so. A mixed earning season seemed to boost stocks even more since investors expected Q3 to go a lot worse.
Earnings Snapshot: Paypal
On Wednesday, the digital payments company had their Q3 earnings call.
Highlights:
Revenue increased by 19% over the last quarter, with EPS increasing by 5% year-over-year.
Free Cash Flow increased by 20% year-over-year.
Customer engagement had also increased heavily during the period, with a 9% yoy increase in transactions per account, a 27% yoy increase in total payment volume, and a 16% yoy increase in active accounts. Two big announcements were also made today regarding Paypal’s prospects.
First, Paypal announced that China approved Paypal’s 70% equity interest in GoPay, allowing Paypal to be the first foreign entrant into the Chinese payments market (a big market).
Second, Paypal showcased its progress on Venmo, which includes new partnerships with many large merchandisers, an increase in users, a $400 million annual revenue run rate, and a new credit card on the way. After reviewing company financial metrics during the call, Paypal made their Q4 2019 and 2020 outlook clear, that Q4 only had more growth (16% year over year) in store and 2020 had even more coming soon (mid 20% growth).
Earnings Snapshot: Amazon
Amazon stock fell 9% as they fell short of revenue and profit expectations. In particular, their operating profit came in 50% below expectations due to higher than expected costs associated with Amazon’s transition from two-day to one-day shipping.
To make matters worse, the Pentagon renewed their cloud-computing contract with Microsoft’s Azure as opposed to Amazon Web Services. Not only does a Pentagon Contract represent $10 Billion in revenue, but it’s huge for credibility in the cloud space. Which service would you rather build your app on? The one used by the Pentagon? That’s what I thought!
Earnings Snapshot: Verizon:
Verizon displayed healthy subscriber growth in Q3, but failed to increase revenue much above consensus estimates. Verizon has lagged other telecom stocks as it invests heavily in a 5G transition that could make or break the future of the business. While management is hoping to have nationwide 5G coverage by the middle of 2020, they don’t expect to see significant revenue gains from the project until 2021. The potential upside? 5G represents a huge growth opportunity in edge-computing, a valuable market for consumers and businesses alike.
Other News:
GM labor strikes officially came to a close on Friday as a final agreement was reached between UAW and GM reached a deal.
Short-sellers of Tesla stock lost over $2 billion this week as the stock soared 20% after better than expected earnings.
Ken Fisher has lost over $2.7 billion in assets under management since he made the sexist joke heard round the world. Goldman Sachs is the latest high profile client to end their relationship with Fisher Investments.
Longhorn Investment Team 