😁 GM and Happy Thursday!
By the way, GM had a great Q2.
Thank God It’s almost Friday. It is earnings week for several companies, and Big Tech defies expectations.
Did you know Microsoft and Alphabet reported higher-than-expected revenue for the second quarter? The market reacted differently to the two stocks, though. But the earning calls show that concerns about recession might be overhyped.
Also, GM is bringing back the Bolt Chevy after saying during the Q1 earning call that it is shutting down production for the budget EV. Like the popular saying among the Ironborn (sorry if you haven’t seen Game of Thrones), what is dead may never die.
Let’s get started. 🎬
MONEY MASTERY BRIEF
- Microsoft Shares Drop Despite Beating Revenue Expectations
- Alphabet Gains Almost 6% After Revenue Exceeds Projections
- Spotify Does Not Expect Price Increases to Affect Subscribers’ Growth
- GM is Resurrecting Chevy Bolt
📉 Microsoft Beats Revenue Expectations, Stock Drops Anyway
The people at Microsoft are probably singing let’s keep the good times rolling after the company announced that its revenue for the second quarter exceeded estimates. Revenue rose 8% for the quarter to $56.2 billion, beating the Wall Street estimate of $55.5 billion. The impressive haul meant net income for the quarter is up 20%, reaching $20.1 billion.
But the positive returns were not enough for investors. Microsoft (NASDAQ: MSFT) dropped 2% in after-hours trading following the earnings call. This is due to a decline in the revenue growth for Azure and its other cloud services revenue. It recorded a 26% growth YoY for the quarter, down 1% from the last. The 7% growth in Microsoft revenue for the 2023 fiscal year is also the lowest annual growth rate since 2017. But investors won’t be bothered by the after-hours decline; Microsoft’s performance remains strong, and its stock is up 46% YTD.
📚 Alphabet Stock Surges After Revenue Rise
On a day when two tech giants dropped earning reports that surpassed forecasts, the market reaction could not be more different. Google parent company Alphabet (NASDAQ: GOOG) recorded almost 6% in its stock price after hours after the earnings call.
The Q2 report surpassed Wall Street forecasts as it came in at $74.6 billion in revenue instead of the projected $72.75 billion. The earnings per share of $1.44 also beat the expected earnings per share of $1.32. A breakdown shows that revenue increased across the board. After turning profitable for the first time in 2023 Q1, Google Cloud continues its profitability with $8 billion in revenue and $395 million in profits. Ads for YouTube and Google also exceeded expectations.
Meanwhile, the company announced that it is creating a new President & Chief Investment Officer role. The current CFO, Ruth Porat, who has been behind Alphabet’s cost-cutting efforts, will take on the new job by September 1 while still remaining CFO.
🎧 Spotify Expects Subscribers to Grow Despite Price Increase
Like a supplier who is sure of the quality of its product, Spotify (NYSE: SPOT) is confident that its decision to increase the price for different subscription plans will not affect its subscriber growth. The CFO, Paul Vogel, believes that price will have little impact on growth, and even Daniel Ek said he feels good about raising prices.
“Our data would suggest that historical price increases have had minimal impact on [subscriber] growth.” – Vogel
The optimism might not be far-fetched given that its monthly active users (MUAs) for Q2 was 551 million, beating the 530 million estimates. The net addition of 36 million is the highest in Spotify quarterly net addition ever. Premium subscribers surpassed the 217 million expectations to close at 220 million.
The streamer increased the cost of subscriptions for premium, duo, family, and student plans in several countries, including the US, the UK, Spain, Peru, and New Zealand, with plans to roll the plan out in other countries. But this did not come as a surprise given that the company is struggling to achieve profitability and all its competitors have also increased prices.
With its major concern now being the wider-than-estimated net loss of €302 million, there is no time like the present to raise prices. Spotify reported €3.18 billion in revenue for Q2, slightly below the expected €3.21 billion. This caused its stock to plunge 14% on Tuesday.
⚡️ EV Markets Heating Up as GM Plans Resurrection of Chevy
The highlight of GM‘s (NYSE: GM) earning call was the announcement that Chevy Bolt EV is making a return. This comes only a few months after the company announced that it is sunsetting the Chevy Bolt; some things are too good to stay dead.
The decision to resurrect Bolt is because of the sales of the current generation of Bolt and the emergence of a new & cheaper battery. According to GM CEO Mary Barra, the Chevy Bolt is so good that some customers have abandoned other EV brands for it. So, it makes sense to bring back a sure money-maker. Fortunately, the cost of production will drop by 40% as the new car will use the Ultium battery.
Besides resurrecting Bolt, GM also surprised Wall Street by beating their estimates. The $44.75 billion in revenue exceeds the consensus estimate by 5.34%. For four consecutive quarters now, the company has topped consensus revenue estimates. But supply chain issues affect the company’s plan to meet its delivery targets.
🔢 The Big Number
$100 Billion. That is how much the resumption of student loan payments in October will reduce consumer spending annually, according to Oxford Economics research.
📌 Trending News (TL;DR)
JPMorgan analysts said that most companies are exceeding expectations for Q2 revenue, but Wall Street is not impressed. The experts examined the results of 90 companies in Europe and 70 in the S&P 500 to reach this conclusion. In some cases, some of these companies have seen their stock decline despite better-than-expected revenue. Full story
Twitter rebranding into X could mean losing billions in brand value. At least, that is what marketing experts think, which points to the popularity of the Twitter logo and how some of the terms associated with the company have made it to regular usage. With the Twitter brand valued within a range of $4 billion to $15 billion, that’s a lot of money to lose for a company that has yet to achieve positive cash flow. Full story
CEOs of Intel (NASDAQ: INTC), Nvidia (NASDAQ: NVDA, and Qualcomm (NASDAQ: QCOM) have warned that US restrictions on chip exports to China could derail President Biden’s goal of encouraging more chip production on home soil. They said this during a meeting with US officials, noting that the restrictions mean less money from China for chip manufacturers, and it could trigger repercussions from China too. Full story
Apple Pay (NASDAQ: AAPL) is gaining on PayPal (NASDAQ: PYPL) in the world of digital payments as more retailers now have multiple checkouts. Lisa Ellis, analyst at MoffettNathanson, wrote that although PayPal is the market leader, Apple Pay is its biggest competitive threat. Apple Pay is available on 80% of iOS apps compared to 44% for PayPal. Full story
Nissan (TYO:7201) will invest $663 million in Ampere, Renault’s (EPA: RNO) EV unit, as Renault also reduced its ownership of Nissan to 15% while leaving the remaining of its 43% share in a French trust. The deal revitalizes the car makers’ alliance, allowing each to pursue independent projects. Parties are expected to finalize the deal by the fourth quarter. Full story
Snap Inc (NYSE: SNAP) fell almost 20% in after-hours trading on Tuesday after the social media platform projected that its Q3 sales would be below expectations citing flagging digital advertising. The company has already reported a loss of $377 million and revenue of $1.07 billion in the second quarter. Full story
Quench.ai, a new startup that uses artificial intelligence to upskill workers, has raised $5 million in a preseed funding round. The AI tool has been developing for about 18 months and will use the funds to expand its team. Full story
💬 Quote of the Day
“The broadening out is more a result of the megacaps going up insanely versus a real broadening of the economy.”
– Gareth Soloway, chief market strategist at Inthemoneystocks.com.
🔍 Must See Chart
With the earnings of several Big Tech companies defying expectations, the Stock Market Fear & Greed Index shot to extreme greed (81) – an indication of the current market sentiment.
🤔 Closing Thoughts
This has been a good week for most companies, with revenue exceeding expectations. But the general market outlook remains a bit gloomy. Many companies, including Microsoft and Tesla, saw their share value drop despite higher-than-expected revenue and earnings per share.
Experts say this is because investors focus more on the outlook for the next quarter. But maybe it is a sign that things are not as good as these earning calls are making it. With the Fed expected to increase interest rates for the 11th time in 12 months today, stock prices are expected to dip across the market.
Do you think the economy has fully recovered, or are Big Tech stocks masking the signs of a weak economy?
Let us know what you think by replying to this email. 📩
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