The markets continued their gyrations heading into the weekend with a down day as investors weighed the upcoming U.S. presidential election, rising coronavirus cases at home and abroad, and diminishing chances for more fiscal stimulus from Congress in the near-term.
Interestingly, good economic news continues to trickle in, with rising consumer spending for the fifth-consecutive month, initial unemployment claims dropping 5.3% from the prior week to 751,000, while U.S. GDP rose at an annual 33.1% rate, which was the biggest rise in GDP ever recorded.
The news helped send markets higher Thursday, as did anticipation of earnings announcements after the market close from the rest of the tech titans known as the “FAANG” stocks — Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX) and Alphabet (GOOGL).
Overall, the companies reported surging earnings and sales as they continue to thrive in the “new normal” and offer customers an economic lifeline through e-commerce, cloud computing, digital advertising and artificial intelligence.
Netflix, which reported disappointing results that I wrote about last week, soared 3.7% on Thursday but then resumed its sell-off after falling earlier in the week.
Despite the market jitters, it’s an exciting time for these major tech leaders, and for my own fundamentally superior stocks, so let’s get right to it…
Facebook reported year-over-year sales growth of 22% to $21.5 billion, with the substantial portion coming from advertising revenue, which also rose 22% to $21.2 billion. Total revenue beat Wall Street consensus estimates by 8.6%.
Earnings climbed 28% from a year prior to $2.71 per share, which crushed analysts’ expectations by 41.9%.
Average daily and monthly active users climbed 12% year-over-year but the figures declined slightly from the second quarter in the U.S, which the company said were elevated due to the pandemic. Despite the positive report overall, Facebook shares sold off more than 5% Friday as investors worried about fewer users in the U.S. and Canada.
Facebook shares sold off more than 7% Friday as investors worried about fewer users in the U.S. and Canada.
Looking ahead, Facebook expects ad revenue growth will be higher in the fourth quarter as the holiday season approaches. Indeed, the company anticipates ad revenue may continue to soar through 2021 as the “new normal” sets in and people turn to online commerce.
Wall Street is anticipating revenue will rise 21.5% in the coming quarter, and earnings should climb 9%.
Amazon’s net sales jumped 37%, year-over-year, to $96.1 billion and topped analysts’ estimates of $92.6 billion by 3.8%. The company’s cloud division, Amazon Web Services, grew year-over-year sales in the quarter by 29% to $11.6 billion.
Earnings of $12.40 per share soared 192% from a year prior, and demolished analysts’ expectations of $7.40 per share by 67%.
CEO Jeff Bezos said the company is seeing more customers shop for holiday gifts early than ever, which points toward a blowout holiday season.
The company expects fourth-quarter sales from $112 billion to $121 billion, which would represent from 28% to 38% growth from the fourth quarter of 2019. Operating income is expected to be between $1.0 billion and $4.5 billion, compared with $3.9 billion in the fourth quarter of 2019.
The company attributes its wide range in expected income in part to an expected $4 billion in costs for testing, cleaning and social distancing steps taken to address COVID-19. Investors sold shares Friday on the uncharacteristic uncertainty from Amazon, with the stock down about 4%.
Analysts anticipate revenue will soar in the upcoming quarter to $117.2 billion, while earnings should dip to $7.72 per share.
Apple notched record fourth fiscal quarter revenue of $64.7 billion, up 1% from a year ago and 2.2% higher than analysts’ expectations.
Earnings of $0.73 per share fell from $0.76 per share year-over-year but beat analysts’ expectations by four cents per share.
The company’s $26.4 billion in iPhone revenue dropped 26% from the year prior, while Mac sales increased 29.2% to $9 billion and beat analysts’ expectations by 13.5%. Services revenue of $14.5 billion jumped 16.3% from a year prior.
CEO Tim Cook said sales from the company’s newly released 5G-enabled iPhones have been “tremendously positive,” though Apple declined to provide fiscal first-quarter guidance, which includes its iPhone 12 sales projections. The lack of guidance helped fuel a sell-off Friday, with Apple shares down over 5%.
Wall Street is looking for Apple earnings to soar to $1.37 per share in the coming quarter, while revenue is expected to rise to $101.3 billion, driven in part by new iPhone 12 sales.
Alphabet (“Google’s” corporate parent) saw revenue climb 14% year-over-year to $46.2 billion, which beat Wall Street’s consensus estimate of $42.8 billion by 7.9%. Earnings of $16.4 per share rose 62% from a year prior and crushed analysts’ expectations for $11.2 per share by 45.3%.
CEO Sundar Pichai said the outstanding results are a “…testament to the deep investments we’ve made in AI and other technologies…” CFO Ruth Porat attributed sales growth to an increase in advertiser spending for the company’s Search and YouTube streams, as well as continued strength in Google Cloud and Play. Total advertising spending at the company jumped 9.8% from a year earlier to $37.1 billion and reversed the company’s first ever reported decline in advertising in July.
Google Search brought in $26.3 billion in the quarter, a 6.5% gain from a year ago, YouTube ad revenue increased 32.4% from a year ago to $5.03 billion, and Cloud revenue soared 44.8% to $3.4 billion.
Shares rocketed over 5% higher Friday on the positive results.
Looking forward, analysts estimate revenue will climb to $52.8 billion in the following quarter, while earnings should come in at $15.5 per share.
How Growth Investors Should Play Long-Term
The bottom line is that despite a pullback Friday for all of the FAANG stocks, with the exception of Alphabet, the tech titans are thriving thanks not only to the services they can provide today, but their adoption of the indispensable technologies of the future, like artificial intelligence and 5G.
And while individual tech companies like Apple, Amazon and Netflix have their positives, I would rather invest in a company that all of Big Tech needs, going forward.
A company I’ve nicknamed The A.I. Master Key. Specifically, it’s behind the hardware that makes the “brain” all artificial intelligence (AI) software needs to function, spot patterns, and interpret data.
Netflix, for example, uses AI to recommend movies and TV shows, and Google uses it to make its search engine smarter. Even email spam filters use them these days. It’s a lot more efficient and effective than waiting on a human to perform these tasks.
And this company’s Volta Chip is what makes it all possible.
I’ll tell you the basics you need to know, as well as my buy recommendation, in my special report for Growth Investor, The A.I. Master Key.
The stock is a “Strong Buy” in this volatile market. And, by the way, it also pays a dividend – which is attractive to investors large and small in this ultralow, even negative interest rate environment!
If you sign up, you’ll also get access to my latest research about my number-one cybersecurity play that just released a strong earnings report on Thursday. The stock is sitting pretty in my Growth Investor portfolio right now with a 37% gain since I recommended it in August 2018.
To learn more about this stock, you can sign up here. Once you do, you’ll receive my special report called The One A.I. Company Set to Corner the Booming Cybersecurity Industry – absolutely free.
You’ll also receive my latest research on one of my key 5G recommendations, The King of 5G “Turbo Button” Technology, for free. The company just beat Wall Street’s earnings estimates by 8.6% and sales estimates by 3.4%. The stock is sitting pretty in my Growth Investor portfolio right now with a 25% gain since I recommended it November 2019, and there’s plenty more upside ahead.
Note: The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:
Facebook (FB), Alphabet, Inc. (GOOGL), Amazon (AMZN)