This was a big week! So many top companies releasing their quarterly earnings. And focus was clearly on Thursday evening when Apple, Amazon, Facebook and Google announced earnings after the markets closed. That's nearly $5tn of market cap, representing >20% of S&P500 announcing their earnings around the same time!
I was quite nervous as I had material exposure to all the FAANG stocks. I was quite relieved when I learnt Apple and Amazon results as they smashed it! Facebook also posted good results despite ad revenues lost as some companies have recently chosen to boycot Facebook's ad platform. Google posted good results but a YoY decline for the current quarter by 2%. This was the first time Google has posted a decline in revenues since they went public. So, overall - Amazon and Apple > Facebook > Google. And the extended trading reflected exactly this. Apple also announced a 4:1 stock split, which will be interesting to see how this plays out in the DJIA which is price weighted index.
I have personally bought so much stuff on Amazon.com / Prime Now / Morrissons since the lockdown was imposed in the UK. So, the increase in Amazon sales goes to show that I am not alone in this world! We are all spending our money on buying stuff on Amazon, whether we really use it or not! Amazon Web Services (AWS) also did quite well. And this story was similar to Microsoft's Azure performance in Q1 and Q2 this year. AWS clearly has a much bigger market share compared to Azure but it is commendable that they have continued to maintain dominance in this space even during difficult stress times we currently live in. Amazon beat the analysts expectations with 40% increase in revenues relative to prior quarter and a strong net income. They achieved $88.9bn in revenue that translated to $5.8bn in Net Income, representing a $10.37 Earnings per Share compared to a $1.30 EPS that the analysts were forecasting.
I also bought a brand new iPad Pro and a second generation Apple Pencil in the last quarter. However, I must confess that I did not see Apple's performance coming. With the tensions between US and China plus the expensive iPhones / iPads / Mac product line, I was expecting relatively soft results from Apple. And how wrong was I!
After Microsoft posted good earnings just a few days ago, their stock price did not react that well. Same can be said about Google and Facebook as well. Given the current circumstances, their results were quite fantastic. Facebook stock at least appreciated in the extended trading hours and kept the increase in stock price into the Friday's trading hours. However, Google stock fell through the extended trading and continued to fall after markets opened on Friday. But, I still expect Google to tend towards $1,600 price target. So, the stock should bounce back soon-ish.
To this mix of stocks, we should add Netflix and Tesla. Both stocks have seen a downward trend recently. Netflix had lackluster Q2 earnings. And Tesla stock price has already been propped up by the front runners in anticipation of being added to the S&P500 index on Sep 22. I am expecting upside to both these tech stocks over the next few weeks and months. Tesla (in my opinion) has a $1,800 price target.
Two other stocks that gained this week were - Wix.com and Wayfair. These two stocks have fascinated me all year long. Investors are pouring capital into these two stocks and they have grown many fold this year. I am bloggin now on a site created using Wix.com --- I like their business model but is it really worth >$280 a share?! I am expecting this bubble to burst at some point. We will have to wait and see.
Two other stocks that were on my watchlist this week were - Zoom and GoDaddy. Zoom had an ordinary (but steady) week. GoDaddy has their earnings call on Aug 5th and I expect the stock price to go up with a good second quarter report. My price target for these stocks are - Zoom @ $265 and GoDaddy @ $80 in the coming weeks and months.
So, that was a heavy Tech Stocks focussed week for me. There were quite a few other really good performers this week - Qualcomm, Shopify, Docusign to name a few. And a few other massive disappointments (like Chevron) but the big disappointments are opportunities to stock up on solid companies at a fairly low price. I spent some cash on Boeing and Chevron this week. If the stimulus package is ever finalised in the next couple of weeks, I think Boeing can go back to trading at $180 levels (today it was trading around $160). Chevron can bounce to $90-$95 levels. So, I felt like these were relatively safe bets to stock up on this week.
We can't not trade pharama stocks! With so much news around Covid vaccines, I traded into and out of and back into a few stocks - Moderna, Astrazenca, Novavax , BioNTech and Johnson & Johnson. Of these stocks, I like Moderna's volatility as it presents many opportunities to trade. However, I do not like their approach of revealing little exciting news every now and then about the vaccine as it tends to market and get investors interested, and therefore pushing their stock price up. The senior management are already a bit notorious for selling their stocks this year as the price has reached unprecendented levels. Astrazenca (with Oxford University) seem to be the lead in the race for vaccination at the moment. My favorite stock though is J&J. They are a stable company with a strong management team and sound ethics (at least seems like it from the outside).
So, that was the last week in July. Good strong tech stocks show, sinking other industries with expectation for stimulus next week or the week after to push the markets back up again.
Have a great weekend!
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