28th October 2016, GTC Advisors - US Earnings Snapshot

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28^th October 2016, GTC Advisors - US Earnings Snapshot

In our second edition we will cover some of the major earnings reported this week and how they have affected the markets as a whole.

Trending on Thursday was the surprise forward announcement from Amazon.com (AMZN). Stating that added costs for the 4^th quarter of 2016 would probably see operating income levels of anywhere from $0 to $1.25Bn, against an analyst estimate of $1.62Bn sent the stock spiraling down by 6%. In preparation for the impending holiday season the company has added 18 new warehouses in the 3^rd quarter and grew their staffing levels by 38%.

The stock is down nearly 5% this week after concerns about rising costs and competition in its cloud business drew concerns. The stock closed trading at $818.36, showing a still healthy +20% gain YTD.

Google's parent company Alphabet Inc. (GOOG) beat analysts' expectations when it announced that revenues were up 20% to $22.45Bn and Net Income had risen 27% to $5.06Bn. The search engine giant has been benefitting from its successful advertising campaigns and from YouTube. Despite having double digit growth for the past seven quarters the stock is still only up 5% YTD and the good news this week has only moved it higher by 1% since its release.

Concerns over Alphabets ability to move its core business from web to mobile and then onto cloud have kept the stock relatively level however there should be some movement over the coming weeks as news that a $7Bn share repurchase has been signed off and with earnings per share beating forecasts ($9.06 against and expected $8.63) the stock should see some strong backing.

Finally, Twitter Inc. (TWTR) managed to post slightly better than expected data after announcing that it planned to stem its workforce by nearly 9%. The company has been struggling since failing to find a suitable buyer and many believe the competition in the market has significantly reduced its growth ability. Posting a $0.13 profit per share, higher than the $0.09 forecast did little to spur the stock which has lost almost 25% YTD. Along with the staffing news the company confirmed that it would be closing down its Vine service after poor performance.

Revenues were still up in the 3^rd quarter, an 8% increase saw revenues of $616Mn against a predicted $605.8Mn with the majority of that, 90%, coming from advertising over its mobile platform. Revenue growth is down significantly however considering the 2^nd quarter saw 20% growth and the previous year 3^rd quarter was up 58%. The stock did manage some gains this week, up just over 3% to close on Thursday at $17.40.

With the general election just over a week away there is no surprise that the markets have been cautious.  The S&P 500 has barely moved over the past 5 days with a gain of 0.05% and the Dow Jones fared slightly better being up 0.55%. The NASDAQ has seen negative territory this week as several key players on the exchange gave earnings reports that disappointed.

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