Trader Talk
Such a disappointment.
I can't believe markets closed on Wednesday almost where they did on Tuesday.
Crossed and recrossed a lot of ground.
Gee whiz.
S&P 500 failed to defend 4200
In fact 4200 became resistance over the final hour.
They gave it all back.
All of it.
You gave it all back too, didn't you?
It ain't over til I say it's over.
Russia, Ukraine, China, Inflation, sagging economic growth, US Q1 GDP bright and early.
Hey, we've still got earnings
Earnings will save us.
Hey, there goes "Facebook" (Meta Platforms).
There goes Teladoc.
You gonna do anything with that?
I don't know, still thinking about it.
Wednesday
On Tuesday, the Nasdaq Composite took a beating of 3.95%, closing at its lowest level of 2022. Tuesday's year-to-date record low close lasted exactly one day. On Wednesday, the Nasdaq Composite was up 1.7% shortly after Wednesday's opening bell, and retested that spot from below again around lunchtime before closing down less than two points, or -0.01%.
In fact, all major U.S. equity indexes gave, or nearly gave it all back. The S&P 500 gained 0.21% for the session, The Russell 2000 surrendered 0.34%. Only the Dow Transports really hung on to the bulk of the day's early moves, closing up 1.25%, supported by Norfolk Southern ( NSC) and several airline stocks.
Interestingly, the regular session left us with five SPDR sector-select ETFs in the green, five in the red, and one unchanged by day's end. Technology ( XLK) , of all sectors, was the day's leader at +1.48%, but performance was mixed within.
The Dow Jones US Software Index roared 2.65% higher, led by Fiserv ( FISV) and Microsoft ( MSFT) . Those two gained 5.03% and 4.81% respectively, while the Philadelphia Semiconductor Index backed up to the tune of 0.49%.
Communication Services ( XLC) finished the day at the rear (eleventh place), down 1.34%. It is an odd day indeed that Technology led and Communications places last as the two are first cousins. The Dow Jones US Internet Index closed down 3.28%, led lower by Spotify ( SPOT) , Snap ( SNAP) and Alphabet ( GOOGL) , as those three names surrendered 12.44%, 5.58%, and 3.67% respectively.
As for breadth, there was no conviction at all. Losers beat winners at the NYSE by less than 9 to 7, and at the Nasdaq Market Site by roughly 7 to 5. However, advancing volume did take a 50.4% share of composite NYSE-listed trade, but only a 41.6% share for Nasdaq-listed names.
Aggregate trading volume edged slightly (very slightly) higher for NYSE-domiciled stocks, but decreased on Wednesday from Tuesday for Nasdaq-domiciled names, as well as for constituent names of both the Nasdaq Composite, and the S&P 500.
In other words, the pros did not get very excited on Wednesday. They, for the most part, did not join the rally, and they did not participate in the reversal. This session was dominated by traders, algorithmic traders for sure, but traders nonetheless. The PMs mostly sat on their hands.
I'll Take Two
Bloomberg News reports that a 15.1 carat vivid blue diamond sold at auction last night in Hong Kong for HK$450.9M ($57.5M), making it the largest vivid blue diamond ever to appear at an auction.
The gem had been recovered from the Cullinan mine in South Africa. Colored diamonds are rarer than colorless diamonds, and blue is perhaps the rarest of all, found at levels four times deeper than diamonds in general.
Earnings Story
Plenty of headline-level earnings are due tonight. Wednesday night, however, has stolen the attention of the masses, at least for now, as Asian and European equities trade higher along with U.S. equity index futures despite Treasury yields that have been on the rise since Tuesday.
The results, as well as the guidance, was for the most part, quite positive. There were, however, two names that stuck out.
Let's call it...
The Bad: Meta Platforms ( FB) . I know the stock is up 17% overnight. The quarter still stunk.
and
The Ugly: Teladoc Health ( TDOC)
The Good
Qualcomm easily beat EPS and revenue expectations on sales growth of 41.1%, while guiding the current quarter well above consensus. The company's QCT business, which includes revenue from products used in mobile phone handsets, increased 52%.
ServiceNow crushed earnings expectations while beating sales estimates. Subscriptions grew 26%, while the company landed 52 transactions worth over $1M in net new annual contract value for the quarter (+41%). The company guides toward Q2 subscription revenue of $1.67B to $1.68B and cPRO growth of 28%.
United Rentals topped both top and bottom-line expectations, while feet productivity increased 13%. The firm guided full-year revenue up to $11.1B - $11.5B from $10.65B - $11.05B.
The Bad
Facebook, I mean Meta Platforms ( FB) , beat earnings expectations while falling short of revenue projections. Revenue growth that slowed to 6.6% provided earnings growth of (oh, yeah) -18%. These results are being referred to as "hitting it out of the park" by the early morning financial media. Okay.
Facebook specifics? Daily Active Users beat slightly. Monthly active users fell short. ARPU of $9.54 beat expectations in the mid $9.30's. Family of apps? Daily active users +5.5%, Monthly active users +5.5%. ARPP $7.72.
The company guided second-quarter revenue toward a range spanning from $28B to $30B. Wall Street had been looking for something close to $31B. I like to tell a full story... Meta did also reduce full-year expense expectations to $87B-$92B from $90B-$95B.
So why has the stock traded aggressively higher overnight? Tepid at best user growth? Really? Well, if it wasn't in the performance or in the guidance, it must have been what was said. Basically, Meta talked up the eventual potential for its "Reels" product to be better monetized. Currently Reels monetizes at a lower rate than do "Stories" and "Feed", but the future is supposedly oh so bright.
The reality is that advertising revenue of less than $27B across Facebook, Instagram, WhatsApp and other services fell short of expectations of $27.5B. Oh,, and Family of Apps operating income fell nearly $1B short of Wall Street consensus.
I mean I guess I see this rally if an outright disaster had been priced in. These earnings are not an outright disaster.
Bottom Line?
I may or may not trade this name today. I certainly will not invest in FB, even at 14 times forward-looking earnings based on anything I read last night. This is not a growth stock. Not by any stretch of the imagination. I am just not sure if it is yet a value stock.
The stock's 50-day simple moving average (SMA) stands at $208. Let's see what happens there.
The Ugly
Teladoc Health ( TDOC) ? What the...?
Teladoc posted a Q1 loss per share of $41.58 on revenue of $565.4M. The sales number was good for growth of 24.6% despite falling short of expectations. The deal is really this: the company took a $6.6B non-cash goodwill impairment charge amounting to $4.11 per share. Good news? A loss of $0.47 per share would have beaten Wall Street expectations.
The company also guided full-year revenue toward $2.4B-$2.5B, below consensus of $2.6B, full-year loss per share to $43.00 to $43.50, and full-year adjusted EBITDA to $240M-$250M. Seems that we're talking about ARPU today -- average revenue per U.S. paid member increased to $2.52 from $2.09 for the year-ago period. I guess that's a positive.
Since Teladoc is taking a whopping charge against goodwill, I think it only appropriate that we take a look at the balance sheet. Current assets of $1.208B look pretty good next to current assets of $306.6M. A current ratio of 3.9 never hurt anybody. Teladoc can meet its short-to medium-term obligations. No problem. Now, total assets are still a bit funky. The total on the balance sheet reads $11.092B, which seriously outweighs total liabilities less equity of $1.95B.
However, the entry for goodwill still reports at $7.899B, even after taking that $6.6B haircut. There's more. Net Intangibles posts at $1.883B. In other words, TDOC has total assets of $11.092B, but $9.782B of that (or 88.2%) is comprised of things that you cannot touch, cannot drop on your foot, and really cannot precisely quantify. Hmm.
Sans those "intangibles," total assets add up to just $1.312B, which I remind readers is less than total liabilities less equity ($1.95B). The company has a net cash position of $838.9M on the books as well as $1.532B worth of senior convertible notes. Despite the gaudy current ratio, I have to say that I do not like this balance sheet at all.
Bottom Line?
Buy this mess? Only on spec -- and that's if you think someone else will see potential here. That said, I don't know what kind of premium there could be.
Meta or Teladoc?
The interesting thing today is that while FB certainly has more potential as a long idea than TDOC, I think that if FB fails at $208, it also might have more potential as a short idea. My portfolio can live without either of these names.
Economics (All Times Eastern)
08:30 -GDP Growth (Q1-adv): Expecting 1.1% q/q, Last 6.9% q/q SAAR.
08:30 - Initial Jobless Claims (Weekly): Expecting 180K, Last 184K.
08:30 - Continuing Claims (Weekly Last 1.417M.
10:30 - Natural Gas Inventories (Weekly): Last +53B cf.
11:00 - Kansas City Fed Manufacturing Index (Apr): Last 46.
The Fed (All Times Eastern)
Fed Blackout Period.
Today's Earnings Highlights (Consensus EPS Expectations)
Before the Open: ( CAT) (2.60), ( CMCSA) (0.80), ( DPZ) (3.08), ( LLY) (2.30), ( HSY) (2.10), ( MA) (2.16), ( MRK) (1.83), ( NOC) (5.98), ( SO) (0.90), ( TWTR) (0.02)
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