With push coming to shove as the weekend approached, the bulls finally decided it would be better to be in than out. The S&P 500 gained 2.48% to end the session and the week at 1940.24.
It wasn’t a winning day for every name out there, though. Gilead Sciences, Inc. (NASDAQ:GILD), Amazon.com, Inc. (NASDAQ:AMZN) and Electronic Arts Inc. (NASDAQ:EA) all used more than their fair share of red ink on Friday. Here’s what investors need to know about each pullback.
Electronic Arts Inc. (EA)
As has been the case so many times this earnings season, Electronic Arts trumped an otherwise-encouraging quarterly report with a lackluster outlook, sending EA shares lower by more than 7.5% on Friday.
The much-anticipated video game “Star Wars: Battlefront” certainly did all it was supposed to do for the quarter, having sold more than 13 million units as of the latest tally… a mark the company was not originally expecting to hit until March. And, EA parlayed that success into a bottom line of $1.83 per share on revenue of $1.803 billion for the holiday quarter, versus expectations for a profit of only a $1.81 per share. Analysts were calling for a top line of $1.805 billion, which the company essentially hit.
It just wasn’t enough to offset the concerning outlook for the current quarter (fiscal Q4).
Electronic Arts also warned investors today that it is only expecting a profit of 40 cents per share on sales of $875 million for the quarter ending in March. Analysts had been calling for a bottom line of 49 cents per share of EA, and revenue of $913 million.
Gilead Sciences, Inc. (GILD)
Good news for Merck & Co., Inc. (NYSE:MRK) became bad news for Gilead Sciences on Friday.
The good news: Thursday evening, pharmaceutical company Merck was granted FDA approval for its hepatitis C drug, Zepatier. The bad news: At $54,600 per treatment, Zepatier costs almost half of what Gilead’s Harvoni costs per round of therapy. Ergo, Zepatier poses a major threat to GILD shareholders, who were largely counting on enjoying the fiscal benefit of the costly drug for a long time. GILD stock fell more than 5.5% on the news. That being said…
Fanning the bearish flames for Gilead Sciences was news that CEO John Martin will be stepping down. COO John Milligan will be taking the helm, so the company will be in experienced, veteran hands. Nevertheless, with Merck now entering the hepatitis race, this may be the least opportune time for such a disruption.
Amazon.com, Inc. (AMZN)
Last, but certainly not least, Amazon.com shares lost nearly 8% of their value on the last trading day of the week following its prior quarter’s numbers.
During the holiday quarter, Amazon earned $1.00 per share on revenue of $35.7 billion. The pros, however, we’re looking for a profit of $1.56 on sales of $35.98 billion.
Superficially speaking, the earnings miss and revenue miss are getting the blame for the big setback from AMZN today. Realistically speaking, though, the market is now more apt to tacitly understand that the e-commerce company is at a point where it must spend heavily to continue logging incremental growth. For perspective, year-over-year sales grew 22% last quarter for Amazon. Operating expenses, however, grew by roughly the same degree, suggesting greater scale isn’t actually helping the company’s fiscal situation.
On the other hand, free cash flow ramped up to $8.8 billion last quarter, from $6.7 million in the same quarter a year earlier. Some analysts think that’s a more important figure for AMZN, which doesn’t quite fit any particular retail or e-commerce mold.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
