Wednesday’s action may have gotten off on the wrong foot, but after traders had time to think about the Federal Reserve’s mostly optimistic stance on the economy, they finally came to the conclusion the glass is half-full rather than half-empty. The S&P 500 ended the day at 2095.15, up 0.16%.
Here’s the deal.
Apple Inc. (AAPL)
IPhone maker Apple missed the mark last quarter, setting up a punishing 6% setback for AAPL shares.
Last quarter, Apple earned $1.90 per share on revenue of $50.56 billion. Analysts, however, were looking for a profit of $1.97 per share of AAPL stock, and sales of $51.51 billion. It was the first time in over a decade the company posted lower year-over-year Q1 results, and the first time ever year-over-year iPhone sales fell.
The results have forced AAPL investors to at least concede the possibility that the company’s best high-growth days are behind it … at least until the company comes up with something much more innovative. Oppenheimer’s Andrew Uerkwitz best explained the market’s current mindset, saying:
“We are downgrading Apple to Perform as we believe that weaker performance seen in this quarter is likely to recur until 2017’s iPhone launch. We believe Apple won’t provide a compelling reason to upgrade until then, when the new iPhone adopts more VR-friendly features. Such belief leads to our more bearish outlook for the coming iPhone cycle (“iPhone 7″) and has us look past favorable longer term trends. We see the stock trading sideways while investors grapple with perceived slowing innovation and unit growth on the one hand, and massive cash generating, dividend paying, attractive valuation on the other.”
H & R Block Inc (HRB)
Although the first quarter has historically been a good one for tax preparer H & R Block (as that’s when most tax returns are filed), this year’s tax season was particularly lackluster for the company.
The official quarterly numbers haven’t been posted yet, but it’s not tough to imagine how unimpressive they were for the quarter in question. The company said it handled nearly 6% fewer tax returns earlier this year than it had at the same point a year earlier, and given that HRB is laying off 250 workers, the company doesn’t appear to expect a turnaround of that trend anytime soon.
Of course, it may not be a bad assumption. This year was the fourth year in a row the number of tax filings H & R Block handled has fallen.
HRB ended the day down more than 13.5%.
Twitter Inc (TWTR)
Last but not least, AAPL wasn’t the only tech name to be up-ended by poor quarterly results and a poor outlook on Wednesday. In the grand scheme of things, it can’t be all that surprising microblogging company Twitter posted disappointing results for its fiscal Q1 of 2016. But the 16% plunge TWTR shares made today says most traders were indeed caught off guard.
Last quarter, Twitter lost 7 cents per share on revenue of $594.5 million. The bottom line was better than the 13 cent loss per share analysts were calling for, but the top line missed estimates of $607.2 million.
The real killer, however, was its tepid user growth and revenue outlook for the current quarter. The company added a scant 5 million monthly users last quarter — pushing the tally up to 310 million — and is now only looking for Q2 revenue of between $590 million and $610 million. Analysts had been calling for a Q2 top line of $677.1 million.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.