The markets continued to gyrate this week as investors weighed the rising concerns about inflation, the effect of the Delta variant and slightly lower-than-expected GDP growth and initial jobless claims. The broader market was up about 1% mid-week but ended the week slightly lower, with the S&P 500, Dow Jones Industrial Average and NASDAQ Composite down about 1%.
As I discussed last week, Netflix reported a disappointing second quarter, with earnings missing analysts’ estimates by 5.8%. As a result, the stock fell nearly 3%.
So, let’s use today’s Market360 to review the remaining FAANG stocks’ earnings reports.
Facebook (FB) — Announced July 28
Facebook’s second-quarter revenue rose 56% year-over-year (YOY) to $29.08 billion, which beat Wall Street consensus estimates for revenue of $27.89 billion. Earnings climbed 181% YOY to $3.61 per share, up from the $1.80 earned in the prior year. Analysts were calling for earnings of $3.03 per share, so the company topped expectations by 19%.
The social media giant’s userbase held steady at 195 million daily active users in the U.S. and Canada but is still down from 196 million in the fourth quarter 2020. However, across all of its apps including Instagram, Messenger and WhatsApp, monthly users ticked up 6% to 3.51 billion from 3.45 billion in the previous quarter.
Average daily and monthly active users climbed YOY, but the figures were only up slightly from the first quarter in the U.S. Despite the overall positive report, Facebook shares sold off more than 4% on Thursday, as investors worried about fewer users in the U.S. and Canada and the scrutiny the company faced from Washington for not doing enough to combat misinformation.
Facebook finance chief David Wehner also noted that Apple’s privacy changes on the iOS 14.5 update could impact Facebook’s ability to target ads to customers, which is a huge part of Facebook’s revenue. The company expects a larger impact in the next quarter from this change.
Amazon (AMZN) — Announced July 29
Amazon’s net sales jumped 27% YOY to $113.08 billion, but missed analysts’ estimates of $115.08 billion by 1.74%. The company’s cloud division, Amazon Web Services, grew YOY sales in the quarter by 37% to $14.81 billion.
Earnings of $15.12 per share soared 48.2% from a year prior and beat analysts’ expectations of $12.24 per share by 23.54%. Operating income for the third quarter is expected to be between $2.5 billion and $6 billion, compared with $6.2 billion in the third quarter of 2020.
Amazon CFO Brian Olsavsky primarily blamed rough YOY comparisons for the disappointing results.
The stock fell about 8% on Friday following the mixed second-quarter earnings report.
Apple (AAPL) — Announced July 27
Apple posted strong third-quarter revenue in fiscal year 2021 of $81.41 billion, up 36% YOY and higher than analysts’ expectations of $73.3 billion.
Earnings of $1.30 per share rose from $0.65 a year ago and beat analysts’ expectations of $1.01 per share by 29%.
The company’s $39.57 billion in iPhone revenue was up 49.78% YOY. However, Apple CEO Tim Cook stated that constraints on “silicon” or computer chips would affect the company’s iPhone and iPad sales in the September quarter.
Mac sales of $8.24 billion beat estimates for $8.07 billion. Services revenue of $17.48 billion jumped 33% from a year prior.
Cook noted that the success of the quarter was not just from people upgrading their old iPhones, but also from Android customers switching to iPhones. Last year’s June quarter was a company record for sales despite the lockdown order around the world — so Apple is still growing.
However, Apple declined to provide fiscal first-quarter guidance. The lack of guidance fueled a minor sell-off this week, with Apple shares slipping down over 1%.
Alphabet (GOOGL) — Announced July 27
Alphabet (Google’s corporate parent) saw revenue climb 61.58% YOY to $61.88 billion, which beat Wall Street’s consensus estimate of $56.08 billion by 10.35%. Earnings of $27.26 per share rose 171.3% from a year prior and crushed analysts’ expectations for $19.08 per share by 42.9%.
Google’s chief business officer, Philipp Schindler, stated that retail was by far the largest contributor to the company’s ad growth. Schindler also said that connected TV is the fastest growing “consumer surface” they have, with over 120 million people who watch YouTube on their TVs every month.
Alphabet’s TikTok competitor, YouTube Shorts, just reached 15 billion daily views, up from 6.5 billion in March. Total Google ad revenue jumped 69% from a year earlier to $50.44 billion. Traffic acquisitions costs (TAC) brought in $10.93 billion in the quarter, YouTube ad revenue increased to $7 billion, and Cloud revenue soared to $4.6 billion.
Looking forward, Alphabet chief financial officer, Ruth Porat, said she expects a more muted third quarter but did not give any hard estimates for next quarter.
Shares rocketed over 5% higher on the positive results.
How to Play the Long Term
Despite a pullback this week for all the FAANG stocks (excluding Google) the tech titans are thriving right now. The bottom line is strong FAANG earnings results are good for overall investor confidence, since these stocks account for a major proportion of both the NASDAQ 100 and S&P 500 indices.
Now here’s the bad news. On a larger scale, every day, these technology companies are taking over more and more of the aspects of the American economy. These new businesses and technologies are wreaking havoc on the established infrastructure.
The way we work, the way we travel, the way we shop, how we communicate to each other, is all drastically different than just a few years ago.
That’s why Investorplace colleague Eric Fry and I teamed up to expose this phenomenon, especially now that there’s a technology that could dump rocket fuel onto it. This one technology has just hit a major inflection point and it’s about to unleash an economic tsunami worth at least $56 trillion. What we’re about to witness will go down in the history books.
The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:
Amazon (AMZN), Facebook (FB), Google (GOOGL)
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