Monday's Headlines: Berkshire Hathaway Reports $43.8 Billion Loss in Q2

Monday's Headlines: Berkshire Hathaway Reports $43.8 Billion Loss in Q2

Here were the biggest movers in the MyWallSt shortlist on Friday:

Moving Up ⬆️

Cloudflare (NET) +27.1%

iRobot (IRBT) +19.1%

Tripadvisor (TRIP) +18.9%

Atlassian (TEAM) +16.6%

Redfin (RDFN) +14.3%

Moving Down ⬇️

Twilio (TWLO) -13.5%

Chuy's (CHUY) -6.9%

Tesla Motors (TSLA) -6.6%

Monster Energy (MNST) -5.2%

IMAX (IMAX) -4.4%

 

Here are the stories that you need to know ahead of market-open today, Monday the 8th of August.

 

​​Berkshire Hathaway Reports $43.8 Billion Loss in Q2 😰

Shares of Berkshire Hathaway (BRK.B) are trading over 1% lower in pre-market today after the company announced its second-quarter results. Berkshire’s operating profits rose 38.8% year-over-year to $9.283 billion despite a weak macroeconomic environment.

However, the Warren Buffett-owned conglomerate also posted a $53 billion loss on investments in Q2 due to the ongoing sell-off in the equity market. But, the Oracle of Omaha maintained his imperative to take a longer-term view on Berkshire’s equity investments as the market is expected to remain volatile in the next 12 months. Its losses stood at $43.8 billion in Q2 of 2022.

In a statement released by the company, Berkshire Hathaway stated, “The amount of investment gains/losses in any given quarter is usually meaningless and delivers figures for net earnings per share that can be extremely misleading to investors who have little or no knowledge of accounting rules.”

Berkshire’s stock fell by 22% in Q2 and is currently trading 18.5% below all-time highs. Due to the recent weakness in share prices, management repurchased shares worth $1 billion in the June quarter. In the last two quarters, its buybacks have totaled $4.2 billion.

The company also ended Q2 with more than $100 billion in cash even though it increased investments in companies such as Occidental Petroleum.

 

Cloudflare Soars on Earnings Beat and Strong Guidance ⬆️

Cybersecurity company Cloudflare (NET) surged 27% on Friday after it delivered spectacular earnings. Revenue rose 54% year-over-year coming in at $234.5 million, beating analysts’ estimates of $227.3 million.

More importantly, management seems optimistic for the near-term future, a welcome surprise in the midst of tough macroeconomic conditions. In Q1 of 2022, Cloudflare spoke of an uncertain rest of the year due to a slowdown in pipeline generation, an extension of sales cycles, and customers taking longer to pay their bills. However, all of these metrics stabilized in Q2, allowing CEO Matthew Prince to announce: “They’re not where we throw a parade yet, but they’re trending in the right direction.”

This prompted Cloudflare to raise its full-year revenue guidance which really got investors talking. Management initially projected revenue of $955 million to $959 million for 2022 and now expects full-year revenue of $968 million to $972 million. This exceeds analysts’ forecasts across the board.

Cloudflare was also showing signs of maturity during its earnings call when executives highlighted a record number of customers paying more than $100,000 per year. This segment grew more than 48% year-over-year. According to Prince: “Large customers now represent 60% of our revenue, and they are leaning forward to hear how Cloudflare can save them money and reduce IT complexity.” This is good news for investors as large customers tend to signal strong revenue reliability as they are unlikely to quickly change service providers.

All and all, things are looking up for Cloudflare.

 

CVS Eyes Acquisition of Signify Health 🤝

CVS is seeking to acquire Signify Health according to a report in the Wall Street Journal. People familiar with the matter claim the drug store giant is looking to expand its reach into home-health services, with Signify exploring strategic options that include a potential sale.

However, it is believed there are other bidders and CVS could face competition, potentially leading to a bidding war. Signify shares are currently up 18% in pre-market trading, giving the firm a value of around $5.7 billion.

CVS, which has a market capitalization of $134 billion, is largely known for its chain of drugstores in the United States and its Aetna insurance operations. However, the company has been expanding into other sectors of the healthcare market in recent years while adding primary-care practices to its portfolio. Reports suggest that CVS was interested in acquiring One Medical before Amazon agreed to buy them for $3.9 billion in July.

Signify uses analytics and technology to help healthcare providers offer in-home care. It went public in February last year but has seen its share price decrease significantly amidst a broader market sell-off. Shares of the company now sit slightly below their $24 IPO price, and far below the $38 it reached shortly after going public. Last month, the company announced it was winding down one of its business units after a change in government payment policies.

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