Market Movers: Brace Yourself For Earnings Season

Market Movers: Brace Yourself For Earnings Season

Happy Saturday folks,

It was a choppy week on the markets this week, with most major indices rising but becoming more volatile towards the end of the week.

The reasons?

Well for one, we’re just getting stuck into a brand new earnings season, which always makes its impact felt on the markets. This week, we saw a great report from Netflix (more on that below), but some not-so-great numbers from Tesla and a brutal quarter for Snap sending shivers through the wider social-media sphere.

More broadly, rising Treasury yields mean that money is still being pulled away from the markets, while all the political madness that’s going on in the UK is making its mark too.

Here were the biggest movers in the MyWallSt shortlist this week:

Moving Up ⬆️

Cloudflare (NET) +17.4%

Netflix (NFLX) +16.6%

Snowflake Inc. (SNOW) +14.2%

Shopify (SHOP) +14.1%

ShotSpotter (SSTI) +13.9%

Moving Down ⬇️

Ericsson (ERIC) -12.4%

Trupanion (TRUP) -9.6%

Baozun (BZUN) -8.5%

Sea Limited (SE) -7.2%

Core & Main (CNM) -7.0%

 

Cloudflare (+17.4%)

Cloudflare got a nice boost this week after the stock got an upgrade from a Wells Fargo analyst.

Although we generally pay little heed to analyst upgrades considering the short-term lens they’re filtered through, it was interesting to see this analyst note that Cloudflare should benefit from a focus amongst enterprise customers on consolidating their relationships with vendors, and that the company is also seeing a payoff from investments in its relationship with channel partners.

Cloudflare is an American web infrastructure and website security company, providing content delivery network services, DDoS mitigation, internet security, and distributed domain name server services. Though it’s been a winner for us since we selected it in August 2020, the stock has fallen almost 60% since the start of the year.

However, with the world becoming ever-more aware of the absolute need for cybersecurity solutions, Cloudflare will certainly play a big part in this future.

 

Netflix (+16.6%)

After a tough year so far, Netflix managed to surprise us all this week by reporting the addition of 2.41 million net new subscribers for the last quarter, more than doubling its own guidance of 1 million additions.

The boost in streamers bucks the trend of 2022, with Netflix having lost subscribers in the first two quarters of the year. Management also expects to add 4.5 million new subscribers in the final quarter.

Aside from subscribers, Netflix grew revenues by 6% year-over-year to $7.9 billion while taking in operating income of $1.5 billion.

The O.G. streamer also noted that it is garnering 2.6 times the U.S. viewership of Amazon and 1.4 times that of Disney and Hulu. With the rollout of its ad-supported offering coming in November, things are finally looking up for Netflix after an awful year in which it more than halved in value: “After a challenging first half, we believe we’re on a path to reaccelerate growth.”

Check out the latest episode of the Stock Club Podcast to find out more about Netflix’s success.

 

Ericsson (-12.4%)

Ericsson found itself down this week after the company reported a miss on earnings for the last quarter, with matters then made worse thanks to increased criticism from an activist investor firm.

Reporting on its fiscal third-quarter on Thursday morning, Ericsson posted revenues of 68 billion Swedish crowns ($6.02 billion), up more than 20% from the same time last year and beating analysts' estimates of 66.25 billion crowns ($5.8 billion).

The disappointment came in the company’s earnings, however, which fell to 7.1 billion crowns ($633 million) from 8.8 billion crowns ($779 million) a year earlier. Gross margin also fell from 44% to 41.4%.

On the earnings call, management blamed higher component and logistics costs for this contraction in earnings. In response, CEO Börje Ekholm said:

“We are also simplifying operations across the company to be proactive in reviewing options to reduce costs.”

Soon after the results were published, activist investor firm Cevian Capital AB — who owns a 5% stake in the company — branded the quarter “disappointing” and called on the company to “drain the swamp of losses.” This is likely to put even more pressure on management, especially with Ericsson stock now sitting at 4-year lows.

JamesJames

Sign up for free to continue reading.