Thursday’s Headlines: Why Are Software Stocks Soaring?
Here were the biggest movers in the MyWallSt shortlist yesterday:
Moving Up ⬆️
DocuSign (DOCU) +12.8%
StoneCo (STNE) +10.2%
Twilio (TWLO) +9.2%
Bill.com (BILL) +9.1%
Zillow (Z) +9.0%
Moving Down ⬇️
Nordstrom (JWN) -6.4%
Axos Financial (AX) -3.9%
Ford Motor Company (F) -3.0%
Hasbro (HAS) -2.8%
1. Though still undecided, the current outlook of a split government — one party in the White House and another in the Senate — appears to be good for software stocks as there will not be a return to 2016 tax rates, which, according to forecasts, could have pressured software EPS by 10% next year. For now, the risk of higher corporate and capital gains taxes is off the table as a potentially Republican-controlled Senate will likely block any implementation of such reforms from a potentially Democratic presidency. Among the biggest winners from this outlook-driven optimism on Wednesday were Datadog (DDOG), DocuSign (DOCU), and Twilio (TWLO), which rose 8.30%, 12.8%, and 9.2% respectively. These stocks belong to the iShares Expanded Tech-Software Sector ETF (IGF), which is up 36% year-to-date (YTD) compared to the benchmark S&P 500 (VOO), which is up 5.7% in the same period. Read more here.
2. In a day that saw green across the board, Ford (F) and its new ‘culture of transparency’ was rewarded with a 3% dip after unveiling an October sales decline of 6.1%. The timing for this bout of honesty was not perfect. Mere hours after announcing its declining sales, Ford was forced to announce a recall of 375,000 Explorer SUVs because of a possible suspension issue which has been linked to 13 crashes and 6 injuries. However, for manufacturers, recalls can be common, and Ford’s decision to release its U.S. vehicle sales on a monthly basis from now, providing investors greater clarity, can only be seen as a positive in the long-term. See the official reports here.
3. Want to know the secret to thriving in a pandemic? Sell stuff online! That’s the takeaway since March really, with MercadoLibre (MELI) becoming the latest e-commerce firm to smash expectations, just a week after Amazon posted its best year ever. The Argentina-based company beat estimates after reporting third-quarter net income of $15 million, or $0.28 per share, after reporting a loss in the same period a year earlier, while revenue jumped to $1.12 billion. This growth is largely attributed to the company’s consolidation of its first-mover foothold in the previously underserved South American market, becoming the go-to service for e-commerce and payment solutions at a time COVID-19 has accelerated the need for such alternatives. Read the official earnings report here.
Some more earnings from last night:
The beleaguered smartwatch-maker isn’t setting the world alight after reporting adjusted losses per share of $0.03 on revenue of $363.9 million, though it did manage to top somewhat conservative Wall Street estimates. The company cited strong e-commerce activity, likely due to people taking up more cardio exercise amid continued gym closures. Fitbit has yet to close out its acquisition by Google, which was announced last November. Read the official press release here.
Match Group (MTCH)
Dating might be hard, but making money off of singles on dating apps appears to be easier, after Match Group beat estimates with net income of $132.1 million, or $0.45 a share, with its Tinder brand taking in the lion's share of subscribers at 6.6 million. Despite glaring issues with dating early into the pandemic, it looks like global adaption to life under COVID is resulting in a re-surging in dating usage, so don’t be surprised to see Q4 earnings top estimates as well. Read the official press release here.
Another software winner in the time of COVID, Paycom beat the Street with Q3 earnings of $0.70 per share on revenue of $196.53 million, up 12.3% year-on-year (YoY). As a leading player in Human Capital Management needs, Paycom has cited its products greater value proposition versus competitors as a key driver behind growth, and with just 5% market share, there is room for a lot more. Read the official press release here.
There are 14 companies on the MyWallSt shortlist that will report earnings today.
Booking Holdings (BKNG)
Evolent Health (EVH)
Monster Energy (MNST)
Planet Fitness (PLNT)
Take-Two Interactive (TTWO)
The Trade Desk (TTD)
Wynn Resorts (WYNN)
Get this week’s full calendar here.