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- HEAR.COM | February 1st, 2024
HEAR.COM | February 1st, 2024
TOGETHER WITH
Today’s report is brought to you by hear.com, the world’s leading online hearing aid company, delivering unparalleled speech clarity to 385,000 customers and counting.
[ good morning ]
Here’s everything you need to know today
Well, the madman actually did it. Jerome Powell torched our rally by all but ruling out interest rate cuts in March. This always seemed like the most likely outcome, but the market is still massively overreacting to this news.
While yesterday’s selloff has stalled—brands are going to need to put up stellar results if they’re going to get the same level of buy-in that folks who reported prior to this fed announcement got.
This makes tonight’s earnings slate critically important. Can Apple demonstrate there’s enough demand to keep their valuation alive this year? Will Amazon keep pace with Microsoft’s incredible cloud growth?
For now, markets are returning to the less optimistic framework we saw during September of last year. Higher rates for longer is a situation nobody wanted to see—but it’s still better than the recession we expected in 2023.
So—let’s examine the most impactful headlines and see what long-term trends are brewing in this economy.
Markets at a Glance
*Market data based on standard trading hours and calculated close to close
[ chips ]
Qualcomm Crushes Estimates as Chip Demand Strengthens
But the results just aren’t enough for finicky investors
BREAKING NEWS
In yet another sign that chip demand is stronger than expected, Qualcomm crushed their earnings expectations for Q4. Every industry is buying more chips.
WHAT HAPPENED
Qualcomm generated an honestly mediocre $2.75 EPS from $9.92 billion in revenue. While those revenue figures are well above what the market expected, Qualcomm simply cannot get their costs under control enough and those profit numbers came in well below expectations.
It’s the same story for Qualcomm’s Q1 projections. They’re expecting more revenue than originally projected, but they’re concerned that they won’t make as much profit from that revenue as The Street wants them to.
DEMAND IS NOT ENOUGH
Qualcomm’s results are great because they suggest that overall chip demand is recovering. After a tough 2023—Android chip sales surged and pushed their smartphone segment up 16% YoY. Investors were expecting demand to stay flat, so this is a huge confidence boost. Qualcomm’s nascent automotive chip business exploded as well—jumping 33% on the year as more manufacturers have decided their vehicles need more processing power.
However, the market wants to back companies who can make the most profits off of chip demand. Qualcomm is spending like crazy in order to scale production and that’s muting their overall earnings. This definitely can pay off in the long term, but for now, investors are bailing on the stock.
WHY IT MATTERS
Now that most of the chip industry has reported earnings, the market is increasingly confident that consumer demand is much stronger than we originally worried. All this really does is set the stage for a major conflict over this year’s smartphone upgrade cycle. Samsung has come out swinging with an AI-enabled Galaxy S24. Will Apple be able to make upgrades that are similarly game-changing? Despite this strong demand, until Qualcomm can demonstrate the ability to drive better profits, investors aren’t really excited for the brand. Qualcomm shares declined 2% in early trading.
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Sectors at a Glance
| Sector | Day | Month | Year |
|---|---|---|---|
| Communications | -2.47% | 4.94% | 38.75% |
| Consumer Disc. | -1.82% | -4.11% | 15.25% |
| Consumer Stap. | -0.74% | 1.60% | -1.03% |
| Energy | -1.87% | -1.21% | -6.81% |
| Financials | -1.22% | 3.36% | 7.13% |
| Health Care | -0.14% | 3.19% | 5.26% |
| Industrials | -1.16% | -0.30% | 11.29% |
| Materials | -1.31% | -3.19% | -2.32% |
| Real Estate | -0.73% | -4.60% | -5.67% |
| Technology | -2.10% | 4.12% | 45.50% |
| Utilities | -0.21% | -2.55% | -10.63% |
*Market data based on standard trading hours and calculated close to close
[ big pharma ]
Merck Pushes Profits as Cancer War Heats Up
After a tough year, Big Pharma is staging a comeback
BREAKING NEWS
Merck defied investor expectations and turned a profit in their most recent earnings report as sales surged. Let’s break down what happened:
WHAT HAPPENED
Merck is pushing out of a pretty disappointing 2023 on a high note. They generated an adjusted $0.03 EPS from $14.63 billion in revenue when most of The Street was anticipating them taking heavy losses this quarter.
Basically, Merck’s Keytruda cancer treatment keeps getting wider adoption—growing 27% YoY. Merck has basically transformed into a company at war with cancer.
FUTURE FOCUS
Rising Keytruda revenue usually hasn’t been enough to keep Merck’s stock rising, as the patent for Keytruda will expire in 2028. However, Merck’s latest guidance and their improved development and acquisition roadmap are finally boosting confidence in the pharma giant’s ability to keep pushing revenue even when Keytruda faces a huge wave of generic pressure.
WHY IT MATTERS
It’s great to see that there’s more to pharma than just Ozempic and Mounjaro these days. Development in the immunotherapy and cancer space is demonstrating huge opportunities for new treatments as cancer rates gradually rise worldwide. Merck has positioned themselves as a key player in the expanded war on cancer—and the market really is here for it. Merck stock rose over 1% in response to this strong showing.
[ fitness ]
Peloton Crumbles as Losses Expand
No amount of transformation can bring the pandemic magic back.
BREAKING NEWS
Peloton stock is in freefall after a mixed-bag earnings report put their ability to generate any kind of profit in the near future in doubt. Let’s explore the damage:
WHAT HAPPENED
While Peloton surprised to the upside and generated $743 million in revenue during the holiday season—their losses expanded to $0.54 per share. Thanks to more digital efforts, investors wanted to see a much faster road to profitability. Last year, Peloton lost $0.98 per share during this period, so there’s definitely progress being made.
SALES DECLINE
Despite the fact that Peloton beat expectations, sales are still mildly down from last year as well. Even worse, Peloton projects further revenue declines in the current quarter. The only bright spot here is Peloton’s strong growth for their paid app subscriptions and two quarters of profitability for their connected devices. Peloton is so close to putting all the pieces together here—but frustratingly far away as well.
WHY IT MATTERS
Peloton has been rebuilding their reputation as a content company after their catastrophic decline in revenue and profitability post-COVID. The stock has a long way to go to win investor sentiment back—and frankly, The Street was expecting better lift from their partnership with Lululemon. Instead, Peloton is still in the wilderness. Peloton stock declined over 9% in early trading.
Extra Moby Snacks
Shell stock got a solid boost in early trading as the oil giant managed to maintain higher profits than expected despite a slump in oil prices. A $3.5 billion share buyback also helped bolster the stock.
Align technologies managed to defy an industry in decline by posting solid Q4 results and massively boosting their Q1 revenue guidance. Shares of the invisible-braces maker surged over 14% in early trading.
TOGETHER WITH
Today’s report is brought to you by hear.com, the world’s leading online hearing aid company, delivering unparalleled speech clarity to 385,000 customers and counting.