It has been a tough week for Wall Street with the big US tech firms failing to keep stocks afloat despite, in many cases, beating earnings expectations.
Expectations were pitched pretty high and Alphabet (GOOG:NASDAQ), in particular, disappointed by revealing a weaker than expected contribution from its cloud computing arm. Market sentiment is also being affected by the escalating tensions in the Middle East.
Insurance firm Willis Towers Watson (WTW:NASDAQ) was in demand after its third quarter numbers came in ahead of forecasts.
Arizona-based orthodontics technology business Align Technology (ALGN:NASDAQ) was slammed as it told investors that third quarter (to 30 September) earnings and revenues came in at $2.14 per share and $960.2 million, below analyst consensus estimates pitched at $2.27 per share and $998.7 million respectively.
Kick in teeth for Align Technology investors after forecast miss warning
‘Our third quarter results reflect lower than expected demand and a more difficult macro environment than we experienced in the first half of 2023’, chief executive Joe Hogan explained. ‘Dental practices and industry research firms have reported deteriorating trends, including decreased patient visits and increased patient appointment cancellations, along with fewer orthodontic case starts overall, especially among adult patients’, he said.
AMAZON
If latest quarterly results from big tech were mixed this week, Amazon’s (AMZN:NASDAQ) third quarter may have tipped the scales to positive. Amazon is working hard to show how on the ball it is when it comes to the generative AI craze, in part to counter the perception that it has drifted behind some rivals in AI cloud computing, particularly Microsoft (MSFT:NASDAQ).
Chief executive Andy Jassy rattled off the ways Alexa, stores and other Amazon businesses are using the technology, and third quarter results show why he is keen to press the point home. Its AWS cloud unit grew only 12% year-om-year, sharply lower than the 28% growth seen in the third quarter of 2022 and way behind the 29% growth Microsoft reported this week from its Azure cloud unit.
So, work to do, but investors will be impressed by cost management, with Amazon’s profit margins beating expectations, especially at AWS, helping operating profit to touch $11.2 billion, quadrupling last year’s equivalent. Ad revenues were strong, up 26% to $12.1 billion, perhaps settling nerves, online store revenues rose 7%, Prime subscription fees were up 14% and third-party seller services jumped 20%.
Amazon’s stock jumped 5% in response, a welcome jolt higher after a rough 17% sell-off since mid-September.
COCA-COLA
Beverages giant Coca-Cola (KO:NYSE) provided a refreshing tonic for investors this week after delivering better than expected third quarter earnings and raising annual sales and profit forecasts.
Adjusted EPS (Earnings per share) came in at $0.74 compared with Street estimates of $0.69 and adjusted sales rose 8% to $11.9 billion, above analysts’ forecasts of $11.4 billion.
Resilient consumer demand for sodas, juices and energy drinks saw volumes rise 2% despite average selling prices 9% higher than the same period a year ago.
Strong trading prompted management to increase full year guidance which now calls for organic revenue growth between 10% and 11% up from 8% to 9%.
Meanwhile core profit is now expected to grow between 7% and 8% from 5% to 6% previously. Chief executive James Quincey said he expects the company’s price increases to moderate over coming months reflecting a slowdown in US inflation.Coca-Cola shares gained around 4% despite a tough week for US stock markets. Year to date the shares are up 1% compared with 9% gains for the S&P 500.
SOLAREDGE TECHNOLOGIES
The past week has been rough for solar power equipment outfit Solaredge Technologies (SEDG:NASDAQ) and the rest of the US solar sector. Its shares tank 32% as it slashed its outlook for the third quarter, taking other solar stocks with it including Sunrun (RUN:NASDAQ), Canadian Solar (CSIQ) and Enphase Energy (ENPH).
Solaredge blamed high inventories and slower installations in Europe for the revised downward outlook. Year-to-date Solaredge shares have fallen over 71% to sit at the $81 mark.
Well known short seller Muddy Waters then published a report saying that home solar panel and battery storage firm Sunrun ‘significantly inflates the number of subscribers it reports’.
Sunrun was quick to refute the claims and said Muddy Waters was purposedly manipulating the share price for his benefit.
Sunrun said in a statement: ‘Muddy Waters is trying to compare all costs incurred for customer purchase systems to only the capitalised costs to create subscribers. Sunrun appropriately captures the cost to install a subscriber in our reported supplemental cost memo. Muddy Waters has it wrong.’ This didn’t stop Sunrun’s shares falling more than 7% on the day the research came out.
