There were divergent fortunes for US indices over the past week. The improving picture for inflation still underpinning reasonably positive sentiment but Netflix (NFLX:NASDAQ) and Tesla (TSLA:NASDAQ) helping to put the tech space on the back foot.
The quarterly updates from both companies were not exactly a disaster, however tech names are heading into this earnings season with expectations and valuations high and this leaves very little margin for error.
Therefore Netflix's weaker than expected revenue, despite better than expected subscriber numbers as a crackdown on password sharing hasn't led to the feared exodus from the platform, really tripped up the shares.
Similarly Tesla's profitability was actually better than feared given the price cuts it has been pushing through to defend market share but the prospect of further price reductions and factory downtime hitting production led investors to turn sour on the stock.
Online bank Discover Financial (DFS:NYSE) slumped as it paused its buyback programme off the back of weaker than expected results and news of a probe into incorrect classification of credit card accounts from around mid-2007.
APPLE
Amid all the AI talk this year, Apple (AAPL:NASDAQ) seems to have missed the boat. While tech rivals Alphabet (GOOG:NASDAQ), Amazon (AMZN:NASDAQ), Meta Platforms (META:NASDAQ) and many others have seen share prices soar as they laid out plans for AI projects and profits, the Cupertino giant has been surprisingly quiet.
The past week has shown that Apple has not been (A)Idle and has been quietly beavering away behind the scenes on its own generative AI tools under the codename Ajax.
Not to be confused with the character from Greek mythology, nor the cleaning spray for that matter, talk swirling round the markets is that Apple has built its own large language model AI system, including what is being termed as ‘Apple GPT’, a direct rival to ChatGPT, Google’s Bard and others.
For now, Apple is keeping mum, declining to make any sort of comment, presumably wanting to wait for a big launch event to capture the biggest exposure, which explains why the stock hasn’t really budged much over the past week, nudging just a couple of percentage points higher.
That said, that still implies a $3 trillion dollar market cap having closed above that incredible level for the first time ever at the end of June.
CARVANA
Picking recovery winners is hard and high-risk but anyone that backed Carvana (CVNA:NYSE) will be quids, or dollars, in. The online used car retailer has jumped more than 50% over the past week after getting sales growth back on track and sealing a potentially life saving debt deal.
The Arizona-based firm posted quarterly sales of almost $3 billion, comfortably beating consensus forecasts of $2.5 billion, with losses also way better than predicted. Earnings per share were -$0.55 versus market expectations of -$1.15 per share.
Carvana has been in the sights of short sellers as growth slumped over the past couple of years thanks to used car demand drying up, putting its heavily geared balance sheet under intense pressure. So a deal over the past week with bondholders, including Apollo Global Management (APO:NYSE), that will cut debt by more than $1 billion has savagely burned shorters.
At $55.80, the stock has now soared 1,105% this year. As of 18 July, about 54% of Carvana’s shares were still being shorted, according to analytics firm Ortex, meaning short sellers are sitting on more than $2 billion of losses after this week’s rally.
Still, Carvana’s share price remains a shadow of its former $361 peaks of two years ago, generating large gains in the past for short sellers who had bet on the price falling.
ODDITY TECH
Profitable Israeli beauty company Oddity Tech (ODD:NASDAQ) turned heads with its Wall Street debut (19 July). Shares in the company behind the Spoiled Child and Il Makiage brands rocketed 36% higher to $47.53 in debut dealings, having priced its initial public offering at $35, above the previously set $32 to $34 range.
Undoubtedly, much of the excitement centred on the fact the consumer tech platform for the beauty and wellness market uses AI to develop cosmetics. Oddity and its selling shareholders, which include private equity group L Catterton, raised $424 million in an offering which added further momentum to the recent new listings revival across the pond.
Guided by co-founder and CEO Oran Holtzman, Oddity Tech has bold plans to shake up the legacy beauty industry and replace the in-store experience by using data and artificial intelligence to develop brands and generate tailored product recommendations.
According to the IPO prospectus, Oddity believes its target market is ‘ripe for disruption, dominated by established, largely offline, wholesale models that we feel have not sufficiently evolved to meet changing consumer preferences for a digital, personalised, and customised experience.’
