The US stock market started the week on the back foot, continuing last week's sell-off before stabilising in mid-week.
Oil prices lifted energy stocks after commercial crude inventories saw a bigger drawdown than expected for the second week running.
Meanwhile, new orders for durable goods flatlined in July against expectations of a small increase and pending home sales showed a drop of 20%, suggesting the economy is already in ‘slowdown’ mode.
However, with core inflation running at close to 4% and wages rising at close to 6% thanks to record low unemployment, Powell is likely to push the argument for rates to move higher for longer to rein in prices.
After such a strong rebound from the June lows, and with volatility already creeping up, markets could be in for a wild ride in the coming weeks.
ZOOM COMMUNICATIONS
Zoom Communications (ZM:NASDAQ) is struggling to grow fast in the post-pandemic world after its latest earnings release once again disappointed investors. The San Jose company reported second quarter to 31 July 2022 adjusted earnings per share of $1.05, beating the $0.94 expected by analysts, but revenue growth slowed to single-digits.
Its $1.10 billion of revenue missed expectations of $1.12 billion, representing 8% year-on-year quarterly growth, sending the share price plunging more than 11% to $86.36. The stock peaked at $559 in October 2020.
Based on data from Investing.com, this is the fifth quarter straight of revenues between $1 billion and $1.1 billion. Zoom's 204,100 enterprise customers increased less than 3% from 198,900 three months earlier. That's not the sort of growth that will make investors pay a growth premium for the shares in future.
SALESFORCE
Shares in Salesforce (CRM:NYSE) sank in after hours trading, despite second quarter earnings and revenues beating analysts' expectations, after the customer relationship management software giant downgraded its sales and earnings forecasts for the remainder of the year.
Adjusted earnings per share (EPS) came in at $1.19 for the quarter ended 31 July, handily beating the $1.02 expected, whilst revenues at Marc Benioff-bossed Salesforce rose 22% year-on-year to $7.72 billion and the San Franciso-based company also announced a $10 billion share buyback programme.
However, EPS for full year 2023 is now expected to be between $4.71 and $4.73 and revenue is projected to reach $30.9 billion to $31 billion (implying 20% growth in constant currency), which is below previous EPS and sales estimates of $4.74 to $4.76 and $31.7 billion to $31.8 billion respectively.
Benioff, Salesforce's charismatic chairman and co-CEO, described Q2 as ‘another strong quarter’ showing ‘yet again the durability of our business model’. He added that Salesforce is ‘thrilled to initiate our first-ever share repurchase program to continue to deliver incredible value to our shareholders on our path to $50 billion in revenue in full year 2026’.
PALO ALTO NETWORKS
Silicon Valley's Palo Alto Networks (PANW:NASDAQ) became the latest tech company to announce a stock split to try and lure in retail investors. The cyber security firm plans to push through a three-for-one share split in the form of a dividend, following in the footsteps of Tesla (TSLA:NASDAQ), Alphabet (GOOG:NASDAQ) and Amazon (AMZN:NASDAQ) earlier this year.
Palo Alto Networks said existing shareholders at the close of trading on 6 September 2022 will receive two additional shares for every one owned, with trading in the new adjusted stock to start on 14 September.
The news followed a blistering fourth quarter (to 31 July) for the company and led to the stock jumping 8% to $551 in after-hours trading.
The Q4 numbers showed EPS (earnings per share) of $2.39 outstripping the $2.28 consensus estimate. Revenue also beat analyst forecasts, surging 27% year-on-year to $1.6 billion, beating the consensus estimate of $1.54 billion as the war in Ukraine thrusts cyber security to the top of board agendas.
