Just when it looked like the battered US technology space might be picking itself off the floor, a weak set of quarterly numbers from Facebook-owner Meta Platforms intervened to reignite the volatile trading seen so far in 2022.
The drop in Meta's market valuation at $250 billion was the biggest for a US-listed firm on record and led the wider US market lower following the earnings release (2 Feb).
Digital payments platform PayPal also slumped as the company guided for earnings per share of between $4.60 and $4.75 for 2022 against a consensus analyst estimate of $5.25 (based on data from Factset). The company is being hit by a cost-of-living squeeze which is putting consumer spending under pressure.
The latest US jobs numbers, which are closely watched by markets and by the US Federal Reserve when weighing interest rate decisions, came in way ahead of forecasts and reinforced expectations for a rate hike when the Fed next meets in March. In their wake US stocks saw a subdued end to the week.
AMAZON
Some investors may be surprised that Amazon's fourth quarter results triggered an 11% rise in its share price. Sales of $137.4 billion were marginally below forecasts, and the $112 billion to $117 billion revenue guidance for the first quarter of 2022 was up to $8 billion below expectations.
A boost from the value of its investment in Rivian might have provided a sweetener to its results yet the electric vehicle maker has seen in valuation plummet by 41% so far in 2021, so will Amazon suffer a write-down on this stake?
Amazon's shares jumped because its cloud computing arm beat expectations and the decision to put up prices for its Prime delivery/streaming membership service will help earnings during these inflationary times.
Perhaps the most exciting bit of news for the market was Amazon disclosing revenue for its advertising business for the first time. Advertising services grew 32% year on year to $9.7 billion in the fourth quarter.
META PLATFORMS
Shares in Meta Platforms crashed by more than 25% on 3 February after it revealed a big decline in quarterly earnings and warned that users were spending less time on its Facebook social network.
More than $220 billion was wiped off the value of the company - the biggest ever one-day market valuation decline in history.
The stock matters to more people than you might think. A lot of pensions are invested in funds that track the MSCI World index, which contains a basket of big companies. Meta accounts for more than 1.3% of that index, so its share price decline will therefore feed through to pension valuations.
The stock is also a big holding for Fundsmith Equity which is one of the UK's most popular funds, managing £26 billion of investors' money.
Spare a thought for Meta founder Mark Zuckerberg whose personal wealth has just fallen by nearly $30 billion, reflecting the decline in the value of his stake in the business.
COCA-COLA/PEPSICO
Thursday 10 February will see drinks giants Coca-Cola and PepsiCo both issue their fourth quarter results.
While fewer drinks and snacks were bought from restaurants, pubs, stadiums and other entertainment venues during the pandemic, greater volumes were bought for home consumption which helped Coca-Cola and PepsiCo.
The sales patterns will now be slowly shifting back to historical trends, so it will be interesting to see if the extra home sales stick, or whether we're trying to get healthy again and not have sweet treats in the house.
Coca-Cola's third quarter talked about a big increase in marketing spend versus the previous year, so the market will be keeping a close eye on profit margins in its fourth quarter results.
PepsiCo is a broader business with Quaker Foods and Walkers Crisps among its brands. Its third quarter saw revenue growth of 11.6% which was a big slowdown from the 20.5% seen in the second quarter.
A key issue for both companies is inflation - are they putting up prices or are they going down the shrinkflation route, pushing smaller sized products at the same prices as previously larger ones?
