AAn important week in the first quarter earnings season has just ended when tech giants like Tesla (TSLA), Amazon (AMZN), Apple (AAPL), Facebook (FB) and Microsoft (MSFT), among other things, removed any doubts that they could maintain the dominance they had maintained during the pandemic.
Concerns were raised early in the quarter not only about how expensive and overbought these stocks were, but that reopening the economy would somehow “disrupt” their businesses. What we learned this week was that many (if not all) of these companies ignored the noise and focused on doing what they can, which again proves the tech cynics and doubters otherwise. In the case of Amazon, which slightly outperformed Street’s first quarter earnings estimates, the online retailer continues to benefit from both the demand for e-commerce and the demand for cloud services. This caused the analysts to revise their earnings estimates.
Amazon’s impressive financial results and guidance, as well as Google’s (Aco , TogetL) seem to allay the headwinds that reopening the economy would have on its results. While it’s early days and half of the winning season still left, the upward forecast they have given is the standout story so far. For added context, the average first quarter revenue growth in digital advertising for online tech giants was over 50%.
The strong growth of Twitter’s online advertising (TWTR) and Snap (SNAP) also suggests that, despite the acceleration of vaccinations and the lifting of lockdown restrictions across the country, a large number of consumers have chosen not to change the online shopping habits they adopted during the COVID peak. Given that 87% of the S&P 500 index companies reporting earnings for the quarter exceeded market expectations, the encouraging economic data we’ve received over the past few weeks appears to have benefited Corporate America.
Will the strong growth trend continue throughout the first quarter earnings season? That remains to be seen. The median GDP growth forecast for the first quarter was 5.8%. It is expected to hit 9.3% in the second quarter. So far, the 2021 guidelines of the companies reported so far appear to support these estimates. But there’s also a certain degree of conservatism, given the many industries that have been hardest hit by the pandemic and that are now preparing to reopen.
Friday’s stock pullback also suggests that while confident that earnings results will support higher valuations, investors may want to continue to wait as stock prices hit near all-time highs. The market is still trying to negotiate whether the optimism about economic growth is well placed. I suspect this question will be answered by the end of this winning season.
Here are the earnings I’ll be seeing this week.
Lift (ELEVATOR) – Reports after the end, Tuesday May 4th
Wall Street predicts Lyft will lose 53 cents per share on sales of $ 558.49 million. This compares to the same quarter last year, which posted a loss of 32 cents per share on sales of $ 955.71 million.
What to Remember: The ridesharing pioneer recently gave up his self-driving business after selling this asset to Toyota for an estimated $ 500 million. While some analysts viewed this as an odd move, the decision will help Lyft reach profitability much sooner. Not to mention, the company no longer has the burden of creating expensive self-driving technologies that haven’t caught on yet. The market welcomed the move. But there are other short-term headwinds in Lyft’s business model that the company must overcome. Last week, US Secretary of Labor Marty Walsh insisted that domestic workers should be classified as employees and receive related benefits. This news, which dropped the stock around 10% last week, resembles the company’s battle against California Theorem 22 This enables him to pay the drivers for the services they provide on demand.
For stocks to rebound, Lyft will need to deliver a top and bottom line beat Tuesday, along with an upward forecast that shows a path towards profitability.
Beyond meat (BYND) – Reports after the end, Thursday May 6th
Wall Street predicts Beyond Meat will lose 19 cents a share on sales of $ 113.83 million. This compares to the same quarter last year when earnings were 3 cents per share on sales of $ 97.07 million.
What To Keep In Mind: Is It Time To Be Nimble With Beyond Meat Stocks? The vegetable meat giant has lost some of its sizzle in the past six months, down 13%, while the S&P has increased nearly 30% over that time. The decrease is due to a combination of factors. Aside from valuation concerns, there are growing fears that competitive pressures could increase from Impossible Foods, among other things. Additionally, the company’s rapid pace of growth has slowed in recent quarters, raising concerns about profitability. According to BTIG analyst Peter Saleh, who oversaw the company’s high profile partnerships with McDonald’s (MCD) and Yum Brands (YUM). Of course, Saleh noted that it may take Beyond some time to realize the growth benefits. But in the near future, with the stock down 40% from its 52-week high of $ 221, Beyond doesn’t have to impress too much on Thursday for the stock to show more signs of life. However, the forecast for the full year will be the main factor in how quickly the stock recovers.
Peloton (PTON) – Reports after the end, Thursday May 6th
Wall Street predicts Peloton will lose 12 cents per share on sales of $ 1.11 billion. This compares to the same quarter last year, when sales of $ 524.60 million lost 2 cents per share.
What to Note: Peloton stock has been under heavy selling pressure for the past few months, falling 42% since hitting its all-time high of $ 171. While the market still believes in Peloton’s long-term position to disrupt the fitness industry through its home-connected subscription platform, the company is facing headwinds in the short term. Supply chain constraints aside, there has been a public relations nightmare that stemmed from a recent fatal incident involving a child with their Tread + product. This sparked an investigation by the Consumer Product Safety Commission (CPSC). Peloton defended its product, which has been in the market since 2018, saying it will contest any recall requests from the CPSC. A 20% decline in the last two weeks and a 35% year-to-date decline could now be a good time to take a position as the demand for fitness products is still high and subscriptions are still on the rise. But the company has a lot to prove on Thursday.
Year (YEAR) – Reports after the end, Thursday May 6th
Wall Street predicts Roku will lose 15 cents per share on sales of $ 490.56 million. This compares to the same quarter last year, when the company lost 45 cents per share on revenue of $ 320.77 million.
What to Remember: Roku stock is up 20% over the past month, compared to a 6% increase in the S&P 500 index. Aside from the rapid growth in sales and accounts, the company grew last year due to the advent of Apple (AAPL) Apple TV + and Disney’s (DIS) Disney + platform, Roku is benefiting from a rising trend in advertising dollars moving from linear television to streaming. In addition, Roku management has started not only to find new sources of income, but also to find ways to penetrate international markets. Analysts have welcomed these moves aimed at enabling years of consistent growth. Last week, Wedbush analyst Michael Pachter upgraded the stock from neutral to outperform with a target price of $ 475, indicating a premium of nearly 40% over current levels. Aside from Roku’s dominant streaming advertising market share, Roku stock looks tastier after falling 30% from its 52-week high. On Thursday, the company must do its part to demonstrate this value.
The views and opinions expressed are those of the author and do not necessarily reflect those of Nasdaq, Inc.