Stocks Finish Mixed Ahead of Big Tech Earning

Dow: +0.01% | Nasdaq: -0.34% | S&P: -0.02%

Catch Up Quick

• The CDC says fully vaccinated people can exercise & hold small gatherings outdoors without masks (CNBC)

• Alphabet ($GOOGL) posted a huge earnings beat as revenue grows 34%

• Carlyle ($CG) plans to raise $22B for its largest buyout fund ever

• Spotify ($SPOT) launched a paid podcast platform, joining Apple in the space of podcast paywalls

• UBS lost a larger-than-expected $774M from the implosion of Archegos Capital Management last month

• The U.S. plans to share ~60M AstraZeneca vaccines across the world

• Fully vaccinated Americans will be allowed to travel to EU countries this summer

• Jeff Bezos' Blue Origin is challenging NASA's decision to let SpaceX build a lander system for the space agency's return to the Moon

• Biden will establish a $15 dollar / hr minimum wage for federal contractors

• Apple ($AAPL) plans to open a new $1B campus in North Carolina

• The U.S. lifts its pause on the use of Johnson & Johnson’s ($JNJ) vaccine

• Foot traffic at malls in March is up 86% from the same month last year (Placer.ai)

Thought of the Day

• Recently, shares of streaming vanguard Netflix ($NFLX) fell as much as 11% as the company reported lower-than-expected quarterly earnings

• Despite earnings per share and revenue that topped estimates by 26% and 0.5% respectively, global net subscriber additions were <4M, painfully short of the expected 6.2M

• While Netflix’ correction might have been overblown given as net subscriber additions were still in line with YoY expectations (despite the quarterly miss), they announced a $5B share buyback program

• Historically, the last 5 times that Netflix has missed on net subscriber additions, the stock has fully rebounded to reach new highs

• Another important takeaway from Netflix’s earnings miss is the quantitative data which supports the thesis of consumer preferences shifting away from pandemic beneficiaries, as better than expected vaccine distribution expedites the return to normalcy

• This isn’t to say that such companies won’t retain the customers/users they added over the last year, but instead investors should be weary of highly ambitious future growth estimates predicated on the previous (abnormal) four quarters

The Bottom Lines

• It's important to remember that over the course of 2020, a record 83%, 87%, and 80% of companies in the S&P 500 beat Q2, Q3, and Q4 earnings respectively

• Greater earnings uncertainty coupled with priced-in growth estimates that will be difficult for certain stay-at-home beneficiaries (Netflix, food delivery companies, etc) to sustain post-pandemic should warrant caution heading into Q1 2021 earnings!

The Afternoon Audit