We have had a tremendous beginning to the Q1 earnings season, seemingly justifying this crazy broader market rally we’ve been experiencing since the March lows. This narrative continues into yesterday evening’s results.
4/28 Earnings Results
Facebook
FB
was the first notable report to hit the print this afternoon, and traders loved it, driving a 6% rally in after-hours trading, sending the stock to a fresh all-time high. Facebook illustrated a blowout quarter driven by digital advertising spending taking off as business spending picks up and social media engagement remains strong.
This was a very similar narrative to Alphabet’s results as far as ad revenue goes, illustrating a 10% topline beat that trickled down to a 40% beat on EPS estimates. Facebook demonstrated year-over-year revenue growth of 48% and net income expansion of 94%. This will catalyze a rerating on the stock, but I’m not chasing FB’s strength at all-time highs. There are still concerns about its targeted ad business moving forward due to regulatory overhang.
The world’s largest public company blew earnings estimate out of the park. Apple
AAPL
beat across-the-board estimates, solidifying its iPhone 12 supercycle. The iPhone illustrated 66% year-over-year growth, with China being a major demand catalyzer. It wasn’t just Apple’s smartphone that drove this incredible quarter. Mac sales were up by 70%, iPad revenue rose 79%, and its subscription-based ‘Services’ revenue expanded by 27%.
This report more than justified its lofty valuation (which I have been questioning for some time), but the mystery moving forward is whether this pandemic-induced demand can be sustained in the post-pandemic world. The stock drove up over 3% in post-market trading.
Unbelievable Q1 Reporting Season Thus Far
I have been impressed with the results from Q1 overall, with some unbelievable reports justifying lofty valuations. I expected beats, but I didn’t anticipate this magnitude of beats that enterprises have illustrated, which has kept the major averages buoyant through what I thought would be a much rockier week. Below I break down some of the most impressive reports I have seen this week so far.
Alphabet’s Results:
Alphabet
GOOGL
has been one of the big 2021 outperformers, with many investors seeing this stock as a recovery trade (due to both increased ad spending from businesses and Google’s usage inactivity/travel searches). The enterprise just reported its biggest EPS beat on record, with top and bottom-line growth of over 35% and 166%, respectively. What really impressed me about this report was its 2021 YouTube (a segment that recently started reporting separately) revenue guidance of $29-$30 billion, matching Netflix’s
NFLX
full-year expectations. YouTube is just one facet of this diverse tech powerhouse’s revenue drivers, and it looks like it could surpass Netflix for content consumption.
GOOGL has been a peculiar trade over the past 6 months, seeming to move up one level with the steps representing increasingly impressive quarterly reports. One of Alphabet’s concerns moving forward is going to be what to do with its $137 billion in cash & equivalents, with the DOJ ready to refute any acquisition that Alphabet proposes on the grounds of anti-trust violations along with regulatory concerns surrounding targeted advertising.
Shopify’s Results:
Shopify
SHOP
is one of the most impressive ultra-high growth stocks I’ve ever seen. This business has been an enormous 2020 pandemic beneficiary as it facilitates the transition from the dying brick-in-mortar model to a digitally-driven hybrid e-commerce economy, working with more than 1 million businesses.
Since the beginning of 2019, the stock has soared over 815% and is up roughly 100% in the past 52-weeks alone. SHOP just reported its best quarter on record. The enterprise continues to illustrate quarter-over-quarter expansion. The company beat EPS estimates by 158% as Shopify thrusts itself into an unbelievably profitable growth positioning with reliable revenue streams that justify its rich (an understatement) valuation multiple of 275x price to forward earnings.
The stock soared over 10% yesterday, headed back to its high of $1,500. SHOP’s incomprehensibly valuation multiples continue to keep me at bay with any share purchases. The company has an enormous amount of growth ahead of its to grow into its $160 billion valuation.
It’s Not All Roses:
Despite the impressive Q1 reports that we have seen thus far, investor’s expectations remain sky-high for this quarter, and we have witnessed profit-pulling following robust reports that exceeded expectations. Microsoft
MSFT
, AMD
AMD
, Pinterest
PINS
, Netflix
NFLX
, Spotify
SPOT
, and Tesla
TSLA
all traded lower following their healthy reports (all beating top and bottom-line estimates) over the past week. This may be a nice ‘buy the dip’ opportunity for some of these innovation-driven stocks, but I will be waiting for the dust to settle before I make any moves.
Amazon (AMZN) On Deck
Amazon
AMZN
, the innovative genius that almost single-handedly catalyzed the brick-and-mortar retail apocalypse, will report its Q1 results after the bell today. Amazon shares have largely consolidated since early September when the stock hit its all-time high. Still, it would appear that investors & traders are betting on an excellent quarter with the stock making its way back to that high over the last month going into the report, trading only a percent or two below today.
According to Zacks Consensus Estimates, analysts estimate that AMZN will report an EPS of $9.75 on sales of $105.23 billion, which would represent year-over-year growth of 94.6% and 39.5%, respectively. We have had some mixed price action from recent earnings, with the last 2 reports resulting in a decline despite top and bottom-line beats. The company is going to need to impress if they want to keep this one-month rally alive. Keep your eyes peeled on its cloud-computing segment, AWS, as this has been one of the enterprise’s most significant growth drivers.
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