Hope you are all doing well. After a terrible start to 2022, three straight weekly declines, the major U.S. stock indexes posted their second positive week in a row, eclipsing the previous week’s modest gains. It was a light week of news. There was a monthly jobs number released and that was the big piece of economic data. The 467,000 jobs that the U.S. economy generated in January exceeded economists’ expectations by a wide margin, and upward revisions to job totals in late 2021 provided added another 709,000 jobs. The report is a further indication of the labor market’s strength. It was not the jobs report or economic data that moved markets this week, it was corporate data. Three of the largest holdings in the index reported earnings this week. With the Winter Olympics underway I have broken down the three earnings reports by Gold, Silver and Bronze.
Alphabet (Google)- Gold Medal
Google parent Alphabet reported better-than-expected fourth-quarter earnings and revenue. The company earned $30.69/share vs $27.34 expected and generated revenue of $75.33 billion over $3 Billion more than was expected. Alphabet reported revenue growth of 32%, proving again that it was able to withstand the pressures from the pandemic and inflation. Their results continue to exceed their competitors by wide margin and the stock price reflects that. More importantly, the company also announced a 20-for-1 stock split that will go into effect in July. The split doesn’t change the fundamentals of the business. Rather, it will lower the price of each share, a move that companies often make when their stock trades in the thousands of dollars. Were the split to happen as of Friday’s close, the cost of each share would go from $2865.86 to $143.29, and each existing holder would get 19 additional shares for every one they own.
Amazon – Silver Medal
Amazon relieved investors with a near doubling in profit in the holiday period and said it is raising the price of its Prime membership in the U.S. to $139 a year from $119. The results showed Amazon was able to control labor and supply costs better than had been expected. The company also saw growth in its cloud-computing and advertising businesses. The company had the largest one day increase in value ever on Friday as the stock surged following the earnings report, increasing founder, Jeff Bezos’s net worth and helping offset the cost he is incurring to dismantle a bridge to fit his yacht through.
Meta (Facebook) – Bronze Medal
I am being generous giving them the Bronze, really they finished significantly off the podium. The company lost the most value in history on Thursday as the stock plummeted more than 26% following the release of their earnings. The results were bad relative to expectations missing their earnings number by 17 cents a share. The company did still beat on the top line generating $33.67 Billion of revenue for the quarter. The reason the stock went down had more to do with the future than the present. The company issued disappointing guidance for the first quarter in addition to coming up short on its active user numbers. I fielded a few questions this week on whether or not it is a time to buy the stock. It does look attractive at this price level but it has not gotten to the point where the selling is irrational and it screams buy, so proceed cautiously and buy in gradually.
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