Stock Market Rally Hits Highs Amid Strong Earnings, Jobs Report; Square, GM, Etsy Among Key Movers
The stock market rally gained ground amid a heavy earnings slate and other news, with the Nasdaq, S&P 500 and Dow Jones all hitting record highs. Square (SQ) soared on a $29 billion deal to enter the “pay later” financing market. ZoomInfo Technologies (ZI), Datadog (DDOG) and HubSpot (HUBS) led big earnings moves by software makers. But there were earnings losers, such as Etsy (ETSY). General Motors (GM) plunged on a raised 2021 EPS forecast that was still below analyst targets. Growth stocks led until Friday, when a strong jobs report and rising Treasury yields shifted investor focus toward financials.
Market Rally At Highs
The Nasdaq hit a record high Thursday, but fell modestly Friday as Treasury yields jumped on the strong jobs report. The Dow Jones and S&P 500 hit record highs on Friday, with higher yields boosting many financials. There were still many big earnings winners and losers. Crude oil prices fell.
Jobs Growth Picking Up
The U.S. added 943,000 jobs in July, the best monthly gain since last August with upward revisions to May and June employment figures. That suggests the Fed will officially begin “taper talk” at the Sept. 21-22 meeting. The jobless rate slid a half-point to 5.4%. Wage growth continued its strong run, especially for pandemic-hit sectors. In the leisure and hospitality sector, which added 380,000 jobs last month, average hourly pay for nonsupervisory workers rose 1.4% from June and 13% from a year ago. Meanwhile, the ISM manufacturing index dipped in July amid labor and supply-chain issues, but remained high. The ISM services index was surprisingly strong, despite rising Covid cases and restrictions.
Square Soars On Afterpay Deal
Square (SQ) agreed to buy Australia-based consumer lending startup Afterpay in a $29 billion all-stock deal. Afterpay competes in the emerging “buy now, pay later” installment payment market. The purchase price represented a 31% premium to Afterpay’s closing price on July 30. Square said it plans to integrate Afterpay into its Cash App consumer business. The acquisition is expected to close in early 2022. Square also reported strong earnings but missed on revenue. Square stock surged.
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GM Dives As 2021 Target Still Low
General Motors (GM) swung to a Q2 profit that beat some views and missed others. Revenue more than doubled vs. the year-ago, pandemic-hit quarter, boosted by strong demand and pricing for full-size trucks and SUVs. But GM’s raised EPS guidance for 2021 fell short as it expects to produce 100,000 fewer vehicles in the second half of the year vs. the first, citing chip and commodity headwinds. Stellantis (STLA), forged out of Fiat Chrysler and Peugeot’s parent, reported $7 billion in profits in the first half of 2021. Toyota (TM) and Honda (HMC) also reported strong Q2 earnings, but the former warned of an extended global chip shortage. GM stock plunged. Stellantis and Honda are near breakouts. Toyota broke out, then dipped below the buy point after earnings.
China EV Auto Sales
Li Auto (LI) and Xpeng Motors (XPEV) sales outsold Nio (NIO) for the first time in July. Li Auto grew EV sales 251% year on year to 8,589 units. Xpeng Motors (XPEV) saw sales surge 228% to 8,040. And Nio grew July sales 125% to 7,931. Li Auto and Xpeng also grew EV sales month on month, while Nio‘s dipped. For Nio, the sequential sales decline came after Tesla ((TSLA)) launched a cheaper Model Y SUV in China. Sales of electric cars in the world’s largest auto market will more than double to 2.4 million in 2021, the China Passenger Car Association recently estimated. The more-established, profitable BYD Co. (BYDDF) sold 50,492 new energy vehicles, including hybrids and commercial EVs, up 171% vs. a year earlier. EV sales totaled 24,996, up 109%.
Roku Misses User Target
Streaming video platform Roku (ROKU) crushed EPS views while sales growth accelerated to 81%. But Roku added just 1.5 million new users, vs. Wall Street’s target of 2.1 million. It ended Q2 with 55.1 million active accounts, up 28% year over year. It blamed the reopening of the economy after the Covid pandemic, which led people to seek other activities. Roku stock fell sharply.
Lilly Jumps On Alzheimer’s Hopes
Eli Lilly (LLY) hit record highs on growing enthusiasm for the company’s Alzheimer’s treatment. The drug giant reiterated its plan to ask for FDA approval this year. Meanwhile, Lilly’s EPS grew 29%, but missed views. Q2 sales rose 23% to $6.74 billion, easily beating.
HubSpot (HUBS) Q2 EPS rose 26% while revenue rose 53% to $310.8 million, both beating. The sales and marketing software maker said Chief Operating Officer and interim CEO Yamani Rangan will assume the CEO role on Sept. 7. HUBS stock gapped up to a new high.
ZoomInfo Technologies (ZI) Q2 earnings doubled while revenue rose 57% to $174 million. ZoomInfo raised its 2021 revenue guidance, including $8.5 million from recently acquired Chorus.ai. ZoomInfo’s online service provides contact and account data for sales and marketing teams. ZI stock had a wild week, but ultimately surged to new highs.
Datadog (DDOG) reported Q2 adjusted earnings jumped 80% to 9 cents, easily beating. Revenue rose 67% to $233.5 million, ending a four-quarter string of slowing growth. The enterprise software maker said it had 1,610 customers with annual recurring revenue of $100,000 or more as of June 30, up 59% from a year earlier. Datadog guided higher for the current quarter. Shares gapped to a new high.
Paycom Software (PAYC) reported a 56% EPS gain as revenue rose 33%, both accelerating and beating views. Fellow human resources software maker Paylocity (PCTY) also beat views. Both stocks broke out.
Cloudflare (NET) reported a smaller-than-expected loss while revenue rose 53% to $152.4 million, though the size of those beats may have disappointed investors. The networking and security software maker gave some mixed guidance. Shares fell Friday from near record highs, but pared losses.
Tech Services Firms Split
Epam Systems (EPAM) earnings rose 40% per share while revenue climbed 39% to $881.4 million, both beating and accelerating yet again. Epam also raised full-year guidance. Shares rose to a fresh high. DXC Technology (DXC) reported fiscal Q1 EPS quadrupled, ending a long string of year-over-year declines. Revenue fell 3.7% to $4.14 billion, but that was an improvement. But DXC tumbled below a buy point on weak guidance before rebounding somewhat on Friday.
Pot REIT’s EPS Doubles
Innovative Industrial Properties (IIPR), a real estate investment trust that serves the U.S. cannabis industry, reported second-quarter earnings that doubled vs. a year earlier while revenue growth accelerated to 38%. Shares broke out of a base. The company buys up cannabis operators’ properties and leases them back — giving the operators a funding infusion in the process.
Alibaba Revenue Falls Short
The Chinese e-commerce giant reported a 22% EPS gain, beating views. But revenue climbed 34% to $31.87 billion, slightly missing. Alibaba ((BA)(BA)) ended the quarter with 1.18 billion annual active customers, up 45 million from the previous quarter. It also increased its stock buyback program to $15 billion, from $10 billion. Shares fell.
Etsy Plunges On Guidance
Etsy (ETSY) reported a 9% EPS drop and a 23% sales gain, which both topped Q2 estimates, as new buyers nearly doubled vs. a year earlier. But it guided low as more consumers return to physical retail stores. Shares plunged.
Wayfair (W) jumped after reporting second-quarter earnings that fell 37% but easily beat views. Revenue unexpectedly fell 10%.
Chip Earnings Positive
Earnings reports were mostly positive from semiconductor stocks in the past week, but only a few got a major lift from the news. Among chipmakers, ON Semiconductor (ON) and SiTime (SITM) gained the most ground after their beat-and-raise June-quarter reports. ON Semi surged 11.7% higher and touched a buy point from a 16-week consolidation. SiTime leapt 31.2% and notched a record high after its report. Among semiconductor equipment suppliers, Axcelis Technologies (ACLS) and Kulicke & Soffa Industries (KLIC) saw the biggest pops from their upbeat earnings reports. Axcelis tacked on a 12.8% gain while Kulicke charged 13.6% higher after hitting an all-time high.
Shale Oil Plays Report
EOG Resources (EOG) reported Q2 results that topped analyst estimates Wednesday following a rebound in crude oil prices. Late Monday, Pioneer Natural Resources (PXD) missed Q2 views while Diamondback Energy (FANG) and Continental Resources (CLR) beat Q2 estimates and boosted dividends or resumed buybacks. On Tuesday, Devon Energy (DVN) boosted its dividend 44% from the prior quarter to 49 cents.
News In Brief
Zebra Technologies (ZBRA), a maker of enterprise systems for tracking inventory and other assets, smashed Q2 estimates and guided higher. Earnings surged 90% as sales increased 44% to $1.38 billion.
Virgin Galactic (SPCE) delayed the start of its commercial service to Q3 2022 from early 2022. But ticket sales have reopened at a start price of $450,000 per seat, up from $250,000 earlier. The commercial space company reported a larger than expected Q2 loss, but its revenue beat Wall Street expectations.
Yeti (YETI) reported better-than-expected second-quarter earnings and sales, with the 45% revenue gain the best in years. The outdoor recreational gear and drinkware maker also raised its full-year outlook.
Nikola (NKLA) lost 20 cents per share in Q2, worse than a 14-cent loss in the prior quarter but better than the 30-cent loss that Wall Street was fearing.
Match Group (MTCH) reported Q2 EPS fell 15%, worse than expected, as revenue climbed 27% to $708 million. The dating app and site operator guided low on Q3 amid the acquisition of Hyperconnect and higher investment costs. Match also said the delta variant of the coronavirus could impact Asia-Pacific subscriber growth.
Translate Bio (TBIO) rocketed Tuesday after Sanofi (SNY) pledged to buy it for $3.2 billion. The biotech is working on messenger RNA vaccines and treatments.
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