Big Tech Misses

Good Morning Everyone!

Remember, the bigger the drawdown the better bigger the bounce.

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Price as of 4 pm EST, 10/25/22; % YTD

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MARKET UPDATE

Nasdaq -1.7%

• Big Tech down on cautious guidance

• Validates much of the macro concern in the broader market

U.S. 30 year mortgage hits 7%, highest since 2000

Crude 86 +1%

• Higher this morning on a slightly lower U.S. dollar

• 10:30 a.m. Department of Energy oil inventory report

China

• Wuhan locked down one of its central districts following new Covid cases

• 900,000 residents told to stay home

Google (NASDAQ:GOOGL)

• Month-to-date +9%

• Premarket -6%

• 15% EBIT miss

• Margins below expectations with high headcount addition of +12,700 (+24% y/y)

• Google said headcount growth would be half of what Q3 was but it’s not enough to offset decelerating revenues

• Continued tough comps in Search and YouTube

• Search proved resilient +4% but YouTube missed, down 2% y/y (FX was a factor)

• Google Cloud beat at +38% y/y

• Repurchased $15 billion

• Consensus estimates coming down in the next few days

Microsoft (NASDAQ:MSFT)

• Month-to-date +7%

• Premarket -6%

• Posted its weakest quarterly sales growth in 5 years (FX was a big factor).

• Azure down two consecutive quarters, growth +42% vs. guide at 43%

• Azure guide below expectations, cautious on new deal among SMB (small and medium businesses)

• Expected headwinds on FX, weak PC/Windows and weak Advertising spend

• Commercial booking slowed to +16%

• Office 365 grew 17%, inline

• Server Products up 4%

• Windows fell 15% y/y on weak PC demand

• CEO: Weak economy impacting PCs, Ad spend and LinkedIn

Texas Instruments (NASDAQ:TXN)

• Month-to-date +5%

• Premarket          -5%

• Guide: Auto is strong but personal electronics and industrial weaker into Q4

• Guided down 12% q/q at the midpoint, $4.6 billion vs. street at $4.9 billion (management is usually conservative on its guide)

• Question on the call: will auto market roll over? Yes, we’re just not sure when”

• Free cash flow $1.98 billion, paid $1 billion in dividends and $$1 billion in buybacks

Visa (NYSE:V)

• Month-to-date +9%

• Premarket +2%

• Q4/2022 EPS $1.93 vs. street $1.86

• Beat driven by higher revenues offsetting higher incentives

• Total U.S. payment volume remained flat so far in October vs. September

• Cross-border volumes in October to date reached nearly 120% of 2019 levels

• Guide for high single digit growth in fiscal 2023

• In the quarter, repurchased 10.8 million shares for $2.1 billion

• The Board authorized a new $12 billion buyback

• No 2023 guidance but street at 10% net revenue growth

• CEO spoke to a 'high risk' of global recession.

• “The reality is we do know that there are some changes in consumer behavior going on but they're still spending the same amount of money and they are still paying in the same way, which are critical to us.'

Earnings Today

• Spotify -5% (NYSE:SPOT), gross margins missed

• Chubb (NYSE:CB)

• Thermo Fisher (NYSE:TMO)

• Bristol-Myers Squibb (NYSE:BMY)

• Automatic Data Processing (NASDAQ:ADP)

• Boeing (NYSE:BA)

• Waste Management (NYSE:WM)

• General Dynamics (NYSE:GD)

• Boston Scientific (NYSE:BSX)

• Roper (NYSE:ROP)

• Hilton (NYSE:HLT)

• Chipotle (NYSE:CMG)

Tonight

• Meta (NASDAQ:META) 5 p.m. call, 14% implied move

• ServiceNow (NYSE:NOW) 5 p.m. call, 8% implied move

• Check Point (NASDAQ:CHKP) 8:30 a.m. call, 5% implied move

• Shopify (NYSE:SHOP) 8:30 a.m. call, 9% implied move

CRYPTO UPDATE

Mastercard & BitOasis (NYSE:MA)

• Mastercard marches deeper into crypto

• Partnering to launch crypto-linked payment cards in Middle East and North Africa (MENA)

• Expected launch early 2023

• Mastercard already has several similar partnerships

  • Nexo, Bitkub, Coinjar, Amber Group

Bitcoin (CRYPTO: BTC) price approaching production cost

• Production cost ~$16,900

• Price has hit production cost 3 other times in past 5 years

• Rallied each time