The stock market rally continued to make strides, with the key indexes above the 50-day lines and moving toward all-time or 52-week highs. Leading stocks from a variety of sectors showed strength. Arista Networks, AppLovin and Toast were earnings winners, but Palantir Technologies, Duolingo and Builders FirstSource were among the many losers.
Stock Market Nears Highs
The S&P 500, Dow Jones and Russell 2000 reclaimed the 50-day line on Monday, following the Nasdaq, as they all moved toward 52-week or record highs. Leading stocks showed strength. Earnings season had a number of big winners and losers. Treasury yields fell solidly, a key tailwind for the stock market.
AI Chip IPOs Fall, Taiwan Semi Rises
Arm Holdings and Astera Labs, which have benefited from the artificial intelligence boom, both fell after their quarterly reports when their guidance failed to meet lofty whisper numbers. That's despite both recent chip IPOs officially beating estimates for the March quarter and with their June quarter guidance. However, Taiwan Semiconductor reported a 59.6% sales jump in April vs. a year earlier in local currency, fueled by AI chips. TSM stock rallied toward a buy point.
Cyclical Chip Plays Rally
Meanwhile, semiconductor stocks exposed to mature, cyclical markets rallied amid improving outlooks. Companies in that camp included Alpha & Omega Semiconductor, Cirrus Logic, GlobalFoundries, Power Integrations and SiTime. Elsewhere, semiconductor equipment vendors MKS Instruments and Veeco Instruments advanced on better-than-expected March-quarter results and guidance.
Software Earnings
Several software makers reported earnings, with mixed stock results.
AppLovin smashed Wall Street's first-quarter targets and guided higher for Q2. The mobile app marketing platform earned 67 cents a share vs. a 1-cent loss a year earlier. Revenue rose 48% to $1.06 billion, with growth accelerating for a third straight quarter. APP stock gapped up out of a base on the stock market.
Palantir Technologies reported Q1 EPS rose 60%, meeting views, while revenue climbed 21% to $634 million, topping estimates. Government revenue grew 16% to $335 million while commercial revenue rose 27% to $299 million, both modestly beating. U.S. commercial revenue rose 40% vs. 70% in Q4 2023. Palantir guided up slightly on Q2 revenue. But shares sold off.
Toast said Q1 revenue rose 31% to $1.075 billion, slightly beating. EBITDA came in at $57 million, crushing estimates of $25.2 million. The restaurant sales and management software maker raised full-year EBITDA guidance. In Q1, Toast added over 6,000 net new locations, reaching 112,000 overall. Shares soared.
HubSpot beat Q1 views with a 40% EPS gain and revenue up 23% to $617.4 million. The marketing software maker guided up on Q2 EPS but down on revenue. However, a fresh report said that Google-parent Alphabet is mulling a HubSpot takeover. Shares fell for the week.
Datadog reported Q1 adjusted EPS rose 29%. Revenue popped 27% to $611 million. The app monitoring software maker guided up slightly on Q2. But Q1 billings slightly missed. Also Amit Agarwal will step down as president at year-end. Shares tumbled.
JFrog reported Q1 EPS of 16 cents on an adjusted basis and revenue of $100.3 million, edging by estimates of 14 cents and $98.6 million. Profit rose 166% while revenue climbed 26%. The software maker forecast Q2 profit of 14 cents and revenue of $103.5 million, in line with stock market estimates. The Sunnyvale, Calif.-based company sells programming tools that automate software development. Its tools also automate software updates, speeding up the deployment of new apps.
Arista Jumps On Earnings, Guidance, Buyback
Arista Networks said Q1 earnings rose 39%, solidly beating, while revenue edged past views with a 16% gain to $1.57 billion. The maker of cloud computing network gear guided up slightly on Q2 revenue and raised its 2024 revenue guidance target to 12%-14% growth. Arista also set a $1.2 billion buyback. Shares ran above their 50-day line.
Utility Stocks Rise On AI Power Demand
Constellation Energy reported Thursday that first-quarter earnings skyrocketed 858%, with adjusted EPS up 133%, beating views. Revenue declined 18% to $6.16 billion, slightly missing. Investors are focused on how power-hungry AI data servers will boost demand for the nuclear energy company. CEG rose solidly for the week and is up more than 80% in 2024. It's one of the best-performing stocks in the S&P 500 this year, behind Nvidia, Super Micro Computer and fellow utility play Vistra, which joined the benchmark index on Wednesday. Vista reported earnings and revenue declines in the first quarter. VST stock still surged for the week.
Disney Tumbles In Stock Market On Mixed Results
The House of Mouse reported a 30% increase in adjusted EPS, the second straight quarter of slowing growth but beating views. Fiscal Q2 revenue rose 1% to $22.08 billion, just short of views. Disney+ subscribership of 153.6 million was up vs. Q1 but below views. Entertainment streaming revenue jumped 13%, driven by an increase in subscribers and average monthly subscription price. Disney's streaming entertainment business reported operating income of $47 million for the quarter vs. a year-earlier loss of $587 million.
Combined streaming losses for its entertainment and sports segments narrowed to $18 million from $659 million. Disney expects its combined streaming business to be profitable in fiscal Q4, with growing profitability in 2025. Theme park revenue rose 10.7% to $7.48 billion to beat forecasts. Disney raised its full-year adjusted earnings outlook to 25% growth from 20%. Elsewhere, Disney and Warner Bros. Discovery plan to unveil a streaming bundle this summer that will combine their Disney+, Hulu and Max streaming services.
Shopify Dives On Guidance
Shopify reported adjusted Q1 EPS of 20 cents vs. 1 cent a year earlier. Revenue climbed 23% to $1.9 billion. Gross merchandise volume rose 23% to $60.9 billion. All topped consensus. But the e-commerce software giant guided lower on Q2 revenue growth while operating expenses rise, hitting gross margins. Shares plunged.
Rivian Loses Over $38,000 Per Vehicle
Rivian Automotive late Tuesday reported a worse-than-expected loss in the first quarter. Revenue grew more than 80% to $1.204 billion, but the EV startup lost more than $38,000 per vehicle delivered. Meanwhile, there was some buzz about a possible partnership with Apple. Fellow EV startup Lucid reported a wider-than-expected Q1 loss with sales up 16% to $172.7 million. Rivian stock rose modestly for the week while Lucid retreated.
Tesla fell solidly amid weak China sales, further executive departures and reports of additional layoffs.
Robinhood Earnings Get Crypto Boost
Robinhood earned 18 cents a share in Q1 stock market trading, tripling expectations, as cryptocurrency revenue surged 232%. The Q1 earnings report came days after the commission-free trading app disclosed it had received an SEC "Wells Notice" over crypto tokens on its trading platform. It also benefited from higher short-term interest rates, Robinhood said. Shares initially jumped Thursday but reversed lower. Separately, bitcoin miners CleanSpark and Marathon Digital easily beat earnings views, though Marathon missed on sales. MARA stock spiked Monday on news of its inclusion in the S&P SmallCap 600 index.
Uber, Lyft Take Different Trips
Uber and Lyft got opposite reactions to their first-quarter earnings — with Lyft for once getting the better of its larger rival. Lyft jumped after reporting an 87% increase in adjusted EPS with revenue up 28% to $1.3 billion and a second straight quarter of positive free cash flow. Uber reported a surprise loss due to lower values for investments. Revenue grew 15% to $10.1 billion, just beating. However, total bookings for rides and food delivery missed expectations. Shares tumbled.
Building Suppliers Are Mixed
TopBuild reported better-than-expected first-quarter earnings and announced a $1 billion buyback. Shares edged higher. Meanwhile, S&P 500 component Builders FirstSource plunged after topping Q1 expectations but only reaffirming full-year guidance. Azek reported better-than-expected earnings, but still fell for the week. Nonresidential-focused Atkore tumbled on a sales miss. Installation firm Installed Building Products beat views but fell modestly.
Toyota, Honda Get Hybrid Boost
Toyota Motor again rode hybrid demand and a weak yen to deliver massive earnings. Operating profit rose 77% in the fourth quarter despite mostly flat vehicle sales. But the world's largest carmaker forecast a 20% decline in annual profit for the current fiscal year as it invests in all-electric vehicles and artificial intelligence. Honda Motor reported a 77% operating profit gain for its fiscal year ended in March, also citing hybrid gains. Honda also sees lower profit in the current fiscal year as it ramps up spending on EVs, especially hybrids.
Ferrari beat on the top and bottom lines for the first quarter, but the Italian sports carmaker reaffirmed prior full-year guidance.
In Brief
Vertex Pharmaceuticals beat first-quarter expectations late Monday, with EPS up 56% and revenue 13% higher to $2.58 billion. The biotech also reiterated its full-year outlook. But investors focused on Vertex's near-term pipeline advancements, including a next-generation cystic fibrosis drug and a painkiller. Shares rose solidly.
Duolingo easily beat profit views while a 45% revenue gain slightly beat. But the language-learning platform's guidance wasn't good enough for investors. Shares plunged from around a buy point.
GigaCloud Technology reported Q1 EPS jumped 69% with revenue up 96% to $251.1 million, both modestly topping. GigaCloud guided slightly higher for Q2 revenue. The company sources large-parcel items such as furniture, home appliances and fitness equipment from China and elsewhere and sells them to buyers and retailers in the U.S.
Trade Desk reported Q1 earnings rose 13% with revenue up 28% to $491 million, both beating. EBITDA jumped 48%, also topping. The digital advertising firm guided slightly higher on Q2 revenue and EBITDA.
Crocs reported a 16% increase in adjusted EPS while revenue rose 6% to $939 million, both easily beating. But HeyDude sales fell 17% and Crocs slashed estimates for the brand. Shares still soared on the stock market.
Celsius reported a 108% EPS gain, beating, but revenue growth slowed to 37%, below views. Shares of the energy drink maker initially fell, but rose sharply for the week.
Coherent sank despite beating expectations for its fiscal third quarter ended March 31. The maker of optical networking gear reported strong sales of AI transceivers for data centers but those gains were offset by continued weakness in its telecom business. Its outlook for the current period was mixed.
Apple revamped its lineup of iPad tablets and accessories. Its new top-of-the-line iPad Pro features major advancements in displays and processors. It uses the company's new M4 chip, which Apple says is faster than any AI PC processor today.
SharkNinja beat expectations for the first quarter and with its guidance for the full year. The kitchen and household device maker's EPS rose 23% with sales up 25% to $1.07 billion. Food preparation appliances were the biggest growth drivers in Q1, led by ice cream makers and compact blenders.
TransDigm flew past fiscal Q2 profit forecasts, as adjusted EPS surged 34%. Revenue grew 21% to $1.919 billion, edging past estimates. The aerospace contractor raised full-year guidance.
Axon Enterprise easily beat first-quarter forecasts, as earnings per share grew 31% and revenue jumped 34% to $460.7 million, $19 million more than expected. Axon raised its 2024 revenue outlook, but also hiked planned capital spending to ramp up production and automation for its Taser 10 weapon. Future contracted revenue dipped vs. the quarter for the first time in five years. Shares retreated from a buy zone.
Coupang fell from two-year highs after the South Korean e-commerce firm broke even vs. expectations for 5 cents profit. Coupang cited the acquisition of global luxury retailer Farfetch to its business. But the firm also said it needed to keep investing in response to competition from China e-retailers Alibaba and PDD. Revenue increased 23% to $7.1 billion for Q1, topping views.
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