The stock market rally suffered sharp losses Tuesday due to a hot CPI inflation report, falling modestly again Friday on PPI data. The Nasdaq fell solidly for the week, though off lows. The Dow Jones and S&P 500 closed the week little changed while small caps rose solidly. A number of stocks gapped up on earnings, including Lyft, AppLovin and JFrog, but buying opportunities were relatively light. Shopify, Roku and Akamai Technologies were among a number of earnings losers. Treasury yields and crude oil jumped to 2024 highs. Bitcoin ran up above $52,000, hitting two-year bests.
Stocks Mixed Near Highs
Despite tumbling nearly 4% on Tuesday, the Russell 2000 rose solidly for the week, near a 52-week high. The Dow Jones and S&P 500 were little changed. The Nasdaq fell though it slashed losses. Bullish sentiment is running high, while the Nasdaq and especially AI stocks are extended. Treasury yields jumped to a 2024 high on hot inflation data. Crude oil ran up to three-month highs.
Near-Perfect Economy Dented
The recent run of strong growth and rapidly falling inflation just hit a speed bump — on both counts. The consumer price index rose a hotter-than-expected 0.3% in January, while core prices, excluding food and energy, jumped 0.4%. That left the core CPI inflation rate at 3.9%. Services prices heated up, partly due to some inflated housing costs but by no mean all. January's producer price index also was hotter than expected. Meanwhile, January retail sales fell 0.8% or 0.5% excluding autos and gas, both far below views. However, falling weekly jobless claims gave no sign that the labor market is turning down. Plus, manufacturing surveys from the Philadelphia and New York Fed indicated that factory activity may be starting to recover.
Bitcoin Soars, Coinbase Skyrockets
Bitcoin surged to a two-year high above $52,000 while cryptocurrency exchange Coinbase and crypto-exposed brokerage Robinhood also leapt on earnings. Coinbase earnings crushed views and snapped a seven-quarter string of losses. Revenue spiked 51% to $953.8 million, with consumer transaction revenue up nearly 60%. Institutional trading volume leapt 173%. Robinhood reported a surprise profit while revenue grew 24% to $471 million, also beating. Both COIN and HOOD surged, topping buy points.
Arista Earnings Strong, Cisco Guides Low
Arista Networks said Q4 earnings rose 48%, easily beating, aided by lower taxes. Revenue jumped 21% to $1.54 billion, just edging views and with growth slowing for a fifth straight quarter. For the March-ending quarter, Arista predicted revenue of $1.54 billion at the midpoint, flat vs. Q4 and just above estimates. Analysts expect revenue growth for ANET stock will slow to 12% in 2024 from nearly 34% in 2023. ANET stock reversed lower from record highs. Cisco Systems reported fiscal Q2 earnings dipped 1% with revenue down 6% to $12.8 billion, both modestly beating. But the Dow giant guided lower on fiscal Q3. Cisco plans to cut 5% of its workforce, roughly 4,200 jobs, in another round of cost-cutting. CSCO, which is in a long slide, fell modestly for the week.
Shopify Earnings Soar, But SHOP Drops
Shopify reported Q4 adjusted earnings per share soared 386% to 34 cents with revenue up 24% to $2.1 billion. Analysts expected EPS of 30 cents a share on revenue of $2.07 billion. Shopify said Q4 gross merchandise volume from merchant transactions rose 23% to $75.1 billion vs. estimates of $71.53 billion. But the e-commerce software giant's 2024 outlook for free cash flow growth and operating margins disappointed. SHOP stock plunged on results, but later pared weekly losses.
Lyft Takes Off On Earnings, Guidance
Lyft soared after its fourth-quarter earnings report. Adjusted EPS topped views of 18 cents per share, while the 4% revenue gain to $1.22 billion was in line. Lyft officials told investors the ride-hail company would have positive free cash flow for the first time in 2024. The earnings release mistakenly said the company expected adjusted EBITDA margins would expand by 500 basis points in 2024, which the CFO quickly corrected as a 50-basis-point bump. A correction from the company chopped part of Lyft's gain, but certainly not all of it. Shares still skyrocketed.
Uber gapped up with a 14% gain Wednesday after announcing a $7 billion share repurchase plan, its first buyback, along with bullish three-year targets. A week earlier, Uber reported strong Q4 results.
Chip Market Improving
Applied Materials handily beat fiscal first-quarter estimates and guided higher than views for the current period, sending AMAT stock surging. Fellow semiconductor-equipment giants ASML and Entegris noted signs of a nascent recovery in the chip market. Meanwhile, chipmakers GlobalFoundries and Lattice Semiconductor posted mixed results for the December quarter but guided much lower than views for the March quarter.
Diamondback Shines On Endeavor Deal
Diamondback Energy will buy privately held Endeavor for $26 billion including assumed debt, forging a Permian Shale giant. It's the latest in a series of big energy deals, often involving the Permian. Diamondback also raised its dividend 7%. The oil producer expects to increase production while reducing the number of drilling rigs as a result of the deal. FANG stock surged through the week to a record high.
DoorDash Tumbles On Loss
The delivery app giant lost 39 cents a share, narrowing vs. a year earlier but triple what was expected. Revenue rose 27% to $2.3 billion, slightly beating. The gross order outlook was in line. DoorDash tumbled from a 22-month high. Meanwhile, app-based grocery delivery company Maplebear, better known as Instacart, said Tuesday that it earned 44 cents per share on sales of $803 million. The earnings beat views but sales just missed. Further, Instacart will lay off 7% of its staff in a restructuring that includes the departures of its chief operating and technology officers. CART shares fell on results but rose for the week.
DraftKings Tops EPS Views, Buys Jackpocket
The online sports betting giant earned 29 cents a share in Q4 vs. a 14-cent loss a year earlier. Revenue rose 43% to $1.23 billion, just missing views and with growth slowing for a second straight quarter. Monthly Unique Players (MUPs) jumped 37% to an average 3.5 million paying customers, while average revenue per MUP rose 6%. DraftKings hoisted its 2024 revenue outlook, expecting 27% to 34% growth. It also announced it will buy Jackpocket, the leading lottery app in the U.S., for $750 million in cash and stock. DKNG stock erased initial Friday losses, and was up solidly for the week to a two-year high.
Airbnb, Hotels Report
Airbnb revenue rose 17% to $2.22 billion, beating views. A one-time tax settlement drove an adjusted loss. The room-booking site said it expects its growth rate for nights booked to moderate. CEO Brian Chesky said Airbnb is at an "inflection point" and will invest in AI-powered booking tools. ABNB rose for the week, but finished below a buy point. Meanwhile, Marriott earnings jumped 82%, beating, but 3% sales growth slightly missed. MAR stock tumbled, but pared weekly losses. Hyatt Hotels on Thursday delayed its earnings release, but Q4 revenue per available room rose 9.1%, ahead of expectations. Hyatt stock jumped, around a buy point.
News In Brief
Monday.com reported Q4 EPS grew 48% while revenue rose 35% to $202.6 million, both beating. The project management software maker guided Q1 and 2024 revenue in line with views. Shares plunged following earnings, but slashed weekly losses.
Howmet Aerospace posted a nearly 40% EPS increase for the fourth quarter on a 14% revenue gain, an overall beat. For the first quarter, the jet parts supplier guided profit and revenue above Wall Street estimates, helped by high demand as Boeing and Airbus ramp up production.
Roku beat fourth-quarter expectations for new users and revenue. But shares dropped after the streaming video platform reported that average revenue per user dropped 4% vs. a year earlier. Roku also warned of a "challenging" year for media and entertainment spending.
Datadog beat Q4 views with a 70% EPS gain and revenue up 26%, topping estimates But the network monitoring software maker guided 2024 EPS far below views amid increased hiring, while its revenue target was just below consensus. Shares fell on earnings, but were little changed for the week.
JFrog reported a 375% EPS surge with revenue up 27% to $97.3 million, both beating, while also issuing bullish guidance. FROG stock skyrocketed to its best levels since mid-2021.
Akamai Technologies reported a 23% EPS gain, slightly beating, but a 7% revenue rise to $995 million slightly missed. For full-year 2024, Akamai forecast 7% revenue growth versus estimates for 8%.
GoDaddy said Q4 EPS jumped 999% to $7.85 while revenue rose 6% to $1.1 billion. Analysts had estimated profit of $1.04 per share on revenue of $1.102 billion. EBITDA rose 12% to $324 million, slightly beating. The website-hosting firm forecast 2024 revenue that was slightly below estimates at the midpoint.
Zillow reported a 9% revenue rise to $474 million, the fourth straight quarter of accelerating growth. EPS fell 5%, but easily beat views. The online real estate site gave weak Q1 EBITDA guidance. Still, Zillow stock rallied on earnings, briefly topping a buy point.
AppLovin blasted higher after the mobile app marketing platform crushed Wall Street's targets for the fourth quarter and guided higher than views for the current period.
Cadence Design Systems beat fourth-quarter estimates with a 44% EPS gain and 19% revenue rise to $1.07 billion. But the maker of electronic design automation software guided low for the current quarter. Shares tumbled.
SharkNinja beat its fourth-quarter targets, thanks to growth in cooking and beverage appliances during the holiday period. The kitchen and household device maker also guided above estimates for 2024.
InterDigital broke out of a base after the mobile, video and AI technology development company posted a beat-and-raise earnings report. InterDigital's EPS rose 31% with revenue down 10% to $105.5 million.
Dropbox squeaked past Q4 views with a 25% revenue gain and 6% revenue rise, though growth slowed for both for a second straight quarter. The file-sharing firm's 2024 revenue forecast was slightly below views. DBX stock plunged.
