The stock market rally saw the Dow Jones, S&P 500 and Nasdaq snap long win streaks, slashing or erasing weekly gains. The Russell 2000 tumbled amid weak breadth. Earnings generally remained positive. Datadog, Affirm Holdings, TransDigm, Duolingo gapped up, with DDOG stock lifting many cloud stocks. But there still were some big earnings losers. The FDA OK'd an Eli Lilly diabetes drug to treat weight loss. Treasury yields tumbled, then recovered. Oil prices hit three-month lows. Bitcoin surged on continued hopes for a spot Bitcoin ETF.
Stock Market Rally Pauses
The stock market rally erased weekly gains in Thursday's pullback, but the major indexes are all above their 50-day lines, near October short-term highs. Market breadth was weak however. Earnings remained heavy. Treasury yields reversed higher amid a weak 30-year auction. Bitcoin and crypto stocks soared while crude oil fell to three-month lows.
Datadog Buoys Cloud Software
Cloud software stocks rose after Datadog reported Q3 earnings and revenue that handily beat consensus estimates amid lowered expectations. EPS swelled 95%, showing accelerating growth for a second straight quarter. Revenue jumped 25% to $525 million. The software maker in August cut its full-year 2023 revenue prediction. Datadog also guided higher for Q4. Datadog skyrocketed on earnings. Mongo, Dynatrace and Snowflake also jumped in sympathy.
Payment Stocks Are Big Movers
Buy now, pay later specialist Affirm Holdings reported a fiscal Q1 loss of 57 cents per share, narrowing from an 86-cent loss a year earlier. Revenue rose 37% to $496.6 million, topping views for $444 million. Gross merchandise volume increased 28% to $5.6 billion, also beating. AFRM soared, breaking out to a 52-week high. Shift4 Payments reported Q3 profit up 86%, topping estimates. Revenue climbed 23% to $675.4 million, falling short. Shift4 gave some bullish guidance for 2024. Founder and CEO Jared Isaacman said the company is exploring strategic opportunities and alternatives. FOUR stock gapped up, breaking a downtrend. Flywire reported a Q3 profit of 8 cents vs. a 4-cent loss a year earlier. But revenue less ancillary services increased 31.4% to $116.8 million, missing estimates of $120 million. FLYW stock plunged.
FDA OKs Lilly Weight-Loss Drug
Eli Lilly shares jumped Wednesday after the FDA signed off on its weight-loss drug, now called Zepbound. In type 2 diabetes treatment, the same drug was already approved as Mounjaro. The FDA weight-loss approval puts Lilly on deck to rival Novo Nordisk, which makes a similar weight-loss drug called Wegovy. Lilly says it will sell Zepbound for $1,056 a month. That's a roughly 20% discount to Wegovy, according to one analyst. NVO stock still rose modestly.
Uber Breaks Out On Earnings
The ride-hailing and food delivery giant earned 10 cents a share, reversing from a year-earlier loss of 61 cents and beating views. Revenue rose 11% to $9.29 billion, missing views due to accounting changes that created a $521 million drag. Bookings topped expectations, with Uber guiding up on Q4 bookings. Shares cleared a buy point. Meanwhile, Uber rival Lyft topped Q3 expectations. Bookings grew 15% vs. Uber's 31% gain in ride hailing. Uber benefits from international growth. Lyft operates only in North America. Lyft shares fell.
Oil Prices Tumble
Crude oil prices fell to their lowest levels since mid-July, as demand concerns grew while fears over potential Mideast supply disruptions waned. Permian Basin producer Occidental Petroleum reported better-than-expected third-quarter earnings and revenue, even as quarterly profit fell more than 50%. Diamondback Energy, a fellow Permian play, surprised with a better-than-expected 15% EPS decline and 4% sales fall. Offshore energy industry services firm Tidewater missed Q3 EPS expectations but surpassed revenue views. OXY stock and FANG fell modestly, dragged lower by oil prices. Meanwhile Tidewater sank 14%.
Arm Disappoints With Outlook
U.K. chip designer Arm Holdings easily beat estimates for its fiscal second quarter but missed with its forecast for the current quarter. Q2 EPS jumped 112% while sales grew 28%. Elsewhere among semiconductor stocks, contract chipmaker GlobalFoundries beat expectations for earnings in the third quarter while matching views on sales. Its guidance for the current period was mixed. NXP Semiconductors cheered investors with a modest beat-and-raise report. Macom Technology Solutions rose after a mixed quarterly report. Alpha & Omega Semiconductor, Diodes and Power Integrations tumbled after their earnings reports.
Li Auto Growth Booming
Li Auto gave strong EV delivery guidance after handily beating earnings estimates for the third quarter. Amid a China EV price war, Li also posted its fourth straight profitable quarter on sharply accelerating sales growth. But analysts worried about the impact of intense competition and its product ramp on costs and margins.
U.S. EV startups skid
Several EV startups reported earnings after Tesla warned on demand and General Motors and Ford scaled back plans for electric vehicles. Rivian bucked the gathering EV gloom. It raised full-year production guidance after revenue surged more than expected in the third quarter. Rivian will also expand commercial van sales beyond existing customer Amazon. Lucid lowered its 2023 production outlook after a far worse-than-feared Q3 revenue decline. Polestar, co-owned by Sweden's Volvo and China's Geely, cut delivery guidance. All three stocks fell sharply.
Celsius Sales Double; Stock Volatile
The energy drink maker served up better-than-expected Q3 results Tuesday. Celsius Holdings earned 89 cents per share vs. a loss of $2.46 per share last year. Revenue leapt 104% to a record $384.8 million, slowing slightly from 112% in Q2. But CEO John Fieldly hinted at potential sales pullbacks for Q4 and noted supplier PepsiCo may reduce inventories during the quarter due to seasonality. Shares swung up and down.
Biotech Earnings
Biotech earnings proved a mixed bag with BioNTech, Biogen and Gilead Sciences all beating third-quarter expectations, while Vertex Pharmaceuticals missed sales views. But only BioNTech stock surged, Biogen shares tumbled after its sales beat was driven by "other revenue," which doesn't include product sales. Total revenue inched 1% ahead to $2.53 billion, while earnings tumbled 9% to $4.36 a share. Gilead came in with adjusted EPS up 20.5% on flat sales of $7.05 billion. But analysts noted Covid drug Veklury drove better-than-expected sales. Veklury sales are tied to Covid hospitalizations, which are difficult to predict. BioNTech, though, reported a surprise profit, albeit down 90%, while sales crashed 74% to $961.2 million. Vertex reported adjusted EPS up 2%, beating views, but product sales were soft at $2.48 billion. Sales climbed 6.4% year over year. VRTX stock fell after jumping in the prior week on hopes that the FDA will approve its gene therapy for sickle cell disease, codeveloped with Crispr Therapeutics.
News In Brief
Bentley Systems, an infrastructure engineering software company, beat expectations for the third quarter. Adjusted earnings rose 16%. Sales climbed 14% to $306.6 million.
Fabrinet topped targets for its fiscal first quarter and guided up for Q2. The contract electronics manufacturer earned an adjusted $2 a share, up 2% year over year, on sales of $685.5 million, up 5%.
TransDigm reported fiscal Q4 EPS jumped 46% while sales grew 223% to $1.85 billion. The aerospace and defense components maker guided higher for fiscal 2024. The company also announced a special dividend of $35 a share and said it will buy the Electron Device unit from Communications & Power Industries for $1.385 bil cash.
AppLovin trounced Wall Street's targets for the third quarter and with its guidance for the fourth quarter. The mobile app marketing firm earned 30 cents a share, up 400% year over year, on sales of $864 million, up 21%, in the September quarter.
D.R. Horton reported better-than-expected fiscal fourth-quarter earnings and revenue early Tuesday. DHI, the largest publicly traded homebuilder, announced EPS fell 5% to $4.45 while sales increased 9% to $10.5 billion. D.R. Horton also announced it expects fiscal 2024 revenue between $36 billion and $37 billion and anticipates deliveries of between 86,000 and 89,000 home units.
Axon Enterprise reported a 70% EPS gain while revenue grew 33% to $413.6 million, both beating. The maker of Taser stun guns, body cameras and digital storage for law enforcement broke out on earnings but then tumbled back.
Duolingo reported a surprise profit with revenue up 43%, beating views. Shares of the language learning platform gapped up to a two-year high.
Trade Desk reported third-quarter EPS grew 27% with revenue up 25% to $493 million. But shares of the digital ad platform plunged on weak Q4 guidance.
