Investing.com’s stocks of the week
Last week was the worst week for US markets since the virus shock of March. The Nasdaq would be considered the 'winner' for only losing 5.5% for the five trading days. Yesterday though, markets had a really good bounce back. Locally, only three stocks of the JSE Top-40 were in the red. The big winner on the JSE was Aspen (JO:APNJ), who finished the day 11.5% higher. The company announced that they are in late-stage discussions with J&J (NYSE:JNJ), for Aspen to use its PE facility to manufacture the J&J Covid vaccine. The deal will be an extra income flow for Aspen and it is a vote of confidence in the company from one of the largest pharma companies in the world.
Yesterday the JSE All-share closed up 1.81%, the S&P 500 closed up 1.23%, and the Nasdaq closed up 0.42%.
Byron's Beats
Last week Facebook released third-quarter results which comfortably beat expectations. In fact, this was the largest Dollar beat in their history. Revenues grew by $3.8bn to $21.2bn. Expectations were for $19.5bn. Earnings were also well ahead of expectations. They made $2.71 per share versus expectations of $1.90. This represented 28% growth form this quarter last year.
This was their best quarter ever in terms of revenue. Usually, that achievement belongs to the fourth quarter which includes the festive season. The momentum should bode well for a whopper fourth quarter for the company. You can see the trend in the image below.
The stock now trades at 23 times next years earnings and cash reserves are sitting at $55bn. The company's financials are in great shape.
Monthly active users for their 3 big sites are now 2.74bn, an increase of 12% from last year. That is another important metric to follow.
Despite these great numbers, the share price dropped 6% on Friday. The whole market was down, so that needs to be taken into context.
The world is digitising and Facebook (NASDAQ:FB) is the advertising winner of that trend. Especially for smaller businesses trying to target specific clients. They also have a few side bets like online retail, gaming and smart glasses in the pipeline. The fundamentals are sound and the business is absolutely flying. This is a must own in your portfolio.
Starbucks was another business from a long list which reported earnings on Thursday last week. The company hasn't received much attention this year, probably because it isn't sexy like the technology companies. Also, the share price is down around 3% for the year. Given how global lockdowns and working from home have impacted the food sector, Starbucks (NASDAQ:SBUX) has done really well to remain flat in 2020. For their latest quarter, the company beat analyst estimations, it posted revenue of $6.2bn ($6bn was expected) and EPS of 52c (31c was expected).
Starbucks hasn't totally escaped Covid, its revenue figure was down 8%, driven by a same-store-sales drop of 9% for the quarter. In China, their second biggest market, sales were only down 3%. The standout stats in the results was their forecast for 2021. The company expects American growth to be between 17% - 22%, and international growth to be between 25% - 30%! It shows you the power of having a strong bran - giving resilience during a crisis and a strong re-bound post the fact.
What I found really interesting was the trend change in consumption. I regularly say that you can probably learn more from company results than from official statistics. Starbucks has seen a shift in consumption from Metros to suburbs, and the ordering times have moved from early mornings to mid-morning. They have also noticed a significant increase in weekend orders. Is this the new work from home routine? With less traffic, people don't need to leave the house as early. I'm not sure how to explain the weekend increase in sales?
Bright's Banter
A lot of businesses in the tourism, aviation and entertainment sectors are fighting for survival amid the Covid-19 pandemic, that's if they haven't gone under already. Conversely, tech businesses seem remarkably unaffected by this pandemic, well so far. We won't count our chickens before they hatch here.
As the legend sports coach and modern day philosopher Yogi Berra once said: It ain't over till it's over.
But the final scorecard is out I would say. Three out of five of the FAMGA (Facebook, Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Google (NASDAQ:GOOGL), Amazon (NASDAQ:AMZN)) group of companies posted double digit revenue growth for the nine months of 2020, notwithstanding what's going on in the world right now. These businesses have helped other businesses accelerate their digital efforts by as much as five years in just 6 months.
Amazon is the beneficiary of consumer changing behaviour to shop more online and also provide cloud services to businesses of all sizes. People seek other means to entertain themselves when they can't physically see their friends and this is where Google and Facebook (Instagram) come in.
Apple enjoyed a big back-to-school quarter with Macs and iPads reporting record sales. Microsoft provided communications and cloud services to small businesses as everyone works from home. The infographic below shows how tech giants have shrugged off the coronavirus pandemic.
Signing Off
As Paul noted above, it is election day in the US. Markets might be subdued for the day as traders pay more attention to voting coverage than the actual market. We might know the winner by tomorrow this time or we might be in for a drawn out process. We shall see. Asian markets are looking strong this morning and the Rand is slightly stronger than yesterday, currently at $/R16.21.
Sent to you by Team Vestact.
