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Tag: disruptions

  • Disney stock dives 10% after earnings and revenue miss, sales growth forecast to slow after record year

    Disney stock dives 10% after earnings and revenue miss, sales growth forecast to slow after record year

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    Walt Disney Co. wrapped up its fiscal year with record sales and its best revenue growth in more than 25 years, but executives predicted much slower sales increases in the year ahead while missing expectations for fourth-quarter earnings and sales, sending shares down more than 10% Tuesday afternoon.

    Disney
    DIS,
    -0.53%
    reported fiscal fourth-quarter net income of $162 million, or 9 cents a share, on sales of $20.15 billion, up from $18.53 billion a year ago but more than $1 billion short of expectations. After adjusting for amortization and certain investment changes, Disney reported earnings of 30 cents a share, down from 37 cents a share a year ago.

    Analysts surveyed by FactSet had on average expected adjusted earnings of 56 cents a share on revenue of $21.27 billion.

    Disney executives blamed a number of factors for the revenue miss, including lower content sales because they had fewer theatrical films on the calendar; underperformance of the parks and media divisions; and seasonality of its fourth quarter, which tends to be the lowest for margins.

    For the full fiscal year, Disney reported record sales of $82.72 billion, more than 22% higher than the previous year, the strongest annual sales growth for Disney since the 1996 fiscal year, according to FactSet records. Profit grew to $3.19 billion from $2.02 billion the year before, but is nowhere close to prepandemic Disney earnings, which hit eight figures in both 2019 and 2018.

    In a conference call Tuesday afternoon, though, Chief Financial Officer Christine McCarthy suggested that revenue and profit growth will slow to single digits on a percentage basis in the current fiscal year, missing Wall Street’s expectations. Analysts’ average revenue projection for Disney in the new fiscal year suggested revenue growth of about 13.9% and operating-income growth of roughly 17.4%, according to FactSet.

    “Putting this all together, assuming we do not see a meaningful shift in the macroeconomic climate, we currently expect total company fiscal 2023 revenue and segment operating income to both grow at a high-single-digit percentage rate versus fiscal 2022,” McCarthy said.

    Disney shares initially fell more than 6% in after-hours trading following the release of the results, but plunged anew to a decline of more than 10% after closing with a 0.5% decline at $99.94.

    Disney has been helped by the return of visitors to its theme parks in the third year of the COVID-19 pandemic, as well as a recovering movie business. The main attraction for investors, though, has been growing Disney’s streaming efforts — total streaming subscribers topped Netflix Inc.’s
    NFLX,
    +1.88%
    subscriber total last quarter, and grew its lead in Tuesday’s report, with Disney adding 12.1 million net new subscribers, while analysts on average expected 10.4 million.

    Disney’s streaming growth has hampered its profitability, however, as the company spends to add content to its streaming services in order to compete with Netflix. Those days appear to be coming to an end as Disney struggles with profit.

    “The rapid growth of Disney+ in just three years since launch is a direct result of our strategic decision to invest heavily in creating incredible content and rolling out the service internationally, and we expect our DTC operating losses to narrow going forward and that Disney+ will still achieve profitability in fiscal 2024, assuming we do not see a meaningful shift in the economic climate,” Disney Chief Executive Bob Chapek said in a statement announcing the results. “By realigning our costs and realizing the benefits of price increases and our Disney+ ad-supported tier coming December 8, we believe we will be on the path to achieve a profitable streaming business that will drive continued growth and generate shareholder value long into the future.”

    Disney’s largest business segment, media and entertainment distribution, reported sales of $12.73 billion in the quarter, down from $13.08 billion a year ago; analysts on average predicted $13.86 billion. Direct-to-consumer sales, which includes streaming services as well as some international products, hauled in $4.9 billion, compared with analysts’ forecast of $5.4 billion on average.

    The trajectory of Disney’ meteoric rise as video-streaming market leader is likely to continue once its advertising-supported service debuts in the U.S. next month, according to Wall Street analysts, after Netflix launched its rival offering on Nov. 3. Disney has leaned heavily on its stable of mega-franchises such as “Star Wars” and the Marvel Cinematic Universe to outpace Netflix Inc.
    NFLX,
    +1.88%    ,
    Apple Inc.
    AAPL,
    +0.42%    ,
    Comcast Corp.
    CMCSA,
    +0.95%    ,
    Warner Bros. Discover Inc.
    WBD,
    -2.04%    ,
    Amazon.com Inc.
    AMZN,
    -0.61%    ,
    Paramount Global
    PARA,
    +1.28%
    and others.

    Read more: Disney overtook Netflix as the streaming leader, and is expected to widen its lead

    Disney’s television networks generated sales of $6.34 billion, while analysts’ average estimates called for $6.64 billion. Content sales and licensing, a category that includes Disney’s film business, registered revenue of $1.74 billion vs. analysts’ expectations of $2.08 billion.

    The company’s signature theme parks and product sales business increased to $7.43 billion in revenue from $5.45 billion a year ago. The average analyst estimate was $7.46 billion.

    Shares of Disney are down 35.5% this year, while the broader S&P 500 index
    SPX,
    +0.56%
    has dropped 20%.

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  • Apple and Google stocks just had their worst week in more than two years

    Apple and Google stocks just had their worst week in more than two years

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    Shares of Apple Inc. and Alphabet Inc. both suffered their largest weekly declines since the beginning days of the pandemic this week, as Big Tech companies continued to draw closer scrutiny from Wall Street.

    Apple’s stock
    AAPL,
    -0.19%
    finished down 11.2% on the week, its worst weekly performance since the week that ended March 20, 2020, according to Dow Jones Market Data. The stock declined 17.5% during that early-pandemic stretch.

    Shares of Apple fell during all five sessions this week.

    Shares in Google parent Alphabet
    GOOG,
    +3.84%

    GOOGL,
    +3.78%
    declined 10.1% during the week, their worst one-day percentage drop since that same March 20, 2020 week, when they fell 12.03%. The stock’s biggest weekly tumble in more than two years came even as Alphabet snapped a four-session losing streak in Friday trading.

    While Apple’s stock has fared better than that of Alphabet and other Big Tech peers, the company faces potential pandemic-related challenges owing to new COVID-19 setbacks at manufacturer Foxconn’s major facility. In addition, the realities of the current economic climate may be catching up to Apple, as Bloomberg News reported Thursday that the company had paused hiring in several areas unrelated to research and development.

    See more: Apple reportedly pauses hiring for many roles, joining Amazon in belt-tightening

    Though there didn’t seem to be any major news developments pegged to Alphabet specifically in the past week, investors are putting more pressure on big internet companies, according to Bernstein analyst Mark Shmulik. He recently conducted a Big Tech “autopsy” of results from Alphabet, Amazon.com Inc.
    AMZN,
    +1.88%    ,
    and Meta Platforms Inc.
    META,
    +2.11%    ,
    concluding that “perfection is required from here” for the three tech giants since Wall Street has less patience for weak performance in any one of their many business areas.

    Read: Amazon closes below $1 trillion valuation for the first time since 2020

    All three names suffered negative stock reactions in the wake of their latest earnings reports, which indicated challenges in the ad market due to economic pressures. At Alphabet specifically, “Search was more or less in-line with the buy-side bogey and the Cloud beat, but disappointing YouTube results combined with margin contraction drove a ~10% fall after-hours,” Shmulik wrote.

    Alphabet’s stock has declined 40% so far in 2022, while Apple’s is off 22% over the same span. The S&P 500
    SPX,
    +1.36%
    is down 21% on the year while the Dow Jones Industrial Average
    DJIA,
    +1.26%
    is off 11%.

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  • Atlassian stock suffers worst day ever, nearly $13 billion in valuation wiped away

    Atlassian stock suffers worst day ever, nearly $13 billion in valuation wiped away

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    Atlassian Corp. shares dropped nearly 30% Friday, after the business-collaboration software company’s earnings and revenue outlook fell short of Wall Street expectations and executives described signs of economic weakness taking hold.

    Atlassian
    TEAM,
    -28.96%
    shares plummeted to an intraday low of $117.11 in Friday trading, nearly 33% lower than Thursday’s closing price and the lowest price for Atlassian stock since March of 2020. At the close, shares were trading for $123.73, a 29% descent that is easily the worst daily percentage decline on record for Atlassian stock — the previous mark was a 15.9% decline on Feb. 5, 2016.

    Atlassian — known for software programs such as Jira — was worth roughly $44 billion at its closing price Thursday, so Friday’s decline represented a loss of nearly $13 billion in market capitalization, $12.86 billion to be exact. Atlassian shares had already declined 54.3% so far this year as of Thursday’s close, while the S&P 500 index
    SPX,
    +1.36%
    declined 21.1%.

    Atlassian executives forecast revenue of $835 million to $855 million for their fiscal second quarter, while analysts expected $879.3 million on average, according to FactSet. Executives also decreased their revenue guidance for the full year, without providing a specific figure for overall annual revenue; instead, they gave color in a letter to shareholders about the different revenue segments within the company.

    In that letter to shareholders, Atlassian’s co-chief executives and co-founders, Mike Cannon-Brooks and Scoot Farquhar, said that the company tracked slower conversions from free to paid subscriptions for its “freemium” software, and slower growth from its paying customers in the quarter.

    “The above two trends are the result of companies tightening their belts and slowing their pace of hiring. In other words, Atlassian is not immune to broader macroeconomic impacts,” they wrote. “Our outlook assumes these trends will persist, but we’ll monitor, respond and keep you updated accordingly.”

    “We will focus our investments on strengthening our market position and scooping up top-tier talent in this environment. But we will balance these investments with the growth of our business and be responsive to the macroeconomic conditions,” they continued. “So while we’re lowering our revenue outlook for FY23 based on macroeconomic headwinds, we are maintaining our midteens % operating margin outlook for the year.”

    Chief Financial Officer Joe Binz detailed planned cost cuts and a hiring slowdown in response during a conference call Thursday afternoon.

    “First and foremost, we’re making reductions in our non-head count-driven discretionary spending,” he said in response to an analyst’s question. “And then, secondarily, we’ll be moderating the rate of planned head count growth in the second half of FY 2023.”

    Executives reported a fiscal first-quarter loss of $13.7 million, or 5 cents a share, compared with a loss of $411.2 million, or $1.63 a share, in the year-ago period. Adjusted earnings, which exclude stock-based compensation expenses and other items, were 36 cents a share, compared with 37 cents a share in the year-ago period.

    Revenue rose to $807.4 million from $614 million in the year-ago quarter. Analysts surveyed by FactSet had forecast adjusted earnings of 40 cents a share on revenue of $806.3 million.

    “These results came as a bit of a shock, and are frankly something we thought we’d never see from a high-performing company like TEAM that also possesses a unique value proposition and business model,” Mizuho analysts wrote while chopping their price target on the stock to $255 from $320 but maintaining a “Buy” rating on the stock.

    “Despite the big setback, we believe TEAM is likely to be one of the biggest
    winners once the macro environment improves,” they wrote. “Why? Most notably, we would highlight a very strong competitive position in the important DevOps market, a still vibrant top-of-funnel (35K net new paid customers added over the LTM), a multiyear cloud migration catalyst, and meaningful pricing power as key growth drivers.”

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  • Qualcomm stock plunges to lowest price in more than two years as magnitude of smartphone shortfall shocks Wall Street

    Qualcomm stock plunges to lowest price in more than two years as magnitude of smartphone shortfall shocks Wall Street

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    Wall Street had braced for a bumpy ride as Qualcomm Inc. navigated an oversupplied market for smartphone chips, but the chip maker’s stock still got T-boned Thursday after a disappointing holiday forecast.

    Qualcomm
    QCOM,
    -6.01%
    shares fell as much as 9.4% Thursday morning to an intraday low of $101.93, the lowest price for the company’s shares since July 2020. Investors were reacting to executives saying the company had up to 10 weeks of inventory in the channel, and that its record handset sales would be followed up by, at best, a $2 billion shortfall in the current quarter, compared with the Wall Street consensus at the time.

    “A weak market, and even a potential inventory correction, was likely not entirely unexpected,” Bernstein analyst Stacy Rasgon wrote, while adding that “the magnitude is probably worse than what some might have had in mind (though it is certainly not confined to Qualcomm, with virtually all handset-exposed players showing similar dynamics).”

    Rasgon cut his price target on the stock to $140 from $165, while pointing out that executive color suggested that Qualcomm would keep Apple Inc.’s
    AAPL,
    -3.63%
    business through at least the next iPhone cycle, an important note as the iPhone maker seeks to start building its own wireless components.

    More than half of the analysts who cover Qualcomm cut their price targets in reaction to the report, according to FactSet tracking. Evercore ISI analyst C.J. Muse cut his target to $120 from $130 while maintaining an in-line rating; he wrote that while Qualcomm set up for a miss, as it did last quarter, the actual read was much worse than expected.

    “While the buyside was clearly set up for a miss, the magnitude for the December Q was clearly a lot worse than expected with revenues/EPS guided 20%/32% below consensus,” Muse said.

    Read: More about Qualcomm earnings

    “Here, management highlighted demand weakness (CY22 handsets now expected down low double-digits% vs. prior down mid-single digits%; largely Android market and includes premium tier) and elevated channel inventory (now 8-10 weeks oversupply) as the key drivers of weakness,” the Evercore analyst noted.

    Of the 32 analysts who cover Qualcomm, 20 have buy-grade ratings and 12 have hold ratings. Of those 32 analysts, 19 cut price targets resulting in an average target price of $153.75, down from a previous $172.71, according to FactSet data.

    Qualcomm stock has declined more than 42% so far this year, in line with a 41.2% decline for the PHLX Semiconductor Index
    SOX,
    -0.65%    ,
    but well past the 21.1% year-to-date decline for the S&P 500 index
    SPX,
    -0.50%    .

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  • Qualcomm stock drops more than 7% after poor outlook, months-long chip glut

    Qualcomm stock drops more than 7% after poor outlook, months-long chip glut

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    Qualcomm Inc. shares fell in the extended session Wednesday following the chip maker’s poor outlook, and estimates of about two months or more of inventory it needs to clear in its core business.

    Qualcomm
    QCOM,
    -4.12%
    shares dropped 7.6% after hours, following a 4.1% decline to close at $112.50 in the regular session. In late July, the San Diego-based chip maker cut its forecast because of weakness in the smartphone market that had yet to creep into the premium handset market.

    On the call with analysts, Chief Executive Cristiano Amon said the accelerated weak demand was related to “macro economic headwinds and the prolonged COVID in China,” and “the rapid deterioration in demand and easing of supply constraints” across the chip industry.” would take out about 80 cents a share in first-quarter earnings.

    “It’s the major factor,” Amon told analysts on the call. “It’s mostly a handset consumer story.” Earnings for the first quarter, as a results, would take a hit of 80 cents a share, the company said.

    Another big factor is that companies are just spending less. Amon said “companies across the board had much higher inventory policies, supply chain got resolved, and you got that macro economic uncertainty, you have a drawdown trying to bring inventory to a different level than it was during the situation of demand constraint.”

    Qualcomm forecast first-quarter earnings of $3 to $3.30 a share on revenue of $9.2 billion to $10 billion, while the Street estimated $3.43 a share on revenue of $12.02 billion.

    Read: Meta spending slams Facebook stock, but here are the chip stocks that are benefiting

    Chief Financial Officer Akash Palkhiwala told analysts there is about eight to 10 weeks of elevated in the channel. In the meantime, Qualcomm was instituting a hiring freeze, and looking into cost-saving measures, execs told analysts.

    While handset-chip sales surged 40% to a record $6.57 billion from a year ago, topping the Street’s expectation of $6.55 billion, the company’s forecast indicates a big glut in inventory in Qualcomm’s CDMA Technologies unit, the one that includes handset and RF chips as well as chips for autos and Internet of Things.

    Qualcomm expects QCT sales of $7.7 billion to $8.3 billion, and sales from Qualcomm’s technology licensing, or QTL, segment of $1.45 billion to $1.65 billion. Analysts had forecast forecast $10.42 billion in QCT sales and QTL revenue of $1.71 billion.

    Qualcomm reported fourth-quarter QCT revenue of $9.9 billion, a 28% gain from a year ago. Analysts had estimated $9.84 billion, based on the company’s forecast of $9.5 billion to $10.1 billion.

    Fourth-quarter auto-chip sales zoomed up 58% to a record $427 million, and Internet of Things, or IoT, sales rose 24% to a record $1.92 billion. The Street was expecting auto sales of $362.4 million, and IoT sales of $1.82 billion.

    Revenue from the QTL segment fell 8% to $1.44 billion compared with Wall Street estimates of $1.58 billion, based on a company forecast of $1.45 billion to $1.65 billion.

    Read about: Intel’s quarterly results, AMD’s quarterly results

    The company reported fiscal fourth-quarter net income of $2.87 billion, or $2.54 a share, compared with $2.8 billion, or $2.45 a share, in the year-ago period. The chip maker reported adjusted earnings, which exclude stock-based compensation expenses and other items, of $3.13 a share, compared with $2.55 a share in the year-ago period. Total revenue for the third quarter rose to $11.4 billion from $9.34 billion in the year-ago period.

    Analysts had estimated earnings of $3.13 a share on revenue of $11.32 billion, based on Qualcomm’s forecast of $3 to $3.30 a share on revenue of $11 billion to $11.8 billion.

    Year to date, Qualcomm shares are down 38%, compared with a 41% decline for the PHLX Semiconductor Index 
    SOX,
    -3.09%    ,
     a 21% decline by the S&P 500 index 
    SPX,
    -2.50%
     and a 33% drop by the tech-heavy Nasdaq Composite Index 
    COMP,
    -3.36%    .

    Shares of Advanced Micro Devices Inc.
    AMD,
    -1.73%
    outperformed the broader market Wednesday after the chip maker said it would clear excess inventory by the end of the year, and forecast that data-center and embedded product sales would continue to rise.

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  • Qualcomm stock drops more than 7% after poor outlook, months-long chip glut

    Qualcomm stock drops more than 7% after poor outlook, months-long chip glut

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    Qualcomm Inc. shares fell in the extended session Wednesday following the chip maker’s poor outlook, and estimates of about two months or more of inventory it needs to clear in its core business.

    Qualcomm
    QCOM,
    -4.12%
    shares dropped 7.6% after hours, following a 4.1% decline to close at $112.50 in the regular session. In late July, the San Diego-based chip maker cut its forecast because of weakness in the smartphone market that had yet to creep into the premium handset market.

    On the call with analysts, Chief Executive Cristiano Amon said the accelerated weak demand was related to “macro economic headwinds and the prolonged COVID in China,” and “the rapid deterioration in demand and easing of supply constraints” across the chip industry.” would take out about 80 cents a share in first-quarter earnings.

    “It’s the major factor,” Amon told analysts on the call. “It’s mostly a handset consumer story.” Earnings for the first quarter, as a results, would take a hit of 80 cents a share, the company said.

    Another big factor is that companies are just spending less. Amon said “companies across the board had much higher inventory policies, supply chain got resolved, and you got that macro economic uncertainty, you have a drawdown trying to bring inventory to a different level than it was during the situation of demand constraint.”

    Qualcomm forecast first-quarter earnings of $3 to $3.30 a share on revenue of $9.2 billion to $10 billion, while the Street estimated $3.43 a share on revenue of $12.02 billion.

    Read: Meta spending slams Facebook stock, but here are the chip stocks that are benefiting

    Chief Financial Officer Akash Palkhiwala told analysts there is about eight to 10 weeks of elevated in the channel. In the meantime, Qualcomm was instituting a hiring freeze, and looking into cost-saving measures, execs told analysts.

    While handset-chip sales surged 40% to a record $6.57 billion from a year ago, topping the Street’s expectation of $6.55 billion, the company’s forecast indicates a big glut in inventory in Qualcomm’s CDMA Technologies unit, the one that includes handset and RF chips as well as chips for autos and Internet of Things.

    Qualcomm expects QCT sales of $7.7 billion to $8.3 billion, and sales from Qualcomm’s technology licensing, or QTL, segment of $1.45 billion to $1.65 billion. Analysts had forecast forecast $10.42 billion in QCT sales and QTL revenue of $1.71 billion.

    Qualcomm reported fourth-quarter QCT revenue of $9.9 billion, a 28% gain from a year ago. Analysts had estimated $9.84 billion, based on the company’s forecast of $9.5 billion to $10.1 billion.

    Fourth-quarter auto-chip sales zoomed up 58% to a record $427 million, and Internet of Things, or IoT, sales rose 24% to a record $1.92 billion. The Street was expecting auto sales of $362.4 million, and IoT sales of $1.82 billion.

    Revenue from the QTL segment fell 8% to $1.44 billion compared with Wall Street estimates of $1.58 billion, based on a company forecast of $1.45 billion to $1.65 billion.

    Read about: Intel’s quarterly results, AMD’s quarterly results

    The company reported fiscal fourth-quarter net income of $2.87 billion, or $2.54 a share, compared with $2.8 billion, or $2.45 a share, in the year-ago period. The chip maker reported adjusted earnings, which exclude stock-based compensation expenses and other items, of $3.13 a share, compared with $2.55 a share in the year-ago period. Total revenue for the third quarter rose to $11.4 billion from $9.34 billion in the year-ago period.

    Analysts had estimated earnings of $3.13 a share on revenue of $11.32 billion, based on Qualcomm’s forecast of $3 to $3.30 a share on revenue of $11 billion to $11.8 billion.

    Year to date, Qualcomm shares are down 38%, compared with a 41% decline for the PHLX Semiconductor Index 
    SOX,
    -3.09%    ,
     a 21% decline by the S&P 500 index 
    SPX,
    -2.50%
     and a 33% drop by the tech-heavy Nasdaq Composite Index 
    COMP,
    -3.36%    .

    Shares of Advanced Micro Devices Inc.
    AMD,
    -1.73%
    outperformed the broader market Wednesday after the chip maker said it would clear excess inventory by the end of the year, and forecast that data-center and embedded product sales would continue to rise.

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  • Amazon closes below $1 trillion valuation for the first time since 2020

    Amazon closes below $1 trillion valuation for the first time since 2020

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    The swift recent decline in Amazon.com Inc.’s stock has brought the company’s closing market value below $1 trillion for the first time in more than two years.

    Amazon shares
    AMZN,
    -0.82%
    fell 5.5% in Tuesday action, finishing with a market value of $987 billion. This marked the first time since April 6, 2020 that Amazon closed out of trillion-dollar territory, according to Dow Jones Market Data.

    Amazon’s valuation fell below the trillion-dollar milestone Tuesday.


    Dow Jones Market Data

    Amazon shares have tumbled 19.74% over the most recent five-session stretch. That five-day decline was the worst five-day loss for Amazon since its 22.03% plunge during the period that ended Nov. 20, 2008.

    The e-commerce giant has come under recent pressure after the company’s latest earnings report highlighted a slowdown in AWS cloud-computing revenue growth. Additionally, Amazon disappointed with the forecast it offered for the holiday quarter.

    “Combined with wobbles on revenue momentum for both AWS and retail, and suddenly the Amazon hiding place doesn’t look good,” Bernstein analyst Mark Shmulik wrote following Amazon’s earnings report last Thursday. “The good news here is that the story isn’t broken, it’s just pushed out into 2023, while Q4 may get worse before it gets better.”

    When looking at companies worth more than $200 billion, Amazon is currently closest to seeing its stock hit its pandemic-era low, according to Dow Jones Market Data. Amazon shares closed Thursday at $96.79, 15.5% above their pandemic low of $83.83. Only shares of Meta Platforms Inc.
    META,
    -2.30%
    have actually plunged below their pandemic low, among this grouping of the largest U.S. companies.

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  • Facebook earnings cut in half, Meta stock sinks toward lowest prices in more than 6 years

    Facebook earnings cut in half, Meta stock sinks toward lowest prices in more than 6 years

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    Facebook parent Meta Platforms Inc. on Wednesday became the latest tech titan tattooed by a precipitous drop in digital advertising, reporting less than half the profit it had in the same quarter a year ago and sending its stock plummeting toward the lowest prices in more than six years.

    Meta 
    META,
    -5.59%
     posted third-quarter earnings of $4.39 billion, or $1.64 a share, down from $9.2 billion, or $3.22 a share last year. Total sales, most of which come from ads, were $27.17 billion, down from $29 billion a year ago. Both results missed the average forecast for profit of $1.90 a share and sales of $27.44 billion, according to analysts polled by FactSet.

    Meta executives issued a fourth-quarter revenue forecast of $30 billion to $32.5 billion, while analysts were forecasting $32.3 billion.

    Daily active users, which edged up 3% to 1.98 billion, were in line with analysts’ projections of 1.98 billion for the quarter.

    “While we face near-term challenges on revenue, the fundamentals are there for a return to stronger revenue growth,” Meta Chief Executive Mark Zuckerberg said in a statement announcing the results. “We’re approaching 2023 with a focus on prioritization and efficiency that will help us navigate the current environment and emerge an even stronger company.”

    In prepared comments, Meta’s departing chief financial officer David Wehner said it is “making significant changes across the board to operate more efficiently. We are holding some teams flat in terms of headcount, shrinking others and investing headcount growth only in our highest priorities. As a result, we expect headcount at the end of 2023 will be approximately in-line with third-quarter 2022 levels.”

    Shares in Meta plunged nearly 20% in after-hours trading, which would put it at levels the stock has not seen since 2016 if the decline were to last into Thursday’s regular trading session. Meta’s stock has been among the worst in tech this year, crashing and burning 61% so far, while the broader S&P 500 index 
    SPX,
    -0.74%
    has declined 19% in 2022.

    After closing with a 5.6% decline at $129.82, Meta shares cratered to less than $115 in after-hours trading; shares have not traded at that level in a regular session since the end of 2016, and have not closed that low since July 2016.

    “Meta is on shaky legs when it comes to the current state of its business,” Insider Intelligence analyst Debra Aho Williamson said in a note late Wednesday. “Mark Zuckerberg’s decision to focus his company on the future promise of the metaverse took his attention away from the unfortunate realities of today: Meta is under incredible pressure from weakening worldwide economic conditions, challenges with Apple’s AppTrackingTransparency policy, and competition from other companies, including TikTok, for users and revenue.”

    In a conference call outlining the results, Wehner pointed out softness in advertising among buyers in online commerce, gaming and financial services.

    Meta’s mess of a quarter came a day after Alphabet Inc.’s
    GOOGL,
    -9.14%

    GOOG,
    -9.63%
    Google reported disappointing ad sales — it missed FactSet analyst estimates by $2 billion — and warned of a deepening pullback in online ad spending. Last week, Snap Inc.
    SNAP,
    -0.21%
    posted slackening ad revenue that sent its shares tumbling more than 25%.

    Read more: Google ad sales take a hit and widely miss estimates, Alphabet stock drops 6%

    Meta announced the results two days after a hellacious Monday, when a major shareholder chastised its metaverse strategy and called for a 20% reduction in payroll costs, as well as a Bank of America note that downgraded the stock.

    Read more: Scathing Meta shareholder’s letter calls for layoffs, less spending on metaverse

    While acknowledging that some people object to Meta’s multibillion-dollar investment in the metaverse, Zuckerberg believes the investment will ultimately prove to be vitally important to Meta’s — and tech’s — future, he said in the conference call.

    Meta executives have blamed inflation, a decline in ad sales, the war in Ukraine, supply-chain issues, increased competition from services such as TikTok, and — most significantly — wrenching changes Apple Inc.  
    AAPL,
    -1.96%
    made to its mobile operating system that make it more difficult for apps to track consumers in ads.

    “We continue to see strategic diversification away from Meta by many advertisers, largely due to stubbornly high CPMs relative to other social platforms and persistent challenges in performance measurement,” Josh Brisco, group vice president of acquisition media at search-engine marketing company Tinuiti, told MarketWatch.

    One factor is a 13% decline in traffic to the Facebook web page in September, year-over-year, according to new report from Similarweb
    SMWB,
    -0.47%    .
    “It’s been down all year, which makes you wonder if they’re going in too many directions — social media, the metaverse, Reels — and whether they are no longer the flavor of the month with competition from TikTok,” David Carr, senior insights manager at Similarweb, told MarketWatch.

    “First and foremost, the discussion needs to pivot to how to build an engaged community of users,” Alex Howland, president and founder of Virbela, which builds virtual worlds, told MarketWatch. “And for that, the metaverse must improve or compliment real-world experiences in some way so that people find value and keep coming back.”

    “Brands have to be focused on what is paying the bills now,” Mike Herrick, senior vice president of technology at Airship, an app-experience platform, told MarketWatch. “Metaverse is going to happen, but not during the life of this recession.”

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  • Heineken shares tumble on cautious outlook, shortfall in beer volumes growth

    Heineken shares tumble on cautious outlook, shortfall in beer volumes growth

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    Heineken NV shares fell Wednesday after it said organic beer volumes rose in the third quarter by 8.9%, missing market consensus expectations of 12% as taken from its website, and that its outlook was cautious.

    Shares at 0730 GMT were down 9% at EUR80.24.

    The Dutch brewer
    HEIA,
    -9.96%

    HEIO,
    -9.19%
    said said that the weaker than expected results were driven by low-single-digit volume growth in Africa, the Middle East, Europe and the Americas, though the Asia-Pacific region delivered a strong recovery from pandemic-related restrictions with total beer volume growth of 89.6%.

    Net revenue, which excludes excise tax expenses–rose to 7.79 billion euros ($7.76 billion) in the quarter from EUR6.03 billion last year. A company-compiled consensus forecast had seen net revenue at EUR7.88 billion.

    In the nine-month period, net revenue rose 23% to EUR21.27 billion while net profit fell to EUR2.2 billion from EUR3.03 billion. Net profit last year was boosted by an exceptional gain of EUR1.27 billion from the revaluation of a stake in United Breweries in India

    The company backed its guidance for 2022 of a stable-to-modest sequential improvement in adjusted operating profit margin, but didn’t reiterate its previously provided 2023 guidance of adjusted operating profit organic growth in the range of mid- to high-single digits.

    “We increasingly see reasons to be cautious on the macroeconomic outlook, including some signs of softness in consumer demand. We remain vigilant and confident in our EverGreen strategy,” Chairman and Chief Executive Dolf van den Brink said.

    The company said it maintains its efforts to offset input cost inflation with pricing.

    Write to Dominic Chopping at dominic.chopping@wsj.com

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  • Microsoft stock slammed by cloud-growth fears, taking Amazon down with it

    Microsoft stock slammed by cloud-growth fears, taking Amazon down with it

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    Microsoft Corp. shares fell more than 6% in after-hours trading Tuesday as the company’s cloud-computing growth hit a sudden deceleration and executives guided for holiday-season revenue to come in more than $2 billion lower than expectations.

    The Azure cloud-computing business has grown into the largest and most important business for Microsoft
    MSFT,
    +1.38%    ,
    and there have been concerns about cloud growth as the U.S. faces a potential recession for the first time since the technology became ubiquitous. Microsoft executives said that Azure grew by 35% in their fiscal first quarter, a marked slowdown from Azure’s 40% growth rate in the previous quarter, as well as the 50% growth shown in the same quarter last year; analysts on average were expecting 36.5% growth, according to FactSet.

    Opinion: The cloud boom is coming back to Earth, and that could be scary for tech stocks

    In the current quarter, Chief Financial Officer Amy Hood suggested a similar sequential decline is in store for Azure, saying percentage growth should decline by five points on a constant-currency basis. Hood also suggested that more cost cuts could be coming to Microsoft, after the company confirmed layoffs of fewer than 1,000 employees earlier this month.

    “While we continue to help our customers do more with less, we will do the same internally,” she said. “And you should expect to see our operating-expense growth moderate materially through the year while we focus on growing productivity of the significant head-count investments we’ve made over the last year.”

    Microsoft shares slid to declines of more than 6% in after-hours trading following Hood’s forecast, which was provided in a conference call. Shares closed with a 1.4% increase at $250.66.

    Concerns about cloud growth immediately spread to Azure’s biggest competitor, Amazon Web Services, as Amazon.com Inc. stock
    AMZN,
    +0.65%
    fell more than 4% in after-hours trading.

    Microsoft reported fiscal first-quarter earnings of $17.56 billion, or $2.35 a share, down from $2.71 a share in the same quarter a year ago, when the tech giant disclosed a 44 cent-per-share tax benefit. Revenue increased to $50.1 billion from $45.32 billion a year ago. Analysts on average were expecting earnings of $2.31 a share on sales of $49.66 billion, according to FactSet.

    For the fiscal second quarter, Hood guided for revenue of $52.35 billion to $53.35 billion, while analysts on average were expecting sales of $56.16 billion, according to FactSet. Hood said that “Intelligent Cloud” revenue should land from $21.25 billion to $21.55 billion, while analysts on average were projecting $21.82 billion heading into the print; Microsoft’s other revenue-segment forecasts were even further off analysts’ average expectations.

    Microsoft has also suffered from the strengthening dollar, as well as a sharp downturn in personal-computer sales, which spiked during the pandemic but are now showing record regression.

    For more: The pandemic PC boom is over, but its legacy will live on

    Microsoft reported PC revenue of $13.3 billion for the quarter, roughly flat from $13.31 billion a year before and beating the average analyst estimate of $13.12 billion, according to FactSet. While PCs have long been what consumers largely know Microsoft for, their importance to the company’s financials has declined in recent years as cloud computing has grown in importance.

    “Historically, Windows was a very large driver of Microsoft revenue and, given its strong margins, a disproportionate driver of earnings,” Bernstein analysts wrote in a preview of the report, while maintaining an “overweight” rating. “Over time other businesses, especially Microsoft’s commercial Cloud, have grown fast while the Windows business has grown quite slower, decreasing the relative impact of Windows.”

    The “Intelligent Cloud” segment reported first-quarter revenue of $20.3 billion, up from $16.96 billion a year ago but slightly lower than the average analyst estimate tracked by FactSet of $20.46 billion. Azure’s 35% growth was the slowest Microsoft has reported in records dating back through the prior two fiscal years; Microsoft only reports percentage growth for its Azure cloud-computing product, even as main rivals Amazon.com Inc.
    AMZN,
    +0.65%
    and Alphabet Inc.
    GOOGL,
    +1.91%
    GOOG,
    +1.90%
    report revenue and profit margin for their cloud-computing products.

    Microsoft’s other revenue segment, “Productivity and Business Processes,” reported revenue of $16.5 billion, up from $15.04 billion a year ago and higher than the average analyst estimate of $16.13 billion, according to FactSet. That segment includes Microsoft’s core cloud-software properties such as its Office suite of products — which is being officially renamed Microsoft 365 — as well as LinkedIn and some other properties.

    Microsoft stock has declined 25.5% so far this year, as the S&P 500 index
    SPX,
    +1.63%
    has dropped 20.3% and the Dow Jones Industrial Average
    DJIA,
    +1.07%
    — which counts Microsoft as one of its 30 components — has declined 13.3%.

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  • Microsoft stock slips as Azure growth slows and cloud sales miss projections

    Microsoft stock slips as Azure growth slows and cloud sales miss projections

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    Microsoft Corp. shares slipped in after-hours trading Tuesday despite an earnings beat, as the company’s cloud-computing revenue came in lower than expected and its core cloud product, Azure, grew at a slower rate than projections.

    Microsoft’s
    MSFT,
    +1.38%
    cloud-computing business has grown into the largest and most important business for the company, especially for investors who like Azure’s high margins and strong growth. There have been concerns about cloud growth as the U.S. faces its first possible recession since the technology became ubiquitous, and Azure’s growth in Tuesday’s report was the slowest Microsoft has reported in the past two years, while Microsoft’s cloud division was the only segment to come in lower than estimates.

    The “Intelligent Cloud” segment reported first-quarter revenue of $20.3 billion, up from $16.96 billion a year ago but slightly lower than the average analyst estimate tracked by FactSet of $20.46 billion. Microsoft said that Azure grew by 35%, while analysts on average were expecting 36.5% growth, according to FactSet.

    Opinion: The cloud boom is coming back to Earth, and that could be scary for tech stocks

    That is a marked slowdown from Azure’s 40% growth rate in the previous quarter, as well as the 50% growth shown in the same quarter last year. Microsoft only reports percentage growth for its core cloud-computing product, even as main rivals Amazon.com Inc.
    AMZN,
    +0.65%
    and Alphabet Inc.
    GOOGL,
    +1.91%
    GOOG,
    +1.90%
    report revenue and profit margin for their cloud-computing products.

    Overall, Microsoft
    MSFT,
    +1.38%
    reported fiscal first-quarter earnings of $17.56 billion, or $2.35 a share, down from $2.71 a share in the same quarter a year ago, when Microsoft disclosed a 44 cent-per-share tax benefit. Revenue increased to $50.1 billion from $45.32 billion a year ago. Analysts on average were expecting earnings of $2.31 a share on sales of $49.66 billion, according to FactSet.

    Microsoft shares fell between 1% and 2% in after-hours trading following the release of the results, after closing with a 1.4% increase at $250.66. Microsoft stock tends to react most strongly in after-hours trading following earnings reports after executives share their forecast for the current quarter in their conference call, which is scheduled to begin at 5:30 p.m. Eastern.

    Microsoft has started to show some effects of a weakening macroeconomic climate, confirming layoffs of fewer than 1,000 employees earlier this month. Microsoft has suffered from the strengthening dollar, as well as a sharp downturn in personal-computer sales, which spiked during the pandemic but are now showing record regression.

    For more: The pandemic PC boom is over, but its legacy will live on

    Microsoft reported PC revenue of $13.3 billion for the quarter, roughly flat from $13.31 billion a year before and beating the average analyst estimate of $13.12 billion, according to FactSet. While PCs have long been what consumers largely know Microsoft for, their importance to the company’s financials has declined in recent years as cloud computing has grown in importance.

    “Historically, Windows was a very large driver of Microsoft revenue and, given its strong margins, a disproportionate driver of earnings,” Bernstein analysts wrote in a preview of the report, while maintaining an “overweight” rating. “Over time other businesses, especially Microsoft’s commercial Cloud, have grown fast while the Windows business has grown quite slower, decreasing the relative impact of Windows.”

    Microsoft’s other revenue segment, “Productivity and Business Processes,” reported revenue of $16.5 billion, up from $15.04 billion a year ago and higher than the average analyst estimate of $16.13 billion, according to FactSet. That segment includes Microsoft’s core cloud-software properties such as its Office suite of products — which is being officially renamed Microsoft 365 — as well as LinkedIn and some other properties.

    Microsoft’s second-quarter guidance will be crucial to investors hoping that the tech giant can withstand any economic jolts headed its way and show stronger growth in cloud. Analysts on average were expecting overall second-quarter revenue of $56.16 billion and “Intelligent Cloud” sales of $21.82 billion heading into the print, according to FactSet, while some wrote that they would like to hear more from Microsoft executives about the picture for the full year.

    “Our hope is that management provides a bit more color on full-year fiscal 2023 beyond just the double-digit revenue growth and operating margins being roughly flat commentary from last quarter,” MoffetNathanson analysts, who have a “market perform” rating and $282 price target on the stock, wrote in their preview. “We would expect headcount-related revenue streams like Office to see increasing headwinds in coming quarters, but volume businesses like Azure, which is tied to data, being more resilient.”

    Microsoft stock has declined 25.5% so far this year, as the S&P 500 index
    SPX,
    +1.63%
    has dropped 20.3% and the Dow Jones Industrial Average
    DJIA,
    +1.07%
    — which counts Microsoft as one of its 30 components — has declined 13.3%.

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  • Twitter shares slump after report that the U.S. mulls national-security reviews for some of Elon Musk’s ventures

    Twitter shares slump after report that the U.S. mulls national-security reviews for some of Elon Musk’s ventures

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    Shares of Twitter plunged in premarket trade on Friday after a report Biden administration officials are considering subjecting some of Elon Musk’s ventures to national-security reviews.

    Twitter
    TWTR,
    +1.18%
    shares plunged 9% to $47.64 in premarket trade, below the $54.20 per share buyout price.

    Bloomberg News reported late Thursday that some U.S. officials have become concerned in recent weeks by Musk’s Russia-friendly tweets and his threat to cut off Starlink satellite internet service to Ukraine. The Tesla
    TSLA,
    -6.65%
    and SpaceX CEO’s pending $44 billion acquisition of Twitter has also reportedly drawn concerns because of its foreign investors, including a Saudi prince, Binance Holdings — a crypto exchange that was initially based in China — and Qatar’s sovereign wealth fund.

    Citing anonymous sources familiar with the matter, Bloomberg said discussions are still in the early stages and officials are trying to figure out what regulatory tools are available to them. One option could be a national-security review by the Committee on Foreign Investment in the United States, the report said.

    Separately, Bloomberg also reported late Thursday that Musk’s lawyers and bankers are preparing paperwork for the Twitter deal to be completed ahead of a Oct. 28 deadline, and that relations between Musk and Twitter have turned cordial rather than adversarial.

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  • Snap stock plummets more than 25% as online advertising continues to struggle

    Snap stock plummets more than 25% as online advertising continues to struggle

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    A bruising year for Snap Inc.’s shares worsened Thursday, as the stock plummeted more than 20% in after-hours trading as executives launched the company’s first major share-repurchase program amid revenue issues in a poor environment for online advertising.

    Snap
    SNAP,
    -0.64%
    executives revealed that revenue increased less than 6% year-over-year in the quarter — its slowest quarterly grow ever recorded — and said that the holiday season is shaping up similarly, with sales increasing 9% so far in the quarter. The social-media company, which laid off roughly 20% of its staff this summer in response to the issues, also declined to provide a full forecast for the important fourth quarter.

    “Our revenue growth continued to decelerate in Q3 and continues to be impacted by a number of factors we have noted throughout the past year, including platform policy changes, macroeconomic headwinds, and increased competition,” executives said in a letter to shareholders, outlining the results. “We are finding that our advertising partners across many industries are decreasing their marketing budgets, especially in the face of operating environment headwinds, inflation-driven cost pressures, and rising costs of capital.”

    “Forward-looking revenue visibility remains incredibly challenging, and this is compounded by the fact that revenue in Q4 is typically disproportionately generated in the back half of the quarter, which further reduces our visibility,” executives explained about the lack of guidance in a letter to investors.

    The board did approve a $500 million share repurchase, a first for the young company. In a news release, executives said that the move was meant “to opportunistically offset a portion of the dilution related to the issuance of restricted stock units to employees as part of the overall compensation program designed to foster an ownership culture.”

    Snap’s results — the first among the major tech companies who rely heavily on digital advertising — likely portend even more turbulent times ahead for Alphabet Inc.’s 
    GOOGL,
    +0.34%
     
    GOOG,
    +0.24%
    Google, Facebook parent company Meta Platforms Inc. 
    META,
    -1.28%    ,
     Twitter Inc. 
    TWTR,
    +1.18%    ,
     Pinterest Inc. 
    PINS,
    -0.30%
    and others in the grip of inflation, a war in Ukraine, foreign-exchange worries and a widening recession.

    Snap’s desultory news sent shares tumbling in extended trading for Pinterest (-8%), Trade Desk Inc.
    TTD,
    +2.26%
    (-5), Meta (-4%) and Google (-3%).

    Deteriorating macroeconomic conditions have left advertisers with little choice but to delay or cancel buys. At the same time, intensifying competition from the likes of TikTok and others has deepened headwinds.

    “As a smaller player, Snap is more susceptible but no platform is immune,” Insider Intelligence analyst Jasmine Enberg told MarketWatch. “I expect more of the same results next week” when Google and Meta report, she added.

    Snap reported a third-quarter net loss of $359.5 million, or 22 cents a share, compared with a loss of 5 cents a share a year ago. Analysts on average were expecting a loss of 24 cents a share.

    Snap’s sales increased less than 6% to $1.13 billion, barely falling short of Street estimates of $1.14 billion. Daily active users rose 19% to 363 million. FactSet analysts had modeled 358.2 million.

    Snap shares initially fell more than 20% in after-hours trading. They closed the regular trading session down 0.6% to $10.79. Shares of Snap have nosedived 77% this year, while the S&P 500 index 
    SPX,
    -0.80%
    is down 23%.

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  • AT&T stock surges toward best day since 2020 as earnings mark a ‘step forward’

    AT&T stock surges toward best day since 2020 as earnings mark a ‘step forward’

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    Shares of AT&T Inc. were up more than 9% in morning trading Thursday after the telecommunications company topped profit expectations and posted another quarter of sizable subscriber gains.

    The company saw 708,000 postpaid phone net additions during the period, building on the 1.5 billion such net additions it saw during the first half of the year. Postpaid phone churn in the latest quarter was 0.84%.

    The subscriber traction reflected “more of the same,” AT&T’s
    T,
    +9.01%
    investor relations head Amir Rozwadowski told MarketWatch. While he said that some wireless competitors have been adjusting their promotions every few weeks, he added that AT&T has stayed more consistent with its strategy, something he saw as beneficial for consumers, who understand what the company is offering, and store associates, who don’t have to make major adjustments to their messaging.

    AT&T also added 338,000 net fiber subscribers in the third quarter.

    Shares were up 9.5% in Wednesday morning trading and on track to log their best single-day performance since March 13, 2020, when they rose 10.0%. The stock is also on track to log its best post-earnings gain since at least 1997, according to Dow Jones Market Data.

    Revenue came in at $30.0 billion, down from $31.3 billion a year before, though up from $29.1 billion in revenue for standalone AT&T when adjusting for business divestments. The FactSet consensus was $29.8 billion in revenue.

    AT&T attributed the drop in headline revenue during the latest quarter to the divestment of its U.S. video business last July as well as lower business wireline revenue. Those trends were partially offset by higher mobility revenue.

    AT&T expects growth in mobility service revenues at the “upper end” of the 4.5% to 5% range for the full year. It gave a target of 4.5% to 5% growth in its second-quarter report.

    “Our results demonstrate that the strategy we put forward more than two years ago is the right strategy for not only the future of our business, but for the future of the communications industry,” Chief Executive John Stankey said on the company’s earnings call.

    The current inflationary backdrop impacts both consumers and AT&T, and the company recently raised prices on some legacy plans recently as it dealt with its own inflationary costs. Despite financial pressures on consumers, Rozwadowski said that AT&T has seen consumers trade up to higher-tier plans more generally because they see more value in those plans.

    While he said that AT&T was “certainly seeing signs of inflation across our business,” he also emphasized that consumers seem to have a strong appreciation for connectivity services as they evaluate their expenses. “You need phone and broadband probably more now than in the last recession,” Rozwadowski said.

    AT&T executives highlighted last quarter that some consumers were taking a bit longer to pay their bills, though they ultimately were still paying them. The company is “not seeing any material change relative to what we saw last quarter,” Rozwadowski said, as customer payment cycles are holding steady at pre-pandemic levels.

    The company posted third-quarter income from continuing operations of $6.3 billion, or 79 cents a share, compared with $5.0 billion, or 63 cents a share, in the year-prior quarter.

    After adjustments for actuarial gains on benefit plans and some other factors, AT&T notched 68 cents a share in earnings from continuing operations, up from 66 cents a share a year earlier, and also above the 62 cents a share in earnings from continuing operations for standalone AT&T during that year-ago period. The standalone number accounts for the fact that the company divested its U.S. video business last summer.

    Analysts tracked by FactSet were modeling 61 cents a share in adjusted earnings for AT&T’s third quarter.

    Citi Research analyst Michael Rollins called AT&T’s latest earnings a “step forward,” highlighting that they “reflect a better balance of profitability relative to its revenue growth.”

    “Results show that AT&T remains highly-competitive in wireless, while showing forward progress on improving fiber net adds with its expanding footprint,” he continued in a note to clients.

    AT&T generated $3.8 billion in free-cash flow from continuing operations during the September quarter, and Chief Financial Officer Pascal Desroches shared on the earnings call that AT&T felt “good about our line of sight to achieving our free-cash flow target in the $14 billion range for the year.”

    Rozwadowski said that the company was focused on putting cash back into the network.

    “The business is generating a healthy amount of cash,” he said, and by investing that money in network improvements, AT&T hopes to achieve a “flywheel effect” since an enhanced network can help the company retain customers and convince them to pay up for more expensive plans.

    Desroches added on the earnings call that AT&T was “very comfortable with our cash levels after paying our dividend commitment” and said that “this should only increase in future years as we expect cash conversion to improve from here.”

    The company models adjusted earnings per share from continuing operations of “$2.50 or higher” for the full year, while analysts tracked by FactSet were looking for $2.53.

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  • Elon Musk teases massive Tesla stock buyback as CFO trims forecast for annual deliveries and stock falls

    Elon Musk teases massive Tesla stock buyback as CFO trims forecast for annual deliveries and stock falls

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    Tesla Inc. Chief Executive Elon Musk suggested the electric-vehicle maker could repurchase up to $10 billion worth of its stock Wednesday, as shares declined following a third-quarter revenue miss and his CFO brought down delivery expectations for the full year.

    Some Tesla
    TSLA,
    +0.84%
    investors have been agitating for a stock buyback after multiple stock splits and the company losing more than a third of its market capitalization in 2022, and Musk said in an earnings conference call that Tesla’s board has discussed a buyback in the range of $5 billion to $10 billion.

    “We debated the buyback idea extensively at board level. The board generally thinks that it makes sense to do a buyback, we want to work through the right process to do a buyback, but it is something possible for us to do a buyback on the order of $5 [billion] to $10 billion even in a downside scenario next year, given next year is very difficult,” he said, adding that it “is obviously pending board review and approval.”

    “So it’s likely that we will do some meaningful buyback,” he concluded.

    The statement did not immediately move Tesla’s stock, as it was followed closely by a forecast revision from Chief Financial Officer Zachary Kirkhorn, who said, “We do expect to be just under 50% growth [for deliveries] due to an increase in the cars in transit at the end of the year.”

    Tesla delivered a record number of cars in the third quarter, but still missed analysts’ expectations and made it more difficult to hit executives’ target for the year of an increase of more than 50% in vehicle deliveries. Kirkhorn said that the company will increase production of cars by 50%, “although we are tracking supply-chain risks which are beyond our control.”

    Shares declined more than 6% following the car company’s earnings report. Tesla reported third-quarter earnings of $3.29 billion, or 95 cents a share, on sales of $21.45 billion, up from $13.76 billion a year ago. After adjusting for stock-based compensation, the electric-vehicle manufacturer reported earnings of $1.05 a share, up from 62 cents a share a year ago.

    Analysts on average were expecting adjusted earnings of $1 a share on sales of $21.98 billion, according to FactSet. Tesla shares declined about 5% in after-hours trading immediately following the release of the results, after closing with a 0.8% increase to $222.04 in the regular trading session.

    Tesla shares have fallen more than 37% so far this year, a harder descent than the 22% decline of the S&P 500 index
    SPX,
    -0.67%    ,
    after years of outsize gains. Pundits have put forth a variety of reasons for the downturn, including increasing competition in the EV market, negative press around Tesla’s full-self-driving claims and actual performance, and Musk’s attention being diverted to his attempt to acquire Twitter Inc.
    TWTR,
    +0.10%    .

    Don’t miss: Market share for electric vehicles expected to roughly double

    None of that cowed Musk, however. He predicted that Tesla would be worth as much as the two most valuable companies in the world, Apple Inc.
    AAPL,
    +0.08%
    and Saudi Arabian Oil Co.
    2222,
    +0.42%    ,
    combined. Both companies have market capitalizations topping $2 trillion.

    “Now I am of the opinion that we can far exceed Apple’s current market,” Musk said on the call, after referencing a previous prediction that Tesla would reach Apple’s then-record market cap. “In fact, I see a potential path for Tesla to be worth more than Apple and Saudi Aramco combined. That doesn’t mean it will happen or that it will be easy, in fact it will be very difficult, require a lot of work, very creative new products, expansion and always good luck. But for the first time I’m seeing, I see a way for Tesla to be, let’s say roughly twice the value of Saudi Aramco.”

    In a preview of the report Tuesday, Wedbush Securities analyst Daniel Ives said that “the Street is starting to worry that the bloom is coming off the rose in the Tesla story with delivery shortfalls front and center.”

    “Between logistical issues in China, supply-chain problems, FSD black-eye moments, the Musk Twitter fiasco and EV competition increasing across the board, there is growing pressure on Musk & Co. to prove themselves,” Ives wrote.

    Tesla’s automotive gross margin, which declined in the second quarter despite price increases that Musk called “embarrassing,” were the same sequentially at 27.9%. Operating margin increased both sequentially and year-over-year, however, to 17.2% from 14.6% both in the third quarter a year ago and the previous quarter.

    Earnings preview: Do record Tesla deliveries mask a demand problem?

    In their communications with investors on Wednesday, Tesla executives disclosed that they will change the process for one of their most challenging tasks of late — transporting cars — in hopes of bringing costs down.

    “We are reaching such significant delivery volumes in the final weeks of each quarter that transportation capacity is becoming expensive and difficult to secure. As a result, we began transitioning to a smoother delivery pace, leading to more vehicles in transit at the end of the quarter,” the company’s shareholder deck reads. “We expect that smoothing our outbound logistics throughout the quarter will improve cost per vehicle.”

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  • Netflix Adds a Better-Than-Expected 2.4 Million Subscribers

    Netflix Adds a Better-Than-Expected 2.4 Million Subscribers

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    Netflix


    shares were trading sharply higher after the streaming giant posted better-than-expected subscriber growth for the third quarter.

    The company added 2.41 million net new subscribers in the quarter, beating its own forecast of 1 million additions. Netflix (ticker: NFLX) said it expects to add another 4.5 million subscribers in the December quarter.

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  • Netflix snaps streak of subscriber declines and beats on earnings, stock jumps 15%

    Netflix snaps streak of subscriber declines and beats on earnings, stock jumps 15%

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    Netflix Inc. added more than 2 million subscribers in the third quarter after stumbling into 2022 with two consecutive quarterly declines, a rebound that sent shares more than 15% higher in after-hours trading Tuesday.

    Netflix 
    NFLX,
    -1.73%
    reported a net gain of 2.41 million subscribers in the third quarter, while analysts on average were forecasting 1.1 million net additions, according to FactSet. That follows a decline of roughly 200,000 subscribers in the first quarter and nearly a million in the second quarter, which has led the company to plan massive changes, including a cheaper, ad-supported streaming tier set to arrive in the fourth quarter.

    In a letter to shareholders, Netflix executives said they expect 4.5 million new subscribers to join in the fourth quarter, with revenue forecast to grow to $7.78 billion from $7.71 billion a year ago. Analysts on average were estimating revenue of $7.97 billion and a net subscriber gain of 4 million for the fourth quarter, according to FactSet.

    “After a challenging first half, we believe we’re on a path to reaccelerate growth,” executives wrote in the letter.

    The news sent Netflix shares up about 15% in after-hours trading following the release of the results, after closing with a 1.7% drop at $240.86. The stretch of subscriber declines has filleted Netflix shares, which have swooned 60% so far this year while the broader S&P 500 index
    SPX,
    +1.14%
    has declined 22.8%.

    The streaming-video giant’s downturn after a pandemic-boosted surge has only intensified pressure from rival streaming services at Walt Disney Co. 
    DIS,
    +1.18%    ,
     Apple Inc. 
    AAPL,
    +0.94%    ,
    Amazon.com Inc. 
    AMZN,
    +2.26%    ,
    Warner Bros. Discovery Inc. 
    WBD,
    +4.55%    ,
    Comcast Corp. 
    CMCSA,
    -0.23%
    and Paramount Global 
    PARA,
    +1.56%    .

    That didn’t stop Netflix executives from taking a pot shot at streaming rivals over profitability. “Our competitors are investing heavily to drive subscribers and engagement, but building a large, successful streaming business is hard — we estimate they are all losing money, with combined 2022 operating losses well over $10 billion, vs. Netflix’s $5 to $6 billion annual operating profit,” Netflix executives said in the shareholder letter.

    A dramatic shift in the video-streaming climate, one in which Disney surpassed Netflix as market leader in July, has prompted a radical makeover at Netflix. Last week, the company announced its long-awaited advertising-supported tier, which debuts Nov. 3 in the U.S. for $6.99 a month. Another 11 countries, including Canada and Mexico, will get the service by Nov. 10. The company has also vowed a crackdown on shared accounts, and is pushing forward on gaming.

    The advertising-supported tier directly acknowledges competition and the necessity of Netflix “adapting to the streaming landscape’s new normal,” Insider Intelligence analyst Ross Benes said in a note late Tuesday.

    For more: Netflix lost its streaming crown to Disney. Here’s how execs expect to win it back.

    Netflix announced third-quarter earnings of $1.4 billion, or $3.10 a share, down from $3.16 a share a year ago. Netflix revenue improved to $7.93 billion in the quarter from $7.48 billion in the same period a year ago, but missed diminished expectations. Analysts polled by FactSet expected earnings of $2.14 a share on sales of $7.84 billion, estimates that had dipped in recent days.

    Tuesday’s results follow some serious self-reflection among Netflix executives on how to stanch a decline in visits among subscribers that has led to cancellations. Co-CEO Reed Hastings has consulted with staff to find ways to make subscribers visit the platform more frequently, according to reports by The Wall Street Journal and Bloomberg News.

    One such strategy is cracking down on multiple users sharing the same account. In the shareholder letter, Netflix said it has “landed on a thoughtful approach to monetize account sharing and we’ll begin rolling this out more broadly starting in early 2023.”

    “After listening to consumer feedback, we are going to offer the ability for borrowers to transfer their Netflix profile into their own account, and for sharers to manage their devices more easily and to create sub-accounts (‘extra member’), if they want to pay for family or friends,” the letter said. “In countries with our lower-priced ad-supported plan, we expect the profile transfer option for borrowers to be especially popular.”

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  • A Tesla stock plunge could destroy ‘zombie stocks’ such as GameStop and Peloton, warns equity research firm New Constructs

    A Tesla stock plunge could destroy ‘zombie stocks’ such as GameStop and Peloton, warns equity research firm New Constructs

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    Tesla shares could decline dramatically — and that could mean disaster for a number of stocks that have already seen deep share-price cuts, according to equity research firm New Constructs.

    The research firm, which uses machine learning and natural language processing to parse corporate filings and model economic earnings, called the stocks in danger “zombie stocks,” and defined them as companies with poor business models that are burning cash at an alarming rate and are at risk of seeing their stock decline to $0 per share.

    The research firm estimates there could be some 300 zombie companies across the marketplace.

    “The Federal Reserve’s aggressive rate hikes so far in 2022 have ended the era of free money and exposed a worrisome dynamic throughout capital markets: zombie stocks,” wrote New Constructs CEO David Trainer, in a note.

    See Now: Tesla earnings are coming, but do record deliveries mask a demand problem?

    New Constructs does not define Tesla Inc.
    TSLA,
    +7.01%
    as a “zombie stock,” citing CEO Elon Musk’s ability to raise capital, but does see the electric car manufacturer as a bellwether for the sector. “It shares many of the common characteristics of a zombie stock, such as an outrageous valuation and high cash burn,” wrote Trainer. “We believe Tesla’s unrelenting share price rise over the past three years – where investors completely ignored company fundamentals – inspired the birth of many of today’s zombie stocks.” 

    Tesla reports its third-quarter results after the closing bell on Oct. 19.

    The company’s stock was trading around $220 on Monday, an increase of over 1,000% compared to three years ago. But Trainer feels that Tesla is at risk of falling more than 80% to $25 a share.

    Tesla’s Optimus bot: ‘High school science project’ or robotics game changer?

    Tesla’s stock has fallen 37.6% in 2022, outpacing the S&P 500 Index’s
    SPX,
    +2.65%
    decline of 22.7%.

    “Its valuation remains nosebleed high because the cash flow expectations baked into the stock price are unreasonably optimistic,” Trainer wrote. “Our message to investors is to take profits in Tesla and avoid zombie stocks at all costs.”

    New Constructs recently added cloud-based communication company RingCentral Inc.
    RNG,
    +6.49%
    to its list of “zombie” stocks. Other companies on the list are Freshpet Inc.
    FRPT,
    -2.03%    ,
     Peloton Interactive Inc.
    PTON,
    +7.04%    ,
     Carvana Co.
    CVNA,
    +6.30%    ,
     Snap Inc.
    SNAP,
    +6.01%    ,
     Beyond Meat Inc.
    BYND,
    +0.64%    ,
     Rivian Automotive Inc.
    RIVN,
    +6.93%    ,
     DoorDash Inc.
    DASH,
    +6.15%    ,
     Shake Shack Inc.
    SHAK,
    +4.01%    ,
     Chewy Inc.
    CHWY,
    +10.76%    ,
     Uber Technologies Inc.
    UBER,
    +4.98%    ,
     Robinhood Markets Inc.
    HOOD,
    +3.24%    ,
     Tilray Brands Inc.
    TLRY,
    +7.32%    ,
     Affirm Holdings Inc.
    AFRM,
    +6.72%    ,
     SunRun Inc.
    RUN,
    +1.70%    ,
     Blue Apron Holdings Inc.
    APRN,
    +3.26%    ,
     and meme stocks AMC Entertainment Holdings Inc. 
    AMC,
    +6.00%
    and GameStop Corp.
    GME,
    +5.40%    .

    See Now: RingCentral added to ‘zombie’ stocks list by equity research firm New Constructs

    “Investors are now fed up with these kinds of companies, especially amid this year’s stock market volatility,” wrote New Constructs’ Trainer. “If investors start to give up on Tesla and take profits on the stock, which is up over 1,000% over the past three years, that spells terrible news for all of the other zombie stocks that don’t have the cash-raising luxury that Tesla has.”  

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  • JPMorgan profit falls but beats estimates while Wells Fargo misses

    JPMorgan profit falls but beats estimates while Wells Fargo misses

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    JPMorgan Chase & Co. shares rose Friday after the megabank beat analyst targets for third-quarter profit and revenue and said it would top forecasts for its net interest in come in the coming quarter.

    In a busy day for bank earnings, Wells Fargo & Co.
    WFC,
    +4.62%
    fell short of earnings target but its stock rose in premarket trades as it beat revenue estimates.

    Morgan Stanley
    MS,
    +3.55%
    shares fell after it missed Wall Street’s targets for earnings and revenue.

    Citigroup Inc.
    C,
    +5.17%
    shares rose after beating its profit mark, although revenue fell 1% after breaking out the impact of divestitures.

    Overall, banks benefited from higher interest rates and strong trading volumes, but investment banking deal activity fell sharply. Banks also channeled more capital into reserves and away from their collective bottom lines to prepare for a potential economic downturn.

    As the largest bank in the U.S. and a bellwether for the sector, JPMorgan Chase
    JPM,
    +5.56%
    turned in a “solid performance” in the latest quarter, in the words of Chief Executive Jamie Dimon.

    The bank said it expects to meet its capital requirements under the international Basel III banking guidelines and resume stock buybacks early in 2023.

    “In the U.S., consumers continue to spend with solid balance sheets, job openings are plentiful and businesses remain healthy,” Dimon said. “However, there are significant headwinds immediately in front of us – stubbornly high inflation leading to higher global interest rates, the uncertain impacts of quantitative tightening, the war in Ukraine, which is increasing all geopolitical risks, and the fragile state of oil supply and prices.”

    Dimon said the bank remains “prepared for bad outcomes” so it can continue to operate even in the most challenging times.

    Dimon’s prepared statement comes a day after the oft-quoted CEO said the U.S. consumer sector remains strong currently, but inflation will start weighing on people by 2023.

    Also Read: JPMorgan CEO Dimon says inflation hasn’t dampened consumer spending yet but give it time

    JPMorgan Chase’s stock rose 2.4% ahead of Friday’s open after it said its third-quarter net income fell 16.7% to $9.74 billion, or $3.12 a share, from $11.69 billion, or $3.74 a share, in the year-ago quarter.

    Third-quarter revenue at the megabank rose to $32.72 billion from $29.65 billion in the year-ago quarter.

    Wall Street analysts expected JPMorgan Chase to earn $2.90 a share on revenue of $32.12 billion, according to estimated compiled by FactSet. T

    The bank said a net credit reserve build of $808 million ate into its net income for the latest quarter, compared with a net reserve release of $2.1 billion in the prior year.

    Net interest income climbed 34% to $17.6 billion and net interest income excluding its Markets unit rose 51% to $16.9 billion on higher interest rates.

    JPMorgan Chase’s total assets under management fell 13% to $2.6 trillion in the face of losses in the equities market and difficult conditions in the bond market.

    Looking ahead, JPMorgan Chase said it expects fourth-quarter net interest income of about $19 billion, ahead of the $18.2 billion analyst estimate.

    Octavio Marenzi, CEO of management consultant company Opimas said the bank’s results were “surprisingly solid” and if you strip away its payments for loan reserves, its profit is basically unchanged.

    “Individual lines of business, such as investment banking and mortgages did predictably badly, but this was more than compensated for by strength in other areas of lending and in trading,” Marenzi said.

    Shares of JPMorgan Chase have lost 30.9% in 2022 compared with a 17.3% drop by the Dow Jones Industrial Average
    DJIA,
    +2.83%
    and a 23.0% loss by the S&P 500
    SPX,
    +2.60%    .

    Wells Fargo misses profit target but share rise

    Wells Fargo & Co. shares advanced 2% in Friday’s premarket after the bank posted net income of $3.528 billion, or 85 cents a share, for the quarter to end September, down from $5.122 billion, or $1.17 a share, in the year-earlier quarter.

    The megabank fell short of the earnings-per-share target of $1.09 a share.

    Wells Fargo’s revenue rose to $19.505 billion from $18.834 billion a year ago, ahead of the $18.775 billion FactSet consensus.

    Chief Executive Charlie Scharf said performance was “significantly impacted” by $2 billion, or 45 cents a share, in operating losses “related to litigation, customer remediation, and regulatory matters primarily related to a variety of historical matters.”

    However, the bank is seeing historically low delinquencies and high payment rates, and the “timing of deterioration in those measures due to high inflation remains unclear. “

    The bank set aside $784 million in provisions for loan losses, after reducing them by $1.395 billion a year ago.

    Net interest income rose 36%, while noninterest income fell 25%, as mortgage banking income declined.

    Citi analyst Keith Horowitz said Wells Fargo turned in a “good” quarter overall, although larger-than-expected one-time charges and a reserve build reduced profits. But Wells Fargo also raised its outlook for net interest income “and we still see upside to 2023 consensus,” Horowitz said.

    Shares of Wells Fargo have declined 12% in the year to date.

    Morgan Stanley shares fall on results

    Morgan Stanley fell 2.6% in premarket trades after the investment bank missed Wall Street’s targets for earnings and revenue amid a drop in deal activity.

    Morgan Stanley said its third-quarter net income fell to $2.49 billion, or $1.47 per share, from net income of $3.7 billion, or $1.98 per share in the year-ago quarter.

    Third-quarter revenue dropped to $12.99 billion from $14.75 billion.

    Wall Street analysts were looking for earnings of $1.52 a share and revenue of $13.29 billion, according to FactSet data.

    “Firm performance was resilient and balanced in an uncertain and difficult environment, delivering a 15% return on tangible common equity,” said CEO James Gorman. “Wealth Management added an additional $65 billion in net new assets and produced a pre-tax margin of 28%, excluding integration-related expenses, demonstrating scale and stability despite declining asset values.”

    Morgan Stanley shares have lost 19.2% in 2022.

    Citi beats targets but shares lose ground

    Citigroup shares fell 1.3% in premarket trades Friday after the bank posted stronger-than-expected profit, but revenue fell 1% after breaking out divestiture-related impacts, as growth in net interest income was more than offset by lower non-interest revenue.

    Citi said its third-quarter net income dropped to $3.5 billion, or $1.63 per share, from $4.6 billion, or $2.15 a share, in the year-ago quarter.

    Excluding divestiture-related impacts, earnings were $1.50 a share.

    Total revenue increased to $18.5 billion from $17.4 billion.

    Analysts were looking for earnings of $1.42 a share and revenue of $18.26 billion for Citigroup, according to a FactSet survey.

    Citi said it continues to shrink its operations in Russia, and expects to end nearly all of the institutional banking services offered in the country next quarter. “To be clear, our intention is to wind down our presence in this country,” Chief Executive Jane Fraser said.

    Shares of Citigroup have dropped 28.9% in 2022.

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