Coronavirus Wasn’t the Worst Thing for Quarterly Results: Earnings This Week

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Coronavirus Not the Worst Thing for Quarterly Results: Earnings This Week

Coronavirus was a big theme in quarterly results over the last week, but it wasn’t all bad.

Companies like Shopify (SHOP), Activision Blizzard (ATVI) and Peloton Interactive (PTON) ripped higher as social distancing drove growth in their online businesses. Match (MTCH) and Mercadolibre (MELI) had similar results.

Amazon.com (AMZN) had record volumes but warned of higher costs. New York Times (NYT) also enjoyed a pop in subscribers, even as advertising dried up.

Still, the broader impact of Covid-19 remains negative. Less shopping, millions of job losses and unknown health costs have swept corporate America. Management teams are responding by withholding guidance, even as states across the country begin to reopen.

Shopify (SHOP), daily chart, with 50- and 200-day moving averages.
Shopify (SHOP), daily chart, with 50- and 200-day moving averages.

Winners of the Lockdown

Not surprisingly, social lockdowns have helped e-commerce firms like SHOP. The provider of online shopping carts and small-business payment services almost doubled leading into the news. It then climbed another 7 percent to new record highs after beating estimates across the board.

“While the COVID-19 pandemic has subdued commerce globally and especially strained small and medium-sized businesses, it has accelerated the shift of purchase habits to e-commerce,” the company said in its release.

Sometimes viewed as “the next Amazon,” SHOP grew its footprint with extended free trials, more gift-card capacity and curbside pickup.

MELI is like a mini-version of SHOP down in Buenos Aires. It also provides a range of products directly to customers and services to smaller firms. The shares flew almost 20 percent after results beat estimates.

Neither MELI or SHOP are likely to be included in the S&P 500 soon because they’re based outside the U.S. However MELI’s in the Nasdaq-100.

Peloton (PTON), daily chart, with 50-day moving average.
Peloton (PTON), daily chart, with 50-day moving average.

Peloton, Activision, Match

PTON, the maker of interactive exercise bikes that went public last year, also to spiked new highs. Shelter-in-place orders drove a mini-boom in workout demand.

Videogame-giant ATVI climbed to a 1-1/2 year high as players holed up playing Call of Duty. Bookings for the current quarter were also well ahead of estimates.

MTCH jumped as users under 30 stayed at home looking for love on services like At Tinder. “People are matching more frequently, sending more messages and engaging in longer conversations,” the online dating service said.

Wayfair (W) also leaped into record territory after crushing estimates. Once heavily shorted by traders doubting its business model, the furniture retailer showed signs of gaining traction — especially as brick-and-mortar rivals shut down.

PayPal’s Big Day

Online-payment provider PayPal (PYPL) was perhaps the strangest report. Its backward-looking numbers were confusing because of an accounting change, but still seemed weak. Earnings were unclear and revenue missed. Bad loans forced management to set aside a $237 million reserve.

But then it said trends improved in April, and May 1 (last Friday) was its busiest day ever. PYPL reversed earlier losses and flew to new highs on the news.

Twilio (TWLO) was amazingly strong across the board, with backward-looking and forward-looking numbers well above estimates. The provider of messaging services for cloud-computing developers enjoyed organic growth initially, plus higher engagement after coronavirus drove millions of people to their computers.

TWLO rocketed more than 30 percent to new highs. Analysts at firms like Cowen, RBC, Mizuho, Needham, and Piper Sandler dramatically hiked their target prices in response.

Beyond Meat (BYND), with 50- and 200-day moving averages.
Beyond Meat (BYND), daily chart, with 50- and 200-day moving averages.

Amazon.com and Apple

Last Thursday also featured results from Apple (AMZN) and AMZN, which both beat estimates. AAPL had a more positive outlook after CEO Tim Cook cited healthy demand in the current quarter.

AMZN, on the other hand, warned that the cost of protecting employees from the pandemic could erase most of its second-quarter profit. Neither AAPL nor AMZN broke out.

General Motors (GM) also beat estimates as CEO Mary Barra hoarded cash. Going forward, investors will monitor plant reopenings on May 18. China will be in focus as well, especially after the country’s automotive association reported strong demand in April.

Beyond Meat (BYND) was another big gainer. Coronavirus had a small impact on its business but the real story was continued expansion of its plant-based offerings. Earnings and revenue both beat estimates. Margins improved. BYND popped 26 percent.

Disney Not So Hot

Walt Disney (DIS) was one of the weaker reports in the last week after closing theme parks and retail stores. Management estimated the steps dragged down pretax income by as much as $1.4 billion.

The Magic Kingdom also halted dividend payments and hesitated to predict its numbers going forward. Growth at its streaming business, launched to high hopes in November, missed estimates as well.

In addition to losing foot traffic, DIS faces less demand for commercials at its television stations like ESPN and ABC.

In conclusion, coronavirus is having a huge impact on quarterly results. However many companies — especially newer technology firms — are thriving amid the crisis.

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