🔔Week Overview: Fall Earnings Season
We are officially entering earnings season with 5 of the 7 MAG7 reporting their quarterly performance this week. We’re also getting quite a bit of data right before early November’s FOMC meeting. This data will continue to support the Fed’s narrative of what they will do with interest rates.
Notable Data:
Tuesday, October 29: Jolts Job Openings 10AM
Wednesday, October 30: ADP Non-Farm Employment change 8:15 AM & Advance GDP Q/Q 8:30AM
Thursday, October 31: Core PCE & Unemployment Claims 8:30AM
Friday, November 1: Unemployment Rate & Non-Farm Employment 8:30AM, ISM PMI 10AM
Advanced GDP quarter by quarter data is usually the most important because it’s the earliest data we have. Meanwhile, all the other data provides us more insight on how healthy the economy is.
Here is EVERY company reporting this week:
The ERs I’m really interested in are:
HOOD 0.00%↑
Wall Street is expecting Robinhood to report some pretty substantial growth YoY, with expected 0.18 EPS and $661 million in revenue. With Robinhood’s new desktop platform launching soon as an effort to capture more active traders, I will be looking to see how it will effect adjusted projections in performance for the future. If the company sees mass adoption from active traders/investors, they could see a healthy boost in revenue from transaction fees.
META 0.00%↑
Meta is expected to report Q3 with an EPS of 5.27 and $40.3B in revenue, up from $5.16/share and $39.1 billion last quarter. Meta’s unique position in the AI market is because the company’s business model doesn’t actually involve selling generative AI directly. The company’s AI is an open source model that is creating a training data flywheel, with the goal of boosting monetization across the company’s platforms. Zuckerberg proudly stated in their Q2 that Meta’s AI “is on track to be the most used AI assistant in the world by the end of the year.”
Of course, all this development requires heavy investment. Capex has steadily been increasing every quarter for the company, meaning investors will be looking intensely at user engagement on Meta platforms as well as revenue boosts. I really like Zuckerberg’s take on the company’s increase in Capex: “[I] would rather bet on being too early with the buildout instead of being too late, given the time it takes to scale up infrastructure.”
SBUX 0.00%↑
Starbucks is expected to report an EPS of 0.89 and $9.14B in revenue. I think Starbucks is a really interesting company to be keeping track of right now, especially because of their new CEO (who ran Chipotle prior). The company came out last week stating that they are suspending FY 2025 outlook. Starbucks is doing this in an effort to take a step back to evaluate the business and how they can proceed.
Preliminary Q4 shows a revenue drop of 3% YoY to $9.1B. Same store sales dropped 7% globally, and 10% in North America. I definitely don’t think this performance can be accredited to their new CEO, Brian Niccol. With this preliminary data, Starbucks also announced a dividend increase to $0.61/share from $0.57/share. I am more of a glass half full person, so I would like to have faith that Mr. Niccol is going to be able to replicate his success from Chipotle with Starbucks. In a way, the dividend bump is the company saying “thanks for believing in us, here’s some incentive to keep holding your shares.” The bottom line is that impactful changes to the business will take time, which makes sense that Starbucks is suspending their outlook for 2025. It may be time to start building a position in the company soon, if you believe the new structural changes will be beneficial. I am certainly interested and ready to deploy capital going into their FY 2025.
TSLA 0.00%↑ Earnings
Tesla reported earnings on Thursday this past week and saw over a 22% boost to its stock price!
Performance:
EPS - 0.6 expected vs 0.72 actual
Revenue - $25.44B expected vs $25.18B actual
Despite missing revenue, Tesla was able to see more profitability this quarter partly because of $739 million in environmental credits. I think the market is being really generous with Tesla’s potential growth with lower costing vehicles being pushed as well as the eventual FSD feature. The company’s robotaxi, Cybercab, is also planning to be in full production by end of 2026. But, testing will begin next year in California and Texas despite needing a human present for emergency steering or emergency braking.
It’s important to note that Elon Musk’s promises of FSD delivery has not been on time nor up to expectations. No discredit to the innovation the company’s doing, but I think it will be difficult to sustain extended stock price growth if Tesla is unable to show strong profitability and differentiation from the market.
TSM 0.00%↑ Sees Strong Demand in US Chip Plant
TSM’s Arizona chip plant sees robust growth and is actually producing more chips than some of the comparable plants in Taiwan. It’s stated that production is about 4% higher than its counterparts. This bodes well for the company as they are planning to build two more plants in Arizona.
I also think this growth shows investors that the chip craze and AI is far from being done. I would be looking to expect other semiconductor companies like NVDA 0.00%↑, AVGO 0.00%↑, ARM 0.00%↑, and AMD 0.00%↑ to continue performing well going forward.