Facebook Earnings Get Super-Like, Plus Boeing Struggles
“Declaring war on China’s currency? Ha ha” — The People’s Daily, the propagandist newspaper of the Chinese Communist Party. The article was published in response to business magnate George Soros’ prediction that China’s economic downfall is inevitable.
- With the Federal Reserve sensing increasing uncertainty in the broader economy (more on that in a minute), U.S. stocks dropped sharply yesterday to continue a volatile trend: the Dow has alternated 200+ point moves up and down the last four sessions
Alternatives to Watch
- Despite falling stocks across the board, oil jumped up yesterday after news surfaced that OPEC hopes to cooperate with Russia to manage the massive global oversupply (Russia is the world’s top oil producer behind OPEC)
- It was a rough day for travel booking stocks Priceline, Expedia and TripAdvisor after Goldman Sachs downgraded the industry due to the continued success of Airbnb
Yellen Holds Off This Time
Janet Yellen is back in the news: ever since she and the Federal Reserve raised interest rates in December for the first time since the Great Recession, she has been patiently waiting for the right time to squeeze in another quarter percent raise or so. What’s being monitored? The global economy and U.S. economic indicators to determine if raising interest rates further is the right choice. But due to the general slowdown in global economic activity, the consensus this time was “not today.” But don’t get too comfortable—the jobs market remains strong and inflation is rising (however slowly).
One for the Record Books
Facebook posted its fourth quarter results yesterday, and it deserves all of the likes: revenue was up an insane 52% and profits topped $1 billion for the first time. The profit increase comes despite a year of increased spending in virtual reality and artificial intelligence. The social media giant enjoyed expanded advertising real estate through Instagram and 20% higher ad prices on its news feed. Worried that FB won’t be able to keep up the growth? Don’t be. With untapped revenue streams like messaging and Oculus, the future appears bright.
A Tale of Two Stocks
We all know the feeling when you see your ex doing better than you. Yesterday, both eBay and recently spun off PayPal reported earnings—and PayPal isn’t look back. Beating earnings, increasing revenues by 21 and boosting its active user base (with a big assist from Venmo) are just a few benefits from PayPal’s return to its mobile payments roots. How were eBay’s earnings in comparison? Flat—sending shares down around 13% after hours.
Blue chip stock, worst performer in the Dow Jones and shares falling the most in 14 years. What do these headlines have in common? Boeing. That’s right, with collapsing earnings and guidance projecting fewer jet deliveries, Boeing shares fell around 10% after hours. Buzzwords like profit recession and global economic turmoil get thrown around a lot, but the real reason shares are down is that analysts believe the falling aircraft deliveries represent “internal production issues.”
- Spotify looks to raise $500 million in debt as competition increases
- Shell shareholders approve acquisition of BG Group
- Wendy’s investigating unusual payment activity
- Theranos Lab may pose threat to patient safety
- Monday: McDonald’s (+), Halliburton (-), D.R. Horton (-) Earnings
- Tuesday: Apple (+/-), AT&T (+/-), 3M (+), Coach (+), DuPont (-), Johnson & Johnson (+), Procter & Gamble (+), Sprint (+) Earnings; Consumer Confidence (+)
- Wednesday: Facebook (+), eBay (-), Fiat Chrysler (-), Las Vegas Sands (+/-), PayPal (+), Qualcomm (-), Texas Instruments (+), Biogen (+), Boeing (-), United Technologies (+/-) Earnings; New Home Sales (+); FOMC Meeting Announcement (+/-)
- Thursday: Amazon, Microsoft, Alibaba, Ford, Altria, Caterpillar, Celgene, Electronic Arts, JetBlue, Time Warner Cable, Under Armour, Visa Earnings; Weekly Jobless Claims; Durable Goods Orders
- Friday: U.S. Q4 GDP; MasterCard, Chevron, Phillips 66, Siemens, Xerox Earnings
CANADA GETS THE SHORT END OF THE BARREL
You probably know that ridiculously low oil prices are wreaking havoc on the global economy. But what you might not know is that if you’re Canadian, the price of getting your daily veggies has skyrocketed, while the value of the Canadian dollar in your hand has plummeted. So what’s going on with our cousins up north?
- Back in 2014, one Canadian dollar was worth almost exactly one U.S. dollar. These days, it only gets you 69 U.S. cents. This means that trips to the grocery store are a lot more expensive than they used to be: for example, one head of cauliflower now costs eight Canadian dollars—and nobody wants cauliflower that badly.
- So what’s causing this? First, the price of one of Canada’s main exports, oil, has dropped significantly. Second, China—a big consumer of Canadian commodities such as oil and nickel—is seeing demand sputter.
- But there’s a silver lining: a weaker currency means more tourism and more attractive exports. That may mean little to consumers when some cereals are going for 10 Canadian dollars, but it’s something.
INTERVIEW QUESTION OF THE DAY
Explain quantitative easing to me. (Answer)
BUSINESS TERM OF THE DAY
Pac-Man — A high-risk hostile takeover defense in which the target firm tries to take over the company that has made the hostile bid by purchasing large amounts of the would-be acquirer’s stock. The Pac-Man defense is supposed to scare off the would-be acquirer, which doesn’t want to be taken over itself.
FOOD FOR THOUGHT
5 million: in the 19 months it has been on the market, over five million units of Google Cardboard (that’s the entry-level VR headset that’s literally made of cardboard) have been shipped. That’s a huge jump from last May, when the company had only shipped one million units.