分类： American Equities

Key Takeaways
Worries about Microsoft’s weaker-than-anticipated cloud growth and plans to raise investments in artificial intelligence weighed on its stock price after its latest earnings report. However, analysts said they remained bullish on the tech giant’s potential to gain from AI. Executives on Microsoft’s latest earnings call said capacity constraints held back its cloud growth, and that AI investments could lead to double-digit revenue growth as capacity catches up with demand. Despite Microsoft’s ( MSFT ) earnings beat , worries about weaker-than-expected cloud?growth and spending on artificial intelligence (AI) sent shares lower in the wake of the company’s quarterly update. Bullish analysts say those concerns could be overblown, citing the company’s potential to gain from AI. The tech giant’s shares lost a bit more than 1% to close at $418.35 Wednesday. The stock has gained over 11% since the start of the year. Analysts are broadly bullish on the shares, with a mean target price above $500 according to Visible Alpha.
Why Bulls Say Microsoft’s Results Reinforce Its AI Potential
Despite “a lackluster end to an otherwise strong” fiscal year, Mizuho analysts said they beleive Microsoft’s medium- and longer-term revenue growth opportunities are “greater than many realize,” citing opportunities in generative AI. Deutsche Bank analysts wrote that Microsoft is “leading the charge” in AI monetization with its Azure AI services and revenue set to grow as the company raises capacity. In Microsoft’s earnings call Tuesday , executives said capacity constraints played a key role in holding back the company’s cloud growth and suggested that it’s investments in AI could lead to double-digit revenue growth as Microsoft’s capacity catches up with surging demand. That is part of what led Goldman Sachs analysts to call Microsoft “one of the most compelling investment opportunities” in tech, drawing a comparison between its current AI investments and the spending surge seen from 2010 to 2017 to build the cloud business that now drives earnings. “The takeaways for the broader tech sector is this AI monetization story is real, ” Wedbush analysts said.

Arm Holdings ( ARM ) shares gave back Wednesday’s gains in after-hours trading, dropping even as the chip-design company reported fiscal first-quarter earnings that were higher than expected.

The shares were recently down more than 12% after gaining more than 8% in the regular session. The shares have risen for much of 2024, climbing more than 90% this year.

The chip-design company projected adjusted earnings per share between 23 cents and 27 cents for the current quarter, leaving unchanged its full-year revenue and adjusted EPS guidance. The quarterly outlook was below some reported analyst consensus estimates.

In its fiscal first quarter ended June 30, Arm posted record revenue of $939 million, up 39% year-over-year and above the analyst consensus of $912 million, per Visible Alpha. Diluted earnings per share were 21 cents, compared to 10 cents in the year-ago quarter and expectations of 16 cents.

The growth was driven by licensing and other revenue, which jumped 72% to $472 million. Royalty revenue increased 17% to $67 million, which the company attributed to penetration of its Armv9-based chips.

Key Takeaways Companies’ cost to employ workers grew 0.9% in the second quarter. Thats less than the prior quarter and less than what economists expected. As hiring has slowed, employers have to compete less to attract workers. As the job market continues to soften, slower hiring spurred sluggish wage growth in the second quarter. Employers paid 0.9% more for labor in the second quarter, according to the employment cost index (ECI) data released by the Bureau of Labor Statistics Wednesday. That’s lower than the prior quarter’s increase of 1.2% and the 1% increase that economists were expecting to see. It’s another sign that the labor market coming back into balance and workers are losing the upper hand . Since 2021, workers’ wages grew as employers competed to fill open positions. At one point, there were as many as 2 open positions for every unemployed worker. However, hiring has slowed since the start of this year and wage growth has slowed along with it. And the softening in the job market hasn’t gone unnoticed. Federal Reserve officials have said they are paying more attention to changes in hiring as part of their monetary policy deliberations. Wednesday’s report gives the Fed even more reason to cut interest rates in September , economists said. “With the ECI the Fed’s preferred barometer of labor costs growth, today’s data mark an important step toward the FOMC gaining ‘greater confidence’ that inflation is cooling sufficiently to begin reducing the fed funds rate,” wrote Wells Fargo Economists Sarah House and Michael Pugliese.

Key Takeaways
The Federal Reserve held its key fed funds rate steady to push down inflation that is nearing the central bank’s goal of a 2% annual rate but is not quite there yet. The Fed is now widely expected to cut the rate starting in September, a perception reinforced by Fed officials’ acknowledgment of cooling inflation and a faltering job market. The fed funds rate influences borrowing costs for all kinds of loans including mortgages and credit cards. A lower fed funds rate would boost the economy, potentially encouraging businesses to hire more and halt a hiring slowdown that’s been underway since 2022. With price increases simmering close to the Federal Reserve’s goal, the central bank signaled it’s still on track to begin reversing its two-year-old campaign of anti-inflation rate hikes—but not just yet. As widely expected, the Federal Reserve held its key fed funds rate steady Wednesday at a range of 5.25% to 5.5%, its highest since 2001, where it has stood since July 2023. In an official statement, Fed policymakers acknowledged that inflation has fallen recently while the labor market has worsened for workers. This reinforced financial market participants’ perceptions that the Fed is preparing to pivot from fighting inflation to supporting the job market. Traders and economists think the Federal Reserve is likely to reduce the fed funds rate in September, although the official statement didn’t say so explicitly. Financial markets were pricing in a 100% chance of a rate cut in September according to the CME Group’s FedWatch tool, which forecasts interest rate movements based on fed funds futures trading data.
Dual Mandate In Focus
The Fed’s two-sided mission given to it by Congress, its so-called “dual mandate,” is to keep inflation low and ensure most people have jobs. “The Committee judges that the risks to achieving its employment and inflation goals continue to move into better balance,” the FOMC said in its official statement. “The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate.” The text of the statement differed significantly from the FOMC’s previous statement in June. For instance, it replaced language stating the committee was “highly attentive to inflation risk” with one that the committee was “attentive to the risks to both sides of its dual mandate.” The statement also said inflation was “somewhat elevated” where in June it had said it was just “elevated.”
Turning Point Likely Ahead
A rate cut would signal a turning point in the Fed’s battle against inflation. In 2022, the Fed began ratcheting up its benchmark fed funds rate, pushing up interest on mortgages and other loans as a result. Rate hikes are designed to discourage borrowing and spending, cooling down an overheating economy to quell a post-pandemic flare-up of rapid price increases. Inflation has now fallen close to the Fed’s goal of a 2% annual rate. At the same time, a steady slowdown in hiring since 2022 has prompted Fed officials to grow more concerned about the employment half of the dual mandate. Fed officials have emphasized that their interest rate decisions will be driven by economic data. There are several important economic reports before the Fed’s next interest rate decision Sept. 18, which could change the picture. High interest rates have reverberated through the entire economy, especially in industries where purchases are usually financed. For example, home sales have languished as high mortgage rates have discouraged both buying and selling. And higher interest rates on credit cards have hurt lower-income households, contributing to an uptick of people falling behind on their bills . Meanwhile, savers have benefitted from high rates, with many banks offering the best returns in decades on certificates of deposit and high-yield savings accounts.

Key Takeaways
Bitcoin and ether traded flat Wednesday. Spot ether exchange-traded funds (ETFs) switched to daily net inflows after four days of having more funds leave them. Bitcoin ETFs had a rare day of outflows on Tuesday. XRP initially rose nearly 3% after news Tuesday that the Securities and Exchange Commission (SEC) won’t pursue a ruling on third-party digital assets named in its case against Binance. The Mt. Gox estate late Tuesday moved a further $3.1 billion worth of bitcoin to a new digital address believed to be that of the custodian helping return the failed exchange’s assets to creditors. Bitcoin ( BTCUSD ) and ether ( ETHUSD ) traded flat Wednesday, with bitcoin steady around $66,000 and ether trading a a bit under $3,300.
Ether ETFs Turn Positive, Bitcoin ETFs Trip
Exactly a week after they made their debut on U.S. stock exchanges, spot ether exchange-traded funds (ETFs) recorded their second day of positive inflows at $33.7 million. BlackRock’s iShares Ethereum Trust ( ETHA ) experienced the third-strongest day of any of the new spot ether ETFs so far with $118 million of inflows, according to Farside Investors. But cumulative net outflows for the spot ether ETFs stood at $406.4 million at end of Tuesday, driven largely by Grayscale Ethereum Trust’s ( ETHE ) $1.84 billion of outflows so far. Tuesday also delivered a rare day of net outflows for the spot bitcoin ETFs , with $18.3 million leaving that market, according to Farside Investors. As expected , the Grayscale Mini Bitcoin Trust began trading Wednesday morning. Its launch included a distribution of 10% of the existing fund’s bitcoin holdings to seed the new ETF, which led to a drop greater than that percentage in the value of GBTC shares the day before the new investment firm’s Mini Bitcoin Trust started trading.
XRP Jumps Amid Optimism Around SEC Lawsuit
XRP ( XRP ) has been a big mover among larger digital assets, initially rising nearly 3% after the SEC made a filing Tuesday in its case against crypto exchange Binance that indicates the regulatory agency may not pursue a ruling on whether third-party tokens, such as Solana ( SOL ) and Polygon ( MATIC ), are unregistered securities. While some traders see this as a sign the SEC will be abandoning lawsuits against digital assets that could be considered unregistered securities, others advise caution. “There is no reason to think SEC has decided SOL is a non-security. That they don’t want to do discovery on a dozen tokens in the Binance case appears to be a litigation tactic, not a change in policy,” Variant Fund Chief Legal Officer Jake Chervinsky posted on X, adding that SEC still considers these tokens securities in other lawsuits.
Mt. Gox Distributions Continue
In addition, failed bitcoin exchange Mt. Gox on Tuesday night transferred $3.1 billion more in bitcoin to a new bitcoin address, believed by crypto analytics firm Arkham Intelligence to be that of custodian firm BitGo, which is helping the Mt. Gox trustee return bitcoin to creditors. The Mt. Gox estate has been distributing funds to former customers over the past couple of months.

Key Takeaways
Meta reported better-than-expected results for the second quarter of 2024. Revenue and earnings grew from the year-ago period and exceeded analysts’ expectations. Meta CEO Mark Zuckerberg highlighted the company’s artificial intelligence (AI) developments, with its new AI model Llama 3.1. The company also raised the lower end of its projected capital expenditures for the full year to $37 billion from $35 billion as it invests in AI infrastructure. Meta Platforms ( META )?reported second-quarter earnings and revenue that beat analysts’ estimates, sending its stock higher in extended trading Wednesday. The company reported second-quarter revenue of $39.07 billion, a 22% jump year-over-year, and above analysts’ estimates compiled by Visible Alpha. Net income came in at $13.47 billion or $5.16 per share, up 73% from the same period a year earlier, also ahead of projections.
Meta’s Strong Quarter Comes Amid AI Push
“We had a strong quarter, and Meta AI is on track to be the most used AI assistant in the world by the end of the year,” Meta CEO Mark Zuckerberg said, highlighting the company’s advances in artificial intelligence (AI) . “We’ve released the first frontier-level open source AI model, we continue to see?good traction with our Ray-Ban Meta AI glasses, and we’re driving good growth across our apps,” Zuckerberg added. Meta recently released Llama 3.1, its most capable open-source AI?model yet, in its efforts to compete with the likes of Microsoft-backed ( MSFT )?OpenAI, Alphabet’s ( GOOGL ) Google, and Amazon-backed ( AMZN ) Anthropic. The company also lifted the lower end of its outlook for full-year capital expenditures to $37 billion from $35 billion as Meta invests in AI, with the upper end unchanged at $40 billion. Meta said it expects revenue in the third quarter of between $38.5 billion and $41 billion, roughly in line with analysts’ projections. Shares of Meta were up over 5% to $499.47 in extended trading as of 5:10 p.m. ET Wednesday following the company’s earnings release.

Key Takeaways
GSK lifted its sales and earnings projections for the year, after a strong performance by its HIV and cancer drugs drove second-quarter sales higher. The British pharmaceutical firm said sales rose 13% year-over-year to 7.88 billion pounds?($10.12 billion), beating analysts’ estimates. GSK said it expects sales growth between 7% and 9% this year, up from its prior forecast, but cut its vaccine sales outlook. GSK ( GSK ) lifted its sales and earnings projections for the year, after a strong performance by its HIV and cancer drugs drove second-quarter sales higher. The company said sales rose 13% year-over-year to 7.88 billion British pounds ($10.12 billion), beating analysts’ estimates. “Q2 sales grew in all areas, with Specialty Medicines in particular benefitting from new product launches in oncology and HIV,” Chief Executive Officer (CEO ) Emma Walmsley said, noting that the pharmaceutical firm had “secured approvals or filings for 10 major opportunities and reported positive data from seven Phase III trials.”
GSK Sees Full-Year Sales Rising But Cuts Vaccines Outlook
The British pharmaceutical giant said it expects sales growth between 7% and 9% this year, up from its previous forecast of 5% to 7%. Core operating profit is expected to rise between 11% and 13%, up from 9% to 11%, while core earnings per share (EPS ) growth is now seen at 10% to 12%, up from 8% to 10%. But the company said it now expects a low- to mid-single-digit percentage rise in vaccine sales, after previously saying that it expected a high-single-digit to low-double-digit percentage increase.
Guidance Lift Follows Pfizer’s, AstraZeneca’s
On Tuesday, Pfizer ( PFE ) also beat second-quarter revenue expectations and raised its full-year guidance . Last week, AstraZeneca ( AZN ) posted better-than-expected Q2 results and lifted its full-year guidance on rising revenue. GSK’s American depositary receipts (ADRs) are falling 2% about 45 minutes before the opening bell Wednesday.

The company announced a number of new features in the quarter, including plans to offer discounted Uber One subscriptions to college students and an extension of a Costco partnership. Uber Technologies ( UBER ) reports earnings Tuesday morning, with the ride-share giant looking to improve on its performance in the first quarter, when Uber reported a surprise loss due to over $700 million in adjustments related to the company’s investments. Estimates compiled by Visible Alpha project Uber’s revenue to rise to $10.56 billion from $9.23 billion a year ago. Net income is projected to rise to $652.33 million from $394 million in the second quarter of 2023. Analyst Estimates for Q2 2024 Q1 2024 Q2 2023 Revenue $10.56 billion $10.13 billion $9.23 billion Diluted EPS (Loss) 31 cents (31 cents) 19 cents Net Income (Loss) $652.33 million ($654 million) $394 million Key Metric: Gross Bookings for Food Delivery vs. Rideshare Trips UBS analysts in a Monday note cited data from tracking firm Sensor Tower, which showed Uber Eats performing better than Uber’s namesake ridesharing platform in terms of converting monthly active users ( MAUs ) to daily active users over the course of the second quarter. The analysts said they view the active user data as a “proxy metric” that can offer indications for how Uber’s gross bookings will come in for a full quarter. UBS projects gross bookings for Uber Eats above consensus, while projecting rideshare deliveries, Uber’s “mobility” division, below analyst consensus. UBS on Monday raised its price target for Uber to $102 from $95, lowering its targets for Uber’s competitors in the rideshare and food-delivery spaces, Lyft ( LYFT ) and DoorDash ( DASH ), to $15 and $125 from $19 and $130, respectively. Business Spotlight: New Features and Partnerships Uber announced a number of new features and partnerships in the quarter, with many coming at the company’s annual Go-Get event in May , when it announced plans to offer discounted Uber One subscriptions to college students and an expansion of its partnership with Costco ( COST ). The company also recently announced a feature to help users schedule rides, providing estimates of average wait times and prices for rides in thousands of cities worldwide. Analysts have previously cited adoption of new features as a potential source of revenue growth for Uber. UBS analysts said Monday that updates on how Uber’s new verticals are contributing to the company’s results are a key factor for investors to watch for. Uber shares were down 1.1% Tuesday to $63.05. They’re up roughly 2.5% this year. Read the original article on Investopedia .

Key Takeaways
Mastercard reported its second-quarter revenue rose 11% year-over-year to $6.96 billion, beating analysts’ estimates. Payment network revenue climbed 7%, driven by a 9% increase in gross dollar volume. CEO Michael Miebach said the company benefitted from “continued healthy consumer spending.” Mastercard ( MA ) shares gained 3% in intraday trading Wednesday after the company reported second-quarter revenue that topped analysts’ expectations, with a lift from “healthy consumer spending.” The credit giant said its revenue for the second quarter rose 11% year-over-year to $6.96 billion, beating analysts’ estimates. Earnings per share (EPS) of $3.50, rose 16% year-over-year, roughly in line with analysts’ expectations, according to estimates compiled by Visible Alpha.
‘Healthy Consumer Spending’ Helps Drive Results
“We delivered another strong quarter across all aspects of our business with double-digit net revenue and earnings growth,” CEO Michael Miebach said, citing “healthy consumer spending” among other reasons. Payment network revenue climbed 7%, driven by a 9% increase in gross dollar volume. Mastercard’s services division, which includes marketing and consulting, saw revenue rise 18%. Shares of Mastercard were up 3% at $461.07 as of about noon ET Wednesday following the company’s earnings release. With Wednesday’s gains, they’ve climbed close to 8% since the start of the year.