BA - Wall Street Breakfast Podcast: Big Tech: Alphabet Microsoft

2023-04-26 07:13:31 ET

Listen on the go! Subscribe to Wall Street Breakfast on Apple Podcasts and Spotify Alphabet ( GOOG ) ( GOOGL ) earnings call: The AI promise at Google , and improving YouTube (00:49). Microsoft's ( MSFT ) Nadella wants to 'grab the opportunity' from AI (02:04). Ryanair ( RYAAY ) likely to cut schedule into summer - report (08:14). Learn more about these stocks with Seeking Alpha Premium .

This is an abridged transcript of the podcast.

• Alphabet and Microsoft both report an earnings and revenue beat. They both also talk about investments in AI.

• Today is stock of the week Wednesday and this one has a twist. We’re hearing from J.D Henning. He’s the Investing Group Leader of Value & Momentum Breakouts on Seeking Alpha. * He’s telling us when he knew it was time to get out of Tesla.

• Vera Bradley is cutting corporate positions. The company is cutting positions in marketing, e-commerce and product development.

OUR TOP STORY

Alphabet is +1.0 percent premarket. The stock rose after hours Tuesday -- (NASDAQ: GOOG ) +3.9%; (NASDAQ: GOOGL ) +4% -- in the immediate wake of its first-quarter earnings .

Alphabet cleared Wall Street expectations on top and bottom lines and announced an increased buyback.

The company posted $69.8B in revenues -- a 3% year-over-year gain, topping consensus for $68.8B by a full billion -- and noted revenues would have grown 6% in constant currency.

Diluted earnings per share of $1.17 came in well ahead of consensus for $1.07. That figure came affected by higher-than-expected charges tied to workforce/office space cuts of $2.6B.

CEO Sundar Pichai launched the earnings call by mainly looking forward to two themes: artificial intelligence and the company's sharpened investment focus.

When it comes to AI, Pichar said the company has “made good progress” across the three areas he outlined in the company’s earnings call last quarter.

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Microsoft also reported earnings Tuesday.

Microsoft’s Q3 Non-GAAP EPS of $2.45 beats by $0.22.

Revenue of $52.86B (+7.0% Y/Y) beats by $1.85B.

Chief Executive Satya Nadella said that Microsoft ( MSFT ) is putting more investments into AI, and that the company is "not being shy about investing” in where it needs “to grab the opportunity" from the AI market.

Chief Financial Officer Amy Hood got in on the AI commentary as well, and said that as Microsoft ( MSFT ) strategically manages itself, the company “will continue to invest in AI infrastructure resulting in revenue to grow over time."

There’s also an update on the planned $69 billion acquisition of Activision (NASDAQ: ATVI ).

Microsoft (NASDAQ: MSFT ) is preparing to close the deal even as the Federal Trade Commission has sued to block the deal.

According to a NY Post report , which cited sources close to MSFT, Microsoft ( MSFT ) is believed to be optimistic about gaining UK antitrust approval for the Activision( ATVI ) deal this week. The UK regulator is scheduled to make a decision on the videogame mega deal today.

Microsoft ( MSFT ) expects to receive European Union approval for the combination next month, according to the report, as the regulator has a June deadline for its review of the deal.

I’d like to point you to an article on Seeking Alpha. It’s an editor’s pick. The article is by Ahan Vashi.

Vashi is the Investing Groups leader of the Quantamental Investor on Seeking Alpha.

The article is entitled “Microsoft Q3 Earnings Review: Solid Report, Valuation Premium Remains Unjustified - Sell.”

In the article he rates MSFT a sell.

He says he believes that Microsoft is a fantastic business but the risk/reward is highly unfavorable. He goes on to say that the latest pop in Microsoft stock looks like a great opportunity to exit.

I’ll leave a link in show notes.

NOW MORE ON THE MARKET

Concern about corporate earnings weighed on U.S. stocks on Tuesday.

The Nasdaq ( COMP.IND ) closed -2.0%, the S&P 500 ( SP500 ) ended -1.6% and the Dow ( DJI ) finished -1.0%.

All 11 S&P sectors posted losses during the session. Materials, Tech and Consumer Discretionary all dropped more than 2%. Consumer Staples and Utilities held up better than the rest of the market segments, each recording a fractional decline.

Earnings news remained in focus. UPS ( UPS ) dropped nearly 10% after the package delivery giant's earnings and revenue came in below expectations .

Elsewhere, First Republic ( FRC ) lost nearly half its value after the company revealed significant Q1 deposit outflows and said it planned to cut jobs. The bank was also reportedly weighing the sale of securities and mortgages as part of a larger restructuring.

Investors also digested another round of economic news. The Conference Board reported a consumer confidence indicator that dropped to its lowest level since July.

Meanwhile, new home sales jumped 9.6% in March, climbing more than expected. At the same time, the FHFA house price index posted a surprise advance .

The bond market was marked by buying, sending Treasury yields sharply lower. The 10-year yield ( US10Y ) declined 13 basis points at 3.39%, while the 2-year yield ( US2Y ) dropped 22 basis points to 3.98%.

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Today is stock of the week Wednesday. We’re hearing from J. D. Henning. He’s the Investing Group leader of Value & Momentum Breakouts on Seeking Alpha.

J.D. recently sat down with Daniel Snyder on the Investing Experts podcast.

Tesla was one of their hot topics.

*audio from Daniel and J.D.*

Their conversation included a wide range of topics including earnings, the VIX and FAANG stocks.

I’ll leave a link to this episode of the podcast in show notes.

The conversations on the Investing Experts podcast always provide deep market insight.

Investing Experts is available wherever you get your podcasts.

MORE OF OUR TOP STORIES

Cryptocurrency lender Voyager Digital ( OTCPK:VYGVQ ) said Tuesday Binance.US has backed out of a ~$1B deal to buy its assets and transfer customers to its trading platform.

Binance.US , blamed the "hostile and uncertain regulatory climate in the U.S." for terminating the deal.

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According to executives at Ryanair (NASDAQ: RYAAY ), they will likely cut back on summer flights due to delayed plane deliveries from Boeing ( BA ), .

The company said some routes planned for July and August will be reduced but Customers are not expected to be impacted by the new schedule.

Ryanair indicated that the delay due to certain manufacturing defects does not impact the airline’s plans to potentially purchase more aircraft from Boeing.

If you remember last week we told you about Boeing’s delivery delays to United Airlines .

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Carrier Global (NYSE: CARR ) on Tuesday said it reached a deal to buy Viessmann Climate Solutions, which is the biggest segment of German industrial manufacturer Viessmann Group.

The price tag is 12 billion euros ($13.17 billion).

Carrier's ( CARR ) stock is up one half of one percent premarket. The shares had declined 7.3% on Monday after The Wall Street Journal reported the company was in deal talks with Viessmann.

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Vera Bradley (NASDAQ: VRA ) on Tuesday said it would cut around 25 corporate positions and appoint a new CFO as part of an additional reorganization and cost reduction plan.

Shares of the handbag and luggage maker closed Tuesday -6.7% at $5.33.

VRA said the positions to be eliminated are in the marketing, e-commerce, product design, and product development areas of the company.

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Now let’s take a look at the markets as of 6:20 am. Ahead of the opening bell today, Dow, S&P and Nasdaq futures are pointing higher. The Dow is up a small fraction. The S&P 500 is up 0.4% and the Nasdaq is up 1.3%. Crude oil is up 0.2% at more than $77 a barrel. Bitcoin is up 5.5% at $28,836.

In the world markets, the FTSE 100 is down 0.2% and the Dax is down 0.3%.

On today’s economic calendar, at 830 am retail inventories and at 11 am survey of business uncertainty.

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