Glass Seems Half Full in Big Tech: Earnings this Week

Investors stayed bullish on big technology stocks in the last week, even when their results missed estimates.

Cisco Systems (CSCO), Take-Two Interactive Software (TTWO) and Booking (BKNG), and (JD) all rallied after reporting quarterly numbers. Some beat consensus, others lagged. Regardless, investors found something to like.

Video game maker TTWO, for instance, initially declined on weak guidance. By the next morning, however, investors were excited about newer titles like NBA 2K, Red Dead Online and Borderlands 3. The firm, along with Activision Blizzard (ATVI) and Electronic Arts (EA), has been fighting off competition from Fortnite this year.

The market also took a glass-half-full approach in BKNG. The company formerly known as missed on both top and bottom lines, but analysts said all that bad news was priced in.

CSCO, on the other hand, beat on earnings, revenue and guidance. The networking giant continued to grow its newer cybersecurity offerings while its older switching business came in better than expected. CEO Chuck Robbins also predicted “very minimal impact” from President Trump’s trade war against China.

Cisco Systems (CSCO) chart, with 50- and 200-day moving averages.

Walmart (WMT), another member of the Dow Jones Industrial Average, beat estimates as well. Traffic in traditional stores surprised to the upside and e-commerce investments translated into new business.

Agilent, Symantec Hammered

The two biggest decliners among major companies were Agilent Technologies (A), a medical and laboratory equipment provider, and IT-security firm Symantec (SYMC).

A missed across the board thanks to “soft market conditions,” according to CEO Mike McMullen. It was the latest example of the rolling meltdown in health care.

SYMC didn’t only miss on everything (earnings, revenue, bookings). It also found itself rudderless after CEO Greg Clark unexpectedly jumped ship. Despite being an early leader in the cybersecurity space, it’s lost market share with among small- and medium sized businesses.

Etsy (ETSY) slid after announcing a rare revenue miss and disappointing guidance. Still, the E-commerce upstart is up more than 400 percent in the last two years.

Unlike ETSY, casino-operator Wynn Resorts (WYNN) trended lower into its report. But like ETSY, it disappointed after showing continued declines in its key high-roller clientele. Is weakness on the mainland, resulting from President Trump’s tariffs, hitting WYNN’s core market of Macau?

Two old-fashioned retailers also fell despite profit beating estimates: Ralph Lauren (RL) and Dillard’s (DDS). Poor comparable sales, which reflect underlying health of demand, hurt both.

Dillard’s (DDS) chart with 50- and 200-day moving averages.

Coty Keeps Cranking

But there were still other winners. Cosmetics company Coty (COTY) continued to rally back from an all-time low as new management cleans up operations. Remember COTY is buried under a mountain of debt after acquiring brands like Cover Girl from Procter & Gamble (PG) in 2016.

Chinese web retailer company (JD) pushed higher after revenue slowed less than feared. JD is trying to find new ways to boost margins as the country’s e-commerce market gets saturated. It’s also dealing with uncertainties from CEO Richard Liu’s legal issues.

Two other tech gainers were Zillow Group (Z) and CyberArk Software (CYBR). Z benefited from strong demand for its Zillow Offers house-flipping app. CYBR continues to benefit from strong demand for its digital-security products.

In conclusion, stocks have been on a rollercoaster as Washington and Beijing clash over tariffs. But investors found some positives in quarterly results over the last week.

This article was written by David Russell, TradeStation Securities, Inc., part of the Monex Group Inc, published on 17/05/2019.

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