Author: AnswerStock

After pricing its shares on the low end of the scale, Casper beats Wall Street’s expectations. 

The online mattress company Casper went public on the New York Stock Exchange on Thursday, and its shares jumped 30% right out of the gate. The company set its IPO price on the lower end of the scale at $12 per share, giving it a market valuation of around $500 million.

At the time of this writing, Casper’s shares are trading above $15 per share. But just days before its market debut, no one was feeling that optimistic about the company’s prospects. 

The backstory on Casper

Casper is a New York-based startup that initially got its start five years ago. The company sells mattresses and pillows through stores like Target, Costco, and Amazon. 

And Casper also has plans to open a fleet of 200 stores across the U.S. The company initially attracted a lot of high-profile investors but has recently come under fire for its lack of profitability. 

Over a period of about nine months, the company reported a net loss of $67.3 million. Casper’s revenue continues to increase, but its losses are growing as well.

Casper filed to go public in January, and initially priced itself between $17 and $19 per share. But then the day before it was scheduled to go public, the company announced it had cut its IPO target to between $12 and $13 per share. 

The lower price target cut the company’s valuation from $700 million down to around $500 million. And it led many people to question Casper’s path to profitability going forward.     

What’s next for the company?

Some of the criticism surrounding Casper is due to the WeWork debacle in 2019. Wall Street is increasingly becoming wary of investing in unprofitable startups. Plus, the market for online mattresses is becoming increasingly saturated. 

But the good news for Casper is that so far, its IPO seems to have been a success. According to regulatory filings, the company will use the proceeds from its IPO toward working capital and additional growth opportunities. 

The stock is up more than 20% since the beginning of the year.

On Thursday, Twitter reported its fourth-quarter earnings before market open, and the results were impressive. The company beat revenue estimates and showed its biggest increase in user growth to date. 

This caused its stock to soar more than 17% by mid-morning. Here is a brief overview of the company’s fourth-quarter earnings:

• Earnings: 25 cents per share reported; 29 cents per share forecast
• Revenue: $1.01 billion reported; $996.7 billion forecast
• Daily active users: 152 million reported; 147.5 million forecast

A closer look at Twitter’s fourth-quarter

Twitter’s revenue grew 11% year over year to surpass $1 billion, which was largely driven by an increase in the company’s advertising revenue.

The company’s operating income did fall by 26% from a year earlier. This was largely due to headwinds from ongoing product issues.

But the most noteworthy aspect of the company’s earnings report was its growth in monetizable daily active users (mDAU). Twitter saw its mDAU grow by 21% from a year earlier. In comparison, the company saw a growth of 17% during the third quarter. 

Company management credited these gains to overall product improvements. Twitter has also worked to make its timeline and user notifications more relevant, and these efforts seem to have paid off. 

What’s next for the social media company?

Twitter expects the momentum to continue into 2020 and its guidance reflected this sentiment. The company expects its first-quarter revenue to fall within a range of $825 million and $885 million.

Going forward, the company will continue to make product improvements, especially to its Mobile Application Promotion (MAP) product. Several months ago, the company reported that it discovered bugs in the legacy MAP product. 

These bugs held back the company’s fourth-quarter revenue by at least four points, making the strong revenue gains especially impressive. Twitter plans to launch its next-generation MAP product sometime this year. 

Company management is also focused on continuing to make its platform safer for users. One of the ways it is doing this is by eliminating political ads from the platform and giving users the option to report content that contains misleading election information.

On Monday, Google’s parent company Alphabet reported Q4 earnings after market close.

Google’s parent company Alphabet released its highly anticipated fourth-quarter earnings on Monday. Plus, the company released its YouTube and Cloud revenue for the first time.

The results beat analyst expectations, but the company’s stock still fell in after-hours trading. Let’s look more at how things went for Google during the previous quarter and what to expect going forward.

Google beats earnings estimates during Q4

During the fourth quarter, Google’s earnings reached $15.35 per share, which is well over expectations of $12.53 per share. The company brought in $46.08 billion in revenue, which did fall short of forecasts of $46.94 billion. 

And for the first time, Alphabet released its full-year revenue from its Cloud and YouTube businesses. In 2019, YouTube ads brought in $15.15 billion, which is up from $11.16 billion in 2018. And the company’s Cloud business generated $8.92 billion in revenue, which is up from $5.84 billion in 2019. 

Google’s advertising revenue continues to make up the bulk of its revenue, and it came to $37.93 billion during the fourth quarter. This is up from $32.63 billion a year earlier. 

The company’s “other revenue” segment grew as well, which includes things like Pixel phones and cloud products. And the company’s traffic acquisition costs fell right in line with Wall Street’s expectations at $8.50 billion. 

Bottom line

Google’s stock has been performing well over the past month, and just recently, the stock passed the trillion-dollar market cap. This was largely due to the decision to replace former Google CEO Larry Page with Sundar Pichai.

The company faced a major leadership shake-up at the end of 2019. Not only did Page step down as CEO, but former President Sergey Brin stepped down and David Drummond resigned as Chief Legal Officer. Drummond was the subject of an ongoing misconduct investigation. 

And Alphabet still has to deal with antitrust probes from the Justice Department. Last year, the company’s YouTube subsidiary paid a $170 million FTC fine over claims that it violated child privacy laws.
Hopefully, Pichai will be able to lead the company in a new direction of transparency going forward. The company is considered to be a strong buy on Wall Street.

Tesla’s stock is currently up more than 190% from a year earlier.

Tesla’s shares have been taking off since the start of 2020 and have risen an incredible 119% year to date. And the company did it again this week as its stock rose another 20% on Monday and hit an all-time high. 

And then, instead of leveling off, the shares jumped an additional 14% on Tuesday. For the first time ever,Tesla’s stock is trading above $900 per share. In comparison, the average price target for the stock is $496.15.

So what’s going on with Tesla? And will the shares continue to take off in the coming months? 

Why did Tesla’s stock jump? 

Things have been going pretty well for Tesla over the last couple of months. The company opened its Shanghai plant quicker than initially expected. And its delivery numbers have been exceeding Wall Street’s expectations.

And just last week, the company delivered a solid fourth-quarter earnings report. It was the second profitable earnings report Tesla has delivered, and the company was optimistic about its guidance going forward.

But Tesla’s stock really took off after Argus Research upped its price target on Tesla. Previously, the company had a price target of $556 per share, but on Monday, the company increased it to $808 per share. 

The firm said cited Tesla’s fourth-quarter financials as the reason why. And then ARK Investment Management gave the stock an additional boost. The company said it believes the stock could be worth $7,000 per share by 2024. 

What does the future hold for Tesla?

This surge is exciting for investors, but some analysts believe that the stock is a speculative bubble that’s about to burst at any moment. Chief market strategist Matt Maley stated, “This is taking Tesla well above a level that would be supported by its current fundamentals.”

And if there’s one thing that’s certain, it’s that Tesla is known for its ups and downs. So it’s likely only a matter of time before the inevitable drop is coming. The company is currently considered a moderate sell on Wall Street. 

The stock was trading higher on Monday due to reports that it may have a coronavirus treatment. 

Over the past couple of weeks, the market has taken a hit due to ongoing concerns about the coronavirus. What started out as a virus in the Chinese city of Wuhan has become a major global concern.

To date, the disease has infected more than 17,000 people globally and spread to more than 25 countries. Researchers have been trying to develop a vaccine to combat the illness, but have been unsuccessful so far. 

But now the biotech stock Gilead Sciences is rising due to reports that one of the company’s experimental drugs could treat the coronavirus. 

Details on the drug

According to the Wall Street Journal, Gilead has given medical professionals access to its experimental antiviral drug remdesivir. Doctors are using the drug as an emergency treatment for a select number of patients infected with the coronavirus.

The company has also reportedly entered into an agreement with Chinese authorities to conduct clinical trials of the drug. However, remdesivir is not approved for use in humans in the U.S. or abroad. Unapproved drugs can be tested in emergency situations where there are no good alternative treatments available.  

A man in Washington state came down with the virus after traveling to Wuhan when the outbreak first began. After returning to the U.S., he tested positive for the coronavirus. 

The man was hospitalized for the virus and on the seventh day of his hospitalization, he was given remdesivir. The next day, his condition improved and while he’s still in the hospital, the majority of his symptoms have resolved. 

Final thoughts

Remdesivir is not the only drug being tested to treat the coronavirus, but it does seem to be the front runner so far. And if the drug proves to be effective, it could be made more widely available to treat the disease. However, it will take time for the drug to be made available on a commercial basis. 

After the news about remdesivir came out, Gilead’s shares were up nearly 5% on Monday morning. And while fears about the coronavirus still remain, the market largely rebounded from Friday’s drop as well.  

Amazon surpassed the $1 trillion market cap on Friday morning.

Amazon reported its fourth-quarter earnings on Thursday and the results were beyond what Wall Street was expecting. They were so good that on Friday morning, the company hit a new 52-week high and broke past the $1 trillion market cap once again. 

2019 was a busy year for Amazon as the company began investing heavily in making one-day Prime shipping a reality for its members. The latest earnings show that these investments are paying off. 

Here are four things you need to know about the company’s latest earnings report.

1. Amazon beat earnings and revenue guidance

During the fourth quarter, Amazon brought in $87.4 billion in revenue and reported earnings of $6.47 per share. This far exceeded Wall Street’s expectations of $86 billion in revenue and earnings of $4.03 per share.

The company’s operating profits in the U.S. did decline by 16% thanks to the roll-out of single and same-day shipping. But Amazon’s operating losses fell as well, so investors weren’t too concerned about this.

And sales for Amazon Web Services were up during the fourth quarter as well. Revenue reached $9.95 billion, which is up 34% from a year earlier. 

2. Amazon Prime memberships are growing

150 million households now have Amazon Prime memberships. This figure is up from 100 million memberships in 2018. This growth is largely due to the exceptional service Amazon provides and how it’s constantly raising the bar for its customers.

3. The company’s advertising business is taking off

When most people think of Amazon, they like either think of Amazon Prime or Amazon Web Services (AWS). But Amazon also has a very profitable advertising business.

During the fourth quarter, the company’s advertising business brought in $4.8 billion in revenue. This is a 41% increase from a year earlier. And there is still plenty of room for this segment of the company’s business to grow.  

4. Wall Street expects good things from Amazon

Not only were Amazon’s fourth-quarter earnings better than expected, but the company is just as optimistic about 2020. And Wall Street is unapologetically excited about Amazon’s prospects.
The company is considered a strong buy with a potential upside of more than 17%. Of the 35 analysts currently reviewing the stock, all but two recommend it as a buy.

Shares fell after the company revealed its spending increased by more than 50% last year. 

Facebook’s shares have been on a tear over the last year. After starting the year on a low note, the stock gained 57% in 2019. Whenever a stock is performing that well, investors start to have very high expectations for performance. 

On Wednesday evening, Facebook reported its fourth-quarter earnings. And even though the company beat both earnings and revenue guidance, the stock fell by as much as 8% when the market opened on Thursday.

So what happened that caused investors to at least temporarily lose faith in Facebook? Let’s look at the quarterly earnings results to learn more.

An overview of Facebook’s Q4 earnings

Facebook handily beat revenue expectations during the fourth quarter. The company’s brought in $21.1 billion in revenue, which is up 25% from a year earlier. And this beat investor expectations of $20.9 billion in revenue. 

The company’s earnings also beat previous guidance, but not by much. Earnings came to $2.56 per share, which is 3 cents higher than analysts were forecasting. And earnings only grew by 8% from a year earlier.

But for investors, the real disappointment came when they got a look at Facebook’s expenses. Facebook reported a 51% increase in expenses, which were largely related to improvements the company is making to its privacy and security features. 

The company’s operating margin was also slightly lower than expected. Its operating margin narrowed from 45% in 2018 to 34% in 2019. 

Plus, management warned that the company could face more challenges with advertising in the coming year. Privacy changes to both the Android and the iPhone could hurt the company’s targeted advertising abilities. 

The bottom line for Facebook

The drop in shares is likely just a temporary blip on Facebook’s radar. The company’s monthly and daily active user growth continue to grow, and its average revenue per user continues to increase. 

Over the past couple of years, Facebook has been repeatedly criticized for how it handles data privacy for its users. And the company seems to be taking these concerns seriously and taking steps to remedy the situation.

CEO Mark Zuckerberg summed this up by stating, “I want us to build a reputation on privacy that’s as strong as our reputation already building good, stable services.”

The company’s shares jumped 13% on the news that Les Wexner may be stepping down.

L Brands, the parent company of Victoria’s Secret, saw its shares jump Wednesday morning over a potential leadership shakeup. The company’s founder, Les Wexner, is reportedly stepping down and selling at least part of the Victoria’s Secret brand. 

In previous years, the company has struggled with falling sales as Victoria’s Secret continues to fall out of favor with consumers. So could this transition be good news for the company? The market certainly seems to think so. 

The backstory on L Brands

Wexner originally founded L Brands in 1963 and has run the company for 57 years. This makes him the longest-running CEO of an S&P 500 company. Wexner also owns 17% of the company’s shares, which also makes him its largest shareholder.

However, Wexner has come under fire in recent years due to his relationship with accused sex trafficker Jeffrey Epstein. Wexner allowed Epstein to manage his finances and even made him a trustee of the Wexner Foundation. 

The L Brand board of directors hired outside counsel to examine Epstein’s relationship with the company. However, they haven’t yet made the results public, and the stigma continues to follow both Wexner and the company.

And for the past two years, Victoria’s Secret sales have continued to decline. Increasingly, consumers want companies that embrace body positivity and Victoria’s Secret doesn’t meet the mark.

Bottom Line

Reports have been circulating for a while that L Brands was considering selling off Victoria’s Secret. According to a Cowen analyst, selling the lingerie brand could cause the company’s shares to rise by as much as 51%.

L Brands declined to comment on whether reports of Wexner stepping down are true. But the timing makes sense for the company.

In September, the company promised that an “evolution” lay ahead. And a Barclay’s analyst recently speculated that “change is afoot” for L Brands. 

Overall, L Brands is considered a hold on Wall Street with a potential downside of more than 10%. But if Wexner does end up stepping down, analysts could quickly change their tune on the company.

Pfizer reported its fourth-quarter earnings and its sales fell steeply year over year.

2019 was a challenging year for the drugmaker Pfizer. Increased competition from other drug companies caused its sales to take a hit. As a result, the company’s shares were up and down for most of the year.

On Tuesday morning, Pfizer reported its fiscal fourth-quarter earnings. And while the results weren’t anything to get too excited about, there were a few bright spots in the earnings report. Let’s take a closer look at Pfizer’s fourth-quarter results.

What happened during the fourth quarter?

During the fourth quarter, Pfizer reported earnings of 55 cents per share. This figure just missed Wall Street’s guidance of 58 cents per share. And the company’s revenue reached $12.8 billion, which is an 8% decline from a year earlier.

And Pfizer reported decreased sales across some of its most popular drug brands. But the biggest culprit is the company’s nerve treatment drug Lyrica. Lyrica sales reached $433 million in the fourth quarter of 2019, down from $1.32 billion a year earlier.

While the company’s overall sales fell, it did see growth in its biopharma business. Sales increased by 7% in this segment of the company’s business. 

For instance, sales of the company’s popular pneumococcal vaccine Prevnar 13 grew by 4% years over year. And sales of Pfizer’s rare disease drug Vyndaqel reached $213 million during the fourth quarter. This is up from $39 million in sales a year earlier.

What’s next for the company?

Investors were expecting Pfizer’s 2019 earnings to take a hit. But many analysts expect that 2020 will be a more profitable year for the company. For one thing, this is the year the company plans to spin off its Upjohn unit and merge it with Mylan.

The company’s projected 2020 earnings look much better without Upjohn. The new and improved Pfizer should earn between $40.7 billion and $42.3 billion in revenue. If the company meets these guidelines, this would reflect a year over year growth of 8%.

Overall, the company is considered a hold on Wall Street. But a Cantor Fitzgerald analyst seemed optimistic about the company and called Pfizer’s 2020 outlook “robust.”

The Dow was down more than 400 points on Monday morning.

On Monday, the Dow dropped 406 points after coronavirus fears escalated over the weekend. The S&P 500 is also down 1.4% and the Nasdaq Composite dropped 1.8%. 

So far, 81 people in China have died as a result of the coronavirus. And there are now five confirmed cases in the U.S. 

China is a huge driver of global growth, and the uncertainty of the illness or its impact is having a huge negative impact on the market. 

What stocks have been hit hardest?

So far, travel and airline stocks have been hit the hardest by fears over the virus. Stocks with significant exposure to China have also been negatively affected. 

United and Delta both dropped more than 4% and American saw its stock fall by 5.7%. Expedia, Carnival, and Marriott saw their shares drop by more than 2%. Apple, Disney, and Nike all have significant exposure to China and dropped more than 2%.

Oil prices are dropping as well as investors try to assess how travel restrictions will impact the demand on energy. In comparison, gold shares are rising since many investors resort to this in times of economic trouble.  

It’s still unclear how big of a global impact the coronavirus will have. The director general of the World Health Organization (WHO) is traveling to China this week to meet with government officials and learn more. 

Final thoughts

Fears over the coronavirus have been growing since last week. Last week marked the first time stocks have declined in the past year. 

However, most experts still agree that there’s no need to panic over the virus. Most of the deaths related to the disease have occurred in individuals over the age of 50 with underlying medical problems. And Chinese officals have done a good job of alerting government officials and the public about the outbreak. 
WHO officials have stated that the virus is not yet a public emergency, though it could become one. But the virus will likely continue to cause market uncertainty and concern in the coming weeks.