Author: AnswerStock

Snap’s earnings and user growth beat expectations, but its shares still fell 3%.

Snap had momentum on its side as it into its third-quarter earnings this week. The company’s shares are up 150% year to date, and Wall Street considers the stock a moderate buy. 

However, even after releasing a mostly positive earnings report, the company’s shares fell slightly in after-hours trading. Let’s look at what happened during the third quarter and what this means for Snap going forward.

Snap’s earnings beat expectations

During the third quarter, Snap beat investor expectations across the board. The company’s revenue was $446 million, beating forecasts of $435.1 million. The company did lose money during the third quarter, but its losses were lower than analysts were expecting.

Snap’s global daily active users reached 210 million, beating forecasts of 207 million. The company also increased its average revenue per user.

This is the third straight quarter Snap has seen its user base grow, which is a significant milestone for the company. During the third quarter of 2018, Snap actually lost users, so it’s good to see that the company is back on track. 

Looking ahead to the fourth quarter, Snap CFO Derek Andersen said the company expects its revenue to fall between $540 million and $560 million. Investors were expecting revenue guidance of $555.4 million, so the lowered guidance came as a big disappointment.

Andersen said the company lowered its guidance because it will lose a week between Black Friday and the end of the year. He added, “That’s a potential headwind for us, and the guide reflects that.”

Will TikTok derail Snap’s progress?

Snap continues to do well in 2019, but it is far from the only social media company gaining momentum. In particular, the social media video app TikTok has become popular with teens, which is one of Snap’s primary user demographics. 

During the earnings call, CEO Evan Spiegel was asked about how the company would deal with competition from TikTok. Spiegel largely dismissed these concerns, saying that the value the two companies offer their users is entirely different. 

Overall, Spiegel was optimistic about Snap’s momentum and the direction the company is headed. He concluded, “We are excited about executing on the many opportunities in front of us.”

The company’s revenue and earnings are up from a year earlier.

The online brokerage firm TD Ameritrade really needed some good news. The company’s shares are down 23% from a year earlier. And in early October, the stock hit a new 52-week low after announcing its plans to slash its trading commissions from $6.95 to $0.

Good news came in the form of the company’s fiscal fourth-quarter earnings report. TD Ameritrade beat Wall Street’s expectations on both earnings and revenue. Here is an overview of the company’s fourth-quarter earnings and what’s next for TD Ameritrade.

Q4 earnings beat Wall Street forecasts

During the fiscal fourth quarter, TD Ameritrade reported earnings of $1 per share on net revenue of $1.6 billion. The company’s earnings are up 25% from a year earlier, and its net revenue rose by 11%. And it beat analysts’ expectations of 94 cents per share on $1.47 billion in revenue. 

The average client trades also rose 5% from a year earlier, reaching 837,000 trades per day. And the company’s interest-rate-sensitive assets also rose 9% over the previous year. According to CFO Steve Boyle, the company’s strong fourth-quarter results “demonstrate the strength of the diversity of our business.” 

However, TD Ameritrade did lower its guidance slightly for the fiscal first quarter of 2020. During the first quarter, the company expects its revenue to fall somewhere between $4.9 billion and $5.3 billion. This would be down slightly from the previous year. 

Will $0 trading commissions kill profits?

TD Ameritrade’s fourth-quarter earnings were impressive, but they don’t account for the company cutting its trading commissions. Currently, roughly two-thirds of the company’s revenue comes from the asset-based fees it charged. Going forward, it will have to rely on this source of revenue almost entirely. 

However, TD Ameritrade isn’t the only online brokerage firm to cut its trading fees. This trend actually started with Charles Schwab and Interactive Brokers announcing they were cutting their fees, forcing other firms to follow suit. 

Getting rid of the trading fees will undoubtedly cause a temporary drop in revenue, but long-term, it could make the company more competitive in the market. Going forward, CEO Tim Hockey said that the company would continue to stand out for its superior platform and exceptional customer experience.

Investors will be looking to see that the company’s vehicle deliveries are picking up.

Tesla stock has seen its share of ups and downs in 2019. The company’s hit a particularly rough patch in early June, and its shares fell to a new 52-week low of $176.99. 

However, the stock has been steadily rising over the past couple of weeks. And on Monday, the stock opened at $258.33 per share.

This Wednesday, Tesla is scheduled to release its highly anticipated third-quarter earnings. And the outcome of this earnings report will have a big influence over whether the stock continues its upward trend. 

Listed below are three things to watch from Tesla’s third-quarter earnings and what investors will be looking to see going forward. 

1. Vehicle deliveries

Tesla’s shares dropped earlier this month after the company reported its third-quarter vehicle deliveries. The company delivered 97,000 vehicles during the third quarter, which is a new record for the company. 

However, Wall Street forecasted the company would deliver 98,000 vehicles. And the number fell short of Tesla’s own guidance of delivering 100,000 vehicles. This week, investors will be looking to hear whether the company believes it can hit its full-year delivery target of between 360,000 and 400,000 vehicles.  

2. Production growth

Tesla recently received permission from the Chinese government to start production on a full-production plant near Shanghai. Tesla hasn’t yet stated when vehicle production will begin at the plant, so investors will be looking to hear any updates on that.

Investors will also be looking to hear updates on the Model Y, which Tesla launched last March. The Model Y is an exciting catalyst for Tesla since it could help the company’s profitability. It’s anticipated that deliveries of the Model Y could start in the fall of 2020.  

3. Signs of profitability

And finally, investors will be looking to see signs that Tesla is taking steps toward becoming profitable. The company’s sales are currently driven by the Model 3, which is its lowest-priced vehicle. 

This has led many people to wonder whether the company can maintain its growth momentum. Investors will be looking at things like free cash flow, vehicle demand, and any sign that the company is on the road to becoming profitable.  

PMI’s guidance disappointed investors, but the company still has room for further growth.

This week, shares of Philip Morris fell after the company released its third-quarter earnings report. The tobacco company beat earnings estimates but lowered its guidance due to an ongoing dispute with the Russian government.

And while the company’s earnings beat Wall Street’s estimates, they still remained relatively flat from a year earlier. That’s mostly due to a large number of headwinds Philip Morris has dealt with in the past year. 

However, it isn’t all bad news for the tobacco giant. The company does have a number of exciting initiatives it’s working on to boost revenue going forward. Listed below are three things you should know before investing in Philip Morris. 

PMI is shifting away from the vaping industry

In August, Philip Morris announced it was in talks to merge with Altria, but then the potential deal was called off in September. And according to CNBC, this is partially due to Altria’s $12.8 billion investment in the vaping company Juul.  

Juul is one of the largest e-cigarette companies in the U.S. and is currently subject to a number of lawsuits. As the public’s concern over vaping continues to grow, PMI is smart to shift its business away from e-cigarettes. 

Philip Morris is launching new tobacco products

Philip Morris is best known for its cigarette brand Marlboro, though this hasn’t been helping the company in recent years. Cigarette sales continue to decline as consumers become more wary of the adverse health effects of smoking.

That’s why the company is launching a new iQOS device, which heats tobacco instead of burning it. The company has already launched the devices in Italy and Germany, and the FDA recently approved the iQOS device for sale in the U.S.  

The company’s growth is accelerating

And finally, PMI’s heated tobacco devices give the company a lot more room to grow, even as cigarette sales continue to decline. And in many ways, the public’s fears over vaping could help the company sell more iQOS devices.

PMI’s sales of heated tobacco nearly doubled in 2019, and the company’s shipments rose as well. Going forward, the company expects that shipments of heated tobacco products could reach 100 million by 2021

During the third quarter, Netflix beat earnings expectations but still fell short on U.S. subscribers.

On Wednesday, Netflix released its highly-anticipated earnings report, and the results were what most investors were looking to see. The company’s subscriber base rebounded, and management addressed the multitude of streaming services that are set to launch during the fourth quarter.  

The earnings report was something of a mixed bag since Netflix showed substantial gains in many areas while falling short in others. Here is an overview of how Netflix made out during the third quarter:

• Earnings: $1.47 per share, instead of $1.04 forecasted
• Revenue: $5.24 billion, instead of $5.25 billion forecasted
• U.S. subscribers: 517,000, instead of 802,000 forecasted
• International subscribers: 6.26 million, instead of 6.05 million forecasted

Netflix’s biggest wins and losses during Q3

During the second quarter, Netflix lost U.S. subscribers for the first time since 2011. So heading into this earnings report, investors were anxious to see that the company’s subscriber base is rebounding. 

The company’s subscriber results were mostly positive, though not as good as analysts had hoped. Netflix once again fell short on U.S. subscribers, but the company did add 6.26 million international subscribers, which handily beat Wall Street’s forecasts.

Netflix announced that starting next year, it will no longer report solely on U.S. subscribers. Instead, it will report subscriber growth in four different regions: the U.S. and Canada, Europe, Asia Pacific, and the Middle East and Africa. 

And the company will only offer guidance for international subscribers. Many analysts have been calling on Netflix to do this for a while. It is challenging to predict Netflix’s paid subscribers since the company has such a large subscriber base. 

Either way, investors didn’t seem too upset over the subscriber miss. The lack of disappointment could be partly because the company’s third-quarter profitability was much higher than analysts were expecting. 

Company management downplays streaming wars

And finally, Netflix addressed the number of streaming services that will launch in the upcoming months. CEO Reed Hastings mostly downplayed the competition, stating that the company has been competing with streamers for the past 10 years. 

Hastings also pointed out that linear TV providers present more competition than Disney or Apple. “We’re all relatively small compared to linear TV,” he added.

This narrative seemed to at least momentarily sooth many investors because the company’s shares jumped as high as 10% in after-hours trading on Thursday. However, one analyst at Macquarie Research still downgraded the stock, saying the earnings report was “comforting, but competition is coming.”

Wells Fargo’s Q3 revenue was impressive, but the bank fell short on earnings and net income.

This week, Wells Fargo was one of the first banks to kick off earnings season. Shares of Wells Fargo have been trading slightly higher in recent weeks, ever since the company announced it found a new CEO. 

However, the company’s third-quarter earnings produced mixed results. The bank’s revenue was in line with what investors were expecting, but it fell slightly short on earnings. 

Here is an overview of the earnings report, as well as what we can expect from Wells Fargo going forward.

Wells Fargo’s Q3 wins and losses

During the third quarter, Wells Fargo’s revenue hit $22.0 billion, which easily surpassed forecasts of $21.19 billion. But earnings fell short by 8 cents, and the bank’s net income was $4.6 billion, which is down from $6.0 billion a year earlier. 

The earnings miss concerns investors because it shows that Wells Fargo is less profitable than it was a year earlier. By digging deeper to figure out the source of the problem, there are several key factors you uncover.

The most apparent culprit we can point to is the bank’s $1.6 billion legal charges. This malpractice charge stemmed from Wells Fargo’s previous account scandals. The legal charge alone reduced the bank’s earnings significantly. 

Wells Fargo’s net interest margin also fell 28 points during the third quarter to reach 2.66%. This can be partially attributed to the Federal Reserve cutting interest rates by a point during the third quarter.

However, it wasn’t all bad news for the bank since their deposits and loans grew slightly. And the bank’s net charge-offs are down from a year earlier. 

What’s next for Wells Fargo?

Going forward, Wells Fargo will still have several headwinds to contend with. The bank will have to continue to deal with the fallout of the fraudulent account scandal. And Federal Reserve still has a $2tn asset cap on Wells Fargo, which the bank will continue to operate under for at least the remainder of the year.

But Wells Fargo does will have a new CEO at the helm during the fourth quarter. Charles Scharf will step into the role of Wells Fargo CEO on Oct. 21, and hopefully, he can usher in the change the bank needs.