(Boursier.com) – Wall Street won this Tuesday, the warning of Snap, parent company of Snapchat, weighing very heavily on the Nasdaq by causing all social media values to fall. The S&P 500 dropped 2.42% to 3,878 pts, the Dow Jones 1.59% to 31,373 pts and the Nasdaq 3.62% to 11,117 pts. Other ‘warnings’ are also reported, particularly in the distribution sector. A few bad ‘stats’ (PMI, housing and industry) complete the markets. On the Nymex, a barrel of WTI crude took 0.1% to $110.4. An ounce of gold also rose by 0.8% to $1,863. The dollar index lost 0.3% against a basket of benchmark currencies. Bitcoin dips below $29,000.
The ‘flash’ US composite PMI for May 2022 came out at 53.8, below the FactSet consensus of 56, but still in the expansion zone. The manufacturing indicator came in close to expectations at 57.5, while the services index came out at 53.5, below the consensus (56).
US new home sales for the month of April 2022 came in at 591,000 according to the daily report, versus 750,000 market consensus and 709,000 for the revised (down) reading from the prior month. The previous estimate for March was 763,000 before revision.
Note also that the Richmond Fed’s manufacturing index for the month of May, which has also just been published, came in at -9, against +12 for the FactSet consensus. Below zero, it signals a contraction of activity in the region.
Fed boss Jerome Powell will also speak tonight. Meanwhile, the Atlanta Fed’s Raphael Bostic said a break in rate hikes in September could make sense. Mary Daly, president of the San Francisco Fed, judged that the Fed could continue its monetary tightening without causing a recession. Esther George of the Kansas City Fed, finally, anticipates a federal funds rate of 2% by August, but adds that subsequent rate hikes will be determined by the evolution of inflation.
Values
Snap loses more than 40% (!) on Wall Street after its earnings warning delivered last night. Snapchat’s parent company takes the entire industry with it. Thereby, Metaex-Facebook, stumbles 10%, while pinterest plunges 28%. Same Twitterwhich was recently the subject of a bid from Elon Musk (since suspended), is dropping 4% with a few hours of opening. Alphabet yields nearly 8%…
Snap said last night that the economy was deteriorating faster than expected. Evan Spiegel’s Californian group has seen particular weakness since late April. As a result, it believes it should report revenue and Adjusted Ebitda below the low guidance ranges for the second quarter of 2022. According to an internal message seen by Reuters, Spiegel warned employees that the company would slow down hiring this year. Snap’s CEO also listed a number of issues, including rising inflation, interest rates, supply chain or labor market disruptions, platform policy changes, and the impact of the war in Ukraine.
Some scheduled hires will be postponed until next year, but the group still expects more than 500 hires by the end of the year. Facebook and Uber had already announced similar measures earlier this month… Snap’s management also intends to determine other cost-cutting actions. Last month, Snap said it expects second-quarter revenue growth of 20-25% year-on-year.
vmware (-3%) jumped last night from 24.8% on Wall Street to $119.4, on rumors of a potential takeover of Broadcom. According to the Wall Street Journal, Broadcom would indeed offer a cash and stock offer for the takeover of cloud computing specialist VMware. Broadcom has a capitalization close to 215 billion dollars, while VMware weighs 50 billion dollars. The Wall Street Journal now adds that the negotiations relate to a transaction of 60 billion dollars, and that the two companies would consider announcing an agreement on Thursday. The offer could therefore be around $140 per VMware title, according to people familiar with the matter quoted by the WSJ. Broadcom reportedly intends to appeal to several banks in order to obtain a debt package of around $40 billion to help finance the acquisition.
Ralph Lauren (-2%) delivered solid annual forecasts on Tuesday, expecting revenues to beat expectations with European and American demand. In the fourth fiscal quarter, period closed, the New York group achieved revenues up 18% to 1.52 billion dollars, against 1.46 billion consensus. Growth in North America reached 19%. Adjusted diluted earnings per share were 49 cents, excluding restructuring and other items. For the 2023 fiscal year just started, the group expects growth of 6 to 9% at constant currencies, well above market expectations.
BestBuy (+1%), the American giant of the distribution of electronic products, reduced its estimates of annual profits due in particular to the impact of inflation. For the first fiscal quarter ending at the end of April, the retailer posted an 8% decline in like-for-like sales, which was less pronounced than the 9% drop expected by the consensus. Total sales were 10.65 billion, against 11.64 billion consensus. Adjusted earnings per share were $1.57, versus $1.61 consensus. The group now expects annual like-for-like sales to fall by 3 to 6%, compared to previous guidance ranging from -1% to -4%. Annual adjusted earnings per share are expected between $8.4 and $9, compared to $8.85 to $9.15 previously.
Abercrombie & Fitch unscrewed by 28% on Wall Street, while the group deplored a loss for its first quarter and delivered very cautious guidance. For the quarter ended, the American clothing retailer announced a net loss of $16.5 million and 32 cents per title, against a profit of $41.8 million a year earlier. The adjusted loss per share was 27 cents, much heavier than expected. Sales totaled $813 million, up from $781 million a year earlier. The annual guidance has also been lowered.
Zoom Video (+3%), one of the stock market stars of containment on Wall Street, who has since lost all of his gains posted between March 2020 and October 2020 (the title had quadrupled over the period!), is trying to take his revenge . The Californian group, which provides videoconferencing services allowing online meetings, chat and mobile collaboration, published solid quarterly accounts last night. Zoom also raised its full-year adjusted earnings guidance, pricing in robust corporate demand in a hybrid environment. In the first quarter, revenues from business customers rose by 31%, representing 52% of activity. The adjusted operating margin reached 37.2% for the quarter ended at the end of April. Quarterly earnings beat the consensus, with guidance for the quarter started also beating expectations.
Total first-quarter revenue rose 12% to $1.07 billion. GAAP net income was $114 million, 37 cents per share, while adjusted earnings were $316 million and $1.03 per share. For the year, Zoom expects adjusted earnings per share ranging from $3.7 to $3.77, a sharp upward revision to previous guidance. Total revenues are anticipated between $4.53 billion and $4.55 billion. Non-GAAP earnings from operations are expected to be between $1.48 billion and $1.5 billion.