Tech stocks popped ahead of the bell on Wednesday, outstripping the broader market as investors welcomed Tesla’s (TSLA) cheaper car pledge and waited for the next rush of corporate earnings.
Futures on the tech-heavy Nasdaq 100 (^NDX) rose roughly 0.5%, coming off a sharp closing gain. S&P 500 (^GSPC) futures were up 0.1%, continuing a rebound from its longest losing streak of 2024, while Dow Jones Industrial Average (^DJI) futures wobbled along the flatline.
The results from the first “Magnificent Seven” to report have intensified the already high hopes for Big Tech earnings, that the megacaps can revive the rally in stocks they powered. The spotlight is now on Meta’s (META) report due after the market close, as the Facebook owner’s shares rose after the Senate voted for a potential ban on rival TikTok. Microsoft (MSFT) and Alphabet (GOOG) next up on Thursday.
Meanwhile, Boeing (BA) earnings are expected early Wednesday, after a quarter rocked by a high-profile plane failure that led to a regulatory cap on production. Also on the docket are updates from AT&T (T), IBM (IBM), and Ford (F), among many others.
Many in the Yahoo Finance newsroom know of my joy for reading up on elevator and escalator maker Otis Worldwide (OTIS) — I am fascinated by what the company makes, how it makes it and what it all says about the health of the global economy.
I just got off the phone with Otis CEO Judy Marks. Her comments to me on China — following her trip in March to the country (an important market for Otis) — left an impression:
“The message from the Chinese government is we want economic development. We want foreign direct investment. We’re going to celebrate 40 years in China this year, and it’s an important market to us, but we’ve watched as the market has developed and some of the challenges in the property market and they’re really continuing. I would tell you that the property market and the new equipment market similar to the last 18 to 24 months, it remains weak. Liquidity and credit constraints are weighing on the developers, and the top 50 developer sales this quarter were down almost 50% versus this quarter last year. So on the equipment side, we’re calling this a down high single digit to down 10% market for the year.”
Marks doesn’t see growth returning to Otis’ China business in 2024.
Hilton continues to buy its company back
Hilton (HLT) continues to be one of the most aggressive acquirers of its stock out of the gazillion companies I follow closely.
In many respects, it almost feels like Hilton is taking itself private again! The hotel and resorts company went public again in 2013 after being bought by Blackstone in 2007.)
This from the company’s just-released earnings report:
“During the three months ended March 31, 2024, Hilton repurchased 3.4 million shares of its common stock at an average price per share of $196.17, for a total of $662 million, returning $701 million of capital to shareholders during the quarter including dividends. The number of shares outstanding as of April 19, 2024 was 250.0 million.”
For perspective, Hilton ended 2022 with a share count of 277 million.
Toymaker earnings not coming in fun
No playing around here, earnings from major toymakers Mattel (MAT) and Hasbro (HAS) aren’t very fun to look at.
Not exactly a great earnings report from Mattel last night — now saying it will return to revenue growth in 2025. Mattel is unique in that the Barbie movie really drove up its results last year, so things mathematically will be down. Sales fell 1% year-over-year in the first quarter.
Hasbro’s earnings this morning are also tough on the eyes for investors. The company is calling out a 21% sales plunge in its key consumer products business due to “broader industry trends, exited businesses and reduced closeout sales as a result of last year’s inventory clean-up.”
Both weak reports say a lot about where shoppers minds are at right now … not with buying dolls, action figures and board games.
One stat to know on AT&T
I am still wading through AT&T’s (T) long earnings report, but one number caught my attention right off the jump.
$4.7 billion.
That’s how much debt AT&T repaid in the quarter, as it continues to try to bring down leverage in life after Time Warner. CEO John Stankey has told me a few times within the past year that paying down debt is one of the most important goals for his management team.
As it should be — AT&T still ended the first quarter with about $132.8 billion in total debt! The company’s market cap is $118 billion.
A list of questions Tesla investors need to ponder
The day after.
Tesla (TSLA) CEO Elon Musk has played investors like a fiddle. He gave them what they were clamoring for ahead of earnings — details on a cheaper Tesla — and they are eating it up. Shares are up 10% in pre-market trading, and the company’s ticker is dominating the Yahoo Finance Trending Ticker page.
All of that is fine and good, but it all detracts (likely by Musk’s design) from the main story at Tesla that has weighed on its stock price this year: The company is struggling, and any bold promises by Musk that sends its stock higher inside an awful year for the company should be questioned big-time.
Here are some questions the Tesla bulls need to ask themselves.
Musk promises robotaxis, shows off in the earnings slide-deck what their ride-sharing app may look like. But…
What do regulators have to say about this? How feasible is this launch within the next 12-months?
Musk does know that Uber (UBER) exists right? And that it’s nicely making profits finally and investing aggressively in its business.
Musk seems to think people will want to share their Teslas and make this platform a success. What happens if they don’t want to share their tricked out Model 3?
Musk mentions Tesla will own some of the robotaxi fleet. What does that do to its cash flow and margin profile? Do investors and analysts want to see Tesla saddled with these extra costs while the pure EV business is under pressure and they are trying to make humanoid Optimus robots?
Musk promises he is fully engaged at Tesla. But …
Some interesting dialogue on the earnings call on how long Musk plans to stay CEO of Tesla. He didn’t answer precisely with a timeline, said he works on Sunday and seemingly around the clock (like many other humans). He then questioned whether Tesla could get out its robots if he weren’t leading the company. Is now the time to ponder a Musk-less Tesla within the next few years? What does that even look like for investors? So many of his top execs have left or are leaving, including one of the guys on the earnings call last night! If buttoned-up/corporate Disney (DIS) CEO Bob Iger is seen as failing at succession planning, then Musk could be seen as one of the worst succession planners in CEO history.
Musk pounds the table on Tesla being an AI company again. But …
Sure, Tesla has some amazing technology. But doesn’t Tesla make cars first that then use its technology? Who would you rather own stock in? A pure play AI company such as Microsoft (MSFT) or a car company masquerading as an AI company?
Musk hypes a cheaper Tesla. But …
Tesla is no stranger to recalls and concerns about product quality. Just check out the Cybertruck recall last week! So, how high quality is a $25,000 Tesla going to be? This sounds like it could be a dreadful ownership experience, not unlike when my parents bought a cheap 1986 Ford Tempo and a 1987 Ford Escort when they came out.
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