Stocks made a comeback last week with 3 straight days of positive returns but all that changed once Facebook reported earnings. Unlike the other big tech companies that were basically showing us how to print money. Facebook faced some hardships and well it took the market with it (more on this below). But thank goodness for Amazon coming in like a knight in shining armor to save the week.
The markets are so crazy right now. We are seeing things that are not supposed to happen, HAPPEN! We are seeing companies with trillion-dollar market caps (Amazon) swing from being down 8% to be up 17% in the SAME DAY! We are seeing companies worth tens of billions of dollars have intraday swings like they are penny stocks. Snapchat went from being down 25% in a day to being up 60%.
As Michael Batnick says, "Everything I moving faster these days."
Because of how fast we get information and how easily accessible everything is to everyone. The markets are making crazy moves.
Things that would take days to play out are taking mere hours.
Things that should take months are happening in days.
The market volatility is crazy. It is hard to stay sane for anyone who is watching the markets. This is why we do not play the timing game. It is hard to know when to be in and when to be out. Things are changing too fast to base our investing on time. Rather, we play the long game and allow time to be our friend, not our enemy.
Indices Result for the Last Week:
Tale of the Tape
ECONOMY
The January jobs report was released on Friday and well it was pleasantly and surprisingly REALLY GOOD. The Omicron variant was supposed to mess up the jobs number for the month of January. After the ADP payroll report showed the economy cut 301,000 jobs in January and usually the ADP gives a preview towards the Non-Farm Payroll. Everyone assumed things were gonna be really bad.
But it was the total opposite! Even with the effects of Omicron and people being sick and not able to work. The Economy added 467,000 jobs last month. This report showed how strong the labor market is right now. Seasonal employment is turning into long-term employment as employers seek to keep as much staff on hand for as long as possible. Average hourly wages are also going up increasing 0.7% month over month and 5.7% year over year.
Unfortunately, not everything was great in the report. Omicron did have a big impact. 6 million people were unable to work because either their employer had to close for the December/January period or the business was had to completely shut down. That is up from 3.1 million in December.
But overall the labor is very strong and it gives the Federal Reserve more confidence to raise interest rates this year.
EARNINGS UPDATE
Google continued the trend of Big Tech companies making more money than countries.
Google brought in $75 billion in Q4 revenue growth of 32%. (When do you think Google will start being in $100 billion a quarter?)
YouTube revenue continues to grow. In Q4 it went from $6 billion to $8 billion
Cloud revenue has a 45% growth in the quarter and cloud losses continue to decline as the revenue keeps growing for Cloud
All that was awesome news but the one thing that Google announced that sent the stock to the SKY was a 20 for 1 stock split
Meaning for every 1 share of Google you own you will get 20 shares in return
This does not make a difference to the stock of Google. It's like splitting a pizza into smaller slicers. It's still the same pizza
However, it makes the stock more appealing to retail investors like you and me. Because for those who do not understand how stocks work, a share price of $160 seems a lot “cheaper” than $3000
Facebook on the other hand straight up pooped the bed with their Q4 2021 earnings report.
Facebook, I mean Meta, released their earnings for Q4 and although it was not that bad they announced some major trends that seemingly will continue to hamper the business going forward
Meta brought in $33.67 billion in revenue versus the estimated $33.4 billion but more scary was the decline in daily and monthly active users.
Daily Active Users (DAUs): 1.93 billion vs 1.95 billion expected by analysts, according to StreetAccount
Monthly Active Users (MAUs): 2.91 billion vs 2.95 billion expected by analysts, according to StreetAccount
They also gave a weak forecast for Q1 2022 revenue. They expect to do about $27-$29 billion in revenue were expecting around $30 billion in revenue.
Meaning rather than Facebook growing at a 15% clip their growth rate is slowing down to 11%
This sent the stock down 25%. Wiping out $250 billion in Market value literally the size of McDonald's in a day.
Never have we seen anything like that. It was the largest single-day drop in the history of the stock market
Facebook said that Apple's iOS changes are affecting their bottom line to the tune of $10 billion.
They also said something about inflation affecting advertisers budgets BUT we just went over Google's revenue and they are growing so that is just a cop-out
This Earnings report really exemplifies why Zuck is really heavy on going into the Metaverse
Unlike Google which controls its platform with Android, Facebook does not.
It is reliant on both Google and Apple to give it access to people
Apple has chosen to deny that access by allowing people to decide if they can be tracked or not and Google did something similar on Android
Meta wants to build its own platform that it controls so it does not have to abide by other people's rules
Speaking of which Meta announced it will be changing its stock ticker symbol from FB to META to match its new name
Amazon, the other big tech company that makes $100 billion a quarter (that is just insane) did it once again.
Amazon brought in $137 billion in Q4 2021
The main growth factor for Amazon is AWS which continues to grow rapidly. In Q4 it grew at 40% bringing in $18 billion in revenue, which may seem small compared to $71 billion from retail
However, AWS is driving the profits for the company with a gross profit margin of 30% whereas retail only has a margin of about 3-4%.
AWS is what we should be paying attention to with this company.
Amazon, just like Google and Facebook, has an advertising business as well and that grew at 32% in Q4 bringing in $10 billion.
This is larger than YouTube's ad revenue
Important deduction you have to make with Amazon's numbers for the Quarter is its $1 billion investment in Rivian that turned into $12 billion and Amazon has to report that as a profit but in my estimation that should not be counted
So although the Earnings look amazing do not be swayed by it
Focus on the actual profits generated by the business, not from the investments.
Side note: Amazon Prime subscription prices are going up which sucks but OH WELL
Annual fees will increase to $139 from $119
Monthly will go up to $14.99 from $12.99.
Looking Ahead
The one thing no one likes to see.
RISING GAS PRICES
Well, it’s happening. Oil crossed $90 a barrel for the first time since 2014 which means gas prices hit levels not seen since 2014. Travel site AAA reports the average price for a gallon of regular gasoline is $3.423, the most since Sept. 10, 2014. That surpassed a recent high of $3.422 on Nov. 8. At this time last year, gas was $2.44 a gallon.
So it is time to adjust your budget to go towards the things we do not like to spend money on. With the possibility of Russia going to war over Ukraine. I do not expect oil prices to come down any time soon meaning gas prices will remain elevated.
Next week, we get the Consumer Price Index aka Inflation numbers from the Bureau of Labor Statistics. The good news is inflation seems to have been abating in recent months when comparing month-over-month increases at about 0.5%. The bad news is year-over-year inflation is still at decade-high levels at about 7%. Hopefully, the slowdown in inflation continues.
Earnings Reports keep floodingwith companies like Disney, Uber (which means Lyft will also report), CVS which means (Wallgreens will be reporting), Coke (meaning Pepsi reports). You get the idea
One to watch will be Peleton whose stock has been absolutely destroyed in recently weeks being down more than 80% from its all-time high.
However, there is a rumor that Amazon and Nike is looking to buy the overpriced ipad on an exercise bike company.
Totally Unnecessary Man U Update
Why do I even care?
It is literally the same story game after game. Man U plays well for about 30 mins and then they just fall apart. This game should have never been close but like always Man U just defaults to depending on individual brilliance. At this point, I can’t even point at the coach anymore. The players have to stand up and do what they know they should be doing.
Thank you for reading
I hope you all have A WONDERFUL WEEK. I will see you back here on Wednesday for another post. In the meantime, Go subscribe to Rambling Mind Podcast for mid-week stock market updates. You can also catch me on TikTok, Instagram, and YouTube every day.
If you enjoyed the post, SHARE IT with one person you hate; one person you love, and one person you have no real strong feelings about.
If you hate this newsletter, please tell me why.
Either way for those who love or hate this newsletter. Please give me feedback on what you would like for me to cover or things to make it better.
Remember GENEROSITY > greed
God bless Each and Everyone of y’all
✌🏾