Last week the GameStop saga held the headlines in the financial world. For a moment, it appeared that any other news is irrelevant for the stock market.
Indeed, that was the case. While GameStop was the battleground between WallStreetBets and short-sellers, the big names in the tech sector in the United States reported their quarterly earnings. Judging by how Nasdaq 100 closed last Friday, at its lows, one would say that the earnings did not matter. Fast forward a couple of days into February, and Nasdaq 100 is on a vertical rise, close to all-time highs again.
And for a good reason, at least if we judge by the solid earnings reported by the FAANG group and Microsoft.
Apple Smashed Expectations
One of the biggest surprises in last week’s reporting was Apple’s fabulous quarter. It reported record revenue higher than $111 billion and close to $30 billion in net profit. Perhaps the biggest surprise came from the iPhone sales – up 17% year on year. As a result, the company declared a cash dividend of $0.205/common share.
Facebook Q4 earnings did not disappoint as well. The company reported EPS of $3.88 on expectations of $3.22. Revenue in the quarter also grew, reaching $28.07 billion on $26.41 expected. Even more importantly, the Q4 number of active users reached 1.84 billion – a staggering number. At this pace, 3.3 billion people log into Facebook, Messenger, or WhatsApp every month, and a rough calculation tells us that Facebook makes an average of $8.62 off each person on a quarterly basis.
Microsoft has crushed expectations on all metrics as well. The company’s crown jewel, the Azure cloud computing business, helped it reach $15.5 billion in the quarter, the third consecutive quarterly growth.
Armed with the info above, last week’s investors saw the Nasdaq 100 falling despite much better than expected earnings. As such, the recent bounce comes as a result of investors buying the dip encouraged by the tech sector’s earnings. Moreover, the prospect of a faster economic reopening due to massive vaccination efforts leads to increased optimism in a strong economic comeback in the period ahead. At this pace, the Nasdaq 100 index trades, once again, close to all-time highs. On a better than expected NFP report next Friday, we should not rule out a move above those levels.