The markets had a positive week with the DOW30, S&P500, and NASDAQ ending 0.7%, 1.0%, and 2.0%, respectively.
The Federal Reserve has given the green light to a long-awaited increase in interest rates, raising benchmark borrowing costs to their highest level in over 22 years. This move involves a quarter percentage point increase, bringing the fed funds rate to a targeted range of 5.25%-5.5%. Although policymakers had previously suggested two rate hikes for this year during the June meeting, the market currently predicts a higher probability that there will be no further increases. Chair Jerome Powell emphasized that the central bank will rely on data-driven assessments, making decisions on a "meeting-by-meeting" approach.
Even with the increase, investors are still putting their money back into the stock market, pushing many stocks to make new all-time-highs for the year.
With all the interest rate hikes, it is another reason why it's compelling to have a high-yield savings account. Many of them give 4-5% APY! 😮
Earnings 📰
META
Meta Platforms (META) reported Q2 earnings that surpassed expectations on both revenue and earnings per share, driving its stock up nearly 8% in premarket trading. With revenues totaling $32 billion, surpassing Wall Street's prediction of $31.06 billion, the company also estimated Q3 revenues between $32 billion and $34.5 billion, above analysts' expectations of $31.2 billion. However, the operating loss in its VR division Reality Labs was larger than anticipated, with a loss of $3.74 billion against an expected loss of $3.68 billion. Meta plans to continue investing in AR and VR despite these losses. Despite laying off over 20,000 employees in 2022 and 2023, the company anticipates increased expenses due to higher infrastructure and payroll costs.
GOOGL
Alphabet Inc., the parent company of Google, reported Q2 earnings that exceeded estimates on both revenue and earnings per share, pushing the stock up by approximately 6%. The company posted a revenue of $74.6 billion, surpassing expectations of $72.75 billion, and reported earnings per share of $1.44, which was more than the $1.32 expected by analysts. Google's ad revenues were $58.14 billion for the quarter, beating the anticipated $57.5 billion, and YouTube ad revenues reached $7.66 billion, exceeding forecasts of $7.41 billion. The Google Cloud business also reported profits for the second consecutive quarter, with revenues amounting to $8 billion and income for the segment totaling $395 million. However, Alphabet's Other Bets segment reported a narrower operating loss of $813 million, compared to a $1.34 billion loss in the same period last year.
MSFT
Microsoft's fiscal Q4 earnings surpassed Wall Street's estimates but a sequential drop in Azure cloud revenue growth led to a 4% fall in shares in after-hours trading. Microsoft reported a 26% YoY growth in Azure and other cloud services for the quarter, a decline from the previous quarter. Overall revenue rose by 8% to $56.2 billion, with net income increasing by 20% to $20.1 billion. Segment-wise, Productivity and Business Processes revenue rose by 10% to $18.29 billion and Intelligent Cloud revenue increased by 15% to $24 billion. However, More Personal Computing revenue decreased by 4% to $13.9 billion. Despite this, Microsoft CEO Satya Nadella expressed optimism about sustained high growth in the cloud business, citing early stages of cloud migration and the impact of AI-driven workloads.
MA
MasterCard's Q2 2023 earnings outperformed the Zacks Consensus Estimate, with earnings of $2.89 per share as compared to the expected $2.84 per share. The company's revenues of $6.27 billion also surpassed the consensus estimate, registering a 1.55% increase over the year-ago revenues of $5.5 billion. Despite these results, MasterCard shares have underperformed the market so far this year, with a 15.7% increase compared to the S&P 500's gain of 18.9%. Going forward, the performance of the stock will largely depend on the management's commentary on the earnings call and the company's earnings outlook.
V
Visa's Q3 report revealed an increase of 9% in adjusted earnings, reaching $2.16 per share, beating analysts' predictions of a 6.5% rise to $2.11 per share. The company also witnessed a 12% growth in revenue to $8.1 billion, surpassing expectations of a 10.8% climb to $8.06 billion. There was a 9% increase in payment volumes, and a 17% surge in cross-border volume. Service fee revenues and data processing fees both rose by 15% to $3.66 billion and $4.1 billion respectively, exceeding estimates. Despite international transaction revenue increasing by 14% to $2.92 billion, it fell short of the forecasted $3.01 billion.
I am bullish on all 5 of these companies as I see revenue continue to increase on a year-over-year basis. However, I would still be more cautious to not be overweight in META or GOOGL since they are more volatile and don't pay a dividend. If I continue to see these shares make higher highs and higher lows, I will add more shares to my long-term positions. I will also be adding more shares of SPY and QQQ to my portfolio.
Steve's Trades
AMZN
AMZN Cash Secured Put
Expiration Date: September 01, 2023
Step 1: Have $12,500 of cash as collateral
Step 2: Sell 1 $125 strike put option (delta -0.28) for $280
Credit/premium received: $280
Since AMZN has earnings next week, just be aware that the stock may be more volatile. If you are not comfortable with the volatility, you can sit this one out.
We have AAPL and AMZN earnings next week, both scheduled for Aug 3. As of now, I'm currently not buying shares or LEAPS as we still have some earnings coming up. Let's see which companies will be on top.
In the end, tweak the numbers to your liking and risk tolerance.
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