The Earnings Scorecard Ahead of Big Tech Results, Model Musings
January 30, 2024
US equity futures are pointing to a modestly lower open although, at least at the time of writing, Cboe Volatility Index (VIX) futures are breaking character and are also lower.
As the market gets ready for the start of Big Tech earnings after today’s market close with Alphabet (GOOGL), Microsoft (MSFT), and AMD (AMD) results, and the Fed’s next policy decision tomorrow afternoon, investors are sifting through an increasingly mixed batch of quarterly results. Those include better than expected results from cybersecurity company F5 (FFIV), Sanmina (SANM), and General Motors (GM), but weaker than expected guidance from Whirlpool (WHR), UPS (UPS), Calix Networks (CALX), and Harmonic (HLIT).
Sanmina (SANM) shares gained serious ground after the company blew away expectations, lifting its 2024 revenue to $1.82-$1.925 billion with EPS of $1.20-$1.30 compared to the consensus forecast of $1.80 billion and $1.09, respectively. Management shared its industrial, medical, defense, and aerospace markets are “pretty stable” but the company is benefitting from cloud infrastructure upgrades.
Shares of Super Micro Computer (SMCI) popped in aftermarket trading after the company reported December quarter results that crushed the consensus forecast and guided current quarter EPS to $5.20-$6.01 compared to the $4.61 consensus. According to the management team, “While we continue to win new partners, our current end customers continue to demand more of Supermicro’s optimized AI computer platforms and rack-scale Total IT Solutions." Super Micro also boosted its full-year revenue forecast to $14.3-$14.7 billion, up from $10-$11 billion.
F5 Networks (FFIV) also posted far better than expected December quarter results and lifted its outlook for the current quarter to revenue of $675-$695 million vs. the $673.50 million consensus. During the company’s earnings call, management shared AI is driving demand for a comprehensive API security solution, inclusive of DDoS protection, bot detection, and data masking and leak protection.
As we are once again seeing, it isn’t enough for a company to deliver a solid quarter, with the stock market being priced to perfection, a vibrant outlook is also necessary to send a company’s shares higher. Over the next few days, the pace of earnings reports will skyrocket, including Big Tech companies and approximately 20% of the S&P 500 basket.
As the dust settles on these reports, investors will have a clearer sense of which companies are thriving and poised to deliver outsized earnings growth in the coming quarters. Readers should be mindful of not only top-line estimates but also spending forecasts that could lead to softer than expected margins and bottom-line performance.
For more, be sure to read our Daily Markets column published each day by Nasdaq.
Model Musings
Cloud Computing and Artificial Intelligence
“Cloud and genAI are developing an almost symbiotic relationship. Cloud technology provides the powerful, highly scalable computing capabilities needed to run gen AI large language models (LLMs). Cloud data platforms store and manage the large datasets required to process data in real-time and train genAI models. GenAI applications can then coordinate model training across services on cloud, and cloud platform security architectures can protect the sensitive information used by genAI applications.” Read more here
Digital Identity & Data Privacy and Artificial Intelligence
“Italy's data protection authority said on Monday it told OpenAI that its artificial intelligence chatbot application ChatGPT breaches data protection rules. The Italian watchdog, known as Garante - one of the European Union's most proactive in assessing AI platform compliance with the bloc's data privacy regime - last year briefly banned ChatGPT over the alleged breach of EU privacy rules.” Read more here
Digital Infrastructure, Cloud Computing and Artificial Intelligence
“As the tidal wave of expected generative AI demand unleashes a flood of new data and capacity requirements, the first weeks of the new year (and the months leading up to it) have seen an astonishing surge of announcements for data center and digital infrastructure industry financing and property investment.” Read more here
The strategies behind our Thematic Models:
Aging of the Population - Capturing the demographic wave of the aging population and the changing demands it brings with it.
Artificial Intelligence – Software, chips, and related companies that facilitate the collection and analysis of large data sets and autonomous generation of solutions given non-machine language prompts.
CHIPs Act – Capturing the reshoring of the US semiconductor industry and the $52.7 billion poised to be spent on semiconductor manufacturing.
Cloud Computing – Companies that provide hardware and services that enhance the cloud computing experience for users, such as co-location, security, and edge computing.
Consumer Inflation Fighters - Companies poised to benefit as consumers stretch the disposable spending dollars they do have.
Core Holdings – Companies that reflect economic activity and are large enough to not get pushed around by day-to-day market trends. Low-beta, large-cap names able to better withstand economic turmoil.
Digital Infrastructure & Connectivity -The buildout and upgrading of our Networks, Data Storage Facilities, and Equipment.
Data Privacy & Digital Identity - Companies providing the tools and services that verify authorized users and safeguard personal data privacy.
EV Transition - Capturing the transition to EVs and related infrastructure from combustion engine vehicles.
Guilty Pleasure – Companies that produce/provide food and drink products that consumers tend to enjoy regardless of the economic environment and potential long-term health hazards associated with excessive consumption.
Homebuilding & Materials – Ranging from homebuilders to key building product companies that serve the housing market, this model looks to capture the rising demand for housing, one that should benefit as the Fed returns monetary policy to more normalized levels.
Market Hedge Model – This basket of daily reset swap-based broad market inverse ETFs protects in the face of market pullbacks, overbought market technicals, and other drivers of market volatility.
Luxury Buying Boom - Tapping into aspirational buying and affluent buyers amid rising global wealth.Market Hedge Model – This basket of daily reset swap-based broad market inverse ETFs protects in the face of market pullbacks, overbought market technicals, and other drivers of market volatility.
Nuclear Energy & Uranium – Companies that either build and maintain nuclear power plants or are involved in the production of uranium.
Precision Ag & Agri Science – Companies that look to address shrinking arable land by helping maximize crop yields utilizing technology, science, or both.
Rebuilding America - Turning the focused spending on rebuilding US infrastructure into revenue and profits.
Safety & Security – Targeted exposure to companies that provide goods and services primarily to the Defense and security sectors of the economy.
Space Economy – Companies that focus on the launch and operation of satellite networks.
The strategies behind our Dividend Income Models:
Monthly Dividend Model – Pretty much what the name says – this model invests in companies that pay monthly dividends to shareholders.
ETF Dividend Model – High-yielding ETFs that provide a range of exposures from domestic equities, international equities, emerging market equities, MLPS, and REITs.
ETF Enhanced Dividend Model – A group of high-yielding ETFs that utilize options to enhance yield through collecting option income.