Big Tech made corporate finances during the COVID-19 pandemic look a bit better, but we are still headed for the worst earnings season in more than a decade as the Walt Disney Co. prepares to discuss its financial performance.
Apple Inc. AAPL,
For more: Pandemic? Antitrust? No worries for Big Tech, which racked up $200 billion in sales anyway
Earnings beats of that magnitude put the S&P 500 SPX,
More than 70% of S&P 500 companies reported results through Thursday afternoon, and those companies delivered an earnings beat of 22.9% in aggregate, according to Credit Suisse Chief U.S. Equity Strategist Jonathan Golub. The beat rate was “only” 13.8% before the Thursday reports came in, showing the outsize impact of Big Tech on profits for the index.
Though aggregate earnings have come in better than expected, the stock-market reaction has been fairly restrained. Companies that topped both earnings and revenue expectations this season saw their stocks outperform the market by 1.5%, compared with an historical average of 1.6%, Golub wrote. Companies missing on both metrics have seen their stocks lag by 1.8% versus a typical underperformance of 3.1%.
See also: How Apple’s stock split will change the pecking order in the Dow
The week ahead brings another packed slate of earnings, with 130 members of the S&P 500 set to report and one member of the Dow Jones Industrial Average DJIA,
Living the stream
Netflix Inc. NFLX,
The Disney+ service promises to be one of the rare bright spots in Disney’s Tuesday afternoon report, given challenges across the business due to park closures, film delays, sports cancellations and a weak advertising market. From a revenue perspective, Disney+ is still a small piece of the sprawling media empire, but the service launched the filmed version of “Hamilton,” one of the summer’s biggest hits, and will look to leverage that momentum even after the “Hamilton” boom is over, given a weak outlook for its more traditional media businesses.
For more: Disney+ may be the only plus for Disney during pandemic
Roku, which sells streaming devices and other technologies that allow people to watch over-the-top content on their TV sets and offers its own free streaming service, will detail some of the best and worst trends in video Wednesday afternoon. On one hand, the company benefits when people sign up for new streaming services through its platform, but it also generates revenue from advertising, which has taken a hit during the pandemic.
Wedbush analyst Michael Pachter said that investors could “expect a dip” in the near term, followed by an acceleration once the economy improves and Roku can better leverage a growing audience.
Catch a ride
Uber’s ride-hailing numbers won’t be pretty given stay-at-home trends, but that’s no surprise. Investors will be looking for signs of momentum as the quarter went on, especially in places that began reopening their economies, as well as any indications that trends began stalling once again as some states scaled back their reopening plans.
Also of interest Thursday afternoon will be trends in the food-delivery business, a glimmer of hope as the traditional ride-hailing business stalled. Companies like Visa Inc. V,
Square Inc. SQ,
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Whether Square can sustain that momentum will be a focus of the company’s Wednesday afternoon call, as will trends on the merchant side of the business. Square likely saw some recovery there as states relaxed in-person business restrictions toward the middle of the quarter. The company’s e-commerce initiatives will also be of note, given uncertainties about how the remainder of the public-health crisis will play out: Square has been getting its bricks-and-mortar merchants to adopt online-shopping tools as they adjust to the new ways of doing business amid the pandemic.
Food for thought
Beyond Meat has signed a number of new deals lately, but it can’t escape the COVID-19 crisis. “The biggest risk for Beyond in the short-term is its ~50% exposure to food-service channels,” wrote Bernstein analyst Alexia Howard, who added that a recovery in the food-service business could take some time to materialize due to restrictions on restaurants.
She’ll also be looking for updates Tuesday morning about the company’s China partnerships with Alibaba Group Holding Ltd. BABA,
Virgin Galactic Holding Inc.’s SPCE,
Also on deck
Following Electronic Arts Inc.’s EA,