Yahoo Finance’s Myles Udland and The Final Round panel break down and dig into the major tech earnings that came out after the bell on Thursday.
Video Transcript
MYLES UDLAND: So let’s talk a bit about those earnings coming out last night after the bell, Facebook, Apple, Amazon, Alphabet, and Twitter among the major tech companies reporting their results. As you see here on the screen, Alphabet the only one of these names that is in the green today.
But let’s talk first. We chatted about it very briefly at the beginning of the program about what we heard from Apple last night. The company again, they got rid of their unit numbers. They didn’t tell you how many iPhones they sold each quarter. They got rid of that maybe three or four quarters ago.
But they still have revenue by product. And yesterday, they reported iPhone revenue in its third quarter, $26.4 billion. The Street was looking for $27 billion, so small beat there.
But Dan Roberts, when the read through from management on the call is that, well, our consumers in China were a little worried about buying a phone before the new one came out, anything that says China not doing amazing for Apple pretty much makes investors sell the stock 5% or 6%. It’s happened several times in the last couple of years.
DAN ROBERTS: So not only that, Myles, but you never want to open up the Apple earnings release, right, when the numbers come out and see that it leads with record quarter for Mac and services. Well, what are we not talking about here? We’re not talking about iPhone.
Now of course, you know, the stock dipped because of the China warning and then also the iPhone sales miss. I will say, on iPhone, I mean, we knew that the upgrade cycle had slowed recently. And they were about to launch that 5G iPhone. I suspect one quarter from now, we’ll be saying, oh my God, gigantic beat. Everyone finally upgraded their iPhones because they sprang for the expensive 5G iPhone.
But that said, it does remind you of January 2019. Remember, it was like January 2 or 3, we started the year with Apple coming out with a warning about iPhone sales in China. It was January 2. And the warning was, we’re about to release numbers, and they’re not going to be good for iPhone sales in China. Everyone said, oh, no, suddenly, the iPhone company is in trouble. And, you know, the stock took a major leg down.
Then it turned out all the bulls on Apple switched to saying, it’s fine because services. It doesn’t have to be just iPhone. They all started saying Apple is more than iPhone. Yes and no. It’s still the iPhone company. And we can see that the stock still really responds based on numbers we get and whispers we get on how iPhone is selling.
We know that the sort of motivation and momentum to upgrade and buy a new iPhone had really slowed. I’ve been saying that for a few years now that every time they try out the new phone on stage, you’re sort of like, that’s it? It’s not that much better. But 5G iPhone could be the change, could be the inflection point. So I’m not surprised by the leg lower.
The other macro comment I would just say right now since we’re talking all the tech earnings bonanza we got yesterday– we got Twitter, we got Apple, we got Google, we got Facebook, we got Amazon– is that at first, if you remember, other than Twitter, which had that user miss, all those names went up in the minutes after dropping the earnings. And that’s because, other than Twitter, they all had beats. I mean, Google had beats in every category across the board, great ad sales numbers. Facebook, great ad sales numbers. You know, Amazon was a big beat.
Now today, you start to see people zoom in on one or two metrics that are troubling, and they’re mostly troubling why? Because they say something about the near future. In Apple’s case, I think in the near future, once that new iPhone comes out and starts to really sell, they’ll be OK.
MYLES UDLAND: Well, so let’s talk about another one of those names that that’s under pressure today and you mentioned on the fears or whatever. And I think there’s a specific phrase that Facebook has in their release that is spooking investors today. And the interesting part of it is, if you read the call, the phrase is really about, you know, regulations, essentially, from Europe preventing Facebook from measuring their business quite as well.
But, you know, Seana, in the press release, the company’s CFO saying there’s uncertainty– there’s also continuing uncertainty around the viability of transatlantic data transfers in light of recent European regulatory developments. And they expect more significant targeting and measurement headwinds in to 2001. I find it interesting that that’s worth 7%, essentially, for the stock.
Because costs rising, that’s a standard part of the story. They’ve risen faster than revenue. Facebook, the company’s revenue guidance, or, you know, their suggested– they didn’t give the guidance, but they suggested towards the guidance based on margins. That all seemed fine, but these headwinds clearly spooking investors today.
SEANA SMITH: Yeah, they clearly are, and I think regulations over in Europe has been a concern here for not only Facebook, but for some of the other tech giants that we’re talking about. And that is certainly one of the things that’s reflected in the stock price today.
But I also think, more broadly speaking, taking a look at Facebook and the reaction that we’re seeing here a day later, the stock is getting hit after it basically gave the bulls what they wanted. But it didn’t give anything extra.
So we’re really talking about companies beating the Street’s expectations, but that bar has been set so high that if you don’t have this huge massive blowout quarter similar to what we got from Google, investors are going to find a reason to sell the stock, or at least, to criticize it and have more of a negative takeaway from that. And I think that’s exactly what we’re seeing here from Facebook today.
In regards to some of that other concern, I think, that’s being reflected in the price of the stock today, the expense growth outlook. I think some analysts this morning were talking about that today. And the market wanted to see a little bit more there. So that, of course, is one of the headwinds I think facing the stock at least in the short term.
But when you take a step back and look at these numbers and look at what Facebook has done over the last couple of months, I mean, Facebook is really showing and reaffirming what we saw from Pinterest, what we’ve seen from Snap, already during the quarter. And that is just this massive recovery and much more dramatic recovery than what we were initially expecting to see in the online ad growth rates.
And that, of course, has been helping the stock here, or at least, I think, offsets some of those losses that we’re seeing today. So I think big picture, some of these concerns are at least more short term.
But when you take a look overall on how well Facebook has been able to weather the challenging environment that we are in right now, the fact that they are continuing to grow their user base, I think that that is something that investors will be able to eventually focus on here. So maybe some of this volatility, or at least the selling action that we’re seeing in the stock today, with shares up just around 7%, I think maybe it’s more of a short-term concern.
MYLES UDLAND: Yeah, and granted, this was a name that’s done quite well through the pandemic, as many of these stocks have. And if we go back and look at where the stock was trading just in the beginning of August, after its second quarter earnings report, stock was at a record high. So again, the shares about $30 per share below those levels, but not too far off of that record.
All right, quickly, let’s talk about Twitter. The stock under considerable pressure today. Jared Blikre pointing out to us down 21%, its worst day in over a year. And this is after the stock hit a five-year high not too long ago. And of course, the questions here, Dan Roberts, should Jack Dorsey be the CEO of two public companies, one of which Square is doing quite well, the other of which Twitter.
And you can say, oh, it’s doing better than it was under Dick Costolo. Sure, but the name has been dead money for five or six years. The stock traded in the 50s in 2014. It traded in the 70s in 2014. And it’s 2020, and it’s $40 per share.
DAN ROBERTS: You said it, and by the way, we’ve been talking about this question of whether Dorsey can continue to pull double duty for two years. And today, I retweeted out a story of mine from two years ago about this conundrum. And a couple of people were sniping at me, well, how can you compare those companies? You know, that’s not fair. Well, right, they’re totally different companies.
But they have the same CEO, and they’re both publicly traded. And so the question is– and it’s a very fair comparison because the question is, can they really continue to have the same person leading them? And they’ve really diverged in terms of how they have done recently. I mean, Square was our 2018 Yahoo Finance Company of the Year.
Now with Twitter, they have learned how better to monetize in a way. You know, it got more ad sales. The numbers there have improved, and a lot of bullish analysts say there’s a lot to like about sort of the path over the last few years. Fine, but zooming in on the user numbers, this thing just hasn’t grown as much as it should. The product is too good for the user base to continue to be so small.
I mean, I know a lot of people have their gripes. Oh, I want this feature. Or I can’t believe they haven’t done enough, you know, clearing out of the trolls. Fine. But for the most part, it’s a pretty unique and important product that, in many ways, newsgathering wise, has embedded itself in sort of American culture. And they still can only add, like, a couple of million users in a quarter? It’s just not good enough.
And I also know that a lot of people, they like to say it’s unfair as to compare the user numbers of Twitter and Facebook. Facebook is just so much bigger. Sure, that’s fine. Facebook, you know, 2 billion global users. But still, it is remarkable when you compare the user pools of these two platforms. Twitter is just so much smaller, so much smaller.
And considering that the current US president, regardless of your politics, uses Twitter as his daily press release, you know, tool, I can’t believe it hasn’t grown more in terms of users. I think it’s a failure to tell the public the story and the utility of what Twitter is for.
MYLES UDLAND: And to tell its ad partners the utility of Twitter as well. I mean, the thing is, you talk about the users that are hardcore Twitter users, they are creating a kind of value for the platform that I don’t think the average Facebook user is creating, right?
Facebook users are business users mostly, and they will pay Facebook directly for that kind of response advertising. That, of course, is a larger business. But on the consumer side, there should be more value in you and I spending five of our working hours every day on Twitter’s platform creating content for Twitter.
And I know that people– you know, people were getting on me yesterday, but I’m like, how can Jack be CEO of both? They’re like, oh, you just tweeted this. Right, there should be more value here than a stock that’s gone nowhere in five years because I’m tweeting this all of the time. And the retort that using Twitter means the company is so great is so ridiculous.
And as you mentioned, there is no overlap between Twitter and Square. And it’s totally fair to wonder why this guy has the top job at both companies.
DAN ROBERTS: And very quickly, you talk about monetizing it better. For how long has Twitter threatened some kind of paid product, some kind of premium tier where you can pay, and you’ll get special features, or you’ll get to read tweets that others don’t. Well, either do it, or don’t, but figure something else out.
Because there’s got to be another way than just inserting ads in people’s Twitter feed because that ain’t good enough. So either grow the user base more, and then you can sell more ads, or start charging people. But figure something out here because it’s a product that they’re just– they’re not able to wring the revenue out of it that they should.
MYLES UDLAND: That’s right. Well, last time I checked, Facebook has no paid products. And Facebook, they’re doing pretty well. So maybe Twitter should try to work on their ad business as well. All right, coming up on the other side of this break, we’re going to talk to Tim Quinlan of Wells Fargo about why this could be a record holiday season coming up here in the US. We’re back with that conversation in just two minutes.
