December 7, 2022

Earning Relationships from Familiar Names – Part 3


Another day another round of earnings reports.

On Wednesday, the focus is on McDonald’s (NYSE: MCD), Facebook (NASDAQ: FB), Shopify (NYSE: SHOP), PayPal (NASDAQ: PYPL) and Spotify (NYSE: SPOT).

As these earnings reports arrive in the middle of the week, it would be interesting to note each company’s stock price movements since Monday. Investors can be fickle, and last minute adjustments can be seen in these buzzy household names.

McDonald’s rolls off its fork in time for the payoff report

Investors have increased their orders of McDonald’s shares over the past week and a half. The price movement is in stark contrast to the range the stock has seen since May. The price of MCD went from a 4-month low of ~ US $ 226 to an all-time high of ~ US $ 246. Within two days of this week, investors are on a diet and price growth has slowed. McDonald’s stock rose 0.99% on Tuesday and then an additional 0.11% outside regular business hours.

McDonald’s is expected to report revenues of US $ 5.6 billion before the bell on Wednesday. Investors expect the Company to continue to recover its sales, a trend suggested in the Company’s latest quarterly report. There is no indication that this might not be the case. The only big obstacle to the company’s takeover is the Delta variant of the spread of Covid in America. Although this concern is too recent to have likely interfered with McDonald’s 2T report.

Does Facebook have enough room to grow after a positive earnings report?


Now, looking at the evolution of Facebook’s stock price over the same calendar period as McDonald’s, it paints a slightly different picture. The past week was favorable for FB, with price jumping 4% on the last day, closing the stock at US $ 374.88. Investors seem to believe that this latest jump was a bit too ambitious and has since fallen to US $ 367.80. Although it is safely above the 23.6% Fib level.

At the close of Wednesday’s session, Facebook is expected to report revenue of US $ 27.9 billion. Keep in mind that Facebook’s peers have all beaten their profit forecasts this week and last year, and the market wouldn’t be surprised if it were to follow suit. However, the positive news may not translate into a rise in the share price. It is a misfortune that befell Apple on Tuesday after its results returned extremely positive. In after-hours trading, APPL was trading down 2.1%. Perhaps FB’s slight retracement on Tuesday will mean there is room for growth if Facebook massively beats its estimate.

Will Shopify stick to the brand’s revenue estimates and crash?


Shopify had a more dramatic retracement this week before the release of its earnings report. Fall from US $ 1,640 to US $ 1,553, or about 5.3%.

The stock price has encountered resistance around US $ 1,540 to US $ 1,555 on several occasions over the past month and a half. The stock price is, of course, currently just below the upper end of this range.

Shopify has a habit of drastically exceeding its estimated quarterly revenue. In its last four quarterly reports, SHOP has exceeded its estimated turnover by 39% on average.

SHOP is expected to beat estimates again in the second quarter, as several of the Company’s cash-generating payment functions begin to gain prominence on the Company’s balance sheet.