JPM Warns Amazon And Google’s Blockbuster Results May Have Marked The Top
Earlier today we reported that traders were “on edge” ahead of today’s earnings reports by giga-cap tech giants Google and Amazon, because in a “perverse” market such as this one, where even solid beats are punished, a disappointment by either of the two companies could have led to a broader market selloff. We now know, of course, that both companies reported blowout results and the real highlights wasn’t the two FAAMG giants’ Q4 earnings but rather the departure of the world’s 2nd richest man, Jeff Bezos, from the helm of his company.
For those who missed it, here is a breakdown of the results (via JPM):
AMZN – Blow out numbers for Q4 and Q1 guide looks more than enough. More focus likely to be on Bezos’ transitioning to an Exec Chair role by Q3.
Q4 net sales +42% FXN (whisper high-30s %) to $125.6b vs St $119.7b, guide$112-121b. AWS +% vs whisper 28-29%. Op Income $6.9b vs whisper $5b+, guide $1.0-4.5b. For Q1, co guiding to net sales $100-106b (+30-37% cc y/y) and opincome $3.0-6.5b vs expectations $99-100b and ~$6b. Co announce that Bezos will transition to an Exec Chair role over in Q3 with Andy Jassy (CEO AWS) hisreplacement.oStock trading +28bps post-market
GOOGL – Q4 Properties growth hits +23% (whisper 17-18%) and Margins well ahead.
Q4 revenue +23% FXHN (whisper ~20%) to $56.9b vs St $52.8b. Within that,Properties +22% (exp +17%) to $38.8b vs St $35.7b (Search +17%, YouTube+46%). Cloud +47% vs exp ~50%. Google Op Income $15.6b vs St $11.8b, OtherBets -$1.14b vs St -$1.25b. Cloud Op Income margin for 2020 was -13.6% (JPMe +2.0%). Co bought back $7.9b in the Q (expectation ~$8b).oStock trading +5.5% post-marke
And yet even though both AMZN and GOOGL stocks jumped after hours, one bank warned that despite the favorable response by the market, this could be as good as it gets.
As JPMorgan’s Andrew Tyler wrote in his daily market intel piece, “with Amazon and Alphabet/Google today, each of the FAAMNG names have now beaten revenue and earnings expectations.”
The question, however, is now that all the upside catalysts are out of the picture, “what’s next for the group” asks JPM and cautions that “it is possible that you see the group used as a source of funds with no major catalysts on the horizon and lowered risk of a Reddit-inspired move.”
Which brings up a follow on question: “If FANG+ fail to rally from here, can the broader tape move higher? There has been increasing chatter across the Street that the combination of positioning and valuation may trigger a pullback.”
On its own, the answer to the latter question would be yes. However, in a world where hedge funds now scramble to delever at the faintest whisper of a short squeeze emerging from the r/wallstreetbets subreddit, could we be on the verge of a perfect storm for stocks, where all the good news are more than priced in, and the smallest turbulence sparks a liquidation cascade?
Tue, 02/02/2021 – 21:20