Gold prices on the move, Tesla set to report earnings after the bell

Key Concepts

• Earnings Season: The period when publicly traded companies release their financial results.
• Cloud Deal: An agreement for cloud computing services, often involving significant financial investment.
• AI (Artificial Intelligence): Technology that enables machines to perform tasks typically requiring human intelligence.
• Market Cap (Market Capitalization): The total value of a company's outstanding shares of stock.
• Meme Stock: A stock that gains popularity through social media, often detached from its fundamental value.
• Share Repurchase Authorization: A company's plan to buy back its own shares from the open market.
• Dividend: A distribution of a portion of a company's earnings to its shareholders.
• EV (Electric Vehicle): A vehicle powered by electricity.
• Web Browser: Software used to access the World Wide Web.
• Generative AI: AI that can create new content, such as text, images, or code.
• IP (Intellectual Property): Creations of the mind, such as inventions, literary and artistic works, and designs.
• M&A (Mergers and Acquisitions): The consolidation of companies or assets through various types of financial transactions.
• Revenue per Available Room (RevPAR): A key metric in the hotel industry measuring revenue generation.
• Adjusted Earnings Per Share (EPS): A company's profit divided by the number of outstanding shares, excluding certain one-time items.
• Tariffs: Taxes imposed on imported goods.
• Geopolitical Tensions: Strains in relations between countries.
• Inflation: A general increase in prices and fall in the purchasing value of money.

Market Sunrise: October 22nd

This broadcast of Morning Brief Market Sunrise, hosted by Raman Karamali from Yahoo Finance Studios in London on Wednesday, October 22nd, covered several key market developments. The show highlighted potential multi-billion dollar cloud deals, ongoing earnings reports, and global trade dynamics.

Earnings Parade and Key Company Updates

The earnings season continued to be a major focus, with several significant companies reporting.

• Netflix: The streaming giant experienced a dramatic pre-market drop of around 7% following a disappointing earnings report.

  • Key Points: Netflix missed analyst expectations for both revenue and profit. Earnings per share (EPS) were reported at $5.87, falling short of the company's own forecast of $6.87.
  • Analysis: Gita Ranganathan from Bloomberg Intelligence noted that investors were expecting an increase in the full-year 2025 operating margin guidance from 30% to 31-32%, but this was instead lowered. The Q3 operating margin miss was a significant factor.
  • Engagement Metrics: Despite the financial miss, Netflix reported record subscriber engagement, with a 20-22% surge in the third quarter driven by major content releases like "K-pop Demon Hunters," "Squid Game season 3," and "Wednesday season 2." Engagement is seen as a key driver for monetization and pricing power.
  • M&A Speculation: There was discussion about Netflix potentially being interested in acquiring Warner Brothers Discovery or parts of it, which would be a strategic move to acquire compelling IP and reduce churn, though historically Netflix has been shy of large M&A.

• Tesla: The electric vehicle (EV) manufacturer was scheduled to report after the market close.

  • Key Points: While Q3 sales were boosted by the end of a tax credit, the company faces scrutiny regarding its revenue forecast and the performance of its Robo Taxis, Optimus, and AI businesses.
  • Analyst Perspective (Steven Gengaro, Stifle NextG):
    • Q3 benefited from a pull-forward of demand due to the EV tax credit expiring on September 30th.
    • A near-term downtick in US EV sales is anticipated over the next couple of quarters due to the absence of tax credits and potentially higher vehicle prices.
    • New lower-priced Model 3 and Y models are expected to create a near-term margin headwind due to the lack of credits and Tesla's strategy to push lower-priced vehicles for volume.
    • However, the long-term strategy aims to maximize Tesla vehicles in the market to underpin growth in full self-driving and robo taxi businesses.

• Other Notable Earnings:

  • IBM, SAP, and Alcoa: Also scheduled to report after the closing bell.
  • Hilton: Lowered its full-year outlook due to a decline in demand for US rooms, despite revenue per available room (RevPAR) falling 1.1% in Q3. Shares were higher pre-market as revenue beat expectations.
  • Boston Scientific: Boosted its full-year adjusted EPS guidance, exceeding analyst estimates. The company is also acquiring Nalu Medical for approximately $533 million.
  • AT&T: Reported strong Q3 results, demonstrating continued demand for wireless and fiber services, and is on track to meet its full-year financial outlook. Adjusted EPS of 54 cents matched analyst estimates.
  • Eni (Energy arm of GG Venova): Reported mixed Q3 results. Revenue of $9.97 billion beat expectations, but EPS missed by over 20 cents.
  • Tech Resources: The Canadian miner reported a 19% jump in Q3 earnings, with rising metal prices offsetting disruptions at its Chilean copper mine. Net profit was just over $200 million, a significant improvement from a nearly $500 million loss last year.

Global Trade and Geopolitics

Global trade dynamics and geopolitical tensions were also under the spotlight.

• China-US Trade: Despite tariffs and ongoing negotiations, China's exports to the US increased in September, reaching approximately $1 billion per day. This highlights Beijing's bargaining power. The potential cancellation of a meeting with Xi Jinping added a "chill" to Asian markets.
• US-India Oil Deal: Reports suggested the US was close to a deal with India where Delhi would reduce its imports of Russian oil. In return, Washington could lower tariffs on Indian exports from 50% to around 15%.
• French Luxury Stocks:
  • Hermes and L'Oreal: Experienced sharp declines following their earnings reports.
  • L'Oreal: While reporting positive sales in China, the CEO's cautious statement ("One quarter doesn't make a trend") led to investor sell-offs. Deutsche Bank reiterated a "sell" rating with a €340 price target, and RBC analysts found the magnitude of improvement "underwhelming."
  • Hermes: Showed revenue growth of 9.6% year-on-year, weathering geopolitical tensions well. However, some analysts suggested investor expectations might have been too high. Despite this, Deutsche Bank and City rated Hermes a "buy," seeing the results as a potential turning point for the luxury sector.
  • LVMH: Was little changed, with rumors of a potential sale of Fenty Beauty.

Technology and AI Developments

The tech sector, particularly AI, was a significant theme.

• Anthropic and Google Cloud Deal: AI giant Anthropic was in talks with Google for a multi-billion dollar cloud deal, potentially valued in the high tens of billions of dollars. This would provide Anthropic with additional computing power. Alphabet (Google's parent company) shares were higher in pre-market trading.

• OpenAI's Atlas Browser: OpenAI announced its new web browser, "Atlas," a direct competitor to Google Chrome.

  • Key Features: Atlas integrates ChatGPT directly, allowing for natural voice search for closed tabs or Google Docs, and standard URL input. It also features an "agent" capability for tasks like grocery shopping or booking restaurant reservations.
  • Competitive Landscape: This move intensifies the competition in the browser space, where Chrome holds around 72% of global market share. Other players like Google (with Gemini in Chrome), Perplexity, and Microsoft Edge (with Copilot) are also integrating AI.
  • Threat to Google: While not an immediate threat, OpenAI's move is seen as a potential "existential threat" to Google's dominance in search and browsing. Google was initially caught off guard by ChatGPT but has since developed Gemini. However, the "mind share" associated with AI is currently leaning towards ChatGPT and Nvidia, while Google is primarily associated with search.

• Apple's Market Cap: There was anticipation about Apple potentially hitting a $4 trillion market cap.

  • Analyst Perspective (Tom SA, Seven Reports): Bullish on Apple, preferring it over Nvidia due to expectations being "baked in" around Nvidia's AI super cycle. Apple was seen as a "lagard" that was discounted but has a strong core business.
  • Yahoo Finance Analyst Agreement: Agreed that Apple's core business is strong, with high demand for the iPhone upgrade cycle extending to 2027. Connected home devices manufactured in Vietnam are also seen as contributing to Apple's ecosystem.

• Samsung Galaxy XR Headset: Samsung released its new extended reality headset, aiming to leverage Google's AI features to compete in the "computing on your face" market dominated by Meta and Apple.

Market Movers and Other Updates

• Oil Prices: Rose over 1.5%, with Brent above $62 and crude above $58, influenced by the potential US-India oil deal.
• Gold and Silver: Were in focus after suffering their steepest sell-offs in years. Gold fell 6.3% yesterday, its biggest intraday decline in over 12 years, and silver dipped over 2%. Gold was trading lower again today, heading towards the $4,000 mark.
• Beyond Meat: The stock experienced a "meme stock moment," closing 600% higher over three trading sessions, despite weak fundamentals. This surge was partly attributed to its six-pack Beyond Burger being available in 2,000 Walmart stores and its inclusion in the Roundhill Meme ETF.
• Capital One: Reported impressive results with a 23% revenue increase. The company announced a new $16 billion share repurchase authorization and plans to increase its quarterly common stock dividend from 60 cents to 80 cents per share.
• General Motors (GM): Shares were rising on strong results. The CFO discussed a strategy shift to fill undercapacity in the US by shifting production globally, including repurposing an EV plant for internal combustion engine production to meet demand for full-size SUVs and trucks. This strategy is seen as helping to ease tariff burdens and aiming for 8-10% margins.

Market Check

• US Stock Futures: Looked to open "pretty flat."
• Asian Markets: A mixed bag. The Nikkei's record run ended, with a slight decline after export data missed expectations. South Korea's Kospi set a new closing record, marking its sixth straight winning session.
• European Stocks: Mostly down, except for the FTSE 100. Consumer products and services led declines, while energy stocks rose with oil prices. The UK's outperformance was attributed to better-than-expected inflation data, potentially boosting sentiment for rate cuts.

Conclusion

The broadcast provided a detailed snapshot of a dynamic market day, with earnings reports from major tech and industrial companies driving significant stock movements. The growing influence of AI was evident in the competition between tech giants and the emergence of new AI-powered tools. Global trade tensions and commodity prices also played a crucial role in shaping market sentiment. Investors were closely watching for signs of economic resilience and strategic shifts within key industries.