Google parent company Alphabet (GOOG, GOOGL) shattered expectations on Tuesday with Q3 results that showed the biggest quarterly revenue gain in 14 years. The figure rose more than 40% Y/Y (or 39% in constant currency) to over $65B amid stronger-than-expected advertising revenues. The search giant appears to be cashing in on a rebound in search traffic, especially with keywords related to travel and retail trends that are picking up globally.
Bigger picture: It's looking to reverse the story of the past couple of days in social Big Tech, where Alphabet, Facebook (FB) and Snap (SNAP) all slid in the wake of latter's quarterly results. Some even referred to the phenomenon as "ad-mageddon," which reflected a painful hit to ad revenues from Apple's (AAPL) update to iOS privacy policies (requiring a double opt-in for ad tracking). However, Google appears to have survived the change unscathed, given its own storage houses full of personal data.
Meanwhile, Microsoft's (MSFT) shift toward more cloud-based software and services continued to pay off for the software giant and led it to report strong quarterly numbers. The company's Azure cloud division grew by 36%, with FQ1 sales coming in at $20.7B. At Google, cloud computing missed elevated consensus estimates, but at $5B, it still notched Y/Y growth of 45%. Premarket: MSFT +2.6%; GOOG -0.1%; GOOGL -0.3%.
Analyst commentary: "I don't know how much better it can get from Microsoft," noted Brent Thill, an analyst with Jefferies. "To grow at that rate, at their size, is insane. I have no other way to put it... Both of these stocks [Microsoft and Google] have just been massive outperformers." (62 comments)
Robinhood tanks
Shares of the stock-trading app tumbled over 10% AH to $35 on Tuesday as the company (which went public in July) reported Q3 revenues of $365M (+35.2% Y/Y), missing expectations by over $70M. Things didn't look better with monthly active users, which fell to 18.9M, down from 21.3M in Q2 (but up 76% Y/Y). Options transaction-based revenue came in at $164M vs. $165M in Q2, while equities transaction-based revenue of $50M fell from $52M.
CEO Vlad Tenev: "This quarter was about developing more products and services for our customers, including crypto wallets. More than 1M people have joined our crypto wallets waitlist to date. With 24/7 live phone support, we believe that Robinhood (HOOD) is becoming the most trusted and intuitive platform for retail and crypto investors. And looking ahead, we're committed to delivering tax-advantaged retirement accounts to help everyone invest for the long term."
Investors specifically zoomed in on crypto trading revenues, which tumbled 78% to $51M from the second quarter. Remember, Dogecoin (DOGE-USD) had been responsible for 61% of all crypto-transaction revenue at Robinhood in Q2. The trends lead to considerably fewer new funded accounts, a slight decline in Net Cumulative Funded Accounts, and lower revenue in Q3 compared with the prior quarter.
Outlook: Robinhood expects that many of the factors that affected its Q3 results, "such as seasonal headwinds and lower retail trading activity" may persist into Q4. On a conference call, the brokerage also conveyed more of a linear outlook due to the difficulty in maintaining the record-setting volumes seen during events like the GameStop (GME) craze. "Historically our growth has come in waves - the surges have come during periods of increased volatility or market events," added CFO Jason Warnick. "Going forward, we expect to continue to see the ebb and flow of our growth with market conditions, as well as product launches." (4 comments)
Shots for kids
A key advisory committee of the FDA has voted to recommend authorization of the Pfizer-BioNTech (PFE, BNTX) COVID vaccine for children between the ages of 5 and 11 years old. The vote was nearly unanimous, with 17 members backing it and one abstention. Nearly 28M kids in the age group would be eligible for the shot, which would be distributed in smaller dosages and with smaller needles to make it easier to administer.
The debate: A lot of the advisors were asking if the authorization should be narrowed to kids that are more "at risk" or have pre-existing conditions. There was also discussion over the chances of myocarditis, a rare heart-related side effect that can cause inflammation (and has predominately been seen among young men after a second dose of an mRNA vaccine).
Children ages 5 to 11 account for about 9% of all reported COVID cases in the U.S., with the number of new cases remaining at high levels. More than 1.1M child cases have been added over the past six weeks, according to the American Academy of Pediatrics. Some parent and advocacy groups still argue that vaccinations for children are unnecessary, as studies show they are less likely to experience symptoms from the disease or suffer serious illness.
Next steps: Be on the lookout for a formal authorization from the FDA this week, while the CDC vaccine advisory group is expected to make its own recommendation on Nov. 2. If it issues an endorsement and CDC Director Dr. Rochelle Walensky signs off, shots for young kids could begin immediately. (11 comments)
Guaranteed basic income
Following in the footsteps of Los Angeles, the Chicago City Council is set to consider today the "largest basic income program in the history of the United States." The $31.5M one-year pilot program will give 5,000 low-income households $500 per month and would be funded through federal money Chicago received from the Biden administration's American Rescue Plan. While the program is supported by most of the city's 50 aldermen, it has received pushback from the 20-member Black Caucus, which has urged Mayor Lori Lightfoot to redirect the cash to violence prevention programs.
How will it work? The 5,000 recipients will be chosen randomly and must be adults who make less than $35,000 a year. The city also plans to track the recipients' expenditures during the first six months and then provide more targeted assistance, such as help with paying utility bills or for food. According to Chicago Alderman Gilbert Villegas, the costs of supporting the program "is well worth the investment," when weighed against daily costs of poverty in Chicago, such as incarceration and gun violence.
Basic income programs have been implemented across the U.S. for decades, like the Eastern Band of Cherokee Indians Casino Dividend in 1997, the Alaska Permanent Fund in 1982 and some even include the "negative income tax" experiments conducted in the 1970s. However, it really only entered the national conversation in 2019, when Stockton, Calif., started providing $500 monthly stipends to 125 of its residents. According to the preliminary findings, the payments resulted in more full-time employment and improved mental and emotional well-being, while 40 other cities have since considered or started similar efforts.
Back to Chicago: The guaranteed basic income program is different than universal basic income, as it directs payments toward a defined group of people - with the goal often being to close wealth gaps. UBI on the other hand (an idea popularized by Andrew Yang during the 2020 presidential campaign) promises money to every recipient regardless of income or circumstance. Critics worry that these programs can discourage people from finding jobs or could drain the workforce - especially given recent supply chain problems - but proponents say they are an ideal way to invest in communities and lift people out of poverty. (10 comments)
Today's Markets
In Asia, Japan flat. Hong Kong -1.6%. China -1%. India -0.3%. In Europe, at midday, London -0.2%. Paris -0.2%. Frankfurt -0.3%. Futures at 6:20, Dow flat. S&P -0.1%. Nasdaq -0.2%. Crude -1.2% at $83.64. Gold -0.3% at $1788. Bitcoin -6.3% at $58860. Ten-year Treasury Yield -2 bps to 1.6%
Today's Economic Calendar
7:00 MBA Mortgage Applications 8:30 Durable Goods 8:30 International Trade in Goods (Advance) 8:30 Retail Inventories (Advance) 8:30 Wholesale Inventories (Advance) 10:00 State Street Investor Confidence Index 10:30 EIA Petroleum Inventories 11:00 Survey of Business Uncertainty 11:30 Results of $28B, 2-Year FRN Auction 1:00 PM Results of $61B, 5-Year Note Auction
Companies reporting earnings today »
What else is happening...
Taiwan Semi (NYSE:TSM) founder calls U.S. chip buildout plans unrealistic.
DraftKings (NASDAQ:DKNG) drops $22B pursuit of Ladbrokes owner Entain.
Rolling in cash... Visa (NYSE:V) hikes quarterly dividend by 17% to $0.375.
GE (NYSE:GE) industrial FCF tops estimates; renewables breakeven date delayed.
CDC extends COVID-19 cruise ship restrictions until January.
UPS (NYSE:UPS) surges on Q3 earnings beats; raises full-year guidance.
Twitter (NYSE:TWTR) call: Modest Apple iOS impact, Olympics a big hit.
Year-end? AMD (NASDAQ:AMD) sees good progress on Xilinx (NASDAQ:XLNX) deal.
Supplier pain... Raytheon (RTN) stops Boeing (NYSE:BA) 787 Dreamliner shipments.
Lockheed Martin (NYSE:LMT) posts massive revenue miss, bearish guidance.
