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Romain Fournier

Chief Editor
Having worked in the British, French and Swiss financial press, Romain is able to report on local and international issues, as comfortable in French as in the language of Shakespeare, Romain Fournier leads the editorial team at Marketscreener. Fine connoisseur of the English-speaking markets, Romain delivers an editorial every day on US and UK markets.

Snap earnings fuel worries over ad spending decline

07/22/2022 | 08:51am EDT
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Disappointing results from Snap shook markets, with Wall Street indexes struggling for direction this morning. Investors worry that this could be a sign that ad spending may be slowing in the current economic climate.

The group's net losses expanded to $422 million in the second quarter, from $152 million last year. In a letter to shareholders, management said that the platform policy changes implemented by Apple last year “have upended more than a decade of advertising industry standards” and macroeconomic challenges “disrupted many of the industry segments that have been most critical to the growing demand for our advertising solutions,” adding that it seeing "increasing competition for advertising dollars that are now growing more slowly."

Today, all eyes will be on the earnings reports from Twitter, Verizon and American Express, as investors look for clues on how well corporate America is coping with high inflation and the strong greenback.

The much-awaited Fed monetary policy meeting on July 27 is fast approaching, and U.S. investors are adopting a cautious stance in anticipation. According to Refinitiv Lipper data, equity funds recorded their biggest weekly outflow in five weeks in the week to July 20. They recorded $8.45 billion worth of net selling.

The Fed is widely expected to hike rates by 75 basis points in a bid to curb inflation, which accelerated in June year-on-year.

Investors didn't react much to the European Central Bank decision yesterday to hike the three key interest rates by 50bp, instead of the standard 0.25%. The ECB wanted to show its determination to tame inflation and show that it is in control.

Bond yields of the most fragile states, such as Greece and Italy, soared yesterday to 3.53% and 3.52% respectively, widening the gap with the German Bund, which instead settled at 1.21%. This looks like a first test for the ECB, which does not yet intend to rescue Italy.

Meanwhile, yesterday's announcement that Russian gas is flowing again through the Nord Stream pipeline to Germany brought some optimism on markets.

July manufacturing and services PMIs from the world's major economies will be unveiled throughout the day, indicators that are expected to be in line with the June reading. They survey the purchasing managers of a panel of companies, so they are good indicators of the mood in the private sector.

 

Economic highlights of the day:

July's leading PMI indices will be published throughout the day. Click here to see all the macroeconomic agenda.

The dollar is up 0.2% to EUR 0.9813. Gold is up to USD 1727. Oil is slightly down with North Sea Brent at USD 102.97 per barrel and US WTI light crude at USD 95.21. The yield on 10-year US debt drops to 2.89% over 10 years. Bitcoin is trading at USD 23500.

 

On markets:

* Snap, which has seen ad demand plagued by record inflation and growing competition from apps like TikTok, reported disappointing quarterly results Thursday and refrained from giving guidance. The social network fell by about 28% in pre-market trading. In its wake, competitors Meta, Twitter and Pinterest lost between 2.5% and 6.3% in pre-market trading. 

* Semiconductor makers Micron Technology and Western Digital lost 4.9% and 6.8% respectively in pre-market trading after rival Seagate, reported down 12%, announced it would cut production as customers limit spending due to macroeconomic uncertainties and component shortages. In addition, Morgan Stanley downgraded its recommendation on Micron to "underweight" from "in-line weight".

* Verizon Communications on Friday lowered its adjusted annual profit forecast after it reported fewer monthly-paying subscribers in the second quarter than expected. It was losing 3.9 percent in pre-market trading.

* Schlumberger reported better-than-expected second-quarter results Friday and raised its annual revenue forecast, buoyed by demand.

* American Express gained 5% after it reported quarterly results and raised its annual growth forecast.

* Mattel reported better-than-expected quarterly results on Thursday as price increases did not dampen demand for its toys.

* Fedex announced Thursday it will suspend Sunday delivery operations in some low-density U.S. rural markets starting Aug. 15.

* Warner Bros Discovery - The U.K. competition authority on Friday approved the merger of Warner and BT's sports broadcasting businesses.

* Nextera Energy said Friday it increased its profit fivefold, buoyed by growing demand for alternative energy.

* Gamestop gained 1.4% in premarket trading after announcing a four-for-one stock split on Friday.

* HCA Healthcare reported a 20% drop in quarterly profit on Friday, hurt by rising labor costs.

 

Analyst recommendations:

  • Apple: UBS considers the stock attractive and recommends it with a buy rating. PT set at USD 185.
  • AT&T: Barclays decreased to equal-weight from overweight. PT up 5.7% to $20.
  • Celsius Holdings: Stifel keeps buy rating. PT up to $93 from $77.
  • Discover Financial Services: Citi downgrades to neutral from buy. PT up 15% to $115.
  • Fevertree Drinks: Goodboy cut the recommendation to sell from hold. PT down 13% to 900 pence.
  • Lithia Motors: Goldman Sachs raises price target to $300 from $284. Maintains neutral rating.
  • LondonMetric Property: Liberum downgrades to hold from buy. PT up 21% to 295 pence.
  • MercadoLibre: Jefferies & Co maintains hold rating and adjust price target to $800 from $850.
  • M&T Bank: Citigroup raises price target to $200 from $185. Keeps buy rating.
  • Northern Trust: Morgan Stanley increases price target to $115 from $110. Keeps equalweight rating.
  • PacWest Bancorp: Keefe, Bruyette & Woods downgrades to market perform from outperform. PT set at $35.
  • Reckitt: Bernstein reiterates its sell rating. PT remains unchanged at GBX 5300.
  • Rockwell Automation: Oppenheimer maintains outperform rating. PT down to $242 from $290.
  • Snap: Goldman Sachs downgrades to neutral from buy. PT down 27% to $12.
  • Southern company: Guggenheim adjusts price target to $80 from $76. Maintains buy rating.
  • The Boston Beer Company: Jefferies & Co maintains hold rating and set price target at $384.
  • Tractor Supply: Wells Fargo Securities cut the target to $250 from $265. Maintains overweight rating.
  • UDR: Jefferies raised the recommendation to buy from hold. PT up 14% to $52.
  • Verizon Communication: Scotiabank maintains sector outperform rating. PT down to $57.50 from $59.

© MarketScreener.com 2022
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Stocks mentioned in the article
ChangeLast1st jan.
AMERICAN EXPRESS COMPANY 3.79% 140.02 Delayed Quote.-17.54%
APPLE INC. 3.08% 142.45 Delayed Quote.-22.17%
AT&T INC. 3.65% 15.9 Delayed Quote.-14.41%
CELSIUS HOLDINGS, INC. 0.60% 91.22 Delayed Quote.22.33%
DISCOVER FINANCIAL SERVICES 3.27% 93.89 Delayed Quote.-18.75%
DISCOVERY LIMITED -0.90% 103.99 End-of-day quote.-27.57%
FEDEX CORPORATION 2.01% 151.46 Delayed Quote.-41.44%
FEVERTREE DRINKS PLC 5.65% 892.23 Delayed Quote.-68.78%
GAMESTOP CORP. 0.99% 25.38 Delayed Quote.-32.26%
HCA HEALTHCARE, INC. 5.15% 193.26 Delayed Quote.-24.78%
LITHIA MOTORS, INC. 2.55% 220.03 Delayed Quote.-25.90%
LONDONMETRIC PROPERTY PLC 1.22% 181.8 Delayed Quote.-36.63%
M&T BANK CORPORATION 2.67% 181.02 Delayed Quote.14.81%
MATTEL, INC. 0.74% 19.08 Delayed Quote.-11.50%
MERCADOLIBRE, INC. 6.59% 882.3 Delayed Quote.-34.57%
META PLATFORMS, INC. 2.16% 138.61 Delayed Quote.-58.79%
MICRON TECHNOLOGY, INC. 3.23% 51.72 Delayed Quote.-44.48%
NEXTERA ENERGY 3.55% 81.19 Delayed Quote.-13.04%
NORTHERN TRUST CORPORATION 3.11% 88.22 Delayed Quote.-26.24%
PACWEST BANCORP 2.35% 23.13 Delayed Quote.-49.97%
PINTEREST, INC. 1.72% 23.7 Delayed Quote.-34.80%
RECKITT BENCKISER GROUP PLC 1.50% 6014 Delayed Quote.-6.56%
ROCKWELL AUTOMATION, INC. 4.90% 225.64 Delayed Quote.-35.32%
SCHLUMBERGER LIMITED 6.69% 38.3 Delayed Quote.27.88%
SNAP INC. 1.63% 9.98 Delayed Quote.-78.78%
SOUTHERN COMPANY 2.54% 69.73 Delayed Quote.1.68%
THE BOSTON BEER COMPANY, INC. 1.63% 328.94 Delayed Quote.-34.88%
TRACTOR SUPPLY COMPANY 4.43% 194.12 Delayed Quote.-18.64%
TWITTER, INC. -2.97% 42.54 Delayed Quote.-1.57%
UDR INC. 1.08% 42.16 Delayed Quote.-29.72%
VERIZON COMMUNICATIONS 3.13% 39.16 Delayed Quote.-24.63%
WARNER BROS. DISCOVERY, INC. 3.91% 11.95 End-of-day quote.-49.24%
WESTERN DIGITAL 4.61% 34.05 Delayed Quote.-47.78%
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