Earnings Season Wrap up Thru Feb 4, 2022
February 4, 2022
Early earnings results are encouraging but it is still early!
Coming in to 2022, many pundits have expressed their belief that this year will be a year for stock picking. I think we hear that refrain every year - mostly from active stock managers that are hoping to 'speak it in to truth'. Whether you want it to be true or not, we do know that we enter 2022 with a unique combination of challenges that almost every company is dealing with worldwide: supply chain issues, inflation, staffing shortages, and Covid-19. There is no doubt that these four issues will be mentioned on many earnings calls over the next several weeks. Some companies will navigate these challenges successfully and some will not. And the market will likely reward or punish these companies accordingly.
To that end, we all saw Facebook suffer its worst one day move down ever yesterday (Thursday, February 3rd). In announcing earnings on Feb 2nd after market close, it failed to continue its impressive growth and warned that its forward growth would be lower in upcoming quarters as it navigates many issues like re-opening, competition, and changes to Apple's mobile tracking policies. The Nasdaq and broader markets sold off across the board on this result in one of those 'baby with the bath water' kind of days. (Side note: our portfolios exited Facebook in October as we began to see degradation in its digital footprint that belied the Wall Street analyst expectations)
After markets sold off yesterday, Amazon announced its earnings and the markets cheered its results - loudly. Amazon stock is up double digits in the pre-market which is over $100 billion in market cap appreciation. In addition, Snap Inc (parent company to SnapChat - ticker SNAP) announced strong earnings after hours last night and showed it is navigating the same challenges as Facebook but with materially better results. SNAP is up over +40% in pre-market trading this morning on these results. Yet, SNAP sold off nearly -25% yesterday in sympathy with Facebook yesterday (remember - baby and bath water). Investors in SNAP that sold yesterday are regretting it today. (Disclosure: we do not own AMZN or SNAP)
It will be important through this earnings seasons to remember that for every Facebook, Netflix, and PayPal that gets sold off worse than -25% for missing on earnings, there will be a Snap, a Microsoft, or a Google that delivers solid earnings results and justifies investor commitment to its stock. And it is our job at Alpha DNA to find these companies that can post strong earnings results in excess of Wall Street analyst expectations. So let's see how we have done so far ...
We have had 19 companies report in our portfolios:
- 95% of our portfolio companies have exceeded or met expectations for Revenue
- 85% of our portfolio companies have exceeded or met expectations for EPS
- We have had 8 companies provide upward forward guidance and only 3 companies provide downward forward guidance
It is a small sample size but we are happy with the results so far. They are in line with our recent quarterly success rates. We like to see a forward guidance ratio that is positive to negative in excess of 2:1 and we are nearly 3:1. The magnitude of the EPS beats is in line with our recent quarters and the magnitude of the Revenue beats is a little lower than recent quarters but with only 19 companies reporting, it is not an out-of-the-ordinary outcome.
It is a small sample size as earnings season is just under way. Remember that companies are reporting fiscal year end results in many cases which can tend to delay earnings an extra week as they prepare their annual filings with their quarterly filings.
Download the Report here!
As usual, you want to see a lot of green on this report and so check it out for yourself!
Remember that if you have any questions about any specific stocks, reach out to us and we are glad to discuss them with you. We can even discuss stocks you hold in other portfolios that have earnings coming in the next few weeks.
Learn more about our investment process at our website: www.alphadnaim.com or call me at 443-288-6444 or email me at firstname.lastname@example.org