Apple, Microsoft & Alphabet Earnings Update ($AAPL $MSFT $GOOGL)

All right, very good morning to you. Hope you're doing well. It's Wednesday, 28th of July, and in this briefing I'm going to talk predominantly about the 3 big mega-cap tech names to get really earning season fully underway. And these 3 companies actually constitute around 37% of the entire NASDAQ 100 index from a market capitalization point of view. So really wanted to run through these, but before I do that, just a very quick overview of market sentiment and look at a couple of charts from a broader cross-asset class perspective before we get stuck into some of those line-by-line details on those earnings. And as far as the actual NASDAQ reaction was concerned, we'll talk about the single stock fluctuation that was seen individually in aftermarket trade. But you can see here some extensions on these wicks, but really not too much of a reaction in the Nasdaq future, partly because Apple was lower about 2% in aftermarket trade, Alphabet was up about 3%, and Microsoft was actually pretty unchanged. So all in all, kind of netting each other off to some respect. So there's that future, um, has partially recovered that sell-off that we saw commenced through the open of Wall Street yesterday after we saw a rejection, uh, pretty much that triple double top from the all-time highs going into the open— pre the US Open yesterday, I should say. And so on the upside now, any further retracement of that, I'd be keeping an eye really around 14965. You can see here was that previous area of support to price going through the back end of last week, and also was an area of resistance on the recovery that we saw going into the final half an hour of trade on Wall Street and with the post-market futures fluctuation with Asia-Pac top following some of those mega-cap earnings. So NASDAQ off its highs but still right up there on a higher time frame perspective. Elsewhere, the FX markets are pretty quiet overall. The dollar index, not too much change, and that's really reflected in both the major pairs. Just looking at a 60-minute chart here at the euro, uh, from a technical perspective, that trend line has been holding up very nicely. This is the same one we've been looking at throughout the course of the last fortnight or so, uh, being respected now on the fourth occasion during the late session yesterday, uh, pretty much to the tick actually, and just backing off from that initial run-up that we saw during, uh, the bulk of yesterday's session with some of the ensuing dollar weakness that we were observing at the time. So, um, point of opportunity to just book some profits on that brief run-up that we had in euro. And then for sterling, you know, despite a lot of the negatives that might be occurring, uh, there is a slight update on the COVID side that we'll look at in a moment, but still remaining fairly elevated. Trendline breaks and pushes seem to be a pretty recurring theme at the moment. You can see that here And this is going back through a week-long trend line, and then the breakout that we saw, and this is going back to Monday session, and then again short-term breakout, multiple tests, and then we saw a bit of a lift through 3 o'clock yesterday, and then we've just kind of moved right up toward the highs that we were seeing going back to the 14th, 15th of the month. Um, in terms of that technical level Um, that was being respected late yesterday, uh, and will be something we'll be keeping an eye on today with the psychological 139 handle also positioned at around the same kind of area as well. Otherwise, final charts really to look at— T-notes pretty quiet, nothing really to mention there. Gold, top right, just ranging— top end of that range, I should say— up about $6 this morning. And as far as WTI crude is concerned, again respecting and this kind of consolidation period that we've been in since the end of last week. So upside level to keep an eye on still, 72.33. And that does come with the API oil inventories. They were seen last night. We had a crude drawdown of 4.728 million, so slightly deeper than was expected. Gasoline particularly bullish. There was a heavy drawdown of 6.226 million, pushing a draw as well of 126,000 $72,000. So, um, oil just remaining fairly buoyant above $72 for the time being, going through the European Open this morning. So let's get straight into it and talk about some of these earnings then, starting off with Apple. Um, it's interesting because I was listening to some of the media this morning and they were talking about the kind of profit levels and revenue levels and how astronomically high they are, and technology firms have been performing continuously so well. The point being here is that, you know, that's great. Apple's making a whole bucket of money. Fantastic. But the shares fell 2%. So context is important. And I think, you know, with someone like Apple, I was reading a couple of market commentators last night when this was all coming out and they were kind of saying, you know, it's great, Apple, they're really kind of smashing it on the numbers. But it's this kind of outlook really of the longer-term pattern that we've been seeing of Um, where do they go next with their product line, with their innovations, as they kind of squeeze the products that they have? Slightly more longer-term perspective because there are perhaps some more rationale here as to why they did dip. So just going through the numbers firstly, their EPS $1.30, beat expectations. Revenue smashed it at $81.4 billion against $73.3 billion expected. In terms of the iPhone revenues, obviously a key metric, and again smashed it, $39.57 billion against $34 billion expected. Quite a few people were keeping an eye on the iPad and the Mac in particular, given the increase that we'd seen and whether or not they could sustain momentum given the lift that those particular— the latter product was seeing through the onset of the pandemic and the work-from-home kind of environment. And the Mac revenues were $8.24 billion above the expected $8.07 billion. So all sounds pretty good overall. Their services, which is the other kind of monster area now of the firm, had a $17.49 billion print on revenues above $16.33. Um, keep in mind as well with a lot of these tech stocks, and Apple's a real case in point because it's very usual price activity, you tend to get this kind of buy into earnings and then it's almost like buy the rumor, sell the fact. They come in, they exceed expectations, and then they kind of drop off a little bit given the pre-positioning that they've seen going into the earnings release. The third quarter typically is Apple's slowest period with consumers holding out for the new iPhone launches, which typically historically happen around September. But the 5G iPhone 12 appears to have helped the company buck that trend. As I mentioned in yesterday's briefing, in the preview, quite a few people were commenting on the fact that a lot of the kind of mobile carriers in America— AT&T, Verizon, and such— were putting out some pretty aggressive deals during the period of the pandemic as well. They did guide Q4 revenue growth of double digits, but below the Q3 growth of 36%. They do expect supply constraints in Q4 to be greater than Q3, which will primarily impact the iPhone and iPad. So something to be aware of, um, there. Otherwise then, in aftermarket, this is what it looked like. As I said, they were down about 2.1%, uh, so, you know, just kind of fading a little bit. Nothing too, um, fantastic though. That doesn't make me feel particularly bearish about the stock or anything like that. Again, it's good to put it in context of recent days. Price action. Microsoft, the other big company— in actuality, if you look at the post-market trade for Microsoft, they actually dipped quite badly. I mean, they were down, I think at the time when I was watching, maybe 2.5-3%, and then they saw this really big rally. So when I came in actually this morning, I had another check through these price charts, and that did shock me a little bit about the recovery, which Obviously, when you see a price reaction like that, there's definitely got to be a reason. And when you see a very distinct, sharp, and immediate price reaction like that, it's normally down to a fundamental catalyst, and of which there is one, and I will cover. So by the numbers, uh, EPS $2.17, um, exceeded expectations in $1.92. Revenue is $46.2 billion, again above expectations by around $2 billion. Their Intelligent Cloud area, which is the one that's closely followed, came in at $17.4 billion above the expected $16.34 billion. Investor optimism was tempered initially by concern about slowing growth in their Azure cloud computing business. So Azure sales increased 51% in the period, but investors had hoped for a faster rate of growth. Obviously, Microsoft's facing very stiff competition at the moment by the kind of industry leader from Amazon's AWS, and also Google, which ranks quite far in third position. Problem is there is that Alphabet are pouring in resources into that business to try and catch it up with the likes of Microsoft and Amazon. So more increased competition. And although I said Azure sales increased 51% in the period, the market is super hungry. Investors love to see super bullish figures on that front, and so that in fact was a slight disappointment. However, as I said, in the post-market trade it really ramped back up, uh, and in the end with Microsoft, um, they did have in their conference call, they guided Q1 revenues at $43.3 to $44.3 billion, and that was above expected $42.2 billion. They also see Q1 productivity and business process revenues at a decent rate, as too is their Q1 intelligent cloud revenues at around $16.5 billion. So on the back of those outlook on the guidance, the shares pop back up again. And then the final one to talk about is, uh, Alphabet or Google. And, and actually their shares were very positive on the back of that. At one point they were up as much as 4%, kind of flattened out with a gain of about 3.26%. So their EPS absolutely blew Street estimates out the water, $27.26 against $19.34. Revenue $61.88 against $56.16 billion. In terms of some of the top level numbers, the one that really matters is Google Services revenues, $57 billion above expected $52 billion. They also had YouTube ad revenue exceed at $7 billion against $6. 3. So after digital ad slowdown a year ago during the pandemic, Google's advertising business is rebounding, buoyed by marketers spending more on search to convince consumers to travel, to go back into shops again, digital spending, on online spending, and so on and so forth. So yeah, really strong numbers for, for Alphabet. One of the other ones I just wanted to mention, because there's a lot of focus on chip makers at the moment given a lot of global supply constraints that's led to some of these transitory inflationary conditions, is AMD. Uh, and in fact, AMD did rise about 1% in aftermarket trade. So their EPS beat, their revenues beat, and they raised their full year 2021 revenue growth view to 60% year on year from previous 50%. Um, so good numbers from them. And this morning there have been some others. I know just as I clicked on the mic to come on live. I've just seen Barclays come out, but just going to focus on Deutsche for the time being. So Deutsche Bank have come out earlier this morning. They're seen up around 2% ahead of the market open. Again, I'm filming this just after 7 AM this morning, so another hour or so to the cash market open on the Deutsche Börse. But in general, really summarized by the point, they weathered a slump in fixed income trading better than their peers, prompting it to raise its revenue target for next year. As the main catalyst for their share price reaction. So a whole ton of earnings coming out, um, and it's not having too much of a dramatic effect. As I said, those big mega-cap tech earnings have kind of netted each other off from the negative price reaction effect from Apple to the very positive, um, in Alphabet, and then kind of leveled out in the end for MSFT. So any price recovery that we see, um, certainly in the likes of the NASDAQ, I'll be keeping an eye on that aforementioned level which would be around 50% retracement of the sell-off that we had yesterday if we're looking at the day trading environment. As far as the DAX is concerned, obviously Deutsche are pretty, pretty decent, but, you know, Deutsche is not as big a company as it used to be in many years gone by, but nonetheless a positive kind of force. And on the upside here, from a technical perspective in the DAX, I'd be keeping an eye on 15,577, which you can see was an inflection point with support resistance going back over yesterday's session. Well, yesterday and the Asia-Pac top was at that level, and the DAX can really run pretty quickly. So I'd be quite keen to watch that as that price develops as we go through the volume push on the cash open later. A few other— very quickly just going to run over a few other points, but I don't want to talk too much about it. But in Asia, a few things to be aware of. Chinese stocks obviously very much in focus at the moment in that region, given the Beijing crackdown on technology and education, seeing tech sector getting absolutely hammered consecutively in recent sessions. But Chinese stocks actually kind of steadied in overnight trade. And elsewhere, the BOJ policymakers appearing undeterred by increasing global debate on withdrawing crisis kind of mode stimulus in their latest debate from their July meeting, some calling for the need to avoid a premature exit of stimulus. And we did have some Australian CPI data overnight, was quite high, 3.8%. I mean, this is up from 1.1%, but that 3.8% was in line with expectations. And actually, it really reflected the impact of a one-off factor, free care free childcare that fueled the gain, um, was what lifted that number, and the core component stripping out volatility only actually was at 1.6%. So no real reaction seen in the Aussie dollar. And then also from North Korea, something to be aware of, um, was that there was a headline that North and South Korea are in talks to reopen a joint liaison office that Pyongyang demolished last year, and they're going to hold a summit as part of efforts to restore relations. According to 3 South Korean government sources. So yeah, not, not none of what I've just mentioned there. I've ran through it very quickly because it's stuff to be aware of, but nothing that's really constituting what's moving markets this morning or should really be part of a trade strategy in the intraday environment. So just having a quick look at the day ahead, obviously the main thing that most people are looking at is the FOMC, but as far as this morning is concerned, it's pretty quiet overall. We've got some CAD inflation data coming out at 1:30, and you've also got the DOE oil inventory numbers to follow, the APIs, at your regular time of 3:30 London time, and then the Fed at 7 o'clock. And the Fed, a bit of talk around this meeting, but I would say it's a little bit, I think, too premature for the Fed to really start talking more explicitly about this idea and, and that kind of tactical approach around tapering. So I think they're just going to maintain a fairly steady course. We've seen COVID cases really started to pick up in the US. We've had some gyration in recent economic data points. And so I think that constitutes just waiting out until the predefined timeline that most Wall Street banks are looking for, which is more talking about the end of August, Jackson Hole formalized with the the latest projections will get in September's meeting rather than this meeting that's going to happen tonight. Um, ING analysts note that Powell made it clear in his recent testimony to Congress, um, that he continues to believe inflation pressures will be largely transitory and there isn't any pressing need to signal any imminent shift in policy given the fact that employment levels remain 6 million lower than where they were pre-pandemic. And I would agree with that, which is why I'm not expecting too much in the way of market reaction to that later on tonight. On the COVID side, there are a few things just to be aware of. The CDC overnight have recommended now fully vaccinated individuals wear masks in public indoor settings to prevent the further spread of the Delta variant. Texas in America has posted now its biggest daily jump in new cases and hospitalizations in almost 5 months. In the UK, you probably would have read that consistent streak of declining new cases has continued. 23,500 cases were reported in the UK yesterday, down for a 7th day, but the number of deaths had jumped to 131, which is the most since the 17th of March. But we know that there's kind of a lagged effect between the case rates and the death numbers, and so we would anticipate that that number would come down at least for the time being, but dependent on where the case rates go from here on out. And then Sydney in Australia's months-long lockdown is going to be extended for another 4 weeks, is the current status there as well. So still, um, in a global sense, trying to manage this COVID situation at the moment is still very much at the forefront. But to summarize, overall market sentiment this morning, fairly neutral. Dollar flat, Equity index futures pretty flat. The Nasdaq not seeing much in any outright real direction on the back of those earnings, even though we're talking about over one-third of the Nasdaq having reported last night. And so really just keeping on those technical levels, that's that recovery point, the range high from the, the area that's been holding price in oil, range high gold, and the FX markets as well. from those aforementioned levels I discussed. All right, that is it. Gonna let you get on with the day. Hope that was useful. Any questions at all, feel free to drop a comment. Happy to help. Uh, and take care. Thanks very much.