And then there were two.
That is, just two FAANG stocks are left to report this earnings season — Apple next week and Amazon.com after today’s close. With gloom swamping techs after that “Winter-Is-Coming” forecast from Facebook, Jeff Bezos & Co. may be feeling pressure to deliver:
— Wavepatterntraders (@Nouf_wpt) July 26, 2018
Facebook could see $100 billion wiped off its market cap, if buyers don’t start to smell a bargain. That’s equal to three Twitters.
But our call of the day offers a sunnier take on the FAANG gang. It comes from The Reformed Broker’s Josh Brown, who says if he had to pick a stock to hold for the next 25 years, it would be a Silicon Valley giant that’s behaving like a Berkshire Hathaway BRK.A, -0.19% BRK.B, -0.43% clone — Alphabet GOOG, +1.25% GOOGL, +1.41% .
It’s “bigger than Berkshire, but in terms of longevity, this is the type of structured company and the type of talent that could become Berkshire over the next 25 years,” said Brown, in a discussion posted on YouTube with Irrelevant Investor’s Michael Batnick, his Ritholtz Wealth Management colleague.
“When Alphabet set itself up as a holding company to own Google, in addition to channeling the profits from Google into other bets and other ventures, they were not doing this surreptitiously,” said Brown.
“They were openly acknowledging, ‘This is our bid to do something Berkshire-esque.”
And he said it makes total sense that the next Berkshire-type company will come from a sector that isn’t finance or insurance.
“To me it’s going to be a technology company that is not afraid,” Brown said. Other Alpha-pluses: Shares don’t look to expensive compared with other tech names, and it’s got built-in fiscal discipline via CFO Ruth Porat, who hails from Morgan Stanley. And in the company’s latest quarterly report, Alphabet posted extra profit owing to its investments.
“It’s not like they’re just throwing Hail Marys, they’re making investments in smaller Silicon Valley things that are paying off, and they’re doing this overseas as well,” Brown said.
The call comes with caveats: “They could end up making a bet that sinks the company, or Siri and Alexa could steal all of their thunder — if search becomes voice-only and Google Assistant never catches up.”
Indeed, Nasdaq futures are getting crushed this morning thanks to Facebook. Those for the Dow YMU8, +0.19% are up a bit, while S&P 500 futures ESU8, -0.16% are modestly lower. The Nasdaq COMP, +1.17% closed at a record on Wednesday, while the S&P 500 busted out of correction territory and the Dow DJIA, +0.68% also gained.
European stocks SXXP, +0.43% are higher, lifted by that EU-U.S. trade truce, while Asia had a mostly down day. The dollar DXY, +0.06% is under some pressure, while gold GCU8, -0.36% and crude CLU8, -0.14% are lower as well, as traders assess terror attacks on two big Saudi oil tankers in the Red Sea.
The European Central Bank is meeting today, but little new is expected, and investors seem pretty focused on Friday’s U.S. GDP data.
See the Market Snapshot column for the latest action.
Facebook gets de-friended.
Is it the beginning of the end for the tech superstars that have been powering the stock market?
JonesTrading’s Michael O’Rourke seems to think so, as he reflects on Facebook’s premarket dive that is shown in the chart above.
“We have continually expressed concern about such narrow large-cap leadership, especially in the names where valuation is not a consideration,” he said, as he predicted (rightly by the looks of it in premarket) that Amazon will sell off into its earnings release.
On the bright side, there are a bunch of other big companies out there that have been reporting good numbers and deserve some love. “These events create the perfect opportunity for the next rotation into the broader market,” said O’Rourke, who shared the chart below.
“Obviously the European Union, as represented by @JunckerEU and the United States, as represented by yours truly, love each other!” — That was a tweet from POTUS referring to his upbeat meeting with European Commission President Jean-Claude Juncker.
He included a kissy photo, though that EU-U.S. trade deal that was short on specifics, so we’ll see if love stays in the air.
$904 billion — That’s where Amazon’s market cap finished at yesterday’s close, marking the first time it has finished above the $900 billion level, according to the WSJ Market Data Group. Shares will need a 11% bump to reach the $1 trillion market-cap milestone.
Facebook FB, +1.32% is looking at a near 20% drop at the open, with the bulk of the worries coming after CFO David Wehner disclosed that the social-media giant expects its revenue-growth slowdown to continue. It also missed expectations on sales and reported slower user growth.
— Quoth the Raven (@QTRResearch) July 25, 2018
PayPal PYPL, -0.04% is also taking a hit this morning after a third-quarter outlook miss, though Chief Operating Officer Bill Ready says investors are “misunderstanding” its guidance.
The earnings barrage continues this morning, with big names like Xerox XRX, -0.12% , McDonald’s MCD, +0.60% , Mastercard MA, +2.19% and Bristol-Myers Squibb BMY, +1.34% on tap early. Along with Amazon after the close, we’ll hear from Intel INTC, +0.48% , Starbucks SBUX, +0.88% , EA EA, +1.51% and Chipotle CMG, +0.48% , to name a few.
Qualcomm QCOM, +0.97% says Apple AAPL, +0.94% will only use Intel modems in its next iPhone. But shares are up after an earnings beat and news it will drop plans to acquire NXP Semiconductors NXPI, -2.27% .
The economic releases on tap today include weekly jobless claims, durable goods orders, advance trade in good and housing vacancies.
On the political beat, House conservatives took a step toward removing Deputy Attorney General Rod Rosenstein from office, filing articles of impeachment against him.
The last surviving female World War II pilot has died at age 101
Man detonates explosive at U.S. Embassy in Beijing, injuring only himself
The remaining members of a doomsday cult in Japan were executed Thursday
Greek minister, residents square off over blame for deadly fires
New York Times map takes a deep look at political bubbles in the U.S.
Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. Be sure to check the Need to Know item. The emailed version will be sent out at about 7:30 a.m. Eastern.