Equity Indexes Wrap: Palo Alto Tanks Cybersecurity Stocks, While Chesapeake Lifts Energy Peers
February 21, 2024 04:14 PM EST
The Dow
Nike (NKE) rose 1.9% to lead the index’s gainers. It was followed by Dow (DOW) and Verizon (VZ), up 1.9% and 1.5%, respectively.
Walgreens Boots Alliance (WBA) fell 2.5% after S&P Dow Jones Indices booted the company from the Dow Jones Industrial Index after 6 years in the blue-chip benchmark. Walgreens will be replaced by Amazon (AMZN) next Monday.
Intel Corp. (INTC) fell 2.4% despite announcing its made-to-order chip foundry business had snagged Microsoft, a major win as it seeks to take on leader Taiwan Semiconductor Manufacturing Co. (TSM).
Tech peers followed Intel lower, with International Business Machines (IBM) falling 2%, Salesforce (CRM) down 1%, and Microsoft (MSFT) losing 0.2%.
Boeing (BA) shares slid 0.9% following reports the jet maker had ousted the head of its 737 Max program amid scrutiny of the company’s safety standards.
The S&P 500
EQT Corp. (EQT) rose 10.6% after competitor Chesapeake Energy (CHK) said it would slash natural gas production this year, sending gas futures soaring off of three-year lows. Energy peers Coterra (CTRA) and ConocoPhillips (COP) advanced 6.3% and 3.1%, respectively.
Amazon rose 0.9% after being named to the 30-stock Dow. Alphabet (GOOGL) also managed to gain, tacking on 1%.
KeySight Technologies (KEYS) fell 6.7% after its fourth-quarter sales fell short of analyst estimates, overshadowing better-than-expected earnings.
First Solar (FSLR) slipped 2.1% after competitor SolarEdge (SEDG) missed earnings estimates and offered disappointing current-quarter sales guidance amid a prolonged slump in solar demand. Peer Enphase Energy (ENPH) fell 1%.
The Nasdaq 100
Exelon Corp. (EXC) rose 4.3% after the electric and gas utility topped Wall Street estimates with its fourth-quarter earnings. Peer American Electric Power (AEP) added 2.1%.
Palo Alto Networks (PANW) tumbled 28.4%, its biggest one-day decline ever, after lowering its full-year billings and revenue guidance, and warning of “spending fatigue” among customers. Its competitors in the cybersecurity industry fell with it. ZScaler (ZS) lost 14.1%, while CrowdStrike Holdings (CRWD) fell 9.7% and Fortinet (FTNT) dropped 3.8%.
Nvidia (NVDA) slumped 2.9% ahead of its earnings report after the bell. Analysts and investors alike expressed concern that sky-high expectations left the AI chip leader room for nothing short of perfection. Fellow chip makers Advanced Micro Devices (AMD) and Broadcom (AVGO) slid 0.8% and 0.2%, respectively.
HSBC Profit Plunges on $3 Billion Write-down of Stake in Chinese Bank
February 21, 2024 03:44 PM EST
HSBC Holdings PLC’s (HSBC) American depositary receipts (ADRs) fell Wednesday after the British bank’s write-down of its stake in a large Chinese lender dragged its quarterly profit lower.
The London-based bank, which makes most of its earnings from Asia, said its fourth-quarter pretax profit plunged to $1 billion from $5.05 billion in the year-earlier period after it took an impairment charge of $3 billion related to its investment in China’s Bank of Communications.
HSBC also took a $2 billion charge on the sale of its French retail operations during the quarter.
Revenue dropped 11% to $13 billion during the latest quarter compared with the previous year, due to the sale of the French banking businesses, as well as charges for Argentina’s hyperinflation.
HSBC’s ADRs were changing hands at $37.30, off 8.7% shortly before markets closed Wednesday. They’ve fallen around 8% so far this year.
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Nvidia Stock Drops Ahead of High-Stakes Earnings
February 21, 2024 02:49 PM EST
Nvidia (NVDA) shares lost ground Wednesday for the fourth consecutive session ahead of an eagerly anticipated earnings report from a company that has been an investor darling amid expectations that it will continue to be a prime beneficiary of the artificial intelligence (AI) boom.
Nvidia shares, which have more than tripled over the past year, were down 3.6% at $670 Wednesday afternoon. The stock, which had hit a record closing high of $739 last Wednesday, fell 4.4% on Tuesday, its biggest single-day drop since October.
Investors have come to expect only the best from Nvidia, so anything less than a blowout earnings report with strong guidance could be perceived negatively by market participants.
Bill Baruch, founder and president of Blue Line Capital, said on CNBC Wednesday that his firm had sold 20% of its Nvidia stake on Tuesday. “We’ve reduced this and really just monetizing the move that’s happened. One of my fears more than anything is just an unwind,” he said, citing “tremendous call speculation.”
Read more: Analysts Raise Nvidia Earnings Estimates, Lifting Mile-High Bar Even Higher
Natural Gas Jumps as Chesapeake Cuts 2024 Production Targets
February 21, 2024 01:58 PM EST
Natural gas futures jumped Wednesday after Chesapeake Energy (CHK) said it would reduce production capacity this year as it grapples with gas prices at multi-year lows.
Chesapeake Energy said in its earnings report Tuesday that it expected to produce between 2.65 and 2.75 billion cubic feet per day (bcf/d) in 2024, down from 3.43 bcf/d last year. Specifically, the company plans to take out of commission this March one of the five rigs it runs in the Haynesville shale and one of its four rigs operating at the Marcellus shale. The company will also halve its fracking activities in March and further reduce rig count around mid-year.
Natural gas continuous contracts were up more than 12% at $1.77 Wednesday afternoon.
Natural gas prices have been battered by robust domestic production, higher storage levels, and unseasonably warm weather forecasts through February. On Tuesday, futures closed at $1.576, their lowest level since June 2020.
The stocks of major natural gas producers followed futures higher. Chesapeake Energy shares rose more than 8%, while EQT Corp. (EQT) and Antero Resources (AR) climbed 12% and 11%, respectively.
Nvidia Partner Vertiv Drops as Sales and Guidance Fall Short of Forecasts
February 21, 2024 12:45 PM EST
Shares of Vertiv Holdings (VRT) slipped Wednesday after the maker of power and cooling equipment for AI data centers missed sales estimates and gave weak current-quarter guidance.
Vertiv reported revenue was up 13% year over year to $1.87 billion, about $10 million short of forecasts. Adjusted earnings per share (EPS) came in at $0.56, double what it was in 2022 and ahead of expectations.
For the first quarter, Vertiv sees adjusted EPS in a range of $0.32 to $0.36, while analysts had been looking for $0.37.
The report sent shares of Vertiv tumbling about 6%, but that has been a rare event recently. The stock’s price hit an all-time high last week, and even with the current selloff shares have soared 300% over the past year.
SolarEdge Stock Dives After Earnings Miss, Weak Sales Guidance
February 21, 2024 12:09 PM EST
SolarEdge Technologies (SEDG) shares slumped 13% to trade at $73 Wednesday after the company announced quarterly earnings that fell short of Wall Street’s estimates and provided weaker-than-expected current-quarter sales guidance amid ongoing softness in the retail solar market that has led to an inventory glut.
The maker of solar inverters, power optimizers, and monitoring platforms posted fourth-quarter adjusted earnings of 92 cents per share on revenue of $316 million. Wall Street had expected earnings of $1.17 a share on sales of $354 million.
Moreover, the top line fell more than 60% from the prior year, highlighting the severity of the solar industry’s prolonged downturn. For the March quarter, SolarEdge sees revenue coming in between $175 million and $215 million, significantly below analysts’ forecast of $406 million.
The company said weakening demand in the second half of last year due to elevated interest rates has led to a backlog of inventory that it doesn’t expect to clear until the end of 2024.
Since gapping below $90 in mid-October, SolarEdge’s share price has tracked mostly sideways, with volume levels in recent months slightly higher than throughout most of last year. If selling continues beyond Wednesday, monitor if buyers can defend the November and February swing low support area around $64. A successful hold of this level could potentially carve out a triple bottom pattern and mark the beginning of a new trend higher.
Cybersecurity Stocks Tumble as Palo Alto Cuts Sales Guidance
February 21, 2024 11:24 AM EST
Cybersecurity stocks were hit hard Wednesday after Palo Alto Networks (PANW) lowered its full-year sales guidance, raising concerns about industrywide headwinds.
Palo Alto Networks now expects fiscal 2024 revenue to fall in the range of $7.95 billion and $8 billion, down from a prior estimate of between $8.15 billion and $8.2 billion. Total billings, which includes deferred revenue, are expected to fall between $10.1 billion and $10.2 billion. The company in November had forecast a range of $10.7 billion and $10.8 billion.
CEO Nikesh Arora noted on a call with analysts that clients were showing signs of “spending fatigue” even as online threats increased. “Customers are finding that adding incremental products is not necessarily driving a better security outcome for them,” he said. The company, he added, was prioritizing “platformization” to facilitate deals and reposition itself for long-term growth.
Palo Alto’s forecasts spooked investors, sending cybersecurity stocks sharply lower Wednesday. Palo Alto Networks shares tumbled more than 25%, their largest drawdown since the company’s 2012 IPO. Peers ZScaler (ZS) and CrowdStrike Holdings (CRWD) dropped 15% and 10%, respectively.
Cybersecurity stocks were flying high before Wednesday’s declines. Palo Alto shares had more than doubled in value in the year leading up to Tuesday’s earnings report, while CrowdStrike stock had nearly tripled and ZScaler had risen more than 90%.
Analysts were less pessimistic than markets. “While claims of cyber fatigue are logical, it hasn’t emerged elsewhere. We remain massive fans of the LT story but shares will be under duress in the interim,” wrote Jefferies analysts, who lowered their price target but reiterated their buy rating on the stock.
That sentiment was echoed by Mizuho Securities: “While we fully acknowledge a messier near-term story, we remain bullish on PANW’s improving mix shift toward higher-growth recurring revenue.”
Amazon To Join the Dow Jones Industrial Average, Replacing Walgreens
February 21, 2024 10:23 AM EST
Amazon.com Inc. (AMZN) rose 0.7% in early trading Wednesday following news that the online retailing giant is set to join the Dow Jones Industrial Average, replacing pharmacy chain Walgreens Boots Alliance (WBA).
The changes will be effective next Monday, according to S&P Dow Jones Indices, which manages the storied 30-stock benchmark and announced the move Tuesday.
S&P said the changes were prompted by Walmart’s 3-for-1 stock split, which also takes effect next week—and reflect “the evolving nature of the American economy.”
The blue-chip index is widely followed by individual investors but is dominated by legacy industrial companies. Adding Amazon will increase the benchmark index’s exposure to the tech industry.
Shares of Amazon are up more than 11% this year. Walgreens shares were down more than 3% in early trading Wednesday and are down 16% this year.
Stocks Making the Biggest Moves Premarket
February 21, 2024 09:12 AM EST
Gains:
- Garmin Ltd. (GRMN): Shares of the navigation technology company gained more than 4% after its fourth-quarter earnings beat analyst estimates on the top and bottom lines.
- PDD Holding (PDD): Shares of the Chinese e-commerce company rose more than 2% after Bloomberg reported the Chinese government would impose a rule banning major institutional investors from being net sellers in the first and last 30 minutes of each trading day, its latest effort to prop up a struggling equities market.
- Amazon.com Inc. (AMZN): Shares inched up about 1% after S&P Dow Jones Indices said the company would replace Walgreens Boots Alliance (WBA) in the Dow Jones Industrial Average starting on Monday. Walgreens shares fell 3%.
Losses:
- Palo Alto Networks Inc. (PANW): Shares of the cybersecurity firm plummeted more than 20% after it offered a disappointing current-quarter bookings forecast and lowered its full-year sales guidance.
- Vertiv Holdings LLC (VRT): Shares slumped about 14% after the company, which sells power and cooling equipment to data centers, forecast current-quarter earnings of between 32 cents and 36 cents a share, falling short of Wall Street’s estimates.
- HSBC Holdings Plc (HSBC): Shares of the British bank fell more than 7% after it reported a $3 billion write-down on its stake in Chinese Bank of Communications Co.
Stock Futures Fall Ahead of Fed Minutes, Nvidia Earnings
February 21, 2024 08:30 AM EST
Futures contracts connected to the Dow Jones Industrial Average traded 0.2% lower in premarket trading on Wednesday.
S&P 500 futures slipped 0.3%.
Nasdaq 100 futures were down 0.6% about an hour before markets opened.
