Jobs Wow Wall Street … Disney, Not so Much
Keepin’ the Bulls Happy
I live for moments like today, dear reader.
The latest U.S. private payrolls data are in, and the economy is looking stronger than ever! (If you judge things solely on jobs data, that is.)
Yes, I know I preach a bit of doom and gloom from time to time, but someone has to keep you grounded in this decade-plus bull market. It can’t all be rainbows and unicorns.
Today, we have a reminder that the U.S. economy is not merely black and white. It’s a beautiful, woven gray tapestry that … OK, that’s too sappy even for me. Blech…
Let’s get to the point. According to Moody’s Analytics and Automatic Data Processing Inc. (Nasdaq: ADP), the private payrolls in the U.S. rose a whopping 291,000 in January. Not only are the results nearly double the estimated 150,000, but they also mark the best monthly gain since May 2015.
Highlights of the report include 96,000 new jobs in leisure and hospitality and 47,000 new jobs in construction — the best growth in a year. Even the struggling manufacturing sector added 10,000 new jobs!
Economists cite unusually mild winter weather for the unexpected jump.
“It’s juiced by very mild winter weather,” said Mark Zandi, chief economist for Moody’s Analytics. “The fingerprints of that are all over this report.”
Of course it was the weather and not poor forecasting … economists have an excuse for everything, don’t they?
While the ADP report is a nice side dish, the main course arrives this Friday in the form of the official January nonfarm payrolls report.
Those same economists who whiffed on January’s private payrolls data expect the Department of Labor to unveil job growth of 158,000, up from 145,000 in December. The unemployment rate is expected to hold at 3.5% — its lowest level since December 1969.
Overall, nonfarm payrolls have jumped by 6.7 million since President Trump took office … a fact he trumpeted at last night’s State of the Union address:
“Incredibly, the average unemployment rate under my administration is lower than any administration in the history of our country,” Trump said. “If we had not reversed the failed economic policies of the previous administration, the world would not now be witness to America’s great economic success.”
Now, I don’t know about all that “history of our country” stuff — the average unemployment rate was just 1.2% in 1944, after all, and that was the Roosevelt administration — but Trump’s sentiment is in the right place.
The point is that while the U.S. economy has its low points (slowing manufacturing, for instance) and growth risks (China’s Wuhan virus), things are still pretty much chugging along.
For now, that should be more than enough to keep the bulls on Wall Street happy and sustain the rally.
The Good: Let Them Eat Cheese!
The Walt Disney Co.’s (NYSE: DIS) stock is having a bit of a down day for all the wrong reasons.
The Mouse’s House reported mixed first-quarter results last night. Earnings beat expectations by $0.10 per share, while revenue rose 38% to $21.08 billion … but still missed expectations.
Capital spending in Disney’s direct-to-consumer unit more than quadrupled, adding to investor concerns.
That said, the real story here is that Disney+ has a greater-than-expected 28.6 million subscribers. Not only does that figure top Disney’s own best-case-scenario projections, it topped nearly every analyst target as well.
In other words, that increased capital spending was put to good use and will pay off big down the road. This dip in Disney shares might just be the opportunity you were looking for to get in on one of Great Stuff’s best of the best for 2020 and beyond.
The Bad: Cold Snap
Next, we have another potential opportunity … if you’re willing to take the risk.
Snap Inc. (NYSE: SNAP) shares plummeted more than 11% today following an extremely negative reaction to earnings. The social media company reported a profit of $0.03 per share on revenue of $561 million.
Earnings beat Wall Street’s forecast by a penny per share, but despite rising 44% year over year, revenue missed expectations for $563 million. It’s important to note that Snap beat its own sales guidance of between $540 million and $560 million.
On the subscriber front, Snap ended the quarter with 218 million daily active users — a 17% jump from year-ago levels.
But the real damage to Snap sentiment came from guidance. The company’s second-quarter revenue targets surrounded the consensus estimate, but Snap expects a loss of between $70 million and $90 million. Wall Street’s second-quarter target sits at a loss of just $72 million.
Here’s the thing: Snap continues to see solid growth in daily active users. It’s also seeing impressive revenue growth (albeit not as robust as the talking heads on Wall Street expect).
Could the company have performed better? Sure. But today’s 11% drubbing is an overreaction driven by excessive bullish sentiment. As such, I expect Snap to bounce back quickly from today’s losses.
The Ugly: Press F to Pay Respects
Have you cratered a Ford lately?
Unfortunately, if you hold Ford Motor Co. (NYSE: F) shares today, that answer is “yes.” Henry Ford’s legacy posted a profit of $0.12 per share on revenue of $39.7 billion. Both figures were down sharply year over year — revenue fell 5.02%, while earnings plummeted 60% — and missed Wall Street’s targets.
And, before you get your hopes up, the future doesn’t look any better. Ford issued full-year guidance for earnings of between $0.94 and $1.20 per share — well below the consensus estimate.
Morningstar analyst David Whiston summed it up best in his note to clients: “The 2020 guidance makes it hard for us to see why investors should get excited about owning Ford stock now.”
Indeed. Despite the headline-generating Mustang Mach-E electric vehicle and the hybrid-electric F-150, there really is no reason to drive a Ford lately.
I’m doing a little housecleaning today.
In doing so, I’ve noticed that many of you read Great Stuff at different times of the day. So, today’s Poll of the Week is an effort to better serve you! When do you read Great Stuff? Inquiring minds want to know.
Just click the button below and let us know:
Great Stuff: Shoop, Shoop Ba-Doop
This past Friday, we set fear aside and blazed a path forward with four stocks to beat the Wuhan virus. Now, I have faith that these particular companies will outperform — I wouldn’t have suggested them otherwise.
However, I also know that investing doesn’t (shouldn’t) take place in a vacuum. In an effort to present all sides of the investment picture today, we’ll look at the potential pitfalls facing one of Friday’s selections: AbbVie Inc. (NYSE: ABBV).
I say “we,” but I really mean Banyan Hill’s own Chad Shoop, who featured the biotech giant in his recent Bank It or Tank It video. You know, the series where Chad walks you through his brilliant stock analysis?
You can read Chad’s opinion on AbbVie here: “Profit From AbbVie’s Struggles Today.” Or, you can watch the video below:
I’m confused … why are you giving us a video on why your recommendation might fail?
First, I’m a fan of having all the information in front of me when investing.
Second, Chad has a completely different approach to investment research that I know you’ll find valuable.
You see, Chad Shoop is Banyan Hill’s own secret weapon — the “Spartan” of options trading, if you will. I’ve been in the options biz (how’s that for market lingo?) for more than 15 years, and Chad’s performance when recommending trades never ceases to amaze me.
Case in point: Yesterday, I saw Chad close out a 400% gain on Tesla Inc. (Nasdaq: TSLA) … and it was the stuff of legends, I tell you.
The thing is, Chad barely blinked an eye when closing that gain. While nothing in the markets is guaranteed, his trading strategy helps him spot knockout trade setups like these on the regular.
Chad just released a video series where he breaks down every step of finding the perfect trade — no matter if the market is up, down or sideways.
Click right here to check out Chad’s trading strategy. It’s truly great stuff.
Until next time, good trading!
Great Stuff Managing Editor, Banyan Hill Publishing