Top US stocks to watch before the bell: Walmart, Home Depot and Baidu
Joshua Warner May 18, 2021 8:28 AM
Walmart’s optimism grows, Home Depot shows demand for home improvements isn’t slowing down, Baidu beats expectations, short-sellers get burnt on GameStop and AMC, and markets continue to consider the implications of the AT&T-Discovery deal as reports suggest Amazon will buy MGM Studios.
Walmart beat expectations in the first quarter and raised expectations for the rest of the year as customers spent stimulus cheques on electronics and clothing.
Revenue in the quarter edged up 2.7% to $138.31 billion in the quarter. Sales at stores open for at least one-year jumped 6%, smashing the 0.86% expected by analysts. Notably, online sales growth of 37% slowed from 74% the year before and 69% in the previous quarter. Operating income jumped one-third to $6.91 billion.
Walmart said it is more optimistic now than at the start of the year and said customers ‘clearly want to get out and shop’ and that pent-up demand should continue for the rest of 2021. It is now targeting full-year earnings growth in the high single digits, a marked improvement from the previous forecast for a slight year-on-year decline.
Home Depot said revenue and profits both jumped during the first quarter of 2021 as demand for home improvement projects remains resilient during the pandemic.
The world’s largest home improvement retailer said revenue jumped one-third to $37.5 billion, with comparable sales up 31%. That beat expectations for revenue of $34.96 billion. Net earnings almost doubled to $4.1 billion from $2.2 billion the year before, also coming in higher than expected.
‘Fiscal 2021 is off to a strong start as we continue to build on the momentum from our strategic investments and effectively manage the unprecedented demand for home improvement projects,’ said chairman and CEO Craig Menear.
Chinese tech giant Baidu beat expectations for both revenue and earnings in the latest quarter as it continues to expand its multiple businesses from cloud-computing and advertising to autonomous vehicles and streaming.
The company, regarded as China’s answer to Google, said revenue was up 25% in the first quarter to CNY28.13 billion, ahead of the CNY27.25 billion expected. Adjusted EPS of CNY12.38 was also well ahead of the CNY10.75 expected by Wall Street.
Revenue from is cloud-computing, AI, autonomous cars and advertising units all rose in the period. Its streaming service iQIYI added 3.6 million subscribers and now has 105.3 million in total as it posted a 25% rise in advertising revenue.
Tencent Music Entertainment
Tencent Music Entertainment Group has said it is facing increased scrutiny from regulators in China, revealing an insight into rising tensions between the Chinese government and businesses.
‘In recent months, we have received increased regulatory scrutiny from relevant authorities, and have been actively co-operating and communicating with the relevant regulators,’ Tencent Music’s chief strategy officer Tony Yip said on an earnings conference call.
It follows on from reports last month that Tencent Holdings, which owns a majority stake in Tencent Music, was being ordered to pay a fine and sell some of its music assets by anti-trust regulators. Tencent Music beat quarterly profit estimates on Monday as it delivered strong growth in subscription and advertising revenue, although monthly active users fell.
GameStop and AMC
Investors are thought to have lost $930 million on their short positions in GameStop and AMC Entertainment over the last five days alone, according to a report from financial analytics firm Ortex.
Both stocks have been at the heart of a trading frenzy by retail traders inspired by Reddit threads over the last year. Both stocks have jumped over 30% over the past week. It suggests that short-sellers lost over $200 million in each stock yesterday alone.
The report said 18.3% of the freefloat of AMC is in the hands of short sellers at present, and around 21.8% of GameStop.
AT&T and Discovery
Markets continue to digest the $43 billion deal that will see AT&T’s media business be spun-off and merged with Discovery to create a new streaming giant, which could spark more deals in the industry as competition intensifies.
The pair unveiled the deal yesterday to combine the likes of Warner Bros Studios, HBO and CNN with Discovery’s lifestyle TV networks. At its heart, it will combine Discovery’s 15 million subscribers with HBO’s 64 million global subscribers, creating a service large enough to compete with market leaders like Netflix and Disney.
The deal has thrown other players trying to make a name for themselves in streaming into the spotlight as concerns grow that firms like ViacomCBS and Comcast could be left behind if they don’t find a way to generate significant new content or strike their own deals to remain competitive.
With the AT&T and Discovery deal in mind, reports suggest Amazon is in talks about buying MGM Studios for $9 billion in an effort to bolster its content for its streaming service.
MGM is a historic film studio in Hollywood and has the rights to huge franchises including James Bond and the Handsmaid’s Tale TV series. It would also give Amazon access to its back catalogue of content such as the Wizard of Oz.
Separately, German antitrust regulators have launched a new investigation into Amazon to consider whether the company is abusing its market dominance. The Federal Cartel Office said it is ‘looking at whether Amazon is of outstanding, cross-market importance for competition’. It hopes to find if Amazon will break new anti-competitive rules for digital firms that came into effect earlier this year.
IBM is buying Waeg for an undisclosed fee as it looks to expand its range of services and bolster its strategy to grow its hybrid cloud and artificial intelligence businesses.
Waeg is a small business based in Brussels with around 130 staff members serving customers across Europe. However, it works on a big scale and is a consulting partner to Salesforce. The deal will compliment IBM’s purchase earlier this year of 7Summits, which is a consultancy firm specialising in Salesforce based in the US.
Stellantis and Foxconn
Stellantis and Foxconn have announced they are forming a new joint venture to work together on products that help cars communicate with each other and other devices.
The 50:50 joint venture will be based in the Netherlands and named Mobile Drive. It will focus on infotainment, telematics and cloud services. It will operate as a supplier to the automotive industry and bid for contracts to supply software and hardware for Stellantis and other carmakers.
Google’s owner Alphabet is expected to unveil new updates across multiple services later today, including a revamp of its search function on Android, as it looks to keep people using their digital devices as the pandemic ends.
Lockdown restrictions have all led to higher demand for the likes of web searches, video conferencing and other digital tools and Google is trying to keep people digitally engaged as they start to head back outside. A two-hour live stream event will start at 1000 PT (1700GMT) as part of a three-day developer conference.
One potential area of surprise could be the launch of any new hardware, which it has done at these events in the past. That could be more likely considering last year’s event was cancelled because of the coronavirus pandemic.
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