An avatar of Mark Zuckerberg, chief executive officer of Meta Platforms Inc., speaks during the virtual Meta Connect event in New York, US, on Tuesday, Oct. 11, 2022.
Michael Nagle | Bloomberg | Getty Images
My top 10 things to watch Thursday, Oct. 26
1. Club name Meta Platforms (META) had a superb quarter, but mentioned one bit of ad spending weakness in the fourth quarter following the start of the war in the Middle East. Shares took a hit. What management didn’t report was that traditionally in these crises there’s a pause in spending and then it starts back up again. We just don’t know when. There is still more meaningful investment in its reality labs business and meaningful hiring, both of which seemed to conflict with CEO Mark Zuckerberg’s “year of efficiency.” We see no meaningful results yet from spending on the metaverse. Still a lot to like: Earnings-per-shares of $4.39 vs. Wall Street’s estimate of $3.50, a big stock buyback and multiple of just 17 times next year’s earnings. The big bet on a VR headset? The Ray-Ban Meta Smart Glasses? Reality labs operating losses to increase “meaningfully.” But Zuckerberg said the company’s ability to deliver AI through smart glasses may up end being a “killer use case.” But is this like the Google glasses? That’s what we are all worried about.
2. The U.S. economy grew even faster than expected in the third quarter, with gross domestic product rising at a 4.9% annual pace. It’s way too strong. We need non-inflationary data so we can handle upcoming bond auctions and selling by China. Supply of bonds can’t be tempered until we get weaker data. Looking for signs of it everywhere
3. Ford, UAW reach a tentative deal to end labor strikes. Includes 25% pay increases over four years. 30% with cost-of-living adjustment (COLA). Win win? Will Ford go more hybrid? Base wage up 68% to $28 an hour. We look forward to hearing more from CEO Jim Farley and the management team — including the impact of the strike on its financials — in the call with investors after the carmaker reports earnings later today.
4. ServiceNow (NOW) is still getting good orders as it helps digitize entire companies and departments in the government. It is winning some very big contracts. The number of customers paying over $10 million in Q3 increased 60% year over year. New platform called Vancouver is producing security software, too. Much stronger than anyone else save Alphabet (GOOGL).
5. We don’t know what happened to Align (ALGN), other than some real declines in both starts and equipment without any real explanation. The quarterly results for the maker of 3D digital scanners and Invisalign clear aligners used in orthodontics was very disappointing. We never thought this company was cyclical.
6. Mattel (MAT) posted an earnings beat for the third quarter but muted fourth quarter guidance and bulk of Barbie gain taken. People shocked by this and the surprising forecast. Multiple questions about how this could be all there is. I don’t think so, but this is the transition to entertainment and getting out of the endless Christmas holiday treadmill for the company.
7. Edwards Lifesciences (EW): We didn’t get any explanation for transcatheter aortic valve replacement (TAVR) sales coming in at only at 11%. No snap back in demand post pandemic. Again we don’t understand it. Good for Humana (HUM) and UnitedHealth Group (UNH), bad for HCA Healthcare (HCA).
8. IBM kept its free cash flow — $1.7 billion — which has been the problem. The company’s hybrid cloud strategy is winning. Third-quarter earnings beat and raised guidance.
9. Otis Worldwide (OTIS) beat and raised on Wednesday and catches price target cuts still. This is all reactive.
10. Thermo Fisher (TMO) price target cuts endless. They had been too upbeat. Too much inventory. Pfizer (PFE) cutting back R&D for example.
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