Earnings Watch: Can Uber stop the bleeding; Amazon spending pays off

Earnings Watch: Can Uber stop the bleeding; Amazon spending pays off

Equities 5 minutes to read
Peter Garnry

Chief Investment Strategist

Summary:  The earnings season continues at full speed with more earnings from outside US being released. Among US technology companies the two most anticipated earnings are from Alphabet and Uber. We take a look at Uber's outlook and their need to soon show a path to profitability. Amazon reported earnings last night with shares up 10% as earnings smashed expectations and guidance was strong.


The earnings season continues with on balance good numbers and the outlook remains cautiously optimistic. As we wrote yesterday’s equity update earnings are looking good in the US and Europe, so the Q4 earnings season is a positive for supporting current equity levels.

Next week 343 companies out of the around 2,000 companies we track during earnings season will report earnings. The 30 largest companies reporting are listed below.

Mon: Google

Tue: BP, Gilead Sciences, Sony, Mitsubishi UFJ Financial, Walt Disney, Fiserv, Chubb, ConocoPhillips

Wed: Novo Nordisk, Siemens, BNP Paribas, GlaxoSmithKline, Qualcomm, Merck, Vinci

Thu: Total, Uber Technologies, Toyota, NTT, Estee Lauder, Philip Morris, S&P Global, T-Mobile, L’Oreal, Bristol-Myers Squibb, Sanofi, Becton Dickinson, Cigna

Fri: AbbVie

Uber needs to deliver to avoid negative spiral

Uber reports earnings on Thursday and the risks are high for the on-demand transportation company which is expected to have had a negative $4bn free cash flow in 2019. Revenue growth is expected to decline to 15% from 42% in 2018 showing the intense competition globally for Uber but also market saturation in key cities and maybe also that the hype is done. Uber is still struggling with negative margins and a bumpy road to profitability.

Financial Times broke the story yesterday that Softbank had pushed Uber and DoorDash to consider merging their food delivery businesses in order to get scale and become profitability. The talks have not materialized in a merger but it underscores the increasing demand from investors for these new technology platform companies to show a path to profitability. Shares are down 19% from the IPO price last year but were down as much as 42% at the lows in November. Much is at stake for Uber next week. We remain skeptical that the business is viable, but luckily for Uber the Fed’s monetary policy will keep rates low for longer which makes it easier for the company to refinance and convince equity investors to finance the company if needed.

Source: Saxo Group

Amazon spending spree pays off

Shares have been more or less flat for almost two years and investors were worried about Amazon’s spending spree, increased competition in cloud infrastructure, integration of Whole Foods acquisition and weak international business. But Amazon delivered in Q4 with revenue reaching $87.4bn slightly beating estimates while EPS at $6.47 smashed estimates of $4.11. Shares were up 11% in extended trading to new record levels for the stock.

Source: Saxo Group

On the positive side Prime membership grew to 150 million, best quarterly free cash flow ever at $14.3bn, higher margins in AWS and slower growth in delivery costs. On the negative side volume in AWS was on the weak side suggest competition from especially Microsoft, which also recently won a big cloud deal with Pentagon beating Amazon, is heating up. For now margins are improving in AWS but over time these could come down as the market matures. International revenue growth at 14% was also a disappointment and shows that Amazon’s brand is not as strong in non-US markets as in its home market.

Amazon generated $21.7bn in free cash flow in 2019 which translate into around 2% free cash flow yield which is still aggressive as it’s lower than Facebook which has a much higher margin business and higher growth rates. Analysts expect Amazon to double its free cash flow to $40bn in 2021 and if that is indeed possible then with low rates on the horizon Amazon will continue to attract investors.

Quarterly Outlook

01 /

  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

  • Equity Outlook: Will lower rates lift all boats in equities?

    Quarterly Outlook

    Equity Outlook: Will lower rates lift all boats in equities?

    Peter Garnry

    Chief Investment Strategist

    After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto...
  • FX Outlook: USD in limbo amid political and policy jitters

    Quarterly Outlook

    FX Outlook: USD in limbo amid political and policy jitters

    Charu Chanana

    Chief Investment Strategist

    As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ...
  • Macro Outlook: The US rate cut cycle has begun

    Quarterly Outlook

    Macro Outlook: The US rate cut cycle has begun

    Peter Garnry

    Chief Investment Strategist

    The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c...
  • Commodity Outlook: Gold and silver continue to shine bright

    Quarterly Outlook

    Commodity Outlook: Gold and silver continue to shine bright

    Ole Hansen

    Head of Commodity Strategy

  • FX: Risk-on currencies to surge against havens

    Quarterly Outlook

    FX: Risk-on currencies to surge against havens

    Charu Chanana

    Chief Investment Strategist

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo...
  • Equities: Are we blowing bubbles again

    Quarterly Outlook

    Equities: Are we blowing bubbles again

    Peter Garnry

    Chief Investment Strategist

    Explore key trends and opportunities in European equities and electrification theme as market dynami...
  • Macro: Sandcastle economics

    Quarterly Outlook

    Macro: Sandcastle economics

    Peter Garnry

    Chief Investment Strategist

    Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p...
  • Bonds: What to do until inflation stabilises

    Quarterly Outlook

    Bonds: What to do until inflation stabilises

    Althea Spinozzi

    Head of Fixed Income Strategy

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ...
  • Commodities: Energy and grains in focus as metals pause

    Quarterly Outlook

    Commodities: Energy and grains in focus as metals pause

    Ole Hansen

    Head of Commodity Strategy

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)

Saxo
40 Bank Street, 26th floor
E14 5DA
London
United Kingdom

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo is a registered Trading Name of Saxo Capital Markets UK Ltd (‘Saxo’). Saxo is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871. Registered in England & Wales.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo assumes no liability for any loss sustained from trading in accordance with a recommendation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.

©   since 1992