Morning Reads

Morning Reads





Meta Platforms (META) slumped 15.1% to $418.85/share AH on Wednesday despite the company topping expectations with its Q1 earnings report, as its revenue guidance for the current quarter came in on the light side. Investors also appeared to be irked by Meta's forecast of heavy spending on artificial intelligence, amid concerns that these huge investments could take years to pay off.

AI push: CEO Mark Zuckerberg launched the earnings call with a decided look forward rather than back, acknowledging a "good start" to the year and focusing most of the call on the company's work on AI. "Overall, I view the results our teams have achieved here as another key milestone in showing that we have the talent, data and ability to scale infrastructure to build the world's leading AI models and services," he said. "And this leads me to believe that we should invest significantly more over the coming years to build even more advanced models and the largest scale AI services in the world."

Meta, which is already spending a lot on AI research and development, raised its capital expenditure guidance for the year to $35B-$40B (from $30B-$37B). The increased spending will support the company's new AI products and the required computing infrastructure. "Realistically, even with shifting many of our existing resources to focus on AI, it will still grow our investment envelope meaningfully before we make much revenue from some of these new products," said Zuckerberg.

SA commentary: Seeking Alpha analysts were mostly unfazed by the stock reaction after seeing highlights in the report. Alex King of Investing Group Leader Cestrian Capital Research said it was an "excellent" quarter, pointing to Meta's unlevered pretax free cash flow margins hitting 38%, the best since March 2022. SA analyst The Asian Investor is aggressively buying the drop, as Meta's reasonably strong earnings suggest that the digital advertising rebound that started in 2023 has staying power. "I also believe the market overreacts to Meta's push into AI, which is not something the company should be punished for." (95 comments)

GDP watch

The U.S. economy likely grew at a slower pace in Q1, as consumer and government spending remains strong. The Bureau of Economic Analysis will publish its first gross domestic product estimate for Q1 before the bell today. Economists largely expect GDP to have risen at a 2.5% annualized rate, compared to 3.4% in Q4. While some expect GDP numbers could surprise to the upside amid a strong labor market and a pickup in the manufacturing cycle, Wells Fargo said weakness in shipments may mean a softer-than-expected reading. Anecdotal evidence suggests that GDP estimates may be too low, warned Investing Group Leader Mott Capital Management. (1 comment)

Ozempic scrutiny

A key Senate committee has launched an investigation into how Novo Nordisk (NVO) prices its popular weight-loss drug semaglutide in the U.S. Senator Bernie Sanders (I-VT), chairman of the Senate Health, Education, Labor, and Pensions Committee, said the drugmaker charges "outrageously high prices" for its semaglutide versions, Ozempic and Wegovy, indicated for diabetes and obesity. "The result is that Ozempic and Wegovy are out of reach for millions of Americans who need them," he said, arguing that Novo sells the same product in Canada and Europe at far lower prices. A study in March showed that Ozempic can be produced for less than $5 a month, but costs far more. (11 comments)

Mega deal

BHP (BHP) has reportedly proposed to buy out Anglo American (OTCQX:AAUKF) for about $39B, in what would rank as one of this year's biggest M&A deals. If a deal is finalized, it would create the world’s biggest copper miner that would account for 10% of the metal's global production. Anglo has been struggling with major setbacks over the past year - a drop in prices for some of its key products, operational difficulties forcing it to slash production targets and declining profits. Deal deliberations are at an early stage and there is no certainty that BHP will proceed with a deal. "If BHP does indeed continue to pursue this deal, we would be surprised if other bidders do not emerge," said Jefferies. (12 comments)

Today's Markets

In Asia, Japan -2.2%. Hong Kong +0.5%. China +0.3%. India +0.7%.
In Europe, at midday, London +0.6%. Paris -0.9%. Frankfurt -0.7%.
Futures at 7:00, Dow -0.6%. S&P -0.6%. Nasdaq -0.9%. Crude +0.1% to $82.90. Gold +0.1% to $2,339.50. Bitcoin -4.4% to $63,471.
Ten-year Treasury Yield unchanged at 4.65%.

Today's Economic Calendar

8:30 GDP
8:30 International Trade in Goods (Advance)
8:30 Initial Jobless Claims
8:30 Retail Inventories (Advance)
8:30 Wholesale Inventories (Advance)
10:00 Pending Home Sales
10:30 EIA Natural Gas Inventory
11:00 Kansas City Fed Mfg Survey
1:00 PM Results of $44B, 7-Year Note Auction
4:30 PM Fed Balance Sheet

Companies reporting earnings today »

What else is happening...

Boeing (BA) slides as loss narrows amid scrutiny of plane safety.

UnitedHealth (UNH) said to wind down Optum telehealth business.

Blinken in China: Contentious talks with Chinese officials begin.

Nvidia to buy two startups aiming to run AI models more cheaply.

DOT forcing airlines to give full refunds for canceled, delayed flights.

HP (HPQ) gains as Einhorn's Greenlight takes stake on AI potential.

IBIT (IBIT) sees one of the longest daily ETF inflow streaks of all time.

U.S. natural gas futures plunge on oversupply, LNG terminal issues.

Big Tech earnings: Alphabet (GOOG), Microsoft (MSFTon deck.

Grocer shares hint at Amazon (AMZN) low-cost delivery concerns.

Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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