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Beyond Ridiculous, Earnings Season Is Underway

Posted July 23, 2019

The dogs are panting on the porch and the people are trying to beat the heat. We had a 113-degree heat index in Maryland on Sunday. Earnings numbers aren’t helping.

Though tech stocks are on a roll, the broader market is below average. Goldman Sachs has reported: “So far, 28% of firms have beaten sales forecasts, well below average, although 49% have beaten on earnings.”

Morgan Stanley is forecasting a 10% correction based on a Fed cut that it believes has already been priced in.

The Economist writes: “Profits in six out of eleven big industries may have declined from April to June compared with a year earlier. FactSet, a research firm, estimates an average drop of 2.8% for S&P 500 earnings, on top of a 0.3% dip the quarter before.”

Trade War Blues

At least nine companies are blaming the trade war with China for the shortfall, including shipping companies and railroads. Much of this was due to a front-loading of inventories last quarter.

The market leaders, the FAANG stocks, have lost their bite. There was a growth slowdown at Google. Netflix took a profit hit, and Apple is suspect regarding phone sales. We will see what Amazon says — I suspect its cloud division will report robust growth.

This will be a busy weak, with 144 companies of the S&P 500 reporting quarterly earnings. Big blue chips like Visa and McDonald's will continue their winning streak. I’m interested in what Nokia has to say regarding the booming 5G sector and the shakeout with Huawei.

The big hitters are Facebook, Tesla, and Amazon over the next two days. There are a lot of market movers reporting this week.

Running Dog Capitalist…

In other news, China’s answer to the NASDAQ, the STAR Market, started trading on Monday with massive gains. Chinese investors bum-rushed the 25 companies listed on the exchange. The volume surge caused prices to climb an average of 140% intraday.

Beijing hopes the STAR Market will inspire more science- and technology-focused companies to list at home rather than seeking an IPO in Hong Kong or New York.

Beyond Reason

And finally, Beyond Meat (NASDAQ: BYND), my favorite ridiculous company, is reporting on the 29th of July. The company has been public just shy of three months, but the stock has been on a one-way trip to capital-gainsville.

Beyond Meat now has a market cap of $11.68 billion. A market capitalization, or total market value, is found by multiplying the number of shares by the share price.

We are talking about a company with 330 employees and $115 million in sales. It has a price to sales of 101 and a forward price-to-earnings ratio of 3,884.00, which is the biggest P/E number I've seen in a long time. 

They do have robust growth, but this is food created in a factory. It is not infinitely scalable. It also costs four times the price of ground beef and isn’t even good for you.

On the plus side, silver hit $16.50 an ounce and is trending higher.

All the best,

Christian DeHaemer Signature

Christian DeHaemer

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Since 1995, Christian DeHaemer has specialized in frontier market opportunities. He has traveled extensively and invested in places as varied as Cuba, Mongolia, and Kenya. Chris believes the best way to make money is to get there first with the most. Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor's page.

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