Earnings roundup: Intel falls, Snap gains, Amex misses, Kimberly-Clark sinks
Julie Hyman, Brian Sozzi and Myles Udland discuss some of Friday’s early morning movers.
Video transcript
JULIE HYMAN: First, let's talk about what's going on on the earnings front here. We heard from Intel after the close yesterday. The new CEO, Pat Gelsinger, of course, had already revealed his plan to turn Intel around. So this is sort of, one could argue, a little bit of a placeholder quarter in that way. That said, though, the company did come out with earnings that were above analyst estimates, revenue above analyst's as well. And Gelsinger, who I know you're going to talk to later today, Brian, talked about a chip shortage really being persistent here for the next couple of years.
BRIAN SOZZI: Yeah, no real change per se, Julie, in the tone of when that chip shortage might end compared to the last time I talked to Gelsinger about a month ago. At the time, said it could last for-- for almost two years. So I think a lot of these companies, automakers, you name it, are going to have to get used to the fact that they're going have to pay higher prices for chips, if they can even get them.
But two concerns here, I think, on Intel, and that's why you see the stock down about close to 4% here in the premarket. One is the profit margins for Intel down about 610 basis points year-over-year. It continues to be a concern on the Street how much market share is Intel losing to the likes of an AMD and an Nvidia? So that's-- that's concern number one.
Number two, data center sales. Data center sales were down 20% year-over-year in the quarter. That's-- that's Intel's most profitable line of business. So you put those two together here, and I think that's why you're seeing investors take profits.
But overall, it was a pretty good earnings call for Gelsinger. He reiterated that hey, we're going full steam ahead to build out our chip-making capacity, and this is what we're doing. Get on board or get out.
JULIE HYMAN: Yeah, so we'll see how all of that works out as the year progresses. Another company that we heard from after the bell was Snap. And Snap is really sort of surprising here, maybe that it still exists at all and that so many people use it. But also, you know, as we talk about these companies that sort of benefited during the pandemic and what happens next, Snap still continues to see pretty rapid growth and expects to continue to see that growth.
The company predicting year-over-year revenue growth of 80% to 85% in the second quarter, which would be an acceleration from the first quarter. They're also talking about a smaller loss than estimated. They broke even last quarter.
They're talking about being cash flow positive. Myles Udland, I mean, I think part of our surprise over Snap has to do with the cohort that uses Snap. But nonetheless, the fact that financially they seem to be improving also might be a surprise.
MYLES UDLAND: Yeah, we don't need to boom or [INAUDIBLE] ourselves too hard talking about who uses Snap anymore. I mean, I think the thing for Snap, and I use them as an example on this talking point of mine which users have probably heard, people might be rolling their eyes, it's fine, but ultimately, Snap's success over the last couple of years, I think, is a great example of when you have a really talented CEO with a good vision and then that CEO has some discipline instilled upon them by financial markets, you start to see a company executing at a really high level.
And that's really been the Snap story after a pretty dicey couple of years there after their initial public debut. This stock was, remember, in the single digits less than two years ago. And here we see it at about $60 per share. And the thing with Snap that they have-- kind of the story they've told so successfully and which remains true in their business is it's still a top line story.
The company is still growing its users. It's still growing its revenue. And we can start worrying about what you do with free cash flow. And obviously, first time they're free cash flow positive, and all of a sudden they're bringing in $126 million worth of free cash flow. So I'm not sure that-- or I know that's not going to be a sustainable path for them in the next few quarters.
But if you continue to grow your top line as a growing business, and I think maybe whether it was inside Snap or the investor base, they saw the company's public debut as, you know, the end point on some kind of a journey. All right, let's start turning this into profits, into shareholder returns. But that's not the phase of life that Snap was in, and it's not the phase of life they remain in.
As you mentioned, Julie, revenue growth, like, 80% this year, that is still a growing business that is bringing in new users at a faster clip than expected. And if the existing social network structure-- you know, you have-- you have Facebook and Twitter, right, if you can continue to kind of portend a future in which you look more like Facebook than you look like Twitter, I think it's going to remain a story that investors get-- continue to be excited about. And it's certainly been an interesting one to track over the last few years.
BRIAN SOZZI: Hey, Myles, very important number you tossed out there, $126 million in free cash flow. There are other-- there were several other bullish numbers or positive numbers in this report. I mean, you had Dell user growth of 22%. That's a multiyear high.
You had revenue growth 66%. That accelerated from the fourth quarter. And the company's Average Revenue Per User, or ARPU as they call on the Street, that was up 35.6% year-over-year. So whatever Snap is doing right now, they are-- they're showing investors that they can monetize this stuff. And I think that's why you're seeing the market like it.
JULIE HYMAN: Let's move to another area here, Amex, American Express out with its numbers this morning. And as you can see, their revenue missing estimates. Revenue falling year-over-year about 12%, even as earnings beat estimates.
It seems like the biggest shortfall, or the entire shortfall, really, in the revenue number came from travel and entertainment, because the company said excluding those areas, volume was up 11% in the first quarter. So that seems to be a big issue for them. But you know, you think of Amex also, or at least I think of Amex as really a primary business card, right, a corporate card for people. And so you would have to think that that would continue to be an issue for them, too, Myles.
MYLES UDLAND: Yeah, and look, I mean, obviously it's not fair to compare an Amex to, you know, what's happening over at, say, Mastercard or some of these other pure consumer spending-type plays. And shares of Amex have benefited to-- you know, to a decent extent over the last year with kind of that consumer coming back kind of reopening trade. But Julie, not only do they have such a large corporate business, as you mentioned, just think about their member base. It is going to skew wealthier. And if we've seen anything in the pandemic, you are going to have more saving from people at the higher end of the income scale.
I mean, this is just basic marginal propensity to consume, right. We've seen stimulus checks go out the door. And we've seen stimulus checks feed right back into the economy. The core Amex member is not really getting a stimulus check. And a core Amex member is spending their rewards, which is really the reason for having the card in the first place.
They're using their rewards to go travel. And that's not something that's able to happen right now. I mean, I think about myself with a Delta Amex, I'm canceling it. Why do I need to pay for a credit card for an airline that I'm not really getting on anywhere, regardless of the fact that I moved away from the Delta hub?
It's just that-- that kind of-- the reason for having that within your wallet has declined considerably over the last year. And I think the company is likely to kind of continue dealing with that over the coming years because, again, that value proposition that Amex offers is so clearly about the world as it was in 2018 to 2019. And I think we're still some ways away from-- from getting back to that.
BRIAN SOZZI: Hey, Myles, too, on-- on Amex, if you're an Amex investor, you need to look yourself in the mirror today and ask yourself, is what we're seeing in the business community in terms of travel, is it structural? Look what we heard from Chipotle CFO Jack Hartung yesterday. Now before a pan-- pre-pandemic, these guys were out there visiting restaurants nonstop. They lived off the plane. They ate a lot of burritos in the stores. That's what they did.
But he told us yesterday in our interview, we're not traveling as much, and we are unlikely to go back to traveling the way we were. Zoom meetings are OK. We can talk to restaurant leaders from inside the restaurant using Zoom. Look at what Southwest told us yesterday when it reported earnings, business travel continues to lag. And as long as those things stay in place, you're going to see Amex here potentially put up a couple more challenging quarters like the one they put up today.
JULIE HYMAN: Yeah, and to Myles's point about travel and the wealthy who might be traveling, they might be doing international travel. But right now international travel severely constrained, in particular. And finally, the great toilet paper boom of 2020. Can we-- can we officially call it over, Myles?
MYLES UDLAND: I think we can call it over. Here we go. Kimberly-Clark CEO Mike Hsu, "First quarter comparisons were impacted by COVID-19-related stock up"-- there's the TP boom-- "in the year-ago period, consumer tissue category softness"--
JULIE HYMAN: Eh.
MYLES UDLAND: Eh, kind of a-- kind of a rim shot?
BRIAN SOZZI: Wow.
MYLES UDLAND: Yeah, sure-- as well-- as well as commodity inflation and temporary supply chain disruptions because of that storm down in Texas. So really hitting all the-- hitting all the marks here for Kimberly-Clark. You look at the stock of the last year, not a huge surprise to investors that the TP boom is over. But boy, it was-- it was some fun while it lasted.
JULIE HYMAN: Yes, indeed it was, although it wasn't fun if you were actually looking for toilet paper--
MYLES UDLAND: Exactly.
JULIE HYMAN: --in the store or trying to get it delivered to your house. Fun for the company, maybe. Let's talk about something else that may be done, at least for now, cryptocurrency rally. It's at least taking a pause, right. And we've had all of this commentary this week from some of the big banks like JP Morgan saying, you know, that Bitcoin was going to see a leg down.
Well, here's a leg down. It went as low as around 47,000. The 50-day moving average, which, you know, in Bitcoin, as we've sort of discussed, in the absence of fundamental drivers, technical drivers tend to gain more importance. And I know that 50-day moving average is something a lot of investors were watching closely.
That said, if you're a cryptocurrency investor, guys, you kind of have to expect volatility, that's part of the deal, and maybe some of the newer crypto investors didn't. But even if you're new, there still have been pullbacks. So this seems just like it's kind of part of it, right Myles?
MYLES UDLAND: Yeah, look, I can't wait to talk to Jared Blikre in about 30 minutes to get his view on the technical setup for Bitcoin, because I've seen a lot of TA on the feed over the last 24 hours that this was not-- or this is no longer just a beautiful-looking chart. So we'll get into that. On Doge, whatever. Like, it was always a joke, so now it's down 30%. I mean, what-- what can you really say about it?
What I will say, though, is as crypto becomes a larger part of serious real money allocations, which-- which I think we all believe and know it's going to be in the years ahead, what's the standard line on crypto? Crypto is a very volatile asset, and it's not for everybody, right? We talked to Michael Sonnenshein of Grayscale not too long ago on that exact point. I mean, kind of tongue in cheek but also seriously, I think that's basically, Brian Sozzi, code from your friendly wealth manager or whatever to say don't ask me why crypto's up or down. It's going to go up and down all the time, and I'm not really going to have a good answer for you.
BRIAN SOZZI: Well, here-- I think the action we're seeing this week, Myles, look what happened yesterday on-- on talk of a higher capital gains tax. And-- and, Julie, you have to wonder, does the Bitcoin trade--
MYLES UDLAND: Oh, boy.
BRIAN SOZZI: --work if we're about a-- a land of a potential--
MYLES UDLAND: Oh, boy.
BRIAN SOZZI: --44% capital gains tax? Not looking good.
JULIE HYMAN: Eh, I mean, no.
MYLES UDLAND: Wow.
JULIE HYMAN: I don't--
MYLES UDLAND: We're doing this-- we're doing this already? We're getting--
JULIE HYMAN: No, we're not doing it.
BRIAN SOZZI: We're breaking it early. It's Friday.
JULIE HYMAN: We're doing it next. We're doing it next.
MYLES UDLAND: This is the appetizer?
JULIE HYMAN: That's a great tease.
