The stock market rally continued in the holiday-shortened week, with the Dow Jones and other major indexes hitting fresh all-time highs. Walt Disney (DIS) rallied on Disney+ user growth, Best Buy (BBY) broke out on results and guidance while Alibaba (BABA) rallied through a buy zone as the e-commerce giant began trading in Hong Kong.
Charles Schwab (SCHW) will buy TD Ameritrade (AMTD), LVMH (LVMUY) will acquire Tiffany (TIF) while Novartis (NVS) reached a deal for Medicines Co. (MDCO)
Stock Market Rally Doesn’t Slow Down
After mild declines in the prior week, the stock market rally rebounded solidly amid big M&A deals like Schwab-TD Ameritrade. Even with Friday’s modest pullback, the Dow Jones rose 0.6%, the S&P 500 index 1% and the Nasdaq composite 1.8%. Despite President Trump signing legislation backing Hong protesters, China trade deal hopes remained higher. Several more stocks broke out, including retailers Best Buy, Burlington Stores (BURL) and Dick’s Sporting Goods (DKS), as leadership continues to expand.
Big M&A Deals
In a busy week for merger activity, Charles Schwab (SCHW) confirmed it will buy smaller rival TD Ameritrade (AMTD) for $26 billion in stock. Assuming the merger wins regulatory OK, the new Charles Schwab will boast roughly 24 million brokerage accounts and more than $5 trillion in client assets. Louis Vuitton brand owner LVMH (LVMUY) will buy Tiffany (TIF) for roughly $16 billion in cash — the largest luxury-goods deal ever — gaining access to more American shoppers. Novartis (NVS) is taking over The Medicines Company (MDCO) for $9.7 billion, which makes a promising cholesterol drug. Kirkland Lake Gold (KL) will buy rival Detour Gold in a $3.7 billion all-stock deal, expanding its Canadian footprint. IBD 50 stock Kirkland Lake tumbled.
Burlington Soars Despite Dim Holiday Forecast
Off-price retailer Burlington Stores (BURL) earnings topped Q3 estimates. But its revenue and holiday-quarter earnings forecast were light. Even so, Burlington shares soared past a buy point. Specialty discounter Dollar Tree (DLTR) missed on earnings and also gave a weak forecast. Shares tumbled.
Disney+ User Growth Strong
Walt Disney (DIS) is averaging roughly a million downloads per day for its new Disney+ streaming service, new data shows. Research firm Apptopia found users downloaded the app 15.5 million times in the two week since it went live Nov. 12. Additionally, Disney generated $5 million through in-app purchases. That suggests many Disney+ app users are subscribing to the $6.99-per-month service beyond the one-week free trial. Disney+ is the No. 1 app on the Apple (AAPL) and Alphabet (GOOGL) app stores in the U.S., according to Apptopia. Disney’s targeting 60 million to 90 million global subscribers — and profitability — by 2024 for the Netflix (NFLX) and Amazon (AMZN) Prime Video challenger.
Best Buy Signals Green Christmas
Best Buy (BBY) reported 22% EPS growth with sales up 2% to $9.76 billion, both beating Q3 targets. For the holiday Q4, Best Buy guided higher on earnings but slightly lower on revenue. To compete with Amazon.com (AMZN) and other retailers this holiday season, Best Buy touted free next-day delivery on thousands of items ordered online with no membership or minimum purchase required. Best Buy customers also can choose to pick up products in a store within an hour of placing their order. Shares soared 11% for the week, blasting past a buy point.
Economy ‘More Than Half Full’
Fed chief Jerome Powell on Monday described the U.S. economy as a glass “much more than half full.” He said Fed policy is positioned to “return inflation decisively to our symmetric 2% objective,” meaning the latest rate-cut pause has legs. The U.S. economy grew 2.1% in Q3, revised up from the initially reported 1.9% rate. Consumer and federal spending was strong but business investment weak. However, the October durable goods report showed a solid rebound in core capital goods orders. The trade in goods balance shrank to $66.53 billion in October, from $70.55 billion. Exports dipped 0.7%, but imports slid 2.4%. Imports may have been expedited in prior months to get ahead of scheduled tariff hikes.
Software Stocks Are Big Earnings Movers
Software continued to recover this week, with individual stocks rising and falling on earnings.
Autodesk (ADSK) briefly cleared a 31-week consolidation after the maker of computer-aided design software reported better-than-expected Q3 results with 169% EPS growth, though its guidance was light.
Medical software provider Veeva Systems (VEEV) reported Q3 EPS up 33% as revenue popped 25% to $280.9 million, both topping. Billings rose 23% to $193 million, above estimates. On its earnings call, management said it expects fiscal 2021 revenue to rise 27% to $1.385 billion at the midpoint of guidance, including recent acquisitions. Veeva’s Vault customer relationship management offering for pharmaceutical sales reps continues to be its growth driver. Shares initially jumped after earnings but reversed lower, after strong recent gains.
Palo Alto Networks (PANW) earnings fell 10% while revenue climbed 18% to $897.4 million, both beating fiscal Q1 views. But product revenue came in light while the cybersecurity firm also gave weak guidance. Shares tumbled.
Nutanix (NTNX) jumped on views its transition to a subscription software model has gained traction. The fiscal Q1 loss tripled but was better than expected, while revenue unexpectedly edged higher.
Biotechs Jump On Good Results
Global Blood Therapeutics (GBT), Intercept Pharmaceuticals (ICPT) and ChemoCentryx (CCXI) popped on strong clinical and regulatory news. Global stock broke out after its sickle cell treatment, Oxbryta, won FDA approval three months early. Intercept jumped Monday after the FDA granted its experimental nonalcoholic steatohepatitis treatment, known as obeticholic acid, a priority review. Meanwhile, shares of its rival, CymaBay (CBAY), collapsed after it scrapped several studies of liver-disease treatments due to unexpected side effects. On Tuesday, ChemoCentryx rocketed 281% on strong Phase 3 test results for an autoimmune disease treatment. Arrowhead Pharmaceuticals (ARWR) leapt Tuesday after the company reported full-year sales soared 946% to $168.8 million. Arrowhead and other biotechs working in RNA interference, a method of silencing genes, jumped Monday on the Novartis-Medicines deal.
Dell Guides Low But VMware Unit OK
Dell Technologies (DELL) earnings fell 17%, still beating Q3 views, but 2% sales growth fell short. The tech giant lowered its January quarter sales guidance amid shortages on Intel (INTC) PC chips and slowing China growth. Shares fell sharply. VMware (VMW), Dell’s majority-owned virtualization software unit, topped Q3 estimates. Its Q4 revenue forecast excluding its Carbon Black acquisition was roughly in line with views.
Chipmakers Seesaw On Earnings
Ambarella (AMBA) beat third-quarter estimates and guided higher for Q4 sales. But after initially rising, shares of the video processing chipmaker plunged 7% the next day. Analog Devices (ADI) missed fiscal Q4 views and guided lower for the current Q1. Shares initially fell 4.8% but rebounded to close up 1.7% that day.
News In Brief
Alibaba (BABA) moved into a buy zone amid China trade deal optimism. U.S. shares kept rising as Alibaba began trading on the Hong Kong Stock Exchange.
Dick’s Sporting Goods (DKS) jumped into buy range after EPS rose 33% to 52 cents, crushing forecasts for 38 cents, and revenue climbed 5.7% to $1.96 billion, topping views for $1.91 billion. Same-store sales popped 6%, burying estimates for 2.8%.
Momo (MOMO) dropped despite the Chinese mobile social media company topping Q3 estimates and offering a bullish outlook.
eBay (EBAY) rose after announcing it will sell StubHub for $4 billion cash to London-based Viagogo, an online marketplace for tickets.
Amazon (AMZN) will open a pop-up store on Chinese e-commerce platform Pinduoduo (PDD) that will run until the end of December and carry a selection of about 1,000 products.
HP (HPQ) beat fiscal Q4 estimates as the PC and printer giant rebuffs takeover advances by Xerox (XRX).
Deere & Co. (DE) blamed “lingering trade tensions” as EPS fell 7% to $2.14 for the fourth quarter. Sales rose modestly to $8.7 billion. The ag and construction equipment maker also lowered 2020 guidance. Shares fell sharply Wednesday.
Hewlett Packard Enterprise (HPE) fell as fiscal Q4 revenue slid 9% to $7.22 billion, missing estimates amid weakness in its storage business. January quarter sales guidance also fell short. HPE stock fell.
Keysight Technologies (KEYS) reported fiscal Q4 EPS rose 32% while sales grew 7% to $1.12 billion, both beating.
Agilent Technologies (A) narrowly topped the Street’s fiscal fourth-quarter estimates with adjusted earnings of 89 cents a share on $1.37 billion in sales. Earnings increased 10% year over year while sales rose 6%. At their core, sales edged up 4%.