What recession? 5 Stocks Leading the Nasdaq to Its Best Month Since 2020
A day after a government report that the US economy shrank for the second quarter in a row – an indicator the country may indeed be in recession – the Nasdaq Composite is up 228 points, or about 1.9% in afternoon trading. Friday. Those gains propelled the index up nearly 10.6% for the month. If the market holds on to that growth, July would be the best month for the tech-heavy index since 2020.
Tech giants Amazon (AMZN 11.82%), up 12%, and Apple (AAPL 3.47%), were up 3.7% after their quarterly reports — before the market opened — beat expectations in Friday’s leading move. Shares of several smaller tech companies are also up, including Five9 (FIVN 9.21%), which rose 12% even after reporting its earnings.
Most clean energy stocks on the Nasdaq are also up. The conglomerate includes SolarEdge Technologies (SEDG 5.29%) and Sunrun (RUN 6.70%), with approximately 6% shares as of this writing. Those gains came after Thursday’s news that the US Senate is moving forward with a spending bill that would provide significant funding and incentives to the renewable energy industry.
Amazon, Apple Buck Supply Chain and Macro Pressure
While Amazon reported a GAAP loss for the second quarter due to rising costs in its e-commerce business, its shares rose on a generally positive result and forward guidance. Revenue was up 10% (adjusted for foreign currency changes), and a significant portion of its losses were tied to a drop in the value of electric vehicle maker Rivian, in which Amazon holds a major stake. Investors are rewarding Amazon because of what’s working well for it — namely, advertising and its Amazon Web Services (AWS) cloud infrastructure unit. Ad sales increased 10%, while AWS revenue increased 33% and operating income increased 36%. The company guided revenue growth in the third quarter to be in the 13% to 17% range.
Apple also shrugged off investor concerns, beating expectations with modest revenue growth and reporting iPhone sales that outpaced the rest of the smartphone market, which is cooling off. This is especially important for Apple. Not only is the iPhone its most important and profitable product, but it is also central to how most people access the tech giant’s ecosystem of services. Revenue in Apple’s Services segment grew 12%; A significant portion of those $19.6 billion in quarterly revenue came from iPhone users.
Tech earnings are making investors more optimistic
Since its failed merger with Zoom Video Communications last year, Five9 investors have been hit hard by it. But Thursday’s earnings report is helping to reverse that downbeat sentiment. The company posted 32% revenue growth to a record $189.4 million. In particular, its enterprise business is looking great, with subscription revenue up 41%. Its gross margin on a GAAP and adjusted basis fell to 53% and 61%, respectively, but those results were in line with expectations. Based on the accelerated pace of its business, management provided guidance for the year for both sales and operating results.
Like many other high-growth cloud and software-as-a-service companies, Five9 is still making losses, and it generated negative operating cash flow in the quarter (though it remained operating-cash-positive in the prior period). Is). Investors will want to monitor its growth, and should also look for better cash flow metrics. This is especially true in today’s interest rate environment, where access to capital is becoming more limited and borrowing more expensive.
Clean energy stocks jump on climate bill deal
Several of Nasdaq’s clean energy stocks also moved higher Friday in Thursday’s news that congressional Democrats have prepared a settlement bill that could pass in the Senate and require $5,000 to support technologies to combat climate change. 369 billion will be provided. Much of that funding will go toward various incentives that favor clean energy tech companies. These include SolarEdge, which makes power management electronics used in residential and commercial solar power systems, and Sunrun, one of the largest installers of solar power systems in the US.
While government incentives will always be helpful to these companies, they are not thesis-changing or thesis-building. SolarEdge and Sunrun, for example, have become important players in their respective segments by focusing on providing high quality products and services at competitive prices. While federal incentives may sweeten the pot, their competitors will have access to similar programs. At the end of the day, it will be an expansion of the clean energy industry and increased global competition for those who do most to reduce the cost of wind and solar power and energy storage – not federal subsidies or tax incentives.
John McKay, CEO of Whole Foods Market, a subsidiary of Amazon, is a member of The Motley Fool’s board of directors. Jason Hall holds positions at Zoom Video Communications. The Motley Fool positions and recommends Amazon, Apple, Five9 and Zoom Video Communications. The Motley Fool recommends SolarEdge Technologies and recommends the following options: long March 2023 $120 call on Apple and short March 2023 $130 call on Apple. The Motley Fool has a disclosure policy.