JPMorgan Shares Are Down Even After Reporting An Earnings Beat

Plus, Biden unveiled a $1.9 trillion coronavirus stimulus package, the SEC has opened an investigation into Exxon’s valuation of a key Permian Basin asset, and Apple is reportedly gearing up debut two new MacBook Pro models.

Stocks were lower to start the last day of he week with the Dow slipping 357 points lower, or 1.1%. The S&P 500 and Nasdaq both fell around 1%.

Big banks kicked off earnings season this morning. JPMorgan delivered a beat for fourth-quarter profit on record trading results as well as a boost from releasing money previously set aside for loan losses. JPMorgan reported earnings per share of $3.79 on revenue of $30.16 billion, compared to analysts estimates for earnings per share of $2.62 on revenue of $28.7 billion. Citigroup also delivered an earnings beat, reporting earnings per share of $2.08—versus estimates for earnings of $1.34 per share—on revenue of $16.5 billion. “As a sign of the strength and durability of our diversified franchise, our revenues were flat to 2019, despite the massive economic impact of COVID-19,” said outgoing Citi CEO Mike Corbat. And Wells Fargo posted a revenue miss, reporting earnings per share of $0.64 on revenue of $17.93 billion, compared to analysts’ expectations for revenue of $18.127 billion. “Although our financial performance improved and we earned $3.0 billion in the fourth quarter, our results continued to be impacted by the unprecedented operating environment and the required work to put our substantial legacy issues behind us,” CEO Charlie Scharf said in a statement. “With a more consistent broad-based recovery and as we continue to press forward with our agenda, we expect you will see that this franchise is capable of much more.”

President-elect Joe Biden unveiled the details of a $1.9 trillion coronavirus rescue package designed to support households and businesses amid the ongoing pandemic. The proposal, titled the American Rescue Plan, includes $1,400 direct payments to most Americans, $400 additional federal unemployment benefit and extending it—as well as the eviction and foreclosure moratorium—through September, increases the federal minimum wage to $15, and includes $350 billion in state and local government aid, among other provisions. “It’s not hard to see that we’re in a once-in-several-generations economic crisis,” Biden said. “We have to act and we have to act now.” But even with Democratic majorities in both houses of Congress, Biden may have a hard time getting the proposal passed given the go-big price tag and the inclusion fo initiatives opposed by many Republicans.

Exxon shares are down nearly 4% this morning after news broke that the SEC has opened an investigation into the oil giant over how it valued a key asset in the Permian Basin. The probe stems from a whistleblower complaint that during a 2019 internal assessment, workers were forced to use unrealistic assumptions about how quickly wells could be drilled to reach a higher valuation, the Wall Street Journal reported adding that at least one of the workers who complained was fired in 2020. The report follows a difficult year for Exxon, which has said it will write down the value of its assets by up to $20 billion in the fourth quarter following a difficult 2020 for the oil and gas industry more broadly. 

A top Apple analyst says the company is preparing to launch two new MacBook Pro models this year with 14- and 16-inch screens, a new design, and the return of MagSafe charging ports. “The MacBook Pro has not changed the form factor design for five years,” said TFI analyst Ming-Chi Kuo. “We believe that the launch of two all-new design MacBook Pro models in 3Q21 will attract consumers’ attention and boost the replacement demand. …Benefited from the replacement demand of new models, we predict that the total MacBook shipments will significantly grow by 25-30% YoY to 20 mn units in 2021.”

And Spotify shares are down 5% this morning after Citi analysts downgraded the stock from Neutral to Sell, writing that the company’s multi-million dollar bet on podcasting that has seen it sign exclusive deals with big names including Joe Rogan, Kim Kardashian, Michelle Obama, and The Duke and Duchess of Sussex, is failing. “The cadence of Premium gross additions (through 3Q20) and app download data (through 4Q20) do not show any material benefit from recent podcast investments that began in 2019,” the analysts wrote. “To date, we have not seen a material positive inflection in app downloads or Premium subscriptions. If we were to see a material positive inflection in app downloads or Premium subs (from higher gross adds or materially lower churn), we would alter our view. But, our fear, is that if podcasting doesn’t provide a way for Spotify to shift away from music label dependence, the Street may reassess the underlying value of the business. And, that would be bad for Spotify’s multiple and equity value.”

Stocks We’re Watching

DPW Holdings (OTC: DPW): DPW Holdings shares surged as much as 52% yesterday after the company announced that its power electronics business, Coolisys Technologies Corp, has begun accepting preorders on Amazon for its wall-mounted ACECoop residential level 2 7kW single electric vehicle charger. Coolisys’ President and CEO Amos Kohn said, “We are pleased to announce the Amazon pre-order launch of our residential EV wall mount charging system. Coolisys’ compact, space saving wall mount AC charging system is easy to install and uses advanced charging technology that provides highly efficient and reliable charging of electric vehicles. We believe our EV charger product line is well positioned to address the expected rapid expansion of infrastructure required to support broad adoption of electric vehicles globally.”