Earnings vs. Inflation; Rivalries are BACK⚔️ | Market News Sentiment Review 10/18-10/22

News sentiment remains polarized on earnings optimism and inflation pessimism. We dive into some recent rivalries: Snapchat vs. Apple, Nikola vs. Tesla, and Ripple vs. The SEC

Happy spooky szn everyone, welcome to another weekly review of stock market news sentiment. I am your host Ramsey Shaffer (@babbldev on Twitter), thanks you for being here, and a big thank you to our 4 new subscribers this week!

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This past week we analyzed another 1,701 stock market news articles from across the internet and summarized the results of our analysis into this 5-minute report to help you gauge the aggregate mood about stocks and the market overall. A breakdown of how this report is written:

  1. This Week’s News Sentiment [1 min read]

  2. Most Mentioned Tickers in News Coverage [2 min read]

  3. Best and Worst Ticker Sentiment [3 min read]

  4. Weekly Market Mood Outlook [1 min read]

1. This Week’s News Sentiment 📰

The mood of the markets this past week remained relatively neutral overall — though Q3 earnings season has brought cause for positivity, hyperinflation remains a cause for concern. Compared to last week, the average sentiment expressed in stock market news articles is trending more pessimistic (though relatively even in terms of optimism and pessimism), indicating that the negative reporting about inflation is slightly outweighing the positivity about earnings. News sentiment is also trending more reactive (ie. more focused on past events than future events, which makes sense given the recent uptick in company earnings reports being commented on). Here’s a breakdown of the events driving this week’s stock market news sentiment:

📈 Stocks: The major U.S. stock indexes climbed 1% to 2% for the week as the S&P 500 and the Dow set records, eclipsing previous highs that they set about two months earlier. The NASDAQ finished the week less than 2% below a record that it set in early September.1 Now two weeks into earnings season, third-quarter net income is expected to rise nearly 33% compared with the same period a year earlier, based on S&P 500 companies that have already reported combined with projections for those still scheduled to report. According to FactSet, that quarterly growth rate would be the third-highest in 11 years. 

₿ Cryptos: The global cryptocurrency market cap rose roughly 4% last week back up to $2.5T dollars — this was driven primarily by Bitcoin ($BTC) setting a new all-time high price above $66K on Wednesday, with Ethereum ($ETH) following suit near a pinnacle price of $4.2K. The new highs appear to be catalyzed by the recent launch of the first-ever BTC futures ETF ($BITO)

🦅 Economy: Inflation remains a hot-button topic as of late, with prices surging and supply flailing across many sectors. The price of U.S. crude oil rose for the tenth week in a row, eclipsing $84 per barrel on Friday. The recent surge began in mid-August and has pushed the price of oil to its highest level in about seven years. Despite this, Federal Reserve Chair Jerome Powell said on Friday that the U.S. central bank was on track to begin reducing its asset purchases soon — though he said it’s not yet time to raise interest rates because employment levels are still too low. Twitter CEO Jack Dorsey doesn’t appear to be buying the chairman’s facade, as he Tweeted Friday:

2. Most Mentioned Tickers 📊

Each week we analyze the number of headlines written about each stock and cryptocurrency. The most mentioned tickers in this week’s news and the tickers with the biggest volume increase compared to last week are shown below:

💻 Apple Inc. ($AAPL) saw the most news coverage of any stock this week appearing in a staggering 24% of all articles we scraped this week. This appears to be a perfect storm of both its recent Apple event and its earnings upcoming this week. On the whole, the company is just coming off of its final Apple Event of the year, in which it announced that it will be releasing redesigned 14-inch and 16-inch MacBook Pro models with Apple's next-generation M1 Pro and M1 Max chips, third-generation AirPods with a similar design as the AirPods Pro with the exception of silicone ear tips, and three new HomePod mini colors. There's also a new Apple Music Voice Plan revolving around Siri.

The action at this event was comparatively bigger than others in recent memory, and as a result $AAPL stock rose nearly 4% over the past week. Overall news sentiment remains relatively positive around 12.3% optimism. Apple also made headlines this week for external reasons, mainly related to its recent privacy policy changes. Snapchat ($SNAP) alleged this week that the privacy changes are destroying the company’s ad-business (some journalists called this Snapchat’s “ad-mageddon”, which is hilarious). Other Apple headlines pertain to the recent global supply-chain perplexion, which threatens to curtail what’s setting up to be a record-setting Holiday season for the company.

3. Sentiment Winners and Losers 👍👎

Each week we summarize the most extreme sentiment scores in the news for each ticker to help you decide where to focus your attention. Here’s a look at which tickers scored the highest (and lowest) in terms of optimism, pessimism, speculation, and reaction expressed in this past week’s news:

Sentiment: Most Optimistic😀 and Pessimistic😒 Tickers

🌻 Enphase Energy Inc. ($ENPH) was the most optimistic ticker in this week’s news coverage after boosting its battery business: this week was a big week for solar tech companies across the board as oil prices continue to hover above $80 and natural gas prices remain near multi-year highs. Accordingly, Enphase Energy — a solar system technology company that competes with Plug Power ($PLUG) and Bloom Energy ($BE) for trade volume in the solar space — has seen renewed interest in recent weeks, rising 15% over the past month to $176.70 per share.

The stock’s climb was buoyed this week by a press release announcing that Enphase will expand its battery business beyond its current markets of North America and Germany into Belgium this month. Enphase batteries are warranted for 10 years of use and can store as much as 42 kWh of power — enough to power most homes for more than a day. Wall St. analysts say the move will make Enphase more competitive in the solar markets, and its stock price appears to reflect this. If oil and gas continue their pricey trajectory, we can expect $ENPH to keep chugging upwards on the company’s growing offerings. This week’s most optimistic $ENPH article:

Why Enphase Stock Jumped 4% Today” | The Motley Fool

⚡ Nikola Corp. ($NKLA) is this week’s most pessimistic ticker, as the rocky road towards EV profitability continues: speaking of electricity-oriented stocks, Nikola made news waves this week relating to its ongoing lawsuit against big-brother Tesla. Nikola originally filed the lawsuit in 2018, alleging that Tesla’s semi-truck was infringing on a number of Nikola’s design patents and that the truck’s design theft would steal $2B from Nikola in market share. The case had been closed for months after both companies stopped responding to court orders, until being reopened this week by a federal judge with new demands for the EV start-up: one to walk the court through the technologies in question and one for a hearing about the scope of the patents Nikola claims were infringed.

Analysts responded to the announcement this week with pessimism, as the whole case seems to be more of a publicity chess piece for Nikola than a merited allegation. The company will have until January to prove any wrong-doing, and if they can (which seems doubtful), $NKLA stock could benefit — though I wouldn’t hold my breath. Outside of the allegations, $NKLA has been on a downward trajectory over the past year, falling more than 80% in share price since its post-IPO hype last June. While some investors remain hopeful that Nikola could become the Lyft to Tesla’s Uber in the EV market, the company remains unprofitable and has been wounded by managerial problems as of late. This week’s most pessimistic $NKLA article:

Nikola allowed to proceed with $2 billion patent lawsuit against Tesla” | The Verge

Time-Sense: Most Speculative🤔⏩ and Reactive😮⏮️ Tickers

🍿 Ripple Coin ($XRP) is this week’s most speculative ticker in news coverage as its feud vs. the SEC becomes pure entertainment: Lakers vs. Celtics, USA vs. USSR, Coke vs. Pepsi, and Ripple vs. SEC — some rivalries for the history books. Ripple has been going back and forth vs. the US Securities and Exchange Commission for years now: first the SEC begins pursuing Ripple over claims that the cryptocurrency is an unregistered security, then in January Ripple files a Freedom of Information Act request demanding to know why the SEC didn’t consider Ethereum ($ETH) to be a security (ie: “if you’re going to penalize us, why don’t you penalize our major competitor?”). Now sixth months later, a district judge is allowing Ripple to depose the former SEC official who declared that wasn’t a security in 2018.

Ripple CEO Brad Garlinghouse has been outspoken about the conflict in recent days, claiming that the SEC’s favorable treatment of $ETH has allowed it to overpass $XRP over the past three years (XRP was the second largest crypto asset by market capitalization in late December 2017. It has currently slipped to seventh place while Ethereum has held the second spot ever since.) While the ongoing legal action may not save Ripple’s demise relative to Ethereum, it does have the potential to make cryptocurrency regulation more bonafide as a whole.

The digital asset space lacks clarity, that’s nearly unanimous. The SEC v. Ripple lawsuit may help the industry move toward a clearer regulatory framework and will provide precedent for the next enforcement actions and litigations with the SEC. This week’s most speculative $XRP article:

“Ripple CEO says the SEC helped Ethereum to overtake XRP as No.2 Crypto” CoinTelegraph

🩺 Intuitive Surgical Inc. ($ISRG) is this week’s most reactive stock after posting big-boy growth in its Q3 Earnings Report: Intuitive Surgical has long been of interest to growth investors as the company’s surgery robots show serious potential to disrupt the healthcare sector. The interest seems warranted this week: the company reported Q3 revenues of $1.4 billion — up 30% from Q3 last year and narrowly beating analyst estimates. Much of the revenue growth appears to be driven by the leasing of its famous da Vinci robot — which went viral back in 2014 for this video of it autonomously stitching a grape back); during Q3 2021, the number of surgeries completed using the da Vinci jumped 20%. Overall, Intuitive Surgical has seen compound average annual growth of 12%, brought down by a serious decline in revenues during the COVID-19 woes of last year.

Following the company’s earnings release, $IRSG stock rose 3.5% last week to $341.52 per share. The stock has climbed 43% over the past year, and while it currently trades for a premium 72 times trailing 12-month free cash flow, analysts argue that the price tag is not unreasonable given the company’s steady rate of sales growth and even faster increases of its bottom line. If the Delta variant can remain in-check, we might expect Inuitive’s revenues to continue climbing in the coming months, and share price might as well follow suit. This week’s most reactive $IRSG article:

Robotic Surgery Giant Tops Forecasts On Roaring Procedure Growth; Is It Sustainable?” | Investors Business Daily

Biggest Mood Swings and Changes 🎭🔀

Each week we compare the sentiment of each ticker to its sentiment from the previous week. Presented below are the tickers that saw the biggest change in each of our four sentiment metrics this week compared to last.

🏬 Best Buy Inc. ($BBY) saw the largest increase in optimism this week after climbing 5% to $118.39 per share on the hype surrounding its recent acquisition of Current Health, a tech company that helps with remote patient monitoring and telehealth.

🧾 Broadridge Financials Solutions Inc. ($BR) recorded the biggest increase in pessimism this week after it surfaced that Chairman Richard Daly sold 73,300 of his shares in the company.

🏠 Airbnb Inc. ($ABNB) posted the biggest increase in speculative language expressed this week compared to last on news that the company expects its upcoming Q3 earnings to be its “strongest ever” behind easing COVID-19 restrictions.

🔬 Laboratory Corp. of America Holdings ($LH) toated the biggest increase in reactive language expressed this week compared to last as share price rose 5% in its run-up to its upcoming earnings release this Thursday, in which the company is expected to report impressive revenues from its COVID-19 testing services wing.

4. Market Mood Outlook 🌡️🔭

After another big week of earnings, stock market news sentiment remains relatively polarized compared to recent months. On the one hand, the stock and crypto markets continue to vulture near all-time high price points, yet no one seems convinced that inflation won’t be a serious issue for the economy over the next year or so.

Our takeaway: the sentiment suggests markets should continue to climb through the remainder of Q3 earnings reports (which are expected to continue exceeding estimates behind looser COVID-19 restrictions) — however, the party could be over before we all know it if the Fed can’t stave off hyperinflation in the coming months. A big determiner of the economic and market trajectory will come this upcoming Holiday season — if we can get through Christmas without any major supply chain fiascos, there may be hope for us yet. For now, we’ll all just remain prisoners of the moment.

That’s all for this week folks — good luck in the markets, and enjoy earnings season while the pickings are ripe. Stay tuned for an upcoming edition of “What We’re Reading”, and let us know in the comments below which stocks you’d like us to do some spotlight analysis for. Thank you for reading! 😄🙏

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