Weekly StockWatch: JPMorgan Takes a Profit Hit, Amazon Registers its Biggest Prime Day Ever, Emmy Nominations are Out & more

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JP Morgan Lower Profits

The banking giant took a hit in its bottom line in the second quarter of the year, as Thursday's results showed Net Income of $8.649 billion, which marked a 28% slump year-over-year, but was marginally improved compared to Q1 2022. [1]

This was largely driven by a $428 million credit reserve build, compared to a $3 billion a year ago, as the bank prepares for a challenging environment, while also "temporarily" suspending share buybacks.

CEO Jamie Dimon had a word of caution and talked of "negative consequences on the global economy sometime down the road", due to geopolitical tensions, erosion of consumer confidence, monetary tightening and other factors.

The US Fed has embarked upon an aggressive monetary tightening path - having already delivered 150 basis points worth of hikes - and has pointed towards another 0.75% move next week. Higher interest rates are generally good for the banking sector, but banks care mostly about longer-term rates and the Fed's hike cycle is frontloaded this year.

This is evident in the recent inversion of the 2/10 year yield curve, which apart from being considered a precursor of recessions, is not really good for banking institutions either. Kansas City Fed President Ms George alluded to this last week, expressing concerns of the "implications for the yield curve and traditional bank lending models" from the aggressive tightening. [2]

JPM.us shed more than 3% on Thursday after the earnings report, in a bad day for the US Stock market, droping to the lowest level of the year.

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Amazon Prime Day

The e-commerce goliath held the 2022 Prime Day this week (July 12-13), which is an important two-day annual event, during which it offers major discounts on products across various categories, to Prime members.

Amazon.com touted this year's event as the biggest in its history, with Prime members worldwide saving over $1.7 billion. Consumers purchased more than 300 million items, while selling partners outpaced Amazon's retail business. [3]

Given these metrics, it looks like consumers were undeterred by sky-high inflation, which hit new four-decades highs in June, as headline CPI came in at 9.1% year-over-year.

The tech and retail juggernaut releases its Q2 2022 results on Thursday July 28 and it is worth noting that any year-over-year comparison maybe unfavorable, since last year's Prime Day was held a month earlier, ie within the second quarter.

Last week, Amazon (AMZN) had taken a step into the US food delivery market, after a collaboration with Dutch Just Eat Takeaway (TKWY.nl), under which it will obtain a 2% stake in Grubhub.

Regulatory scrutiny persists and the firm made concessions to the European Commission in relation to its Buy Box, the Prime service and the marketplace seller data, in an effort to avoid a potentially hefty fine. [4]

AMZN.us comes for a very bad second quarter, during which it dropped to the lowest levels in two years. July started in a better footing, but the stock runs a negative week so far.

Emmy Nominations

The 2022 Emmy nominations were announced this week [5], with the awards ceremony scheduled for September 12. Warner Bros - owned HBO/HBO Max dominated the list, with 140 designations and its critically acclaimed Succession drama toping all shows with 25 nomination.

The swiftly expanding Disney+ clinched 34 nominations, mostly for Marvel and Star Wars related programs, while the Walt Disney Company as a whole earned 147.

AppleTV+ surpassed Disney's streaming service, with a tally of 52 nominations, with Ted Lasso having once again a very strong presence, while streaming king Netflix, came in at the second place, scoring 105 nominations.

Streaming services had benefited during the pandemic but they now face challenges as the world leaves lockdown behind it, competition increases and surging inflation leaves consumers with less disposable income.

Delta Returns to Profits

The US airliner posted another strong quarter, taking advantage of the pent-up demand for traveling, as covid-19 restrictions that devastated the industry are lifted.

Its top line returned to pre-pandemic levels, since it recorded Adjusted Operating Revenue of $12.311 billion in the second quarter, which fell just 1% short of the Q2 2019 figure. [6]

More to it, Delta Airlines (DAL.us) reported Adjusted Net Income of $921 million, while Adjusted Operating Margin hit double digits, as it came in at 11.7%.

However, challenges still lay ahead, as the war in Ukraine has sent energy prices and fuel costs higher, while airports and airlines struggle to meet increased demand, causing a barrage of flight cancelations.

ZIP Cancels Sezzle Merger

ZIP Co Ltd is an Australian fintech company, which provides Buy Now Pay Later (BNPL) services in various countries, including the United States.

The Buy Now Pay Later sector has been increasingly popular worldwide, while tech giant Apple is making an entry into the market, with Apple Pay Later service which is included in the upcoming iOS 16.

However, the sector has also come under scrutiny, whereas surging inflation, higher interest rates and prospects of an economic downturn create a challenging environment.

In an effort to strengthen its US presence, ZIP had announced back in February, an agreement to acquire Sezzle, but this week it announced the termination of the merger. The company said that the US remains "a core market and area of focus, and a significant opportunity for the business". [7]

We believe that the cancellation of the agreement underscores those challenges and is a warning signal for the BNPL sector, which we will continue to follow closely.

Z1P.au wiped out a mid-boggling 90% of its value during the first half of the year, although it finds some reprieve this month, while the termination news have not had an adverse impact.

NEXT WEEK (July 18-22)

The US earnings season heats up during the upcoming week, as more banks, such as Bank of America, report and the tech sector comes into focus.

The king of the Electric Vehicle (EV) industry, Tesla Motors Inc, releases its financial results on Wednesday, having already announced the delivery of 254,695 in Q2 – a noted decline form the record highs of the previous quarter. [8]

The troubled streaming leader, Netflix (NFLX), reports its earnings a day ahead and investors will be eagerly awaiting the subscribers update. During the previous announcement in April, the firm had revealed the loss of 200,000 users in the first quarter and had projected a shocking loss of 2 million subscribers for the to-be-reported Q2.

On Friday, attention will turn to Twitter's results, amidst the ongoing Elon Musk Saga. The CEO of Tesla (TSLA) recently announced that he is , but Twitter sued him in order to enforce the merger agreement. [9]

Nikos Tzabouras

Senior Market Specialist

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 15 Jul 2022 https://www.jpmorganchase.com/content/dam/jpmc/jpmorgan-chase-and-co/investor-relations/documents/quarterly-earnings/2022/2nd-quarter/084c5750-7947-474e-8138-8268b6c72b88.pdf

2

Retrieved 15 Jul 2022 https://www.kansascityfed.org/Speeches/documents/8875/2022-George-MidAmericaLabor-07-11.pdf

3

Retrieved 15 Jul 2022 https://press.aboutamazon.com/news-releases/news-release-details/prime-day-2022-was-biggest-prime-day-event-ever

4

Retrieved 15 Jul 2022 https://ec.europa.eu/commission/presscorner/detail/en/ip_22_4522

5

Retrieved 15 Jul 2022 https://www.emmys.com/404-search

6

Retrieved 15 Jul 2022 https://s2.q4cdn.com/181345880/files/doc_financials/2022/q2/Delta-Air-Lines-Announces-June-Quarter-2022-Results_vFinal-(1).pdf

7

Retrieved 15 Jul 2022 https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02541126_PS-2A1384864

8

Retrieved 15 Jul 2022 https://ir.tesla.com/press-release/tesla-vehicle-production-deliveries-and-date-financial-results-webcast-second-quarter

9

Retrieved 03 Oct 2022 https://twitter.com/btaylor/status/1546965769983889409

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