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- đ° 5 Fact Friday: Techâs Tale Of Two Business Models
đ° 5 Fact Friday: Techâs Tale Of Two Business Models
Services-focused companies like Meta and Microsoft outperformed their product-reliant peers as tariff risk and weaker guidance weighed on results.
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Hey Money Maniacs,
The S&P 500 and Dow are on an eight-day tear, brushing off a GDP dip and riding a wave of friendlier trade headlines into May.
The U.S. locked in a minerals deal with Ukraine, eased auto tariffs, and is closing in on new trade ties with India, South Korea, and Japan.
Meanwhile, Big Tech is holding the line on AIâreporting solid earnings while continuing to pour cash into their core growth engines.
The marketâs rallying. The question now is: will it stick?
Letâs dive in!
STOCKS
1. Techâs Tale Of Two Business Models đ
More than a third of the S&P 500 reported this week in the busiest stretch of earnings season so far. Out of 180+ companies, hereâs the highlight reelâstarting with the tech titans.
Meta $META ( Ⲡ0.17% ) crushed it. Revenue jumped 16% to $42.3B as ad impressions rose 5% and ad prices climbed 10%. Despite jacking up its 2025 AI capex forecast to a staggering $68B and burning $4.2B in Reality Labs, earnings per share (EPS) still surged 37%.
Microsoft $MSFT ( Ⲡ0.51% ) impressed across all major segments. Revenue climbed 13%, and EPS beat by over 22%. Cloud grew 20%, and Azure soared 33% as AI adoption continues to provide a tailwind. Capex came in hot at $16.7B, but margins are still trending up. Oh, and tariffs? Only mentioned once.
Apple $AAPL ( âź 0.36% ) beat expectations on both the top and bottom line, delivering $1.65 EPS on $95.4 billion in revenue. The company sold more iPhones, Macs, and iPads than analysts anticipated. Services revenue rose 12% to $26.7B, though it came in slightly under forecasts.
Tim Cook noted Apple is already sourcing over half of U.S. iPhones from India and most other products from Vietnam, helping manage tariff risk. The board also approved a massive $100B buyback and a 4% dividend increase to 26 cents per share.
Amazon $AMZN ( Ⲡ0.98% ) also delivered strong headline numbers, reporting 9% revenue growth and EPS of $1.59, a 16% beat over estimates. However, Q2 sales guidance was muted due to tariff uncertainty. After all, about 70% of its goods are sourced from China.
The company also made headlines for considering a checkout feature that itemized tariff costs, before reversing course under pressure from the White House.
Qualcomm $QCOM ( âź 2.6% ) reported 15% revenue growth, topping expectations across the board. But soft forward guidance and 46% China revenue exposure spooked investors, sending shares lower.
Bottom Line: Services-focused companies like Meta and Microsoft outperformed as investors cheered margin strength and AI momentum. But product-reliant peersâApple, Amazon, and Qualcommâfaced a cooler reception as tariff risks and weaker guidance clouded the outlook.
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STOCKS
2. Earnings Season Offers Glimpse Of Whatâs Ahead đŽ
Outside the tech giants, the rest of the market delivered a little bit of everythingâearnings beats, guidance pulls, and some good old-fashioned tariff tension.
Visa $V ( âź 0.09% ) narrowly beat expectations on strong cross-border spending and steady consumer demand. They left guidance unchanged and announced a shiny new $30B buyback.
Spotify $SPOT ( âź 0.97% ) missed profit estimates badlyâreporting EPS of âŹ1.07 vs. expectations of âŹ2.13. However, monthly active users (MAUs) rose 10% to 678M and premium subscribers hit 268M, both in line with guidance.
Robinhood $HOOD ( Ⲡ1.43% ) surged on rising trading volumes and expanded its buyback program by $500M. Plus, earnings more than doubled.
Coca-Cola $KO ( âź 0.99% ) beat earnings and largely reaffirmed its full-year guidance, calling tariffs âmanageable.â
Snap $SNAP ( Ⲡ1.81% ) beat revenue expectations but declined to offer guidance. Shares tanked after the company warned of softening ad spend, especially as a result of eliminating the de minimis import exemption.
Starbucks $SBUX ( Ⲡ1.19% ) missed on both revenue and earnings, with same-store sales falling for the fifth straight quarter. CEO Brian Niccol called the results âdisappointing,â but insisted that the brand is gaining âmomentumâ in its turnaround.
Yum Brands $YUM ( âź 0.64% ) was a mixed bag: Taco Bell posted 9% same-store sales growth, KFC was up 2%, and Pizza Hut declined 2%.
Royal Caribbean $RCL ( Ⲡ0.27% ) raised guidance on record bookings and lower fuel costs. Norwegian $NCLH ( Ⲡ1.28% ) held firm despite âsofteningâ demand.
ECONOMY
3. GDP Falls, Markets Rise Anyway đ§
On the surface, the U.S. economy shrank in Q1.
GDP declined 0.3%, marking the first contraction since early 2022. Thatâs a steep drop from last quarterâs 2.4% gain and a far cry from the 0.8% growth economists were expecting.
But hang on.
This âbadâ GDP print was almost entirely driven by a 41% spike in imports, as businesses scrambled to stockpile goods ahead of Trump-era tariffs set to resume this summer.
Since imports subtract from GDP, that surge erased more than five full percentage points from the headline number.
Under the hood? The economy actually held up surprisingly well.
Consumer spending rose 1.8%âthe slowest pace since mid-2023, but still solid given all the doom and gloom in consumer sentiment surveys. Business investment in equipment soared 23%, likely another byproduct of the tariff pull-forward.
Meanwhile, the Fedâs preferred inflation gaugeâcore PCEâwas flat month-over-month and up just 2.6% year-over-year. That keeps the door open for rate cuts in what looks like a healthy but cooling economy.
After a sharp drop at the open from the shock of a negative GDP headline, Wall Street caught on. Markets digested the details, recognized the short-term distortions, and ultimately finished the day in the green.
Remember, GDP is backward-looking and the stock market is forward-looking. So this is the kind of x-ray vision we need to get a real-time read on economic strength.
Still, you canât have it both ways.
If you normalize this quarterâs GDP to adjust for early import activity, youâll need to do the same next quarterâwhen those purchases wonât happen again.
A drop in imports could boost Q2âs GDP and give the opposite illusion of an economy heating up, when itâs really just feeding off last quarterâs inventory binge.
Bottom Line: The economy isnât stalling, yet. But thanks to the tariff pull-forward, Q2âs GDP report just got a lot more consequential.
How will Q2 GDP compare to Q1? |
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OPTIONS
4. How To Make Your Stocks Work Overtime đź
Covered calls are one of the most popular (and practical) income strategies for long-term investors.
If youâre sitting on 100+ shares of a stock you wouldnât mind selling at the right price, this move lets you squeeze some extra cash out of your holdingsâwithout selling yet.
Hereâs how it works:
1. You own stock XYZ, trading at $50.
2. You sell a call option with a $55 strike price.
3. You collect the premiumâsay, $2 Ă 100 shares = $200.
4. If XYZ stays below $55 until expiration, the option expires worthless. You keep both the shares and the $200.
5. If XYZ rises above $55, your shares get âcalled awayâ (sold at $55), and you still keep the premium.
đ Why It Works
Extra Income: You get paid the premium regardless of what happens.
Softens Small Losses: The premium lowers your breakeven. In this example, if XYZ falls to $48, your net loss is $0 ($50 cost - $2 premium = $48 breakeven).
Built-In Exit Plan: If youâre open to selling at a higher price anyway, this gives you a bonus on the way out.
â ď¸ What to Watch Out For
Capped Gains: If the stock surges, youâre stuck selling at the strike price.
No Downside Protection: The premium helps, but you still lose if the stock drops significantly.
đ§ž Tax Implications
Option expires worthless: The premium is taxed as a short-term capital gain (at ordinary income rates).
Option is exercised: The premium is added to your stockâs sale proceeds and taxed based on how long you held the stock.
Option is closed early: The difference in premiums is treated as a short-term gain or loss.
â Best For
Sideways markets: If your stock trades in a tight range, you keep earning income without losing your shares.
Mild bull markets: You can sell calls a bit above market price, capture steady gains and premiums.
Volatile markets: When market volatility (VIX) is high, option premiums get juicierâeven if your stock doesnât move much.
Income-focused investors: Especially retirees who want to boost yield from a stock theyâre comfortable selling.
Bottom Line: Covered calls let you earn income from stocks you already ownâespecially when the marketâs not doing much. Just remember: you're trading potential upside for steady cash flow.
STOCKS
5. Guess That Stock đľď¸ââď¸
This company started as a textile mill before pivoting to insurance, buying cash-rich businesses, and quietly transforming into a $1.1 trillion investment powerhouse.
Can you name the stock?
1. This global holding company owns more than 65 businesses outright, including a freight railroad, a utility powering millions of homes, and good olâ Seeâs Candies.
2. It has delivered nearly 20% average annual returns for six decades, driven by a strategy of avoiding fads and betting on time-tested, cash-rich businesses.
3. The firmâs latest move? Raising its stake in five of Japanâs largest trading houses to nearly 10% apiece.
4. The 94-year-old CEO is hosting the companyâs annual shareholder meeting, jokingly called âWoodstock for Capitalists,â in Omaha, Nebraska, on May 3rd.
5. Retail investors flock to the companyâs quarterly 13F filings, hoping to mimic the trades of arguably the greatest investor alive.
Got a guess? Tap here to reveal the answer â
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