Alphabet Jumps, Tesla Skids on Earnings

The Daily Breakdown takes a closer look at Alphabet and Tesla after the two firms reported earnings. One was good and one was lacking…

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Thursday’s TLDR

• “Alpha-beat” tops expectations
• Tesla misses the mark
• Chipotle tumbles

What’s Happening?

It was a mixed bag of earnings last night, with the main focus going to Alphabet and Tesla. Shares of GOOG are up modestly this morning, climbing 3% to 4%, while Tesla shares are down about 5% to 6%. Let’s take a quick look at them.

Alphabet reported better-than-expected earnings and revenue last night, with earnings growing more than 20% year over year. Search revenue topped estimates, while cloud revenue — which is an important read-through for other cloud firms, like Amazon and Microsoft — also beat expectations.

Notably, Alphabet sees full-year CapEx spend of roughly $85 billion. That’s up from a previous outlook of $75 billion and above analysts’ estimates of $73.3 billion, according to Bloomberg. The read-through there? That it’s good news for chip companies — like Nvidia — and other AI infrastructure plays as mega-cap tech continues to invest in this area.

Turning to Tesla, the company’s results “paint a picture of a company caught in transition,” according to eToro analyst Josh Gilbert — @JoshGilbert9. “There’s a road ahead, but Tesla is stuck in the slow lane, carrying the weight of underwhelming vehicle sales today while pushing the ambitious promises of robotaxis, AI, and energy dominance tomorrow.”

That’s as revenue fell 12% year over year — its steepest decline since 2012 — while earnings missed analysts’ estimates and free cash flow plunged 89%. CEO Elon Musk noted that “We probably could have a few rough quarters.”

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The Setup — IBM

IBM stock had been a strong performer heading into last night’s earnings report, with shares up more than 25% this year and more than 50% over the past 12 months. The company beat on earnings and overall revenue estimates, however, IBM missed on software revenue estimates. That has shares down more than 6% in pre-market trading. 

With this morning’s dip, bulls are hoping that the stock finds support in the $260 to $265 range. This area had been resistance for most of this year until IBM stock broke out in June and ran to new highs near $296. if this area acts as support, perhaps IBM can rebound from this dip. Shares aren’t necessarily doomed if this area fails as support, but more selling pressure could ensue. 

Options

For options traders, calls or bull call spreads could be one way to speculate on support holding on a pullback. In this scenario, options buyers limit their risk to the price paid for the calls or call spreads, while trying to capitalize on a bounce in the stock. 

Conversely, investors who expect support to fail could speculate with puts or put spreads. 

For those looking to learn more about options, consider visiting the eToro Academy.

What Wall Street Is Watching

SOL

Solana climbed above $206 on Tuesday, but then pulled back yesterday and again this morning. Now Solana faces an interesting technical area for active bulls, as it retests the breakout area we talked about this week and its short-term moving averages. 

CMG

Shares of Chipotle are tumbling this morning, down more than 10% as the company’s quarterly earnings disappoint investors. Chipotle reported a second straight quarterly sales decline, revenue missed analysts’ expectations, and management cut its full-year guidance.

Disclaimer:

Please note that due to market volatility, some of the prices may have already been reached and scenarios played out.