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Big Tech earnings showed digital ad revenue came roaring back

Big Tech’s third-quarter earnings showed that digital ad revenue came roaring back in recent months….

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Facebook CEO Mark Zuckerberg makes his keynote speech during Facebook Inc’s annual F8 developers conference in San Jose, California, U.S., April 30, 2019.

Stephen Lam | Reuters

Big Tech’s third-quarter earnings showed digital ad revenue came roaring back in recent months, and suggested some of the digital ad trends tied to the explosion of e-commerce could be here to stay.

Alphabet, Facebook, Twitter and Amazon, which reported earnings Thursday after-hours, along with peers Snap and Pinterest, which reported earlier, showed strong digital advertising growth in the quarter as brand advertising started to rebound and sports made a return.

And though digital advertising has been on the rise for years, events of this year appear to be accelerating existing trends like e-commerce growth, as consumers get comfortable buying online out of necessity. And advertisers are following them online.

“In a world where we debate what structural changes will COVID bring… we believe one answer is clear: advertisers’ eagerness to spend/experiment on digital advertising has inflected,” Morgan Stanley analysts wrote in a Friday note. “The platforms with leading reach and ad offerings are set to capitalize and drive that shift into ’21 and beyond.”

Research firm MoffettNathanson added that the recovery in digital advertising is “so rapid and voluminous that many of the leading digital platforms are now exceeding the ad growth they posted” before the pandemic in the fourth quarter of 2019.

“In essence, history will likely show that the impact of COVID-19 and the attendant negative economic shocks depressed spending for only five months,” MoffetNathanson analysts wrote Friday. “We also strongly believe that history will show that 2020 will be seen as an inflection point for the industry as secular shifts in e-commerce, small to medium-sized business formation and declines in linear TV viewing accelerate the growth in digital ad spending.”

Here’s what happened in the ad businesses of Google, Facebook, Twitter and Amazon this quarter and what they mean for the digital ad market.

Facebook

Facebook saw ad revenue in the quarter up 22% compared to a year ago, adding another million active advertisers in the quarter to reach 10 million. Morgan Stanley analysts said the broader trend of advertisers moving dollars online, along with Facebook’s reach and the efficacy of its ads, is why the business is “likely growing faster now than it was in January/February.”

As brand advertising continues to pick up and e-commerce accelerates for the holidays, that will likely mean continued acceleration for Facebook, Barclays analysts noted.

Some are hesitant around the potential reversal of the trends spurred by Covid-19. Needham analysts said Friday that Facebook benefited from higher usage per day amid global lockdowns, which results in more ad units Facebook can sell. That elevated usage may not continue as businesses like movie theatres and restaurants open.

But, as JPMorgan analysts pointed out, the Street may interpret Facebook’s comments about the uncertainties of 2021 as more cautionary.

“Investor concerns around the cautious tone for 2021 seem overdone given the easy comps [through] 2Q and FB’s history of such commentary,” Barclays analysts added Friday.

Google

Google saw a strong advertising quarter. Its “search and other” category rebounded to 6% growth. YouTube ad revenue showed 32% growth as direct-response strength was joined by a return of brand advertising spend.

Credit Suisse analysts said Google was able to capitalize on the movement of more ad dollars online.

“As the pandemic accelerates the secular shift to online, Google has been looking to onboard merchants of all sizes with a series of products including Google My Business and free listings on Google Shopping – this along with tools to help start advertising in 15 minutes should help to convert these businesses to paying advertisers,” Credit Suisse analysts said.

Though the pandemic has hurt some traditional channels of advertising, Wedbush analysts said the shift to online disproportionately benefits Alphabet.

“We expect this shift to continue at least until there is a widely available vaccine, and even then, it is likely that many consumers who discovered online grocery shopping and online restaurant delivery will be converted to more frequent purchasers ahead,” they wrote. “In the near term, we anticipate increased consumer spending in ecommerce channels to continue to drive product and brand advertising increasingly online.”

Twitter

Though Twitter’s ad revenue was up 15% in the quarter, driven by the return of sports and delayed events and product launches, many analysts saw the company as one of the weaker recovery stories in advertising.

The company, which has a stronger brand advertising business, said it will delay updates to its direct-response ad product next year. That means Twitter won’t yet be able to take advantage of a segment of the ad market that has remained stronger during the pandemic.

“The rising online ad market tide is likely to be a meaningful tailwind to TWTR in 4Q and ’21,” Morgan Stanley analysts wrote. “But in our view, TWTR needs to improve execution (and utilize its new ad infrastructure) to drive sustained stronger user retention and higher monetization.”

RBC analysts said they expected to see 22% year-over-year ad revenue growth in Q4. And it’s yet another example of the way advertisers are thinking differently about digital.

“Overall we view 3Q results as a positive indicator on strength of digital advertising market as offline businesses refocus on Online activity,” BofA Securities analysts wrote Friday.

Amazon

Amazon reported 51% year-over-year growth in its “other revenue” category, which includes advertising, as ad budgets improved from their second-quarter contraction.

“With increased online traffic, AMZN has turned that traffic into valuable real estate for advertisers, and in turn, had strong advertising performance in 3Q,” KeyBanc analysts wrote Thursday.

Analysts expected e-commerce advertising would ramp up even more heading into the holiday season in the fourth quarter, but noted that with higher competition for traffic from traditional retail, advertising costs could be higher.

And though digital advertising has been on the rise for years, events of this year appear to be accelerating existing trends like e-commerce growth, as consumers get comfortable buying online out of necessity. And advertisers are following them online.

Source: https://www.cnbc.com/2020/10/30/google-facebook-amazon-twitter-earnings-show-ad-revenue-recovery.html

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JPMorgan Chase beats profit estimates on strong trading, $5.2 billion release of loan-loss reserves

JPMorgan posted first-quarter profit of $4.50 a share, much higher than the $3.10 per share expected by analysts surveyed by Refinitiv.

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JPMorgan Chase on Wednesday reported profit and revenue that exceeded analysts’ expectations on robust trading results and a $5.2 billion benefit from releasing money it had previously set aside for loan losses that didn’t develop.

The bank posted first-quarter profit of $14.3 billion, or $4.50 a share including a $1.28 per share benefit from the reserve release, higher than the $3.10 per share expected by analysts surveyed by Refinitiv. Excluding the impact of a $550 million charitable contribution, which lowered earnings by 9 cents, the bank earned an adjusted figure of $4.59, exceeding the $3.10 estimate.

Companywide revenue of $33.12 billion exceeded the $30.52 billion estimate, driven by the firm’s trading operations, which produced about $1.8 billion more revenue than expected.

JPMorgan’s release of $5.2 billion in reserves is the biggest sign yet that the U.S. banking industry is now expecting to have fewer loan losses than it did last year, when it set aside tens of billions for defaults anticipated from the coronavirus pandemic. A year ago, the firm had added $6.8 billion to credit reserves.

“Overall, this was a great quarter for JPMorgan,” said Octavio Marenzi, CEO of consultancy Opimas. “It is now increasingly clear that the bank over-reserved, and that money is now flowing back into its earnings, concealing some of the weakness in consumer banking.”

JPMorgan shares dipped less than 1%.

Fixed income trading produced $5.8 billion in revenue, a 15% increase that exceeded analysts’ estimates by more than $800 million, on activity in securitized products and credit markets. Equities trading revenue surged 47% to $3.3 billion, a full $1 billion more than estimates, on “strong performance across products.”

JPMorgan, with the world’s biggest Wall Street bank by total revenue, was expected to benefit from robust investment banking fees driven by record issuance of special purpose acquisition companies, which saw more activity in the first quarter than all of 2020, itself a record year.

That came to pass: The firm said first-quarter investment banking revenue surged 222%, or a full $2 billion, to $2.9 billion, exceeding the estimate of $2.65 billion.

Most of the quarter’s reserve release came from the bank’s retail division: The firm said $3.5 billion was tied to the bank’s credit card borrowers, and another $625 million from home loan borrowers.

While that meant that the firm’s consumer and community banking division saw profit surge by $6.5 billion from a year earlier, to $6.73 billion, the bank said that card and mortgage revenue was impacted by lower balances as flush consumers pay down their debts.

In the release, CEO Jamie Dimon called loan demand “challenged,” but during a call with reporters Wednesday, Dimon added that the dynamic would ultimately be good for loan demand because consumers were in good shape.

Dimon struck an optimistic tone for the near-term economic future in the U.S., similar to comments he made this month in his annual shareholder letter.

“With all of the stimulus spending, potential infrastructure spending, continued quantitative easing, strong consumer and business balance sheets and euphoria around the potential end of the pandemic, we believe that the economy has the potential to have extremely robust, multi-year growth,” Dimon said in the release.

Analysts will also be curious about the pace of share repurchases the bank is expected to make. Last month, the Federal Reserve said banks that pass the industry’s 2021 stress test at mid-year will be allowed to resume higher levels of dividend payouts and buybacks starting June 30.

Shares of JPMorgan rose 21% so far this year, compared to the 25% advance of the KBW Bank Index.

After JPMorgan’s earnings statement, Goldman Sachs also released first-quarter results that crushed forecasts with record first-quarter net profits and sales due to strong performance in trading and investment banking.

Here are the JPMorgan numbers:

Earnings: $4.59 per share vs. $3.10 per share expected by analysts polled by Refinitiv.
Revenue: $33.12 billion vs. $30.52 billion expected.

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Correction: JPMorgan’s EPS figure comparable to estimates has been adjusted 9 cents higher to account for a one-time charitable contribution.

JPMorgan shares dipped less than 1%.

Source: https://www.cnbc.com/2021/04/14/jpmorgan-jpm-earnings-q1-2021.html

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Coinbase drops below debut price

Coinbase held its direct listing on the Nasdaq on Wednesday, luring public market investors who’ve been waiting to get into the cryptocurrency exchange.

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Coinbase shares opened at $381 on the Nasdaq Wednesday morning, giving the cryptocurrency exchange an initial market cap of $99.6 billion on a fully-diluted basis. Shares quickly shot up as high as $429, giving it a market cap of $112 billion on a fully-diluted basis, before dropping back below the debut price.

The price was still well above the reference price of $250 set on Tuesday night, but no shares were traded on public markets at that price.

Skirting the traditional IPO process, Coinbase listed its stock directly, allowing employees and existing shareholders to sell shares immediately at a market-based priced.

Excluding options and restricted stock units, Coinbase’s market cap was about $80 billion at the opening price. Including options and RSUs, it’s already one of the 85 most valuable U.S. companies.

Founded in 2012 as a way to simplify the purchase of bitcoin, Coinbase has emerged as the most popular crypto exchange in the U.S. and soared in value alongside digital currencies bitcoin and ethereum. The service now has 56 million users, up from 43 million at the end of 2020 and 32 million the year before that. In its last private financing round in 2018, investors valued Coinbase at $8 billion.

Coinbase is hitting the public market as a record amount of cash pours into cryptocurrencies and tech investors are thirsty for high-growth stories. Snowflake, Palantir, DoorDash, Airbnb and Roblox have all gone public in the past six months and have market capitalizations ranging from $45 billion to $106 billion.

Relative to those companies and others in the IPO pipeline, Coinbase’s recent growth is unparalleled. The company said last week in announcing preliminary first-quarter results that revenue in the period surged ninefold from a year ago to $1.8 billion, and net income climbed from $32 million to between $730 million and $800 million. The number of monthly transacting users (MTUs) climbed from 2.8 million three months earlier to 6.1 million.

For the full year of 2020, revenue more than doubled to $1.28 billion, and the company swung from a loss in 2019 to a profit of $322.3 million.

Most transactions on Coinbase involve the purchase of bitcoin or ethereum, which have been on a historic tear, climbing over 800% and 1,300%, respectively, in the past year. The company has said that its short-term performance will largely be determined by crypto prices.

Bryan Armstrong, Coinbase’s co-founder and CEO, owns 39.6 million shares. In August, Armstrong was granted a multibillion-dollar performance award tied to the company’s stock price, potentially letting him purchase up to 9.29 million options at $23.46 over 10 years.

WATCH: Coinbase public debut is historic moment for cryptocurrencies

Founded in 2012 as a way to simplify the purchase of bitcoin, Coinbase has emerged as the most popular crypto exchange in the U.S. and soared in value alongside digital currencies bitcoin and ethereum. The service now has 56 million users, up from 43 million at the end of 2020 and 32 million the year before that. In its last private financing round in 2018, investors valued Coinbase at $8 billion.

Source: https://www.cnbc.com/2021/04/14/coinbase-to-debut-on-nasdaq-in-direct-listing.html

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States rush to replace J&J vaccine appointments after FDA recommends pause

The FDA and CDC recommended a pause in the use of J&J’s vaccine after six women developed a rare blood clotting disorder.

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More than two dozen states took steps Tuesday to halt inoculations with Johnson & Johnson‘s coronavirus vaccine, shortly after the Food and Drug Administration recommended to pause its use after reports some women developed a rare blood clotting disorder.

The states, like the FDA and the Centers for Disease Control and Prevention, stressed that they were acting out of an abundance of caution, as more than 6.8 million doses of J&J’s vaccine have been injected and only six of the blood clotting cases have so far been reported.

J&J said in a statement that “no clear causal relationship” has been identified between the rare type of blood clots and the vaccine, adding it is working closely with regulators to assess the data.

New York Health Commissioner Dr. Howard Zucker said the state will “immediately” stop administering the single-dose J&J inoculation, and will use Pfizer‘s two-shot vaccine in its place for already scheduled appointments.

At least 25 other states, along with Washington, D.C., and Puerto Rico, also announced they are taking J&J’s vaccine doses out of their distribution plans.

Those precautions may not be in effect for long, however: Acting FDA Commissioner Janet Woodcock said Tuesday that she expected the pause to last only for a matter of days.

Dr. Anne Schuchat, principal deputy director of the CDC, noted Tuesday that people who got the J&J vaccine more than a month ago are at very low risk for developing the blood clots. All six reported cases occurred in women ages 18 to 48, whose symptoms developed within two weeks after they received the shot.

New Jersey’s Department of Health said that all vaccination sites in the state “have been told to cancel or put on hold appointments for the J&J vaccine until further notice.” The agency said it will work with those sites to replace J&J appointments with an alternative two-dose vaccine.

Virginia “will cease all Johnson & Johnson vaccines” while the FDA investigates the “extremely rare possible side effect,” according to a statement from the state’s vaccination coordinator, Dr. Danny Avula.

Connecticut’s Department of Public Health recommended all Covid vaccine providers stop using J&J’s vaccine “for the time being” while the FDA and the CDC complete their review.

Ohio Gov. Mike DeWine and top health officials in his state issued a similar advisory.

Massachusetts’ Department of Public Health notified all vaccine providers in the state to stop administering the J&J vaccine, “effective immediately.”

The other states are Colorado, Florida, Illinois, Indiana, Iowa, Kansas, Kentucky, Maine, Maryland, Michigan, Minnesota, Missouri, Nebraska, New Hampshire, North Carolina, Rhode Island, South Dakota, Texas, Utah and West Virginia.

Source: https://www.cnbc.com/2021/04/13/states-rush-to-replace-jj-vaccine-appointments-after-fda-recommends-pause.html

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