Uber Plunges 6% While Merck, Comcast Show Solid Growth

Good morning. It's October 31st, and in today’s edition, we'll look at why Uber is falling despite beating revenue expectations and strong Q3 results from Merck, Cigna, and Comcast.

Previous Close 📈

Stocks posted modest losses on Wednesday, with the S&P 500 down 0.3%, the Dow declining 0.2%, and the Nasdaq Composite slipping nearly 0.6%. Investors are digesting a softer-than-expected third-quarter GDP report, which showed 2.8% annualized growth, below the 3.1% forecast.

Futures

Stock futures are lower on Thursday morning following earnings reports from Microsoft and Meta. S&P 500 futures have fallen 0.48%, Nasdaq 100 futures are down 0.7%, and Dow futures have slipped 76 points (0.18%). Investors are now focused on the PCE Price Index report and the weekly jobless claims data.

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What to Watch

Earnings season continues in full as Mastercard (NYSE: MA), Merck & Company (NYSE: MRK), Uber Technologies (NYSE: UBER), and Comcast (NASDAQ: CMCSA) will be sharing their earnings before the opening bell today.

After the market closes, Apple (NASDAQ: AAPL) and Amazon.com (NASDAQ: AMZN) will report their results.

Several key economic indicators, including the Personal Income for September, Initial Jobless Claims for October, and the U.S. Employment Cost Index for Q3, will be released today at 8:30 a.m. ET.

Additionally, the Chicago PMI for October will be published at 9:45 a.m. ET.

Technology

Uber Faces Slower Growth in Q3 as Riders Turn to Public Transport

Uber Technologies reported slower-than-expected growth in gross bookings for the third quarter today, prompting a 6% decline in its shares during premarket trading.

Gross bookings rose 16.1% to $40.97 billion, missing the $41.24 billion forecast. The slower growth reflects a shift among riders toward more affordable public transport options amid economic uncertainties and elevated inflation.

While the company’s overall revenue beat expectations, reaching $11.19 billion against an estimate of $10.98 billion, its forecast for fourth-quarter gross bookings came in slightly below market expectations.

Uber's core mobility business grew by 26.4%, but CFO Prashanth Mahendra-Rajah noted that revenue growth outpaced bookings primarily due to reduced supply incentives, refunds, and increased advertising revenue.

Uber’s diversified services, spanning freight, delivery, and ride-hailing, have helped the company manage sector-specific risks. Competition with U.S.-based Lyft remains a challenge, as Lyft leverages competitive pricing to attract customers.

The company achieved a record operating profit of $1.06 billion and reported net income of $2.61 billion, which included a $1.7 billion pre-tax gain from equity investments.

Adjusted EBITDA for Q3 was $1.69 billion, slightly above the expected $1.64 billion, with Uber projecting fourth-quarter adjusted EBITDA between $1.78 billion and $1.88 billion.

Media and Entertainment

Comcast’s Q3 Revenue Soars From Olympics Boost and Box Office Hits

Comcast reported stronger-than-expected third-quarter revenue today, reaching $32.07 billion and surpassing Wall Street’s forecast of $31.66 billion.

The impressive growth is fueled by a $1.9 billion revenue surge from increased advertising during the Paris 2024 Olympics and robust box office sales for major film releases like Despicable Me 4 and Twisters.

These hits propelled Comcast’s studio revenue up by 12.3% to $2.83 billion, exceeding the anticipated $2.75 billion. Shares are rising 4.2% in premarket trading as Comcast’s media and studio segments offset declines in other areas.

Despite a 5.3% drop in theme park revenue, attributed to a customer shift toward international travel and cruises, Comcast is optimistic about the upcoming opening of Universal Epic Universe in Florida on May 22, aiming to attract more visitors to its Orlando theme parks.

Comcast’s broadband business, though affected by the expiration of the federal Affordable Connectivity Program (ACP), is reporting a smaller-than-expected subscriber loss of 87,000 compared to the forecasted 143,200. Excluding ACP impacts, Comcast actually gained 9,000 broadband subscribers.

The company’s streaming service, Peacock, added 3 million new paid subscribers, reaching 36 million in total, while losses in traditional video subscribers were below expectations at 365,000. Comcast’s media revenue surged by 36.5%, driven by continued growth in streaming and advertising.

Healthcare

Cigna’s Pharmacy Unit Powers Q3 Profit Beat Amid Rising Demand for Biosimilars

Cigna reported better-than-expected third-quarter earnings, largely due to impressive growth in its pharmacy benefit management (PBM) unit, Evernorth.

The healthcare giant posted an adjusted profit of $7.51 per share, surpassing Wall Street's forecast of $7.20 per share, as demand surged for its biosimilar offerings, including close copies of the popular arthritis drug Humira.

Evernorth’s revenue rose 36% year-over-year to $52.64 billion, bolstered by new client acquisitions and expanding demand for specialty drugs. In June, Cigna began distributing biosimilar versions of Humira at no out-of-pocket cost to patients through its specialty pharmacy, Accredo.

This move aligns with the company’s broader strategy to capitalize on biosimilar opportunities, which Cigna anticipates will target an additional $100 billion of U.S. specialty drug spending by 2030.

Pharmacy benefit managers like Cigna’s Evernorth handle drug benefits for various payers, including insurers and large employers, and they play an increasingly significant role in managing specialty drugs and biosimilars.

Cigna’s Q3 results underscore the growing importance of Evernorth in driving revenue and profitability, as well as the company’s commitment to reducing patient prescription costs.

The positive Q3 result is causing Cigna’s stock to rise 1.7% in premarket trade.

Pharmaceuticals

Merck Beats Q3 Forecasts Despite Weak Gardasil Demand in China

U.S. pharmaceutical giant Merck & Co. posted better-than-expected third-quarter earnings today, driven by strong sales of its cancer treatment Keytruda.

The firm’s total sales rose 4% to $16.66 billion, surpassing Wall Street’s forecast of $16.45 billion. Keytruda’s revenue jumped 17% to $7.43 billion, outpacing analyst expectations of $7.20 billion and solidifying its role as Merck’s top-performing drug.

However, Merck’s Gardasil vaccine for human papillomavirus (HPV) faced a challenging quarter in China, with sales dropping 11% to $2.31 billion, missing analyst estimates of $2.46 billion.

This marks the second consecutive quarter of disappointing Gardasil performance in China, where economic pressures have dampened demand and decreased promotional activities, while a nationwide anti-corruption campaign is affecting hospital contracts.

CEO Rob Davis highlighted that Merck is focusing on driving demand in China, where Gardasil had previously fueled much of its international growth. Despite these setbacks, Davis expressed confidence in Gardasil’s long-term potential in China, citing opportunities for expanding vaccination to men and reaching a broader population.

Outside of China, Gardasil saw double-digit growth in other major markets, and Merck expects to reach its target of $11 billion in global sales for the vaccine by 2030. The company's overall earnings reached $3.99 billion, or $1.57 per share, surpassing the $1.50 expected by analysts.

Despite strong quarterly results, Merck’s stock remains down about 7% this year.

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Root Inc. [ROOT] - Last Close: $40.49

Root Inc.’s stock is soaring 77% in premarket trading today.

The company reported a surprise Q3 profit, marking a major turnaround from last year’s losses.

Root posted a net income of $23 million, or $1.35 per share, surpassing expectations of a loss.

Revenue surged to $305.7 million, nearly doubling from the previous year, driven by a 57% increase in policies in force and a 48% rise in gross premiums written.

Key improvements in Root’s underwriting profitability, shown by a reduced combined ratio of 89%, alongside strong cash reserves and refinancing of its term loan, have strengthened its financial outlook.

CPS Technologies [CPSH] - Last Close: $1.45

CPS Technologies is rising 19% in premarket trading after the company announced a $12 million contract with a major semiconductor client to provide power module components, marking a significant boost to its core business.

Despite reporting lower Q3 revenue of $4.2 million, down from $6.3 million last year due to the end of its HybridTech Armor® contract, CPS remains optimistic for Q4 and beyond.

The new contract will support high-demand sectors like high-speed rail, wind turbines, and EV applications.

With a promising book-to-bill ratio of 1.22 and recent U.S. government contracts, CPS anticipates strong growth ahead, fueling investor confidence.

Avadel Pharmaceuticals [AVDL] - Last Close: $12.91

Avadel Pharmaceuticals shares are surging 27% in premarket trade after a favorable court ruling upheld the FDA's approval of its once-nightly drug, LUMRYZ, for treating cataplexy or excessive daytime sleepiness (EDS) in narcolepsy patients.

The ruling supports LUMRYZ’s Orphan Drug Exclusivity, a designation that Jazz Pharmaceuticals had challenged in court.

The FDA determined that LUMRYZ’s once-at-bedtime dosing offers significant benefits over Jazz’s twice-nightly oxybate, reducing nocturnal awakenings for patients.

This decision allows Avadel to continue its commercial rollout of LUMRYZ, strengthening its position in the narcolepsy treatment market and driving investor optimism.

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Everything Else

• Sales of Eliquis and Revlimid helped Bristol Myers surpass third-quarter profit estimates.

• Weak demand from industrial clients forced STMicroelectronics to lower it's 2024 revenue forecast.

• Higher LNG sales drove Shell's Q3 profit, boosting investor confidence.

• Microsoft posted solid earnings and revenue growth, but its stock dipped amid a slower future outlook.

• Meta shares are falling nearly 4% in premarket trade as AI Investments and Reality Labs losses raise concerns.

• Growth efforts dragged down Robinhood's third-quarter revenue, and shares dropped 11%.

• Elliott raised its Southwest stake to 11.3% following an agreement with the airline.

• MicroStrategy set its sights on a $42 billion Bitcoin purchase in an aggressive 21/21 plan.

• Li Auto posted strong third-quarter earnings, driven by L-Series EV sales and production efficiency.

• Stellantis reported a 27% drop in Q3 revenues and highlighted progress in cutting U.S. inventories.

That’s all for today. Thank you for reading. If you have any feedback, please reply to this email.

Best Regards,

— Adam Garcia
Elite Trade Club

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