Coca-Cola's sales plunge 28% but the stock jumps on a sweeter future
No more halftime truck-sized sodas... Coca-Cola's sales plunged 28% last quarter and profits plopped 30%. Over half of Coke's sales come from "away-from-home" venues — think: restaurants, sports stadiums, and movie theaters. Since those were corona-closed, expectations for Coke were pretty low. Coke stock actually jumped after the news because:
- The worst is over, according to Coke's CFO. The April-June quarter put sales through the wringer, but he thinks the only place to go from that bottom is up.
- Coke's sales improved in May and June as lockdown measures eased and businesses started reopening around the world. Investors like the way this is trending.
The anti-Netflix earnings report... Coke's earnings (and their effect on its stock) were the opposite of what we just saw with Netflix. The lockdown hero beat on sales and added 10M new paying subscribers, crushing the 8.2M expected. Buuut...
- Netflix stock plunged 11% because the streamer expects new subscriber growth will majorly slow this quarter to just 2.5M new subs.
- Netflix added 26M new subscribers in the first two quarters of 2020. For reference: it added 28M in 2019 in total.
- The best is over for Netflix... At least, that's what investors think. The accelerated growth Netflix experienced in the corona-conomy will likely take away growth from this quarter. Netflix's disappointing forecast validated that.
Earnings are old news — investors care about new news... Earnings reports are mostly lagging indicators on how a company did in the past. Investors are most interested in leading indicators that point to how it'll trend in the future. Profits for the S&P 500 are expected to decline 44% this quarter, the biggest drop since 2008. But the major indexes are hitting all-time highs because investors believe the worst is over.