Big Tech Earnings Reaction, and Elon's World

Big Picture: April Markets

The Bright Side: In a month that historically has seen strong performance, the second quarter of 2021 saw solid gains across the board for stocks. The S&P 500 and DJIA both notched new all-time highs almost weekly in April, large-caps and value stocks retained their upward trend, and small-caps followed suit with a run of their own in the latter half of the month. It was a relatively quiet month in terms of structural developments in the economy as the reopening continues in sympathy with vaccinations. In his 2021 65-page letter to shareholders, Jamie Dimon (head of JPMorgan Chase) paints a rosy picture:

“I have little doubt that with excess savings, new stimulus savings, huge deficit spending, more QE, a new potential infrastructure bill, a successful vaccine and euphoria around the end of the pandemic, the U.S. economy will likely boom… This boom could easily run into 2023.” 1

We are seeing tremendous economic news on top of great corporate earnings news as earnings season continues. With over half of the S&P 500 posting earnings last month, 87% have beaten estimates; according to Edward Jones, index earnings are now on track to have grown 40% in Q1 and 30% for the full year. It will be interesting to see how the stock market performs as the economy reopens. We are hitting all-time highs every day so the big question will be: what keeps stocks going up?

The Not-so-Bright Side: We are traversing uncharted territory, and the overall economy is just beginning to join the party that the stock market has been throwing for a year now. Going into May, which is historically the 4th worst month of the year for stocks, we expect to see things cool off a bit, hopefully delaying the rumored correction.2 Additionally, the global chip shortage continues, representing a thorn in the side of the global economy (chips are in everything nowadays). The US reliance on a fragile global supply chain is being highlighted. Expect significant domestic investment to bolster the United States’ chip production capacity in the coming years. With all this in mind, let’s take a look at the stocks that made headlines in April:

Big News: April Headlines

Last month we analyzed impactful sentiment metrics expressed in the news to gain insight into each stock and cryptocurrency’s outlook. With earnings season in full swing, the average finance news article in the month of April was markedly more speculative compared to March (0.40 vs. 0.29 on a scale from 0 to 1 measuring the % of sentences expressing speculative language). Articles were less optimistic in April compared to March (0.05 vs. 0.11), but also less pessimistic (0.04 vs. 0.09), on average expressing less polarizing sentiment with respect to individual tickers than previous months. In terms of conversation volume for individual tickers, the FAANG stocks were far-and-away the most talked-about tickers in April. Tesla, Apple, Amazon, Facebook, Alphabet, and Microsoft all finished the month with a combined total of 2,241 headlines, accounting for over 21% of all articles that we sampled from around the internet. Much of this hype came near the end of the month with incredible earnings reports. Other tickers with considerable numbers of headlines were Coinbase ($COIN) after their recent IPO, and of course Dogecoin ($DOGE) after defying all odds to reach nearly 40 cents by the end of the month (and more than 65 cents by the time I’m writing this on May 5th), up from less than 5 cents at the beginning of April. Aside from conversation volume, how did the sentiment breakdown for the tickers in conversation this month?

Average sentiment distribution of the top-25 most talked-about tickers in April.

With big tech earnings and big-name cryptos taking much of the spotlight this month, it is no surprise to hear them being spoken of with significant degrees of optimism. From the plot above of the top 25 most-mentioned tickers in April, we can see that the majority of big tech stocks cluster moderately in the upper right “bullish” (ie. optimistic + speculative or future-focused) quadrant of conversation, joined by the S&P 500 ($SPY) with more speculative language expressed than any of the others. The majority of the remaining tickers fall in the second quadrant of the graph, with high optimism and high reaction (ie. past-tense language) in conversation; these tickers are a mix of stocks with surprising or notable Q1 earnings ($QCOM, $INTC, $AMD), big-name cryptocurrencies which have seen double- and triple-digit percent price movements this month ($ETH, $BTC, $DOGE, and sympathy $COIN), and the meme-stocks of months’ past ($GME and $AMC). The only ticker in the top-25 with more pessimism than optimism expressed this month was Boeing ($BA), after suffering in earnings, posting a net loss in Q1, and halting deliveries of their 737 Max.

Sentiment Winners😀 and Losers😒

Outside of the top-25 most discussed, let’s highlight a few of the most notable tickers in terms of sentiment. Last month, the tickers with the largest increase in optimistic sentiment (compared to March) include $TWTR (+60%), $DOCU (+56%), and $DIS (+45%).

On the other side of the coin, the tickers with the largest increase in pessimistic sentiment were $ETSY (-80%), $FSR (-77%), and $QS (-68%).

Overall, the most optimistic ticker in the news last month outright was $CRWD (0.79), and the most pessimistic ticker outright was $BUZZ* (-0.71).

Finally, in terms of speculation, the most future-focused tickers in conversation were $AEM (0.95), $VIX* (0.91), and $BBBY (0.90), and the most reactive (past-oriented) tickers in conversation were $BNTX (-0.95), $OKTA (-0.94), and $NVAX (-0.90). Now let’s take a deeper look at the most talked-about stock and crypto this month…. of course, Tesla and Dogecoin.

It’s Elon’s World…

Not unlike previous months, it was hard to go more than a day in April without seeing a headline involving Elon Musk. It’s become so commonplace that we have just written it off in past reports. However, never have we seen such a disproportionate volume of headlines about Tesla and Dogecoin, and we would be remiss to not dive into them both for this month’s round-up. While Elon has definitely been making a bit of his own news (hosting SNL this upcoming Saturday, and remaining outspoken on Twitter), surely a considerable portion of the Tesla and Dogecoin news mentions are in passing alongside his name. But alas, with Tesla trading sideways after a volatile month, and Doge continuing to climb to the moon, we must do exactly what Elon wants us to do: write about them both. As the sub-heading suggests, it’s Elon’s word (soon to be worlds, plural), and we’re all just living in it.

Tesla (Tesla)

After posting Q1 earnings on April 26th and reporting a record net income of $438 million (along with $0.93 EPS on $10.39 billion in revenue)3, Tesla appeared in 579 headlines and finished the month with an average article sentiment of 0.29 reaction, 0.33 speculation, 0.09 optimism (80% above overall average), and 0.04 pessimism (20% below overall average). While the global chip shortage has brought serious production challenges, the company has pivoted to new suppliers and kept up the pace, reaffirming its January delivery forecasts (the new Model S sedan will start deliveries this month, Model X will start in Q3 2021, and semi deliveries are expected to start this year as well). With higher expectations than virtually any other stock in the markets, Tesla somehow managed to quell the bear cases yet again, and on top of stellar production revenues and advances in their other lines of business, posted sales of over $272 million worth of “digital assets” (ie. Bitcoin). However, the stock finished the month relatively flat, ending a volatile April below $700 per share. Much of this volatility can be attributed to media reports of a Model S crash on April 17th, which remains under investigation by the NHTSA4. Key headlines last month about Tesla include:

  • Bullish: “Why Earnings Season Could Be Great For Tesla (TSLA)?” | Zack’s
  • Bearish: “Tesla’s Earnings Note a New Risk” | Barron’s

Dogecoin ($DOGE)

Dogecoin started the month trading below $0.06 USD, and since then has been riding a rollercoaster towards the moon, finishing the month up 1000% and now sitting near $0.70 USD. Elon has been no stranger to Tweeting about $DOGE alongside Dallas Maverick’s owner Mark Cuban, and with Musk’s upcoming appearance on Saturday Night Live, analysts are attributing much of the Dogecoin movement to his outspoken association with the coin (yes, there are now Dogecoin analysts). While we have read many uplifting stories of everyday people earning thousands from $DOGE (like this tweet from @JasonYanowitz), it is incredibly difficult and perplexing to know what to expect of the crypto in the near future. This is truly a phenomenon we have never seen before (and may never see again). As mentioned before, a simple investment of all three government stimulus checks this year directly into Dogecoin would now be worth upwards of $500,000. While some praise Dogecoin for “leveling the playing field” of asset management, many crypto traditionalists argue that the lack of underlying asset value or purpose will doom Dogecoin to a life of volatility down the road. With speculation abound, here are the best cases for Dogecoin (and the broader implications for the crypto market as a whole) that we could find in our analysis of articles in April:

  • Overall case: "Dogecoin Symbolizes the Conundrum Facing Investors” | Bloomberg Opinion
  • Bullish: “Billionaire Mark Cuban Defends Bitcoin, Ethereum, Dogecoin and Maker, Says Crypto Critics are Mistaken” | The Daily Hodl
  • Bearish: “Crypto Bubble 2021: 5 Bears Calling for the Bubble to Burst as Dogecoin Prices Soar” | InvestorPlace

Conclusion and Takeaways

After everything we’ve seen in April, there is plenty of hope to make a case for a resilient stock market bull run continuing into the future. With optimistic corporate earnings, new market highs seemingly every week, excess consumer savings, steady economic guidance from the Fed, and a closing(?) window on the COVID-19 pandemic, it would be tough to say that a large market correction is right around the corner. But given May’s historical precedent for underwhelming stock market performance, it does appear likely that stocks will cool off a bit in the coming weeks. The cryptocurrency market remains highly speculative, and the case for strong movement either up or down can be made, especially with promises of additional regulation from the Biden White House. We will look to remaining earnings reports to provide more context, and for upcoming movement from Bitcoin and Ethereum to paint the picture for the outlook of cryptos over the next few months. This is unknown terrain, but the light at the end of the tunnel looks bright. As always, thank you for reading! 🙏

About

Our goal at Babbl is to bring better sentiment analysis to retail investors to help automate some of the legwork around investment research. We analyze finance media to detect "mood" signals such as optimism, speculation, confidence, and credibility about individual stocks, markets, and publishers over time. Every week and month, we summarize these findings into a newsletter for our subscribers. Our goal is to make it easier for retail investors to make confident, well-rounded decisions by quantifying finance news.

This roundup was written by Ramsey Shaffer and Joe Alberg, with help from the Babbl Discord and the MoneyMen group. We randomly scraped 1000+ articles from across a variety of financial news platforms this past week, and to determine this sentiment, the language used in each article was automatically analyzed across the four metrics mentioned above; scores were determined based on the percent of sentences in each article containing words considered to be reactive, speculative, optimistic, or pessimistic for each of the tickers mentioned, respectively. Please note: all information reported here is for informational and educational purposes. We are amateur investors, not financial advisors. To help us make this better down the road, please consider leaving a comment below or sharing this post with a friend.

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