What the Club is watching: Snap and Abercrombie plunge, Zoom pops, Netflix base questioned

Published Tue, May 24 20228:55 AM EDTUpdated Tue, May 24 202211:09 AM EDT

What the Club is watching — May 24, 2022 Snap (SNAP) shares crater in the premarket after company said it will miss its revenue and adjusted earnings target for the current quarter, slow hiring growth. CEO Evan Spiegel said the "macro environment has deteriorated further and faster than we anticipated when we issued our quarterly guidance last month." He added that revenue and adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) are likely to come in below the low end of the guidance range. What a change in only a month. There's a debate if this is all about TikTok. But it's likely more than that. The Snap warning was having a ripple effect on the digital advertising ecosystem Tuesday morning. Jefferies lowers 2022 and 2023 revenue estimates for Facebook-parent Meta Platforms (FB), Alphabet 's (GOOGL) Google, Snap, Twitter (TWTR), Trade Desk (TTD), and others by an average of 3% and 6%, respectively. This is why people find it hard to trust rallies in the market. One day there is a bounce and the next day a bad earnings print (like Walmart/Target last week) or a pre-announcement (late Monday Snap) suggests an entire group's earnings estimates may be too high. Zoom (ZM) reports better than expected earnings per share on in-line revenues, raises full year profit outlook. The stock popped in premarket trading. Best Buy (BBY) reports revenue of $10.65 billion vs. $10.41 billion expected, small earnings-pre-share miss $1.57 vs. $1.61. Same-store sales better than expected down 8% vs. down 8.6% expected. The stock was up initially after the release but then turned lower. Lowers full year adjusted EPS outlook to range of $8.40 to $9 from $8.85 to $9.15. After last week's carnage of retail, a not as bad as feared quarter? Can't say that for all of them. Abercrombie & Fitch (ANF) shares plunge after reporting an unexpected loss $0.27 vs. $0.08 profit expected, weighed down by higher-than-expected freight and product costs. Company expects higher costs to remain a headwind through at least year-end. This was a single digit price-to-earnings multiple stock and it goes to show that it wasn't low enough because earnings estimates were too high. Apparel is a very tough group to own right now. You have to stick with the best of the best. Snowflake (SNOW) upgraded to buy at Rosenblatt into the company's fiscal first-quarter results. BTIG lowers price target to $183 from $359 per share. Citi said Netflix (NFLX) does not have a natural investor base — doesn't have the subscriber adds to please growth investors and not enough free cash flow for value-oriented investors. Citi added the video streaming company has two options: Have a lower priced advertising tier or monetize account sharing. Netflix previously said it's considering both. More signs of slowing hiring in tech: Uber (UBER) is freezing most hiring, but no layoffs are planned, according to Insider. M & A update: Still waiting for more news on Broadcom (AVGO) and VMware (VMW) talks in tech. In the meantime, in health care — diabetes continuous glucose monitoring maker Dexcom (DXCM) reportedly in talks to buy Insulet (PODD). Roblox (RBLX) downgraded to neutral by Atlantic, which believes the company is taking the right approach on monetization and sees easy comps ahead. But Atlantic says weakening app download trends suggest engagement could soften in the near term. The analysts also think the stock's growth adjusted valuation looks less attractive compared to others in their coverage. Honeywell (HON) backs Q2 and full year guide at the Wolfe Research Global Transportation and Industrials Conference. (Jim Cramer's Charitable Trust is long FB, GOOGL and HON. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

CEO of Snap Inc. Evan Spiegel walks to a morning session at the Allen & Company Sun Valley Conference on July 07, 2021 in Sun Valley, Idaho.

Kevin Dietsch | Getty Images

What the Club is watching — May 24, 2022

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