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Today's big stories

Microsoft reported better-than-expected earnings, doubling down on its long run of form
Our analyst explained why the once down-on-its-luck GameStop has seen its share price climb 750% this year – Read Now
UBS reported better-than-expected earnings, and it’s planning to return billions of dollars to its shareholders

Dream Teams

What’s Going On Here?

At least those awkward virtual company socials have been paying off for someone: Microsoft reported better-than-expected quarterly earnings late on Tuesday, and its stock initially jumped 6%.

What Does This Mean?

With the world spending all day, every day in their own homes, Microsoft’s cloud computing business, “productivity” segment (think Microsoft Office and LinkedIn), and personal computing division (think XBox and Windows) have unsurprisingly been in high demand. And it showed: all three divisions – which make up roughly a third of sales each – did better than expected, with the cloud business even growing faster than it did the quarter before. Put it all together, and Microsoft’s profit beat expectations too. Maybe investors should’ve seen that coming: the company’s been on a long run of form, only falling short of analysts’ expectations four times since 2010.

Why Should I Care?

Zooming in: Everyone knows its name.
The pandemic hasn’t just boosted demand for Microsoft’s products: it’s lowered its operating costs too. The tech giant’s far-reaching name recognition, after all, makes it a go-to for home-based businesses, which means it hasn’t needed to pump as much money into marketing as normal. Of course, the question now is whether it’ll hold on to that captive audience when we’re all allowed outside again…

For markets: There’s life in the old dog yet.
The incoming economic recovery is expected to benefit cheaper-looking “cyclical” shares the most,which might be why Big Tech has underperformed the US stock market over the last three months. But Netflix’s better-than-expected results last week might’ve reminded investors there’s still plenty of growth in tech stocks to be had, and they’ve been piling back in ever since. That’s worked out especially well for Microsoft: its share price is now just shy of all-time highs, and there isn't a single analyst at a major investment bank who recommends selling the stock.

You might also like: Is now the right time to invest in Microsoft?

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2. Analyst Take

Why GameStop Has Climbed 750% This Year

What’s Going On Here?

GameStop – a veteran video game retailer that’s been through some rocky times in its 37 year history – saw its share price shoot up 50% on Friday, 18% on Monday, and another 93% on Tuesday.

That brings its gain to 750% this year alone. So what gives?

It all started when short-seller Citron Research said the video game retailer was in “terminal decline” and that its share price was all set to halve.

But retail traders on Reddit put a plan in motion that’d boost GameStop’s stock and bag them a huge profit in the process.

Things are never quite that simple, though: those traders might have won in the short term, but they could be about to come up against massive losses.

So that’s what we’re exploring in today’s Insight: the battle between short-sellers and Reddit’s trading community – and how not to get caught in the crossfire.

Read or listen to the Insight here

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What Goes Around Comes Around

What’s Going On Here?

UBS announced fourth-quarter results that were better than expected on Tuesday, and its investors certainly got what was coming to them: uh, more money.

What Does This Mean?

As the world's biggest wealth manager, UBS makes most of its money by looking after and charging fees on rich people’s piles of cash – piles that tend to get even bigger when stock markets surge. The bank boasts a pretty significant trading business too, which does especially well when there’s a lot of uncertainty in the markets – like, say, when there’s a pandemic or a once-in-a-generation election. In other words, last quarter was practically tailor-made for UBS’s two biggest businesses, which might be why the company’s profit grew by 137% compared to the same time the year before. Throw in an announcement that UBS will be buying back $4.5 billion of its own shares, and it might come as no surprise investors pushed the bank’s stock up (tweet this).

Why Should I Care?

For markets: European banks are getting jealous.
UBS is rewarding its shareholders with more than just share buybacks: it’s also one of the few banks in Europe that paid out its full dividend last year. That might irk its European rivals, which were banned from paying dividends altogether by the European Central Bank (ECB) when the pandemic broke out – even as Swiss regulators were more lenient. That ban’s been lifted now, but the ECB’s still urging its banks not to throwing round too much cash – clearly a worry UBS doesn’t have.

Zooming in: The art of the buyback.
There are a few reasons a company might want to buy back its own stock, but in UBS’s case, it’s a good way to give back to its investors. See, when a company buys its shares, it slashes the number of them available on the stock market. That means each remaining share represents a greater portion of ownership, which should then boost the company’s overall share price.

You might also like: How to pick the best of the banking stocks.

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💬 Quote of the day

“A ship in port is safe, but that is not what ships are built for. Sail out to sea and do new things.”

– Grace Hopper (a US Naval officer and an early computer programmer)

Tweet this

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🌎 Finimize Community

🤝 Domo arigato, Mr Roboto

Autonomous technology still sounds pretty niche, but much like smartphones, it could become essential to our everyday lives overnight. And that makes it a sector with a lot of growth potential: join the CEO of autonomous security botmaker Knightscope to find out where the investment opportunities with the most potential are hiding.

🤖 The Opportunity for Autonomous Tech: 1pm New York Time, January 27th

💪 Live Q&A with Finimize CEO & Founder: 1.30pm UK Time, January 29th

🚀 Future of Fintech in Latin America: 6pm UK Time, February 2nd

👾 Bitcoin vs Ethereum: 7pm Paris Time, February 5th

📚 What we're reading

In defense of getting fired (Inc.)
Stephen Colbert is losing his punchline (Vanity Fair)
Exploding vagina candles (People)

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Finimize - 🌤 Microsoft’s on cloud nine

Today's big stories

Dream Teams

What’s Going On Here?

What Does This Mean?

Why Should I Care?

Why GameStop Has Climbed 750% This Year

🎉 Live that bitcoin life in 2021

What Goes Around Comes Around

What’s Going On Here?

What Does This Mean?

Why Should I Care?

🚨 Windows is not responding

🤝 Domo arigato, Mr Roboto

Older messages

🛁 Goldman's worried about the bubbles

Is no tech company safe?

🤭 Apple ain't worth $2 trillion

😮 US banks.

🤓 How to trade this earnings season

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