Thursday was a bad day on Wall Street, and the Nasdaq compound (NASDAQINDEX: ^ COMP) and Nasdaq-100 suffered the largest declines among the main benchmarks. With declines of about 2.5%, the Nasdaq indices posted much steeper losses than the index Dow Jones Industrials and the broader S&P 500 – much less the flat return on small caps Russell 2000.
Investors had anticipated earnings results of Tesla (NASDAQ: TSLA) For months, and in the classic way of selling the news, the electric vehicle maker’s shares fell even after shareholders made the profits they expected to see. In the meantime, Citrix systems (NASDAQ: CTXS) It also released gains, and while its numbers were solid, they failed to live up to the high expectations investors had at the tech company.
Tesla is almost certainly linked to the S&P 500
Tesla shares fell 5%, which helped lower the Nasdaq indices. Interestingly, stocks were trading higher in the Wednesday night session immediately following their earnings report, but investors apparently had doubts at the end of Thursday’s regular trading.
Image source: Tesla.
Tesla’s results were generally better than most expected. Revenue for the second quarter of 2020 reached $ 6.04 billion, and while that was lower than last year’s second quarter numbers, the top line held up well against the coronavirus pandemic. The company reversed the loss from a year ago with a solid adjusted profit of $ 2.18 per share.
Importantly, for the purposes of listing the S&P 500, Tesla also posted positive GAAP earnings of $ 0.50 per share. That marked four straight quarters of profit, which was the last remaining hurdle for the electric vehicle maker to qualify to join the S&P 500.
However, there were a few things detractors looked closely at. Gross margin benefited from a one-time sale of zero-emission credits, which were added to revenue. Furthermore, Tesla is still unsure whether it can reach its goal of delivering 500,000 vehicles by 2020. For a stock whose price could be said to be perfect, there were apparently too many wildcards for shareholders to accept.
Citrix can’t satisfy growth-hungry investors
Elsewhere, Citrix Systems saw its shares drop 13%. Even though the virtualization company’s second quarter was reasonably good, investors didn’t see it that way, making clear their disappointment in the response to the stock price.
Sales at Citrix increased 7% from the prior year quarter, led by a 54% jump in annual recurring subscription revenue. That produced adjusted earnings of $ 1.53 per share. Both figures were stronger than consensus forecasts among those watching the action.
However, some expected Citrix to deliver overwhelming results by consensus that investors have seen from other companies charging the big shift toward remote work. With many business customers focused on the solutions they need immediately to continue operating in the world of COVID-19, Citrix has not been as successful in getting customers on its cloud platform as fast as initially expected. That could affect revenue growth later in 2020 and beyond.
In the long run, Citrix’s business remains healthy. But given that shares are up as much as 50% to date just before the announcement, today’s pullback seems like a mere pause in a long run for the tech company.
