Stocks jumped on Friday as investors digested fresh quarterly earnings reports, a strong reading of the job market, and the increasing likelihood that the financial sector will soon enjoy a friendlier regulation environment.
The good news helped the Dow Jones Industrial Average (^DJI 0.56%) and the S&P 500 (^GSPC -0.88%) indexes each finish the trading session higher by more than 0.5%.
Image source: Getty Images.
Today's stock market:
|
Index |
Percentage Change |
Point Change |
|---|---|---|
|
Dow |
0.94% |
186.55 |
|
S&P 500 |
0.73% |
16.57 |
Data source: Yahoo Finance.
The biggest daily gainers were financial stocks, which pushed the popular Financial Sector SPDR Select ETF (XLF 1.38%) higher by 2%. The volatile Direxion Daily Gold Miners Bull 3X ETF (NUGT 1.91%), meanwhile, ended slightly higher as gold prices ticked up.
As for individual stocks, both GoPro (GPRO -2.86%) and Fortinet (FTNT -0.98%) attracted heavy investor interest following their quarterly earnings announcements.
GoPro misses its holiday opportunity
GoPro shares dove 12% after the sports camera device maker posted its fourth-quarter results. The good news is that its brutal streak of sales declines ended as the Hero 5 product lineup fared much better this past holiday season than its predecessor did a year ago. Revenue rose 24% to $541 million, compared to a 31% slide in the comparable period in 2015. Profitability also improved against last year's awful result: Gross margin jumped by 10 percentage points to 39% of sales and GoPro managed a slight profit, on a non-GAAP basis.
Yet the company missed its official sales forecast by a wide margin while also coming in short of the $575 million that analysts were targeting. GoPro struggled with several production problems, including an early bottleneck for the Hero 5 Black camera and recall of the Karma drone that contributed to weak overall sales.
CEO Nick Woodman and his executive team issued a conservative outlook for the current quarter that calls for $200 million of revenue, compared to the $265 million that Wall Street was expecting. Expenses are projected to plunge as a percentage of sales, which should help the company climb back toward profitability this year. But the 30% gross profit margin GoPro predicts is still far from the 48% it enjoyed as recently as 2015.
Fortinet raises the bar on profits
Fortinet shares spiked following the announcement of surprisingly strong fourth-quarter results. The cybersecurity specialist posted a 22% revenue bounce, which kept up its healthy growth pace from the prior quarter and edged past consensus estimates. Service revenue again led the way higher, jumping 34% while product sales improved by 10%.
Image source: Getty Images.
Better still, the company enjoyed strong profitability expansion. Gross profit margin rose by 2 percentage points to 75% of sales, and operating margin improved to 15% of sales from 13% on a non-GAAP basis. "We are pleased with our strong finish to 2016, demonstrating our strong technology advantage and revenue growth," CEO Ken Xie said in a press release.
Fortinet's bulked-up sales force and robust product offering have given management confidence that it can achieve continued growth on the top and bottom lines. Its first official 2017 forecast calls for revenue to rise 16% to mark a slowdown from last year's 26% spike. Profitability should continue moving meaningfully higher, too. After rising to 15% last year from 13%, the company sees operating margin hitting 16% in 2017. Investors chose to focus on the prospect for much stronger earnings to send the stock to a new 52-week high.
