Today's stock market
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Drug stocks were hit hard today; the iShares NASDAQ Biotechnology ETF (NASDAQ:IBB) sank 2.3%. Technology shares rose in advance of some key earnings reports, with the Technology Select Sector SPDR ETF (NYSEMKT:XLK) gaining 0.4%.
Celgene misses on revenue, cuts outlook
Shares of drugmaker Celgene got crushed today, falling 16.4% after the company reported third-quarter sales that were sharply below expectations and lower projections for 2020 sales and profit. Revenue increased 11% to $3.28 billion, compared with analyst expectations for a 15% gain. Adjusted earnings per share grew 21% to $1.91, beating the analyst consensus of $1.87.
The guidance for 2017 was revised to $13 billion from an earlier range of $13 billion to $13.4 billion, and the sales forecast for 2020 was lowered from $21 billion to a range of $19 billion to $20 billion. EPS guidance for the current year was raised slightly to $7.30 to $7.35, but for 2020 was lowered $0.50 to $12.50.
The Q3 revenue miss was blamed on sales of psoriasis drug Otezla, which increased a less-than-expected 12%. According to executives during the conference call, the company is not losing market share, but the entire psoriasis market is not growing as fast as it has in the past due to "increasingly restrictive PBM formulary controls." The long-term forecast also accounted for a discontinued trial announced last week.
Between the failed trial of a drug valued at $3.3 billion, the top-line miss for Q3, the lowering of 2020 revenue by 7% and 2020 EPS by 4%, the stock has lost a third of its value since the beginning of the month. Given that the revised forecast still calls for compound annual earnings growth of 19.5%, long-term bulls are likely to see this move as an overreaction.
Twitter nears profitability
Twitter stock soared 18.5% today after the company indicated it may be close to profitability. Revenue for the third quarter fell 4% to $590 million, but the bottom line improved to a loss of $0.03 per share on a GAAP basis, compared with a loss of $0.15 per share last year. Non-GAAP EPS was $0.10, up from $0.09 last year and above analysts' expectations of $0.07 in EPS.
Average monthly active users were up 4% to 330 million, and average daily active users grew 14%. The company forecast that adjusted earnings before interest, taxes, depreciation, and amortization in Q4 will be in a range of $220 million to $240 million, compared with $215 million in the quarter last year, and then followed with some magic words that got a lot of attention: "We also expect that at the high end of our adjusted EBITDA range, we will likely be GAAP profitable."
"Our momentum was driven by improved execution from our sales team, strength in video and direct response ad formats, as well as in our data business, where we saw our third consecutive quarter of accelerating year-over-year growth," said CFO Ned Segal. "We also achieved record profitability in Q3, with a sequential improvement in our GAAP net margin and record adjusted EBITDA margins."
Investors were cheered that long-awaited profitability may be near, thanks largely to aggressive cost-cutting.