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What Happened in the Stock Market Today

By Jim Crumly – Apr 18, 2019 at 4:52PM

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Zoom Video Communications soared on its first day of trading, and United Rentals is seeing a strong domestic economy.

Stocks rose on news that consumer spending was strong in March and U.S. jobless claims fell to a 50-year low. The Dow Jones Industrial Average (^DJI -0.56%) and the S&P 500 (^GSPC -0.09%) both closed higher.

Today's stock market

Index Percentage Change Point Change
Dow 0.42% 110.00
S&P 500 0.16% 4.58

Data source: Yahoo! Finance.

Initial public offerings (IPOs) made headlines today, with investors clamoring for shares of Zoom Video Communications (ZM 2.65%). Elsewhere, strong results from United Rentals (URI 0.96%) were a positive indicator for the U.S. economy.

Hand holding pen pointing to upward graph.

Image source: Getty Images.

Zoom IPO lives up to its name

Shares of Zoom Video Communications rocketed higher during their first day on the public markets, closing 72.2% above the offering price at $62.00. The offering price had already been raised from $32 in a filing 10 days ago to $36. At the closing price, the company is valued at $16.8 billion.

Zoom's core product is a cloud-based video system for online meetings. The company is growing rapidly, with revenue in the fiscal year ended Jan. 31, 2019, up 118% to $330.5 million. Zoom has 344 customers that contributed more than $100,000 in revenue, up from 143 the year before.

Unlike other high-profile IPOs, Zoom is actually profitable, having earned $7.6 million, or $0.03 per share last year. After the offering, the company also has over $600 million in cash and marketable securities and no long-term debt.

Investors today were excited about a tech "unicorn" that is growing so quickly and is already profitable with a rock-solid balance sheet -- so much so that they were willing to pay a rich 50 times revenue to own a piece of it.

United Rentals boosts confidence in the economy

Investors have been preoccupied with nervousness that the economy is slowing down, but United Rentals' first-quarter report gave reason for optimism, and shares gained 8.1% after results beat expectations. Revenue grew 22.1% to $2.12 billion and adjusted earnings per share increased 15.3% to $3.31. Wall Street was expecting the company to earn $3.03 per share on revenue of $2.06 billion.

Top-line growth was driven by a 23% increase in rental revenue, although profitability slipped, with GAAP net income falling 4.4% due to increased interest expense from United's acquisitions last year. Over the last 12 months, the company has repurchased $798 million of its stock, reducing the share count by 6.1%.

United reaffirmed guidance for full-year revenue to grow between 13.7% and 18.7%, with CEO Michael Kneeland saying, "By reaffirming our guidance, we're emphasizing our confidence in the cycle. The year is unfolding as expected -- customer sentiment remains positive, and feedback from the field points to healthy end-market activity."

That outlook following the second straight quarter of impressive results had investors in this value stock celebrating today.

Jim Crumly has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Stocks Mentioned

United Rentals Stock Quote
United Rentals
$356.42 (0.96%) $3.39
Zoom Video Communications Stock Quote
Zoom Video Communications
$77.43 (2.65%) $2.00
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$34,395.01 (-0.56%) $-194.76
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
$4,076.57 (-0.09%) $-3.54

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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