Thursday, January 16, 2014
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The earnings backdrop for today's trading action is a little less
reassuring than was the case the last few trading sessions. With
Jobless Claims and Inflation data coming in largely as expected,
today's mixed earnings picture will likely come in the way of the
strong two-day momentum.
This morning's bank sector results from
) provide a mixed picture of the sector's profitability, unlike
what we saw from
Bank of America
). Citi's miss reflected issues in its mortgage pipeline and
fixed income trading business.
Goldman's overall results aren't that bad, but the Wall Street
titan appears to be struggling in its core fixed income,
currencies and commodities (FICC) franchise. Trading activities
in those assets were no doubt challenging in Q4 and all of last
year, but we saw decent FICC revenue gains from JPM and BAC in
their results. This seems to indicate that Goldman may have lost
market share to those firms.
In other results,
) came out with disappointing same-store sales numbers for the
holiday season. It seems that the company's strategic
repositioning may have been a result of an aggressively
promotional posture that may not be sustainable in the long-run
given the need for bottom-line validation.
) isn't facing the same type of headwinds, but that company has
been under pressure as well following its week pre-announcement.
The issue with GameStop reflects investors' exaggerated fears
that its business model may not be sustainable in the face of
newer service offerings from
) and Xbox.
Those concerns are justified, but we remain confident that the
GameStop situation isn't analogous to the
)/Blockbuster match-up from the recent past, and we should see
evidence of that in the coming quarters.
Director of Research