© Reuters.
Scott Kanowski
Investing.com — SAP cuts its outlook after selling its Qualtrics unit, the balance of business activity in Europe leans toward services, and Tesla shares plummet.
1. SAP Lowers Guidance
SAP (ETR:) shares fell in early trading on Friday after the business software group sharply cut its annual earnings guidance following the sale of its subsidiary Qualtrics.
The tech giant expects non-IFRS operating profit in the range of €8.6 billion to €8.9 billion in 2023, down €200 million from its previous guidance. Revenue for the main cloud unit is also expected at €14 billion to €14.4 billion, down €1.3 billion from previous estimates.
The Walldorf, Germany-based company pointed out that it has already removed revenue from Qualtrics, the US-listed corporate online survey maker it sold last month, from its latest results. However, SAP’s return does not yet include the proceeds from the sale.
Meanwhile, the cloud division’s Q1 revenues increased 22% to €3.18 billion, still short of Bloomberg’s consensus forecast of €3.22 billion.
For the Group as a whole, three months of earnings exceeded expectations. This is largely due to the increase due to the one-time license fee. Analysts at Jefferies argued that the beat was “not for good reason,” adding that investors will likely continue to focus on the performance of Cloud’s business.
2. Service boom and manufacturing slowdown in Europe
European stock markets are under pressure to close out the trading week as traders consider economic data outside the euro zone.
Business activity in the currency sector hit an 11-month high in April, suggesting the economy “gained further growth momentum” heading into the second quarter, according to a preliminary S&P Global survey. The data provider points out that it does.
But S&P Global warned that the upturn was “increasingly disproportionate,” with a sector surge compensating for weakness caused by weak demand for commodities.
S&P Global said business confidence remained resilient in the face of the recent banking crisis, and easing supply constraints eased inflationary pressures.
But Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, warned that price developments in the services sector are likely to continue to unsettle officials at the European Central Bank.
“This increases the likelihood that the ECB will tighten monetary policy further or for longer,” de la Rubia said.
3. Tesla shares crash
Tesla (NASDAQ:) stock plunged 9.75% on Thursday. That comes after the electric car maker said sales fell short of Wall Street expectations, in part because of promotional price cuts.
The stock, which was green in Friday’s pre-market trading, is down just under 50% over the past year.
Elsewhere, Twitter, a billionaire-run social media platform, has begun removing verified blue check marks from the accounts of celebrities such as Justin Bieber, Ben Stiller, and Katy Perry. Musk said last week that Twitter would start removing those check marks. It was used under the site’s previous leadership to identify high-profile users and businesses.
It’s the latest step in Musk’s controversial move to overhaul the company, but it’s fueled concerns that users are having a harder time distinguishing genuine tweets from spoofs and hoaxes.
4. US futures are more stable than PMI data
US futures traded broadly near the flat line as traders awaited the release of business activity data from the world’s largest economy.
At 04:38 ET (08:38 GMT), the contract fell 27 points or 0.08%, dropped 2 points or 0.07% and lost 1 point or 0.01%.
Later in the session, S&P Global will release preliminary figures for April. Surveys are expected to show a slight increase in lunar activity.
Meanwhile, on the earnings calendar, consumer goods giant Procter & Gamble (NYSE:) is one of the major names reported today.
5. Oil prices under pressure
Oil prices have remained stable even in the face of fears that the United States, the world’s largest oil consumer, could plunge into recession this year.
As Energy Information Administration data showed earlier this week, it was lower than last week’s forecast, but unexpectedly bounced back on disappointing demand.
By 04:47 ET, the contract was up 0.05% to $81.14, trading 0.03% higher at $77.39 a barrel.
Both benchmarks fell more than 2% to their lowest levels since late March on Thursday, and are on track for weekly declines of around 6%.