Monday’s Market Movers: Zscaler, Amazon & Kraft Heinz

Stock traders may have had an eventful start to the trading week as companies like Amazon, Kraft Heinz, and Zscaler made the headlines for various reasons. Here’s what you need to know about Monday’s market movers:

Zscaler Drops Despite Record Earnings 

Generally speaking, when companies report above-expected earnings, their share prices may rise. However, this isn’t always the case, and Zscaler’s Monday drops are an example. 

American cloud security company, Zscaler (ZS.US) reported its earnings on Monday, November 27. Its earnings came in above-expectations as its revenue rose by 40% to land at $496.7 million and its Earnings Per Share (EPS) reached 67 cents which is 131% higher than the year ago’s figures. This also exceeded analysts’ expectations as they predicted an EPS of 49 cents. Furthermore, the company’s billings reached $456.6 million whereas estimates were $442.7 million. 

Despite this, the company’s stock dropped by 6.8% in extended trading as the company’s strong performance was overshadowed by a rise in operating expenses. The rise came in response to the need to develop and advance Artificial Intelligence (AI) across its services. 

Jay Chaundhary, Zscaler’s Chief Executive, said that “in order to meet this growing need, [the company] is scaling [its] go-to-market and R&D organizations.” In addition, according to some market experts, costs may be further incurred as “global spend on cloud security is expected to rise nearly 25% in 2024.” (Source: Reuters)

Nonetheless, despite yesterday’s falls, it is important to remember that Zscaler’s stock gained over 74% since the start of 2023.

Amazon Shares Soar Following Salesforce Deal 

Amazon (AMZN), the powerhouse in both technology and e-commerce, experienced a robust 0.7% surge on Monday. This uptick was propelled by anticipations of a formidable Cyber Monday shopping spree, further amplified by a significant development: Amazon's surpassing of both FedEx (FDX) and UPS (UPS), solidifying its position as the biggest US delivery company. 

According to the report which was announced by The Wall Street Journal (WSJ), “Amazon eclipsed UPS last year, after overtaking FedEx in 2020. The WSJ also mentioned that “prior to Thanksgiving and the start of the holiday shopping season, the company had already delivered more than 4.8 billion packages domestically.” 

Beyond the mentioned developments, Amazon has unveiled plans to broaden its collaboration with Salesforce (CRM) within Amazon Web Services (AWS), marking a strategic move to further enhance its joint venture in the realm of Artificial Intelligence. This, too, has given its share price a boost on Monday. 

These gains only solidify Amazon’s strong performance this year adding to the company's 72.1% gain since the start of 2023. 

Kraft Heinz’s $3 Billion Share Repurchase 

American multinational food giant, Kraft Heinz (KHC), which had quite a volatile year and has dropped by more than 14% since the start of 2023, revealed that it has authorized a $3 billion share repurchase program on Monday. 

According to the announcement, the renowned ketchup-maker is poised to reclaim its outstanding shares until December 26, 2026. This strategic move is attributed to a robust performance in the third quarter and an improved balance sheet, substantiating the rationale behind the decision to repurchase.

Evidently, despite this year’s weak performance, Kraft Heinz’s latest earnings report on November 1, revealed that the company’s net and organic sales were up 1% and 1.7%, respectively.

While the true impact of this repurchase remains to be witnessed, it is commonly observed that when a share repurchase occurs, the company's stocks typically gain a larger percentage of ownership of the overall corporation, which can make the stock more “attractive” to some investors. 

Conversely, while share buybacks can be advantageous in certain contexts, they may also create an impression that the company is struggling to identify lucrative avenues for expansion. This could potentially expose the business to vulnerability in the event of an economic downturn or if the corporation encounters financial obligations beyond its capacity to fulfill. (Source: Investopedia)

Still, it is important to recognize that past performance does not reflect future results and that the markets are volatile and can be unpredictable. As such, it remains to be seen how this repurchase will affect Kraft Heinz in the future. 

Conclusion

All in all, the start of the trading week has been marked by significant events. Traders may want to keep an eye out for any market moves or news to see how the markets will perform in the near future.