Another US stock technology giant “burst thunder”.
Cisco, the global network equipment giant, failed to satisfy the market with its latest financial report. According to the financial report, in the fiscal quarter ended April 30, Cisco’s revenue was $12.8 billion, with almost zero year-on-year growth, which was seriously lower than market expectations, and the company was also very pessimistic about its future performance outlook. After the opening of US stocks on Thursday, Cisco suffered a market sell-off. As of 23:40 Beijing time on May 19, the decline expanded to 13.67%, and the total market value fell to US $174.2 billion (about RMB 11695 billion). The market value evaporated by more than US $36.7 billion (about RMB 246.4 billion) in the past two trading days.
facing this round of crazy selling of US stocks, Wall Street giants who are long in technology stocks suffered huge losses. On May 18 local time, Melvin capital, a 10 billion star fund on Wall Street, announced its liquidation. At the beginning of this year, the fund managed assets of about $12.5 billion (about 84.4 billion yuan)
For the future of US stocks, Wall Street investment bosses seem to be more and more pessimistic. Scott minerd, chief investment officer of asset management giant Guggenheim, said in a recent interview that U.S. stock investors are expected to experience “a terrible summer and Autumn”, and the S & P 500 index will plunge 45% (currently down 18%) from its peak on January 3, 2022. In addition, Jeremy Grantham, a legendary investor who successfully predicted the two market crashes, also predicted that the S & P 500 index would continue to fall, or 40% lower than its peak.
Cisco’s performance suddenly exploded
Since 2022, the punishment of “performance explosion” in the US stock market has been particularly severe.
This time, Cisco, the global network equipment giant, is the “Thunderbolt” of the financial report. After Wednesday’s us time, Cisco disclosed its latest quarterly financial report. As of April 30, Cisco’s revenue was US $12.8 billion, with almost zero year-on-year growth, significantly lower than the US $13.34 billion expected by analysts; The net profit was US $3 billion, a year-on-year increase of 6%.
Specifically, in the third quarter, Cisco’s product revenue was $9.45 billion, lower than analysts’ expectation of $9.79 billion; The secure and agile network department including the network switch in the data center recorded a revenue of US $5.87 billion, lower than the market expectation of US $6.09 billion; In the future, the Internet sector recorded US $1.32 billion, lower than the US $1.44 billion expected by the market.
The market value of Cisco shares fell sharply to US $174.5 billion (about US $1.67 billion) in the opening day, and the total market value of Cisco shares fell sharply to US $174.5 billion (about US $1.9 billion) after the opening of the day. The market value of Cisco shares fell sharply to us $174.5 billion (about US $1.9 billion).
For this less than expected report card, Cisco management attributed the reasons to: Russian Ukrainian conflict, epidemic, inflation and supply chain crisis.
Cisco CEO chuck Robbins said on the earnings conference call that the conflict between Russia and Ukraine reduced Cisco’s revenue by about $200 million, while increasing sales costs of $5 million and operating expenses of $62 million.
In addition, Robbins said that the recent covid-19 epidemic in some areas has exacerbated the shortage of upstream parts and affected the company’s production capacity.
What worries the market more is Cisco’s pessimistic outlook on the company’s future performance. Cisco expects revenue to fall by 1% to 5.5% in the fourth quarter of fiscal year 2022, with adjusted earnings per share of 76 cents to 84 cents; It is expected that the annual revenue growth in fiscal year 2022 will be 2% to 3%, lower than the previous expectation of 5.5% to 6.5%, and the adjusted earnings per share will be $3.29 to $3.37.
Wall Street had previously predicted that Cisco would achieve a revenue of US $13.87 billion in the fourth quarter of fiscal year 2022, up about 6% year-on-year; Cisco’s annual earnings per share are expected to reach $3.44
In contrast, the performance guidance given by Cisco is obviously significantly lower than the expectations of Wall Street institutions, which also intensifies the determination of these capital giants to sell their funds.
Cisco was founded in 1984 by a couple of teachers at Stanford University. At present, Cisco has become the world’s leading provider of network interconnection solutions, especially in the enterprise market. According to statista’s data, Cisco occupies the largest share of the global enterprise network solution market, almost half of the country.
As a U.S. technology giant, Cisco’s pessimistic expectations for future performance also further exacerbated market funds’ concerns about U.S. technology giants, leading to another wave of killing valuation market for U.S. technology stocks.
80 billion star fund liquidation
In this round of crazy selling of US stocks, Wall Street institutions that are long in technology stocks have suffered huge losses. After the “Waterloo” of tiger Global Fund and “Empress of science and technology” Catherine wood, another $10 billion star fund can’t carry it.
On May 18 local time, Melvin capital, a hedge fund, said that during the turmoil in the US stock market this year, the fund’s losses were increasing, and it would gradually close the fund and return cash to investors.
this means that the former star fund of Wall Street will be completely liquidated. Gabe Plotkin, founder of Melvin capital, announced the decision in a letter to investors on Wednesday. Gabe Plotkin said, “the past 17 months have been an incredibly difficult period. I have done my best, but I still can’t achieve the expected return on investment. Now I realize that I need to stay away from managing external capital.”
Plotkin also said in the letter that he has worked tirelessly for 20 years, tried to do his best and appreciated the trust of investors.
According to the arrangement, Melvin capital has significantly reduced the risk exposure of the fund. From June 1, the management fee will no longer be charged, and at least 50% of the investors’ funds will be redeemed before May 31, and the rest will be redeemed before June 30.
As of April this year, Melvin capital managed assets of about $7.8 billion (about 52.7 billion yuan). At the beginning of this year, the fund managed assets of about $12.5 billion (about 84.4 billion yuan).
This round of sharp decline in technology stocks is undoubtedly the last straw to “crush” Melvin capital.
According to the 13F document, Melvin capital significantly increased its holdings of Amazon and Microsoft in the first quarter of this year. In this round of selling since April, Amazon and Microsoft also suffered sharp declines, with declines of 34.3% and 17.4% respectively.
in addition, as of the end of March, Melvin capital’s largest position was mainly the beneficiary stocks of economic reopening, including live nation, Hilton Hotel and Expedia. The cumulative decline of these three stocks since the beginning of this year has also reached 28.7%, 17.5% and 33.5% respectively.
As of April, the cumulative pullback of Melvin capital’s portfolio this year reached 23%.
It is worth mentioning that Melvin capital was also one of the worst victims in the “air war” of retail investors in US stocks in 2021. The short position of the game station held by its portfolio was “exploded”, resulting in a huge loss of 55% in that month and a floating loss of more than $1 billion per day.
In order to avoid being liquidated, the founder of Melvin capital urgently asked for help from the outside world and obtained $2.75 billion to tide over the crisis.
However, in 2022, Melvin capital still failed to escape the bad luck of being liquidated. In fact, until 2021, Melvin capital has been one of the best performing hedge funds on Wall Street, with an average annualized performance of more than 30%. Despite the “Waterloo” in 2021 and 2022, the average annual return of the fund since its establishment is still 11.9%.
Wall Street bosses are increasingly pessimistic about the future
After a sharp fall of 1100 points, US stocks continued to weaken. At the opening of trading on Thursday, the three major indexes of US stocks collectively opened low, with the Dow down 0.97%, the NASDAQ down 0.47%, the S & P 500 index down 0.78%, and the decline of the Dow expanded to 1.1%.
The market’s concern about the prospect of economic growth and profit pressure has not been alleviated, and the outlook of Wall Street investment leaders for the future market of US stocks has become increasingly pessimistic.
Scott minerd, chief investment officer of asset management giant Guggenheim, said in an interview that U.S. stock investors are expected to experience “a terrible summer and Autumn”. He predicted that in the second half of the year, the Nasdaq composite index will collapse, with a retreat of 75% (currently down about 28%) from the highest point on November 19 last year, and the S & P 500 index will plunge 45% (currently down 18%) from the highest point on January 3, 2022.
at the same time, Jeremy Grantham, the legendary investor who successfully predicted the two market crashes and the co-founder and chief strategist of GMO, also believes that the US stock market crash is seemingly similar to the bursting of the Internet foam in 2000. It is expected that the S & P 500 index will continue to fall, or 40% lower than its peak
The CEO of Apollo global said that the sharp rise in the global stock market valuation caused by Apollo would continue to be seriously damaged by the sharp correction in the global private equity market.
At present, the pessimistic expectations of Wall Street institutions on the US stock market are mainly based on the following three concerns:
First, the Fed’s monetary policy is still the biggest risk point. In an interview, US Federal Reserve Chairman Powell said that he would continue to raise interest rates and do not stop without reducing inflation. This process may bring some pain.
Second, investors’ concerns about the US economy falling into recession are deepening China International Capital Corporation Limited(601995) analysis said that from the perspective of direct causes, earnings and growth concerns are the main factors triggering the current round of sharp decline in US stocks; In addition, investors are also worried that the Fed may not be able to achieve the so-called economic “soft landing”.
Finally, the earnings season of U.S. listed companies has been “thundering”, with frequent financial reports of technology giants and retail consumption giants falling short of expectations, which has significantly exacerbated the panic in the market.
