US OPEN: Earnings reports drive stock price moves

• Wall Street opens lower
• US2000 with potential head and shoulders pattern
• Big post-earnings moves on Arista, Shopify, Reddit and ZoomInfo

Wall Street indices launched today's cash session lower, following a mixed trading in Europe. Small-cap stocks underperformed larger peers at session launch. S&P 500 was down 0.3% at the opening, Dow Jones traded 0.2% lower, Nasdaq moved 0.6% lower and Russell 2000 dropped over 1%. Earnings remain the main driver of moves on individual stocks, with Arista Networks, Shopify, Reddit and ZoomInfo experiencing large post-earnings price moves.

Source: xStation5

Small-cap Russell 2000 (US2000) is one of the worst performing Wall Street indices today. Taking a look at US2000 chart at D1 interval, we can spot an interesting situation on the chart. A recent upward move has been halted in the 2,090 pts area, more or less the level of local high from late-December 2023. As a result, a potential right shoulder of the head and shoulders pattern was painted. A reversal from the 2,090 pts area suggests that the move towards the neckline of the pattern in the 1,935 pts area could come next. Breaking below the neckline could pave the way for a larger sell-off. A textbook range of the breakout below the neckline suggests a possibility of a move to as low as 1,700 pts area.

Company News

Arista Networks (ANET.US) is trading higher after reporting earnings yesterday after close of Wall Street session. Company reported a 16% YoY jump in Q1 revenue to $1.57 billion (exp. $1.55 billion), driven by a 13% YoY increase in product revenue to $1.33 billion (exp. $1.32 billion). Cost of revenue increased 4.2% YoY to $570 million (exp. $588.1 million). Adjusted gross margin improved from 60.3% a year ago to 64.2% now. Adjusted operating margin reach 47.4% (exp. 42.7%). Adjusted EPS improved from $1.43 a year ago to $1.99 now (exp. $1.73). Company expects Q2 revenue to reach $1.62-1.65 billion (exp. $1.62 billion) and adjusted gross margin of about 64%. Arista Networks authorized share buyback of up to $1.2 billion.

Shopify (SHOP.US) plunges after reporting Q1 earnings today before the opening of the Wall Street session. Company reported a 23% YoY jump in Q1 revenue to $1.86 billion (exp. $1.84 billion), with subscription revenue climbing 35% YoY to $511 million (exp. $498 million). Gross merchandise volume was 23% YoY higher at $60.86 billion (exp. $59.46 billion). Adjusted gross profit reached $962 million (exp. $943.6 million), while adjusted gross margin reach 52% (exp. 51.3%). Adjusted EPS of $0.20 was also higher than $0.17 expected. Nevertheless, stock dropped on the back of weak Q2 outlook. Shopify expects Q2 revenue to grow in 'high-teens percentage rate' and gross margin to drop approximately 50 basis points compared to Q1 2024.

Shopify (SHOP.US) launched today's trading lower, responding to a lackluster Q2 guidance offered by the company. Stock opened at the lowest level since the first half of November 2023, clearing the $68 resistance zone and 200-session moving average (purple line) in the process. Source: xStation5

Reddit (RDDT.US) jumps after reporting Q1 earnings yesterday after close of Wall Street session. Social media company reported Q1 revenue at $243 million (exp. $212 million), adjusted EBITDA of $10 million and a net loss of $575.1 million (exp. -$613 million). Company have 82.7 million daily active users (exp. 77.35 million) and a revenue per user of $2.94 (exp. $2.75). Company expects Q2 revenue to reach $240-255 million (exp. $228 million) and Q2 adjusted EBITDA of $0-105 million (exp. -$13 million).

ZoomInfo Technologies (ZI.US) slumps after reporting Q1 earnings yesterday after close of Wall Street session. Company reported a 3.1% YoY increase in Q1 revenue to $310.1 million (exp. $308.5 million) and adjusted EPS of $0.26 (exp. $0.23). While Q1 results were better-than-expected, company disappointed with sales forecasts for Q2 and full-2024. ZoomInfo expects Q2 revenue to reach $306-309 million (exp. $313 million) and adjusted EPS of $0.23-0.24. Full-year revenue is expected at $1.255-1.270 billion (exp. $1.27 billion), while full-year adjusted EPS is seen at $1.00-1.02 (up from previous guidance of $0.99-1.01).

ZoomInfo Technologies (ZI.US) launched today's trading with a big bearish price gap. While company reported better-than-expected Q1 results, Q2 and full-year guidance disappointed. Stock is trading over 20% lower and is testing from early-November 2023 in the $12.50 area. Source: xStation5