Biden Era Begins; United (UAL) Posts Dire Q4 Numbers
Major market indexes have all closed at fresh record highs this Hump Day, which happens to be the same day Joe Biden has become the 46th President of the U.S. and putting to rest the administration of Donald Trump (for now). To the extent this occurrence might be construed as a reason for markets to surge forward, it is most likely in that a $1.9 trillion stimulus package may be forthcoming through Congress, as well as a federal plan for administering Covid-19 vaccines for millions of Americans in the very near term.
From a Biden administration, we also may count on the closure of the Keystone XL oil pipeline running from Canada through the Dakotas, as well as capital gains taxes likely to be discussed at some point in the next year or two. But all that is hash for another breakfast — fast-tracking stimulus and relief will give a strong boost to the U.S. economy, and that’s what market participants are pricing in today.
The Dow grew 0.83% or 258 points on the day, while the tech-heavy Nasdaq performed even better: +1.97% or 260 points. This was partly to do with a strong 17% gain from Netflix NFLX after its Q4 report yesterday brought in 33% higher net added subscribers in the quarter. Alibaba BABA also performed well, up 5.5% on the day after CEO Jack Ma appeared in public for the first time since the Chinese government began to crack down on his businesses. The S&P 500 was up 1.39% while the small-cap Russell 2000 was +0.44%.
United Airlines UAL reportedly expectedly miserable quarterly numbers after the closing bell, and results were even slightly worse than expected. A bottom line loss of $7.00 per share was a farther miss from the -$6.56 expected, and revenues of $3.41 billion were a tad light of the $3.42 billion in the Zacks consensus. Jet fuel pricing and, of course, Covid-19 issues keeping flight bookings extremely low were the main culprits, as analysts had been considering. Shares fell 2% on the release.
The Chicago-based airline currently has a daily cash burn of $33 million per day. Even stripping out debt and pension obligations, the company is still bleeding $20 million in cash on a daily basis. Advance bookings are improving, however, indicating pent-up consumer demand for air travel once the main pandemic is behind us. Thus, though break-even cashflow levels are still unknown at this time (generally expected to be sometime in 2021), there is big potential upside for United once U.S. citizens resume their earlier flight travel habits. The question is: when will that be?
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