A Bottom Forming in Housing? Plus NVDA, CRM, SNOW Report Q2

Pending Homes Sales for July may be showing signs of a bottom forming in housing, for as we once again saw a negative headline (-1.0%) for the eighth month out of the past nine, it was better than the expected -3.0%, and far removed from the downwardly revised -8.9% we saw for June. Overall, pending home sales have dropped -19.9% year over year.

None of this comes as much of a surprise, with mortgage rates having ramped up +54% on average from a year ago — a direct result of rising interest rates from the Fed translating to higher mortgage costs. But that rounding-out on the bottom end is something worth considering as these reports come out over time — if we’ve come close to hitting bottom on housing, that suggests the return back upward should (soon?) follow.

By region, only the West showed a month over month improvement in pending home sales, +2.2%. That said, the West is also the worst performer year over year: -30.1%. The South was -1.1% from the previous month and -20% year over year. The Northeast shows a -1.9% drop from June to July, -15.4% from July 2021, while the Midwest lost -2.7% month over month and -13.4% from a year earlier. All of these numbers indicate major headwinds mostly on the price/mortgage rate side.

Meanwhile, graphics chip innovator NVIDIA NVDA posted Q2 earnings this afternoon, a couple weeks removed from a big guide down for the quarter. Earnings of 51 cents per share missed even the lowered Zacks consensus 56 cents (which helped bust the normally well-regarded semiconductor leader down to a Zacks Rank #4 [Sell]), while revenues in the quarter came in-line with expectations at $6.70 billion. Prior to the lowered guide, analysts were expecting more like $1.26 per share on $81 billion in sales.

For the most part, NVIDIA is still NVIDIA — including robust Data Center revenue growth of +61% to $3.81 billion in the quarter. But supply chain issues continue to hamper production, leading to the first earnings miss for the company since Q3 2018. And guidance going forward is weak, as well, likely due to a discount in the overall Gaming business, which was down -33% in Q2. Details will likely be revealed at this afternoon’s conference call.

Q2 earnings results for cloud computing giant salesforce.com CRM came in ahead of expectations on both top and bottom lines this afternoon: earnings of $1.19 per share easily surpassed the $1.02 in the Zacks consensus, on $7.72 billion in quarterly sales which outpaced expectations of $7.69 billion. The company also announced the initiation of its first-ever share buyback program.

So why are shares selling off more than -5% in late trading on the earnings report? Guidance — for both next quarter and full-year 2022 — were lowered, disappointingly. This was partly due to foreign exchange headwinds (salesforce brings in a third of its overall revenues from overseas), while the company’s Remaining Performance Obligation (RPO) was in-line with expectations. Shares of CRM were already down -30% year to date, and are taking another step lower in the after-market.

Meanwhile, salesforce’s enterprise cloud competitor Snowflake SNOW shares are soaring +16% following the release of its Q2 report, where a worse-than-expected -7 cents per share (from -2 cents in the Zacks consensus) was outshined by a big jump in revenues: $497 million versus $466 million expected. Product revenue growth was a very impressive +83% in the quarter, while net revenue retention came in at +170%. For a growth company like Snowflake, top-line numbers count a lot more than bottom-line ones.

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