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Microsoft reports — What you need to know in markets on Thursday

Myles Udland
Markets Reporter

During a week that’s seen investors sort through a deluge of earnings, one of the week’s premier reports — Microsoft (MSFT) — will serve as something of a finale after the market close on Thursday.

Investors expect the company to earn adjusted earnings per share of $0.71 on revenue of $24.3 billion, according to estimates from Bloomberg.

A major focus with this report will be the company’s Azure unit, which is its cloud-computing business that competes with Amazon Web Services, among others, and is expected to bring in $7.31 billion in revenue.

This report will also come on a day that follows tech stocks surging past their tech bubble peak, with the Financial Times noting that the S&P 500 information technology index hit a new high.

In 2017, the main stock story has been the rally in the FANG stocks — Facebook (FB), Amazon (AMZN), Netflix (NFLX), and Google (GOOGL) — and which has been amended by some analysts to include Apple (AAPL) and Microsoft.

As of the market close on Wednesday, Apple, Google, Microsoft, Amazon, and Facebook — in that order — were the largest companies by market cap in the U.S. market. Combined, they have a market cap of nearly $3 trillion. Each company’s market cap is over $400 billion individually.

Elsewhere on the calendar on Thursday, earnings highlights are expected to include results from Abbott Labs (ABT), Philip Morris (PM), and Sherwin-Williams (SHW).

On the economic data side, the highlight should be the weekly report on initial jobless claims.

Ackman eats his own cooking

In the investment business, the expression “eat your own cooking” means that you, the investor, also invest your money in strategies you manage for clients.

(There are arguments for and against doing this, though the average person is likely surprised to find that an investment management often does not invest their own money in the fund they manage professionally.)

On Wednesday, Bill Ackman, the billionaire founder of hedge fund Pershing Square, tweeted a photo of himself standing in line at Chipotle (CMG). Ackman’s fund owns over $1 billion worth of Chipotle stock and is the company’s largest shareholder.

Bill Ackman at Chipotle. (Source: Twitter)

Ackman’s tweet followed news Tuesday that a Chipotle restaurant had been closed in Virginia following an outbreak of norovirus, commonly known as the stomach bug. This sent shares of the company down by almost 5% on Tuesday. It also follows a bruising 2015 for the company when it was rocked by an outbreak of E.coli, salmonella, and norovirus outbreaks.

Earlier this year, Ackman said, “Chipotle’s reputation has been bruised,” adding that, “we believe that the business will ultimately recover and become stronger.”

And while a Chipotle official told Business Insider Tuesday that norovirus, “does not come from our food supply” — thus differentiating it from E.coli or salmonella — the market’s reaction indicates that investors still fear customers associate Chipotle with one, negative idea: that their food makes you sick.

In a note to clients on Wednesday, Credit Suisse analyst Jason West wrote that, “National media coverage [of the norovirus outbreak] clearly adds to the risk profile of [Chipotle’s] sales recovery.”

West noted that Google searches for “chipotle norovirus” spiked on Tuesday after the first reports of the store closure in Virginia, indicating that there remains a high interest among the media and consumers to news about customers getting sick at Chipotle.

Google searches for “chipotle norovirus” spiking is not something the company wants to see. (Source: Credit Suisse)

From a business standpoint, West fears that the coverage of this event could slow Chipotle’s recovering sales trends, impact store traffic, or push back the company’s plans for a pricing increase.

The company is also still fighting against the tide of public perception.

In an April presentation, Ackman called Chipotle, “one of the most compelling and authentic large-scale food brands in the U.S.” It appears, however, that this brand is also still associated with getting sick.

Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland

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