Magic
The Liberation Day spell may have lifted, but market uncertainty lingers. Still, some firms conjured Q1 results defying Wall Street’s crystal ball.
Hasbro ($HAS) shares rallied 14% last Thursday after its Q1 results blew past expectations. Revenue was up 17% YoY to US$887.1m, and its adjusted EPS surged 70% to US$1.04. The key driver? Magic: The Gathering,which clocked a 45% increase in revenue as part of the firm’s ‘Wizards’ segment.
In an earnings call, Hasbro CFO Gina Goetter said the strength of Wizards and Hasbro’s asset-light model ‘continues to offset tariff pressures and support margins.’ Not bad for a toy manufacturer with significant exposure to China.
Google parent Alphabet ($GOOGL) also pulled better-than-expected earnings out of its hat this season. EPS came in at US$2.81, well above estimates of US$2. The tech firm’s magic potion is still advertising, which makes up 75% of Google’s total revenue: it rose 8.5% to US$66.9b.
A US$70b stock buyback was a nice touch for spooked investors. Then CEO Sundar Pichai’s optimistic remarks on AI further comforted them. It was a glimpse through the looking glass on how other big tech earnings may unfold, fueled by the same AI-driven aspirations.
Not all CEOs escaped the curse of negative earnings guidance, of course. Saying the words ‘macro headwinds’ on an earnings call can sometimes send stock prices down quicker than a rookie Quidditch player. Just ask Pepsi ($PEP) CFO Jamie Caulfield, who said tariffs and macro uncertainty was the main rationale behind the firm’s lowered earnings guidance. The stock fell by 4.6% the day of its earnings report.
Really, it was Tesla ($TSLA) that pulled off the biggest magic trick in the earnings season so far. EPS might have missed, net profit might have declined 71% YoY, but investor sentiment somehow still levitated. CEO Elon Musk said his focus was back on Tesla after his side act at DOGE, and the firm secured two major wins on the FSD (full self-driving) front. That was enough to summon a green candle that saw TSLA round out the week with an 18% gain.
Earnings season always brings its fair share of surprises, but it’s hard not to question this quarter’s upbeat forecasts amid tariff uncertainty. Is this real growth or merely a well-crafted illusion? Either way, the S&P 500’s forward 12-month P/E ratio is now below its five-year average. And the wizards of Wall Street smell opportunity.
