Microsoft (MSFT) and Robinhood (HOOD)

This is about the two stocks, MSFT and HOOD, but I think they’re also illustrations of how today’s US stock market functions.

MSFT; the other day the company reported earnings after the close. From the data in its press release, it was clear that MSFT’s cloud offering, Azure, hadn’t shown much grown during the quarter.

The stock dropped immediately, either because of the result itself or because market expectations were considerably higher (my guess is the former).

On the ensuing conference call, MSFT management explained that Azure continues to grow strongly, but that the business is lumpy. That is, it consists of very large deals–something any analyst is surely aware of–and that MSFT doesn’t use recordkeeping tricks to make this less obvious in the financials–again, something any analyst would know. Anyway, contracts that might easily have been signed in December were signed in January instead.

The red stock quote immediately turned green.

For good or ill, this is today’s world: AI reacting fast, but in a relatively unsophisticated way, to the latest public newsfeeds.

HOOD: my take has been that the company made a brilliant choice in naming itself but acts much more like King John or the Sheriff of Nottingham than Robin of Locksley. Perhaps because of this apparent indifference to customer wellbeing, the stock has been a real clunker. Yes, it came out at $38 in early August and raced ahead to $85 the following day …but it is just under $11 as I’m writing this today.

I find two things interesting about HOOD now.

–it has a brand name, it has a large share of the underserved market of younger investors and it has about $8 a share in working capital. In other words, it’s a prototypical value stock

–I turned on CNBC while I was having lunch yesterday. What I saw/heard was a male moderator (who’s a good proxy for dumb money) explaining to a female panelist (a professional investor) that ARKK-like stocks will never recover.

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