AT&T, Crocs, Biogen top Q2 estimates, Didi shares dip as China regulatory woes persist

Myles Udland, Brian Sozzi, and Julie Hyman breakdown more Q2 earnings, which include: AT&T stock rising as the company topped estimates due to a push from wireless subscriber additions, Crocs beating earnings as sales growth accelerates from continued customer demand, Didi experiencing more scrutiny as China weighs serious penalties, and Biogen reporting strong Q2 earnings despite criticism of its new Alzheimer’s drug.

Video Transcript

MYLES UDLAND: All right, welcome back to Yahoo Finance Live on this Thursday morning. A couple of minutes out from the opening bell. Still some more earnings to get through. Let's take a look here at what we're seeing in AT&T. The company reporting results coming in a little bit better than expected. Topline revenue, $44 billion. Adjusted earnings per share, $0.89. Of course, company is in the process, Julie, of divesting its Warner Media arm. But they did offer a positive outlook, an upgraded outlook of sorts for HBO Max subscribers for the balance of 2021.

JULIE HYMAN: Yeah, and we also talked yesterday about the promotions that Verizon was pushing. AT&T sort of helped spark that war earlier in the year. And so that's something that also has been driving subscriber growth for AT&T and drove it again over the course of the quarter. So it's interesting here the way they now report 1.16 million regular wireless customers. But those aren't all phone subscribers. 789,000 phone subscribers, and then part of those are streaming subscribers, too, is what it looks like. So it's kind of interesting here the way that this breaks down now.

To your point about HBO and HBO Max, 2.8 million were added in the second quarter, total of 47 million, and now says it's going to have 70 to 73 million globally by the end of the year from 67 and 1/2 million now. So obviously seeing some, you know, pretty strong growth with that product.

BRIAN SOZZI: Guys, can we just say where in the world did AT&T get 67.5 million subscribers to HBO Max in the second quarter? I mean, that is a big number for a service that basically just launched in a very competitive field. Now they're looking for close to 73 million for the full year.

So that is a very interesting number, which I think is benefiting Discovery shares here in the premarket. Discovery shares up about 1% because it looks like they're getting an asset from AT&T that is accelerating. They're seeing accelerating business momentum. Also even worth noting here, too, I mean, the earnings guidance, the EBIT profit guidance for AT&T, the company came out and upgraded there, too, as well. So all in all, pretty good quarter.

And even, finally, Netflix. How interesting is that you have AT&T come out here, raising their outlook for HBO Max? And Netflix just reported earnings this week, and they came out with a cautious outlook for the third quarter. Pretty interesting dynamics.

MYLES UDLAND: Yeah, I mean, Sozz, you say how are they going to explain where they got those subscribers from? Well, that's David Zaslav's problem now. And he'll figure out how to do that, I guess at some point. Probably not until next year, right? That seems like that--

BRIAN SOZZI: That's right.

MYLES UDLAND: --deal is going to take some time to get through. But again, AT&T maybe looking at the other side of their ownership of that asset. Let's move on here to another stock that is on the move in a big way this morning. Shares of Crocs up about 10% in premarket trade. And I will say, in moving about the world, if there is one piece of footwear you can count on to see someone under the age of 20 wearing, it usually is a pair of Crocs. We see here topline beating, bottomline beating, 640 million in revenue.

So, you know, let's be charitable here. Let's call it an annualized revenue run rate, 2 and 1/2, maybe 3 billion if we're accelerating. The company here has a market cap around $8 billion. So we get a nice multiple on that. Revenue is up 93%, Brian Sozzi, in the most recent quarter and guiding to 60% to 70% revenue growth in the third quarter of this year, compared to last year.

BRIAN SOZZI: This is bananas. I love the Crocs you're wearing today, Myles. I mean, this is-- no, he's actually not wearing Crocs. I'm sorry. Just calling him out here a little bit. But this is a mind blowing quarter, another one from Crocs here. The stock is now trading at a close to four-year high, 4 PE multiple, according to Yahoo Finance Plus data.

What interests me is the gross profit margins. Gross margins up 740 basis points year over year for a product that is essentially made with resin and oil. Oil prices have gone through the roof over the past year. So to see that type of margin expansion on this type of product is very, very fascinating.

I-- guys, I'm really looking forward to talk to Crocs, talking to Crocs CEO Andrew Rees tomorrow. We have talked to him before. He's been a changemaker at the company. Go to the website right now. They're selling tie dye clogs Crocs. They have hit a home run here. They really have.

JULIE HYMAN: You know, I have so many thoughts on Crocs. To your point, Myles, about people under 20, certainly my kids are big Crocs fans. My nine-year-old, you got to pry the Crocs off of him to put on sneakers when he has to do sports and such.

But what also is happening with Crocs, at least on an anecdotal basis-- full disclosure, I didn't get a chance to look at the call to see if they commented on pricing. On an anecdotal basis, these prices have gone up. Crocs used to be viewed as a cheap shoe. It's not a cheap shoe anymore. You're-- buying it you're paying at least 50 bucks for those plastic shoes-- at least 50 bucks--

BRIAN SOZZI: Are they plastic?

JULIE HYMAN: --for those plastic-- well, resin and oil. It's plastic.

BRIAN SOZZI: Yeah, I don't know.

JULIE HYMAN: I think it counts as plastic, no?

BRIAN SOZZI: 40 bucks. Yeah, 40, 50 bucks on the site. You're right, Julie. I mean, yeah--

JULIE HYMAN: At least.

BRIAN SOZZI: --you can put accessories on these things.

JULIE HYMAN: That's where they start. And what's also been so interesting to me for Crocs, by the way, is the trajectory of the company. If you recall, this stock previously peaked back in 2008 when there was a big debate about were these shoes a fad. They were at that point because then there was a huge drop in demand.

And then there has now been a huge comeback in demand over the past year or so. They've got celebrities wearing these things. At the same time, they've had to spend more on legal bills also. They are fighting a lot of fake Crocs out there. So that is costing them more as well to have those fights in court.

MYLES UDLAND: You know, it's interesting that they would fight the fake Crocs because in a way-- I mean, I understand the IP, all that stuff. But doesn't the proliferation of fake Crocs merely validate the real thing, right? If you're looking to drive pricing power to say this is a premium product.

JULIE HYMAN: Imitation.


JULIE HYMAN: --is serious form of flattery, Myles.

BRIAN SOZZI: It's too deep for me right now.

MYLES UDLAND: Well, I know it's--

BRIAN SOZZI: I'm not even going to--

MYLES UDLAND: Look, I know there's no fun in business, but, you know, just an idea. All right, there it is, opening bell on this Thursday morning. Instructure ringing the opening bell here as we get today's trading underway. Futures weren't pointing to a whole lot of action at the open. At one point, S&P futures were literally unchanged, which is always exciting when we see a 0.00 move on any of the majors. And we'll see where things open up there as we get into today's trading session.

But, you know, just, we'll talk about this with Crocs tomorrow. That'll just be my suggestion. We'll see-- we'll go through the call and see how they talk about that part of their business if it is indeed material, and we'll get to it there.

But let's go to another story that we've been following here. It's had a lot of developments over the last month. And that, of course, is the relationship between Chinese regulators, China-based companies, and their listing in US markets.

Brian Sozzi, Didi under pressure once again today. And it's starting to look like there will be no China-based companies making their way to US markets any time soon. Didi shares now off 7%. Remember, what did this thing open, 17? Something along those lines, $17, $19 per share. Here, trading right around 10.

BRIAN SOZZI: Yeah, and the sell-off here-- I've been watching this all morning long-- started off down about 2%, 3%. Now it opened up about 7% here on concerns of there being a stiff financial penalty from Chinese regulators on Didi. That is not yet confirmed yet. There have been no actual penalties that have been out there yet. But the market remains concerned about this company moving forward, as they should. It's not a good look, not a good story, and definitely not a good look on Wall Street.

MYLES UDLAND: Yeah, and again, a story today in the Financial Times saying that-- citing a senior banker kind of in the space that they would be shocked if any-- if you get any businesses based in China listed in the US, rather than making their listing over in Hong Kong. And the Hong Kong Stock Exchange has a lot of different requirements specifically around profitability, which is a problem for a number of these businesses and of course, why US capital markets have been the venue of choice for so many of these businesses.

All right, before we get out of here, let's quickly also talk about Biogen's most recent quarter. As you see here on our lower third, company topping estimates for sales during the most recent quarter, actually beating on the top as well as the bottom line here.

Now, Julie, of course, Biogen's story within the last quarter hasn't really been about the quarter. It's been about their recent Alzheimer's drug, which had some very, very marginal impact. I wouldn't even say $2 million is an impact. But it registered in the most recent quarter. But I think certainly brings into question just where the company's pipeline is headed and whether this will, indeed, be the blockbuster that perhaps it had seemed.

JULIE HYMAN: I mean, the thing is, Biogen needs it to be or it needs something to be, right? Because if you look at its other big selling drugs, we have seen generic competition. You're going to see generic competition for them. Tecfidera, for example, $488 million, which is a little ahead of estimates. Spinraza, which treats spinal muscular atrophy, $500 million. That was also ahead of estimates. But still, these are things to watch in terms of generic competition. The pipeline is-- you always got to feed the pipeline for these large companies.

At the same time, the head of research and development at Biogen is coming out in defense of Aduhelm in an open letter. And so that caught my attention, in addition to the earnings. Alfred Sandrock, he wrote an open letter to the Alzheimer's community, let's call it, a doctor's patient in that community, family members. He said the approval has been subject to misinformation and misunderstanding that has stepped, quote, "outside the boundaries of legitimate scientific deliberations."

So he said he welcomes any inquiries into the review and approval process between the FDA and Biogen. So I continue to watch that whole process with a lot of attention because Aduhelm, the drama over that drug. And of course, the very real drama that people with Alzheimer's and their family members have that is intertwined with that is definitely an interesting story to continue to watch.

MYLES UDLAND: And also the relationship, as you outlined there a little bit, with the FDA, drugmakers, who's on those panels, we've all, unfortunately, learned a lot more about FDA approval processes in the last 18 months than we ever cared to learn and this fitting into a part of that conversation as well.

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