BlackRock, Inc. (BLK) shares moved sharply lower on Monday after reporting worse-than-expected second quarter financial results. While the stock is still more than 10% higher this year, investors are becoming concerned over the cost competition between asset managers as investors increasingly seek out the lowest-cost options. The Federal Reserve's unwinding of assets could also put pressure on fixed income assets under management.
Revenue rose 6.1% to $2.96 billion – missing consensus estimates by $40 million – while net income of $5.24 per share missed consensus estimates by $0.15 per share. While BlackRock reported $94 billion in long-term net capital inflows, exchange-traded funds (ETFs) accounted for about $74 billion of that figure, and their lower fees do not produce the same bottom-line gains as mutual funds or other investment vehicles. (See also: BlackRock Q2 Earnings Lag Estimates as Expenses Rise.)
From a technical standpoint, the stock broke down from trendline and R1 resistance at $432.90 to the pivot point at $420.35. The relative strength index (RSI) moderated from nearly 70.0 to 50.3, while the moving average convergence divergence (MACD) resumed its bearish downtrend after nearly breaking out higher. The stock's longer-term uptrend remains intact, but a breakdown from the pivot point could signal a mid-term reversal.
Traders should watch for a rebound from the pivot point to retest its trendline resistance or a breakdown to the 50-day moving average and S1 support at $409.85. In the meantime, shares are likely to consolidate between the pivot point and R1 resistance until the market digests the information and decides on a new medium-term trend. The upshot is that shares are over 1% higher in pre-market trading on Tuesday, which could suggest a relief rally. (For additional reading, check out: How BlackRock Makes Money.)
Charts courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.