In our weekend digest, we summarize the best pieces published from the working week. These can be read in full by clicking on the link over the name/ticker.
Editor’s Picks – Earnings Season Continues
Phil ran through the Q1 earnings through from Meta Platforms (NASDAQ:FB). There was a bad taste in the mouth from the Q4 earnings, that missed expectations and saw a material drop in the share price of 25% on the day. With the market also jittery in general following the war un Ukraine, rising US yields and China growth concerns, earnings from one of the largest players was closely watched.
Robert updated the figures for the consensus from analysts on Netflix shares following the earnings:
BUY – 29%
HOLD – 62%
SELL – 9%
The 12 month consensus target price is ~$315, which implies a return potential of over 50% from the current price. This is a stark difference from the positioning at the start of the year, which was 73% BUY and a 12M target of ~$680.
Whilst NFLX faces serious challenges in maintaining their subscriber base and managing their costs, the steep decline in such a short amount of time may offer a tempting entry for a recovery trade.
Stocks – Tech Slump Overshadows The Broader Market
Since the initial news on April 4th (regarding Twitter and Musk), Tesla has lost $275B in market capitalisation. That’s a drop of 23%. Musk’s own wealth as seen a decrease of more than $40B in that time, nearly twice the proposed amount of cash he plans to put up. Yesterday’s sell off caused $126B on its own.
These circumstances couldn’t have come at a worse time for investors in the company. General growth stocks are selling and the S&P500 is down 7% in just four trading days.
IT Tech Packaging is a leading paper manufacturer in North China. Using recycled paper as its primary raw material, the company produces and distributes three categories of paper products: packaging paper (corrugating medium paper), offset printing paper and other paper products, which include digital photo paper as well as tissue paper, a part of the Company’s current business expansion plans.
FX & Commodities – USD Surging, Oil At Crossroads
The main story from last week was the continued USD strength seen across the board. In EM FX, crosses like USDZAR made considerable moves, but even in the G10 space there was big levels broken. Particularly as we came to the end of the week, stops being triggered saw deep losses on pairs such as GBPUSD.
Before we go into this in more detail, it’s important to understand why this is happening. The main driver behind the move is the rise in US yields. The US 2yr broke to 2.75%. Although longer dated bonds such as the 10yr and the 30yr didn’t move as much, the selloff in the bond market is causing yields to pull higher. The USD is most sensitive to moves in the short end of the curve, i.e the 2yr and below. This reflects the more immediate likelihood of achieving a higher return from holding USD versus other lower yielding currencies.
Jesse put out a great piece on the technical side of Oil. The price will help be an indicator in the next move. A break above or below this triangle (see article chart) will likely see more volume as traders enter for the move. However, most of these moves so far have been sentiment driven. Oil fell 5% on Shanghai and Beijing news. A fall of another 5% would see the price sit on the bottom of support, likely falling through.
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