Alibaba surge on report of Ma buying shares

On Tuesday, US equities closed with modest gains, featuring mixed performance among major indices. The S&P 500 achieved a record close for the third consecutive day, rising 0.3%, while the Dow Jones Industrial Average declined by the same percentage, influenced by a significant drop in 3M’s stock due to disappointing earnings. Investors assessed varied corporate results, with consumer staples and communication services leading sectoral gains, and banks and retailers lagging. In, Europe, the Stoxx 50 Index declined by 0.3% amid investor caution ahead of key central bank meetings in the Eurozone, responding to an unexpected dip in consumer morale in January. 

Summary for 24.01.2024 

• Asian shares rose on optimism about potential support for Chinese stock markets, but caution prevailed due to lingering concerns. The MSCI’s Asia-Pacific index gained 0.27%, while Japan’s Nikkei was 0.68% lower. Chinese equities were mixed as authorities considered measures to stabilise the market, with the Hang Seng up 1.5%. The yen strengthened after the Bank of Japan signalled a hawkish stance.  
• European stocks are anticipated to open higher as traders seek central bank policy clues ahead of the ECB decision, while in the U.S., positive momentum is expected with Nasdaq 100 and S&P 500 futures rising following Netflix’s robust fourth-quarter subscriber growth and strong financial performance. 
• Oil prices showed little change in Asian trading on Wednesday due to weak demand and a recovery in supply, limiting the market’s reaction to increasing geopolitical risks. The front-month March contract for crude inched up, with geopolitical tensions driving demand for nearer-term supply. A coalition led by the US and UK conducted strikes against Houthi fighters in Yemen, aiming to halt attacks on global trade. Despite this, news of Libya restarting oil exports and recovering US supply from a recent cold snap restrained significant price increases. 
• Former US President Donald Trump won the New Hampshire primary, dealing a blow to his only remaining major rival Nikki Haley, and solidifying his status as the Republican party’s likely nominee. His New Hampshire victory comes after a decisive win in Iowa and delivers a setback to Haley, ahead of the Feb. 24 primary in her home state of South Carolina. Trump currently leads Haley by about 30 points there, according to a RealClearPolitics polling average. 
• Netflix reported Q4 earnings with revenue of $8.83 billion, beating estimates, but with an EPS of $2.11, missing expectations. The streaming giant added 13.12 million subscribers, surpassing forecasts, and contributing to an increased operating margin of 17%. Despite an expected Q1 slowdown, Netflix remains optimistic, projecting a 13% revenue growth and raising its full-year 2024 guidance to 24%. The shares rose 8% in after-hours trading.  
• Texas Instruments shares dropped over 4% in after-hours trading as the company reported Q4 revenue of $4.08 billion, down 13% YoY and below the estimated $4.13 billion. Earnings per share were $1.49, compared to $2.13 in the same period last year. The company’s guidance for the current quarter fell short of expectations, with an EPS range of 96 cents to $1.16 and projected revenue between $3.45 billion and $3.75 billion.  
• Intuitive Surgical reported robust Q4 results, surpassing analyst expectations. Total revenue reached $1.93 billion, up 17% YoY, and earnings per share were $1.60, beating estimates. Strong growth in the Instruments and Accessories segment, operational performance, and a 21% increase in worldwide procedures contributed to the positive outcome. The installed base of the Da Vinci Surgical System also exceeded expectations at 8,606 systems, a 14% annual increase. 
• Apple’s ambitious automotive project, initially focused on a fully autonomous electric vehicle, faces a pivotal moment with a shift towards a more feasible goal of an electric car with driver-assistance features similar to Tesla. The projected release timeline has been delayed from 2026 to 2028. This strategic adjustment raises questions about Apple’s competitive stance in the EV market and its ability to balance growth with ambitious projects. 
• Johnson & Johnson reported quarterly results slightly above expectations, with strong sales of its psoriasis drug Stelara contributing to the positive outcome. The company tentatively agreed to settle a talc products investigation with over 40 states for about $700 million. J&J’s medical device business rebounded, benefiting from increased demand for surgeries delayed during the pandemic. Despite the positive results, J&J shares fell 2% due to higher costs and a lack of near-term catalysts. The company reaffirmed its adjusted operating profit forecast for 2024. 
• Procter & Gamble cut its annual profit forecast due to a $1.3 billion writedown in the value of its Gillette business. However, P&G’s better-than-expected profit margins, driven by strong demand for daily-use products and favourable production costs, lifted its shares over 5%. The company’s annual profit outlook now anticipates a decline of 1% to in line with fiscal 2023 earnings per share, compared to the previous estimate of 6% to 9% growth. P&G’s overall volumes were flat in the second quarter, but average prices across product categories rose 4%. 
• D.R. Horton, the largest US homebuilder by volume, missed estimates for its Q1 profit, reporting a gross home sales margin of 22.9%, below its forecast. The company attributed the miss to higher incentives and rate buydowns offered to spur demand amid higher mortgage rates. About 70% of its buyers utilised rate buydowns, adding pressure on gross margins. Despite the profit miss, D.R. Horton raised its forecast for full-year home sales and reported Q1 revenue of $7.72 billion, above analysts’ estimates. 
• Halliburton beat quarterly profit expectations with adjusted net income at 86 cents per share for Q4, higher than the 80 cents expected by analysts. The company’s international revenue was boosted by improved activity in the Middle East, and it expects strong business in North America in 2024 due to stable activity levels. The company plans to return over 50% of its free cash flow to shareholders in 2024. 
• 3M forecasts full-year earnings below Wall Street estimates, attributing the disappointment to a “muted” macro environment and challenges in its electronics business. The company expects 2024 profit between $9.35 and $9.75 per share, falling short of analysts’ estimates. 3M’s ongoing restructuring, including job cuts and the healthcare business spinoff, is expected to yield $700 million to $900 million in savings. Analysts expressed concern about margins and noted the impact of lawsuits related to earplugs and water pollution claims, though the forecast does not factor in potential settlement funding. 
• General Electric anticipates lower-than-expected profits in the current quarter, citing slow improvements in its renewable business, GE Vernova. Despite strong fourth-quarter earnings driven by jet engine services demand, GE expects a gradual profit uptick in renewables later in the year. The aviation sector, benefiting from aftermarket service demand, is projected to report $6.0 billion to $6.5 billion in adjusted operating profit in 2024. GE plans to spin off GE Vernova into a separate company in early April. 
• Verizon exceeded expectations with strong quarterly results, driven by robust demand for wireless plans and successful promotions. The company’s myPlan and bundled offerings with Netflix and Warner Bros Discovery’s Max streaming service contributed to significant subscriber growth. Verizon’s annual profit forecast for 2024, ranging between $4.50 and $4.70 per share, surpassed estimates, boosting its shares by nearly 6%. The company added 449,000 monthly bill-paying wireless phone subscribers, outperforming estimates of 223,800 additions. 
• Shares of Plug Power surged over 33% after the company announced the operational status of its liquid green hydrogen plant in Georgia, the largest of its kind in the US. The facility is designed to produce 15 tons per day of liquid electrolytic hydrogen, enhancing Plug Power’s supply for forklifts, fuel cell electric vehicles, and stationary power applications. Despite the positive news, analysts remain cautious due to potential delays impacting fourth-quarter revenues and margins. 
• Citi Research maintained a Buy rating on Volkswagen and a €146.00 price target, following the automaker’s strong Q4 2023 sales performance, surpassing expectations with 2.5 million quarterly sales. The sales boost is expected to positively impact full-year 2023 revenues, EBIT margins, and free cash flow. Citi remains optimistic about VW Group’s EBIT outlook for fiscal year 2024, suggesting that the consensus estimate is underestimated, with the potential for an increase in shares as EPS and technical indicators improve. 
• CFRA Research has raised the price target for NVIDIA to $700 from $600 while maintaining a Buy rating. The analysts highlighted the data centre growth prospects, driven by new product offerings, higher price points, and a strategy to reduce the cadence of GPU launches. They anticipate 15%-20% upside to the quarterly revenue run rate exiting CY 2024. 
• UBS analysts downgraded shares of Philip Morris International (PM) to Sell with an $86.50 price target, citing expectations of a slowdown at IQOS, the company’s heated tobacco product. The bank’s analysis suggests a potential shortfall in PMI’s heated tobacco volume target for 2026, contributing to a de-rating of the equities. UBS expressed scepticism about the overall growth of next-generation products in the tobacco sector over the next five years. 
• TD Cowen upgraded ExxonMobil to Outperform, citing a more compelling upside with a declined stock and unchanged valuation. The price target is $115. Meanwhile, Chevron was downgraded to Market Perform, with a reduced price target, highlighting concerns about the discounting of key drivers and potential cash inflows from the HES deal. 
• Morgan Stanley has raised Microsoft’s price target from $415 to $450, citing optimism about the company’s potential for further market share gains in the IT sector, driven by its strong position in the GenAI portfolio. The analysts also raised their FY25 revenue and earnings estimates, expecting high-teens EPS growth and emphasizing Microsoft’s alignment with long-term software sector trends. 
• eBay Inc is set to cut around 1,000 jobs, approximately 9% of its current workforce, as part of organizational changes aimed at aligning teams, improving the end-to-end experience, and addressing the growth of expenses outpacing business growth. The move follows a trend of tech layoffs in the US after pandemic-related hiring, affecting giants like Amazon and Google. eBay had previously announced a plan to lay off 500 employees globally in February last year. 
• Commerzbank CEO Manfred Knof dismissed speculation about a possible merger with Deutsche Bank, stating it is not under discussion at his bank. Knof emphasized the goal of keeping Commerzbank independent, refuting suggestions of renewed merger talks. Deutsche Bank CEO Christian Sewing also recently mentioned that mergers and acquisitions were not a priority for him this year. Knof’s comments follow his efforts to overhaul Commerzbank and restore profitability since joining in 2021. 
• Alibaba co-founder Jack Ma and Chairman Joe Tsai purchased millions of dollars worth of Alibaba shares in Q4 2023, according to reports. Jack Ma reportedly bought $50 million worth of Hong Kong-traded stock, while Joe Tsai purchased around $151 million worth of Alibaba’s US-traded shares through his Blue Pool Management family investment. Alibaba is currently undergoing an overhaul, and the share purchases come amid ongoing challenges and competition in China’s online shopping market. The company’s ADRs rallied by almost 8% in Tuesday’s trading session. 
• Sanofi has agreed to acquire US biotech firm Inhibrx for up to $2.2 billion, gaining access to Inhibrx’s experimental treatment for Alpha-1 Antitrypsin Deficiency (AATD), a rare genetic disease. As part of the deal, Inhibrx’s other experimental drugs will be spun off into a separate company, with Sanofi retaining an 8% stake. The acquisition aligns with Sanofi’s strategy to focus on differentiated and potential best-in-class products.