Apple ends EV project

US equity markets closed mixed on Tuesday as investors awaited PCE inflation data. The Nasdaq and S&P 500 posted modest gains, while the Dow Jones edged lower. Bond yields rose, fueled by expectations of delayed Fed rate cuts. Durable goods orders for January fell more than anticipated at 6.1%. Tech giants Apple and Meta advanced, while Amazon retreated. Macy’s and Lowe’s rose despite weak guidance, while Zoom Video soared on strong earnings. In the Euro area, the Stoxx 50 index climbed 0.4%, with notable gains in Bouygues and Casino Guichard, surging 8% and 43% respectively. 

Summary for 28.02.2024 

• Most Asian shares traded cautiously on Wednesday amidst concerns about sustained higher US interest rates, with Japanese indexes retreating from record highs. Caution prevailed ahead of key PCE price index data release, while Chinese markets stalled amid worries over the property sector. South Korea’s Kospi was a standout gainer, rising 0.6%. 
• European equity markets anticipate a cautious opening today amidst uncertainty, while US equity futures remain stable as investors await PCE inflation data, with eBay rallying 4% in afterhours on dividend and buyback updates. 
• Oil futures slightly retreated from one-month highs, correcting after a recent 3% climb driven by geopolitical tensions in the Middle East and positive US market signs. Uncertainty persists over Israel-Hamas ceasefire talks, while Yemen’s Houthi rebels disrupt Red Sea shipping. Investors await OPEC+’s March decision on extending output cuts amid rising US exports and active Chinese buying. 
• On Tuesday, Bitcoin surpassed $57,000, its highest level since November 2021, following a 5.5% rise on Monday, driven by increased buying from major players. MicroStrategy added 3,000 Bitcoins to its portfolio from February 15 to February 25. Record volumes in nine Bitcoin ETFs and anticipation of the April halving event fuelled market activity. 
• Australia’s January Consumer Price Index remained unchanged at 3.4%, defying market expectations of 3.6% growth. Transport and housing prices decelerated, while health costs moderated. Recreation and culture prices continued their decline, but food prices accelerated. Excluding volatile items and travel, CPI rose by 4.1%, remaining above the RBA’s target range of 2-3%. 
• In January, US durable goods orders fell by 6.1% month-over-month, surpassing the expected 4.5% decline, marking the largest drop since April 2020. Transportation equipment drove the decline with a 16.2% decrease, while orders for capital goods fell by 15%. Excluding transportation, orders decreased by 0.3%. 
• Eurozone household lending reached €6.870 trillion in January 2024, marking a 0.3% year-on-year increase, below the expected 0.4% and the slowest pace since March 2015. This slowdown underscores the impact of the European Central Bank’s recent tightening measures on the bloc’s economy. 
• Italy’s upper house approved legislation to revamp the country’s capital markets, aiming to attract newcomers to Borsa Italiana. However, concerns arise from provisions allowing increased voting rights for longstanding investors and potential complications in shareholder decision-making processes. The government plans to review and potentially amend the bill later. 
• eBay exceeded market expectations in Q4, driven by strong consumer spending during the holiday season, particularly in the US. It reported revenue of $2.56 billion and adjusted profit per share of $1.07, with shares rising 3% in extended trading. Despite weakness in the UK and Germany, the company remains optimistic, authorizing a $2 billion share repurchase program. 
• Beyond Meat plans to raise product prices and cut costs after surpassing revenue expectations in Q4, causing a 73% surge in shares in afterhours trading. About 40% of its shares were short in January. The company aims to restore margins by increasing prices and implementing cost-saving measures, expecting improved gross margins in 2024. 
• First Solar turned a profit in Q4 and expects higher sales in 2024 due to strong demand for renewable energy. Tariffs limited solar module imports from China, benefiting US-based suppliers. The company forecasts net sales of $4.4-4.6 billion for 2024 and anticipates significant tax credits under the Inflation Reduction Act. 
• Lowe’s indicated a slower recovery in the home-improvement market, echoing Home Depot’s sentiments amid consumer caution due to high prices and economic uncertainty. Despite surpassing Q4 expectations with demand from Pro-customers, Lowe’s projected a 2-3% decline in comparable sales for fiscal 2024, below analyst estimates. 
• AutoZone exceeded expectations with robust quarterly profits, driven by the growing trend of DIY car maintenance amid escalating vehicle prices. Revenue surged by 4.6% to $3.86 billion, surpassing analyst forecasts. CFRA raised their price target to $3,200, citing strong Q2 earnings and international expansion, maintaining a Buy rating with a projected P/E ratio of 19.0x for FY 2025, reflecting confidence in the company’s future growth prospects. 
• Macy’s forecasts annual sales below market expectations due to weak demand for apparel and shoes, announcing plans to close 150 stores by 2026 and monetise assets worth $600 million-$750 million over three years. Facing activist pressure and a proxy battle, Macy’s also plans store openings for better-performing brands amidst declining holiday quarter sales.  Meanwhile, CFRA downgrade the shares to Hold from Buy and reduced the price target to $18 from $19.00. 
• Norwegian Cruise Line Holdings forecasts a first-quarter profit, driven by strong demand for Caribbean and European cruises. Record bookings in 2024 enable operators to offset high labour and fuel costs. The company anticipates an adjusted profit of 12 cents per share, contrasting analysts’ estimates of a 20-cent loss. 
• Puma anticipated a challenging first half but maintained annual targets, announcing a new brand-boosting campaign. Strategies include targeting upmarket retailers, tailoring products, and focusing on high-profile ambassadors. Lagging rivals Nike and Adidas, Puma considers share buybacks to improve investor sentiment. Regional sales varied, with growth in Asia-Pacific but declines in EMEA and the Americas. 
• Applied Materials disclosed receiving subpoenas from the SEC and the US Attorney’s Office for the District of Massachusetts regarding China customer shipments and federal award applications, respectively. The company’s shares declined 2.0% in extended trading, and the US Attorney’s Office declined to comment. 
• Apple is expected to receive an EU antitrust fine of approximately €500 million next week over allegations of restricting music streaming competitors such as Spotify from advertising alternatives beyond its App Store. The European Commission argues such practices create unfair trading conditions. The fine, slated for 5^th March, coincides with broader scrutiny under new EU tech regulations. Breaches could result in fines of up to 10% of global turnover. 

• On a separate note, Apple has reportedly halted its electric vehicle project, Project Titan, surprising the nearly 2,000 employees involved. The decision redirects the team to focus on generative AI projects under executive John Giannandrea. This move follows challenges in the EV industry, including high interest rates impacting consumer interest. 
• Walt Disney directly addressed shareholders, rebutting activist investor Nelson Peltz’s assertions on its Vote Disney site. Disney refuted nine of Peltz’s claims, questioning his performance with companies where he held board seats. The company contested Peltz’s profit assertion from Disney share sale and defended its streaming services’ performance. The battle escalates as Peltz, Blackwells Capital, and Disney vie for shareholder support for board nominations. 
• Jefferies reaffirms its ‘buy’ rating on Siemens, raising the price target to €225 from €185. The firm believes the market undervalues Siemens’ potential, especially in automation. Despite not leading in AI like Schneider, Siemens’ projected mid-10% EPS growth until 2026 at a 30% discount appears compelling. Jefferies sees Digital Industry trading 46 euros below its implied value and views its valuation as conservative. 
• UBS analysts raised Netflix’s estimates and price target to $685, foreseeing continued subscriber momentum, increased Average Revenue per Member, and enhanced operating leverage. Despite an anticipated slowdown in new subscribers, they expect revenue growth to accelerate this year due to user conversion, price hikes, and advertising expansion. As traditional TV faces challenges, broadcasters’ strategies towards profitability benefit Netflix. 
• Bank of America reaffirmed a Buy rating and €57 price target on STMicroelectronics, citing a decrease in Apple concentration from 16.8% to 12.3% according to the company’s recent 20-F report. They anticipate this decrease to narrow the multiple gap to peers, with STM positioned to outperform due to various revenue drivers and market share gains. 
• New Street Research downgraded Arm Holdings from Buy to Neutral, citing future earnings forecasts and risks. They anticipate an Ebit of $3.8 billion in FY28, higher than consensus. Factors like increased smartphone royalty rates and market share in datacentre and PC sectors were noted, but doubts lingered about delivering a 15% annual return for investors. 
• Wells Fargo downgraded Roku from Equal Weight to Underweight, citing significant risk from Walmart’s acquisition of Vizio (VZIO). They lowered the price target from $77 to $51 as Walmart’s move could impact Roku’s net additions by 2025-26, requiring repositioning amidst shifting competition and collaborative changes with Walmart. 
• Citi raised Foot Locker’s price target to $22.00 but maintained a Sell rating, expecting it to surpass Q4 EPS estimates due to stronger comparable store sales. However, concerns persist over fiscal 2024 guidance, inventory levels, and heavy reliance on Nike products, suggesting downside risk at current stock prices. 
• UBS upgraded Accor SA from Neutral to Buy, raising the price target to €50.00 from €40.35. The revision reflects optimism about revpar trends and stable travel demand. Confidence in management’s strategic plan and potential for multiple re-rating also influenced the upgrade, aiming to narrow the valuation gap with peers. 
• Chinese developer Country Garden faces a liquidation petition over a $205 million loan default, impacting its debt restructuring and shaking confidence in China’s property sector. This follows a series of defaults and regulatory pressures since 2021, exacerbating concerns about the country’s economic stability and real estate market recovery.