Boeing announces leadership shakeup

US equities began the week lower after last week’s highs. The Dow Jones fell 162 points, with the S&P 500 and Nasdaq 100 down 0.3%. Consumer staples and industrials declined, while energy stood out. Intel and Microsoft shares dropped on China concerns, and United Airlines on increased FAA scrutiny. Chipmakers like Micron Technology rose. Despite the dip, equities held positive momentum, with several global indices hitting highs as bond rates rose slightly. Meantime, European equity markets continued their upward trajectory on Monday, buoyed by dovish central bank meetings, with the Stoxx 50 edging higher and nearing its 23-year peak. Notable performers included BMW, Stellantis, Volkswagen, Eni, Total Energies, Dassault Aviation, and Telecom Italia. 

Summary for 26.01.2024 

• Asian equity markets were mixed this morning as the recent rally paused amid expectations of interest rate cuts and AI enthusiasm. Investors awaited key economic reports, notably the US Fed’s PCE price index data. Australian consumer sentiment weakened, reflecting concerns about economic and family finances. South Korean and Hong Kong shares rose, while Australian, Japanese, and Chinese stocks remained subdued. 
• European shares are poised for a muted open while US equity futures are set to rebound after a previous session stall, with investors closely monitoring economic indicators amidst profit-taking and concerns over US-China tech relations and airline safety. 
• On Tuesday, WTI crude futures surged past $82 per barrel, continuing gains amid ongoing supply concerns. Russian oil companies were ordered to cut production for the second quarter to meet OPEC targets, while Ukrainian attacks on Russian refineries impacted oil processing. The UN Security Council called for an Israel-Hamas ceasefire, but doubts lingered over its effectiveness in curbing Houthi attacks on Red Sea shipping.  
• Boeing Co announced CEO Dave Calhoun’s departure by the end of 2024, with Larry Kellner not standing for re-election as board chair. Steve Mollenkopf succeeds Kellner. Stan Deal, Boeing Commercial Airplanes CEO, retires, replaced by Stephanie Pope. The changes come amidst scrutiny, with Calhoun committed to stabilising the company’s future. 
• EU antitrust regulators are investigating Apple, Google, and Meta Platforms for potential breaches of the Digital Markets Act, scrutinising practices related to app store rules and self-preferencing. Violations could lead to fines up to 10% of global turnover. The companies are urged to comply, while investigations are set to conclude within a year. 
• China’s reported move to phase out US chips from Intel and AMD, alongside sidelining Microsoft‘s Windows, could cost the firms billions in sales. Bernstein analyst Stacy Rasgon predicts up to $1.5 billion revenue hit for Intel and a few hundred million for AMD, potentially impacting their earnings significantly. 
• United Airlines shares dropped 3.4% on Monday following the FAA’s decision to increase oversight due to recent safety incidents. These include a missing panel on an aircraft, a 737 MAX rolling onto grass in Houston, and a tire issue on a Boeing 777-200. United also faces delays in Boeing deliveries. 
• Novo Nordisk announced the acquisition of Cardior Pharmaceuticals for up to €1.03 billion to bolster its cardiovascular pipeline, aligning with its focus on diabetes and weight-loss therapies. The deal includes Cardior’s lead compound CDR132L, aimed at treating heart failure, with plans for further trials. The acquisition won’t affect Novo’s 2024 profit guidance. 
• Mizuho raised Micron Technology‘s price target to $130 from $124, maintaining its Buy rating. The update considers new tax assumptions aligned with Micron’s guidance and anticipates growth in AI and High Bandwidth Memory sectors. Mizuho highlights Micron’s competitive edge in HBM market and estimates a substantial market growth by 2026. 
• Wedbush reiterated its Outperform rating on Alphabet Inc. with a stable price target of $175.00, citing confidence in Google Search’s sustained dominance. A comprehensive analysis of Google’s Search Generative Experience (SGE) indicates potential monetization opportunities, reinforcing Wedbush’s positive outlook on Alphabet’s strategic direction and ad revenue streams. 
• JPMorgan initiated coverage on Super Micro Computer with an Overweight rating and a price target of $1,150 for December 2024. Analysts view the company as a leader in the AI compute market, expecting revenue growth of over 43% from 2023 to 2027, driven by expanding demand for AI servers. 
• Citi raised Netflix‘s price target to $660 from $555 while maintaining a Neutral stance, citing the company’s consistent subscriber growth exceeding estimates. This performance is attributed to initiatives like an ad-supported tier and password sharing crackdown. Citi anticipates continued strong subscriber growth, reflecting in revised estimates and a positive outlook. 
• Morgan Stanley maintained an Overweight rating on Tesla but noted potential consumer fatigue from frequent price cuts. Tesla’s reduction in Shanghai factory production and analysts’ concerns about profitability indicate a shift towards balancing supply and demand. They anticipate consensus earnings estimates to decline in the first half of 2024. 
• CFRA increased Walt Disney‘s price target to $139 from $120, maintaining a Buy rating, citing confidence in Disney’s growth strategy. Barclays upgraded Disney from Equal Weight to Overweight with a $135 target, anticipating positive estimate revisions post-proxy vote. Both firms highlight Disney’s strong performance in key segments like Experiences and Entertainment, albeit acknowledging ongoing challenges and visibility concerns, especially regarding ESPN’s streaming partnerships. 
• Scotiabank maintains a Sector Outperform rating and a $400.00 price target for CrowdStrike Holdings, citing its strong performance and potential S&P 500 inclusion. While achievable financial targets and positive customer feedback support its outlook, caution is advised regarding expectations for further multiple expansion. 
• Barclays revised Nike‘s price target down to $114 from $142, citing uncertainty following the recent earnings call. While maintaining an Overweight rating, Barclays noted lower sales forecasts for the first half of fiscal year 2025 and adjusted expectations, reflecting less upside potential but continued confidence in Nike’s long-term performance. 
• Jefferies increased its price target for LVMH to €790 from €695 while maintaining a Hold rating. This follows LVMH’s fourth-quarter sales, which didn’t outperform the industry. Investors await the impact of margin strategies on first-quarter performance, with expectations for stable market share in the Fashion & Leather Goods sector. 
• Jefferies raised SAP SE‘s price target to €205.00 from €200.00, maintaining a Buy rating. The update follows SAP’s annual report highlighting robust cloud backlog growth, expected to sustain a 27% growth rate. Despite profit definition changes, Jefferies remains optimistic about SAP’s cloud services and overall market performance. 
• RBC Capital raised Ferrari NV‘s price target to €463, citing growth opportunities in the electric vehicle sector. Ferrari’s effective management of its order book influences revenue growth per unit and residual vehicle values, while its focus on personalisation enhances profit margins without significantly expanding production volumes. 
• Jefferies maintained its underperform rating on Dassault Systemes SE, with a stable price target of €33.00. While the company’s accounts show no major concerns, the transition to a subscription model poses challenges. Jefferies believes the stock’s premium valuation might be at risk amid growth hurdles. 
• Stifel lowered Infineon Technologies AG‘s price target to €41 due to expected weaker industrial demand and a delayed consumer business recovery. Challenges from key customer Siemens’ performance prompted Stifel to reduce earnings estimates, despite anticipating growth in Infineon’s automotive sector. The new target aligns with revised earnings expectations. 
• HSBC revised Rio Tinto Plc‘s price target to £5,150 from £5,400, maintaining a Hold rating. The adjustment is based on a new valuation method considering both DCF and forward EV/EBITDA multiples. HSBC raised WACC to 9.9%, reduced EV/EBITDA multiple to 5.75x due to anticipated growth tempered by above-average risks in Mongolia and Guinea projects. 
• CFRA upgraded their rating on shares of Thermo Fisher Scientific from Hold to Buy, also raising the price target to $635 from $522. The adjustment is based on forward-looking earnings projections, with the new target reflecting confidence in the company’s growth potential and justified valuation. 
• Jefferies maintained a Buy rating on Lonza Group AG and raised its price target to CHF 647 from CHF 637 following Lonza’s $1.2 billion acquisition of a Vacaville site from Roche. The deal is expected to strengthen Lonza’s position in biologics, with projected revenue growth and a positive long-term outlook. 
• Regeneron Pharmaceuticals‘ blood cancer therapy, odronextamab, faced FDA decline for approval due to insufficient data from ongoing trials for Follicular and Diffuse large B-cell lymphomas. The FDA cited the need for more information from dose-finding and confirmatory trials. Regeneron aims to expand its oncology portfolio beyond its approved drug, Libtayo. 
• Ericsson announces plans to lay off approximately 1,200 employees in Sweden as part of earlier cost-cutting measures due to challenges in the mobile networks market and lower volumes in 2024. The company cites reduced demand for 5G equipment prompting industry-wide layoffs, with ongoing negotiations with unions. 
• Nissan Motor plans to launch 30 new models over three years, aiming to increase global sales by 1 million vehicles and achieve a 6% operating profit margin by March 2027. With a focus on electrification, Nissan targets 60% of global sales to be electrified by 2030 and plans strategic partnerships for EV advancement. 
• Luxury electric carmaker Lucid is raising $1 billion from an affiliate of Saudi Arabia’s Public Investment Fund, boosting its shares by over 5%. The investment underscores Lucid’s advantage amid EV startup struggles. The company plans to use the funds for various purposes, including corporate expenditures and capital expenses. 
• In a notable move closely observed by investors, Berkshire Hathaway Inc. has made a significant purchase of Liberty Media Corp shares, investing approximately $36.77 million. The transactions, spread over three separate days, reflect strong confidence in the media company’s value from the renowned investment firm. Following these purchases, Berkshire Hathaway’s holdings in Liberty Media’s Series C Liberty SiriusXM Common Equity have significantly increased to a substantial 57,886,716 shares. 
• Morgan Stanley’s equity strategists upgraded the energy sector to Overweight, citing improving earnings revisions, market breadth, and attractive valuations. They expect energy equities to catch up with rising oil prices, especially with Brent forecasted to reach $90/barrel by Q3. The bank is bullish on ConocoPhillips, Devon Energy, Occidental Petroleum, and Diamondback Energy. 
• Oppenheimer analysts suggest a market top may not occur until 2025, drawing parallels to the 1987-1990 bull cycle and central bank tightening. They note that if the Fed cuts rates in the coming months, it could delay the market peak, aligning with historical patterns and the US Presidential cycle. 
• Goldman Sachs predicts S&P 500 EPS to rise by 8% in 2024 and 6% in 2025. The report emphasises that today’s growth shares rally differs from past experiences, with investors prioritising profitability. AI optimism remains high, but valuations for major tech companies aren’t considered in ‘bubble’ territory. They note Nvidia’s strong demand and constrained supply conditions, projecting a potential 10% increase in the S&P 500’s forward P/E ratio. 
• Citi analysts predict a total of 125 basis points of rate cuts in 2024 due to weakening labour market data. They anticipate a 75 basis point reduction even if activity and inflation hold up, citing a potential dovish stance from the Federal Reserve beginning in June.