Nvidia surpasses Alphabet at the US third most valuable company

Equities rebounded on Wednesday following a decline driven by high US CPI. Positive factors included lower UK inflation, European gains, and dovish remarks from Chicago Fed Goolsbee. Small-cap and Nasdaq shares surged as 10-year Treasury yields fell to 4.26%, potentially stabilizing bonds amid expectations of Fed rate cuts. The S&P 500 rose 1%, the Dow gained 0.4%, and the Nasdaq jumped 1.3%, with Lyft and Uber contributing to gains. The Eurozone’s Stoxx 50 index saw a 0.4% increase, led by industrial giants like Schneider and Safran, each adding over 1.3%, along with Siemens and Airbus, which advanced nearly 1%, while ASML shares closed positively after its CFO hinted at a European semiconductor market recovery. 

Summary for 15.02.2024 

• Asian equity markets showed mixed performance on Thursday. Australian and Japanese shares mirrored Wall Street’s rebound, buoyed by strong earnings and positive corporate outlooks amid inflation and rate concerns. Hong Kong shares retreated slightly, while South Korean shares remained sluggish. China’s markets were closed for the Lunar New Year. Economic data from Japan, Singapore, and Australia were also digested. 
• European shares are positioned for a positive start, with Airbus and Schneider Electric among the companies reporting earnings. Central bank commentary and NATO meetings are anticipated, while US equity futures held steady after Wednesday’s rebound, with notable moves from Tripadvisor and Cisco on earnings news. 
• Oil prices declined on Thursday due to a larger-than-expected rise in US crude inventories, signalling potential demand issues. Brent and WTI crude futures fell despite gasoline and distillate stocks dropping more than forecast. Geopolitical tensions partly offset concerns over delayed US rate cuts, while OPEC forecasted rising global oil demand. 
• In Q4 2023, Japan’s economy unexpectedly shrank by 0.4% annually, contrary to market expectations of a 1.4% expansion. This marks the first recession in five years, driven by declining private consumption, accelerated business spending reductions, and lacklustre government expenditure, despite a positive contribution from net trade due to faster export growth. 
• The inflation rate in the UK remained unchanged at 4.0% in January, matching November’s low and falling short of the expected 4.2%, staying above the Bank of England’s 2.0% target. Declines in housing, utilities, and transport slowed, while inflation for furniture, household goods, and food decelerated, except for miscellaneous goods and services. Core inflation held steady at 5.1%. 
• Nvidia surpassed Alphabet as the third most valuable US company, following its recent overtaking of Amazon. The dominant AI chipmaker’s stock surge anticipates its upcoming quarterly report. Analysts expect strong results but warn of potential market volatility if expectations are not met. Nvidia controls 80% of the high-end AI chip market. 
• Berkshire Hathaway disclosed a reduction in its Apple stake by selling 10 million shares in Q4 2023, though it still holds over 905 million shares worth $174 billion. The conglomerate shed holdings in DR Horton, Globe Life, Markel, and StoneCo, while increasing its Chevron stake and decreasing HP and Paramount Global. 
• Cisco revised its full-year guidance downward, expecting adjusted EPS of $3.68 to $3.74 and revenue of $51.5B to $52.5B. Fiscal Q2 saw adjusted EPS of $0.87 on $12.8B revenue, with product revenue down 9% but services up 4%. The company plans to cut 5% of its global workforce, resulting in an $800 million charge. Cisco shares fell 5% after hours. 
• Occidental Petroleum exceeded fourth-quarter profit estimates, boasting its best output in three years and cutting spending. Despite a slight decrease in oil prices, its production uptick helped offset costs. Occidental projected a marginal production increase for 2024 and announced a 22% dividend hike, aiming for long-term shareholder value. 
• Kraft Heinz forecasts slower annual core sales growth following a steeper-than-expected drop in quarterly sales, attributed to muted demand for sauces and meat products. Despite anticipating a volume decline, the company expects positive volumes in the second half of the year and aims for flat to 2% organic net sales growth in fiscal 2024. 
• Twilio’s shares dropped over 8% after reporting fiscal Q4 earnings surpassing expectations with EPS of $0.86 and revenue of $1.08 billion. Despite organic revenue growth of 8%, Q1 2024 outlook fell slightly below estimates with projected EPS between $0.56 and $0.60 and revenue of $1.03 to $1.04 billion. CEO Shipchandler expressed confidence in the company’s trajectory towards profitability. Meantime, HSBC downgraded the shares from Hold to Reduce and lowered the price target from $62 to $61. 
• Ahold Delhaize exceeded Q4 operating margin expectations, citing a relentless focus on cost amid slowing food inflation. With a projected margin of over 4% this year and free cash flow of around €2.3 billion, the supermarket group aims to navigate challenges like rising wages and supply chain disruptions. 
• Renault reported 2023 revenue slightly below consensus at €52.38 billion, with automotive revenue also missing estimates. However, the operating margin improved to 7.9%, surpassing expectations, and the dividend per share exceeded consensus at €1.85. For 2024, Renault anticipates an operating margin of at least 7.5% and plans to launch ten new vehicles. Shares were up 1% on Wednesday. 
• Heineken’s profit forecast for 2024 disappointed investors, leading to a 6.4% decline in shares. The company expects operating profit growth to range from low to high single digits due to economic challenges, contrasting with more upbeat projections from rivals like Carlsberg. Rising costs and potential disruptions in key markets contribute to caution. 
• Thyssenkrupp revised its annual sales and net profit forecasts downward due to impairment losses and softening demand in its steel division. The disclosure led to a significant drop in shares, highlighting structural challenges amidst high costs and weak automotive sector demand. The company aims to boost profit through its APEX performance program. 
• Sony revised down its PlayStation 5 sales forecast to 21 million units due to weaker year-end sales, with no major franchise releases expected next fiscal year. It plans to list Sony Financial Group in 2025. Despite a 10% rise in operating profit, driven by strong financial, movies, and music sectors, game business profit fell. 
• Trian Fund Management, led by Nelson Peltz, criticised Disney’s investment strategy as unfocused and calls it a “spaghetti against the wall plan.” They oppose Disney’s stake in Epic Games and the ESPN streaming service, pushing for cost cuts and clearer succession planning, aiming to replace two directors. 
• Uber Technologies soared to a record high after announcing its first-ever $7 billion share buyback program, following its first annual net profit since going public. With strong ride-share revenue and food delivery demand, investors welcomed the move, reflecting confidence in Uber’s financial momentum and operational strategy under CEO Dara Khosrowshahi. 
• BHP Group announced $5.7 billion in impairments for its Brazilian Samarco dam failure and Western Australia Nickel business. Despite expectations of stable earnings due to strong iron ore prices, ongoing legal challenges from the 2015 dam collapse and a decline in nickel prices prompted the charges. 
• Jefferies raised Uber’s price target to $95 from $85, maintaining a Buy rating, citing confidence in Uber’s updated financial targets, anticipating substantial EBITDA growth exceeding expectations, improving free cash flow conversion, and plans for share repurchases. The firm sees Uber on a solid path, balancing expansion with financial health for future success. 
• DA Davidson downgraded Airbnb from Buy to Neutral with a $145 price target, citing a “neutral to normalising” growth profile and potential EBITDA margin compression. Goldman Sachs maintained a Sell rating but raised the price target to $123 after Q4’23 results exceeded expectations. RBC Capital raised the price target to $150 from $140, maintaining a Sector Perform rating, despite concerns over weaker-than-anticipated Q1 and full-year margin outlooks. 
• Jefferies adjusted Coca-Cola’s price target to $65 from $63, maintaining a Hold rating, citing sustained momentum and strong fundamentals. Positive volume growth is anticipated despite potential first-quarter lighter results. Recent re-franchising in the Philippines is viewed favourably for enhancing shareholder returns and profit margins, with potential increased buyback activities. 
• Morgan Stanley maintains an Equal-weight rating on Lyft, raising the price target to $12 from $10.50. They anticipate improved gross bookings and revenue, with a 1% growth in gross bookings and a 3% rise in revenue for 2024 and 2025. Despite margin pressure, increased EBITDA is projected, though FCF conversion rates remain a concern. 
• RBC Capital reduced Gilead Sciences’ price target to $75 from $76, maintaining a Sector Perform rating. Insights from management discussions indicate confidence in the HIV sector but challenges in diversifying into oncology, limiting near-term catalysts for stock appreciation. The CBAY acquisition is seen as a stabilizing factor. 
• Citi lowered Shopify’s price target to $93, maintaining a Neutral rating due to lower Q1 profitability forecasts and a slight miss in take rate expansion despite strong Q4 performance. They caution against the high valuation and increased marketing spending. Conversely, DA Davidson sees the recent share pullback as a buying opportunity, reaffirming a Buy rating and raising the price target to $90. 
• Stifel downgraded Pure Storage from Buy to Hold, with a price target of $41, citing the share’s recent outperformance and high valuation. The downgrade follows lower-than-expected fourth-quarter guidance due to challenges in transitioning to an as-a-Service model, despite long-term opportunities in AI and hyperscale cloud markets. 
• JMP Securities raised Robinhood Markets’ price target to $25.00 from $23.00, maintaining a Market Outperform rating, after the company’s Q4 2023 performance surpassed expectations. With earnings per share at $0.03 against an anticipated loss, higher revenues, particularly from net interest and transaction-based revenue, and efficient cost management contributed to the positive outlook. 
• Britain’s Economic Secretary to the Treasury, Bim Afolami, asserts that British banks are undervalued due to lingering Brexit-related perceptions, despite stability and solid earnings. He emphasises the sector’s strength and government responsiveness, urging market players to recognise the banks’ potential.