Earnings Season, Economic Trends, and Geopolitical Developments
Here’s your comprehensive market update for today:
Earnings Season Continues: The first quarter earnings season remains in full swing, with focus shifting to the U.S. banking sector as Bank of America (NYSE:BAC) and Morgan Stanley (NYSE:MS) are set to report on Tuesday. While JPMorgan Chase (NYSE:JPM), Citigroup (NYSE:C), and Wells Fargo (NYSE:WFC) started the season on a disappointing note, Goldman Sachs (NYSE:GS) reversed the trend with strong numbers fueled by a recovery in underwriting and bond trading.
Global Economic Indicators: China’s first quarter GDP growth exceeded expectations, driven by sustained government stimulus measures. However, mixed economic data suggests challenges in achieving a strong post-COVID recovery, particularly in industrial production and retail sales.
Geopolitical Tensions: Escalating tensions in the Middle East, following Iran’s attack on Israel, weigh on market sentiment alongside rising bond yields and cautious corporate outlooks.
Bank of England’s Interest Rates: The Bank of England maintains interest rates at the highest level since 2008, citing encouraging signs of easing inflation. However, concerns over wage-driven inflation persist, with expectations of interest rate cuts in August or September.
Crude Market Dynamics: Crude prices stabilize as traders assess Chinese growth data and geopolitical uncertainties. Despite a recovery in the world’s biggest oil importer, concerns over supply disruptions persist amidst escalating tensions in the Middle East.
$DPZ- UBS raised the firm’s price target on Domino’s Pizza to $570 from $526 and keeps a Buy rating on the shares. Domino’s Pizza is well-positioned for sustained multiyear U.S. sales momentum, with support from a solid value proposition, digital and loyalty enhancement, improved service levels, menu innovation, marketing and third aggregator partnerships, the analyst tells investors in a research note. The firm’s 2024 Quick Service Restaurant Survey results suggest consumers maintain strong affinity for the brand with multiple attributes that continue to resonate, and solidly positive visit intent over the near-term, UBS says.
$GS- Oppenheimer analyst Chris Kotowski raised the firm’s price target on Goldman Sachs to $479 from $466 and keeps an Outperform rating on the shares following quarterly results. While Goldman cautions that its investment banking backlog fell in the quarter because of Q1’s strong transaction volumes, Oppenheimer does still think that private equity sponsors remain relatively inactive and that there is considerable upside to activity levels from here over time. The results also gave the firm increased confidence that after a lot of special charges last year, 2024-2025 will be a lot cleaner.
$DJT- Trump Media & Technology Group’s Truth Social announced that after six months of testing on its Web and iOS platforms, the Company has finished the research and development phase of its new live TV streaming platform and will begin scaling up its own content delivery network. TMTG plans to roll out its streaming content in three phases: Phase 1: Introduce Truth Social’s CDN for streaming live TV to the Truth Social app for Android, iOS, and Web. Phase 2: Release stand-alone Truth Social over-the-top streaming apps for phones, tablets, and other devices. Phase 3: Release Truth Social streaming apps for home TV. The streaming content is expected to focus on live TV including news networks, religious channels, family-friendly content including films and documentaries; and other content that has been cancelled, is at risk of cancellation, or is being suppressed on other platforms and services.
$CAT- JPMorgan raised the firm’s price target on Caterpillar to $435 from $385 and keeps an Overweight rating on the shares ahead of the Q1 report. Construction data points are mixed, but demand commentary from manufacturers is generally optimistic, the analyst tells investors in a research note. The firm expects Caterpillar’s multiple re-rating to continue on the back of resilient margin performance this year and expectations of earnings growth acceleration in 2025.
$AFRM- Barclays analyst Ramsey El-Assal lowered the firm’s price target on Affirm to $41 from $50 and keeps an Overweight rating on the shares as part of a Q1 earnings preview for the financial technology group. The sector appears to be setting up well into the Q1 earnings season, as fiscal 2024 outlooks have been largely set at reasonable levels, the analyst tells investors in a research note. The firm says consumer spending trends have remained healthy in Q1, bouncing back following the impact of unseasonably cold weather in January.
$AAPL- Needham keeps a Buy rating and $220 price target on Apple but cuts the firm’s EPS view for Q2 by 10c to $1.51 and for FY24 by 15c to $6.40. The revisions reflect lower iPhone sales and weakness in China, though these are offset in part by slightly higher revenue than previously expected for iPads and Macs, the analyst tells investors in a research note. Apple’s anemic or negative growth outlook, along with expected cost increases to fund GenAI, are the biggest gating factors preventing new investors from buying the stock, Needham added.
$TSLA- JPMorgan analyst Ryan Brinkman says Tesla’s announcement yesterday that it would conduct its largest ever layoffs, amounting to more than 10% of its global workforce, should “firmly dispel the notion” that the company’s big Q1 delivery miss was somehow supply-driven rather than reflective of a demand problem. The news “should now leave no doubt that the decline in deliveries has been a function of lower demand and not supply,” the analyst tells investors in a research note. Looking beyond Q1, JPMorgan says the retrenchment in employment and capacity has “far reaching implications for the hypergrowth narrative still embedded in Tesla’s share price, suggesting material downside risk for the stock.” It keeps an Underweight rating on Tesla with a $115 price target.
Meanwhile, GLJ Research analyst Gordon Johnson lowered the firm’s year-end 2024 price target on Tesla to $22.86 from $23.53 and keeps a Sell rating on the shares. Tesla sold 95,000 fewer cars in Q1 quarter-over-quarter and GLJ now assumes the company’s average selling price in the quarter will fall just over $2,000 per car quarter-over-quarter, meaning its revenue will be down $5B from Q4. Further, the reported job cuts pushed the firm to lower its assumption for Q2 deliveries to 405,000 from 425,000. GLJ believes consensus estimates remain too high.
$NFLX- Guggenheim raised the firm’s price target on Netflix to $700 from $600 and keeps a Buy rating on the shares. The analyst says investor confidence into the company’s Q1 earnings report is high. The firm’s data analysis indicates incremental download strength in the U.S. and Canada but sequential slowing in other international regions, contributing to its below buy-side member growth estimate. Guggenheim sees uncertainty regarding the relative pace of Netflix’s core member growth and the likely non-recurring impact of an initial contribution from the implementation of paid-sharing policies. Looking at the bigger picture, however, it believes Netflix continues to have “significant runway” for sustained global membership growth.
$AMD- HSBC last night upgraded AMD (AMD) to Buy from Hold with a price target of $225, up from $180. Given AMD’s recent share price correction of 15% over the past month, market expectations for the company’s MI300 2024 and 2025 revenue have been reset, the analyst tells investors in a research note. However, the firm thinks AMD has enough supply capacity and demand to surpass management’s artificial intelligence revenue guidance. AMD’s next-generation AI GPU is a more direct competitor to Nvidia (NVDA) GB200 in 2025, the analyst tells investors in a research note. HSBC sees an attractive risk/reward at current share levels.
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