Tech giants Apple and Amazon delivered better-than-expected quarterly earnings this week, showcasing resilient growth despite ongoing challenges from tariffs and intensifying competition in artificial intelligence. Both companies beat Wall Street estimates but revealed underlying concerns that tempered investor enthusiasm.
Apple’s Record-Breaking Quarter
Apple reported exceptional third-quarter fiscal 2025 results on Thursday, with revenue surging 10% year-over-year to $94 billion, marking the company’s largest quarterly revenue growth since December 2021. The iPhone maker posted earnings per share of $1.57, significantly exceeding analysts’ expectations of $1.43.
“Today Apple is proud to report a June quarter revenue record with double-digit growth in iPhone, Mac, and Services and growth around the world, in every geographic segment,” said CEO Tim Cook during the earnings call.
China Sales: $15.37 billion (up 4% YoY), beating expectations
Gross Margin: 46.5% vs. 45.9% expected
The standout performer was the iPhone business, with Cook revealing that the iPhone 16 models showed “strong double-digit” growth compared to their predecessors. The company also reached a milestone, shipping its 3 billionth iPhone during the quarter.
However, not all product lines performed equally well. iPad revenue fell to $6.58 billion, missing expectations of $7.24 billion, while the wearables division also saw a year-over-year decline to $7.40 billion.
Amazon’s Mixed Results Spark Concerns
Amazon reported second-quarter results that exceeded expectations but disappointed investors with lighter-than-expected operating income guidance. The e-commerce giant posted earnings per share of $1.68, beating the $1.33 estimate, while revenue reached $167.7 billion, surpassing the $162.09 billion forecast.
Despite the strong numbers, Amazon shares slid more than 7% in after-hours trading as the company provided cautious guidance for the third quarter, projecting operating income between $15.5 billion and $20 billion. CEO Andy Jassy attempted to reassure investors about AWS’s “pretty significant” leadership position in cloud computing.
AI Investments and Competition
Both companies are heavily investing in artificial intelligence capabilities. Amazon has committed to spending up to $100 billion this year on AI infrastructure, including data centers and software development. Meanwhile, Apple faces criticism for its slower AI rollout compared to competitors.
Cook hinted at potential acquisitions, stating Apple is “open to M&A that accelerates our roadmap” and confirmed the company would “significantly grow” its AI investments. Industry analysts have suggested Apple should consider acquiring AI startups to catch up with rivals.
Tariff Impact and Future Outlook
Tariff concerns loomed large in both earnings reports. Apple incurred $800 million in tariff costs during Q3, lower than its initial $900 million estimate. Looking ahead, Cook warned that tariff costs could reach $1.1 billion in the September quarter if policies remain unchanged.
Amazon similarly cited “tariff and trade policies” and “recessionary fears” as factors that could affect future guidance. However, Jassy noted that tariffs haven’t significantly dented demand or driven up prices so far this year.
Looking Ahead
For the upcoming quarter, Apple expects mid- to high-single-digit revenue growth with gross margins between 46% and 47%, including tariff impacts. The company’s services segment faces a potential $20 billion threat if a federal judge rules against Google’s exclusivity deals in an ongoing antitrust case.
Amazon forecast third-quarter revenue between $174 billion and $179.5 billion, representing 10% to 13% year-over-year growth. The company’s cloud division, while still growing, showed signs of deceleration with three consecutive quarters of revenue misses.
Both tech giants demonstrate resilience in navigating a complex landscape of regulatory challenges, AI competition, and economic uncertainty. However, investors remain cautious about the sustainability of growth amid these headwinds, particularly as the companies face increasing pressure to deliver returns on their massive AI investments.
We’re now just days away from the ’24 elections, and what a race it’s been. Polls have been all over the place, and both parties can make legitimate claims to holding the advantage as we approach Tuesday’s vote.
Amidst the political drama, the stock market has remained robust, with the S&P 500 surging 20% year-to-date. Historically, the index tends to perform well in election years, but this year has been exceptional, making it the most bullish election-year market in decades. A mix of macroeconomic factors, especially expectations of further Fed rate cuts, has fueled strong investor confidence.
Morgan Stanley’s analysts are embracing this momentum, picking out stocks they believe are primed for gains regardless of the election outcome. They’ve zeroed in on two specific stocks poised for substantial growth in the coming year – including one with a potential upside as high as 670%.
As if that weren’t compelling enough, according to the TipRanks database, both stocks are also rated as Strong Buys by the analyst consensus. Let’s see what’s driving this optimism among market experts.
Tenaya Therapeutics (TNYA)
We’ll start with Tenaya Therapeutics, a research-oriented biopharmaceutical company that is focused on developing and producing new therapeutic drugs for the treatment of heart disease. Tenaya is targeting its approach on the underlying causes of heart disease, including rare genetic disorders. The company’s approach includes gene therapies, cellular regeneration, and precision medicines.
Heart disease is the world’s leading cause of death among adults, making its treatment an important niche. Tenaya currently has two primary drug candidates under investigation, TN-201 and TN-401, for the treatment of MYBPC3-associated hypertrophic cardiomyopathy and PKP2-associated arrhythmogenic right ventricular cardiomyopathy, respectively.
The leading candidate, TN-201, is currently undergoing a Phase 1b human clinical trial. The study is focused on safety and tolerability and will enroll up to 24 adults. Data from the first patient cohort in the study are expected to be released in December, presenting a significant milestone for the stock. Meanwhile, enrollment is ongoing for the second cohort.
The second candidate, TN-401, entered its Phase 1 RIDGE-1 trial earlier this year. This global, open-label, dose-escalation study, which will continue patient dosing through Q4 2024, aims to evaluate the safety, tolerability, and effectiveness of a single intravenous dose of TN-401.
Morgan Stanley analyst Michael Ulz views TNYA as a compelling investment, with TN-201 as the primary value driver. Ulz notes, “Interim Ph1b MyPEAK-1 data for TN-201 in nHCM are expected in [December] and represent a key catalyst for Tenaya’s lead program. We see a favorable risk/reward on initial data, which could provide early de-risking, followed by more robust data in 2025.”
“We view favorable trends on cardiac biomarkers and uninterpretable protein expression data as the most likely scenario,” Ulz added. “We believe investors would view the data as positive and suggestive of benefit… Under this scenario we would expect TNYA shares to trade up +100%.”
To this end, Ulz rates TNYA shares an Overweight (i.e. Buy), while his $15 price target offers a whopping ~670% upside from current levels. (To watch Ulz’s track record, click here)
The consensus view here shows that Morgan Stanley’s bullish take is no outlier. TNYA stock has a unanimous Strong Buy consensus rating, based on 7 recent positive analyst reviews. The stock’s $1.94 trading price and $20.20 average target price together suggest an impressive upside of 941% on the 12-month horizon. (See TNYA stock forecast)
Royalty Pharma (RPRX)
The next Morgan Stanley pick we’ll look at is Royalty Pharma, a company that gives investors an interesting way to put money into the biotech sector. Royalty Pharma operates as a royalty company; that is, it purchases ownership rights in biopharmaceutical products and earns royalties on sales and profits. Royalty Pharma has built up a pipeline of such opportunities, designed to generate and maintain a steady stream of revenues.
This royalty strategy has led the company to put together a solid portfolio of assets. Royalty Pharma boasts rights in more than 35 approved products, and backs that up with rights in another 17 drug candidates still in the development stage. Of this total lineup, 15 products are considered ‘blockbusters,’ generating more than $1 billion in annual sales. And for the long term, the company’s portfolio has an average duration of 13 years. In the five-year period from 2018 to 2023, Royalty Pharma deployed an average annual capital of $2 billion, and in calendar year 2023, Royalty Pharma brought in $3 billion in total portfolio receipts.
In its last reported quarter (2Q24), Royalty Pharma reported portfolio receipts (revenue) of $608 million, marking a 12% year-over-year increase, though this came in $18 million below consensus. The company raised its 2024 portfolio receipts guidance to a range of $2.7 billion to $2.775 billion, up from a previous forecast of $2.6 to $2.7 billion. Additionally, the company posted an EPS of $0.96, reflecting a 13% increase year-over-year, slightly shy of the consensus estimate of $0.99.
Checking in with the Morgan Stanley view, we find analyst Terence Flynn taking an upbeat view of the company and its prospects for the long-term.
“RPRX has one of the highest top line growth rates in our coverage and is trading at a discount. In our view the company’s growth profile and diversified portfolio deserves at least an in-line multiple and hence our Overweight rating. We acknowledge that RPRX must continue to deploy capital towards new deals given patent/royalty expiries in order to sustain HSD growth, but management has a strong historical track record on this front. We see two areas of potential upside to estimates that could meaningfully move the needle – AMGN’s Olpasiran/ NOVN’s Pelacarsen for ACVD and JNJ’s Tremfya for psoriasis/IBD,” Flynn opined.
Flynn’s Overweight (i.e. Buy) rating is backed by a $51 price target, suggesting a potential one-year upside of 88%. (To watch Flynn’s track record, click here)
Morgan Stanley isn’t alone in this positive outlook. Royalty Pharma enjoys unanimous support, with 5 Buy ratings and a Strong Buy consensus. Currently priced at $27.10, the stock’s average price target of $44.40 implies a ~64% upside in the coming months. (See RPRX stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
Share prices were up 5% in after-hours trading on Thursday after the strong earnings beat.
Amazon (AMZN/NASDAQ): Earnings per share of $1.43 (versus $0.14 predicted) and revenues of $134.4 billion (versus $131.5 billion predicted).
Amazon Web Services (AWS) remains the golden goose, even though very few of Amazon’s retail customers know it exists. Revenues climbed 19% during the quarter, and totalled $27.4 billion. Amazon’s advertising revenues were another highlighted area of the report, as they were up 19%. Overall operating profits grew 56% year over year to $17.4 billion, mostly credited to the 27,000 jobs cut by the company since 2022.
Founder, executive chairman and former president and CEO of Amazon, Jeff Bezos was in the headlines this week in his role as owner of the Washington Post. He refused to allow the Post’s editorial team to print their endorsement of Kamala Harris for president, and it was met with widespread outrage from Post readers. As of Tuesday, more than 250,000 subscriptions were cancelled as a result.
Fortunately for Bezos, he purchased the Washington Post (one of the world’s premier news brands) for “chump change”—$250 million (roughly a mere 1.2% of his net worth). So, if he drives it into the ground, I don’t think he’ll shed tears.
No doubt co-founder and CEO of Tesla, Elon Musk, is making similar calculations with his luxury purchase two years ago of Twitter (which he rebranded as X). Critics say he has turned the social platform into an echo chamber for Republican presidential candidate Donald Trump. What are the billions for, if a person can’t even enjoy themselves by buying a little media, am I right?(That’s sarcasm.)
So far we’ve yet to see analysis to show Bezos’ editorial decision affecting Amazon’s share price or revenue numbers. Apparently Republicans buy Amazon Prime, too.
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Microsoft, Meta and Google: Predictably incredible earnings
While not having quite as large a market cap as Nvidia and Apple, other mega tech stocks in the U.S. are no slouches. For example, Microsoft is also as valuable as the entirety of Canada’s stock exchanges at $3.2 trillion. Alphabet and Meta clock in at $2.1 trillion and $1.5 trillion respectively. (All figures in this section are in U.S. dollars.)
Other Big Tech stock news highlights
Here’s what these companies announced this week.
Alphabet (GOOGL/NASDAQ): Earnings per share came in at $2.12 (versus $1.51 predicted) on revenues of $88.27 billion (versus $86.30 billion predicted).
Microsoft (MSFT/NASDAQ): Earnings per share of $3.30 (versus $3.10 predicted), and revenues of $65.59 billion (versus $64.51 predicted).
Meta (META/NASDAQ): Earnings per share coming in at $6.03 (versus $5.25 predicted) and revenues of $40.59 billion (versus $40.29 predicted).
All three companies crushed earning estimates across the board. However, shareholders’ reactions to these earnings beats were still muted. Meta shares were down 2.5% in after-hours trading on Wednesday, and it was a similar situation for Microsoft. Alphabet fared better as its shares were up 3%.
It’s hard to put these numbers into the massive context into which they belong, because the world has never seen anything like these companies before. Here are highlights from the earnings calls. (Scroll the chart left to right with your fingers or press shift, as you use scroll wheel on your mouse to read.)
Despite these setbacks, CPKC posted an income gain of 7% year over year. The four categories that made the most impact were grain, energy, plastics and chemicals, and they grew revenues by 11%. CPKC says the shipment of wheat to Mexico from the Canadian and American Prairies over the past 12 months was exactly the type of “synergy win” that it was hoping for when the former Canadian Pacific acquired Kansas City Southern back in 2021. This railway remains the only one to span Canada, the United States and Mexico.
CNR CEO Tracy Robinson commented on the railway’s operational challenges. “Our scheduled operating plan demonstrated its resilience in the third quarter, allowing us to adapt our operations to challenges posed by wildfires and prolonged labor issues,” she said. “Our operations recovered quickly and the railroad is running well. As we close 2024, we will continue to focus on recovering volumes, growth, and ensuring our resources are aligned to demand.”
CNR’s revenues were up 3% year over year; however, increased expenses meant the company’s operating ratio rose 1.1% to 63.1% (indicating that expenses are growing as a share of revenue). The railway announced it was raising its quarterly dividend from $0.79 to $0.845. This raise of nearly 7% is right in line with CNR’s mission to conservatively raise its dividend payouts each year.
Thursday’s revenue miss left some Rogers shareholders shaking their heads.
Rogers earnings highlights
Here’s what the large mobile company reported this week:
Rogers Communications (RCI/TSX): Earnings per share of $1.42 (versus $1.34 predicted) and revenues of $5.13 billion (versus $5.17 predicted).
While solid earnings numbers did take away some of the sting, Rogers’ share price was down 3% on Thursday. Lower-than-expected numbers for new wireless customers were at the root of low revenue growth. The oligopolistic Canadian wireless market remains uncharacteristically competitive as Rogers, Telus and Bell all continue to fight for market share. That competition is hurting profit margins for all three telecommunications giants at the moment. (Unlike in past years, when the three telcos all enjoyed charging some of the highest wireless plan fees in the world.)
One highlight for Rogers was its sports revenue vertical, which was up 11% from last quarter. Rogers has really doubled down on its sports media strategy over the last few years and now owns a controlling share of the:
Toronto Blue Jays in the Major League Baseball league (MLB)
Toronto Maple Leafs in the National Hockey League (NHL)
Toronto Raptors in the National Basketball Association (NBA)
Toronto FC in Major League Soccer (MLS)
Toronto Argonauts in the Canadian Football League (CFL)
SportsNet, a major Canadian sports network
Toronto’s Rogers Centre and Scotiabank Arena venues
Naming rights of sports venues in Edmonton, Toronto and Vancouver
National NHL media rights in Canada
Local media rights to the NHL’s Vancouver Canucks, Calgary Flames and Edmonton Oilers
Partial local media rights to the Maple Leafs and Raptors
Several minor-league franchises and esports (gaming) teams
Despite owning all those household-name sports assets, it’s worth noting that Rogers’ wireless and cable divisions were responsible for close to 90% of revenues, with sports and media making up the rest.
Changes to the BoC rate impacts the prime rate set by Canadian lenders, which in turn affects the pricing of variable-based borrowing products, which are based on the prime rate plus or minus a percentage. Following this most recent cut, the prime rate at most Canadian lenders will drop to 5.95% from 6.45%. What does that mean to your money and your debt? Keep reading.
The BoC is taking action with this larger-than-usual cut
When the central bank lowers its benchmark rate, it typically does so in quarter-point increments —unless there’s an economic reason for a heftier cut. Half-percentage point decreases like today’s are rare, but they do have a precedent; the last time the BoC doled out cuts of this size was back in March 2020, when it implemented three in rapid succession to support the economy amid the onset of the COVID-19 pandemic. Outside of the COVID era, today’s rate cut is the largest since March 2009.
That the BoC is once again supersizing its cuts points to concerns that the economy is slowing at a faster pace than expected. The most recent inflation report for September from Statistics Canada revealed the year-over-year inflation as measured by the Consumer Price Index (CPI) fell to 1.6%, which is below the BoC’s 2% target. That’s considered sustainable for the Canadian economy. The BoC tweaks its benchmark rate to keep it as close as possible to target. When inflation is running hot, it hikes rates to cool consumer spending and access to credit. The opposite occurs when inflation gets too soft; the BoC must ease borrowing conditions to encourage consumption, and bolster economic growth, otherwise it risks an impending recession. We’re in the latter situation right now.
Will the BoC continue to drop its rate?
Should economic data, such as inflation, GDP, and job market numbers, continue to trend as it has, additional rate cuts are a certainty, including more supersized cuts. Much will hinge on the next CPI report, due out on November 19. Should inflation remain sluggish, that increases the chances of another half-point cut in the BoC’s next rate announcement, on December 11.
The BoC is also keen to lower its rate down to “neutral” state, which is a range between 2.25% to 3.25%. This again is a rate that neither inflames or stunts economic growth, and remaining above it too long poses economic risk.
Following this rate cut today, the overnight lending rate remains 0.50% above the higher end of the neutral range. Overall, analysts think the BoC will lower its rate by another 1.75% by the end of 2025.
What does the BoC rate announcement mean to you?
What does it mean for you, your home, your finances and more? Read on.
The impact on Canadians with a mortgage
Whether you’re shopping for a brand new mortgage rate or renewing your existing term, today’s rate cut will make it slightly more affordable to do so.
The impact on variable-rate mortgages
Variable mortgage rate holders are the most heavily impacted by the October rate cut, as their mortgage payments—or the portion of their payment that services interest—will immediately decrease along with their lenders’ prime rate. These borrowers in Canada also have much to look forward to, with anticipated rate cuts on the horizon.
(Bloomberg) — Stocks struggled for direction as traders weighed prospects of a slower pace of Federal Reserve rate cuts. Treasury 10-year yields hovered near 4.2%.
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Wall Street are paring back bets on aggressive policy easing as the US economy remains robust and Fed officials have sounded a cautious tone over the pace of future rate decreases. Rising oil prices and the prospect of bigger fiscal deficits after the upcoming presidential election are only compounding the market’s concerns. Since the end of last week, traders have trimmed the extent of expected Fed cuts through September 2025 by more than 10 basis points.
“Of course, higher yields do not have to be negative for stocks. Let’s face it, the stock market has been advancing as these bond yields have bee rising for a full month now,” said Matt Maley at Miller Tabak + Co. “However, given how expensive the market is today, these higher yields could cause some problems for the equity market before too long.”
Exposure to the S&P 500 has reached levels that were followed by a 10% slump in the past, according to Citigroup Inc. strategists. Long positions on futures linked to the benchmark index are at the highest since mid-2023 and are looking “particularly extended,” the team led by Chris Montagu wrote in a note.
“We’re not suggesting investors should start to reduce exposure, but the positioning risks do rise when markets get extended like this,” they said.
The S&P 500 was little changed. The Nasdaq 100 rose 0.1%. The Dow Jones Industrial Average added 0.1%. The Russell 2000 of smaller firms slipped 0.2%. Texas Instruments Inc., which gets almost three-quarters of its revenue from industrial and automotive chips, reports results after the market close.
Treasury 10-year yield was little changed at 4.20%. Oil advanced as traders tracked tensions between Israel and Iran. Gold climbed to a fresh record. Options traders are increasing bets that Bitcoin will reach a record high of $80,000 by the end of November no matter who wins the US presidential election.
The stock market has rallied this year thanks to a resilient economy, strong corporate profits and speculation about artificial-intelligence breakthroughs — sending the S&P 500 up over 20%. Yet risks keep surfacing: from a tight US election to war in the Middle East and uncertainty around the trajectory of Fed easing.
“While recent data indicate a more resilient US economy than previously thought, the broad disinflation trend is still intact, and downside risks — albeit lower — to the labor market remain,” said Solita Marcelli at UBS Global Wealth Management. “We continue to expect a further 50 basis points of rate cuts in 2024 and 100 basis points of cuts in 2025. This should bring Treasury yields lower.”
A string of stronger-than-estimated data points sent the US version of Citigroup’s Economic Surprise Index to the highest since April. The gauge measures the difference between actual releases and analyst expectations.
“On the back of September’s strong economic data, markets have already priced a slower pace of cuts,” said Lauren Goodwin at New York Life Investments. “If the Fed is able to move towards a 4% policy rate — still above the levels most believe represent the ‘neutral’ rate — then the equity market rally can continue. Disruptions to that view make equity market volatility more likely.”
Most Fed officials speaking earlier this week signaled they favor a slower tempo of rate reductions. Policymakers at their meeting last month began lowering rates for the first time since the onset of the pandemic. They cut their benchmark by a half percentage point, to a range of 4.75% to 5%, as concern mounted that the labor market was deteriorating and as inflation cooled close to the Fed’s 2% goal.
“We can point to a few reasons for the rise in global long rates but one possibility is that markets are giving a big thumbs down to central banks easing policy before we’ve seen a sustainable drop in inflation.” said Peter Boockvar author of The Boock Report. “I remain bearish on the long end and bullish on the short end.”
The last time US government bonds sold off this much as the Fed started cutting interest rates, Alan Greenspan was orchestrating a rare soft landing.
Two-year yields have climbed 34 basis points since the Fed reduced interest rates on Sept. 18 for the first time since 2020. Yields rose similarly in 1995, when the Fed — led by Greenspan — managed to cool the economy without causing a recession.
In prior rate cutting cycles going back to 1989, two-year yields on average fell 15 basis points one month after the Fed started slashing rates.
Meantime, the International Monetary Fund said the US election is creating “high uncertainty” for markets and policymakers, given the sharply divergent trade priorities of the candidates. That gap creates the risk of another potential round of volatility on global markets similar to the rattling August selloff.
“Presidents don’t control markets,” said Callie Cox at Ritholtz Wealth Management. “Over time, the stock market’s common thread has been the economy and earnings, not who’s in the Oval Office. Be prepared for mood swings in markets as we get closer to Election Day. But remember that election-fueled storms often dissipate quickly.”
As the earnings season rolls in, US companies are reaping the best stock-market reward in five years for beating profit expectations that were lowered in the run-up to the reporting season.
S&P 500 firms that posted better-than-estimated third-quarter earnings have outperformed the benchmark by a median of 1.74% on the day of reporting results, according to data compiled by Bloomberg Intelligence. That’s the strongest rate in BI’s records going back to 2019.
At the same time, companies missing estimates trailed the S&P 500 by a median of 1.5%, a less severe underperformance than the 1.7% experienced in the second quarter, the data showed.
“This earnings season we are watching what companies are saying about inflation and the economy,” said Megan Horneman at Verdence Capital Advisors. “In addition, their view on interest rates, especially if the Fed cannot be as aggressive as the market is pricing in at this point. It is good to see analysts getting realistic about 2025 earnings growth. However, at 15% earnings growth, we believe it is still too optimistic given the expectation for slower economic growth in 2025.”
Corporate Highlights:
Verizon Communications Inc. reported revenue that missed analysts’ expectations, weighed down by lackluster sales of hardware such as mobile phones.
3M Co. increased the low end of its 2024 profit forecast and reported earnings that topped analyst estimates as a push to boost productivity gained traction.
General Motors Co. signaled solid US demand for its highest-margin vehicles even as the broader market softens, posting better-than-expected results for the latest quarter and raising the low end of its full-year profit forecast.
General Electric Co.’s sales fell short of Wall Street’s expectations last quarter, tempering enthusiasm for its improved profit outlook as the jet engine maker grapples with supply-chain limitations that are weighing on deliveries.
Kimberly-Clark Corp., owner of the Scott toilet paper brand, lowered its full-year organic sales forecast after reporting weaker-than-expected results.
Philip Morris International Inc. forecast higher-than-expected profit this year, citing soaring demand for its Zyn nicotine pouches in the US.
Lockheed Martin Corp.’s third-quarter revenue missed expectations, pulled down by weaker aeronautical sales and ongoing issues with its F-35 fighter jet program.
Zions Bancorp’s third-quarter adjusted net interest income came in ahead of estimates. Morgan Stanley said the results beat across the board and sees the positive trajectory in net interest income continuing into 2025.
L’Oreal SA posted disappointing sales last quarter as the beauty company suffers from worsening consumer demand in China.
An investigation of Huawei Technologies Co.’s latest AI offering has unearthed an advanced processor made by Nvidia Corp. manufacturing partner Taiwan Semiconductor Manufacturing Co., suggesting that China is still struggling to reliably make its own advanced chips in sufficient quantities.
Key events this week:
Canada rate decision, Wednesday
Eurozone consumer confidence, Wednesday
US existing home sales, Wednesday
Boeing, Tesla, Deutsche Bank earnings, Wednesday
Fed’s Beige Book, Wednesday
US new home sales, jobless claims, S&P Global Manufacturing and Services PMI, Thursday
UPS, Barclays earnings, Thursday
Fed’s Beth Hammack speaks, Thursday
US durable goods, University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
The S&P 500 was little changed as of 1:47 p.m. New York time
The Nasdaq 100 rose 0.1%
The Dow Jones Industrial Average rose 0.1%
The MSCI World Index fell 0.2%
The Russell 2000 Index fell 0.2%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro fell 0.1% to $1.0803
The British pound was little changed at $1.2983
The Japanese yen fell 0.1% to 151.02 per dollar
Cryptocurrencies
Bitcoin fell 0.6% to $67,338.79
Ether fell 1.9% to $2,625.07
Bonds
The yield on 10-year Treasuries was little changed at 4.20%
Germany’s 10-year yield advanced four basis points to 2.32%
Britain’s 10-year yield advanced three basis points to 4.17%
Commodities
West Texas Intermediate crude rose 2.3% to $72.21 a barrel
Spot gold rose 1% to $2,748.02 an ounce
This story was produced with the assistance of Bloomberg Automation.
Netflix (NFLX/NASDAQ) shareholders were happy on Thursday, as they saw share prices rise 5% in after-hours trading on the back of another excellent earnings announcement. (All figures in U.S. dollars.) Earnings per share came in at $5.40 (versus $5.12 predicted) and revenues were $9.83 billion (versus $9.77 billion predicted).
Paid memberships also topped expectations, at 282.7 million, compared to the 282.15 million predicted by analysts. Netflix chalked up the increase in viewers to new hit shows such as The Perfect Couple, Nobody Wants This and Tokyo Swindlers, as well as new seasons of favourites Emily in Paris and Cobra Kai. Looking ahead to the next quarter, Netflix is banking on the new season of Squid Game and its foray into the world of live sports. Two National Football League (NFL) games and a massively anticipated boxing bout between Jake Paul and Mike Tyson represent new attractions for the streaming giant.
Photo courtesy of United Airlines
United Airlines shares take to the sky
Tuesday was a massive earnings day for United Airlines (UAL/NASDAQ) as earnings per share came in at $3.33, well outpacing the $3.17 that analysts were predicting. (All figures in U.S. dollars.) Revenues were $14.84 billion (versus $14.78 billion predicted). Shares were up more than 13% on the outperformance and the news that the airline was starting a $1.5-billion share buyback program.
Corporate revenue was up more than 13% year over year, while basic economy seat sales clocked an even more impressive 20% increase. Last week, the company announced new international routes headed to Mongolia, Senegal, Spain, Greenland and more.
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The inflation dragon has been slain
It doesn’t seem that long ago that annualized inflation rates were topping 8%, and there appeared to be no end in sight. Well, the end has arrived. Statistics Canada announced this week that the Consumer Price Index (CPI) annualized inflation rate for September had dropped all the way down to 1.6%. That’s substantially lower than the Bank of Canada’s 2% target.
Led by deflation in clothing and footwear, as well as transportation, the downward trend appears to be widespread. Gasoline was also down 10.7% from this time last year.
Of course, increased shelter costs remain the major concern for many Canadians. Rent increases were up 8.2% year-over-year; while that’s down from August’s figure of 8.9%, it’s still a bitter pill to swallow for many.
17. 2018: Transitioning to more protectionist policies, the United States initiated a renegotiation of the North American Free Trade Agreement (NAFTA)—brought into force in 1994. The Canadian government worried it could significantly affect exports to the country’s largest trading partner. The conflict led to a short-lived but dramatic trade war. Canada, the United States and Mexico ended up negotiating a new trade deal—the United States–Mexico–Canada Agreement (USMCA)—which includes a sunset clause after 16 years.
18. 2019: The federal government was concerned about retirement security, with the decline of workplace pension plans and Canadians’ low savings rate. So, it expanded the Canada Pension Plan (CPP). The public pension plan will grow to replace 33.33% of Canadians’ average work earnings, up from 25%. Over the seven-year roll-out of the program’s enhancement, CPP contributions will also continue to increase.
19. 2020: The COVID-19 pandemic swept through the world, and it had dramatic repercussions on the economy. The federal and provincial governments enacted various degrees of lockdowns across Canada to try to contain the virus’ impact.
Image by Drazen Zigic on Freepik
20. 2020: The government spent hundreds of billions of dollars to pay for benefits that encouraged Canadians to stay home and practice social distancing, most notably, the Canada Emergency Response Benefit (CERB), which was a $2,000 taxable monthly payment. The government also loaned huge sums to businesses to support them through lockdowns that prevented many from operating. The high spending level is one of the factors that led to runaway inflation over the next few years.
21. 2021: Saving rates increased significantly during the pandemic at the same time that the Bank of Canada dropped interest rates to historic lows. Those factors and others led to a boom in Canada’s housing market. Previously, high prices had been mostly limited to major cities, but 2021 saw housing prices rise across the nation, exacerbating long-standing housing affordability issues.
22. 2021: The huge supply of money that entered the economy during the pandemic due to government spending and borrowing, plus supply chain disruptions, led to a dramatic increase in inflation. Houses, cars, groceries and other daily essentials all rose significantly in price.
23. 2022: The Bank of Canada started hiking interest rates rapidly to try to tamp down runaway inflation. Housing prices stabilized (and even fell slightly), but affordability remained an issue as some borrowers’ mortgage payments increased, even doubled. The stock market entered a slump, while prices on everyday goods like gas and groceries remained high, leading to frustration for many Canadians.
24. 2023: The federal government continued to increase its immigration targets to unprecedented levels, letting in millions of international students and low-wage, low-skilled workers under temporary worker programs. The surge in population challenged Canada’s already-tight housing market and strained health-care systems. Wages, which had begun to rise shortly after the pandemic because of labour shortages, started to stabilize. Widespread support for immigration, which had for decades been positive, began to waver.
Columbus Day, also called Indigenous Peoples Day, may be a federal holiday, but it’s also one of the nation’s most inconsistently celebrated days, according to Pew Research.
Even though the event, which falls annually on the second Monday in October, is one of the nation’s 11 federally recognized holidays, it’s not observed by some businesses, states and institutions, especially amid a push to shift recognition away from explorer Christopher Columbus and instead honor the original inhabitants of North America via Indigenous Peoples Day.
As a result, Columbus Day isn’t as widely marked as it once was. Still, the day remains a federal holiday, meaning that some types of services and businesses will be shuttered on Oct. 14 this year.
Here’s what to know about what is open and closed on Columbus Day/Indigenous Peoples Day.
Is today a federal holiday?
Yes, Monday, Oct. 14, is a federal holiday, which means that federal offices will be closed and federal workers have the day off.
Are banks open today on Columbus Day?
Some banks will be closed to commemorate Columbus Day or Indigenous Peoples Day, with Oct/ 14 counting as a holiday for the Federal Reserve system. Among those that will be closed are Bank of America and Wells Fargo.
Some banks, however, say they will remain open on Oct. 14, including Chase, which says its branches will remain open, and TD Bank.
However, the USPS says that its Priority Mail Express will still be delivered in some regions for an additional fee.
Is the stock market open on Columbus Day?
Yes, the stock market is open on Monday, Oct. 14. The New York Stock Exchange does not observe Columbus Day/Indigenous Peoples Day as a holiday, nor does the Nasdaq.
Is Walmart open today?
Walmart tells CBS MoneyWatch its locations will be open during their regular hours on Columbus Day.
Is Target open on Columbus Day?
Target says its stores will be operating on Columbus Day/Indigenous Peoples Day with its regular store business hours, although those hours vary by location. Local hours can be found at Target.com’s “Find a store” feature.
Is Costco open today?
Costco is closed for seven holidays each year, but Columbus Day isn’t one of them, which means the retailer’s doors will be open on Oct. 14.
Is Chick-fil-A open on Columbus Day?
Chick-fil-A’s restaurants are open on Oct. 14, but “they may have limited operating hours,” a spokesperson said. “Please check with your local restaurant for specific hours of operation.”
Aimee Picchi is the associate managing editor for CBS MoneyWatch, where she covers business and personal finance. She previously worked at Bloomberg News and has written for national news outlets including USA Today and Consumer Reports.
For a decade now, big acquisitions by Canadian oil-and-gas producers have mostly been met with distaste by investors. So we’ll take it as a heartening sign how well the markets received Canadian Natural Resources’ (CNQ/TSX) decision to buy the Alberta upstream assets of Chevron Corp. (CVX/NYSE) for USD$6.5 billion in cash. CNQ stock rose 3.7% Monday in the wake of the announcement. Chevron was up 0.7% on a day when oil prices increased.
The assets in question comprise a 20% stake in the Athabasca Oil Sands Project, along with 70% of the Kaybob Duvernay shale play. That should add 122,500 barrels of oil equivalent per day to Canadian Natural Resource’s 2025 output, the company said. It also announced a 7% bump to its quarterly dividend, to 56.25 Canadian cents a share, beginning in January.
Chevron explained the asset sale in terms of freeing up cash for U.S. shale acquisitions as well as targeted positions abroad, such as in Kazakhstan, which it considers to hold better long-term profit potential.
Canada’s best dividend stocks
Nvidia moves up to number 2 in market cap
Reports of the death of the Magnificent 7 tech stocks’ decade-long run are greatly exaggerated, Nvidia (NVDA/Nasdaq) seemed to say this week as its shares rose past $130. (All figures in U.S. dollars.) That pushed its market capitalization ahead of Microsoft Corp. to $3.19 trillion. That leaves only Apple, with a market cap of $3.4 trillion, worth more than the AI-focused chip-maker.
Nvidia’s stock is up 26% in the past month, compared to a 6% advance for the S&P 500. Nvidia has grown tenfold in just two years. The price movement this week appeared to come from a positive report from Super Micro Computer, a provider of advanced server products and services. It found that sales of its liquid cooling products, deployed alongside Nvidia’s graphics processing units (GPUs), would be even stronger than expected this quarter. Analyst estimates of Nvidia’s adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) for the three-month period ended this month is $21.9 billion.
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Pepsi earnings leave a sour taste
Posting its second straight disappointing set of quarterly results on Tuesday, beverage-and-snack maker PepsiCo lowered its full-year guidance for organic revenue unrelated to acquisitions.
Results were hampered by recalls of the company’s Quaker Foods products, related to potential salmonella contamination. PepsiCo also experienced weak demand in the U.S. and business disruptions in some overseas markets, such as the Middle East. Pepsi’s North American beverage volumes fell 3% year-over-year, mostly due to declines in energy drink sales. Meanwhile, its Frito-Lay division suffered a 1.5% decline.
“After outperforming packaged food categories in previous years, salty and savory snacks have underperformed year-to-date,” executives said in a prepared statement. Overall, PepsiCo revised its 2024 sales growth outlook from the previous 4% to low single digits.
Interestingly, small-cap stocks have historically outperformed their larger counterparts and, if academics are to be believed, will continue to do so over the long term. Don’t let recency bias sway you; the dominance of mega-cap stocks over the last decade isn’t the whole story.
What is a market cap?
Market cap, short for market capitalization, is the total market value of a company’s outstanding shares, or stocks. To calculate market cap, multiple the number of shares by the market price of one share. (For example, a company with 10 million shares priced at $25 each has a market cap of $250 million.) People in the investing community use market cap to indicate a company’s value and compare its size relative to others in the same industry or sector. Stock exchanges and cryptocurrencies also have a market cap.
When it comes to the stock market, there are certain formulas, known as asset pricing models, that help us understand why stocks move the way they do. You might have heard of one called CAPM, or the Capital Asset Pricing Model. Basically, CAPM tells us that the return you should expect from a stock is tied to how risky it is compared to the whole market. It’s like saying, the riskier the stock, the bigger the potential reward should be.
Here’s the twist: CAPM doesn’t reveal the whole story. It misses out on some other factors that can also affect a stock’s performance. Back in the 1990s, two professors from the University of Chicago, Eugene Fama and Kenneth French, added more layers to this model. It’s called the Fama-French three-factor model. It later grew into a five-factor model, but to keep it simple, let’s go with the original three:
Market Factor (Rm-Rf): This is the extra return you’d expect from investing in the stock market over something super safe, like government bonds.
Size Factor (SMB for Small Minus Big): This one’s interesting because it shows that smaller companies often outperform larger ones. It’s kind of like rooting for the underdog.
Value Factor (HML for High Minus Low): This tells us that stocks that are priced lower relative to their book values (think bargain stocks) often do better than those that are more expensive.
So, focusing on the size factor, it explains why, over time, these smaller companies, or “small caps” as we call them, might give you better returns than the giants of the stock world.
To understand the performance dynamics between large- and small-cap stocks, we can examine two older U.S. index-based mutual funds: the Vanguard 500 Index Fund Admiral Shares (VFIAX), which tracks the S&P 500, and the Vanguard Small-Cap Index Fund Admiral Shares (VSMAX).
We’ll use a back-test period from November 14, 2000, to September 19, 2024. This timeline is particularly insightful as it includes several major market events: the dot-com bust, the 2008 financial crisis, the COVID-19 pandemic and the ensuing bull market primarily driven by technology stocks.
During this period, small caps, represented by VSMAX, outperformed the S&P 500, as tracked by VFIAX. The Compound Annual Growth Rate (CAGR) for VSMAX stood at 9.21% compared to 7.98% for VFIAX. However, this higher return came with increased volatility and larger drawdowns (price drops from peak to trough).
On a risk-adjusted basis, the performance of both funds essentially leveled out with an identical 0.31 Sharpe ratio, meaning that investors in VSMAX were compensated more or less fairly for the higher risk associated with small-cap investments.
LAS VEGAS, NV, October 7, 2024 (Newswire.com)
– Crazy Pita Corp Launches National Crowdfunding Campaign to Expand Its Three Renowned Brands Across the U.S., Offering Investors an Exciting Growth Opportunity
Crazy Pita Corp, a leader in the fast-casual dining industry, has officially launched a Crowdfunding Campaign to scale the business Nationally, With a multi-brand portfolio that includes Crazy Pita, Chicken Genius, and Salad Madness, the company is poised to take these concepts nationwide. These three brands offer unique, fresh options in the fast-casual space and are already recognized by consumers as go-to spots for healthy, high-quality meals. Crazy Pita Corp was recently recognized as one of the top 100 fast-casual restaurants in the U.S.
The company will host investor events in key markets across the country connecting with potential investors and local restauranteurs who are eager to join Crazy Pita Corp in its next chapter of growth. Investors are particularly excited about the company’s diversified portfolio, Crazy Pita Corp’s crowdfunding link is here, to view the Investment Deck please click the link below.
“Our expansion is built on years of operational excellence, and we are excited to bring these fresh concepts to new markets,” said Mehdi Zarhloul, CEO and Founder of Crazy Pita Corp. “Our three brands offer something for everyone, and we’re confident that investors and consumers alike will embrace what we have to offer.”
Check out our YouTube Video with Mehdi Zahrloul >>>>>>> HERE
Crazy Pita Corp is concurrently running a Regulation D 506 (b) alongside the Reg CF “Crowdfund” for Accredited Investors. Please click the link to View our Investor Deck and Crowdfunding Offer. Review the Deck Here
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations and are subject to risks and uncertainties that may cause actual results to differ materially from those anticipated. Crazy Pita Corp undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise.
Contact Information
Eden Miller Director of Investment Relations eden@crazypita.com 702-466-2574
Some experts speculate the real sticking point in negotiations isn’t about wages but protection from automation. The ILA refused to allow its members to work on automated vessels docking at U.S. ports. As a result, American ports are getting more and more inefficient, ranking not only behind ports in China, but also Colombo, Sri Lanka. (The Container Port Performance Index is put together annually by The World Bank and S&P Global Market Intelligence.)
For reference, the highest-rated port in Canada is Halifax, listed at 108th in the world. Halifax’s port efficiency was well behind not only Sri Lanka, but also economic powerhouses like Tripoli, Lebanon. To give further Canadian context, Montreal is 348th, and Vancouver is 356th, which is just ahead of Benghazi, Libya.
Something tells me that negotiating for USD$300,000-per-year dockworkers is not going to help these North American efficiency numbers. The higher salaries get, the more attractive automation strategies will quickly become. Clearly there will be an eventual reckoning. In the meantime, for at least one more important presidential news cycle, dockworkers will be able to extract large wage gains as they hold the broader economy hostage.
Why utilities aren’t “boring”—any more
As income-oriented Canadian investors start to grow less enamoured of high-interest savings accounts and guaranteed investment certificates (GICs), the dividend yields of dependable North American utility stocks should begin to look more attractive. Given how quickly interest rates are likely to fall, it’s clear that there is a stampede of investors heading for the stocks of utility companies.
The iShares U.S. Utilities ETF (IDU/NYSE) is up more than 30% year to date, and the iShares S&P/TSX Capped Utilities Index ETF (XUT/TSX) is up about 15% year to date. (Check out MoneySense’s ETF screener for Canadian investors.)
Most of the time utilities (especially those in sectors regulated by federal and local governments) are perceived as “boring.” Sure, the profits are dependable, but if the government is going to determine how much is paid for electricity or natural gas, then a company’s profit margins are tough to change. The dividend income is dependable. But that’s really the whole sales job in a nutshell.
Lately, however, due to AI’s electricity needs and possible AI-fuelled efficiency increases, utilities have been getting some glowing press. Falling interest rates mean that annual interest costs will drop (utilities often have to borrow a lot of money to complete big projects). Meanwhile, Canadian investors looking for safe cash flow are pouring in. Utility stocks make up about 4% of the S&P/TSX Composite Index. The largest utility companies—such as Fortis, Emera, Hydro-One and Brookfield Infrastructure—are some of Canada’s largest companies.
Some of the same income-oriented investors who like utility stocks may also be interested in two new exchange-traded funds (ETFs) that J.P. Morgan Asset Management Canada just launched. The JPMorgan US Equity Premium Income Active ETF (JEPI/TSX) and the JPMorgan Nasdaq Equity Premium Income Active ETF (JEPQ) use options strategies to “juice” the income already provided by higher-dividend-yielding stocks.
The Chinese government commands the economy to grow
Many people like to sort countries’ economies as either communist, socialist, capitalist or free markets. But these days, every country has some version of a mixed economy. The practical implementation of fiscal and monetary policy is becoming increasingly more grey than our old black-and-white economics textbooks would have us believe. Yet, even within the grey, China’s approach for its economic system is uniquely difficult to define.
Back in 1962, when asked about building a socialist market economy, future China leader Deng Xiaoping famously said, “It doesn’t matter whether the cat is black or white, so long as it catches mice.”
Well, the current China leaders have let the fiscal and monetary cats out of the bag, and they’re hoping those cats are hungry.
We wrote about China’s housing problems about a year ago, warning about rising deflation fears. These issues seem to have gotten worse, and the biggest news in world markets this week was that China’s government decided enough was enough. And in a “command” economy (which is probably the most accurate way to describe its approach), the government has a very high degree of control over economic levers. Consequently, markets reacted swiftly and positively to this news.
Here are the highlights of the multi-pronged fiscal and monetary stimulus that the Chinese government has decided to implement:
Banks cut the amount of cash they need in reserve (this is known as the reservation requirement ratio) by 0.50%. This will incentivize banks to lend more money (basically “creating” 1 trillion yuan, USD$142 billion).
The People’s Bank of China (PBOC) Governor Pan Gongsheng said another cut may come later in 2024.
Interest rates for mortgages and minimum down payments on homes were cut.
A USD$71 billion fund was created for buying Chinese stocks.
That last point is pretty interesting to me. Here you have a supposedly communist government essentially creating a big pot of money to spend within a free stock market. The fund is to directly purchase stocks, as well as providing cash to Chinese companies to execute stock buybacks. Good luck defining that action in traditional economic terms.
The idea is to give investors and consumers faith that they should go out there and buy or invest in China’s expanding economy. Clearly something major had to be done to jolt Chinese consumers out of their malaise.
Early reports are speculating that the Chinese gross domestic product (GDP) could fail to rise by less than the 5% target set by the government. If so, we’re about to see what happens when the commander(s) behind a command economy decide that the GDP will rise no matter what.
Burry began aggressively buying Chinese stocks in the fourth quarter of 2022, and it seems to finally be paying off.
According to 13F filings, Burry’s Scion Asset Management, which manages about $200 million, has about half of its portfolio invested in Chinese tech giants.
Burry counts Alibaba at his largest position at 21% of the portfolio, and he was still buying the stock as recently as the second quarter, boosting his stake by 24%.
Burry also has 12% of his portfolio invested in Baidu, and another 12% of his portfolio invested in JD.com. Altogether, Burry had about 46% of his portfolio invested in the three Chinese stock as of June 30.
The People’s Bank of China announce key interest rate cuts, lowered bank reserve requirements to stimulate lending, and said it plans liquidity support for the stock market.
The country also encouraged its companies to start buying back stock.
All of these measures and dovish speak from policymakers led to a massive surge in China’s stock market this week.
The iShares MSCI China ETF is up 18% so far this week. Meanwhile, shares of Alibaba, Baidu, and JD.com are up 19%, 18%, and 32% so far this week, respectively.
According to data from HedgeFollow, which tracks and compiles data from 13F filings, the recent gains in China’s stock market should mean Burry too is seeing some sizable gains in his portfolio, with Alibaba leading the charge.
HedgeFollow estimates that Burry has an average cost per share of $78.83 for his Alibaba stake. Shares of Alibaba hit $105.25 in Thursday afternoon trades, representing an estimated gain of 34%.
This assumes that Burry has not sold any shares since Scion’s last 13F filing, which offers data as of June 30.
Burry isn’t the only hedge fund manager making money off of the recent surge in China’s stock market.
Like Burry, Tepper count Alibaba as his hedge fund’s largest position, making up about 12% of his $6.2 billion Appaloosa fund. Tepper believes there’s more upside to be had in Chinese stocks due to their depressed valuations.
“Even with the recent moves they’re like on a flat-line low compared to where they have been in the past. And you’re sitting there with single multiple PEs, with double-digit growth rates for the big stocks that trade over here,” Tepper said in an interview with CNBC on Thursday.
U.S. Fed cuts rates for the first time in four years
The U.S. dollar remains the most important currency in the world, and the American economy is arguably the most important financial system as well. Consequently, when the U.S. Federal Reserve makes a big announcement, it creates an economic wave that ripples everywhere. That’s why Wednesday’s decision to cut the key overnight borrowing rate by 0.50% is a very big deal.
Many speculated the U.S. Fed would begin cutting rates this week, but it was generally thought it would go with a 0.25% drop to begin an interest rate-cut cycle. The 50 basis points cut lowers the federal funds rate range 4.75% to 5%.
The U.S. Fed announced in a statement: “The Committee has gained greater confidence that inflation is moving sustainably toward 2%, and judges that the risks to achieving its employment and inflation goals are roughly in balance.”
Federal Reserve Chair Jerome Powell said, “We’re trying to achieve a situation where we restore price stability without the kind of painful increase in unemployment that has come sometimes with this inflation. That’s what we’re trying to do, and I think you could take today’s action as a sign of our strong commitment to achieve that goal.”
Immediately after the news of the U.S.’s first interest rate cuts in four years, major stock market indices responded with a brief jump on Wednesday. But they ended the day nearly flat. That seemed to be a bit of a delayed reaction from investors, as the Bulls returned Thursday with Nasdaq soaring 2.5% and the Dow leaping 1.3% to pass 42,000 for the first time ever.
Notably, former U.S. President Donald J. Trump continued to criticize the monetary decisions made by the U.S. Federal Reserve. This despite centuries of financial wisdom telling us that politicians getting involved in short-term monetary policy is a bad idea. (See: Turkey – Erdoğan, Tayyip.) At bitcoin bar PubKey on Wednesday, Trump said, “The economy would be very bad, or they’re playing politics.”
The larger-than-expected rate cut left some commentators questioning if this action would spook the markets. But, if the U.S. Fed manages to thread the needle and cut rates without a recession, it could be a good thing. The historical precedents are very positive for shareholders.
This large rate cut helps ease pressures on emerging markets that borrowed in U.S. dollars. And, it takes some of the pressure off other central banks around the world that didn’t want to see their currencies devalued too much relative to the mighty USD.
Growing grocery delivery business and other opportunities
The company also said it’s hitting pause on a new fulfilment centre to help save costs in its grocery delivery business Voilà, among other changes.
“While the market penetration of Voilà continues to be strong, the size and growth of the Canadian grocery e-commerce market is smaller than anticipated, resulting in higher net earnings dilution than originally estimated,” Empire said in its press release. The company says it’s focusing on driving volume and performance at its three existing centres.
Empire also prematurely ended its mutual exclusivity agreement with technology provider Ocado, as part of changes it’s made to lower costs and increase flexibility. The changes “are expected to have a significant, positive impact on Voilà’s profitability in fiscal 2025 and 2026,” Empire said. The company says its profit amounted to $0.86 per diluted share for the 13-week period ended Aug. 3.
The result was down from a profit of $1.03 per diluted share in the same quarter last year when its bottom line was boosted by the sale of 56 gas stations in Western Canada.
Analyst take on Empire’s quarter
RBC analyst Irene Nattel said Empire’s operating results came in “a tick above forecast as consumer value-seeking behaviour stabilizes.” She said in a note that the company continues to execute on its strategy to maximize revenue in its full-service stores, despite the broader momentum in discount stores, though she added Empire is also growing its discount presence. Nattel has previously said Empire is overly exposed to the full-service part of the grocery sector compared with its competitors, giving it a relative disadvantage amid heightened price sensitivity.
Empire earnings highlights
Here’s a breakdown of the results this week.
Empire Company (EMP/TSX): Earnings per share of $0.63 (versus $0.62 predicted). Revenue of $7.41 billion (meeting the prediction).
Sales for what was the company’s first quarter totalled $8.14 billion, up from $8.08 billion a year earlier. Same-store sales for the quarter were up 0.5%, while same-store sales, excluding fuel, increased 1%.
Medline said a year and a half after completing the rollout of loyalty program Scene+ across Canada, the program has more than 15 million members, with those members spending on average 55% more than non-members. “Scene+ has significantly boosted our incremental sales and margin compared to our prior loyalty program,” he said.
On an adjusted basis, Empire says it earned $0.90 per share in its latest quarter, up from an adjusted profit of $0.78 per diluted share in the same quarter last year. Shares in Empire closed up 5.6% on the Toronto Stock Exchange at $40.62.
Tuesday’s earnings call was the best day that Oracle shareholders have seen in a while.
Oracle earnings highlights
All figures in U.S. currency in this section.
Oracle (ORCL/NYSE): Earnings per share came in at $1.39 (versus $1.32 predicted), and revenues of $13.31 billion (versus $13.23 billion predicted).
Share prices rose more than 13% after the tech giant showed profits that were up nearly 20% from last year. Revenues across the company’s cloud services division continue to increase. And CEO Safra Catz said, “I will say that demand is still outstripping supply. But I can live with that.”
Founder Larry Ellison (who recently passed Mark Zuckerberg to become the second richest person in the world) excitedly predicted that Oracle would one day operate more than 2,000 data centres, which is up from the 162 today. The current project that he highlighted is a massive data centre that will use three modular nuclear reactors to produce the needed gigawatts of electricity.
In other U.S. stock market news, Trump Media and Technology Group (DJT/NASDAQ) investors face a big decision this week. The stock plummeted from highs of $66 per share on March 27, to $16.56 after the debate on Wednesday. Don’t say we didn’t warn you.
That’s not the worst news for DJT investors though. Next week, a potentially crippling event occurs: the entity that owns 57% of the shares can sell the stock for the first time. If it were to sell all its shares (in order to get as much money as possible out of a business venture that loses millions of dollars every month), the share price would tank.
What is the “entity”? It’s actually a question of who not what: Donald Trump.
Even at reduced share price levels, Trump’s slice of Truth Social is worth about $1.9 billion. It’s not like he needs money for pressing issues or anything like that…
Dell and Palantir kick American Airlines and Etsy out of the S&P 500
In other big events to look forward to, September 23 will see major U.S. market indices experience a reweighting. Given that trillions of dollars are now passively invested into indice-based index funds, whether your company is a member of a specific index or not can make a big difference in its share price. That said, these indice moves are largely anticipated by the market, so a lot of the value movement has already been priced in.
“Private investments” is a catch-all term referring to financial assets that do not trade on public stock, bond or derivatives markets. They include private equity, private debt, private real estate pools, venture capital, infrastructure and alternative strategies (a.k.a. hedge funds). Until recently, you had to be an accredited investor, with a certain net worth and income level, for an asset manager or third-party advisor to sell you private investments. For their part, private asset managers typically demanded minimum investments and lock-in periods that deterred all but the rich. But a 2019 rule change that permitted “liquid alternative” mutual funds and other innovations in Canada made private investments accessible to a wider spectrum of investors.
Why are people talking about private assets?
The number of investors and the money they have to invest has increased over the years, but the size of the public markets has not kept pace. The number of operating companies (not including exchange-traded funds, or ETFs) trading on the Toronto Stock Exchange actually declined to 712 at the end of 2023 from around 1,200 at the turn of the millennium. The same phenomenon has been noted in most developed markets. U.S. listings have fallen from 8,000 in the late 1990s to approximately 4,300 today. Logically that would make the price of public securities go up, which may have happened. But something else did, too.
Beginning 30 years ago, big institutional investors such as pension funds, sovereign wealth funds and university endowments started allocating money to private investments instead. On the other side of the table, all manner of investment companies sprang up to package and sell private investments—for example, private equity firms that specialize in buying companies from their founders or on the public markets, making them more profitable, then selling them seven or 10 years later for double or triple the price. The flow of money into private equity has grown 10 times over since the global financial crisis of 2008.
In the past, companies that needed more capital to grow often had to go public; now, they have the option of staying private, backed by private investors. Many prefer to do so, to avoid the cumbersome and expensive reporting requirements of public companies and the pressure to please shareholders quarter after quarter. So, public companies represent a smaller share of the economy than in the past.
Raising the urgency, stocks and bonds have become more positively correlated in recent years; in an almost unprecedented event, both asset classes fell in tandem in 2022. Not just pension funds but small investors, too, now worry that they must get exposure to private markets or be left behind.
What can private investments add to my portfolio?
There are two main reasons why investors might want private investments in their portfolio:
Diversification benefits: Private investments are considered a different asset class than publicly traded securities. Private investments’ returns are not strongly correlated to either the stock or bond market. As such, they help diversify a portfolio and smooth out its ups and downs.
Superior returns: According to Bain & Company, private equity has outperformed public equity over each of the past three decades. But findings like this are debatable, not just because Bain itself is a private equity firm but because there are no broad indices measuring the performance of private assets—the evidence is little more than anecdotal—and their track record is short. Some academic studies have concluded that part or all of private investments’ perceived superior performance can be attributed to long holding periods, which is a proven strategy in almost any asset class. Because of their illiquidity, investors must hold them for seven years or more (depending on the investment type).
What are the drawbacks of private investments?
Though the barriers to private asset investing have come down somewhat, investors still have to contend with:
lliquidity: Traditional private investment funds require a minimum investment period, typically seven to 12 years. Even “evergreen” funds that keep reinvesting (rather than winding down after 10 to 15 years) have restrictions around redemptions, such as how often you can redeem and how much notice you must give.
Less regulatory oversight: Private funds are exempt from many of the disclosure requirements of public securities. Having name-brand asset managers can provide some reassurance, but they often charge the highest fees.
Short track records: Relatively new asset types—such as private mortgages and private corporate loans—have a limited history and small sample sizes, making due diligence harder compared to researching the stock and bond markets.
May not qualify for registered accounts: You can’t hold some kinds of private company shares or general partnership units in a registered retirement savings plan (RRSP), for example.
High management fees: Another reason why private investments are proliferating: as discount brokerages, indexing and ETFs drive down costs in traditional asset classes, private investments represent a market where the investment industry can still make fat fees. The hedge fund standard is “two and 20”—a management fee of 2% of assets per year plus 20% of gains over a certain threshold. Even their “liquid alt” cousins in Canada charge 1.25% for management and a 15.7% performance fee on average. Asset managers thus have an interest in packaging and promoting more private asset offerings.
How can retail investors buy private investments?
To invest in private investment funds the conventional way, you still have to be an accredited investor—which in Canada means having $1 million in financial assets (minus liabilities), $5 million in total net worth or $200,000 in pre-tax income in each of the past two years ($300,000 for a couple). But for investors of lesser means, there is a growing array of workarounds:
Investment within the financial services technology sector is creeping back up after plummeting in August.
Following a July peak, Bank Automation News’ BAN Stock Index in August fell to 256.23, the lowest on the index since February, when it was 255.21. The BAN Stock Index tracks the average performance of financial technology providers.
The index tracks the daily stock performance of public technology providers and fintechs of various market capitalizations since 2014.
According to BAN’s BAN Stock Portfolio, which tracks the daily stock performance of financial service technology providers, these public companies have seen the highest percentage change in stock price since market close Sept. 6:
DeFi Technologies’ shares are up 20.23% to $2.08. The company has a market capitalization of $673.72 million; and
NEC shares are up 14.25% to $85.69. It has a market capitalization of $23.31 billion.
Behind the growth
DeFi Technologies’ stock growth follows a Sept. 5 announcement that it partnered with investment firm Professional Capital Management to expand into the exchange-traded fund (ETF) market, according to a DeFi Technologies release.
“ETFs represent a transformative opportunity to redefine how investors access and manage their portfolios,” Professional Capital Management founder and Chief ExecutiveAnthony Pompliano said in the release.
Also last week, NEC launched its Gateless Biometric Authentication system that is aimed to authenticate large numbers of people at one time while they’re in motion, according to a Sept. 3 NEC release.
Register for the upcoming complimentary webinar presented by Bank Automation News: “The future of open banking: Payments meet data,” on Tuesday, Sept. 17, at 11 a.m. ET. Register for the webinar here.
