Equities: New extremes and a challenging opportunity set
Discover insights on the future of equity markets in Q1 2024 and navigate the potential recession with strategic investment choices.
Head of Equity Strategy
Summary: In today's equity update we take a look at which stocks that will be in focus in today's session. We talk about Tesla, Adidas, Coinbase, NIO, and many others. We also touch on the shaky equity market and its high valuation as the Fed is getting closer to liftoff in rates amid tighter labour market conditions.
Yesterday’s session was the first negative (close-to-close) in Nasdaq 100 futures in 11 trading sessions showing that the market is testing the recent exceptional gains. The 16,130 level in Nasdaq 100 futures seems to be a critical junction in US technology stocks and with Tesla under pressure yesterday we could see an extension of the selloff. The selloff in US government bond yields also seems to have stopped and with China flashing inflation alerts overnight, there is a growing likelihood that the Fed will soon swing into tightening mode as the US labour market is strengthening month by month. We currently have the most loose monetary conditions compared to the tightness in the US labour market measured by the total unemployment rate (full and partial employment), and given the prior liftoffs in the Fed Funds Rate vs labour market we are getting close to the next phase.
Electric vehicles in the spotlight today
The stocks below are the ones that are on the move today. We explain shortly why they are interesting to track.
Adidas – the sportswear brand is cutting FY gross margin guidance on strong headwinds from supply constraints and it is now getting quite clear that the company is relatively managing the supply constraints much worse than Nike.
Infineon Technologies – raising guidance on operating margin and revenue growth driven by strong demand in its automotive segment. FY22 revenue guidance is above analysts’ consensus.
Noble and Maersk Drilling – the two oil & gas drillers are merging in an all-share deal with shareholders owning 50% each after the merger. The reasons behind the merger is increasing headwinds for offshore drilling since the oil rout in 2014 and the two drillers agree that size will matter in the future.
Tesla – shares down heavily yesterday shredding $200bn in market value over two trading sessions following Elon Musk’s poll on selling 10% of his stake in the EV-maker. The recent weakness has felt very technically and idiosyncratic just as the dramatic move higher in recent weeks has seem out of touch with the rest of the market.
Coinbase – disappointed in Q3 on revenue, but the market was more spooked by the lower monthly transacting users on their crypto trading platform suggesting that the company is potentially losing market share.
NIO – reported better than expected Q3 revenue, margins, and deliveries narrowing its operating losses. Its Q4 guidance was a tad to the weak side and suggests that the Chinese EV-maker is still struggling to meaningfully ramp up production.
Rivian – the electric-truckmaker is pricing its shares at $78 on strong demand which is significantly above its initial range of $57-62. The stock will start trading today and provide investors with another pure play on EVs. Rivian is backed by Amazon.
General Electric – the industrial conglomerate is being broken into three separate units focusing on aviation, health care, and energy. This is the right move in our opinion and will focus the company on innovation and creating value for shareholders.
DoorDash – the company announced yesterday that is buying its competitor Wolt for €7bn on top of reporting much better than expected Q3 figures on both revenue and EBITDA. Q4 guidance on revenue was away above consensus.
What happened to the future?
What happened to the future?
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