Notable market news this past week (11-Aug-24)
Here is the Skeptivest roundup of the latest market headlines for the week
🚗 Uber (+24.62% past 5 days) has returned to profitability after posting losses in Q1 2024, following a profit last year
Uber exceeded 2Q24 earnings expectation: Revenue grew 16%, trips grew 21%, and daily active users grew 14%. Strong growth helped raise guidance beyond Street estimates, driving shares higher. Earnings of $0.47/share beat estimates by 51.6%.
Slipping into the red in Q1 after finally turning an annual profit: After years of burning billions of VC cash, the ride-share giant finally achieved an annual profit last year (operating profit of $1.1 billion in 2023), only to fall back into the red in the first quarter of 2024.
Uber is somewhat recession proof?:
- Economic downturns (i.e. huge recessionary fears at the moment) tend to lead to more driver sign-ups, thus reducing prices and wait times for riders.
- Meanwhile, Uber’s initiative to leverage our valuable mobility data to build an advertising powerhouse is beginning to pay off, potentially establishing a steady new revenue stream. In its earnings call, Uber said that its ad revenue run rate will exceed $1 billion this year, well up from the $650 million seen last year.
Other gig economy stocks also rose:
- Doordash (+16.35% past 5 days) beat earnings expectations: Sales grew 23% YoY, and losses narrowed. Total orders grew 19%, indicating improved monetization, and guidance came in higher than expected. Nontheless, EPS was still a loss of $0.38/share.
- Instacart (+6.94% past 5 days) posts sales beat, issues strong earnings outlook: Revenue gained to US$823m, far surpassing analysts’ expectations of US$806m. Instacart said that it expects the value of orders in the third quarter to total between US$8.1b and US$8.25b, the high end of which surpasses estimates.
🇺🇸 US Elections Update
Harris leads Trump in three major election battlegrounds: A recent NYT poll shows VP Kamala Harris leading former President Donald Trump in three crucial battleground states: Michigan, Wisconsin, and Pennsylvania. Harris holds a 50% to 46% advantage among likely voters in these states, though the margins are within the poll’s error range. This poll is particularly significant as it comes after President Joe Biden's withdrawal from the race and his endorsement of Harris as the Democratic nominee. Despite Harris's overall lead, Trump continues to hold an advantage on economic issues, with a nine-point lead over Harris in that area
Potential civil conflict amid US shifting political landscape: Hedge fund manager, Ray Dalio's analysis of the current U.S. political climate suggests that the nation is at a critical point in its internal order, with the potential for increased conflict, possibly even civil war, looming. Several recent developments have shifted the political landscape, including a debate that weakened trust in President Biden, an assassination attempt that almost led to chaos, and the Republican convention, which united the party around Donald Trump. Dalio notes that the strategic direction remains the same: the country is deeply divided by irreconcilable differences. The recent changes reduce the likelihood of a close and contested Trump loss, which Dalio identifies as the scenario most likely to lead to civil unrest. However, if the Democrats handle the transition following Biden's withdrawal poorly, and Trump loses as a result, the chances of conflict could rise significantly
☕️ Quick fire happenings to note
🌏 Global macro
- China launches appeal at WTO over EU electric vehicle tariffs: In July, the EU slapped extra provisional duties of up to 38% on Chinese EVs after its executive arm concluded in an investigation that they were unfairly undermining European rivals. On Aug 9, China appealed to the WTO's dispute settlement mechanism over the EU's temporary anti-subsidy measures on EVs. The ministry said the appeal aimed to "safeguard the development rights and interests of the electric vehicle industry and cooperation over the global green transformation"
- Initial jobless claims in the US fell to 233k for the week: A decline of 17k from the previous week, and lower than the expected 240k. This drop is seen as a positive sign for the labour market, countering concerns of a slowdown. Despite this, continuing claims rose slightly to 1.88m, the highest since late 2021. The four-week average of claims also increased to ~241k, reflecting recent disruptions like Hurricane Beryl and auto plant shutdowns. The report provided some relief to Wall Street, with stock market futures turning positive after the release. However, concerns about the overall state of the labour market persist, especially after a weaker-than-expected nonfarm payrolls report and an increase in the unemployment rate to 4.3%. Markets are now anticipating potential interest rate cuts from the Fed in response to the economic uncertainty
- Gold prices rose by more than 1%: driven by strong safe-haven demand and growing optimism that the U.S. Federal Reserve will implement a significant interest rate cut in September. Spot gold settled at ~$2,463, reflecting a 1.27% increase. The rise in gold prices is attributed to investors seeking stability amid geopolitical tensions in the Middle East and economic uncertainties. The likelihood of a 50-basis-point interest rate cut by the Fed, as forecasted by major financial institutions, has further boosted gold's appeal. Other precious metals, including silver, platinum, and palladium, also saw significant gains
- Grameen Bank founder sworn in as chief advisor of Bangladesh's interim government: Nobel Prize-winning economist Muhammad Yunus was sworn in as the chief advisor of Bangladesh’s interim government, just days after widespread student-led protests drove the authoritarian Prime Minister Sheikh Hasina, who was responsible for the deaths of numerous protesting civilians, to flee the country.
- Recessionary risk: JPMorgan now sees a 35% chance that the US economy tips into a recession by the end of this year, up from 25% as of the start of last month, thanks to hints of a “sharper-than-expected weakening in labor demand and early signs of labor shedding.”
- China export growth slows in July: China's export growth unexpectedly slowed in July, indicating a decline in the global demand. This is particularly concerning for Beijing, as domestic consumers have been cutting back on spending. Meanwhile, imports grew by 7.2%, reducing the trade surplus to $84.65b from the previous month.
- Countries telling citizens to leave Lebanon: The US, UK, Australia, France, and other nations urged their citizens to leave Lebanon over concerns that a wider regional war would break out in the Middle East following two assassinations, one in Tehran and one in Beirut, last week
🏦 Individual stocks/companies
- Hospitality earnings disappoint - hinting slowdown in discretionary spending: Airbnb (-7% past 5 days) missed EPS estimates of $0.92/share by 6.5%. Gross booking value grew healthily, but take rate seems to be slowing down. Marriott (+5.59% past 5 days) barely beat EPS estimates of $2.49/share with EPS of $2.50/share. Growth was slowest in the luxury brands segment (e.g. Ritz Carlton).
- CrowdStrike outage disruptions on Delta: Delta Air Lines reported that a CrowdStrike outage in July 2024, which led to the cancellation of 7,000 flights, cost the company $550m. This includes a $380m revenue loss due to customer refunds and compensation and a $170m expense for managing the outage and recovery efforts. Delta is pursuing legal action against CrowdStrike and Microsoft, holding them responsible for the disruption, which affected 1.3m customers and 37,000 Delta computers. CrowdStrike and Microsoft have responded by defending their actions and offering support during the incident
- Warren Buffett's unexpected sale of a large portion of Apple: Apple’s true influence in major stock indexes is set to rise. Berkshire Hathaway’s long-term holding of these shares had previously limited Apple’s weight in indexes, which were calculated using float-adjusted market capitalization. Now, Apple's full value will be reflected in these benchmarks.
- Disney streaming business turning green: The company’s streaming business, which includes Disney+, Hulu, and ESPN+, turned a profit for the first time—a quarter sooner than it planned
- Novo Nordisk shares dips: Drug maker posts earnings miss and cuts operating profit outlook. Novo Nordisk is facing increasing competition in the weight loss space, both from smaller companies and from pharmaceutical giants such as Roche. Its CEO said he was still “very confident” that the company could “sustain competitiveness long term.”
- Boeing hires new CEO: Robert Ortberg, the new CEO of Boeing, took over on August 8, with a mission to restore the company's reputation amidst ongoing safety and manufacturing crises. Boeing is facing multiple challenges, including production defects, regulatory trust issues, and financial losses totaling $8b this year. Ortberg’s leadership will be crucial in stabilizing Boeing's operations, addressing the manufacturing flaws, and improving relations with customers and suppliers. His initial focus includes enhancing workforce training, with a potential strike looming from union workers demanding significant wage increases. Analysts are cautiously optimistic about Ortberg's potential to steer Boeing back to its former status as a leading aerospace company
- Cisco Systems alleged layoff plans: Cisco Systems reportedly plans to fire thousands more of its people in a second round of mass terminations this year. In February, the company dismissed about 4,000 employees.
🇸🇬 Singapore related
- Singapore looks to build first-of-its-kind renewable energy farm in waters around Raffles Lighthouse: The total energy generated in a year could power the equivalent of 1,000 four-room HDB flats. It would likely be used to charge electric harbour craft, in line with upcoming requirements to decarbonise the maritime industry
- Taskforce set up to bolster S’pore’s tech resilience following Crowdstrike outage: Set up by the Ministry of Digital Development and Information (MDDI), the taskforce will engage relevant partners to gain insights into the incident, which disrupted banks, hospitals and emergency lines around the world.
- DBS CEO change: Tan Su Shan, currently DBS Group Head of Institutional Banking, will take over as CEO of DBS Group Holdings when Piyush Gupta retires in March.
