David Fuller and Eoin Treacy's Comment of the Day
Category - General

    Amazon's stock is misunderstood for these 3 reasons, according to an analyst

    This article from Bloomberg may be of interest to subscribers. Here is a section: 

    "First, we believe the current growth rate is depressed by the overall softness in consumer discretionary spend," Mahaney wrote of Amazon's retail business, which he expected will grow revenue by 10% this year, compared with 13% last year. An improvement in macroeconomic trends "should enable an acceleration in North American Retail revenue growth."

    Further, Amazon could see big revenue benefits as it continues making its shipping times ever speedier. As Mahaney wrote, "the faster the shipping, the greater the demand."

    On the cloud-computing side of the business, Mahaney saw the potential for an even more dramatic slowdown in the near term. Revenue there could increase by only 10% or 11% in the second quarter and 16% for the whole of 2023, by his estimates, versus 29% in 2022.

    But he also saw room for Amazon to drive a growth inflection after the second quarter of this year, driven by easier comparisons, traction for artificial-intelligence workloads and a relaxation of "optimization" efforts like discounts and bundled renewals.

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    When Delivery Costs More Than the Food You Ordered

    This article from Bloomberg may be of interest. Here is a section: 

    Delivery companies as publicly listed entities are under pressure to churn out profits. And there’s very little competition. Consolidation, particularly since that start of the pandemic, has left three dominant players in the US. DoorDash had 65% of food delivery sales as of April, including those from its Caviar unit, according to Bloomberg Second Measure, a provider of transaction data analytics. Uber Eats has a 25% share, aided by its 2020 acquisition of Postmates. Grubhub Inc. — which has over the years absorbed Seamless, Eat24, and Tapingo before being acquired by Just Eat Takeaway.com — has 9%. 

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    Nvidia Eyes the $1 Trillion Club as AI Outlook Sparks Rally

    This article from Bloomberg may be of interest to subscribers. Here is a section: 

    “It doesn’t happen often to see a $700 billion company move 25% in one day — I’ve never seen anything like it,” said Richard Windsor, founder of independent researcher Radio Free Mobile based in Abu Dhabi. For as long as the AI craze persists, “Nvidia is in a good position.”

    A trillion dollars of data center infrastructure will be upgraded to handle so-called accelerated computing, Chief Executive Officer and co-founder Jensen Huang told analysts, letting them run generative AI tools such as ChatGPT. Huang said the firm saw “incredible orders.”

    Nvidia’s outlook was so strong that Morgan Stanley analyst Joseph Moore said the numbers match what they had in mind for 2025. “The transformational surge in AI spending is paying off much earlier than expected,” he wrote in a note.

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    South Africa Rate Hike Fails to Stop Rand Slumping to Record Low

    This article from Bloomberg may be of interest. Here is a section: 

    “The health of the local economy is now the primary concern,” said Brendan McKenna, an emerging-markets strategist at Wells Fargo Securities in New York. “It’s difficult to make a really compelling case to deploy capital toward South Africa and the rand at the moment. The rand has been an EM currency that has underperformed for most of this year, and given the commentary from the SARB today, that underperformance is likely to continue.”

    Bloomberg’s forecast model based on prices of options to buy and sell the rand shows a 53% chance of the currency breaching 20 per dollar within the next week. That compares with a probability of just 6.8% before Thursday’s rate decision.

    All of the monetary policy committee’s five members voted for the half-point increase, the first such unanimous decision since September 2021. There have been a cumulative 475 basis points of interest-rate hikes since November 2021, the most aggressive tightening cycle in at least two decades.

    “The rand should strengthen after an interest rate hike, but given the poor reaction in the currency, the market seems to think that this is a potential policy mistake,” said Michelle Wohlberg, a fixed-income analyst at Rand Merchant Bank in Johannesburg. “The yield curve has steepened aggressively post the rate hike as fiscal fears start playing in investors’ minds on the back of poor growth prospects.”

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    Great Wall Motor, BYD Sink After Chinese Auto Giants Clash on Car Emissions Tests

    This article from Yicai Global may be of interest. Here is a section: 

    BYD’s Qin Plus DM-i and Song Plus DM-i models use normal-pressure fuel tanks and therefore purportedly fail to meet the country’s vehicle emissions standards, Great Wall Motors said today, citing the filing it made to the Ministry of Ecology and Environment, State Administration for Market Regulation and the Ministry of Industry and Information Technology on April 11.

    Great Wall Motors is paying close attention to the case to see if legal action will be taken, the Beijing-based carmaker said. Environmental protection authorities need to conduct a probe and legal proceedings must be started should the results show any irregularities, it added.

    BYD retorted that it reserves the right to carry out legal action of its own and is firmly against any form of unfair competition. All of the Shenzhen-based company’s autos conform with national standards and they have all passed verification by the country’s authorities.

    Great Wall Motor bought the two cars and sent them to the China Automotive Technology & Research Center for testing, BYD said. They were not tested according to national-level standards, it said.

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    Email of the day on demand for EV charging

    One must also consider that a healthy percentage of ev owners charge at home. The business model for gasoline retailers would be very different if the same percentage of ice owners had gas pumps at home.

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    UK Price Shock Sends Bond Yields to Levels Last Seen Under Truss

    This article from Bloomberg may be of interest to subscribers. Here is a section: 

    UK bond yields are back to where they were when Liz Truss was in No. 10 after a shocking inflation report prompted traders to bet on more rate hikes from the Bank of England.

    The inflation rate came in higher than all economists forecast — sending wagers on future interest-rate hikes soaring and lifting yields to levels last seen when the former Prime Minister rattled markets with her unvetted mini-budget. 

    The rate on 10-year securities now pays a premium of more than 50 basis points over equivalent US notes, around the biggest seen in more than a decade. A key part of the curve inverted the most since February, a sign bond traders are positioning for short-term borrowing costs to remain elevated for longer. 

    “It’s a terrible inflation print that really sets the UK apart from other major developed economies,” said Derek Halpenny, head of research, global markets EMEA & international securities at MUFG Bank. “The scale of divergence on the inflation path risks undermining policy credibility.”

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