The Market News Reel for this week! Get the most important market news & updates for the week ahead each Monday!
Major headlines, excerpts from news sources and a link to the full article are shown below. "Breaking Thoughts" section is purely our opinion.
Hedge Funds Slash Tech Holdings Ahead of Earnings
"Hedge funds that make both bullish and bearish wagers on stocks are turning skeptical on tech megacaps just days before earnings from the likes of Apple Inc. and Facebook Inc.
Their exposure to the five biggest American companies slipped over the past month, hitting the lowest level in more than two years, according to Goldman Sachs Group Inc.’s prime broker.
All is fueling anxiety over the bloc’s 40% premium in price-earnings multiples at a time when a spike in Treasury yields stoke aversion toward richly valued stocks.
“That love story seems to be petering out a little bit,” said Peter Essele, portfolio manager for Commonwealth Financial Network." - read more on BNN Bloomberg here
Breaking Thoughts: The sentiment around the "FAANGs+" has been cautious over tax, regulatory and chip shortage issues for much of this year. Some of these big techs trade at forward PE ratio's that would put them firmly in the "value" category. Yet their high growth (in both sales & earnings), as well as very high profit margins, continue to suck all the air out of the room. They hire the best talent, build the best products, and earn the most money. We think most will beat expectations and continue to do so for many years.
Global Foundries Seeks to IPO During Chip Shortage
"GlobalFoundries Inc. filed for an initial public offering as investors pour money into semiconductor makers amid a pandemic-induced chip shortage.
In a filing Monday, the company listed the size of its offering as $1 billion -- a placeholder that will change when terms of the share sale are set. GlobalFoundries, owned by an investment arm of the Abu Dhabi government, also disclosed financial details of its business, including a 2020 net loss of $1.35 billion and revenue of $4.85 billion.
GlobalFoundries, based in Santa Clara, California, is appealing to public-market investors as interest in the semiconductor industry hits an all-time high. Shortages caused by a surge in demand for electronics during pandemic lockdowns and insufficient supply have made chip factories more valuable to the economy." - read more on BNN Bloomberg here
Breaking Thoughts: While this $1+ billion infusion of capital is positive, it may prove to be little more than a temporary life line. Traditionally, in supply constrained growth industries, all producers should do better than they were prior to shortages (all else being equal). Or as the saying goes "a rising tide lifts all boats".
However, Global Foundries has mostly outdated processor technologies (stuck on 14nm, 22nm and larger nodes) leaving them with primarily niche industrial end users not in need of high end computing. This means they cannot raise prices or volumes aggressively and growth will not be as good as it will be at the big manufacturers (TSMC, Samsung or even Intel). Given ongoing large losses, investors need to either steer clear or believe that the new capital along with their turn around plans will be successful. The road will be difficult.
Major Earnings This Week
Monday October 25:
Celestica (CLS): Expected Q3 earnings of $0.32 per share
Facebook (FB): Expected Q3 earnings of $3.19 per share
Logitech (LOGI): Expected Q2 earnings of $1.09 per share
Tuesday October 26:
3M (MMM): Expected Q3 earnings of $2.20 per share
AMD (AMD): Expected Q3 earnings of $0.67 per share
Alphabet (GOOG): Expected Q3 earnings of $23.47 per share
General Electric (GE): Expected Q3 earnings of $0.43 per share
Microsoft (MSFT): Expected Q1 earnings of $2.08 per share
NCR (NCR): Expected Q3 earnings of $0.64 per share
Robinhood (HOOD): Expected Q3 earnings of $-1.36 per share
Twitter (TWTR): Expected Q3 earnings of $0.15 per share
Visa (V): Expected Q4 earnings of $1.54 per share
Wednesday October 27:
Apple (AAPL): Expected Q4 earnings of $1.24 per share
Boeing (BA): Expected Q3 earnings of $-0.15 per share
Coca-Cola (KO): Expected Q3 earnings of $0.58 per share
Ebay (EBAY): Expected Q3 earnings of $0.89 per share
Ford (F): Expected Q3 earnings of $0.26 per share
General Dynamics (GD): Expected Q3 earnings of $2.98 per share
General Motors (GM): Expected Q3 earnings of $0.82 per share
McDonald's (MCD): Expected Q3 earnings of $2.46 per share
Netgear (NTGR): Expected Q3 earnings of $0.42 per share
ServiceNow (NOW): Expected Q3 earnings of $1.38 per share
Spotify (SPOT): Expected Q3 earnings of $-0.19 per share
Suncor Energy (SU, TSX:SU): Expected Q3 earnings of $0.71 per share
Thursday October 28:
Amazon (AMZN): Expected Q3 earnings of $8.93 per share
Shopify (SHOP): Expected Q3 earnings of $1.17 per share
Sony (SONY): Expected Q2 earnings of $1.54 per share
Starbucks (SBUX): Expected Q4 earnings of $0.99 per share
Western Digital (WDC): Expected Q1 earnings of $2.45 per share
YUM! Brands (YUM): Expected Q3 earnings of $1.08 per share
Major IPOs Expected This Week
Wednesday October 27:
Informatica (INFA) enterprise software is raising up to $928M at a $9B valuation
Rent the Runway (RENT) an online designer rental firm is raising up to $315M at an $1.3B valuation
Thursday October 28:
Global Foundries (GFS) chip maker is raising up to $1.55B at a $25B valuation
Friday October 29:
Udemy (UDMY) e-learning platform is raising up to $440M at a $4.5B valuation
See you next week!
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