vestact posted: " Market Scorecard US markets closed off the week with some decent gains on Friday. Both the S&P 500 and Nasdaq rose on the back of a 14% jump in Amazon shares and a better-than-expected January jobs report. The US Labour Department said thei"
US markets closed off the week with some decent gains on Friday. Both the S&P 500 and Nasdaq rose on the back of a 14% jump in Amazon shares and a better-than-expected January jobs report.
The US Labour Department said their economy added 467 000 jobs in the month, beating the 150 000 which economists expected. The unemployment rate ticked up to 4%, with more individuals re-joining the workforce. Positive developments all around!
In company news, Snap Inc. shares surged by 59% after the social-media company posted its first-ever quarterly profit. Elsewhere, Pinterest jumped 11% higher after it also reported its first full-year profit and more than $2 billion in annual revenue. In hindsight, PayPal should've closed the deal to buy them!
On Friday, the JSE All-share closed up 0.25%, the S&P 500 climbed 0.52%, and the Nasdaq gained 1.58.
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Michael's Musings
Meta, formerly known as Facebook, released underwhelming numbers on Wednesday night. The street took a dim view of the results because profit missed estimates and there was weak forward growth guidance. Not a great combination.
Here are the details. For the fourth quarter, Meta managed to grow revenue by 20% to $33.7 billion, but profits dropped 8% to $10.3 billion. The reason for the divergence between top-and bottom-line growth is because Meta is spending a huge amount of money on development. Over the last year, their spending on new platforms has increased by 35% to $7 billion a quarter.
CEO Mark Zuckerberg is committing 20% of revenue on new projects because the company has reached an inflection point. Facebook, the anchor app, lost daily active users (DAU) for the first time in the company's history.
Across the whole group, DAU still grew 8% to 2.8 billion people, and monthly active users grew 9% to 3.6 billion people. Instagram and WhatsApp are still going strong. Of course, it's tough to keep growing user numbers off of such a large base. Another headwind is increased competition from TikTok. Meta also noted that the changes in Apple's iPhone privacy settings cost it around $10 billion for the year in lost sales. Ouch!
Where to from here? As it stands, the stock is being priced as a company that has peaked and has no growth to offer. I think that is crazy. They might struggle to grow user numbers, but there is still massive upside as more advertisers move online. For instance, Meta makes three times more per US user, than they do in Europe and 12 times more than Asia-Pacific. I would expect to see those gaps narrowing.
The current business generates mountains of cash, and that won't change anytime soon. Buying Meta now is also a bet on the metaverse, whatever that may look like. I can't see myself spending my days living in virtual reality, but what do I know, I didn't think an app showing people what I ate for supper was going to take off. Meta's management team are convinced that the next phase of the internet is the metaverse. If that's the case, the stock is very cheap at the moment.
One Thing, From Paul
Netflix has had a tough month. After reporting slightly disappointing subscriber growth in mid-January, its stock price sold off by over 20%. It's now trading far below its all-time high (just above $700 per share), at just $410.17 per share. Yikes!
Mind you, I've seen this before with this company, so I'm not surprised or rattled. They have 222 million paying customers, and that will go up in time, of that I'm sure. Remember too that the company raised subscription prices last month, so revenues will be strong.
Late last week Netflix released details of its 2022 movie line-up, and it looks good. They plan to release 86 original movies, including 61 live-action films, five animated movies, 17 non-English language features, and three anime films.
Some of the most anticipated releases include the Russo brothers', The Gray Man starring Ryan Gosling, Guillermo del Toro's Pinocchio, and the return of rom-com Lindsay Lohan in Falling for Christmas.
Content is king, and they know what their customers like to watch. Netflix spent $17 billion on original content in 2021, and will likely spend even more this year. I'm a buyer of this stock.
Byron's Beats
There's a lot of low-hanging fruit out there to turn our economy around, but for me the juiciest of the lot is South Africa's rail network. Did you know that South Africa has 36 000 kilometres of installed track? That is 85% of all the rail in Africa and is almost the same size as Germany's famous Deutsche Bahn.
Astonishingly, the South African private sector has not had access to this network for the last 160 years. According to James Holley, the Chairperson of the African Rail Industry Association and CEO of Traxtion, there is demand for 58 million tonnes of freight to move from road to rail if it was available.
Most importantly, sense seems to be prevailing in government. In 2020 the president announced that the private sector would be able to access this network. Of course, things move slowly with the government but James seems optimistic we could see the first private locomotive on state-owned track this year.
Not only is rail more efficient than road, it also takes thousands of trucks off our roads. That's better for the environment, traffic and road conditions.
Ferrari announced that it will be taking their mythical prancing horse logo into the metaverse. The Italian luxury sports car maker has set up a department dedicated to digital services which will include exploring opportunities in things like virtual reality, gaming, and social media.
The push also includes technologies such as blockchain and NFTs. I find this quite bold considering the fact that Ferrari has been very slow to adopt electric vehicles despite seeing rivals like Lamborghini, Bentley, and Aston Martin announcing their all-electric supercars. I guess Ferrari fans will have to settle for NFTs for now!
Last year the Turkish Lira lost 44% of its value. That's a timely reminder of how quickly things can deteriorate when the international community loses confidence in a country - Turkey's inflation hits nearly 50%, highest in two decades.
Signing Off
Asian markets are mixed this morning. Hong Kong, Japan, and South Korea fell, but mainland China was up almost 2% as that market plays catch up after being closed for the whole of last week for the Lunar New Year celebrations.
US earnings season is winding down, but notable companies that will be releasing their earnings this week include Amgen, Cloudflare, Twitter, Uber, and Disney.
US futures are very modestly higher in early trade, meaning we might start off the week in the green. The Rand is bumbling along, trading at around R15.44 to the US Dollar.
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