Is the raging rally in Indian equities over?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Indian equities appear to be losing their mojo since hitting a lifetime high in March, as weak corporate earnings, soft growth momentum and uncertainty over the government’s tax policy discourages investors.

The S&P BSE Sensex has fallen almost 8 percent since March 4, when the benchmark index touched an all-time peak of 30,024.74. Year-to-date, the gauge is up just 1 percent, trailing regional peers such as the Shanghai Composite, which is up 36 percent.

With a number of challenges hanging over the market, it’s likely to move sideways in the months ahead unless positive catalysts emerge, say strategists.

“There are a number of reasons to explain the reversal of fortunes. For a start, confidence over the government’s reform agenda may be waning a little. In particular, the Finance Ministry’s plan to retrospectively tax both foreign and domestic companies is likely to have unnerved investors,” Shilan Shah, India economist at Capital Economics, wrote in a note.

“Looking ahead, with valuations still looking stretched and uncertainty over the government’s tax policy, a spectacular rebound in the equity market seems unlikely,” said Shah, who expects the Sensex to end the year at 30,000.

Potential catalysts

According to Simon Grose-Hodge, head of South Asia investment strategy at LGT Group, an interest ratecut could help inject fresh life into the market.

“Some people are disappointed that the Reserve Bank of India (RBI) hasn’t been more aggressive with cutting interest rates,” he said. “I think we’ll get at least one more cut, which will be beneficial for the stock market.”

At its last meeting on April 7, the RBI kept rates on hold at 7.5 percent, saying that it would wait longer to assess inflationary pressures before making its next move.

Read More: India’s IPO market is heating up: BSE Head

Nevertheless, Grose-Hodge believes the pullback in the market is temporary and presents a buying opportunity.

“There’s a fair amount of reform going on, and the foreign direct investment (FDI) channel looks encouraging. As for corporate earnings, I think the pessimism is unwarranted, profitability seems to be underestimated,” he said.

“As a medium-to-long term investor, there’s still a lot of value. We’re advising clients to buy into the weakness,” he added.

Land Acquisition Bill

Jigar Shah, CEO of Maybank Kimeng Securities India said another potentialmarket stimulant would be the passage of the controversial Land Acquisition Bill.

Opponents of the bill argue it will hurt the interests of farmers, while the government says it’s required for economic development.

During the first leg of its budget session, which ended on March 20, the government won parliamentary approval for three key bills crucial to its reform agenda: the Mines and Minerals Bill, the Coal Mines Bill and the Insurance Bill.

However, it was unable to pass the Land Acquisition Bill through the upper house and had to re-introduce the ordinance in early April.

Investors are waiting to see if the bill to make it easier to acquire land will be passed during the second leg of the budget session from 20 April to 8 May 2015.

“If they can pull through on the Land Acquisition Bill it will provide a catalyst for the market,” said Shah.

Aside from reforms, further evidence of a turnaround in the economy will help the stock market, he said.

“The recovery is still elusive, I think in another 6-9 months we’ll see some stronger evidence on the ground to suggest the Indian economy is performing to potential.”

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Asian stocks mostly higher on US lead; Greece eyed

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Asian stocks were higher across the board on Friday following a mildly positive lead from Wall Street.

Uncertainty over a “Grexit” is back on the radar as the debt-stricken nation prepares for a meeting with the Eurogroup later in the day, which analysts say won’t yield results.

“It is now clear that the chances of Greece reaching a deal to unblock the funds during the coming meeting on 24 April are very slim. This means that Greece is unlikely to receive official funds until at least the next Eurogroup meeting scheduled for 11 May, which given the lack of progress on negotiations so far, also seems unlikely at this stage,” IHS analysts wrote in a note.

“This creates significant uncertainty regarding Greece’s ability to pay its bills over the coming weeks and months,” the note added.

Overnight, US stocks closed near highs, with the tech-heavy Nasdaq adding 0.4 percent at an all-time high, as investors cheered corporate earnings reports. The S&P 500 added 0.2 percent, while the blue-chip Dow closed up 0.1 percent.

Nikkei slips 0.6 percent

Japan’s Nikkei 225 underperformed early Friday as profit-taking kicked in after the bourse charged up to 15-year highs for the second straight session yesterday.

Airlines were among the laggards in early trade; Japan Airlines plunged nearly 2 percent, while ANA Holdings ticked down 0.3 percent following lower oil prices overnight.

Carmaker Honda, which is in the news for unveiling its first business jet on Thursday, notched up 0.7 percent.

Meanwhile, brokerage houses Nomura Holdings and Daiwa Securities continued to attract buy orders, up 1.5 and 0.6 percent.

Mainland indices mixed

China’s Shanghai Composite opened down 1.2 percent, with blue-chip developers and lenders leading the decline.

Bank of China and Industrial and Commercial Bank of China fell nearly 2 percent each, while China Vanke and Poly Real Estate receded 1.5 and 2.3 percent, respectively.

Hong Kong’s Hang Seng index ticked up 0.3 percent at the open.

ASX jumps 1.1 percent

Australia’s S&P ASX 200 index touched a one-week high amid a broad-based rally.

The materials and energy sectors were off to a positive start, on the back of support from firmer iron ore, gold and crude oil prices. Fortescue Metals and BC Iron led gains by rallying 6.5 and 15 percent each. Oil-related counters Santos and Origin Energy opened up more than 2 percent, respectively.

Banks were also buoyant; National Australia Bank and Commonwealth Bank of Australia advanced 1 percent each.

Kospi gains 0.3 percent

South Korea’s benchmark Kospi index opened up to a near four-year peak, with the spotlight remaining on corporate earnings.

Kia Motors firmed up 2.4 percent despite seeing a drop in first-quarter operating profit and revenue due to weakness in key markets like Russia. Its bigger affiliate Hyundai Motor shrugged off a 2.2 percent drop in first-quarter net profit to open up 1.1 percent.

The country’s top builder Samsung C&T tanked 2.6 percent on the back of a 25.9 percent plunge in first-quarter earnings.

Meanwhile, the European Court of Justice upheld a 210 million euros (USD 224.8 million) fine imposed on LG Display for participating in a cartel of LCD panel makers between 2001 and 2006. Shares of LG Display gained 0.6 percent.

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Petrobras loses $9 billion in Q4 in wake of scandal

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Brazilian oil giant Petrobras lost 26.6 billion reais (USD 8.8 billion) in the fourth quarter after taking a write-down of 50.8 billion reais (USD 16.8 billion) due to corruption and other disruptions, the company said on Wednesday, according to Reuters.

Write-downs linked to a corruption scandal amounted to 6.19 billion reais (about USD 2 billion), while remaining losses came from cost overruns at refineries and oil price pressures, among other factors, Reuters said.

U.S.-listed shares in Petrobras were choppy in extended trading after the company released heavily-anticipated audited fourth-quarter financials. Markets eyed the results for impairments to the company’s assets.

Read More: Long-awaited audit may shed light on Petrobras scandal

The delayed release was Petrobras’ first audited financial statement since August. It marked a key step for the state-controlled oil company’s future in international stock and credit markets and held implications maybe even for the future course of the world’s seventh-biggest economy.

“The audited results are likely to improve overall expectations and reduce the risk of further downgrade from credit rating agencies for the time being,” the Eurasia Group, a political consulting firm, wrote in a Wednesday note.

Petrobras is engulfed in what’s probably the largest financial scandal in Brazil’s history — a high bar, given the country’s record of corruption.

The scandal started with the arrest early last year of a company director, who subsequently struck a deal with prosecutors in September. Since then, details have emerged almost daily of a decade-long, alleged bribery scheme involving company officials.

The executive alleged to investigators that for nearly 10 years, Petrobras contracts were routinely padded by 3 percent, with the extra money used for bribes and kickbacks. Much of that money was supposedly funneled to the country’s ruling political parties.

If the earnings report is deemed credible by markets, the next step will be to convince investors that the company has a plan to establish a positive cash flow. Petrobras started a borrowing binge years before the price of oil began plunging in 2014, and it quickly became the most indebted company in the world.

Petrobras commands oil and gas reserves of about 13 billion barrels.

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Greek crisis talks as Tsipas, Merkel meet

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Just one day ahead of a crucial meeting of euro zone finance ministers, Greek Prime Minister Alexis Tsipras is due to meet German Chancellor Angela Merkel to discuss Greece’s ongoing solvency crisis.

A spokesperson for the German government confirmed to CNBC that the pair were due to have a “private discussion” in Brussels Thursday, but that the meeting was not officially scheduled.

Greece’s bailout program, the reform agenda and progress on reforms would be discussed by the leaders, according to the spokesperson.

The conversation – which will be on the sidelines of a European Union (EU) summit to discuss the region’s migrant crisis — comes ahead of Friday’s crucial Eurogroup meeting of euro zone finance ministers, where Greece’s progress in its reform pledges will be top of the agenda.

Greece’s leftwing government is reluctant to impose reforms that entail more austerity, but the organizations overseeing the country’s bailouts — the International Monetary Fund (IMF), European Central Bank (ECB) and European Commission — have refused to release a last tranche of aid until concrete reforms are in place.

Read More: Greece facing ‘Lehman moment’ as debt costs soar

Germany, the biggest contributor to Greece’s bailout, has been particularly keen to avoid showing Greece the money before it commits to completing its bailout program, which is now due to end in June.

High hopes

Hopes are high that Friday’s Eurogroup meeting will result in agreement between Greece and its creditors. But there is also the risk of disappointment – particularly as some of the main players have played down the chances of a deal.

Greek Finance Minister, Yanis Varoufakis, told reporters earlier this week that there was “convergence” with creditors, but a deal would not necessarily come Friday.

Read More: ECB staff mull plans to curtail bank funding

“There will be a deal, a comprehensive agreement,” Varoufakis told reporters in Athens, Reuters reported. “But this does not mean that there will be an agreement at Friday’s Eurogroup”.

Meanwhile, Germany’s Finance Minister, Wolfgang Schaeuble, said he was sceptical the meeting will lead to a solution.

Markets watching

Investors are keeping a close eye on the meeting, however. In the last week, Greece’s borrowing costs have spiked and its banking stocks fallen on the back of fears that the country is about to default on its debt repayments to the IMF and ECB.

It came as the Greek government ordered local state bodies to transfer their idle cash reserves into the country’s central bank in a bid to cover its funding needs.

The move raised eyebrows among economists who have been wondering how much longer Greece can pay its domestic and international bills.

“Greece remains at the forefront of the markets mind, with one of the major questions being when exactly will the country run out of cash,” a note from Rabobank’s rate strategy team said Thursday.

They said Greece could “hold out” until at least the end of May before having to choose between external creditor payments and politically unavoidable domestic payments. But whether the ECB was willing to keep on extending emergency liquidity assistance (ELA) to Greek lenders was another matter, they added.

As such, Rabobank said a deal Friday was unlikely.

“This simply reinforces the point that a resolution to the Greek crisis is very unlikely at the 24th April informal Eurogroup meeting or the formal one in Brussels on 11th May,” the note said. “The other factor to consider is that the ECB may be unwilling to let things drag on for as long as the cash position implies.”

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Facebook user growth crushes estimates

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Facebook’s first quarter revenue missed analyst expectations on Wednesday, but the social media giant announced strong user growth that showed its monthly user base was now larger than the population of China.

The tech firm reported earnings of 42 cents per share on revenue of USD 3.54 billion after the closing bell. Analysts had expected Facebook to report earnings of 40 cents per share on USD 3.56 billion in revenue, according to a consensus estimate from Thomson Reuters.

The social media giant had never before come in light on revenue, according to FactSet.

Read More: Is your social media choice for the rich or poor?

Facebook shares fell about 1.5 percent in after-hours trading immediately after the release, and wavered throughout the firm’s earnings webcast.

Daily active users (DAUs) for the social media platform came in at 936 million on average for March 2015, an increase of 17 percent year-over-year and higher than the StreetAccount consensus estimate of 920.2 million.

“I think this is a fine quarter. It’s a little bit shy on the top line, but when you dig into the details, what you see is that monthly active users did come in a little better than expectations,” Brean Capital’s Sarah Hindlian said on CNBC’s “Closing Bell.”

 “And on top of that advertising revenues also look relatively solid. Q1 is a seasonally weak quarter for the advertising market and there’s obviously a significant impact coming from foreign currency with over half or approximately half of Facebook’s revenues coming from overseas,” she added. “So overall I’m pretty comfortable with these numbers.”

The company’s monthly active users (MAUs) were 1.44 billion in March — a 13 percent year-over-year rise. Mobile MAUs were 1.25 billion for that month. Both of those MAU figures topped StreetAccount consensus estimates of 1.43 billion and 1.23 billion, respectively.

“This thing is a rocket ship, it’s almost at 70 percent mobile. The company made a promise, they executed on it. This thing goes higher,” “Shark Tank” investor Kevin O’Leary said on “Closing Bell.”

With Wednesday’s announcement the social media giant’s monthly user number officially surpassed the population of China.

 CEO Mark Zuckerberg described Q1 as “a good quarter and a good start to the year,” highlighting the strong mobile growth (including more than one billion mobile searches every day).

Read More: 7 takeaways from Zuckerberg’s impromptu Q&A

Those mobile gains led Facebook and its Instagram app to control more than one out of every five minutes that U.S. users spend on mobile, COO Sheryl Sandberg said on the webcast. (The company said that Instagram has over 200 million DAUs, spending an average of 21 minutes each day.)

Zuckerberg claimed that Facebook had the largest mobile audience in the world, promising that the company is continuing to capitalize on the shift to mobile use.

Facebook CFO David Wehner told CNBC after the release that the first quarter was a major engagement story, with DAUs representing about 65 percent of MAUs — a record level for the company.

Zuckerberg also focused on the firm’s messaging efforts, saying that more than 45 billion messages are sent daily. He called this sector a “big priority” for the company. The CEO later said he is not inclined to combine the firm’s WhatsApp application with Facebook Messenger, saying that each program sees different use cases.

Video, meanwhile, is seeing “good progress,” Zuckerberg said, adding that the company posted more than 4 billion daily video views.

On the revenue front, the USD 3.54 billion figure represented a 42 percent increase over USD 2.50 billion from the year-ago period. The firm said it would have seen a 49 percent increase if not for a foreign exchange impact.

Advertising revenue was USD 3.32 billion for the quarter, with mobile representing about 73 percent of that figure, the company said. Ad sales had totaled USD 3.59 billion the prior quarter, but Q1 is a traditionally light period for the industry. Analysts had expected Facebook to only post USD 3.28 billion during the reported period, according to StreetAccount.

Facebook’s operating expenses rose 83 percent in the first quarter as R&D costs jumped 133 percent and marketing and sales spending nearly doubled.

Over the same period last year Facebook earned 35 cents per share on USD 2.50 billion in revenue.

As for the company’s outlook for the future, foreign exchange headwinds in Q2 will likely be greater than was seen in the first quarter, Wehner said. The company expects to tighten its expenses, he added, lowering the top end of its forecast for that figure. The remainder of the firm’s guidance was unchanged, the CFO said.

Read More: In online ads, it’s Google, Facebook and then who?

Also looking to the future, Zuckerberg said that the company would have more to share “in the coming months” about search, artificial intelligence, and Oculus.

The CEO also indicated that Facebook may be going after search engine giant Google down the road.

“There is so much unique content that people share in Facebook that I think that that is the clear unique opportunity to go for first,” he said. “If you think about the overall web, there’s a lot of public content that’s out there that any web search engine can go index and provide.”

“A lot of what we can get at are recommendations on products, and travel, and restaurants and things that your friends have shared that they haven’t shared public ally,” he added. “Those are questions we can answer that no one else can answer, and that’s probably going to be what we continue to focus on doing first.”

The growth in advertising revenue is attributable to the shift in mobile and video, Sandberg said. But even the largest marketing clients are not yet spending 5 percent of their budgets on Facebook, she said, so there is room to grow.

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Asian stocks hold on to gains after weak China flash PMI

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Asian stocks traded higher across the board early Thursday, holding on to gains despite a private survey showing China’s manufacturing activity at a one-year low.

HSBC’s preliminary reading of China’s factory activity for April came in at 49.2, compared with a Reuters forecast for a 49.6 print. Last month, government data showed the official purchasing managers’ index (PMI) edged up to 50.1, better than HSBC’s final PMI, which came in at 49.6 indicating the country’s vast manufacturing sector in contraction. The 50-point level separates an expansion in activity from a contraction.

Overnight, US stocks closed about half a percent higher, ending a day of choppy trade as investors weighed mixed earnings and signs of strength in the housing market.

Mainland markets mixed

Chinese markets pulled back modestly following the data release; the Shanghai Composite index fell deeper into negative terrain, slipping as much as 0.3 percent, while Hong Kong’s Hang Seng index trimmed gains to 0.6 percent from 0.8 percent.

In Shanghai, financial plays traded on the negative side; Agricultural Bank of China dropped 0.5 percent, while Industrial and Commercial Bank of China and Bank of Communications shed 0.3 percent each.

In Hong Kong, casino plays were the main laggards; Sands China led losses with a plunge of 2.2 percent, while Melco Crown and Galaxy Entertainment fell 1.7 and 0.7 percent each.

Nikkei gains 0.3 percent

Japan’s Nikkei 225 continued its advance above the 20,000 mark, hitting a new 15-year high of 20,193 points, after closing above that level for the first time in 15 years on Wednesday.

“The Nikkei has rallied 33 percent in the past six months and [that] is down to the fact the Bank of Japan (BoJ) and the Abe government are working on the same page with mass fiscal and monetary policy stimulus,” Stan Shamu, IG market strategist, wrote in a note. “What looks like taking the Nikkei higher still is signs the BoJ is considering even more stimulus as it fails to reach its 2 percent inflation target within the allotted time frame of two years.”

Sony charged up 0.4 percent after raising its earnings estimates for the second time in three months on Wednesday, citing higher than expected sales of video games and digital cameras.

Other electronics-makers also drew buy orders from investors; Sharp and Panasonic opened up gained more than 2 percent each.

Kyushu Electric Power slipped into negative terrain, down 1.4 percent from the get-go, after rallying 2.8 percent in the previous session following news that a Japanese court rejected a lawsuit to halt the restart of its Sendai nuclear station.

ASX flat

Australia’s S&P ASX 200 index was lackluster in early trade, while the local dollar fell as low as USD 0.7717 from USD 0.7733 against the U.S. dollar following the mainland’s PMI reading.

Banking heavyweights extended losses, still hurt by Wednesday’s first-quarter inflation data which did not add to the case of a May rate cut. National Australia Bank led losses with a 1 percent slump, while Westpac, Australia & New Zealand Banking and Commonwealth Bank of Australia shed nearly half a percent each.

Miners cheered the rally in iron ore prices overnight, providing some support for the resource-heavy bourse. Fortescue Metals, which launched an offering for USD 1.50 billion of senior secured notes early Thursday, surged 12 percent. Rio Tinto and BHP Billiton advanced 1.8 and 2.2 percent each, while BC Iron soared 42 percent.

Meanwhile, according to the World Bank’s quarterly commodities report, the steel-making raw material will average USD 63 a tonne this year, compared with the estimate of USD 75 given in the January report. The forecast for 2016 was cut to USD 66.60 from USD 77.90.

Kospi up 0.6 percent

South Korea’s benchmark Kospi index jumped to a fresh three-and-a-half-year high, thanks to a slew of better-than-expected corporate results.

LG Display rallied 4.4 percent after reporting its best quarterly profit in more than four years late Wednesday. SK Hynix climbed 2.7 percent following the announcement of a 50.2 percent rise in January-March operating profit from a year earlier, beating market expectations.

Also due to hand in its corporate report card today is Hyundai Motor and local analysts are expecting a 10 percent fall in operating profit, along with a 12 percent drop in net profit for the March quarter. Shares of the carmaker firmed up 1.8 percent.

Meanwhile, South Korea’s economy beat expectations to expand 0.8 percent on-quarter over the January-March period, a pick-up from the 0.3 percent in the preceding quarter, government data released before the market open showed. On an annual basis, the country grew 2.4 percent in the first quarter, matching a Reuters forecast but marking the slowest growth since the same quarter in 2013.

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China’s factory activity falls to one-year low

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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China’s manufacturing activity fell to a one-year low in April, a private survey showed on Thursday.

The flash HSBC Purchasing Managers’ Index (PMI) came in at 49.2, compared with a Agency forecast for a 49.6 print, and following the final March reading of 49.6. A figure below 50 signals contraction.

China markets pulled back modestly following the data; Shanghai Composite fell deeper into negative terrain, down 0.3 percent, while the Hang Seng index trimmed gains to 0.6 percent from 0.8 percent.

The Australian dollar fell as low as USD 0.7718, from USD 0.7733 before the data.

Over the weekend, the People’s Republic of China slashed the reserve requirement ratio (RRR) of major banks. The 100 basis point-cut to 18.5 percent is the biggest since 2008, during the height of the global financial crisis.

The move was the latest in a series of aggressive measures by policymakers to stem further slowdown in the world’s second largest economy.

China grew 7 percent in the first quarter on an annual basis, growth figures revealed last week, the slowest pace in six years.

The flash redaing is typically based on approximately 85–90 percent of total PMI survey responses each month. April’s final PMI data will be released on May 4.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Greek contagion risks may be higher than you think

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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A perception in financial markets that Greece exiting the euro zone would have limited knock-on effects is misguided, some analysts say.

Euro zone officials meet in Latvia this week to discuss a rescue deal between Greece and its creditors amid growing talk that time is running out for Athens to avoid defaulting on its debt and being ejected from the 19-member euro zone.

“UBS does not believe, as its base case that Greece, will leave the euro,” Paul Donovan, UBS global economist, said in a video published by the bank’s research team.

“However, there seems to be a belief in financial markets that if Greece were to be forced from the euro area it should be regarded as an isolated incident,” he said. “This belief, seems to us, to be dangerous.”

Read More: Greece facing ‘Lehman moment’ as debt costs soar

Donovan said that the view that Greek problems were distinct from the rest of the euro zone was reflected in recent online search patterns: Searches on Google for the term “Grexit” had soared, while those for “euro crisis” or “euro collapse” had not, even though they did during the 2012 euro zone debt crisis.

In the latest crisis, government bond yields in peripheral euro zone countries—in the past viewed as most vulnerable to any Greek contagion—have not followed Greek bond yields higher.

Greek bond yields have risen sharply this week, reflecting the greater risk attached to holding them. Greece’s benchmark 10-year bond yielded over 13 percent on Tuesday, well above Spain’s 10-year yield at 1.48 percent and Portuguese yields at 2.12 percent.

Although this can partly be explained by the European Central Bank’s (ECB) massive monetary stimulus program, which is putting downward pressure on yields, it also reflects diminished contagion fears.

“I don’t get the sense that there is a widespread view that if a deal is not made and Greece exits the euro zone, you would have this massive contagion effect,” Ben White, Politico’s chief economic correspondent, told CNBC on Monday.

Cash over deposits

UBS’ Donovan said any contagion from a Grexit would come from the banking system. He said that if Greece did leave the euro area, any money in Greek banks would be redenominated into a new currency, which would probably plunge in value, distressing depositors.

Read More: ECB staff mulls plans to curtail bank funding

Depositors in other countries may think their holdings are safe, since their country is not going to leave the euro zone–or they may decide to avoid any risk and withdraw their savings, Donovan said.

“Why take the risk that your country probably won’t leave the euro, if it’s a relatively simple operation to withdraw your savings and hold them in cash?” Donovan asked.

“A euro held as cash today is a euro tomorrow,” he said. “A euro held in a bank account today may be an entirely different currency tomorrow, if the irrevocable monetary union has been revoked. Investors are thus likely to choose cash over deposits.”

Antonio Roldan Mones, southern Europe analyst at Eurasia Group, said there were valid reasons why financial markets now viewed the contagion risk from a Greek crisis differently to a few years ago.

In particular, the ECB has established institutions to come to the aid of any member state in trouble, it has a 1 trillion euro ($1.1 trillion) monetary stimulus program in place and smaller economies such as Portugal and Spain have taken steps to strengthen their banking system, Mones said.

“But it’s true once you open the possibility of exit, once the irrevocability clause is no longer credible, then if there are problems – a populist party comes to power or the growth numbers go down – then the possibility of exit is there and markets may start betting on it,” Roldan Mones told CNBC.

“The other issue is that there are still structural challenges in some of these countries,” he added. “Portugal still has a large debt-to-GDP ratio of around 130 percent, growth is better than it was but still weak; there are still problems in the banking sector, so I wouldn’t discount the possibility of contagion if things go south in Greece.”

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Why Coca-Cola may fizzle on earnings

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Coca-Cola is set to report earnings before Wednesday’s bell. And one well-regarded technical analyst, Rich Ross of Evercore ISI, warns that the stock could fall sharply on the results.

“The weekly chart illustrates the gravity of this earnings release,” Ross said. “Right now, the stock is precariously perched right at that key long-term 150-day moving average, which comes in right at $40,” he said.

Coke shares “have been hanging around there a little bit too long,” the technician said.

“I think on a bad number, which we just might get, you may get that break below $40, and that sets the stock up for further underperformance on both a relative and absolute basis.”

David Seaburg, head of equity sales trading at Cowen, is similarly bearish.

“You may get a pop if they put a number up that’s much better than the Street expects. But ultimately, long term, soda is dead, and that’s their exposure,” he said.

The latest confirmation of the downtrend came in March, when the trade publication Beverage Digest reported that Coca-Cola sales volume dipped 1.1 percent in 2014, and Diet Coke sales slid a painful 6.6 percent (thereby ceding second place in the U.S. soda rankings to Pepsi).

Read More: Analysts shrug off the Diet Coke downturn

“There’s probably a lot more downside risk than upside risk in that story. So again, I’d just stay far and clear away from this stock altogether,” Seaburg said.

 Of course, the earnings report may or may not mean a great deal for the stock.

“We do not see 1Q15 [earnings] as a major catalyst,” wrote Nomura’s research team in a recent note. The stronger dollar is likely to weigh on earnings, but by now analyst estimates are “fully discounting recent USD strength,” the note said.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Yahoo earnings and revenue miss expectations

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Yahoo reported first-quarter earnings and revenue that missed Wall Street’s expectations on a stalling display ad business.

The tech giant said Tuesday after the bell that its first-quarter adjusted earnings came in at 15 cents per share on USD 1.04 billion in revenue. Analysts had expected Yahoo to report earnings of about 18 cents per share on USD 1.06 billion in revenue, according to a consensus estimate from Thomson Reuters.

Both the top and bottom line figures fell from the year-ago period when the company had posted earnings of 38 cents per share on USD 1.09 billion in revenue.

The company’s stock dropped about 1.5 percent in after-hours trading immediately following the announcement. But by the time the earnings webcast conclude, shares traded more than 1 percent above Tuesday’s close.

“Yahoo is amidst a multi-year transformation to return an iconic company to greatness,” CEO Marissa Mayer said in the company’s earnings release.

 Ironfire Capital’s Eric Jackson told CNBC he believed Mayer’s turn around of the company had thus far proven disappointing, especially since activist investor Starboard Value began agitating for changes.

“It’s been six months [since Starboard began speaking up] and these results are very underwhelming,” Jackson said. “I think investors are wanting to know when do we actually start to see a ‘Marissa premium’ built into these shares rather than a ‘Marissa discount.'”

Display advertising revenue (excluding traffic acquisition costs), an area of focus for the company, fell 7 percent from the year ago to USD 381 million. Total GAAP display revenue saw a 2 percent gain—which would mark the first Q1 growth in this metric since 2011, Mayer said on the firm’s earnings webcast. 

Read More: Fmr. Yahoo CEO: Marissa Mayer may have to go

Yahoo said its price-per-ad fell about 17 percent compared to the same period in 2014.

Mayer revealed on the webcast that Yahoo is working to develop a plan for its stake in Yahoo Japan (a joint venture with SoftBank), and that the company had been advised not to include that stake in its proposed Alibaba spin-off. She said the options “require careful study,” and that the company would share the details of any eventual plan on future earnings calls.

Following the earnings release, Yahoo said it expected to see its second-quarter revenue (excluding traffic acquisition costs) between USD 1.01 billion and USD 1.05 billion. The guidance midpoint was slightly below the consensus estimate of USD 1.04 billion.

There were some bright spots for the tech giant, however, as search revenue increased 20 percent from a year ago, to USD 956 million. Search volume rose to a five-year high on the strength of a partnership with Mozilla, Yahoo said. Mayer called this a “high-quality” deal.

“We are even more excited about that partnership today than we were when we signed it,” she said of the Mozilla deal. Still, she added, future deals would need to be similarly profitable.

Mobile user growth and GAAP revenue also saw sizable gains, the CEO said, adding that the company’s more than 20 percent year-over-year growth for mobile monthly active users underscored its commitment to being “mobile-first.”

Mayer also boasted on the earnings webcast that the company was seeing increased interest from prospective hires, receiving about 43,000 applications for the first-quarter alone.

On the product side, Mayer revealed on the webcast that Yahoo is working on a daily fantasy sports product that it plans to launch this summer.

In January, along with reporting its fourth-quarter earnings results, Yahoo announced that it intended to spin off its remaining stake in Alibaba. The tax-free deal would spin off Yahoo’s 384 million shares in the Chinese e-commerce giant into a new company, with its shareholders receiving stock pro rata.

“This level of capital return is historic, especially for a company of our size,” Mayer said at the time.

Read More: Yahoo investors got their wish, and aren’t happy

Yahoo CFO Ken Goldman said on Tuesday’s webcast that the company was still on target for a fourth-quarter spin off of the Alibaba shares. After the spin, Yahoo expects to distribute USD 41 billion to its shareholders, he added.

But the significant spin off could end up costing Mayer her job, according to former Yahoo interim CEO Ross Levinsohn. He told CNBC last week that the absence of the Alibaba stake will mean it is make or break time for the chief executive.

“This is all at the feet of Marissa Mayer; she’s the one that decided to increase costs at Yahoo by USD 500 million over the last couple of years and she really needs to start to answer some tough questions,” Jackson said.

Elsewhere in Yahoo’s portfolio, April featured a series of headlines about the company’s 10-year search partnership with Microsoft’s Bing. These included that Yahoo could deliver some of its own results and ads, and that a termination clause had been appended to the deal struck 5 years ago.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow