The ASX 200 continued its stellar run in 2023 last week, with the index posting its third straight week of gains, climbing 1.7%. So far this year, the Aussie market has gained 6%, outperforming the S&P500, led by gains from the materials sector. The Nasdaq rallied on Friday, jumping 3%, likely setting the tone for tech stocks on the local market this week.
3 things that happened last week:
1. Whitehaven Coal keeps rewarding investors
Whitehaven Coal (WHC) was the best performer on the ASX in 2022, and its Q2FY23 report showed exactly why. Its average coal price for the quarter was AUD$527 per tonne- a massive 150 per cent increase from the same period a year earlier. This, coupled with sales climbing by 22 per cent over the quarter, meant Whitehaven generated AUD$1 billion in cash through the December period, taking its net cash position to AUD$2.5 billion. For investors, Whitehaven’s growth in 2022 was sensational, with earnings soaring, and this will be an update that the market likes. Although growth will moderate over 2023, investors are likely to see another record year with market expectations for 60 per cent earnings growth, before tailing off in 2024. Whitehaven might not be a stock to marry, but it may be set to continue rewarding investors in 2023.
2. Netflix back in action
Netflix (NFLX) subscriber numbers have bounced back from the 200,000 loss at the start of 2022, adding 7.6 million new subscribers in the fourth quarter. Content is key in the current streaming showdown, and Netflix delivered a strong quarter of movies and shows that retained customers and attracted new ones. Investors will hope the streaming giant can continue delivering a steady stream of new releases throughout 2023 instead of one-hit wonders now and then. But let’s remember, there’s still a lot of work for Netflix to do. 2022 was its slowest year of subscriber growth since 2011 despite the strong end to the year. Earnings and revenue both missed the street’s expectations. Revenue came in at USD$7.85 billion against expectations of USD$7.86 billion, and earnings were light at USD$0.12c vs the USD$0.42c expected. Some volatility to shares could be caused by the announcement that Netflix Co-Founder. Reed Hastings will step down from his role as Co-CEO, after being at the helm for more than 20 years. Although this is unlikely to bring any dramatic changes, a change in C-suite management may bring some uncertainty for shareholders.
3. A winner and loser last week from the S&P/ASX200
The good news doesn’t seem to end for Pilbara Minerals (PLS) investors right now, with shares gaining 14% last week. The miner jumped after its trading update showed production, sales volumes, lithium prices, and unit costs all improved quarter on quarter.
Liontown Resources (LTR), on the other hand, didn’t have a great week, with shares falling by -11.86%. Its trading update didn’t please investors, with the company noting that the construction of the Kathleen Valley project would continue to rise.
3 things to watch for the week ahead:
1. Australian Inflation for Q4
The recent monthly inflation indicator for November signalled a 7.3 per cent increase year-over-year, which has set out expectations for inflation peaking in this week’s (Jan. 25th) reading at around 8 per cent for Q4 2022. This reading may just be one of the most important inflation reports Australia has received in its current cycle. With the Reserve Bank of Australia (RBA) pivoting late in 2022, the next step may well be a pause, but the RBA will undoubtedly have a job on its hands to navigate a soft landing if inflation does come in line with expectations at 8 per cent. Arguments could be had for the increases seen in the November reading being temporary, with fuel-price increases already showing signs of reversing, and many of the other categories, such as food and construction, that drove inflation higher in 2022 are unwinding. On top of this, employment unexpectedly fell last month, giving the RBA more ammunition to leave the cash rate unchanged next month, helping to move markets higher on Thursday, but this inflation data will be the key to the board’s next move.
2. Tesla Earnings
This Thursday morning (Jan. 24th), Tesla (TSLA), Australian retail investors’ favourite stock, reports its Q4 earnings after the bell. It’s already been a tough start to 2023 for Musk and co. after its disastrous 2022, with Q4 deliveries missing market expectations. This miss was the second straight for Tesla, leaving investors questioning whether the manufacturer has a demand issue. With Musk’s Twitter escapades still ongoing, investors will be hoping to see him devoting more time to his electric vehicle love child and offer renewed positivity with clear guidance on this week’s earnings call. But despite all the noise around Tesla, fundamentals have remained strong, with earnings set to rise by 78 per cent for the full year 2022. Tesla is the poster child for EVs and therefore has felt the full force of EV concerns, but the story doesn’t end here. EV sales growth is set to slow this year but still rise around 40 per cent and put EV penetration of total new cars sold at over 13.3 per cent, a significant growth in penetration. Its Q4 earnings may set the tone for its performance in the first half of the year, and some Musk magic might be needed to have Tesla powering again in 2023.
3. Bitcoin lodges near record run, can it continue?
Last week capped a near-record run for bitcoin, with 14 straight days of gains, as good news went a long way with macro headwinds easing with the end of the Fed’s interest rate cycle in sight. Bitcoin has now gained 35 per cent from its low in November 2022. Still, investors shouldn’t get too ahead of themselves with bitcoin eyeing a never seen before recession, volumes that are significantly depressed, and crypto bears unlikely to lay down without a fight. However, Crypto continues to develop despite a bear market in 2022, with the ETH Merge going off without a hitch. More upgrades will follow this year, with the Shanghai upgrade, which is set to improve the ETH blockchain’s transaction speed, security and efficiency. Although not set to take place until 2024, investors are already beginning to position themselves for the next bitcoin halving. Continued upgrades and developments for crypto will keep investors focused on long-term growth and innovation. Although many headwinds will lie ahead for crypto in 2023, it will almost certainly be a better year ahead.
*All data accurate as of 23/01/2023. Data Source: Bloomberg and eToro
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