The ASX200 climbed 0.3% last week, with the local tech sector leading the way thanks to a strong week from the Nasdaq following easing debt ceiling fears.
Investors digested the latest RBA minutes showing that another hike is still on the table despite markets believing that May was the Reserve Bank’s final hike.
3 things that happened last week:
- Xero Full-Year Results
Last week, Xero’s (XRO) full-year results showed that its net loss had widened for the full year with EBITDA missing estimates but revenue and subscribers showed meaningful growth, which pushed shares 15% higher last week. There was some strong growth in revenue, jumping by 28 per cent, whilst subscribers rose by 14 per cent year-over-year and international revenue grew by 30 per cent. The future looks bright for long-term investors, with strong international potential and a new CEO at the helm. Shareholders also seem to be happy to shelve the fact that losses are widening short term and focusing on the future. Xero’s key to growth will be cornering the local market and breaking further into international markets, where it looks to be making solid progress.
- Newmont & Newcrest agree to join forces
Newcrest Mining (NCM) announced last week it had accepted the terms of a takeover from Newmont Mining (NEM) to form the world’s biggest gold miner. The deal is still subject to a shareholder vote in September or October but is expected to be completed by year-end. This merger comes from what has already been a great year for Newcrest shareholders. It combines two mining powerhouses into a solid portfolio containing gold, silver and – importantly, copper, which is a key commodity in the clean energy transition process. This takeover solidifies Newmont as the king of gold mining at a time when gold is trading near all-time highs, and this creates industry consolidation, with the gold sector by far the least consolidated of all major metals, as miners look to boost volumes and improve efficiency.
- A winner and loser last week from the S&P/ASX200
It was a good week for tech last week, with Life360 and Xero leading the index, but it was also a stellar week for James Hardie Industries (JHX). Shares jumped 10.7% for the week after handing down record net sales globally.
Elders shareholders had a disappointing week, with shares falling by more than 15% after handing down its half-yearly results. It was a miserable report for the group, with profits falling by 47% and cash flow dropping by 57%.
3 things to watch for the week ahead:
1. Australian Retail Sales
The RBA got good news last week as unemployment rose to 3.7% in a key data point that could well mean the Central Bank leaves rates on pause next month. Another focal point in the data puzzle impacting the RBA’s next move is handed down this week with monthly retail sales. March’s read on retail sales showed sales rose by 0.4% month-on-month as retail spending begins to subdue. As the full effect of the RBA’s rate hikes passes through to households, consumers are becoming more cautious over their spending habits, something the RBA wants. As a result, this period will see more consumers ‘down trade’, which should benefit consumer staple names such as Coles, with retail sales being driven by food sales. The everyday consumer has been fairly resilient over the last 12 months, but confidence is near record lows, and households are now really starting to feel the pinch.
2. Nvidia Earnings
The conversation of AI in the investment world has been rife so far in 2023, and earnings season in the US was no different, with thousands of mentions of AI on earnings calls from US tech. The investor excitement for this developing technology has sent Nvidia’s (NVDA) shares soaring by more than 100% this year, and so far, the tech giant wears the crown for the S&P500’s best-performing stock of 2023. This week, Nvidia reports its Q1 earnings in which investors will be hoping for more good news, but question marks now lie over its valuation with its rally this year. Nvidia is by far the market leader in developing graphics chips, and this is exactly what is needed to handle the complex calculations required to power AI applications, meaning investors believe Nvidia will reap the rewards from growing demand. However, outside of AI, the PC market is seeing considerable weakness affecting AMD and Intel this quarter. So the focus for investors will be if AI demand can offset other areas of weakness and if Nvidia can provide strong guidance for the rest of the year. Nvidia said in Q4 it expects $6.5 billion in revenue, which will be an important number to watch.
3. Webjet Full Year Results
Travel stocks have been some of the top performers on the ASX200 so far this year as investors believe the surge in travel demand won’t taper anytime soon. Earnings from travel compatriots globally in the last month have been stellar, with Expedia (EXPE), Booking.com (BKNG), Singapore Airlines and Emirates all reporting better-than-expected results. This week, Webjet investors will be hoping to see the same result from its full-year numbers. In its half-yearly results, Webjet reported a massive 217% increase in revenue and a 557% jump in EBITDA, but importantly said that profitability should climb above pre-pandemic levels. Given that travel has come back in a big way, Webjet’s full-year results could spell more good news for shareholders this year, but its guidance may be in focus with headwinds such as labour costs, weakening consumers and recession risks.
*All data accurate as of 22/05/2023. Data Source: Bloomberg and eToro
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