25 November 2024 | Weekly Snapshot

Did you know?

On this date 26 years ago, Amazon went public at the equivalent of $0.08 per share. The stock has since risen to $200 or a 2,500-times return on the IPO price!

Market Movements

The ASX 200 finished Friday on a positive note, and for the week rose 1.31% to an all-time high with energy stocks leading the charge. US equities were also higher on Friday with broad gains closing out a strong week, despite the rising geopolitical tensions. For the week, the S&P 500 rose 1.68%, the Nasdaq rose 1.73%, and the mid cap Russell 2000 surged 4.46%, testing the all-time high from late 2021 with expectations that Trump’s economic policies will likely benefit US mid and smaller cap stocks and small businesses in particular.

A2 Milk rose 13.3% last week, primarily due to the company’s announcement of its inaugural dividend and an upgrade in revenue guidance. Paladin Energy was also one of the strongest performers last week up 12.48%, clawing back some of its previous week’s fall of -25.0%. Elders Ltd declined by 10.89% last week, primarily due to the company’s announcement of a 55% drop in net profit after tax and the announcement to raise $143 million at a price of $7.85, a 9.2% discount to the previous closing price, for its planned acquisition of Delta Agribusiness.

The ASX Energy Index was the strongest group gaining 4.32%, led by Paladin Energy, the uranium miner was up 12.48%, closely followed by Deep Yellow, also a uranium miner, up 10.96%. The Information Technology Index fell -2.94%, driven by Wisetech Global, the cloud-based logistics software company, falling -9.64% and Life360, the location tracking application company, down -7.96%.

In the USA the number of Americans applying for unemployment benefits fell to 213,000 for the week ending November 16, 2024, remaining near a seven-month low. However, continuing claims rose by 36,000 to a total of 1.91 million for the previous week, marking a three-year high. On the S&P 500 Super Micro Computer Inc was the strongest performer, gaining an eye watering 78.42% after appointing a new independent auditor, following the resignation of Ernst & Young, which had raised concerns about Super Micro’s accounting practices. Despite this surge, Super Micro’s stock remains down -59.5% since 30 June 2024. Target Corp fell -17.83% over the week due to disappointing third-quarter financial results that highlighted margin pressures. The CEO noted that consumers are spending cautiously, particularly on discretionary items, amid ongoing price inflation, leading to the Company issuing a cautious outlook for the upcoming quarter.

Portfolio Movements

 Sonic Healthcare reaffirms guidance – Shares surge

• Leading global laboratory , pathology and radiology service provider Sonic Healthcare held their AGM last week and reaffirmed FY25 EBITDA guidance in the $1.70-1.75B range, in line with the $1.73B market estimate.
• They noted total revenue growth of 10% on this time last year with strong group-wide organic revenue growth including Australian pathology (+8%) and radiology (+11%), although growth was weaker in USA.
• The interest expense guidance was increased by around 25% on FY24 and is a bit on the high side following a raft off acquisitions in recent years. They also noted inflationary pressures on labour and other costs were easing which is good and is something that has weighed.

Palo Alto Networks beats Q1 estimates – Announces share split

• Leading global cybersecurity firm Palo Alto Networks reported solid Q1 results with Q1 EPS $1.56 ex-items ahead of the $1.48 expected with Q1 GAAP net income of $350.7 million compared to $194.2 million in Q1 last year. Q1 revenue grew 14% year over year to $2.1 billion which was largely in line.
• Full year guidance was raised to $6.26-6.39 range per share vs prior of guidance $6.18-6.31.
• “Our Q1 results reinforced our conviction in our differentiated platformization strategy,” said CEO Nikesh Arora adding “We see a growing market realization that platformization is the game changer that will solve security and enable better AI outcomes. I expect this will be a multiyear trend for which we are best positioned to deliver to our customers.”
• The company also announced a two-for-one stock split to take place on the 12th of December with trading on a split-adjusted basis on 16th December

Santos updates capital allocation framework

• Leading Australian oil and gas company Santos held an investor day providing an updated capital allocation framework that will target returns to shareholders of at least 60% of all-in free cash flow from 2026, following a period of major capital investment to bring significant new production online from the Barossa and Pikka projects.
• CEO Kevin Gallagher said “With Barossa and Pikka coming online, Santos’ production is expected to increase by more than 30% by 2027 compared to 2024, significantly lowering unit production cost which will support strong free cash flow generation throughout the commodity price cycle.
• Adding “From 2026 we will return at least 60% of all-in free cash flow to shareholders, and when gearing is below our target range of 15-25%, 100% of free cash flow will be returned to shareholders in the form of dividends and/or buybacks.”

The Week Ahead

• Wednesday: US New Home Sales are expected to be 725k for October, slightly down on the previous 738k and the Conference Board Consumer Confidence is expected to rise to 111.8 in November from the previous reading of 108.7. Australia CPI Year on Year (YoY) is expected to be 2.3%, a slight increase on the previous reading of 2.1%.
• Thursday: US GDP Quarter on Quarter (QoQ) is expected to be 2.8% for Q3, flat on the previous quarter.
• Friday: US Initial Jobless Claims are expected to be 217K compared with 213k last week, the Chicago PMI is expected to show an improvement to 45 from September’s reading of 41.6m, while Personal Income for October is expected to show 0.3% growth, in line with the previous reading and Personal Spending is expected to be 0.4%, a slight decline on the previous reading of 0.5%.
• Saturday: China Manufacturing PMI for November is expected to be 50.2 compared with 50.1 in October.