Anyone who expected a beautiful trading day after last night will be disappointed. The AEX (-0.4%) still opened more than 2% in the green, but nothing is left of this profit. It is the technology funds that take the biggest blows.
Just Eat Takeaway (-11.7%) after that dramatic day of yesterday is again ruined. That while the meal deliverer still opened 4% in green. I do not rule out the possibility that after the reappointment of CEO Jitse Groen and his associates, a number of investors will throw in the towel. Also Iron (-5.4%) has completely lost it since the publication of its first quarter figures.
As a market watcher of the day, it is my job to interpret this turn of sentiment. This is quite difficult, as I see no clear reason for this decline. Fed Chair Jerome Powell actually said exactly what to say yesterday.
He ruled out a 75 basis point rate hike and argued why a series of rate hikes will not lead to a hard but soft landing for the economy. In short a dovish story that should reassure the market. The opposite is true and that shows how bad the sentiment is. Actually, a day like today belongs to a bear market† Every increase is used to sell.
Shell
Very strong numbers from Shell (+2.3%), which easily beats the consensus. Thanks to the exceptional market conditions, the group can do everything at once. Shell is taking full advantage of the very high energy prices and the cash flow is unprecedented.
On the positive side, the company has taken advantage of the situation to significantly reduce its debt. Net debt is expected to be $40 billion at the end of this year. By comparison, the company generated $10 billion in free cash flow in the first quarter.
In short, Shell has the necessary financial scope to make acquisitions. In addition, it can spoil shareholders in the form of an additional share repurchase program or higher dividend. You can read in the article below whether you can also buy the shares at €27.
Shell price target raised sharply #SHELLPLC https://t.co/aS9GYoU58C
– IEX Investor Desk (@Investor Desk) May 5, 2022
ArcelorMittal
Also ArcelorMittal (-2.0%) is in the sweet spot† Thanks in part to a 46% higher steel price, the company was able to increase its sales in the first quarter by 32% to $21.8 billion. The EBITDA, also known as the operating result, even increased by 60%.
Earnings per share in the first quarter came in at $4.28 and such a figure is almost never seen at the steel giant. This year promises to be a peak year as the consensus is on earnings per share of $16. The stock is trading at just over twice expected earnings.
The market thus indicates that the company cannot maintain this profit. Because the results of a cyclical company like ArcelorMittal are so volatile, it is very difficult to arrive at a good price target.
In any case, the bad years must also be included in the calculation. Our analyst Peter Schutte also does this. You can read whether he thinks the stock is undervalued in the article below.
Low-rated ArcelorMittal outperforms expectations #ArcelorMittal https://t.co/aFQ51S0WQl
– IEX Investor Desk (@Investor Desk) May 5, 2022
AMG
The bleeder of the day is AMG (-13.2%). That while the first quarter figures were not bad at all. Thanks to higher prices for vanadium and lithium, turnover increased by no less than 53% in the past quarter. Yet the market apparently expected more.
AMG is a typical boom/bust stock. In good times like now, the company makes a super profit, but if the prices for special metals are disappointing, the money also runs out. The company itself is counting on continued high demand, which is why it is significantly expanding its production capacity.
This should benefit profitability. Analyst Paul Weeteling expects the company to be able to increase its earnings per share by 15% annually in the period 2023-2027, although the company is highly dependent on metal prices. The actual growth figure will therefore deviate significantly from this.
You can read an extensive analysis below.
Finally real profit for AMG #AMG https://t.co/TW1QgWd8Lj
– IEX Investor Desk (@Investor Desk) May 5, 2022
Annuities
Interest rates are going through the roof. The US ten-year treasury is up no less than 13 basis points to 3.04%. Yesterday US interest rates plummeted as a result of the Fed rate decision, but this effect has completely faded after today.
- Netherlands: +1 basis point (+1.29%)
- Germany: +3 basis points (+1.01%)
- Italy: +2 basis points (+2.98%)
- United Kingdom: -3 basis points (+1.94%)
- United States: +13 basis points (+3.04%)
broad market
- The AEX (-0.4%) performed in line with the DAX (-0.4%) and CAC (-0.6%) today
- The CBOE VIX Index (Volatility) is up 22.5% to 31.3 points.
- Wall Street is in the doldrums. The Dow Jones (-2.6%), S&P500 (-3.0%) and Nasdaq (-4.2%) are deep in the red.
- The euro is down 1.0% and is now trading at 1.052 against the US dollar.
- Gold (+0.0%) stays close to home
- Oil: WTI (+0.3%) and Brent (+0.5%) remain at high levels
- Bitcoin (-6.6%) is also taking a big hit.
The Damrak:
- Who shares this morning prosus (-4.5%) is already 8% in the minus. After all, when it opened, the South African investment company was still one of the big winners.
- ING (+0.4%) is significantly better than ABN Amro (-4.0%). Investors therefore appear to be confident in tomorrow’s numbers.
- Technology stocks trading at a high multiple are not bullish today. So also Adyen (-4,5%).
- Safe harbors like Heineken (+0.5%) in Wolters Kluwer (+0.2%) keep your head well above water
- High beta stocks like Inpost (-6.4%) in alfen (-3.0%), on the other hand, you should not have today.
- The numbers of BAM (-3.8%) were reasonably in line with expectations. The headache file remains the closing dike.
- The results of ForFarmers (-4.2%) hurt my eyes. Volumes declined by 7.3% in the first quarter and EBITDA plummeted by 47% year-on-year. The market for animal feed is currently not the place to be.
- CM.com (-1.1%) also seems unable to increase. The chart is getting scarier by the day. Fundamentally, though, I see value in this venture.
Advice
- Brunel: to €16 from €15 and buy – ING
- ForFarmers: to €3.20 from €4.20 and keep – BankDegroof
- ForFarmers: to €3.75 from €4.25 and keep – KBC
- IMCD: to €133 from €128 and keep – Deutsche Bank
- Just Eat Takeaway: to €35 and keep – Bank of America
- UMG: to €29 from €25 and buy – Deutsche Bank
Agenda Friday May 6, 2022
Consensus
- 08:00ING Q1 figures
- 08:00Aperam Q1 numbers
- 08:00Adidas Q1 numbers
- 08:00Germany industrial production Mar-0,8% MoM
- 14:30VS Non Farm Payroll Report apr+395K
- 14:30US unemployment rate April3,6%
- 14:30US wage growth apr+5,5% YoY
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