Bitcoin, Alibaba and Burberry: Investing in the Spotlight
(Bloomberg)
Cryptographic doubts
One tweet was all it took for Bitcoin to falter. On Wednesday night, Tesla Inc. CEO Elon Musk changed course and tweeted that his automaker would no longer accept the world’s largest cryptocurrency as payment for its electric vehicles, citing concerns about power demand. . The token’s price fell on the news, briefly dropping as much as 15% before cutting some of its losses.
Musk’s tweet caused a number of assets adjacent to Bitcoin to tumble on Thursday: Tesla itself, which bought the token worth more than $ 1 billion, fell 3.1%. The stock has fallen 34% since the company announced the investment in February. Coinbase Global Inc., the largest cryptocurrency exchange in the US, fell as much as 11%. Microstrategy Inc., which also owns Bitcoin, fell as much as 11.8%.
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After a meteoric rise in late 2020, Bitcoin has gone through a combination of rallies followed by rapid corrections in the last three months. Concerns about its ecological impact, as well as poor performance compared to alternative digital currencies, including Ethereum, Litecoin, and Dogecoin, have spurred speculation that the best days for the coin could be behind us.
Whats Next? However, other crypto experts think that it might not be the time to give up just yet. “This may be the selloff that sets Bitcoin to new all-time highs,” said David Grider of Fundstrat Global Advisors LLC. “We think the news is exaggerated and we would not be surprised if Tesla is signaling plans to make cryptocurrencies ‘greener’.”
Alibaba setback
Thursday’s quarterly earnings report was another blow to Jack Ma’s Alibaba Group Holding Ltd.: The e-commerce company, China’s largest, posted a net loss of 5.5 billion yuan ($ 852 million), the first since 2012, after the company incurred a $ 2.8 billion fine. for the monopolistic behavior imposed by Beijing. Its US-listed shares fell 6% on Thursday, 35% less than their October peak.
The company now intends to refocus on its business, dumping “all incremental profits” back into technology and highly controversial areas such as community commerce, CEO Daniel Zhang promised on Thursday.
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Whats Next? Better-than-expected revenue in the coming quarters may not be enough to offset the impact of increased spending on the company’s bottom line. Profitability “may take a backseat as you increase investments in the next fiscal year in a bid for market expansion and higher profits and user share,” said Bloomberg Intelligence analyst Vey-Sern Ling.
Luxury upset
Not all post-lockdown rallies are the same: Burberry Group Plc’s shares fell as much as 10% on Thursday after it reported that sales remained below 2019 levels, showing the company is lagging behind. some of his peers.
Demand for luxury goods was expected to increase this year as consumers who stayed home for most of 2020 made up for lost time. Comparable store sales in the three months through March increased, but revenue was still below the level of two years earlier. Meanwhile, the sales of rivals LVMH and Hermes International exceeded 2019 amounts last quarter.
Burberry announced a capital spending project as part of a plan to catch up. It will spend up to 190 million pounds ($ 267 million) on store renovations, digital offerings and information technology.
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Whats Next? The brand’s new medium-term guidance implies a slower-than-expected improvement in the profit margin, said Elena Mariani, an analyst at Morgan Stanley. “Having said that, the tone of confidence in the Group’s next strategic chapter and in the recovery of organic sales growth is likely to resonate well with investors.”
Memestock Encore
Daily traders once again boosted AMC Entertainment Holdings Inc. shares after driving a 320% rally earlier this year. Earlier in the month, the theater chain reported a first-quarter loss of $ 567.2 million, causing an eight-day drop. But the price rallied after Reddit-inspired investors got involved: Stock closed up 24% Thursday, extending a streak to five consecutive days of gains.
Movie theaters were among the industries hardest hit by the pandemic, as closures forced theaters across the country to close. In January, AMC raised more than $ 900 million in financing to avoid filing for bankruptcy.
With nearly all AMC theaters in the US open and Covid restrictions gradually being lifted, there is hope that movie-going habits will return to normal sooner rather than later.
Whats Next? Signs that the pandemic is coming to an end are a positive sign, but the company “is still facing challenging fundamental trends as the industry may not recover significantly from the pandemic until 2022,” said Bloomberg Intelligence analyst Geetha Ranganathan. “Theatrical reopenings, especially in New York and Los Angeles, are a bright spot, however we believe box office sales may drop more than 55% this year as movies are delayed.”
IPO issues
Alphawave IP Group Plc shares disappointed investors in their initial public offering. The Canadian semiconductor company sank as much as 24% on its first day of trading in London, sparking criticism that the company overvalued its shares in the current environment.
The disappointing IPO came amid a sell-off in tech stocks: the tech-heavy Nasdaq is down more than 5% so far in May as growing apprehension over extreme valuations and risk inflation eroding future earnings has led to global defeat. across the industry.
