Our head of investment rounds up the morning's big news.
The FTSE 100 has opened lower for a second day as investors digest the slew of UK corporate updates. Haleon (LSE:HLN) is near the top of the UK index after lifting its revenue guidance ahead of its AGM.
Banking stocks such as Barclays (LSE:BARC), HSBC (LSE:HSBA), NatWest (LSE:NWG), Standard Chartered (LSE:STAN) and Lloyds Banking Group (LSE:LLOY) are at trading higher after Morgan Stanley reported strong quarterly earnings and after hotter-than-expected UK inflation data set the scene for another potential rate hike from the Bank of England.
A new poll from Reuters suggests the Federal Reserve will deliver another 25-basis point increase in May and then hold steady for the rest of the year with a ‘short and shallow’ US recession most likely.
Tesla (NASDAQ:TSLA) reported first-quarter revenue of $23.33 billion, beating analysts’ expectations with autos revenue up 18% year-on-year and energy revenue jumping 148% to $1.53 billion. Earnings per share hit 85 cents, meeting consensus forecasts and net income fell 24% versus last year to $2.51 billion.
The company faces a squeeze on margins because of cost inflation, the ‘under-utilisation of new factories’, and price cuts to tackle the softening consumer backdrop. Just this week, Tesla cut prices in the US for the sixth time this year and signalled further price reductions could be on the cards. The electric vehicle giant is prioritising growth in its market share and volumes.
CEO Elon Musk highlighted the macroeconomic uncertainty amid the Fed’s rate hiking path, which is denting demand. Nonetheless Tesla said it still aims to produce 1.8 million vehicles this year, potentially up to 2 million.
Shares in Tesla sold off sharply in 2022 caught up in the ‘teck wreck’ after central banks removed the punch bowl of cheap money. Elon Musk also sold billions of dollars of Tesla stock to fund his Twitter acquisition. However, the stock has been rebounding this year, up 67% year-to-date to yesterday’s close. Shares fell last night after-hours as investors digested the pressure on margins and Musk’s economic forecast for ‘stormy weather’ over the next year.
Deliveroo (LSE:ROO) reported like-for-like revenue up 11% in the UK and Ireland. Overall group revenue rose by 4% but gross transactional value fell by 1% year-on-year because of a 9% drop in orders. An expansion to its offering in the UK and Ireland helped support growth, however international revenue struggled amid weakness in the French market and Covid restrictions in Asia at the start of the year.
Deliveroo has been struggling with cost inflation as well as weaker demand amid the cost-of-living crisis with the backdrop of a softening consumer as households look to make cutbacks on non-essential spending. This is also a highly competitive sector with players such as Uber Eats and Just Eat Takeaway NV (LSE:JET) as well as the q-commerce players promising to deliver groceries within minutes. After a disastrous flotation, shares have had a horrible time during their lifespan on the public market, shedding 64% since April 2021 with shares under pressure again today.
Foxtons Group (LSE:FOXT) reported first-quarter revenue up 10% to £32.9 million. Lettings revenue rose by 27% to £22.8 million, however sales revenue fell 16% to £8.1 million.
The lettings division is becoming a growing percentage of Foxtons’ overall business as home sales struggle in the aftermath of the mortgage market mayhem since the mini budget last September. Foxtons said there has been ‘reduced buyer activity’ as the fiscal fiasco prompted many would-be homeowners to hold off for purchasing a house or flat because of the spike in mortgage rates and the expectation that house prices will continue to fall this year. Its financial services revenue has also been struggling, shedding 18% to just £2 million amid the weak under-offer sales pipeline.
Shares in Foxtons have struggled since the peak before pandemic sell-off at the start of 2020, reaching a low in October last year following the mini-budget. Since then, the stock has been attempting to regain ground, up 25% so far this year but is a long way off the 2020 highs.
Haleon (LSE:HLN) reported first-quarter organic growth up 9.9%. It now expects organic revenue growth towards the upper end of its 4-6% guidance range and kept all other full-year 2023 guidance unchanged.
In an update provided ahead of its AGM, GSK (LSE:GSK)’s consumer health spin-off said it enjoyed growth across respiratory health, pain relief, oral health and digestive health thanks to strong demand for drugs during the cold and flu season. It benefited from strength in China as Beijing unwound its strict anti-Covid lockdown measures and because of demand for medicines amid the high levels of Covid, colds and flu.
Since the spin-off, shares initially had a shaky start, reaching a trough in September last year but the stock has been progressing nicely in recent months, rallying almost 30% over a half year period.
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