European Equities: Service Sector PMIs and Brexit in Focus

Economic Calendar:

Thursday, 3rd December

Spanish Services PMI (Nov)

Italian Services PMI (Nov)

French Services PMI (Nov) Final

German Services PMI (Nov) Final

Eurozone Markit Composite PMI (Nov) Final

Eurozone Services PMI (Nov) Final

Eurozone Retail Sales (MoM) (Oct)

Friday, 4th December

German Factory Orders (MoM) (Oct)

IHS Markit Construction PMI (Nov)

The Majors

It was a mixed day for the European majors on Wednesday, following Monday’s gains. The DAX30 and EuroStoxx600 fell by 0.52% and by 0.05% respectively, while the CAC40 ended the day up by 0.02%.

For the majors, concerns over a lack of progress towards Brexit pegged the majors back on the day. Also weighing on the majors and the DAX30, in particular, was news that the Democrats would retain the phase 1 trade agreement with China near-term.

There were positives, however, that provided support. News of the UK approving the BioNTech/Pfizer.inc vaccine delivered support, as did Joe Biden talk of a COVID-19 stimulus package.

According to reports on Wednesday, the President-Elect stated that delivering a COVID-19 stimulus package was an immediate priority.

The Stats

It was a relatively busy day on the Eurozone economic calendar. German retail sales figures for October were in focus going into the European open.

According to Destatis, retail sales rose by 2.6% in October, reversing a 1.9% slide in September. Economists had forecast a 1.2% rise.

  • Compared with the same month a year ago, retail sales were up by 8.2%.
  • Supermarket, self-service department shops, and hypermarket sales were up by 7.9%, year-on-year.
  • In the non-food retail sector, sales rose by 9.0%.
  • When compared with February 2020, the pre-COVID-19 pandemic month, retail sales rose by 5.9%.

Unemployment numbers from Spain and the Eurozone released later in the day had a muted impact on the majors.

In Spain, the unemployment rose by 25.3k in September, following a 49.6k jump in August.

For the Eurozone, the unemployment rate slipped from an upwardly revised 8.5% to 8.4% in October. Economists had forecast an unemployment rate of 8.4%.

According to Eurostat,

  • While down from 8.5% in September, unemployment was up from 7.4% in October 2019.
  • Compared with September 2020, Eurostat estimates that the number of unemployed persons fell by 91,000.
  • By contrast, however, the number of unemployed persons increased by 2.186 million when compared with October 2019.

From the U.S

ADP non-farm employment change figures were in focus late in the day.

In November, nonfarm employment increased by 307k, falling short of a forecasted 410k increase. In October, nonfarm employment had increased by 365k.

The Market Movers

For the DAX: It was a mixed day for the auto sector on Wednesday. Continental slid by 1.56%, with BMW and Volkswagen falling by 0.39% and by 0.44% respectively. Daimler rose by 0.24%, however, to buck the trend on the day.

It was a bullish day for the banks. Deutsche Bank rose by 0.90%, with Commerzbank ending the day up by 1.81%.

From the CAC, it was a bullish day for the banks. BNP Paribas and Credit Agricole rose by 1.69% and by 1.67% respectively, with Soc Gen gaining 2.10%.

It was a mixed day for the French auto sector, however. Peugeot fell by 0.79%, while Renault rose by 1.45%.

Air France-KLM slipped by 0.85%, while Airbus SE rose by 2.15%, following Tuesday’s 1.90% gain.

On the VIX Index

It was a 2nd consecutive day in the green for the VIX, after having fallen for 5 consecutive days. Following on from Tuesday’s 0.97% gain, the VIX rose by 1.93% to end the day at 21.17.

Disappointing ADP nonfarm figures had limited impact, while plans to retain the phase 1 trade agreement with China was market negative. On the positive, however, remained progress towards a COVID-19 vaccine and hopes of a stimulus package to support the U.S economy.

For the U.S markets, it was a mixed day after Tuesday’s gains and last month’s rally. The Dow and S&P500 rose by 0.20% and by 0.18% respectively, while the NASDAQ slipped by 0.05%.

VIX 031220 Daily Chart

The Day Ahead

It’s a busy day ahead on the Eurozone economic calendar. Key stats include services and composite PMI numbers for Italy and Eurozone retail sales figures.

Finalized services and composite PMI figures for November are also due out for France, Germany, and the Eurozone.

We would expect the Eurozone’s composite and services PMI to have the greatest impact on the majors.

From the U.S, the all-important ISM services PMI and weekly jobless claims figures will also influence later in the day.

Away from the economic calendar, Brexit and COVID-19 news updates will need monitoring. Any further chatter on a stimulus package from Capitol Hill would influence.

The Futures

In the futures markets, at the time of writing, the Dow Mini was up by 18 points.

For a look at all of today’s economic events, check out our economic calendar.

Veeva Systems Shares Plunge Despite Strong Q3 Earnings; Target Price $301

Veeva Systems, an American cloud-computing company focused on pharmaceutical and life sciences industry applications, reported better-than-expected earnings in the third quarter of the fiscal year 2021 and forecasts revenue between $1,446-$1,448 million for the next fiscal.

Despite that Veeva Systems’ shares plunged about 10% to $257.47 in pre-market trading on Wednesday. However, the stock is up over 100% so far this year.

The cloud-computing company reported revenues of $377.5 million in the third quarter, beating the Wall Street consensus of $362 million, up from $280.9 million one year ago, an increase of 34% year-over-year. Subscription services revenues for the third quarter were $302.9 million, up from $226.8 million one year ago, an increase of 34% year-over-year.

For the third quarter, fully diluted net income per share was $0.60, compared to $0.52 one year ago, while non-GAAP fully diluted net income per share was $0.78, compared to $0.60 one year ago. That was higher than the market expectations of $0.68.

“Veeva reported a beat-and-raise F3Q with strength across all areas of the business. Guidance for F4Q and FY22 came in above consensus and looks conservative, especially as initial FY22 revenue guidance calls for a deceleration to 19% Y/Y growth. FY22 non-GAAP operating margin guidance reflects Veeva investing more in newer growth drivers, such as Data Cloud and MyVeeva, which we view as the right move. We maintain our BUY rating and $325 price target on Veeva Systems Inc,” said Rishi N. Jaluria, Senior Research Analyst at D.A. Davidson & Company.

Veeva Systems Stock Price Forecast

Seven equity analysts forecast the average price in 12 months at $301.71 with a high forecast of $335.00 and a low forecast of $225.00. The average price target represents a 6.16% increase from the last price of $284.20. From those seven analysts, five rated “Buy”, one rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $332 with a high of $532 under a bull-case scenario and $194 under the worst-case scenario. The firm currently has an “Overweight” rating on the cloud-computing company’s stock.

“Veeva delivered 11% billings upside in Q3, doubling the typical beat, while also driving op margins to company high of 41%. First look at FY22 revenue and profitability suggests plenty of conservatism to deliver beat/raise quarters. We roll forward estimates, remain OW and increase PT to $332,” said Stan Zlotsky, equity analyst at Morgan Stanley.

Several other analysts have also upgraded their stock outlook. Stifel raised their target price to $325 from $300. Needham upped the target price to $327 from $310. Raymond James increased the target price to $335 from $285. In August, Bank of America boosted their price objective to $302 from $230 and gave the stock a “buy” rating. Piper Sandler boosted their price target to $310 from $220and gave the stock an “overweight” rating.

Analyst Comments

“Veeva’s core products provide SaaS solutions for the Life Sciences industry, targeting $10B+ of spending today with potential overtime to address more of the $44B Life Sciences spend on IT, leveraging the company’s strong brand recognition and expanding its TAM into other regulated industries and use cases,” said Stan Zlotsky, equity analyst at Morgan Stanley.

“As Veeva penetrates this large TAM, we see a sustainable 17% revenue CAGR over the next 5 years. Our $332PT is based on 2.4x EV/CY25 FCF/Growth adjusted, a premium to large-cap peers, but justified given the long term FCF durability and large market opportunity,” Zlotsky added.

Upside and Downside Risks

Risks to Upside: 1) VEEV penetrates its TAM faster than expected as it gains traction outside life sciences. 2) Traction within newer products and add-ons accelerates – highlighted by Morgan Stanley.

Risks to Downside: 1) 70%+ seat penetration in CRM could limit growth while declining sales headcount in Life Sciences may be a headwind. 2) TAM may be more limited due to vertical-specific focus. 3) Increased competition on CRM by competitors such as Iqvia.

Check out FX Empire’s earnings calendar

Salesforce.com Earnings Beat Wall Street Estimates But Slack Acquisition Steals Thunder

Salesforce.com Inc, an American cloud-based software company, reported better-than-expected profit in the third quarter of the fiscal year 2021 with revenue increasing 20% year-over-year to $5.42 billion, but shares plunged over 4% in extended trading on news of Slack acquisition.

The company reported GAAP net income of $1.08 billion, or $1.15 per share, compared with a loss of $109 million, or 12 cents per share a year ago. Adjusted earnings came to $1.74 a share. That higher than the market consensus for earnings of 75 cents per share and revenue of $5.25 billion.

“Wide-moat Salesforce reported strong results, including a meaningful upside to both revenue and non-GAAP EPS, while guidance for the fourth quarter was mixed. Stealing the thunder from fine results was the formal announcement that the company is acquiring Slack, and this dominated the earnings call. We have mixed feelings on the Slack acquisition,” said Dan Romanoff, equity analyst at Morningstar.

“We are maintaining our fair value estimate of $253 for Salesforce as good organic results are offset by the seemingly modest deleterious impact on shareholder value arising from the Slack acquisition. With the recent pullback, we think Salesforce shares are looking increasingly attractive,” Romanoff added.

Salesforce’s shares closed 1.81% lower at $241.35; traded over 4% lower at $231.50 in extended trading on Tuesday. However, the stock is up about 50% so far this year.

Salesforce Stock Price Forecast

Eighteen equity analysts forecast the average price in 12 months at $291.53 with a high forecast of $325.00 and a low forecast of $234.00. The average price target represents a 20.79% increase from the last price of $241.35. From those 18 analysts, 15 rated “Buy”, three rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $275 with a high of $332 under a bull-case scenario and $187 under the worst-case scenario. The firm currently has an “Equal-weight” rating on the enterprise cloud computing solutions leader’s stock. Raymond James raised their target price to $280 from $255.

Several other analysts have also upgraded their stock outlook. Salesforce.com has been given a $275 price target by The Goldman Sachs Group. The brokerage currently has a “buy” rating on the CRM provider’s stock. Bernstein restated a “neutral” rating and set a $234 price target. Barclays boosted their price target to $315 from $264 and gave the stock an “overweight” rating.

Analyst Comments

“While Salesforce.com (CRM) remains one of our best secularly positioned names given enterprise IT spend prioritized towards digital transformation, we see current valuation reflective of long-term share gains within an estimated $175 billion TAM over the next 4 years and >$200 billion longer-term,” said Keith Weiss, equity analyst at Morgan Stanley.

“We see total revenue nearly doubling by FY24, but at CRM’s current scale and market cap, an increasing focus on FCF and earnings is likely necessary for further price appreciation. Our Equal-weight view on CRM shares is based on our $275 PT, which is based on 30X our CY25e FCF per share of $12.07, discounted back at 8.5%,” Weiss added.

Upside and Downside Risks

Risks to Upside: Slack Connect becomes a powerful contributor to net new customer additions. Net dollar retention rate stabilizes as new COVID-19 customers begin to meaningfully expand – highlighted by Morgan Stanley.

Risks to Downside: Competition from Microsoft, which offers a similar product for free to Office 365 users; Difficulty expanding outside of the IT department; Organizations defer to a bundled alternative (MSFT Teams, Google Workspace) in a weaker macro.

Check out FX Empire’s earnings calendar

UnitedHealth Forecasts 2021 Revenue Between $277-$280 Billion; Target Price $400 in Best-Case

For this year, UnitedHealth Group expects revenues of about $257 billion, with net earnings to approach $15.90 per share and adjusted net earnings to approach $16.75 per share.

“Management previously braced investors that 2021 EPS growth would be below its long-term target of 13-16% due to COVID-19 uncertainty. The $18 starting point represents 8% growth, which is 2% below the Street. However, ex $1.80 of potential COVID-19 impact, growth would be an impressive 18%,” said David Windley, equity analyst at Jefferies.

“Other takes: 1) Positive enrollment updates: MA +13.5%, Commercial+1%; 2) Optum margins expand 45bps while Commercial declines 85bps due to COVID;3) Repurchases of $5BN vs $4.5BN in ’20,” Windley added.

At the time of writing, UnitedHealth’s shares traded 4.47% higher at $351.99 on Tuesday; the stock is up about 20% so far this year.

UnitedHealth Stock Price Forecast

Sixteen equity analysts forecast the average price in 12 months at $367.47 with a high forecast of $409.00 and a low forecast of $330.00. The average price target represents a 4.48% increase from the last price of $351.71. From those 16 analysts, 13 rated “Buy”, three rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $371 with a high of $449 under a bull-case scenario and $183 under the worst-case scenario. The firm currently has an “Overweight” rating on the insurance company’s stock.

“We calculate our price target by applying a 20.5x P/E multiple to our base case FY21E EPS of $18.14. Multiple reflects 0.8 turn premium to S&P 500 multiple of 19.6x. Premium in-line with UNH 5 year average premium UNH has historically traded at the adjusted repeal of HIF (+0.4x) and for periods in 2019 where fears over M4A weighed on multiple (we don’t believe this outcome is likely),” said Ricky Goldwasser, equity analyst at Morgan Stanley.

Several other analysts have also upgraded their stock outlook. UnitedHealth Group had its price target increased by equities research analysts at Piper Sandler to $409 from $385. The firm presently has an “overweight” rating on the healthcare conglomerate’s stock. SVB Leerink lifted their price target to $373 from $370 and gave the company an “outperform” rating. Credit Suisse Group boosted their target price to $395 from $355 and gave the stock an “average” rating.

Analyst Comments

“UnitedHealth Group is the number one Medicare Advantage player with 28% market share, the number two Medicare PDP player with 20% market share, and the number two commercial player with 15% market share. United’s model is enhanced via vertical integration with its OptumRx PBM platform, which is one of the three largest PBMs in the country,” said Ricky Goldwasser, equity analyst at Morgan Stanley.

“With a large lead in the breadth of services offerings and considerable exposure to government businesses, UnitedHealth is well-positioned for any potential changes in the U.S. healthcare system. A strong balance sheet and continued solid cash generation give flexibility for continued M&A,” Goldwasser added.

Upside and Downside Risks

Risks to Upside: 1) MA growth above the market. 2) Optum integration leads to industry-leading MLR performance. 3) Medicaid margins improve to target 3%-5% range – highlighted by Morgan Stanley.

Risks to Downside: 1) Regulatory uncertainty. 2) Slower growth in core growth areas such as Medicare Advantage, commercial, and Medicaid with focus on services. 3) Optum growth slows as competitors become more reluctant to work with UnitedHealth.

Zoom Earnings Beat Wall Street Estimates But Shares Dip 5% After Hours on Disappointing Margins

Zoom, a cloud video communications provider, reported better-than-expected earnings in the third quarter of the fiscal year 2021 with a revenue surge of over 365% and forecasts total revenue between $2.575-$2.580 billion in the full fiscal year.

But shares traded down 5% in the aftermarket, partially on gross margins that were light of consensus and down sequentially, driven by the high volume of free users and higher public cloud usage. Zoom’ shares closed 1.43% higher at $478.36 on Monday; the stock is up over 600% so far this year.

The company said its revenue climbed 367% to $777.2 million in the third quarter ended October 31, beating the Wall Street consensus estimate of around $694 million. Adjusted earnings came in at 99 cents per share, also beating market expectations of 76 cents per share.

Zoom forecasts revenue between $806-$811 million in the fourth quarter, above estimates of $730.1 million and non-GAAP income from operations between $243.0 million and $248.0 million. Non-GAAP diluted EPS is expected to be between $0.77 and $0.79 with nearly 306 million non-GAAP weighted average shares outstanding.

“Zoom (ZM) reported a record F3Q21, but shares traded down 5% AMC on light gross margins (partly the result of more free users). We would be buyers on a sustained pullback, as the quarter was beyond impressive, with ZM scoring a 420 on a “Rule of 40” basis,” said Rishi N. Jaluria, Senior Research Analyst at D.A. Davidson & Company.

“In our view, the key debate is about the sustainability of ZM’s growth post-pandemic and we take the view that ZM will be increasingly necessary to enable a hybrid remote work strategy and that many of the changes in work brought on by the pandemic are irreversible in nature. We maintain our BUY rating and $600 price target on Zoom Video Communications,” N. Jaluria added.

Zoom Stock Price Forecast

Twenty equity analysts forecast the average price in 12 months at $486.33 with a high forecast of $611.00 and a low forecast of $315.00. The average price target represents a 1.67% increase from the last price of $478.36. From those 20 analysts, ten rated “Buy”, nine rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $380 with a high of $530 under a bull-case scenario and $250 under the worst-case scenario. The firm currently has an “Equal-weight” rating on the video communications provider’s stock.

“We are rolling forward our price target a year as the year comes to a close. As a result, our price target increases to $380 from $350, which represents 29x EV/FY23e Revenue or 28x EV/discounted FY32e FCF. We believe that while COVID-19 keeps video conferencing as a critical piece of employee connectivity, valuation is likely to remain closer to our bull case,” said Meta Marshall, equity analyst at Morgan Stanley.

“Our bull case moves to $530 from $500 and represents 31x EV/FY23e Rev or 29x EV/discounted FY32e FCF. Our bear case also increases to $250 from $210, which represents 19x EV/FY23e Revenue or 27x EV/discounted FY32e FCF. Risks to valuation remain macro headwinds, competitive efforts, COVID-19 vaccine causes a return to work/school.”

Several other analysts have also upgraded their stock outlook. Citigroup raised their stock price forecast to $467 from $377; RBC lowered the price target to $550 from $600; Credit Suisse upped their target price to $340 from $315; JP Morgan raised the target price to $450 from $425; Bernstein increased their target price to $611 from $228 and D.A. Davidson increased their target price to $600 from $460.

Analyst Comments

“Zoom eliminates barriers to video conferencing growth. Company has meaningful competitive moat built on more than just architecture. Leveraging position with customers to be center of UC platform. WFH has permanence but diminishes post-COVID-19. Valuation credits significant expansion opportunities in broader unified communications landscape, supported by initial Phone execution,” Morgan Stanley’s Marshall added.

Upside and Downside Risks

Risks to Upside: 1) Zoom Phone adopted faster than expected. 2) Sales efficiency matches previous levels. 3) International business shows continued leverage. 4) Topline beats to flow to bottom line WFH permanence. 5) K-12 Market – highlighted by Morgan Stanley.

Risks to Downside: 1) Macro conditions suffer. 2) Large competitor refreshes portfolio and gets aggressive on the price. 3) WFH wanes post COVID-19. 4) China / K-12 opportunity not monetizable.

Check out FX Empire’s earnings calendar

European Equities: Economic Data and Brexit in Focus

Economic Calendar:

Tuesday, 1st December

Spanish Manufacturing PMI (Nov)

Italian Manufacturing PMI (Nov)

French Manufacturing PMI (Nov) Final

German Manufacturing PMI (Nov) Final

German Unemployment Change (Nov)

German Unemployment Rate (Nov)

Eurozone Manufacturing PMI (Nov) Final

Eurozone Core CPI (YoY) Prelim

Eurozone CPI (MoM) Prelim

Eurozone CPI (YoY) (Nov) Prelim

Wednesday, 2nd December

German Retail Sales (MoM) (Oct)

Spanish Unemployment Change

Eurozone Unemployment Rate (Oct)

Thursday, 3rd December

Spanish Services PMI (Nov)

Italian Services PMI (Nov)

French Services PMI (Nov) Final

German Services PMI (Nov) Final

Eurozone Markit Composite PMI (Nov) Final

Eurozone Services PMI (Nov) Final

Eurozone Retail Sales (MoM) (Oct)

Friday, 4th December

German Factory Orders (MoM) (Oct)

IHS Markit Construction PMI (Nov)

The Majors

It was a bearish end to the month and the start of the week for the European majors on Monday. Coming off the back of a bullish week, the DAX30 and EuroStoxx600 fell by 0.33% and by 0.98% respectively. The CAC40 slid by 1.42%, however, to lead the way down.

On the day, a lack of progress towards Brexit and some profit-taking following an impressive November rebound left the majors in the red.

Inflation figures from the Eurozone and stats from the U.S didn’t help, however, with the stats skewed to the negative.

The Stats

It was a relatively busy day on the Eurozone economic calendar. Prelim November inflation figures for Spain, Italy, and Germany were in focus on the day.

In Spain, consumer prices fell by 0.8% in November, compared with November 2019. In October, consumer prices had also fallen by 0.8%. The harmonized index of consumer prices fell by 0.9%, following a 0.9% decline in October. Economists had forecast a 0.8% decline, year-on-year.

Things were not much better from Italy, with consumer prices falling by 0.1% in November, month-on-month. In October, consumer prices had risen by 0.2%.

From Germany, deflationary pressures saw a marked pickup. Consumer prices slid by 0.8% in November, reversing a 0.1% rise from October. Economists had forecast a 0.7% decline.

From the U.S

Chicago PMI numbers for November and October pending home sales figures also disappointed.

The Chicago PMI fell from 61.1 to 58.2 in November, with pending home sales falling by 1.1% in October. In September, pending home sales had fallen by 2.0%.

The Market Movers

For the DAX: It was a mixed day for the auto sector on Monday. Daimler rose by 0.32% to buck the trend on the day. Continental and Volkswagen slid by 2.35% and by 3.27% respectively, however, with BMW seeing a more modest 0.04% loss on the day.

It was also a bearish day for the banks. Deutsche Bank fell by 1.44%, with Commerzbank sliding by 3.38%.

From the CAC, it was a bearish day for the banks. BNP Paribas and Credit Agricole fell by 1.96% and by 1.93% respectively. Soc Gen slid by 3.70% to lead the way down, however.

It was also a bearish day for the French auto sector. Peugeot fell by 1.13, with Renault sliding by 2.23%.

Air France-KLM also hit reverse, tumbling by 7.34%, with Airbus SE ending the day with a 2.52% loss.

On the VIX Index

It was a 5th consecutive day in the red for the VIX on Monday. Following a 1.93% decline on Friday, the VIX fell by 1.30% to end the day at 20.57.

On Monday, the Dow and S&P500 fell by 0.91% and by 0.46% respectively, with the NASDAQ slipping by 0.06%.

The downside for the VIX came in spite of the losses across the U.S benchmarks, with COVID-19 vaccine hopes weighing.

VIX 011220 Daily Chart

The Day Ahead

It’s a busy day ahead on the Eurozone economic calendar. November Manufacturing PMIs for Italy and Spain, and prelim Eurozone inflation figures for November are due out in the early part of the session.

German unemployment figures and finalized manufacturing PMIs for France, Germany, and the Eurozone are also due out.

Expect Italy, Germany, and the Eurozone’s manufacturing PMIs and Germany’s unemployment figure to have the greatest influence.

From the U.S, the market’s preferred ISM Manufacturing PMI for November will also provide direction late in the session.

Earlier in the day, China’s CAXIN Manufacturing PMI for November will set the tone following impressive NBS numbers on Monday.

Away from the economic calendar, Brexit and COVID-19 news updates will need monitoring. Any progress towards a stimulus package on Capitol Hill would influence.

The Futures

In the futures markets, at the time of writing, the Dow was up by 15 points.

For a look at all of today’s economic events, check out our economic calendar.

European Equities: A Month in Review – November 2020

The Majors

It was a particularly bullish month for the European majors in November, with COVID-19 vaccine news delivering a much-needed bounce.

After 2 consecutive months in the red, the CAC40 surged by 20.12%. The DAX30 and the EuroStoxx600 weren’t far behind, with gains of 15.01% and 13.73% respectively. For the DAX30, November’s gains reversed losses from the year to move into positive territory year-to-date. The CAC40 and EuroStoxx600 still have some way to go in order to reverse losses from earlier in the year, however.

While the news of a COVID-19 vaccine drove demand for riskier assets, Joe Biden’s victory in the Presidential Election added support for riskier assets.

On the negative side, however, was a reintroduction of lockdown measures by member states including France and Germany.

Towards the end of the month, the COVID-19 numbers reflected the effect of the lockdown measures.

In France, the number of new COVID-19 cases and hospitalizations were in decline allowing the government to ease lockdown measures going into December.

On the geopolitical risk front, last-ditch Brexit negotiations failed to deliver a deal, which left the majors in the red at the end of the month.

The Stats

It was a busy month on the Eurozone economic calendar. Looking at the private sector PMIs, it was a disappointing set of numbers for November.

Service sector activity contracted in France, Germany, and across the Eurozone as a result of a reintroduction of containment measures.

France’s services sector suffered the most, with the PMI tumbling from 46.5 to 38.0. With Germany’s Services PMI falling to 46.2, the Eurozone’s Services PMI fell from 46.9 to 41.3.

While Germany’s manufacturing sector avoided a contraction, sector activity in France contracted. The PMI fell from 51.3 to 49.1, dragging the Eurozone’s Composite PMI down from 50.0 to 45.1.

In spite of the disappointing numbers, hopes of a COVID-19 vaccine fuelled economic recovery fuelled muted the effect of the PMIs.

Other stats were mixed in the month.

Consumer and business sentiment weakened in October as a result of the 2nd wave of the pandemic and lockdown measures.

Germany’s ZEW Economic Sentiment Indicator fell from 52.3 to 32.8, with the Ifo Business Climate Index falling from 92.5 to 90.7.

Things were not much better on the consumer confidence front. The GfK Consumer Climate Indicator fell from -3.2 to -6.7.

For the Eurozone, consumer confidence also waned, with the Eurozone Consumer Confidence Index falling from -15.5 to -17.6.

On the positive front, however, were 3rd quarter GDP numbers for France, Germany, and the Eurozone. The respective economies had made progress in recovering from the 2nd quarter economic meltdown before November’s lockdown measures.

From the U.S

Labor market stats pointed to a stalling in the labor market recovery. Initial jobless claims inched up to 778k after having eased down to 709k in the 1st week of November.

While new COVID-19 cases surged across the U.S and a number of states reintroduced containment measures, COVID-19 vaccine news eased any market tensions in the month.

As a result of the jump in COVID-19 cases, consumer confidence softened in November. The CB Consumer Confidence Index fell from 101.4 to 96.1, with the Michigan Consumer Sentiment Index falling from 77.0 to 76.9.

On the positive, however, were private sector PMIs. Both the manufacturing and services sectors saw activity pick up in November.

In November, the Markit Manufacturing PMI rose from 53.4 to 56.7, with the Services PMI rising from 56.9 to 57.7.

The divergence from the Eurozone stemmed from a decision by the U.S administration to keep the economy running.

Monetary Policy

The ECB monetary policy meeting minutes, Economic Bulletin, and Financial Stability Review talked of doom and gloom.

From the minutes and other ECB reports and from ECB President Lagarde commentary, the markets are expecting further policy easing, however.

While the ECB minutes stated that there should be no commitments made, the 2nd wave COVID-19 pandemic is likely to force the ECB’s hands. It remains to be seen how far the ECB will go with a COVID-19 vaccine on the horizon.

From the FED, the FOMC meeting minutes also provided few surprises. Both central banks were focused on the effects of COVID-19 on their respective economies.

The respective minutes followed decisions by both to keep rates unchanged in the month.

The Market Movers

For the DAX: It was a bullish month for the auto sector in November. Daimler surged by 26.99%, with BMW and Continental jumping by 23.99% and by 24.73% respectively. Volkswagen trailed with a 12.52% gain in the month.

It was also a bullish month for the banks. Deutsche Bank rallied by 17.04%, with Commerzbank ending the month up by an impressive 28.8%.

From the CAC, it was a particularly bullish month for the banking sector. BNP Paribas surged by 43.95%, with Credit Agricole and Soc Gen ending the month with gains of 42.63% and 43.38% respectively.

It was also a bullish month for the auto sector. Peugeot rose by 28.06%, with Renault jumping by 56.94%.

Supported by COVID-19 vaccine news, however, it was Air France-KLM that impressed the most with a 77.94% rebound. Airbus SE also impressed, surging by 40.17%.

On the VIX Index

It was back into the red for the VIX in November, ending a run of 2 consecutive monthly gains. Reversing a 44.18% surge in October, the VIX tumbled by 45.90% to end the month at 20.57.

The downside for the VIX came as pharmas released impressive COVID-19 phase 3 clinical trial results. Talk of a vaccine being available by mid-December supported riskier assets, which sank the VIX.

In November, the Dow and NASDAQ rallied by 11.84% and by 11.80% respectively, with the S&P500 ending the month up by 10.75%.

VIX November Monthly Chart

The Month Ahead

We can expect another busy month ahead on the Eurozone economic calendar. Much of the economic data, however, will likely take a backseat in the month ahead.

We would expect COVID-19 vaccine updates and any progress towards a COVID-19 stimulus package on Capitol Hill to be key drivers.

On the geopolitical front, there’s also Brexit for the markets to consider. In late November, last-ditch talks failed to deliver an agreement. The two sides have just one month left until the end of the transition period.

Key stats that will draw interest, however, will include private sector PMIs for December, unemployment figures, and consumer and business sentiment numbers.

From the U.S, private sector PMIs, labor market numbers, and consumer confidence and spending will also influence.

There are also stats out of China that will need to continue reflecting China’s post-pandemic economic recovery.

JetBlue Forecasts Revenue to Plunge 70% in Q4 as Fresh Spike in COVID-19 Cases Hurts

JetBlue Airways, a major American low-cost airline, forecasts revenue to plunge 70% y/y in the fourth quarter, worse compared to a previous prediction of nearly 65% y/y decline, and expects cash burn to surge to around $8 million per day as a resurgence in COVID-19 cases hammered air travel demand.

The passenger carrier said given the recent booking trends and the delay in receipt of cash tax refunds of nearly $70 million originally anticipated during the fourth quarter, the company now expects its average daily cash burn in the fourth quarter to be in a range of $6 million and $8 million, compared to its prior expectation of a range between $4 million and $6 million.

Booking trends remain volatile and the company continues to believe demand and revenue recovery will be non-linear through the fourth quarter and beyond, JetBlue added.

JetBlue Airways’ shares were down about 16% so far this year, traded nearly flat in pre-market trading on Monday.

JetBlue Airways Stock Price Forecast

Ten equity analysts forecast the average price in 12 months at $13.50 with a high forecast of $17.00 and a low forecast of $12.00. The average price target represents a -14.29% decrease from the last price of $15.75. From those ten analysts, three rated “Buy”, six rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $16 with a high of $29 under a bull-case scenario and $6 under the worst-case scenario. The firm currently has an “Overweight” rating on the ratings company’s stock.

Several other analysts have also upgraded their stock outlook. Stifel raised their price target to $13 from $12. Cowen and Company upped their target price to $13 from $10. Credit Suisse increased the target price to $12 from $11. JP Morgan lowered the target price to $16 from $17. UBS raised the target price to $13 from $9.

Analyst Comments

“We like JetBlue’s significant exposure to the “Medium Haul” U.S. domestic market, which we believe is likely to be the first to return (with short-haul challenged by driving and long-haul more challenged by international regulations). Additionally, JBLU’s “snowbird” network provides significant upside as leisure travel returns,” said Ravi Shanker, equity analyst at Morgan Stanley.

“We use a 10-year DCF assuming a 6.8% WACC and terminal cash flow perpetual growth rate of 2%. Our DCF valuation implies a 2023 EV/EBITDAR multiple of 6.1x, which is in line with LUV’s historical average given the “best in class” operating model,” Shanker added.

Upside and Downside Risks

Risks to Upside: 1) COVID-19 vaccine timing. 2) Leisure market recovery for point to point network. 3) Industry rationalization and fare stability – highlighted by Morgan Stanley.

Risks to Downside: 1) COVID-19 the second wave. 2) Better improvement in international travel vs. domestic.

S&P Global in Advanced Talks to Acquire London-based IHS Markit for $44 Billion

S&P Global Inc, a leading provider of independent ratings, benchmarks, analytics and data to markets worldwide, is in advanced talks to acquire IHS Markit, a financial information services company, for nearly $44 billion, according to the Wall Street Journal.

This deal for IHS would be the largest of the year globally, according to Dealogic data, topping both chipmaker Nvidia Corp’s about $40 billion deal to buy chip designer Arm Holdings and nearly $40 billion deal between Nippon Telegraph & Telephone Corp. and a subsidiary, reported by the WSJ.

S&P Global’s shares closed 1.0 4% higher at $341.57 on Friday; the stock is up about 25% so far this year.

S&P Global Stock Price Forecast

Nine equity analysts forecast the average price in 12 months at $397.25 with a high forecast of $422.00 and a low forecast of $353.00. The average price target represents a 16.30% increase from the last price of $341.57. From those nine analysts, seven rated “Buy”, two rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $411 with a high of $629 under a bull-case scenario and $242 under the worst-case scenario. The firm currently has an “Overweight” rating on the ratings company’s stock.

Several other analysts have also upgraded their stock outlook. UBS raised the price target to $424 from $422. BMO lowered their stock price forecast to $375 from $392. Credit Suisse increased their target price to $405 from $400. Stifel upped the target price to $353 from $351 and Oppenheimer raised the price objective to $399 from $396.

Analyst Comments

“S&P Global’s collection of businesses include a top two ratings agency, a leading index franchise, a market data platform, and a leading commodity pricing provider. It has a wide moat, strong market share, and high margins,” said Toni Kaplan, equity analyst at Morgan Stanley.

“We expect SPGI’s pricing power, the potential for product innovation, global expansion, commercial transformation, and cross-enterprise opportunities will drive an 11% EPS CAGR through 2024 with potential upside from China, Kensho, and ESG,” Kaplan added.

Upside and Downside Risks

Risks to Upside: Better-than-expected debt issuance due to rapid economic recovery. Counter-cyclicality of non-transaction revenue and ERS business could offset weaker issuance. Higher-than-expected synergies from BvD acquisition – highlighted by Morgan Stanley.

Risks to Downside: Greater-than-expected issuance decline due to credit-led recession. Additional industry regulation. Increased share loss to smaller rating agencies in both structured and corporate.

European Equities: The Futures Point South, with Stats on the Quieter Side

Economic Calendar:

Monday, 30th November

Spanish CPI (YoY) Prelim

Spanish HICP (YoY) (Nov) Prelim

Italian CPI (MoM) (Nov) Prelim

German CPI (MoM) (Nov) Prelim

Tuesday, 1st December

Spanish Manufacturing PMI (Nov)

Italian Manufacturing PMI (Nov)

French Manufacturing PMI (Nov) Final

German Manufacturing PMI (Nov) Final

German Unemployment Change (Nov)

German Unemployment Rate (Nov)

Eurozone Manufacturing PMI (Nov) Final

Eurozone Core CPI (YoY) Prelim

Eurozone CPI (MoM) Prelim

Eurozone CPI (YoY) (Nov) Prelim

Wednesday, 2nd December

German Retail Sales (MoM) (Oct)

Spanish Unemployment Change

Eurozone Unemployment Rate (Oct)

Thursday, 3rd December

Spanish Services PMI (Nov)

Italian Services PMI (Nov)

French Services PMI (Nov) Final

German Services PMI (Nov) Final

Eurozone Markit Composite PMI (Nov) Final

Eurozone Services PMI (Nov) Final

Eurozone Retail Sales (MoM) (Oct)

Friday, 4th December

German Factory Orders (MoM) (Oct)

IHS Markit Construction PMI (Nov)

The Majors

It was a bullish end to the week for the European majors on Friday. The CAC40 rose by 0.56%, with the DAX 30 and the EuroStoxx600 ending the day with gains of 0.37% and 0.41% respectively.

Following a mid-week blip stemming from concerns over the state of the economy, the markets returned attention to vaccine news.

With the markets expecting a vaccine to become available by mid to late December, expectations of an economic rebound in early 2021 supported riskier assets.

News of easing restrictions also provided support. The CAC40 was the main beneficiary, which found additional support from news of falling new cases and hospitalizations in France.

The Stats

It was a relatively busy day on the Eurozone economic calendar. Finalized 3rd quarter GDP, October consumer spending, and prelim November inflation figures from France were in focus.

The stats were skewed to the positive, providing the CAC40 with support through the early part of the session.

Consumer spending jumped by 3.7%, reversing most of a 4.4% slide from September. Consumer prices and the harmonized index of consumer prices both increased by 0.2% following a flat October. And finally, the French economy expanded by 18.7% in the 3rd quarter, which was revised up from a prelim 18.2%.

From the U.S

There were no material stats with the U.S markets on a half-day for Thanksgiving.

The Market Movers

For the DAX: It was a mixed day for the auto sector on Friday. BMW and Volkswagen fell by 0.83% and by 1.69% respectively. Continental and Daimler saw relatively more modest gains of 0.51% and 1.09% respectively, however.

It was a bullish day for the banks. Deutsche Bank and Commerzbank saw gains of 1.20% and 1.85% respectively.

From the CAC, it was a bullish day for the banks. BNP Paribas rose by 1.06%, with Credit Agricole and Soc Gen seeing more modest gains of 0.37% and 0.80% respectively.

It was also a bullish day for the French auto sector. Peugeot and Renault ended the day with gains of 1.14% and 1.37% respectively.

Air France-KLM continued to find support, rallying by 4.82%, with Airbus SE eking out a 0.22% gain.

On the VIX Index

It was a 4th consecutive day in the red for the VIX on Friday. Following a 1.80% decline on Wednesday, the VIX fell by 1.93% to end the day at 20.84. Thursday was a public holiday in the U.S.

On Friday, the Dow and S&P500 saw gains of 0.13% and by 0.24% respectively, with the NASDAQ rising by 0.92%.

VIX 301120 Daily Chart

The Day Ahead

It’s a relatively busy day ahead on the Eurozone economic calendar. Prelim November inflation figures are due out from Spain, Italy, and Germany.

The numbers are unlikely to have a material impact on the European majors, with further ECB policy easing priced in.

From the U.S, Chicago PMI and pending home sales are due out. Expect the Chicago PMI to have a greater influence late in the session.

NBS private sector PMIs from China due out ahead of the European open will set the tone.

Away from the economic calendar, updates from Brexit negotiations from the weekend and COVID-19 news updates will also influence.

The Futures

In the futures markets, at the time of writing, the DAX was down by 63 points, with the Dow down by 112 points.

For a look at all of today’s economic events, check out our economic calendar.

Earnings to Watch Next Week: Zoom, Salesforce.com and Splunk in Focus

Following is a list of company earnings scheduled for release November 30-December 4, along with earnings previews for select companies.

Earnings Calendar For The Week Of November 30

Monday (November 30)

IN THE SPOTLIGHT: ZOOM VIDEO COMMUNICATIONS

Zoom, a cloud video communications provider, is expected to report a profit of $0.57 in the third quarter lower than Q2’s $0.92 as the company is nearing the end of their growth cycle. Zoom’s shares closed 6.28% higher at $471.28 on Friday; the stock is up over 600% so far this year.

“Recent selloff makes some rebound on print more likely as current conditions have not changed. While a vaccine does change the outlook for how many employees will be working from home by the end of 2021, it doesn’t change the fact that in 2020, most employees remain at home (at least for a good portion of the week). While we are cautious on the achievability of long-term growth assumptions built into Zoom’s valuation, we are cognizant that the recent move discounts Zoom’s ability to post a meaningful beat in FQ3,” said Meta Marshall, equity analyst at Morgan Stanley.

“Our expectations for FQ3 and FY21 non-GAAP revenue / EPS are $688.1 million / $0.75 and $2.4 billion / $2.44, respectively. Our revenue forecasts imply 313% Y/Y growth in FQ3 (4% sequentially) and 283% growth for FY21, with quarterly, adds slowing meaningfully in our assumptions from the 102% Q/Q increase in FQ2. In general, we would view our estimates as conservative given churn rates should still be low and ability to sign new customers or expand deployments should be high. We believe a 9% beat is reasonable, at ~$750 million revenue (up 350% Y/Y) and implying 2 million net adds. Given last quarter’s Y/Y growth of 355%, we would note that continued acceleration is possible, which would cause a bigger correction in the name. With the 20% selloff since the peak, we continue to think there could be a correction this print,” Morgan Stanley’s Marshall added.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE NOVEMBER 30

Ticker Company EPS Forecast
NJR New Jersey Resources $0.57
ADNT Adient PLC $0.68
MNTA Momenta Pharmaceuticals -$0.46
ATHM Autohome $6.40
WB Weibo $0.60
BMA Banco Macro $1.30
IMMU Immunomedics -$0.29
EC Ecopetrol $0.15
VIST Vista Oil Gas -$0.19
GPFOY Financiero Inbursa ADR $0.09
MSNFY Minera Frisco ADR $0.05
GCTAY Siemens Gamesa ADR $0.01
AEG Aegon $0.27
TLK Telekomunikasi Indns Tbk Prshn Pp Pt $0.40
WF Woori Bank $1.57

 

Tuesday (December 1)

IN THE SPOTLIGHT: SALESFORCE.COM

Salesforce.com, an American cloud-based software company headquartered in San Francisco, is expected to report a $0.75 profit in the third quarter with more than 16% growth in revenue to over $5 billion. Salesforce.com’s shares closed 0.32% higher at $247.63 on Friday; the stock is up over 50% so far this year.

“Salesforce is benefiting from a robust demand environment as customers are undergoing a major digital transformation. The rapid adoption of its cloud-based solutions is driving demand for its products. Salesforce’s sustained focus on introducing more aligned products as per customer needs is driving it stop-line. Continued deal wins in the international market is another growth driver,” equity analysts at Zacks Research noted.

“Furthermore, the recent acquisition of Tableau positions the company to be a leader in business analytics for actionable results in everything from operations to HR. The stock has outperformed the industry in the past year. However, stiff competition from Oracle and Microsoft is a concern. Besides, unfavourable currency fluctuations along with increasing investments in international expansions and data centers are an overhang on near-term profitability.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE DECEMBER 1

Ticker Company EPS Forecast
JKS JinkoSolar Holding Co. Ltd. ADR $0.85
BMO Bank Of Montreal USA $1.46
BNS Scotiabank $0.93
NTAP NetApp $0.73
TCOM Trip.com Group Ltd $1.02
VEEV Veeva Systems $0.68
HPE Hewlett Packard $0.34
BOX BOX $0.14
JRONY Jeronimo Martins $0.45
HOCPY Hoya Corp $0.74
AVAV AeroVironment $0.30

 

Wednesday (December 2)

IN THE SPOTLIGHT: SPLUNK

Splunk, the market leader in analyzing machine data, is expected to report a $0.09 profit in Q3 for the first time in the last three quarters with cloud revenue growth of over 85%. Splunk’s shares closed 2.6% higher at $204.03 on Friday; the stock is up over 35% so far this year.

“Our partner checks show weaker performance vs. last quarter & our gov’t checks also imply weaker growth on tough comps. Combined w/ some GTM changes under new sales leadership & pivot towards Observability & we see a lot of moving parts. We do see the upside to margins & 4Q pipelines sound good, but we feel top-line bookings could be more volatile Q-to-Q. Maintain Market Perform,” said J. Derrick Wood, equity analyst at Cowen and Company.

“For 3Q, we model -27% license growth, cloud growth at 87%, total revenue growth at -1% and ARR growth at 48%. We estimate normalized product bookings growth (ex-perpetual) in the high-teens for 3Q. For 4Q, we model -29% license growth, cloud growth of 86%, total revenue growth of -6% (Street -2%) and ARR growth of 45%,” Derrick Wood added.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE DECEMBER 2

Ticker Company EPS Forecast
RY Royal Bank Of Canada $1.55
PDCO Patterson Companies $0.38
SNOW Intrawest Resorts -$0.38
CRWD CrowdStrike Holdings Inc. Cl A -$0.15
FIVE Five Below $0.20
SNPS Synopsys $1.56
SMTC Semtech $0.46
PVH PVH $0.18
RH Restoration Hardware $5.31
VRNT Verint Systems $0.60

 

Thursday (December 3)

IN THE SPOTLIGHT: DOLLAR GENERAL, KROGER AND ULTA BEAUTY

Ticker Company EPS Forecast
DG Dollar General $1.98
CM Canadian Imperial Bank Of Commerce USA $1.92
TD Toronto-Dominion Bank $0.97
KR Kroger $0.66
DCI Donaldson $0.45
ULTA Ulta Salon Cosmetics Fragrance $1.44
SAIC Science Applications International $1.53
COO Cooper Companies $3.09
MRVL Marvell Technology $0.25
OLLI Ollies Bargain Outlet Holdings Inc $0.58
CLDR Cloudera Inc. -$0.04
DOCU DocuSign Inc. -$0.23
YEXT Yext Inc. -$0.22
MDLA Medallia, Inc. -$0.18
PD PagerDuty Inc. -$0.20
FIZZ National Beverage $0.93

 

Friday (December 4)

No major earnings scheduled for release.

European Equities: A Week in Review – 27/11/20

The Majors

It was another bullish week for the European majors in the week ending 27th November.

The CAC40 rose by 1.86% to lead the way, with the DAX30 and EuroStoxx 600 gaining 1.51% and 0.93% respectively.

Through the week, market reaction to positive COVID-19 vaccine news delivered support. Pfizer Inc. and BioNTech announced that a vaccine would be available in a matter of days after FDA approval.

The news of an imminent vaccine allowed investors to focus on an economic recovery rather than economic damage caused by the COVID-19 pandemic.

Mid-week, however, disappointing economic data from the U.S and doom and gloom from the ECB did pin the majors back.

At the end of the week, however, the focus returned to the COVID-19 vaccine, which supported a bullish end to the week.

The Stats

It was a busy week on the economic calendar.

At the start of the week, private sector PMI numbers disappointed. While Germany continued to see growth, numbers from France were particularly disappointing.

Weaker numbers led to a fall in the Eurozone’s composite PMI from 50 to 45.1, with service sector numbers doing the damage.

From Germany, 3rd quarter GDP numbers came in ahead of prelim figures, though had a muted impact.

With containment measures in place, a slide in business and consumer sentiment were negatives in the week.

At the end of the week, stats from France wrapped things up.

French consumer spending, inflation, and finalized 3rd quarter GDP numbers were in focus. The stats were all skewed to the positive providing support.

In October, consumer spending rose by 3.7%, reversing most of a 4.4% decline from September, with consumer prices on the rise in November.

Consumer prices rose by 0.2%, with the harmonized index for consumer prices also rising by 0.2%. Both had stalled in October.

For the French economy, the 3rd quarter GDP was revised up from 18.2% to 18.7%.

While the stats were positive, November’s private sector PMIs from earlier in the week supported the ECB’s plans to make a move next month.

From the ECB, November’s financial stability review and monetary policy meeting minutes pegged the majors back on Wednesday and Thursday. Doom and gloom and economic uncertainty ahead weighed on the COVID-19 vaccine optimism.

From the U.S

In the 1st half of the week, prelim private sector PMI numbers for November impressed. The all-important services PMI rose from 56.9 to 57.7, with the manufacturing PMI climbing from 53.4 to 56.7.

Consumer sentiment waned in November, however, with the CB Consumer Confidence Index falling from 101.4 to 96.1. This was to be expected, with the latest spike in new COVID-19 cases and dire labor market conditions.

Mid-week, the weekly jobless claims, core durable goods orders, 3rd quarter GDP, and personal spending figures were in focus.

The stats were mixed. Initial jobless claims rose from 742k to 778k in the week ending 20th November. The latest figure further confirmed that the labor market recovery had stalled.

Core durable goods orders impressed with a 1.3% rise in October, with personal spending rising by 0.5% to come in ahead of forecasts. Spending was down from a 1.2% rise in September, however.

2nd estimate GDP numbers for the 3rd quarter were in line with 1st estimates, which came up short of a forecasted upward revision.

On the monetary policy front, the FOMC meeting minutes had a muted impact. The FED focus on the COVID-19 pandemic was somewhat dated following the latest COVID-19 vaccine updates.

The Market Movers

From the DAX, it was a mixed week for the auto sector. Continental and Daimler saw gains of 6.45% and 1.68% while BMW and Volkswagen fell by 1.08% and by 3.19% respectively.

It was a bullish week for the banking sector, however. Commerzbank rallied by 8.52%, with Deutsche Bank ending the week up by 5.33%.

From the CAC, it was another bullish week for the banks. BNP Paribas and Soc Gen rose by 7.03% and by 7.24% respectively, with Credit Agricole rallying by 10.17%.

The French auto sector found more support. Peugeot ended the week up by 3.09%, with Renault rallying by 10.60%.

COVID-19 vaccine news delivered yet more gains for Air France-KLM, which jumped by 27.78%, while Airbus saw a more modest 1.53% gain.

On the VIX Index

It was back into the red for the VIX, marking a 3rd weekly decline in 4-weeks. In the week ending 27th November, the VIX fell by 12.07%. Reversing a 2.60% gain from the previous week, the VIX ended the week at 20.84.

For the week, the NASDAQ rose by 2.96%, while the Dow and S&P500 seeing gains of 2.21% and 2.27% respectively.

VIX 281120 Weekly Chart

The Week Ahead

It’s another busy week ahead on the Eurozone economic calendar.

November private sector PMIs for Italy and Spain are in focus, along with finalized PMIs for France, Germany, and the Eurozone.

Expect Italy’s PMI and the Eurozone’s composite PMI to draw plenty of interest barring revisions to German and French PMIs.

From Germany, employment, retail sales, and factory orders for October will draw also interest in the week. With German manufacturing sector activity holdings its ground, expect the employment and retail sales figures to have the greatest impact.

Other stats include prelim inflation figures for November, which would likely have a muted impact on the majors.

From the U.S, the market’s preferred ISM private sector PMIs, weekly jobless claims, and nonfarm figures will influence.

Out of China, manufacturing sector PMI numbers due out on Monday and Tuesday will also provide direction.

Away from the economic calendar, COVID-19 news updates and Brexit talks will also need continued monitoring.

Focus Shifts to Speed of Recovery After Autodesk’s Upbeat Q3 Earnings; Target Price $290

Autodesk, an American multinational software corporation, reported better-than-expected earnings in the third quarter, largely driven by a recovery in subscription renewal rates, sending its shares up about 2% in pre-market trading on Friday.

The software company said its total revenue increased 13% to $952 million; GAAP operating margin was 18%, up 5 percentage points; Non-GAAP operating margin was 30%, up 3 percentage points; GAAP diluted EPS was $0.59; Non-GAAP diluted EPS was $1.04, beating market expectations of $0.96.

“Despite another great quarter for Autodesk, the company warned of the lagged effects they expect in fiscal 2022 as a result of the nature of subscription revenue recognition. While we previously had factored in such a lag, the effect is greater than we expected, moderating our fiscal 2022 expectations. Considering the rosy third-quarter results sobered by what could be an anomalous 2022 ahead, we are maintaining our fair value estimate of $198 per share for wide-moat Autodesk,” said Julie Bhusal Sharma, equity analyst at Morningstar.

“Share have remained flat upon news of the quarter, leaving shares trading at $258 per share. As a result, we continue to believe Autodesk is overvalued. Nonetheless, we reiterate our continued belief that Autodesk has built an extremely moaty company which we think will be well protected in the future,” Morningstar’s Sharma.

Autodesk’s shares closed 4.74% higher at $271.24 on Wednesday; the stock is up about 50% so far this year.

Autodesk Stock Price Forecast

Thirteen equity analysts forecast the average price in 12 months at $290.67 with a high forecast of $310.00 and a low forecast of $266.00. The average price target represents a 7.16% increase from the last price of $271.24. From those 13 analysts, 11 rated “Buy”, two rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $266 with a high of $370 under a bull-case scenario and $193 under the worst-case scenario. The firm currently has an “Equal-weight” rating on the software company’s stock.

“An acceleration to +18% cRPO bookings growth likely suggests the worst is behind Autodesk. While our reseller checks and management commentary suggest a more gradual recovery thru FY22, greater confidence in durable 20%+ FCF growth into and through FY23 could drive a re-rating in the stock,” said Keith Weiss, equity analyst at Morgan Stanley

Several other analysts have also upgraded their stock outlook. Autodesk had its price target hoisted by equities research analysts at Credit Suisse Group to $275 from $265. The brokerage currently has an “outperform” rating on the software company’s stock. Mizuho upped their target price to $290 from $280 and gave the company a “buy” rating. Barclays increased their price objective to $295 from $283 and gave the company an “overweight” rating.

Analyst Comments

“The subscription transition (now largely complete) has significantly reduced volatility in earnings, which has driven the multiple higher. Additionally, Autodesk has found multiple avenues to better monetize a sticky customer base. However, long-standing debates on the longer-term sustainable growth, higher macro sensitivity and quality of near-term FCF likely limit further multiple expansion NT, leaving us EW on ADSK,” said Keith Weiss, equity analyst at Morgan Stanley.

“Our long-term model forecasts $9.80 in FCF/share by FY23 and $14.24 by FY26, applying a 25X EV/FCF multiple against this FCF and discounting back at 11.3% drives our $266 price target. Our applied 25X multiple is in line with design software peers,” Weiss added.

Upside and Downside Risks

Risks to Upside: Improved monetization of the customer base and reduction of piracy drives better than expected top-line growth. Secular opportunities within newer markets like Field Construction drives higher Cloud ARR growth – highlighted by Morgan Stanley.

Risks to Downside: High correlation to the global macro environment given a high dependence on construction and manufacturing industries. The increased investment is necessary to enter new markets pressures margins.

Check out FX Empire’s earnings calendar

Salesforce.com in Advanced Talks to Buy Workplace Communication App Slack; Shares Down Over 5%

Salesforce.com Inc, an American cloud-based software company headquartered in San Francisco, is in advance talks to buy workplace messaging application Slack Technologies, according to the Wall Street Journal.

“Strategically, this would be a sound acquisition for Salesforce, as it would add serious direct exposure to collaboration and the remote work movement, large and rapidly growing markets that the company indirectly participates in, and would allow for yet another connection between Salesforce and its customers. We stress that no deal has been formally announced, so obviously, there are no deal metrics to consider,” said Dan Romanoff, equity analyst Morningstar.

“The reports have sent shares of Slack up more than 20% intraday while weighing on Salesforce shares by approximately 3%. With Slack’s market cap at $21 billion now, the deal would likely be the largest ever for Salesforce in terms of dollars. However, it would be smaller than Salesforces’ June 2019 Tableau deal announcement in terms of percentage of market cap, with Slack currently at 9% of Salesforce’s market cap, compared with 13% for the Tableau deal. For now, we are maintaining our fair value estimates of $253 for Salesforce and $20 for Slack,” Morningstar’s Romanoff.

Salesforce.com’s shares closed 5.37% lower at $246.82 on Wednesday. However, the stock is up over 50% so far this year.

Salesforce.com Stock Price Forecast

Sixteen equity analysts forecast the average price in 12 months at $292.20 with a high forecast of $325.00 and a low forecast of $234.00. The average price target represents an 18.39% increase from the last price of $246.82. From those 16 analysts, 14 rated “Buy”, two rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $275 with a high of $332 under a bull-case scenario and $187 under the worst-case scenario. The firm currently has an “Equal-weight” rating on the enterprise cloud computing solutions leader’s stock.

“CRM is down 5% after Wall Street Journal reported Salesforce is in advanced talks to buy Slack. At the current $23B valuations (21x EV/ NTM sales), the deal would be CRM’s largest yet and likely dilutive. While WORK can give CRM a boost in collaboration tools, MSFT competition remains a key risk,” said Keith Weiss, equity analyst at Morgan Stanley.

Several other analysts have also upgraded their stock outlook. Salesforce.com has been given a $275 price target by The Goldman Sachs Group. The brokerage currently has a “buy” rating on the CRM provider’s stock. Bernstein restated a “neutral” rating and set a $234 price target. Barclays boosted their price target to $315 from $264 and gave the stock an “overweight” rating.

Analyst Comments

“While Salesforce.com (CRM) remains one of our best secularly positioned names given enterprise IT spend prioritized towards digital transformation, we see current valuation reflective of long-term share gains within an estimated $175 billion TAM over the next 4 years and >$200 billion longer-term,” said Keith Weiss, equity analyst at Morgan Stanley.

“We see total revenue nearly doubling by FY24, but at CRM’s current scale and market cap, an increasing focus on FCF and earnings is likely necessary for further price appreciation. Our Equal-weight view on CRM shares is based on our $275 PT, which is based on 30X our CY25e FCF per share of $12.07, discounted back at 8.5%,” Weiss added.

Upside and Downside Risks

Risks to Upside: Slack Connect becomes a powerful contributor to net new customer additions. Net dollar retention rate stabilizes as new COVID-19 customers begin to meaningfully expand – highlighted by Morgan Stanley.

Risks to Downside: Competition from Microsoft, which offers a similar product for free to Office 365 users; Difficulty expanding outside of the IT department; Organizations defer to a bundled alternative (MSFT Teams, Google Workspace) in a weaker macro.

European Equities: Economic Data, COVID-19, and Brexit in Focus

Economic Calendar:

Friday, 27th November

French Consumer Spending (MoM) (Oct)

French CPI (MoM) (Nov) Prelim

French GDP (QoQ) (Q3) Final

French HICP (MoM) (Nov) Prelim

Eurozone Consumer Confidence Final

The Majors

It was a bearish day for the European majors on Thursday, though the losses were minor with the U.S markets closed. The EuroStoxx600 fell by 0.12%, with the DAX30 and the CAC40 declining by 0.02% and by 0.08% respectively.

Economic data from Germany and the ECB’s sentiment towards the Eurozone’s economic outlook pegged the majors back.

Mid-week, Germany announced plans to extend containment measures to further curb the spread of the coronavirus. While progress towards a COVID-19 vaccine remains positive for the markets, the economic damage stemming from the 2nd wave of the pandemic will need assessment.

The Stats

It was a quiet day on the Eurozone economic calendar. German consumer sentiment figures were in focus on the day.

In December, the GfK Consumer Climate Index fell from -3.1 to -6.7. Economists had forecast a rise to -2.5.

According to the GfK survey,

  • Sentiment in November took a hit as a result of the partial lockdown.
  • The shutdown of the hotel, restaurant, and events industry, as well as the tourism industry, weighed heavily on sentiment.
  • The economic expectation indicator fell by 7.3 points to -0.2, the lowest figure since -10.4 points in May.
  • Income expectations also took a hit, falling by 5.2 points to 4.6, with the propensity to buy indicator falling by 6.5 points to 30.5.

Monetary Policy

From the ECB, the monetary policy meeting minutes were in focus later in the day.

Some key points from the minutes included:

  • After a strong rebound in the summer, the euro area’s economic recovery was losing momentum.
  • The rise in COVID-19 cases and containment measures would restrict activity levels in high contact sectors.
  • There has been a clear deterioration in the near-term economic outlook as a result.
  • Household consumption is expected to remain subdued.
  • Increased uncertainty about the economic outlook and weaker balance sheets were weighing on business investment.
  • Headline inflation declined further to 0.3% in September, with inflation excluding energy and food falling to an all-time low of 0.2%.
  • The ECB expected headline inflation to remain negative through early 2021, longer than in the September baseline projection.
  • Risks surrounding the euro area growth outlook were clearly tilted to the downside.
  • The ECB held monetary policy unchanged ahead of a new round of macroeconomic projections due out in the coming weeks.
  • In December, it was felt necessary for a recalibration of all of its instruments, as appropriate, to ensure that financing conditions remain favorable to support the economic recovery. It was noted, however, that the ECB should not pre-commit itself to specific policy actions.
  • Finally, members agreed that an ambitious and coordinated fiscal stance remained critical and was the most effective policy to deal with the effects of the pandemic.

From the U.S

There were no material stats with the U.S markets closed for Thanksgiving.

The Market Movers

For the DAX: It was a bearish day for the auto sector on Thursday. Daimler fell by 2.48%, with BMW and Volkswagen declining by 2.08% and by 2.18% respectively. Continental saw a more modest 1.35% loss on the day.

It was also a bearish day for the banks. Deutsche Bank and Commerzbank fell by 1.58% and by 0.38% respectively.

From the CAC, it was a bearish day for the banks. BNP Paribas and Credit Agricole slipped by 0.89% and by 0.47% respectively. Soc Gen fell by 1.21%, however, to lead the way down.

It was also a bearish day for the French auto sector. Peugeot fell by 0.73, with Renault sliding by 2.32%.

Air France-KLM continued to find support, rising by 1.94%, while Airbus SE fell by a further 1.86% following Wednesday’s 2.14% slide.

On the VIX Index

The U.S markets were closed on Thursday for Thanksgiving.

The Day Ahead

It’s a relatively busy day ahead on the Eurozone economic calendar. French consumer spending for October and prelim inflation figures for November are due out. Finalized 3rd quarter GDP numbers are also due out on the day.

We would expect the markets to be relatively nonresponsive to the stats, however. The focus will be on COVID-19 news and Brexit news at the end of the week.

With progress made towards a COVID-19 vaccine, expectations are that containment measures will soon ease. This would support a pickup consumption and economic activity, limiting the impact of backward-looking data. The extent of the economic damage, however, will likely dictate the shape of any economic recovery.

Late in the session, Eurozone consumer confidence figures should also have a muted impact on the majors, barring any major revisions.

From the U.S, there are no material stats, with the U.S markets on a half-day for the Thanksgiving holidays.

Away from the economic calendar, expect COVID-19 news updates and Brexit to also influence.

The Futures

In the futures markets, at the time of writing, the DAX was down by 32 points.

For a look at all of today’s economic events, check out our economic calendar.

Deere Earnings Beat Wall Street Estimates; Forecasts Net Income Between $3.6-4.0 Billion for FY2021

Deere & Company, the world’s largest makers of farm equipment, reported better-than-expected earnings in the fourth quarter as demand for farm machines bounced on higher crop prices and government subsidy payments.

Agricultural, construction and forestry equipment manufacturer reported net income of $757 million for the fourth quarter ended November 1, 2020, or $2.39 per share, beating market expectations of $1.55 per share, up compared with net income of $722 million, or $2.27 per share, same period last year.

“The coronavirus pandemic was undoubtedly a headwind for Deere in fiscal 2020, but the company managed to post resilient operating margins in the fourth quarter, largely due to cost-cutting and solid pricing. We are raising our fair value estimate to $187 per share from $183 due to a more favourable near-term outlook than we previously modelled. In fiscal 2021, we expect Deere’s top-line to grow by roughly 10% compared with 2020,” said Brian Bernard, sector director at Morningstar.

“We expect Deere will benefit from increased investment from its dealer network over our forecast, resulting in 3% average sales growth from 2021-2025,” Bernard added.

For fiscal 2020, net income attributable to Deere & Company was $2.751 billion, or $8.69 per share, compared with $3.253 billion, or $10.15 per share, in 2019. Worldwide net sales and revenues decreased 2%, to $9.731 billion, for the fourth quarter of 2020 and declined 9%, to $35.540 billion, for the full year.

However, uncertainties regarding supply constraints as well as labour force availability due to the ongoing COVID-19 pandemic could negatively affect the company’s results and financial position in the future.

Deere’s shares closed 1.94% lower at $256.43 on Wednesday amid a weak broader market. However, the stock is down about 50% so far this year.

Net income attributable to Deere & Company for fiscal 2021 is forecast to be in a range of $3.6 billion to $4.0 billion. In the year ahead, Deere expects to benefit from improving conditions in the farm economy and stabilization in construction and forestry markets, according to John C. May. That forecast is higher than the Wall Street estimate of $3.3 billion.

Executive Comments

“Higher crop prices and improved fundamentals are leading to renewed optimism in the agricultural sector and improving demand for farm equipment. At the same time, we are looking forward to realizing the benefits of our smart industrial operating strategy, which is designed to accelerate the delivery of solutions that will drive improved profitability and sustainability in our customers’ operations,” said John C. May, chairman and chief executive officer.

Deere Stores Stock Price Forecast

Ten equity analysts forecast the average price in 12 months at $254.70 with a high forecast of $285.00 and a low forecast of $220.00. The average price target represents a -0.67% decrease from the last price of $256.43. From those ten analysts, four rated “Buy”, five rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $335 with a high of $467 under a bull-case scenario and $134 under the worst-case scenario. The firm currently has an “Overweight” rating on agricultural equipment manufacturer’s stock.

Several other analysts have also upgraded their stock outlook. Deere & Company had its price objective raised by Robert W. Baird to $281 from $250. The brokerage currently has an outperform rating on the industrial products company’s stock. Deutsche Bank raised their price target to $244 from $227 and gave the stock a hold rating. BMO Capital Markets increased their price objective to $235 from $150 and gave the stock an outperform rating.

Analyst Comments

“Deere is one of the highest quality, most defensive names within the broader Machinery universe, given a historically lower cyclicality of Ag Equipment and history of strong management execution. FY21 should mark a tangible acceleration in the NA large ag replacement cycle, as commodity tailwinds are complemented by moderating trade headwinds and improving farmer sentiment,” said Courtney Yakavonis, equity analyst at Morgan Stanley.

“With mgmt continuing to execute against its 15% mid-cycle operating margin target, we see continued momentum in Deere’s margin improvement narrative – representing one of the most attractive idiosyncratic margin improvement narratives in the broader Machinery group,” Yakavonis added.

Upside and Downside Risks

Risks to Upside: 1) Recovery in commodity prices and US cash receipts. 2) Better than expected margin improvement efforts. 3) US infrastructure bills pass, driving outsized C&F growth – highlighted by Morgan Stanley.

Risks to Downside: 1) Commodity prices truncate ongoing replacement cycle. 2) Excess Used inventories limit pricing power and demand pull-through. 3) Mis-execution around 15% operating margin target. 4) Supply chain woes and price/material headwinds persist.

Check out FX Empire’s earnings calendar

European Equities: Brexit, Economic Data, and the ECB Minutes in Focus

Economic Calendar:

Thursday, 24th November

GfK German Consumer Climate (Dec)

ECB Publishes Account of Monetary Policy Meeting  

Friday, 25th November

French Consumer Spending (MoM) (Oct)

French CPI (MoM) (Nov) Prelim

French GDP (QoQ) (Q3) Final

French HICP (MoM) (Nov) Prelim

Eurozone Consumer Confidence Final

The Majors

It was a mixed day for the European majors on Wednesday. The CAC40 rose by 0.23%, while the DAX30 and the EuroStoxx600 slipped by 0.02% and by 0.08% respectively.

A planned easing of containment measures provided support to the European majors on the day. While Germany will reportedly allow gatherings for Christmas, France will begin to ease lockdown measures this weekend. The more aggressive plans to ease containment measures in France delivered the upside for the CAC40.

From the U.S, a continued surge in new COVID-19 cases and disappointing economic data weighed on the day, however.

The Stats

It was a quiet day on the Eurozone economic calendar. French jobseeker figures were in focus in the early part of the session.

In October, the total number of jobseekers decreased from 3,606.3k to 3,549.7k. Coupled with progress towards a COVID-19 vaccine, the numbers supported the CAC40.

From the ECB, the Financial Stability Review also failed to move the dial.

Salient points from the review included:

  • The coronavirus pandemic, and its impact on macroeconomic prospects as well as sovereign, corporate, and household balance sheets, continue to dominate the outlook for euro area financial stability.
  • Near-term financial stability risks are contained by massive policy impact. A premature end to schemes could challenge corporates and households, however.
  • Medium-term vulnerabilities have increased with rising debt burdens. Euro area banks, which have shown resilience so far, face a combination of growth asset quality concerns, persistent structural problems, and ongoing pressures on profitability.
  • Macroprudential policy must continue to focus on leaning against undue deleveraging, supporting capital buffer usability, and developing an effective framework for the non-bank financial sector.
  • The euro area economy faces a fragile and uneven recovery, notwithstanding considerable policy support.
  • Downside risks that remain include an adverse outcome of Brexit negotiations. On the plus, the availability of a vaccine in the near future may help the euro area return to pre-pandemic levels of economic activity faster.

From the U.S

It was a particularly busy day on the economic data front. Key stats included the weekly jobless claims, core durable goods, 3rd quarter GDP, and personal spending figures.

In the 3rd quarter, the economy expanded by 33.1%, according to the 2nd estimate figures. This was in line with the 1st estimate while coming up short of a forecasted 33.2%.

Core durable goods orders rose by 1.3% in October, following a 1.5% increase in September. Economists had forecast a 0.5% rise.

Personal spending followed a 1.2% increase in September with a 0.5% rise in October. Economists had forecast a 0.4% rise.

On the employment front, initial jobless claims stood at 778k in the week ending 20th November. This was up from the week prior’s 742k and was another signal that the labor market recovery was stalling.

The FED

From the FED, the FOMC meeting minutes were released after the European close, which was focused heavily on the effects of the COVID-19 pandemic.

Salient points from the Committee Policy Action section included:

  • Economic activity and employment had continued to recover but remained well below their levels at the beginning of the year.
  • Weaker demand and earlier declines in oil prices had been holding down consumer price inflation.
  • The FED was committed to using its full range of tools to support the U.S economy in this challenging time.
  • Members stated that the path of the economy would significantly depend on the course of the virus.
  • Additionally, members agreed that the ongoing health crisis would continue to weigh on economic activity, employment, and inflation in the near-term. This was posing considerable risks to the economic outlook over the medium-term.
  • Members expected to maintain an accommodative stance on monetary policy until inflation moved moderately above 2% and maximum employment was achieved.
  • Over the coming months, it would be appropriate for the FED to increase its holdings of Treasury Securities and agency MBS.
  • The FED would continue to monitor the implications of incoming information for the economic outlook and would be prepared to adjust the stance on monetary policy as appropriate.
  • Considerations would include readings on public health, labor market conditions, inflation pressures, and expectations, and financial and international developments.

The Market Movers

For the DAX: It was a bearish day for the auto sector on Wednesday. Volkswagen slid by 2.43% to lead the way down, with BMW and Daimler seeing losses of 1.69% and 1.24% respectively. Continental ended the day down by a more modest 0.46%.

It was also a bearish day for the banks. Deutsche Bank fell by 1.06%, with Commerzbank sliding by 2.85%.

From the CAC, it was a relatively bullish day for the banks. Credit Agricole and Soc Gen rose by 0.53% and by 0.93% respectively. BNP Paribas eked out a 0.05% gain on the day.

It was also a bullish day for the French auto sector. Peugeot and Renault ended the day with gains of 0.63% and 0.22% respectively.

Air France-KLM followed Tuesday’s 11.07% surge with a 2.1% gain, while Airbus SE slid by 2.14%.

On the VIX Index

It was a 3rd consecutive day in the red for the VIX on Wednesday. Following a 4.50% decline on Tuesday, the VIX fell by 1.80% to end the day at 21.25.

The downside for the VIX came in spite of the Dow and S&P500 seeing red on Wednesday. Disappointing economic data from the U.S left the pair in the red for the day.

On Wednesday, the Dow and S&P500 fell by 0.58% and by 0.16% respectively, while the NASDAQ rose by 0.48%.

VIX 261120 Daily Chart

The Day Ahead

It’s a relatively quiet day ahead on the Eurozone economic calendar. German GfK Consumer Climate figures for December are due out later this morning.

With progress towards a COVID-19 vaccine, however, the DAX30 will likely be resilient to today’s numbers.

From the ECB, the ECB monetary policy meeting minutes will draw interest later in the day, however.

With the ECB assuring more support next month, the markets will be looking for some guidance on what to expect.

From the U.S, there are no material stats, with the U.S markets closed for Thanksgiving.

Away from the economic calendar, expect COVID-19 news updates and Brexit to also influence.

The Futures

In the futures markets, at the time of writing, the DAX was down by 0.50 points.

For a look at all of today’s economic events, check out our economic calendar.

Dell Reports Surprise Revenue Growth in Q3; Target Price $82

Dell Technologies Inc, an American multinational technology company headquartered in Texas, reported a surprise quarterly revenue growth of about 3% to $23.48 billion as demand for remote working devices and desktops and notebook computers increased during the COVID-19 pandemic.

The leader in digital transformation said its total revenue rose 3% to $23.5 billion in the three months ended October 30, beating market expectations of a drop of 4.4% to $21.85 billion. Diluted earnings per share up 64% to $1.08, non-GAAP diluted earnings per share up 16% to $2.03, in line with the Wall Street estimates.

“Dell had record shipments, revenue, and profitability for its computer division, helping make up for weakness experienced within the server and storage business unit. While the pandemic may only be a temporary gusty tailwind for computer demand, we believe Dell’s hybrid-cloud offerings can provide it with a sustainable presence in the IT infrastructure stack for customers. We are maintaining our $65 fair value estimate and see shares as fairly valued,” said Mark Cash, equity analyst at Morningstar.

Dell forecasts revenue to grow 3% to 4% in the fourth quarter, implying a range between $24.18 billion and $24.42 billion, higher than the market expectations of $23.09 billion.

“While explicit guidance was not provided for fiscal 2022, Dell is cautiously optimistic that the demand environment for IT spending is improving. The company also believes it may be on the cusp of achieving investment-grade credit quality, which is up to the agencies and will continue to prioritize paying down its obligations,” Morningstar’s Cash added.

Dell Technologies shares closed 1.37% higher at $70.33 on Tuesday; the stock is up over 35% so far this year.

Executive Comments

“We met unprecedented demand for remote work and learn solutions this quarter while increasing revenue to $23.5 billion. At the same time, we accelerated our as-a-Service strategy and hybrid cloud capabilities at the edge – positioning us to win in these growing markets and making it easy for customers to manage data and workloads across all their operations,” said Jeff Clarke, vice chairman and chief operating officer.

Dell Technologies Stores Stock Price Forecast

Ten equity analysts forecast the average price in 12 months at $72.78 with a high forecast of $82.00 and a low forecast of $60.00. The average price target represents a 3.48% increase from the last price of $70.33. From those ten analysts, seven rated “Buy”, three rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $82 with a high of $116 under a bull-case scenario and $39 under the worst-case scenario. The firm currently has an “Overweight” rating on the technology company’s stock. JP Morgan raised their target price to $80 from $70 and UBS assumed coverage with a buy rating and set the target price at $80.

Several other analysts have also upgraded their stock outlook. Evercore ISI raised their target price to $75 from $70; BofA Global Research upped their price objective to $75 from $70; Deutsche Bank increased their stock price forecast to $72 from $65; RBC raised their target price to $80 from $48; Citigroup upped their price target to $75 from $55.

Analyst Comments

“Dell is a full-stack technology provider managing more data than any other IT provider, which positions the company well to capitalize on the ‘Data Era’. A path to IG rating in the next ~12 months along with accelerating market share gains across ISG and CSG segments warrant a valuation in-line with peers,” said Katy Huberty, equity analyst at Morgan Stanley.

“Dell’s strategic evaluation of its VMware stake (announced 7/15/20) and commitment to go-to-market synergies positions the company to unlock trapped value while retaining operational exposure to a key asset. Our base case valuation assumes a 50% probability of a VMware spin, meanwhile, our bull case valuation assumes a 100% probability,” Huberty added.

Upside and Downside Risks

Risks to Upside: 1) VMware spin and cash dividend accelerate core debt pay down. 2) Faster recession recovery & pent up demand. 3) Stronger share gains across PCs, Servers and Storage – highlighted by Morgan Stanley.

Risks to Downside: 1) Dell and VMW don’t agree on terms for a VMW spin. 2) Longer recession accelerates public cloud migration & legacy server/storage declines. 3) Rate of share gains across servers & storage is short-lived. 4) Slower debt paydown vs guidance.

Check out FX Empire’s earnings calendar

European Equities: Futures Point North ahead of a Data Deluge from the U.S

Economic Calendar:

Wednesday, 23rd November

ECB Financial Stability Review

France Jobseekers Total

Thursday, 24th November

GfK German Consumer Climate (Dec)

ECB Publishes Account of Monetary Policy Meeting  

Friday, 25th November

French Consumer Spending (MoM) (Oct)

French CPI (MoM) (Nov) Prelim

French GDP (QoQ) (Q3) Final

French HICP (MoM) (Nov) Prelim

Eurozone Consumer Confidence Final

The Majors

It was a bullish day for the European majors on Tuesday. The DAX30 and the CAC40 rose by 1.26% and by 1.21% respectively, with the EuroStoxx600 gaining 0.91%.

Positive updates on the COVID-19 vaccine front continued to support the majors on the day. News of Trump agreeing to the transition and of previous FED Chair Yellen joining the new administration also delivered a boost.

On the economic data front, a fall in business sentiment failed to weigh on the DAX30 and broader risk sentiment. Progress towards a COVID-19 vaccine muted any disappointing numbers on the day.

The Stats

It was a relatively busy day on the Eurozone economic calendar. Finalized 3rd quarter GDP and November IFO Business Climate Index figures for Germany were in focus.

In the 3rd quarter, the German economy expanded by 8.5%, partially reversing a 9.7% contraction from the 2nd quarter.

Year-on-year, the economy contracted by 3.9%. In the 2nd quarter, the economy had contracted by 11.3%.

Both were revised upwards from 1st estimate numbers.

On the business sentiment front, the IFO Business Climate Index fell from 92.5 to 90.7 Economists had forecast a decline to 90.1. Weighing on sentiment was a fall in business expectations, which slid from 94.7 to 91.5. The current assessment indicator saw a marginal decline from 90.4 to 90.0 for November.

From the U.S

Consumer confidence figures were in focus. In November, the CB Consumer Confidence Index fell from 101.4 to 96.1. Economists had forecast a decline to 98.0. COVID-19 vaccine news is likely to give consumers a boost, however, which muted the impact of the softer than expected number.

The Market Movers

For the DAX: It was a particularly bullish day for the auto sector on Tuesday. Continental rallied by 5.60% to lead the way, with Volkswagen rising by 3.98%. BMW and Daimler weren’t far behind with gains of 3.31% and 3.19% respectively.

It was a bullish day for the banks. Deutsche Bank rose by 2.98%, with Commerzbank rallying by 4.35%.

From the CAC, it was a particularly bullish day for the banks. BNP Paribas and Credit Agricole rallied by 5.41% and by 5.48% respectively. Soc Gen saw a more modest 4.14% gain on the day.

It was also a bullish day for the French auto sector. Peugeot rose by 2.59%, with Renault rallying by 6.87%.

Vaccine news continued to support airline stocks, with Air France-KLM surging by 11.07%, while Airbus SE saw a more modest 3.73% gain.

On the VIX Index

It was a 2nd consecutive day in the red for the VIX on Tuesday. Following a 4.39% decline on Monday, the VIX fell by 4.50% to end the day at $21.64.

COVID-19 vaccine news and news of Joe Biden being given the green light for an orderly transition weighed on the VIX.

On Tuesday, the Dow rose by 1.54%, with the NASDAQ and S&P500 seeing gains of 1.62% and 1.31% respectively.

VIX 251120 Daily Chart

The Day Ahead

It’s a relatively quiet day ahead on the Eurozone economic calendar. French jobseeker totals are due out later today.

With the markets expecting labor market conditions to deteriorate, however, the numbers should have a muted impact on the majors.

Of greater interest will be the ECB Financial Stability Review that is due out ahead of the French data.

The ECB is expected to make a move next month. With November PMIs disappointing, the Review could give some idea of what to expect from the ECB.

From the U.S, it is a particularly busy day on the economic calendar ahead of the market close on Thursday.

Key stats include the weekly jobless claims, core durable goods, 2nd estimate GDP, and personal spending figures.

Away from the economic calendar, expect COVID-19 news updates, any stimulus talk from Capitol Hill, and Brexit to also influence.

The Futures

In the futures markets, at the time of writing, the Dow was up by 138 points, with the DAX up by 76.5 points.

For a look at all of today’s economic events, check out our economic calendar.

Specialty Retailer Tiffany Earnings Beat Wall Street Estimates on Solid China Demand

Tiffany & Co, luxury jewelry and specialty retailer, recently bought by LVMH, reported better than expected profit in the third quarter, largely driven by strong sales growth in China, Korea and a revival in demand at home.

The specialty retailer said its global net sales fell 1% to of $1.0 billion and comparable sales increased by 3% from the prior year; on a constant-exchange-rate basis, net sales decreased 2% and comparable sales increased 1% from the prior year. Tiffany reported net earnings of $119 million, which was 52% higher than the prior year’s $78 million, and net earnings per diluted share were $0.98 versus $0.65 in the prior year.

Excluding certain costs, net earnings were at $136 million, or $1.11 per diluted share, were 73% higher than the prior year. That was higher than the market expectations of 66 cents.

“We are retaining our $131.50 fair value estimate for Tiffany’s shares as the company reported improving sales and profit dynamics in the third quarter. Our fair value estimate reflects the acquisition premium LVMH agreed to pay for Tiffany. The drop in revenue drop during the third quarter was contained to 1% at constant exchange rates, after the drop of 29% for the quarter ended July and a 45% drop in the first quarter (February to April). This was slightly worse than4% growth for Richemont’s Jewellery Maisons in the recent quarter, but still a solid performance,” said Jelena Sokolova, equity analyst at Morningstar.

“China grew by 70% in the quarter, boosted by Chinese nationals buying more locally as travel restrictions remained in place. The Asia region was the only one with a strong positive performance in the quarter, up 36% on a comparable basis and at constant exchange rates. In Japan and Europe comparable sales were down 5% and 9% respectively, with a solid performance in Europe, given a lack of tourists,” Sokolova added.

At the time of writing, Tiffany shares traded nearly flat at $131.5 on Tuesday. However, the stock is down about 2% so far this year.

Executive Comments

“We believe that the results we released today demonstrate that our strong continuing execution against the strategic priorities we set three years ago positions us to achieve sustainable sales, margin and earnings growth for this legendary brand. Further to continued management focus and investment in that important market, sales in Mainland China continued to grow dramatically in the third quarter, increasing by over 70%, with comparable sales nearly doubling in that period as compared to the prior year,” said Alessandro Bogliolo, Chief Executive Officer.

“In addition, and consistent with our focus, e-commerce sales finished the third quarter up 92% globally as compared to the prior year, performing positively in all markets. As a result, total e-commerce sales represent 12% of total net sales in the year-to-date, as compared to 6% for each of the last three fiscal years,”

Tiffany Stores Stock Price Forecast

Seven equity analysts forecast the average price in 12 months at $127.38 with a high forecast of $135.00 and a low forecast of $120.00. The average price target represents a -3.17% decrease from the last price of $131.55. All those seven analysts rated “Hold”, according to Tipranks.

Morgan Stanley gave the base target price of $131.5 with a high of $131.5 under a bull-case scenario and $87 under the worst-case scenario. The firm currently has an “Equal-weight” rating on the specialty retailer’s stock.

Several other analysts have also upgraded their stock outlook. ValuEngine upgraded Tiffany & Co. to a buy rating from hold. Zacks Investment Research upgraded to a buy rating from hold and set a $129 price target. UBS Group lowered their price target to $123 from $135 and set a neutral rating. Wells Fargo & Company lowered their price target to $120 from $135 and set an equal weight rating.

Analyst Comments

“LVMH and TIF announced LVMH will acquire TIF for $135/share in November 2019, and following potential transaction risk in September 2020 and subsequent legal disputes, both parties agreed to a slightly reduced $131.50/share purchase price in October 2020. Despite the slightly amended acquisition price, the transaction valuation remains in line with LVMH’s precedent transactions, and appears reasonably haircut to reflect COVID-19’s impact on TIF’s cash flows,” said Kimberly Greenberger, equity analyst at Morgan Stanley.

“We continue to see solid strategic rationale, as TIF’s status as a dominant luxury brand, global expansion potential, and pricing power make it a fundamentally attractive business,” Greenberger added.