Mixed Signals Ahead of Microsoft Report

Dow component Microsoft Corp. (MSFT) reports fiscal Q3 2022 results after Tuesday’s closing bell, with analysts looking for a profit of $2.20 per-share on $49.05 billion in revenue. If met, earnings-per-share (EPS) will mark a 13% improvement over the $1.95 reported in the same quarter last year. The stock rose 2.9% in January after beating consensus and raising guidance, but the rally failed, yielding narrow rangebound action that’s still in place ahead of the news.

Growth Stocks Under Pressure

Mr. Softee faces the same issue as other tech giants, i.e. ultra-high valuation in a rising rate environment that rarely favors growth plays. However, Microsoft is clearly ‘best-in-class’, with unbeatable cloud computing growth and broad diversification that evens out revenue peaks and valleys. Even so, it’s just lost a large market due to the Russia – Ukraine war while red flags, like the broad slowdown in video game revenue, raises the prospect of a missed quarter.

Rosenblatt Securities analyst Blair Abernathy posted a bullish commentary ahead of the news, reiterating a ‘Buy’ rating and $349 price target. As he notes, “we believe enterprise IT spending, digital transformation project activity, and shift to the cloud trend remained strong in the March quarter.” On the flip side, Piper Sandler analyst Brent Bracelin had a more cautious take, maintaining an ‘Overweight’ rating while admitting there is “little margin for error” due to increasing global headwinds.

Wall Street and Technical Outlook

Wall Street consensus has been pristine for years, maintaining a ‘Buy’ rating based upon 36 ‘Buy’, 6 ‘Overweight’, and 2 ‘Hold’ recommendations. No analysts are recommending that shareholders close positions. Price targets currently range from a low of $307 to a Street-high $410 while the stock is set to open Tuesday’s session more than $25 below the low target. This dismal placement highlights the failure of analysts to measure the impact of rising rates on investor risk appetites.

Microsoft posted exceptional returns into the current decade and barely skipped a beat during the pandemic, breaking out to a new high in June 2020. It continued to gain ground into November 2021’s all-time high at 349.67 and turned tail, breaking down from a small triple top pattern in January. The stock fell quickly into the 270s and has tested that support level three times into Monday’s close. Mixed signals in longer time frames suggest this range will hold, for now.

Catch up on the latest price action with our new ETF performance breakdown.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Brazil To Begin CBDC Pilot in Second Half of 2022

Key Insights:

  • Brazil’s central bank chief says the CBDC pilot would begin in the second half of 2022.
  • The CBDC will be guaranteed by the Brazilian real, and banks can issue stablecoins upon deposits.
  • Brazil chose nine projects in March, including Aave, Visa, and Microsoft, to develop CBDC.

The Central Bank of Brazil chief said Monday that it would begin the CBDC pilot later this year.

The President of Banco Central do Brasil (BCB), Roberto Campos Neto, announced the move during an event presented by TradersClub (TC) and Arko Advice.

Neto said that Brazil would start piloting its central bank digital currency (CBDC) in the second half of 2022.

CBDC Pilot Roll Out Coming Soon

The central bank gave a hint in November 2021 that it would roll out the CBDC pilot this year. However, earlier reports say that the asset will not be ready for use until 2024.

According to Neto, the sovereign national digital currency would be pegged to the country’s official currency— the Brazilian real (BRL). He also confirmed that the CBDC dubbed “Digital Real” would have a fixed supply, similar to Bitcoin.

“This is a way of creating the digitalization of the currency without creating a rupture in the banks’ balance sheets. This project should have some kind of pilot in the second half of the year.”

Neto stressed that the bank has been exploring and studying the process of CBDC for a long time. He believes that crypto is more prominent as a form of “investment rather than payment” but could change with broader adoption and acceptance.

It is unknown whether the pilot project would make the CBDC available to the public or would restrict the asset to the central bank itself.

Brazil Picks up Pace in the Crypto Marathon

The central bank joined hands with nine partner projects to complete its CBDC goals. Announced in March, the selected partners include Aave, a DeFi lending platform, Visa of Brazil, ConsenSys, and Microsoft.

Brazil has been catching up pace in the crypto space by introducing various “pro-crypto” measures. CBDC development isn’t Brazil’s only crypto-related pursuit. The city of Rio has been at the forefront of the crypto adoption movement.

Rio de Janeiro announced that it would allow its citizens to pay their real-estate taxes in cryptocurrencies. Additionally, the city plans to expand its crypto-friendly measures to stimulate arts, culture, and tourism.

Rio Secretary of Finance and Planning Pedro Paulo stated last month,

“Going further, we will use these crypto assets to stimulate the arts, culture, and tourism, through NFTs, and create a sound and responsible governance policy to evaluate the realization of crypto investments.”

The city announced early this year that it would buy Bitcoin as a store of value for city reserves. The seaside city said it intends to invest 1% of the Treasury in Bitcoin, and the mayor of Rio, Eduardo Paes, has promised to launch its coin dubbed “Crypto Rio.”

The Growing Importance of The Cybersecurity Sector In Light Of The Russian-Ukraine War

Cyberattacks have long been a constant threat to the users of modern technology, and the likelihood of cyberattacks becoming modern warfare is high, as cyber weapons are viable tools that can easily disrupt a nation’s power supply, electrical grid, and food supplies without any military interference. Russia’s full-scale invasion of Ukraine presents the world with the most serious cyber threat it has ever faced.

The war between Russia and Ukraine stalled the global economy’s recovery from the worst of two years of pandemic-related instability. Russia invaded Ukraine more than a week ago, shocking the world and putting financial systems, security alliances, and global trade under pressure.

Uncertainty and growing fear over Russia’s invasion, as well as heightened market anxiety following the announcement from the United States, NATO nations, and allied countries of several economic sanctions on Russia, have impacted financial markets in the United States and other countries.

The Ukrainian crisis has escalated into a major conflict, and global companies, particularly those in sensitive and technology industries, may expect increased risks. Although the sanctions have a direct impact on Europe since it is a significant buyer of Russian energy exports, it would be naive to assume that Russia will not try to create a negative impact on other countries, particularly the United States.

The conflict with Russia and the introduction of broad sanctions will have a significant impact on the global technology industry, particularly smaller companies, which will almost surely be targeted as the war’s “weak spot.”

Despite the form of attack being unknown, cyber threats such as Advanced Persistent Threats (APTs), Malware, Ransomware, DDoS, Brute-force attacks, Zero-Day vulnerabilities, Code flaw vulnerabilities, Privilege escalation, Data anomalies, Network anomalies, and others have been warned about by cybersecurity agencies. Multiple Ukrainian governments and bank websites were claimed to have been damaged by a cyber-attack a week before the war began.

Over 48 hours following the invasion, suspected Russian-sourced cyber-attacks increased by over 800%. Last month, the U.S. Cybersecurity and Infrastructure Security Agency (CISA), the FBI, and the Department of Homeland Security issued a warning of the risk of Russian cyberattacks spilling over onto U.S. networks. The European Central Bank (ECB) also warned European financial institutions of the risk of Russian cyberattacks in the event of sanctions.

As cyber warfare has become an important instrument in the current global military arsenal, every enterprise, regardless of size, must move quickly to defend its information technology infrastructures. In his 2021 speech, President Biden warned that cyber-attacks might lead to a “real shooting war.”

The comments highlight the intensity of cyberattacks in the past few years, which have been connected to sources in China, Russia, Iran, and ISIS-affiliated groups. Cyber threats to nations and infrastructure are on the rise, and businesses are finding themselves on the front lines of this international conflict to not only guard themselves but also the country.

The cybersecurity threat is real

In 2017, the devastating ‘NotPetya’ cyber-attack, which was blamed on Russia, damaged sectors of Ukraine’s infrastructure and took down thousands of systems in many nations. The United States estimated total losses from the NotPetya hack to be north of $10 billion, with A.P. Moeller-Maersk, one of the world’s largest shipping corporations, losing roughly $300 million.

76 ports throughout the world were affected by the attack, including those in the Netherlands, Spain, and Los Angeles, and more than 4,000 servers, 45,000 personal computers, and 2,500 applications had to be immediately reinstalled.

In February 2022, there were 83 data breaches and cyber-attacks, accounting for 5,127,241 breached records, according to IT Governance UK. The department noticed a wave of security incidents in the closing days of February that were either directly or indirectly related to the Ukraine crisis. The discovery of “wiper” malware last week in Ukraine, which permanently deletes data on infected systems, has intensified a rush by businesses to strengthen their defences in case it spreads to other countries.

Microsoft‘s Threat Intelligence Center (MSTIC) also discovered offensive and destructive cyberattacks directed against Ukraine’s digital infrastructure several hours before the military attack began on February 24. In addition, the known criminal ransomware group, which was responsible for a major attack on Ireland’s healthcare system last year, claimed that it was offering the Russian government “full assistance” and would use its resources to “strike back at an enemy’s important infrastructures.”

The growth of Russian-based companies or companies with any kind of Russian connection that has a significant market share within the U.S. or Russian software firms that generate a major share revenue from products and services in the U.S., EMEA, and Asia, can also result in an increase in cyber threats.

Evan Koronewski, a Canadian columnist and political journalist, said, “Russia has significant cyber capabilities and a demonstrated history of using them irresponsibly.” As cyber warfare is intensifying, governments urged critical infrastructure groups such as financial institutions, pipelines, aviation, and electricity companies to prepare for the possibility of attacks from Russia.

With the motto “shields up,” the U.S. Cybersecurity and Infrastructure Security Agency also warned of consequences for the nation’s vital infrastructure, asking U.S. corporations to strengthen their infrastructure security. Companies must strengthen their cybersecurity resilience by updating systems, enabling multifactor authentication, and backing up data, according to the National Cyber Security Centre (NCSC) in the United Kingdom. The Canadian government is also providing cyber support to Ukraine including intelligence sharing, cyber security, and cyber operations.

The cybersecurity sector seems primed for growth

Organizations preparing for potential cyberattacks have recently expressed interest in the sector, and the increased geopolitical interest is expected to put upward pressure on cyber budgets. In 2021, France launched a cyber strategy with a total investment value of €1 billion, including €720 million in public funding, to triple the industry’s turnover from €7.3 billion to €25 billion, double the number of jobs in the sector from 37,000 to 75,000, and create three French cybersecurity unicorns.

The proposed budget of U.S. President Joe Biden includes $9.8 billion for all civilian cybersecurity activities, nearly half of which is devoted to protecting and improving federal IT systems and networks. On March 02, Governor DeSantis of Florida announced $20 million in funding to create and expand cybersecurity and IT training opportunities while also emphasizing that the global shortage of cybersecurity professionals is anticipated to be over 2.7 million, with approximately 22,000 cybersecurity-related jobs vacant in Florida.

According to ReportLinker, the Global Cyber Security Services Market size is expected to reach $178 billion by 2027, rising at a compounded annual growth rate (CAGR) of 9. 8 percent.

Even if the Ukraine conflict subsides, the importance of cyber-security will not diminish. This sector’s growth will be fuelled by the migration to hybrid or fully remote work options. The work shift that began in 2020 in response to public health emergencies is projected to continue in 2022 and coming years. Post-pandemic, many business owners have decided to either stay a remote-first company or transition to a hybrid model, with remote work as part of their corporate culture.

According to a study by Ladders Inc., by the end of 2022, one-fourth of professional roles, largely in the United States, will be remote, up 18% from the end of 2021, implying that more than 20 million jobs will not be returning to the office in the post-pandemic world. Because of the present hybrid work environment, employees will be connecting personal laptops to the corporate network, creating an opening for cybercriminals.

Home offices are less secure than corporate offices that are centralized with more secure firewalls and managed by IT professionals. As a result, focusing on the security problems of distributed workforces is a critical cyber security trend.

Furthermore, the growing Internet of Things (IoT) concept and the increasing number of businesses migrating to the cloud for the ease of scaling, adapting, managing, and automating activities will result in an increase in cybercrime risks. By 2026, there will be 64 billion IoT devices installed around the world, driven primarily by the shift to remote work.

Figure 1: Cyber-attack threat scenarios and potential worst-case impact on businesses worldwide in 2021, by category

Source: Statista

The demand for cybersecurity will only grow as more devices and computers become connected to the Internet. The use of AI and machine learning is going to boost the market growth of cybersecurity providers while increasing the demand for intelligent security software solutions, data protection, and cost-effective data management services.

AI has played a critical role in the development of advanced, automated security systems and autonomous threat detection, as it allows for the analysis of large amounts of data at a much faster rate, which benefits both large companies dealing with massive amounts of data and small and mid-sized businesses with limited resources. The revenue in the Cybersecurity market is projected to reach $146.3 billion in 2022.

Figure 2: Cybersecurity market revenue by segment

Source: Statista

This favourable outlook for the cybersecurity industry will help companies in this sector grow exponentially in the coming years, and it would be reasonable to expect a stellar stock market performance from this sector in the coming years.

Companies to look out for

Wall Street stocks have fallen following Russia’s invasion of Ukraine, but this catastrophic event has boosted cybersecurity stocks as investors have become concerned that the conflict could lead to a significant number of cyber threats. So far in 2022, the cyber-security sector has outperformed the software industry, with analysts expecting increased spending on security-related services as businesses and companies prepare for cyber warfare amid a rush to build cyber defences.

Since February 23, a day before the Russian invasion, the First Trust NASDAQ Cybersecurity ETF has gained 10.6 percent, while the ETFMG Prime Cyber Security ETF has gained 9.5 percent. The demand for cybersecurity is growing as the adoption of digitization and technological advancements necessitate securing critical information, networks, and programmes from digital threats. The majority of cyber-attacks aim to gain access to or harm sensitive data.

Cybercrime has progressed in line with technological advancements, making cyber-security deployment more difficult. Russia’s RT and Sputnik accounts were recently blocked by Alphabet Inc.’s Google (GOOG), Microsoft Corporation (MSFT), and other tech companies, preventing Russian official media from utilising and propagating falsehoods.

Companies like NortonLifeLock Inc. (NLOK) and CrowdStrike (CRWD) are anticipated to witness increased revenue as a result of the ongoing conflict. Hub Cyber Security Israel Ltd (HUB), a computing solutions provider based in Israel, is also reinventing cyber security with quantum-powered confidential computing.

The company aims to protect sensitive commercial and government information operating through three segments including Consulting Software, Training, and Software Testing and Outsourcing. Hub Security recently signed a strategic alliance with Getronics, a global ICT integrator, in December 2021 to provide secure compute protection to banks and organisations in the EU, Latin America, and the Asia Pacific.

Cybersecurity stocks are likely to continue to outperform other software stocks with investors betting the demand for these products will remain at elevated levels as a result of fears that cyber warfare will spread to computers around the world, as well as policymakers’ efforts to strengthen IT systems and networks.

Conclusion

Cybersecurity has long-term benefits, and it’s more important than ever to identify threats, secure resources over different networks, protect data when it’s delivered to partners and customers, be ready to safely recover when things go wrong, and ensure operations remain unaffected in the face of adversity.

Cybersecurity is essential for businesses, especially for critical infrastructure providers, and its importance is growing, with escalating the Russia-Ukraine conflict. For months, intelligence services have warned that Russia’s assault on Ukraine would be backed by cyberattacks, including repeats of infrastructure attacks that made businesses invest more in their infrastructure security.

Ethereum Focused ConsenSys Closes $450M Series D Funding Round

Key Insights:

  • Consensys closed a $450 million Series D funding round led by ParaFi Capital.
  • The deal more than doubles its valuation.
  • Ether price broke above a key bearish trend line with resistance at $2,580.

On Tuesday, ConsenSys, an Ethereum-focused and decentralized protocol software firm with products like MetaMask, Infura, and Truffle, announced the closing of a $450-million Series D funding round co-led by ParaFi Capital.

The new participants were the SoftBank Vision Fund 2, Microsoft, Anthos Capital, Sound Ventures, and C Ventures. Since raising $200 million in a Series C financing in November 2021, its value has doubled.

The cash will be used to continue its remarkable expansion in its core infrastructure offerings. ConsenSys will use a portion of the money raised in this round to equalize the proportion of ETH to US dollar equivalent treasury assets.

The firm is looking for opportunities to earn returns on such assets through DeFi (decentralized finance), protocols, and staking.

ConsenSys To Use the Funds To Develop MetaMask Wallet

The fresh funding validates the company’s impressive growth in core infrastructure offerings.

The funds will also be used to enhance MetaMask, with a major overhaul planned for release later this year. 

The introduction of a plugin extensibility system is also planned to enable access to numerous blockchain protocols and account security methods.

In January, ConsenSys’ MetaMask wallet’s monthly usage surpassed 30 million users for the first time, indicating a 42% increase in MetaMask users in just over four months.

ConsenSys founder and Ethereum co-creator Joe Lubin made the following remarks regarding the new funding round,

“I think of ConsenSys as a broad and deep capabilities machine for the decentralized protocols ecosystem, able to rapidly capitalize at scale on fundamental new constructs that emerge.”

Ether (ETH) Price Analysis

Ethereum’s price started the day positively, reaching a high of $2,733 earlier today. The cryptocurrency was able to establish a foundation above the $2,520 mark.

ETH began a new rally and passed the critical $2,600 and $2,620 resistance levels. There was also a push above the $2,700 mark.

ETH/USD FXEmpire
Ethereum price action

The altcoin king reached as high as $2,790 before correcting. On the other hand, there was a break above a key bearish trend line with resistance at $2,580 on the hourly chart of ETH.

However, the bulls were unable to hold gains above $2,720. The price reached a high of $2,733 before declining sharply.

Mark Zuckerberg Touts Instagram NFTs at Media Event

Key Insights:

  • Instagram will allow NFT minting in the coming months.
  • Zuckerberg hopes Metaverse clothing can be tokenized.
  • A launch date was not mentioned, but it is likely to be “in the near term.”

Speaking at the South by Southwest (SXSW) event in Austin, Texas this week, Meta (FB) co-founder Mark Zuckerberg said they are working to bring NFTs to Instagram in “the near term.”

SXSW is one of the world’s premier events showcasing music, film, and interactive media.

Zuckerberg was tight-lipped about the specifics but did say that he hoped NFT minting would be made available on the social media platform in the coming months.

Instagram’s foray into the NFT scene was initially reported in December when CEO Adam Mosseri revealed that the social media giant was actively exploring the NFT space.

Minting NFTs on Instagram

Zuckerberg participated in a discussion on the Metaverse when he confirmed the speculation that they would be coming to the photo and video-sharing social networking service.

“We talked about stuff like NFTs and the ability, you know, long-term, I would hope that the clothing that your avatar is wearing in the Metaverse can be minted as an NFT, and you can take it between different places.”

He added that there was a “bunch of technical things” to work out, but nonfungibles will be coming to the platform soon.

NFTs provide a way to tokenize real-world things such as art, graphics, photos, and music while providing immutable proof of ownership on the blockchain.

In recent years, the industry has exploded, with daily sales surging into the hundreds of millions of dollars. According to industry tracker, Nonfungible.com, $28 million worth of NFTs were sold on March 15.

Launch Date Not Confirmed

The Meta boss did not confirm any launch dates or specifics but added:

“I’m not ready to announce exactly what that’s gonna be today, but, over the next several months, [people will have] the ability to bring some NFTs in, and hopefully over time be able to mint things within that environment.”

He did mention a greater focus on shopping, though, stating that most of the stuff he wears has probably been purchased through an ad on Instagram or Facebook.

An increasing number of high-profile companies such as Microsoft, Warner, Adidas, Nike, Marvel, and DC Comics have recently made investments and inroads into the NFT industry.

Central Bank of Brazil Lists Nine Partners to Assist With CBDCs

Key Takeaways:

  • Brazil has chosen nine partner projects to help build its CBDC.
  • Partners include companies like Mercado Bitcoin and Aave.
  • Implementation of the partner projects is expected to occur between March and July 2022.

The Central Bank of Brazil recently revealed that it has selected nine projects to help develop its central bank digital currency (CBDC).

Brazilian CBDC on Its Way

As reported by media organizations on March 3, Brazil’s central bank has listed nine proposals from 47 options. On Thursday, the central bank said it received 47 project proposals from Brazil, Germany, the US, Israel, Mexico, Portugal, the UK, and Sweden. The bank further noted that it is looking at CBDC use cases and assessing its technological feasibility.

The selected partners include the Defi lending platform Aave, the Brazil-based cryptocurrency exchange Mercado Bitcoin, and banks like Santander Brasil and Itaú Unibanco.

The list also consists of the Brazilian bank federation Febraban, the German payments company Gieseck+Devrient, and the Brazilian banking service Tecban and its partner Capitual.

The projects would move forward through an innovation lab co-managed by the bank. That said, other firms set to collaborate on the project include VERT (with Digital Asset and Oliver Wyman), a tokenization project for rural financing. The list also includes Visa of Brazil, ConsenSys, and Microsoft. The projects would use a Defi solution for financing small and medium-sized businesses.

As per reports, the bank also said:

“Given a large number of projects of relevance and interest for the development of the real digital initiative, the selection process sought a balance between the diversity of the portfolio of proposals submitted to the lab and the need for detailed monitoring of the chosen projects.”

Pilot Set to Roll out This Year

In November last year, the Central Bank of Brazil announced that it would begin its CBDC pilot in 2022. The emerging reports also suggested that the final product could be complete by 2024.

Reportedly, the partnerships announced today could be implemented between March 28 and July 27 this year. Brazil’s CBDC will be pegged to the country’s official currency— the Brazilian real (BRL).

That said, the economic affairs committee of Brazil had approved a crypto bill on February 23, this year, marking the country’s first step towards regulation.

Apart from the nation’s CBDC efforts, Brazil has become a pioneer of cryptocurrencies. Notably, Rio de Janeiro plans to invest 1% of its treasury in Bitcoin. At the same time, Brazil’s senate has introduced a bill that could recognize crypto markets.

China’s Supreme Court Rules Fund Raising in Crypto Illegal

Key Insights

  • The Chinese Supreme Court will now be able to issue jail sentences against people who raise public funds through crypto 
  • The move adds fuel to the already lit fire in the cryptocurrency and financial markets
  • Jail terms and sentences would vary based on the intensity of the offense and the money involved

Putin’s ‘special military operation’ caused a significant financial upturn across different financial markets across the globe. The crypto market, too, wasn’t spared from the bloodbath as the global cryptocurrency market cap slipped to as low as $1.5 trillion.

To add to the worldwide tension, China’s Supreme Court ruled that virtual asset transactions constitute ‘illegal fundraising.’ Thus, further paving the way for tightening laws around cryptos in the nation.

Adding Fuel in Fire

China’s supreme announced powers to jail those found guilty of raising funds through token sales, expanding its crypto crackdown. Amid primarily sensitive market conditions as Apple, Microsoft, and other Big Tech stocks led the market selloffs, China’s decision to come down firmly on crypto added fuel to the fire.

The effects of Russia’s military operation were seen on major indices, too, as Nasdaq 100 index plunged by more than 20% for the first time in nearly two years.

According to the statement released, China’s highest court amended its interpretation of its Criminal Law to raise public money through ‘virtual currency illegal. The amendment comes into force on March 1, 2022.

The ruling further stated that suspects would be prosecuted under Article 176 of China’s criminal law, which stipulates prison sentences between three and 10 years and fines between $7,900 (RMB 50,000 ) and $79,000 (RMB 500,000) for crimes involving large sums of money.

According to the criminal law, less serious offenses will be prosecuted with under three years of prison and fines between $3,160 (RMB 20,000) to $31,600 (RMB 200,000).

China’s Tussle With Crypto Continues

Interestingly, while China had banned crypto-based fundraising in 2017, the new amendment allows the Chinese courts to issue sentences to criminals officially. That said, jail terms for the said crimes would vary based on the intensity of the offense and the money involved in the crime.

Notably, the People’s Bank of China and several other top-tier agencies had declared that crypto transactions were illegal fundraising back in September 2021. The Thursday court ruling formally designates them as crimes, determining related punishments.

In May 2021, China’s State Council ordered a crackdown on crypto mining and trading that led to the migration of a dozen of crypto mining firms and crypto organizations. The same also led to the fall of the crypto market in May when BTC dropped to as low as $30K, and Ethereum’s price plunged to a low of $1750.

NYSE Files NFT and Metaverse Related Trademark Applications

The flurry of NFT and the Metaverse related activity continue to hit the news wires this week. As activity grows, trading volumes and lucrative fees also rise, drawing the interest of mainstream market places.

The New York Stock Exchange

Located on Wall Street, the NYSE is the world’s largest stock exchange. Founded under a buttonwood tree in 1792, the exchange evolved from a group of just 24 stockbrokers and adopted its current name in 1863. Ownership was controlled by members, capped at 1,366 since 1953 until members became shareholders in December 2005. In anticipation of a change in structure, some seats on the exchange sold for as much as $4m. Significantly, the exchange was an instrumental part of the U.S industrial revolution.

On the regulatory front, it was the 1929 crash that placed the NYSE under the purview of the Securities and Exchange Commission (SEC).

The NYSE and U.S Companies Pave the Way for NFTs and the Metaverse

Ahead of the NYSE application, a number of U.S listed companies have filed similar trademark applications. These include Microsoft (MSFT), Warner Brothers (AT&T), and McDonald’s (MCD). Back in April 2021, even the NYSE minted NFTs in celebration of first trades for Coupang, DoorDash, Roblox, Snowflake, Spotify, and Unity. Each NFT is a short video clip providing details of the first trade. The Spotify NFT is viewable on Crypto.com (CRO).

NYSE Looks to Expand to NFTs and the Metaverse

Late last week, the New York Stock Exchange filed a trademark application that suggests new endeavors in NFTs and the Metaverse.

According to the trademark application, the NYSE aims to provide an online market place for buyers, sellers, and traders of:

  • Downloadable digital goods authenticated by NFTs;
  • Virtual and digital assets, artwork, collectibles, and NFTs;
  • Digital currency, virtual currency, cryptocurrency, digital tokens, crypto tokens, and utility tokens.
  • Downloadable digital art images authenticated by NFTs.

Additionally, the application requests for

  • Developing and designing virtual retail stores, virtual stores, and virtual showrooms.

With regulatory scrutiny on the rise, the New York Stock Exchange’s expansion into NFTs and the Metaverse will be an interesting one to watch.

Best Growth Stocks to Buy Now for February 2022

The best growth stocks in this environment have low debt levels and great business models, which means they can survive rocky times. In other words, they’re the highest quality, “best in breed” names. You see this combination a lot in large-cap stocks, which have been supporting markets for a long time, but smaller stocks can check the boxes too.

See, I believe the process is more important than the stocks. The best outlier stocks (regardless of market cap) have 3 traits: strong fundamentals, great technicals, and a history of Big Money activity in the shares.

Outlier stocks see a lot of Big Money buying. Oftentimes, that can be institutional activity. At MAPsignals, we believe Big Money trading can alert you to the forward fundamental picture of a stock. And we want the odds on our side when looking for the highest quality stocks.

Focusing on quality is paramount when markets are under pressure. Using the MAPsignals database, we’ve filtered for various quality metrics to identify five ideas for potential long-term investment. Three of the names are large caps that can handle storms, while the other two are smaller, riskier stocks with big upsides: GOOGL, ADBE, MSFT, GNRC, & INMD.

Up first is Alphabet, Inc. (GOOGL), Google’s parent company.

Even though great stocks can be volatile, like GOOGL this year, these companies are worthy of attention, especially after blowout earnings and stock split announcements. Check out GOOGL:

  • 3-month performance (-9.7%)
  • Historical Big Money signals

Just to show you what our Big Money signal looks like, have a look at the top buy signals GOOGL has made the past few years in the chart below. Blue bars are showing it was likely being bought by a Big Money player according to MAPsignals.

When you see a lot of them, I call it the stairway to heaven:

Source: www.MAPsignals.com

But, what about fundamentals? As you can see, GOOGL’s sales and earnings have been strong, and its debt-to-equity ratio is low:

  • 1-year sales growth rate (+41.2%)
  • 3-year earnings growth rate (+39.9%)
  • Debt/equity (+11.3%)

Next up is Adobe Inc. (ADBE), the design software giant.

Check out these technicals for ADBE:

  • 1-month performance (-9.0%)
  • Historical Big Money signals

Let’s look long-term. These are the top buy signals Adobe has made since 2016. The Big Money love is obvious:

Source: www.MAPsignals.com

Now let’s dive deeper. As you can see, Adobe has had rock-solid growth and low debt:

  • 3-year sales growth rate (+20.8%)
  • 3-year earnings growth rate (+29.2%)
  • Debt/equity (+31.6%)

The third growth stock idea is Microsoft Corporation (MSFT), the technology giant.

Strong candidates for growth usually have Big Money buying the shares. Microsoft has that. Also, the stock has fallen recently:

  • 3-month performance (-12.4%)
  • Historical Big Money signals

Below are the Big Money signals Microsoft has made since 2010. That’s the JUICE!

Source: www.MAPsignals.com

Now let’s look under the hood. Microsoft’s sales and earnings growth is impressive. And given its strong cloud business, software foothold, and gaming prospects, I expect more growth in the coming years:

  • 3-year sales growth rate (+15.1%)
  • 3-year earnings growth rate (+63.7%)
  • Debt/equity (+57.9%)

Number four on the list is a high-quality smaller company with a lot of promise, Generac Holdings Inc. (GNRC), which makes residential generators and other power generation equipment.

Here are the technicals important to me:

  • 1-month performance (-10.1%)
  • Historical Big Money signals

Below are the Big Money signals for GNRC since 2013:

Source: www.MAPsignals.com

Let’s examine a bit more. Generac has been growing nicely and has manageable debt:

  • 1-year sales growth rate (+12.7%)
  • 3-year earnings growth rate (+30.0%)
  • Debt/equity (+68.3%)

Our last growth candidate is an under-the-radar small cap, InMode Ltd. (INMD), which designs, makes, and sells minimally invasive and non-invasive medical products.

Check out these technicals:

  • 3-month performance (-49.7%)
  • Historical Big Money signals

InMode has lost nearly half its value recently, but believe me, it’s still a high-quality stock. It’s made the MAPsignals Top 20 report many times since it began trading in 2019:

Source: www.MAPsignals.com

Now look under the hood. InMode has been growing sales and earnings at HUGE clips for years, and its debt is almost non-existent:

  • 3-year sales growth rate (+58.4%)
  • 3-year earnings growth rate (+119.7%)
  • Debt/equity (+0.5%)

The Bottom Line

GOOGL, ADBE, MSFT, GNRC, & INMD represent top growth stocks to buy now for February 2022. Strong fundamentals and historical Big Money buy signals make these stocks worthy of extra attention for long-term investors.

To learn more about MAPsignals’ Big Money process please visit: www.mapsignals.com

Disclosure: the author holds long positions in GOOGL, MSFT, and INMD in personal and managed accounts.

Investment Research Disclaimer

https://mapsignals.com/contact/

 

Bitcoin Outperforms Tech Stocks by 12%, But Can It Continue to?

Bitcoin’s numerous comparisons with the traditional market assets have stemmed from the former’s relatively high ROIs through the years, and rightly so.

Recently, a Finbold report presented that as of 13 February 2022, Bitcoin had outperformed the top six tech stocks by an average return on investment (ROI) of 12.24%. 

Bitcoin Leading the ROI Race

Bitcoin is down 38.57% from its all-time high price of $69K made in November 2021, however, the top cryptocurrency seemed to steal the show, still. Data highlighted that BTC significantly outperformed Meta by 46.74%, followed by Tesla at 18.37%. Furthermore, the top coin also outperformed Amazon by 3.78%, followed by Alphabet at 1.84%. 

FXempire, BTC, Crypto, Bitcoin
Source: Finbold

In comparison to the American multinational technology corporation, Microsoft Bitcoin’s ROI was 1.95% higher. Additionally, the king crypto’s ROI almost matched Apple’s surpassing the stock by 0.76%.

That said, at press time BTC’s yearly ROI vs USD was -13.19%, notably Bitcoin’s price drawdown after the fall from ATH has affected Bitcoin’s generally high ROI track.

But that isn’t all, another factor that seemed to worry Bitcoiners was the top coin’s rising correlation with the two major indices—the S&P 500 and Nasdaq. Historically, Bitcoin has had a relatively low correlation to traditional asset classes, however, since last year, the same has been on the rise. 

Rising Correlation, Diminishing Returns

Bitcoin’s trajectory after the September-November recovery last year made the top cryptocurrency one of the leading investment products with returns of about 60%.

While BTC’s ROI over the longer time frame has been higher than tech stocks, the two investment products have moved in tandem over the last year. 

It can be argued that the higher correlation points to the impact of interest rates and inflation concerns that have affected both the stocks and the crypto market. That said, the maturing Bitcoin market and BTC’s developing narrative as an asset class could have also propelled the higher correlation.

Despite the relatively higher ROI, BTC’s ROI vas USD over the last year has diminished. Furthermore, higher volatility and increased correlation with traditional assets could play a spoilsport for the top coin. 

Notably, over the last couple of months, volatility has affected both Bitcoin and traditional assets equally, amid worries of a potential interest hike and tapering measures by the Federal Reserve. 

At press time, Bitcoin traded at $42,047.10 noting 0.87% price losses in 24-hours while the coin was down 1.31% by the week.

Microsoft Cryptic Tweet Gets ShibArmy Excited

A cryptic tweet from Microsoft has sent tongues wagging in the Shiba Community. Yesterday, the tech company tweeted that “There are two types of dogs on Teams meetings.” 

ShibArmy Reacts to Microsoft’s Tweet

This has led many in the Shiba community from interpreting this as a possible partnership between Microsoft and Shiba Inu.

Hundreds of ShibArmy members have reacted to the tweet, calling on the tech giant to partner with SHIB Token. Some even went as far as to talk about the endless possibilities that such a partnership could bring. 

However, there’s no official comment or statement from either party yet. This suggests that whatever Microsoft has planned, it’s keeping it well under wraps.

While Microsoft might not have any partnership with Shiba Inu yet, the company is an early crypto adopter. It started accepting Bitcoin back in 2014.

The company is also planning to enter the metaverse space. Its record-breaking acquisition of Activision Blizzard is one of the steps towards achieving this. 

Shiba Inu is Working on Several Projects

For Shiba Inu, the team is working on expanding beyond just being a meme coin. It’s currently working on its Layer-2 solution called Shibarium, with plans to launch anytime soon. 

The team also has a partnership with Welly’s restaurant based in Naples. Welly’s recently announced its plan to go global by issuing franchise licenses. This will lead to more Shiba Inu-themed restaurants all over the world.

Presently, the Shiba Inu token is trading at $0.00003179 and has seen a 2.1% drop in the last 24 hours. This shows that the rumours linking it to Microsoft haven’t significantly affected its price action.

However, the token has recovered from its drop in value following the crypto market meltdown. The price has risen by more than 53% in the past seven days. The positive price action has been so for the last 30 days with a 14.7% rise in the past month,

Shiba Inu is also currently working on its metaverse project and recently announced Shiba Lands. Users will be able to purchase digital real estate through this project. With several plans in the works, Shiba Inu is looking to become a whole ecosystem.

Apple Stock Jumps after CEO Hints at Metaverse Investment

The Metaverse mania and primarily Facebook’s Meta rebrand were key in pushing the space to mainstream attention in the last year.

Since then institutional interest in the Metaverse space has kept attracting eyeballs and stirring the narrative for Metaverse tokens. The newest institution to jump on the Metaverse razzmatazz is Apple

Apple Embraces the Metaverse

On Thursday after Apple CEO Tim Cook talked about expansion of the company’s augmented reality apps, teasing metaverse ambitions, the same prompted a strong investor response that pushed Apple stocks. 

Apple’s stock price jumped in after-hours trading after Cook during the company’s Q1 2022 earnings call said that he sees considerable potential in the Metaverse space. Notably Apple stock jumped by close to 5% in after-hours trading on January 27. 

Cook further added:

“We’re always exploring new and emerging technologies and I’ve spoken at length about how it’s very interesting to us right now.”

APPL had dropped about 3% to $159.22 during day trading hours, however, post the announcement it saw a close to 8% jump and traded at $167.23 in after-hours trading. 

Furthermore, during the company’s Q1 2022 earnings call Cook also said that metaverse developments are related to the company’s current AR/VR endeavors. Adding to that the Apple CEO said that the company is in the ‘business of innovation’ and has ‘over 14,000 AR apps in the App Store.’

AppleInsider also reported that Cook pointed out that apps designed using ARKit could help users gain access to the Metaverse.

For now, while Meta is tilting towards using the Oculus headset to immerse users into the Metaverse, Apple is placing its bets on AR technology. Notably, an Apple headset was scheduled for release in 2022, but it may be delayed for now due to hardware and software challenges. 

In the last few months, some of the biggest tech companies like Meta and Microsoft, have taken steps to move forward with public plans to develop in the Metaverse space. 

Metaverse Interest Could Trigger Token Growth

After Facebook’s Meta rebrand considerable amount of interest poured into the space which pumped Metaverse tokens to their new ATHs amid rising curiosity about the space.

Decentraland (MANA) a decentralized 3-D virtual reality platform supported by the Ethereum blockchain, saw its native token MANA soar to an all-time high of $4.11 on 31 October amid the Meta rebrand mania. Furthermore, metaverse tokens like Enjin Coin, The Sandbox, and others considerable surge in price too. 

FXempire, Metaverse, Crypto, MANA, SAND, AXS
Source: CoinMarketCap

Likewise, if the tech giant Apple explores a way to enter the Metaverse space in the future the same could aid price rallies for the aforementioned tokens in the future. That said, Apple’s plans to enter the Metaverse space aided Metaverse tokens’ price uptick at press time.

Notably, MANA was up almost 4% over the last day while SAND saw close to 10% price appreciation in the last 24-hours, while trading volume saw a considerable jump too. 

Why Microsoft Stock Is Up By 4% Today

Microsoft Stock Rallies After Strong Quarterly Report

Shares of Microsoft gained strong upside momentum after the company released its quarterly report.

The company reported revenue of $51.7 billion and earnings of $2.48 per share, beating analyst estimates on both earnings and revenue.

Microsoft noted that Azure and other cloud services revenue grew by 46%, suggesting that demand for this important segment remained strong. In the next quarter, the company expects to report revenue of $48.5 billion – $49.3 billion.

The market is happy with the company’s performance and the guidance in the cloud segment, which is expected to be a significant driver of Microsoft’s earnings growth.

The company’s stock has been under pressure together with other tech stocks on valuation concerns, and the earnings report provided the company with an opportunity to strengthen the bull case for the stock.

What’s Next For Microsoft Stock?

Microsoft stock is currently down by roughly 15% from the highs that were reached back in November 2021. Analysts expect that Microsoft will report earnings of $9.22 per share in the current year and $10.55 per share in the next year, so the stock is trading at 28 forward P/E. This is not very cheap, but it’s a normal price tag for the robust growth of one of the world’s leading tech companies.

The near-term direction of Microsoft stock will depend on the market’s sentiment towards leading tech stocks. The appetite for risk will soon be tested by the Fed, which will release its Interest Rate Decision and commentary today. In case the Fed is not too hawkish, leading tech stocks may get additional support.

From a big picture point of view, Microsoft’s fundamental story remains solid, and the only question is whether the market will be ready to pay something like 30 forward P/E for the company’s growth. Most likely, the answer is yes, assuming that Fed does not say anything too disappointing.

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

Best Oversold Growth ETFs to Buy Now

Big Money has been selling a lot recently, causing losses almost market-wide (energy being the only survivor). Fears over inflation and the Federal Reserve raising interest rates, among other worries, have spooked investors. Going to MAPsignals.com, we can scan Big Money ETF buys and sells. Recent big selling, indicated by the deep red lines in the chart below, can help explain the market drawdown:

Source: www.mapsignals.com

When markets move like this, the hysteria can entrap great assets and cause them to be sold off. To identify those “unfairly hit,” long-term investors need to look for ETFs (and their stocks) with great setups.

Remember: ETFs are just baskets of stocks, so we need to look at them in detail. MAPsignals specializes in scoring more than 6,500 stocks daily. If I know which stocks compose the ETFs, I can apply stock scores to the ETFs. Then I can rank them all from strongest to weakest.

Let’s get to the five best oversold growth ETFs to buy now.

#1 iShares Expanded Tech-Software Sector ETF (IGV)

This ETF has been getting hammered since about mid-November of last year. Below are the buys and sells for the fund according to the Big Money process:

IGV holds several solid stocks; one example is its largest holding, Microsoft Corporation (MSFT). Here are the times MSFT was a high-ranking Big Money buy signal since 2016:

#2 First Trust Dow Jones Internet Index Fund (FDN)

FDN holds some of the biggest, most successful stocks out there. These are names we’ve all heard of and know well. Their ability to bounce back is appealing, as is the growth of FDN:

One great stock FDN holds is Amazon.com, Inc. (AMZN). It’s a long-time Big Money favorite with awesome fundamentals. As the multi-year chart below shows, it’s been a monster stock for a while:

Chart, histogram Description automatically generated

#3 First Trust Cloud Computing ETF (SKYY)

Big Money started buying this ETF focused on cloud computing back in 2020, and no wonder because it holds tremendous stocks. Given its quality, I think this could be a great opportunity to get a solid growth ETF at a discount price:

One of the biggest holdings within SKYY is Arista Networks, Inc. (ANET). It’s an outlier stock that Big Money has liked for years:

#4 iShares Russell 2000 Growth ETF (IWO)

While it’s been a weaker-performing ETF of late, IWO still holds stocks with strong growth prospects. IWO has been sold hard, but this could be an opportunity:

One company within this ETF on a pullback that could flourish is Synaptics Incorporated (SYNA). Big Money loved it for years. The multi-year chart shows a lot of blue signals years ago:

#5 ARK Innovation ETF (ARKK)

While it has fallen significantly, ARKK holds innovative companies that could overturn the business world. So, it could be a potential scoop down here.

One great stock in ARKK is Tesla Inc. (TSLA). It’s held up relatively well during the growth pullback and has a phenomenal long-term trend. Big Money has loved TSLA for a long time:

Fair or not, all these ETFs have been hit hard this year due to their growth-oriented focus. But that doesn’t change the fact they hold great stocks that could rise in the future.

The Bottom Line

IGV, FDN, SKYY, IWO, and ARKK are my best oversold growth ETFs to buy now. These picks are poised to do well going forward, in my opinion, largely because they each hold great stocks. They may be experiencing selling pressure, but on quality assets, deep red days often prove to be fire sales over time.

To learn more about MAPsignals’ Big Money process please visit: www.mapsignals.com

Disclosure: the author holds no positions in IGV, FDN, SKYY, IWO, ARKK, MSFT, AMZN, ANET, SYNA, or TSLA in managed or personal accounts at the time of publication.

Investment Research Disclaimer

https://mapsignals.com/contact/

 

Stocks: Was Yesterday’s “V” Rally the Reversal to Buy?

The broad stock market index accelerated its sell-off on Monday, as it reached the new local low of 4,222.62. The market was 596 points or 12.4% below the Jan. 4 record high of 4,818.62. Investors reacted to further Russia-Ukraine tensions. We are also waiting for series of quarterly earnings releases, tomorrow’s FOMC Statement release and Thursday’s important U.S. Advance GDP release. Overall, we had a big increase in volatility yesterday.

Late December – early January consolidation along the 4,800 level was a topping pattern and the index retraced all of its December’s record-breaking advance. This morning it is expected to open 1.6% lower and we may see more short-term volatility. Will it reach yesterday’s low again? Probably not – we’ll likely see a consolidation.

The nearest important resistance level is now at 4,420-4,450, marked by yesterday’s daily high, among others. On the other hand, the support level is at 4,300-4,350. The support level is also at 4,220-4,250. The S&P 500 remains below a steep short-term downward trend line, as we can see on the daily chart (chart by courtesy of http://stockcharts.com):

Microsoft Stocks Ahead of the Earnings Release

Microsoft (MSFT) will release its quarterly earnings today after the session’s close. It’s an important stock, as it weighs 6.0%, just after the Apple’s 6.7%. So, the S&P 500 traders will be watching that release very closely. Microsoft accelerated its sell-off yesterday and it fell to the local low of $276.05. It was 21% below the Nov. 22 record high of $349.67. The stock remains below the downward trend line, but we can see some clear short-term oversold conditions.

Let’s take a look at the Microsoft’s monthly chart. The stock broke below its multi-year hyperbolic run marked by the thick blue curve. The chart is logarithmic, and we can see an enormous rally that took place since 2013. The breakdown may lead to a change in trend or some medium- or long-term consolidation. It looks like a multi-year bull run is over.

Futures Contract Got Close to the 4,200 Level Yesterday

The S&P 500 futures contract accelerated its downtrend yesterday, as it fell close to the 4,200 level. There have been no confirmed positive signals so far, however there are some downtrend exhaustion signals. (chart by courtesy of http://tradingview.com):

Conclusion

The S&P 500 index accelerated its sell-off yesterday and at some point it was 4% lower! But the market rebounded sharply following a “V” pattern reversal and it closed 0.3% higher. This morning it is expected to open 1.6% lower and we may see some further volatility.

The coming quarterly earnings releases (MSFT on Tuesday, TSLA on Wednesday and AAPL on Thursday, among others) remain a bullish factor for stocks, but there is still a lot of uncertainty concerning Russia-Ukraine tensions. Investors are also waiting for tomorrow’s Fed release and Thursday’s U.S. Advance GPD number release. If you want to be in the loop about any future market changes (with instant mail notifications!) sign up for the newsletter here.

Here’s the breakdown:

  • The S&P 500 is expected to open lower again; we may see a consolidation.
  • Opening a speculative long position is justified from the risk/reward perspective.
  • We are expecting a 5% upward correction from the current levels.

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Thank you.

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

Paul Rejczak,
Stock Trading Strategist
Sunshine Profits: Effective Investments through Diligence and Care

* * * * *

The information above represents analyses and opinions of Paul Rejczak & Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. At the time of writing, we base our opinions and analyses on facts and data sourced from respective essays and their authors. Although formed on top of careful research and reputably accurate sources, Paul Rejczak and his associates cannot guarantee the reported data’s accuracy and thoroughness. The opinions published above neither recommend nor offer any securities transaction. Mr. Rejczak is not a Registered Securities Advisor. By reading his reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees, affiliates as well as their family members may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Will Azure Undermine Microsoft Quarter?

Dow component Microsoft Corp. (MSFT) reports fiscal Q2 2022 results after Tuesday’s closing bell, with analysts looking for a profit of $2.32 per-share on $51.0 billion in revenue. If met, earnings-per-share (EPS) will mark a 14% profit increase compared to the same quarter last year. The stock rose 4.2% in October after beating Q1 estimates and lifted to an all-time high at 349.67 just ahead of the Thanksgiving holiday. The stock has given up all gains posted since July 2021 in the last two months.

Slowing Azure Growth?

The Azure cloud computing segment continues to book strong growth but there is disagreement about the most recent quarter, with some market watchers worried that tough comparisons and adverse seasonality will negatively impact results. Meanwhile, the More Personal Computing segment continues to weigh on profits, yielding lower estimates in expectations of weakening PC sales. Note: the company’s recent Activision-Blizzard Inc. (ATVI) acquisition won’t impact the reporting quarter.

Citigroup analyst Tyler Radke just reiterated his ‘Buy’ rating while lowering Microsoft’s price target from $407 to $376. His commentary notes “a modestly positive set-up” for the quarterly report, powered by “strong renewals by enterprise customers, with particular strength in Office 365 and Dynamics”. However, he admits that Azure revenue growth could disappoint, moderating “on a tough comparison and seasonally weaker bookings”.

Wall Street and Technical Outlook

Wall Street consensus stands at a ‘Strong Buy’ rating based upon 30 ‘Buy’, 2 ‘Overweight’, 4 ‘Hold’, 0 ‘Underweight’, and 0 ‘Sell’ recommendations. Price targets currently range from a low of $294 to a Street-high $425 while the stock is set to open Tuesday’s session right on top of the low target. Short-term downside appears limited with this humble configuration but lower-than expected Azure growth could generate enough bearish sentiment to power a selloff.

Microsoft has been an outstanding performer since 2016. It mounted the February 2020 peak at 190.70 in June, entering a strong uptrend that cleared secondary resistance at 233 in January 2021. Price action carved a string of higher highs and higher lows into November’s all-time high, ahead of a decline that relinquished more than 20% into Monday’s intraday low. That session could mark a tradable low but market volatility is too high to make a bullish call.

Catch up on the latest price action with our new ETF performance breakdown.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Key Events This Week: All Eyes on the Fed, Tech Titans Release Earnings

The highlight will be the Federal Reserve meeting on 26 January, sandwiched between key economic data releases and tech earnings:

Monday, January 24

EUR: Eurozone January PMI
GBP: UK January PMI

Tuesday, January 25

AUD: Australia 4Q inflation and December business confidence
IMF updates World Economic Outlook
Microsoft earnings

Wednesday, January 26

US crude: EIA crude oil inventory report
USD: Fed rate decision
CAD: Bank of Canada rate decision
Tesla earnings
Intel earnings

Thursday, January 27

CNH: China December industrial profits
USD: US weekly initial jobless claims and 4Q GDP
Apple earnings

Friday, January 28

NZD: New Zealand January consumer confidence
EUR: Eurozone January economic confidence, Germany 4Q GDP
USD: US December PCE deflator, personal income and spending, and consumer sentiment

The FOMC is expected to signal a rate hike in March and the immediate end of its bond buying programme, brought forward from the current mid-March end point.

Markets are now pricing in four Fed hikes of 25bp this year with a good chance that we will see more than two rate hikes in the first half of 2022, or alternatively a 50bp hike. Most notably, bond yields have moved higher with stable to lower inflation expectations, resulting in a sharp move higher in real rates. This has been the key driver of souring risk appetite and will determine market direction going forward, in what is becoming quite an aggressive path for Fed action.

Stock markets brace for tech sector results

Company earnings will be in focus with many investors hoping the releases stop the strong selloff we have seen in tech stocks and the broader US equity markets.

Anxiety over rising US interest rates has seen investors flee global stocks this year with the tech-heavy Nasdaq suffering its biggest slide since the pandemic rocked markets in March 2020.

NASDAQ 100 daily chart

The broader blue-chip S&P 500 index shed 5.7% last week with more than two-thirds of the companies within the index now in a technical correction – or down at least 10% from their record high – including 149 stocks that have fallen by 20% or more. Some of the world’s biggest companies report in the next fortnight, including Microsoft after the US market closes on Tuesday, Tesla and Intel mid-week and Apple after US markets close Thursday, while Amazon and Facebook release their latest earnings next week.

The pressure is on many of last-year’s high-flying tech companies to refuel investor confidence and stop the contagion from the tech drawdown.

That said, the S&P500 is still higher now than it was in September, even though equities remain richly valued. An alignment of financial markets and conditions with the Fed’s more hawkish rhetoric and outlook has been on the cards for some time.

S&P 500 daily chart

Bank of Canada set to pull the rate hike trigger

Hours before the Fed meeting on Wednesday, policy makers at the BoC are likely to raise interest rates 25bps, with at least three more rate hikes predicted by markets this year. Inflation is at 30-year highs and the economy is at record employment, while Covid restrictions are set to ease at the end of the month.

With some analysts predicting as many as five rate rises in 2022, the Canadian dollar should continue to outperform, especially against those currencies whose central banks are in no rush to tighten monetary policy, like the ECB and BoJ.

USD/CAD daily chart

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Monstrous Earnings Ahead: IBM, Microsoft, Intel, Tesla, Apple, Visa in Focus, Along With The Fed

Investors will focus on Q4 earnings for stocks that are economically sensitive, which should show better profits than technology stocks. Increasing Treasury yields and risk aversion could also hit the stock market hard next week, making the big tech earnings that much more critical. In addition, investors will closely monitor the latest news on the rapidly spread Omicron coronavirus variant in order to see how it impacts earnings in 2022. The following is a list of earnings slated for release January 24-28, along with a few previews.

Earnings Calendar For The Week Of January 24

Monday (January 24)

IN THE SPOTLIGHT: IBM

The Armonk, New York-based technology company, International Business Machines, is expected to report its fourth-quarter earnings of $3.39 per share, which represents year-over-year growth of over 60% from $2.07 per share seen in the same period a year ago.

The world’s largest computer firm’s revenue would decline over 21% to $1.96 billion from $20.37 billion a year earlier. It is worth noting that the technology company has beaten earnings in most of the quarters in the last two years, at least.

International Business Machines (IBM) 4Q earnings will be focused on standalone model mechanics and whether Software revenue can re-accelerate while Consulting demand sustains. However, we believe the setup becomes more attractive in 2H21. We update our estimates to reflect IBM standalone post-KD spin,” noted Katy Huberty, equity analyst at Morgan Stanley.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 24

TICKER COMPANY EPS FORECAST
BRO Brown & Brown $0.38
BOH Bank of Hawaii $1.39
BMRC Bank of Marin Bancorp $0.57
CR Crane $1.12
HAL Halliburton $0.34
HMST HomeStreet $1.3
IBM International Business Machines $3.39
PETS PetMed Express $0.3
SMBK SmartFinancial $0.48
STLD Steel Dynamics $5.66
TRST Trustco Bank $0.74
ZION Zions Bancorp $1.33

 

Tuesday (January 25)

IN THE SPOTLIGHT: MICROSOFT

The Redmond, Washington-based global technology giant, Microsoft, is expected to post its fiscal second-quarter earnings of $2.28 per share, which represents year-over-year growth of over 12% from $2.03 per share seen in the same period a year ago.

The world’s largest software maker would post revenue growth of nearly 17% to around $50.3 billion. It is worth noting that with a track record of always beating earnings per share estimates in the last five years, Microsoft is one of the best FAANG stocks in terms of earnings surprises.

“We model Azure growth of 45% cc & see 2-3% of upside, translating to steady growth vs. 48% last qtr. We see potential for strong M365 demand ahead of price hikes, as well as continued execution from LNKD, PowerApps & Dynamics ERP. Although tougher PC/Server dynamics, we expect strengthening trends for C22. Expect Mar Q guide slightly above Street,” noted Derrick Wood, equity analyst at Cowen.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 25

TICKER COMPANY EPS FORECAST
MMM 3M $2.07
AGYS Agilysys $0.13
AXP American Express $1.75
ADM Archer Daniels Midland $1.19
BXP Boston Properties $1.51
CNI Canadian National Railway $1.25
COF Capital One Financial $5.15
FFIV F5 $1.97
GE General Electric $0.84
JNJ Johnson & Johnson $2.12
LMT Lockheed Martin $8.04
LOGI Logitech International $1.23
NAVI Navient $0.81
NEE NextEra Energy $0.41
VZ Verizon Communications $1.28
WSBC WesBanco $0.67

 

Wednesday (January 26)

IN THE SPOTLIGHT: FOMC MEETING CONCLUDES, INTEL, TESLA

Tuesday and Wednesday will mark the first meeting of the Fed’s policymaking arm in 2022. At around 7:30 pm GMT on Wednesday, Jerome Powell will conduct a press conference. This is expected to be the biggest market event since investors expect more details about the central bank’s plan to raise interest rates.

INTEL: The California-based multinational corporation and technology company is expected to report its fourth-quarter earnings of $0.9 per share, which represents a year-over-year decline of about 40% from $1.52 per share seen in the same period a year ago. The company’s revenue would fall nearly 8% to $18.39 billion.

Intel remains controversial. Long-term skepticism remains and share losses will continue until products ramp on the Intel 4 node (old 7nm), but with a new CFO, improving PC and server market outlooks, cash inflows from the US Govt, Mobileye on the horizon, and a February analyst day now reconfirmed, we are cautiously optimistic sentiment can continue to gradually improve. Still LOTS to prove,” noted Matthew D. Ramsay, equity analyst at Cowen.

TESLA: The California-based electric vehicle and clean energy company is expected to report its fourth-quarter earnings of $2.31 per share, which represents year-over-year growth of 180% from $0.80 per share seen in the same period a year ago.

“Q4 results on 26 Jan are critical to validate (or not) the Q3 profit dynamics that could see Tesla 1) carve out meaningful share from legacy OEMs busy protecting their own share by ramping up BEVs and 2) claim a disproportionate share of the industry profit pool. We raise 2021-23 EBIT and FCF 10%, mostly on higher volume,” noted Philippe Houchois, equity analyst at Jefferies.

The high-performance electric vehicle manufacturer would post revenue growth of over 50% to $16.65 billion. The electric vehicle producer has beaten earnings estimates only twice in the last four quarters.

Tesla 4Q deliveries were 20% above our forecast, annualizing to over 1.2mm units, which is already above our prior FY22 forecast. We raise our forecasts and target to $1,300 on this ‘opening act’ and look for more in FY22,” noted Adam Jonas, equity analyst at Morgan Stanley.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 26

TICKER COMPANY EPS FORECAST
ABT Abbott Laboratories $1.16
ANTM Anthem $5.11
AZPN Aspen Technology $1.41
T AT&T $0.76
KMB Kimberly-Clark $1.29
LRCX Lam Research $8.46
RJF Raymond James Financial $1.77
STX Seagate Technology $2.21
NOW ServiceNow $0.22
SIMO Silicon Motion Technology $1.56
SLG SL Green Realty $1.56
URI United Rentals $6.97
VRTX Vertex Pharmaceuticals $2.92
WHR Whirlpool $5.84

 

Thursday (January 27)

IN THE SPOTLIGHT: APPLE, VISA

APPLE: The consumer electronics giant would post its fiscal first-quarter earnings of $1.88 per share, which represents year-over-year growth of nearly 12% from $1.68 per share seen in the same period a year ago.

The iPhone manufacturer would post revenue growth of 6% to $118.13 billion. It is worth noting that with a track record of always beating earnings per share estimates in the recent five years, Apple is the best FAANG stock in terms of earnings surprises.

Apple is expected to report 1QFY22 earnings after market on Thursday, January 27th and host a call with investors at 5:00 PM ET. In our view, the recent strength in shares is a reflection of investors’ willingness to reward Apple for entering new markets, including electronic vehicles (EV) and the metaverse (with an augmented reality/virtual reality product). Now, we look for comments from management on its future product roadmap to justify the increase in share price,” noted Tom Forte, Senior Research Analyst at D.A. DAVIDSON.

“We are reiterating our BUY rating for Apple (AAPL) and putting our price target of $175 under review ahead of the company reporting 1QFY22 earnings.”

VISA: The world’s largest card payment company is expected to report its fiscal firth-quarter earnings of $1.70 per share, which represents a year-over-year decline of about 20% from $1.42 per share seen in the same period a year ago.

The global technology payment company would post revenue growth of nearly 19% to $6.8 billion. It is worth noting that the company has beaten earnings in most of the quarters in the last two years, at least.

Visa (V) is one of our preferred stocks, as it is a key beneficiary of resilient global consumer spend growth, the ongoing shift from cash to electronic payments, and broadening merchant acceptance. Global Personal Consumption Expenditure and secular growth drivers should support low double-digit revenue growth in the near-to-medium term,” noted James Faucette, equity analyst at Morgan Stanley.

“While Covid-19 headwinds are likely to persist, we see upside opportunity from the faster-than-expected recovery of travel. Continued investment in longer-term initiatives (faster payments, P2P, B2B) and partnerships continue to increase its TAM and offer an opportunity for compounding double-digit earnings growth for the foreseeable future.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 27

TICKER COMPANY EPS FORECAST
AOS A.O. Smith $0.77
ALK Alaska Air Group $0.21
BX Blackstone $1.3
CNX CNX Resources $0.5
CMCSA Comcast $0.73
DOW Dow $2.16
EMN Eastman Chemical $1.88
HCA HCA Healthcare $4.57
IP International Paper $1.02
JBLU JetBlue Airways $-0.39
MA Mastercard $2.2
MCD McDonald’s $2.32
LUV Southwest Airlines $-0.39
X U.S. Steel $5.12
V Visa $1.7

 

Friday (January 28)

TICKER COMPANY EPS FORECAST
ALV Autoliv $1.18
BAH Booz Allen Hamilton $0.97
CAT Caterpillar $2.23
CHD Church & Dwight $0.59
CL Colgate-Palmolive $0.79
RDY Dr. Reddy’s Laboratories $0.64
GNTX Gentex $0.33

 

Microsoft’s Stock Is Well Worth Watching Ahead of Q2 Earnings

The Redmond, Washington-based global technology giant, Microsoft, is expected to post its fiscal second-quarter earnings of $2.28 per share, which represents year-over-year growth of over 12% from $2.03 per share seen in the same period a year ago.

The world’s largest software maker would post revenue growth of nearly 17% to around $50.3 billion. It is worth noting that with a track record of always beating earnings per share estimates in the last five years, Microsoft is one of the best FAANG stocks in terms of earnings surprises.

“We believe F2Q expectations are achievable driven by Microsoft’s (MSFT) WFA bundle although comps get progressively tougher in FY22; reflected in 14% yoy cons CY22 rev growth vs 20% in CY21. Investor focus will likely be on cumulative $88B in M&A & whether MSFT is buying rev growth or views these as opportunistic TAM expanders. Key items to watch are Azure (high 40s reported bogey) & comm booking. MSFT is down 10% ytd but trades at 31x CY22 EPS vs large-cap peer median 45x,” noted Brent Thill, equity analyst at Jefferies.

Microsoft stock traded 011% higher at $301.73 on Friday. The stock slumped nearly 11% so far this year after surging over 50% in 2021.

Analyst Comments

“While M&A news may garner near-term attention, another solid print highlighting the breadth of its strong secular positioning, durable margins, high teens total return profile and reasonable multiple likely reminds investors why Microsoft (MSFT) is the asset to own in unsettled markets,” noted Keith Weiss, equity analyst at Morgan Stanley.

“Strong positioning for public cloud adoption, large distribution channels and installed customer base, and improving margins support a path beyond $2T mkt cap. Durable double-digit NT rev growth is supported by Azure (winning in public cloud), data center (share gains and positive pricing trends), O365 (base growth and ARPU uplift) and LinkedIn. GM % improvement, continued opex discipline and strong capital return lead to durable teens total return profile. At ~26.6x CY23e GAAP EPS, MSFT trades at a discount to the large-cap peers, unwarranted due to MSFT’s premium return profile. Multiple expansion will likely come from more comfort in the durability of commercial business gross profit dollars.”

Microsoft Stock Price Forecast

Twenty-eight analysts who offered stock ratings for Microsoft in the last three months forecast the average price in 12 months of $372.92 with a high forecast of $425.00 and a low forecast of $320.00.

The average price target represents a 24.21% change from the last price of $300.24. From those 28 analysts, 22 rated “Buy”, four rated “Hold” while one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $364 with a high of $479 under a bull scenario and $253 under the worst-case scenario. The investment bank gave an “Overweight” rating on the global technology giant’s stock.

Several other analysts have also updated their stock outlook. Citigroup cut the price target to $376 from $407. CFRA raised the target price by $14 to $402. Mizuho cut the target price to $350 from $360. BMO lifted the target price to $360 from $355.

Technical analysis also suggests it is good to hold for now as 100-day Moving Average and 100-200-day MACD Oscillator flashing mixed signals.

Check out FX Empire’s earnings calendar

S&P 500 – Should We Buy the Dip?

The broad stock market index lost 1.10% on Thursday following its Wednesday’s decline of around 1%. The S&P 500 index fell below the 4,500 level and it was the lowest since mid-October. Investors reacted to quarterly earnings releases and further Russia-Ukraine tensions. Late December – early January consolidation along the 4,800 level was a topping pattern and the index retraced all of its December’s record-breaking advance. This morning the market is expected to open 0.4% lower and it will most likely extend the downtrend.

The nearest important resistance level is now at around 4,500-4,525, marked by the recent support level. On the other hand, the support level is now at around 4,450. The S&P 500 broke below an over month-long upward trend line this week, as we can see on the daily chart (chart by courtesy of http://stockcharts.com):

Futures Contract Broke Below its Previous Lows

Let’s take a look at the hourly chart of the S&P 500 futures contract. The market broke below its previous local lows along the 4,520 level. There was a chance that entering a long position would be justified here, but any short-term bullish scenario seems invalidated now. On the other hand, it may be too late to enter a short position right now, because of some clear technical oversold conditions. (chart by courtesy of http://tradingview.com):

Conclusion

The S&P 500 index is expected to open 0.4% lower this morning, so it will likely extend a short-term downtrend. We may see another intraday rebound, but there have been no confirmed positive signals so far. Yesterday we’ve seen a convincing rally, but it failed and the market sold off to new lows. The coming quarterly earnings releases (next week we’ll have MSFT, AAPL, TSLA among others) remain a bullish factor for stocks, but there is still a lot of uncertainty concerning Russia-Ukraine tensions.

Here’s the breakdown:

  • The S&P 500 reached yet another new low yesterday and it was the lowest since mid-October.
  • Stocks will most likely bounce at some point, but any rally may be short-lived.
  • In our opinion no positions are currently justified from the risk/reward point of view.

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Thank you.

Paul Rejczak,
Stock Trading Strategist
Sunshine Profits: Effective Investments through Diligence and Care

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The information above represents analyses and opinions of Paul Rejczak & Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. At the time of writing, we base our opinions and analyses on facts and data sourced from respective essays and their authors. Although formed on top of careful research and reputably accurate sources, Paul Rejczak and his associates cannot guarantee the reported data’s accuracy and thoroughness. The opinions published above neither recommend nor offer any securities transaction. Mr. Rejczak is not a Registered Securities Advisor. By reading his reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees, affiliates as well as their family members may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.