عقود الفروقات هي أدوات مالية معقدة، وتنطوي على مخاطر عالية لخسارة الأموال بشكل سريع بسبب الرافعة المالية. 70% من حسابات مستثمري التجزئة يخسرون الأموال عند تداول عقود الفروقات مع هذا المزود. عليك الأخذ بعين الاعتبار ما إذا كنت تفهم طريقة عمل عقود الفروقات، وما إذا كان بوسعك تحمل المخاطر العالية لخسارة أموالك.
Vaccination shares: GSK vs Moderna
Moderna and GlaxoSmithKline represent two interesting paths pharmaceutical stocks have taken this year. We examine the GSK share price and Moderna shares to see which has come out on top – and what the future holds for both.
GSK shares & Moderna
Examining the GSK price
GlaxoSmithKline’s fortunes in 2021 have been up and down. While competitors like Pfizer and AstraZeneca have enjoyed major share price growth across the pandemic, GSK stock hasn’t been so reactive.
At the time of writing, the GSK share price is around £14.35. Before the pandemic, GlaxoSmithKline shares had peaked at £18.42 in January 2020. Since then, it’s been a tale of ups and downs. Shares fell to a new low in February 2021, but as we can see from the current price, progress has been made since then.
News came in June from CEO Emma Walmsley that GlaxoSmithKline is currently in the progress of separating its core pharmaceuticals business from its consumer goods side. New GSK, taking over pharmaceuticals, and the spin off, which will be listed on the London Stock Exchange, will remain linked with New GSK taking a 13.6% share of the new entity.
The whole plan could put GSK share price back on a growth footing. After the separation, New GSK is aiming at annual sales growth of over 5% between 2021-2026. Underlying profit growth is targeted at 10% in the same period, hoping to generate £33bn in sales by 2031.
That’s the mid-to-long term outlook. One thing that may put off investors is the GSK’s updated dividend payment scheme. The company has stated it will pay shareholders a dividend of 55p per share in its new form – down from the 80p investors used to enjoy.
Shares rose 2.8% after the demerger plans were announced at the tail end of June. The plan is ambitious, but some analysts believe this may not be enough to support GSK share prices in the long run. Questions over CEO Walmsley and her senior team are being raised as, under Walmsley’s tenure, GSK has struggled to take off compared with some of its competitors.
What about Moderna shares?
Moderna shares, on the other hand, are having a much better 2021 than GSK’s.
Share prices have risen 125% across the first six months of the year. Moderna’s mRNA-1273 vaccine is one of the most widely distributed inoculants used to combat the Covid-19 virus.
Moderna is nearing an $100bn market capitalisation. Its product revenue has grown from virtually nil at the start of the pandemic to around $1.7bn – purely driven by vaccine sales. Given the company is just 11 years old, Moderna can be considered one of the biggest beneficiaries of the Covid-19 pandemic.
Moderna shares are currently trading at $246.66 – up 4.8% in daily trading as of 15th July 2021.
While this is all amazing in the short term, what about the longer view? Moderna product-generated revenues were small to low at the beginning of the pandemic. While it was able to create a product in huge demand quickly and effectively, there are concerns that revenue growth, flagged at a $21bn top end for 2021, could not be sustainable.
However, Moderna’s executives are hopeful its technologies and research can help provide solutions for other diseases in the future. The company is looking to leverage its Covid expertise into other respiratory disease vaccines such as Respiratory syncytial virus (RSV) and cytomegalovirus (CMV).
Betting on other pandemics, however, is possibly not a smart bet. While Moderna is pushing ahead with trials on some vaccinations that could prove effective should we see other wide-scale breakouts, a lot of its experimental products are still in the early stage.
Comparing Moderna shares & GSK
What can we glean from the above?
A couple of things. Moderna’s ability to capitalise quickly on the Covid-19 situation, helped by emergency authorisation of its vaccine, has led to huge yearly and 6-month gains. The company is close to reaching a new all-time high market cap and will probably remain so.
It’s during the transition out of the pandemic and if Moderna can swing into sustainable revenue generation from its product side to bolster regular operations that will be really telling here.
Switching to GSK, it has come out with a fairly radical plan of action. It has set itself goals that, while ambitious, are fairly achievable for the company’s size and scope. Crucially, in the long term, GlaxoSmithKline doesn’t seem as tied in with the pandemic and its progression as Moderna.
If you are looking into trading or investing in Moderna or GSK stock, then be aware of the current market conditions, share price, and other variables. Only invest if you can potentially afford to take any losses as trading and investing both present risk of capital loss.
Is the ASOS share price on the rise?
Online fashion retailer ASOS is a familiar name to pretty much all UK fashionistas – but what about traders and investors? Does the ASOS share price make it one of the season’s hottest items?
Is ASOS one of the top fashion stocks?
ASOS is an online fashion retailer. Featuring a mixture of own-brand and branded items, ASOS has been a major player in the e-commerce world across the last decade. It appears its growth story is nowhere near finished.
Over the past five years, revenues have grown at a compound rate of 23.4%. Further growth is expected, particularly in the Covid economy which has so far favoured online retailers.
FY 2021 revenue growth is forecast at 23% according to city analysts. 2022 revenues will not expand at quite the same rate but are still estimated to rise by a comfortable 18%.
ASOS holds impressive business fundamentals backed up by a strong customer base and desirable products.
For instance, in its H1 2020/2021 results posted in April of this year, the company moved from a net debt of £163m to a cash surplus of £92m.
Such strong fundamentals are important to gauge when picking stocks and will also have an affect on the ASOS share price.
A look at the ASOS share price
At the start of the year, the ASOS share price had risen 23%. According to the one-year change indicator in the Markets.com Marketsx platform, ASOS shares are up 59% as of July 8th, 2021.
There is a couple of factors at play that are helping ASOS into one of if not the hottest fashion stocks on the FTSE Alternative Instrument Market (AIM). The AIM lists UK firms considered outside of the large caps – although ASOS’ current market capitalisation stands at a cool $5.3bn.
Firstly, there is the overall sales growth. According to its interim results reported in April, ASOS showed a 24% increase in UK sales, and a further 15% in international sales growth. The fashion retailer has also built up a considerable customer base. Its interim financial report states 24.9m customers shop at ASOS regularly – an increase of 1.5m against 2019/2020’s numbers.
Because it is only an e-commerce site, the pandemic has been greatly beneficial to ASOS, and thus to its share price. First half profits soared 275%. For many shoppers, they had no choice but to shop online. Many high street rivals, including Topshop/Topman owners the Arcadia Group and Gap have all taken massive hits too. Bricks and mortar operations have shut, which plays into ASOS’ hands.
Speaking of Arcadia Group, the ASOS share price was boosted in February when the online retailer acquired the Topshop, Topman, Miss Selfridge, and HIIT brands from Peter Green’s collapsed retail empire.
The acquisition is expected to drive “double-digit return on capital” for ASOS once fully integrated and promoted. ASOS spent £275m to acquire the brands in February 2021.
But any further ASOS share news must be tempered by re-opening trends. The UK high street is enjoying a post-lockdown renaissance. ASOS has no physical presence, although it may be able to turn Topshop’s flagship Oxford Street store in London into its first physical location.
Even son, ASOS is confident it can keep its momentum growing and believes online fast fashion retail will remain consumers’ preferred choice. But the re-opening of British high streets suggests competition can return to pre-pandemic levels.
This may still be unlikely, as physical retail was declining prior to the Covid-19-induced shuttering of shops in 2020, but it is worth watching if you’re planning on investing or trading ASOS.
There is also a caveat to share price performance. While the ASOS share price was up at the start of the year, and is up significantly year-on-year, the price has fallen away from its 2021 highs as of July.
Shares are currently trading at around £49.15 – below the February high of £59.18.
Part of the reason for this is what we slightly touched on above: economic uncertainty. While ASOS has been a pandemic growth success, we don’t know what the future might hold. Its core consumer base – fashion-loving 20-somethings – are facing tough times economically, even as lockdown eases.
ASOS has subsequently kept its forecasts for the full 2021 year in line with normal expectations, rather than another bumper first half.
There is also competition in the online space. BooHoo, also an AIM fashion stock, has seen its share price rise 3.25% month-on-month between June and July 2021. According to its Q1 2021 results, BooHoo has grown its customer base by 18% to 18 million – closing the gap on ASOS. Revenues also increased by 41%.
Risks of trading ASOS & fashion stocks
Research into fashion stock fundamentals, as well as the more technical aspects of stock price action, is very important. Read our guide on how to pick stocks for more information.
When considering the ASOS share price, also consider that investing and trading carries inherent risk of capital loss. Only invest or trade if you can afford any potential losses. Always do your due diligence before investing or trading.
Robinhood files for IPO: Just PFOF
- Regulatory scrutiny may present risk to business model
- Mega growth in active clients
- Crypto a growing part of the business
US online trading company Robinhood has finally filed for its long-awaited public listing in what’s sure to be one of the most closely watched IPOs of recent years. The company, which enjoyed rapid growth last year but has been at the centre of a storm over trading outages and restricting access to trades earlier this year when capital limits were reached, is seeking a valuation of around $40bn. The stock is set to list on the Nasdaq under the ticker HOOD.
The S1 prospectus dropped just a day after FINRA issued Robinhood with a $70m for “widespread and significant harm” to its customers. The investigation remains ongoing and Robinhood expects more penalties. There are numerous other cases, including class action suits relating to Robinhood restricting access to trading on a number of very volatile stocks at the height of the GameStop frenzy. As I commented on back in January when all this was taking place, I didn’t think Robinhood wanted to stop trading – it was just a question of regulatory capital requirements and Value at Risk models that left the clearing house demanding more cash up front.
Since having to secure $3.5bn from investors PDQ, Robinhood has strengthened the balance sheet considerably and now has about $4.8bn in cash or cash equivalents, plus it has a new $2.2bn revolving credit facility for financing margin trading in the event of another volatile episode.
“Our vision is for Robinhood to become the most trusted, lowest-cost, and most culturally relevant money app worldwide,” the company said in the SEC filing document. Part of this has involved offering questionable products (like stock options) to relatively unsophisticated traders. (Although the GameStop frenzy proved the Reddit crowd could be very sophisticated indeed, ganging together to concentrate out of the money calls where dealers couldn’t hedge on stocks with lots of short interest, the concentrated buying of the physical to squeeze shorts and create a gamma squeeze on the dealers). The tragic suicide of one customer
Robinhood has ridden – and in many ways helped fuel – a boom in retail trading in recent years, particularly since the pandemic hit. Retail investing now comprises roughly 20% of US equity trading volume, doubling in the decade from 2010 to 2020. “Yet, we believe there is still significant room for growth,” the company asserts. Meme stocks are a big part of the business and I think this presents a risk, albeit Robinhood itself could benefit from becoming the next big meme stock itself – a lot depends on how much reputational damage it suffered this year and how much good faith it retains among the retail crowd. The fact that it is reserving as much as 35% of the shares at IPO for its retail clients could be a master stroke.
For the year ended December 31, 2020, total revenue grew 245% to $959 million, up from $278 million in 2019. But it’s still not exactly profitable, recording net income of $7 million, compared to a net loss of $107 million in the prior year. Adjusted EBITDA rose to $155 million, compared to negative $74 million.
Fuelled by the meme stock craze, the first three months of 2021 saw total revenue grow 309% to $522 million, up from $128 million in the same period of 2020. However it recorded a net loss of $1.4bn in the quarter due to a $1.5 billion fair value adjustment to its convertible notes and warrant liability.
Incredibly, Robinhood has doubled the number of users since the start of the year, with 31m accounts. Of these, 18m are funded, representing a 151% increase from last year. Fundraising in 2020 indicated a market valuation of around $11bn, but the rapid growth in active accounts and revenues this year has seemingly propelled the company to seek a much larger valuation.
Payment for order flow
Robinhood came under fire in the first quarter of 2021 as meme stock craze exploded. Among the many charges levelled against the platform was the practice of paying for order flow. Robinhood sells market makers like Citadel client trades, who will execute at or better than the current market price. This is what enables commission free trading but has come under scrutiny as could represent a conflict of interest. Nevertheless, Robinhood made 75% of its revenues last year – some $720m – from selling client trades. Of this, about half comes from Citadel Securities (34% of total revenues).
This is perhaps the biggest risk for investors: the SEC has already fined Robinhood $65m for misleading customers over PFOF, as it is called. And chief Gary Gensler has ordered a review of the practice, as well as the ‘gamification’ of investing through apps and incentives. This would tend to put Robinhood in the crosshairs of the SEC just as the former seeks to go public and the latter is likely to get stricter. Timing appears problematic for Robinhood.
If the US regulator were to act on PFOF it could hit the very business model that Robinhood has relied on to secure growth so far. “Because a majority of our revenue is transaction-based, including payment for order flow … reduced spreads in securities pricing, reduced levels of trading activity generally, changes in our business relationships with market makers and any new regulation of, or any bans on, PFOF and similar practices may result in reduced profitability, increased compliance costs and expanded potential for negative publicity,” the filing states (my emphasis).
Crypto trading: blame Elon
Robinhood specialises in stocks and stock options, but cryptocurrency trading is a growing part of the business. From just 4% last year, crypto accounted for 17% of revenues in Q1 2021.
Robinhood notes that 34% of its cryptocurrency transaction-based revenue was attributable to transactions in Dogecoin, as compared to 4% for the three months ended December 31, 2020. For a token set up as a joke, that’s a staggering amount – roughly 5% of all Robinhood revenues in the first quarter of the year.
“A substantial portion of the recent growth in our net revenues earned from cryptocurrency transactions is attributable to transactions in Dogecoin. If demand for transactions in Dogecoin declines and is not replaced by new demand for other cryptocurrencies available for trading on our platform, our business, financial condition and results of operations could be adversely affected,” the S1 states.
I tend to think there is always another Dogecoin round the corner. Robinhood currently supports 7 cryptocurrencies on its platform. That compares with 25 at Markets.com.
Regulatory headwinds appear strong, particularly regarding PFOF, which should see the shares trade at a discount. Crypto is also clearly an area that presents a high level of regulatory uncertainty as well as unreliable flow and trading activity. Reputational risk is also a big factor post-GameStop and in a highly commoditized industry, it’s hard to see where it can really deliver much in the way of margin growth. The business is still not really profitable and the valuation of $40bn+ looks well above peers, even assuming growth continues apace this year.
UK investing: Sectors to watch
While the pandemic has by no means ended, there is hope that the UK economy will reopen fully in the second half of 2021. With that in mind, here are some sectors that have been eyeballed as holding great growth potential from a UK investing standpoint.
Sectors to watch for UK investing strategies
The ins and outs of international travel are still being straightened out, but the airline industry and its related infrastructure and suppliers may be about to take to the skies. Of course, this all depends on not just internal policy, but the willingness of other countries to accept tourists, but with travel restrictions loosening, there is high potential in airline stocks.
In terms of what this means for investors, we can use EasyJet as a case study. The orange discount airline has, like many, had a turbulent time in 2020 and into 2021. However, the stock has provided absolute returns of 22.6% over the past year. The Marketsx in-platform trader trends tool has EasyJet on a 96.9% bullish rating.
Stocks like Rolls-Royce, one of the airline industry’s key engine suppliers, are also stocks to watch. It currently holds a 99.3% bullish rating on the Marketsx trends tool.
Over $122bn was invested into green energy projects in the UK between 2010-2019. More funding is on the way. The world’s largest offshore windfarm is currently under construction in Dogger Bank off the east coast. Some £12bn has been pledged by the UK government for future renewable projects, but PricewaterhouseCoopers forecasts the government’s 10 point “green energy revolution” plan may cost upwards of £400bn to implement.
A lot of capital is being poured into clean power generation. Wind is a priority, but so is solar energy, tidal and other forms of renewable energy.
As well as owning stocks in the likes of SSE, which has committed to triple its green energy output by 2030, investors may look into various funds centred on renewables. For example, the NextEnergy Solar Fund offers a dividend yield of 6.5%, while the Gore Street Energy Fund offers a yield of around 6.7%.
Oil & gas
While the future is green, don’t be too quick to write off oil & gas stocks when looking into UK investing and trading strategies. Oil prices are currently trending at some of their highest levels for years. Demand for oil is forecast to soar in the second half of 2021 as the world navigates out of the Covid-19 pandemic.
With that in mind, oil & gas still has potential for investors. Take BP as an example. Goldman Sachs recently identified the stock as one a potential reopening winner with post-pandemic upsides of a huge 45%.
Many supermajors are also looking to futureproof themselves with business investment in renewables and attempting to clean up their act. Look at BP. It has 23 GW of clean power projects in the pipeline and has committed to net-zero carbon emissions by 2050, so may morph over time from oil & gas stock to renewable stock. Certainly, one to watch with interest.
Hospitality includes live entertainment, pubs, clubs, restaurants and so on. Naturally, due to lockdown, the sector has suffered over the course of the pandemic. But there is light at the end of the tunnel. Pubs and restaurants are now offering seated service inside in addition to al fresco options. There have even been some pilot schemes for live events, not least the 10,000-strong Download music festival.
With the reopening of the UK economy, although the lifting of full restrictions has been pushed back to July, hospitality stocks could be poised to boom.
For instance, the Wetherspoons share price gained 45% in the run up to April’s relaxation of dining restrictions. Other pub stocks, like Martson’s have made even greater strides. In Marston’s case, it had made 106% in the six months up to May 2021.
With the Delta variant spreading, however, the UK may be forced back into lockdowns. So, while hospitality stocks have potential, proceed with caution, although that goes without saying when pursuing UK investing.
Risks of UK investing
Whether pursuing business investment, retail trading, or other activities, UK investing comes with risks inherent to all forms of financial speculation. All such activity comes with the risk of capital loss. Always be sure to do your research prior to committing any money and only do so if you are comfortable taking any potential losses.
Didi Global: When is the IPO and where can I trade it?
Didi Global, China’s rival to Uber, is looking to raise $4 billion in what could be one of the biggest IPOs in years. Books were covered on the first day of the build, meaning the company comes with an estimated valuation of $62 billion to $67 billion. That would place its market capitalisation some way behind Uber’s $95bn but well ahead of rival Lyft’s roughly $19bn valuation.
The company is offering 288 million American depositary receipts (ADRs) at $13 to $14 each, with a midpoint implying it would raise $3.9bn, making the second-biggest IPO this year behind Coupang Inc. Pricing is due to be finalised Tuesday/Wednesday this week with the stock beginning trade on Jun 30th. The company will list on the New York Stock Exchange under the ticker symbol DIDI.
Didi boasted in SEC filing that it operates in 16 countries and revenues of $6.4 billion for the three months ended March 31, 2021, with net income turning positive at $800m. Rather like Uber and Lyft it has not been profitable before then, racking up $1bn+ losses in each of the last three years.
Uber sold its China business to Didi in 2017 for $7bn and retains a 12% stake in the company after the IPO. The largest shareholder is SoftBank Group, which owns 21.5% ahead of the IPO.
What do analysts say are the best investment bank stocks?
Banks have enjoyed a rollicking recovery since the depths of the pandemic in March 2020. The XLF financials ETF has more than doubled since it struck a multi-year low over a year ago. A strong monetary and fiscal response from governments and central banks and a strong trading performance sparked the first phase of the recovery, whilst powerful economic growth and rising bond yields has helped the sector continue to gain.
But among the major financial stocks, there are some top picks in the investment banking arena from JPMorgan that are worth a look. “The Investment Banking (IB) industry, in our view, is in a much better shape today compared to where it has ever been,” analysts from the bank said in a note. IBs operate a lower risk model as they become less capital-intensive, revenue streams are more sustainable, barriers to entry remain high and they have an increasing share of so-called ‘captive’ wealth management.
Here are JPM’s top investment bank picks and what other analysts say
In the global investment banking space, Goldman Sachs takes the top spot. “We see GS as a contender given its agile culture, which allows it to move as a Fintech, and its strong IT platform to retain its strong market share growth momentum from Tier II players,” the JPM team says.
Goldman also gets a buy rating on our Analyst Recommendations tool.
In Europe, Barclays is the number one pick, with the analysts describing the UK-listed stock as “a relative winner with its transaction bank providing an advantage along with its diversified IB revenue mix”. UBS comes in second and Deutsche Bank also gets a nod. The German bank also received an upgrade from Kepler Capital.
East meets West: top banks say these are stocks to watch
Goldman Sachs and Morgan Stanley have produced fresh reports on stocks they think are about to do well.
Goldman’s focus is mainly on European stocks with an international reach. Morgan Stanley, on the other hand, has been appraising stocks that could highly benefit from stronger US-China ties.
Top banks’ stocks to watch
Goldman eyeballs these equities
CNBC reports Goldman has identified a number of stocks as poised to outperform their pre-pandemic earnings while Europe’s post-Covid reopening continues.
All of the large caps listed on Goldman’s Reopening Beneficiaries list have been rated as buys by the bank’s analysts with major potential upsides over their 12-month share targets.
Goldman has been tracking various sectors set to soar once economies are fully reopened, using Europe as a guinea pig with the bank pouring over hotel booking, flight, and restaurant booking data, as well as Covid-19 hospitalisation levels and vaccination uptake.
Starting with oil, three supermajors have been identified as buys, all with significant upsides. Currently, oil prices are soaring, with key benchmark contracts trading for levels not seen for at least two years. As such, the below stocks are at the top of Goldman’s buy list, beating their 12-month price targets:
- BP – 45% estimated upside
- ENI – 27% estimated upside
- Total – 23% estimated upside
The aviation industry is clear for take-off too. Again, one major stock could be looking to fly high with a 45% topside. As we’ve touched on in the past, stocks related to international and domestic air travel may be big winners once the world opens up. That includes airlines themselves but also associated infrastructure like engine suppliers and airports.
Goldman Sachs identifies the following equities with high potential:
- Rolls Royce – 45% estimated upside
- Flughafen Zurich – 27% estimated upside
- EasyJet – 18% estimated upside
Looking to retail, Goldman has several firms in different subsectors on its watchlist. According to the bank’s analysis, Swiss conglomerate Richemont, whose portfolio covers Cartier, Montblanc, and a host of jewellery and watchmakers, has high potential, but it may be outstripped by retail brands:
- Swatch Group – 19% estimated upside
- Adidas – 16% estimated upside
- Richemont – 13% estimated upside
All of the above rests on the successful reopening of global and European economies, however. Vaccine rollout has been largely successful in key economies like the US, European Union and the UK. Covid variants, however, have led to some delays in the full lifting of restrictions. We’re not out of the woods yet, but the tree density is dropping off. Specks of light are seeping through the undergrowth.
Morgan Stanley looks eastward for stock picks
While Goldman has an internationally-facing European focus, Morgan Stanley heads to China to look at some equities that could be potential buys.
Morgan’s analysis, however, is all based on closer US-China relations. We all remember the trade wars of President Trump’s tenure. Morgan is betting on closer relations between Beijing and the Biden White House during the 46th US president’s tenure.
In one of the bank’s China-related portfolio, it has listed 30 Chinese firms that are dependent on the US market for solid chunks of their revenue.
Many have strong track records too, in terms of share performance. Morgan Stanley analysts reported earlier in June that the equities outperform the MSCI China index by an average of 206 points when things are good between the US and China.
It should be pointed out at this juncture that Joe Biden has maintained a tough stance on China. However, instead of pursuing sanctions, his administration is tacking a different tack by working more closely with US allies in the region, rather than instigating a tit-for-tat trade spat.
That said, if the frost relations thaw, then Morgan Stanley suggests the below could be poised to make big gains.
Universal Scientific International (USI)
USI is a subsidiary of US-listed, Taiwan-based ASE Technology. The firm manufactures electrical components used by other firms and recently inked a substantial deal with a European manufacturing giant in 2020.
Total profit grew to 351.5 million yuan ($54.9 million) in the first three months of this year, up 65% from 212.5 million yuan in the first quarter of 2020.
70% of USI’s revenue is sourced from the US market.
Futu is, along with Robinhood, part of the new breed of millennial-aimed investment apps. It is one of the two main apps young Chinese investors use to trade stocks listed overseas.
The company has ambitious growth plans, identifying Singapore and the US as its next target regions for userbase growth. Futu is also applying for licenses that would allow it to offer cryptocurrency trading in those two nations – something of big interest to the current crop of younger traders.
Morgan Stanley estimates 62% of Futu’s revenues comes from the US already, but it expects a large portion of 700,000 new customers to come from there too.
WuXi’s business is the research, development and manufacturing of services for the pharmaceutical, biotech and medical device industries. It is currently focussing on beefing up its gene therapy and drug development industries.
55% of WuXi’s revenues, Morgan Stanley says, is generated by its business in the US.
All of the above stocks have been listed as overweight by Morgan Stanley, indicating they expect the stocks to perform better in the future. This does all depend on how US-China relations develop under Biden.
Of course, remember all investing and trading comes with the risk of capital loss. Do your due diligence and research before committing any money and only invest or trade if you are comfortable taking any potential losses.
Wise IPO: everything you need to know
Fintech firm Wise is planning its initial public offering. No date has been set yet, but with the original May deadline now passed, observers think the IPO is coming very soon. Here’s what to watch out for.
Wise IPO: what to watch
What is Wise?
Previously known as TransferWise, Wise is an online money transferring service. The company was founded in London by Estonians Taavet Hinkirus and Kristo Käärmann in 2010 and has since expanded considerably.
Wise allows customers to send money abroad at real mid-market exchange rates, as opposed to higher bank-transfer rates, plus low fees.
As an example, Wise charges less than $8 in fees for sending $1,000 to Europe. Going via a bank would cost $26. This is done on a peer-to-peer basis.
February’s rebranding away from TransferWise lets us see where Wise wants to go. It is no longer just for money transfers.
Wise now offers a multi-currency account, designed to make it easier for people to relocate and let them pay with local currencies when ordering goods online, alongside a debit card service.
How is Wise performing financially?
As of 2020, Wise’s revenues were totalling $300m annually, with a 70% year-on-year growth rate. It boasts over 10 million customers worldwide and employs around 2,200 workers in 11 countries.
Ahead of the IPO, Wise is valued at an estimated $5bn – but the float may take its valuation as high as £9bn according to some of the more over-optimistic forecasts.
Looking at financials, Wise appears very healthy.
Its pre-tax profit for the financial year ended March 2020 to £20m from £10m in 2019. As mentioned above, revenues also jumped 70% between 2019 and 2020.
Profitability within the tough challenger bank and money transfer spheres suggest Wise’s upper management is pursuing a successful strategy. Impressive y-o-y revenue growth and an expanding customer base reinforce this.
Because Wise straddles two worlds, challenger banks and money transferring, it has a variety of competitors. In terms of money transfers, Western Union, MoneyGram, WorldRemit, Remitly, and PayPal are Wise’s chief rivals. In the alternate challenger banking space, Wise’s competitors include Monzo, Revolut and Starling Bank.
Against its rivals, Wise has been praised for the transparency of its fees structure. Offering true mid-market exchange rates is also a big selling point for the brand, reflected in the growing volume of transactions handled by the firm. Wise processed £67bn worth of customer payments in 2020 – nearly double 2019’s £36bn.
Where will Wise be listed?
Wise is likely to go public via a direct listing on the London Stock Exchange. This is something of a coup for the LSE, as it could imply incoming rules changes, such as the introduction of a dual-class share structure and lower float requirements, are enticing more tech firms to list in London.
The London-listing Wise is pursuing will be one of the largest European tech listings since Spotify went public in 2018.
A direct listing means Wise will be offering shares via the London Stock Exchange without the need for any intermediaries. There are several potential reasons why Wise is pursuing such a strategy. Wise could be looking to avoid share dilution, for example, or might be wanting to avoid lock-up periods. It may be a money-saving move too, as direct listings tend to be cheaper than IPOs.
Commentators believe Wise could be pursuing a dual-class share strategy – something that has proven unpopular on other London tech listings, such as Deliveroo. Will it prove the same for Wise?
When will the Wise IPO go live?
As touched on earlier, the original May 2021 IPO deadline has passed. Even so, the market is expecting Wise to go live on the London Stock Exchange very soon.
Trading carries risk of capital loss. Only start trading if you are comfortable taking any potential losses.
Thematic investing: investing in technology
Our next instalment in the thematic investment series looks at which tech stocks to buy. Investing in technology can pay dividends – but it can also prove tricky too.
Thematic investing: tech stocks
Investing in technology: what you need to know
Technology is an all-encompassing term. It covers an enormous range of sectors. Everything from your smartphone to electric vehicles to productivity, and more besides sits within the technology sphere. Even companies like Disney, with its Disney+ streaming service, or Amazon with its Amazon Web Services offer, are considered tech stocks.
The best tech stocks to buy will be entirely up to you and what your investing or trading goals are. Be aware that, because of the sector’s diversity, there are many different types of company with differing compositions, market caps and characteristics within the technology space.
Some might be multi-billion-dollar behemoths like the FAANG stocks (Facebook, Apple, Amazon, Netflix and Google). Others might be market disruptors like Uber or Spotify. Some firms will be well established with vast cash reserves. Others might up-and-comers might be burning through capital but with rapid share appreciation to match.
That said, tech stocks are amongst some of the best performers. Indices dedicated solely to technology and related firms offer some considerable potential returns for instance. The Nasdaq 100, listing the top 100 US tech stocks for example, is up over 43.8% as of May 25th 2021. The Dow Jones US Technology Index is also showing similar numbers, up 47.92% year-to-date.
Remember the risks when searching for tech stocks to buy
Technology is all about innovation. It never stands still. Because of that, even the best tech stocks can be a risky investment. Huge capital investment is needed to ensure a company’s solutions and products remain at the head of the pack. A company can disappear completely if a rival develops a product or service consumers and the market prefer.
Some tech firms’ valuations have been questioned too. We mentioned Uber earlier. That’s a company that has admitted it may never be profitable. Is that worth the risk for investors?
Then there are general economic patterns to consider. When times are tough, luxury items like brand new smartphones may not sell well. Thus, the manufacturer’s share price may fall, along with companies supply components and raw materials needed to build a new smartphone.
When times are good, and consumers have more cash to spend, there might be higher demand.
Inflation woes play a part too. As recently as late May 2021, we’ve seen tech-sell offs generated by fears that inflation may bite into tech manufacturers and providers’ profitability. This was triggered by a spike in bond yields and general uncertainty around the economic picture caused by the global Covid-19 pandemic.
All investing and trading is risky. Investing in technology can prove doubly so. Only invest or trade if you are comfortable with any potential losses. Do your research and understand how to pick stocks before committing any capital.
What are some of the best tech stocks to watch?
Again, what is the best stock will depend entirely on your individual budget and circumstances. Consider a wide range of different sectors and industries covered under the tech umbrella.
Diversification, i.e., getting exposure to several different industries, stocks, and sectors, is used by investors to mitigate risk. If one stock performs badly, the theory goes, the other stocks or assets in your portfolio can help protect against that by performing well.
With that in mind, the below may be tech stocks to buy if they meet your individual criteria.
AMD makes semiconductors and micro-components used to build everyday essentials like phones, laptops and so on. Its main product line covers graphics cards, microprocessors and motherboard chipsets.
As of May 25th, 2021, AMD stock was up just over 47%. It also looks like it has a bright future. Latest quarterly earnings saw AMD revenues expand 93% year-on-year, reaching $3.45 billion. Operating income for the quarter was $662 million while net income was $555 million – a 243% increase from the prior year.
We mentioned earlier how technology companies must invest heavily to keep up with the pace of innovation. In the case of AMD, its investments are a form of protection. Due to intense demand, chipset raw materials are at a premium right now. To avoid shortages, AMD recently inked a $1.6bn wafer supply deal with GlobalFoundaries.
GlobalFoundaries will be supply necessary components between 2022 and 2024 under the terms of the deal. AMD is now developing second and third generation Epyc server chips – a product of high interest to AMD customers.
According to the Analyst Recommendations tool on the Marketsx trading platform AMD is rated as a buy by 52.9% of analysts.
Apple is one of the most recognisable brands on the planet. As tech companies go, they don’t come bigger than the Californian company. Its clean-cut branding combined with a reputation for innovation and useability make its products hot property. Because of that, Apple often makes an appearance amongst the best tech stocks.
Apple’s latest round of earnings, coming in April 2021, saw the company enjoy yet another blowout quarter. Companywide sales were up 54% y-o-y. iPhone sales shot up 65.5% during this period, spurred on by the launch of the new iPhone 12. Mac and iPad sales outperformed even Apple’s flagship product, notching impressive 70.1% and 79% annualised growth.
In monetary terms, total revenues were up 53.7%, totalling $89.58 billion. Earnings per share (EPS) beat expectations at $1.40 vs. the estimated $0.99.
Apple stock is up across the year. It was trading for around $80 in May 2020. Flash forward to May 2021, and AAPL is exchanging hands for about $126. Analyst forecast is bullish with analyst consensus heavily weighted towards buy.
ASX-listed Xero is carving out a position as a global leader in cloud accounting.
In its 2021 financial year, the Wellington, New Zealand-based software supplier, managed to expand its subscriber base by 20% to 2.74 million worldwide. Stand out geographies included:
- 17% growth in UK customers – 720,000 subscribers
- 18% growth in US customers – 285,000 subscribers
- 40% growth in Rest of the World customers – 175,000 subscribers
Growth is carefully pared with stock performance. It’s something to consider when investing in technology stocks. Xero’s average annual 25.1%, which ranks better than 85% of the companies in Software industry, according to analysts GuruFocus.
The 3-year average Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) growth is 86% – better than 97% of software companies profiled by GuruFocus. Taxes, Depreciation, and Amortization
Xero’s future is entirely focussed on expansion. It regularly tells investors it has a preference to re-invest cash generated to drive long-term shareholder value. But because it reinvests so much, Xero may not have major profitability going forward. Something to consider.
Investing in technology: reiterating the risks
When looking at tech stocks to buy or trade, consider the risks. While you can make money, there is a risk of capital loss. Do your research before committing any capital and only invest if you are comfortable with any potential losses.
Investing in North American energy
The US stands at an energy crossroads. While it has long thrived on oil & gas, the world’s largest economy looks to be switching to clean sources for its power needs. With that in mind, we’re examining what both conventional and renewable energy in the US can potentially offer investors.
Traditional & renewable energy in the US – a worthy investment?
The wider North American energy picture
The US needs an energy overhaul. Those are the signals coming from the Biden administration. The 46th President of the United States has made it clear his White House will be doing all it can to overhaul his predecessor’s less-than-enthusiastic attitude to climate change. For a start, Biden has realigned the United States with the historic Paris Climate Change agreements signed in 2016.
Significant investment in clean power and renewable energy in the US is likely on its way throughout the next four years. At least. $380bn has been apportioned to the sector as part of a wider $2 trillion infrastructure plan. As such, investors are looking to some of the top US renewable energy companies for long term portfolio bolsters.
But that is not to forget traditional energy sources. Shale oil and gas has turned the US from a net importer to a net exporter. 2021 however, has battered oil & gas markets – mainly oil – but demand recovery is predicted to surge throughout the rest of the year with economies worldwide opening up post-lockdown.
Liquid natural gas (LNG) could also be a significant money-spinner for US energy firms. Rising import numbers from Asian markets are propping up the market currently. Feed gas volumes at Texan LNG terminals are nearing record levels at roughly 11 billion cubic feet per month.
Midstream: a key component in North America’s energy system
Midstream energy firms, i.e. those involved in the transportation, storage and processing of hydrocarbon products, make ideal investment vehicles. They are essential to the current fossil fuel-led global economy. This sector includes pumping stations, pipelines, storage facilities, tanker ships, tank trucks, and rail tank cars.
Even in 2020, a torrid year for oil, yields from such investments could have been as high as 10%, as midstream firms typically operate on long, multi-year contracts with set fees. That gives them more dependable free cash flow compared with upstream (getting oil & gas out of the ground) firms, who struggled immensely due to the multi-billion-dollar cost of their activities. While midstream is expensive to set up, tax breaks ensure companies remain profitable by swallowing some of the cost.
Looking at the Alerian Midstream Energy Index, an index tracking performance of midstream energy firms, we can see it gave a 10.4% yield in November 2020, and a 6.7% yield by March 2021. For context, the S&P 500 index’s yield for March 2021 was 1.5%.
The case for US renewable energy for investors
Moving back to renewable energy, there is a long term case for renewables. We spoke earlier about the Biden White House’s major spending plans. The current administration is targeting carbon-free nationwide electricity generation by 2035. That will require sustained capital injections across the solar, wind and other forms of clean power generation over the coming decade. A ten-year extension to the US’ current renewables tax credit scheme worth $400bn has been proposed too.
Companies in the midstream oil & gas sector are looking to slash emissions. Natural gas pipeline company Williams Companies (WMB) is investing $400 million in solar installations to power its facilities and is targeting net-zero emissions by 2050.
For investors looking to beef up their portfolios for companies with solid green credentials, or are just supplying clean energy and infrastructure, renewables companies could generate solid returns.
This will take looking at the top renewable energy firms in the US, such as NextEra Energy. The Florida-based utility company is one of the nation’s clean power pioneers. It is currently in the midst of significantly boosting its green energy capacity, aiming to construct 30 GW of new power generation infrastructure by 2030.
NextEra projects sales growth of 12% throughout 2021 too, although conservative estimates say a steady 6-8% rise per year until 2023 is more likely. Utility firms like NextEra work on fixed-rate power supply deals. That means firms like NextEra can count on steady cash flow generation. Factor in 5.5m Floridian homes already powered by NextEra, and its ambitious growth targets, long term ideals are there.
Marketbeat recently upped NextEra’s target price to $75.00, with the stock currently trading at around $74, as of May 20th 2021.
US renewable energy investment & risk
When investing in North American renewable or conventional energy, risks must be taken into consideration. In 2020, for example, the pandemic caused the oil market to crash. It’s only now starting to claw its way back up but is nowhere near pre-pandemic levels of capital expenditure by oil companies, or product demand. Personal positions on oil as a commodity or on oil company stocks are likely to have shed considerable value across 2020.
Renewable energy stocks are subject to volatility too. Turning back to 2020, we’ve seen utility firm share prices drop as they fail to get new projects off the ground owing to tougher working conditions or supply chains snags caused by Covid-19. Likewise, some equipment manufacturers have struggled to fulfil orders for the same reason, leading to their own share prices dropping.
With any investment, be sure you can afford to ride out market volatility. Only do so if are comfortable taking any losses.