Stock recap and outlook for major Tech, E.V. Stocks and Energy & precious metal etc.
Stock recap
WEEKLY STOCKS RECAP
IN TECH
Microsoft seals Activision deal, owes IRS billions
According to the January 2022 deal, Microsoft (NASDAQ:MSFT) and Activision Blizzard (NASDAQ:ATVI) have finalized their merger, Microsoft’s largest deal in 48 years, after extensive regulatory scrutiny and delays.
Activision Blizzard became a wholly owned subsidiary of Microsoft when Anchorage Merger Sub Inc. merged with it.
After the U.K.’s Competition and Markets Authority (CMA) said the buyout, excluding cloud gaming rights, would help maintain competitive pricing and improve services, Microsoft prevailed in a U.S. district court.
After the contract closed, the U.S. Federal Trade Commission indicated it will continue to dispute the pact.
“Today we start the work to bring beloved Activision, Blizzard, and King franchises to Game Pass and other platforms,” Microsoft Gaming CEO Phil Spencer blogged.
Microsoft said in an 8-K filing that the IRS has alerted it of a $28.9 billion back-tax claim, including penalties and interest, for 2004–2013.
The case concerns how Microsoft distributed revenues across countries and authorities throughout that time. Microsoft adds that the recommended adjustments involve TCJA taxes, which could reduce the audit’s tax burden by $10B.
Since the IRS Appeals procedure takes years, the corporation plans to fight the IRS’s claim and does not expect any immediate tax liability changes.
BofA analysts write, “The $28.9 billion represents 111% of Microsoft’s deferred income tax liabilities and 45% of the company’s net cash balance.” They don’t expect large impacts on FY24/25 EPS or FCF.
At $327.73 Friday, Microsoft shares barely moved for the week.
Arm Holdings gets many buy ratings.
After its highly anticipated IPO last month, chip designer Arm Holdings (NASDAQ:ARM) received top ratings from many major brokerages, ending Arm’s underwriters’ quiet period.
SoftBank (TYO:9984), Arm’s 90% owner, raised $4.87 billion in the largest offering of the year.
Arm, which dominates the smartphone market, has been affected by a recent drop in sales.
According to client notes, several major brokerages started their coverage of Arm with buy-equivalent recommendations, citing optimism about the firm’s aspirations to increase licensing revenues and expand into cloud and automotive industries.
“We believe these strategic shifts and the higher royalty rates they can command should accelerate the company’s revenue growth and further expand the valuation premium at which the company historically traded, based on the uniqueness and ubiquity of its technology ecosystem as well as the highly profitable and predictable nature of its business model,” Deutsche Bank analysts said, giving Arm a Buy and a price target of $60.
With a $62 price target, Goldman Sachs expected that Arm will increase royalties to strengthen its smartphone supremacy.
Other Citi, Mizuho, and TD Cowen analysts set $60–$70 price estimates, with JPMorgan being the most bullish.
Arm closed at $50.78, down 6% for the week. They launched at $51.
Netflix loses Wolfe Research Outperform.
Netflix (NASDAQ:NFLX) fell Friday after Wolfe Research downgraded it to Peer Perform from Outperform.
“2024 ARPU [average revenue per user] expectations look full, while today’s paid-sharing net adds lead to tomorrow’s gross add shortfalls,” analysts downgraded.
Netflix is increasing its global premium video revenue, but the analyst thinks 2024-2025 growth is overly rosy.
“If future growth is weak, NFLX’s 50% P/E and 70% EV/EBITDA premium over the S&P may not hold up,” they said.
The firm’s previous positive thesis was based on the predicted transition from a land-grab phase to a more efficient one that addresses concerns like AVOD and password sharing among 100 million global users to monetize existing viewing.
The analyst noted NFLX’s risk/reward is balanced due to delayed AVOD uptake, recent ARM deficits foreshadowing trade down, management signaling slower margin expansion, and a lack of compelling 3P data on sub growth.
Stock fell nearly 7% to $355.68 this week.
IN EV SPACE
Tesla passes battery production milestone
Tesla (NASDAQ: TSLA) announced on X (previously Twitter) Wednesday that its Texas Gigafactory had produced its 20 millionth 4680 battery cell.
After promising 10 million battery cells by summer, Tesla has doubled its 4680 battery cell output in four months. Tesla announced these high-performance cells at Battery Day 2020 to improve vehicle range, power, and longevity.
Some Model Y vehicles have used these cells, but the Cybertruck may use them.
Tesla is fighting shareholder lawyers’ $230 million director compensation legal cost demand.
Tesla claims a “unwarranted windfall” and requests a $64M charge. This case did not include Elon Musk’s $56 billion compensation.
Directors settled the dispute in July 2020 by paying Tesla $735M in a $919M agreement. Tesla claims that shareholder lawyers are seeking 25% of this compensation, which is overstated and doesn’t reflect the deal’s $295M benefit.
TSLA fell 1.6% to $251.12 after hitting $268.38 on Tuesday.
LG and GM have OSHA issues
In light of escalating workplace safety concerns, OSHA has proposed $270,000 in fines for an Ohio joint venture battery plant owned by General Motors (NYSE:GM) and LG Energy Solution (KS:373220).
Following many infractions, including poor safety training and failure to meet federal PPE rules, OSHA made a recommendation. The JV, Ultium Cells, must follow OSHA’s instructions, including installing machine guarding and training workers in hazardous energy control and emergency response.
OSHA’s suggestion prompted Ultium Cells to pledge its commitment to workplace safety. The company has requested a hearing with OSHA to discuss these issues.
After a June fire, OSHA has started inspecting Ultium, complicating problems. The government has also opened three investigations, one of which involved workers’ chemical exposure from a pressure gauge failure in August that leaked battery slurry onto the plant floor.
GM shares fell 3.1% to $29.66 after touching $31.94 on Wednesday.
VinFast acquisition of VinES strengthens position
By buying 99.8% of VinES, Vietnamese EV maker VinFast (NASDAQ:VFS) strengthened its position.
This arrangement should ensure VinFast’s EV battery supply despite initial cost increases.
The acquisition intends to minimize operating costs and boost VinFast’s EV technology, reducing battery costs by 5%–7%.
VinES’s founder, Pham Nhat Vuong, has pledged to fund all interest payments on VinES’s current borrowings until 2027, supporting VinFast’s electric vehicle endeavors.
VFS shares hit $8.24 on Friday before settling at $7.98.
Energy & precious metal Settlement and outlook
Crude oil
Oil Market Settlements and Activity
WTI crude for November delivery finalized at $86.35 on Friday after ending at $87.69, up $4.78, or 5.8%. $87.83 was the session high and $82.78 was the week low for US crude.
Friday’s London-traded Brent crude for the most active December contract closed at $90.80 after finishing at $90.89. The weekly low was $85.18 and the session high was $91 for oil.
WTI Technical Price Outlook
The pullback to $82.30 and fresh to $87.80 has closed the gaping gap for US crude left at $82.80, said Sunil Kumar Dixit, chief technical strategist at SKCharting.com.
“Going further, WTI resistance is seen at the Daily Middle Bollinger Band of $88.10 followed by $88.30,” he said.
Clearing $88.30 will highlight $90.80 as the following task. If the market accepts this zone, expect a nice rally to $96.50.
Dixit stated stability above the 100-week SMA of $86.20 may be active support on the downside.
“A sustained break below $86.60-$86.20 will be the first sign of sellers gaining confidence for $83 again.”
Gold
Gold Market Settlements and Activity
The Middle East’s latest crisis sparked a strong Friday jump in gold prices, sending bulls back to $1,900 safety after a week of wild price fluctuations.
December, New York’s most active gold futures contract, closed Friday at $1,945.90 per ounce, up $58.50, or 3.1%. The benchmark gold futures gained 5%, the biggest since March.
Gold spot prices, which traders watch more than futures, closed at $1,932.82, up $63.95 or 3.4%. Real-time bullion spot prices touched an intraday low of $1,810.10 on Friday, barely than $10 over $1,700.
Friday’s spot gold gain was the largest since March 17. The 5% weekly rise this week was the highest since March.
Gold rose again after the Israeli authorities advised over 1 million Northern Gazans to flee late Thursday as its war with Hamas worsened. Speculation that Israel was planning a large land invasion on Gaza increased.
Neils Christensen stated on kitco.com that “Growing chaos in the Middle Easter continues to fuel safe-haven demand for gold as a 2% rally into the weekend also puts pressure on bears in the marketplace.”
More surprising, the gold surge came as the US Dollar Index, or DXY, rose for a second day, resuming the greenback’s three-month run-up, halted only by last week’s drop. Gold usually moves against the dollar.
Technical Outlook for Gold Spot Price
The next immediate barrier for spot gold is the declining trendline at $1,938 and $1,942, stated Dixit of SKCharting.com.
“A continuation above $1,942 will lead to the previous month high of $1,953, which is the acceleration point for the next bull run into a new record high after retesting $2,080.”
He also stated that spot gold’s 4-hour chart indicated overbought circumstances, suggesting a pullback into the breakout zone at the 200-day SMA of $1,929 and the 100-day SMA of $1,923.
If selling takes the gold below $1,923, expect a drop to the 50 Day EMA of $1,897 and the Daily Middle Bollinger Band of $1,878.
Natural Gas
Natural Gas Market Settlements and Activity
After finishing the session at $3.2360, down 10.8 cents, or 3.2%, the most active November gas contract on the New York Mercantile Exchange’s Henry Hub closed Friday at $3.208 per mmBtu. For the week, November gas dipped 2% after rising 14% the week before.
Gas prices declined despite the Energy Information Administration’s report of an 84 billion cubic feet (bcf) fuel storage build in the week ended Oct. 6, compared to Investing.com’s 88 bcf estimate. The week before Sept. 29, storage rose 86 bcf.
The EIA reported 3.529 trillion cubic feet of US gas storage last week, up 9.8% from a year earlier. additional than 20% additional storage was added this year. Inventory rose 4.8% over five years (2018-2022), down from double-digits earlier this year.
Outlook natural gas prices
According to SKCharting’s Dixit, prices will consolidate below $3.47-$3.37 and retest $3.14 and the Daily Middle Bollinger Band of $2.97.
If this zone fails as support, look for a decline to the 50-day EMA of $2.84 and 100-day SMA of $2.66.”
Dixit said gas must regain momentum above the 50-week EMA of $3.35 and get acceptance above the swing high of $3.47 to resume the bullish trend.
“The 200-week SMA of $3.77 and 50-month EMA of $3.84 are the next major resistances.”
Weekly Earnings Calendar
Mondayday, Oct 16
- Charles Schwab (SCHW)
- Equity Lifestyle Properties (ELS)
Tuesday, Oct 17
- Johnson & Johnson (JNJ)
- Bank of America (BAC)
- Lockheed Martin (LMT)
- Goldman Sachs (GS)
- Prologis (PLD)
- Bank of New York Mellon (BK)
- J.B. Hunt Transport Services (JBHT)
- Ericsson (ERIC)
- United Airlines (UAL)
- Albertsons Cos. (ACI)
Wednesday oct 18
- Tesla (TSLA)
- Procter & Gamble (PG)
- Abbott Laboratories (ABT)
- Netflix (NFLX)
- SAP (SAP)
- Morgan Stanley (MS)
- Elevance Health (ELV)
- Lam Research Corp. (LRCX)
- U.S. Bancorp (USB)
- Crown Castle (CCI)
- Kinder Morgan (KMI)
Thursday Oct 19
- Taiwan Semiconductor Manufacturing Co. (TSMC) (TSM)
- Philip Morris International (PM)
- Union Pacific Railroad (UNP)
- AT&T (T)
- Intuitive Surgical (ISRG)
- Marsh & McLennan Cos. (MMC)
- Blackstone Inc. (BX)
- CSX Corp. (CSX)
- Freeport-McMoran (FCX)
- Truist Financial Corp. (TFC)
Friday, Oct 20
- American Express (AXP)
- Schlumberger NV (SLB)
- Regions Financial Corp. (RF)
- Huntington Bancshares Inc. (HBAN)
- Autoliv (ALV)
- Comerica Inc. (CMA)
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