Your portfolios in brief
This week, we've chosen to talk to you about Twilio (TWLO). Based in the United States, the company develops communications tools via a cloud platform. These tools are dedicated to developers, as well as messaging and marketing services for businesses. In recent months, the artificial intelligence boom has focused mainly on chipmakers. According to many analysts, the next companies to benefit will be those developing the programs surrounding this new technology, such as Twilio.
When it filed its latest quarterly results on May 9, the company announced that its revenues had increased by 15% year-on-year. Twilio also announced that it had cut around 17% of its workforce. Despite weaker-than-expected quarterly results last quarter, the company is financially solid and should, over the next year, benefit from the AI boom and could build a new customer base looking for products derived from artificial intelligence. In the long term, companies will increasingly invest in AI software, saving time and money, which will position Twilio well.
Furthermore, in filing its results, management stressed its focus on achieving sustainable profitability, adding that "we have structured the business with the aim of enabling Twilio to operate profitably in any financial climate, and our first-quarter non-GAAP operating profit is a strong signal of our ability to do just that."
Twilio shares advanced on Wednesday following a report that activist investor Legion Partners is considering making changes to the company's board of directors after meeting with them on several occasions. As such, this could bring significant changes to the company, which brought several investors to buy the stock following this news.
"In the current environment, which is favorable to the development of artificial intelligence, Twilio is creating a strong position for itself in terms of the usefulness of their communications platform and their extensive technology portfolio. This environment should stabilize revenues and earnings over the next few quarters, and AI should lead them to the next big change in their platform, creating a rebound in earnings. Data consumption is only increasing, and the arrival of AI is completely changing the future picture of the sector," explains our President and Portfolio Manager Philippe Pratte.
The stock we hold in our Pratte North American Equity fund has accumulated year-to-date gains of 33% to $67.13 per share, but is still trading 38.5% below its 52-week high of $109.21.
Stock Markets at a Glance
Last week, we told you that Nvidia was slowly but surely approaching the $1 trillion mark in market capitalization. On Tuesday, the company finally surpassed this milestone, becoming the first microchip company to reach this valuation. It joins the likes of Apple, Microsoft, Amazon, Alphabet and Saudi Aramco.
Its shares have accumulated gains of 180% since January alone, and closed Tuesday's session up 2.99%. Nvidia demonstrated its strength and power when it filed its latest quarterly results, far outstripping its competitors. At last week's quarterly results filing, the company announced that it expects $11 billion in sales for the second quarter of fiscal 2024, 50% more than analysts had estimated.
The company outperformed its competitors, while in second place was Taiwan Semiconductor Manufacturing Co, with a market capitalization of over $530 billion. In third place is Broadcom Inc, valued at just over $360 billion.
On the markets, the three main indices closed the last session of May slightly down. The Dow ended the month down 3%, while the NASDAQ, buoyed by the resurgence of the technology sector and the rally surrounding Nvidia, gained 6% and the S&P 500 posted gains of 0.61%. Over the month, the Dow Jones lost over 3%, while the NASDAQ gained around 6% and the S&P 500 0.5%.
As expected, an agreement on the U.S. debt ceiling has finally been reached, and was submitted to elected officials in the Senate on Wednesday evening for what will hopefully be a swift vote. The bill put in place provides for a suspension of the debt until January 2025. Investors were expecting a decision before the deadline. Nevertheless, the negotiations brought their share of volatility to the markets in recent sessions, as the talks proved more difficult than anticipated.
Indices started June strongly, with the NASDAQ and S&P 500 closing their best session in 9 months en route to a positive week, supported once again by the rally in the technology sector. The volatility surrounding the debt ceiling debate eased again on Thursday evening as the Senate approved the suspension agreement and handed the document over to the President of the United States.
On Friday, the employment report showed that the US economy had added 339,000 jobs, whereas economists surveyed by Dow Jones were expecting a relatively modest increase of 190,000. The markets reacted well to the announcement, with the three main indices starting the session strongly. Lululemon shares jumped 17% at the opening after strong quarterly results, while MongoDB shares soared 33% following the announcement of upbeat forecasts for the next quarter, both of which are included in our portfolio.
"A very interesting week for our portfolio, we managed to capitalize on stocks such as Nvidia and AMD. We reallocated some of our profits from microchip manufacturers to programming companies such as MongolDB, which reported much better-than-expected earnings on Friday, sending the stock soaring. The AI craze is once again the big theme of the week," explains Philippe Pratte.
Here is the weekly average for the three main U.S. indices at midday on Friday.
And here's the average for the week for the TSX in Canada.
Pratte Portfolio Management is a firm registered with the Autorité des marchés financiers (AMF) and the Ontario Securities Commission (OSC).
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