Your portfolios in brief
Pinterest is a social media platform focused on image sharing, enabling users to discover and share visual ideas often related to their interests. Users can create virtual "boards" to pin images or videos they find inspiring. In 2023, the company continued to innovate, launching new features to help users plan events such as weddings and collaborating with platforms such as Shopify to enhance the e-commerce experience.
Highlights in 2023
In 2023, Pinterest has seen several significant developments. CEO Bill Ready announced a forecast for revenue growth in the mid-to-high 10% range and EBITDA margin improvement in the low 30% range over the next three to five years. The announcement was made at the company's Investor Day, and was followed by a 4.4% rise in the share price on Tuesday.
Why Pinterest is a stock to watch
Pinterest is a stock to watch because of its promising growth prospects. The company's executives forecast accelerating revenue growth year after year, despite a slowdown in 2022 and 2023. They anticipate a compound annual growth rate (CAGR) over the medium and long term, which is higher than analysts' forecasts. This growth is underpinned by effective collaborations with retailers and an advertising partnership with Amazon, which should make ads more relevant to users.
Investor analysis and opinions
Analysts are optimistic about Pinterest's prospects. The company has bounced back from the economic challenges of the previous year, which had a significant impact on digital advertising companies. With a reduced workforce and more efficient operations management, Pinterest is well positioned to capitalize on future growth opportunities, and investors appear to have confidence in management's ability to achieve set financial targets.
Conclusion
Pinterest represents a wise choice for our Pratte North American Equity fund. With solid growth prospects, promising strategic initiatives and effective management, Pinterest is well positioned to deliver significant returns in the years ahead. The company stands out as an attractive buying opportunity for investors thanks to its significant advances in improving user engagement and monetization. This optimism is fueled by Pinterest's advertising innovations and should support improving monetization trends, as well as expanding adjusted EBITDA margins going forward. The stock has accumulated around 10% since the start of the year and should continue this good performance over the coming weeks.
Markets in brief
Monday
-Markets up slightly
The three main indices experienced moderate movements on Monday, with the Dow and NASDAQ remaining relatively stable and the S&P 500 recording a slight rise of 0.1%. Investors are currently focused on the upcoming meetings of the Federal Reserve and other central banks around the world, and are keeping a close eye on possible actions that could influence global markets.
-Stockss in brief
Apple (+1.69%): Apple stood out as one of the session's big winners. The rise was boosted by positive data on delivery times for the iPhone 15 Pro Max, indicating strong demand, particularly in China. Pre-orders for this model are up 10-12% year-on-year.
Nikola (+33.61%): Nikola had an exceptional day. This massive increase was mainly due to the announcement of the arrival of a new CFO, who had previously worked at General Motors, boosting investor confidence.
Tesla (-3.32%): Despite positive expectations linked to the social conflict in the automotive sector, Tesla suffered a decline. The absence of unions within the company could be one of the reasons for this disappointing performance.
Moderna (-9.12%): Moderna was one of the day's big losers. The drastic fall in its share price was attributed to disappointing forecasts for the US vaccination rate for its new version of the COVID-19 vaccine.
General Motors (-1.80%), Ford (-2.14%) and Stellantis (-1.61%): These automotive giants suffered significant declines, mainly due to the historic strike currently underway in the sector.
Arm (-4.53%): After an impressive IPO with a 24.69% rise, Arm seems to be losing momentum. Following a significant drop on Friday, the company posted another loss on Monday. What's more, after the close on Wall Street, it fell by almost 5% in electronic trading.
Tuesday
-A day of caution and readjustments
The session was marked by notable investor caution, with key indices down slightly. The Dow lost 0.31%, the NASDAQ surrendered 0.23%, and the broader S&P 500 index gave up 0.22%. This downward trend is mainly attributed to growing nervousness on the bond market. US 10-year government bond yields reached a 15-year high of 4.3667%.
Investors were also concerned by soaring oil prices, which rekindled fears of uncontrollable inflation, prompting the US Federal Reserve (Fed) to potentially adopt a tighter stance. This concern particularly affected the technology sector, which depends on favorable credit conditions to finance its growth.
-Inflation in Canada
Inflation in Canada accelerated significantly, reaching an annual rate of 4% in August, up significantly from the 3.3% recorded in July. This upward trend, observed for the second consecutive month, was mainly fuelled by higher gasoline prices. Economists had largely anticipated this surge, although they expect a slower pace of reduction in price growth over the coming months. It's also important to note that this trend is not isolated to the national level, as the province of Quebec recorded an even more marked increase in prices, with inflation reaching 4.6%.
As Canadians face higher energy costs, they must also contend with rent increases and higher mortgage interest rates, putting further pressure on households across the country.
In Canada, the Toronto Stock Exchange also had a difficult day, posting a 1.3% drop, mainly due to concerns over recent inflation data.
-Instacart makes its debut on the stock market: A remarkable entry, but with challenges to overcome
Instacart has made a stunning debut on the stock markets. The American shopping delivery platform closed its first day up 12% at US$33.70, surpassing its initial launch price of US$30. This performance was hailed as a positive sign of renewed investor appetite for IPOs, after a period of hibernation in the sector lasting almost two years.
The company, valued at around $9.3 billion (and $11.3 billion including shares allotted to employees and executives), experienced moments of soaring, reaching up to 43% gains before stabilizing. Despite a lower valuation than 2021, Instacart CEO Fidji Simo remains optimistic, stressing that the main objective of this IPO was not to raise funds, but to offer liquidity to its employees.
-Focus on the oil market: A precarious balance
The oil market had an eventful day, with Brent flirting with US$96 a barrel before stabilizing at US$94.34. This momentum was fueled by a combination of OPEC+ supply cuts and comments from the Saudi Energy Minister, who refrained from suggesting an imminent change of course. Industry experts, including Chevron's CEO and analysts at Citigroup, anticipate a possible return of oil to US$100 a barrel, fuelled by falling inventories and a sustained economic recovery in the USA and China.
This rise in oil prices is likely to exacerbate inflationary pressures, posing additional challenges for central banks around the world who are already on alert due to growing inflationary pressures.
-Stockss in brief
US Steel (+3.70%): US Steel saw a notable rise, attributed to third-quarter forecasts that exceeded expectations. This performance demonstrates investors' confidence in the company's ability to navigate the current economic landscape.
Disney (-3.62%): Disney shares fell after CEO Bob Iger announced an ambitious investment plan. He plans to invest $60 billion over 10 years in theme parks and cruises. Although this is a long-term vision for the company, investors voiced their concerns, which led to a fall in the share price.
Intel (-4.34%): Intel saw its share price plummet following comments made by its CFO, David Zinsner. The group's forecasts, deemed disappointing, caused concern among investors, which had a negative impact on the share price.
Amazon (-1.68%): Amazon shares fell, reflecting general market concerns. Although the company is an e-commerce giant, it is not immune to market fluctuations.
Nvidia (-1.01%): Nvidia also recorded a decline, as a result of current market uncertainty. Despite its technological innovations, the company is affected by macroeconomic dynamics.
Wednesday
-Wall Street under pressure: The Fed's offensive stance
The session was marked by an offensive communication from the US central bank (Fed). The New York Stock Exchange ended sharply lower. The Dow Jones lost 0.22%, the NASDAQ index fell 1.53% and the S&P 500 index gave up 0.94%. The Fed kept its key rate unchanged, but made it clear that it remained in a position to fight inflation. The Fed's projections surprised the markets, with a possible further rate hike in 2023 and only two rate cuts expected in 2024, compared with four previously.
-The Fed stays the course, but signals a possible hike ahead
At its latest meeting, the US Federal Reserve (Fed) kept its key interest rate unchanged, marking the second time in three meetings that it has opted for this decision. This suggests a moderation in the fight against inflation, even though price pressures have eased. However, Fed officials have signalled that they expect to raise rates once again this year. Consumer inflation has fallen from 9.1% in June 2022 to 3.7%, but remains well above the Fed's 2% target. The current policy rate is around 5.4%, the result of 11 rate hikes since March 2022.
-Stockss in brief
Nvidia (-2.94%): Nvidia Corp was down. The company continues to implement strategies to overcome supply constraints, US sanctions on semiconductors destined for China and the resurgence of its rival, Huawei Technologies.
Microsoft (-2.40%): Microsoft shares fell after the company refused to comply with a U.S. judge's order to hand over customer emails stored in a data center in Ireland.
Klaviyo (+9.20%): digital marketing specialist Klaviyo surged on its first day of trading, reaching a valuation of $10.1 billion.
Instacart (-10.68%): Following its IPO, Instacart suffered a significant decline. Investors were concerned about the company's long-term profitability in a competitive sector.
Arm (-4.10%): Arm, the microprocessor designer, experienced a fourth consecutive session of decline after an initial rise at the time of its IPO.
Ford (-1.59%) and General Motors (-2.24% ): These two automotive giants were once again impacted by the ongoing strike in the auto sector.
Stellantis (+1.71%): Stellantis benefited from higher inventories, enabling it to better cope with the consequences of the shutdown of production sites due to the strike in the automotive sector.
Thursday
-Wall Street: Notable losses following the Fed's stance
The session was marked by significant losses for the main Wall Street indices. The US Federal Reserve's aggressive stance raised concerns among investors, which had a direct impact on the markets. The Dow declined, closing the session with a loss of 1.1%. The S&P 500 was not spared, falling 1.6% for the day, while the NASDAQ was down 1.8%. These negative performances add to an already difficult week for the markets. The bond market was also affected, with yields rising, reflecting expectations of interest rate hikes by the Fed. Investors are turning to bonds against a backdrop of uncertainty, seeking safe havens in the face of volatile equity markets.
-Stockss in brief
Technology: A sector in decline
Technology giants suffered notable losses on Thursday, dragged down by growing concerns about high valuations in a context of monetary tightening. Decisions by central banks, in particular the Fed, have had a direct impact on technology companies, which are often more sensitive to changes in interest rates.
Microsoft (-2.40%): Microsoft shares continued their slide, marking the fifth consecutive day of losses for the stock. Microsoft Corp. closed at $47.25 below its 52-week high ($366.78), which the company had reached on July 18.
Nvidia (-2.94%): Nvidia shares ended another session lower as they plunged 10% this month, feeling what investors call the "September effect". This decline wiped nearly $180 billion off the semiconductor giant's market capitalization.
Alphabet Inc (-2.47%): It was the third consecutive day of losses for Alphabet shares. The company closed at $8.72 below its 52-week high ($139.16) reached on September 18.
Friday
-Week of losses for the three main indices
The week ends on a sour note for Wall Street. The S&P 500 was up on Friday morning, but the market still looks set to end the week with heavy losses. The index climbed 0.3%, while the NASDAQ gained 0.5%. However, the Dow remained stable. These moves come after three consecutive days of losses for the major indices. In addition, investors are concerned about a possible US government shutdown, which could affect consumer confidence and slow the economy.
Philippe Pratte's comments: Volatility and economic decisions
The week was marked by a series of major events on the financial markets. The Fed's announcements raised concerns about the future direction of the US economy. The possibility of higher interest rates is on the horizon, and investors are watching for signs of inflation, its impact on consumer spending and business investment. What's more, the threat of a US government shutdown adds a layer of uncertainty, with possible consequences for the global economy.
On the industrial front, the UAW strike disrupted the automotive industry, affecting giants such as General Motors and Stellantis. Exxon Mobil, for its part, is forecasting a 30% increase in oil prices, which could have repercussions on the global economy. Tesla, showing its interest in the Asian market, is in talks with India for a battery factory. In the financial sector, the SEC fined Citadel Securities $7 million, underlining the importance of regulation. The Fed's decision had a notable impact on the technology sector. Other events, such as the Evergrande situation and the Apple strike in France, contributed to volatility.
In conclusion, in the face of this volatility and uncertainty, investors need to remain vigilant. We will be monitoring economic indicators, central bank decisions and geopolitical events to assess the potential impact on our investment strategies.
Pratte Portfolio Management is a firm registered with the Autorité des marchés financiers (AMF) and the Ontario Securities Commission (OSC).
This newsletter is intended to provide general market and security information and is not intended to address your specific needs. The views (including recommendations, if any) expressed in this newsletter are those of the author only and do not necessarily represent those of Pratte Asset Management and do not constitute investment advice for your specific needs.
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