28 July 2020 Pre-Earnings Rally | Pushpay Update

29 July 2020

Global markets were mixed overnight as the US market closed higher (S&P 500 Index +0.7%) as investors watched US politician progress on an additional $1 trillion coronavirus aid proposal as the enhanced unemployment benefit expires on Friday.
Gains were led by the technology sector with notable names Apple, Amazon, Facebook and Google all due to report this week, lifting the market higher in anticipation. Almost 40% of the Nasdaq report on Thursday and this will offer clues on whether the record-breaking tech sector advance through mid-July has been justified.
Overall, about 80% of the 130 S&P 500 firms that have reported so far have managed to beat a low bar of earnings estimates, according to IBES Refinitiv data.

The main concern for investors however is that the economic recovery will be slow due to the combination of an inability to bend the virus curve and that stimulus packages may not be enough. 
In other news, one of the front runners for a covid-19 vaccine Moderna Inc shares finished up 9%, after company officials said its covid-19 vaccine may be ready for widespread use by year-end, as trials are starting to demonstrate safety and effectiveness,

Pushpay Limited (PPH:NZX / PPH:ASX)
After an amazing run, shares in church payments software business Pushpay (PPH) have pulled back heavily recently, likely triggered after early investors the Huljich family sold a quarter of their stake in a block trade at $8.60 per share, and as the resignation of a director sparked speculation.

Despite the heavy pull-back fundamentally nothing has changed and the recent acquisition and covid-19 are both playing an important part accelerating growth for the business. While still trading at twice what it was 12 months ago, valuation metrics appear to be fair based on the company's recent guidance and peer group tech stock valuations.

We maintain our BUY rating on Pushpay, with the recent dip an attractive entry point for an investors seeking an attractive technology exposure. 

Australia & New Zealand Market Movers

The Australian market edged higher on Monday (ASX 200 Index +0.3%) as  the price of gold  rallied strongly helping producers of the precious metal lead on a day of mild gains for Australian shares. This came despite another record daily rise in covid-19 cases in Victoria – experts warning the lockdown may be longer if cases continue to rise. 

Rare earth miner Lynas was one of the best performers on the day (+12%) after confirming it was awarded a Pentagon contract, which was previously caught under political uncertainty. 

The New Zealand market was lower yesterday (NZX 50 Index -0.4%) as tensions between the US and China continued to build up fuelling the demand for defensive assets such as gold, which hit an all-time high. With no significant NZ related news, there were minor rises for some more defensive companies, as investors become more "risk-off" in-light of the current situation.

Travel related stocks fell with Air NZ and Auckland international Airport down while Tourism Holdings led the market lower (-4%), as its key markets outside of NZ (Australia and The US) are both seeing a heavy resurgence in covid-19 cases and the possibility of stricter or extended lockdowns. 

Cancer diagnostics company Pacific Edge rose +11.6% yesterday continuing on its solid run, following ANZ's $22m  investment for new shares at $0.65 per share (a 14% premium to what it was trading at prior to the announcement).


3 Things Markets Will be Watching this Week

  1. ​​​​​​​​​​Covid-19 newsflow around a second wave and re-opening of economies remains top of mind
  2. Reporting season continues with a bumper round of earnings this week with 193 S&P 500 companies reporting including Apple, Amazon, Facebook, Exxon Mobil, Chevron and GE. US 2nd quarter GDP and the latest Federal Reserve rate decision are also due. 
  3. Trade  tensions with China look to be escalating once again.
Global markets were mixed overnight as the US market closed higher (S&P 500 Index +0.7%) as investors watched US politician progress on an additional $1 trillion coronavirus aid proposal as the enhanced unemployment benefit expires on Friday.

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