Global markets were mixed overnight as the S&P 500 and Dow slipped with gains in Apple (after a strong result) offset by a drop in energy and industrial shares, while the US Federal Reserve remained on course for an expected hike in September.
The US central bank left rates unchanged this morning, reiterating its view that the US economy is growing and the job market is strengthening, and inflation continues to hover near the Fed’s 2% target since it last raised rates in June. As we have discussed previously, the pace of interest rate hikes in the US will likely be a key driver of markets and there were no real surprises in today’s announcement.
In other stock news, Tesla said it expects to increase Model 3 production to 6,000 per week by late August, buoying expectations that the Elon Musk-led electric vehicle maker will meet its goal of profitability and positive cash flow in the next two quarters.
Stock in Focus: Pushpay (PPH:NZ / PPH:AX)
Pushpay was the worst NZX performer yesterday as it fell to its lowest closing price since February. The mobile payments app developer delivered first-quarter revenue within guidance and has reshuffled its senior management after another executive exit.
It felt like déjà vu for us as once again Pushpay shares were hit hard on what we saw as a relatively unsurprising update (apart from the management change – James Maiocco, chief business development officer, has resigned and will not be replaced). Revenue for the three months ended June 30 was US$21.4 million, within Pushpay’s guidance and up 52% on the year earlier. Guidance for the current quarter is for revenue between US$21.8 million and US$23.3 million. As with Tech stocks further abroad, expectations are high and it does appear to take much to see significant share price reactions at the current juncture – with Facebook’s -20% decline on earnings being a prime example.
We see the update as relatively sound with no change to our medium-term investment case.
We currently have a BUY (High-Risk) rating on PPH which remains unchanged following yesterday’s announcement.
Members should look out for a full update on PPH to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian share market was slightly lower yesterday (ASX 200 index -0.07%) weighed on by losses in the Bank sector as house prices continue to soften. Data from CoreLogic revealed that house prices had experienced their biggest annual fall since 2012. In stock news, accounting software company Xero rose as it announced the acquisition of Canadian management software company Hubdoc for $US60 million. After the close it appears that Rio Tinto released a result which has disappointed the market.
The New Zealand market sold off on Wednesday (NZX 50 index -0.70%) as Pushpay shares hit a five-month low while Metlifecare and Spark New Zealand dropped. In other stock news, Heartland Bank shares were unchanged as it said it is planning a corporate restructure and a listing on the Australian securities exchange. Heartland’s current Aussie business is limited, with some of its reverse mortgage business generated from Australia.
3 Things Markets Will be Watching this Week
1. US corporate earnings season continues as investors digest quarterly company profit announcements.
2. Locally, investors in Australia and NZ will also turn their attention to corporate profit announcements which kick off this week.
3. NZ employment figures are released on Wednesday, the US Federal Reserve makes an interest rate decision on Thursday morning (AU/NZ time).
Have a Great Day,
Team