Air Bnb Doubles on IPO | Appen Sinks

14 December 2020

Global markets were mixed overnight (S&P 500 index -0.1%) as technology stocks outperformed.

Earlier tech sentiment was dampened after US antitrust officials and a coalition of a states sued Facebook, seeking to unwind its acquisitions of Instagram and WhatsApp. However, the big stock news in the US was the listing of Airbnb, which surged 115% from its $68 per share IPO price.

Elsewhere, the Euro rose after policy makers escalated their efforts to shield the region from a possible double-dip recession with another burst of monetary stimulus, while cautioning that it may not use up all the new firepower. The pound fell as negotiations between the U.K. and the European Union were seen on course to end without a trade deal.

Appen (APX:ASX)

Appen shares fell -12% yesterday as it was forced to cut its full-year earnings guidance after warning fourth-quarter earnings were failing to pick up as they traditionally did, because of disruption to its big tech customers from the pandemic.

Appen now expecting 2020 operating earnings to be in the range of $108-111m (at US$0.70); a circa 16% downgrade at the midpoint to their previous guidance in August at $125-130m (at US$0.70). Indicating that COVID has disrupted and reshaped priorities for customers, especially in California and the 3th quarter has typically averaged 30% of full year results.

Appen said that major clients are reprioritising resources towards new product development which should be a positive longer term. They are also seeing a significant increase in the number of new projects although some are early in lifecycle. Appen also continue to win new customers in markets less impacted by COVID, including in new business areas such as shipping, automotive, education and health care.

We do not have full research coverage on Appen, but the moves highlight to us the small margin of error for market darling technology stocks, which can be punished if they disappoint the high bar expected by the market.


Australia & New Zealand Market Movers

The Australian market dipped yesterday (ASX 200 index -0.7%) as a seven-day winning streak for local shares came to an abrupt end on Thursday, as the market took its first backward step this month, led by the tech stocks and gold miners. Aftrerpay and Xero pulled back after a tremendous run, and gold miners also faced heavy selling pressure, as the price of the precious metal tumbled -2% as the US dollar firmed.

Travel stocks were also weaker, with JPMorgan warning in a note that most had run ahead of fundamentals. China said it would slap "anti-subsidy" duties on Australian wine from December 11, pushing Treasury Wine Estates shares -2% per cent lower.

On the flipside, Fortescue Metals led the market gains, as the price of iron ore broke over $US150 a tonne for the first time since 2013.

The New Zealand market (NZX 50 index -0.2%) and the kiwi dollar both edged lower with investors hitting pause on a two-month strong run caused by buying risk assets in hopes of global economic recovery.

Amid ongoing speculation about the AustraliaSuper takeover bid, Infratil-owned Trustpower continued to rally, climbing 2.6%, while Tilt Renewables fell -8% — it is still almost a dollar higher than where it started the week.

Outside the NZX 50, Michael Hill International jumped 10.5% after it said same-store sales for October and November were up 8.5% against last year. The company now expects to deliver a half year earnings result “materially exceeding” the prior year’s first half result, $31.6 million, even before adding wage subsidies.

Z Energy's (ZEL) November 2020 sales volumes were softer than in recent months, with ZEL citing the lack of international tourists that would have been arriving for the start of summer and the wet weather hurting domestic travel. Retail margins are being squeezed at present, with the sharp lift in crude oil prices impacting on headline margins. Since the beginning of November, the crude oil price (in NZD) has lifted +14% and is an issue to watch.

3 Things Markets Will be Watching this Week

  1. ​​​​​​​​​​​​​COVID related news flow, including vaccines are likely to dominate headlines for another week.
  2. US inflation data is released on Thursday.
  3. US fiscal stimulus package talk also continue to drag on.


The big stock news in the US was the listing of Airbnb, which surged 115% from its $68 per share IPO price.

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