Markets See-Saw | Sky TV Result

11 September 2020

Global markets were lower overnight (S&P 500 Index -1.7%) as the selloff in mega-cap technology shares sent stocks to their fourth loss in five days. Volatility remains elevated as investors remain worried that valuations stretched too far in a five-month rally.

Reasons for caution were plenty, though no single factor alone set the tone. Signs mounted that the pandemic continues to upend the global economy. In the US, data showed cracks in recent labour-market strength, while Europe re-emerged as a virus hot spot. Congress remained far apart on a fresh relief bill.

Vaccine newsflow as we head into the 4th quarter of the year remains key. With massive amounts of resources invested towards finding a vaccine there seem to be about 7 in late stage trials. Markets will likely react positively and negatively as vaccine news is released. In the latest vaccine news, AstraZeneca’s CEO in the press is suggesting a Covid-19 vaccine it is developing with the University of Oxford could still be ready by the end of the year, despite the company pausing late-stage trials after a participant in the U.K. developed an unexplained illness.
 

Sky TV (SKT:NZX / SKT:ASX)
Sky TV has reported a net loss of $156.8m for the year to June 30, including a non-cash impairment of goodwill of $177.5m – but raised its guidance for 2021, saying the faster-than-expected return of sport will see a return to net profit, and at a higher level than it previously forecast.

The 2020 result was bad but more or less in line with analyst consensus expectations, and SKT does still have $8m of net cash. Some investors were disappointed as the shares still fell -10%, but the share price had been run up more than 20% ahead of the result.
With SKT making the necessary move to a stronger streaming proposition we worry about cannibalisation adding to the nearer-term pressures on revenues. 

While guidance for 2021 is not too bad, uncertainty remains. We have been SELL rated on Sky TV for several years now and continue to see no reason to buy the stock.

Australia & New Zealand Market Movers

The Australian market (ASX 200 Index +0.5%) closed off its opening highs but still recouped some of yesterday's big losses following a big tech rebound that led Wall Street higher.
Interestingly, both NAB and Commonwealth Bank are launching new no interest credit cards to combat buy now, pay later companies such as Afterpay. 

While the outlook for a number of companies remains upbeat, COVID-19's blow to the economy was on full display as Myer swung to a $172.4 million annual loss. In fiscal year 2019, the department store had $24.5 million net profit. Its shares plunged -17% after the report's release.

The New Zealand market was higher yesterday (NZX 50 Index +0.6%) following offshore leads.

Air NZ has grounded its Boeing 777 fleet until at least September 2021 as international recovery looks slower than initially thought.
The Labour Party, if re-elected, will bring forward its target of 100% renewable electricity by 5 years to 2030. We see little in Labour’s policy announcement on renewable energy that should materially impact the Gentailers in the near-term given the sector is already heading in renewable direction under private market signals (e.g. Tiwai exit). 

 

3 Things Markets Will be Watching this Week

  1. ​​​​​​​​​​​​​​​COVID-19 related news-flow remains key, with second wave and lockdown headlines, while US Congress debate what an extension of stimulus will look like.
  2. Key data this week includes US CPI, Eurozone Q2 GDP, the latest ECB interest rate review and exports/import data from China.
  3. In NZ, Sky TV, Briscoe Group, and Restaurant Brands will report earnings and Investore Property will host its AGM.
Global markets were lower overnight (S&P 500 Index -1.7%) as the selloff in mega-cap technology shares sent stocks to their fourth loss in five days. Volatility remains elevated as investors remain worried that valuations stretched too far in a five-month

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