Global markets were higher overnight with Wall Street making gains across the board as fears of a global economic slowdown were calmed by robust economic data from China, while easing tensions in Hong Kong added to an upbeat mood.
Political tensions appeared to subside in Hong Kong, after embattled leader Carrie Lam said she formally withdrew legislation to allow extraditions to China, the detonator for three months of often-violent protests. Also in the UK, the pound surged after Parliament took a crucial first step to block a no-deal Brexit.
Stock in Focus: Electronic Arts (EA:Nasdaq)
EA shares jumped on its 2020 first quarter result. Despite growth rates remaining weak due to a light release of games this year, the growing popularity and engagement amongst existing games was enough to deliver a sound result pleasing investors.
Total revenue for the 2020 fiscal year first quarter came in a $1.21 billion, which was up +6% from last year but more importantly ahead of market expectations. EA also delivered a solid operating profit of $415m, which was up +38.3% from last year.
We continue to maintain our medium-term view that growth will remain strong for EA, and that the outlook remains positive with potential blockbuster game releases around the corner and continued strong performance from its sport titles and with Esport viewership on the rise – adding another stable growth stream. Given negative sentiment surrounding the industry EA shares appear reasonably priced at a 23x price to forward earnings multiple.
We currently have a BUY recommendation on EA.
Members should look out for a full update on EA to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian market was lower on Wednesday (ASX 200 Index -0.31%) as Australian shares fell heavily at the open but rallied through the session, despite the economy recording the weakest annual GDP growth print since the global financial crisis. The contraction in US manufacturing pushed commodity prices lower, with concern demand for oil and metal would be sapped – weighing on the Energy sector.
Australia's GDP (economic growth ) data growth for the second quarter came in at 1.4% at an annualised rate. The annual growth rate was the worst since September 2009, although given it printed in-line with expectations, did little to move the market. The Australian economy is navigating a period of cyclical weakness, centred on construction, particularly housing, and economists remain split as to whether the Australian economy will enter a recession.
The New Zealand market added to gains yesterday (NZX 50 Index +0.49%) and the NZX 50 index cracked another milestone, climbing above 11,000 for the first time, as export-based software firms Vista Group and Pushpay led gains.
New Zealand's stock market outperformed most other markets after weaker than expected US manufacturing data stoked fears of a recession in the world's biggest economy. The NZX50's relatively high average dividend yield remains a strong drawcard for investors struggling to find reliable income in fixed interest assets. At the same time, a kiwi dollar trading near a four-year low is boosting the outlook for exporters.
3 Things Markets Will be Watching this Week
- Trade War related news-flow is likely to continue to feature in headlines.
- The Reserve Bank of Australia maker an interest rate decision on Tuesday.
- Escalating geopolitical tensions between Hong Kong & China & Brexit are also creating nervousness.
Have a Great Day,
