Stock in Focus: Pacific Edge (PEB.NZX)
Pacific Edge announced it is nearing a timeline for the finalization or withdrawal of the draft Local Coverage Determination (LCD) and the associated Local Coverage Article (LCA) covering the reimbursement of its CXbladder tests by Medicare, the US national health insurance provider.
Following further review and discussion with its advisers and other industry participants, Pacific Edge now understands that Novitas must either finalize or withdraw the proposed LCD and LCA by 9 June 2023.
Pacific Edge continues to receive coverage for CXbladder tests, and has not been notified by Novitas of any intent to finalize or withdraw and will update the market as soon as they are aware of additional information related to the LCD and LCA.
Pacific Edge are in a binary situation, trading in the middle of where it would if coverage continues or not.It is still a quality product and offering and can still grow without Novitas coverage- just a lot slower than we had anticipated in 2021 with the coverage. We rate it as a high-risk BUY, for those wanting to take a punt on it going through at the moment. Those more risk adverse would want to wait til after 9 June when the decision is finalized.
New Zealand
The New Zealand market (NZX50, +0.9%) was up as the US government agree on extending the debt ceiling.
It was modestly a positive day for the large caps, Fisher and Paykel Healthcare (4.9%) and Meridian Energy (+2.6%) both up the former recovering from its post result sell-off. NZ Mid-caps were lower as Tourism Holdings which was removed from the MSCI Small Cap Index. Chorus and Sky City were also removed but were up on the day.
Australia
The Australian market (ASX200, +0.2%) edged higher as markets breathe a sigh of relief on debt ceiling progression.
Most sectors were higher, healthcare and tech sector leading gains.
National house prices in Australia rose for the third month in a row, up +1.2% from the previous month, with Sydney registering the largest monthly gain of 1.8%.
Despite a -30% fall in borrowing capacity, recent data suggests the worst of the house price downturn may be over – however we are still wary of further downside, given no light on interest rates cutting (improving serviceability) anytime soon.
People can’t get money out of Apple’s savings accounts
A month ago Apple launched their savings account with Goldman Sachs, and the whole thing was “Apple is a bank now”. Of course, Apple isn’t really a bank – it’s actually just money going through to Goldman’s with an Apple interface – but it was a hint of China-like “everything app” capabilities. Tech bros have famously been obsessed with an “everything app” forever – Elon Musk wants Twitter to be an everything app! Paypal wanted to be an everything app! Everyone wanted to have an everything app! The buzzwords in meetings must be outrageous – “cross-sell”, “walled-garden”, “synergies”, “web 3.0”. Anyway – now people are having trouble getting their money out of their Apple account.
“Nathan Thacker, who lives outside Atlanta, had been trying to transfer $1,700 from his Apple account to JPMorgan Chase since May 15. Each time he called Goldman’s customer service department, he said, he was told to give it a few more days.”
This is not very good! If you are Apple your whole business is built on things “just working”. If your bank account does not “work” then you are going to have some issues going forward. For instance, people might just take all their money out again:
“Min-Jae Lee was curious to try out the Apple account and intrigued by its high interest rate. She deposited $100,000 in April, but soon decided she would rather have her money elsewhere. On May 1, she tried to transfer it out.”
Again – if you are Apple you are probably not very happy right now. Your reputation is everything and People Are Not Happy. The fault is likely Goldman’s more than Apple’s – Goldman is the provider – and it’s sort of not much of a surprise given Goldman’s famously bad consumer banking service (“MARCUS”) which they have been winding up somewhat sheepishly. It’s surprising that Apple decided to use Goldman Sachs in the first place, given its highly-publicised consumer banking flop. In any case; if you are a consumer and you can’t get your money out, it’s unlikely you’re going to continue to use those services.
Speaking of Goldman, the investment bank flagged trading revenues would be down 20% going forward. They’re the best pure investment bank in the business – dealmakers par excellence – but it’s telling that they’re seeing less trading revenue and less M&A revenue. Goldman is typically cyclical – they do well during a boom, etc etc – and while they have tried to stabalise their revenue via consumer banking this has not really worked out (see above). We prefer buying Goldman at or below book value: it’s a great franchise but one of those “rinse and repeat” cyclical stocks – right now the odds are not in their favour.
Meta
The investment case for Meta is: lots of ad money, hopefully Mark has given up on the Metaverse. So it is a spanner in the works when Meta unveils yet another virtual reality headset, which they did today, which will cost around $500USD (multiples cheaper than Apple’s rumored device). So far the Metaverse has burnt tens of billions of dollars for Meta shareholders and returned very little: they are continuing on anyway. This is, perhaps, not what you want to hear if you are a Meta shareholder. You perhaps want to hear: hey, our TikTok clone is going well. You probably do not want to hear: hey, our all-powerful CEO is going to continue with this Metaverse stuff, because the company is essentially a vast hobby horse for Mark Zuckerberg and friends. I mean: this works if the company continues to generate unholy amounts of ad revenue. It even works when the company doesn’t; because Zuckerberg has de facto control over the entire company. But the question (as always) is – does anyone really want the Metaverse?