Global markets were lower overnight, US Markets (S&P 500 Index, -0.8%) slipping again but cutting down larger losses in the middle of the session thanks to some support from defensive names.
The tech sell-off continues the NASDAQ index down -2.2%, following social media company (which makes it revneue from advertising spend) Snap’s weak result but more importantly bleak guidance – saw the stock crashed -43% down to $12.79 per share, well below its IPO price of $17 when it listed in 2017. The weak revenue and profit forecast was due to heightened competition for digital advertising spend over multiple platforms available and lower amount of usage on these platforms since the peak of lock down, but more importantly weaker economic outlook, impacting the amount businesses are willing to spend on advertising – the later reigniting economic slow down fears the major catalyst of the risk-off tone for investors. This caused other advertisers to sell off heavily Meta (Facebook) slumped -7.6%, Alphabet (Google) down -5.1% and Amazon with some advertising exposure slipped -3.2%.
Retailers were also weaker, including e-commerce platform provider Shopify down -11.9% as it users are heavily reliant on digital advertising, while Abercrombie & Fitch slumped -28.6% after reporting a weak quarter due to higher freight and product costs, adding to a long list of heavy losses across the sector feeling added costs pressures.
It wasn’t all red, as defensive sectors such as utilities, consumer staples and real estate reported modest gains. The 10-year US Treasury yield made a sudden move lower as investors fearing a recession crowded into bonds sending their prices higher. The 10-year Treasury yield slipped as low as about 2.73% on Tuesday after topping 3% earlier this year.
European markets (Stoxx 600 index, -1.1%) closed lower as recession fears grows, retail, travel and tech shares leading losses.
Pushpay (PPH:ASX)
Church donation processor Pushpay shares jumped 12.9%, bucking the tech sell-off after ending its trading halt which lasted half of the day. Existing shareholders BGH Capital and Sixth Street with a 20.3% ownership revealed that they are both working together on a takeover bid following an announcement last month of a potential takeover approach from a third-party.
It is still early, with no party revealing a bid price yet and either party are in the position to walk away and is working with Goldman Sachs as their advisor. Pushpay is still an attractive business which is profitable and has growing margins, high cash generation and a positive net cash position.
Analyst anticipate a takeover price of $1.70 to $1.80 a share, given the above and take into account Sixth Street did acquire a significant stake at $1.85 per share last year.
We remain BUY rated on Pushpay, as a quality tech business at a reasonable valuation. Medium-term investors may want to now wait for the offer to not fall through to enter at a more attractive price – given high level of volatility in the market over the near-term. While those willing to take a punt a deal does go through but be wary off near-term weakness (if a deal does not eventuate) – but overall we should see reasonable upside over the medium-term given their growth outlook.
Australia & New Zealand Market Movers
The Australian market was down yesterday (ASX200 index, -0.3%).
Most sectors were lower, with tech sectors leading losses following weak after hours trade in the US after Snapchat released its result.
Real estate and bank stocks were the only sectors up and helped offset losses, the later benefiting from comments from JP Morgan that the higher interest rate environment will help improve returns.
Nufarm was the biggest loser of the day down -14.6% after Sumitomo sold a 15.9% stake in a block trade on Monday.
The New Zealand market (NZX 50 index, -0.6%) was down on Tuesday as large caps were generally weaker ahead of RBNZ’s announcement today.
Fisher and Paykel healthcare slipped -0.5%, ahead of its result due today, while Pacific edge which reports on Thursday was down -2.5%.
3 Things Markets will be Watching this Week
- Geopolitical risks remain elevated given the Russia/Ukraine conflict.
- RNBZ monetary policy decision
- Local earnings from Kiwi Property Group, Arvida, Fisher & Paykel Healthcare, Pacific Edge, Mainfreight, Tower Insurance, Elders, and Select Harvest.