Stocks

Mastercard (MA) reported strong results for Q4 and FY22. EPS came ahead of analyst expectations at $2.65 and net revenue came in at $5.8B (+17% YoY). Adjusted operating margin increased 80 bps to 55%. Cross-border transaction volumes remained flat at 41% for January. Switched transactions grew 14% YoY for the quarter.

Microsoft (MSFT) reported revenues of $52.7B, a 2% increase from the previous year. This was slightly lower than the expected $53.1B forecast by analysts, but still within the company’s projected range of $52.4B to $53.4B. Adjusted EPS came in at $2.32 per share, surpassing the predicted $2.29 per share by Wall Street. Gross margin came in at 66.8%, slightly lower than the 67.2% from the previous year. In other words, there are two ways to take these results: the first is that they’re better-than-expected, and show the company’s relative resilience. The second is that they show material slowdown across the board. Both are accurate – the read-through we take is that tech earnings aren’t as bad as feared, but they’re nothing to “write home about” either.

Myer’s shares have been on a strong run reaching a fresh 5-year high, recovering from a turn around in profitability and stronger sales update from rivals over the Christmas period as well as Private Equity companies circles competitors like David Jones and City Chic. We remain underweight retail, as we think secular pressures are likely to hit retail hard, especially discretionary retail. That majority of its value is now on a potential takeover.

Wastewater treatment company De.mem shares jumped +25% yesterday after revealing their fourth quarter operations. Cash receipts came in at $6.7m for the quarter, and $22.9m for the year, both at record highs with 15 consecutive quarters of cash receipt growth. Recurring revenue growth was also strong for the year up +41% from the previous year to $19.5m (on the top end of guidance) and representing 85% of total cash receipts at higher margins. 

We see too much optimism “priced into” Netflix’s latest results. EPS fell to 11c from $1.33 in the comparable quarter in ‘21. Analyst expectations came in at 55c. In spite of this the stock rose on very strong subscriber numbers. Subs grew 7.6M vs. the company’s projected 4.5M. Churn was kept to a minimum, with several hit shows (“Wednesday” “Harry & Meghan”) breaking records – “Wednesday” was NFLX’s second-most popular series ever and “Harry and Meghan” the streaming service’s second-most popular documentary. All this reads well, however the company’s overall revenue came in flat at +2% growth. To be fair, FX was partially the culprit here — revenue grew 10% on a FX neutral basis. Yet signs of weakness remain – on a FX neutral basis APAC revenues declined 4% whilst EMEA revenues grew only 5% (2% deceleration). We think any sign of excitement is premature, especially because Netflix is still expensive – it trades at 25x earnings, above Disney x20 and WarnerBrothersDiscovery x10.

Manchester United is one of the most famous names in the world of football. Alongside Chelsea and Liverpool, the club is an incredibly recognisable brand with a fiercely loyal fanbase. The Glazer family bought the club in 2005. It has indicated the club is up “on the auction block”. INEOS founder Jim Ratcliffe, the richest man in the UK, has indicated that he has entered bidding for the company. Ratcliff recently bid +£4B in a failed attempt to purchase Chelsea. The other major party who has formally entered the bidding process is the government of Saudi Arabia.

Goldman Sachs reported Q4 earnings that came in under the street’s expectations. EPS came in at $3.32 per share vs. expectations of +$5.70, whilst revenue narrowly missed estimates, coming in at $10.59B. Return on equity was 10.2% for the quarter, whilst annualised ROE was 4.4%. We initiate our coverage of Goldman with a sell rating.

JPM reported strong results as the US earnings season kicks into gear. Strong net interest income (NII) was buoyed by the Fed’s increase in interest rates, while trading revenues were driven by continued volatility in the market. We continue to favour JPM as our best bank stock pick – it trades at ~11x fwd earnings, trades for 1.45x book value and generates a 16% return on equity – since last quarter these fundamentals have become paradoxically more tempting and less tempting; book value is slightly “cheaper” at 50bps less than last quarter, whilst the bank’s return on equity has fallen 200bps.