Stocks

Nike reported good earnings which significantly beat the street’s expectations, suggesting that the company’s logistics-related issues we highlighted in our last report appear to be behind it. The company reported EPS of 0.85 vs. estimates of 0.65 and revenues of $13.3B vs. estimates of $12.57B. Lower inventories ($9.3B vs $9.7B in Q2) suggest that the company’s strategy of selling direct to consumers is bearing fruit. We retain a buy rating for Nike.

We initiate coverage of Squarespace with a sell rating. The company is engaged in providing an all-in-one website solution ranging from design to hosting. The company’s main competitors are Wordpress and Wix. While the company provides a good product — it is easy to use and looks very professional, we think the company appears to be struggling to scale its product well. In short, it has a limited audience.

JPMorgan reported earnings of $3.12 per share, beating the street’s estimates of $2.88. Revenue slightly beat estimates, coming in at $33.29B. Third quarter profit fell 17% YoY as headwinds began to materialise in the company’s business – the bank wrote off $727M in bad debts and took ~$959M in paper losses on stocks.

Aristocrat shares have been slipping lower despite delivering a sound full year result where operating revenue rose +17.7% and net profit after tax rose +27.1% as casinos and travel reopened. Managment also expects to achieve modest growth in 2023, but investors appeared wary given slowdown in digital gaming growth towards the end of the year. 

We downgrade our rating on Argosy to a HOLD despite being attractively valued on a 30% discount to Net Tangible Asset, and much cheaper than office specialist Precinct and Industrial specialist Goodman.

Tower (TWR) shares have held up well most of the year, and managed to delivery a solid result for the 2022, which was flagged earlier. Underlying net profit after tax, with the inclusion of large events, rose +31.2% from last year to $27.3m for the year.

We anticipate loan growth to slow making for challenging market conditions which is partly priced in and balance sheet adequate to handle a moderate pull-back in the house prices from here, a real risk is a major housing crisis which is now a slim but foreseeable risk to consider given rapid rate rises by central banks on both sides of the Tasman.

Just like BHP, Rio Tinto shares have rebounded recently, partly on hopes of China eventually reopening and as Chinese authorities provided stimulus to the property sector to boost construction activity, supporting iron ore pricing. Commodity prices have held up well due to supply and demand dynamics, but also as an inflation hedge. With the latter likely to ease, we believe added pressure from a slowing in economic activity means we are nearing the end of the current commodity cycle boom.