Stocks

Xero plunged after Chief Executive Steve Vamos announced their resignation effective February 1, 2023 after 5 years in the job. Further, the company reported its earnings for the six months to September 30. Revenue jumped +30.0% from last year to NZ$658.5m, and total subscribers increased +16.0% (to 3.5 m), all the while its net loss increased +172.9% to NZ$16.1 million from NZ$5.9 million the previous year, due to combination of increased costs and investment into growth and non-cash impairment against its Waddle business.

James Hardie shares slumped  despite delivering strong half year result. What spooked investors was the dramatic change in the outlook for the housing market across all its key markets. 

Starbucks displayed some signs of recovery in their Q4 earnings. As we wrote in our initiation report, this is a “show me” story and management, to their credit, has worked tirelessly to show the market what a turnaround looks like. The company grew revenues 3% YoY to $8.4B, and it grew same-store sales in the U.S 11% YoY. Credit where credit is due – this is an exceptional performance in a very tough environment to do business. However, we think a lot of Starbucks’ performance is due to passing on costs to the consumer and we retain a hold rating on the stock.

Westpac shares fell after reporting a 1.0% decline in its 2022 cash profit to $5.276 billion. Additionally, the bank noted the many uncertainties facing the company and their clients, including high inflation and rapidly rising interest rates however, they had not yet registered an increased in hardship or stressed assets. Most parts of the result were mostly inline but given the strong run in bank stocks over the last month investors were expecting better net interest margins towards the close of the year.

A mixed quarter from Amazon Inc. The company reported EPS of $0.31 per share or $2.9B, though this includes $1.1B in non-operating income from the company’s investment in Rivian, the electric truck manufacturer. “Actual” operating income was $1.8B. Net sales increased 15% to $127.1B; FX created a drag of ~$5B YoY. The company beat on EPS by ~36% while missing revenue expectations by about 0.29%. The stock sold off in the double digits after earnings, mostly on the back of management’s lowered guidance for Q4.

Booking Holdings reported both a strong revenue and EPS beat for the third quarter of 2022 as consumers begin to travel again and more of the world opens up. We anticipated this in our last report on the company, seeing the stock as a reopening play. The company reported revenue of $6.05B vs estimates of ~$5.9B and earnings per share of $53.03 vs. the street’s estimates of $49.85. Room nights booked were up 8% on a three-year stack. Q3 revenue was 20% higher on a three-year stack and adjusted operating earnings (EBITDA) was 7% higher. These are stellar results and the stock as justifiably rallied in spite of the broader market selloff. We reiterate what we have said in our reports on Visa and Mastercard: consumer spend is shifting from “things” to experiences and Booking Holdings benefits from this.

Shares in church payment software business PPH jumped after receiving a $1.34 per share takeover bid from Sixth Street and BGH Capital, who currently hold 20.34% of shares outstanding.