Stocks

Shares of Nike Inc fell sharply in aftermarket trading after missing on gross margin expectations. GM narrowed to 44.3% and mgmt reiterated that GM may decline another ~50bps this fiscal year. Revenue grew – up 10% on a currency neutral basis; Nike Direct sales were up 16% cur. neutral and Nike Online grew 23% cur. neutral. Inventory grew 40%. Diluted EPS were down 20% YoY (0.93), slightly beating analyst’s estimates.

We initiate coverage of Meta Platforms Inc (NASDAQ: META) with a SELL rating. Meta Platforms is the owner of Facebook, Instagram, and WhatsApp. We trust our readers are familiar enough with all three platforms – they are amongst the most widely used in the world – 2.87 billion people use one of Meta’s core products daily.

We think private equity is correct: music catalogues are an extremely valuable asset class. However, we prefer Warner Music Group and Universal Music Group as ways to “play” this, simply because they already own a lot of catalogues and are in the business of producing more at an up-front cost with the artists they’ve signed. Private equity and Hipgnosis is in the business of paying more aftermarket, which can hike up the price significantly — we prefer to own it at the source.

We initiate coverage of Brown-Forman with a BUY (underweight) rating. The company is engaged in the distillation and sale of liquor, including it’s flagship brand, Jack Daniel’s.

We initiate coverage of Adobe Systems Inc with a BUY rating. Recently the stock plunged +16% intraday due to its $20B acquisition of Figma, a collaborative workflow platform. Adobe is the software company behind Photoshop, inDesign, Adobe Acrobat (.pdfs) and other design-orientated software. The bulk of its revenue comes from Creative Cloud subscriptions, which are paid on a recurring basis.

We initiate coverage of Moët Hennessy Louis Vuitton (LVMH) with a BUY rating. The company is the pre-eminent luxury goods producer globally, controlling a sprawling network of luxury labels, jewellery, alcohol and cosmetics. The company is controlled by Bernard Arnault and family.

LYC shares have had a volatile in 2022 after an amazing run in 2021 where the stock rose +155%. The volatile year also allows us to identify a support level that can create an attractive entry point over the last 6 months, we see ‘strong support’ at $8.40, while the stock struggles to hold above $9.98 which we see as being overbought. Lynas shares rebounded strongly from its July lows, helped by its strong full year result benefiting from doubling is price of rare earths it produces, and delivering a record $540.8m net profit after tax. Lynas has strong cash reserves to expand its growth investing addition $500m to expand its Mt Weld. Lynas being the largest producer of rare earths outside of China means they gained US department of defence deal of $120m and favourable financing to work with JARE Japan Australia Rare Earths.

Shares in childcare centre operator G8 Education (GEM) have been under pressure. And unlike most of the market failed to recovery from June lows. This comes as the childcare operator delivered a weaker result after a challenging start to the year greatly impacted by covid-19 and flooding fortunately things recovered in the second quarter and occupancy rates are now nearing 2019 levels.

Genesis shares have held flat for the year, after their slide late last year as investors worried about the times of record low-interest rate environment would be over. Despite rates heading upwards aggressively this year, Genesis has held its value better as risk adverse investors appreciate its dependable dividend in-light of economic uncertainty. As seen below Genesis is fairly priced in our opinion at current levels as it offers an attractive dividend, while any levels below $2.60 would be considered oversold and tend to bounce back from that, and on the flipside above $3.25 can be viewed as an overbought level pushed by record low-interest rates (which pushes up asset prices higher, especially yield stocks) which was not permanent.