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Volkswagen share price sits at a make-or-break level

The Volkswagen share price has been in a freefall in the past few weeks as the company’s woes continue. The stock dropped to a low of €87.90 this week, its lowest swing since November 2020, and down by 50% from its highest point in 2022.

Mountain of challenges remain

Volkswagen and other automakers are having a bad year as competition rises and demand slips in key markets like China and Europe.

In the United States, Ford and General Motors have dropped by 50% from their 2022 highs. Electric vehicle companies like Tesla, Rivian, and Lucid Group are not doing well either while the likes of Fisker and Mullen Automotive are on life support.

In Europe, Stellantis, Renault, and BMW have dropped by over 30% from their year-to-date highs. The same is happening in Japan, where stocks of companies like Toyota and Honda have retreated.

The only country where automakers are doing modestly well is India, where companies like Tata Motors and Maruti Suzuki have jumped this year.

This month, Volkswagen made headlines when it announced its plans to start closing locations in Germany for the first time in decades, citing falling sales and need to boost efficiency.

The company’s key challenge is that its electric vehicles have not been all that successful while its European and Chinese markets are still under pressure. Additionally, Volkswagen is still dealing with rising costs as energy and labor remains significantly high in Europe. 

It is also facing substantial challenges as competition from Chinese companies like Xpeng, Nio, BYD, and Li Auto rise. These companies are targeting the European market as their growth at home slows.

Earnings are slowing

The most recent results showed that Volkswagen’s total units delivered to customers dropped by 3.8% in the last quarter to over 2.24 million and 4.38 million in the first half. 

Its quarterly revenues rose by 4% to €83.3 billion, helped by higher vehicle prices while its earnings after tax slipped to €3.6 billion. This decline happened even as its number employees continued falling. Most importantly, its net free cash flow stood at over €2.4 billion.

Analysts believe that Volkswagen’s turnaround strategy needs to work out well, a situation that will be highly difficult. For example, the decision to shut down locations in Germany, will be hard because of the government’s and union’s efforts. 

The other challenge is that Volkswagen has made a commitment to go all electric by 2035, a goal that seems unachievable because of the lukewarm demand in key markets like in the United States. 

It has made several measures to achieve its EV goal. In the US, it has invested over $5 billion in Rivian, the maker of the popular pickup trucks. That was a big investment, almost 50% of the company’s total market cap. 

While Rivian makes great vehicles, analysts warn that its cash burning track record may be untenable in the future. There are risks that Rivian will go bankrupt, according to analysts.

Most importantly, the company has invested in the battery technology by taking a big stake in QuantumScape, a company that is working on solid state batteries.

Volkswagen has also invested in Xpeng, a Chinese EV company. The investment aims to help it gain market share in key countries like the US and China. It is still unclear whether these investments will bear fruit in the long term.

What is clear, however, is that Volkswagen has a lot of work to do to regain its former glory as the automobile industry goes through a new normal.

Volkswagen share price analysis

Turning to the weekly chart, we see that the Volkswagen stock price peaked at €173.10 in 2021 and then dropped to a low of €87.90 this week as its woes escalated. 

The stock has failed to move below this level several times since July 2022, meaning that it is a strong support point. It has also dropped below the 50-week and 100-week moving averages. 

It also moved below the 61.8% Fibonacci Retracement point while the Relative Strength Index (RSI) has tilted downwards. Therefore, the path of the least resistance for the VW stock is downwards, especially if it drops below the key support at €90.72. If this happens, it will fall to the next key support at €77.90, the 78.6% retracement point.

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Citigroup stock needs to flip this price to continue its uptrend

Citigroup (NYSE: C) stock price has pulled back in the past two months as concerns about the pace of Federal Reserve interest rate cuts and its ongoing turnaround efforts remain. It retreated to a low of $58, down by 14% from its highest point this year, meaning that it is in a technical correction.

Citigroup’s turnaround measures

To a large extent, Citigroup is one of the cheapest banks in Wall Street. The company trades at a price-to-book ratio of 0.58, while JPMorgan, Goldman Sachs, Bank of America, and Morgan Stanley have a multiple of over 1.12. 

This valuation means that its market value is much lower than its book value. In other words, in a period of liquidation, Citi’s assets would be worth more than the current market value.

The company’s forward price-to-earnings ratio of 9.89 is also lower than the S&P 500 index average of 21 and that of other banks, which have a multiple of over 11. 

This valuation divergence is because of Citigroup’s long history of slow growth and scale. Unlike the other Wall Street banks, Citi is a global bank with branches from over 150 countries, making it a more difficult company to run. Instead, despite its size, JPMorgan is primarily an American company.

Citigroup’s scale also means that it has more employees than most banks. It has over 229k employees while Goldman Sachs and Morgan Stanley have 33k and 79k, respectively. JPMorgan and Bank of America have 313k and 212k, respectively.

Most importantly, past Citi’s CEOs have mostly focused on short-term profits instead of making substantial investments in technology. A good example of this is the company’s big mistake of sending millions of dollars to Revlon a few years ago.

Therefore, Jane Fraser, who became CEO in 2021, is working to turn the company around. She is exiting some of its international markets, including Mexico, where it hopes to spin its Banamex bank into a separately run company. The deal is expected to end in 2025. Analysts believe that the company has more foreign operations to shutter.

Citigroup is also working on its internal systems, which most people believe are mostly outdated. Fixing these systems will be a highly expensive affair, meaning that its profits could take a hit. Just recently, the company received a $60 million fine by the Federal Reserve Board for failure to hit key milestones on data quality management.

Additionally, Citi is laying off over 20,000 jobs,  merging divisions, and like other banks, she is focusing on the wealth management industry. 

Analysts believe that Citi’s turnaround measures will take a long time to engineer and to start bearing fruit. Some analysts believe that the company should consider separating its business into two entities: an American and an international bank.

However, this breakup will likely not happen because Citi’s vision is to be a banking partner for institutions with cross-border needs, a leader in wealth management, and a leader in personal bank in the US.

Ctigroup stock remains sharply lower than ATH

Citigroup’s stock has jumped by over 115% from its lowest point in 2020 and is up by over 56% from the year-to-date low. 

However, the stock remains 85% below its all-time high. In contrast, the other large Wall Street companies like JPM, GS, and Morgan Stanley are hovering near their all-time high. Crawling back to a record high of $395 will take more drastic measures. 

The most recent financial results showed that Citi’s revenues rose by 4% to over $20.1 billion while its net income jumped by 10% to $3.2 billion. Its earnings per share came in at $1.52, a 10% increase from the same period in 2023.

This growth happened even as its net interest income dropped by 3% to $13.49 billion. Its costs optimisation program led to a 2% decline in costs to over $13 billion.

Citigroup’s net interest margin fell slightly because of weak deposit growth as many customers moved their cash to money market funds. Customer deposits stood at $1.31 trillion, down from $1.38 trillion in the same period in 2023.

Therefore, from a fundamental aspect, I believe that Citi is a cheap bank whose management is taking the right measures. If it succeeds, then the company will be in a good place to narrow its valuation gap with the other banks.

Citi stock price analysis

Turning to the monthly chart, we see that the Citigroup share price has risen to a key area of resistance, where it failed to move above two times since January 2021. This price is also the upper side of the ascending triangle chart pattern. 

Therefore, the stock will only become a good buy if it crosses that area of resistance. If this happens, the next point to watch will be the psychological point at $100. Before that happens, there is a risk that it could drop and retest the ascending trendline that connects the lowest swings since March 2019.

The post Citigroup stock needs to flip this price to continue its uptrend appeared first on Invezz

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Politics

Why Mexico’s judicial reform is sparking controversy

Mexico’s recent Senate approval of a far-reaching judicial reform has ignited a heated debate among legal experts, judges, and international observers.

This reform, backed by the ruling party Movimiento Regeneración Nacional (Morena), is designed to overhaul Mexico’s judicial system by enabling the popular election of over 6,500 judges and magistrates starting in June 2025.

The proposed changes aim to enhance public accountability within the legal system but have been met with significant opposition and concern from various stakeholders.

Senate approval and legislative process

The reform was passed in the Senate with a vote of 86 in favor and 41 against, despite strong resistance from opposition parties such as Acción Nacional (PAN), Revolucionario Institucional (PRI), and Movimiento Ciudadano (MC).

This approval represents a significant legislative victory for Morena, which has a two-thirds supermajority in Congress.

The next phase involves the reform being reviewed by state legislatures, where Morena’s support base is expected to facilitate its passage.

Following successful passage, the reform will be officially published in Mexico’s government gazette, marking a critical step in its implementation.

Mexico judicial reform: opinions and concerns

Moisés Montiel, a prominent lawyer and professor at Mexico’s Center for Economic Research and Teaching, has raised substantial concerns about the implications of the proposed reform.

Montiel argues that electing judges through popular vote could undermine the independence of the judiciary and expose it to political pressures and external influences.

According to him, this change could lead to an erosion of judicial impartiality and increased susceptibility to manipulation.

Montiel acknowledges that the reform seeks to address some genuine issues within the Mexican judicial system, such as corruption, delays in legal proceedings, and restricted access to justice.

However, he criticizes the reform’s approach, which he believes may exacerbate existing problems rather than solve them.

He contends that the mass dismissal of district judges, circuit magistrates, and Supreme Court ministers, as outlined in the reform, could destabilize the judiciary and impact its effectiveness.

The reform initially proposed a comprehensive overhaul of the judiciary but has since evolved into a staggered replacement plan.

The first round of elections is set for 2025, with subsequent elections planned for 2027.

This gradual implementation is intended to ease the transition but also raises questions about the coherence and long-term impact of the reform.

The nomination process for new judges remains complex, with candidates to be selected from the executive, legislative, and judicial branches.

Montiel points out that the lack of clarity regarding nomination criteria and the absence of a transparent process could undermine the meritocratic nature of the new judicial appointments.

Judicial Discipline Tribunal

A particularly contentious aspect of the reform is the establishment of the Judicial Discipline Tribunal.

Montiel has expressed significant reservations about this tribunal, describing it as potentially becoming an “Inquisition of the Judicial Power.”

He argues that the tribunal’s broad grounds for dismissing judges, coupled with a voting mechanism that could be biased, poses a risk to judicial independence.

Montiel is concerned that judges could be removed without substantial justification, leading to a lack of recourse for those facing dismissal.

Montiel also highlights the potential negative impact of the reform on judicial efficiency.

He argues that without additional financial or material resources, the reform may fail to improve the handling of cases and could even slow down judicial processes.

The new judges, who may lack the experience necessary for effective court management, could further contribute to delays rather than enhancing efficiency.

Despite the accelerated timelines mandated by the reform, which require judges to justify delays in cases that have been pending for over two years, Montiel believes that the lack of resources will ultimately hinder progress.

Judicial quality and public perception

Another significant concern is the reform’s impact on the quality of the judiciary.

The reform stipulates that candidates for judicial positions must have achieved a minimum academic score and be licensed lawyers.

However, the specific requirements for postgraduate experience remain unclear.

Montiel criticizes this lack of clarity, suggesting that it could compromise the quality of the judicial personnel and raise serious concerns about the protection of citizens’ rights under the new regulations.

The reform has elicited strong reactions from various sectors, including academics and members of Mexican society.

Critics argue that the establishment of the Judicial Discipline Tribunal, combined with the insufficient resources allocated for judicial functions, could lead to unfair dismissals of judges and undermine the overall effectiveness of the judicial system.

These concerns underscore the complexity of the reform and the need for careful consideration of its potential implications.

Mexico’s judicial reform represents a bold attempt to address longstanding issues within the country’s legal system.

However, the controversy surrounding the reform highlights significant concerns about judicial independence, efficiency, and quality.

As Mexico moves forward with these changes, it is crucial to address the ambiguities and potential pitfalls of the reform to ensure that it achieves its intended goals without compromising the integrity of the judiciary.

The ongoing debate reflects broader questions about the balance between accountability and independence in judicial reforms, underscoring the need for a nuanced approach to strengthening Mexico’s legal system.

The post Why Mexico’s judicial reform is sparking controversy appeared first on Invezz

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Business

BMW share price: Rolls-Royce parent forms a dangerous pattern

The BMW share price has suffered a harsh reversal as the automobile industry goes through a difficult phase. It dropped for three consecutive weeks, reaching its lowest level since January 2023. It has retreated by over 32% from its highest point this year, meaning that it is in a deep bear market.

New normal for the auto industry

The automobile industry is going through a new normal as the electric vehicle growth slows and as China becomes a leading player.

A decade ago, China was a relatively small player in the vehicle manufacturing industry. Today, companies like BYD, which Warren Buffett backs, have become giants. China has even overtaken Japan as the biggest exporter of vehicles.

Most importantly, companies that have long dominated the Internal Combustion Engine (ICE) industry are having a difficult time competing with the new EV firms like Tesla, BYD, and Rivian.

In the United States, Ford and General Motors have been forced to cut their EV manufacturing ambitions significantly. The same is happening in Germany, where EV brands by BMW, Volkswagen, and Mercedes have not become highly popular.

This explains why most automobile stocks like Stellantis, Ford, General Motors, and Volkswagen have all tumbled in the past few months.

BMW is facing significant challenges

BMW, the parent company of Mini and Rolls-Royce, is facing significant challenges as growth in its key markets like China and Europe continues slowing down. 

These challenges have also pushed Volkswagen, another giant German company, to announce plans to shut down factories in Germany for the first time in decades. 

The most recent financial results showed that the company’s business was slowing. Its total revenue dropped by 0.7% in the second quarter to over €32.9 billion. In the first half of the year, revenues fell by 0.7% to over €73.5 billion.

Most of this slowdown was because of eliminations, which cost it over 5.8 billion. Instead, its automotive division‘s revenue rose by 1.4% to €32 billion while its financial services jumped by 10.8% to €9.7 billion. 

These results mean that BMW is doing relatively better than Volkswagen, which we covered before here. Unlike VW, which has numerous brands, BMW focuses on three brands: BMW, Mini, and Rolls-Royce. It is also a leading player in the motorcycle industry. 

While BMW’s sales were relatively strong, its profits were not, as the company continued to see elevated costs. As a result, its group profit dropped by 10.7% in the second quarter to €3.8 billion and to €7.93 billion in the year’s first half. It also slashed its guidance, which explains why the stock has tumbled.

Its flagship BMW deliveries rose by 2.2% to 565,490 while its Mini and Rolls-Royce units fell by 27% and 16%, respectively.

Catalysts and challenges

BMW is one of the best-known brands in the automobile industry with a presence around the world. 

The biggest catalyst for its brand is that it has a legacy of creating quality ICE vehicles, which will continue offsetting its losses in the EV industry. Like with most analysts, I believe that BMW should focus on being a leader in the ICE sector, instead of pouring substantial sums of money on the EV business.

Another option is where the company used its strong balance sheet to acquire some of the currently undervalued Chinese EV manufacturers. Potential acquisitions would be firms like Nio and Li Auto, which have valuations of $11.5 billion and $20 billion.

Such an acquisition would let the company continue to leverage its scale in the ICE industry while still having an edge in the EV sector. 

The other catalyst for BMW is that it is significantly cheaper compared to its peers. It trades at a 3.9x free cash flow and 2.16 forward earnings. It also has a price-to-book ratio of 0.52. 

BMW is fairly undervalued because investors anticipate weak demand in the coming years as the industry goes through a rough patch.

On the positive side, BMW is a great dividend payer with a yield of 8.01%, higher than companies like General Motors and Ford.

BMW share price analysis

The weekly chart shows that the BMW stock price formed a double-top chart pattern around the €106 level. In most cases, this is one of the most popular bearish signs in the market.

The stock has also dropped below the neckline at €81.65, its lowest swing in October last year. It has flipped below the 50-week and 200-week moving averages and the 38.2% Fibonacci Retracement level. 

The Relative Strength Index (RSI) and the MACD indicators have continued falling. Therefore, the path of the least resistance for the BMW share price is downwards, with the next point to watch being at the 61.8% retracement point at €58.32.

The post BMW share price: Rolls-Royce parent forms a dangerous pattern appeared first on Invezz

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Forex forecasts: South African rand (ZAR) and Turkish lira (TRY)

The forex market will be eventful this week as central banks in the US, Japan, and many other countries publish their interest rate decisions. The most notable one will be the Federal Reserve, which is expected to start cutting interest rates on Wednesday. This article looks at the South African rand (ZAR) and the Turkish lira (TRY).

South African rand analysis

The South African rand has been one of the best-performing currencies in the emerging markets. It has jumped by almost 9% from its lowest point this year and is hovering near its lowest level since July 2023.

The USD/ZAR exchange rate has pulled back because of the recent South African election where the ANC lost for the first time since the end of the apartheid.

The election loss has led the party to enter a deal with the business-friendly Democratic Alliance (DA). 

As a result, business confidence has bounced back in the past few months while consumers are doing relatively well. South African stocks have also jumped, helped by locals and international investors. 

Most importantly, there are signs that South Africa has started to handle the power crisis that has existed in the past few years. While load-shedding is still continuing, the frequency has improved in the past few months. South Africa’s credit rating has also been upgraded by agencies like Moody’s and S&P Global.

Therefore, the Reserve Bank of South Africa (SARB) will be in the spotlight as it delivers its interest rate decision this week.

Analysts believe that the bank will start cutting interest rates for the first time since 2020. Besides, there are signs that the country’s inflation is falling. Analysts expect the headline Consumer Price Index dropped to 4.5% in August, at the midpoint of its target.

USD/ZAR technical analysis

The daily chart shows that the USD to ZAR exchange rate has been in a downward trend. This sell-off could continue as the Federal Reserve cuts push more investors to emerging market countries like South Africa.

The USD/ZAR pair has dropped to a low of 17.7, a few points below the key support level at 17.86, its lowest point in June. It has remained below the 50-day and 200-day Exponential Moving Averages (EMA). 

The pair has also formed a bearish pennant chart pattern, a popular bearish sign. Therefore, it will likely continue falling as sellers target the next key support at 17.4, its lowest point in July 2023.

Turkish lira analysis

The Turkish lira will also be in the spotlight this week as the Central Bank of the Republic of Turkey (CBRT) delivers its interest rate decision. 

Like a few other banks, it is not expected to deliver a rate cut or hike in this meeting. Instead, it will leave rates unchanged at 50% for the sixth consecutive meeting. 

The CBRT is the central bank that is under intense pressure because of the currency’s depreciation and the elevated inflation.

The Turkish lira has crashed by over 15% this year and by 26% in the last 12 months. It has also dropped by 500% in the last five years. 

Nonetheless, there are some good news from Turkey. Recent data showed that the headline CPI dropped from over 72% to 52% and the CBRT hopes that it will end the year at about 40%.

The country has also received some credit upgrades. Earlier this month, the country was upgraded by Fitch to BB- because of its improved fiscal policy. Moody’s also upgraded the country for the first time in over a decade. S&P Global, the other giant ratings agency, has also upgraded the country.

These agencies cited the central bank’s orthodox policy, planned budget cuts, and wage adjustments. 

The outlook of the USD/TRY pair is nonetheless muted because President Erdogan can change it instantly. Unlike other countries, the Turkish president has the mandate to hire and fire central bank officials at will.

USD/TRY technical analysis

USD/TRY chart by TradingView

The weekly chart shows that the USD to TRY exchange rate has been in a strong bullish trend for a long time. It peaked at 34.46, up from last year’s low of 18.

The pair has constantly remained above all moving averages, meaning that bulls are in control. Therefore, the pair will likely remain in this range when the Fed and the CBRT makes their decisions. A Turkish lira rebound cannot be ruled out in the coming months as foreign investors move to the country.

The post Forex forecasts: South African rand (ZAR) and Turkish lira (TRY) appeared first on Invezz

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USD/JPY forecast: death cross forms ahead of Fed, BoJ decisions

The USD/JPY exchange rate slipped for the second consecutive week and reached its lowest point since December last year. It dropped to a low of 140.80, down by about 13% from its highest point this year, meaning that it has moved into a correction.

The GBP/JPY, EUR/JPY pairs have also slipped to 185 and 156, down by over 10% from their highest levels this year. The AUD/JPY fell to 94.42, its lowest point since July 5.

Federal Reserve interest rate decision

The USD/JPY exchange rate has pulled back sharply as investors anticipate the upcoming Federal Reserve interest rate decision.

Recent economic numbers show that the economy was softening, meaning that the Fed will need to intervene with interest rate cuts.

Data released earlier this month showed that the unemployment rate remained stubbornly above 4% in August as the economy created 113k jobs. 

There are signs that the number of nonfarm payrolls (NFP) were weaker than the reported ones. The Bureau of Labor Statistics (BLS) has revised the number of jobs added to the economy in the past few months.

In a recent report, the bureau revised downwards the number of jobs created in the twelve months to March by over 818,000. 

Meanwhile, there are signs that the US inflation is falling and that it could drop to the Fed’s target of 2.0%. Data released last week showed that the headline Consumer Price Index (CPI) dropped from 2.9% in July to 2.5% in August, its lowest level in months. 

There are signs that the country’s inflation is falling as energy prices have slipped. Brent, the global benchmark, dropped to $71 while the West Texas Intermediate (WTI) fell to $69. As a result, gasoline prices have moved downwards in the past few months. 

Therefore, the expectation is that the Federal Reserve will cut interest rates by either 0.25% or 0.50% in this meeting. In a note, a Bloomberg analyst said:

“We think Fed Chair Jerome Powell supports a 50-basis point cut. However, the lack of a clear signal from New York Fed President John Williams before the pre-meeting blackout period makes us think Powell doesn’t have the full committee’s support.”

The Fed cut will come a week after the European Central Bank delivered its second interest rate cut of the year to avert the country’s slowdown. 

Bank of Japan decision

The other big catalyst for the USD/JPY exchange rate will be the upcoming BoJ interest rate decision on Friday.

This decision will come a month after the bank roiled the market by delivering its second interest rate hike of the year. 

Economists expect that the central bank will embrace a wait-and-see approach in this meeting even as inflation has remained stubbornly high.

The most recent data showed that the headline Consumer Price Index (CPI) remained at 2.8% in July, higher than the median estimate of 2.7%. It has risen from a low of 2.2% earlier this year. 

There are also signs that the Japanese economy is slowing. The most recent economic data showed that the GDP expanded by 2.9% in the second quarter, missing the expected 3.1%. 

A key concern for Japan is that the automobile industry is going through big changes, with China being a dominant player. Also, China is dominating other industries in Southeast Asia and Japan used to be a big player.

Japanese yen carry trade unwind

The BoJ and Fed decisions will be notable because of the carry trade that has existed for many years. A carry trade is a situation where investors borrow money in low-interest-rate countries and invest in higher-rate countries. 

In the past, it has been highly profitable to borrow in Japan, which had negative interest rates, to invest in the US. Now, with the Fed cutting rates, and the BoJ relatively hawkish, the spread has narrowed, making the carry trade unattractive. 

Therefore, the main actions of the Fed and BoJ will likely not have a big impact on the USD/JPY pair. Instead, the pair will react to the statements by Powell and BoJ’s Kazuo Uoda, who will hint on the next actions. 

USD/JPY technical analysis

USD/JPY chart by TradingView

The daily chart shows that the USD to JPY exchange rate peaked at over 160 earlier this year and then suffered a harsh reversal as the BoJ started to hike rates. 

Most recently, the pair has formed a death cross pattern as the 200-day and 50-day Exponential Moving Averages (EMA) crossed each other. A death cross is one of the most bearish patterns in the market.

The pair has also dropped below the key support level at 141.67, its lowest level in August. Therefore, the pair will likely continue falling as sellers target the key support level at 137.16, its lowest swing since July last year.

The post USD/JPY forecast: death cross forms ahead of Fed, BoJ decisions appeared first on Invezz

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Stocks

Is Uber a buy following robotaxi deal with Waymo?

Uber Technologies Inc. (NYSE: UBER) saw its stock jump over 5% on Friday after announcing an expanded partnership with Waymo, the autonomous driving subsidiary of Alphabet Inc.

The collaboration will bring fully autonomous ride-hailing services to Austin and Atlanta by early 2025, marking a significant milestone in Uber’s strategy to integrate autonomous vehicles (AVs) into its platform.

Waymo’s all-electric Jaguar I-PACE vehicles will be available for UberX, Uber Green, Uber Comfort, and Uber Comfort Electric rides in these cities, with plans to scale the fleet into the hundreds over time.

This expansion builds on Uber’s previous deals, including a multiyear partnership with General Motors’ Cruise, which will bring Chevy Bolt-based autonomous vehicles to Uber’s platform next year.

The announcement of this expanded partnership comes on the heels of Uber’s strategic investment in AI tech firm Wayve, which is focused on developing Level 4 autonomous vehicles.

This move signals Uber’s commitment to advancing its AV capabilities and maintaining its competitive edge as the technology matures.

Additionally, Uber’s recent $4 billion bond offering, following its upgrade to investment-grade status by major credit rating agencies, underscores its solid financial position.

The proceeds from this offering will be used to pay down existing debt, further strengthening Uber’s balance sheet.

Uber Q2 2024 performance

Uber’s Q2 2024 earnings report further highlighted the company’s strong financial performance.

The company posted revenue of $10.7 billion, up 15.9% year-over-year, beating analyst expectations by $120 million.

Gross bookings grew by 19% YoY to $40 billion, driven by a 23% increase in Mobility bookings and a 16% rise in Delivery bookings.

The company achieved an adjusted EBITDA of $1.6 billion, a 71% YoY increase, demonstrating significant operational efficiency.

Uber also generated $1.7 billion in free cash flow, ending the quarter with $6.3 billion in unrestricted cash and short-term investments.

Uber’s capital-light approach

Despite the positive earnings, Uber continues to navigate a dynamic and competitive landscape.

The company is making significant strides in the AV space, evidenced by its partnerships with Waymo, Cruise, and BYD.

Uber’s CEO Dara Khosrowshahi has emphasized the company’s focus on leveraging these partnerships to enhance its platform while maintaining a capital-light approach.

Khosrowshahi also highlighted growth opportunities in advertising, particularly in sponsor listings and grocery delivery, which have seen substantial gains in recent quarters.

Uber’s ongoing expansion into international markets, including its recent growth in South Korea despite stiff competition from local players, further underscores its global ambitions.

The company has managed to capture nearly 20% of the South Korean taxi market, with a significant year-over-year increase in passenger numbers.

This growth is supported by Uber’s broader strategy of becoming a transportation super app, offering a range of services at different price points to increase user loyalty and spending.

Uber stock valuation

On the valuation front, Uber currently trades at a forward EV/EBITDA multiple of 22.8x, reflecting a market that recognizes its growth potential but remains cautious of the challenges ahead.

The stock’s recent rally, fueled by strong Q2 results and strategic partnerships, suggests that there is still room for upside, particularly as Uber continues to innovate in the AV space and expand its advertising business, which now contributes over $1 billion annually.

As investors digest these developments, it’s essential to consider how they are reflected in the stock’s current price action.

With significant catalysts on the horizon, we now turn to the charts to analyze the technical patterns and indicators that could guide Uber’s stock movement in the coming weeks.

Uber stock technical analysis

Uber’s stock saw a rapid surge from $30 levels to above $80 between April last year and March this year.

However, the stock has lost some steam since then.

Source: TradingView

It has been making lower highs and lower lows since March indicating a medium-term downtrend.

Moreover, the stock has faced significant resistance trading above $74.5 since May.

Hence, investors who are bullish on the stock must wait for it to give a weekly closing above $74.5 before initiating a fresh long position.

Traders who have a bearish outlook on the stock can initiate a short position at current levels near $71.5 with a stop loss of $75.1.

If the bearish momentum intensifies it can again take the stock below $60, where one can book profits.

The post Is Uber a buy following robotaxi deal with Waymo? appeared first on Invezz

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Stocks

Volkswagen share price sits at a make-or-break level

The Volkswagen share price has been in a freefall in the past few weeks as the company’s woes continue. The stock dropped to a low of €87.90 this week, its lowest swing since November 2020, and down by 50% from its highest point in 2022.

Mountain of challenges remain

Volkswagen and other automakers are having a bad year as competition rises and demand slips in key markets like China and Europe.

In the United States, Ford and General Motors have dropped by 50% from their 2022 highs. Electric vehicle companies like Tesla, Rivian, and Lucid Group are not doing well either while the likes of Fisker and Mullen Automotive are on life support.

In Europe, Stellantis, Renault, and BMW have dropped by over 30% from their year-to-date highs. The same is happening in Japan, where stocks of companies like Toyota and Honda have retreated.

The only country where automakers are doing modestly well is India, where companies like Tata Motors and Maruti Suzuki have jumped this year.

This month, Volkswagen made headlines when it announced its plans to start closing locations in Germany for the first time in decades, citing falling sales and need to boost efficiency.

The company’s key challenge is that its electric vehicles have not been all that successful while its European and Chinese markets are still under pressure. Additionally, Volkswagen is still dealing with rising costs as energy and labor remains significantly high in Europe. 

It is also facing substantial challenges as competition from Chinese companies like Xpeng, Nio, BYD, and Li Auto rise. These companies are targeting the European market as their growth at home slows.

Earnings are slowing

The most recent results showed that Volkswagen’s total units delivered to customers dropped by 3.8% in the last quarter to over 2.24 million and 4.38 million in the first half. 

Its quarterly revenues rose by 4% to €83.3 billion, helped by higher vehicle prices while its earnings after tax slipped to €3.6 billion. This decline happened even as its number employees continued falling. Most importantly, its net free cash flow stood at over €2.4 billion.

Analysts believe that Volkswagen’s turnaround strategy needs to work out well, a situation that will be highly difficult. For example, the decision to shut down locations in Germany, will be hard because of the government’s and union’s efforts. 

The other challenge is that Volkswagen has made a commitment to go all electric by 2035, a goal that seems unachievable because of the lukewarm demand in key markets like in the United States. 

It has made several measures to achieve its EV goal. In the US, it has invested over $5 billion in Rivian, the maker of the popular pickup trucks. That was a big investment, almost 50% of the company’s total market cap. 

While Rivian makes great vehicles, analysts warn that its cash burning track record may be untenable in the future. There are risks that Rivian will go bankrupt, according to analysts.

Most importantly, the company has invested in the battery technology by taking a big stake in QuantumScape, a company that is working on solid state batteries.

Volkswagen has also invested in Xpeng, a Chinese EV company. The investment aims to help it gain market share in key countries like the US and China. It is still unclear whether these investments will bear fruit in the long term.

What is clear, however, is that Volkswagen has a lot of work to do to regain its former glory as the automobile industry goes through a new normal.

Volkswagen share price analysis

Turning to the weekly chart, we see that the Volkswagen stock price peaked at €173.10 in 2021 and then dropped to a low of €87.90 this week as its woes escalated. 

The stock has failed to move below this level several times since July 2022, meaning that it is a strong support point. It has also dropped below the 50-week and 100-week moving averages. 

It also moved below the 61.8% Fibonacci Retracement point while the Relative Strength Index (RSI) has tilted downwards. Therefore, the path of the least resistance for the VW stock is downwards, especially if it drops below the key support at €90.72. If this happens, it will fall to the next key support at €77.90, the 78.6% retracement point.

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Citigroup stock needs to flip this price to continue its uptrend

Citigroup (NYSE: C) stock price has pulled back in the past two months as concerns about the pace of Federal Reserve interest rate cuts and its ongoing turnaround efforts remain. It retreated to a low of $58, down by 14% from its highest point this year, meaning that it is in a technical correction.

Citigroup’s turnaround measures

To a large extent, Citigroup is one of the cheapest banks in Wall Street. The company trades at a price-to-book ratio of 0.58, while JPMorgan, Goldman Sachs, Bank of America, and Morgan Stanley have a multiple of over 1.12. 

This valuation means that its market value is much lower than its book value. In other words, in a period of liquidation, Citi’s assets would be worth more than the current market value.

The company’s forward price-to-earnings ratio of 9.89 is also lower than the S&P 500 index average of 21 and that of other banks, which have a multiple of over 11. 

This valuation divergence is because of Citigroup’s long history of slow growth and scale. Unlike the other Wall Street banks, Citi is a global bank with branches from over 150 countries, making it a more difficult company to run. Instead, despite its size, JPMorgan is primarily an American company.

Citigroup’s scale also means that it has more employees than most banks. It has over 229k employees while Goldman Sachs and Morgan Stanley have 33k and 79k, respectively. JPMorgan and Bank of America have 313k and 212k, respectively.

Most importantly, past Citi’s CEOs have mostly focused on short-term profits instead of making substantial investments in technology. A good example of this is the company’s big mistake of sending millions of dollars to Revlon a few years ago.

Therefore, Jane Fraser, who became CEO in 2021, is working to turn the company around. She is exiting some of its international markets, including Mexico, where it hopes to spin its Banamex bank into a separately run company. The deal is expected to end in 2025. Analysts believe that the company has more foreign operations to shutter.

Citigroup is also working on its internal systems, which most people believe are mostly outdated. Fixing these systems will be a highly expensive affair, meaning that its profits could take a hit. Just recently, the company received a $60 million fine by the Federal Reserve Board for failure to hit key milestones on data quality management.

Additionally, Citi is laying off over 20,000 jobs,  merging divisions, and like other banks, she is focusing on the wealth management industry. 

Analysts believe that Citi’s turnaround measures will take a long time to engineer and to start bearing fruit. Some analysts believe that the company should consider separating its business into two entities: an American and an international bank.

However, this breakup will likely not happen because Citi’s vision is to be a banking partner for institutions with cross-border needs, a leader in wealth management, and a leader in personal bank in the US.

Ctigroup stock remains sharply lower than ATH

Citigroup’s stock has jumped by over 115% from its lowest point in 2020 and is up by over 56% from the year-to-date low. 

However, the stock remains 85% below its all-time high. In contrast, the other large Wall Street companies like JPM, GS, and Morgan Stanley are hovering near their all-time high. Crawling back to a record high of $395 will take more drastic measures. 

The most recent financial results showed that Citi’s revenues rose by 4% to over $20.1 billion while its net income jumped by 10% to $3.2 billion. Its earnings per share came in at $1.52, a 10% increase from the same period in 2023.

This growth happened even as its net interest income dropped by 3% to $13.49 billion. Its costs optimisation program led to a 2% decline in costs to over $13 billion.

Citigroup’s net interest margin fell slightly because of weak deposit growth as many customers moved their cash to money market funds. Customer deposits stood at $1.31 trillion, down from $1.38 trillion in the same period in 2023.

Therefore, from a fundamental aspect, I believe that Citi is a cheap bank whose management is taking the right measures. If it succeeds, then the company will be in a good place to narrow its valuation gap with the other banks.

Citi stock price analysis

Turning to the monthly chart, we see that the Citigroup share price has risen to a key area of resistance, where it failed to move above two times since January 2021. This price is also the upper side of the ascending triangle chart pattern. 

Therefore, the stock will only become a good buy if it crosses that area of resistance. If this happens, the next point to watch will be the psychological point at $100. Before that happens, there is a risk that it could drop and retest the ascending trendline that connects the lowest swings since March 2019.

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Italian espresso prices could rise by 66% as global coffee costs soar

Italy’s cherished coffee culture is facing a significant challenge as global coffee bean prices surge to record highs, potentially forcing Italians to pay up to €2 for their beloved espresso shots.

This price increase, which could be as much as 66% higher than current rates, is stirring concern among consumers and cafe owners alike in a country where affordable coffee has long been a cultural staple.

Italians, accustomed to paying around €1.20 for an espresso or €1.50 for a cappuccino, are now bracing for a substantial price hike.

Coffee price hikes can disrupt lifestyle

Luigi Morello, president of the Italian Espresso Institute, which certifies quality, expressed the widespread anxiety:

Everybody is quite nervous, afraid and panicking about the price of espresso.

The potential price increase threatens to disrupt a deeply ingrained social habit.

Assoutenti, a prominent consumer association, estimates that Italians and foreign tourists consume a staggering 6 billion coffees annually at public establishments, generating revenues of approximately €7 billion.

This heavy caffeine habit has been fueled by the traditionally low coffee prices in Italy, which are among the lowest in Western Europe.

However, global coffee supply chains are facing significant disruptions due to climate change and recent geopolitical events.

Coffee futures prices skyrocket

Coffee futures prices have skyrocketed, with higher-end arabica coffee trading at $2.49 per pound and robusta beans topping $5,000 per tonne – double the prices from a year ago.

The situation has been exacerbated by Houthi militant attacks on ships in the Red Sea, forcing vessels to take longer routes and further straining supply chains.

Consumer groups are voicing their concerns about the impact of these price increases on daily life.

Gabriele Melluso, president of Assoutenti, warned that further price hikes at local cafes could threaten “a daily ritual for millions of citizens.”

There are fears that some Italians might resort to drinking coffee at home, using machines acquired during the COVID-19 pandemic, or even forgo their espresso habit entirely.

Coffee industry says price rises are bound to happen

The coffee industry, however, argues that price increases are unavoidable.

Representatives of baristas and cafe owners point out that traditional coffee bars, where espresso and related drinks can account for up to 30% of sales, are particularly vulnerable to rising costs.

Luciano Sbraga, deputy president of the Federation of Italian Public Establishments, painted a grim picture of the situation:

Dedicated coffee bars are in trouble. They can only work if they are run by families, with no employees, and no expensive locations. Then you can keep yourself alive.

The situation is complicated by Italy’s historical relationship with coffee pricing. For years, Rome regulated the price of espresso to keep it affordable for all.

Although these price controls ended decades ago, the expectation of cheap coffee remains deeply ingrained in Italian culture. Cafe owners face not only economic pressures but also social ones, as they are often deeply embedded in their local communities.

“There is an expectation among the people to have a fixed price, which is a political price,” Morello explained.

From the other side, baristas are afraid to increase too much, so as not to lose the volume.

This cultural expectation creates a challenging balancing act for cafe owners. Gianni Manganiello, who runs the Tazza D’Oro coffee shop in Rome’s Centocelle district, recently increased his espresso price from 90 cents to €1 per cup.

While he’s open to a further 10% increase if raw material costs continue to rise, he emphasizes the need for caution: “You can’t increase every price or all the customers disappear. You have to maintain a balance.”

Inflation adds further pressure

The pressure on cafe owners is multifaceted. In addition to rising coffee bean prices, they are also grappling with increased energy costs and other inflationary pressures. Consumer groups note that espresso prices have already risen by about 15% since 2021.

Major coffee roasters are also feeling the pinch and have already raised their prices. Industry leaders like Giuseppe Lavazza, chair of Lavazza Group, and Cristina Scocchia, chief executive of Illycaffè, have publicly warned of further price increases on the horizon.

Despite these warnings, some consumer advocates argue that coffee bars still maintain significant profit margins.

Melluso of Assoutenti contends that “the production cost of a cup is significantly lower than the selling price, and profit margins continue.”

This view, however, is contested by industry representatives who point to the increasing costs across the supply chain.

The situation has led to some creative solutions. In Liguria, one bar owner responded to customer complaints about prices by offering to sell espresso for just 70 cents if customers brought their cups, spoons, and sugar from home.

Such initiatives highlight the lengths to which some cafe owners are willing to go to maintain their customer base while grappling with rising costs.

As the Italian coffee industry navigates these turbulent waters, the outcome remains uncertain. Will Italians adapt to higher prices, or will their coffee consumption habits change dramatically?

The answers to these questions could have far-reaching implications for Italy’s cafe culture, tourism industry, and daily social life.

For now, Italians are holding their breath – and their wallets – as they wait to see how much their next cup of coffee will cost.

The coming months will reveal whether the country’s longstanding love affair with affordable espresso can withstand the pressures of global economic forces.

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