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What is happening with cocoa, wheat, soybeans, orange juice prices?

Agricultural commodities have been in the spotlight this month as investors focused on the recent hurricanes in the US and weather-related events. There are also concerns about the upcoming American election and its impact on key commodities like soybeans and wheat. 

Soybeans price analysis

Soybeans continued its strong downward trend this week, reaching a low of $9.7, its lowest level since September 2020. It has dropped by about 44.2% from its highest level this year. 

The main catalyst for soybeans will be the US general election and the rising odds that Donald Trump will win a second time.

Polymarket, the popular prediction market, has placed his odd of victory at 62%, its highest point since ever. Similarly, Kalshi and PredictIt give him higher chances of winning against Kamala Harris.

Donald Trump would have a big impact on the soybean market because of his pledge to levy substantial tariffs on Chinese imports. He has floated a universal tariff of 20% on goods from all countries, with China suffering a 60% tariff hike.

Most economists believe that substantially high tariffs will lead to more inflation because these costs will be passed to consumers. That’s mostly because the US depends on China for most items. 

Also, the rising wages in the US mean that it is not likely for manufacturers to shift their operations in the United States.

Therefore, China will likely respond to these tariff threats by targeting the American agricultural sector, which is a crucial constituent of Donald Trump. 

The country has also been boosting its local soybean production. Data shows that China produced 20.8 million metric tons in 2023 and it hopes to get to 32 million tons by 2032. This is part of an elaborate strategy to reduce demand for its American soybeans. 

Technically, there are signs that the soybeans price has formed a small double-bottom at $9.78. In most periods, this is one of the most bullish patterns in the market, meaning that it may bounce back towards the election. 

A drop below this support at $9.78 will point to more weakness in the near term. Besides, as shown below, soybeans has formed a death cross on the weekly chart as the 200-week and 50-week moving averages crossed each other.

Soybeans chart by TradingView

Read more: US traders scramble to export soybeans ahead of potential China tariffs

Orange juice price analysis

Orange juice price has been in a strong uptrend in the past few years. Data shows that the price of the frozen concentrate rose to a record high of $509 earlier this week. It has soared by over 413% from its lowest point in 2020.

Florida is the main reason for the ongoing surge in orange juice prices. The state, which is the biggest producer in the US, has gone through several severe hurricanes that have destroyed thousands of trees. 

The most recent one was Hurricane Milton, which caused substantial damage to the state’s citrus. Therefore, there are rising odds that the state will not hit its production target for the year. 

Florida was expected to produce 20.5 million boxes of oranges this year, a 30% increase from last year. 

The rising waves of hurricanes mean that many citrus farmers will likely shift to other plants, which will lead to higher orange juice prices. 

Wheat price analysis

Wheat prices have held steady in the past few weeks, rising from a low of $4.96 to $5.58. This jump was mostly because of the ongoing weather-related issues in Russia, a leading producer. 

Data released this year showed that Russia’s wheat production will drop for the third consecutive year because of the hotter weather than expected. Its wheat production is expected to be about 80.1 million tons, the smallest production since the 2021 and 2022 seasons. 

Other countries like the United States and those in Europe have also reported weaker production in the past few years. However, the most recent data by the USDA shows that the US production will jump by 9% this year to 1.9 billion bushels. This increase is because of the increased planted area and higher yields. 

Therefore, there is a likelihood that wheat prices will remain on edge in the coming days as traders watch for more data.

Cocoa price finds support

Cocoa chart by TradingView

Meanwhile, cocoa is no longer the red-hot commodity it was a few months ago when its price surged to a record high. It has dropped by over 36% from its highest point this year, meaning that it is in a deep bear market.

Most recently, cocoa has found strong support at $7,566, where it failed to drop below since July this year. It has also dropped below the 50-week moving average. Most notably, it has found substantial support at the 200-day moving average.

Therefore, a break below the current level will point to more selloffs, with the next point to watch being at $7,000.

The post What is happening with cocoa, wheat, soybeans, orange juice prices? appeared first on Invezz

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Tilray Brands stock analysis: attractive risk/reward?

Tilray Brands (TLRY) stock price has gone nowhere in the past few months. It has found a strong support level at $1.61, where it has failed to move below since November last year. It remains about 50% below the highest point in 2023, and is 97% below the 2021 high. 

Cannabis industry is under pressure

The cannabis industry has come under pressure in the past few years amid rising pricing and regulation risks in key markets.

For example, in Canada, a key market for cannabis, prices have dropped sharply in the past few years as the number of companies has grown. There are now over 900 licensed cannabis companies in Canada.

Lower cannabis prices mean that companies like Tilray Brands, Aurora Cannabis, and Canopy Growth are making less money for each product sold, while still paying substantial taxes. In a recent statement, Irwin Simon, Tilray’s CEO, said that this price compression had costed it $200 million in the past few years.

Other markets are not doing well either. Cannabis is still not yet fully legal in the United States, and the process will likely take longer.

While cannabis has been made legal in the country, there are still major barriers that have hindered the sector. One of it is banking, where many major banks still don’t do business with firms in the cannabis industry because of strict anti-money laundering rules.

The other big issue is that, like in Canada, there are now thousands of cannabis companies in the US. It is estimated that there are over 10,000 licensed players in the sector. 

Worse, there are signs that the reclassification process and the banking bill that the Senate has been working on will not go on.

If Donald Trump wins, there are chances that the cannabis reclassification process to a less harmful product will stall. Also, with the Senate and the House of Representative expected to be divided, no major banking legislation will continue. 

There are rising odds that Donald Trump will win, with Polymarket placing his odds at 63%. Also, there are rising odds that Republicans will dominate in other state elections. 

Read more: Tilray Brands stock sits at a make-or-break price: now what?

Tilray Brands is no longer just a cannabis company

Tilray Brands is significantly different from other companies in the industry. For one, unlike most of them, it has worked to diversify its business by investing in the beverage industry.

It did that through acquisitions and internal research and development (R&D). For example, the company acquired eight beer brands from AB InBev in 2023 and additional more from Molson Coors this year. The company also owns SweetWater Brewing Company through its Aphria buyout. 

Therefore, it hopes that these acquisitions will help its business continue growing in the next few years. Also, it wants the cannabis and alcohol businesses to even out each other. In this, if the cannanis industry struggles, then it will be offset by the alcohol business. 

To be clear: investing in the alcohol business is a risky bet now that the young people are not drinking as much as their parents did in the past. Nonetheless, there is a room for growth, especially in the craft brewing sector, where Tilray is now one of the biggest brands. 

The company also hopes that its cannabis business will rocket higher when the US passes friendly regulations in the future. This is notable since Tilray does not have a big presence in the US cannabis industry.

Read more: Tilray Brands stock price analysis: risky but a short squeeze is likely

Diversification is paying off

There are rising signs that the diversification process is starting to pay off even though it is too early to tell.

Its beverage alcohol revenue came in at $56 million in the last quarter, a 132% increase. The cannabis revenue rose to $61.2 million, while its distribution and wellness revenues rose to $68.1 million and $14.8 million, respectively. 

The cannabis gross margin came in at 40%, while the beverage business has 41%. The other two businesses have lesser margins.

Additionally, the company has diversified its sources of revenue because of its strong presence in Germany. 

The other catalyst is that Tilray Brands is seeing improved bottom line. Its net loss in the last quarter was $34 million, a 38% improvement from the $55.9 million it lost in the same period last year.

Tilray Brands stock analysis

TLRY chart by TradingView

The daily chart shows that the TLRY share price has found a strong bottom at $1.61, meaning that sellers are afraid of shorting it below that level. As such, there are signs that the stock has bottomed, meaning that a bullish breakout cannot be ruled out.

Tilray’s stock remains below all moving averages, meaning that sellers are a bit in control for now. 

Therefore, from a risk/reward perspective, I believe that the stock may stage a comeback in the near term. If this happens, it may rally to $2.95, its highest point on April 4, which is about 72% higher than the current level. A break below the support at $1.61 will point to more downside, potentially to below $1.

The post Tilray Brands stock analysis: attractive risk/reward? appeared first on Invezz

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Joby Aviation vs Archer: one is a better flying car stock for now

Archer Aviation (ACHR) and Joby Aviation (JOBY) stocks have bounced back in the past few weeks as investors have embraced a risk-on sentiment in the market. JOBY jumped to a high of $6.25 on Tuesday, up by 37% above its lowest point this year.

Similarly, Archer Aviation, which is backed by Stellantis, rose to $3.30, also higher than the year-to-date low of $2.82. Other flying car stocks like Lilium, Ehang,  and Vertical Aerospace also bounced back.

The rebound this week after the Federal Aviation Administration (FAA) finalized comprehensive pilot training and certification rules for flying taxis. In its statement, the agency said that the rule was the final piece in the puzzle for safely introducing these aircrafts in the near term.

Archer and Joby Aviation have been working through the certification process as they work towards the commercialisation phase. 

The two have received most of the certificates they need to start flying their aircraft, with their management expecting final approvals either in 2025 or in 2026. Most recently, Joby Aviation has applied for certifications in other countries like Australia and the United Arab Emirates (UAE).

Joby Aviation stock analysis

JOBY, the biggest company in the EVTOL industry by market cap, will use a different business model compared to other companies. 

It will do the manufacturing process and then offer the mobility solutions itself or through partnerships. The core of its offering is its aerial ridesharing service, where customers will be able to book flights using their smartphones. 

This model will ensure that the company makes money by selling its aircraft and then earning recurring revenues through the life of the aircraft.

Joby Aviation has made a lot of progress in the past few months as it prepares for commercialisation. The most recent announcement was that it received a $500 million investment from Toyota, one of its core clients. Toyota has invested $894 million in the company so far.

This investment is notable for three reasons. First, Toyota is one of the best manufacturers globally. As such, it will likely have a positive influence in the company’s manufacturing process over time.

Second, the investment has boosted its balance sheet, by bringing its cash and short-term investments to over $1.3 billion today. 

Third, there are chances that the partnership will unlock Joby Aviation’s business in Japan, where Toyota has a large presence. 

The daily chart shows that Joby Aviation is a good speculative buy for now. It has formed an ascending double-bottom chart pattern, a popular bullish sign whose neckline was at $7.68, its highest point on June 16.

Joby Aviation is also about to form a golden cross as the 50-day and 200-day Exponential Moving Averages (EMA) cross each other. It is also approaching the 61.8% Fibonacci Retracement point.

Therefore, there are odds that the JOBY stock will have more upside, with the initial target being at $7.68, which is about 25% above the current level. A move above that level will point to more gains.

Joby chart by TradingView

Archer Aviation stock analysis

Archer Aviation is another large company in the flying car industry. The company will have two lines of businesses after receiving certificates by the FAA. It will have Archer UAM, where it will operate its aircraft in select cities by letting customers book through an app. 

Archer Direct, its other business, will let it sell aircraft to third parties. For example, it has a large deal with United Airlines, which will buy up to $1 billion worth of aircraft. The deal also has an option for another $500 million worth of aircraft. Also, it has a large deal with the US Airforce. 

Like Joby Aviation, Archer also raised $400 million from Stellantis a few months ago. Stellantis, the parent company of Jeep and Chrysler, will also help it in the manufacturing process. In this deal, Stellantis will fund its manufacturing, and then receive shares each quarters in return. 

Read more: Archer Aviation: risk/reward analysis for this flying car stock

The challenge, therefore, is that the company will continue to dilute its investors as it has done in the past few years. Archer’s outstanding shares have jumped from just 50 million in 2020 to almost 300 million today, and the trend may continue.

The daily chart shows that the ACHR stock price has been in a downtrend, falling from last year’s high of $7.50 to a low of $3. It has remained below the 50-day and 200-day moving averages.

Archer Aviation stock has also formed what looks like a double-bottom chart pattern. The Relative Strength Index (RSI) has also continued rising, and has moved above the neutral point at 50. 

Therefore, there are rising odds that the Archer Aviation shares will bounce back in the near term. However, for this to happen, it needs to remain above the key support at $3. A drop below that point will lead to more losses in the near term.

Therefore, I believe that Joby Aviation is a better investment for now based on its technicals and fundamentals.

Archer Aviation chart by TradingView

Read more: Analysts are upbeat about Archer Aviation stock: should you?

The post Joby Aviation vs Archer: one is a better flying car stock for now appeared first on Invezz

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Deutsche Bank beat third-quarter expectations, but what drove the surge?

Deutsche Bank, Germany’s largest lender, returned to profit in the third quarter, reporting a net income of €1.461 billion ($1.58 billion) attributable to shareholders.

This surpasses the €1.047 billion forecast by analysts polled by LSEG.

The bank’s Q3 performance marks a turnaround from a €143 million loss in the previous quarter, driven by improved litigation provisions and a strong revenue stream.

Amid challenging market conditions and declining interest rates, Deutsche Bank’s results reflect its strategic shift towards cost-saving measures and a renewed focus on shareholder returns.

Deutsche Bank Q3 revenue hits €7.5 billion

  • Revenue reached €7.5 billion in Q3, exceeding the €7.338 billion anticipated by analysts.
  • Profit before tax jumped 31% year-on-year to €2.26 billion.
  • Provision for credit losses increased to €494 million, compared to €245 million a year ago.
  • CET 1 capital ratio improved to 13.8%, up from 13.5% in Q2.
  • Return on tangible equity (ROTE) rose to 10.2% from 7.3% year-over-year.

Cost-saving efforts key to Deutsche Bank’s Q3 recovery

Deutsche Bank’s profitability in Q3 is partly attributed to its ongoing cost-cutting program.

The bank aims to reduce its headcount by 3,500 roles by 2025, including 800 job cuts announced last year.

The savings initiative aligns with broader industry trends, as European banks adjust to a shifting interest rate environment.

Analysts suggest that further cost reductions will be essential to maintain competitive margins amidst softer market conditions.

The partial release of €440 million in litigation provisions during Q3 provided a significant boost to Deutsche Bank’s profit.

The provisions are tied to a long-running lawsuit over the bank’s acquisition of Postbank.

Notably, 60% of plaintiffs settled with Deutsche Bank in August, allowing the bank to pursue a stalled share repurchase plan.

This litigation relief has helped the bank navigate the financial impact of ongoing legal challenges.

Deutsche Bank distances itself from Commerzbank merger talks

Amid speculation of mergers within Germany’s banking sector, Deutsche Bank has moved away from a potential merger with Commerzbank.

The focus now shifts to Commerzbank’s possible acquisition by Italy’s Unicredit.

Market analysts view Deutsche Bank’s strategic direction as a signal of its intent to strengthen its position independently.

The decision highlights the bank’s focus on internal restructuring rather than pursuing inorganic growth through domestic consolidation.

European banks, including Deutsche Bank, have leaned on stock buybacks and dividend payouts to strengthen shareholder value in recent years.

With the European Central Bank’s shift to a looser monetary policy, banks now face pressure to deliver earnings growth in an environment of falling interest rates.

McKinsey’s Global Banking Annual Review 2024 warns that maintaining current ROTE levels will require European banks to cut costs approximately 2.5 times faster than revenue declines.

As Deutsche Bank eyes further growth, the pressure is on to adapt swiftly to these changing dynamics.

The post Deutsche Bank beat third-quarter expectations, but what drove the surge? appeared first on Invezz

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Tilray Brands stock analysis: attractive risk/reward?

Tilray Brands (TLRY) stock price has gone nowhere in the past few months. It has found a strong support level at $1.61, where it has failed to move below since November last year. It remains about 50% below the highest point in 2023, and is 97% below the 2021 high. 

Cannabis industry is under pressure

The cannabis industry has come under pressure in the past few years amid rising pricing and regulation risks in key markets.

For example, in Canada, a key market for cannabis, prices have dropped sharply in the past few years as the number of companies has grown. There are now over 900 licensed cannabis companies in Canada.

Lower cannabis prices mean that companies like Tilray Brands, Aurora Cannabis, and Canopy Growth are making less money for each product sold, while still paying substantial taxes. In a recent statement, Irwin Simon, Tilray’s CEO, said that this price compression had costed it $200 million in the past few years.

Other markets are not doing well either. Cannabis is still not yet fully legal in the United States, and the process will likely take longer.

While cannabis has been made legal in the country, there are still major barriers that have hindered the sector. One of it is banking, where many major banks still don’t do business with firms in the cannabis industry because of strict anti-money laundering rules.

The other big issue is that, like in Canada, there are now thousands of cannabis companies in the US. It is estimated that there are over 10,000 licensed players in the sector. 

Worse, there are signs that the reclassification process and the banking bill that the Senate has been working on will not go on.

If Donald Trump wins, there are chances that the cannabis reclassification process to a less harmful product will stall. Also, with the Senate and the House of Representative expected to be divided, no major banking legislation will continue. 

There are rising odds that Donald Trump will win, with Polymarket placing his odds at 63%. Also, there are rising odds that Republicans will dominate in other state elections. 

Read more: Tilray Brands stock sits at a make-or-break price: now what?

Tilray Brands is no longer just a cannabis company

Tilray Brands is significantly different from other companies in the industry. For one, unlike most of them, it has worked to diversify its business by investing in the beverage industry.

It did that through acquisitions and internal research and development (R&D). For example, the company acquired eight beer brands from AB InBev in 2023 and additional more from Molson Coors this year. The company also owns SweetWater Brewing Company through its Aphria buyout. 

Therefore, it hopes that these acquisitions will help its business continue growing in the next few years. Also, it wants the cannabis and alcohol businesses to even out each other. In this, if the cannanis industry struggles, then it will be offset by the alcohol business. 

To be clear: investing in the alcohol business is a risky bet now that the young people are not drinking as much as their parents did in the past. Nonetheless, there is a room for growth, especially in the craft brewing sector, where Tilray is now one of the biggest brands. 

The company also hopes that its cannabis business will rocket higher when the US passes friendly regulations in the future. This is notable since Tilray does not have a big presence in the US cannabis industry.

Read more: Tilray Brands stock price analysis: risky but a short squeeze is likely

Diversification is paying off

There are rising signs that the diversification process is starting to pay off even though it is too early to tell.

Its beverage alcohol revenue came in at $56 million in the last quarter, a 132% increase. The cannabis revenue rose to $61.2 million, while its distribution and wellness revenues rose to $68.1 million and $14.8 million, respectively. 

The cannabis gross margin came in at 40%, while the beverage business has 41%. The other two businesses have lesser margins.

Additionally, the company has diversified its sources of revenue because of its strong presence in Germany. 

The other catalyst is that Tilray Brands is seeing improved bottom line. Its net loss in the last quarter was $34 million, a 38% improvement from the $55.9 million it lost in the same period last year.

Tilray Brands stock analysis

TLRY chart by TradingView

The daily chart shows that the TLRY share price has found a strong bottom at $1.61, meaning that sellers are afraid of shorting it below that level. As such, there are signs that the stock has bottomed, meaning that a bullish breakout cannot be ruled out.

Tilray’s stock remains below all moving averages, meaning that sellers are a bit in control for now. 

Therefore, from a risk/reward perspective, I believe that the stock may stage a comeback in the near term. If this happens, it may rally to $2.95, its highest point on April 4, which is about 72% higher than the current level. A break below the support at $1.61 will point to more downside, potentially to below $1.

The post Tilray Brands stock analysis: attractive risk/reward? appeared first on Invezz

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Speed bumps ahead? Goldman Sachs downgrades outlook on Indian stocks, lowers Nifty 12-month target to 27K

Goldman Sachs Group Inc. has downgraded its outlook on Indian equities from overweight to neutral, citing concerns about weakening economic growth and corporate earnings.

The downgrade comes as India’s key stock indices experience sharp declines, with the NSE Nifty 50 Index seeing its steepest monthly fall since the onset of the pandemic.

In a research note released on Tuesday and reported by Bloomberg, Goldman Sachs strategists, including Sunil Koul, said,

“While we believe the structural positive case for India remains intact, economic growth is cyclically slowing down across many pockets.”

They added that worsening earnings sentiment, an accelerating pace of earnings-per-share cuts, and a weak start to the September-quarter results season indicate an impact on profits.

“A large ‘price correction’ is less likely given support from domestic flows, but markets could ‘time correct’ over the next three to six months,” Goldman Sachs strategists said, indicating that Indian equities could face a period of stagnation rather than a sharp correction.

As a result, the firm lowered its 12-month target for the Nifty 50 Index from 27,500 to 27,000, implying only a 10% upside from Tuesday’s closing levels.

High valuations and a challenging macroeconomic environment are expected to limit any significant gains in the near term.

The Nifty 50 currently trades at 20 times its 12-month forward earnings, higher than its five-year average of 19.4 times, signaling possible overvaluation.

Foreign sell-offs, and slowing earnings growth

Indian equities have been hit hard by a wave of foreign investor selling, with overseas funds withdrawing a net $7.8 billion in October, according to Bloomberg data.

This is the largest monthly outflow since March 2020, as foreign investors react to India’s weakening economic data and mounting inflationary pressures.

Analysts have widely raised concerns about a slowdown in earnings growth, citing challenges such as a high base, weakening demand, and shrinking margin tailwinds.

Other leading brokerages, including Motilal Oswal Financial Services, Nuvama Institutional Equities, and Axis Securities, forecasted that Q2 earnings growth would decline to a post-pandemic low, with profit growth expected to sharply moderate to around 2% for the July-September period.

According to MOFSL, this would represent the slowest earnings growth for Nifty companies in 17 quarters.

In terms of sector outlook, Goldman Sachs remains overweight on automobiles, telecom, and insurance, while upgrading realty and internet sectors to ‘overweight.’

Conversely, it downgraded cyclicals such as industrials, cement, chemicals, and financials.

The brokerage advises investors to prioritize quality, earnings visibility, and targeted alpha themes to navigate the current volatility in Indian equities.

The post Speed bumps ahead? Goldman Sachs downgrades outlook on Indian stocks, lowers Nifty 12-month target to 27K appeared first on Invezz

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UK’s largest mortgage lender, Lloyds, reports third-quarter profits: Buy LLOY stock?

Lloyds Banking Group announced on Wednesday that its third-quarter profits exceeded expectations, reflecting growing financial confidence among its customers and reaffirming its performance guidance for 2024.

The UK’s largest mortgage lender reported a statutory pretax profit of £1.8 billion ($2.34 billion) for the period from July to September.

While this figure is a slight decrease from £1.9 billion in the same quarter last year, it surpasses the average analyst forecast of £1.6 billion.

Lloyds, along with competitors like NatWest, has benefited from increased profitability in recent years due to rising interest rates, which enhanced lending returns.

However, the bank now faces the challenge of sustaining its profit levels as interest rates begin to decline.

Despite concerns about Britain’s growth prospects and the state of public finances, Lloyds has opted to keep its performance guidance unchanged.

The bank anticipates a return on tangible equity of around 13% for this year, along with a net interest margin exceeding 2.9%.

Group Chief Executive Charlie Nunn attributed the strong quarterly results to factors such as income growth, disciplined cost management, and high asset quality.

The bank reported an increase in total lending balances, which rose by £4.6 billion to reach £457 billion during the quarter, primarily driven by growth in credit card and unsecured loan offerings.

Additionally, Lloyds’ mortgage portfolio grew by £3.2 billion over the same period.

Looking ahead, Lloyds predicts house prices will rise by 3.1% this year, up from a prior forecast of 1.9% growth made earlier in the year.

The bank also anticipates one more base rate cut from the Bank of England before the end of 2024.

Furthermore, Lloyds confirmed it has made no additional provisions related to the ongoing motor finance review by the Financial Conduct Authority.

Should you buy LLOY stock?

Lloyds shares have performed well recently, trading close to their 52-week and four-year highs.

Regarding valuation, the shares are currently priced at a forward-looking price-to-earnings (P/E) ratio of approximately 9.3. Analyst Edward Sheldon suggests that they are fully valued at this earnings multiple, while others believe there may still be some potential for value.

Lloyds Banking Group has a TipRanks Smart Score of ‘4 Neutral’ and is categorized as a ‘hold’ by analysts, with 2 ‘buy’ and 7 ‘hold’ ratings.

According to LSEG Data & Analytics, analysts classify Lloyds Banking Group shares as a ‘hold,’ with 1 ‘strong buy,’ 6 ‘buy,’ 11 ‘hold,’ and 1 ‘sell’ rating.

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Are there more gains ahead for AppLovin?

AppLovin Corp (NASDAQ: APP) continues its remarkable ascent, hitting new all-time highs daily, including a peak of $163.13 yesterday.

On October 22, Loop Capital initiated coverage on the stock with a ‘Buy’ rating and a $181 price target.

Analyst Rob Sanderson emphasized AppLovin’s indispensable role in the mobile gaming industry and its emerging position in big data and AI.

He noted that despite the stock’s impressive growth and recent breakout, it remains relatively undiscovered and misunderstood.

Sanderson also compared AppLovin to The Trade Desk, highlighting that AppLovin’s software business is larger with higher margins.

He suggested that an expansion into e-commerce advertising could significantly boost the company’s total addressable market.

AppLovin: strong Q3 earnings anticipated

The company is set to report its Q3 earnings on November 6, and expectations are high. Thirteen Wall Street analysts who cover the stock have a consensus forecast earnings per share (EPS) of $1.21 on revenue of $1.13 billion.

This represents a substantial increase from the EPS of $0.30 on revenue of $864.3 million reported in Q3 of the previous year.

Notably, all 13 analysts have revised their EPS estimates upwards in the last 90 days, reflecting strong confidence in AppLovin’s performance.

Mixed analyst ratings and price targets for AppLovin

While Loop Capital’s initiation adds a positive outlook, other analysts have varied opinions.

On October 14, Goldman Sachs downgraded the stock from ‘Buy’ to ‘Neutral,’ even as it slightly raised the price target from $147 to $150.

Analyst Eric Sheridan pointed out that after a 113% increase since the last earnings report, the risk-reward profile has become more balanced.

He acknowledged the company’s strong execution and profitability but advised caution ahead of the Q3 earnings.

Morgan Stanley maintained an ‘Equal-weight’ rating but raised its price target from $80 to $110.

Analyst Matthew Cost questioned the sustainability of AppLovin’s ambitious goal to grow its ad business by 20-30%, especially when consumer spending on mobile games is projected to grow by only 5%.

He noted that while the company has recently gained a significant edge, sustaining this growth may require outperforming competitors like Meta and Google.

Contrasting the cautious views, Citi increased its price target to $155 from $110, citing increased confidence in AppLovin achieving over 20% revenue growth.

Analyst Jason Bazinet highlighted multiple paths for growth, including incremental share gains in mobile gaming ad spend, higher take rates, and expansion into e-commerce advertising.

UBS also upgraded the stock to ‘Buy’ from ‘Neutral,’ raising the price target to $145 from $100.

The analysts expressed better visibility into revenue growth over the medium term and potential upside from expansion into new verticals like e-commerce.

AppLovin: business fundamentals show robust growth

AppLovin’s financial performance has been strong. In Q2 2024, the company reported revenue of $1.08 billion, a 44% year-over-year increase, driven largely by its software segment.

Adjusted EBITDA rose 80% to $601 million, resulting in a 56% adjusted EBITDA margin, up from 52% in the previous quarter.

The software platform contributed $711 million in revenue and $520 million in adjusted EBITDA with a 73% margin.

This growth is attributed to enhancements in their AXON system, improving the platform’s ability to identify high-value users for advertisers.

APP stock: valuation metrics

The stock’s rapid appreciation has led to higher valuation multiples. Some analysts caution that the stock may have outpaced its fundamentals.

For example, using a discounted cash flow analysis with optimistic assumptions, the stock still appears to be overvalued by about 10-20%.

Morningstar’s model also suggests a fair value below the current trading price.

However, forward-looking metrics indicate a significant decrease in the price-to-earnings ratio in the coming years, suggesting that the valuation may become more reasonable if growth continues as expected.

Insider selling raises concerns

Recent insider transactions have raised some eyebrows. The CEO sold stock worth $21.5 million, and other executives have also sold significant shares recently.

While insider selling can be for various reasons, substantial sales may indicate that insiders believe the stock’s upside potential is limited in the near term.

AppLovin’s ascent to new heights is underpinned by strong financial performance, strategic expansion plans, and positive analyst sentiment, albeit with some cautionary notes.

The upcoming Q3 earnings report will be a crucial indicator of whether the company can meet the high expectations set by analysts and justify its current valuation.

With the stock reaching new all-time highs and significant developments on the horizon, it’s an opportune moment to examine the technical factors that could influence its future trajectory.

Threefold returns YTD: Strong upward momentum for APP

AppLovin has been one of the best-performing large-cap tech stocks this year, rising nearly threefold thus far.

With the stock making new all-time highs every day, it is displaying exceptional upward momentum across timeframes.

Source: TradingView

Considering that investors and traders with a bullish view can buy the stock at current levels.

However, cautious investors with a bullish view can wait for a retracement or a minor pullback toward $138 levels before initiating fresh long positions.

Traders who want to take the opposite trade must refrain from doing so with the strong displaying strong upward momentum in the short-term charts.

A short position must only be considered if the stock hits resistance and starts making lower highs and lower lows.

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Sweden is now offering big money to make immigrants leave: here’s how much and why

Sweden is set to implement a new policy that increases payments for immigrants who voluntarily leave the country, with incentives rising significantly by 2026.

Under the plan, the current payment, capped at 40,000 Swedish kronor, will increase to a maximum of 350,000 kronor.

The policy shift, announced in September 2024, aligns with the government’s goal to reshape its migration framework.

Supported by the anti-immigration Sweden Democrats, the initiative is part of a broader effort to manage immigration levels, reduce social strain, and promote integration.

Boost in payments to drive return migration

Sweden’s current incentive for immigrants who choose to return to their home countries is modest, with 10,000 kronor offered per adult and 5,000 kronor per child, subject to a family cap of 40,000 kronor.

The upcoming changes mark a significant increase, with payments reaching up to 350,000 kronor by 2026.

This adjustment aims to encourage voluntary returns, easing pressure on social services and fostering a sustainable migration system.

The policy is part of a broader shift that includes stricter entry requirements for low-skilled labour.

Other European countries’ return incentives compared

Sweden is not alone in offering financial incentives for voluntary return migration.

Denmark leads with payments of over $15,000 per person, while Norway offers around $1,400, and France provides approximately $2,800. Germany’s incentive stands at about $2,000.

These measures reflect a regional trend where European countries offer financial support to immigrants who choose to return, helping them resettle in their countries of origin.

Along with increasing return payments, Sweden plans to tighten its work permit criteria for low-skilled workers.

By June 2025, immigrants will need to earn at least 80% of the median Swedish salary—35,600 kronor (approximately $3,455)—to qualify for a work permit.

The new law aims to prioritise skilled labour, directing opportunities toward domestic workers for lower-wage jobs. Certain professions, such as domestic care, will remain exempt from this rule to ensure critical services are maintained.

Attracting highly skilled immigrants

Despite the restrictions on low-skilled workers, Sweden is enhancing its appeal for highly skilled immigrants.

A proposal to adopt the EU’s new Blue Card Directive aims to attract top talent by lowering salary thresholds and expanding eligibility criteria. This change is expected to take effect on January 1, 2025.

The government’s strategy is to boost Sweden’s competitiveness by ensuring that employers in advanced sectors can access the skilled workforce they need.

In a shift from previous decades, Sweden is experiencing net emigration for the first time in over 50 years.

Between January and May 2024, 5,700 more people left Sweden than arrived, driven by stricter immigration policies and fewer asylum seekers.

The Swedish Ministry of Justice shared in a social media post that 2024 is set to see the lowest number of asylum-seekers since 1997.

The trend reflects a broader move towards sustainable migration policies, aiming to balance integration efforts and reduce social exclusion.

Indians lead the surge in departures

A notable trend in Sweden’s emigration patterns is the increase in Indian nationals returning to their home country.

In the first half of 2024, 2,837 Indians left Sweden, a 171% rise compared to the same period in 2023.

Despite this, Indians remain one of the largest immigrant groups in Sweden, second only to Ukrainians in terms of arrivals this year.

The number of Indian arrivals has dropped to 2,461 from 3,681 in the same period last year, marking a shift after years of steady growth.

Sweden’s crackdown on immigration sees results

Sweden’s stricter stance on immigration has led to a significant drop in new arrivals and an increase in emigration.

The Swedish Migration Agency projects continued declines in asylum applications and rising emigration in the coming years.

Immigration fell by 15% year-on-year in early 2024, while emigration surged by 60%.

The policy changes follow a shift that began in 2015 when Sweden acknowledged the need for a more controlled approach to migration after years of high intake.

Sweden’s history as a “humanitarian superpower” has seen a transformation.

In 2014, the country received over 81,000 asylum-seekers, and the number nearly doubled in 2015.

The nation has since moved towards more controlled migration, particularly following the rise of the Moderate Party and Sweden Democrats in 2022.

The government’s recent actions represent a significant shift in Sweden’s approach to immigration, prioritising integration and economic sustainability over previous humanitarian ambitions.

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S&P 500 annual returns will be capped at 3% over the next decade, Goldman Sachs warns

S&P 500 has offered healthy returns over the past ten years but the investment landscape will be dramatically different through 2034, warns David Kostin of Goldman Sachs.

The bank’s chief of US equity strategy does not expect the broad market index to return more than 3.0% annually over the next decade.

In comparison, it returned about 13% on average between 2013 and 2023.

Kostin cited unreasonable initial valuations and unusual concentration for his dovish view for the long term.

S&P 500 is currently up close to 25% versus the start of this year but much of it is attributed only to the “Magnificent Seven”.  

Kostin expects S&P 500 to underperform bonds

Investors are keeping super bullish on the S&P 500 as inflation is returning to the 2.0% target, economy remains sufficiently strong, and the Federal Reserve plans on cutting interest rates further in November.  

But the likes of Google and Nvidia can help the benchmark index push further up for so long, as per David Kostin.

“Our historical analyses show that it’s extremely difficult for any firm to maintain high levels of sales growth and profit margins over sustained periods of time,” he told clients in a recent research note.

Historically, the S&P 500 handily beats bonds in terms of yearly returns. But the bank’s chief of US equity strategy now sees a 72% probability of it actually underperforming the 10-year Treasury over the next ten years.  

Our market expert Crispus Nyaga also expects the overbought SPX to reverse in the coming months.

Why else is Goldman Sachs dovish on S&P 500?

David Kostin does not expect investing in the S&P 500 index to be sufficient to lock in healthy returns for the next ten years also because of lofty initial valuations.

The current high level of equity valuations is a key reason our 10-year forward return forecast sits at the lower end of the historical distribution.

Goldman Sachs uses CAPE or cyclically adjusted price/earnings ratio for valuation and remains dovish as higher initial valuation typically leads to lower future returns.

At 38 times, that metric is currently in the 97th percentile.

In the worst-case scenario, Kostin even expects the broad market index to return negative 1.0% annually.

He is not, however, alone in expecting lower than average returns from the S&P 500 over the next decade.

JPMorgan also cited high valuation and enormous fiscal spending in a recent research note as it forecast an annual return of about 6.0% out of the benchmark index for the next ten years.

Persistent inflation could shrink multiples as well, the investment firm added.

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