Month: November 2023

© Reuters

Investing.com — Shares in Salesforce (NYSE:CRM) surged in premarket U.S. trading on Thursday after the cloud software provider raised its annual guidance and posted better-than-anticipated third-quarter earnings.

The San Francisco-based company, which offers a range of apps like workplace messaging platform Slack and data visualization service Tableau, also delivered a fourth-quarter outlook that topped projections, fueling hopes that a downturn in client spending on technology may be abating.

Total revenue in the three months ended on October 31 expanded by 11% versus the corresponding period last year to $8.72 billion, narrowly beating Bloomberg consensus forecasts. Top-line growth, which normally comes in at around 20% a year, has showed signs of slowing in recent quarters as customers choose to rein in spending in response to inflationary pressures and elevated interest rates.

However, the stock has still soared by over 70% so far this year thanks in large part to a push by Salesforce to boost margins through cost cuts, including deep headcount reductions in January. The firm has also prioritized building out its artificial intelligence offerings like Einstein Copilot, a conversational AI assistant launched in September that can summarize video calls and generate sales language in emails.

Adjusted profit of $2.11 per share in the third quarter was 5 cents higher than Wall Street estimates. In a statement, Chief Executive Officer Marc Benioff said Salesforce is “executing on our profitable growth plan we set in motion last year.”

The business unveiled current-quarter adjusted income projections of $2.25 to $2.26, above Wall Street forecasts of $2.17, although analysts at Goldman Sachs argued in a note that the “guide […] looks conservative in the context of strong renewals and a large customer win.”

For its 2024 fiscal year, Salesforce now expects to report adjusted earnings per share of $8.18 to $8.19, up from a prior forecast of $8.04 to $8.06. Bloomberg consensus estimates had seen the figure at $8.06. Full-year adjusted operating margin expectations were also improved to 30.5% from 30% previously. 

“[G]iven management’s strong emphasis on organic growth and profitability at scale today, our expectations are for margin expansion to continue, albeit at a more moderate rate, when a macro[economic] recovery starts to form,” the Goldman analysts said.

Yasin Ebrahim contributed to this report.

© Reuters.

Investing.com — Here is your Pro Recap of the biggest analyst picks you may have missed since yesterday: upgrades at Snap, Pinterest, Hewlett Packard Enterprise, and an Outperform initiation at Ecolab.

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Snap shares gain on Jefferies upgrade

Snap (NYSE:SNAP) shares rose more than 2% pre-market today after Jefferies upgraded the company to Buy from Hold and raised its price target to $16.00 from $12.00.

According to the analysts, the most challenging times for the company seem to be over, and they see a pathway back to a mid-teens revenue CAGR over the next 3-5 years. The underperformance of Snap in the past, according to Jefferies, was largely due to the rebuild of their direct response (DR) advertising platform. This revamp led to a drop in revenue in the first two quarters of the year. However, recent developments suggest that the DR platform is starting to show positive trends.

The analysts also pointed out other potential revenue sources for Snap, such as a more in-depth integration with Amazon ads, potential collaborations with other retailers, the growing impact of Snapchat+, and the expansion of their brand advertising products. The analysts believe that Snap is well positioned to achieve a 15% revenue growth in fiscal 2024, marking a significant increase from around 0% in 2023.

Pinterest earns an upgrade, shares rise

Pinterest (NYSE:PINS) shares gained nearly 3% pre-market today after Jefferies upgraded the company to Buy from Hold and raised its price target to $41.00 from $32.00, as reported in real-time on InvestingPro.

The analysts cited several reasons for the upgrade, including expected EBITDA growth outperforming market predictions, confidence in advertising pricing tailwinds, and more durable than expected user growth and engagement gains.

Jefferies views the Q4 revenue guidance of 11-13% growth as conservative and expects a beat.

“We also view Q1’24 rev ests as achievable, as they assume relatively typical Q1 seasonality despite the Amazon partnership being an incremental contributor early next year. We now have more confidence in PINS’s ability to deliver sustainable mid-to-high teens rev growth with potential upside to 20%+ growth over the next 3-5 years.”

Two more picks

Hewlett Packard Enterprise (NYSE:HPE) shares surged more than 4% pre-market today after Morgan Stanley upgraded the company to Equalweight from Underweight with a price target of $16.00.

The company reported its Q4 results, beating the consensus estimates, which led to more than a 6% gain in its stock price yesterday.

Raymond James initiated coverage on Ecolab (NYSE:ECL) with an Outperform rating and a price target of $210.00.

The analysts highlighted that the common perception of water technology usually involves the traditional concept of “pipes and pumps,” which typically represent a one-time purchase. However, Ecolab’s approach is different. As a major player in water treatment chemicals, the company primarily generates its revenue through recurring sales. The analysts pointed out the company’s strong revenue predictability, particularly from its sales to the food service, hotel, hospital, and pharmaceutical industries.

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Investing.com — The major stock indices in the U.S. head into the final day of trading in November on pace to post their best months since last year. Markets are also gearing up for the publication of the Federal Reserve’s favored inflation gauge, as traders attempt to suss out the central bank’s future policy plans. Elsewhere, Microsoft (NASDAQ:MSFT) is set to take a position on the board of OpenAI following days of tumult at the celebrated artificial intelligence start-up.

1. Futures point higher before final November session

U.S. stock futures inched up as investors gear up for the last trading day in what has been a largely positive November for equities.

By 04:56 ET (09:56 GMT), the Dow futures contract had added 144 points or 0.4%, S&P 500 futures rose by 6 points or 0.1%, and Nasdaq 100 futures gained 26 points or 0.2%.

The main averages were mixed on Wednesday, but are still on pace to finish the month in the green.

Recent data has buoyed hopes that inflation may be cooling in the U.S., fueling expectations that the Federal Reserve could soon begin to bring interest rates back down from over two-decade highs. Treasury yields, which move inversely to prices, have subsequently slipped, while stocks have jumped.

Heading into the final session of November, the benchmark S&P 500 is up by 8.5% and the tech-heavy Nasdaq Composite has jumped by almost 11%, putting them both on track to post their best monthly performance since July 2022. The 30-stock Dow Jones Industrial Average has advanced by 7.2%, on course for its best month since October last year.

2. PCE ahead

Traders will likely be focusing on Thursday’s release of the October personal consumption expenditures (PCE) price index, the Fed’s preferred measure of inflation.

Economists are expecting a year-on-year figure of 3.0% for the month, which would mark a deceleration from 3.4% in September. On a monthly basis, the gauge is also seen slowing to 0.1%. The core reading stripping out volatile items like food and fuel is projected at 3.5% annually and 0.2% month-on-month.

“Today’s session will […] be all about inflation,” analysts at ING said in a note to clients.

The data could help determine how Fed officials will calibrate interest rates in the coming months. The central bank is widely tipped to leave rates at a range of 5.25% to 5.50% at its meeting next month, although some policymakers have hinted that a pivot away from this unprecedentedly tight monetary policy stance may be coming soon.

Earlier this week, Fed Governor Christopher Waller, a typically hawkish voice, suggested that “we could start lowering the policy rate” if inflation continues to slow for “several more months.” The comments bolstered expectations that the Fed may slash rates as early as May next year.

3. Microsoft to take board seat at OpenAI

Microsoft will take a spot on OpenAI’s board of directors, according to returning Chief Executive Officer Sam Altman.

The tech giant — a key investor in OpenAI — will be a non-voting observer in the artificial intelligence start-up’s revamped board, which will at first include Chair Bret Taylor, former U.S. Treasury Secretary Larry Summers and Quora CEO Adam D’Angelo, Altman said in a blog post on OpenAI’s website. It was not immediately clear who Microsoft would appoint to the board.

D’Angelo is the only remaining member from OpenAI’s previous board, which was ousted earlier this month after its abrupt decision to remove Altman as CEO sparked ire among OpenAI employees and backers.

Meanwhile, Altman, who has become known as one of the leading figures in the debate over the usage of AI, is coming back to the helm of the maker of the megapopular AI chatbot ChatGPT. He was initially offered a role at Microsoft after his sudden departure, as was co-founder Greg Brockman, who had quit in solidarity with Altman.

“We clearly made the right choice to partner with Microsoft and I’m excited that our new board will include them as a non-voting observer,” Altman said.

4. Chinese manufacturing activity contracts

Chinese manufacturing activity shrank for a second straight month in November, as the sector saw increased headwinds from slowing overseas demand.

The official manufacturing purchasing managers’ index (PMI) read 49.4 in November, data from the National Bureau of Statistics showed. The figure was weaker than expectations of 49.7, and contracted from the prior month’s reading of 49.5.

A reading below 50 indicates contraction, with China’s manufacturing PMI now having contracted for six out of the 11 months so far in 2023.

China’s non-manufacturing PMI came in at 50.2 in November, missing projections of 51.1 and declining from 50.6 in October.

The numbers point to weakness in the world’s second-largest economy despite liquidity injections by Beijing aimed at shoring up what has been a sluggish post-pandemic recovery. Investors are now clamoring for more targeted fiscal measures from Chinese authorities to boost growth.

5. Oil prices rise as key OPEC+ meeting looms

Oil prices climbed on Thursday as traders eyed a previously-postponed OPEC+ meeting and the weaker-than-expected Chinese factory activity data.

By 04:56 ET, the U.S. crude futures traded 0.9% higher at $78.58 a barrel, while the Brent contract advanced by 0.9% to $83.62 per barrel.

The Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, meets later Thursday. Although the gathering was delayed from Sunday after disagreements between members over output targets, markets are still expecting news of additional production cuts.

Gains have been limited by signs of slackening growth in China, the world’s top oil importer, while U.S. crude inventories recorded an unexpected 1.6 million-barrel build in the week to Nov. 24.

© Reuters. JPMorgan sees 8% downside risk for S&P 500 next year

JPMorgan Chase equity strategists continue to stand apart with a notably pessimistic outlook amid a wave of Wall Street strategists forecasting all-time highs for U.S. stocks in the coming year.

JPMorgan predicts the S&P 500 Index will decline to 4,200 by the end of 2024, indicating an approximately 8% drop from its current level.

Absent rapid Fed easing, analysts expect a more challenging macro backdrop for stocks next year with softening consumer trends at a time when investor positioning and sentiment have mostly reversed,” the analysts said in a note on Wednesday.

In addition to softening consumer trends, the strategists also listed decelerating global growth, shrinking liquidity, geopolitical and political risks, and elevated valuations as significant headwinds facing risk assets.

“Equities are now richly valued with volatility near the historical low, while geopolitical and political risks remain elevated. Analysts expect lackluster global earnings growth with downside for equities from current levels,” they added.

“For S&P 500, analysts estimate earnings growth of 2-3% next year with EPS of $225.”

Along these lines, JPMorgan continues to recommend a more defensive stance within styles and sectors due to potential downside risks to corporate profits.

“While it is difficult to pin down the start date and depth of a recession ahead of time, analysts think it is a live risk for next year even though investors are not pricing in this uncertainty consistently across geographies, styles, and sectors yet,” the strategists concluded.

© Reuters.

Investing.com — U.S. stock futures traded in a mixed fashion Thursday, as a largely positive month comes to a close with investors digesting the release of the latest important inflation data.

By 09:45 ET (14:45 GMT), the Dow Jones Industrial Average rose 240 points, or 0.7%, the S&P 500 traded 4 points, or 0.1%, higher, while the NASDAQ Composite dropped 25 points, or 0.2%.

The main Wall Street indices are on course post hefty gains this November. The blue-chip Dow Jones Industrial Average is on track to gain 7.2%, which would be its best month since October last year. The broad-based S&P 500 is up 8.5% in November, while the tech-heavy Nasdaq has advanced nearly 11% – both set for their best monthly performances since July 2022. 

PCE inflation data due

These strong monthly gains have been largely generated by data showing inflation may be cooling in the U.S., fueling expectations that the Federal Reserve could soon begin to bring interest rates back down from over two-decade highs. 

The October personal consumption expenditures price index, the Fed’s preferred measure of inflation, added to these hopes, rising at a slower rate on an annual basis in October compared to the prior month, in the latest sign that the central bank’s long-standing campaign of interest rate hikes may be working to corral price growth.

The overall figure rose by 3.0% annually, decelerating from 3.4% in September thanks in large part to a drop in energy prices. On a monthly basis, the measure stood at 0.0%, down from an uptick of 0.4% in the prior month. Economists expected readings of 3.0% year-on-year and 0.1% month-on-month.

Fed officials in spotlight

Investors will also be listening to comments from influential Fed New York President Williams later on Thursday, ahead of Q&A appearance by Fed Chair Jerome Powell on Friday.

Earlier this week Federal Reserve Governor Christopher Waller, normally seen as a hawkish voice at the Fed, had flagged the possibility that officials “could start lowering” interest rates if inflation continues to retreat.

A pause in rate hikes has been fully priced in for the upcoming December meeting, and focus has increasingly shifted towards the potential for rate cuts next year.

Microsoft linked with OpenAI board

in the corporate sector, Salesforce (NYSE:CRM) and Snowflake (NYSE:SNOW) both posted strong gains after reporting better than expected numbers after the close Wednesday.

Ford (NYSE:F) stock fell 0.7% after the auto giant estimated the cost of a new labor deal at $8.8 billion and cut its full-year profit forecast due to lost production from a lengthy strike at its U.S. plants.

Additionally, Microsoft (NASDAQ:MSFT) will take a spot on OpenAI’s board of directors, according to returning Chief Executive Officer Sam Altman.

Oil gains ahead of OPEC+ decision

Oil prices rose Thursday amid optimism that OPEC+ will cut future production levels, overshadowing weaker-than-expected Chinese activity data as well as a sustained rise in U.S. inventories. 

By 09:45 ET, the U.S. crude futures traded 1.3% higher at $78.88 a barrel, while the Brent contract climbed 1.2% to $83.88 a barrel. 

The Organization of Petroleum Exporting Countries and allies, a group known as OPEC+, is meeting , and the market is still expecting news of additional production cuts even though the gathering was delayed from Sunday after disagreements between members over output targets.

Still, gains have been limited by signs of slackening growth in China, the world’s top oil importer, while U.S. crude inventories recorded an unexpected 1.6 million barrel build in the week to Nov. 24.

Additionally, gold futures fell 0.6% to $2,035.60/oz, while EUR/USD traded 0.6% lower at 1.0908.

(Oliver Gray contributed to this item.)

© Reuters

Investing.com — The Federal Reserve’s preferred inflation gauge rose at a slower rate on an annual basis in October compared to the prior month, in the latest sign that the central bank’s long-standing campaign of interest rate hikes may be working to corral price growth.

Last month’s so-called “core” personal consumption expenditures (PCE) price index, which strips out volatile items like food and fuel, eased to 3.5% annually and 0.2% monthly, in line with estimates. In September, they had increased by 3.7% and 0.3%, respectively.

“After fears of ‘sticky’ and ‘persistent’ inflation, the month to month slowing in the core [PCE] readings is encouraging,” said Kathy Jones, Chief Fixed Income Strategist at Charles Schwab (NYSE:SCHW), in a post on social media platform X.

The overall figure increased by 3.0% annually, decelerating from 3.4% in September thanks in large part to a drop in energy prices. On a monthly basis, the measure stood at 0.0%, down from an uptick of 0.4% in the prior month. Economists expected readings of 3.0% year-on-year and 0.1% month-on-month.

The data could help determine how Fed officials will calibrate interest rates in the coming months. The central bank is widely tipped to leave rates at a range of 5.25% to 5.50% at its meeting next month, although some policymakers have hinted that a pivot away from this unprecedentedly tight stance may be coming soon.

Earlier this week, Fed Governor Christopher Waller, a typically hawkish voice, suggested that “we could start lowering the policy rate” if inflation continues to slow for “several more months.” The comments bolstered expectations that the Fed may slash rates as soon as May next year.