44.53 +0.10 (0.23%)
After hours: 5:41PM EDT
|Bid||44.39 x 1200|
|Ask||44.53 x 1000|
|Day's Range||44.29 - 45.01|
|52 Week Range||36.74 - 51.53|
|Beta (3Y Monthly)||1.29|
|PE Ratio (TTM)||9.55|
|Earnings Date||Jul 18, 2019|
|Forward Dividend & Yield||1.20 (2.67%)|
|1y Target Est||53.57|
Citigroup beat estimates with some help from its consumer cards business and a trading platform's IPO, but can other big banks rely on the same help in their earnings this week?
A senior Goldman Sachs banker has highlighted to colleagues the role played by rival Morgan Stanley in failed Hong Kong IPOs following the collapse on Friday of Budweiser APAC's $9.8 billion initial public offering, according to an internal email seen by Reuters. On Friday AB InBev called off the Hong Kong listing of its Asia Pacific brewing business, that was being managed by Morgan Stanley and JPMorgan, citing several factors, including prevailing market conditions. A further 11 banks were listed as global coordinators and bookrunners but Goldman had no role on the deal.
(Bloomberg) -- JPMorgan Chase & Co. and Morgan Stanley lost out on their cut of what would’ve been the year’s biggest initial public offering last week.The top two advisers on Anheuser-Busch InBev SA’s Asia Pacific unit IPO would’ve split up to $140 million to $170 million in fees, according to people with knowledge of the matter. The world’s biggest brewer intended to raise as much as $9.8 billion before it announced Friday that it wouldn’t proceed with the listing citing “prevailing market conditions.”Click here to read more about the IPO’s failure.Advisers of Budweiser Brewing Company APAC Ltd. were slated to split about 2% of the funds raised in the IPO, said the people, who asked not to be identified because the information is private. Sponsors, or lead arrangers, would take home about 70% of the fee pool plus potential incentive payments, the people said.The banks’ reputations are taking a hit alongside their wallets as some analysts blame them for the IPO’s failure. Morgan Stanley has been ranked No. 1 for equity offerings in Asia Pacific since 2017, according to data compiled by Bloomberg. JPMorgan is eighth on equity deals in the region so far this year.“AB InBev and its bank consortium headed by JPMorgan and Morgan Stanley failed to properly price, attract cornerstone investors and drum up demand,” said Nikolaas Faes, an analyst at Bryan Garnier & Co., in a note to clients where he called the IPO a “fiasco.”Read more analyst comments on the IPO here.Representatives for AB InBev, JPMorgan and Morgan Stanley declined to comment.Budweiser had planned to seek $8.3 billion to $9.8 billion in the Hong Kong IPO, valuing the business at as much as $64 billion. It could’ve been the biggest IPO so far this year, taking advantage of the beer market’s growth in Asia to attract investors, and surpassing Silicon Valley darling Uber Technologies Inc.’s May share sale.\--With assistance from Albertina Torsoli.To contact the reporters on this story: Crystal Tse in Hong Kong at firstname.lastname@example.org;Vinicy Chan in Hong Kong at email@example.comTo contact the editors responsible for this story: Fion Li at firstname.lastname@example.org, Amy ThomsonFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Netease Inc. is planning an initial public offering in the U.S. of its Youdao arm that could raise at least $300 million, people familiar with the matter said, propelling its expansion into a crowded online education arena.The company is working with Morgan Stanley and Citigroup Inc. on the share sale with a goal to list as early as in the third quarter, said the people, asking not to be identified as the information is private. A deal could value Youdao at about $2 billion, one of the people said. The firm could file confidentially as soon as in coming weeks, according to another person.Netease -- Tencent Holdings Ltd.’s closest competitor in the world’s biggest mobile gaming market -- is delving deeper into adjacent sectors from e-commerce to media content. Its Youdao arm, founded in 2006, explored several business models before settling on becoming an internet education platform about five years ago. It now offers everything from online dictionaries to math courses and prep classes for important certification-tests.The company completed its first round of financing in April last year at a post-money valuation of $1.12 billion, according to its website. Deliberations are at a preliminary stage and details of the share sale including fundraising size and timeline could still change, the people said. Representatives for Netease, Morgan Stanley and Citi declined to comment.Netease is trying to court investors during a volatile time for capital-raising, roiled by U.S.-Chinese trade tensions and worries about a global downturn. But it wants to grab a bigger slice of a market that’s projected to boom in coming years, and make headway against rivals from New Oriental Education & Technology Group to VIPKid and iTutorGroup. Online revenue from children at nurseries and students attending kindergartens up to high school, also known as the K-12 group, could rise 38% a year though 2022, Bloomberg Intelligence cites iResearch as saying.“Revenue contribution from online courses will likely increase for reputable tuition providers as more students from lower-tiered Chinese cities pay for access,” Bloomberg Intelligence analysts Catherine Lim and Sheng Tan Zhu wrote Monday. “New digital teaching technology may raise the learning efficiency of online students and increase their academic performance, fueling stronger demand.”\--With assistance from Zheping Huang.To contact the reporters on this story: Lulu Yilun Chen in Hong Kong at email@example.com;Crystal Tse in Hong Kong at firstname.lastname@example.orgTo contact the editors responsible for this story: Edwin Chan at email@example.com;Fion Li at firstname.lastname@example.orgFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Barron’s caught up with most of its all-star investor panel members to sniff out remaining bargains at a time when the U.S. stock market is at a record high and risks -- including trade conflicts, Federal Reserve policy and the 2020 presidential election -- are closing in.Here’s what some of them are thinking, as reflected in the cover story of Barron’s July 15 issue.Todd Ahlsten, lead portfolio manager of the Parnassus Core Equity fund at San Francisco’s Parnassus Investments, picks Trimble Inc., which sells hardware and software for construction, agriculture, trucking and surveying and has a $50 billion addressable market. He’s also sticking with Nvidia Corp., a high-flying tech stock that plummeted since its October peak.Scott Black, founder and president of Delphi Management, says the market is really expensive but could go higher if the U.S. trade dispute with China is resolved. He recommends Kemet Corp., a leader in capacitors that’s trading at $18.13, down from $30 a year ago, and TriplePoint Venture Growth BDC Corp., a diversified investment company.Abby Joseph Cohen, senior investment strategist at Goldman Sachs Group Inc., says the U.S.-China trade war is contributing to lower capital spending and that a Fed interest rate cut won’t change that. The risk of another federal budget showdown also could hurt equities. Her picks: the SPDR S&P Dividend ETF, which is linked to the S&P Composite 1500 and can include small-cap and mid-cap stocks; Japanese auto-parts company Denso Corp.; and pharmaceutical company Eli Lilly & Co.Oscar Schafer, chairman of investment advisory company Rivulet Capital LLC, is sticking with picks from earlier in the year. He likes Ball Corp. and Crown Holdings Inc., aluminum can manufacturers benefiting from bad press about the environmental impact of plastic containers, as well as Sealed Air Corp., another packaging company, and discount retailer Dollar Tree Inc.Henry Ellenbogen, the former manager of T. Rowe Price New Horizons fund who recently left to form his own venture, says the 2020 election cycle stokes unpredictability. His picks include Vail Resorts Inc., which he says could move as high as $300 a share (from Friday’s $227.49), and real estate companies FirstService Corp., and Redfin Corp.Meryl Witmer, a general partner at the hedge fund Eagle Capital Partners, said equity valuations are “all over the place,” with bubbles in some stocks while industrial-type companies are “wallowing at low valuations.” She likes Morgan Stanley, Swiss-based cement producer LafargeHolcim Ltd. and Fox Corp., which was spun out of 21st Century Fox at the time of Disney’s acquisition of 21st Century Fox assets.Geopolitical risks are high, and the easy pickings from globalization in creating a cheap labor force are mostly over, said William Priest, CEO of Epoch Investment Partners. His mid-year picks included gaming company MGM Resorts International and Centene Corp., a health insurer active in Medicaid and the Obamacare exchanges.(Updates with Witmer, Priest picks in final bullets.)To contact the reporter on this story: Margaret Newkirk in Atlanta at email@example.comTo contact the editors responsible for this story: Stephen Merelman at firstname.lastname@example.org, Ros Krasny, Virginia Van NattaFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Traders taking profit from Kuwait’s longest-winning streak since at least 2016 sent the nation’s main stock index to its first loss this month.The gauge declined less than 0.1%, led by National Bank of Kuwait and HumanSoft Holding. While a favorable deposit shift for lenders in the country may boost second-quarter margins from lows in the previous quarter, they will stay below 2018 and might slow profits, said Edmond Christou, a financials analyst with Bloomberg Intelligence.Still, “the implementation of the Kuwait government’s multiyear development plan, which has been essential for the acceleration of infrastructure projects and supporting the delivery of Vision 2035, will drive private-sector credit growth,” Christou wrote in a report. “The National Bank of Kuwait has gained the most from infrastructure financing thanks to its scale and capabilities.”Read more about NBK’s second-quarter earnings.Equity gauges in Saudi Arabia, Dubai, Abu Dhabi and Israel advanced, while those in Oman, Qatar and Egypt fell as investors track second-quarter results throughout the region.MIDDLE EASTERN MARKETS:Saudi Arabia’s Tadawul All Share Index gains 0.5% on Sunday in RiyadhJarir Marketing falls 1.5% after it reported profit for the second quarter of 169.1m riyals, below the lowest of three analyst estimates Kuwait’s main equities index drops as much as 0.4%. It posted the first decline in 12 sessionsGauge is still up 29% this year, more than any other in the Middle East, North Africa Egypt’s central bank kept the benchmark interest rate steady last week, opting to assess the impact of new round of subsidy cuts even as annual inflation hit a three-year lowThe EGX 30 lost 1%, trimming gains this year to 4.9% MORE: Egypt Expects Last IMF Loan Installment Before End August (1)To contact the reporter on this story: Filipe Pacheco in Dubai at email@example.comTo contact the editors responsible for this story: Celeste Perri at firstname.lastname@example.org, James AmottFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Meryl Witmer, a Barron’s Roundtable panelist and general partner at Eagle Capital Partners, says that with the 2020 presidential campaign heating up, “searching for something that provides downside protection is our operating mode.”
(Bloomberg) -- Walmart Inc. has a hole to fill at its online unit, and whoever assumes the role faces a big challenge ahead.The company is searching for a new chief revenue officer for its U.S. e-commerce business, who would work under online leader Marc Lore to help map out its battle plan against Amazon.com Inc., Target Corp. and other rivals. The yet-to-be-named executive will also work to stem the online businesses’ mounting losses in an increasingly competitive digital arena.The vacancy was created when Scott Hilton, a senior vice president and Lore’s longtime lieutenant, left the company in May, according to an internal memo obtained by Bloomberg. Hilton, whose departure hadn’t been previously reported, didn’t reply to an emailed request for comment.Longtime LieutenantHilton met Lore about 14 years ago when both were students at the University of Pennsylvania’s Wharton business school, the memo said. He became Lore’s first employee at Quidsi, the e-commerce startup that included Diapers.com and was acquired by Amazon in 2011. Not long after, Lore left Amazon to launch Jet.com, bringing Hilton with him.When Jet was acquired by Walmart for $3.3 billion in 2016, Lore, Hilton and other Jet leaders assumed senior posts at its online business. They revamped Walmart’s digital offerings with millions of new products, a sleeker website and free two-day delivery for orders of $35 or more.“Scott created a retail organization that has brought on some incredible leaders, new brands, significantly expanded our assortment and designed and built the tools that have set us on a course to enable Walmart to efficiently scale and compete in the ever-evolving retail arena,” Lore said in the memo announcing Hilton’s departure.Walmart’s U.S. online business has grown, becoming a viable second fiddle to Amazon after the division’s revenue expanded 40% last year. But the business continues to be in the red, with losses expected this year of about $1.7 billion, up from $1.4 billion last year, according to Morgan Stanley estimates.Web StrugglesA portion of the retailer’s web traffic has also declined, according to data tracker SimilarWeb, falling by about a third between June 2017 and June 2019. SimilarWeb measures so-called non-bounced traffic, or customer visits that go beyond the landing page.A big reason for the falloff is that Walmart’s customers are increasingly using its shopping apps, particularly for grocery orders, rather than its website. And even as Walmart.com’s traffic has declined, sales are up as customers buy more items on each visit and purchase higher-priced goods, like the Lord & Taylor apparel it started offering last year.A Walmart.com spokesman said the SimilarWeb data was “completely incorrect,” adding that overall traffic to Walmart.com “has increased significantly during that time period.”SimilarWeb, in response, said it’s unaware of how the retailer reports on its digital activity.It confirmed that overall digital activity is up, while data for Walmart.com from web browsers only has shown a slight decline.Walmart shares rose 0.5% to $114.49 at 3:28 p.m. Friday in New York.To help streamline things, Walmart brought Jet fully under its umbrella last month. It has also encouraged consumers to pick up their online orders at the store, saving Walmart money on home-delivery costs. More recently, it has rolled out a next-day delivery service that’s now in 28 states, according to data tracker Marketplace Pulse, which Lore claims is less expensive to operate as orders typically come in one box from a nearby warehouse.Hilton’s departure follows that of Chief Technology Officer Jeremy King, who left in March for Pinterest Inc. and has been replaced by tech-industry veteran Suresh Kumar, who started work this week. Other dot-com executives have also moved on in recent weeks, such as Darren MacDonald, a vice president and general manager of entertainment products, who became chief digital and innovation officer at Petco in June.The management reshuffles come as the company looks to counter next week’s Prime Day, a manufactured web-sales holiday created by Amazon that’s become part of every retailer’s calendar.(Updates with shares and SimilarWeb comment in 11th, 12th paragraphs.)To contact the reporter on this story: Matthew Boyle in New York at email@example.comTo contact the editors responsible for this story: Crayton Harrison at firstname.lastname@example.org, Anne Riley Moffat, Eric PfannerFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Citigroup Inc. is the first big U.S. bank to report second-quarter earnings when its latest results come out Monday at 8 a.m. Investors will be keeping a close eye on how tightly the bank reined in expenses, and how its international businesses fared, as weak trading revenues are already anticipated.In mid-June, Citigroup CFO Mark Mason said second-quarter fixed-income and equities trading revenue would likely fall by a “mid-single-digit” percentage range from a year ago, while investment-banking fees were expected to drop in the “mid-teens.” Morgan Stanley sounded a warning bell on trading then, too.“Weakness in trading revenues could be offset by controlled expenses,” Barclays analyst Jason Goldberg wrote in a note previewing the second quarter. If revenues remain soft, Barclays will look to see whether Citigroup adjusts its 2019 expense guidance from “flattish” to down. Relative to the first quarter, Goldberg expects higher net interest income, driven by balance sheet growth; little change in net interest margin (NIM); higher tech and marketing costs; higher provisions, though “still benign” credit metrics; a higher tax rate and a lower share count.Any signs from Citigroup’s international business “will be watched closely - Mexico and Asia in particular,” Bloomberg Intelligence’s Alison Williams said. She expects expenses will fall 1% compared with the prior year, with modest revenue growth, and will be tracking FICC (fixed income, currency and commodities) for its implications for Citi’s rivals.Citigroup’s “forward look and management’s take on the macro backdrop” will be key for Credit Suisse’s Susan Roth Katzke, along with “global GDP growth, capital markets health and of course, the cost of the yield curve shift.” She’s watching the bank’s willingness to affirm its return-on-tangible-equity targets.“We need to see revenue growth, especially from the North American consumer business,” RBC analyst Gerard Cassidy wrote via email. The bank’s Institutional Clients Group, or ICG, business is “always important to them as well.”Cassidy is a contrarian overall, as he views a cut in the Fed Funds rate as a likely positive for bank stocks, since it would “steepen the yield curve for the banks, which will bolster net interest revenue growth,” according to a recent note. Other analysts have been trimming their estimates for earnings per share, with some cutting ratings, too.Cassidy said he believed that the Fed waited too long to cut rates in 2007-2008, which meant “the down leg of the credit cycle overwhelmed” the benefits of rates cuts and a steeper yield curve. This time may be different.“Bank stocks are unloved,” and should outperform the broader market, he said.JPMorgan Chase & Co., Goldman Sachs Group Inc. and Wells Fargo & Co. follow Citigroup with reports on Tuesday. Then comes Bank of America Corp. on Wednesday, and Morgan Stanley on Thursday.Banks were gaining in mid-day Friday trading, with Citigroup shares up 0.4%, JPMorgan rising 0.6%, Goldman up %, and Morgan Stanley rallying 1.3%. Earlier, Morgan Stanley got a lone upgrade from Citi analyst Keith Horowitz, who downgraded a host of regional banks.CITIGROUP ESTIMATESEarnings release expected Monday 8am2Q EPS estimate $1.80 (range $1.70 to $1.88)2Q adjusted revenue estimate $18.52 billion (range $18.01 billion to $19 billion)4Q equities trading revenue estimate $830.7 million (Bloomberg MODL, 7 ests.)FICC $3.01 billion (7 ests.) I-banking revenue est. $1.26 billion See Bloomberg Intelligence, July 11: Citi Leads View on Trading Result, Evolving Outlook: 2Q Preview Call 10am 866 516-9582 password: 1879538 JPMORGAN ESTIMATESEarnings release expected 7am July 16 2Q adjusted EPS estimate $2.50 (range $2.40 to $2.56)2Q adjusted revenue estimate $28.88 billion (range $28.28 billion to $29.61 billion)4Q equities trading revenue estimate $1.82 billion (Bloomberg MODL, 7 ests.)FICC $3.33 billion (7 ests.) I-banking revenue est. $1.82 billionBloomberg Intelligence, July 12: JPMorgan Rate Risk, Long-Term Landscape in Spotlight: 2Q Preview Call 8:30am (New York time), (866) 541-2724 GOLDMAN SACHS ESTIMATESEarnings release expected 7:30am July 16 2Q adjusted EPS estimate $4.93 (range $4.38 to $5.52)2Q net revenue estimate $8.90 billion (range $8.62 billion to $9.36 billion)4Q equities trading revenue estimate $1.84 billion (Bloomberg MODL, 8 ests.)FICC $1.60 billion (8 ests.) I-banking revenue est. $1.91 billion Bloomberg Intelligence, July 11: Goldman’s Trading, CCAR Result and Outlook Are Focus: 2Q Preview Call 9:30am 1-888-281-7154 WELLS FARGO ESTIMATESEarnings release expected 8am July 16 2Q EPS estimate $1.16 (range $1.08 to $1.27)2Q net interest margin estimate 2.86% (range 2.81% to 2.9%) (BD) Bloomberg Intelligence, July 11: Wells Fargo Mortgage, Costs Eyed Amid Rate Pressure: 2Q PreviewCall 10am 866-872-5161 BOFA ESTIMATESEarnings release expected 6:45am July 17 2Q adjusted EPS estimate 71c (range 67c to 75c)2Q revenue net of interest expense estimate $23.16 billion (range $22.78 billion to $23.72 billion)4Q equities trading revenue estimate $1.21 billion (Bloomberg MODL, 7 ests.)FICC $2,12 billion (7 ests.) I-banking revenue est. $1.41 billion2Q net interest yield estimate 2.46% (range 2.41% to 2.5%)Bloomberg Intelligence, July 12: BofA Wealth Margin May Be Bright Spot in Rate Cloud: 2Q Preview Call 8:30am 877-200-4456 password: 79795 MORGAN STANLEY ESTIMATESEarnings release expected 7:30am July 18 2Q EPS estimate $1.15 (range $1.03 to $1.29)2Q net revenue estimate $10.03 billion (range $9.71 billion to $10.66 billion) 4Q equities trading revenue estimate $2.30 billion (Bloomberg MODL, 6 ests.)FICC $1.35 billion (6 ests.) I-banking revenue est. $1.56 billionBloomberg Intelligence, July 12: Morgan Stanley Wealth Margin, Mix May Help Meet Goal: 2Q Preview Call 8:30am 877-895-9527 password: 8194229 For more stories on 2Q, see:To contact the reporter on this story: Felice Maranz in New York at email@example.comTo contact the editors responsible for this story: Catherine Larkin at firstname.lastname@example.org, Scott Schnipper, Brad SkillmanFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Opinion) -- An age-old question has reared its head again: Why can’t China create a globally competitive investment bank in the mold of Goldman Sachs Group Inc. or Morgan Stanley?It’s not like the country hasn’t tried. China International Capital Corp., a venture formed in 1995 with New York-based Morgan Stanley, foundered amid disputes between the local and U.S. partners and slipped behind newer rivals without ever becoming a global heavyweight.(1) Citic Securities Co. made an unsuccessful attempt to buy into Bear Stearns Cos. in 2007 (which was probably a lucky escape). Now add CLSA Ltd. to the list of failures.A common theme running through the exodus of foreign executives from Citic’s CLSA, detailed by Cathy Chan of Bloomberg News this week, and the earlier strains at CICC is the clash of cultures between Wall Street’s freewheeling practices and the more staid, hierarchical approach of Chinese state-controlled financial institutions. U.S. investment banks are highly competitive and individualistic, studded with rainmakers, big-hitting traders and star analysts who may earn vast pay packages and hold power that’s disproportionate to their place in the management structure. It’s a way of working that doesn’t gel easily with China’s top-down state industrial model.When one senior CLSA executive had concerns about the direction of his unit, “colleagues from Citic advised him to steer clear of conversations with the boss that didn’t involve flattery,” Chan wrote. Compare that with this profile of CICC from 2005: “Morgan Stanley's Western bankers were used to disagreeing openly with colleagues. CICC's Chinese employees preferred to resolve differences without confrontation, and in private.” Not much seems to have changed.These tensions took a toll on CLSA, a Hong Kong-based outfit with a reputation for independent-minded research that was acquired in 2013 by Citic Securities. The Chinese brokerage is an arm of Citic Group, a state-owned pioneer of the country’s economic reforms set up under the direction of Deng Xiaoping in the late 1970s. Before the takeover, CLSA was ranked in the top three for Asian research by institutional investors, along with Morgan Stanley and Deutsche Bank AG. By last year, it had dropped out of the top six, according to Greenwich Associates.As a group, Chinese investment banks and securities firms have failed to make much impact on international markets. The combined overseas revenue of the country’s 11 largest brokerages was just $3.5 billion last year, according to Bloomberg Intelligence analyst Sharnie Wong. That’s roughly on a par with the Asian revenue of BNP Paribas SA, which doesn’t rank among the biggest global investment banks. Chinese brokerages are relatively unsophisticated beside their Wall Street rivals, focusing mostly on equities trading – a business that Deutsche Bank AG said this week it’s exiting amid increased automation and low margins. Mainland firms have less of a presence in bond trading and structured products, which remain driven by humans and are the bread and butter of international banks. It could be argued that China doesn’t need a world-class investment bank, given the dominance of local firms in its increasingly important domestic market. The inclusion of the country’s shares in the MSCI Emerging Markets Index and its bonds in the Bloomberg Barclays index has driven billions of dollars of foreign money into Chinese capital markets. Chinese firms have also made headway in IPO underwriting in Hong Kong, dislodging Wall Street rivals in the league tables.Besides, global investment banking revenues have been sliding since the financial crisis, amid low interest rates and the trend toward automated trading. That would be a short-sighted view, though. If China is serious about modernizing its capital markets, it needs the expertise developed by leading international investment banks to provide better fundraising options for its companies. It may be no coincidence that Beijing has finally relented and allowed overseas banks to control their Chinese ventures, among them UBS Group AG, Nomura Holdings Inc., JPMorgan Chase & Co., Morgan Stanley and Credit Suisse Group AG. A slowing economy means efficient allocation of capital has become more more important than ever. Exposing local brokerages to overseas competition may spur them to raise their game.Chinese firms operating in Hong Kong are already moving up the curve in research as they try to make their way in the city’s more robust environment. An example is CGS-CIMB Securities, a venture between China Galaxy Securities Co. and Malaysia’s CIMB Group Holdings Bhd.A world-class investment banking operation needs more than research, though. Much of the competitive advantage for bulge-bracket firms derives from networks of relationships with companies and investors that have been cultivated over decades. Building such capabilities will take time.It’s hard to see this happening until China stops using financial firms as tools of the state. In 2015, the government leaned on brokerages to rescue a crashing stock market. Last month, it asked large securities firms to take over the role of providing financing to small and medium-size enterprises. If China is to produce its own Goldman Sachs, it’s unlikely to come from the sclerotic state economy. Look instead to the wellspring of Chinese innovation: the private sector. For that to happen, though, the state has to get out of the way.Ultimately, the biggest block to Beijing’s ambitions is Beijing itself. (Updates the eighth paragraph with Chinese firms dislodging rivals in Hong Kong IPO underwriting. An earlier version of this column corrected the spelling of Bear Stearns in the second paragraph.)(1) Morgan Stanley sold its CICC stake in 2010.To contact the author of this story: Nisha Gopalan at email@example.comTo contact the editor responsible for this story: Matthew Brooker at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Nisha Gopalan is a Bloomberg Opinion columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
Editor's Note: This article was previously published in April 2019. It has been updated and republished.I attended a meeting of startup founders who pitched their companies. Interestingly enough, many of them touted artificial intelligence.Source: Shutterstock Yes, this technology has quickly become red hot. After all, the market opportunity is massive. Gartner estimates that spending will grow at an average compound annual rate of 18% to $383.5 billion by 2020.InvestorPlace - Stock Market News, Stock Advice & Trading TipsYet AI is not easy to develop. There needs to be access to huge amounts of data, so as to find patterns. What's more, AI requires top-notch data scientists. As should be no surprise, this kind of talent is in short supply nowadays.Because of all this, when it comes to finding artificial intelligence stocks, they are usually larger companies. * 10 Best ETFs for 2019: The Race for 1 Intensifies OK then, which names are positioned to benefit? Well, let's take a look at five that stand out: Alphabet (GOOG)Alphabet's (NASDAQ:GOOG, NASDAQ:GOOGL) Google CEO, Sundar Pichai, refers to the company as "AI first." And this is certainly not hype.Source: Shutterstock AI has become pervasive across the product line, such as with Gmail, YouTube, Maps, Photos, Google Cloud and so on. The company has also developed its own assistant, which connects with more than 5,000 devices in the home.Google has been creating industry standards for AI as well, primarily through its own language called TensorFlow. Just some of the companies that use it include Uber, eBay (NASDAQ:EBAY) and Coca-Cola (NYSE:KO).Something else: Google is a top player in autonomous vehicles. The company's Waymo unit could be worth as much as $175 billion, according to analysts at Morgan Stanley.Finally, the valuation of GOOG stock is at reasonable levels, with the forward price-to-earnings ratio is 28.62, which is in-line with other mega tech operators like Microsoft (NASDAQ:MSFT). This puts it at the top of the heap among artificial intelligence stocks. Nvidia (NVDA)Nvidia (NASDAQ:NVDA) is the pioneer of GPUs (Graphics Processing Units), which are chips that process large amounts of data cost-effectively. The technology was initially focused on the gaming market.Source: Shutterstock But NVDA realized that GPUs were also ideal for AI. To this end, the company has leveraged these systems into areas like datacenters and autonomous vehicles.No doubt, it has been a very good move. Consider that NVDA has been on a strong growth ramp before flattening a bit at the end of its fiscal year. In the latest quarter, revenues dropped by 24% to $2.21 billion year over year, but finished the year up with 21% growth to $11.72 billion. * 7 A-Rated Stocks to Buy for the Rest of 2019 It's true that the valuation of NVDA stock is far from cheap, with the forward price-to-earnings ratio at 24x. But then again, a premium is to be expected for a company that is a leader in a massive industry.For example, earlier this year Evercore ISI analyst C.J. Muse boosted the price target on NVDA stock to $400, which implies 41% upside. In his report, he noted that the company's technology is "becoming the standard AI platform." IBM (IBM)AI is nothing new for IBM (NYSE:IBM). The company has been developing this type of technology for many years. For example, back in 1985, it developed its AI computer called Deep Blue.Source: Atomic Taco via FlickrIt would actually beat chess world champion Garry Kasparov in 1996. Then in 2011, IBM created Watson to take on the best players on the quiz show Jeopardy!. The computer won.Now, IBM has definitely had its troubles. But the investments in AI and other cutting-edge technologies have been making a difference. Note that during the trailing 12 months, IBM's Strategic Imperatives, which include cloud computing, security, analytics, Big Data and mobile, generated $40 billion, more than 50% of total revenues. This has helped improve the growth rate of the overall business.IBM stock also has an attractive dividend, which is at 4.61%. This is one of the highest in the tech industry. Oh, and the valuation is reasonable as well. Consider that the forward price-to-earnings ratio is only 11.85x. Yext (YEXT)Yext (NYSE:YEXT) has been among the most exciting Artificial Intelligence stocks.Source: TechCrunch via FlickrThe reason: the company is a top data provider, with integrations of over 150 services from operators like Google, Apple (NASDAQ:AAPL), Amazon.com (NASDAQ:AMZN), Microsoft, Facebook (NASDAQ:FB) and Tencent (OTCMKTS:TCEHY).Yext has also added context and intent to all this, which allows for more accurate real-time searches. * 7 Marijuana Companies: Which Pot Stocks Should You Buy? On the latest earnings call, CEO Howard Lerman noted:"Today, we manage more than 185 million facts about our customers in our platform, providing brand-verified answers in services like Google, Siri, Alexa and WeChat to consumers looking for information verified by the source of truth."Growth has been strong. In the latest quarter, revenues shot up by 33% to $63.8 million. The company has also been getting much traction with enterprise customers. Note that the quarter saw nearly 130 new logos. Baidu (BIDU)When it comes to the search business, Baidu (NASDAQ:BIDU) remains the king in China. Over the years, the company has transitioned to mobile, which has been critical.Source: Simone.Brunozzi Via FlickrBut BIDU has also invested heavily in becoming one of the serious artificial intelligence stocks. This has helped with personalizing the search experience as well as improving the impact of online ads.But AI has done more than just bolster BIDU's own platform. The company has created several platforms for third parties. One is DuerOS, which has an installed base of 100 million devices and processes over 400 million queries a month. Then there is Apollo. It is an AI system for autonomous vehicles. Recently, BIDU used this with King Long Motors to launch the first fully self-driving L4 minibus.The AI efforts have been paying off, and BIDU has a highly scalable business model. That all is only good news.BIDU stock has taken a hit over the past year, down 32%, but so far this year it's up nearly 5% and looks as if it's set to keep moving. Keep in mind that Chinese stocks have been in the bear phase and that there are concerns about the U.S. trade tensions. But for investors looking for a play on AI in China, BIDU stock does look attractive at these levels.Tom Taulli is the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Companies Apple Should Consider Buying * 7 Beaten-Up Housing Stocks Due for a Bounce Back * Take Buffett's Advice: 5 Vanguard Funds to Buy The post 5 Artificial Intelligence Stocks to Consider appeared first on InvestorPlace.
Cheaper valuation, better earnings growth prospects, solid performance in Stress Test, dividend hike announcements and less chances of a rate cut should position financial ETFs in a good spot in 2H.
Anheuser Busch InBev, General Electric, Bed Bath & Beyond, Morgan Stanley, and 7-Eleven are the companies to watch.
Morgan Stanley (MS) doesn't possess the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.
(Bloomberg) -- Traders boosted the amount of easing they expect from the Federal Reserve this month and beyond as Chairman Jerome Powell emphasized persistent risks to the economy.The market firmed in its conviction that a quarter-point cut is coming at the end of this month. Traders also dialed up bets on an even bigger July shift as Powell responded to questions from U.S. lawmakers in Washington, including one directly on the possibility of such a move. The market is now pricing in almost three quarters of a point of easing by the end of 2019 and short-dated Treasury rates have fallen sharply, taking the two-year yield as low as 1.82%. The dollar also weakened, while U.S. stocks are firmer on the day.Powell’s testimony appears to have reassured traders that the rebound in payrolls reported last week won’t deter policy makers from a July move. The Fed chairman himself said Wednesday that the strength of hiring in June had not changed the central bank’s thinking.“Powell fully endorsed the July rate cut and did absolutely nothing to pull the markets back from that expectation,” Peter Boockvar, chief investment officer at Bleakley Financial Group, said in a note.While Powell appears to have removed doubts about whether a rate cut is on the way, market debate over the size of this month’s move is heating up. Columbia Threadneedle senior strategist Ed Al-Hussainy said after Powell’s initial statement that traders might be getting ahead of themselves pricing in more than a quarter-point move this month, as there’s no evidence so far of broad support for more-aggressive action among the members of the Federal Open Market Committee.“The case for a 50 basis points cut in July is very strong, but there isn’t a strong base for it on the FOMC,” he said. “Even on the more dovish side of the spectrum, the voices have been lukewarm.”Morgan Stanley and UBS are among those market watchers still looking for a half-point cut, while Barclays pared its July call back to 25 basis points.Pressed during his Congressional testimony on what would justify a larger move, Powell stuck to general references about a “broad range of data” informing the Fed’s decision, along with the “extent to which trade and global growth are weighing on the outlook,” and the path of inflation.Ben Emons at Medley Global Advisors said Powell’s emphasis on the risks to global growth are a tilt in the direction of more action, and noted the market has raised the odds of a half-point cut.“Powell’s statement reopens the door to the possibility of a 50 basis point cut. The market definitely had that wrong by being too single-data-point minded,” the strategist wrote in a note.The implied rate on fed funds futures for August -- which indicates where the market reckons the central bank’s key rate will be after its July 31 decision -- has fallen to 2.09%. That suggests around 32 basis points of easing from the most recent effective fed funds rate of 2.41%, or more than the usual quarter-point sized move that the central bank tends to make.The implied rate for August had been around 2.16% just before the release of Powell’s remarks. Meanwhile, the yield on the January contract -- an indicator for year-end rates -- slid to 1.70% from 1.80% before the testimony, and the U.S. dollar slipped as much as 0.4% against the yen.Treasury YieldsAs rate cut wagers strengthened, the decline in yields across the Treasuries market also pulled the 10-year benchmark down roughly five basis points from where it was just before Powell’s testimony, to around 2.05%. The sharper drop in two-year rates drove the yield curve steeper to around 22 basis points, reversing its recent flattening trend.The U.S. dollar’s decline, meanwhile, was consistent with Powell’s testimony, according to Bipan Rai, North American head of foreign-exchange strategy at Canadian Imperial Bank of Commerce. But he also said the market’s reluctance to price in a half-point Fed cut for July should keep the currency supported.(Adds comments, updates prices.)\--With assistance from Benjamin Purvis, Alyce Andres and David Wilson.To contact the reporters on this story: Emily Barrett in New York at email@example.com;Liz Capo McCormick in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: Benjamin Purvis at email@example.com, Mark TannenbaumFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Investors betting the European Central Bank will wait until September before ramping up monetary stimulus may be underestimating the risk of earlier action.The latest reports suggest the economy is still limping, giving President Mario Draghi reasons to follow through on last month’s pledge that the ECB will act if the outlook doesn’t improve. The European Commission cut its outlook for euro-area GDP and inflation on Wednesday, and a survey of investors this week suggested a German recession is likely as factory orders plunge.Draghi’s eight-year term has been marked by bold action, including an interest-rate cut at his first policy meeting, his “whatever it takes” pledge, negative rates and massive bond-buying. Yet markets are only pricing a 10 basis-point cut in the deposit rate by the Sept. 12 meeting.Economists also see officials waiting until then, using the July 25 gathering to signal a reduction is imminent, and holding off from resuming bond purchases until September or later.Importantly, two of Draghi’s colleagues on the six-person Executive Board -- the two who make presentations to the council -- have given recent speeches suggesting a need to move fast. Chief economist Philip Lane said central banks must be “proactive” and Benoit Coeure, head of market operations, said loose monetary policy is needed now “more than ever.”“The recent comments from officials suggest that the balance of risks are toward earlier moves,” Nick Kounis, an economist at ABN Amro NV in Amsterdam, said in a note to clients. For now, he’s still predicting a rate cut in September, followed by a second cut and renewed QE early next year.What Our Economists Say:“The Governing Council tends not to make big policy changes without fresh economic forecasts to consider -- the next batch won’t be readied until September. Still, the speed with which clouds have gathered over the euro-area economy means action could come sooner. While we expect a change to forward guidance at the July meeting, to signal that stimulus is imminent, the chances of an early rate cut have risen.”-- Jamie Murray, chief European economistIf Draghi does try to push ahead in July, he may have to overcome some resistance on the board and on the Governing Council.Board member Yves Mersch said last month that the ECB should avoid “erratic policy debates for the purpose of creating short-term stimulus.” Bank of France Governor Francois Villeroy de Galhau stressed on Monday that officials have “several Governing Councils to come in the next months” in which they could take any decision. Draghi could also leave the decision to his successor Christine Lagarde, who takes the reins as president from Nov. 1.One concern is that the ECB won’t have updated economic projections until September. Those forecasts are a useful justification for a move if they show the outlook deteriorating. Conversely, taking action in the absence of new predictions risks sparking concern in markets that ECB officials are exceptionally worried about the the economy and inflation.Despite the slowdown and plenty of weak data, there are occasional bright spots. Unemployment continues to drop, putting upward pressure on wages. German exports improved in May, and France -- which is indulging in fiscal stimulus -- saw production surge.Also important is the U.S. Federal Reserve’s policy decision at the end of this month, a week after the ECB meeting. A Fed cut could push the euro higher against the U.S. currency, further damping euro-zone inflation and giving the ECB reason to step up its own stimulus.Investors have pared back bets on a Fed rate reduction of as much as 50 basis points after an unexpectedly strong jobs report last week. Governing Council members may prefer to wait for that decision before acting.Another factor they’ll need to consider is the extent to which global trade tensions are weighing on confidence. Draghi justified his change of language last month by saying the “lingering uncertainty” is in itself a materialization of economic risk.Since then, the U.S. has since agreed to postpone more tariffs on China as it extends talks. While that has cleared some of the clouds, it might not last. President Donald Trump has made clear he’s willing to impose levies on the European Union, which he believes is unfairly weakening the euro with loose monetary policy.(Updates with European Commission forecasts, French industrial output.)To contact the reporters on this story: Paul Gordon in Frankfurt at firstname.lastname@example.org;Jeannette Neumann in Madrid at email@example.comTo contact the editors responsible for this story: Simon Kennedy at firstname.lastname@example.org, Brian Swint, Lucy MeakinFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
This weekend, German lender Deutsche Bank (DB) announced a major restructuring plan that it will undertake over the next four years. The restructuring is projected to cost a total of $8.3 billion and is to be completed by the end of 2022.
The Zacks Analyst Blog Highlights: Morgan Stanley, McCormick, Walmart, Automatic Data and Air Products
Investing.com - U.S. futures fell on Tuesday, as more evidence of the hit to corporate profits from the U.S.'s trade conflict with China shook markets in Asia and Europe.