News and analysis

I told you this coffee stock is a perfect and unsinkable investment, and here it is bubbling to the $100 surface. The great and powerful Wizard of Chipotle, CEO Brian Niccol, is performing a small miracle here and now, trying to copy and scale his former Mexican Grill success into an even wider Starbucks window of opportunities. Starbucks gained more than 8% this week to touch $110 after posting a reducing weakness amid bets on revitalization. Not a poor style to start a coffeehouse career for the former chief of Chipotle and a board member of companies like Walmart and Harley Davidson who also took brand management positions in P&G and Pizza Hut before.

Simple decisions like removing extra charges for alternative non-dairy milk from oat, almond etc, as well as re-adjusting and digitizing pricing strategies and streamlining Starbucks' menu already made available some "positive response" to the changes. Well, the chain's operating margin slid by 3.9% to 11.9% YoY, but the difference has been used with a good purpose of encouraging and rewarding store partners' employees with wage bonuses and other benefits and hours. The market seemingly believes this would help by bringing in more purchases, orders and visits, and more loyal customers for re-buys.

Same-store sales globally dipped by 4%, instead of a worse 5.5% decline in consensus worries before the report. EPS (earnings per share) of $0.69 on revenue of $9.4 billion was only slightly better than a supposed decline from $0.80 of EPS to $0.68 on sales of $9.35 billion. Discounted price policy attracts loyal customers but naturally leads to lower income, which markets consider as a normal phenomenon during a transition period. Meanwhile, the clients' base is more important. And the revenue achievement was very close to its previous record values. As to EPS, this is still far from excellent numbers above $1 per share, which were peculiar for late 2023. But more time may provide more space for recovering, and so my base scenario for the stock is climbing on expectations for approaching profit records in the second quarter of 2025, as a hopeful projection.

When it came to $95, I told you that even $85 would be a golden chance to Buy, and then it retraced to $86.35 as a mid-summer low. And now I feel that even the area around $110 is good enough while any attempt to decrease to $105 would be a great opportunity to enter the rising wave for Starbucks. But going to repeat 2021's high above $125 is still within bulls' reach.

Three giant tech names marked the midweekly set of corporate reports when the echoes of a large AI-related stock price fall were still audible. The plummet on January 27 has been triggered by an emergence of a low-cost generative chat model, made by a small Chinese start-up DeepSeek. A sudden sell-off in Nvidia (NVDA) and other AI flagships seem to have exhausted themselves. Even though the news was probably over-reacted, it couldn't but leave an imprint on investors' perception of fresh and objective quarterly numbers. Shares of Meta Platforms (META) remained most resilient to the overall cautiousness over the fate of AI budgets, as Meta recently switched into cutting its own costs and improving groundworks from other primary developers. Therefore, the Facebook and Instagram parent company delivered a fantastically record Q1 profit of $8.02 per share on $48.4 billion of revenue to beat even already high average expert expectations of $6.73 per share on $47.0 billion, compared with Mark Zuckerberg's brainchild's previous achievement of $6.03 on $40.6 billion in Q3. A 33% quarter-by-quarter growth in pure income led to a 50% of additional profit in the ending quarter of 2024 vs the same period only a year ago. As an immediate response, Meta's market value jumped by nearly 5% to as much as $708 per share in after-hours trading on Wednesday, January 29. But it later slid again by nearly $20 per share to about $688, as Meta CEOs reported somewhat muted outlook, with their own Q1 2025 sales projection between $39.5 billion and $41.8 billion, vs analyst pool's estimate of $41.72 billion and only an inch better than it was through July to September quarter. This partially tempered outstanding results in the last three months of 2024, especially as Mr Zuckerberg admitted that total expenses for 2025 would be supposedly planned inside the range of $114 billion to $119 billion, up from $95 billion in 2024. In any case, Meta's family daily active people (DAP) metric for unique users to open at least one of Meta apps rose by almost 5% YoY to now reach 3.35 billion people, and advertisement views' contribution is still a vital lifeblood for its ever-rising market cap. It is consolidated well above $1.7 trillion after adding a double digit percentage for the last two weeks, even if we count that Meta share price may resist from another temptation of climbing the $700 landmark.

Meta's triumph was widely anticipated, but Microsoft (MSFT) was the real, if maybe more hidden, hero of the reporting period's culmination. Its cloud unit's Azure growth was 31% up QoQ, which was high, though very close to average consensus. This was a better situation compared to a rather unhappy cut of cards three months ago, when Microsoft forecasted Azure growth between 31% to 32% for Q4 vs market estimates of 32.25% on average. The crowd was not deluded in vain and was fully prepared for such a scenario. Success of Azure prompted Microsoft's total revenue rose by as much as 12.25% to $69.6 billion YoY in the December quarter against $62 billion in Q4 2023 and analysts' average estimate of $68.78 billion. This record achievement included 6% of sales climbing during the last quarter. Microsoft earned a profit of $3.23 per share to beat consensus expectations of $3.11 per share, being so close to repeating its Q3 2024 absolute record in quarterly profits of $3.30.

This has not prevented Microsoft stock price from sliding by nearly 5%, so that bulls in the Window developer temporarily abandoned their previous defence positions above $440 per share to replace them with a lower area around $420 at the moment. This means the stock dipped on strong financial numbers just a day after fully recovering from DeepSeek headwinds, despite worries on harder competitions from a Chinese newcomer for Microsoft's close partner and the AI veteran OpenAI. However, Microsoft has passed the double crash test this week. We have no doubt that more dip buyers will appear soon, as Microsoft also posted a 67% YoY growth in what it calls commercial bookings, meaning new contracts signed with large customers, mostly driven by a large new Azure contract with OpenAI, according to Brett Iversen, Microsoft's vice president of investor relations. OpenAI also confirmed a data center deal with Oracle (ORCL), but it is Microsoft who retains the rights to most of the hosting of OpenAI's models.

As to DeepSeek's alleged threat, this low-budget AI chatbot was freshly ranked low in terms of news delivery accuracy. An audit made by NewsGuard revealed a mere 17% accuracy rate to place DeepSeek only 10th out of 11 Western chatbots, including OpenAI's ChatGPT and Google's Gemini. When using the same 300 news-related prompts to evaluate who is better, DeepSeek happened to repeat false claims from the network in 30% of all cases, also giving unhelpful answers in 53% of the time in response to news-related prompts. Western rivals averagely failed in 62% fail rate of all cases vs 83% for DeepSeek, which is hardly performing "on par or better" than Microsoft-backed OpenAI, but at a lower cost, as it was initially claimed. The 300 test prompts reportedly included 30 prompts based on 10 false claims circulating online, with topics ranging from killing UnitedHealthcare executive Brian Thompson to downing of Azerbaijan Airlines flight. In 3 out of 10 prompts, DeepSeek reiterated Beijing's government's stance on the particular topic, even when the very point was not related to China.

As for Tesla stock, it lost about $50 per share, or about 12%, from its January peak price before this Wednesday night's report, but has quickly recovered more than 4.5% to trade above $400 again. Reversing recent losses to another bullish wave soon is a basic scenario after the electric car maker shared its plans for further growth in 2025, even though Tesla reported last quarter's revenue missing consensus hopes. Tesla's profit margin from vehicle sales, excluding regulatory tax credits, which would be banned soon by Trump's administration, decreased to 13.6% from above 17% in the quarter. Tesla CEO Elon Musk shared his view late last year that car sales would grow 20% to 30% in 2025. And this time Tesla proclaimed more than 60% production growth over 2024 levels even before the process may require any further investment in manufacturing lines. The hyping firm also promised cheaper electric vehicle models in the first half of 2025 after costs reportedly "had hit their lowest level ever in the fourth quarter, at less than $35,000, driven by lower costs of raw materials". Its Q4 sales came out at $25.71 billion, falling short of Wall Street experts' bets on $27.23 billion, citing slowing demand with higher interest rates and global competition which continued to weigh on. Earnings per share were $0.73, only slightly below the $0.76 in consensus estimates. Tesla said its discounted prices were aimed at defending and expanding sales later, with outlined plans for Tesla's Cybercab robotaxi to enter mass volume production in 2026, but a robotaxi rollout in the U.S. and supervised full self-driving system in Europe and China will be ready this year. Our conclusion here is that technical retests of a lower price area between $350 and $375 cannot be ruled out yet, but this range will provide a strong support, while more upside towards $500 will follow in any scenario, with or without additional corrections.

Bitcoin (BTC) is up 0.5% this week to $105,122, recovering from a sharp 6.4% drop to $97,696 on Monday. The decline was triggered by Donald Trump’s tariff threat against Colombia. Though, BTC pulled through it surviving during panic over China’s DeepSeek R1 chatbot and a hawkish Federal Reserve (Fed) meeting on Wednesday.

However, there were positive developments as well. Fed Chair Jerome Powell acknowledged that banks can serve clients holding crypto assets, provided risks are properly managed. He also stressed the need for clear crypto regulations. Trump continued pressuring the Fed, criticising its indecision facilitating bullish trends for crypto markets. On this news, Bitcoin gained 3.0%.

Despite this rebound, Bitcoin remains at a crossroads. A potential correction to $80,000–90,000 could take place before the next major rally in April–May. Alternatively, BTC may continue its uptrend without a significant pullback. February will be key in determining the path.

Cardano (ADA) is down 5.0% this week to $0.9303, underperforming the broader crypto market, where Bitcoin (BTC) fell 1.9% to $102,534. The entire market faced sell-off pressure after U.S. President Donald Trump threatened Colombia with tariffs over its initial refusal to accept deported citizens. The decline was further fueled by concerns over China’s DeepSeek R1 chatbot, which rattled the generative AI industry.

While stocks of AI developers are now recovering, and the crypto market is showing signs of a rebound, Cardano remains weak after falling below the key $1.0000 support level. Despite ongoing network development, including the Plomin hard fork scheduled for Wednesday, these factors are unlikely to reverse ADA’s downtrend in the short term.

If broader market sentiment doesn’t improve, Cardano could continue declining toward the $0.8000 support level.