News and analysis

At least, I was obviously wrong with my assessment of Starbucks' stocks. The technical path of the coffee house's price went much worse than it could be expected a couple of months ago. Since it performed a fast route from a $90+ area to above $100 per share in early November, I felt as if the best moment to invest passed by. Yet, the stock was treading water near the same price range and even lower for quite a long time after that. Finally, quarterly numbers in after-hours trading on April 30 re-shaped the disposition to temporarily bearish, derailing previous attempts to recover and sending the stock below $75.

A 15.88% drop in one day happened amidst weaker sales and profit numbers during the last quarter, also marked by a decrease in customer visits. Same-store sales were down by 4% YoY globally, and were down by double digits on the Chinese market, citing dampening demand in North America and China, which was the worst thing one could imagine. Equity per share (EPS) amounted to $0.68 only vs consensus of $0.80 (a 15.2% of supposed money inflows was missing). Besides, gross marginality per sold unit was 25.6%, down from 26.2% a year ago, and free cash flow lessened to $629.9 million, down 64.8% from the previous quarter.

The bright side of the bigger picture for me is the growing number of new store locations to reach 38,951 before the end of the quarter, as much as 2,317 higher than 12 months ago. Of course, that was the reason for growing expenses, which did not return quickly, yet are promising to bring more money back even if the business marginality would remain relatively low for a while. I am sure that this globally renowned chain of coffee houses, with a nearly $100 billion of market caps, perfectly knows what it is doing when opening new stores in Asia. It should not be an instant coffee effect, but a far-reaching invigorating contribution to a long history of the company, which successfully taught millions of Americans of drinking proper coffee drinks as they were designed and created in Europe, instead of enjoying a poor excuse for a coffee in fast food points. Now, they are teaching this to their Chinese and broader Asian audience as well. A retreat by value-oriented customers and other forms of consumer weakness, when more families prefer eating at home, as well as unfavourable weather conditions in the US, come and go. Yet the coffee empire remains all penetrating amid competitive pressure.

Not too much time will pass and the current price of $75 per share of Starbucks would be perceived as a blessing, though the price may use this short-lived opportunity to test even lower levels. After all, the price briefly dropped below $70 in May 2022 and reached almost $50 in the covid year of 2020. Many of those who abandoned lost opportunities to buy Starbucks in between $50 and $70, being feared by a fleeting moment, would be biting their elbows later when the price surfaced to above $100 again. Taught by various kinds of experience, I began to add more to my buy positions in Starbucks here and now.

Cardano (ADA) has experienced a decline of 3.0% this week, currently trading at $0.4530. This downturn comes after the token attempted to recover from a significant loss, dropping by 10.1% to $0.4180 on May 1st. In its effort to regain traction, ADA is aiming to re-enter the ascending channel established since October 19, 2023. However, achieving this goal requires prices to surpass the $0.4600-0.4700 range.

Investor sentiment remains cautiously optimistic, as there has been observed increased activity among whales accumulating ADA tokens. Over the past 8 days, there has been a daily average of $13.84 billion in large transactions, suggesting the potential for a forthcoming rally in ADA prices.

The German DAX stock index reached a historic milestone on April 2, soaring to an all-time high of 18,638 points. However, it subsequently entered a corrective phase, experiencing a decline of 6.3% to 17,450 points by April 19, marking its lowest level since February 27. Despite this setback, the benchmark has managed to partially recover from its losses and encounter resistance within the confines of an ascending channel.

The recent rebound has underscored the resilience of the index, albeit with indications of limited upside potential. As the index encountered resistance, it demonstrated its strength, suggesting that further significant gains may be constrained. Currently, the resistance level has been adjusted to 18,850 points, while the support zone lies within the range of 16,000 to 16,500 points, serving as a noteworthy downside target.

In light of these developments, setting a stop-loss between 19,000 and 20,300 points could be prudent, with a preference for higher levels to mitigate the impact of unexpected volatility.

Shares of Amazon.com initially went down when having crossed over the halfway point of last week to touch a two-month dips around $166.5, battered by a slight shock from a double-digit corrective move of Meta Platforms. But this did not last long. Markets' belief in the power of sales on Amazon is strong enough for the price to bounce back above $175 the next trading session. An enthusiastic crowd proved right when making the E-commerce giant soaring once again, as its quarterly numbers clearly surpassed experts estimates on the night of May 1.

Some persistent losses of the S&P 500 broad indicator to follow the Federal Reserve's unchanged rate decision, as the central bankers rather downplayed chances for more rare hikes, partially prevented further gains after Amazon's quick re-test of the uncharted territory above $185 per share. Yet, the prospects look rosy, especially as Amazon Web Services (AWS), a growing cloud segment, added 17% on an annual basis to reach $25 billion in revenue. This topped consensus forecasts of about 14.5% to 15% growth. The sales of AWS for the whole year are now running at more than $100 billion, contributing more and more to the company's delivery business. "The combination of companies renewing their infrastructure modernization efforts and the appeal of AWS’s AI [artificial intelligence] capabilities is reaccelerating AWS’s growth rate," the company commented on the results.

All in all, Amazon.com announced its quarterly EPS (equity per share) of $0.98 on revenue of $143.31 billion, against average expectations of $0.84 on revenue of $142.65 billion. For the next quarter, Amazon CEOs suggested sales figures in the range between $144 billion and $149 billion. Even though consensus on Wall Street were betting at nearly $150 billion, this did not stop the bullish bias. Such estimates mean 7% to 11% YoY, being higher than $143 billion in Q1. Operating income is supposed to range between $10 billion and $14 billion, compared with $7.7 billion in Q2 2023. an analyst pool 12-month price target for Amazon is still above $215 per share, which means another 20% upside. Thus, no one among large investment houses expect a solid price adjustment for Amazon before the market reaches this area. Amazon's solid performance is also a bright beacon for other mega caps on Wall Street.

This spring was not the best time for the “Magnificent Seven” stocks, yet the last three quarters showed very healthy margin expansion opportunities, happily used by Amazon. The operating cash flow jumped by 82% YoY, while free cash flows spiked to $50 billion from an outflow of $3.3 billion, allowing to make bigger investments into generative AI. These financial results were achieved despite a pre-tax valuation loss of $2 billion from Amazon’s investment in Rivian Automotive vs a similar kind of loss of just $500 million in the same season of 2023. Customer experiences and businesses are changing because of this, so Amazon CEO Andy Jassy sees "considerable momentum on the AI front, where we’ve accumulated a multi-billion-dollar revenue run rate already”. However, "we don’t spend the capital without very clear signals that we can monetize it this way. We remain very bullish on AWS,” he added. That's why our own estimated target lies between $230 and $250 per share, or even 7% to 16% above the strong consensus pool target of large investment houses.