News and analysis

London wheat futures (LWBc1) rose to £307.50 per tonne by March 31. This is more than 35% higher than £226.5 recorded a couple of days before the start of military conflict in Ukraine. By the beginning of April wheat contracts were about 61.5% higher than in the same season a year ago. Barley was up by almost 44% during March 2022, while U.S. Corn Futures were almost a quarter more expensive than at the beginning of January. 

In some parts of the world there are food shortages due to crop failures and supply disruptions following the corona crisis. Top level politicians, including speakers of the French agriculture ministry and U.S. President Joe Biden, are referring to this as direct consequences of war as well as consequences of economic and financial sanctions that were placed on Russia. Russia and Ukraine together account for up to a quarter of global wheat exports and almost a fifth of all corn deliveries, as well as 12% of the total calories supplied to the world market, according to Bloomberg. These two countries produce grain at lower prices than North America and Europe. In recent days, Russian authorities have also been actively discussing options like selling resources for national currency or even only to "friendly countries". 

Anyway, even if food prices did partially stabilise, they probably remain high. One of the largest agricultural originations and processing companies, Archer-Daniels-Midland may further benefit from the situation. It offers sustainable nutrition for humans and animals, and it is also engaged in developing energy and bio-based alternatives. Big money may continue to lift the stock even though the ADM price is almost 40% higher compared to pre-Christmas dates. It could easily become the next hot stock. The company's cap now exceeds $50 billion, but it may become even higher before the release of the next quarterly report scheduled for May 3. ADM sales and earnings are growing at double-digit rates, as its one-year sales growth rate was 32.4%, and three-year equity per share (EPS) growth rate was above 19%. Nearly 9% of the short-term correction of the ADM shares which were priced down on March 25-29 have already met active demand, causing quotes to quickly recover more than half of the correction losses.

The chains of discount stores in the United States like Walmart or Target look to be immune to inflation surges or even may win in consumers' attention when the prices are going up all over the country. Consumer inflation almost reached the level of 8% year-on-year in March. Financial regulators are not in a hurry to act decisively against it. Until recently, the Federal Reserve considered inflation as a transitional phenomenon. In such conditions, many households tend to save their money by visiting stores where they have a chance to buy cheaper. During the pandemic, Walmart has increased the number of its customers by offering free deliveries and a smart loyalty program. This process is only going faster in the face of rising retail prices for food and convenience goods. 

Walmart's financial report on February 17 revealed an all-time record sales of more than $150 billion in the history of this chain of stores, plus an increase in net profit compared to the previous quarter and only a slight decrease in profit compared to the first half of 2021. A solid report helped Walmart stocks to gain almost 8% in the following four weeks, but the peak values of 2021 are still about 6% higher. So these stocks could be characterized as potential value stocks with at least enough free space above the current price to previous records. And with a tailwind, such kinds of stocks could be a rather stable anti-inflation instrument for investors. 

Both of the two world's most popular streaming services mentioned above, Netflix and Disney+, deserve their places among this set of successful and fast growing businesses, at least for better balance of risks and potential profits. Netflix stocks already lost more than half of its record value of $700 per share, reached in November 2021. However, the main reason was a logically irrational but fast downward movement in January after the company collected the maximum revenue of $7.7 billion in its history but failed to please the public by the number of new subscribers. Just in one night, the capitalization of Netflix sank more than 20%, as the streaming service added 8.28 million new customers from October to December, but estimated it would be able to attract "only" 2.5 million subscribers for the next three-months period. For some reasons, polls showed average expectations of more than twice better prognoses of about 5.9 million subscribers expected in the first quarter of 2022. It would be strange to keep such a high pace after a prosperous Christmas season, plus in conditions when no more corona lockdowns were awaited. 

Further bearish moves continued to develop mostly under its own inertia. However, as soon as there would be the first signs of a comeback start in Netflix shares, with its new season of "The Witcher" and other premiere events, the prospect of a great profitable return here may cause a huge interest in this asset. Sales of Netflix for the first two quarters of pandemic 2020 was $5.77 billion and $6.15 billion, respectively, and each of them was much lower than last figures of $7.71 billion. The formal profit of business now is lower but exclusively thanks to the costs of creating new attractive shows. So, it all works to bring and keep customers from all over the world. Netflix picked up more than 36 million subscribers in 2020 plus 18.2 million more in 2021. Most of them are loyal Netflix customers. So, even if each quarter of 2022 brings 2.5 million newcomers, then on average it could potentially give about 10 millions, which looks quite a normal result to justify the potential comeback in price. 

C3.ai stocks lost nearly 90% of their peak prices of 2021. The large AI software provider’s stock prices are now less than 50% of the IPO price. It seems that the time for buying C3.ai stocks for long-term investments has now arrived. For the fiscal Q4 2022 that ended April 30 revenues rose by 38% year-on-year to $72.3 million, while the number of clients increased by 48% to 223. The company has reached agreements with large corporates like PwC, Ernst & Young, and Accenture.

The company previously focused on oil & gas and industrial corporations, but is now expanding further to financials, healthcare, and other sectors. Oil and Gas client bookings increased by 95%, while other sectors increased by 116%. The company is the most famous in its niche, so it is a clear choice for any corporation that wants to improve the automation of its operations.

AI Enterprise value is at $978 million while revenues for the fiscal year of 2023 are expected at $316 million, making forward EV/S (enterprise value to sales) at 3, which is a very low ratio for a company with such huge potential. C2.ai has recently received FedRAMP status that allows the company to deliver its solutions to U.S. Federal Government entities with large budgets.

The price of AI stocks may reach $50 after market sentiment changes to positive.