News and analysis
Capital One Financial corporation shares are trading at 50% off their peak prices. This has inspired the management of the company to deliver a massive buyback program bringing the buyback yield to 19.3%. Together with 2.7% dividend yield, this has made the company one of the most generous in the market. COF shares are in great demand among investors that are focused on value stocks, such as Oakmark Fund with more than $45 billion in assets under management.
The specialisation of Capital One is mostly credit cards, auto loans provided to substandard borrowers, or in other words, people with high credit risk profiles. This business is highly profitable, although it does bear high risks too. The company says it has a reliable risk assessment model in place to run the business. The lender generates not only higher margins compared to its peers, but overruns regulators’ requirements of capital adequacy with 13.6% vs required 6%. Considering these criteria, the company is in line with some of the largest banking institutions in the world, like JP Morgan with 14.1% and the Bank of America with 12.8%.
The company’s capital base, which is built on clients’ deposits, is enough to conduct high-margin lending. Such a model of cheap resources is not only profitable but it is also stable. Capital One has a margin of 10-15% on its tangible equity. The interest for the company’s services is unlikely to decline in the foreseeable future considering the current economic environment. So, COF shares could be selected for long term investments with the upside potential of 30-40% once the market starts recovering.
eBay stocks are trading 50% off their peak prices despite significant progress in key businesses that increase the possibility of an increasing turnover of the auction platform. The dividend yield of the company is at 2.2%, while its buyback yield is at an impressive 24.4%. So, the overall reward for investors is at 26.6% in 2022, a record among public corporates. eBay has bought back shares for $5.3 billion during the last four quarters. So, outstanding shares have been reduced to 551 million from 685 million a year ago.
The company is actively developing collectable trading, including an acquisition of TCGplayer, a marketplace where enthusiasts exchange their collectables like Pokemon, Magic: The Gathering and others. The most important service that the platform provides is guaranteed authenticity of the collectables that ensures the buyers will not be subject to scams and also protect sellers from any malicious fraud. eBay has recently made this service available for jewellery above $500.
The company has published strong forward guidance for Q4 2022 with turnover at $17.8 billion, revenues at $2.46 billion, and EPS at $1.06. The EPS in the Q4 2021 was at $1.05. So, considering the tense situation in the retail market this year, any figures above record values of 2021 should be considered an achievement. eBay stocks will be able to recover rapidly to their peak prices once the market reverses to the upside, and that would mean 100% profit from the current values.
Avalanche
is ranked by Coinmarketcap at the 12th position by market cap with
$7.8 billion, which is 4% less than Ethereum’s market cap. AVAX prices dropped
by 82% of its peak values, allowing investors to buy it at early 2021 prices.
Avalanche’s infrastructure consists of three logically isolated networks, each
of these with their own processing, validators, and own set of rules.
This
platform is often compared to the existing internet web infrastructure with
core connection protocols like HTTP, surrounded by a huge number of networks to
their apps. Avalanche allow for the creation of public and private systems as a
blockchain or DAG (Directed Acyclic Graph) and for the use of different virtual
machines for apps, including EVM engine (Ethereum Virtual Machine) that allows
Enthereum network programs to be developed.
Avalanche
includes C-chain to create smart contracts that are processed on an advanced
EVM engine, P-Chain that coordinates validators that process transactions and also
allows for the creation and management of new subnetworks, and X-Chain which is
a directed acyclic graph regulating issuance and trade of cryptoassets. DAG
systems record new transactions on top of the old ones, allowing for processing
speed to be increased and for capacity substantially. It is quite different to
other blockchains, where transactions are compiled in blocks in order to be
processed.
The
advantage of Avalanche is that it provides anyone with the opportunity to
create his or her own isolated blockchain with its own set of parameters,
including access to apps and the programming language with which it will work.
Every subnetwork can process around 4,500 transactions per second compared to
14 processed by the Ethereum network.
Tesla is
unique in terms of its share price. TSLA stocks rallied long before the company
established the production of viable and steady electric vehicles (EV) and also
thanks to the reputation of its leader Elon Musk. It is true that Tesla
sometimes misses its mark and deadlines to launch new models and products but it
seems that the crowd invests in Tesla not for its hit-and-run strategy but because
of their belief in Musk’s ability to transform our everyday life in the long
run.
Tesla
stocks are trading 60% off their peak prices thanks to the market correction
that has been squeezing the market since the end of 2021. Nevertheless, market
participants are discussing some drivers that may hit the company’s business.
For example, lower gasoline prices may hamper EV sales. It is true that
Americans are now paying around $3.6 per gallon compared to $5 a few months
ago. But this driver is largely exaggerated as gasoline prices is not the major
reason for someone to buy an electric car. A move towards green energy and minimising
carbon footprints is not a short term affair, but a sustainable long-term trend
that is supported by governments, including the United States and China.
Besides. oil producers forecast global demand will outweigh the supply side over
the coming years while also betting on higher prices of fuel. So, no short-term
movements of gasoline prices would affect EV buyers, as well as TSLA stock
buyers.
The more
serious issue is the declining prices for Tesla’s second-hand EVs. Tesla used
cars are now 15% cheaper after a summer peak. If this downtrend is sustained
pressure on sales of new model could mount. Tesla is planning to increase EV’s
quarterly production to 500,000 by the end of 2022 and it is likely to increase
production further after launching new production facilities in Berlin and
Austin. But Tesla is not a mass market. So, Tesla fans are unlikely to pay much
more to get a brand-new Tesla.
Apple stocks have had a very impressive performance amid a clearly bearish market while losing only 20% of their peak values. However, investors should be prepared for elevated turbulence in these stocks considering the situation in China.
China’s zero-tolerance policy to COVID-19 led to a massive exit of employees from Zhengzhou city plant amid fears over tightening curbs. Over 200,000 workers are rumoured to have left the plant. If this is true, the production of iPhone 14 Pro and iPhone 14 Pro Max would be very complicated with no clear outlook on when it could be resumed. The delivery delay shown on Apple’s website has already hit six weeks. Americans who ordered the brand new IPhone for Thanksgiving Day will only receive it for Christmas now. Meanwhile the last two months of the year are very valuable for any mass-market company in terms of holiday sales.
Apple is planning to move iPhone production to India. But that would require years. The company has already invested $75 billion in the Chinese market and now this investment may be at risk as the ruling Communist party in China may put a local ban on the sale of Apple products. China is the third largest market for Apple with the United States at the first place with $153 billion and Europe at the second with $95 billion. Wall Street is expecting Apple’s earning to go up by five percent over the next three years. So, any troubles with production in China may alter these forecasts.
