Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Morgan Stanley analyst Brian Nowak outlined four bullish trends for internet stocks,
“All 10 of our companies’ 2Q ad results were stronger than expected … with GOOGL (8% or $3.9bn ) and SNAP (14%) notable standouts … we take comfort in the online ad market’s ability to deliver continued outsized growth even through growing dollar compares given 4 structural factors … 1. Advertising is Still Cyclical: We see faster GDP growth leading to more ad spend across more industries … Ad Dollars Follow Transactions as Ad TAM [advertising total addressable market] Expanding: E-commerce and omnichannel spend continue to grow healthily as wallets move online even through re-opening… AMZN’s surging ad business is largely directly linked to retail transactions... 3. E-commerce a Key Guidepost for Online Advertising: Given the high and rising importance of e-commerce to online advertising, we believe it is insightful to analyze/sanity check online advertising as a percent of e-commerce. There is some consistency with this relationship, as online advertising made up 16-20% of total US e-commerce from ‘14-’19. We model US e-commerce to grow 9%/10% in ‘21/’22. Our new ad forecast implies ‘21/’22 digital ad spend will increase to 20%/21% (essentially back to ‘17-’18 levels)… 4. Advertisers Finding New Online Alternatives Through Near-term Measurement Challenges: APP/U [average profit per user] 2Q ad network results were 52%/23% better than expected which we attribute to strong and growing mobile user bases that lend themselves well to advertising”
Mr. Nowak’s top picks are Alphabet Inc., Facebook Inc., Snap Inc. and Pinterest Inc.
“@SBarlow_ROB MS: 4 Bullish trends for internet stocks’ – (research excerpt) Twitter
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BofA Securities analyst James Redfern discusses the ‘freefall’ in iron ore prices,
“Iron ore prices in freefall - down >$100/t from 2021 highs Iron ore prices plunged by 15% overnight to $130/t and have fallen 44% from a high of $233/t in May 2021. The ferocity of the pullback has surprised many with consensus at $190/t for 3Q21 and $170/t for 4Q21. Spot prices are also well below BofA forecasts of $210/t in 3Q21 and $180/t in 4Q21… Buy rated iron ore producers [are] BHP, Rio Tinto, and Vale… In our view, iron ore prices appear to have overshot on the downside and should increase in the coming days and weeks. As discussed in China Economic Watch: What to expect from China policy easing?, our China economics team expects a step-up in credit easing especially on infrastructure and property investment, along with two small interest rate cuts and reserve ratio requirement (RRR) cuts in the coming months. So while China is targeting lower crude steel production in 2021 vs 2020, this could prove difficult to achieve given the 7M21 growth rate of +8.0%.”
“@SBarlow_ROB B of A: “Iron ore prices in freefall”” – (research excerpt) Twitter
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Credit Suisse analyst Andrew Kuske sees a buying opportunity in Canadian renewable power stocks,
“the TSX renewable sub-sector remains the weakest performer among the three major infrastructure related groups (energy infra, renewables and utilities). From our perspective, largely on the basis of coherent NAV driven approaches to valuation, rather compelling opportunity set is present in some of the renewable stocks with one of the most fundamentally favourable narratives across a variety of sub-sectors … We reiterate our Outperform ratings on Brookfield Renewable Power LP (BEP), Innergex Renewable Energy Inc. (INE) and Northland Power Inc. (NPI) in the core pure play renewable stocks along with identical ratings on the Alberta incumbents: Capital Power Corporation (CPX) and TransAlta Corporation (TA). Simply, we view BEP as one of the best in class globally focused renewable players with a unique business and funding model … Both INE and NPI offer interesting value propositions in our view after a series of real or perceived strategic missteps or weak execution. Overall, we are most constructive on Alberta’s power market with an interesting market transition that does not appear to be fully appreciated by the Street. On this basis, TA provides a compelling valuation.”
“@SBarlow_ROB Credit Suisse sees buying opportunity in Canadian renewable power stocks” – (research excerpt) Twitter
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Diversion: “‘A Smile With Sharp Teeth’: Mike Richards’s Rise to ‘Jeopardy!’ Host Sparks Questions About His Past” – The Ringer
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Scott Barlow