Chief Investment Strategist
Summary: Adyen shares are up 32% as investors are both relieved and optimistic on the future post Adyen's Investor Day presentation. Disney shares were up 4% in extended trading as the company revealed additional cost savings of USD 2bn and beating estimates on Disney+ subscribers. ArcelorMittal missed estimates on Q3 revenue while EBITDA is in line, but more interestingly the company has put out a forecast for India's steel consumption which is expected to double by 2032.
As we flagged in our Tuesday equity update, yesterday’s Adyen Investor Day was a moment of truth for the company and its shareholders. How much would management take down medium-term expectations for revenue growth and EBITDA margin. The key takeaway is that investors liked the Investor Day presentation in which financial objectives were clarified to “grow net revenue annually between the low-twenties and high-twenties percent until 2026” which is a slight downgrade from previous growth expectations. EBITDA margin expectation is set to above 50% by 2026 which is down from 65% in their previous target, and finally capex is set to up to 5% of net revenue. Shares are up 32%.
Here are some the key takeaways from the Investor Day presentation:
If Adyen can maintain the growth and EBITDA margin they are guiding then the equity valuation is not stretched at all compared to previous growth cases in the equity market.
Disney shares rose 4% in extended trading as the company’s fiscal fourth quarter results beat on earnings per share, but more importantly announced that it is on track to deliver additional cost savings of $2bn which will improve profitability. Its Disney+ subscriber base also rose more than expected to 150.2mn vs est. 147.4mn. Disney’s 58% decline in its share price since the peak in 2021 is grabbing the attention of value investors and with the business stabilizing the question is whether big value investors will begin making a move.
ArcelorMittal, Europe’s largest steelmaker, reported weaker than estimated revenue in Q3 while EBITDA was in line with estimates. More interestingly, the company announced its long-term forecast for India’s steel demand which is expected to double by 2023. The company says that India’s per-capita steel consumption is 81 kilograms which is significantly lower than the global average of 230 kilograms indicating material upside to steel consumption in India.
While China today is the key commodity consumer the world will rapidly change over the next 10 years as China’s commodity consumption share will moderate as India’s will rise rapidly as the country urbanizes.
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
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