Chief Investment Strategist
Summary: The big winner in the Q3 earnings season has been technology companies with Nasdaq 100 companies such as Amazon, Airbnb, MercadoLibre, Meta, and Alphabet significantly increasing their earnings compared to a year ago. Yesterday's move higher in the US 10- year yield might suggest that falling yields are not a one-way street lower. Adyen is facing its most critical test since going public as the Dutch payments company is hosting its Investor Day updating the market on its mid-term financial targets since the catastrophic first-half results in August.
Around 84% of S&P 500 companies have now reported Q3 earnings and the overall conclusion is that companies globally are doing better than expected and their outlook is supportive for equities. Operating income (EBITDA) has been stable for S&P 500 and STOXX 600 companies compared to Q2 while technology earnings have increased significantly in Q3 on the back of stronger than expected revenue growth in technology and efficient cost focus. Examples of technology companies that have increased earnings a lot in Q3 are Amazon, Airbnb, MercadoLibre, Meta, and Alphabet.
Can long-end US bond yields rise again?
The US 10-year yield rebounded yesterday and has stayed firm today. The big risk-on move last week was driven by Powell’s remarks bolstering the ‘peak policy rate’ narrative as Powell said the higher long-end bond yields had done most of the tightening needed. In an almost comical move long-end bond yields plunged with equities rallying. BlackRock recently said that 5.5% level in the US 10-year yield would be consistent with the underlying inflation dynamics, term premium etc. and JPMorgan CEO Jamie Dimon warned that inflation might be stickier than what most think and that the Fed could be forced to hike 25, 50, or eve 75 basis points more and said that the US 10-year yield at 5.5% to 7% was not unusual.
Recent export figures from South Korea suggests that the global economy might be accelerating and the JPMorgan GDP nowcast figures are still suggesting that the US economy is growing around 1.5% annualized in real terms. In other words, the global economy seems to be robust at the moment. Should US bond yields rise again we could quickly see equities be sold off again.
The payments industry in Europe has been rocked twice this year by first Adyen and later Worldline as we have written about in our research notes Quick take: Payment stocks plunge on Worldline outlook and Risk-off, Nvidia earnings, and Adyen’s sudden collapse. Adyen lived a quiet life in public markets until August of this year when the company announced H1 2023 financial results missing on volume and EBITDA due to cost pressures related to its North American business – revenue was up 21% y/y and EBITDA was down 10% y/y making investors questioning Adyen’s EBITDA margin target of 65% as the EBITDA margin plunged to 43%. It did not make things better that management delivered a horrible explanation in financial news and the quiet approach subsequently made things worse. The recent Worldline revenue growth outlook then made investors questioning Adyen’s mid-term forecasts of 25% revenue growth.
Tomorrow’s Investor Day presentation is key for Adyen shareholders but management to reset expectations. Adyen is valued at a premium to its nearest and most comparable competitor Block, so there is still downside risks to Adyen if they cannot better explain what happened to costs and present a plan for get costs under control. But even more importantly for the long-term value of the business, what is the long-term expected revenue growth rate?
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Head of Fixed Income Strategy
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Head of Commodity Strategy
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Head of Fixed Income Strategy
Quarterly Outlook
Head of Commodity Strategy
Disclaimer
The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.
Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)