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Welcome to Equity Espresso’s Daily Recap. 

The ASX 200 index (+0.12%) edged higher on Monday to start the new week positively following Friday's gains on Wall Street, which saw the S&P 500 close at another all-time high. Discretionary (+1.11%) and Technology (+0.87%) companies were the big gainers, offsetting falls in the Energy (-2.12%) sector.

Wesfarmers (+1.80%) rose higher as the consumer discretionary sector continued its positive run, while online retailer Kogan (+23.7%) rocketed after reinstating its dividend as it returned to profitability. Adairs (+14.9%) was another to climb as it reported a 10.1% drop in sales, which was better than analysts had expected.

Energy (-2.1%) stocks were sold off today as Brent crude prices fell by 2.5% on Friday, trading below US$82.00. The U.S. dollar rose amid market concerns that higher-than-expected inflation could delay cuts to high U.S. interest rates. Woodside Energy (-1.67%), Santos (-5.26%) and Yancoal Australia (-2.72%) all finished the day lower.

In company news, Alumina (+6.86%) shares rose to $1.09 after it told shareholders to accept an all-share takeover offer from U.S. partner Alcoa, valuing the company at around $1.14 per share or $3.3 billion.

Aussie Broadband (+1.99%) was another company wrapped up in takeover news, lobbing a $466 million takeover proposal for rival Superloop. Aussie said it had already acquired a 19.9% interest in the company, purchasing the shares at $0.95. Superloop shares closed 14.3% higher to $1.00.

Here is a quick wrap-up of some of the companies reporting earnings today:

• Kogan.com (+23.69%) was the big winner today, closing at a share price not seen in over two years ($7.57), even with a 9.9% slide in revenue to $248 million as cost-of-living pressures put the squeeze on shoppers. The online retailer reported an NPAT of $8.68 million during the first six months of the year, a massive reversal from the $23.8 million loss in the pcp.

• Adairs (+14.99%) was another retailer to climb even after sales fell 10.1% to $291 million. Adairs said it saw “significantly lower” customer traffic compared to last year and that sales for the first eight weeks of 2H FY24 remain challenging.

• Suncorp Group (+3.50%) shares rose after the insurance company increased premiums by 16.3% to $6.9 billion, which it said was driven by higher inflation costs, wild weather, and higher costs of its reinsurance protection. The company's cash profits for the six months were up 13.8% to $660 million.

• TPG Telecom (-8.02%) shares slumped as annual profit fell to $49 million from $513 million a year earlier due to higher expenses from increased tower leasing costs and higher interest rates on debt.

• Endeavour Group (-3.42%) fell after reporting a 2.5% sales lift during the fiscal year's first half to $6.7 billion. EBIT also rose, with a 2.6% jump to $661 million thanks to cost-saving initiatives and gross margin improvement. Despite this, Net profit fell 3.6% to $351 million, driven by higher financing costs.

• Lynas Rare Earths (+1.03%) reported a 74% fall in Net Profit to $39.5 million as a weak Chinese construction sector drove down rare earth prices. Revenue fell 37% to $370 million.

Wall Street

The S&P 500 and Dow Jones Industrial Average recorded another closing high on Friday, with all three Wall Street leading indices notching weekly gains, as artificial intelligence-related stocks kept the recent market rally going.

Nvidia briefly hit $2 trillion in market cap on Friday following its bumper revenue forecast on Thursday, which saw it increase in market value by $277 billion - the biggest one-day gain in Wall Street history. 

In company news, Warner Bros. Discovery (-9.9%) shares dropped after reporting Q4 earnings that missed analysts’ estimates, with a loss of 16 cents per share vs. expectations of a 7 cents per share loss. Block (+16.5%) shares rose after reporting quarterly revenue of $5.77 billion - ahead of the $5.70 billion expected. Adjusted earnings per share was $0.45, with the company’s Cash App business reporting $1.18 billion in Gross Profit - a 25% rise year-on-year.

Economic Data

• Germany’s Business Climate Indicator rose slightly to 85.5 in February 2024, remaining almost unchanged from a three-and-a-half-year low of 85.2 in January.

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Quick Singles

🌎️ Around The Globe

• BHP Group has informed the Queensland government that it will not invest any more funds in the state's coal industry following the recent increase in royalties. BHP stated that the combination of royalties and income taxes resulted in an adjusted effective tax rate of 62%.

• A botched Network Expansion update caused AT&T to experience a wireless outage that disrupted services for mobile customers last week.

• The German parliament has backed a new law to allow the recreational use of cannabis. Smoking cannabis in many public spaces will become legal from April 1. Possession of up to 25g will allowed in public areas.

• Reddit invested excess cash into cryptocurrencies such as Bitcoin, Ethereum, and Matic. Reddit has pursued crypto-related projects in the past, most notably its series of Polygon-based NFTs, which the company calls Collectible Avatars.

• BuzzFeed announced yesterday that it is selling Complex, a media brand focusing on streetwear, music, and sports, in an all-cash deal worth $108 million. BuzzFeed acquired Complex three years ago but is selling it at a loss of about $200 million.

• Google will temporarily halt Gemini's image generation capability of people due to the criticism it received. The model had been overcorrecting for diversity in its output, leading to inaccurate results. Gemini's attempts to diversify its image outputs of people went viral, with users having difficulty generating Caucasian characters.

• General Motors unveiled its luxury electric Cadillac Lyriq in France, expanding its European market after returning last year.

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A Little Extra

📉 Going Down?

Top-10 shorted stocks on the ASX - as of February 19

🗂️ Broker Ratings

1. Eagers Automotive (APE) - Upgrade to Neutral from Sell (Citi)

2. Cedar Woods Properties (CWP) - Upgrade to Add from Hold (Morgans)

3. Latitude Group (LFS) - Upgrade to Neutral from Sell (Citi)

4. Wagners Holding Co. (WGN) - Add (Morgans)

👨‍💼 Director Transactions

What are the insiders doing? (On-market trade only)

DISCLAIMER: Please note that the information provided in this newsletter is for educational purposes only and should not be considered financial advice. It is not intended to encourage you to buy/sell assets or make financial decisions. We strongly recommend conducting your own research before making any investment decisions.