Good Evening,

Welcome to Equity Espresso's Daily Recap. Markets continued their positive run, with Xero’s weaker-than-expected result not enough to stop the ASX200 crossing back above the 7,000 mark. Let’s jump in.

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The Recap

The ASX200 index rose again today to reach three-week highs, closing the day 0.28% higher to finish at 7,014.90 as November is proving to be a bumper month, with the index now up 3.4%. The rise today came despite weaker Chinese economy data released today, which showed that Consumer prices deflated in October. Eight sectors finished higher, with Health Care (+0.98%) and Telco (+0.90%) leading the way, as CSL (+1.80%) was one of the day’s biggest movers.

The Technology (-4.83%) sector saw a sharp fall, mainly due to Xero, who reported half-year earnings today that fell short of expectations. Xero reported a 21% lift in revenue to NZ$799.5m, with a 13% increase in subscribers to 3.95 million. Xero also recorded a profitable half of NZ$54.0m - a significant turnaround from the (NZ$16.1m) loss in the pcp. The positive Net Income result was, however, short of expectations of NZ$62.0m.

The other big company to report earnings today was NAB, which reported an 8.8% lift in cash profits to $7.7bn with a final dividend of 84c per share in what it says was a “challenging environment” during the second half of the year. The bank’s home loan segment saw a 9.1% fall in earnings to $1.4 billion, where NAB said it took a deliberate decision to slow down the growth of home lending where returns have been challenged.

Economic Data

• China Producer Prices declined by 2.6% in October YoY, slightly more than the 2.5% drop in September but better than the 2.7% estimated. This marks the 13th consecutive drop in producer deflation.

• China Consumer Prices fell by 0.2% in October YoY, which was a larger drop than the flat read in September and slightly higher than the 0.1% drop estimated.

• U.S. 30-year fixed-rate mortgages declined for a second consecutive week to 7.61% in the week ended November 3 from 7.86% in the previous period.

• Euro Retail Sales declined by 0.3% in September, marking the third consecutive month of decrease and exceeding market expectations of a 0.2% drop.

Wall Street

The S&P 500 rose for the eighth straight day, albeit small, extending its longest win streak in two weeks, closing at 4,382.78. The NASDAQ also edged out a small gain. The S&P 500 is now up 4.5% for November, while the NASDAQ is 6.2% higher. Earnings season is approaching the tail end, with 88% of the companies reporting results, with analysts estimating that more than 88% of those companies beat estimates.

Speaking of earnings, Walt Disney shares rose 4% in after-hours trading, reporting earnings of 82 cents per share, well above estimates of 70 cents. Revenue of $21.24 billion was slightly behind estimates of $21.33 billion as the company reported 150.2 million subscribers at the end of the quarter. Disney also said it plans to “aggressively manage” its cost base, announcing further cost-cutting measures of $2 billion.

Semiconductor company Arm fell 6.3% in its first report as a public company due to weak earnings guidance. Instacart rose 3.5% after reporting third-quarter revenue of $764 million that beat analysts estimates.

Outlook

A quieter night on the economic front is expected, with Initial Jobless Claims data in the U.S. the main item to watch. Futures markets in the U.S. are marginally lower at the time of writing for both the S&P 500 (-0.03%) and NASDAQ (-0.04%).

Some companies reporting tonight include Sony Group, AstraZeneca, Li Auto, Unity and The Trade Desk.

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Quick Singles

🪃 Local News

• Optus said that services on its network had been restored and back online in a post on social platform X, made just after 8:00 p.m. on Wednesday. The company still has not officially said what caused the issue. Communications Minister Michelle Rowland said the government will undertake a post-incident review of the outage.

• The Age reported that Victoria is considering using a public-private partnership to cover the cost of building the Suburban Rail Loop East, as the government faces a multibillion-dollar funding hole in its flagship infrastructure project.

• NASDAQ-listed fast-charging company Tritium will close its Brisbane-based factory and consolidate operations in the United States. Trititum, which manufactures fast chargers for electric vehicles, is listed on the NASDAQ at a valuation of $US2 billion and currently valued at $US33.1 million as it struggles to raise capital.

• The AFR reported today that Ernst & Young (EY) Oceania would cut 232 jobs, around 2% of its workforce, as it sees reduced demand from financial services and public sector clients.

🌏 Around The Globe

• Fashion retailer Shein is reportedly seeking a $90 billion valuation for its potential U.S. listing. This is up from the $64 billion valuation the company received during its last funding round, according to a Bloomberg report.

• General Motors will temporarily halt production of its fully autonomous Cruise Origin vans; this comes only days after it paused operations following an incident where the vehicle dragged a pedestrian.

• Google is facing a second antitrust trial, this time defending its Android Play store. The trial centres on how Google treats third-party mobile developers, with allegations that the company takes an unfair share of revenue generated from in-app payments.

• American consumer credit card debt has risen to $1.08 trillion, according to a new report from the Federal Reserve Bank of New York, as credit card balances spiked by $154 billion from the previous year.

• Robinhood will roll out its E.U. crypto trading and U.K. brokerage platforms in the coming weeks, and it looks to expand into new jurisdictions.

• According to Reuters, Chinese authorities have allegedly requested that Insurance Group Ping An acquire a controlling stake in Country Garden, the largest private property developer in the country. Ping An has denied these claims.

• The Food and Drug Administration has approved Eli Lilly's tirzepatide, a popular weight-loss medication. Adults who are overweight or suffer from obesity, along with at least one weight-related condition, can now use this medication to manage their weight in the long term.

Markets

ASX200 Company Movers

Index & Commodity Prices

Bond Prices

Sector

ETF Watch

ASX News

🗞️ Company Announcements

• Challenger (CGF) will expand its strategic relationship with Apollo Global Management to support its growth strategy.

• NAB (NAB) reported an 8.8% lift in cash earnings to $7.7 billion during FY23, including a final dividend lift to $0.84. Similar to Westpac commentary, the bank said it was a “more challenging environment” during the second half of the year, which it expects to continue into FY24

• Orica (ORI) shares moved higher after it reported a five-fold increase NPAT of $295.7 million for FY23, with a jump in dividend of 43 cents per share.

• Scentre Group (SCG) reaffirmed its funds from operations guidance (FFO) for 2023 in the range of 20.75¢ to 21.25¢ per security, representing a 3.4% to 5.9% increase for the year.

• Sezzle (SZL) went into a trading halt today pending an announcement regarding an application to be removed from the ASX. Sezzle also reported Q3 earnings today, with Total Income increasing by 34.3% to US$40.8m.

• Wildcat Resources (WC8) went into a trading halt today as the company plans to raise $80 million via the issue of new ordinary shares at $0.76 per share. The company last traded at $0.855 per share and reported cash holdings of $8.7m at the end of September.

• Xero (XRO) reported a net profit of $NZ54.1 million, a significant milestone for the accounting software company, which reported a net loss of NZ$16.1 million in the same period last year.

• Zip Co. (ZIP) said in an investor presentation that it expects to deliver positive cash earnings in FY24, with an increased revenue margin from new products.

Social Media

 📱 Post of The Day

A four-minute tutorial on how to become a Chat-GPT app developer

Technical Analysis

Chart Watch

A bearish chart to keep an eye on - AUB Group (AUB)

Notes

• The share price of AUB is getting close to $28.50, which could provide a good Risk/Reward shorting opportunity.

• After a heavy sell-off in late October, the share price moved upward on low volume to the underside of the diagonal trend line.

• A potential shorting opportunity if the share price starts to stall at near-resistance levels ($28.50) and shows weakness on a lower timeframe

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Broker Research

Pureprofile

Code: PPL | Market Cap: $29.9m  | Current Price: $0.027
Price Target: $0.095 | Sector: Communication Services | Broker: RaaS

Overview

Pureprofile Ltd (ASX: PPL) is a company that provides data analytics, consumer insights, and media services to business decision-makers in brands, media companies, and market researchers. The company operates across three segments: Data & Insights, Pure.amplify Media AU and Pure.amplify Media UK.

Q1 Financial Highlights

• Revenue increase of 16% to $12.3 million

• Underlying EBITDA increases of 36% to $1.5 million,

• EBITDA margin of 12%, up from 10% in the same quarter last year.

Platform revenue rose by 118% to $1.8 million, with the broker stating that this appears ahead of forecasts for the first half of FY24. Whilst the Australian and New Zealand businesses contributed $7.1 million of the total revenue, this segment only grew by 6%. The Rest of the World (RoW) saw an increase of 34% to $5.2 million.

Recommendation

The broker’s base case price target is $0.095, as it believes that continued demonstration of solid revenue growth, a sustained return to profitability, and further evidence of EBITDA margin expansion should underpin PPL’s share price in the near term.

Daily Quiz

❓️ Test Your Knowledge

Yesterday’s Question. How many customers were estimated to be affected by Optus's data breach in September 2022?

Answer: 9.7million. The data breach affected approximately 9.7 million former and current Optus customers. An estimated 10,000 customers had their details exposed on the dark web.

A Little Extra

📉 Going Down?

Top-10 shorted stocks on the ASX - as of November 3

📊 Broker Ratings

What do the brokers have to say?

1. Lottery Corp (TLC) - Upgrade to Outperform from Neutral (Macquarie)

👨‍💼 Director Transactions

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

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LAIMER: None of the information provided in this newsletter should be constituted as financial advice. This newsletter is strictly for educational purposes only. It should not be taken as investment advice or a solicitation to buy or sell assets or make financial decisions. Please do your research.