Good Evening,

Welcome to Equity Espresso's Daily Recap. It was another busy day of earnings with a dose of Lithium takeover drama to keep shareholders on edge. Let’s get stuck in.

The Recap

Markets sunk again as the ASX200 index spent most of the session under 6,800 before ending the day 42 pts. or 0.6% lower to 6,812.30. Wall Street saw a sharp sell-off overnight, particularly in the tech sector, as Alphabets (Google) earnings disappointed. This carried over to our Tech companies today, which fell the most out of the 9 sectors that finished the day in the red.

Megaport (-16.3%) was the big faller in our Tech (-2.5%) sector despite reporting a 38% YoY increase in quarterly revenue and EBITDA of $15.0 million.
WiseTech (-1.9%), Xero (-2.0%) and NextDC (-2.5%) also ended the day lower.

Azure Minerals shareholders started their day with a spring in their step but would have ended it nervously. Azure’s share price shot up over 40% today to $3.50 after the Lithium company confirmed they had agreed to a takeover proposal by Chilean miner Sociedad Química y Minera (SQM) for $3.50 per share, valuing the company at $1.63 billion.

However, takeovers in the Lithium sector don’t seem straightforward of late.

The AFR reported that stockbroker Euroz Hartleys bought nearly 64.9 million shares today at around $3.50 - representing approximately 14.5% of the company. The article speculates that this could be Gina Rinehart’s Hancock Prospecting buying up a stake in the company.

Could we be seeing Liontown 2.0? One to watch over the coming days.

In other news, RBA governor Michele Bullock spoke at senate estimates today, stating that yesterday’s inflation read was slightly higher than the RBA had forecast in August and reinforced that services inflation was uncomfortably high.

Economic Data

• Sales of new single-family houses in the U.S. increased by 12.3% to a seasonally adjusted annualised rate of 759k in September, up from a revised 676k in August and beating market estimates of 680k.

• The number of U.S. Building permits fell by 4.5% to a seasonally adjusted annual rate of 1.471 million in September, down from August's 10-month high of 1.541 million.

• The Bank of Canada held interest rates at 5.00%, which was in line with expectations after August’s 25bps rise.

Wall Street

U.S. stocks fell after a broad sell-off on Wednesday as Alphabet shares tumbled 9.5% after posting earnings after the market close on Tuesday that missed market expectations. The NASDAQ (-2.4%) fell sharply, whilst the S&P 500 lost 1.43%. Treasury yields resumed their upward momentum, with the 10-year edging closer to the 5% level, feeding fears that interest rates could linger.

Alphabet missed revenue estimates in the company’s cloud unit, starkly contrasting Microsoft, which reported accelerated growth in its Intelligent Cloud business. Google posted cloud revenue of $8.41 billion, compared to estimates of $8.64 billion.

Outlook

The S&P 500 (-0.71%) and NASDAQ (-1.15) futures are trading well down this afternoon, indicating another negative for markets.

U.S. GDP for Q3 gets reported tonight, with a QoQ jump of 4.3% expected. Initial Jobless Claims are also scheduled to be released.

Over in Europe, the ECB will decide what to do with their interest rates, which are currently at 4.50%. Back at home, PPI data for Q3 gets reported tomorrow.

Another busy night of Quarterly Earnings, with Amazon, Mastercard, Merck & Company, Comcast and Intel all reporting.

Sponsor

Stay Ahead of the AI Curve

Join 17,000+ daily readers who get The Geek AI's three-minute
newsletter on what matters in AI.

Quick Singles

🪃 Local News

• The Australian government will double the subsidies available under the Critical Minerals Facility to $4 billion to support clean energy projects.

• NRMA Insurance has announced a new distribution deal that involves offering home loans directly to its 3 million customers. Bendigo & Adelaide Bank will fund NRMA Home Loans.

• A KPMG report revealed that Australia could generate over US$10 billion in exports to the United States and create 34,000 high-skilled jobs by accelerating biotechnology collaboration.

🌏 Around The Globe

• The United Auto Workers (UAW) union expanded its strike against the Big Three auto manufacturers, hitting a large Texas plant that builds full-size SUVs.

• How to get more app downloads. McDonald's has started a new promotion named "Free Fries Fridays", which gives customers one medium-sized order of fries - for free, every Friday until the end of the year. The catch? You need to download the McDonald's app, join the rewards program, and make an in-app purchase of at least $1 to claim your free fries.

• Google is temporarily turning off live traffic data in Israel and Gaza for its Maps and Waze apps amid the ongoing conflict. The company took similar action during the Russia / Ukraine war.

• 41 U.S. states are suing Meta for using addictive features, like infinite scroll and persistent notifications, to hook children on Facebook and Instagram.

• According to Reuters, Japan's government plans to spend $33 billion on low-income households and an income tax cut to ease the impact of rising living costs.

Enjoying The Recap?

Forward this email to a friend, family member, or work colleague who would benefit from getting caught up on the day’s news.

They can sign up with the link below. ⬇️ 

Markets

ASX200 Company Movers

Index & Commodity Prices

Sector

Bond Prices

ETF Watch

ASX News

🗞️ Company Announcements

• Allkem (AKE) reported a 35% increase in lithium production during the September qtr. to 4,453/t and a 22% increase in lithium sold at 4,554/t. Revenue was down 18% to US$123 million, as the average price received fell by 40% to US$25,981/tonne.

• Aussie Broadband (ABB) held its AGM today, providing a Q1 trading update where it reported a 20% YoY increase in total broadband connections to 731,785. The company added more than 40,000 connections in the qtr. and now has an 8% share of the NBN market.

• Brambles (BXB) reaffirmed its FY24 guidance after reporting a 13% increase in sales revenue from continuing operations to US$1,640.8 million. Pricing increases drove this jump, as volumes remain flat YoY.

• Coles (CLS) reported a 6.7% sales revenue from continuing operations increase to $10.2bn during the first quarter of FY24. Coles said that supermarket price inflation declined to 3.1% during the qtr. (5.8% in 4Q23) with deflation in the ‘fresh’ category. Sales in the early part of Q2 remain broadly in line with Q1.

• DroneShield (DRO) will supply $10.4 million of Counterdrone equipment to Ukraine as part of the Australian government’s $20 million aid package to Ukraine.

• Fortescue Metals (FMG) reported a 3% fall in Iron Ore shipments for the September qtr. to 45.9 million tonnes. Full-year shipments remain on track to be 192 - 197 M/t.

• JB Hi-Fi (JBH) held its AGM today, saying sales so far in the new financial year are in line with expectations. JB Hi-Fi Australia (-0.1%) and Good Guys (-12.2%) both have lower sales on the pcp., whilst JB Hi-Fi New Zealand (+1.0%) was higher.

• Megaport (MP1) revenue for Q1 rose 38% YoY to $46.5 million, with annual recurring revenue increasing by 36% to $189.8 million. The company reported a positive quarterly Net Cash result of $10.6m.

• Pilbara Minerals (PLS) produced 144.2/kt of spodumene concentrate during Q1 FY24, down 2% from the pcp. Whilst sales were 6% higher, the average realised price of US$2,240/t - a 47% decline from the pcp. and 31% less than the prior qtr.

• Reliance Worldwide (RWC) said that sales in the Americas during Q1 were down on the pcp, which was in line with its expectations when it released full-year earnings in August.

• Westpac's (WBC) FY23 net profit will be reduced by $173 million due to several notable items, including restructuring costs and provisions related to customer refunds linked to the Commonwealth Compensation Scheme of Last Resort levy.

 📱 Post of The Day

A Breakdown of Meta’s Earnings

International News

📰 Global Earnings

Reported During Trading Hours

• Norfolk Southern (NSC) dropped 5.3% after disappointing third-quarter earnings as the rail transporting company posted EPS of $2.65 per share, slightly below estimates of $2.69. Revenue was about in line with expectations.

• General Dynamics (GD) rose 4% after the defence contractor’s third-quarter earnings and revenue beat analyst estimates. The company posted earnings of $3.04 per share on revenue of $10.57 billion against analyst estimates of $2.91 in earnings per share and $10.05 billion in revenue.

• Waste Management (WM) rose by over 6% in the day trade after saying it expects FCF for 2023 to be between $1.825 billion and $1.925 billion, above previous guidance of between $1.675 billion and $1.775 billion.

• Boeing (BA) shares dropped by 2.5% after a mixed earnings report. The aircraft manufacturer reported a quarterly revenue beat, but a wider-than-expected loss likely drove the price fall.

Reported After Hours

• Meta (META) shares fell in after-hours despite reporting better than expected results for Q3, with a revenue lift of 23% to $31.15 billion with earnings per share of $4.39m. This exceeded estimates of $33.56 billion in revenue and $3.63 EPS. Metas core digital ads businesses rebounded after a slower 2022, whilst daily active users increased to 2.09 billion. For Q4, Meta said it expects revenue of $36.5 billion to $40 billion.

• IBM (IBM) rose after reporting adjusted EPS of $2.20 - above analysts estimates. Revenue for the quarter was $14.75 billion, which was also ahead of forecasts. The company’s Software unit reported an 8% growth in revenue to $6.27 billion.

• Service Now (NOW) posted a better-than-expected EPS of $2.92, beating expectations of $2.56. Revenue for the quarter was $2.29 billion as the company’s subscription revenue rose by 27%.

Newsletter Reccomendation

One-click subscribe

Analyst Report

Carly Holdings

Code: CL8 | Market Cap: $4.0m | Current Price: $0.015
Price Target: $0.091 Sector: Industrials
Broker: Research as a Service (RaaS)

Carly Holdings Limited is an online technology company that offers car subscription and rental services to individuals and businesses in Australia and New Zealand.

The company operates two services: Carly.Co, a car subscription service, and DriveMyCar.com.au, a peer-to-peer car rental service. Carly provides vehicles to customers for a period exceeding 30 days under a subscription model. The subscriber is required to pay a flat monthly subscription fee, which includes insurance, registration, servicing, and exclusive use of the vehicle.

Carly sources vehicles through two models:

1. An external owner in exchange for a share of receipts, which is called asset-light or;

2. Securing the vehicle through a vehicle finance lease or purchasing the vehicle themselves -which is called asset-heavy.

Highlights

• Carly provided a quarterly business update on Monday, reporting growth in its owned fleet to 359 vehicles, while costs grew at a modest 4% from the pcp.

• Subscription revenue grew by 15% from the June quarter, with an increase in Average Monthly Subscription revenue from $212,000 in June to $243,000. Annualised, this is $3.1 million. The analyst forecasts FY24 total revenue of $6.3 million, which includes further fleet growth.

Valuation

The research team at RaaS maintain their valuation of $24.4 million at a share price of $0.091. Their valuation is based on the discounted cash-flow methodology using a discount rate of 13.75% (risk-free rate of 4%)

Reply to us at [email protected] if you want access to the full report.

Daily Quiz

❓️ Test Your Knowledge

Yesterday’s Daily Quiz Question. Which of the following is known as the "Fear Index"?

Answer: VIX. The CBOE Volatility Index (Vix) index is a real-time measure of the market’s expectations of the relative strength of near-term price changes of the S&P 500. The index is a measure of volatility as a way to gauge market sentiment.

A Little Extra

📉 Going Down?

Top-10 shorted stocks on the ASX - as of October 20

📊 Broker Ratings

What do the brokers have to say?

1. Brickworks (BKW) - Downgrade to Hold from Add (Morgans)

2. Beach Energy (BPT) - Upgrade to Neutral from Sell (Citi)

3. Damstra Holdings (DTC) - Upgrade to Equal-weight from Underweight (Morgan Stanley)

4. Telstra Group (TLS) - Upgrade to Accumulate from Hold (Ord Minnett)

5. Treasury Wine Estates (TWE) - Upgrade to Neutral from Sell (Citi)

👨‍💼 Director Transactions

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

💲Dividends

Companies trading ex-dividend today

1. Bank of Queensland (BOQ) - $0.21

2. Morphic Ethical Equities Fund (MEC) - $0.035

DISCLAIMER: 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.