Microsoft still a popular stock, Adobe rises and the ASX company rekindling its uranium asset
Australian investors are piling into shares they feel could bounce back when major economies reopen after lockdown. That’s the message from global multi-asset investing platform eToro, which has shared with Finfeed its Australian figures when it comes to its top traded May stocks.
In May, Australian investors using eToro’s platform overwhelmingly backed firms that had either weathered coronavirus well or those that are expected to take off once lockdown ends.
For instance, Home Depot rocketed from the 46th most invested in stock in April to the eighth highest in May, as many homeowners now have time to dive into their DIY projects.
Beyond Meat, which makes plant-based meat substitutes, moved from the 26th most invested in stock in April to the third highest in May following strong recent earnings.
Amazon and Netflix, both of which should thrive during lockdown, fell out of favour with investors in May. Possibly because as people return to work, less will be watching the streaming services.
Interestingly, Microsoft has been up and down over the two month period.
“Microsoft has seen a huge rise in its stock price in April up a staggering 17.1%, but a rather subdued May comparatively, up 4.2% for the month, eToro analyst Mathew De Corrado commented.
“Despite the relatively slower month, Microsoft still managed to be one of our most popular stocks. Microsoft, as with much of the technology sector, has benefitted from the increased demand for cloud services, communication software, and collaboration software during the lockdown. Overall, the Information technology sector has outperformed the S&P 500 since the start of the year, with May being the third best performance for the sector over the past 12 months.
“In late April, Beyond Meat announced that it had officially entered the Chinese market by partnering with Starbucks, with approximately 3,300 locations across China, which was seen as another big win for the company. The good news continued into May for Beyond Meat whose share price has risen 35.9% for the month alone. A huge driver for Beyond Meat’s success was its Q1 earnings released on May 5. Analyst estimates expected -$0.08 earning per share (EPS), however, Beyond Meat delivered an EPS beat of $0.03 for Q1. In fact, Beyond Meat has beaten its last four quarterly EPS estimates. Beyond Meat has also delivered net revenue of $97.1 million (analysts had estimated only $88.3 million) compared to Q1 revenue of $40.2 million for the year prior, an increase of 141% year-on-year. During the first quarter, COVID-19 shutdowns have impacted meat processing plants (mainly pork and beef), giving Beyond Meat the opportunity to capitalise and gain market share.
“Some of our other most popular stocks among Australians for May have included Amazon, Nvidia, Disney, Facebook and Netflix. The technology sector has proven resilient since the onset of COVID-19 and the subsequent global lockdowns. Part of the reason the technology sector has been so strong is the migration of workforces from offices to the home, which has resulted in a rapid adoption of technology. Moreover, the decline in typical forms of entertainment, such as restaurants, bars and cinemas has driven demand for online entertainment services such as Netflix and Disney. In particular, the month of May has seen a decline in trading activity surrounding Netflix and Disney compared with the previous month as restrictions appear to be easing across the globe.
“Interestingly, SolarEdge and Home Depot surged in popularity on eToro last month. SolarEdge announced its revenue and earnings in the first week of May, and although it missed EPS estimates, it announced revenue of $431.2 million for the quarter, a 3% increase from Q4 2019, and a 59% rise on Q1 the year prior. Home Depot has benefited from the lockdown, with many homeowners now finally having the time to complete their DIY projects. Sales increased 7.5% for the quarter, and revenue rose 7.1% (compared to the year prior) to $28.2 billion. However, Home Depot’s bottom line was largely affected by measures it took to support its workforce with sustained employment and increased wages during the outbreak.”
Further stocks to watch
Adobe (NASDAQ: ADBE)
“Driven by optimism around demand for its cloud-based services, and the security of its subscription-based earnings, Adobe’s share price is up more than 20% year-to-date and close to 50% over the past 12 months,” says eToro’s Adam Vitesse.
“The firm reports its latest set of quarterly earnings today, where investors will be watching for revenue growth to justify the share price valuation. Earnings reports have been hit and miss for the mainly tech stocks that investors have piled into in anticipation of increased demand driven by the pandemic, and even when firms have beaten expectations, the immediate reaction in some cases has still been a share price pullback. Analysts expect Adobe to report an earnings per share figure of $2.32, in line with expectations three months ago. Currently, 18 analysts rate the stock as a buy or overweight, eight as a hold, and one as an underweight.”
Lululemon (NASDAQ: LULU)
“High end athleisure wear retailer Lululemon has been an unexpected beneficiary of the pandemic, with its share price soaring by 40% year-to-date, benefiting from loyal customers, a strong online presence and consumers turning to casual clothing options while stuck at home. Investors are also optimistic that the firm will bounce back strongly from store closures, and return to its multi-year winning streak. Analysts are still expecting a dire quarter earnings wise when Lululemon reports earnings today, with a $0.23 earnings per share figure predicted, versus the $0.86 predicted for the quarter three months ago. Price targets on the firm’s share price range from $175 to $378, versus its Wednesday close of $323.25.”
The Aussie market
This week, the Utilities sector were in the green along with Consumer Staples and Materials. The worst performing sectors include Energy down over 3%, Real Estate down over 2% and Industrials down over 1% so far this week.
Of the ASX top 100 stocks, Coca-Cola is currently topping the list up over 5%. The Bank of Queensland is up over 4% and Medibank Private up over 3%. CSR is down over 9%, Amcor and Whitehaven Coal are down over 8%, and Stockland is down over 7% at time of writing.
What's next for the Australian share market?
Dale Gillham of Wealth Within says, "I feel like I have been repeating myself lately, but it is true that a week can be a long time in the stock market. Earlier this week, the All Ordinaries Index continued its strong move up before falling away later in the week in a move that showed just how nervous the market really is. Last week, I mentioned that up until two weeks ago, it was highly likely that the rise on the Australian stock market was just a suckers rally and high risk, which now may be the case.
"In previous reports, I indicated that I expected the market to continue to rise into mid to late June, and while we are only a few days off mid-June, we are now entering the period for the high to occur, so the recent rise could be coming to an end. The current volatility is again a sign that the market is very emotional and likely to provide false triggers and make unexpected moves both up and down.
"From here the market could continue to fall, and as I mentioned last week, if the down move only lasts for a few weeks and is under 10%, then over the medium term the market will rise into the second half of this year. That said, if the move down is longer and/or deeper, then this may signal that we are not out of woods just yet. Given this, what occurs next week is critical to determining how the market will unfold over the coming months."
5 ASX small caps to watch
- Vulcan Energy (ASX:VUL)
Vulcan continued its rise this week. The company released an announcement updating the market on its lithium project PFS and was also buoyed by a Wise Owl research report. Vulcan was up 32.35% for the week.
- Beston Global Limited (ASX: BFC)
Beston is up 100% for the week having announced the signing of an agreement with Aurora Dairies for the sale of Beston’s dairy farms in Mount Gambier. The sale is for $40.4 million in cash.
Under the terms of the Proposed Transaction, Beston will receive all milk from the farms, currently around 17 million litres per annum, over a ten-year period. Aurora is expected to continue to grow production from these farms in the future.
- MRG Metals Limited (ASX:MRQ)
MRG is up 50 per cent over the week and up 63% on Wednesday, after they received auger drilling results that confirm heavy mineral sand (HMS) mineralisation at the Poiombo target in Mozambique. Further results are expected in the next few weeks.
- Venture Minerals Limited (ASX: VMS)
Venture was up 33.33% this week, having cleared a major hurdle in its goal of producing Iron Ore from the Riley Mine. The company signing the Road Access Agreement with Hydro Tasmania for the initial 21km from the mine. This agreement has secured a transport route by bitumen (all weather) road from the mine gate to the Port of Burnie, where I may or may not have recently purchased a house.
- Marmota Limited (ASX:MEU)
MEU has had a steady week, up 15.5% during the week. MEU has commenced a strategic review of its Uranium asset in South Australia. This was prompted by the increasing uranium price and market interest, with the company now looking at ways to fulfil its potential.
Tesla is now the most valuable carmaker in the world
On Wednesday this week, Tesla (NASDAQ: TSLA) rose 9%, taking the firm’s share price past $1,000 for the first time in its history. The gain meant that Tesla became the most valuable carmaker in the world, surpassing Toyota.
We’ll leave you with that thought.