Signs of a global recovery, SpaceX drive Tesla shares higher … and Zoom continues to rise

By Jonathan Jackson. Published at Jun 5, 2020, in Features

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Are we in the midst of the “worst economic collapse, likely ever”?

That’s certainly the line being pushed by Principal Global Investors’ chief global economist, Dr Bob Baur as COVID-19 related closures cause profit downgrades due to a lack of, or in some cases, no revenue being generated by some companies.

It is not all doom and gloom, with Dr Baur already seeing signs of global recovery and short-term investment opportunities.

Dr Baur told Principal’s Economic Insights that he expects traditional economic data to improve throughout June improve.

China’s recovery could play a major role in this improvement.

“China was the first to suffer from the onset of COVID-19 in January and February and the earliest to restart its economy,” Dr Bauer said.

“It’s had a remarkable rebound. Industrial companies have mostly reopened and are approaching normal activity. Home and vehicle sales, industrial output, real estate investment, and electricity consumption are all above last year’s levels. The pollution level is nearing normal. Official surveys of manufacturing companies eased slightly in May but still show expansion with rising new orders. Overall, China’s incredible progress in just a few months should be the template for the rest of the world as it returns to normal.”

Looking globally, Dr Baur is optimistic that the reduced rate of infection is prompting economic reopening.

“The Eurozone economy was battered by COVID-19 in March and April, but the economy was trying to find a trough in May. Economic sentiment did edge up recently across the currency union but remains near the low of the financial crisis. After a historic two-month collapse from 51.6 to 12.6 in April, the Eurozone composite business survey by Market News moved up to 30.5 in May; 50 is the breakeven between expansion and contraction. The forward-looking results of current business surveys have rebounded substantially, suggesting companies are expecting conditions to improve.

“More good news comes from a watershed European Union (EU) fiscal package to provide relief from the effects of the COVID-19 shock. The EU commission proposed borrowing up to €750 billion (AU$1.2TN) and dispersing €500 billion in grants and €250 billion in loans to EU countries.”

Meanwhile, the Abe administration in Japan will add more than 10% of GDP in stimulus packages, well above the relief total during the financial crisis. And in the US, DR Bauer said consumer confidence is creeping higher and has held well above the depths of the financial crisis.

Unfortunately, the recent George Floyd tragedy and subsequent riots may quell this confidence.

Overall, though, global sentiment seems to be slowly returning. Time will tell just how optimistic investors are, but there is cause to be positive.

SpaceX success boosts Tesla stock

The tech heavy Nasdaq Composite is now back within 2% of its all time high, with its year-to-date gain now standing at 7.2%.

eToro analyst Simon Peters notes that while the Nasdaq index has risen in 2020, the S&P 500 and Dow remain in negative territory.

Helping the index fly higher is Tesla.

“Tesla helped take the index higher on Monday, gaining 7.6% after Elon Musk’s other venture, SpaceX, successfully docked a spacecraft with the International Space Station,” Peters says.

Trips to space will do that to a share price.

International stocks to watch

Zoom Video Communication (NASDAQ: ZM)

“The rise of Zoom has been dramatically accelerated by the coronavirus pandemic, which has propelled it into both the public consciousness and companies worldwide,” Peters says.

“The company’s share price gained 13% on Monday ahead of its latest set of quarterly earnings on Tuesday, as investors are widely expecting an impressive quarter. Zoom stock is now up 200% year-to-date, and investors will be watching for data or commentary that justifies that valuation. Of interest in the firm’s earnings report will be how big the revenue rise has actually been, how it has fed through to Zoom’s bottom line, and how it plans to keep the clients it is winning during this period. How the company is addressing negative press coverage relating to security and privacy issues will also likely be front and centre.”

Crowdstrike Holdings (NASDAQ: CRWD)

“Cybersecurity company Crowdstrike has been another beneficiary of the coronavirus pandemic, as demand for its services – which include machine learning based anti-virus and threat intelligence – is likely to be driven by a shift to remote working and cloud-based IT infrastructure. The company’s stock is up 90% in 2020 so far, and its share price currently stands at $94.84, versus its $34 IPO price. Crowdstrike reports quarterly earnings on Tuesday. Currently, 15 Wall Street analysts rate the stock as a buy, four as a hold, and two as an underweight or sell.”

5 ASX small caps to watch

  1. Elixir Energy (ASX: EXR)
    Elixir Energy ended the week 48% higher at 3.7 cents. The move followed last week news of the completion of its Placement and Share Purchase Plan at 2 cents, which were both massively oversubscribed. The funds will support further exploration activities as its coal seam gas project in Mongolia where it recently made the country's first ever gas discovery.
  2. FBR Limited (ASX: FBR)
    FBR’s shares have continued to climb this week, moving from $0.028 on Thursday to $0.066 by week’s end. FBR’s Hadrian X® construction robot recorded a new peak laying rate of over 200 blocks per hour. This new top speed of over 200 blocks per hour has been achieved periodically during routine testing as part of FBR’s continuous improvement program.
  3. Dimerix Limited (ASX: DXB)
    DXB was up 67% after announcing its DMX-200, a therapy for diabetic kidney disease, has been selected in a major global study aimed at treating ARDS – a respiratory illness that is the biggest killer of patients with COVID-19. It finished the week slightly lower than that, however it is moving along nicely.
  4. Comet Resources Limited (ASX: CRL)
    CRL was as high as 33% after they executed a binding heads of agreement with privately owned El Alamo Resources Limited for the proposed 100% acquisition of the Santa Teresa Gold Project. The Santa Teresa Gold Project is comprised of two mineral claims totalling 202 hectares located in the gold rich El Alamo district, approximately 100km southeast of Ensenada, Baja California, Mexico.
  5. In Pay Tech Limited (ASX: IP1)
    IP1 was up as high as 243% this week. While there was no news, there is speculation that investors were piling into buy now pay later stocks and that small traders were taking advantage of the low $0.024 share price. The company ended the week down slightly at $0.021.

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