Weekly Stockwatch: Elon Musk’s Bid to Buy Twitter, JP Morgan Earnings Disappointment, Tesco Profit Warnings More

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Elon Musk's Bid to Buy Twitter

Earlier in the month, it was disclosed that the head of Tesla and SpaceX had become Twitter's largest shareholder, with an around 9% stake. Shortly after, the company announced that Mr Musk would join the Board of Directors. [1]

The story however did not end there, since a few days and many tweets later, Twitter's CEO Parag Agrawal, announced that Mr Musk decided not to join the Board after all. Mr Agrawal also noted that "I believe this is for the best" and that the firm "will remain open to his input".[2]

Had Mr Musk agreed to join the board, his stake in Twitter would be limited to no more than 14.9% for the corresponding period. Just earlier today, we had further news, as an SEC filing revealed that Mr Musk made an offer to acquire Twitter. His proposal is for all outstanding shares that don't currently belong to him, for $54.20 per share.

He said that this is his "best and final offer and if it is not accepted, I would need to reconsider my position as a shareholder", adding that the social media platform has "extraordinary potential. I will unlock it". [3]

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On Tuesday, a group of Twitter's shareholder filed a class action lawsuit against Mr Musk, for failing to promptly disclose his Twitter ownership stake once it exceeded 5%. [4]

Twitter's stock closed above $45.00 on Wednesday and was up in today's premarket, at the time of writing.

JP Morgan Q1 Earnings Disappointment

The US banking giant kicked off the new earnings season on Wednesday, but the financial results for the first quarter of the year, disappointed markets. It announced a 42% drop in Net Income compared to Q1 2021, to $8.3 billion, mainly driven by the fact that it set aside $902 million to cover potential losses. In the year ago quarter it had released $5.2 billion of reserves and $1.8 billion in Q4 2021. [5]

JP Morgan also registered $524 million of losses from widening spreads and credit valuation adjustments, related to the Russia-Ukraine war. Net Revenue was $31.6 billion, down 5% year-over-year, but 4% higher than the Q4 2021 figure.

The year did not start well, but rising interest rates are generally viewed as good for the banking sector. However, banks benefit when the yield curve is widening, with the recent reversal that can be a sign of upcoming recession, not boding well.

In his letter to the bank's shareholders earlier in the month, CEO Jamie Dimon, had commented that he is not worried about the direct exposure to Russia, but JP Morgan "could still lose about $1 billion over time". [6]

JPM.us shed more than 3% yesterday after the report and set new year lows, moving towards the third straight losing week.

Delta Airlines Upbeat Q2 Projections

The US airliner reported adjusted Revenue of $8.16 billion for the first quarter of the year compared $3.16 billion a year ago and was 79% of the figure reported in the pre-pandemic Q1 2019. Its adjusted Net Loss narrowed to $784 million, from $2.256 in Q1 2021. [7]

Delta offered upbeat guidance for the second quarter of the year, projecting 84% capacity and 93%-97% Revenue recovery from Q2 2019.

A common theme among airliners and plane makers recently is the strong performance of their Cargo business, which supported them through the pandemic. The segment's Revenue rose to $289 million, from $215 million in Q1 2021 and $192 million two years ago.

The war in Ukraine and the boom in energy price affected the company's fuel costs, as it paid a price of $2.79/gallon in the reported quarter, up 33% from Q4 2021.

Markets reacted positively to the optimistic guidance and sent DAL.us 6% higher yesterday, to the highest levels since late-February.

Tesco Financial Results

The UK retail published on Wednesday, its financial results for the financial year 2021/2022, which showed Group Sales of £54.768 billion, up 2.5% year-over-year and a strong 34.9% growth in Retail Adjusted Operating Profit, to £2.649 billion. [8]

Tesco's forward guidance however, disappointed investors, since it projects lower profit for the current financial year (2022/2023), of £2.4 - £2.6 billion.

UK inflation continued to rise and headline Consumer Price Index hit 7% in March year-over-year, as this week's data showed, not a favorable environment for super-market chains. Tesco's CEO Ken Murphy, noted that the external environment is "more challenging in recent months" and expressed the firm's "laser-focus" on keeping the weekly shop cost in check, "against a tough backdrop for our customers and with household budgets under pressure".

TSCO.uk dropped to 2022 lows on Wednesday after the results and heads towards another negative week.

Volkswagen Group Deliveries Decline

The Group delivered a total of 1,898,300 vehicles during the first quarter of the year, marking a 21.9% drop year over-year, with the Volkswagen brand itself accounting for the vast majority of them. [9]

On the EV front however, things were much better, as the Group saw a 65.2% (/y/y) surge in Deliveries of battery-electric vehicles (BEV) in Q1 2022, which amounted to 99,100 units. On a geographic basis, China stood out with a staggering 360.5% y/y jump, to 28,800 units. Volkswagen's ID.4 model came on top with 30,300 units, followed by the smaller ID.3, with 13,000 units. [10]

Volkswagen Group is expected to publish its Q1 financial results on May 4, but has already provided preliminary figures, for Operating Profit (before special items) of around 8.5 billion Euros. The company noted the important impact of the war in Ukraine on exchange rates, commodity prices and supply chain. [11]

Next Week (April 18-22)

The earnings season starts to heat up next week, with some big names reporting their financial results. Streaming giant Netflix on Tuesday and EV king Tesla are the ones that stand out.

Netflix's stock had plunged after the last report and the disappointing Q2 subscriber growth projection, while Tesla has been on a roll recently, having already announced record Q1 2022 deliveries.

To read more about some of the companies that will be in our radar during the current quarter, read the Top 10 Stocks for Q2 2022 Part 1 and Part 2.

Nikos Tzabouras

Senior Market Specialist

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 14 Apr 2022 https://d18rn0p25nwr6d.cloudfront.net/CIK-0001418091/8e6028bd-1f8c-4521-b3bd-3a69e84a23d0.pdf

2

Retrieved 14 Apr 2022 https://twitter.com/paraga/status/1513354622466867201

3

Retrieved 14 Apr 2022 https://d18rn0p25nwr6d.cloudfront.net/CIK-0001418091/aa412090-b7e5-470b-bfea-35d48c913951.pdf

4

Retrieved 14 Apr 2022 https://www.globenewswire.com/news-release/2022/04/12/2421464/23044/en/Block-Leviton-LLP-Has-Filed-a-Lawsuit-Against-Elon-Musk-for-Securities-Law-Violations.html

5

Retrieved 14 Apr 2022 https://www.jpmorganchase.com/content/dam/jpmc/jpmorgan-chase-and-co/investor-relations/documents/quarterly-earnings/2022/1st-quarter/c1afebcf-9ba1-44de-97fc-a446d7baf619.pdf

6

Retrieved 14 Apr 2022 https://reports.jpmorganchase.com/investor-relations/2021/ar-ceo-letters.htm

7

Retrieved 14 Apr 2022 https://ir.delta.com/news/news-details/2022/Delta-Air-Lines-Announces-March-Quarter-2022-Financial-Results/default.aspx

8

Retrieved 14 Apr 2022 https://www.tescoplc.com/news/2022/preliminary-results-202122/

9

Retrieved 14 Apr 2022 https://www.volkswagenag.com/presence/investorrelation/publications/deliveries/2022/20220414_Deliveries_Table_03_2022.pdf

10

Retrieved 14 Apr 2022 https://www.volkswagenag.com/en/news/2022/04/volkswagen-group-deliveries-of-all-electric-vehicles-up-by-65-pe.html

11

Retrieved 16 May 2022 https://www.volkswagenag.com/en/news/2022/04/volkswagen-ag-publishes-preliminary-key-figures-for-the-first-qu.html

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