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In the Global Week Ahead, the world’s political and business leaders meet up in the Swiss resort of Davos, Switzerland.
This 54th annual Davos confab occurs against a complex geopolitical backdrop. It is beset by war, tectonic shifts in monetary policy, climate change, and comes early in an uncertain U.S. Presidential election year.
The global economy appears to be avoiding recession, for now.
On Wednesday, the latest U.S. Retail Sales data will shed light on that economy’s 2024 outlook.
Finally, a key mark for Mainland China arrives, with real 2023 GDP growth figures out.
Next are Reuters’ five world market themes, reordered for equity traders—
(1) The World Economic Forum in Davos kicks off this week.
The 54th annual World Economic Forum meeting kicks off in the Swiss ski resort of Davos. Central bankers, financiers and business leaders will discuss a challenging global economic picture, shifting monetary policy and rising debt levels.
They will try to seek answers on how to navigate a complex geopolitical framework that includes war in Ukraine and Gaza. U.S. Secretary of State Antony Blinken, French President Emmanuel Macron and key Middle East leaders are due to attend.
One key event is the Jan. 17 closed-door Financial Services Governors Meeting, which will bring together 100 chairs and CEOs from banking, markets, insurance and asset management.
A separate survey released by the WEF showed extreme weather and misinformation were seen by risk specialists as most likely to trigger a global crisis in the next couple of years.
(2) On Wednesday this week, the latest U.S. retail sales data will come out.
The health of U.S. consumers will be in the spotlight, through the lens of retail sales data and bank earnings.
The Wednesday Jan. 17th retail sales numbers are expected to give a glimpse into consumer spending and offer evidence of the resilience of the U.S. economy in the face of 525 basis points of rate increases from the Federal Reserve since 2022.
Signs that consumers may be pulling back might undermine the expectation of a economic soft landing that helped boost stocks 24% last year. Economists polled by Reuters expect retail sales rose a monthly 0.3% in December, matching November's increase.
Investors are also keen to hear what big financial institutions say about consumers and their own operations, with Goldman Sachs and Charles Schwab both reporting.
(3) Also out on Wednesday, we get a fresh batch of U.K. consumer price inflation data.
The next batch of U.K. consumer price data could be exactly what Bank of England officials and politicians are hoping for: a big enough slide to declare victory on the war on inflation.
With headline inflation at +3.9%, the U.K. doesn't look like such an outlier anymore compared with other advanced nations -- a welcome development for a government expected to hold a general election later this year.
Typically, stickier price pressures, such as those in services and workers' wages, are softening, but only marginally. And the near-21% rise in inflation since 2020 still outstrips that of any other G7 economy and is the joint-highest increase in Western Europe.
The pound has got off to a relatively firm start to the year, supported by a rise in UK government bond yields. A soft read of inflation on Jan. 17th may prove an unwelcome development for sterling bulls.
(4) For Mainland China, their full-year GDP growth figures land on Wednesday.
Just how close China got to realizing the official 5%-or-so growth goal for 2023 will become clear on Wednesday, with the release of full-year GDP figures.
That it hit the target is not really in question. The challenge is how to do the same this year, if Beijing follows its advisers and keeps the goal unchanged. Unlike last year, there's no 2022 COVID-lockdown slump to flatter the result.
A hint of what Beijing has planned has come from a key central bank official, who was reported by state media as saying policy tools would be used to support reasonable credit growth.
Chinese government bond yields have neared a nearly four-year trough and the yuan slid to a one-month low, as the market speculated on a rate cut as soon as Monday.
(5) Taiwan headed to the polls on Saturday, and elected a new president and parliament.
Taiwan headed to the polls on Saturday and elected a new president and parliament under the shadow of its increasingly assertive neighbor Mainland China, which said the vote was a choice between "peace and war.”
Lai Ching-te, from Taiwan's ruling Democratic Progressive Party (DPP), won the closely-watched presidential election. Mainland China had warned against voting for Lai, calling him a “separatist."
The high-stake geopolitical event marks the start of one of the busiest election years ever: countries making up over 60% of the world's economic output and more than half of its population hold elections this year.
The United States, Britain, Russia, South Africa, India and Indonesia are just some of the more than two dozen countries holding national elections.
The heavy election calendar has fueled fears that financial market volatility could soar and fiscal discipline be at risk as growth prospects face and debt hits record highs.
Zacks #1 Rank (STRONG BUY) Stocks
To no surprise, 2024 kicks off with three major tech growth stocks on our #1 list.
(1) Meta Platforms (META - Free Report) : This is a $370 a share stock, with a current mega-cap tech market cap of $950B. I see a Zacks Value score of D, a Zacks Growth score of B and a Zacks Momentum score of B. It is founds in Zacks Internet – Software industry.
Image Source: Zacks Investment Research
Meta Platforms is the world’s largest social media platform. The company’s portfolio offering evolved from a single Facebook app to multiple apps like Instagram and WhatsApp, owing to acquisitions. Along with in-house developed Messenger, these apps now form Meta’s family of products used by almost 3.96 billion people on a monthly basis as of Sep 30th, 2023.
Newly introduced metric, which is the family daily active people (DAP) that measures daily users of its family of products, was 3.14 billion, as of Sep 30th.
Meta uses metrics like daily active users (DAUs) and monthly active users (MAUs) to measure Facebook’s user base. As of Sep 30th, 2023, DAUs and MAUs were 2.085 billion and 3.049 billion, respectively.
Headquartered in Menlo Park, CA, Meta generated revenues worth $116.61 billion in 2022. Advertisement accounted for 97.5% of revenues. Marketers buy ads that can appear on multiple platforms including Meta, Instagram, Messenger and third-party applications and websites.
Meta, thanks to its huge user base, gained a significant market share in the advertising space wherein it faces tough competition from Google, Twitter, Amazon and Snapchat-parent Snap.
Meta also faces significant competition from the likes of Apple (messaging), YouTube (advertising and video), Bytedance (social media) and Tencent (messaging and social media).
Meta’s core app enables people to connect, share, discover and communicate with one other on mobile devices and personal computers. User engagement on the core Meta platform is fostered by News Feed, which displays an algorithmically-ranked series of stories and advertisements customized for each user.
Instagram is a community for sharing photos, videos and messages, enabling people to discover interests that they care about. People can express themselves through photos, videos and private messaging via Instagram Feed and Stories.
Messenger helps people to connect with friends, family, groups and businesses across platforms and devices. WhatsApp is a simple, reliable and secure messaging application, used by people and businesses around the world to communicate in a private way.
Meta also offers virtual reality (VR) products through its Oculus division.
(2) Shopify (SHOP - Free Report) : This is a $81 a share stock, with a current market cap of $104.2B. I see a Zacks Value score of F, a Zacks Growth score of C and a Zacks Momentum score of A. It is found in the Zacks Internet – Services industry.
Image Source: Zacks Investment Research
Ottawa, Canada-based Shopify Inc. provides a multi-tenant, cloud-based, multi-channel commerce platform for small and medium-sized businesses (SMBs). The company completed its Initial Public Offering (IPO) in May 2015.
Merchants use the company’s software to run business across various sales channels, including web and mobile storefronts, physical retail locations, social media storefronts, and marketplaces.
Shopify’s platform enables merchants to manage products and inventory, process orders and payments, ship orders, build customer relationships and leverage analytics along with reporting from one integrated back office.
Moreover, Shopify hosts a huge database of merchant and customer interaction. Merchants leverage this transactional dataset to get meaningful insight into the sales channel growth prospects and consumer behavior. This improves their ability to target prospective customers more easily, which drives sales growth.
Apart from the company’s own payment solution, payment wallets like Apple Pay and Google Pay are also available to the merchants, which they offer to customers on the Shopify platform.
In 2022, revenues came in at $5.60 billion. The company generates revenues from two sources: Subscriptions Solutions (26.6% of 2022 revenues) and Merchant Solutions (73.4%).
Subscription revenue is recognized on a ratable basis over the contractual term. The terms range from monthly, annual or multi-year subscription terms. The company earns revenue based on the services it delivers either directly to merchants or indirectly through resellers.
Shopify generates the majority of merchant solutions revenue from fees that it charges merchants on their customer orders processed through Shopify Payments.
The company also derives merchant solutions revenue relating to Shopify Shipping, Shopify Capital, other transaction services and referral fees, as well as from the sale of Point-of-Sale (POS) hardware.
(3) MercadoLibre (MELI - Free Report) : This is a $1,591 a share stock, with a current market cap of $80.5B. I see a Zacks Value score of D, a Zacks Growth score of A and a Zacks Momentum score of F. It is found in the Zacks Internet – Commerce industry.
Image Source: Zacks Investment Research
MercadoLibre, Inc. is one of the largest e-commerce platforms in Latin America.
The company offers a bunch of six integrated e-commerce services:
MercadoLibre Marketplace enables businesses and individuals to conduct sales, purchase online and list their merchandise.
MercadoLibre Classifieds offers online classified listing services for motor vehicles, real estate and services. These listing charge only optional placement fees and hence they are different from Marketplace listings.
MercadoPago FinTechplatform allows users to send and receive payments seamlessly within MercadoLibre's marketplace.
Outside of this, merchants are allowed to process payments via websites, mobile apps and mobile point of sale.
MercadoLibre Advertising program enables advertisers and seller to display their product ads on the company's webpages.
MercadoShops online webstores solution aids users in managing and promoting their online stores.
Key Global Macro
The Davos WEF begins on Sunday.
Mid-week Wednesday should be the busiest day for global macro prints.
On Monday, it is Martin Luther King’s birthday in the USA.
There is a Eurogroup meeting.
Euro Area industrial production for NOV should be -5.9% y/y, after a prior reading of -6.6% y/y.
On Tuesday, the Bank of Canada (BoC) core CPI for DEC comes out. The prior reading was +2.8% y/y. The BoC broad CPI should get to +3.4% y/y, higher than a prior print at +3.1% y/y. This looks similar to the USA CPI scenario, to no surprise.
On Wednesday, Mainland China’s retail sales for DEC come out. I see a solid +10.1% y/y prior print.
The Euro Area core HICP inflation rate for DEC comes out. The +3.4% y/y consensus is the same as last month’s +3.4% y/y reading. The broad HICP reading for DEC should be +2.9% y/y, also stable.
U.S. retail sales for DEC come out. The prior reading was up a strong +5.9% y/y.
The Fed’s Beige Book with regional economic conditions comes out.
On Thursday, U.S. Housing Starts for DEC come out. The consensus is for 12.45M, with the prior reading at 1.56M.
U.S. Building Permits for DEC should be 1.48M, up from 1.46M the month prior. Both measures are still quite strong.
On Friday, U.K. Retail Sales ex-fuel for DEC comes out. The consensus is for +1.3% y/y, after a +0.3% y/y prior print. This is not strong data, here.
Conclusion
Here are Zacks Research Director Sheraz Mian’s four key Jan. 10th, 2024 EPS points:
(1) Q4 earnings for the S&P500 index are currently expected to be down -0.4% from the year-earlier level on +2.2% higher revenues.
This would follow the +3.8% earnings growth in 2023 Q3 on +2.0% higher revenues.
(2) Earnings estimates for Q4-23 came down in October and part of November but notably stabilized afterward.
That said, the magnitude of declines to aggregate Q4-2023 estimates exceeds what we saw in the first three quarters of the year.
(3) Q4-23 earnings are expected to be above the year-earlier level for half of the 16 Zacks sectors, with the Technology, Retail, Consumer Discretionary, and Utilities sectors enjoying robust year-over-year earnings growth.
(4) For the 21 S&P500 members that have reported results for their fiscal quarters ending in November (counted as part of the Q4-23 tally), total earnings are up +9.0% from the same period last year on +4.8% higher revenues.
90.5% are beating EPS estimates and 52.4% are beating revenue estimates.
That’s it for me.
Happy Trading and Investing!
John Blank Zacks Chief Equity Strategist and Economist
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Surf's Up in Davos: Global Week Ahead
In the Global Week Ahead, the world’s political and business leaders meet up in the Swiss resort of Davos, Switzerland.
This 54th annual Davos confab occurs against a complex geopolitical backdrop. It is beset by war, tectonic shifts in monetary policy, climate change, and comes early in an uncertain U.S. Presidential election year.
The global economy appears to be avoiding recession, for now.
On Wednesday, the latest U.S. Retail Sales data will shed light on that economy’s 2024 outlook.
Finally, a key mark for Mainland China arrives, with real 2023 GDP growth figures out.
Next are Reuters’ five world market themes, reordered for equity traders—
(1) The World Economic Forum in Davos kicks off this week.
The 54th annual World Economic Forum meeting kicks off in the Swiss ski resort of Davos. Central bankers, financiers and business leaders will discuss a challenging global economic picture, shifting monetary policy and rising debt levels.
They will try to seek answers on how to navigate a complex geopolitical framework that includes war in Ukraine and Gaza. U.S. Secretary of State Antony Blinken, French President Emmanuel Macron and key Middle East leaders are due to attend.
One key event is the Jan. 17 closed-door Financial Services Governors Meeting, which will bring together 100 chairs and CEOs from banking, markets, insurance and asset management.
A separate survey released by the WEF showed extreme weather and misinformation were seen by risk specialists as most likely to trigger a global crisis in the next couple of years.
(2) On Wednesday this week, the latest U.S. retail sales data will come out.
The health of U.S. consumers will be in the spotlight, through the lens of retail sales data and bank earnings.
The Wednesday Jan. 17th retail sales numbers are expected to give a glimpse into consumer spending and offer evidence of the resilience of the U.S. economy in the face of 525 basis points of rate increases from the Federal Reserve since 2022.
Signs that consumers may be pulling back might undermine the expectation of a economic soft landing that helped boost stocks 24% last year. Economists polled by Reuters expect retail sales rose a monthly 0.3% in December, matching November's increase.
Investors are also keen to hear what big financial institutions say about consumers and their own operations, with Goldman Sachs and Charles Schwab both reporting.
(3) Also out on Wednesday, we get a fresh batch of U.K. consumer price inflation data.
The next batch of U.K. consumer price data could be exactly what Bank of England officials and politicians are hoping for: a big enough slide to declare victory on the war on inflation.
With headline inflation at +3.9%, the U.K. doesn't look like such an outlier anymore compared with other advanced nations -- a welcome development for a government expected to hold a general election later this year.
Typically, stickier price pressures, such as those in services and workers' wages, are softening, but only marginally. And the near-21% rise in inflation since 2020 still outstrips that of any other G7 economy and is the joint-highest increase in Western Europe.
The pound has got off to a relatively firm start to the year, supported by a rise in UK government bond yields. A soft read of inflation on Jan. 17th may prove an unwelcome development for sterling bulls.
(4) For Mainland China, their full-year GDP growth figures land on Wednesday.
Just how close China got to realizing the official 5%-or-so growth goal for 2023 will become clear on Wednesday, with the release of full-year GDP figures.
That it hit the target is not really in question. The challenge is how to do the same this year, if Beijing follows its advisers and keeps the goal unchanged. Unlike last year, there's no 2022 COVID-lockdown slump to flatter the result.
A hint of what Beijing has planned has come from a key central bank official, who was reported by state media as saying policy tools would be used to support reasonable credit growth.
Chinese government bond yields have neared a nearly four-year trough and the yuan slid to a one-month low, as the market speculated on a rate cut as soon as Monday.
(5) Taiwan headed to the polls on Saturday, and elected a new president and parliament.
Taiwan headed to the polls on Saturday and elected a new president and parliament under the shadow of its increasingly assertive neighbor Mainland China, which said the vote was a choice between "peace and war.”
Lai Ching-te, from Taiwan's ruling Democratic Progressive Party (DPP), won the closely-watched presidential election. Mainland China had warned against voting for Lai, calling him a “separatist."
The high-stake geopolitical event marks the start of one of the busiest election years ever: countries making up over 60% of the world's economic output and more than half of its population hold elections this year.
The United States, Britain, Russia, South Africa, India and Indonesia are just some of the more than two dozen countries holding national elections.
The heavy election calendar has fueled fears that financial market volatility could soar and fiscal discipline be at risk as growth prospects face and debt hits record highs.
Zacks #1 Rank (STRONG BUY) Stocks
To no surprise, 2024 kicks off with three major tech growth stocks on our #1 list.
(1) Meta Platforms (META - Free Report) : This is a $370 a share stock, with a current mega-cap tech market cap of $950B. I see a Zacks Value score of D, a Zacks Growth score of B and a Zacks Momentum score of B. It is founds in Zacks Internet – Software industry.
Image Source: Zacks Investment Research
Meta Platforms is the world’s largest social media platform. The company’s portfolio offering evolved from a single Facebook app to multiple apps like Instagram and WhatsApp, owing to acquisitions. Along with in-house developed Messenger, these apps now form Meta’s family of products used by almost 3.96 billion people on a monthly basis as of Sep 30th, 2023.
Newly introduced metric, which is the family daily active people (DAP) that measures daily users of its family of products, was 3.14 billion, as of Sep 30th.
Meta uses metrics like daily active users (DAUs) and monthly active users (MAUs) to measure Facebook’s user base. As of Sep 30th, 2023, DAUs and MAUs were 2.085 billion and 3.049 billion, respectively.
Headquartered in Menlo Park, CA, Meta generated revenues worth $116.61 billion in 2022. Advertisement accounted for 97.5% of revenues. Marketers buy ads that can appear on multiple platforms including Meta, Instagram, Messenger and third-party applications and websites.
Meta, thanks to its huge user base, gained a significant market share in the advertising space wherein it faces tough competition from Google, Twitter, Amazon and Snapchat-parent Snap.
Meta also faces significant competition from the likes of Apple (messaging), YouTube (advertising and video), Bytedance (social media) and Tencent (messaging and social media).
Meta’s core app enables people to connect, share, discover and communicate with one other on mobile devices and personal computers. User engagement on the core Meta platform is fostered by News Feed, which displays an algorithmically-ranked series of stories and advertisements customized for each user.
Instagram is a community for sharing photos, videos and messages, enabling people to discover interests that they care about. People can express themselves through photos, videos and private messaging via Instagram Feed and Stories.
Messenger helps people to connect with friends, family, groups and businesses across platforms and devices. WhatsApp is a simple, reliable and secure messaging application, used by people and businesses around the world to communicate in a private way.
Meta also offers virtual reality (VR) products through its Oculus division.
(2) Shopify (SHOP - Free Report) : This is a $81 a share stock, with a current market cap of $104.2B. I see a Zacks Value score of F, a Zacks Growth score of C and a Zacks Momentum score of A. It is found in the Zacks Internet – Services industry.
Image Source: Zacks Investment Research
Ottawa, Canada-based Shopify Inc. provides a multi-tenant, cloud-based, multi-channel commerce platform for small and medium-sized businesses (SMBs). The company completed its Initial Public Offering (IPO) in May 2015.
Merchants use the company’s software to run business across various sales channels, including web and mobile storefronts, physical retail locations, social media storefronts, and marketplaces.
Shopify’s platform enables merchants to manage products and inventory, process orders and payments, ship orders, build customer relationships and leverage analytics along with reporting from one integrated back office.
Moreover, Shopify hosts a huge database of merchant and customer interaction. Merchants leverage this transactional dataset to get meaningful insight into the sales channel growth prospects and consumer behavior. This improves their ability to target prospective customers more easily, which drives sales growth.
Apart from the company’s own payment solution, payment wallets like Apple Pay and Google Pay are also available to the merchants, which they offer to customers on the Shopify platform.
In 2022, revenues came in at $5.60 billion. The company generates revenues from two sources: Subscriptions Solutions (26.6% of 2022 revenues) and Merchant Solutions (73.4%).
Subscription revenue is recognized on a ratable basis over the contractual term. The terms range from monthly, annual or multi-year subscription terms. The company earns revenue based on the services it delivers either directly to merchants or indirectly through resellers.
Shopify generates the majority of merchant solutions revenue from fees that it charges merchants on their customer orders processed through Shopify Payments.
The company also derives merchant solutions revenue relating to Shopify Shipping, Shopify Capital, other transaction services and referral fees, as well as from the sale of Point-of-Sale (POS) hardware.
(3) MercadoLibre (MELI - Free Report) : This is a $1,591 a share stock, with a current market cap of $80.5B. I see a Zacks Value score of D, a Zacks Growth score of A and a Zacks Momentum score of F. It is found in the Zacks Internet – Commerce industry.
Image Source: Zacks Investment Research
MercadoLibre, Inc. is one of the largest e-commerce platforms in Latin America.
The company offers a bunch of six integrated e-commerce services:
Key Global Macro
The Davos WEF begins on Sunday.
Mid-week Wednesday should be the busiest day for global macro prints.
On Monday, it is Martin Luther King’s birthday in the USA.
There is a Eurogroup meeting.
Euro Area industrial production for NOV should be -5.9% y/y, after a prior reading of -6.6% y/y.
On Tuesday, the Bank of Canada (BoC) core CPI for DEC comes out. The prior reading was +2.8% y/y. The BoC broad CPI should get to +3.4% y/y, higher than a prior print at +3.1% y/y. This looks similar to the USA CPI scenario, to no surprise.
On Wednesday, Mainland China’s retail sales for DEC come out. I see a solid +10.1% y/y prior print.
The Euro Area core HICP inflation rate for DEC comes out. The +3.4% y/y consensus is the same as last month’s +3.4% y/y reading. The broad HICP reading for DEC should be +2.9% y/y, also stable.
U.S. retail sales for DEC come out. The prior reading was up a strong +5.9% y/y.
The Fed’s Beige Book with regional economic conditions comes out.
On Thursday, U.S. Housing Starts for DEC come out. The consensus is for 12.45M, with the prior reading at 1.56M.
U.S. Building Permits for DEC should be 1.48M, up from 1.46M the month prior. Both measures are still quite strong.
On Friday, U.K. Retail Sales ex-fuel for DEC comes out. The consensus is for +1.3% y/y, after a +0.3% y/y prior print. This is not strong data, here.
Conclusion
Here are Zacks Research Director Sheraz Mian’s four key Jan. 10th, 2024 EPS points:
(1) Q4 earnings for the S&P500 index are currently expected to be down -0.4% from the year-earlier level on +2.2% higher revenues.
This would follow the +3.8% earnings growth in 2023 Q3 on +2.0% higher revenues.
(2) Earnings estimates for Q4-23 came down in October and part of November but notably stabilized afterward.
That said, the magnitude of declines to aggregate Q4-2023 estimates exceeds what we saw in the first three quarters of the year.
(3) Q4-23 earnings are expected to be above the year-earlier level for half of the 16 Zacks sectors, with the Technology, Retail, Consumer Discretionary, and Utilities sectors enjoying robust year-over-year earnings growth.
(4) For the 21 S&P500 members that have reported results for their fiscal quarters ending in November (counted as part of the Q4-23 tally), total earnings are up +9.0% from the same period last year on +4.8% higher revenues.
90.5% are beating EPS estimates and 52.4% are beating revenue estimates.
That’s it for me.
Happy Trading and Investing!
John Blank
Zacks Chief Equity Strategist and Economist