In today’s top stories, tech is in focus after Tesla shareholders react negatively to Elon Musk’s (pictured) plan to take a loan against his stake in the business to finance his Twitter buyout. The social media’s valuation is also said to be an indication that similar stocks could be undervalued. Meanwhile, Microsoft is adopting its peer’s cloud strategy and Bank of America is looking to Europe’s tech sector.
Tesla takes a hit
The electric vehicle maker [TSLA] wiped more than $125bn off its value on Tuesday after news broke that Elon Musk sealed a deal to buy Twitter [TWTR]. Driving down investor sentiment was how the billionaire CEO planned to fund the $44bn takeover. Musk will reportedly take a $12.5bn loan against his Tesla stake as well as $13bn of debt from Wall Street’s largest lenders. It is not yet confirmed how he will raise the remaining $21bn.
Rolls-Royce goes nuclear
The jet engine manufacturer is set to bolster its nuclear reactor division with plans to play a critical role in the UK’s aim to supply 100% of its energy from renewables by 2035. Paul Stein, the company’s chair, hopes that the government will give its small modular reactors (SMRs) the green light by mid-2024, which could see the firm starting to supply power to the national grid by 2029. The business shift in focus could also see a demand for SMRs from countries in eastern Europe.
Microsoft copies cloud peers
The tech giant is said to be emulating a strategy used by cloud providers such as Amazon [AMZN] and Salesforce [CRM] to set up an acquisitions team that will raise sales to cloud holdouts, according to The Information. The cloud model transformation could unlock midmarket customers for the revenue-generating platform. However, CEO Satya Nadella said during the company’s earnings that Windows was still a durable part of the group.
While Roblox [RBLX] may be a pioneer in the virtual reality space, Meta Platforms’ [FB] aggressive shift into the area has put the companies at odds with one another. Because of the gaming stock’s healthy player base, Roblox is seen to have the edge over Meta, which has been haemorrhaging cash in its Reality Labs division. Both stocks have fallen since the start of the year, but Roblox is leading in declines.
Twitter’s value: A bellwether for rivals
Piper Sandler analyst Thomas Champion wrote in a note seen by MarketWatch that Musk’s takeover offer for Twitter might indicate that other digital advertising focused companies could be undervalued. The deal prices the stock at 48 times 2023 consensus earnings expectations and 6.1 times sales forecasts. In comparison, Snap [SNAP] and Pinterest [PINS] trade 33.9 and 15 times 2023 earnings predictions, indicating a stark difference compared to Twitter.
Large-caps trade at 50% discount
MarketWatch has identified 21 stocks in the Nasdaq and S&P 500 that have fallen 50% from their 52-week highs, including Netflix [NFLX], Zoom [ZM], PayPal [PYPL], DocuSign [DOCU], Meta [FB], Okta [OKTA], Moderna [MRNA] and Atlassian [TEAM]. For investors looking to avoid big tech’s volatility, Bank of America has looked further afield to find companies such as Wise [WISE.L], Adyen [ADYEY] and Capgemini [CAP.PA] that have significant upside potential. Within the software space specifically, analysts at the bank were bullish on SAP [SAP].
Chinese stocks slip up
The CSI 300 stock benchmark closed down 10% this month, marking its steepest monthly loss in six years as major equities, such as semiconductor maker SMIC [0981.HK] and battery maker CATL, led the declines. Investors’ outlooks have darkened amid lockdowns in cities such as Shanghai. With the country struggling to reign in recent Covid-19 outbreaks, the prospect of further lockdowns has put intensified pressure on the already battered economy.