In today’s top stories, Amazon Web Services could grow to triple the value of the whole company, BYD’s EV sales soar and Airbus signs a $37bn deal with Chinese airlines. Meanwhile, Tesla’s Q2 deliveries fall and analysts see Levi’s and Kroger as potential winners in H2.
AWS could be $3trn opportunity
Amazon’s [AMZN] cloud division could grow to $3trn, more than triple the value of the entire company, says Redburn analyst Alex Haissl. Though the tech giant has no plans to spin off Amazon Web Services (AWS), Haissl argues that “if the performance gaps versus the non-AWS parts continue to widen, it could be on the table further down the road”. His target of $270 implies an upside of 146% from the 1 July closing price of $109.56. In the first quarter of 2022 AWS revenue grew 37% to $18.4bn, while the company’s ecommerce arm saw sales decline.
Tesla deliveries reverse
The slowdown in China impacted Tesla’s [TSLA] global deliveries in the second quarter. Although up 27% year-over-year to 254,695 for the months April to June, it was a significant fall from the 310,048 vehicles delivered between January and March. Performance should improve in the third quarter given China’s reopening and production restarting at its Shanghai factory. However, Elon Musk has a “super bad feeling” about the global economy in general and has already started laying off staff in its Autopilot team..
Chinese airlines favour Airbus over Boeing
Three major Chinese airlines have ordered 292 Airbus [AIR.EPA] jets between them in a $37bn deal seen as a blow to rival Boeing [BA] as the two companies fight for dominance in the Chinese market. A spokesperson for the US aerospace firm stated that it was “disappointing that geopolitical differences continue to constrain” exports. John Strickland, an aviation analyst at JLS Consulting, told Bloomberg that Netherlands-based manufacturer “Airbus has long had a stronghold in China”, which the deal will help strengthen.
Rapid rise in BYD’s EV sales
Warren Buffet-backed BYD [1211.HK] continues to report a rapid rise in electric vehicle sales. Over the weekend the company announced it had shifted 134,036 new energy vehicles last month, up from 41,036 in June last year. It took total sales for the first half to 641,350, up 315% year-over-year. Chairman Wang Chuanfu told investors at its AGM on 8 June that the shift to electric is “accelerating, much faster than we imagined”. The company’s Hong Kong-listed shares have gained 12.2% in the past month.
H2 picks with major upside
With June now over, investors are looking for ideas for the rest of the year. Denim jeans maker Levi’s [LEVI] has been chosen as a second half pick by Bank of America’s Christopher Nardone. Levi’s “has multiple growth engines to navigate this [current] challenging consumer backdrop,” he wrote in a research note seen by CNBC. Scotiabank’s Patricia Baker has named grocery chain Kroger [KR] as another one for the watchlist as the company is well positioned to weather inflation and has posted strong results this year.
Shell shakes off windfall tax worries
The Shell [SHEL.L] share price has shaken off any immediate worries about Rishi Sunak’s windfall tax, recording a 52-week high of 2,459.24p on 9 June. The North Sea oil giant could report bumper profits for the second quarter, which could result in a double-digit percentage dividend increase, according to analysts at Jefferies. Challenges remain, though, as it comes under pressure from activist investors who want it to get serious about green energy.
Water stocks sink lower
Water stocks can generally be thought of as recession and inflation-proof. For example, Severn Trent’s [SVT.L] dividend increases in line with inflation. However, both Severn Trent and Pennon [PNN.L] recorded 52-week lows on Monday despite showing resilience in recent months. The United Utilities [UU.L] share price has also sunk lower but is currently around 6% above its 52-week low set last October.
Disclaimer Past performance is not a reliable indicator of future results.
CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.
CMC Markets does not endorse or offer opinion on the trading strategies used by the author. Their trading strategies do not guarantee any return and CMC Markets shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein.
*Tax treatment depends on individual circumstances and can change or may differ in a jurisdiction other than the UK.