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Vodafone gets the engaged tone, Amazon looks for a licence to thrill

Vodafone gets the engaged tone

It’s been another fairly subdued day of trading for markets in Europe, as an initially strong start and a new record high for the DAX soon gave way to some intraday profit taking, and a mixed finish to the day.

The FTSE 100 briefly managed to push above the 7,100 level before retreating, with telecoms acting as the biggest drag, as Vodafone shares took a bit of a pummelling after falling a little short on expectations. 

The last 12 months have seen Vodafone’s fortunes slowly start to improve, with its share price hitting an 11 month high earlier this month, as it sought to put its problems from the previous fiscal year firmly behind it. Last year the company had to write down the value of its Indian business which saw the company sink to a rather large loss. This year management has been able to concentrate on reshaping the business, as well as try to address the company’s cash flow and debt issues. Full-year revenues for the current year saw a decline of £2.6% to €43.8bn, with the lift to its revenues from its Liberty Global acquisition offsetting a weaker market for handset sales and roaming revenue.

The proceeds of the Vantage Towers IPO have seen the company’s debt come down to €40.5bn, while full year EBITDA came in €14.38bn, slightly below the lower range of €14.4bn to €14.8bn it guided for at the start of this year. It appears that this modest miss on EBITDA may well be behind today’s big sell-off. This comes across as a bit of an overreaction, however the shares are still well above last October’s low point. Organic service revenue did beat estimates rising 0.8%, above expectations of 0.4%, helping the company to return to a profit of €536m, however free cash flow fell 11.9% to €5bn. The final dividend was kept unchanged at 4.5c share.

Another underperformer today has been commercial property owner Land Securities after reporting that full year losses had risen to £1.39bn, as revenues declined to £251m. The commercial property sector has been another area that has struggled due to the pandemic as their customers struggle to meet their rents due to the various lockdowns over the last 10 months, and which has seen cash flows impacted due to lower footfall.

The owner of Bluewater in Kent and Gunwharf Quays in Portsmouth said that the value of its combined portfolio declined 13.7% to £10.8bn, as remote working and lockdowns sent footfall and occupancy rates lower.   

Imperial Brands has seen H1 revenues increase 6.1% to £15.6bn, helping to secure a 77% rise in operating profits to £1.6bn, which was also helped by the disposal proceeds of £281m on the Premium Cigar division. Revenues also received a boost from a 16% increase in Next Generation Products (NGP) which includes e-cigarettes and vaping products. Full year guidance was kept unchanged with the company raising the dividend by 1% to 42.12p a share.

Britvic shares hit their highest levels since December 2019, despite seeing a fall in revenues and profits in the first half of the year. This wasn’t entirely unexpected; however, revenues were still better than expected at £617m and as such management took the decision to reinstate the dividend as well as saying that the second half of the year had got off to a good start, due to the recent gradual easing of lockdown restrictions.  

Having taken a bit of a beating yesterday, travel and leisure stocks have rebounded today with British Airways owner IAG shares outperforming, along with other airline shares after Germany’s national carrier, Lufthansa said it had seen a surge in demand for transatlantic flights.


After a fairly subdued and negative start to the week US markets have maintained that theme in early opening trade, rolling over towards the downside, with some exceptions.  

Having only just digested yesterday’s news that AT&T was looking to spin off its Warner Media and merge it with Discovery to create a new streaming giant, it perhaps shouldn’t have been too much of a surprise to hear reports that Amazon is in talks to buy MGM for $9bn, as it looks to beef up its Prime Video offering in the face of a big push by a number of players to take on Netflix in the online streaming space.

Disney already has its Disney+ offering, while Apple has Apple TV+, while Comcast owns Sky, and if Amazon wants to stay relevant in this area then it also needs to move with the trend, given how crowded the streaming sector is becoming. MGM has a huge movie library, including the James Bond and Rocky franchise, and at $9bn would be a snip when you compare it to the AT&T deal. With Amazon’s deep pockets it's almost a no-brainer if they are serious at cementing their position in the online content market, and creating a streaming product that would, if you’ll forgive the pun, be a licence to thrill.

Today’s latest numbers from Walmart and Home Depot would appear to show that US consumers have confidence in the outlook. Walmart’s Q1 numbers have continued where they left off at the end of its previous fiscal year with e-commerce sales continuing to drive the business forward. Last year full year revenues hit $559bn as e-commerce sales rose in every single quarter. This has continued in Q1, with another 37% rise helping to push total revenue to $138.1bn, helped to a large extent by the March stimulus payments. Profits also beat expectations crushing expectations of $1.21c a share, coming in at $1.69c, prompting the company to upgrade its full year guidance. Same store sales rose 6%, well above expectations of 0.9%.

Home Depot’s latest Q1 numbers also saw a big beat for profits and revenues as the trickle-down effect of US stimulus payments saw an increase in consumer spending. In Q4 revenues smashed expectations of $35bn, and they’ve done the same again today, coming in at $37.5bn, well above the $32.26bn seen in the previous quarter. Profits also smashed expectations of $3 a share, coming in at $3.86c. Customer transactions also saw a big increase, rising over 19% to 447.2m. Despite this outperformance management declined to offer any guidance.  

Tesla shares are also lower after it was reported that Michael Burry had taken out a large short position against the electric car company. AT&T shares have lost further ground today as optimism over the Discovery spinoff wanes.  


The US dollar has come under further pressure trading back towards its February lows as further dovish commentary from a number of Fed speakers keeps downward pressure on the US dollar, while a weak housing starts report for April hasn’t helped. While we’ve heard a lot of chatter about a robust US economic recovery, there are still plenty of data points that cast doubt on some of the recent bullishness.   

While the US dollar has remained under pressure, bond markets don’t appear as sanguine with yields remaining fairly firm. It is certainly true that the recent weak payrolls report has taken the pressure off in terms of expectation of an imminent central bank tightening, however bond markets still suggest that there is more chance of a Fed move on monetary policy in the short term, than there is in Europe.   

The latest UK unemployment numbers pointed to an improvement in the labour market with the latest monthly jobless claims numbers for April seeing a drop to 7.2%, as the easing of restrictions in April prompted a further fall in monthly claims of 15.1k. The reopening of some parts of the economy also saw 97k return to the workforce, and while we are still 772k below the levels we saw in February 2020, it's quite likely that the additional easing of restrictions this month will see this number come down further. Vacancies also saw an increase in the three months to April, rising to 657k jobs, with accommodation and food seeing the largest rise.


Brent crude oil prices appear to be looking past concerns over the spread of the new Indian variant of the coronavirus, and focussing on a continuation of the reopening process in the UK and US, and to a lesser extent in Europe, where cases are still much higher. That said, it's struggling to break above its March peaks, when it traded briefly above $71 a barrel.   

Gold has hit a four-month high on the back of today’s US dollar weakness, consolidating its recent strength and its move above the 200-day MA, while silver is also trying to push higher, breaking above $28, however the bigger obstacle is the $30 level which got rebuffed back in February on the back of a Reddit inspired short squeeze.

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