In today’s top stories, value investors swoop up Meta shares, analysts downgrade Coinbase’s stock and Robinhood’s takeover rumour is squashed. Meanwhile, China airline stocks soared on news that the government had loosened quarantine restrictions and managers of large-cap growth funds take the biggest underweight position in tech on record.
Downgrade causes Coinbase to crumble
Coinbase’s [COIN] share price continued its crypto winter slump on Monday after Goldman Sachs downgraded the stock to sell. “We believe Coinbase will need to make substantial reductions in its cost base in order to stem the resulting cash burn as retail trading activity dries up,” analyst William Nance wrote in a note seen by Bloomberg. He slashed his price target from $70 to $45, implying a downside of 19.5% from 27 June closing price.
China airline stocks soar
The Chinese government said on Tuesday that it will shorten the quarantine time for international travellers to 10 days from 21 days in what is seen as a key step in relaxing Covid-19 restrictions across the board. The news sent Air China [753.HK] 10% higher to set a 52-week high, as did China Eastern Airlines [670.HK]. Hong Kong’s main airline Cathay Pacific [293.HK] also recorded a 52-week high, closing 7% higher.
Robinhood takeover rumours squashed
Crypto exchange FTX rubbished speculation that it’s to buy beleaguered Robinhood [HOOD] on Tuesday, sending shares in Robinhood down in early trading. The stock had initially soared more than 14% on Monday after Bloomberg reported that FTX was deliberating the takeover internally. A deal would be good for the trading platform’s reach, Mizuho analysts wrote in a note, but it can also “survive and thrive on its own”.
Meta attracts value buyers
Bargain hunters are sniffing around Meta’s [META] share price, which is trading at its lowest level in over two years — the stock had also hit a 52-week low of $154.25 on 23 June. David Katz, CIO at value firm Matrix Asset Advisors, is bullish on the stock. “You want to find dynamic growth companies at value prices. Meta has a good outlook, but it is being priced as though it’s in a secular decline,” Katz told Bloomberg..
Growth funds underweight on tech
Fund managers continue to be bearish on tech stocks, according to an analysis of Q2 13F filings by Jefferies seen by Seeking Alpha. Managers of large-cap growth funds are underweight in the Technology Select Sector SPDR Fund [XLK] at -9.1%, the largest on record. They remain overweight on financial services at 3.3% and healthcare at 3.1%. Funds are trailing the Russell 1000 Growth by 2.2% on average with only a quarter beating it.
Margins to come under pressure at ASOS
As UK consumers feel the pinch, clothing spending is likely to fall significantly. ASOS [ASC.L] CFO Matt Dunn expects the retailer’s margins to come under pressure throughout the rest of the year, although it has no plans to start charging for returns like some of its competitors have. The Asos share price is down 63% year-to-date and, with no recovery in sight, the stock has been the target of a spate of downgrades.
Domestic growth slows at Alibaba
With the worst of Beijing’s regulatory crackdown appearing to be over, now could be a good time to buy Alibaba [BABA], according to Caroline Cai, manager of the Pzena Emerging Markets Value Fund. Sid Choraria of SC Asia Strategy likes the Chinese big tech stock as well, especially the long-term investment thesis. In the near-term, however, slowing domestic growth could prove to be a stumbling block.
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