UK’s New PM, Open Letter to Meta, and Q3 2022 Earning
Rishi Sunak inherits UK’s economy crisis
Britain’s next prime minister, former Treasury Chief Rishi Sunak, was chosen on Monday to lead a governing Conservative Party. Rishi Sunak was left to inherit the UK’s economy, which was headed for a recession and currently undergoing economic and political turbulence.
The previous Prime Minister, Liz Truss, resigned after her budget of tax cuts funded by debt create the crash of the Sterlings and the slip of several financial markets. It cost the UK to implement tax U-Turn.
Rishi Sunak defeated centrist politician Penny Mordaunt, who failed to get enough backing from lawmakers to enter the ballot, Boris Johnson, former prime minister, withdrew from the line for the reason he could no longer unite the party.
The first British-Asian and the youngest UK Prime Minister in more than 200 years said in his first public statement, “the United Kingdom is a great country, but there is no doubt we face a profound economic challenge.”
He continued, “We now need stability and unity, and I will make it my utmost priority to bring our party and our country together.”
Being left with a formidable challenge to combat the UK economy including double-digit inflation, rising interest rates, surging cost of energy, food, and mortgage costs along with the need to hold Britain’s dominant political party together after some party Members of Parliament blamed him for the downfall of Truss’s predecessor, Boris Johnson after he resigned from Johnson’s cabinet last July.
“We need someone who can provide stability and proven economic competence in these challenging times, and Rishi Sunak is that person,” said Grant Shapps, Home Secretary.
Sunak steered the economy through the Covid-19 pandemic when he stands as a finance minister at that time showing remarkable performance with his financial support for businesses and workers.
Sterling took support after the announcement as the currency pared gains to trade down against the dollar.
“It seems that the announcement was pretty well priced in by this point – especially after sterling’s notable gains at the Asia open last night,” – Michael Brown, head of Market intelligence at Caxton.
Meta shareholder’s Open Letter
Meta has too many employees, stop spending so much money on the ‘metaverse’ and moving too slowly to retain the confidence of investors are the highlight of Altimeter Capital Chair and CEO Brad Gerstner’s open letter to Meta and CEO Mark Zuckerberg on Monday
In the letter, the Meta investor suggested the company cut on its headcount expenses by 20% and put a cap on the company’s metaverse investment technology to $5B per annum.
Gerstner wrote in the letter. Meta’s Time to Get Fit – “Meta needs to re-build confidence with investors, employees, and the tech community in order to attract, inspire and retain the best people in the world.”
The letter highlights the concern after Meta’s continuous slump performance. Meta stock is down over 61.68% in 2022, which is concerning from the investor point of view as Altimeter Capital held more than 2 million shares of Meta. The company’s stock traded at $129.72 on October 25 while it was traded at $328.69 on the same date last year.
Meta announced a new high-end VR headset, the Quest Pro, on October 11. However, Horizon Worlds are not catching any interest among the public.
“An estimated $100B+ investment in an unknown future is super-sized and terrifying, even by Silicon Valley standards,” Gerstner wrote.
Gerstner highlighted that currently, Meta is having too many employees, along with excessive capital expenditure spending. A 20% cut in employee spending would take Meta back to the levels of employment it had last year. He also emphasizes that Meta needs to be able to control those outflows. Hence, it will lead to share price improvement.
US Q3 2022 Earning Season
Earnings season for the third quarter begins on October 14, 2022, after JP Morgan and other US Banks release their earning report. Data from Factset suggests that the growth rate for S&P 500 earnings will be 2.9% as of early October. If the rate is as reflected, it will be the lowest Q3 had been reported since 2020. Further, according to Factset, as of October 21, about 20% of companies in the S&P 500 already reported their Q3 results.
TESLA – Earnings results miss on revenue
Tesla reported a total of $21.45 billion in revenue, somewhat lower than the $21.96B in expectation. However, Tesla touts it as a strong record. On the other hand, Tesla’s EPS number came in at $1.05 per share, 6% higher than the expected EPS, of $0.99.
The electric automotive company produced 365,923 vehicles in Q3, an increase of almost 54% compared to the year ago. On the contrary, Tesla’s share price is down 38% in the past year, compared with an 18% drop in the S&P 500 Index.
SNAP – Miss the run of 25% on Q3 revenue
Snap’s shares plummeted more than 25% in extended trading after the company presented its weaker-than-expected Q3 revenue. Snap reported a total of $1.13 billion in revenue, lower than the $1.14B expectation, while their EPS number came in at $0.08 per share. Despite the weakened data, Snap’s Global Daily Active Users reported 363M users, a 1.34 higher than the expected figure of 358.2M users.
JP Morgan – A huge thanks to the higher interest rate
JPMorgan Chase & Co. (JPM) open the earning season bell of Q3 2022 with beat analyst predictions report of profit, revenue, and net interest margin even though the figure report was partially offset by a net credit reserve of more than $800M and investment securities losses of almost $1.
JPM revenue outperformed 10.4% YOY, whereas its EPS declined by 16.6% YOY to $3.12, compared with a consensus estimate of $2.87. Currently, JPM’s share traded at $122.38 with a 24.32% decrease YTD.
Netflix – Re-earn subscriber’s interest
Netflix’s stock surges 16% after Q3 2022 earnings report showed its better-than-expected figure along with an increase in subscriber growth. The stock price increase added $17B to Netflix’s market capitalization, lifting it to $124B.
After 2 consecutive quarterly declines in subscribers, Netflix finally put a smile on their investors as the company reported that 2.4M subscribers increased globally. The release of the mega-hit “Monster: The Jeffrey Dahmer Story” and the fourth season of “Stranger Things.” contributes to the figures.
Netflix reported a total of $7.9 B in revenue, a total 5.9% increase. However, their net income dropped to $1.4 B, amounting to a total shrunk of 3.5%. The share currently traded at $282.45, a week’s rise of 12.99% but traded at a 52.72% decline YTD.
Upcoming Q3 2022 Earnings
October 25 – 3M, Coca-Cola, GE, HSBC,
October 26 – META
October 27 – Amazon, Shopify, Intel, McD,
October 28 – Exxon Mobile
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