Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
BMO bank analyst Sohrab Movahedi previews what looks like will be a miserable earnings season for his sector,
“The Q1/24 earnings season kicks off February 27 with BNS and unrated BMO. Across the ‘Big 5′ (excl. BMO) in Q1/24, cash earnings are expected to be down approximately 12 per cent year-over-year. Except for EQB, our estimates see double-digit y/y earnings declines across our coverage universe. Our outlook contemplates flat y/y revenue in Q1 (hurt by softer loan growth), more normalized trading revenue, and higher credit provisions (reflective of normalizing loss rates). We believe that the first half of 2024 will likely reflect a continuation of the economic fundamentals of 2023, with economic headwinds expected to continue weighing on bank stock valuations. But as we get into the second half of 2024 and into 2025, we see cause for greater optimism, buttressed by balance sheet strength (capital/reserves/liquidity), greater clarity on the economy, and improving earnings growth prospects for the banks. Our Outperform-rated names remain CM, NA, EQB, and CWB”
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Citi U.S. equity strategist Scott Chronert and commodity strategist Aakashh Doshi began preparing clients for the upcoming presidential election,
“What Is Driving Voters in Swing States? — The economy remains the single most important issue, but there is a disconnect between strong data and weak confidence, eroding Biden’s edge. Trump polls better in swing states and is viewed as better for the economy. In a soft landing, though, social issues could prevail as a driving force—as they did in the 2022 midterms—and favor Biden … We presume a second term for President Biden would follow a policy path similar to his first term. The assumption is a split Congress, but with flipped House and Senate control versus today (as per the scenario analysis in section 1, Election Overview and 2025 Policy Implications). As a result, pricing the continuation of core policy initiatives may not bring much surprise to markets. … The larger unknown at this stage is the market impact of an ex-President Trump win, with the assumption that Republicans gain control of both the House and the Senate. Our early take is that another Trump presidency Bonds tend to do better if the elections result in divided government. ... Specifically, we anticipate a marked change in the fiscal backdrop, with negative implications for aggregate government spending … Answering the question “What’s the Trump trade?” is a difficult prospect. A renewed deregulatory focus most likely favors Financials and Energy”
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Network security remains a focus for global CEOs which is resulting in strong revenue growth for related stocks,
“We recently conducted calls with channel partners and the feedback suggests solid C4Q23 deal activity, largely improving on the first nine months of 2023 and reflecting more typical 4Q budgets as well as improving sales cycles and deal sizes … We upgraded SentinelOne today to Buy from Neutral. and flag several positives. SentinelOne has maintained strong relationships with channel partners and saw solid deal activity in C4Q23 and 1Q. CrowdStrike should also have a solid quarter, and we note its latest focus on solidifying partner relationships … Zscaler and Palo Alto remain the notable vendors [for firewall security], especially for enterprises, yet partners are beginning to ramp with Cloudflare in the SMB segment as they build out their channel program … Cloud security remains top of mind, with strong growth and deal activity in C4Q23 and C1Q24 so far. SentinelOne’s solution is still in the early innings, while Wiz’s technology remains best-of-breed, though at a slight premium to peers. Palo Alto and CrowdStrike continue to gain momentum and benefit from cross-selling to existing customers”
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Diversion: “Why patients are waiting so long in emergency rooms across Canada” – Macleans
Scott Barlow