AIMSTAR FINANCIAL INSIGHTS – February 16, 2024

Your Weekly Guide to Financial Insights and Market Trends

Vikki Zhao and Olena Li

PUBLISHED Fri, Feb 16, 2024, 11:30 AM EST. 6 min read.

Weekly AimStar News

AimStar’s Financial Insights Seminar: RRSP 2024 Deadline Notice

As the tax season approaches, AimStar reminds you that the deadline for opening and investing in an RRSP account is February 29th, 2024. With an RRSP (Registered Retirement Savings Plan), you can not only save for your future retirement but also enjoy immediate tax benefits.

AimStar is proud to announce the successful completion of our online seminar, focusing on “Maximizing RRSP & Minimizing TAX.” The seminar provided valuable insights into optimizing RRSP contributions and minimizing tax burdens for participants. Additionally, attendees had the opportunity to learn about AimStar’s special New Year promo plan and discover the new investment tool: the 2023 Personal Tax Calculator at https://aimstar.ca/taxtool/ .

If you have not yet opened an RRSP account or would like to learn how to maximize the use of this account, AimStar’s wealth management team is here to help. Don’t miss this opportunity to enhance your financial security for the future. If you have any questions or need further assistance, please feel free to contact us. AimStar is always committed to helping you achieve your financial goals.

Weekly Market Analysis

A market downturn with the S&P 500 dropping by 1.4%, the Russell 2000 by 4%, and 92% of the trading volume on the NYSE being in decline on Wednesday.

This downward shift, coming after a 23% increase over the past 72 days, suggests a likely retest of the 20-day moving average (4909), a critical support level that has been maintained in recent months. Following the 20-day moving average, other significant support levels are the 50-day moving average at 4800, a horizontal support at 4600, and the 200-day moving average at 4472. A period of consolidation or a minor pullback after the rapid rise is considered normal and potentially beneficial, offering a chance to invest as the situation stabilizes.

The majority of the Q4 earnings season has already been reported, with 72% of S&P 500 companies having shared their results. An additional 92 companies are expected to release their earnings by the end of the following week. The performance has generally been strong:

  • 76% of these companies have exceeded earnings expectations, surpassing forecasts by an average of 4.8%.
  • Projections for the full years of 2024 and 2025 have remained mostly stable, although there’s been a slight downward adjustment in expectations for the first and second quarters of 2024.
  • The market’s response to these reports has varied, with half of the companies experiencing an average increase of 0.5% in their stock prices upon announcing their results. Companies announcing better-than-expected results and future guidance (“beat & raises”) have seen an average increase of 2.5% in their stock prices over three days, while others have seen a 1% average decline.
  • Sectors like Industrials and Energy have shown some of the most positive responses to their earnings announcements. In contrast, Real Estate and Consumer Discretionary sectors have not performed as well. Meanwhile, technology-oriented sectors have continued to demonstrate robust fundamentals, such as stronger earnings growth projections and revisions compared to the broader market, which has helped sustain their positive performance trends.

Recent data have led to a reassessment of expectations for Federal Reserve rate cuts, highlighted by robust wage growth in the January employment report and a rise in the prices paid index from the ISM Services survey. Despite initially overlooking these indicators, the market reacted to the latest Consumer Price Index (CPI) report, which indicated a month-over-month increase of 0.4% in core inflation. For the Federal Reserve to achieve its annual core CPI target range of 2-2.5%, a monthly increase of 0.2% is necessary.

However, with the past three months averaging a 0.33% increase, this trend may cause the Fed to reconsider its strategy. While there’s a belief that inflation is on a downward trajectory, the path towards easing inflation may not be smooth, particularly if the economy continues to exhibit strength.

Weekly Investing News

🤩For investors who like buybacks : Corporations were stingy about share repurchases in 2023, but buybacks are projected to increase this year as profit growth improves and central banks eventually start cutting rates. U.S. companies announced US$105 billion in planned share repurchases during the first seven days of February, surpassing the full-month tally in January . And Uber Technologies Inc. on Tuesday said it will buy back as much as US$7 billion in shares, a first for the company.

😫 For Tesla Inc. shareholders: The rapid decline of Elon Musk ’s electric-vehicle maker has some questioning whether it belongs in the Magnificent Seven group of megacaps that have taken over the markets. “We have a much different backdrop for Tesla and the others in the Mag Seven: the demand trend for Tesla products is fading, while it’s exploding higher for those companies that are more associated with AI,” says market strategist Matthew Maley.

🤩For First Quantum Minerals Ltd. shareholders: Chief executive Tristan Pascall says he hopes to keep the Cobre Panama copper mine open despite a government closure order, saying “it’s impossible for the next government to ignore the contribution that a responsible mining sector can make.”

😫For BlackBerry Ltd. shareholders: The smartphone-turned-software maker cut 200 jobs last quarter and anticipates further job losses within its cybersecurity business, which it expects to generate annualized savings of around US$27 million. It’s also exiting six of its 36 global office locations.

🤩For Nouveau Monde Graphite Inc. shareholders: The Quebec-based miner has agreed to provide 18,000 tonnes of graphite for multiple years to General Motors Co. and Panasonic Holdings Corp.  once it starts production. Its stock rose as much as 27.5 per cent following the announcement on Thursday.

😫For Shopify Inc. shareholders: The Canadian e-commerce champ on Tuesday reported fourth-quarter sales and profit that beat analysts’ estimates, but missed on free cash flow margin , which was in the “high single digits” instead of the expected 13.6 per cent. The company’s stock fell about 12.5 per cent on the day.

This report by The PF Investor was first published Feb. 16, 2024.

Weekly Business News

Canada’s Housing Starts Dip in January, Urban Developments Lead Decline

Canada’s housing starts in January decreased by 10% from December, with the seasonally adjusted annual rate falling to 223,589 units from 248,968. Urban housing starts dropped 11%, led by a 14% decline in multi-unit projects to 164,789 units, while single-detached urban starts slightly rose by 0.08% to 43,330 units. Significant regional variances included a 179% increase in Toronto, driven by multi-unit starts, but Montreal and Vancouver saw declines of 28% and 55%, respectively, due to fewer multi-unit projects. Rural starts were estimated at 15,470 units. The six-month moving average of housing starts in January was 244,827, a 2% decrease from December’s 249,757 units.

Coca-Cola Reports Strong Q4 2023 Financial Performance

Coca-Cola Company announced robust financial results for Q4 2023, with revenues hitting $10.8 billion, a 6.9% increase year-over-year, exceeding expectations. Earnings per share rose by 10% to $0.49, meeting projections. The company raised prices across products to counter rising costs, leading to a 9% price increase, surpassing forecasts.

Organic revenue surged by 12% in Q4, driven by growth in Latin America, Europe, the Middle East, Africa, Asia-Pacific, and bottling investments. However, North American unit case volume dropped by 1%. Analysts noted the need for improved sales performance as pricing power wanes. Operating and free cash flow for the year both rose. Coca-Cola anticipates 6%-7% organic revenue growth in 2024, exceeding analyst forecasts.

Tim Hortons Franchise Profitability Surges Amid Strong Sales and Strategic Partnerships

Tim Hortons (part of Restaurant Brands International) sees improved franchise profitability, with a 27% annual increase, driven by strong sales. Total sales at RBI rose to $1.82 billion, with Tim Hortons benefiting from beverage offerings and a partnership with Baileys. Franchise profitability at Tim Hortons improved with EBITDA averaging $280,000 per location in 2023. RBI’s turnaround plan, led by CEO Joshua Kobza, aims at boosting franchise profitability. Burger King, Popeyes, and Firehouse Subs also saw EBITDA improvements. However, RBI’s shares fell about 3% due to softening performance in China and some markets in western Europe, alongside concerns about the Middle East conflict’s impact on sales.

OpenAI Faces Leadership Shake-up: Co-founder Andrej Karpathy Departs

OpenAI Co-founder Andrej Karpathy has announced his departure from the company, citing personal reasons. Karpathy, a former research scientist at OpenAI who later served as Senior Director of AI at Tesla before returning to OpenAI in 2023, leaves amidst speculation about his next steps. His resignation follows a period of leadership changes at OpenAI, including the dismissal of CEO Sam Altman last November. Karpathy’s departure marks another chapter in the evolving story of one of the most prominent organizations in the field of artificial intelligence.

BioVaxys Acquires IMV Inc.’s Intellectual Property and Immunotherapy Platform

This Wednesday, BioVaxys Technology Corp. announced the signing of a definitive asset purchase agreement on February 11, 2024, acquiring the discovery outcomes and asset portfolio of tumor, infectious disease, antigen desensitization, and other areas based on the DPX™ immune guidance platform technology developed by the Canadian biotechnology company, IMV Inc., spanning preclinical and clinical development stages.

Lightspeed Commerce Announces Leadership Change with Founder’s Return

On February 15, 2024, Lightspeed Commerce revealed a significant shift in its executive team as founder Dax Dasilva steps back into the role of interim CEO, taking over from Jean Paul Chauvet. This strategic move comes at a time when the company is facing stock price challenges, despite showing growth in sales and profitability. Dasilva, who originally led Lightspeed from its inception until 2022, is poised to steer the company towards a renewed focus on profitability and efficiency. The leadership transition underscores Lightspeed’s commitment to regaining investor trust and enhancing operational performance as it moves forward.

Lightspeed shares were up about 2 per cent on the Toronto Stock Exchange shortly after markets opened.

Gold Prices Swing, Breaking Below $2,000 Amid Stubborn Inflation

Recent U.S. Producer Price Index (PPI) data reveals persistent inflation, casting doubts on potential rate cuts and causing sharp fluctuations in gold prices, which briefly fell below $2,000 per ounce before rebounding. The PPI for final demand rose more than expected, with a 0.3% month-over-month increase and a 0.9% year-over-year gain. Core PPI, excluding food and energy, also exceeded forecasts with a 0.5% monthly and 2% annual increase. This led to a temporary $8 drop in spot gold to $1,995 per ounce, nearly recovering afterward. Amid these developments, U.S. and Eurozone bond yields rose, with markets eyeing the Federal Reserve’s next steps closely. Despite the pressure from adjusted rate cut expectations, the downturn in gold prices may be short-lived.

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