Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
BMO analyst Sohrab Movahedi previewed bank earnings and provided top picks,
“The Q2/24 earnings season kicks off May 23 with TD. Across the “Big 5″ (excl. BMO), cash earnings are expected to be down ~4% y/y, with positive pre-tax pre-provision earnings growth more than offset by still elevated credit provisions (albeit stable q/q). Our estimates contemplate slow loan growth but stable margins, some firming in Capital Markets/Wealth revenue, and sticky expenses not yet showing full benefits from last year’s restructuring charges. We believe that the Canadian bank earnings trends are close to an inflection point; last year’s triple whammy of higher minimum regulatory capital requirements, credit reserve building, and negative operating leverage from double-digit non-interest expense growth should moderate starting this quarter and improve through FY25. Our Outperform-rated names are CM, RY, NA, EQB, and CWB”
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BofA Securities analyst Wamsi Mohan attended Apple’s demonstration of its new voice interactive AI companion that will soon be available on Apple phones,
“OpenAI demo shows the true power of virtual assistants that developers can tap into creating a plethora of apps … We expect AAPL to be a net beneficiary of AI at the edge [on devices]. Maintain Buy … the demo highlighted how devices at the edge (Mac, iPhones to start) can benefit from AI. By combining voice, text and images seamlessly, the demo captured how AI can drive incredible amounts of productivity … Demo highlights the disruptive nature of AI. Realtime language translation, narration, ability to tutor (linear equation in demo) echoed skilled professionals like translators, story tellers, educators etc. The ability for developers to create apps that tap into the potential of AI is exciting. CEO Sam Altman also posted on a blog that “we’ve made the best model in the world available for free in ChatGPT, without ads or anything like that”. This could mean OpenAI will monetize using other means and might not create a model similar to Apple’s licensing relationship with Google … It remains unclear from the demo what the latency will be in practical terms and if the processing power on device and connectivity speeds will be enough to support use cases highlighted in the demo. In our opinion, Apple will increase the local processing ability on iPhone 16 potentially with higher RAM that can drive superior performance relative to prior models thereby creating a need for upgrades”
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Morgan Stanley analyst Laura Sanchez identifies the winners and losers from U.S. tariffs on Chinese renewable power inputs 9note the report was written the day7 before tariffs were announced),
“New tariffs on clean tech imports could have a detrimental impact on near-term growth, and thus climate benefits, but should serve as a demand accelerant for domestic-made [U.S.] products … We see the most acute risk for the US battery storage market. As it stands today, the majority (~70%) of the battery storage supply chain is linked to China. While there has been significant growth in manufacturing capacity in South Korea and a wave of new battery manufacturing announcements in the US following the passing of the IRA, we would expect potentially significant near-term disruption to battery storage deployments in the US if tariffs were to be placed on China as a significant amount of battery storage supply today is still sourced directly from China … Biggest beneficiaries: FSLR (OW), ICE-exposed names F (OW), GM (OW), PHIN (OW), AXL (OW), GPI (EW), and AN (EW). Most at risk near-term: FLNC (EW), STEM (EW), and EV-exposed stocks APTV (UW), LCID (UW), TSLA (OW), and RIVN (OW), although for TSLA could be a wildcard”
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Diversion: “OpenAI Unveils GPT-4 Omni’s Voice Capabilities and They’re Literally Unbelievable” – Gizmodo
Scott Barlow