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A survey of North American equities heading in both directions

On the rise

Cenovus Energy Inc. (CVE-T), Canada’s third-largest oil producer, rose 0.6 per cent after it said on Tuesday it plans to boost energy production by 19 per cent during the next five years as the country’s pipeline capacity expands.

Canada’s heavy oil sells at a discount to the North American benchmark in part because of limited export pipeline capacity. Expansion of the Canadian government-owned Trans Mountain pipeline, expected to be completed in the second quarter, will expand shipping to refineries on the U.S. West Coast and in Asia.

Canadian oil producers are modestly expanding output to take advantage of the expansion, which will nearly triple Trans Mountain’s capacity to 890,000 barrels per day.

“This represents a new pathway into global markets,” said Chief Commercial Officer Drew Zieglgansberger at Cenovus’s annual investor day in Toronto.

Cenovus said it plans to raise production by 150,000 barrels of oil equivalent (boe/d) to 950,000 boe/d by 2028.

Pet Valu Holdings Ltd. (PET-T) closed narrowly higher after raising its quarterly dividend by 10 per cent as it reported its fourth-quarter profit and sales rose compared with a year ago.

The retailer of pet food and supplies says it will now pay a quarterly dividend of 11 cents per share, up from 10 cents.

The increased payment to shareholders came as Pet Valu says it earned $28.8-million or 40 cents per diluted share for the quarter ended Dec. 30, up from $25.9-million or 36 cents per diluted share a year earlier.

Revenue totalled $286.9-million, up from $266.0-million in its fourth quarter last year.

Same-store sales were up 1.9 per cent as a 3.0 per cent increase in same-store average spend per transaction was partially offset by a 1.1-per-cent decrease in same-store transactions.

On an adjusted basis, Pet Valu says it earned 54 cents per diluted share in its latest quarter, up from an adjusted profit of 43 cents per diluted share a year earlier.

SRG Mining Inc. (SRG-X) reversed course in the wake of calling off its financing deal with an opaque China-based company after Canada’s federal industry minister publicly chastised the company for trying to skirt a national security review around the agreement.

Last summer, Carbon ONE New Energy Group Co., Ltd. (C-ONE) proposed buying a 19.4-per-cent stake in SRG’s Lola graphite project, in West Africa. For the first few months after the deal was announced, Montreal-based SRG told its investors that the deal was subject to a national security review by the Canadian federal government. But the company eventually announced that it was planning on redomiciling to the Middle East, a legal manoeuvre it said would negate the requirement for the security review.

“It’s never smart to try to circumvent the rules,” Minister of Innovation, Science and Industry François-Philippe Champagne told the Globe and Mail on Monday.

The federal government is prepared to use “every tool at our disposal” to make sure that Canadian law is respected, he added.

The critical minerals sector was watching the SRG situation closely, because if the deal was allowed to proceed, it offered a potential loophole for executives to use in raising money from China and other jurisdictions Ottawa has deemed national security threats.

The decision to terminate the deal with C-ONE was “challenging,” SRG chief executive officer Matthieu Bos said in a news release on Tuesday, but was made in the interests of safeguarding shareholders.

- Niall McGee

Target (TGT-N) on Tuesday reported higher holiday-quarter earnings on a smaller-than-expected sales decline and predicted that annual comparable sales would come in largely above Wall Street expectations, sending its shares soaring over 12 per cent.

The mass merchandiser is banking on same-day services, product launches and a new membership program to boost spending at its stores.

Target reported adjusted earnings of US$2.98 per share in the fourth quarter, compared to US$1.89 per share in the same period a year earlier. Analysts on average expected US$2.42 per share, according to LSEG estimates.

Total comparable sales in the November to January period fell 4.4 per cent compared with the 4.6-per-cent decline analysts were expecting, in part due to a recovery in sales on Online sales fell 0.7 per cent during the fourth quarter, an improvement from the 6% decline in the previous quarter.

Robust Black Friday and Cyber Monday spending helped drive holiday-quarter sales, the company said, and shoppers gravitated to newly launched collections such as Kendra Scott jewelry and its private-label Figmint line of kitchenware.

Shoppers also responded to same-day pickup services, such as Drive-up, which made up more than 10% of total sales in the quarter, the company said.

“(The) biggest takeaway is now back-to-back strong quarters, which is exactly what the market wants to see out of Target - consistency, which is an adjective that has been elusive for the company over the past 2-3 years,” said Dave Wagner, portfolio manager at Aptus Capital Advisors.

The quarter marks the end of a challenging year for Target. During the second quarter, Target reported its first decline in store visits and comparable sales since before the pandemic as inflation limited Americans’ spending on discretionary items, which accounts for 50 per cent of Target’s revenue.

Commerce Department data showed that prices on a basket of goods and services continued to tick up in January.

Looking ahead, Target will focus on rolling out new products and services, including a new Target Circle membership program, to reignite sales, traffic and market share gains in 2024, Target’s CEO Brian Cornell said in a statement.

Target introduced its earnings outlook for 2024, saying it expects adjusted earnings between US$8.60 to US$9.60 per share. The midpoint of that range was largely in line with analysts’ expectations of US$9.14 per share, according to LSEG data.

Annual comparable sales are expected to be in a range of flat to up 2 per cent this year, compared to analysts’ average expectations of 0.86-per-cent rise.

The stock is undervalued, trading at 16.8 times forward earnings, just below its 5-year average of 17.2 times, Alex Morris, chief investment officer of F/m Investments said in an email.

On the decline

Shares of auto parts supplier Magna International Inc. (MG-T) closed down 0.1 per cent after the Tuesday announcement it will working with General Motors Co. (GM-N) and and IT company Wipro Ltd. (WIT-N) to create a sales platform to buy and sell automotive software.

The joint venture, SDVerse, will link the buyers and sellers through a digital platform, where the software’s features and attributes can be listed.

Wipro, in a regulatory filing, disclosed an investment of US$5.85-million, equating to a 27-per-cent stake in SDVerse. GM and Magna will hold a 46-per-cent and 27-per-cent stake, respectively.

The transaction is expected to be completed before the end of March.

The platform is in its development stage and is expected to feature hundreds of automotive software products and participants across the industry.

The announcement comes at a time when automakers are ramping up their tech investments to help create connected vehicles with advanced driver aids.

“The market for automotive software is expected to nearly double this decade, potentially outpacing the growth of software development talent pools,” said Harmeet Chauhan, global head Wipro Engineering Edge, Wipro Ltd.

While the companies did not detail specific revenue targets, SDVerse will follow an annual subscription fee model and not charge any fee for buying or selling products.

Apple Inc. (AAPL-Q) slid 2.8 per cent after research firm Counterpoint reported its iPhone sales in China fell 24 per cent year-on-year in the first six weeks of 2024, as the U.S. company faced increased competition from domestic rivals such as Huawei.

The U.S. tech giant’s chief competitor in China in premium smartphones, Huawei, saw unit sales rise by 64 per cent in the period, according to the report.

This could fan fears of a slowdown in demand for the U.S. company, whose revenue forecast for the current quarter was US$6-billion below Wall Street expectations.

Shares of the iPhone maker have lost about 10 per cent of their value so far this year, underperforming their big tech peers in the United States.

Counterpoint’s report said Apple’s share of the Chinese smartphone market dropped to 15.7 per cent, putting it in fourth place, compared with second place in the year-ago period when it had 19-per-cent market share.

Huawei rose to second place as its market share expanded to 16.5 per cent from 9.4 per cent a year earlier. The overall smartphone market in China shrank 7 per cent, the report said.

Apple “faced stiff competition at the high end from a resurgent Huawei while getting squeezed in the middle on aggressive pricing from the likes of OPPO, Vivo and Xiaomi,” Counterpoint’s senior analyst Mengmeng Zhang said.

Meta Platforms (META-Q) slipped 1.6 per cent as its Facebook and Instagram platforms suffered an outage for hundreds of thousands of users across the globe on Tuesday.

Andy Stone, Meta’s head communications, acknowledged the issues on X, formerly known as Twitter, and said the company “resolved the issue as quickly as possible for everyone who was impacted, and we apologize for any inconvenience.”

Users reported being locked out of their Facebook accounts and feeds on the platform as well as Threads and Instagram were not refreshing. WhatsApp, which is also owned by Meta, appeared unaffected.

A senior official with the U.S. Cybersecurity and Infrastructure Security Agency told reporters Tuesday that the agency was “not aware of any specific election nexus nor any specific malicious cyberactivity nexus to the outage.”

The outage comes just ahead of Thursday’s deadline for Big Tech companies to comply with the European Union’s new Digital Markets Act. To comply, Meta is making changes, like allowing users to separate their Facebook and Instagram accounts so personal information can’t be combined to target them with online ads. It’s not clear whether the outage is connected to any preparations Meta might be carrying out for the DMA.

Tesla Inc. (TSLA-Q) slipped 3.9 per cent as its European Gigafactory near Berlin halted production and was left without power after what CEO Elon Musk called an “extremely dumb” suspected arson attack that set an electricity pylon ablaze close to the site early on Tuesday.

The blaze southeast of the German capital, which did not spread to the Tesla site - the U.S. electric vehicle maker’s first manufacturing plant in Europe - was extinguished by the fire brigade, police said.

A Tesla spokesperson confirmed production had stopped and the site evacuated.

Local media published a letter purportedly from a far-left activist organization called the Volcano Group that claimed responsibility for the incident, in a 2,500-word attack on Tesla and its billionaire CEO Musk.

Police said they were aware of the letter, which was signed “Agua De Pau”, the name of a volcanic mountain in the Azores, and said they were checking its authenticity.

“These are either the dumbest eco-terrorists on Earth or they’re puppets of those who don’t have good environmental goals,” Mr. Musk said on X.

Advanced Micro Devices (AMD-Q) has hit a U.S. government roadblock in its efforts to sell an AI chip tailored for the Chinese market, as Washington cracks down on the export of advanced technologies to Beijing, Bloomberg News reported late Monday.

AMD tried to get the U.S. Commerce Department’s go-ahead but officials said it must obtain a license from the Bureau of Industry and Security as the chip was too powerful despite being weaker than what the company sells outside China, and designed to meet U.S. export restrictions, the report said, citing sources familiar with the matter.

Shares of the U.S. company dipped on Tuesday as investors feared that the reported development could hamper its efforts to catch up with AI front-runner Nvidia, whose semiconductors have captured more than 80 per cent of the market for the advanced chips.

The U.S. government has moved aggressively in recent months to halt shipments to China of more advanced AI chips, as part of its efforts to stop Beijing from receiving cutting-edge U.S. technologies that could strengthen its military.

It imposed new rules in October barring exports of Nvidia’s A800 and H800 chips to China, both of which were made to comply with previous export rules. AMD was also impacted by the move.

Shares of MicroStrategy (MSTR-Q) dropped over 21 per cent on Tuesday after the software firm announced plans to raise capital through a US$600-million private offering in convertible notes that it would use to buy more bitcoins.

The stock of the listed company with the biggest bitcoin holding hit a 24-year high on Monday, as the world’s largest cryptocurrency climbed closer to 2021 record high.

With the latest offering, MicroStrategy joined a slew of companies raising capital through convertible bond deals, taking advantage of an environment of high interest rates and surging stock prices.

Last month, MicroStrategy bought about 3,000 bitcoins, taking its total holdings to 193,000 bitcoins -- bought at an average price of US$31,544 apiece as of Feb. 25.

At the current bitcoin price of US$66,850, its holdings are worth US$12.90-billion, according to Reuters calculations, nearly double the price at which they were bought.

The company’s valuation stood at US$22.64-billion up to the last closing price, LSEG data showed.

“Maybe MicroStrategy has found the perpetual money trade, repeatedly sell debt, and invest the proceeds in the asset you own, further fueling its rally,” said Michael O’Rourke, chief market strategist at JonesTrading.

MicroStrategy began buying bitcoin in 2020 to focus on “HODLer” strategy, which involves hoarding but not easily selling crypto as revenue from its software business eased in the past two consecutive years to US$496.23-million in 2023.

With files from staff and wires

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 24/05/24 3:35pm EDT.

SymbolName% changeLast
Adv Micro Devices
Apple Inc
Cenovus Energy Inc
Magna International Inc
Meta Platforms Inc
Microstrategy Cl A
Pet Valu Holdings Ltd
Srg Graphite Inc
Target Corp
Tesla Inc

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