Our family is growing. No, not another baby. A few days ago, we got a fish. It seemed like the lowest maintenance way to appease the kids’ request for a pet. We are still figuring out how much to feed Crowny. ChatGPT said just once per day and maybe skip a day. After a few days I squinted to read the fish food bottle and it said 2-3 times a day! Crowny seems relieved his intermittent fasting days are behind him.
Remember, this is the LAST DAILY NOTE for the summer! We will be back regularly in September!
In this episode of In the Money with Amber Kanwar, real estate investor Michael Missaghie of Arch Corporation isn’t just waiting for the real estate market to turn, he’s actively making it happen. His firm was behind pushing for the sale of InterRent. And he says that’s just one of many REITs poised for a takeover. He names who could be next! You can tune in on Apple, Spotify or here.
Spend happy: The Federal Reserve kept interest rates steady for the fifth meeting in a row but for the first time in 32 years there were two dissenting governors who wanted rate cuts. Fed Chair Jerome Powell showed no signs of bowing to those pressures, saying there was no decision about September. There are still two jobs reports and inflation reports until then and those will inform whether September is a live meeting. This morning we just got a read of inflation in the US that showed higher than expected growth with core inflation re-accelerating for a third month in a row and at the highest level since February. But today isn’t the day for macro. Futures are ripping this morning after Microsoft and Meta delivered blockbuster results (and blockbuster spending plans) that show the AI trade is alive and well (more on that below). . Tomorrow is August 1st which is the deadline for Canada and the US to reach a trade agreement. Prime Minister Mark Carney warned that there is a good chance no deal is struck by the August 1st deadline at which point US President Donald Trump has threatened to increase tariffs to 35% from 25%. The Canadian dollar is trading at a two month low on those dimmed prospects. The Bank of Canada kept rates on hold yesterday but signaled that more rate cuts could be coming which also weighed on the loonie.
Doing the work: Meta (11%) and Microsoft (+8.5%) are soaring after smashing earnings expectations and unveiling even bigger spending plans. Let’s start with Meta. Sales soared 22% which was 6% higher than expected. Meta is effectively using AI to sharpen its ad targeting and clearly it is paying off. It is also keeping users engaged with a 20% jump in in video viewing time. Sad for humans, great for shareholders. The spending is eye popping. Meta could spend up to $72 billion on AI this year alone and said its possible that could be $100 billion next year. But the company is writing checks it CAN cash according to Evercore’s Mark Mahaney. “In Q2, META generated $8.5B of (free cash flow), repurchased $9.8B in share, and paid out $1.3B in dividends while finishing the quarter with $47.1B in cash and $28.8B in debt,” Mahaney wrote. He sees 20% more upside in the stock. Microsoft blew the doors down in its latest quarter and is on track to become the second company to be worth $4 trillion (after Nvidia). Their cloud business smashed with Azure growing 39% (remember a few quarters ago everyone was sad about slowing growth?) The spending is insane: Microsoft plans to spend $120 billion in AI investments in its fiscal year, which is significantly higher than the $80 billion it last telegraphed. All this is music to Nvidia’s ears with the stock up 2% right now.
Mixed bag: These Canadian stocks could come under pressure as results were not a clean beat. CP Rail missed earnings slightly but reiterated their full year forecasts. Analysts are wary about what railway consolidation means for Canadian rail stocks. TD’s Sherilyn Radbourne says while they wouldnt take an operational hit, investor fund flows could be diverted to the US. National Bank’s Cameron Doerksen takes the other view: he thinks CP Rail could benefit from investors wanting to avoid regulatory uncertainty. Doerksen upgraded CP Rail to buy after earnings citing compelling relative valuation. Bombardier’s sales, profit and free-cash burn were all worse than anticipated. However, the plane maker touted the highest jet backlog in a decade and maintained their financial forecasts. Those could help allay concerns that cracks are forming in the business. In the energy sector keep an eye on Tourmaline which could come under pressure. Results were fine, but analysts are noting that the long-awaited multi-year plan contained some unpleasant surprises. Near-term production is expected to be lower while spending is significantly higher than anticipated. Raymond James is downgrading Tourmaline here. “The plan incorporates a materially higher capital spend in the interim, which was likely expected to some degree – though we were surprised by the magnitude – and combined with deferrals and decreased guidance this year, we would not be surprised to see some near-term weakness,” said Luke Davis of Raymond James.
Marching to the beat: Cameco is trading up 2% in the pre-market after the uranium producer smashed profit expectations and posted a 47% surge in revenue. The resurgence of nuclear is clearly showing up in demand for Cameco, although they maintained their forecasts rather than increased them. Lightspeed is up 2% despite missing profit expectations as sales came in better. The point-of-sale software company also said sales for the year would be higher than current analyst estimates. TC Pipelines (the former TransCanada Pipeline) posted a beat and raise quarter and noted that it is actually tracking 15% below budget on a number of its assets. The only caveat is that the stock is trading at a premium to its historical valuation. However, according to TD this is warranted given results. Lastly, Agnico Eagle will likely trade up this morning after earnings beat expectations on higher gold production.
