Futures higher on trade deal prospect, BCE cuts, Shopify drops, Peloton flops, analysts defend Google
In this episode of In the Money with Amber Kanwar, Mike Vinokur of Propellus Wealth Partners which is part of iA Private Wealth, tells us why he is holding a staggering 37% of his equity portfolio in cash. In a world where investors chase returns and FOMO dominates market behaviour, why is this seasoned money manager pumping the brakes? Tune in to find out! You can listen on Apple, Spotify or here.
Tea time: Markets are bouncing higher this morning on expectations of a trade deal announcement between the US and the UK. This would be the first major deal announced since Liberation Day. Markets are in full risk-on mode with stocks rallying, Bitcoin flirting with $100,000 and bonds under pressure. We’ve also got a deluge of earnings with 32 companies reporting on the TSX this morning and 22 on the S&P 500. I’ll go through some notable ones below.
The first cut is the deepest: BCE finally blinked and cut its dividend by 56% this morning. This was expected by the market given the stock was yielding north of 13% and consensus had baked in the cut. However, it is still stunnning given this is a company that has reliably payed a dividend that many retail investors depend on since 2009. CEO Mirko Bibic said cutting the dividend is the “appropriate decision” given “significant changes in our economic and operating environments.” Shares are trading flat in the pre-market which is a small win given the stock is languishing at a 15-year low. Profit fell this quarter but came in better than expected, however the number of subscribers fell which was not was analysts were expecting. In addition, the company announced it will hive off a chunk of their Ziply acquisition which will be purchase by Public Sector Pension Investment Board. This will reduce the leverage the company took on to buy Ziply in the first place (an unpopular transaction with investors). What to do with the stock? “We anticipate that more institutional investors will now consider investing in BCE to diversify their Canadian telecom positions, which should provide support and counterbalance the selling pressure from dividend seekers selling over the coming weeks,” wrote Desjardin’s Jerome Dubreuil.
Dropify: Shares of Shopify are falling in the pre-market despite better than expected quarterly results and a forecast that was in-line. Sales grew 27% from last year but the company is forecasting a bit of a deceleration of growth saying growth next quarter would be in the mid-twenties. The Street was alreadying there, expecting 23% growth. Investors tend to punish Shopify when they don’t blow the doors down given its high valuation. However, even at 23% growth it suggests that tariffs are not taking a material bite out of momentum. “…We think relatively in-line Q2 guidance should settle growth concerns in light of new tariff policies…” wrote ATB’s Martin Toner.
Push harder: Peloton is falling in the pre-market after posting a third straight sales decline. Sales dropped 13% from last quarter, which was better than feared, but the loss was also wider. Peloton has been in the midst of a turnaround trying to find stabilization after the pandemic – the stock is down 95% since the peak in 2021. New President and CEO Peter Stern is just three months into the job and promised improved profitability for the year. Investors are using today’s print as an excuse to take profits given there are unconvincing signs of a turnaround. While the stock is way off 2021 levels, as you can see below, you can make a lot of money on expected turnaround efforts in the short term!
Recovery day: Shares of Alphabet are recovering after a huge sell-off yesterday. Shares fell more than 7% after an Apple executive said that Search volumes on Apple’s Safari fell for the first time. The market panicked about Google losing its dominance amidst the growth of AI. This morning the stock is higher as bulls ride to the rescue. Evercore’s Mark Mahaney calls reports of search’s death “greatly exaggerated.” He notes that it is possible that Safari is losing market share and it doesn’t necessarily reflect what is happening at Google. It is such a cheap stock it may be tempting. I am a shareholder, but conversations with teenagers tell me that their first stop is ChatGPT when seeking answers – not Google. For what it is worth, I spoke about this with Mike Vinokur on the podcast. Google was one of his Pro Picks and he thinks there is room for the stock to go back to all-time highs.
