All Eyes on Micron

🔮 Welcome back to Finsights, fellow financial wizard. Let’s get you up to speed on the market with a flick of your finger! 🪄

• 🕺Markets slide sideways

• 🐻 Fed spookiness around the potential rate hike

• 🚫🚫 China says no to Micron

📈 Market levels – US equity futures indices are stable today: S&P, Dow, and Nasdaq are flat. Micron's stocks dropped 5.5% pre-market following China's ban on its memory chips, which might impact the broader US semiconductor industry, currently down by about 1%. European indices are stable with small gains between 0-15bp in various sectors. Asian stocks generally went up, with gains ranging from 0.04% (Taiwan TAIEX) to 1.51% (HSCEI). Treasury yields are down 2-4bp, and the DXY (Dollar Index) is mostly flat. Brent crude oil is roughly unchanged, while US natural gas slides 150bp and Eurozone natural gas falls by 215bp. Bitcoin and gold remain steady.

🗞️ What's happening – US equity futures show resilience despite mixed news over the weekend. Debt ceiling negotiations gained some stability with a productive phone call between Biden and McCarthy. The looming early June 'X-date' suggests urgency, but a deal is anticipated. However, this may lead to liquidity shortages as the Treasury refills its General Account. Everyone’s eyes are on Micron this morning and the Chinese infrastructure ban.🌍

🔍 Our Market Thoughts – Our optimistic outlook remains unchanged, based primarily on strong earnings, the end of Fed rate hikes, and favorable technical conditions. Valuations are high but not prohibitive, especially when 2024 estimates are considered. There's concern about the gap between equal and capitalization-weighted versions of the SPX on a MTD, QTD, and YTD basis, and some tech stock price action is seen as extreme. We advise investors to focus more on earnings and less on binary macro scenarios. Expectations for Fed rate cuts in H2 could shift towards a hawkish direction. 📊 

🚗 F (Ford), known for their iconic Mustang and their recent foray into electric vehicles, has stuck to their 2023 guidance like glue. There were no unexpected twists or turns in their latest press release - the financial numbers remained as steadfast as a reliable pick-up truck. One key takeaway: Ford is setting its sights on an adjusted EBIT margin of 10% by 2026, splitting that goal into low double digits for Ford Blue, mid-teens for Ford Pro, and around 8% by the end of 2026 for Ford Model e. 👌

💵 JPM (JPMorgan), the Wall Street heavyweight bank, also stayed on course with their 2023 guidance, projecting a Net Interest Income (NII) of $81B and expenses to match. Even when we add First Republic to the mix, we see the same balance - NII is expected to hit ~$84B with expenses reaching $84.5B. No major hiccups here, folks! 🎯

🏦 PACW (PacWest), the LA-based commercial bank, has agreed to sell a portfolio of 74 real estate construction loans (valued at roughly $2.6B) to Kennedy-Wilson. Kennedy-Wilson will also take on all future funding obligations of around $2.7B associated with these loans. It's a hefty financial handshake, to say the least! 🤝

🔬 AMAT (Applied Materials), the unsung hero behind semiconductor tech, has grand plans to build a new research facility in Silicon Valley that's expected to cost up to $4B over seven years. But don't expect the stock to do a happy dance - management already hinted at this on their earnings call last week. 🧪

🌐 META (Meta), aka Facebook's cool new avatar, got slapped with a $1.3B fine from the EU over data transfers to the US. But the market reacted with a collective shrug. Investors seem to be growing a thick skin to these kinds of regulatory hiccups, viewing them more as nuisances than major red flags. 🚩

🚢 ZIM (ZIM Integrated Shipping), the globe-spanning shipping powerhouse, hit some fiscal rough waters in Q1. They rolled into port with a disheartening revenue of $1.374B, which was quite the detour from the $1.589B destination that Wall Street's financial GPS had set. Furthermore, their EBITDA dropped anchor at $373MM, well shy of the $414MM that the analysts had in their logbooks.

And buckle up, because here's where the ride gets a bit choppy: they reported a sharp 63% Y/Y revenue dip. That's a combo punch of volumes being 10% down and pricing taking a nosedive by 64%. Not the kind of splash you want to make, unless you're doing a belly flop contest.

But hang onto your sailor hats, because despite this turbulence, ZIM's management is standing at the helm, steadfastly reaffirming their guidance for the year. They're eyeing a forecast that promises an upswing in demand and an incoming tide of inventory restocking. That's their lighthouse on the horizon, promising to lift freight rates out of the doldrums.

So, they're charting a course for 2023 that targets an adjusted EBITDA in the $1.8B to $2.2B range, and an adjusted EBIT between $100M and $500M. But don't expect any extra wind in your sails: there won't be a Q1 dividend payout for shareholders. Navigate accordingly! ⛵️💰

💾 Micron (MU), the tech titan who keeps your devices' memory sharp, had some thoughts on the current Chinese “critical information infrastructure”. Their vision seems largely clear, with trends playing nicely into the forecasts they shared on their late-March earnings call. They're seeing the data bits grow across both DRAM and NAND, which makes them feel they're edging closer to a period of sequential revenue growth. The supply/demand teeter-totter is tilting toward equilibrium, with signs that industry players are reducing output, and prices are finding solid ground with occasional upticks. When it comes to the recent security kerfuffle in China, they're still connecting the dots. With their sales to China-headquartered companies standing at around 25% of total revenue, they estimate a 2-8% sales hit from a potential "critical information infrastructure" ban, assuming smartphones are excluded. 📊

💼 Chevron (CVX), the old hand in the energy game, is set to purchase PDC Energy (PDCE) in a power move that's seeing stars (or rather, stocks). The deal is all-stock and tallies up to a whopping $7.6B in enterprise value. The PDCE shareholders will find themselves with 0.4638 CVX shares in their pockets once the ink is dry on the papers. ⛽️

💵 Greenhill (GHL), the investment bank with the Midas touch, is being snapped up by Mizuho for a cool $15 per share in cash. That transaction, when all is said and done, will ring the register to the tune of $550MM in enterprise value. 💰

🌯 Wrap for earnings. Have a fantastic day! 🌯

🪄🪄 With Finsights, you get Wall Street wisdom delivered straight to your pocket. Subscribe today and spread the wealth by forwarding this email to a friend who deserves it.

Fin-specto Revelio!