The last week has been packed with a number of significant and memorable events that have kept investors, political watchers, and the general public on their toes.
After the political spectacle of Donald Trump’s second inauguration, financial markets continued their upward momentum. The S&P 500 reached new all-time highs, reflecting continued optimism and a strong economic outlook in the wake of corporate earnings reports and policy expectations (with Trump actively advocating for the Fed to lower interest rates).
The FTSE 100 also achieved a new milestone, marking a fresh all-time high. The FTSE 250 (perhaps a better barometer of the health of domestic companies), will hopefully get a kick to the upside soon.
In this week’s company news, the FTSE managed to string together two consecutive days without a profit warning (a worryingly rare occurrence that was noticed by Graham). These were a few of the announcements that piqued my interest:
easyJet numbers disappoint
I was surprised by the negative market reaction to easyJet’s Q1 trading update on Wednesday, with shares falling 5% after the forecast for underlying unit revenue to be modestly lower in Q2. easyJet confirmed it remains on track to meet its medium-term target of £1bn pre-tax profit and reiterated its FY expectations of around £709m in PBT. At the current market capitalisation, this implies a forward P/E ratio of less than 5.5. Roland covered the update in more detail here.
Brokers had mixed reactions: UBS maintained a buy rating with a slight target price reduction to 845p from 855p, while Bernstein lowered its price target to 600p from 625p, maintaining a market-perform rating.
Given easyJet's net cash position on its balance sheet, the lack of share buybacks may have disappointed the market, especially as British Airways owner IAG has been more active in this regard. Investor sentiment is definitely in favour of IAG, with its share price more than doubling over the past year.
Next week’s volatility could continue with Ryanair’s earnings report on Monday. Michael O'Leary’s comments often have a notable impact on the entire budget airline sector. Just one to watch out for either way!
Apple trails the Mag7
Warren Buffett’s genius has once again come into focus as Apple's performance has significantly diverged from the other “Magnificent 7” stocks. Buffett’s timing…
