Stock Take 03/08/2021

China calls video games ‘spiritual opium’

Fears of new regulations in China hit the shares of video game providers on Tuesday. The stocks of Activision Blizzard (“Candy Crush”) and Electronic Arts (“Fifa22”) suffered price losses of up to 3.5 per cent. In a Chinese state medium, video games were described as “spiritual opium”. This scared off some investors. Beijing had already tightened the thumbscrews on other tech companies recently.

Activision was also weighed down by the announced departure of the president of its Blizzard Entertainment division, J. Allen Brack. California authorities have sued Activision Blizzard for alleged sexual discrimination, among other things.

Lyft with bigger than expected loss

Ride service provider Lyft has opened its books for the second financial quarter. For the ride service provider Lyft, the second fiscal quarter of 2021 has once again ended in the red. The minus per share was 0.76 US dollars. Analysts had previously expected -0.239 US dollars per share. A year ago, Lyft had still generated negative EPS of 1.41 US dollars.

At the same time, revenues came in at 765 million US dollars, compared to 339.3 million US dollars a year ago. Analysts’ estimates had been 699 US dollars in advance.

Lyft shares nevertheless rose 4.14 per cent to 57.67 US dollars in after-hours NASDAQ trading.

Robinhood share sought after weak IPO

Only last week, the neo-broker Robinhood went public on NASDAQ. Last Thursday, investors were not quite encouraged to buy, but things are already looking much different today.

The Robinhood share has been traded on the US technology exchange NASDAQ since 29 July. At the jump to the stock exchange floor, the share was quoted exactly at the issue price of 38 US dollars and even slipped significantly below it in the further course. The issue price was already at the end of the previously targeted range of 38 to 42 US dollars. 

On Monday, stock market expert Jim Cramer took a closer look at the Robinhood share on his CNBC programme Mad Money. He referred in particular to the app’s existing 22 million users and the further prospects of the business model. Especially the combination of younger investors and their preferences with the current share price level represents an investment opportunity, Cramer said.

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“That’s why I say Robinhood can be bought at current price levels,” the investment expert summarises his assessment. “If Square rallies 10% after the Afterpay deal, imagine what would happen to Robinhood if they acquired someone in the industry – think Affirm. The stock would go up,” he compared it to the Square billion-dollar deal that was announced yesterday.

Slowly but surely, however, investors are showing more and more conviction in the new broker’s paper. In NASDAQ trading, the share gained 24.20 per cent to 46.80 US dollars, leaving even the upper end of the pre-IPO price range far behind.

The competition puts pressure on Alibaba

Similar to its big US competitor Amazon, the growth of the Chinese provider Alibaba has slowed down recently.

Revenues increased by 34 per cent from April to June to just under 206 billion yuan, as the company founded by Jack Ma in 1999 announced on Tuesday. In the previous quarter, the increase was 64 per cent. Chinese shoppers were more likely to go shopping themselves again in the USA instead of ordering online due to the relaxed Corona regulations. In addition, competitors such as JD.Com and Pinduoduo increasingly scored with their online offerings.

Alibaba has recently had to fight headwinds. On the one hand, the $37 billion IPO of the fintech Ant Group, in which the company holds a stake of about one third, was cancelled last year. On the other hand, Chinese authorities are increasingly taking action against monopolies and fined Alibaba billions for anti-competitive behaviour in April. The company’s CEO Daniel Zhang said his company would study the impact of the regulatory changes, which are in flux.

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In addition, the government’s tone sharpened – most recently on Tuesday when it classified online games as spiritual opium. This was a frontal attack on the internet company Tencent, among others. Tencent’s shares fell by 6 per cent in Hong Kong; as a result, extending their decline of the past few days to almost a fifth.

Alibaba is comparable to Amazon in many respects; however, the Chinese do not have a strong cloud division as the US company. This is Amazon’s most important profit driver. Alibaba shares, which are also listed on the US technology exchange Nasdaq, have recently performed significantly worse than Amazon shares on the stock market.

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Alibaba shares fell by 1.33 per cent to 197.43 US dollars in trading on the NYSE.

Under Armour becomes more optimistic again

Sporting goods maker Under Armour raises its full-year targets again due to the continued strong demand for comfortable clothing. Accordingly, the adjusted earnings per share should be between 0.50 and 0.52 US dollars in 2021, as the company announced in Baltimore on Tuesday. Previously, the management had still had 0.28 to 0.30 US dollars per share on the cards. Analysts had expected an increase but were still surprised by the level. This is the second time this year that the competitor of Adidas and Nike has raised its forecast.

Under Armour, shares jumped more than 7 per cent in pre-market trading. The US company was able to almost double its sales in the second quarter to 1.4 billion dollars after the weak quarter of the previous year due to Corona. Here, too, analysts had expected less. The bottom line was a good 59 million dollars after a significant loss a year ago.

On Tuesday trading on the NYSE, Under Armour shares rose by 5.92 per cent to 22.36 US dollars.

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