Daily Market Outlook, August 2, 2022

Daily Market Outlook, August 2, 2022 Overnight Headlines Biden Team Tries To Blunt China Rage As Pelosi Heads For Taiwan Chinese Leaders Report GDP Goal Is Guidance, Not A Hard Target Several China’s Warplanes Fly Close To Taiwan Strait Median Line Sec Blinken Dodges Question On US Return To Iran Nuclear Talks Biden, Putin Strike Conciliatory Tones As Nuclear Arms Talks Start Democrats Side Deal With Manchin Would Speed Up Gas Projects US Treasury Raises Quarterly Borrowing Estimate To $444 Billion Japanese Finance Minister Suzuki Frets About Hectic Yen Swings Australia Central Bank Raises Rates 50bp To 1.85%, As Expected UK PM Candidate Truss Lifted By Former Rival Mordaunt Backing Italy Right-Wing Favourites See Room To Revamp Recovery Plan Yen Recovery Continues On Lower US Yields As Markets On EdgeThe Day Ahead Asian equity markets are down sharply this morning. US-Sino relations are in focus as US Congressional leader Pelosi seems set to begin a visit to Taiwan today despite objections from China. She may meet with President Tsai tomorrow. A US National Security spokesperson said that the trip should not be seen as a provocation. However, the Chinese have warned of “grave consequences”. The Australian central bank as expected raised interest rates by 50 basis point the fourth consecutive increase since May. It also said that it was committed to bringing inflation down but that rates were “not on a pre-set path”. There are no major data releases today. However, in the US the June JOLTS survey of job openings and labour market turnover will provide further detail on employment trends. The main monthly report for June that was released a few weeks ago showed employment growth slowing but overall, the message seemed to be that the labour market is still tight. The same message is expected from today’s report. Job openings and turnover are both projected to have slipped but with demand for labour continuing to run ahead of supply. This is important not least because US Federal Reserve policymakers have cited that as evidence the economy is not in recession despite confirmation GDP fell in the first half of 2022. They also remain concerned that labour market tightness may further fuel wage growth. Several Fed policymakers seem likely to touch on those topics in speeches today. A key theme of last week’s Fed monetary policy update, when interest rates were raised again, is that policymakers are still more concerned about inflationary pressures than they are by signs that economic growth has stalled. Today’s speakers seem set to once again strongly emphasise that message. Financial markets in contrast appear increasingly convinced that a sharp slowdown in growth is the bigger risk. So, it will be very interesting to hear to what extent today’s speakers try to push back against that sentiment. Overnight Australian retail sales and the China Caixin services index will provide updates on trends in the Asia-Pacific region. Today’s interest rate rise indicates that the Australian central bank is currently more concerned about inflation but markets will be looking for signs that monetary policy tightening may be raising downside growth risks. Meanwhile, the Caixin comes in the wake of other Chinese PMI outturns for July having disappointed.FX Options Expiring 10am New York Cut EUR/USD: 1.0240 (556M) EUR/GBP: 0.8645 (481M), 0.8660-65 (592M) AUD/USD: 0.7160 (641M). NZD/USD: (380M)Technical & Trade ViewsEURUSD Bias: Bearish below 1.0350 Pelosi inspired geopolitical fears adding to global growth worries Asia was risk-off and resulted in EUR/JPY selling at various stages It also weighed on US yields, which helped to underpin the EUR/USD Resistance 1.0250/60 stronger offers seen to 1.0350/60, support 1.0100-05, 1.0070-75 20 Day VWAP is bullish, 5 Day bullishGBPUSD Bias: Bearish below 1.2280 Steady in a 1.2212-1.2279 Asian range, off its best levels as LDN starts Risk off, awaiting China response to Pelosi Taiwan visit BoE rate decision Thursday; 50 bps hike is consensus forecast Offers sited at 1.2280/1.23 bids 1.2090 20 Day VWAP is bullish, 5 Day bullishUSDJPY Bias: Bearish below 134 Japanese importers nowhere to be seen, biding time awaiting lower levels Japan FinMin Suzuki jaw-boning Suzuki again warned of rapid FX moves, this time to downside Drop defusing implications of ccy manipulation, purposely weakening JPY Bears target a test of 130 Offers seen at 134 20 Day VWAP is bearish, 5 Day bearishAUDUSD Bias: Bearish below .7050 RBA statement similar to the July's and signals more tightening to come There weren't any hawkish surprises, but RBA retaining hawkish bias AUD/USD was under pressure earlier on heavy AUD/JPY selling out of Tokyo Risk-off mood prevailed in Asia with the AXJ index falling over 1.5% Geopolitical fears on Pelosi's Taiwan visit adding to global growth concerns With RBA decision out of the way, AUD/USD will be driven by external factors Offer at .70 being eroded as price is accepted above .70 bulls target .71 test AUD/USD support now sited at .6890 20 Day VWAP is bullish, 5 Day bearishBTCUSD Bias: Bearish below 25.3K BTC sub 23k Risk aversion underway, largely due to US-China tensions US Speaker Pelosi expected to visit Taiwan Tues... Potential for aggressive China reaction spooks stocks Bulls need a close above 25k to gain significant upside momentum Closing below 21k would be a noteworthy downside development 20 Day VWAP is bullish, 5 Day bearish

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Market Update – August 2 – Pelosi Taiwan Visit Saps Sentiment

USDIndex sinks again to 105.00, dragged lower by falling Yields (10yr -2.88% to 2.54%). US Stocks lower following record July. HSBC +6.5% Boeing +5.96% Pearson +12.66% BBBY +14.77%. Asian markets pressured lower by Pelosi’s proposed visit to Taiwan and China promising “countermeasures” including “military actions”. (Hang Seng -2.68%, Nikkei -1.44%). European FUTS also lower. (-0.6%).  Oil tanks under $93, Gold spiked to  $1780  and BTC down under $23k.

RBA raised rates 50bp, as expected, (3rd consecutive month & fastest rate hike cycle since 1994) – BUT cools forward guidance will raise rates in months ahead, but adds “not on a pre-set path” #AUDUSD falls from 0.7030, to 0.6950, AUDJPY -1.66%.

Biden announces US have killed head of Al-Qaeda, Zawahiri in Kabul drone strike.

• USDIndex weakens further to test under 105.00 now. YEN & CHF outperform again in Asian session.
• Equities – USA500 closed lower -11.66pts (-0.28%) (4118), US500FUTS at 4100 now.  4175 remains next key resistance 
• Yields 10-year yield dived into close 2.60%, down again to 2.54% now. 
• Oil – tanked to $93.00 from $101.80 highs on Friday. 
• Gold – spiked to $1780 before cooling to $1773 now. Support at $1770 & $1766.
• Bitcoin also weaker USD to trade at $22.8K now, from as high as $24.4K. 
• FX Markets – EURUSD rallied to test 1.0300 zone, USDJPY dived under 131.00 to 130.40 lows. Cable holds over 1.2200 and tests key 1.2260 resistance area.   

Overnight – AUD Building Approvals better than expected (-0.7% vs. -5.3%), Commodity prices lower (14.1% vs. 24.3%) UK House inflation a tick lower at 0.1% m/m. 

Today – Canadian Manufacturing PMI, New Zealand Unemployment, US NY Fed Household Debt & Credit Report, Speeches from Fed’s Bullard, Evans & Mester. Earnings BP (out – EPS exceed by +26%), CAT, UBER, AirBnB, AMD, PayPal, Starbucks, Gilead, Marriott.

Biggest FX Mover @ (06:30 GMT) AUDJPY (-1.66%). Dovish RBA and Taiwan tensions hit the key most risk sensitive pair. Collapses from 92.500 to 90.75 lows. MAs aligned lower, MACD histogram negative & falling, RSI 22.5, OS & falling,  H1 ATR 0.294, Daily ATR 1.198.

 

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Stuart Cowell

Head Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

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Soybean Futures (ZS1!), H4 Potential For Bullish Rise

Type: Bullish RiseKey Levels:Resistance: 1508'4Pivot: 1400'4Support:Preferred Case:On the H4, with prices moving above the ichimoku indicator and broken out of the descending trendline , we have a bullish bias that price will rise from the pivot at 1438'6 where the pullback support and 23.6% fibonacci retracement are to the 1st resistance at 1508'4 where the swing high resistance is.Alternative Scenario:Alternatively, price could break pivot structure and drop to the 1st support at 1400'4 where the pullback support, 38.2% fibonacci retracement and 78.6% fibonacci projection are.Fundamentals:Since Russia and Ukraine are major exporter of agriculture goods, their persistent war will lead to a shortage of agricultural goods and give us a bullish bias for soybean .

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/soybean-futures-zs1-h4-potential-for-bullish-rise"
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Are we heading for a commercial property crash?

The pandemic has reduced the demand for office spaces and permanently changed the office environment. But John Stepek says rising interest rates are a bigger threat to commercial property right now.

from Moneyweek RSS Feed https://moneyweek.com/investments/alternative-investments/605177/are-we-heading-for-a-commercial-property-crash
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BTCUSD, H4 | Potential Bullish Continuation

Type: Bullish BreakoutKey Levels:Resistance: 26097.86Pivot: 24267.52Support: 22482.7Preferred Case:On the H4, with price moving within a bullish channel and above the ichimoku indicator, we have a bullish bias that price might rise to our pivot at 24267.52 where the pullback resistance is. Once there is upside confirmation of price breaking pivot structure, we would expect bullish momentum to carry price to 1st resistance at 26097.86 where the 161.8% fibonacci extension and 100% fibonacci projection are.Alternative Scenario:Alternatively, price could drop to 1st support at 22482.7 where the pullback support, 50% fibonacci retracement and 61.8% fibonacci projection are.

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Market Update – August 1

1st day of the month – Fears over slowing growth and expectations for moderation in Fed rate hikes overshadowed still hot inflation prints. 

USDIndex sinks again to 105.50, while against Yen extedned to 6-week lows, i.e. 131.96. US data out Friday showed stubbornly high inflation and wages growth. Corporate earnings have mostly beaten lowered forecasts. The China PMI reports that flagged risks to the overall outlook as the country’s zero-Covid policy continues to bite as they missed miserably. Hong Kong’s benchmark underperformed and lost -0.2%. US Stocks are steady . Nikkei and ASX gained 0.6% and 0.7%, GER40 and UK100 futures.

Overnight: China’s property developers in focus and Alibaba still weighed down after the US included the company in the delisting watchlist.Evegrande fails to deliver  a restructurong plan; Alibaba added to SEC List of Chinese Firms Facing Delisting, alogn with another 200 companies. German Retail Sales plunged -1.6% m/m in June –  flags ongoing cost pressures that coupled with the threat of energy rationing means recession risks are palpable now. HSBC posted a higher profitability target and bullish dividends outlook.

• USDIndex weakens & YEN outperforms.
• Equities – USA500 closed higher +48.8 pts (+1.21%) (4072), US500FUTS at 4105 now. Fed’s Kashkari affirmed the bank’s commitment to bring inflation down, which acted as a reminder that the Fed will continue to hike rates, even if the path of the tightening cycle may not be quite as aggressive as markets had feared at one point. 
• Yields 10-year Treasury rate lifted 1.6 bp to 2.665. (after sliding to the lowest since early April at 2.618% at the end of last week)
• Oil – drifted back to 97.60, as  OPEC+ meeting is on Thusday and expected to produced an increase in supply, even if only minor.
• Gold – steady at 2-week highs at  $1764.
• Bitcoin at 23,170.
• FX Markets – Yen remains the main beneficiary of the correction in haven flows into the USD and USDJPY slipped to 131.96. The USDCHF also caught a bid,i.e. 0.9500 and Sterling rose against both USD and EUR – with GBPUSD now at 1.2196, while EURUSD is lingering at 1.0240.

Today – UK, Australian central banks expected to hike this week, while is NFP week as well.

Biggest FX Mover @ (06:30 GMT) USDJPY (-0.79%). Broke 132.00 low. 1Hour-MAs flattened, but MACD histogram negative & falling, RSI sideways 34.50. H1 ATR 0.305, Daily ATR 1.354.

 

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Andria Pichidi

Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

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Daily Market Outlook, August 1, 2022

Daily Market Outlook, August 1, 2022 Overnight Headlines Fed’s Kashkari: Fed Committed To Slowing Inflation To 2% Goal BoE Set To Consider Biggest Rate Rise For More Than 25 Years Biden’s Covid ‘Rebound’ Case Keeps Him At White House Again House Speaker Pelosi Begins Asia Tour, No Mention Of Taiwan Midterm Misery For Biden As Vital Gauge Signals 30-Seat Loss China’s Rebound Remains Fragile As Factories, Property Slump China July Home Sales Plunge, Mortgage Revolt Deters Buyers Japan's Factory Activity Growth Slows As New Orders Contract Australia’s Aggressive Policy Tightening To Weigh On Economy Goldman Signals 25% Australia Recession Odds, 30-35% In NZ UK’s Sunak Vows 20% Cut To Income Tax Within Seven Years Lufthansa Faces More Turmoil As Pilots Back Possible StrikesThe Day Ahead Asian equity markets are generally up this morning. However, US equity futures are down following hawkish comments from some US Federal Reserve policymakers that highlighted their concerns about ongoing inflationary pressures. Official China PMI data for manufacturing and non-manufacturing both slipped in July and the manufacturing fell back below the key 50-contraction level. China’s unofficial Caixin PMI for manufacturing also declined by more than expected. This morning’s Eurozone and UK July manufacturing PMIs are final estimates, although we will get the first readings for Italy and Spain. The final PMIs are expected to confirm earlier ‘flash’ estimates. The Eurozone survey was particularly weak with the composite index dropping to 49.4, the first sub-50 reading since early 2021, reflecting a contraction in manufacturing and fading pent-up demand for services. In the UK, the composite PMI held above the 50-mark but softened to 52.8, a seventeen-month low, and the future output index pointed to further losses of momentum in the coming twelve months. Inflationary pressures remained elevated, but the price indices hinted at near-term peaks. A key parallel across both the Eurozone and UK ‘flash’ surveys for July was the further moderation in new manufacturing orders, which were down for a second- and third-consecutive month in the UK and Eurozone, respectively. On a more positive note, falls in both the composite input cost and prices charged indices pointed to some cooling in inflationary pressures across both economies. In the US, alongside the ‘final’ reading of the July manufacturing PMI report, the more widely watched manufacturing ISM survey will be released. In keeping with the slippage seen in the former, the latter is expected to record a decline in the headline index, from 53.0 to 52.5, which would be the weakest since June 2020. Ahead of Thursday’s policy announcement from the Bank of England, the Reserve Bank of Australia (RBA) delivers its latest policy update early tomorrow morning. Expectations are centred on the RBA hiking interest rates by 50bp for the third successive meeting. At one-point markets were expecting a 75bp rise but this was cut after inflation picked up by less than expected in Q2. Nevertheless, the larger move cannot be ruled out.CFTC Data IMM: USD long position drops on CAD and GBP buying; JPY largest net short USD spec long position pared in Jul 20-26 period $IDX +0.58% EUR$ -1.35% in period, specs +1,161 contracts now short 41,584 Yen specs -2,256 contract in yen strength, short grows to 61,481 contracts GBP specs +3,260 contracts now -53,990; GBP +0.41% in period pre-Aug 4 MPC CAD specs +9,102 contracts, AUD specs -4,237 BTC specs +385 contracts now short 121 On net USD basis JPY short pulls slightly ahead of EUR short Yen specs long $5.6bn, EUR long $5.3bn, GBP in 3rd place specs long $4.1bn Source: Reuters DataFX Options Expiring 10am New York Cut EUR/USD: 1.0100 (647M), 1.0125 (496M), 1.0200 (698M), 1.0250 (650M) EUR/USD: 1.0275 (411M), 1.0300 (958M). GBP/USD: 1.2125 (617M) EUR/GBP: 0.8325 (482M), 0.8535 (352M)Technical & Trade ViewsEURUSD Bias: Bearish below 1.0350 Quiet start after small gain on Friday EUR/USD eked out a 0.29% gain Friday after a whippy session Risk rally and lower US yields helped to underpin EUR/USD EUR/USD remains in consolidation mode and isn't trending in short-term Resistance 1.0250/60 stronger offers seen to 1.0350/60, support 1.0100-05, 1.0070-75 20 Day VWAP is bullish, 5 Day bullishGBPUSD Bias: Bearish below 1.2280 UK's Truss gets the backing of several senior MPs for PM Truss looks set to be the next UK PM - markets will likely be cautious CBI survey expects zero UK growth for the next 3 months Surging UK cost of living to hit domestic spending in the third quarter Offers sited at 1.2280/1.23 bids 1.2090 20 Day VWAP is bullish, 5 Day bullishUSDJPY Bias: Bearish below 134 USD/JPY plunge late last week persists into the new month Plenty JPY shorts forced to cover on move down from 137.45 on July 27 Japanese importer demand again eyed in Tokyo on big move down Some option expiries in area - 132.75-85 $400 mln, 133.00 $300 mln Also above 132.50 $283 mln, 134.00 $393 mln, nothing massive in area Eyes still on US yields, short-end saw bounce Friday, long-end easier Newly minted bears target a test of 130 Offers seen at 134 20 Day VWAP is bearish, 5 Day bearishAUDUSD Bias: Bearish below .7050 AUD/USD recovers from China data disappointment, rising Sino-U.S. tensions China's factory activity contracts unexpectedly in July as COVID flares up July official services PMI grows at slower pace U.S.-China tensions weigh as Pelosi begins Asia tour Tempering of aggressive Fed rate hikes expectations may limit downside RBA meeting Tuesday in focus, 50bps rate hike widely expected Offer at .70 being eroded as price is accepted above .70 bulls target .71 test AUD/USD support now sited at .6950/40 20 Day VWAP is bullish, 5 Day bullishBTCUSD Bias: Bearish below 25.3K Range bound around the 23,300 level and Ethereum also eked mild gains but failed to hold above 1,700 Southeast Asia-focused crypto exchange Zipmex filed for bankruptcy protection Crypto assets need new rights in law, UK legal body says Bulls need a close above 25k to gain significant upside momentum Closing below 21k will be a noteworthy downside development 20 Day VWAP is bullish, 5 Day bearish

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Bitcoin is on the Rise

Bitcoin has already tested the flag. The asset currently remains at the broken level of 23,500. Bitcoin is likely to hit the level of 25,500 next.Oil hasn’t managed to form the reversal pattern, pulling back from the resistance level of 107.50. The asset has dropped to the level of 100. Oil is likely to pull back from the psychological resistance at the level of 100 and head north.The currency pair EUR/USD has tested the level of 1.0000. The asset is heading north, gradually approaching the level of 1.0400. This level serves as a crossing point for the middle point of the range and downtrend, away from which the currency pair might potentially pull and drop. So, let’s wait and see what is about to happen next.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/bitcoin-is-on-the-rise-01-08-2022"
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Starbucks: FR 50.0% in focus ahead of Earnings Release

The world’s largest coffeehouse chain committed to being the premier roaster and retailer of specialty coffee – Starbucks – is scheduled to report its Q3 2022 financial results this Tuesday (2^nd August), after market close.

Fig.1: Reported Sales and EPS versus Analyst Forecast for Starbucks.

Source： money.cnn

In the previous quarter, Starbucks sales aligned with consensus estimates at $7.6B, however earnings per share (EPS) underperformed at only $0.59, below analysts expectation by nearly -30%. Both sales and EPS were down -6.17% and -18.06% respectively compared to those in Q1 2022. The disappointing results were mainly weighed down by an international shrinkage in sales especially in China, the company’s second-largest market, in which a resurgence of the coronavirus and new lockdowns caused a temporary closing of stores.

The catastrophe may not end very soon. Recently reimposed Covid restrictions by the Chinese government in pursuit of its ‘zero Covid’ policy have presented more challenges for hospitality businesses including Starbucks. The management’s aim to reach 6,000 stores (currently over 5,400) in China by the end of this year is now in doubt due to various uncertainties.  Comparatively, US stores performed much better, with sales +12% versus international comparable store sales at -8%. Active membership of the Starbucks loyalty program in the US also reported an increase of 17% to 26.7 million customers in the second quarter.

Consensus estimates towards sales in Q3 remains positive, at $8.1B, up 6.58% (q/q) and 8% (y/y), while EPS is expected to hit $0.77, up over 30% from the previous quarter, but slightly down -23.77% from the same quarter last year. Besides the existing unfavorable macroeconomic factors (Fed rate hike, recession risk, supply chain issues, competitors, etc), recent issues related to safety concerns which have led to closure of 16 stores in the US may serve as a headwind for the coffee conglomerate in the near future. The management responded to the issue earlier by stating a few measures to implement, including doubling the hours of training in conflict de-escalation (disruptive patrons (usually those who are homeless and/or suffering from mental health issues), drugs abuse in the bathrooms, smashed windows), evaluation of modifying operations to align with new safety goals, implementation of the Starbucks Outreach Worker Program to embed social workers in stores with high level challenges, etc.

Technical Analysis: 

The #Starbucks share price managed to lift off its recent lows ($68.37), with gains nearly 24%.  FR 50.0% (extended from 15^th March 2020 lows to 18^th July 2021 highs) at $88.16, or median estimates of analysts at $89 serve as the nearest resistance to watch. Breaking above these levels may bring the bulls towards testing the next resistance at $97.16, the 100-Weekly SMA, and $108.30. Otherwise, $79.15 serves as the nearest support. A close below this level may encourage more downward pressures, into testing the next support at $66.33 and psychological level at $60. OsMA value: 2.3858; RSI: 48.53; Stochastics: above 80 (overbought).

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Larince Zhang

Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

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Three “billionaire” stocks to give your portfolio a boost

Samed Bouaynaya of the Global Billionaires Fund picks three diverse global stocks that are overseen and guided by billionaire owners.

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Jennifer Lopez: the American dream on steroids

Jennifer Lopez built a business empire on top of an entertainment career, thereby paving the way for the likes of Reese Witherspoon and Gwyneth Paltrow.

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EU Inflation Breaks to a New High, Driving Higher Recession Risks

Annual inflation in the Eurozone in July accelerated to 8.9%, showed a report released on Friday. This is a new all-time high. In June, inflation was 8.6% and in May, 8.1%.Inflation in the Eurozone has been breaking the record for the ninth month in a row. In July, it beat consensus of 8.6% and was well above the target of 2% set by the European Central Bank.The main driver of inflation this month was rising energy prices due to Russia's operation in Ukraine. However, the rise in prices also affected food and services, which indicates a broadening of inflation from energy to other goods and services.Core inflation, which excludes energy and food, slowed growth in June but jumped to a record 5% in July, according to Eurostat data.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/eu-inflation-breaks-to-a-new-high-driving-higher-recession-risks"
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Why Big Tech’s move into medicine is a mistake

The big tech companies have long wanted a slice of the medical action, and now they are moving in. They are making a big mistake and will fae a huge backlash, says Matthew Lynn.

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PayPal: Estimated Q2 Revenue and Share Price Projection

PYPL.s

Fintech giant PayPal Holdings, Inc. is expected to report earnings for the fiscal quarter ending June 2022, on Tuesday (02/08), after market close. The company projects year-on-year revenue growth of 9% at current and currency-neutral spot rates for Q2. The Zacks Consensus forecast for revenue was pegged at $6.76 billion, representing an 8.3% increase from the figure reported in the previous year’s quarter.

PayPal reported non-GAAP earnings of 88 cents per share in Q1 2022, down 28% y/y and 20.7% from the previous quarter. Net revenue of $6.5 billion represents growth y/y of 8% on an FX-neutral basis and 7% on a report basis. Venmo’s strong performance is another positive. Total payout volume (TPV) growth, thanks to a net increase in new active accounts, is driving results.

PayPal projects non-GAAP earnings of 86 cents per share. The Zacks Consensus forecast for earnings is pegged at 85 cents per share, representing a 26.09% decline from the figure reported last year. Furthermore, the figure has moved down 1.2% over the past 30 days. Based on 15 analyst estimates, the consensus EPS forecast for the quarter is $0.54. The reported EPS for the same quarter last year was $0.88.

PayPal Holdings, Inc. price-eps-surprise | PayPal Holdings, Inc. Quote

PayPal’s continued efforts to strengthen its product portfolio may have helped the company gain traction among customers in Q2. It has introduced three new products which are expected to have a positive impact on quarterly performance: The PayPal Cashback credit card, issued by Synchrony, offers unlimited 3% cash back when paying with PayPal at checkout and unlimited 2% cash back on all other purchases wherever Mastercard is accepted; The PayPal business credit card, Business Cashback Mastercard, offers 2% cashback on all purchases, and PayPal Pay Monthly, a buy now pay later solution, which allows customers to divide the total cost of goods purchased into monthly payments.

https://investor.pypl.com/home/default.aspx

In general, total payment volume (TPV), active customer accounts, payment transactions per active account, and total number of payment transactions are often considered the main metrics for analyzing PayPal’s business growth.

For Q2, the Zacks Consensus pegged the TPV at $345.01 billion, representing 10.9% year-on-year growth. Active customer accounts are pegged at 433 million, up 7.4% from the figure reported in last year’s quarter. Payment transactions per active account are pegged at 48.69 million, representing an 11.9% growth from the amount reported in last year’s quarter. The total number of payment transactions was pinned at 5.5 billion, representing a 16.5% increase from the figure reported in the previous year’s quarter. Zacks ranks the stock at position #3 (Hold). ¹)

However, the company’s weakening momentum in the international market is expected to be a hindrance. The impact of uncertainty regarding the ongoing coronavirus pandemic and foreign exchange headwinds is likely to be reflected in Q2 results this time around. Investors are concerned that the market may experience a downturn in e-commerce transactions for now, as the world shifts to live shopping. However, PayPal’s growing scale of operations, the addition of Venmo and its somewhat interesting valuation present prospects for the future as digital payments adoption in the long term will continue to grow. Q2 performance is likely to benefit from the strength of the Venmo product line, which is expected to continue to aid customer engagement on the PayPal platform. The company’s CEO highlighted the importance of Venmo by saying that it is an area of growth that PayPal needs to focus on. This is expected to have helped the growth of total active accounts in the quarter under review.

An interesting aspect of Venmo is the partnership between Amazon and PayPal. The collaboration between the two companies will allow customers to check out on Amazon using the Venmo app. This means the Venmo app will be exposed to Amazon’s large customer base, which represents a substantial increase in active users for Venmo. These partnerships may have little impact at the moment, but they could be profitable in the long run and be a significant growth driver for the company.

Technical Overview

#Paypal prices have slumped more than -72% in the last 12 months, due to macroeconomic challenges. The decline matched the December 2017 low (68.11) at the end of June, recording a low of 67.55. And in July, it also recorded a low of 68.50 and formed a double bottom before rebounding upwards.

#Paypal,Daily

The current price position is below the 89.30 resistance. A break of this level will confirm the ongoing rebound. The impetus from a better-than-expected earnings report could pump up the upside to test the 122.78 resistance and the 200-day EMA. The price is currently above the 26-day and 52-day EMAs with daily oscillations in the buy zone and bullish divergence clearly visible. Given the end of the month, some short term liquidation is also possible, if the minor resistance at 89.30 is not broken.

In addition, several equity research analysts recently issued reports on PayPal’s price projections.

https://www.tipranks.com/stocks/pypl/forecast

Equity analysts at Oppenheimer lowered their Q2 2022 earnings per share estimate for PayPal. They forecast that the credit service provider would post earnings per share of $0.50 for the quarter, down from their previous estimate of $0.56, and outperform with a target price of $101.00 on the stock. The consensus estimate for PayPal’s current full-year earnings is $2.56 per share. In addition to Oppenheimer, Morgan Stanley lowered its price target from $137.00 to $129.00 and assigned the company an “overweight” rating. Barclays lowered its target price from $200.00 to $125.00. Truist Financial lowered its target price from $85.00 to $80.00 and assigned a “hold” rating to PayPal. Based on data from MarketBeat, PayPal has a consensus rating of “Moderate Buy” and a median target price of $143.12.² TipRanks, based on 22 Wall Street analysts offering 12-month price targets for Paypal Holdings in the last 3 months, gives an average price target of $106.11 with a forecast high of $145.00 and a forecast low of $75.00. The average price target represents a 24.66% change from the last price of $85.12.³

.¹). Zack ²). Marketbeat ³).Tipranks

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Ady Phangestu

Market Analyst – HF Educational Office – Indonesia

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