Here are five things you need to know this morning:
Mishmash: Futures are mixed this morning, with tech poised to rebound. Tech is getting a helping hand from Taiwan Semiconductor (supplier to Nvidia) which reported better-than-expected results and rosier sales outlook driven by… guess what? If you didn’t guess AI by now, it’s time to move out from under that rock. Elsewhere, equity markets have been grappling with delayed rate cut probabilities. March is now a coin toss for the U.S. Federal Reserve. This morning’s jobless claims numbers in the U.S. added to the narrative that the economy is resilient. Jobless claims were the lowest since September 2022.
Blink: Birchcliff finally announced it is cutting its dividend by 50 per cent yesterday. I say finally, because the dividend yield was screaming past 13 per cent with many calling that unsustainable. A dividend cut is not a total surprise, and even with the cut, the yield is still north of seven per cent. These are all moves taken by the new CEO, who took the helm at the beginning of the year. Long-time CEO and founder of the company Jeff Tonken stepped aside and made way for Christopher Carlsen. Natural gas prices have been a sore spot and Birchcliff is famously unhedged. Tonken once said to me, the road to hell is paved with hedging. Instead, the company says they can deal with lower commodity prices through cost cuts. Indeed they said they have the option to cut spending by $80-90 million this year if prices don’t recover. Carlsen took the opportunity as the new guy to make a real kitchen sink announcement. Not only was the dividend cut, the cash flow outlook was reduced and its product forecast was also lowered. Will this be enough for investors to believe Birchcliff is now on a sustainable path? I’ll put that to Christopher Carlsen this morning at 10 a.m. ET. Don’t miss it!
Feed the ducks: I’ll watch the uptake on Dye & Durham’s share sale. The legal software company announced plans to raise $126 million by selling stock at $12.10 per share. That’s about a seven per cent discount to yesterday’s close, but follows a near 70-per-cent rally in the shares since its October low. Clearly taking advantage of the momentum, but even shares at a 12-handle look like a steal considering the stock got as high as $50 per share when tech could do no wrong in 2021.
Apple a day: After a string of downgrades, Apple caught an upgrade by the folks at Bank of America. While most of the downgrades have centred on lacklustre outlook for iPhone sales, Bank of America says the iPhone upgrade cycle is going to be a strong multi-year process. This will be driven by the need for latest hardware to enable generative AI features they expect to be introduced this year or next. But that’s not all. They also see better growth in services side of the business (which makes up 22 per cent of sales), expect more dividends and buybacks and see a buying opportunity because Apple has underperformed its “magnificent seven” peers.
Bull and bear: Shopify was downgraded by BNP Paribas, which is taking a hatchet to a number of tech stocks like Zoom and Adobe, in addition to Shopify. Shopify is a little lower on the downgrade, but an analyst at Barclays increased his price target by nearly $20 per share. Barclays is neutral on the stock but did say channel checks indicate strong customer trends.