A survey of North American equities heading in both directions
On the rise
Shares of Air Canada (AC-T) were higher by 1.6 per cent after it said late Friday that it will cap fares and add more than 6,000 seats in some markets operated by Lynx Air in light of the imminent suspension of operations by the troubled Canadian budget airline.
Air Canada said that the measures would help Lynx Air customers impacted by the shut down of the airline to return home or make alternative arrangements for planned trips.
Calgary-based Lynx Air filed for court protection from creditors on Thursday, and said it would cease operations from Feb. 26 as it grapples with higher operating costs, fuel prices, and airport charges.
According to Cirium, an aviation analytics company, Lynx has 9 Boeing 737 MAX 8 in service and is scheduled to operate 569 flights in February.
Air Canada said the capped fares will be available for purchase before Feb. 26 for travel across Canada up until April 2, to aid travel during the spring break and Easter holiday periods.
Micron Technology (MU-Q) has started mass production of its high-bandwidth memory semiconductors for use in Nvidia’s (NVDA-Q) latest chip for artificial intelligence, sending its shares up on Monday.
The HBM3E (High Bandwidth Memory 3E) will consume 30 per cent less power than rival offerings, Micron said, and could help tap into soaring demand for chips that power generative AI applications.
Nvidia will use the chip in its next-generation H200 graphic processing units, expected to start shipping in the second quarter and overtake the current H100 chip that has powered a massive surge in revenue at the chip designer.
Demand for high-bandwidth memory (HBM) chips, a market led by Nvidia supplier SK Hynix, for use in AI has also raised investor hopes that Micron would be able to weather a slow recovery in its other markets.
HBM is one of Micron’s most profitable products, in part because of the technical complexity involved in its construction.
The company had previously said it expects “several hundred million” dollars of HBM revenue in fiscal 2024 and continued growth in 2025.
Chipmaker Broadcom (AVGO-Q) was higher on news it is selling its business which allows users to access desktops and applications from any device to private equity firm KKR in a deal valued at about US$4-billion.
The end-user computing (EUC) unit will become a standalone company and will continue to be run by its existing management team led by Shankar Iyer, KKR said in a statement.
Reuters first reported the deal on Saturday, citing sources who said KKR prevailed in the auction for the end-user computing (EUC) unit over other private equity firms including EQT.
Broadcom is separately attempting to shed VMware’s security software business Carbon Black.
The US$69-billion VMware deal, which faced several regulatory hurdles, was among the biggest globally when it was announced in May 2022. Broadcom closed the acquisition more than a year later, in November 2023, after receiving regulatory approval in major market China.
The EUC deal marks the latest of KKR’s acquisitions in the technology sector in recent years.
In 2018, it purchased U.S. business software company BMC for US$8.5-billion, and two years later, it combined BMC with Compuware, a company it acquired from buyout firm Thoma Bravo.
Domino’s Pizza (DPZ-N) beat Wall Street targets for quarterly results on Monday as a revamp of its loyalty program and a delivery partnership with Uber Eats boosted appetite for its pizzas and chicken wings, sending its shares up.
After struggling with a sales slowdown in early 2023, the company has rolled out multiple initiatives in recent months including promotions and offering more redeemable points to its loyalty program users, helping it turn the tide and attract more consumers.
The global pizza giant recorded higher customer transactions at its U.S. stores in the fourth quarter.
Domino’s entry into third-party delivery through the national rollout of its partnership with Uber Eats has also helped it capture new customers and swiftly grow its market share.
It already held a 19-per-cent market share among pizza chains on the Uber Eats platform in December, according to research firm M Science.
“The Uber Eats and Domino’s loyalty program revamp are paying immediate dividends. (The Uber Eats partnership) has delivered on its promise,” said Zak Stambor, senior analyst at Insider Intelligence, adding that the two initiatives would continue to power sales throughout the first half of 2024.
U.S. same-store sales at Domino’s rose 2.8 per cent in the quarter, beating a 2.2-per-cent increase estimated by analysts, according to LSEG data.
The company also lifted its quarterly dividend by 25 per cent to US$1.51 per share and announced an additional $1 billion share buyback plan.
Still, like other fast-food majors including McDonald’s (MCD-N) and KFC-parent Yum Brands (YUM-N), which have taken a hit to overseas business amid the conflict in the Middle East, Domino’s international same-store sales growth of 0.1% lagged estimates of about 3%.
Higher wage rates and expenses tied to the loyalty revamp ate into Domino’s U.S. company-owned store-level margins, but lower food costs drove quarterly earnings per share to US$4.48, above estimates of US$4.38.
Amer Sports (AS-N) shares rose on Monday as analysts initiated coverage with largely bullish ratings and highlighted strong demand for the Wilson tennis racquet maker’s premium outdoor and sportswear products in China.
The company returned to public markets on Feb. 1 after selling shares at a discounted price in its U.S. IPO for a valuation of US$6.3-billion. China’s Anta Sports bought the company in 2019.
At least 10 brokerages, including TD Cowen and Bernstein, on Monday rated the stock “outperform” and UBS assigned the highest price target of US$23.
The shares were trading at US$16, giving the company a market value of US$8 -billion, in early trading on Monday, compared with the IPO price of US$13.
“I think Arc’teryx and Salomon are being well received by the market in China. Both brands have been catering to the region with unique in-store experiences, products and campaigns,” Jane Hali & Associates senior analyst Jessica Ramirez said.
TD Cowen expects China to generate 43 per cent of the company’s total incremental sales growth into fiscal 2027. Revenue from China rose about 68 per cent to US$593-million for the nine months ended Sept. 30.
On the decline
Cargojet Inc. (CJT-T) fell over 3 per cent after swing to a loss last quarter as it felt the pinch of falling consumer demand along with rising inflation, leading the firm to cut back on growth plans.
The air freight and plane leasing company reported a net loss of $34.9-million in its fourth quarter versus a profit of $2.6-million in the last three months of 2022, marking Cargojet’s first quarterly loss in nearly two years.
“To say that 2023 was a challenging year for Cargojet would probably be an understatement,” said co-CEO Pauline Dhillon.
She cited higher interest rates, “uncontrolled inflation,” a sputtering economy and a consumer pullback from the splurge on doorstep deliveries during the pandemic as key reasons behind the Mississauga, Ont.-based outfit’s struggles.
The COVID-19-induced spending wave doubled Cargojet’s revenue between 2019 and 2022 and turbocharged its share price to a high that topped $242 in November 2020. However, that same surge in demand soon posed challenges for the company, as “every passenger airline in Canada announced their entry into the dedicated air cargo business,” Dhillon said.
Cargojet’s stock now trades at less than half its 2020 high.
Air Canada and WestJet established fleets of air freighters, rather than simply hauling goods in their passenger planes.
Nonetheless, co-CEO Jamie Porteous said Cargojet sees “no threat” from Canada’s two largest airlines domestically, where it has refocused its efforts after ditching plans to expand internationally with a slate of aircraft aimed at intercontinental trips.
Shares of Vancouver-based gold exploration firm Osino Resources Corp. (OSI-X) finished lower following Sunday’s announcement it will be acquired by China-based Yintai Gold in an all cash deal for $368-million.
Osino will end its $287-million deal with Canadian gold miner Dundee Precious Metals, which was announced in December, and Yintai also will pay a $10-million termination fee for the deal, according to the statement.
“Whilst we were appreciative of the previous offer from DPM, the all-cash offer from Yintai represents a significant premium to the DPM offer price, thus is clearly a superior proposal, and is an excellent outcome for Osino’s shareholders,” Osino CEO Heye Daun said in a statement.
The deal also will help Osino fast-track development of the wholly owned Twin Hills Gold Project in central Namibia.
The deal offers cash consideration of $1.90 for each Osino common share and was approved by the Osino board Special Committee, which recommended it to shareholders, the statement added.
Warren Buffett’s Berkshire Hathaway (BRK.B-N, BRK.A-N) closed down almost 2 per cent after early gains on Monday, slowing its march to US$1-trillion market value on investor worries after the U.S. government warned of a lawsuit against its power company, PacifiCorp.
Berkshire disclosed the risk of a lawsuit against its unit over its alleged failure to cover US$356-million in costs associated with the 2020 Slater wildfire in southern Oregon and northern California.
The investment conglomerate had on Saturday warned that the parent of PacifiCorp and one of Berkshire’s biggest businesses outside insurance, Berkshire Hathaway Energy, was under pressure.
“It will be many years until we know the final tally from BHE’s forest-fire losses and can intelligently make decisions about the desirability of future investments in vulnerable western states,” Mr. Buffett wrote in his annual letter to shareholders.
He also toned down expectations for Berkshire’s share price, saying it did not have many lucrative investment opportunities left, while reassuring investors that biggest financial firm by market value was “built to last.”
The 93-year-old investing legend told shareholders that Berkshire would perform slightly better than the “average American corporation,” but anything beyond that is “wishful thinking,” even though it had a cash pile of US$167.6-billion.
“There remain only a handful of companies in this country capable of truly moving the needle at Berkshire, and they have been endlessly picked over by us and by others... All in all, we have no possibility of eye-popping performance,” Buffett wrote.
Investors closely watch Berkshire as its results are often seen as a bellwether for the U.S. economy.
“While this reads as if Buffett is saying that global equities are fairly valued, the truth is more nuanced than that,” Nicholas Colas, co-founder of DataTrek Research, wrote in a note.
Houston-based Intuitive Machines (LUNR-Q) slumped on Monday after the space exploration firm said its Odysseus moon lander had tipped over and was resting on its side.
The company, which became the first private company to land on the moon and the first from the U.S. since 1972, said that all but one of its six NASA science and technology payloads were facing upwards and receptive to communications.
The payload on its side contains an art piece comprising miniature stainless steel sculptures by artist Jeff Koons, the company said.
The rest of the payloads are expected to carry out their scientific objectives.
Intuitive’s stock fell over 23 per cent to US$7.35 shortly after the opening bell on Monday, more than offsetting the gains on Friday, in which nearly 99 million shares exchanged hands, a record for the stock.
On Friday, the total value of traded shares reached US$1.01-billion, surpassing the company’s market valuation of approximately US$960-million, as per LSEG data.
The company’s shares, which went public about a year ago, are vulnerable to high levels of volatility as only 18 per cent of the stock is available to trade.
The landing could make things easier for other space focused companies - like Rocket Lab, Astra Space and Jeff Bezos’ Blue Origin - seeking investments and stable government contracts.
With files from staff and wires