A survey of North American equities heading in both directions
On the rise
Lightspeed Commerce Inc. (LSPD-T) rose 4.5 per cent in response to the news it is officially up for sale, the latest in a series of Canadian tech companies to consider going private following a stock market slump after pandemic restrictions were lifted.
The board of the Montreal-based point-of-sale software vendor has hired U.S.-based investment bank JP Morgan Chase & Co. to run a strategic review of the business that includes a potential sale to a rival tech company or private equity fund, according to a source familiar with the situation.
Reaction from the Street: Thursday's analyst upgrades and downgrades
Lightspeed is in the early stages of the strategic review and there are no assurances the company will be sold, the source said. The Globe and Mail agreed not to name the source because they are not permitted to speak for the company. Reuters first reported that Lightspeed is up for sale.
On Wednesday, Lightspeed’s Toronto Stock Exchange-listed shares jumped and closed up by 13 per cent on news of a possible takeover. The company’s market capitalization is $3.2-billion. Lightspeed sells transaction software to retailers, restaurants, golf courses and hotels.
The company is in the midst of a strategic shift, after the board replaced chief executive officer Jean Paul Chauvet in February with founder and former chief executive officer Dax Dasilva. After retaking control, Mr. Dasilva moved to increase Lightspeed’s sales at a sharper pace while still maintaining a commitment to improve its bottom line.
- Andrew Willis and Sean Silcoff
National Bank of Canada (NA-T) gained 0.6 per cent after saying it has cleared a key regulatory hurdle in its proposed acquisition of Canadian Western Bank (CWB-T).
The Montreal-based bank says it has received the Competition Bureau’s clearance for the deal.
The transaction still requires approval by the Office of the Superintendent of Financial Institutions and the minister of finance.
Canadian Western shareholders voted to approve the deal earlier this month.
National Bank announced an all-stock deal to buy Canadian Western earlier this year in a proposal that valued the Edmonton-based bank at about $5 billion.
It has said its acquisition of Canadian Western will significantly expand its western footprint and create a stronger national competitor.
Toronto-Dominion Bank (TD-T) increased 0.6 per cent after it named Andy Bregenzer and Jill Gateman as co-heads of its U.S. commercial banking business, replacing Chris Giamo, who retired earlier this year.
The appointments come as Canada’s second-biggest lender shakes up its top management in preparation for expected U.S. fines stemming from regulatory scrutiny of its anti-money laundering protocols.
Last week, TD announced CEO Bharat Masrani will leave the bank next year and hand over the top job to Ray Chun, the head of its Canadian banking unit.
The bank reported its first loss in decades in August after earmarking $2.6-billion to cover the potentially hefty penalties.
The U.S. regulatory probes relate to allegations that Chinese drug traffickers used the bank to launder at least $650-million from 2016 through 2021, and an employee took a bribe to facilitate laundering of drug money.
These regulatory probes come on the heels of TD Bank’s termination of its $13.4-billion acquisition of Tennessee-based First Horizon in May 2023, a deal that would have significantly expanded its network in the Southwestern United States.
Mr. Bregenzer, a nearly 30-year industry veteran, has been with TD for two decades. In his new role, he will focus on the regional commercial banks, including small businesses, in the U.S.
Ms. Gateman will lead TD’s national commercial banking effort in the country and continue to partner with TD Securities and TD Cowen to deliver advisory and investment banking services to its commercial banking clients.
Ms. Gateman joined the Canadian lender in 2023 to lead its middle-market, asset-based and sponsor-backed finance business segments.
Last week, TD announced CEO Bharat Masrani will leave the bank next year and hand over the top job to Ray Chun, the head of its Canadian banking unit.
The bank reported its first loss in decades in August after earmarking $2.6-billion to cover the potentially hefty penalties.
The U.S. regulatory probes relate to allegations that Chinese drug traffickers used the bank to launder at least $650-million from 2016 through 2021, and an employee took a bribe to facilitate laundering of drug money.
These regulatory probes come on the heels of TD Bank’s termination of its $13.4-billion acquisition of Tennessee-based First Horizon in May 2023, a deal that would have significantly expanded its network in the Southwestern United States.
Mr. Bregenzer, a nearly 30-year industry veteran, has been with TD for two decades. In his new role, he will focus on the regional commercial banks, including small businesses, in the U.S.
Ms. Gateman will lead TD’s national commercial banking effort in the country and continue to partner with TD Securities and TD Cowen to deliver advisory and investment banking services to its commercial banking clients.
Ms. Gateman joined the Canadian lender in 2023 to lead its middle-market, asset-based and sponsor-backed finance business segments.
Micron Technology (MU-Q) surged 14.7 per cent on Thursday, leading a rally in chip stocks after its strong revenue forecast signaled robust demand for semiconductors used to power generative AI technology.
The company, whose high-bandwidth memory chips (HBM) are used in Nvidia’s popular artificial intelligence processors, was set to add more than US$17.5-billion to its market value.
Strong demand for HBM chips has helped Micron offset inventory buildups in other areas such as the personal computer market.
The company delivered its best quarterly revenue growth in a decade in the fourth quarter ended Aug. 29 and its forecast for the current period was widely above Wall Street estimates.
Shares of Nvidia (NVDA-Q), Intel (INTC-Q) and Broadcom (AVGO-Q) gave up earlier gains of more than 2 per cent to trade only slightly higher.
Qualcomm (QCOM-Q) and AMD (AMD-Q) were also up. The Philadelphia Semiconductor Index trimmed its gains to trade 2 per cent higher, after rising more than 4 per cent earlier in the day.
“The firm (Micron) benefits from a broad and strong up-cycle in memory chip demand, aided by AI-related demand,” Morningstar analysts said in a note.
Strong pricing for HBM chips is expected to help Micron’s gross margins, which were earlier pressured by an expensive ramp-up of its HBM manufacturing capacity.
The company said it expects adjusted gross margin of about 39.5 per cent for the first quarter ending November, compared to estimates of 37.7 per cent.
North American miners, including Hudbay Minerals Inc. (HBM-T), First Quantum Minerals Ltd. (FM-T) and Teck Resources Inc. (TECK.B-T), surged after China vowed to offer “necessary fiscal spending” to meet an economic growth target after its central bank’s aggressive policy easing measures earlier in the week.
“Chinese stimulus measures increasingly look like a comprehensive package. Earlier this week there were rate cuts and macro prudential measures, now they are talking about adding a fiscal stimulus which every economist was saying was the missing link,” said Yvan Mamalet, senior economist and strategist at Kleinwort Hambros.
Reuters reported separately that China plans to issue special sovereign bonds worth about 2 trillion yuan (US$284-billion) this year primarily to stimulate consumption.
The materials sector came under focus as gold prices edged higher on mounting expectations of another U.S. rate cut this year. Copper prices rose on more stimulus hopes from China.
The optimism also spread to U.S.-listed Chinese firms, including Alibaba (BABA-N), Li Auto (LI-Q) and JD.com (JD-Q).
Southwest Airlines (LUV-N) jumped after it unveiled a slew of measures including partnerships with international carriers, vacation packages, and sale-and-leaseback transactions of aircraft to turn around its business and boost profit margins.
The initiatives came as the U.S. carrier faces pressure from an activist investor to shake up its management.
Southwest said the measures would help produce at least a 10-per-cent operating margin, 15-per-cent return on its invested capital and more than US$1-billion in free cash flow by 2027. It also announced a new US$2.5-billion share buyback program.
The pioneering low-cost airline once boasted a record 47 consecutive years of profit before the COVID-19 pandemic. But aircraft delivery delays by planemaker Boeing’s, excess capacity in the domestic airline industry and post-pandemic travel patterns have all combined to depress earnings.
Its passenger volumes are running below pre-pandemic levels and shares have lost about 40 per cent of their value in the past three years. It has downgraded its outlook at least eight times in the past 20 months despite booming travel demand and analysts expect profit in 2024 to plunge about 83 per cent from a year ago.
As investors and analysts gather in Dallas on Thursday for Southwest’s first public investor meeting since 2022, they want a credible strategy and timeline to restore its long-term profitability.
The stakes are high. Activist investor Elliott Investment Management has launched a campaign to oust CEO Bob Jordan and replace two-thirds of Southwest’s board of directors, blaming them for the airline’s underperformance. Elliott plans to request a special shareholder meeting as soon as next week to force the changes.
IT services major Accenture (ACN-N) unveiled a US$4-billion share buyback on Thursday, closing the fourth quarter with better-than-expected results thanks to strong demand for its services that help businesses adopt generative AI technology.
Accenture’s generative AI business has been outpacing the growth in its other core businesses, as organizations look for automation to curtail costs and improve efficiency.
Generative AI bookings have shown robust quarter-on-quarter acceleration for the past four quarters, reaching a total of US$3-billion for the year.
Shares of Accenture rose on Thursday, rebounding from a near 4-per-cent decline over the year. The tech-heavy Nasdaq , on the other hand, rose 20.4 per cent this year.
Excluding items, the company earned US$2.79 per share, beating estimates of US$2.78 per share, according to LSEG data.
However, the company’s forecast for growth between 3 per cent and 6 per cent missed the midpoint of the analysts’ average estimate of 5.9% growth.
While analysts expect a turnaround in IT services, the expectations for next year remain modest. Analysts at JP Morgan earlier said they were not as bullish for the sector as they were this time last year, adding that clients will continue to withhold discretionary spending on projects.
Ahead of Accenture’s results, Morgan Stanley said that overall IT services demand will likely be generally slower than expected in the coming quarters.
Indian IT services company Tata Consultancy Services slightly beat its first-quarter revenue estimates and said it is “too early” to predict sustained growth in future quarters.
On the decline
The U.S. Department of Justice is investigating Super Micro Computer (SMCI-Q), the Wall Street Journal reported on Thursday, nearly a month after short-seller Hindenburg Research alleged “accounting manipulation” at the AI server maker.
Super Micro’s shares fell following the report.
The WSJ report, which cited people familiar with the matter, said the probe was at an early stage and that a prosecutor at a U.S. attorney’s office recently contacted people who may be holding relevant information.
The prosecutor has asked for information that appeared to be connected to a former employee who accused the company of accounting violations, the report added.
Super Micro had late last month delayed filing its annual report, citing a need to assess “its internal controls over financial reporting,” a day after Hindenburg disclosed a short position and made claims of “accounting manipulation.”
The short-seller had cited a three-month investigation that included interviews with former senior employees of Super Micro and litigation records.
Hindenburg’s allegations included evidence of undisclosed related-party transactions, failure to abide by export controls, among other issues.
Facebook owner Meta Platforms (META-Q) gave back early gains a day after it showed off its first working prototype of augmented-reality glasses, called Orion, during its annual Connect conference on Wednesday, as the California company sketched out its aspirations for products that would bring the virtual world into the real one.
“This is the physical world with holograms overlaid on it,” Chief Executive Mark Zuckerberg said after pulling out the chunky black glasses from a metal case dramatically brought to him on stage.
“For now, I think the right way to look at Orion is as a time machine,” he said. “These glasses exist, they are awesome and they are a glimpse of a future that I think is going to be pretty exciting.”
Meta also showed off new AI chatbot capabilities for its services and a new Quest mixed-reality headset.
Meta shares registered a record closing high on Wednesday, up 0.9 per cent at US$568.31.
The Orion glasses are made of magnesium alloy and powered by custom silicon designed by Meta. Users will be able to interact with the glasses through hand-tracking, voice and wrist-based neural interface. Meta plans to work on making it smaller, sleeker and more low-cost before releasing it to consumers later on, Mr. Zuckerberg said.
With files from staff and wires