FIVE at FIVE AU: Qantas flies high despite strike threat; why central banks are buying gold; Zoom hits a wall; Tennis Australia accelerator program

The ASX was higher today.

The S&P/ASX200 rose 10.00 points or 0.14% to 7,241.80 and set a new 100-day high. Over the last five days, the index has gained 1.49% but is down 2.72%for the last year to date.

Top-performing stocks in this index were St Barbara Ltd (ASX:SBM) and Brainchip Holdings Ltd up 9.09% and 8.63% respectively. 

Other big winners were companies with an iron ore objective after iron ore prices rose by 2% on Wednesday.

BHP Group was 1.39% higher, while Fortescue Metals Group (ASX:FMG) firmed 0.92% and Rio Tinto Ltd gained 1.36%.

Qantas Airways (ASX:QAN) Group Ltd also rallied for some reason, possibly due to the current cost of interstate flights and despite the fact that cabin crew have voted in favour of industrial action.

There is no official date for the strike but it was announced a day after Qantas said it expected its first-half underlying profit to be $150 million higher to about $1.45 billlion as a result of strong demand for air travel.

“Just weeks after its initial forecasts, Qantas has raised its profit outlook for the final six months of 2022. This is despite already elevated oil prices, which aren’t likely to drop dramatically anytime soon,” eToro market analyst Josh Gilbert said.

“This is a clear indication that even with sky-high airfares, travel demand is strong and will continue into early next year. It also serves as an indication of the resilience of the average consumer, who continues to spend despite the rising cost of living pressures. This may be amplified by years of travel restrictions due to COVID-19 conditions.

“Following a difficult period during the pandemic, Qantas appears to be turning its fortunes around. Its profit forecast has been increased by $150 million to between $1.35 billion and $1.45 billion, which means its dividend could very likely be reinstated in 2023. As a result, Qantas may be able to further narrow its debt, with forecasts of net debt expected to fall to $2.5 billion by the end of the year. 

“Despite plenty of media criticism of the standards of its service and increasing scrutiny of CEO Alan Joyce, it has already been a stellar year for Qantas investors, with shares up more than 17% and the market will certainly enjoy today’s news.”

Qantas was as high as 2.1% today before finishing up 0.49%.

Looking at the sectors, only a few were down with Energy the biggest loser at minus 1.81%. The biggest gainer was Information Technology, rising 1.25%. Real Estate was 1.21% higher.

Making news today

Zoom hits a wall

Facing more competition and a move from work from home to hybrid conditions, Zoom has hit a wall.

Gilbert said of Zoom’s current plight: “The return to offices and the waning impact of COVID-19 has seen Zoom’s astronomical growth hit a wall. Its sales have seen a sharp slowdown this year as it faces stiff competition from Microsoft, Google and RingCentral.

“Its recent downgraded guidance is another sign of this competition and the challenging macro environment as corporate budgets are slashed. 

“The focus for Zoom is to retain current customers, expand and become a larger platform. This is feasible thanks to a decent cash position of over US$1 billion but given the current macro backdrop, that cash is fading rapidly; falling by 17% year-over-year in its recent earnings.

“Zoom’s focus on expansion has seen its product suite grow to comprise Zoom Phone, Contact Centre and a CRM offering that could make its offering more attractive to enterprise customers.

“However, with so many businesses currently looking to cut software costs and numerous established players in the VoIP and CRM spaces, Zoom will have to communicate its value and competitive edge to potential customers both effectively and quickly to gain a foothold.”

Gilbert has also cited a slowdown in IT spending as having a broader impact.

“A slowdown in IT spending isn’t only impacting software firms, with hardware plays Dell and HP, both reporting disappointing earnings guidance. Dell’s personal computing revenue fell by 17% in Q3, a big slide given this segment makes up 55% of the company’s total revenues.

“HP is facing similar struggles, with its consumer revenue falling by 25% in Q3 as global PC deliveries continue to tumble. It’s clear from the market that computer upgrades aren’t a high priority on corporate or personal spending lists right now. As has been the case across the tech sector recently, HP is cutting 6,000 jobs to lower operating costs as they navigate the uncertain macro environment.

“Weak demand for these businesses’ products and services may well continue as we head into 2023, which could point to a further slowdown in growth. Until inflation begins to fall and aggressive rate hikes start to ease, these mid-range tech stocks are unlikely to be rewarding investors anytime soon.” 

Could a central bank shift away from dollar boost bullion prices?

That’s the question asked by senior market analyst Justin McQueen.

“According to the World Gold Council, central banks have been buying gold in Q3 at the fastest pace on record at roughly $20 billion. Among the largest buyers of gold, this includes Turkey, Qatar and Uzbekistan.

“However, there have been central banks that have not been identified that have purchased a sizeable amount of gold. Some speculate this may be in fact China, as per reports in the Nikkei,” McQueen said. 

“The rationale is that China would look to reduce their exposure to the US dollar and therefore has been stockpiling on gold. Now while China’s involvement cannot be confirmed, the fact that central banks have been excessively accumulating does provide an undercurrent of support for the precious metal.”

Netflix underperforms

While Netflix Inc (NASDAQ:NFLX) is a well-searched-for stock, it is underperforming the market. 

Shares of the internet video service have returned -1.5% over the past month versus the Zacks S&P 500 composite’s +6.9% change. 

In this current quarter, Netflix is expected to post earnings of $0.49 per share in what will be a change of -63.2% from the corresponding quarter last year.

It’s not all bad news for Netflix, with reported revenues of $7.93 billion in the last quarter representing a year-on-year change of +5.9%.

This week Netflix snapped a four-day losing streak, however, its performance is mixed compared with competitors Amazon and Disney.

One wonders if the introduction of ads to the basic streaming package will have a broader impact on user growth and therefore share price.

According to streaming guide Just Watch, in Australia there are 1,283 movies and 72 TV shows that are not accessible for customers with the Basic with Ads option.

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