May 4th, 2022 | 11:26 CEST
Pay attention to financial stocks: PayPal, MAS Gold, Deutsche Bank, Commerzbank - inflation, real interest rate and precious metals!
Table of contents:
"[...] We knew the world was rapidly electrifying and urbanising and needing significant amounts of copper to do so. [...]" Nick Mather, CEO, SolGold PLC
Born in Munich, he first studied economics and graduated in business administration at the Ludwig-Maximilians-University in 1995. As he was involved with the stock market at a very early stage, he now has more than 30 years of experience in the capital markets.
Inflation and rising interest rates - The stagflation scenario is alive
It is a foregone conclusion! Central bank interest rates are being successively raised to stem the rise in prices and curb the increased demand for capital worldwide. Despite the high money supply, nevertheless, the velocity of circulation is slowing, evidence that economic activity is declining. For economists, this scenario is a dire version of describing the economy, called stagflation: stagnant growth accompanied by inflation. The inflation is not fed by booming demand but by a massive supply deficit in all sectors. And although the assembly lines in industry are slowly coming to a standstill, prices continue to rise! The consumer becomes very insecure and drives up his savings rate. Everything is counterproductive!
PayPal - Price jump after the quarterly figures
In the described stagflation scenario, market participants try to lower their costs. A guarantor for low transaction costs is the former payment division of eBay, better known as PayPal. The Company's valuation has increased by more than 11% after the publication of its quarterly figures. What is the market celebrating?
PayPal has taken a massive hit in the last 6 months, but the latest figures were extremely well received on the stock market. Earnings per share of 0.88 were in line with expectations, while revenue of USD 6.48 billion slightly exceeded analysts' estimates, which should not really trigger any leaps of joy. That is all the more true as the outlook for the current year has even been slightly lowered. The forecast for sales growth in 2022 was lowered from 15-17% to 11-13%. Earnings are also expected to be around 15% below estimates.
The current share price jump must therefore be viewed from the technical side. The PayPal share has lost more than 60% on a 12-month view and reached a preliminary low of EUR 77.9 as of the end of April. From there, there was now a leap upwards; the Anglo-Saxons jokingly say: "Dead cat bounce!" - i.e. a prompt rise after a long period of losses. Watch calmly for a few more days to see if the trend has really turned because the sudden turnaround occurred directly at the multi-year upward trend. If so, from a technical point of view, the way would now be clear in the direction of EUR 100-115.
MAS Gold - First results from North Lake
Canadian company MAS Gold Corp. is an explorer focused on potential gold projects in Saskatchewan's prospective La Ronge gold belt. Four properties are being explored in this belt: Preview-North, Greywacke Lake, Elizabeth Lake and Henry Lake. They extend along a total of approximately 60 km of the geologically prospective La Ronge, Kisseynew and Glennie domains, which together form the La Ronge Gold Belt.
Initial results are now available from a completed drill program. It focused on the Company's North Lake deposit, where a total of 4,123 meters of diamond drilling was completed in 34 holes. Preliminary assay results from 5 of 34 holes contain average grades of 0.61 to 1.88 grams of gold per tonne of rock over lengths ranging from 14 to 99 meters. An additional 772 and 996 metres of drilling were completed at the Point deposit at Ramsland Lake and the recently acquired Preview SW gold deposit.
The Company's objective is to define a sufficient gold resource over the next few years to make a medium-term production decision. MAS is currently well-positioned to further improve its key assets in 2022. It will require further investigation of numerous exploration targets on the extensive property using a comprehensive database. MAS shares, which are currently trending sideways, are being held back by the weak gold price and should immediately take off again when the precious metals turn around.
Deutsche Bank and Commerzbank - The big turnaround hope for 2022
What leads to the constant increase in price for consumers, e.g. for the purchase of real estate, is like a summer rain for banks after the drought years: Rising interest rates! The balance sheets of the financial sector are easing noticeably, and operating margins are also returning to bearable dimensions. The share prices of the financial institutions have thus risen sharply in the last 2 months, but now new woes are looming.
On the one hand, the probable, imminent increase in the EU key interest rate is providing investors with corresponding price fantasies. On the other hand, the raid at Deutsche Bank in Frankfurt last week because of possible money laundering violations hit investors hard in the stomach - because it would not be the first time that the financial institution has to fight legal problems. According to information from DPA, investigators accuse Germany's largest financial institution of having filed the relevant money laundering suspicious activity reports too late, although there had already been suspicions earlier. DBK shares lost a full 15% in just 5 days.
With its latest figures for the last financial year, Commerzbank, in particular, caused a stir, with an operating profit of half a billion euros exceeding analysts' expectations by double. There was talk of "crazy good figures" in financial circles, although the full report will not be published until May 12. Despite the good news, financial institutions performed consistently poorly in April. Experts attributed this to higher costs and concerns about the negative impact of the Ukraine war on annual targets. There is a threat of write-downs on Russian loans here, and Ukraine's credit rating is also falling significantly. Technically, the EUR 9 and EUR 6 marks are an important holding line to the downside for DBK and CBK shares, respectively. The significant period of operating losses should turn to the good in the current year, despite the write-downs in the East. Conclusion: Buy in on weak days!
Sharp interest rate rises and inflation are taking their toll on stock prices. The return of a positive capital market interest rate is nevertheless a blessing for the financial sector. Still, unfortunately, the negative real interest rate is leading to a loss of purchasing power among consumers. Financial stocks and precious metals should rise in this environment. But it does not seem so simple. The junior MAS gold can already report individual results, which should slowly bring a higher valuation into the running.
Conflict of interest
Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as "Relevant Persons") may hold shares or other financial instruments of the aforementioned companies in the future or may bet on rising or falling prices and thus a conflict of interest may arise in the future. The Relevant Persons reserve the right to buy or sell shares or other financial instruments of the Company at any time (hereinafter each a "Transaction"). Transactions may, under certain circumstances, influence the respective price of the shares or other financial instruments of the Company.
In addition, Apaton Finance GmbH is active in the context of the preparation and publication of the reporting in paid contractual relationships.
For this reason, there is a concrete conflict of interest.
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