November 7th, 2022 | 12:07 CET
Up or down? Stocks in sports mode: PayPal, Meta Platforms, Barsele Minerals, Porsche, VW
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"[...] China's dominance is one of the reasons why we are so heavily involved in the tungsten market. Here, around 85% of production is in Chinese hands. [...]" Dr. Thomas Gutschlag, CEO, Deutsche Rohstoff AG
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.
PayPal and Meta Platforms - Negative outlook clouds the mood
Technology stocks on the NASDAQ have more than doubled from March 2020 to the end of 2021. Some stocks have even risen over 1000% during this period. Shares of payment platform PayPal rose from around USD 80 to USD 260 during this time, while those of Facebook operator Meta Platforms rose from USD 140 to around USD 320. These are two examples of a successful business model in the digital transformation. PayPal achieved a prominent position as an online payment service during the pandemic. The collapse of Wirecard accelerated this growth again considerably. In the meantime, however, the competition in online payment is fierce as tech giants Apple and Google have entered the market.
For several years, there have been accusations against Mark Zuckerberg's group for failing to comply with data protection standards that apply in Europe but are not observed in the US. Although this has cost the social media platforms Facebook, WhatsApp and Instagram some customers, the advertising business was still doing quite well until 2021. With the last announcement of the figures, however, the Californians had to row back strongly. With USD 27.7 billion in revenue, operating cash flow fell by 31.2% to USD 9.6 billion, and the remaining free cash flow margin was just 0.6%, down from over 30% in the same quarter of the previous year. The stock market was shocked and sent Meta shares down over 30%, and on an annual basis, they are now already 69% from the top. PayPal did not fare any better. Here, the Q3 figures were still within the framework, but the outlook for the approaching Christmas business is catastrophic. Here, too, the share is already down 61%.
Nevertheless, a fundamental look at 2023 is worthwhile for both shares. Meta Platforms now trades at 11.5 times earnings and a P/S of 2, while PayPal is valued at a P/E of 15.7 and a P/S of 3. Both stocks thus reach a 5-year low in valuation and yet continue to grow in revenue. Analysts have already revised their price targets sharply downward but remain, on average, with a "buy or overweight" vote. Add the shares to your watchlist for observation!
Barsele Minerals - What the sparrows slowly whistle from the roof
In terms of gold and silver, a jolt went through the stock market halls last week. Most recently, the FED maintained its course of interest rate increases and consistently raised the key interest rate to between 3.75 and 4.00%. The continuing price pressure was cited as the reason. However, the US dollar is climbing steadily due to the rise in interest rates, and it has now reached a new 10-year high against the euro. In euro terms, this also means stable to slightly rising prices for gold and silver. As an inflation hedge, the precious metals have always worked - in good times and in bad, of course, especially in times of hyperinflation.
Still in the Swedish ground are the resources of Barsele Minerals (BME). Together with Agnico-Eagle, the Canadian explorer operates a large project in the mining region of Västerbottens Län, where, in addition to the indicated 2.4 million ounces of gold, mineralization of lead, zinc and nickel can be found. The latter plays a major role for all GreenTech applications in the field of alternative mobility or power generation. The cooperation with Agnico is going well, but Barsele would like to see a higher rate and would like to exchange Agnico's 55% stake for a shareholding. The only deciding factor is price, as Barsele CEO Gary Cope sees his property as "highly undervalued." At the Precious Metals Fair in Munich, it already sounded like the first progress was being made. After all, with further financing, it would be possible to drill a full 35,000 meters and quickly uncover the true potential. The experts of the Belcarra Group, at any rate, see about 5 million ounces of gold in the ground. With today's standards of USD 150 per ounce, this would correspond to a market value of USD 750 million, and with a 45% share, a 338 million market value for the gold stocks. The other metals are not even included here.
At present, the 137.3 million BME shares are quoted in the range of CAD 0.30 to 0.38. That gives a market capitalization of about CAD 45 million. Considering the presumed gold value under the earth alone, this results in a huge appreciation potential. In view of flourishing gold and silver prices again, this could become a reality quite quickly.
Porsche AG - The pearl of the Volkswagen Group
After the largest German IPO of the decade, it is clear that Porsche AG is the earnings pearl of the Volkswagen Group. Because what no one really expected was the outstanding performance of the share in the first six weeks. The share price is now a full 22% above the initial listing price of EUR 82.50 - who would have thought that? It could even be included in the DAX shortly before Christmas, which would entail a covering of the share by the ETF industry to ensure 100% index replication.
On the earnings side, Porsche is certainly a highlight, with operating margins reaching 18.2% in the first half compared to 16.1% a year earlier. Sales advanced 8% to USD 17.92 billion in the process. However, the all-electric Taycan was about 3,200 units below last year's deliveries, but the classic 911, Panamera and Cayenne sales increased by over 3,000 units. Sports car owners still relied on the popular internal combustion engine across the board, but Porsche wants to expand sales of e-mobiles drastically.
Of course, Porsche also suffers from faltering supply chains, high energy prices, and further Corona lockdowns. Nevertheless, sales are not significantly dependent on the purchasing power of the broad middle class, as is the case with the mass manufacturer Volkswagen. Here, there are likely to be sharp declines in the coming recession due to consumption cutbacks and postponements. It remains to be seen how the general economic climate will affect the buying mood of Porsche customers. The strong inflation and shortage of goods could have the opposite effect, as it tends to lead to more rapid purchasing decisions among the wealthy classes. In the current political environment, the horsepower bolides could also become a valuable discontinued model.
Germany's leading index, the DAX, is currently celebrating a recovery rally. At the same time, NASDAQ stocks are still correcting noticeably downward. The indices were level a few weeks ago, but now the DAX is 2,600 points higher. Since commodities are picking up noticeably again, resource stocks such as Barsele Minerals are now attractive again in addition to the bombed standard stocks.
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