Maxim Manturov

Maxim Manturov

Maxim Manturov began his career as investment analyst in 2017, conducting a credit analysis of global market companies and stock fluctuations assessment. He also participated in development of fixed income portfolio strategy which included more than 100 security names.

In 2020, Freedom Finance Analytical Center was awarded as Best Research Center by Global Banking & Finance Review. In the same year, Bloomberg ranked Freedom Finance's Beyond Meat and Zoom Video stock recommendations as "the best" for forecast accuracy.
 
Now Maxim continues to develop the Freedom24.com investment Ideas section as Head of Investment Advice. Out of duty, he is fond of cross fit and freeride snowboarding.
National Bank of Hungary's Shift: Moving Away from Autopilot Monetary Policy

Hidden Gems: Exploring Promising Stocks - Etsy, Tapestry Inc, Garmin Ltd, and More

Maxim Manturov Maxim Manturov 29.06.2023 14:09
Stocks worth taking a closer look at are fewer known companies such as Etsy (ETSY), Tapestry, Inc (TPR) and Garmin Ltd (GRMN).   For example, Etsy operates the top 10 e-commerce market operators in the US and UK, with significant operations in Germany, France, Australia and Canada. The company dominates the exchange of vintage and artisanal goods. In 2022, the consolidated gross merchandise volume exceeded $13 billion. And at the end of last year, the firm connected more than 95 million buyers and 7.5 million sellers on its sites. The fundamental potential for an average target price is $115.   Meanwhile, Tapestry, Inc owns clothing and accessories brands such as Coach, Kate Spade and Stuart Weitzman. TPR has a strong brand, category, and channel mix at an attractive price. The stock is strongly undervalued and the fundamental potential for an average target price stands at $50.70.   Garmin Ltd. is a manufacturer of wireless devices. The company is particularly renowned for its wide range of products, including portable GPS devices for cars, aviation, marine and outdoor activities, as well as fitness trackers, smart watches and cycling computers. Four of GRMN's five segments showed double-digit revenue growth. For example, in the first quarter, revenues from the fitness segment grew by 11%, from the aviation segment by 22%, from the marine segment by 10% and from the automotive OEM segment by 11%. And the company's net profit is 19.94% of revenue. The stock is moving in a medium-term upward channel, testing resistance in the form of a local high, in case of a breakdown it could move to $119.50.   As for the IPOs, Freedom Finance Analysts expect two US companies to go public by the end of 2023: Fogo Hospitality and Turo Inc. The former is a chain of Brazilian steakhouses in the US called Fogo de Chao. In total, it has more than 75 locations, of which 67 are company-owned and eight franchisees. On average, 151,000 people visit one Fogo Hospitality restaurant a year.    Turo is a platform that connects car owners with renters. The platform offers registered car rental trips for hours, days or weeks. As of 31 March 2023, it had more than 165,000 active hosts, more than 330,000 cars and 3.1 million active guests.   Disclaimer: Capital is at risk. Past performance does not guarantee future results. Presented material is not meant to represent "Investment advice" or provide "Investment research" services. It is important to do your own analysis before making any investment in the stock market.   
Stocks to keep an eye on in the second half of 2023

Stocks to keep an eye on in the second half of 2023

Maxim Manturov Maxim Manturov 29.06.2023 14:08
Analysts at Freedom Finance Europe have highlighted several companies that investors should look out for in the second half of this year. One of them is Amazon (AMZN), which continues to grow revenues in key segments. "The company has too many positive catalysts to ignore, and the recent weakness provides an opportunity to enter into an attractive asset", says the speaker. In addition, despite the challenging macroeconomic environment, AMZN's revenues in the latest quarter exceeded the forecast range to $127.4 billion and operating profit was $4.8 billion. These results are due to growth in e-commerce. North American region, for example, saw double-digit sales increases and a return to profitability, while the international segment also saw strong growth. On top of that, company's cloud business revenues, Amazon Web Services were up 16% year-on-year.  "Management forecasts sales growth of 10%, to $133 billion in the next quarter, with operating profit expected to remain stable, at between $2 billion and $5.5 billion. These results and forecasts look quite compelling. The company has also built an unrivalled logistics network for parcel delivery, sometimes with same-day delivery", said the speaker. These factors take Amazon’s potential to a maximum target price of $220.  Next up is the well-known coffee chain Starbucks (SBUX). As the speaker explained, the company is considered an attractive and long-term investment due to its commitment to shareholder value, revenue growth and higher earnings per stock. SBUX had a solid quarter. In Q2 2023, Starbucks had revenue of $8.7 billion, up 14% year-on-year. EPS increased by 36% compared to the same period in 2022. Even more impressively, Starbucks quarterly sales and EPS were 38% and 49% higher than the same period in 2019 (before the pandemic). The company also has a rewards programme that rewards customers for repeat purchases. For example, there are currently 30.8 million active loyalty programme members in the US. That's an increase of 15% over last year.   "Coffee is an integral part of society and it is hard to imagine a scenario where Starbucks ever disappears. The company has almost 37,000 shops and the goal is to have 55,000 outlets worldwide by 2030", the speaker added. The fundamental potential for an average target price is at $114. Another company that may be worth taking a closer look at is Booking Holdings (BKNG), which operates in the online travel industry. In particular, it offers services through its Booking.com, KAYAK, Priceline, Agoda, Rentalcars.com and OpenTable brands. Data from the Economist Intelligence Unit shows that the segment is expected to grow by 30% in 2023 as the number of Chinese tourists abroad may increase. "In previous years, the 'zero COVID' policy has held back tourism from China, which has recently been a major source of growth. As the situation changes this year, Booking Holdings could benefit from this. In addition, the number of trips remains below 2019 levels, which leaves room for growth and continues a solid recovery", explained the speaker. BKNG's revenue increased by $4 billion in the last quarter, and it continues to benefit from a network advantage that has allowed it to maintain its agency model rather than move to a vendor model where the online travel agency would be responsible for paying the fees. Fundamental potential for an average target price of $2800.  
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Navigating Risk and Resilience: Strategies for a Post-Correction Market Recovery

Maxim Manturov Maxim Manturov 29.06.2023 14:04
Prioritise quality companies. If an investor needs to take a defensive stance, it is worth turning to quality stocks, as their robust balance sheets and stable cash flows should insulate them from unforeseen downside risk. With this in mind, many of the largest technology and Internet stocks meet these criteria, while exposure to highly cyclical sectors and companies with excessive leverage should be kept to a minimum. Thus, in order to increase the resilience of your portfolios, you should focus on high quality companies, strong dividend payers and also not forget about regional diversification, as lower valuations and a weaker US dollar can also make global stock markets outside the US attractive.   The general understanding is that the market is likely to come out of the correction this year with expectations of a continued recovery in the second half of the year and a return to a bullish trend. This recovery is expected to help recoup portfolio losses from 2022.   However, there are several factors that pose risks to the market in the near future. These risks include the potential for a bear market, which could be triggered by inflation statistics such as the PCE index and strong labour market conditions. Another risk is the narrow scope of the current rally, where only some sectors have shown growth while others, including cyclical, defensive and growth sectors and assets such as bonds, have remained weak. There is also uncertainty about the timing and severity of a possible recession this year. The market is now looking at the likelihood of a moderate recession, which is already factored into current expectations and prices.   Once there is more clarity on these risk factors, portfolio allocation can be adjusted accordingly, considering both bonds and stocks, with a focus on the second half of the year and recovery of losses incurred in 2022. Two scenarios were considered for such an adjustment:   Scenario No. 1, the positive outlook, sees the market rising and breaking through significant resistance levels of 4200-4300 in the SPX index, which would lead to a rally. In this case, it would be prudent to increase long positions. Risky stocks should be held until they reach the most likely level of local recovery, and then locked in. For positions that still have potential, they should be held. The portfolio as a whole should then be rebalanced, creating a new balanced structure with a 25% allocation to cyclical assets, 35% to growth assets, 10% to protection and 30% to bonds.   Scenario #2, the negative outlook, assumes that the market continues to decline either from the current level or below 4100. In this scenario, protection should be strengthened by using inverse ETFs and reducing long positions (using stop losses) until the target stock is reached. This approach aims to minimise further drawdown until the correction is finally resolved in 2023.   The US stock market has thus experienced a strong recovery since the start of the new year, supported by a resilient technology sector, growth in the semiconductor industry due to AI development, a strong Q1 2023 reporting season, a pause in the Federal Reserve's rate hike, expectations of future rate cuts, lower inflation, a resilient economy, a smooth economic landing and a debt limit increase. While risks are still present, a focus on longer-term investment strategies can help investors benefit from the market's upward trajectory and continued recovery in 2H.  
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Debt Ceiling Resolution, Strong Earnings, and Sector Rotation Drive Market Momentum in the US

Maxim Manturov Maxim Manturov 29.06.2023 14:03
In addition, the recent increase in the debt ceiling has helped to boost sentiment by removing some of the uncertainty that was present in the moment. By raising the debt ceiling, the government ensured continued funding of essential programmes and services, reducing uncertainty and boosting investor confidence in the US economy and its ability to service its obligations.   The market momentum was further supported by a solid first quarter 2023 reporting season. Many companies across sectors reported solid financial results that exceeded analysts' expectations. Overall to date, 99% of S&P 500 companies have reported actual results for the first quarter of 2023. Of these companies, 78% reported actual EPS above estimates, exceeding the 5-year average (77%) and the 10-year average (73%). Collectively, companies report revenues that are 6.5% above estimates, below the 5-year average (8.4%) but above the 10-year average (6.4%). At the sector level, seven sectors saw upward EPS estimates for 2023, led by communications services (+3.1%), consumer services (+2.5%) and information technology (+2.0%).   S&P 500 companies thus performed better than analysts' expectations from Q4 2021, both in the number of companies reporting positive EPS surprises and in the magnitude of these surprises, exceeding the 10-year average.  The strong earnings performance instilled confidence in investors and demonstrated underlying business strength and profitability, which contributed to the upward trajectory of the market.   It is also worth noting the sector rotation that has occurred in the market. Last year, pro-inflationary sectors such as energy, commodities and protective market segments led the way amid concerns about inflation and uncertainty. This year, however, there has been a shift towards growth sectors, particularly technology, semiconductors and communications services, which have taken the lead.
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Resilient US Economy and Market Recovery Driven by Future Rate Cut Expectations, Technology Sector, and Low Inflation

Maxim Manturov Maxim Manturov 29.06.2023 14:01
According to the CME FedWatch tool, markets are currently seeing a ~74% probability that a hike will not take place at the Fed monetary policy committee meeting in June. In addition, expectations of future rate cuts closer to the end of 2023 and continued rate cuts through 2024 are increasing, further boosting investor sentiment, supporting valuations of technology companies, growth sectors in general and contributing to the upward trajectory of the market.   Lower inflation has also played a role in the positive market performance. Inflationary pressures continue to fall, allowing consumers to maintain their purchasing power and businesses to plan for the future with greater certainty, removing uncertainty about inflation. This favourable inflation environment has strengthened investor confidence in the resilience of the economy in the 2nd half of the year, given the expected policy shift from the Fed. Moreover, the US economy has demonstrated its resilience, continuing to show growth despite relatively high interest rate levels. Key economic indicators such as GDP growth, employment figures, labour market strength and consumer spending are showing signs of stability, indicating sustained and balanced economic growth. Expectations of a soft economic landing have allayed fears of a prolonged recession and laid a solid foundation for market recovery.
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US Stock Market Bounces Back: Resilience of Technology, Semiconductor Growth, and Fed Rate Pause Drive Recovery

Maxim Manturov Maxim Manturov 29.06.2023 14:00
After a difficult previous year marked by market volatility and economic difficulties, the US stock market has experienced a strong recovery since the start of the new year. This recovery was driven by several key factors: the resilience of the technology sector, growth in the semiconductor industry driven by the development of AI, the expected pause in Fed rate hikes and the assessment of future rate cuts in late 2023 amid lower inflation.    The technology sector, which includes leading companies in innovation and digital transformation, has played a critical role in the market's resurgence. Industry giants such as Apple, Amazon, Microsoft and Alphabet have achieved significant stock price gains as they continue to innovate and provide products and services that meet changing consumer demands. The development of artificial intelligence technology has been a major catalyst for growth in the technology sector.   The semiconductor sector has also been one of the growth drivers of the markets. Companies such as Nvidia and AMD are experiencing strong demand for their advanced chipsets, which are vital for AI applications. The widespread adoption of AI technology across sectors has made semiconductor companies key drivers of innovation, contributing to their stock prices and overall market recovery.   The market was also supported by the expected decision of the Fed to pause its rate hikes. This pause in monetary policy tightening has helped to maintain the thesis of an end to the tightening cycle as early as H2 2023. 
Citi's Outlook: Expected 0.3% MoM Increase in August Core CPI, Signaling Inflationary Pressures

The Resurgence of the Tourism Industry: Opportunities and Challenges for Investors

Maxim Manturov Maxim Manturov 19.06.2023 15:05
The global tourism industry has faced unprecedented challenges during the COVID-19 pandemic and companies in the sector have suffered significant losses. However, as the world recovers and travel restrictions finally come to an end, the industry is now poised for a resurgence. A successful summer season on the horizon brings new hope to the afflicted industry. As travel resumes, equity prices in the tourism and travel sector are expected to show positive momentum. The market reaction to the reopening of borders and the resumption of international travel is likely to be reflected in the share prices of companies in the industry.   While the industry is on track to recover, it is important to note that reaching pre-pandemic levels may not happen immediately for all companies. The losses incurred during the pandemic have had a significant impact on the financial position of many tourism enterprises. Some companies are still striving to recover losses and restore financial stability, but here’s a look at the prospects for individual sectors of the tourism industry:   Airlines: Companies such as Lufthansa and other major airlines have been hit hard by the pandemic. As demand for travel increases, airline shares are expected to rise. However, the recovery of airline inventories will depend on various factors, including vaccination rates, travel regulations and consumer confidence in air travel.   Online booking platforms: Platforms such as Airbnb and Booking.com are likely are likely to benefit from the resurgence of the travel industry. As travelers start planning their trips, the demand for online booking services is expected to increase. Hence, these platforms may see their stock prices rise as they gain momentum.    Hotels: The hospitality sector has faced major challenges during the pandemic. As travel resumes, hotels are expected to reopen. However, the pace of recovery may vary depending on factors such as location, travel restrictions and the ability to meet changing consumer preferences, such as an increased focus on hygiene.    In terms of the impact of inflation on the travel industry, rising prices have the potential to affect both the market and share prices. Higher prices may lead to higher spending on travel-related services, which may affect consumer behavior and demand. Companies operating in the travel industry will need to carefully manage their pricing strategy to balance profitability and affordability for customers.   When it comes to investment opportunities, it is extremely important to do a thorough research and consider various factors before making an investment decision. While the share prices of some travel companies may have risen significantly, there may still be room for growth. Further development of stock prices in the near future will depend on factors such as the pace of the global recovery, travel trends, company performance and market dynamics against the backdrop of Fed policy.
Unraveling the Resilience: US Growth, Corporate Debt, and Market Surprises in 2023

Best stocks for soft economy landing according to Goldman Sachs

Maxim Manturov Maxim Manturov 19.06.2023 12:55
Despite the weak GDP growth data, economists at Goldman Sachs still believe that the US economy will avoid a recession. Goldman Sachs' estimates are based on bold corporate earnings forecasts, steady decline in inflation and strong labour market data. While the economy is headed for a so-called soft landing, the investment bank recommends focusing on value stocks with strong balance sheets.   Goldman Sachs presented a list of the Russell 3000 stocks, which demonstrate stable financial performance and have reasonable valuations. Analysts from a Freedom Finance Europe, a company operating Freedom24 online brokerage platform, analysed the Goldman Sachs list and chose three stocks which have the best potential return per unit of risk accepted: 3M Company (MMM) PayPal Holdings (PYPL) Sealed Air Corporation (SEE)   3M Company: Manufacturing business with stable prospects Ticker: MMM.US Entry price: $99–$101 Target price: $129 Horizon: 12 months  About company   3M Company (MMM) is a diversified business conglomerate offering a wide range of products including adhesives, abrasives, laminates, medical dressings and healthcare information systems. 3M Company operates through four business segments: Safety and Industrial, Transportation and Electronics, Health Care, and Consumer.   Why do we like 3M Company? 3M Company has a strong competitive position thanks to its broad portfolio of over 100,000 patents, a recognizable brand and a corporate culture focused on innovation. Continuous investment in research and development allows the company to introduce new products and register more than 3,500 patents annually, which improves product quality and production efficiency. 3M owns 51 technology platforms covering areas such as ceramics, abrasives, adhesives, and nanotechnology. 3M serves a large number of end markets, including the most dynamic and promising markets of personal protective equipment and medical software. The growth of the personal protective equipment market is fueled by the increasing companies’ attention to the health and safety of employees, also monitored by government agencies. According to Grand View Research, in the US, the market will grow at a compound annual rate (CAGR) of 6.7% until 2030 and reach $32.5 billion by the end of the period. The global market for personal protective equipment is also likely to grow, helped by rapid industrialisation in developing countries.  The medical software market is also experiencing strong tailwinds amid the rising rates of wound infections, diabetes and chronic diseases, and ageing population. According to Acumen Research and Consulting, the global healthcare software market was estimated at $41.2 billion in 2021 and is expected to reach $104.1 billion by 2030, implying a CAGR of 10.9%. Last year, 3M announced a plan to spin-off its medical solutions business into a separate firm. With the medical equipment and healthcare companies trading at a significant premium to industrial enterprises, we expect the transaction to help 3M to unlock its value potential. The spin-off is expected to be completed by the end of 2023.   3M is a so-called dividend aristocrat, as the company has maintained dividend payments for more than 100 years and has increased its annual dividend for 64 years in a row. At the current market value, the dividend yield of the stock is about 6%, which is the highest level since 1996. We believe that 3M is able to maintain the current level of dividend payments because of the following reasons: In 2022, the company allocated 87.7% of free cash flow to dividends, which is a reasonable level for a mature business. Given the company’s restrained investment programme, we believe that 3M will continue to generate significant free cash flow. In Q1 2023, 3M announced a plan to improve operational efficiency, including a reduction in headcount by 6,000 people. The company plans to increase operating profit by $700–$900 million by the end of the year. That is, the payout ratio will decrease organically, due to the growth of cash flow. 3M has a healthy balance sheet (more below) with no significant debt repayments expected in coming years.   Financial performance 3M Company's financial performance in the trailing twelve months (TTM) can be summarised as follows: TTM revenue amounted to $33.43 billion, down by 2.3% from the end of the last year. The decrease was observed in all segments except healthcare. Gross profit decreased slightly from $15.00 billion to $14.41 billion. Gross margin stood at 43.11% against 43.81% for the year. Operating profit amounted to $6.14 billion versus $6.54 billion at the end of the last year. Operating margin decreased from 19.10% to 18.36%. Net income was down from $5.78 billion to $5.45 billion. Net margin decreased from 16.88% to 16.31%. Cash from operations increased from $5.59 billion to $5.86 billion, driven by a decrease in net working capital. Free cash flow rose from $3.84 billion to $4.06 billion.   During the latest conference call, the company's management announced efficiency measures that include cutting jobs, simplifying the structure of the supply chain and optimising operating expenses. In case of successful implementation of the presented measures, 3M is likely to return to the moderate growth trajectory.   Stock valuation Market headwinds have been overly reflected in the current 3M stock value. However, it does not fully reflect the business potential in case of successful implementation of efficiency measures. 3M currently trades at a significant discount to peers. The minimum price target from investment banks set by Crispidea is $103 per share. At the same time, Langenberg estimates MMM at $210 per share. According to the Wall Street consensus, the stock’s fair market value is $114, implying a 14.5% upside potential. Our estimate is based on industry average multiples. The sector average EV/Sales multiple is 1.71x (-17.79% to the current price), EV/EBITDA is 11.73x (+53.13%), P/Cash flow is 14.29x (+51.86%), and P/E is 19.30x (+86.47%). For each multiple, we assigned a specific gravity of 0.125. As noted above, the Wall Street consensus implies a 14.5% upside potential. We assigned a specific gravity for this factor at 0.50. Thus, we determined the stock’s fair market value at $129 per share, implying a 29% upside potential.   Key risks 3M Company operates in a highly cyclical industry. Although we believe that macroeconomic challenges have already been priced in, there is a possibility that the deterioration in consumer sentiment will have a greater impact than we think. In this case, the stock may remain under for an extended period of time. 3M’ margins have been declining steadily since 2020. If the efficiency plan is not implemented or does not produce the expected results, the stock could remain under pressure.   PayPal Holdings: Online payments benefiting from the market growth Ticker: PYPL.US Entry price: $63–$65 Target price: $93 Horizon: 12 months   About company PayPal Holdings (PYPL) operates a technology platform that allows users to make digital payments worldwide in 150 currencies and withdraw funds to their bank accounts. The company provides a digital alternative to traditional money transfer methods. PayPal was founded in 1998 and is headquartered in San Jose, California.   Why do we like PayPal Holdings? Over the past few years, PayPal’s stock has shown disappointing returns. The lifting of Covid-19 restrictions, global supply chain issues, deteriorating consumer sentiment, monetary tightening and the war in Ukraine have all weighed on the firm's financials and growth potential. Changes in the company's management did not add confidence to investors either. As a result, one of the largest online payments market players has lost about 80% of its market cap compared to its highs of 2021. During the Investor Day 2021, PayPal’s management set a goal to increase the number of active accounts from 377 million to 750 million over five years, i.e. more than 70 million a year. However, already in Q4 of the same year, the company announced that it would not be able to achieve the goal and in 2022 the number of accounts would  increase by only 15–20 million. In fact, PayPal managed to attract only 9 million new customers in 2022, and the number decreased by 2 million in Q1 2023. The company’s inability to maintain growth was the main reason behind the stock price depreciation. However, in our view, the market has overreacted to the growth slowdown. PayPal is a mature business with a high penetration level. According to Oberlo, 8.2% of all digital shoppers in the world used PayPal in 2022. With this level of penetration, it is difficult for the company to continue to grow market share, and given the overall decline in sales in the e-commerce sector, PayPal's headwinds seem completely natural. The long-term outlook for the digital payments market remains promising. According to Mordor Intelligence, the market size will grow from $8.7 trillion in 2023 to $14.8 trillion by 2028, implying a CAGR of 11.08% over the forecast period. With its large user base, network effect, brand strength and business scale, PayPal has a significant competitive advantage. The company has 433 million active accounts and serves 35 million merchants worldwide. Over the last 12 months, the firm has processed payments worth $1.39 trillion, earned $28 billion in fee and commission income, and $5.1 billion in free cash flow. PayPal has been actively investing in its future. The company owns one of the leading digital wallets, Venmo, and plans to develop another “super app” that would provide users with a complete set of commercial and communication services in one package. According to the company, citing third-party research, 60% of consumers choose PayPal as their primary tool for making online transactions. Only 8% of respondents were in favour of the closest competitor. PayPal customers are twice as likely to make a purchase when they see the company’s icon. PayPal has significantly increased the number of new and repeating purchases, as well as improved the placed orders’ conversion rate. In other words, PayPal is an essential tool for any online merchant. The company seeks to maximise shareholder value through share buybacks. In Q2 2022, PayPal’s board of directors authorised a $15 billion buyback programme, of which only $4.1 billion was spent. Thus, the current programme allows the firm to buy back shares worth $10.9 billion, or about 15% of PayPal's current cap.   Financial performance PayPal’s financial performance in the trailing 12 months (TTM) can be summarised as follows: TTM revenue was $28.08 billion, up 2.0% YoY. The largest increase was observed in the company’s key market of the US (+13%). Operating income increased from $3.84 billion to $4.13 billion. Operating margin rose from 13.94% to 14.69%. Net income amounted to $2.71 billion versus $2.42 billion at the end of the last year. Net margin increased from 8.79% to 9.63%. Cash from operations declined slightly from $5.81 billion to $5.77 billion, driven by an increase in net working capital. Free cash flow amounted to $5.08 billion against $5.11 billion at the end of 2022. PayPal’s management seeks to increase business margins by cutting costs and focusing on the most active and profitable users. This strategy is already showing positive results: the firm raised its net income guidance twice in the past two quarters. PayPal has a strong balance sheet, with total debt of $10.48 billion, cash equivalents and short-term investments of $10.66 billion, and net debt of -$179 million.   Stock valuation PayPal trades at a significant discount to the industry average. The minimum price target from investment banks set by BNP Paribas is $58 per share. At the same time, Berenberg estimates PYPL at $145 per share. According to the Wall Street consensus, the stock’s fair market value is $93, implying a 46.4% upside potential.   Key risks Working in the market of cross-border money transfers makes PayPal susceptible to macroeconomic conditions. High inflation, tight monetary policy and a slowdown in economic growth — all these factors carry risks for people’s payment activity and, as a result, for the company's financial performance. Amid the rapidly increasing popularity of fintech platforms, competition in the cross-border money transfer market has intensified. Companies such as Wise, Payoneer and Revolut have established strong market presence and are constantly increasing their market shares. The current trend threatens PayPal's position.   Sealed Air Corp.: Packaging supplier with good chances to rise Ticker: SEE.US Entry price: $38–$40 Target price: $54 Horizon: 12 months    About company Sealed Air Corp. (SEE) provides packaging solutions for food, consumer goods, pharmaceutical and medical devices, and industrial manufacturing markets. The company operates through two business segments: Food and Protective. Sealed Air was founded in 1960 and is headquartered in Charlotte, North Carolina.   Why do we like Sealed Air Corp.? As a major supplier of consumer packaging, Sealed Air has benefited greatly from the tailwinds in the e-commerce sector during the pandemic. However, declining demand in the protective packaging segment and weakness in the retail end markets affected the company’s financials and market value. Over the past year, Sealed Air’s market cap has lost more than 36%. Sealed Air is not the only cyclical business company facing consumer weakness and destocking. Similar headwinds have been experienced by intermodal railroads and retailers, who continue to cut inventories to cope with declining consumer demand. However, headwinds are temporary. Sealed Air's management expects the challenges to remain in Q2 2023, but predict the market environment to normalise in H2 2023. The company cites China’s recovery from Covid lockdowns as one of the growth drivers. The long-term potentials of Sealed Air's target markets remain favourable. According to Grand View Research, the global food packaging market is valued at $362.9 billion and is expected to reach $565.4 billion by 2030, implying a CAGR of 5.7% over the forecast period. The segment accounts for more than half of Sealed Air's revenue. The industrial packaging market is also expected to grow faster than inflation. According to Mordor Intelligence, the industrial packaging market is forecast to grow at a CAGR of 5.0% and reach $80.9 billion by 2028. Sealed Air has been regularly increasing its target markets by adding new offerings. In November 2022, the company signed a definitive agreement to acquire Liquibox and use its packaging solutions, such as bag-in-box, to expand into new markets. The company's management expects liquid packaging sales to reach $1 billion by 2027. Another area with significant potential is Automated Protective Solutions, which currently account for about 35% of Sealed Air's business. The segment targetes a variety of customers, from industrial enterprises to e-commerce. The company has been working to expand and optimise its existing portfolio while increasing its market penetration. The segment’s address market is estimated at $15 billion. Sealed Air plans to expand its portfolio by implementing a comprehensive strategy and aggressively expanding its fibre solutions and equipment independent systems. This will create new opportunities and provide an additional growth driver. Sealed Air seeks to maximise shareholder value through a prudent capital allocation strategy. The stock’s current dividend yield of 2% is not very high, but the company is buying back its shares. Under the current $1 billion share buyback programme, authorised by the board in August 2021, Sealed Air can purchase shares worth $537 million, or about 10% of the firm's current market cap.   Financial performance  Sealed Air's financial results in the trailing 12 months (TTM) can be summarised as follows: TTM revenue was $5.57 billion, down 1.2% YoY. The decline was driven by weak results in Q1, which saw the Protective segment shed 19% and the food segment up 6%. Gross profit decreased from $1.77 billion to $1.70 billion. Gross margin fell from 31.42% to 30.52%. Operating profit amounted to $852.2 million versus $944.8 million at the end of 2022. Operating margin decreased from 16.75% to 15.29%. Net profit amounted to $404.3 million against $491.6 million at the end of 2022. Net margin decreased from 8.71% to 7.25%. Cash from operations slightly increased from $613.3 million to $616.8 million due to a decrease in net working capital. Free cash flow amounted to $381.6 million versus $376.0 million at the end of the year.   The decline in financial performance in the last reporting period was due to the cyclical nature of the Protective segment, which offers packaging materials for consumer goods, pharmaceutical and medical devices, as well as industrial markets. We expect the segment to recover as end-market inventory levels stabilise, declining steadily after abnormal growth amid global supply chain issues. Sealed Air is heavily leveraged, with total debt of $4.83 billion, cash and cash equivalents of $303.1 million, and net debt of $4.53 billion. However, we do not see any risks to the firm's financial stability, as the interest coverage ratio remains within normal levels. In addition, the next repayment of the company's debt in the amount of $423.7 million is not expected until December 2024.   Stock valuation Sealed Air currently trades at the industry average on the main multiples: EV/Sales — 1.67x, EV/EBITDA — 9.21x, P/Cash flow — 9.04x, P/E — 13.98x, FWD P/E — 10.20x. However, the company enjoys a stronger market position compared to its peers as it has better margins (meaning the firm's cash flow is less volatile) and significant exposure for the non-discretionary and less cyclical food segment. The minimum price target from investment banks set by Morgan Stanley is $48 per share. At the same time, UBS values SEE at $59 per share. According to the Wall Street consensus, the stock’s fair market value is $54, implying a 40% upside potential.   Key risks Sealed Air operates in a highly cyclical industry. Although we believe that macroeconomic challenges have already been priced in, there is a possibility that the deterioration in consumer sentiment will have a greater impact than we think. In this case, the stock may remain under pressure for an extended period of time.   While we see no risks to Sealed Air's financial strength, the company's high leverage, coupled with the cyclical nature of the industry, could increase the volatility of the firm's stock.
Pound Slides as Market Reacts Dovishly to Wage Developments

Expert opinion on the aluminum market: an overview on the opportunities, risks and future of the sector

Maxim Manturov Maxim Manturov 19.06.2023 12:52
The aluminum industry plays a critical role in various sectors including transportation, building & construction, electrical engineering, consumer goods production, foil & packaging, machinery & equipment and many others. By some estimations, the global aluminum market is projected to grow from roughly $169 billion in 2022 to almost $256 billion by 2029, at a CAGR of 6.1% in the forecast period. Current economic cooldown shouldn’t be a barrier for increased global demand for aluminum. Two major sectors, the transport, which accounts for almost a third of the global aluminum market share, and construction, are the two main drivers for the aluminum market. Another major growth factor is machinery demand, which has been growing in the aftermath of COVID-19 as industrial activities picked up. Some of the factors driving the demand for aluminum are the implementation of strict greenhouse gas (GHG) and carbon emission requirements, increase in focus on the use of lightweight aluminum for the fabrication of vehicle durable components, and low hazardous emission. Here are some key possibilities and risks emerging from the growing demand for aluminum worldwide.   Possibilities: Growing demand: Demand for aluminum is expected to increase due to its lightness, recyclability and its use in sectors such as electric vehicles, renewable energy infrastructure and lightweight building materials. Sustainability Focus: Aluminum's recyclability and low carbon footprint make it attractive to industries looking for sustainable solutions, making it attractive to companies and investors looking for sustainability. Technological advances: Continuous research and development is aimed at improving the properties and applications of aluminum, opening the door to new opportunities in various industries.   Risks: Price Volatility: The aluminum market is subject to price fluctuations, which are affected by factors such as global economic conditions, supply and demand dynamics, energy costs and geopolitical events. Raw material availability: Aluminum production is dependent on the availability and cost of raw materials such as bauxite and alumina. Any disruptions or price fluctuations in these markets could affect the profitability of aluminum companies. Regulatory and trade policy: Changes in regulations and trade policy, including tariffs and export restrictions, could affect the global aluminum market, which could lead to problems for companies operating in this sector. As the market is being shaped by these possibilities and possible risks, its future is ultimately dependent on whether it could satisfy the increased focus on sustainability and the transition to a low-carbon economy.  Demand for aluminum is expected to continue to grow as industries seek lightweight and energy efficient materials, especially fir the global infrastructure development projects in emerging markets, and the market could see significant growth if it succeeds in technological innovation.

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