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Move over Apple, Microsoft now the world’s most valuable company

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October 29, 2021

By Subrat Patnaik

(Reuters) -Apple Inc lost its crown as the world’s most valuable public company to Microsoft Corp on Friday, as the iPhone maker’s shares fell about 2%.

Apple took a $6 billion hit to its sales during the fiscal fourth quarter due to persistent global supply chain problems, leading to a miss on Wall Street expectations. Top boss Tim Cook said the impact will be even worse in the current holiday sales quarter.

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“Compared to less hardware focused FAANG peers, Apple is also a lot more exposed to supply chain disruption,” said Sophie Lund-Yates, equity analyst at Hargreaves Lansdown.

Apple’s shares dropped 1.8% to end the session at $149.80, giving the company a market capitalization of $2.48 trillion. By contrast, shares of Windows software maker Microsoft rose 2.2% to a record high of $331.62, ending the session with a market capitalization of $2.49 trillion.

Apple, which has repurchased $421.7 billion worth of shares over the years, had announced a massive $90 billion share buyback in April. As a result, the outstanding stock pool keeps shrinking, and the company ended its fiscal fourth quarter with 16.4 billion shares.

Microsoft’s stock has surged 49% this year, with pandemic-induced demand for its cloud-based services driving sales. Shares of Apple have climbed 13% so far this year.

Apple’s stock market value overtook Microsoft’s in 2010 as the iPhone made it the world’s premier consumer technology company. The companies have taken turns as Wall Street’s most valuable business in recent years, with Apple holding the title since mid-2020.

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Analysts say Apple has managed the supply chain issue well, but with Cook warning of more pressure, the door is open to a hit to its performance as the holiday season kicks in.

In contrast, Microsoft on Tuesday forecast a strong end to the calendar year. But it also warned that supply-chain woes will continue to dog key units, such as those producing its Surface laptops and Xbox gaming consoles.

(Reporting by Subrat Patnaik and Sruthi Shankar in Bengaluru; additional reporting by Caroline Valetkevitch in New York; Editing by Bernard Orr, Saumyadeb Chakrabarty, Maju Samuel and Sonya Hepinstall)

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Wood’s ARK fund fails to join broad market rally as lockdown stocks slip

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November 30, 2021

By David Randall

NEW YORK (Reuters) – The broad market relief rally on Monday left many so-called stay-at-home stocks behind, dealing another blow to Cathie Wood’s ARK Innovation fund.

The $18.6 billion ARK Innovation fund, which outperformed all other U.S.-based equity funds last year due to its outsized holdings of stocks that rallied during the economic lockdowns, dropped 0.5% in morning trading Monday, well behind the 1% gain in the S&P 500.

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The benchmark index dropped nearly 2.3% Friday on news a new coronavirus variant, now known as Omicron, had been identified in southern Africa, spurring new travel restrictions worldwide. Yet global equity markets made up some of that lost ground Monday on reports the new variant may produce mild symptoms.

Signs Omicron will not deal a severe blow to the economy are prompting investors to remain in cyclical stocks, said Phil Orlando, chief equity market strategist at Federated Hermes.

“This is not February of 2020 when the world is about to shut down. If anything we think the economy will continue to improve from here,” he said.

ARK Innovation’s declines were widespread Monday, with 8 out of the fund’s 10 largest holdings down for the day. Telemedicine company Teladoc Health Inc, the fund’s second-largest holding, fell 5.1%, while streaming company Roku Inc shed 2.6% and Zoom Video Communications Inc lost 3.2%.

For the year, ARK Innovation is down 14%, while the benchmark S&P 500 is up 23.4%. That underperformance places ARK Innovation among the worst-performing mid-cap growth funds for the year to date, according to Morningstar. It remains among the top-performing funds over the last 5 years.

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Ark did not respond to a request to comment for this story.

(Reporting by David Randall; Editing by Mark Porter)

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Oil prices rise on bets OPEC+ will hold off output hike

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November 30, 2021

By Sonali Paul

MELBOURNE (Reuters) – Oil prices climbed on Tuesday, extending a rebound from last week’s plunge on growing expectations major producers would pause plans to add crude supply in January amid uncertainty over the severity of the Omicron coronavirus variant.

U.S. West Texas Intermediate (WTI) crude futures jumped 99 cents, or 1.4%, to $70.94 a barrel at 0105 GMT, adding to a 2.6% rise on Monday.

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Brent crude futures climbed 82 cents, or 1.1%, to $74.26 a barrel, after gaining 1% on Monday.

Oil plunged around 12% on Friday along with other markets on fears the heavily mutated Omicron would spark fresh lockdowns and dent global growth.

The World Health Organization said on Monday Omicron posed a very high risk of infection surges, and several countries stepped up travel curbs. It is still unclear how severe the new variant is and whether it can resist existing vaccines.

With the demand outlook under a cloud, expectations are growing that the Organization of the Petroleum Exporting countries, Russia and their allies, together called OPEC+, due to meet on Dec. 2 will put on hold plans to add 400,000 barrels per day (bpd) of supply in January.

“We think the group will lean towards pausing output hikes in light of the Omicron variant and the oil stockpile release by major oil consumers,” Commonwealth Bank commodities analyst Vivek Dhar said in a note.

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Pressure was already growing within OPEC+ to reconsider its supply plan after last week’s release of emergency crude reserves by the United States and other major oil-consuming nations to address soaring prices.

“Following the global strategic reserve releases and the announcement of dozens of countries restricting travel to and from South Africa and neighbouring nations, OPEC and its allies can easily justify an output halt or even a slight cut in production,” OANDA analyst Edward Moya said in a note.

Also weighing on the market is the prospect of a resumption of oil exports from Iran, following upbeat comments from diplomats as talks resumed on Monday between world powers and Iran on reviving a nuclear pact.

(Reporting by Sonali Paul. Editing by Gerry Doyle)

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Main IKEA retailer’s profits jump despite ‘unprecedented challenges’

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November 30, 2021

By Anna Ringstrom

STOCKHOLM (Reuters) – Ingka Group, the owner of most IKEA stores world-wide, reported on Tuesday a jump in annual profit on the back of record demand for home furnishing as people stay at home more due to the pandemic.

Despite more temporary store closures due to pandemic related restrictions than the year before, and product shortages due to the global supply chain crisis, operating profit in the 12 months through August was up 31% at 1.9 billion euros. Sales were up 6%, to above pre-pandemic levels, with online sales jumping to account for 30% of total sales, against 18% the year before.

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Compared to the pre-pandemic fiscal 2019, profit was still down, by 8%, due to high investment levels. Capital expenditure was up 52% on the year, at 3.2 billion euros, as Ingka accelerated investments in digitalisation, new inner-city store formats, existing stores, and distribution and delivery networks.

Chief Financial Officer Juvencio Maeztu told Reuters he expected sales to grow also in the current fiscal year, and profits to be at least as high as in the past year. Investment levels would probably remain at least as high as in the past year, he said.

“Our journey to create a better IKEA forges ahead in a world that faces unprecedented challenges. COVID-19 will continue to impact our business and the communities we are a part of,” the company said in a statement.

“The global supply and transport crisis will require a resilient, flexible response. Efforts across the value chain will continue to mitigate the challenges with product availability, inflation, prices of raw materials and transport that are expected to continue into FY22.”

Budget furniture brand IKEA operates through a franchise system, with Ingka the main franchisee to brand owner Inter IKEA with 392 stores including city stores, and 73 smaller store formats.

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Inter IKEA, which is in charge of design and supply, in the past year absorbed substantially higher costs for raw materials and transports, but has flagged it will raise prices to its retailers this year in the face of continued high supply related costs.

Ingka’s Maeztu said in the interview that he could not rule out that Ingka would also raise prices this year.

(Reporting by Anna Ringstrom; editing by Richard Pullin)

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