The Making of a Multi-Bagger Stock
4 Customs Street: 28 Aug 2023
Good Morning 😃
How are you doing?
Welcome to this week’s edition of 4 Customs Street, our weekly newsletter on the stock market.
The newsletter is divided into two:
Green White Green—focused on the Nigerian stock market.
Star-Spangled Banner—focused on the US stock market.
Green White Green Last Week
Nigeria’s GDP growth slows to 2.51%
Nigeria's GDP grew by 2.51% in the second quarter of 2023, which is lower than the 3.54% growth in the same period last year. This slower growth is due to tough economic conditions.
GDP (Gross Domestic Product), is a measure of the total economic output of a country. It adds up the value of all final goods and services produced within the country's borders in a given period, usually a year or a quarter.
The services sector was the main driver of this growth, expanding by 4.42%, contributing 58.42% to the total GDP. Agriculture grew by 1.50%, better than the 1.20% in Q2 2022.
However, the industry sector shrank by -1.94%, an improvement from -2.30% in Q2 2022. Agriculture and industry contributed less to the GDP in Q2 2023 compared to the same period in 2022.
The oil sector contributed 5.34% to the GDP while the non-oil sector contributed 94.66%.
GDP matters because it gives us a snapshot of a country's economic health and the overall size of its economy. It helps us understand if the economy is growing or shrinking and provides insight into the standard of living and economic well-being of the people.
Only 4.1% of Nigerians are unemployed ~ Nigeria Bureau of Statistics
While a significant portion of Nigerians were engaged in some form of work, many faced part-time or informal employment, highlighting challenges in finding stable and full-time jobs.
Below are the key points from the Nigeria Labour Force survey released by the Nigeria Bureau of Statistics.
Employment levels: In the last two quarters (Q4 2022 and Q1 2023), around 73-77% of working-age Nigerians had some form of job, even if it was just for an hour a week and paid little.
Unemployment rate: The percentage of people without jobs was 5.3% in Q4 2022 and 4.1% in Q1 2023. This is similar to other developing countries where people take any work they can to support themselves due to a lack of social protection.
Types of work: More Nigerians were self-employed (running their businesses or farming) than those with wage jobs. About 11-13% had wage jobs, while 73-75% were involved in their own businesses or farming.
Part-time work: Around 36% of employed people worked less than 40 hours a week. This was more common among women, those with lower education, young individuals, and rural residents.
Underemployment: The underemployment rate, indicating those employed but willing to work more hours, was 13.7% in Q4 2022 and 12.2% in Q1 2023.
Informal employment: A large percentage of employed Nigerians (around 92-93%) were engaged in informal jobs, including agriculture, which are less regulated and may not offer stable income.
Trading highlights at the Nigerian Exchange Group
Last week, investors at the Exchange traded a total of 1.812 billion shares valued at N29.299 billion in 31,163 deals. The week before this, there were 1.689 billion shares worth N29.407 billion traded in 29,477 deals.
The most active industry was financial services, where 936.685 million shares worth N10.116 billion were traded.
Conglomerates came next, with 461.589 million shares worth N2.333 billion.
The conglomerate sector is like a collection of different businesses that belong to one big company. These businesses can be all sorts of things, like banks, factories, stores, and more.
Consumer goods followed with 127.310 million shares worth N5.003 billion.
The top three stocks that were traded the most were Transnational Corporation Plc, Fidelity Bank Plc, and Access Holdings Plc.
United Bank for Africa Plc delays half-year 2023 audited financial statements
United Bank for Africa Plc (UBA) has informed the Nigerian Exchange Limited (NGX), shareholders, and the investing public about a slight delay in publishing the bank’s half-year 2023 audited financial statements (AFS). UBA now aims to submit them to NGX no later than Friday, September 15, 2023.
Delay in release of Stanbic IBTC's 2023 half-year audited financial statements (AFS)
Stanbic IBTC Holdings Plc has announced a slight delay in the release of its 2023 half-year audited financial statements. The delay arises from the company pursuing approval from the Central Bank of Nigeria (CBN), for the half-year audited financial statements. Once the approval is obtained, Stanbic IBTC will proceed to release the financial statements to the market.
Star-Spangled Banner Last Week
NVIDIA: The making of a multi-bagger stock
A multi-bagger stock is an equity stock that gives a return of more than 100%.
NVIDIA experienced a significant boost in its financial performance during the second quarter of 2024, with a remarkable 101 percent growth in revenue on an annual basis. In its recent report, NVIDIA disclosed a quarterly revenue of $13.51 billion, with a substantial portion of this figure, $10.3 billion, originating from the company's data centre segment.
Perhaps the most unexpected development was NVIDIA's impressive projected performance. The company is now poised to achieve $16 billion in sales for the third quarter of 2024, a noteworthy departure from the earlier consensus estimate of $12.61 billion.
Renowned Rosenblatt analyst, Hans Mosesmann, has substantially revised NVIDIA's stock target from $800 to a significant $1,100. This revision implies a potential increase of around 130 percent from the prevailing stock price.
From its humble value of $4.81 per share in 2014, NVIDIA's shares now command a significantly higher value of $480 per share, indicating a remarkable cumulative gain of 9,879 percent. Should Rosenblatt's ambitious projection materialise, the potential gains would be an astounding 22,769 percent relative to the closing price of 2014.
Zoom releases second-quarter results
Zoom's stock experienced an increase of up to 8% in after-hours trading on Monday following the announcement of better-than-expected fiscal second-quarter results.
Here’s how the company did:
Earnings: $1.34 per share, adjusted, vs. $1.06 per share as expected by analysts.
Revenue: $1.14 billion, vs. $1.11 billion as expected by analysts.
The company's revenue in the quarter ending on July 31 grew by 3.6% compared to the previous year. Net income for the quarter rose to $182 million from $45.7 million in the same period of 2022.
However, Zoom's growth rate is slower than it was two years ago, when the impact of Covid-19 led to a significant revenue increase. The company had about 218,100 enterprise customers by the end of July, a 1% increase from April 30. Zoom defines enterprise clients as those working with its direct sales teams, resellers, or partners.
Although Zoom's quarterly guidance slightly missed expectations, its full-year forecast was raised by management. They now predict adjusted earnings per share of $4.63 to $4.67 and revenue of $4.485 billion to $4.495 billion for the entire fiscal year 2024. This implies 2% growth at the midpoint of the range. Despite this positive news, Zoom's stock has seen a 1% decline over the year, in contrast to the S&P 500 index's 15% increase during the same period.
BRICS expansion and challenges
BRICS, a group of emerging nations trying to boost their global influence, just got bigger by adding six new countries, including Saudi Arabia and Iran. This move makes China stronger and reduces Russia's isolation, but they're facing economic issues that could mess with their plans. While Iran joining the group brings up worries about tensions, the group is a mix of different countries aiming to change the world's financial and governing systems.
They couldn't quite pull off creating a new currency to challenge the US dollar and the fact that Russia's president skipped the meeting due to some heavy allegations. Besides, economic struggles in China and Russia added some drama to the mix. People aren't totally convinced this expansion will work smoothly, especially with Iran now on board.
Saudi Arabia, surprising everyone by joining, shows there are some interesting shifts happening in the Middle East. India is in the mix, too, even though they're not 100% sold on everything. BRICS started out as an economic thing but now it's getting all political, and folks are worried about where it's headed. The United States acknowledges the expansion but asserts that it does not view BRICS as a geopolitical rival.
Lowe's uses RFID to prevent theft
Joe McFarland, Lowe's Executive Vice President of stores, mentioned during a conference call that Lowe's Cos. Inc. is integrating Radio Frequency Identification (RFID) technology into power tools to prevent theft. This technology, though not visible to customers, renders the tool inoperable until it's scanned and purchased.
Lowe's stock saw a 4.1% increase, surpassing the S&P 500 index's 0.1% gain on Tuesday, August 22, 2023. Retail earnings have been impacted by "shrink," which involves various factors like damaged items, but theft and organised retail crime, highlighted by major retailers like Target Corp. and Home Depot Inc., are increasingly significant contributors.
USDC dissolved as Coinbase acquires minority share
The Centre Consortium, which issues the second-largest stablecoin USD Coin (USDC), is being dissolved as Coinbase acquires a minority share in Circle Internet Financial. As a result, Centre will no longer exist as an independent entity, and Circle will take over as the issuer of USDC, assuming governance and operations responsibilities. The revenue from interest earned on the dollar reserves backing USDC tokens will now be equally shared between Circle and Coinbase.
Previously, USDC was governed by a consortium formed by Coinbase and Circle, but now Circle will be the sole issuer. USDC will expand to new blockchains by the end of October, increasing its availability to 15 networks. This move comes as USDC, the second-largest stablecoin, holds a market capitalisation of nearly $26 billion, trailing behind Tether (USDT) with an $83 billion market cap.
Instacart's profitable IPO
An IPO, or Initial Public Offering, is like a company's grand opening to the public. It's when a private company decides to sell shares of its ownership to anyone who wants to buy them.
Instacart, the San Francisco-based grocery delivery service, announced its core operations became profitable following the release of its long-awaited stock market filing. Additionally, it revealed an investment from PepsiCo Inc. In the filing submitted to the US Securities and Exchange Commission, Instacart stated that PepsiCo agreed to purchase $175 million worth of preferred convertible stock.
Convertible stock, also known as convertible preferred stock, is a type of investment that combines features of both stocks and bonds. It's like a special kind of stock that can "convert" into a certain number of the company's common shares at a predetermined ratio.
The company also mentioned the participation of cornerstone investors like Norges Bank Investment Management, associated with Norges Bank, as well as entities linked to venture capital firms TCV, Sequoia Capital, D1 Capital Partners, and Valiant Capital Management, in its upcoming IPO.
In the six months ending on June 30, Instacart achieved $1.48 billion in revenue, marking a 31% increase from the same period the previous year. Notably, advertising and other revenue saw a 24% surge, reaching $406 million. The company reported a net income of $242 million during this half-year duration, a significant improvement from the $74 million loss recorded in the corresponding period last year.
Arm files IPO on Nasdaq
Arm, the chip design firm owned by SoftBank, has initiated the process of going public by filing for an IPO on the Nasdaq exchange. This move is anticipated to be one of the most significant IPOs in recent times. This action comes 18 months after Nvidia, a chip manufacturer in Silicon Valley, dropped its plan to acquire Arm for $40 billion due to legal opposition from the Federal Trade Commission.
In the recently submitted filing, Arm did not specify the expected share price. The company's revenue for the last fiscal year was $2.68 billion, slightly below the $2.70 billion of the previous year. In the latest quarter, Arm's net income was 10 cents per share, a decrease from the previous year's 22 cents.
The decision will offer SoftBank, the parent company of Arm, additional funds for increased investment in startups. During a recent discussion with investors and analysts, Masayoshi Son, the CEO of SoftBank, expressed the company's readiness to take an aggressive stance in the artificial intelligence sector. Arm's recent report indicated the shipment of over 30 billion chips based on its technology in the past fiscal year. SoftBank will maintain its majority ownership of Arm.
Star-Spangled Banner This Week
Upcoming reports will cover the job market, including JOLTS, ADP’s National Employment Report, and the Labor Department’s August nonfarm payrolls.
The Case-Shiller National Home Price Index for June will be released, giving insight into home prices.
The BEA will share the PCE Price Index for July, which is the Fed's preferred measure of inflation.
Several companies, including Pinduoduo, Hewlett Packard, Best Buy, Salesforce, Broadcom, UBS, Dell Technologies, and Lululemon Athletica, will announce their earnings.
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