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A record-breaking IPO deluge could be coming this autumn
The latest reports suggest that autumn 2021 will be the busiest period for IPO launches to date.
Potentially hundreds of new public offerings are on their way
2021 has already seen the highest number of initial public offerings since the 2000 dot-com boom. It could be about to see more as we transition into autumn.
CNBC reports that up to 110 companies will go public across the next 3-4 months. That would bring the total number of deals up to 375 – valued at a cool $125bn in fundraising.
In the pipeline, we see a mixture of companies but a significant number of FMCG and food firms are on the radar.
Grocery business Fresh Market, deliver service Instacart, and Greek yoghurt producers Chobani are in the process of making their initial filings. Adding to the list of food-related businesses prepping their IPOs are casual salad restaurant chain Sweetgreen and Impossible Foods, a manufacturer of plant-based meat alternatives.
A number of fashion firms are involved too. Warby Parker, the prescription eyewear business, will likely be going live with a direct listing in the coming months. Authentic Brands, which owns the Nautica and Eddie-Bauer brands, has been eyeballed as about to go public, alongside Indian e-commerce retailer Flipkart and sustainable footwear brand Allbirds.
Digital payment processor Toast and mobile payments processor Stripe represent some of the tech stocks possibly launching IPOs.
They may be joined by several cryptocurrency filings. We’ve already seen Coinbase, the US largest crypto exchange, go public, and there are indicators other digital currency businesses will join them. Sustainable crypto mining firm Stronghold Digital Mining is one such company.
Others to watch include EV builder Rivian Automotive, global asset manager TPG and Republic Airways.
In terms of direct listings, the only one mentioned so far is Warby Parker.
What about SPACs?
It’s thought that SPACs – special-purpose acquisition companies – may have a tougher time raising capital for initial offers in the second half of 2021. Greater scrutiny from regulators like the SEC and a drop off in investor returns from SPACs may contribute to this.
The first half of the year, however, was a SPAC bonanza. 310 such offerings were launched then, generating $70bn in funds. A further 410-blank cheque companies smashed records too when they raised $109bn in the same period.
Will investors make returns?
It’s hard to say at this stage. After market performance has generally been negative across 2021 so far. Some much-anticipated tech stocks, like Coinbase or Robinhood, underperformed after going public for a myriad of reasons. In the case of Robinhood, its links to the volatile cryptocurrency market has caused several fluctuations in the share price.
Pricing IPOs towards the lower end may help sustain growth going forward. Some IPO-tracking ETFs, such as the Renaissance Capital IPO ETF, were flat towards the end of H1 2021, but have subsequently gained traction in July and August. Public offerings since then have been had lower pricings, which may have fed into heightened investor interest.
With the rumoured number of new IPOs, however, it may be worth prepping your trading calendar now. Be sure to stay tuned to Markets.com for further initial public offering updates.
Are these UK stocks ready to mount a recovery surge?
With the UK economy growing at record speed in the last quarter, the markets are looking at recovery stocks to add to their portfolios. HSBC analysts have revealed some equities that could be ones to watch as the country’s economic recovery rolls on.
UK recovery stocks
HSBC picks British stocks to watch as economy stirs back to life
In a research note published last week, HSBC highlighted several stocks it believes could perform very well in a recovering UK economy.
HSBC analysed 68 midcap stocks, i.e., mid-sized companies, to gauge how their 2019 earnings would compare against their theoretical 2022 levels.
This list is similar to Goldman Sachs’ “conviction stocks” list of equities it thinks can overperform in 2021.
“For the most part the market has already priced in a recovery,” HSBC said. “Of the 68 names, there are 24 where consensus doesn’t expect to see a full recovery by FY22. If we narrow the list further, only 12 are still trading below the prevailing share price on 1 February 2020.”
The implication is that the stocks flagged by HSBC have yet to have recovery fully priced in. As they’re currently trading below their pre-pandemic levels, they have a sheen to them that should attract investors and traders alike.
Of course, no analysis is perfect. HSBC could still be wrong, and these stocks may underperform. Because of their status as “recovery” assets, their performance essentially hinges on how well the UK economy performs from here on out.
The UK economy roared in 2021’s second quarter, accelerating at a rate of 4.8% after a first quarter contraction of -1.6%. Momentum, however, is expected to slow towards the end of the year. The Bank of England predicts Q3 GDP growth of 3%, for instance, while other analysts suggest it’ll be more like 1.5%.
Despite this, things are still relatively good for Britain, all things considered. 75% of adults have had two jabs. The vast majority of travel and social restrictions have been lifted. There’s a sense of the country coming back to life.
With that in mind, let’s look at some standouts from HSBC’s recovery stocks list.
UK recovery stocks to watch
The headline stocks on HSBC’s recovery watchlist all come from a variety of different sectors and industries. This approach takes in the full sweep of key areas of the UK economy and doesn’t weigh too heavily in one direction.
Stocks to watch, according to the bank, include:
- Marks & Spencer – Retail
- Greencore – Food producer
- WH Smith – Retail
- Nichols – Drinks producer
- IWG – Office & property rentals
“All have been hit hard in the pandemic – in large part due to working from home – and we think they should see a full recovery in due course, but the shares have yet to price this in. We rate all of these names Buy,” HSBC said.
Several stocks also had their target prices raised by HSBC.
TT Electronics, a manufacturer of electronic components and subsystems, was rated up to £0.315 from £0.310.
Likewise, semiconductor supply XP Power saw its target price upgraded from £61.00 to £64.90.
Of the XP Power hike, HSBS analysts said: “We have a Buy rating as we expect growth to surprise on the upside due to the strength of the capex cycle in semiconductors.”
In response to strong trading and faster-than-anticipated recovery, audio-video firm Midwich also enjoyed a target price improvement from HSBC. The bank upped Midwich’s target to £6.30 from £5.85.
“The H1 2021 trading update indicated a strong rebound with healthy organic revenue growth of 25% y-o-y [year-over-year] vs our estimate of -4%,” HSBC said, regarding Midwich.
Cryptocurrency update: BTC rally pushes crypto market above $2 trillion
Key tokens start the day with greens across the board, with Bitcoin and Ethereum leading the charge.
Global cryptocurrency market hits $2 trillion
With BTC and ETH reaching highs not seen for months, the total value of the global crypto market has exceeded $2 trillion for the first time since May.
Bitcoin crept above $48,000 on Monday morning, although it fell back towards $47,175 as the day progressed. Ether, which has strengthened on a successful network upgrade, is on a seven-day high after gaining 11% throughout the week. Cardano is up 53% across the last seven days.
It’s a good sign of market confidence in digital tokens. Bitcoin in particular had been experiencing a torrid couple of months recently. A strong sell-off in July, precipitated by falling token prices influenced heavily by China’s crypto crackdown, caused prices to dip below $30,000. Now, they’re rallying strongly and eyeing up the next resistance level.
During the BTC sell-off with prices at their lowest in July, the overall crypto market cap was around $1.12 trillion. Its peak, recorded in May when Bitcoin was trading at all-time highs, totalled $2.5 trillion.
There is still ground to recover. Volatility, however, is never far away from the world’s cryptocurrency markets.
While the bulls are feeling pretty good, there is still time for prices to go south again. Analysts predict the current BTC surge could top out at around $55,000. After that, the token may begin to fall away below $30,000 again.
The impact of the upcoming US Infrastructure Bill’s crypto tax provisions has yet to be truly felt.
That said, some are still optimistic. Others are predicting BTC hold its place above $40,000 and possibly over $50,000, going forward.
Singaporeans prefer Ether
A joint survey by digital token exchange Gemini, crypto market data analysts CoinMarketCap, and finance platform Seedly has revealed Singapore’s favourite coin: Ether.
78% of those surveyed by the group stated they hold onto Ether, compared to 69% that hold Bitcoin. Cardano was the third most popular token with 40% of respondents saying they had invested in it.
4,000 adults were surveyed as part of this study. 67% of respondents said they included digital tokens in their portfolios, and two-thirds of that group said they had increased their crypto holdings during the pandemic.
A fifth of those surveyed said that half or more of their investments are in cryptocurrencies.
Ether has been tipped to overtake Bitcoin as the world’s most popular digital token in the future. Many decentralised finance (DeFi) apps run off the Ethereum blockchain network, for instance, and users wishing to use said blockchain must pay a small fee in ETH to do so.
The network’s recent London Fork upgrade has introduced more user-friendly features, which may explain why ETH is rallying right now.
Still, with Bitcoin accounting for up to 68% of the total worldwide crypto market, Ether has some way to go before it can challenge for the top spot. It does appear, however, to be moving in the right direction – particularly if one nation’s traders and investors are seeing high potential in Ether.
The top five crypto-investing banks revealed
Institutional support for cryptocurrencies has been steadily building throughout the year, even with Bitcoin’s erratic price behaviour. Banks have stepped up their digital finance services and offers and been keen to grab their slice of the $2 trillion market.
A report from Blockdata has put together the 13 banks investing the most capital into blockchain networks and cryptocurrency wallets. Together, they represented over $3bn in investments. This includes token purchases and acquisition, as well as investment into tech companies and others in the digital finance ecosystem.
Blockdata said it reviewed banks in terms of size of funding rounds as a proxy of investment into the crypto space, saying it used that measure as banks participated in funding rounds with multiple or many other investors.
The top five crypto-investing banks as identified by Blockdata are:
- Standard & Chartered – $380m in 6 investments
- BNY Mellon – $321m in 5 investments
- Citibank – $279m in 14 investments
- UBS – $266m in 5 investments
- BNP Paribas – $236m in 9 investments
While the above banks represent those betting the most on the crypto sector, it’s starting to pick up steam amongst other financial institutions.
55% of the world’s 100 biggest banks by assets under management are investing directly or indirectly in companies and projects related to digital currencies and blockchain, according to Blockdata research.
A guide on how to start investing for new pandemic investors
Millions of beginners chose to start investing and trading during the pandemic. If you were one of these, or you’re thinking about taking the plunge, here is what to watch out for.
Did you start investing over the pandemic?
Newcomers hit the investment & trading scene
A recent survey undertaken by Charles Schwab revealed 15% of its clients started trading or investing during 2020 at the height of the pandemic.
A mixture of more time at home and access to trading and investment platforms has led to an upsurge in new retail clients. The bulk of these newcomers are still planning on staying investors and traders after the pandemic subsides.
Interestingly, while there has been a considerable rise of youngbloods investing in Millennial’s preferred assets like cryptocurrency and the so called meme stocks, the mix of newcomers isn’t entirely dominated by younger investors. From Boomers, Gen Xers, and Millennials, there is healthy interest amongst most adult age groups.
What’s more interesting is that Investopedia research suggests a third of pandemic investors knew nothing about investing or trading prior to opening their first position.
If you wish to join them, there are some basic principles that could help you at the start of your journey.
How to start investing in stocks
To start investing in stocks and shares, you’ll first need to know what they are and why you are investing.
The act of investing is buying an asset to keep in the hopes that it will gain value over a long period of time.
A stock, also known as an equity, is security that represents ownership of a small percentage of a company. Units of stock are known as shares. By owning them, you become a company shareholder, and are thus entitled to a proportion of a company’s potential profits appropriate to the number of shares you own.
Some pay dividends, i.e. a share of company profit, but other businesses prefer to reinvest profit back into the company.
It’s a common misconception that investing is only for people who have millions to spend. You can start from a low base. However, investing carries risk of capital loss, no matter how much you choose to sink into different assets. The value of your investment can rise or fall. Be mindful before making any deposits or committing any capital.
Other asset classes to invest in
Of course, stocks are not the only asset to invest in. Plenty of options are available to you. Amongst the most popular financial assets are:
- Commodities – Oil, natural gas, crops, metals and so on
- Gold – A traditional store of wealth and a relatively stable investment
- Forex – Foreign currency
- Cryptocurrency – Digital currencies like Bitcoin and Ethereum
- Mutual funds – A collection of assets overseen by a financial manager
What about trading?
Trading is similar to investing but is based around short term activity. With trading, you do not own the underlying asset. Instead, you trade on the asset’s price movements using products like Contracts for Difference (CFDs) or activities like Spread Betting.
Also, unlike investing where you want your asset to increase its value over time, trading means you can speculate on an asset’s price failing. This is known as shorting.
Trading allows you to get market exposure for a fraction of an asset’s total value. Brokers like Markets.com offer leverage, which allows you to trade on margin. That means you only have to place down a small percentage of how much an asset is worth to open a trade.
With trading on margin, you can potentially make some big wins. However, it would mean any losses would be magnified too, making it a riskier endeavour than simply investing.
Mistakes to avoid if you want to start investing or trading
Investopedia’s recent research into the pandemic investor surge suggests 56% of newcomers weigh their portfolios too heavily in favour of a single asset. Most successful investors and traders ensure they have a diverse portfolio.
Diversification is important because it helps mitigate risk and gives balance to your trades. Even if you’re looking at how to start investing in shares, it’s important to have a broad base of stocks across different sectors. That way, if one sector is performing badly, you can use others to hedge against potential losses with gains from other stocks.
It’s important to also consider different assets, not just equities, when putting a portfolio together too.
Doing little to no research
When getting started with how to invest in stocks, it’s massively important to do your research. Investing and trading comes with a risk of capital loss. There are lots of factors at play that affect stock’s price, but there is a lot of information available to you to help you make a research-based decision prior to committing any money.
There are lots of ways to do your due diligence and research. Fundamental and technical analysis, for instance, is used by many successful investors when they pick stocks. These look at fundamental aspects of a stock, i.e. how the company is performing financially, and the technical, such as price trends over time.
You can also use the multitude of tools available to you on our trading and investing platforms, including powerful charts and sentiment indicators, to help you decide.
While we cannot advise you on which assets are worth spending your money on, we can say it is better to do research than go in blind. Fail to prepare and prepare to fail. So, read up on things like company performance, check earnings reports. Has there been any management or personnel changes? What are the broader market conditions? All these will give you a better picture on whether to invest or not.
Emotion-led decision making
This pairs with the above. Investopedia’s look into new investors’ habits reveals that just over a quarter of pandemic players are trading or investing on gut feeling alone. It’s not advisable to do that.
Experience may lead you to be able to spot trends down the line, but if you’re just about to start investing, do as much research as possible. Try to not let yourself be ruled by emotions. Investing is a long-term process. Spontaneity and knee-jerk reactions should be avoided.
Careful research and patience are what separates a successful investor from a mediocre one.
Taking investment advice from unreliable sources
No one can definitively tell you how to spend or invest your own money. Everyone’s circumstances and attitudes to risk are different.
Recently, with the rise of the Reddit forum /r/wallstreetbets and meme stocks (GameStop, AMC, etc.), more and more investors are turning to untrustworthy corners of the internet to get advice. It can be tempting to hop on the bandwagon and pour cash into flavour of the month equities.
Always take their advice with a grain of salt. YouTubers and influencers are often seeking to aggrandise themselves, grow their audience, and ultimately make money for themselves.
Instead, if you are seeking analyst opinions, look for reputable sources, such as the Financial Times or CNBC. Speaking with a reputable financial advisor can also help but, as if you were looking at assets to add to your portfolio, always ensure you’ve researched them thoroughly beforehand. Look at their client reviews and so on.
How you can start investing with Markets.com
At Markets.com, our Share Dealing and Investment Strategy Builder services allow clients to start investing at their own pace.
Asking yourself how to start investing in shares? Click here to learn more about our investment services.
Please note: these services are only available in certain jurisdictions.
Robinhood files for IPO: Just PFOF
- Regulatory scrutiny may present risk to business model
- Mega growth in active clients
- Crypto a growing part of the business
US online trading company Robinhood has finally filed for its long-awaited public listing in what’s sure to be one of the most closely watched IPOs of recent years. The company, which enjoyed rapid growth last year but has been at the centre of a storm over trading outages and restricting access to trades earlier this year when capital limits were reached, is seeking a valuation of around $40bn. The stock is set to list on the Nasdaq under the ticker HOOD.
The S1 prospectus dropped just a day after FINRA issued Robinhood with a $70m for “widespread and significant harm” to its customers. The investigation remains ongoing and Robinhood expects more penalties. There are numerous other cases, including class action suits relating to Robinhood restricting access to trading on a number of very volatile stocks at the height of the GameStop frenzy. As I commented on back in January when all this was taking place, I didn’t think Robinhood wanted to stop trading – it was just a question of regulatory capital requirements and Value at Risk models that left the clearing house demanding more cash up front.
Since having to secure $3.5bn from investors PDQ, Robinhood has strengthened the balance sheet considerably and now has about $4.8bn in cash or cash equivalents, plus it has a new $2.2bn revolving credit facility for financing margin trading in the event of another volatile episode.
“Our vision is for Robinhood to become the most trusted, lowest-cost, and most culturally relevant money app worldwide,” the company said in the SEC filing document. Part of this has involved offering questionable products (like stock options) to relatively unsophisticated traders. (Although the GameStop frenzy proved the Reddit crowd could be very sophisticated indeed, ganging together to concentrate out of the money calls where dealers couldn’t hedge on stocks with lots of short interest, the concentrated buying of the physical to squeeze shorts and create a gamma squeeze on the dealers). The tragic suicide of one customer
Robinhood has ridden – and in many ways helped fuel – a boom in retail trading in recent years, particularly since the pandemic hit. Retail investing now comprises roughly 20% of US equity trading volume, doubling in the decade from 2010 to 2020. “Yet, we believe there is still significant room for growth,” the company asserts. Meme stocks are a big part of the business and I think this presents a risk, albeit Robinhood itself could benefit from becoming the next big meme stock itself – a lot depends on how much reputational damage it suffered this year and how much good faith it retains among the retail crowd. The fact that it is reserving as much as 35% of the shares at IPO for its retail clients could be a master stroke.
For the year ended December 31, 2020, total revenue grew 245% to $959 million, up from $278 million in 2019. But it’s still not exactly profitable, recording net income of $7 million, compared to a net loss of $107 million in the prior year. Adjusted EBITDA rose to $155 million, compared to negative $74 million.
Fuelled by the meme stock craze, the first three months of 2021 saw total revenue grow 309% to $522 million, up from $128 million in the same period of 2020. However it recorded a net loss of $1.4bn in the quarter due to a $1.5 billion fair value adjustment to its convertible notes and warrant liability.
Incredibly, Robinhood has doubled the number of users since the start of the year, with 31m accounts. Of these, 18m are funded, representing a 151% increase from last year. Fundraising in 2020 indicated a market valuation of around $11bn, but the rapid growth in active accounts and revenues this year has seemingly propelled the company to seek a much larger valuation.
Payment for order flow
Robinhood came under fire in the first quarter of 2021 as meme stock craze exploded. Among the many charges levelled against the platform was the practice of paying for order flow. Robinhood sells market makers like Citadel client trades, who will execute at or better than the current market price. This is what enables commission free trading but has come under scrutiny as could represent a conflict of interest. Nevertheless, Robinhood made 75% of its revenues last year – some $720m – from selling client trades. Of this, about half comes from Citadel Securities (34% of total revenues).
This is perhaps the biggest risk for investors: the SEC has already fined Robinhood $65m for misleading customers over PFOF, as it is called. And chief Gary Gensler has ordered a review of the practice, as well as the ‘gamification’ of investing through apps and incentives. This would tend to put Robinhood in the crosshairs of the SEC just as the former seeks to go public and the latter is likely to get stricter. Timing appears problematic for Robinhood.
If the US regulator were to act on PFOF it could hit the very business model that Robinhood has relied on to secure growth so far. “Because a majority of our revenue is transaction-based, including payment for order flow … reduced spreads in securities pricing, reduced levels of trading activity generally, changes in our business relationships with market makers and any new regulation of, or any bans on, PFOF and similar practices may result in reduced profitability, increased compliance costs and expanded potential for negative publicity,” the filing states (my emphasis).
Crypto trading: blame Elon
Robinhood specialises in stocks and stock options, but cryptocurrency trading is a growing part of the business. From just 4% last year, crypto accounted for 17% of revenues in Q1 2021.
Robinhood notes that 34% of its cryptocurrency transaction-based revenue was attributable to transactions in Dogecoin, as compared to 4% for the three months ended December 31, 2020. For a token set up as a joke, that’s a staggering amount – roughly 5% of all Robinhood revenues in the first quarter of the year.
“A substantial portion of the recent growth in our net revenues earned from cryptocurrency transactions is attributable to transactions in Dogecoin. If demand for transactions in Dogecoin declines and is not replaced by new demand for other cryptocurrencies available for trading on our platform, our business, financial condition and results of operations could be adversely affected,” the S1 states.
I tend to think there is always another Dogecoin round the corner. Robinhood currently supports 7 cryptocurrencies on its platform. That compares with 25 at Markets.com.
Regulatory headwinds appear strong, particularly regarding PFOF, which should see the shares trade at a discount. Crypto is also clearly an area that presents a high level of regulatory uncertainty as well as unreliable flow and trading activity. Reputational risk is also a big factor post-GameStop and in a highly commoditized industry, it’s hard to see where it can really deliver much in the way of margin growth. The business is still not really profitable and the valuation of $40bn+ looks well above peers, even assuming growth continues apace this year.
UK investing: Sectors to watch
While the pandemic has by no means ended, there is hope that the UK economy will reopen fully in the second half of 2021. With that in mind, here are some sectors that have been eyeballed as holding great growth potential from a UK investing standpoint.
Sectors to watch for UK investing strategies
The ins and outs of international travel are still being straightened out, but the airline industry and its related infrastructure and suppliers may be about to take to the skies. Of course, this all depends on not just internal policy, but the willingness of other countries to accept tourists, but with travel restrictions loosening, there is high potential in airline stocks.
In terms of what this means for investors, we can use EasyJet as a case study. The orange discount airline has, like many, had a turbulent time in 2020 and into 2021. However, the stock has provided absolute returns of 22.6% over the past year. The Marketsx in-platform trader trends tool has EasyJet on a 96.9% bullish rating.
Stocks like Rolls-Royce, one of the airline industry’s key engine suppliers, are also stocks to watch. It currently holds a 99.3% bullish rating on the Marketsx trends tool.
Over $122bn was invested into green energy projects in the UK between 2010-2019. More funding is on the way. The world’s largest offshore windfarm is currently under construction in Dogger Bank off the east coast. Some £12bn has been pledged by the UK government for future renewable projects, but PricewaterhouseCoopers forecasts the government’s 10 point “green energy revolution” plan may cost upwards of £400bn to implement.
A lot of capital is being poured into clean power generation. Wind is a priority, but so is solar energy, tidal and other forms of renewable energy.
As well as owning stocks in the likes of SSE, which has committed to triple its green energy output by 2030, investors may look into various funds centred on renewables. For example, the NextEnergy Solar Fund offers a dividend yield of 6.5%, while the Gore Street Energy Fund offers a yield of around 6.7%.
Oil & gas
While the future is green, don’t be too quick to write off oil & gas stocks when looking into UK investing and trading strategies. Oil prices are currently trending at some of their highest levels for years. Demand for oil is forecast to soar in the second half of 2021 as the world navigates out of the Covid-19 pandemic.
With that in mind, oil & gas still has potential for investors. Take BP as an example. Goldman Sachs recently identified the stock as one a potential reopening winner with post-pandemic upsides of a huge 45%.
Many supermajors are also looking to futureproof themselves with business investment in renewables and attempting to clean up their act. Look at BP. It has 23 GW of clean power projects in the pipeline and has committed to net-zero carbon emissions by 2050, so may morph over time from oil & gas stock to renewable stock. Certainly, one to watch with interest.
Hospitality includes live entertainment, pubs, clubs, restaurants and so on. Naturally, due to lockdown, the sector has suffered over the course of the pandemic. But there is light at the end of the tunnel. Pubs and restaurants are now offering seated service inside in addition to al fresco options. There have even been some pilot schemes for live events, not least the 10,000-strong Download music festival.
With the reopening of the UK economy, although the lifting of full restrictions has been pushed back to July, hospitality stocks could be poised to boom.
For instance, the Wetherspoons share price gained 45% in the run up to April’s relaxation of dining restrictions. Other pub stocks, like Martson’s have made even greater strides. In Marston’s case, it had made 106% in the six months up to May 2021.
With the Delta variant spreading, however, the UK may be forced back into lockdowns. So, while hospitality stocks have potential, proceed with caution, although that goes without saying when pursuing UK investing.
Risks of UK investing
Whether pursuing business investment, retail trading, or other activities, UK investing comes with risks inherent to all forms of financial speculation. All such activity comes with the risk of capital loss. Always be sure to do your research prior to committing any money and only do so if you are comfortable taking any potential losses.
Wise IPO: everything you need to know
Fintech firm Wise is planning its initial public offering. No date has been set yet, but with the original May deadline now passed, observers think the IPO is coming very soon. Here’s what to watch out for.
Wise IPO: what to watch
What is Wise?
Previously known as TransferWise, Wise is an online money transferring service. The company was founded in London by Estonians Taavet Hinkirus and Kristo Käärmann in 2010 and has since expanded considerably.
Wise allows customers to send money abroad at real mid-market exchange rates, as opposed to higher bank-transfer rates, plus low fees.
As an example, Wise charges less than $8 in fees for sending $1,000 to Europe. Going via a bank would cost $26. This is done on a peer-to-peer basis.
February’s rebranding away from TransferWise lets us see where Wise wants to go. It is no longer just for money transfers.
Wise now offers a multi-currency account, designed to make it easier for people to relocate and let them pay with local currencies when ordering goods online, alongside a debit card service.
How is Wise performing financially?
As of 2020, Wise’s revenues were totalling $300m annually, with a 70% year-on-year growth rate. It boasts over 10 million customers worldwide and employs around 2,200 workers in 11 countries.
Ahead of the IPO, Wise is valued at an estimated $5bn – but the float may take its valuation as high as £9bn according to some of the more over-optimistic forecasts.
Looking at financials, Wise appears very healthy.
Its pre-tax profit for the financial year ended March 2020 to £20m from £10m in 2019. As mentioned above, revenues also jumped 70% between 2019 and 2020.
Profitability within the tough challenger bank and money transfer spheres suggest Wise’s upper management is pursuing a successful strategy. Impressive y-o-y revenue growth and an expanding customer base reinforce this.
Because Wise straddles two worlds, challenger banks and money transferring, it has a variety of competitors. In terms of money transfers, Western Union, MoneyGram, WorldRemit, Remitly, and PayPal are Wise’s chief rivals. In the alternate challenger banking space, Wise’s competitors include Monzo, Revolut and Starling Bank.
Against its rivals, Wise has been praised for the transparency of its fees structure. Offering true mid-market exchange rates is also a big selling point for the brand, reflected in the growing volume of transactions handled by the firm. Wise processed £67bn worth of customer payments in 2020 – nearly double 2019’s £36bn.
Where will Wise be listed?
Wise is likely to go public via a direct listing on the London Stock Exchange. This is something of a coup for the LSE, as it could imply incoming rules changes, such as the introduction of a dual-class share structure and lower float requirements, are enticing more tech firms to list in London.
The London-listing Wise is pursuing will be one of the largest European tech listings since Spotify went public in 2018.
A direct listing means Wise will be offering shares via the London Stock Exchange without the need for any intermediaries. There are several potential reasons why Wise is pursuing such a strategy. Wise could be looking to avoid share dilution, for example, or might be wanting to avoid lock-up periods. It may be a money-saving move too, as direct listings tend to be cheaper than IPOs.
Commentators believe Wise could be pursuing a dual-class share strategy – something that has proven unpopular on other London tech listings, such as Deliveroo. Will it prove the same for Wise?
When will the Wise IPO go live?
As touched on earlier, the original May 2021 IPO deadline has passed. Even so, the market is expecting Wise to go live on the London Stock Exchange very soon.
Trading carries risk of capital loss. Only start trading if you are comfortable taking any potential losses.
Thematic investing: investing in technology
Our next instalment in the thematic investment series looks at which tech stocks to buy. Investing in technology can pay dividends – but it can also prove tricky too.
Thematic investing: tech stocks
Investing in technology: what you need to know
Technology is an all-encompassing term. It covers an enormous range of sectors. Everything from your smartphone to electric vehicles to productivity, and more besides sits within the technology sphere. Even companies like Disney, with its Disney+ streaming service, or Amazon with its Amazon Web Services offer, are considered tech stocks.
The best tech stocks to buy will be entirely up to you and what your investing or trading goals are. Be aware that, because of the sector’s diversity, there are many different types of company with differing compositions, market caps and characteristics within the technology space.
Some might be multi-billion-dollar behemoths like the FAANG stocks (Facebook, Apple, Amazon, Netflix and Google). Others might be market disruptors like Uber or Spotify. Some firms will be well established with vast cash reserves. Others might up-and-comers might be burning through capital but with rapid share appreciation to match.
That said, tech stocks are amongst some of the best performers. Indices dedicated solely to technology and related firms offer some considerable potential returns for instance. The Nasdaq 100, listing the top 100 US tech stocks for example, is up over 43.8% as of May 25th 2021. The Dow Jones US Technology Index is also showing similar numbers, up 47.92% year-to-date.
Remember the risks when searching for tech stocks to buy
Technology is all about innovation. It never stands still. Because of that, even the best tech stocks can be a risky investment. Huge capital investment is needed to ensure a company’s solutions and products remain at the head of the pack. A company can disappear completely if a rival develops a product or service consumers and the market prefer.
Some tech firms’ valuations have been questioned too. We mentioned Uber earlier. That’s a company that has admitted it may never be profitable. Is that worth the risk for investors?
Then there are general economic patterns to consider. When times are tough, luxury items like brand new smartphones may not sell well. Thus, the manufacturer’s share price may fall, along with companies supply components and raw materials needed to build a new smartphone.
When times are good, and consumers have more cash to spend, there might be higher demand.
Inflation woes play a part too. As recently as late May 2021, we’ve seen tech-sell offs generated by fears that inflation may bite into tech manufacturers and providers’ profitability. This was triggered by a spike in bond yields and general uncertainty around the economic picture caused by the global Covid-19 pandemic.
All investing and trading is risky. Investing in technology can prove doubly so. Only invest or trade if you are comfortable with any potential losses. Do your research and understand how to pick stocks before committing any capital.
What are some of the best tech stocks to watch?
Again, what is the best stock will depend entirely on your individual budget and circumstances. Consider a wide range of different sectors and industries covered under the tech umbrella.
Diversification, i.e., getting exposure to several different industries, stocks, and sectors, is used by investors to mitigate risk. If one stock performs badly, the theory goes, the other stocks or assets in your portfolio can help protect against that by performing well.
With that in mind, the below may be tech stocks to buy if they meet your individual criteria.
AMD makes semiconductors and micro-components used to build everyday essentials like phones, laptops and so on. Its main product line covers graphics cards, microprocessors and motherboard chipsets.
As of May 25th, 2021, AMD stock was up just over 47%. It also looks like it has a bright future. Latest quarterly earnings saw AMD revenues expand 93% year-on-year, reaching $3.45 billion. Operating income for the quarter was $662 million while net income was $555 million – a 243% increase from the prior year.
We mentioned earlier how technology companies must invest heavily to keep up with the pace of innovation. In the case of AMD, its investments are a form of protection. Due to intense demand, chipset raw materials are at a premium right now. To avoid shortages, AMD recently inked a $1.6bn wafer supply deal with GlobalFoundaries.
GlobalFoundaries will be supply necessary components between 2022 and 2024 under the terms of the deal. AMD is now developing second and third generation Epyc server chips – a product of high interest to AMD customers.
According to the Analyst Recommendations tool on the Marketsx trading platform AMD is rated as a buy by 52.9% of analysts.
Apple is one of the most recognisable brands on the planet. As tech companies go, they don’t come bigger than the Californian company. Its clean-cut branding combined with a reputation for innovation and useability make its products hot property. Because of that, Apple often makes an appearance amongst the best tech stocks.
Apple’s latest round of earnings, coming in April 2021, saw the company enjoy yet another blowout quarter. Companywide sales were up 54% y-o-y. iPhone sales shot up 65.5% during this period, spurred on by the launch of the new iPhone 12. Mac and iPad sales outperformed even Apple’s flagship product, notching impressive 70.1% and 79% annualised growth.
In monetary terms, total revenues were up 53.7%, totalling $89.58 billion. Earnings per share (EPS) beat expectations at $1.40 vs. the estimated $0.99.
Apple stock is up across the year. It was trading for around $80 in May 2020. Flash forward to May 2021, and AAPL is exchanging hands for about $126. Analyst forecast is bullish with analyst consensus heavily weighted towards buy.
ASX-listed Xero is carving out a position as a global leader in cloud accounting.
In its 2021 financial year, the Wellington, New Zealand-based software supplier, managed to expand its subscriber base by 20% to 2.74 million worldwide. Stand out geographies included:
- 17% growth in UK customers – 720,000 subscribers
- 18% growth in US customers – 285,000 subscribers
- 40% growth in Rest of the World customers – 175,000 subscribers
Growth is carefully pared with stock performance. It’s something to consider when investing in technology stocks. Xero’s average annual 25.1%, which ranks better than 85% of the companies in Software industry, according to analysts GuruFocus.
The 3-year average Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) growth is 86% – better than 97% of software companies profiled by GuruFocus. Taxes, Depreciation, and Amortization
Xero’s future is entirely focussed on expansion. It regularly tells investors it has a preference to re-invest cash generated to drive long-term shareholder value. But because it reinvests so much, Xero may not have major profitability going forward. Something to consider.
Investing in technology: reiterating the risks
When looking at tech stocks to buy or trade, consider the risks. While you can make money, there is a risk of capital loss. Do your research before committing any capital and only invest if you are comfortable with any potential losses.
Thematic investing: electric vehicles
Electric vehicles are gaining traction among car owners, legislators, and fleet operators worldwide. Can the same be said for investors? In our latest thematic investing guide, the spotlight turns to EV stocks.
EV stocks & why you should consider them
Goodbye ICE. Hello EVs
More and more EVs are appearing on the world’s roads. Drivers have long enjoyed the freedom of movement afforded to us by Nicolaus Otto’s people-empowering invention but the internal combustion engine’s days are numbered.
The environmental cost of fossil-fuel-powered engines is getting heavier. Slowly, but surely, the chug of a diesel engine or the throaty roar of a high-powered V8 will disappear from our roads.
The changeover may be coming even faster than that. Reports indicate the EU will move to ban sales of new ICE vehicles as early as 2025. The UK has brought its ban forward to 2030. The book is closing on petrol and diesel. The next chapter begins with lithium-ion battery-powered machines.
Proliferation is not total. ICE still dominate everyday driving, but EVs sales continue to grow year-on-year, quarter-on-quarter.
More pure EVs and plug-in hybrid models are on the roads in key automotive markets. 245,000 fully electric models, plus 515,000 hybrid vehicles, were registered in the UK by the end of April 2021, for instance, representing just over 13% of all registered vehicles.
In China, pure battery-powered car sales were up 113% in Q1 2021, with 333% more hybrids being sold in the same period. Overall EV sales in the US in the first quarter of 2021 shot up 81% too. The appetite for electric power is spreading among vehicle owners.
Tesla is arguably the most visible electric vehicle brand. Its optics are massive, especially with relentlessly self-publicising CEO Elon Musk in the driver’s seat. That said, the race is on to develop hybrid and electric vehicles by legacy marques, as well as new badges hoping to overtake Tesla.
It was Toyota that really got the hybrid trend rolling with its iconic Prius model, launched for worldwide sales in 2002. Now, all the major marques have at least one hybrid model in their range or adding one.
Even luxury brands like Aston Martin are in the act. The “big three” of hypercars, the Porsche 908, Ferrari La Ferrari and McClaren P1, are all hybrid-drive vehicles for example.
Ford has even transferred its iconic Mustang name to a new electric model, launched in 2020. Renault has plans to resurrect its cheeky-but-charming 5 as a full EV too. VW is planning for its ID range of four electric models will be the core of its range as it pivots towards full electrification.
The list of car manufacturers making the jump to electric power is extensive, but here are some stocks below to keep an eye on.
EV stocks to watch
Beginning with the biggest name in EVs, Tesla shares have been a bit of a journey across the year so far.
The Elon Musk-controlled marque was soaring, closing January 2021 at $883 – an all-time high.
Now, a combination of concerns over criticisms from the Chinese market, fatal accidents caused by Tesla’s autopilot system, rising competition, and questions over the brand’s acquisition of $1.5bn worth of Bitcoin cryptocurrency, has caused Tesla’s share price to drop. As of May 21st, Tesla stock was trading at around $593.50.
Despite this, Tesla increased vehicle deliveries in Q1 2021. Net income hit $438 million during the quarter. Earnings of 93 cents per share on $10.39 billion in revenue.
New Tesla models are on their way. An updated version of the flagship Model S sedan is coming soon. The Model X SUV will start rollout in Q3 2021. It has also weathered the EV chip shortage by pivoting to new suppliers, meaning manufacturing can continue relatively undisturbed.
However, if you are considering investing in Tesla stocks, make sure to do your research. Michael Burry, the hedge fund guru who gained fame for exploiting the 2008 Financial Crisis, is shorting $534m worth of Tesla shares, indicating he thinks further stock price declines are on their way.
A bumpy ride may be ahead for Tesla – but its major brand recognition and positive financial outlook may help steer it back on a growth footing in 2021.
Nio is not the largest Chinese electric automaker, but it is making big waves.
Q1 2021 saw NIO deliver just over 20,000 vehicles – a more than 400% y-o-y increase. NIO has already delivered about 95,000 vehicles in total in the year so far. It is leading the way in China’s electric SUV market too, selling slightly more than 7,100 in April, outpacing Tesla.
In terms of prices, NIO shares are showing similar volatility to Tesla. Since the start of 2021, NIO stock is down 37.5%. Year-to-date, however, NIO share price has soared 870%. Market cap stands at around $55bn. Currently, NIO stocks are trading at around $34.50.
So where next for NIO? It’s already showing impressive sales growth figures. China is already the largest auto market in the world. It’s forecast to become the largest EV market too, accounting for 40% of the 31.1m global EV sales Deloitte predicts for 2030.
For NIO, being a native Chinese brand is a huge advantage here. It is protected by domestic laws favouring homegrown brands over foreign marques like rival Tesla. It already holds 23% of the electric SUV segment too. If it can maintain deliveries, NIO and its shares may look very positive in the future.
The above EV stocks are manufacturers that deal exclusively in pure electric, battery-driven vehicles. Volkswagen is a legacy marque. While it has made substantial headway in introducing its ID range of electric cars, it is still a manufacturer of ICE-powered machines.
That said, it has an aggressive electrification plan in place. A new factory has been built dedicated solely to EV production at its Wolfsburg campus. It’s even pushing for one million EV sales by the end of 2021, with the ID.4 model identified as VW’s electric golden goose.
VW shares were up 62.3% from the start of 2021 to the beginning of April, reaching $258. As of May 21st, the share price had grown further with VW shares changing hands for $272. Optimistic electric vehicle sales are potentially powering this growth. VW may be on course to outsell Tesla in 2022 if it can maintain successful sales.
Here’s the rub. While Tesla had an enormous head start over legacy manufacturers, once the full weight of Toyota, VW, GM, Ford and so on is turned towards non-ICE cars, it will be difficult to match their potential output. These are companies with already massive manufacturing capabilities and the capital to invest in new factories and product lines as we’ve already seen. Therefore, don’t think of single-play manufacturers when looking at EV stocks. Remember established automakers too.
Risks in investing & trading EV stocks
Whether a newer brand or a legacy marque, always remember trading EV stocks comes with inherent risks. Market volatility has been seen in the electric vehicle space. While profits can be made, you can also lose money. Always do your research and only invest or trade if you are comfortable taking any potential losses.
Snowflake earnings: what to watch
Snowflake (SNOW) is due to report its first quarter results after the close today (May 26th). Shares in the company are worth about a half of the value they were at their peak in 2020.
The consensus estimate for Q1 is $213.36m in revenue and a $0.16 loss per share. In Q4, Snowflake posted a loss per share of $0.70 on a 117% rise in revenues of $190.5 million.
Goldman Sachs put out a note yesterday on the stock, giving it a buy rating with a 12-month price target of $275. “Following a ~40% correction in the stock since its December 2020 highs, we see a path towards outperformance and believe the durability of growth is not fully reflected in the company’s valuation,” they said.
Snowflake is seen as being well-positioned to capitalize on a “generational shift” in data and analytics to the cloud, and replace incumbent data warehousing solutions “owing to their scalable and elastic cloud native”. GS added: “We continue to expect another strong quarter as the overall demand environment remains resilient.”
Analysts maintain a broadly positive stance on the stock, with 50/50 buy/hold ratings.
Price action has been positive of late although we have seen the momentum just fade a little as it approached the April swing highs around $244. The beak of the trendline from the Dec ‘20, Feb ‘21 and Apr ‘21 peaks suggests bulls are taking charge again. MACD crossover also seen as bullish.