Research Market strategy
By Swissquote Analysts
Published on 13.06.2022
Morning news

Tesla Plans 3-for-1 Stock Split, Joining Other Big Tech Companies

Topic of the day

Tesla Inc. plans a 3-for-1 stock split, joining other technology companies with lofty share prices that have taken such a step to make ownership more accessible to individual investors. The electric-car maker on Friday detailed the plan in a regulatory filing ahead of its planned Aug. 4 annual shareholder meeting. Tesla in March said it would seek shareholder approval for a stock split at that gathering, but at the time didn’t provide details. America’s largest auto maker by market value said in the disclosure it would ask shareholders to approve the company issuing 4 billion more common shares. Tesla is currently authorized to issue 2 billion shares of common stock. As of March 31 the company had around 1.04 billion common shares outstanding. Tesla shares closed down Friday at $696.69. Shares have fallen more than 40% since their November highs. The stock rose 1.8% to $709.50 in after-hours trading following the disclosure. Already this year, two of the largest tech companies have pursued stock splits. Amazon.com Inc. recently implemented a 20-for-1 stock split, following shareholder approval last month. Shareholders of Google parent Alphabet Inc. earlier this month approved the company’s proposal for a 20-to-1 stock split, which takes effect in mid-July.

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Swiss stocks

Surprisingly strong increases in US consumer prices dampened the mood on the Swiss stock market at the end of the week. The SMI lost 2.1 per cent to 11,085 points. All 20 SMI stocks closed in the red. 50.08 (previously: 55.86) million shares were traded. Credit Suisse (CS) was again the weakest stock in the SMI after State Street finally confirmed after the close of trading in Europe on Thursday that it was not interested in the Swiss bank. CS fell by 5.7 per cent. UBS shares fell by 3.5 per cent. Although the current environment of rising interest rates tends to be positive for banks and insurers, an economic downturn would also affect these sectors. Swiss Life, Swiss Re and Zurich saw share price losses of up to 2.4 per cent. Investors also divested from cyclicals such as Holcim (-4.9%) and Sika (-3.8%). Consumer-related stocks such as Richemont (-3.7%) suffered from fears of dwindling consumer spending as a result of inflation and economic weakness. Nestle (-0.4%) narrowed its losses significantly towards the end of trading on no news, closing 0.4 per cent lower. However, the stocks had already fallen significantly in the previous days. Pharmaceutical stocks were also unable to escape the selling pressure, even though some market approvals and encouraging trial data from the past few days prevented worse at Roche (-1.3%). Novartis fell by 1.7 per cent. UBS's downgrade to Sell from Neutral pushed Swisscom's share price down by 2.7 per cent.

International markets

Europe

Shares were sharply lower in Europe Friday, tracking Wall Street's previous-session losses on worries central banks will have to double down on battling inflation with higher interest rate. Investors are nervous about a potential slowdown in economic growth in the wake of monetary policy tightening, with Friday's key consumer-price index for May likely to show U.S. prices remain stubbornly high, at levels not seen in about 40 years. The Stoxx Europe 600 index lost 2.7% to 422.7 points. In Paris, the CAC 40 and SBF 120 gave up 2.7% and 2.6%, respectively. In Frankfurt, the DAX 40 fell by 3.1%, while in London, the FTSE 100 dropped by 2.1%. For the week as a whole, the Stoxx Europe 600 index fell by 4%. The market is also continuing to analyse the announcements of the European Central Bank (ECB). The institution announced on Thursday that it would raise rates by 25 basis points at its next meeting on 21 July. Further rate hikes will be needed to curb inflation, the ECB warned, not ruling out a 50 basis point hike in September. President Christine Lagarde also said the ECB could use new instruments to avoid any risk of fragmentation of financial conditions in the eurozone. Solutions 30 lost 11.6%, Orpea 6.4%, Korian 5.1%, Atos 8.5%, Maisons du Monde 5.7% and Faurecia 4.4%. Euroapi (+1.2%), a manufacturer of active ingredients for the pharmaceutical industry, stood out as the Euronext scientific council announced on Thursday evening that the stock would be included in the "CAC Mid 60" index. In Frankfurt, German chemical and pharmaceutical group Bayer (-2.8%) announced on Thursday evening that a Missouri court had ruled in its favour in a lawsuit over its Roundup weedkiller, which is accused of causing cancer.

United States

A fresh inflation shock hammered stock and bond prices anew, heightening investors’ fears that the Federal Reserve could be forced into more drastic action to tame surging consumer-price increases. Declines hit across the board, with rising interest-rate expectations increasing worries about the possibility of the economy slipping into a recession. The Dow Jones Industrial Average fell 880 points, or 2.7%, to 31392.79. Technology shares slid along with banks and consumer stocks, sending the S&P 500 down 116.96 points, or 2.9%, to 3900.86, and the Nasdaq Composite tumbling 414.20 points, or 3.5%, to 11340.02. All three indexes declined for a second-consecutive week. Stocks fell broadly, with all 11 of the S&P 500’s sectors finishing in the red. Shares of DocuSign fell $21.43, or 25%, to $65.93 after the e-signature software developer said that its growth slowed in the first quarter and that it is scaling back its hiring plans. Stitch Fix dropped $1.44, or 19%, to $6.34 after the personal-styling service said it is cutting about 330 jobs as it contends with a slowdown in consumer spending and widening losses. Investors piled into companies selling the everyday goods consumers stock in their pantries. J.M. Smucker, the maker of Jif peanut butter and Smucker’s jam, ended up $1.16, or 0.9%, to $128.41.

Asia

In Asia, major indexes broadly closed with losses on Monday tracking Wall Street’s selloff on Friday. In China, the corona restrictions in Beijing and the commercial metropolis of Shanghai were tightened again. This is likely to have a negative impact on supply chains once more, as is the ongoing truck drivers' strike in South Korea. Japan’s Nikkei 225 is down 2.8 per cent to 27,040 points, Seoul edged 3.1 per cent lower and Hong Kong decreased by 2.8 per cent. Shanghai (-1.1%) has been slightly less affected.

Bonds

Yields on 2- and 10-year U.S. Treasury notes hit their highest levels in years on Friday, while part of the curve inverted, after data showing the U.S. inflation rate rose to 8.6% in May with few signs of peaking. The spread between 5- and 30-year yields narrowed to minus 6 basis points, as yields on maturities from one to seven years out rose by a whopping 16 to 23 basis each.

Analysis

DZ raises Beiersdorf target to EUR 111 (106) - Buy

Berenberg lifts Eutelsat target to EUR 11.60 (11) - Hold

Warburg cuts Aareal Bank to Sell (Hold) - Target EUR 35.10

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