Microsoft's Revenue Forecast at Risk | 25 October 2022 | Daily Morning Note

The Daily Morning Note is a round-up of local and global business headlines that you need to know to get ahead of your day.

Microsoft is set to post its slowest quarterly revenue growth in over five years. Some analysts have cast doubts on whether the company can maintain its annual outlook. A spike in inflation this year has fanned worries of a global economic slowdown.


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Key takeaways

Summary

Singapore stocks closed below the 3,000 level on Friday (Oct 21) for the first time since March 2021, amid recession fears with the US Federal Reserve seemingly persistent in its aggressive rate hikes. The Straits Times Index (STI) fell 1.8 per cent or 52.75 points to close at 2,969.95, its lowest closing level since February 2021.

Wall Street stocks powered higher for a second straight session on Monday, cheered by signs of greater political normalcy in Britain and optimism about corporate earnings. Analysts pointed to the election of British politician Rishi Sunak as Conservative party leader and Britain’s next prime minister. The Dow Jones Industrial Average finished up 1.3 per cent; the S&P 500 gained 1.2 per cent; while the tech-rich Nasdaq Composite Index advanced 0.9 per cent.

Singapore News

iX Biopharma Ltd announced that its novel sublingual medicinal cannabidiol, or CBD wafer, Xativa™, has won the “Best CBD (Sublingual) Edible” award” at the 2022 World CBD Awards ceremony in Barcelona, Spain, on 20 October 2022. The CBD industry is one of the fastest growing sectors, propelled by rising public demand and the rapidly changing perceptions about the therapeutic potential of the cannabis plant.

Comment: The award follows up from being accorded “CBD Product of the Year” award at the Australian Cannabis Industry Awards 2020. iX Biopharma continues to expand the marketing reach of its cannabis product (Xativa) into Europe and the United States. iX Biopharma (BUY, Target Price S$0.25) is also planning to launch Hypera, a tetrahydrocannabinol cannabis wafer, in 1HFY23. No change in our recommendation or forecast. Paul Chew Head Of Research paulchewkl@phillip.com.sg

William Tay, chief executive officer of the manager of CapitaLand Ascendas Reit, wants to increase the proportion of overseas assets in the Singapore-listed real estate investment trust‘s portfolio, with the intent of gaining resilience through diversification. As of end June, some 61 per cent of Clar’s S$16.6 billion portfolio of investment properties are based in Singapore. The United States accounts for 15 per cent of its portfolio by asset value, with another 14 per cent based in Australia, and the remaining 10 per cent in the United Kingdom and Europe.

Food and beverage operators are wooing local hires with higher starting salaries, four-figure joining bonuses and other benefits amid an acute labour crunch, while raising pay to keep existing staff from being poached. From hawker centres to restaurant chains, some starting salaries have risen more than a fifth in recent months.

US News

Apple Inc on Monday increased monthly and annual subscription prices in the U.S. for its streaming services Apple TV+ and Apple Music. It also raised prices for Apple One, its bundle. Now, a monthly individual subscription to Apple Music costs $10.99, versus the previous price of $9.99. Competitor Spotify currently starts at $9.99 a month.

Shares of Chinese companies listed in the U.S. dropped sharply Monday after Beijing tightened President Xi Jinping’s grip on power, souring investor sentiment for non-state-driven companies. The Invesco Golden Dragon China ETF, which tracks the Nasdaq Goldman Dragon China Index, plunged 14.5% to hit its lowest level since 2009. The ETF slumped more than 20% at one point Monday.

U.S.-traded shares of Chinese electric vehicle makers were among those hit by a dramatic sell-off Monday, as investors soured on non-state-run Chinese companies following a weekend of dramatic political developments in China. Shares of Li Auto ended the day down 17%, Nio’s closed nearly 16% lower, and Xpeng Motors’ dropped 12% in trading in New York, while shares of larger BYD closed down over 8%.

In our recommendation section,

analyst Jonathan Woo maintains a Buy recommendation on Netflix.

We maintain a BUY recommendation with a lowered DCF target price of US$346.00 (previous US$399.00) as we lower FY22e revenue/PATMI forecasts by 3%/17% on the back of increasing FX headwinds, offset slightly by a raised terminal growth rate of 3% as we account for a longer-term improvement in revenue from advertising.

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