Equities

(New York)

Bloomberg thinks it is time for markets to accept reality. Despite a lot of effort, the president has overpromised and under delivered when it comes to repealing Obamacare, tax cuts, and infrastructure spending, and at some point soon the market is going to react to that, says Bloomberg. The failure over the Obamacare repeal is not a big deal for markets, but it does signal that Trump will likely not be successful in his other efforts, a troubling realization for investors. This may mean that markets react with stocks moving lower as current valuations cannot be justified, and that yields also move downward as the Treasury would need much less debt than has been anticipated.


FINSUM: The fissure of the Republican party has already been laid bare, so we do not think markets are suddenly going to react. We think a lack of action on taxes and infrastructure are already priced in.

(San Francisco)

The IPO and subsequent few months of trading of SNAP has been an unmitigated disaster, says one analyst. MoffettNathanson analyst Michael Nathanson thinks that SNAP is still overpriced by more than 25% and will fall to just $11 per share, way below its IPO price. The stock has not performed well since its debut, and even Morgan Stanley, its lead underwriter who presumably knows it best, has given up on it, drastically lowering their price target. The competitive environment for advertising is proving difficult for SNAP and it is seeing a seasonable slump in its core business. It also only lasted nine quarters without a slowdown in growth, a short time compared to rivals.


FINSUM: Snap is facing some headwinds, but if it can turn itself around and prove wrong its critics, there are a lot of gains to be had. One thing to worry about is the end of the lockup period for insiders, which is coming soon and could send the stock sharply lower.

(San Francisco)

It took about seventeen years but it finally happened. After peaking in March of 2000, the S&P 500 tech sector index finally surpassed its previous high yesterday at 993.39. To put in perspective how much the sector has changed, back in 2000 Google wasn’t public and Facebook didn’t exist. The outlook from here looks solid, with earnings expectations strong. Compared to 2000, tech companies are infinitely stronger and more profitable. Holders of the index took many years to get their money back and would have done much better simply buying component stocks, such as Amazon.


FINSUM: The tech industry is completely different than in 2000, and this purely numbers based milestone should have no effect on its valuation or consideration. That said, mentality counts for a lot and it could make some feel the sector is over-priced.

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