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🏦 An Outside-the-Box Interest Rate Cut Play
Plus, Chick-Fil-A clucks into the streaming game.
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Happy Thursday afternoon to everyone on The Street. Here's a snapshot of where markets ended the trading session, plus tomorrow's trade idea delivered to you today.
🟥 | US stocks ticked lower on Thursday. The S&P 500 retreated slightly below 1% after a recent rally as investors prepared for Fed Chair Jerome Powell’s speech at the Jackson Hole conference.
📈 | One Notable Gainer: Peloton reported a slight sales increase and reduced losses for the first time in nine quarters, causing its shares to surge 35%.
📉 | One Notable Decliner: Chipmaker Wolfspeed’s stock dropped 5% after reporting a fourth-quarter loss and announcing the closure of its Durham factory in a bid to save costs.
🏦 | Tomorrow's Trade: An Outside-the-Box Interest Rate Cut Play
Plus, put your money to work with expert-built portfolios with Betterment.
S&P 500 Heatmap. Credit: Finviz
All Stock Heatmap. Credit: Finviz
Global ADR snapshot. Credit: Finviz
MARKET MOVERS
ZOOM (+13%) Zoom jumps on earnings, raises full-year revenue outlook (Yahoo Finance)
URBN (-10%) Urban Outfitters Shares Sink on Disappointing Sales Growth (Bloomberg)
WSM (-9%) Williams-Sonoma Stock Sinks as Retailer Cuts Full-Year Revenue Outlook (Investopedia)
AAP (-17%) Advance Auto Parts to Sell Worldpac to Carlyle for $1.5 Billion (WSJ)
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OVERHEARD ON THE STREET
CNN: Walmart is partnering with Burger King to give Walmart+ members a daily 25% discount and free Whoppers every three months.
Axios: Amazon is offering Prime members a $99.99 annual grocery delivery add-on, highlighting how companies are adding extra fees to subscriptions.
Axios: Paramount is extending the deadline for competitors to surpass Skydance's $6 billion offer from Edgar Bronfman Jr.
WSJ: Whitehaven Coal sold a 30% stake in an Australian coal mine for $1.08 billion to two Japanese steelmakers securing future supply for their mills.
CNBC: U.S. crude oil was above $72 per barrel on Thursday, having lost most yearly gains due to weak Chinese demand and U.S. economic concerns.
TOMORROW’S TRADE IDEA, TODAY
An Outside-the-Box Interest Rate Cut Play
Boon or Blockade?
To hear the Street tell it, interest rate cuts are inevitable — and imminent. Investors are unanimously pricing in at least a 25-basis-point cut at the Federal Reserve’s September meeting, per the CME FedWatch tool. And across the pond, the first cuts were already made by central banks in the E.U. and U.K.
There are plenty of companies that could benefit from a more favorable borrowing environment. But insurers, which tend to benefit from higher interest rates, probably aren’t the first to spring to mind.
However, according to at least one investment firm, this insurer could stand to grow massively in the coming months — with rate cuts a boon, not a blockade.
Not Like Other Firms
Jefferies analysts say Prudential PLC (PUK) — a British insurance and asset management company listed in London and Hong Kong, unrelated to the U.S.-based Prudential Financial (PRU) — could see its share price double over the next 12 months.
Unlike many other financial companies, interest is not the biggest part of Prudential PLC’s revenue, Jefferies maintains. Rather, a large portion of its money comes from underwriting health and protection policies, which have essentially no correlation to market movement.
On top of that, lower interest rates should improve its discounted cash flows, making it appear more valuable, per the analyst note. As rates start to drop, Jefferies expects Prudential PLC’s competition to see their earnings fall, while its own get a significant boost.
Beyond Interest Rates
Rate cuts aren’t the only reason Jefferies is bullish on the stock. It has also seen a rebound in overall sales, and notable growth in the Asian life insurance market, where it does not have much competition.
Additionally, the insurer recently announced plans to expand its strategic partnership with Google Cloud. The aim is to utilize AI to improve customer experience, access to affordable healthcare, and increase distribution. A potential AI bump among investors could potentially be an agreeable side effect.
The stock is down over 27% over the past 12 months. That’s not a problem, Jefferies argues, just an opportunity.
Are you bullish or bearish on Prudential PLC (PUK) over the next 12 months? |
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Betterment’s financial experts and automated investing technology are working behind the scenes to make your money hustle while you do whatever you want.
ON OUR RADAR
Axios: Chick-fil-A is reportedly launching its own streaming platform with original content, potentially adding to the crowded streaming market.
Bloomberg: Crayola’s CEO, Pete Ruggiero, aims to make the newly trademarked crayon scent a familiar smell in stores.
AP: Canada's major freight railroads have halted over a worker contract dispute, risking economic harm to Canada and the U.S.
Newsweek: A federal judge has unsealed the full list of shareholders for X Holdings Corp., the owner of social media giant X (formerly Twitter).
Bloomberg: BMW AG led Europe’s electric-vehicle market for the first time last month, surpassing Tesla Inc. amid strong growth while others lagged.
YESTERDAY’S POLL RESULTS
🟩🟩🟩🟩🟩🟩 🐂 Bullish (40)
🟨🟨⬜️⬜️⬜️⬜️ 🐻 Bearish (15)
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