Nvidia Disappoints Investors with Forecast, Shares Drop

LOCAL MARKET COMMENTARY

On the stock market, the Top-40 index fell by about 0.74% on Wednesday, the all share closed at 84,018 points down 0.39%. South African investors are closely watching upcoming economic data, with July's producer inflation figures expected today and money supply, trade, and budget balance data due tomorrow, which will offer insights into the domestic economy's health. Meanwhile, food services giant Bidcorp announced a significant 16% increase in its total dividend for FY 2024, declaring a final cash dividend of 565 cents per share.

EUROPEAN MARKET COMMENTARY

The benchmark European stock index reached its highest level since July on Wednesday, driven by gains in insurance and chemical stocks ahead of Nvidia's earnings and important economic data. French consumer confidence for August met expectations at 92. Looking ahead, Eurozone consumer confidence data is due today, along with consumer price reports from Germany and Spain. Investors are particularly focused on tomorrow's key inflation data for the Eurozone, which could influence monetary policy decisions.

US MARKET COMMENTARY

U.S. stocks declined on Wednesday as investors awaited Nvidia's highly anticipated quarterly report, which could either dampen or boost the ongoing rally fuelled by enthusiasm for artificial intelligence. Nvidia's shares, a key player in AI processors, dropped 2.1%, reducing their year-to-date gain to 154%. Investors are increasingly betting that the U.S. Federal Reserve will lower interest rates at its September meeting, especially after Fed Chair Jerome Powell signalled support for policy adjustments last week, which led to market gains. The upcoming Personal Consumption Expenditure report for July, expected tomorrow, may offer more clues on the Fed's rate-cut plans.

ASIA MARKET COMMENTARY

Asia-Pacific markets declined this morning, with tech stocks leading the downturn in South Korean and Taiwanese indexes following Nvidia's second-quarter results. Investors in the region are closely monitoring potential impacts on local tech stocks, particularly companies like Taiwan Semiconductor Manufacturing Company and SK Hynix, which are part of Nvidia’s supply chain.

CURRENCY MARKET COMMENTARY

The South African rand weakened on Wednesday as investors remained cautious ahead of key economic data releases expected later in the week. The dollar stabilized this morning, recovering slightly from recent steep losses as traders awaited a key U.S. inflation report due at the end of the week. This data could provide further insights into the future direction of interest rates in the U.S.

COMMODITY MARKET COMMENTARY

Gold prices fell on Wednesday, pressured by a stronger U.S. dollar as investors turned their attention to upcoming U.S. inflation data, which could influence the Federal Reserve's decision on the size of a potential interest-rate cut in September. Meanwhile, oil prices remained relatively stable this morning, balancing concerns over lower-than-expected U.S. crude inventory draws and ongoing worries about demand from China against supply disruptions in Libya.

BID CORPORATION LIMITED – (BID) + 4.54%

The company saw strong financial growth this year, with revenue increasing by 15.1% to R225.9 billion and trading profit rising by 15.9% to R12.2 billion. Cash generated from operations before working capital grew by 12.8% to R15.4 billion, while EBITDA (non-IFRS 16) increased by 14.4% to R13.5 billion. The company effectively converted 113% of its trading profit and 102% of its EBITDA into cash. Headline earnings per share went up by 15.5% to 2405.5 cents, and earnings per share grew by 16.0% to 2392.6 cents. The full-year dividend distribution also saw a 16.0% increase, reaching 1090.0 cents.

TRANSPACO LIMITED - (TPC) 0.00%

The company's financial results for the 12 months ending June 2024 show a decline in key metrics compared to the previous year. Revenue decreased by 4.0% to R2 487.1 million, while operating profit fell by 15.7% to R212.7 million. Profit before taxation dropped by 13.8% to R206.5 million. Earnings per share and headline earnings per share both declined by over 8%, reaching 521.5 cents and 520.9 cents, respectively. The total gross dividend per share was reduced by 7.7% to 240.0 cents. However, the net asset value per share increased by 9.3% to 3,232.0 cents. The company's operating margin also decreased from 9.7% to 8.6%. Despite these declines, the company maintained a net cash-positive position.

MURRAY & ROBERTS HOLDINGS LIMITED - (MUR) -2.81%

The Group anticipates improved results for FY2024, expecting a significant reduction in losses compared to FY2023. Headline loss per share is projected to decrease by 90-94%, ranging between 47 to 27 cents per share, down from 473 cents in FY2023. Similarly, the basic loss per share is expected to decline by 94-97%, falling to a range of 44 to 24 cents per share, compared to 789 cents in the previous year.

Abercrombie & Fitch – (ANF) -16.99%

Abercrombie & Fitch reported strong revenue growth of 21% during its fiscal second quarter, driven by continued momentum following last year's 16% increase. The company's earnings and revenue both surpassed Wall Street expectations, with earnings per share at $2.50 (vs. $2.22 expected) and revenue at $1.13 billion (vs. $1.10 billion expected). Net income rose to $133 million, or $2.50 per share, compared to $57 million, or $1.10 per share, a year ago. Despite issuing optimistic guidance for the current quarter, where it expects sales to grow by a low double-digit percentage, its full-year outlook remained aligned with estimates due to the impact of having one fewer week this year. Following these results, Abercrombie's shares, which had surged nearly 89% this year, dropped about 15% in early trading.

Foot Locker (FL) – 10.24%

Foot Locker reported a positive fiscal second quarter, with comparable sales growing for the first time in six quarters, up 2.6%, exceeding analysts' expectations of a 0.7% increase. The company's gross margin also improved for the first time in over two years. Foot Locker posted a loss of $12 million, or 13 cents per share, compared to a loss of $5 million, or 5 cents per share, a year earlier. Excluding one-time items, the adjusted loss was 5 cents per share, better than the 7 cents loss analysts had expected. Revenue increased by 2% to $1.90 billion, slightly above the $1.89 billion forecasted. For the current fiscal year, Foot Locker maintained its guidance, expecting sales to range from a 1% decline to 1% growth, better than the 0.4% decline analysts anticipated. The company also upheld its adjusted earnings per share guidance, projecting between $1.50 and $1.70, with much of this range surpassing analysts' expectations of $1.54.

Nvidia (NVDA) -2.10%

Nvidia's quarterly forecast on Wednesday fell short of the high expectations set by investors, leading to a 6% drop in its stock during after-hours trading. Although Nvidia reported strong growth, with second-quarter revenue of $30.04 billion surpassing estimates and a 154% increase in data centre sales, its revenue and gross margin forecasts for the current quarter were only slightly above analyst predictions. This was seen as a disappointment given the company’s recent track record of consistently exceeding Wall Street targets. Nvidia also announced a $50 billion share buyback, but the news was overshadowed by concerns that the company's ability to consistently beat expectations is becoming increasingly challenging.

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