Markets started the day in the red on continuing concerns about global growth but the main indices are now pretty much flat after the Bank of England announced it would buy more UK government bonds. A more settled European bond market is reassuring for US investors.
The S&P 500 is currently up 13 points at 3,626, and the Nasdaq is up 18 points at 10,561.
Read on for Tuesday morning's main market movers.
The biotech giant Amgen (AMGN) has been boosted by an upgrade from Morgan Stanley – from ‘equal weight’ to ‘overweight.’ The stock price is up 6% at $246.25.
Morgan Stanley is impressed by Amgen’s development pipeline including obesity drug AMG 133, and a rival to Abbott’s Humira drug for arthritis. Humira’s patent is about to expire, and Amgen is ready to launch a ‘biosimilar’ copy to the drug in January. Humira is a complex biotech drug, so producing a copy that satisfied regulators wasn’t easy.
There’s much to like about Amgen, including a 3.5% dividend yield. Just remember that this isn’t a young biotech where one successful drug approval can send the stock piece into overdrive. Amgen has over 20 drugs on the market and a market value of over $130 billion. In many ways, it’s like a traditional ‘big pharma’ company, and that includes the challenge of patent expiries. In other words, Amgen has to develop new drugs just to replace the drugs that go off patent – that’s why the market keeps the stock price sufficiently low to offer such a chunky dividend yield.
Viatris (VTRS) is up 6% to $9.33 on a Bloomberg report that the pharma company is considering a sale of its consumer health assets in Europe. A sale could raise $2.9 billion.
Consumer stocks should be fairly resilient when markets are falling and that’s certainly been the case with beverages business Keurig Dr Pepper (KCP) in this bear market. While the S&P 500 is down a quarter this year, Keurig’s stock price is up 1.5% this year. And today the stock price is up 2.5% after positive comment from analysts at Wedbush.
The broker initiated coverage on five non-alcoholic beverage companies: Coca-Cola (KO), PepsiCo (PEP) , Monster Beverage (MNST), Celsius Holdings (CELH) and Keurig. Wedbush’s top pick was Keurig with an ‘outperform’ rating and $43 price target. Keurig has been hemmed in by capacity constraints in its coffee business, but Wedbush says those constraints are now gone and earnings growth should accelerate.
Keurig’s big plus point is the strength of its brands which include Dr Pepper, Keurig coffee machines, 7UP, Canada Dry, Sunkist, and Snapple. That brand strength will help Keurig withstand competitive pressure from private label products.
Shares in electric vehicle company Lucid (LCID) were hit yesterday as its rival Rivian announced a product recall. But the stock price has bounced back strongly today with a 5% rise to $13.19. Lucid is only expecting to manufacture 7,000 vehicles this year and it’s not expected to make a profit anytime soon. On the plus side, its luxury sedan, the Air, can drive 520 miles before it needs a charge. Impressive!
The Biden administration’s new restrictions on semiconductor sales to China continued to hit stock prices today. US chip toolmaker KLA (KLAC) is going to stop supplying some services and supplies to China-based customers including South Korea’s SK Hynix from tomorrow, according to Reuters.
Sales in China account for nearly 30% of KLA’s revenue, so it’s no surprise the stock price is down 5% at $284.77. Several other chip stocks continued to fall today including ON Semiconductor (ON), down 4% at $59.50, and Lam Research (LRCX), down 3.9% at $337.20.
Zscaler (ZS) was one of the biggest fallers yesterday and it’s continued to drop today, currently down 4.9% at $149.52. The cloud security company’s President, Amit Sinha, has resigned from the company after 12 years to join a privately owned tech company as CEO. Analysts at Guggenheim expect ‘little disruption’ from the move, but the market isn’t convinced.
Netflix (NFLX) has had a bad day ahead of third quarter results that are expected next week. The stock price is down 4% today at $221.01. Pessimism about next week’s statement is understandable given Netflix’s disappointing year – subscriber growth completely stopped in the summer.
That said, it’s not all bad news at Netflix. A new tier where you pay a lower fee in return for receiving ads is expected to launch early next year. JP Morgan thinks the new tier could generate $600 million in ad revenue in 2023, and that’s just in the US and Canada.
Shares in Uber (UBER) are down 6% at $25.97 after the Department of Labor proposed new rules that would categorize Uber’s drivers as employees rather than contractors. As a result drivers would be entitled to more benefits and legal protections.