After a large-scale technical correction earlier this month, the good old, or "chronic" demand for Big Tech stocks has not recovered so far. Amazon shares are flashing somewhere near the $3150 road, and Google is also experiencing a similar story just above $1500 and Facebook is ranging in between $265 and $280 per share. Apple stocks only moved slightly after yesterday's presentation of new products in Cupertino, including a redesigned iPad Air, the Apple Watch Series 6 plus a bundle of services such as Apple Music, but without the 5G-based iPhone 12, as the global situation postponed its production for several weeks with no particular date set yet to launch it.
However, delayed sales and deferred profits will later materialise into the same or even bigger earnings, it's probably just a matter of time. As long as tech giant stocks are dormant, the retail sector may be seen to steal the thunder. The main contribution to the rise of the European composite indices today was made by the two largest fast-fashion names on the continent, the Spanish Zara owner Inditex and its Swedish rival H&M. The reports showed, both companies became profitable again after a rather turbulent two fashion seasons mostly destroyed by the coronavirus influence with all these terrible lockdowns first and a relative consumers' inactivity during the viral banditry "after party".
Inditex stocks, also known by it flagship Zara, jumped up by more than 6.5% this morning, from the $24 area to $26 at the highest point, and the possible price target for the mid-term may be located above $30 or even $32 per share, where its stocks were in February. The company made it clear that it returned to its quarterly profit levels of 214 million Euros. These profits were made during the three month period before their shopping network experienced its first losses since its creation. Now Zara's presentation specifically mentioned its online performance on a "single inventory platform" as most of the consumers stayed away from shopping districts. The figures say that unsold volumes took a fall of 19% from a year earlier. Pablo Isla, the main Inditex frontman and owner, said on Wednesday that he’s "confident Inditex has turned a corner", as the second quarter marks the turning point for the sales recovery. The president of Inditex believes that the foundations have been laid for a return to commercial "normality". Between August 1 and September 6, Inditex had recovered 89% of its sales, which was obtained in the same period of the previous year, and were at the level of those it had in 2018, as Isla said during a conference call.
H&M had beaten average quarterly forecasts already a day before, and now Inditex gave one more signal in favour of the proper rebound for the retail sector. H&M stock prices jumped up by 10.6% on Tuesday and then rose by another 3.1% on Wednesday to the high levels since May, but it's still 12.5% lower than the pre-crisis peak price. H&M’s warehouse inventories will not exactly be defined until the firm releases the full report in another couple of weeks. But the company already managed to outperform even its own previous forecasts, with a pre-tax profit of some 2 billion Swedish Kronas in Q2 2020, which is approximately 192 million Euros, citing a “higher-than-expected full-price sales”. In previous months, both companies commented on their very strict cost control because of the "drastic and sudden" stop of orders in many emerging markets earlier in the year. In addition, H&M even used the lockdown situation to prompt a necessary optimisation plan to close some stores as these shops were opened in a rush of excessive and risky expansion over recent years.
Some other retail fashion stocks have already gained following Zara and H&M's example, with Next, boohoo.com and Zalando up by more than 5% over the last two days. If the current rise in newly detected Covid-19 cases could be localised and controlled, then the next season for the fashion industry could bring an even bright messenger pigeon to tell us about much better times for the habitual life worldwide.
This sign is particularly noteworthy in the background of recent spikes in stock prices of grocery networks across the pond, meaning Walmart or Target shares, and even Macy's in some episodes. Walmart, the world’s biggest retailer, is soaring high especially due to its great free express delivery service program. So, Walmart shares topped $150 in September after a great earning report, that's after $120 only in mid-summer, compared with a fall below $105 on the bottom in March.
There is a feeling that the listed companies, as well as giant food retailers like McDonalds, or beverage suppliers like Coca-Cola and Starbucks, or other retailers with a relatively low average purchase size for the consumers, have been growing in price sharply over the past few weeks, as they are attracting some attention from the temporarily break in high-tech shares. However, this trend may well continue for a longer period if some capital owners could prefer to minimize or hedge their risks of holding too big lots of too expensive and "too profitable" shares. If so, it might serve as a good turn at least for a further climbing of the U.S. S&P broad market index and for the similar movements in the Pan-Euro Stoxx 600 - if not just in September, than before the end of the year.
Analysis and opinions provided herein are intended solely for informational and educational purposes and don't represent a recommendation or investment advice by TeleTrade.
We are ready to assist you in every step of your trading experience
by providing 24/5 multilingual customer support.
Risk Warning: Trading Forex and CFDs on margin carries a high level of risk and may not be suitable for all investors. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75.19% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Prior to trading, you should take into consideration your level of experience and financial situation. TeleTrade strives to provide you with all the necessary information and protective measures, but, if the risks seem still unclear to you, please seek independent advice.
© 2011-2023 Teletrade-DJ International Consulting Ltd
This website is operated by Teletrade-DJ International Consulting Ltd, which is registered as a Cyprus Investment Firm (CIF) under registration number HE272810 and is licensed by the Cyprus Securities and Exchange Commission (CySEC) under license number 158/11. Teletrade-DJ International Consulting Ltd is located at 88, Arch. Makarios Avenue, 2nd floor, Nicosia Cyprus.
The company operates in accordance with the Markets in Financial Instruments Directive (MiFID).
The content on this website is for information purposes only. All the services and information provided have been obtained from sources deemed to be reliable. Teletrade-DJ International Consulting Ltd ("TeleTrade") and/or any third-party information providers provide the services and information without warranty of any kind. By using this information and services you agree that under no circumstances shall TeleTrade have any liability to any person or entity for any loss or damage in whole or part caused by reliance on such information and services.
TeleTrade cooperates exclusively with regulated financial institutions for the safekeeping of clients' funds. Please see the entire list of banks and payment service providers entrusted with the handling of clients' funds.
Teletrade-DJ International Consulting Ltd currently provides its services on a cross-border basis, within EEA states (except Belgium) under the MiFID passporting regime, and in selected 3rd countries. TeleTrade does not provide its services to residents or nationals of the USA.
Material posted here is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer.CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75.19% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.