Market Analysis: Fundamentals still matter; Analysts bullish on Zscaler, Squarespace, Micron

Market Analysis: Fundamentals still matter

Despite the current rally fueled by investor enthusiasm for artificial intelligence and the potential profit margins for AI-related stocks, a likely recession, weak market breadth, and rising interest rates threaten global stocks according to Phillip Wool, a portfolio manager at $17 billion asset management firm Rayliant. Classic recession signals like an inverted Treasury yield curve and The Conference Board's Leading Economic Index have been signaling a downturn for months now. The Federal Reserve's recession probability model, based on the Treasury yield curve, assigns a 70% chance of a downturn in the next 12 months. Consumers are also burning through their savings, as indicated by rising credit card debt and loan payment delinquencies.

Wool's view is slightly more bearish than the average Wall Street strategist's year-end price target of 4,000 for the S&P 500. Morgan Stanley's Wilson has a 3,900 year-end target, but has said that the index could fall to a range between 3,000-3,300 before then. Piper Sandler's Michael Kantrowitz also sees the S&P 500 falling to 3,225 by the end of 2023 as a recession unfolds in the second half of the year. The excitement that has driven the market upwards has Wool worried that investors have forgotten about recession warnings. "Fundamentals still matter…eventually," Wool said.

Bullish sentiments on Zscaler, Squarespace, and Micron

Despite the warning signs, analysts remain optimistic about the performance of Zscaler, Squarespace, and Micron. According to Tal Liani from Bank of America Securities, Zscaler is a Buy with a price target of $175.00. The word on The Street in general suggests a Strong Buy analyst consensus rating for Zscaler with a $172.46 average price target. Oppenheimer also initiated coverage with a Buy rating on the stock with a $180.00 price target. Ygal Arounian from Citi reiterated a Buy rating on Squarespace, with a price target of $40.00. Currently, the analyst consensus on Squarespace is a Hold with an average price target of $31.80, representing a -5.8% downside. Piper Sandler also reiterated a Buy rating on the stock with a $35.00 price target. Harlan Sur from J.P. Morgan maintained a Buy rating on Micron. The word on The Street in general suggests a Moderate Buy analyst consensus rating for Micron with a $72.59 average price target, a 3.5% upside from current levels. Wells Fargo also maintained a Buy rating on the stock with a $82.00 price target.

Success Stories: Startups that are thriving despite the pandemic

The pandemic has created a myriad of challenges for startups, from disrupted supply chains to a lack of funding. However, some startups are showing remarkable resilience and even growth in this challenging environment. One such startup is Workvivo, a Cork-based social network for companies. The platform has doubled its customer base in the past year and raised €14m in funding. Another success story is Gorillas, a Berlin-based grocery delivery startup that has raised $290m in funding since launching in May 2020. Gorillas delivers groceries in just ten minutes and has expanded to over 20 cities across Europe. Finally, there's K Health, an AI-powered telemedicine platform that has experienced rapid growth during the pandemic. The platform has raised $270m in funding and is now valued at over $1.5 billion.

Business Trends: The rise of e-commerce and the future of retail

The pandemic has accelerated the shift towards e-commerce, with online sales reaching record levels in 2020. However, the future of retail is not all doom and gloom. According to a report from CBRE, retailers are increasingly adopting a hybrid model that combines online and offline shopping experiences. This allows retailers to leverage the benefits of both channels, such as the convenience of online shopping and the sensory experience of in-store shopping. Another trend in the retail industry is the rise of social commerce, which allows consumers to shop directly through social media platforms. Facebook and Instagram have both launched shoppable features, and TikTok is testing a similar feature. As the retail industry continues to evolve, retailers will need to adapt to changing consumer preferences and embrace new technologies to stay competitive.

Market Analysis: The outlook for renewable energy

The renewable energy sector has been one of the fastest-growing industries in recent years, driven by a combination of falling costs and increasing demand for clean energy. According to a report from the International Energy Agency (IEA), renewable energy is set to grow by 50% over the next five years, driven by solar and wind power. The report also predicts that renewable energy will account for 90% of the global power capacity additions by 2022. However, there are still challenges facing the industry, such as the intermittency of solar and wind power and the need for energy storage solutions. Despite these challenges, the outlook for renewable energy remains positive, and the industry is expected to play a significant role in the transition to a low-carbon economy.

Market Analysis: The impact of inflation on the global economy

Inflation has been a hot topic in recent months, as the global economy recovers from the pandemic and supply chain disruptions cause prices to rise. The US Federal Reserve has indicated that it expects inflation to be transitory, but there are concerns that high inflation could persist if supply chain disruptions continue. Inflation can have a significant impact on the global economy, affecting everything from interest rates to consumer spending. High inflation can also erode the value of savings and investments, making it more difficult for individuals to plan for the future. However, there are also potential benefits to inflation, such as reducing debt burdens and increasing exports. As the global economy continues to recover, it will be important to monitor inflation and its impact on different sectors and regions.

References (June 17, 2023). 'Fundamentals still matter': A portfolio manager at a firm managing $17 billion warns stocks are due to sink 15% as AI hype fuels the current rally and drowns out recession alarm bells.
howard-kim. (June 17, 2023). Analysts Are Bullish on These Technology Stocks: Zscaler (ZS), Squarespace (SQSP).

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