Ghost Global (US Banks | GM | Porsche | Samsung)

In this week’s edition of Ghost Global, Ghost Grads Kayla Soni and Sinawo Bikitsha bring us the latest on banks, automobile manufacturers and the world of Samsung.

Get ready for provisions

When US banks report earnings, they will need to adjust for economic conditions

Like a group of toddlers running in the same direction, the US banks report earnings in quick succession. Much like the toddlers, it might become an emotional affair with significant highs and lows.

The bank shares have taken serious pain this year. JPMorgan has lost nearly 37%, Morgan Stanley is down 23% and Goldman Sachs has lost 25% as new listings have dried up.

In an interview on CNBC, JPMorgan’s Jamie Dimon noted “very, very serious things” going on that would push the US into a recession by the middle of next year. Dimon has been in the markets for longer than some of us have been alive, so his opinion matters. With rapidly rising inflation, higher interest rates and the contagion from Europe’s economy, it’s hard to argue with his view.

The bad news never seems to end for these banks, with Morgan Stanley and Bank of America part of the consortium that committed to provide $13 million for Musk’s acquisition of Twitter. This is the same man who has just launched a fragrance called “Burnt Hair” – more like burnt lenders! If the banks tried to offload that debt in this environment, they would almost certainly suffer substantial losses.

General Motors beats Toyota and Ford in the US

Yet nothing can stop the bloodshed in these share prices

This really hasn’t been a good year for automotive manufacturers. The General Motors share price has lost over 47% of its value in 2022 and Ford is down by a frighteningly similar number.

The year-on-year sales numbers for the third quarter tell a different story, with GM’s unit sales up 24.3%. After Toyota experienced a sales decline of 7.1%, GM was able to regain top spot as the country’s top-selling automaker. Ford managed to achieve sales growth of 15.9% in the same period.

With continuing supply disruptions, increasing rates and the risk of recession, the outlook isn’t great for the sector.

Of course, there’s never a dull moment in these corporates. GM has a new COO and among the many things on his plate, there’s GM Financial’s agreement to pay $3.5 million to settle an alleged violation of the Servicemembers Civil Relief Act.

Porsche on pole position

The iconic 911 manufacturer is now Europe’s most valuable automaker

It’s been a volatile start for the P911 stock ticker, trading as high as €93 in Frankfurt before retreating to €85. This isn’t unusual for a new listing, with investment banks sometimes hired under a “greenshoe option” to help stabilise the price after a listing. In this case, Bank of America was the stabilisation manager and “stable” is a relative term here.

With all said and done, Reuters reports that Volkswagen raised 19.2 billion euros from reducing its stake in Porsche. This initial public offering (IPO) was Germany’s second-largest listing on record, so there has been plenty of market attention on this opportunity.

Porsche’s market cap is higher than Volkswagen’s after this listing, with Mercedes-Benz in third place. Further back we find BMW and Stellantis, which is a conglomerate of marginal car brands.

Compared to the rest of the German market, Porsche has the fifth higher market cap overall. Those ahead are Linde, SAP, Deutsche Telekom and Siemans. It turns out that putting the engine in the wrong place is big business.

Samsung slumps

Smartphone demand has dropped as consumers become more cautious

It’s been a productive year for Samsung Electronics Company, with the launch of numerous smartphones and electronics to support the company’s ongoing position as the second-largest electronics company.

So, the real question is this: why has the share price fallen if Samsung remains popular within the target market? It must be the case that Chinese competitors like Xiaomi are hurting demand for Samsung’s products, a function of Samsung’s positioning in the highly competitive Android market. This is why Apple continues to stand apart from the rest.

In earnings guidance released to the market ahead of full third quarter results, Samsung notes that operating profit could fall by over 32% year-on-year. This is the first year-on-year decline in roughly 3 years. The drop vs. the preceding quarter is as high as 25%.

Although we have to wait for detailed results to be released, analysts are estimating a double-digit drop in smartphone shipments. Have smartphones simply become too expensive for this economic environment?

You’re obviously interested in global stocks if you’ve made it this far. There’s a library of 50 research reports and podcasts produced by The Finance Ghost and Mohammed Nalla in Magic Markets Premium. For R99/month or R990/year, the full library is available, along with a new show each week.