Zhou viewpoint
US stocks continued to decline slightly this week, with S & P 500-3.05% and nasdaq-3.82%. US bonds continued to maintain the high volatility this year, further reflecting the market’s concern about global macroeconomic uncertainty.
The quarterly reports of retail giants such as Wal Mart and target released this week further amplified the market’s concerns about the rise of inventory and logistics costs. Target Q1’s total revenue was US $25.17 billion, a year-on-year increase of 4%, net profit was US $1.009 billion, a sharp year-on-year decrease of 51.9%, Wal Mart’s revenue was US $141.6 billion, a year-on-year increase of 2.4%, and Q1’s net profit was US $2.05 billion, a year-on-year decrease of 25%. Rose department store made a profit of US $338 million in the first quarter of 2022, a year-on-year decrease of 28.97%; The total operating revenue was US $4.333 billion, a year-on-year decrease of 4.0%.
We believe that the declining profit margin in the financial report of retail enterprises reflects: 1) the terminal is still digesting inventory, and it is expected that the profits compressed by the upstream and downstream of the industry will be renegotiated; 2) there are significant changes in consumers’ spending. With the recovery of consumer spending on travel, wine and tourism, and the squeeze of rent, oil price and other expenses, the consumption of traditional large electrical appliances and consumer electronics may continue to decrease, and the optional consumption sector may continue to suffer adverse headwinds.
Considering the declining profit margin, the overall market may continue to be under pressure for some time in the future. Considering that S & P is looking forward to PE, 3800 is relatively reasonable, but it has not fully reflected the downward trend of enterprise profit margin under the possibility of the worst recession. In terms of industry. Optional consumption lowered its profit forecast, while the energy industry benefited from oil prices. Supported by the energy sector, the overall S & P 500 profit forecast has not fluctuated significantly. If the market goes down further, it is expected that the long-term support point may be 3460 points of the average line (roughly consistent with 3400 points before the epidemic).
In terms of technology trends: this week, applied materials (Amat. US), the world’s largest manufacturer of semiconductor manufacturing machinery, announced Q2 results. Q2 revenue was US $6.245 billion, a year-on-year increase of 12%. The net profit was US $1.536 billion, a year-on-year increase of 15%. Non GAAP diluted earnings per share was $1.85, a year-on-year increase of 13%, and the market expected $1.9.
We believe that not only is the semiconductor industry accelerating the ordering of semiconductor manufacturing machinery, but the shortage of chips also makes the application materials lose the components needed for manufacturing equipment. The supply chain and blockade prevented the company from obtaining the parts needed to complete the machine manufacturing. The operation proportion of some suppliers is less than 50%. We believe that from the overall financial report of semiconductors, the lack of core may continue, and the reversal of supply and demand will not appear for the time being in two quarters.
We believe that from the perspective of investment suggestions, 1) resilience is more important than growth, so the review of customer structure is more important: we believe that super large companies may have the power to continuously reduce capital expenditure under the pressure of profit side, which has a negative impact on the overall demand of the industrial chain. We believe that considering the resilience of customers’ spending ability, if customers have a better structure and are less affected by inflation, they may show greater resilience. We focus on Microsoft, apple, snowflake and other enterprises that can show greater resilience in consumer electronics and tob.
2) instead of focusing on the uncertain trend of macro reversal, we pay more attention to the ability of scientific and technological innovation to drive demand beyond the economic cycle: Historically, the scientific and technological innovation cycle is a force that can surpass the macroeconomic cycle. We suggest to continue to pay attention to the progress of meta, apple and other technology giants invested in VR / AR devices and the investment opportunities in related industries (Electronics and content).
Risk warning: Overseas epidemic control is less than expected; Strict overseas risk supervision policy; Inflation rose rapidly.
