Evening Wrap: ASX 200 higher + A bumper week for Wisetech, NextDC and Altium

The ASX 200 finishes the week down 1.7% while the Tech Index surges to levels not seen since April 2022, Australian retail sales turnover was flat in April as consumer cut back on dining out and a few standalone Macquarie notes.

Let's dive in.

ASX 200 Session Chart

ASX 200 trends higher intraday and closes at session highs (Source: Market Index)

Markets

The ASX 200 is trying to pick up the pieces after a four-day losing streak. This is where the market is increasingly due for a short-term bounce but momentum has taken a turn for worse. Tech stocks continued to push higher on Friday, in-line with the Nvidia-inspired Nasdaq rally overnight. The S&P/ASX 200 Materials Index bounced after an almost 5% decline over the last five sessions. Overall, the market is trying to stabilise against a backdrop of bearish momentum and higher volatility. Let's see if the dust can settle next week.

Economy

Australian retail turnover was unchanged month-on-month in April.

• This follows a 0.4% rise in March and 0.2% increase in February

• Spending was again soft in April but was boosted by increased spending on winter clothing in response to cooler and wetter than average weather across the country," said Ben Dorber, ABS Head of Retail Statistics

• “The modest fall in food-related spending comes after a period of consistent growth driven largely by high food inflation."

• “Spending at cafes, restaurants and takeaway food services remains at a particularly high level despite the fall in April, with turnover up 13.3 per cent compared to this time last year.”

Latest news

Market Insights: It's Tech Time?

The S&P/ASX 200 Tech Index is up 12.1% so far in May, breaking out of its longstanding trading range and marking another run above March 2020 levels.

ASX 200 Info Tech Index chart (Source: TradingView)

Nvidia has inspired a broad-based rotation into large cap tech names, especially names like Wisetech (ASX: WTC), TechnologyOne (ASX: TNE) and NextDC (ASX: NXT).

Is this the beginning of a new bull market for tech? Or is this just another bubble?

Here's a little food for thought:

• The S&P 500 Tech Index rallied 4.5% overnight but the ARK Innovation ETF was down 2.7%. This might tell us that not all tech stocks are made equal and the rotation remains focused on the best quality names

• The only other times where the S&P 500 Tech Index surged over 4% while the rest of the market decline was at the onset and in the middle of the 2000 dot com bubble

• But then again, Nvidia isn't your average 2000 dot com bubble company ...

Interesting news and movers

Trading higher

• +13.5% Catapult Group (CAT) – Continuation rally, up 16% in previous three

• +11.1% Poseidon Nickel (POS) – Update for Black Swan project restart

• +9.7% APM Human Services (APM) – Guidance

• +8.0% Audinate (AD8) – Initiated with Buy at Jefferies

• +6.2% Brainchip (BRN) – Bounce after down 20% in previous three

• +5.6% Adbri (ABC) – Continuation rally, up 22% in previous three

• +5.5% 29 Metals (CAT) – Bounce after down more than 30% in past week

• +3.5% NextDC (NXT) – Nvidia earnings (Thurs)

• +3.1% Incitec Pivot (IPL) – MoU with Keppel

Trading lower

• -8.2% Humm (HUM) – ASIC order to stop BNPL segment

• -6.3% Fisher & Paykel (FPH) – Earnings

• -5.1% CSR (CSR) – Ex-dividend

• -3.5% Latitude Group (LFS) – Guidance

Broker notes

A few standalone Macquarie notes:

Macquarie’s take on healthcare:

• “Volumes per workday for Apr-23 showed improvement YoY but with slightly weaker trends for pathology and imaging volumes vs Mar-23.”

• “Volumes/benefits for most services are ahead of pre-COVID-19 levels but remain below trend.”

• “Our preferred exposures remain HLS, IDX, CAJ (all Outperform-rated). We have a Neutral rating on RHC and an Underperform rating on SHL.”

Adbri (ABC): Neutral with $2.00 target price

• “ABC did not provide 1H guidance but noted that underlying NPAT for the four months to April 2023 is tracking significantly above pcp.”

• “The group is enjoying the benefits of last year’s price increases and expects to raise prices in 2023 across most product lines. This is in line with feedback from industry participants.” 

• “But we believe many uncertainties remain a drag on the thesis – management succession, the capex-heavy Kwinana project is yet to complete, the balance sheet is relatively stretched.”

Costa Group (CGC): Outperform with $2.86 target price

• “No formal guidance, consistent with practice. However, CGC is seeing generally improved growing conditions in CY23, consistent with Feb commentary.”

• “We forecast a strong EPS rebound in CY23 (+60%) off a low CY22 base driven by International and a partial recovery of CY22 citrus impacts plus an “on year” in that category.”

Treasury Wine Estates (TWE): Outperform with $13.90 target price 

• “Despite deteriorating operating conditions, we remain bullish on TWE’s near-term prospects in China. A reopening of the group’s largest and most profitable market for Penfolds would be a game changer.”

Sandfire Resources (SFR): Outperform with $7.30 target price 

• “Motheo has delivered first concentrate production and the progress of the ramp up will be a key focus in the near-term.”

• “The ESIA approval de-risks A4 development and Motheo’s expansion to 5.2mtpa processing capacity.”

• “SFR has strong upside to spot prices and in a spot price scenario in FY24 trades on an EV/Ebitda of 4.6x and FCF yield of 10%.”

Scans