AI panic, planes and trench coats
DeepSeek, Ryanair, GenSight, European Cloud, Stabilus, BASF, Ericsson, Burberry and GL Events
DeepSeek Causing panic
Chinese AI startup called DeepSeek is causing a bit of a buzz in the tech world. Over the weekend, they introduced a new AI model that’s not only cheaper but also runs on simpler chips.
This news made a lot of people start questioning whether the big U.S. tech companies are really worth their sky-high valuations. As a result, the Nasdaq 100 futures are taking a hit, and the S&P 500 seems also ready to fall. Over in Europe, tech stocks didn’t fare much better, with ASML, a big name in chip-making equipment, taking a dive of more than 8%.
The chatter about DeepSeek is all about how they could shake up the way we think about investing in AI. Normally, the big players pour loads of money into developing cutting-edge tech, but DeepSeek’s model shows you might not need to spend that much to make something great.
This could really mess with the current AI supply chain, which relies on heavy spending from a few major companies. DeepSeek’s AI, crafted by Liang Wenfeng, is getting props for competing with big names like OpenAI and Meta Platforms, and people are loving its straightforwardness and efficiency.
In Asia, folks are pretty excited. Stocks related to Chinese AI, like Merit Interactive, are jumping. But elsewhere, investors started rethinking what they thought they knew about computing power and energy use. This change of heart led to a drop in Nvidia’s shares, which fell more than 6% in Germany.
DeepSeek’s big reveal is making people nervous about geopolitical risks and the high prices of U.S. tech stocks it seems. As big names like Apple and Microsoft gear up to share their earnings, the tech sector is under a microscope because of its high valuations, even though profit growth has slowed down. DeepSeek’s success is making people question whether China’s tech is really that far behind the U.S., especially since they used open-source tech that’s pretty easy to get your hands on, despite U.S. trade bans.
Bottom line, competition is heating up!
Ryanair (RYA) A surprising boost from Boeing
Ryanair recently unveiled its financial results for the third quarter, presenting a mix of surprises. While the airline's EBIT were slightly below what analysts had predicted, the net income far exceeded expectations, thanks to some unexpected boosts.
The company reported an EBIT of €32.6 million, which was less than the anticipated €38.7 million. This shortfall was primarily due to a rise in unit costs, excluding fuel, despite a modest 1% bump in revenue per passenger. Fortunately, Ryanair managed to counterbalance some of these increased costs through savings on fuel hedging. However, the real game-changer was the compensations received from Boeing due to delivery delays, along with favorable foreign exchange movements, both of which significantly improved the net income.
Ryanair's net profit for the quarter soared to €148.6 million, leaving previous forecasts in the dust. This unexpected windfall was largely driven by the compensations from Boeing and favorable currency revaluations, contributing an additional €92 million more than what was expected.
Ryanair is optimistic yet cautious. The company has adjusted its traffic growth forecast for the fiscal year, increasing it from 8% to 9%. However, they’ve also slightly reduced their passenger target for the next fiscal year, citing potential challenges like further Boeing delays or geopolitical issues. They’ve set their profit after tax estimate for the current fiscal range between €1.55 billion and €1.61 billion, though they remain wary of unforeseen external factors.
Despite the solid net income figures, we believe we should remain cautious here, especially with expectations of flat unit costs and a competitive landscape in the upcoming quarter due to the Easter holiday period.
GenSight Biologics (SIGHT) A financial balancing act
GenSight Biologics recently shared an update, highlighting both the challenges and opportunities it faces. As of the end of 2024, the company had €2.5 million in cash, a slight decline from €3.4 million in September. This includes funds raised from two capital increases totaling €4.3 million. While this provides some short-term stability, GenSight is focused on strategic planning as it approaches the anticipated restart of its Compassionate Access Authorisation (CAA) program in February 2025.
The CAA program is crucial for GenSight, with the potential to significantly strengthen the company's finances over the next year. However, to secure its future beyond that, particularly regarding obligations from the CAA program in 2025, GenSight is looking into additional funding options, including partnerships or possible mergers and acquisitions.
On the regulatory side, GenSight is making strides with its LUMEVOQ treatment. The French regulatory agency ANSM is reviewing the company's application to resume the CAA program after GenSight responded to their inquiries last December. Meanwhile, preparations are underway for a phase III clinical trial for the RECOVER study and a submission to the UK's MHRA.
Despite these advancements, we remain very cautious until there is more clarity on the CAA's resumption and the company's medium- to long-term financing plans.
European cloud (yes there are some) Trump’s policies an opportunity for European cloud?
Recent political moves by the Trump administration are shaking up the European cloud market. An executive order has set the stage for reviewing and possibly overturning previous national security decisions, including those impacting data transfer agreements between the EU and the US. This has raised concerns in Europe, as it could affect the legality of data transfers currently overseen by the Privacy and Civil Liberties Oversight Board (PCLOB).
European cloud companies like IONOS (IOS) and OVHCloud (OVH) are closely monitoring these developments. With potential restrictions on US cloud services, there's growing concern that European data could be more accessible to US government agencies. This might lead European firms to consider moving their data back to local providers or internal solutions.
For OVHCloud, this situation presents both challenges and opportunities. Despite a competitive European market, the company’s position as a sovereign cloud provider could become a strong selling point for customers wary of US-based services.
IONOS, meanwhile, could see significant benefits. The company recently secured a major contract with the German government, boosting its credibility in the cloud market. With cloud services already accounting for a significant portion of its revenue and expected growth of 19% in 2025, IONOS is well-positioned to take advantage of any shifts in the market influenced by these geopolitical changes.
Stabilus (STM) A good start to the year
Stabilus kicked off its fiscal year 2024-25 with results that were a bit better than anticipated, giving investors a reason to smile. The company reported group sales of €326 million for the first quarter, which is a 7% increase compared to last year, even though they saw a slight dip in organic sales. This growth was helped along by bringing Destaco into the fold.
Breaking it down by region, Stabilus saw a 15% sales jump in the Americas, a 6% rise in Europe, the Middle East, and Africa (EMEA), but a small 1% decline in the Asia-Pacific (APAC) region. Looking at specific markets, their Automotive Gas Spring sales dropped by 6%, Automotive Powerise by 15%, and Industrial sales by just 1% year-over-year.
Despite these mixed sales numbers, Stabilus delivered a solid performance with adjusted EBIT rising by 14% to €37.8 million, which is a little better than what analysts predicted. Their EBIT margin also improved to 11.6%. Earnings per share (EPS) climbed by 20% to €0.56, again slightly surpassing expectations.
However, their free cash flow (FCF) before mergers and acquisitions came in at €9 million, which was quite a bit lower than expected, mainly due to tax effects and an increase in net working capital.
Looking ahead, Stabilus has confirmed its full-year guidance, expecting sales to be flat or increase by up to 11%, with an adjusted EBIT margin between 11% and 13%. They’re optimistic that the second half of the fiscal year will bring better business performance, which is good news for anyone keeping an eye on their shares.
BASF (BASF) Preliminary results - muah
BASF recently gave a sneak peek at their Q4 results, and it looks like a bit of a mixed bag. The company's EBITDA came in at around €1.6 billion, which matches what analysts were expecting, though it's a tad below the lower end of their guidance range. Overall, for the year 2024, their EBITDA totaled €7.9 billion, which is a 3% improvement from last year but still below their five-year average.
The Chemicals segment had a tough time, with EBITDA barely above last year's numbers, but their core operations saw some decent growth, thanks to improvements in their AgSolutions business and other areas. Despite a challenging year, BASF managed to double their operating free cash flow to €0.7 billion, much better than expected, mainly because they spent less on capital investments than planned.
BASF had to deal with significant impairments, particularly in their Battery Materials segment, which weighed down their EBIT to €2.0 billion, falling short of forecasts. There's some hope that some self-help measures could offset challenges like the ramp-up costs for their new site in China.
Ericsson (ERIC) Hope for the future?
Ericsson's recent results were a bit of a letdown. The company didn't provide specific guidance for 2025, but they’re expecting their Networks and Cloud Software and Services divisions to follow the usual seasonal patterns. They’re also planning to keep operating expenses stable while continuing to invest in research and development.
During a recent call, Ericsson's management struck an optimistic tone, especially about the U.S. market. They believe that increasing data consumption could drive more spending from operators, thanks to new tech like AI and AR/VR. They’re also looking at the potential of 5G and future 6G technologies to keep things moving forward.
While Ericsson has its challenges, especially with uncertain markets outside the U.S. and ongoing legal issues, they remain hopeful about finding new revenue streams from network applications and partnerships.
Burberry (BRBY) Burberry’s retail sales show signs of recovery
The retail scene at Burberry is starting to look a bit brighter as we roll into the new year. After the rollercoaster ride of ups and downs, particularly the steep declines we witnessed in the second quarter, the iconic fashion brand is finally showing some encouraging signs. The latest from Q3 indicates that Burberry's retail sales have bounced back, coming in about 10% higher than what most analysts were bracing for. This is quite the turnaround from the previous quarter, where we saw a massive 20% drop.
This recent performance has certainly grabbed attention. With sales hitting £659 million, the numbers show a modest decline of about 4% on a like-for-like basis. While not perfect, it’s a vast improvement. The Americas seemed to have found their footing, Europe and the Middle East, Africa (MEA) dipped slightly (2%), but Asia, which was really struggling, saw a decline of only 9%, which is a significant improvement from their previous 27% drop.
China, in particular, appears to be on the mend. Altogether, Chinese consumption, both onshore and offshore, is holding steady, which is quite promising.
Burberry could break even or even turn a small profit. This upswing is largely attributed to the company’s new game plan under CEO Joshua Schulman, who’s been steering the brand back to its roots. By focusing on their traditional staples like scarves and outerwear, they've seen a boost in sales, especially during the holiday season.
Burberry's strategy seems to be paying off. While the year-end festivities provided a nice bump, the challenge will be to maintain that momentum throughout the year. There’s still a long road ahead, especially in the realm of soft luxury where competition is fierce, but things are looking up. The company is banking on the momentum to continue into the next quarter, expecting flat growth, and potentially turning a slight profit for the fiscal year. They’re also setting their sights on 2026 and 2027, with hopes of ramping up sales and improving profit margins.
GL Events (GLO) Looking good
GL Events just closed out the year on a high note. The company’s latest results for the fourth quarter exceeded expectations, which is a pretty big deal considering the challenges they faced last year. With revenues hitting €431 million, they managed to surpass the forecast of €410 million. This is especially noteworthy given the big-ticket events they hosted the previous year, which set a high bar.
The Live division was the standout performer, pulling in €277 million. A significant chunk of this came from Olympic revenues, which was a major contributor to their strong showing. The division saw an impressive 8.5% growth in Q4, defying the odds and proving their resilience in a challenging market.
The Exhibitions division held steady, bringing in €29 million, right in line with expectations. This was thanks to a series of successful trade shows like Première Vision and Hyvolution, which kept the momentum going in regions like France and Latin America. Even in China, where the market has been tough, they managed to hold their ground.
Meanwhile, the Venues division experienced a slight dip, with revenues coming in at €124 million. This was mainly due to the absence of some biennial events that didn’t occur this year. However, the drop wasn't too concerning, as the underlying business activities in Europe and South America remained strong.
GL Events has upgraded their margin guidance, raising it to 15% from a previous minimum of 13%. While they didn’t lower their leverage guidance, the increase in EBITDA guidance is a positive sign. The company is looking ahead to 2025, expecting stable revenues, even though they might not see a big leap unless they engage in some strategic acquisitions.
Despite a few bumps in the road, like the Sofina stake creating a bit of an overhang, the outlook remains promising. The chairman is keen on addressing these issues in the near future, which should provide further stability and confidence moving forward.
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