EasyAssetManagement Watchlist: Decoding Success with AI

Tune in to Thulisa Shandu, Junior Portfolio Manager, and Shaun Krom, our CIO at EasyAssetManagement, as they analyze this week's stock market movements, and AI advancements. More updates on key players like Meta, Microsoft, Alphabet, and more.

Watchlist

• Meta's stock took a significant hit on Thursday, plummeting by more than 15%. This drop was fuelled by lower-than-expected revenue forecasts for both the first and second quarters, as well as management's projection of higher total expenses and capital expenditure for 2024, primarily due to increased investments in AI.
  
  Despite this, Easy Asset Management, with approximately a 10% stake in our global unit trust, remains optimistic about the stock. Meta has become increasingly vocal about surpassing heavy spending by Chinese advertisers, the monetization acceleration of Reels, and the strong momentum in engagement since 2023. The company is also more enthusiastic and ambitious about its AI endeavours than ever before, aiming to emerge as the leading AI firm globally.
  
  While we recognize that long-term aspirations are driving greater infrastructure investments, Meta has a solid track record of generating returns on increased spending. We anticipate healthy revenue and EPS growth over the next two years. Moreover, given the recent decline in its stock price, Meta appears somewhat more appealing from an investment perspective.
  
  
• Microsoft delivered strong Q3 results, with significant reacceleration in Azure and commercial bookings. All segments performed well, surpassing expectations with a remarkable 2% total revenue beat (+17% year-over-year), notably led by Azure, which exceeded expectations and accelerated by 3 percentage points to 31% year-over-year growth. AI services contributed 7 percentage points to this growth, with notable surprise coming from non-AI or core Azure services. The introduction of Generative AI/Co-Pilot features in the Azure business has notably improved digital productivity and collaboration, leading to sustained impacts, increased demand, and adoption for the productivity business. We believe that Microsoft currently holds a competitive advantage with its strong presence in the enterprise sector.
  
  
• Alphabet celebrated robust Q1 results across all fronts, introducing a new annual cash dividend of $10 billion. With revenue reaching $80.5 billion, approximately 2% higher than the consensus estimate, the company demonstrated strength. Cloud revenue surged to 28%, propelled partly by the increasing contribution from GenAI. Google maintains its focus on innovation, and we remain confident in the promising prospects across Search and YouTube ads, especially as AI enhances ROI and as television advertising budgets transition to online platforms. Alphabet stands out as one of the most well-positioned companies in the internet sector, with newer advertising products like PMax/Gemini, ACA, and Demand Gen gaining traction as the broader online advertising landscape strengthens.
  
  

Weekly movement in the Rise Enhanced Equity Portfolio
Tech heavyweights Naspers and Prosus share price increased by 11.27% and 11.98% respectively. This was driven by their stakes in Tencent. Furthermore, the announcement of the highly anticipated "Dungeon and Fighter" mobile game release on May 21 by the Chinese tech giant resulted in a 4.5% surge in its shares. Market likely to see this as positive development for Tencent 2Q/2H24 games revenues. To know more about the Rise Enhanced Equity Portfolio, click here.

South Africa Economics
The annual producer price inflation in South Africa edged up to 4.6% in March 2024, compared with February's 4.5%. The main contributors were paper & printed products (4.4% vs 2.8%), and in contrast the biggest price slowdown was transport equipment (3.5% vs +5.7%).

US Economics
Thursday saw GDP growth falling short of expectations at 1.6%, while Personal Consumption Expenditures (PCE) and core PCE prices picked up pace during the quarter. This has led to uncertainties about a smooth economic transition and caused traders to adjust their predictions on when the Fed might lower interest rates. Currently, there's a 58% chance of a rate cut in September.

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