Amazon enters AI battle, Superdry withdraws profit guidance, AO World bullish and 888 expects earnings improvement

“The FTSE 100 followed up yesterday’s Wall Street gains as easing factory gate prices from across the pond suggested the Fed is nearing the end of its battle with inflation,” says AJ Bell investment director Russ Mould.

“Resulting strength in sterling versus the dollar, with the UK currency hitting a 10-month high against its US counterpart, weighed on the index a little thanks to its heavy exposure to overseas earnings which are relatively diminished by a higher pound.

“Sterling’s recovery from near parity to the dollar in the wake of the disastrous mini-Budget in September 2022 has been Lazarus like.

“The recent banking crisis started across the Atlantic with the collapse of Silicon Valley Bank and the US regional banking sector is perceived as more vulnerable than UK banks.

“All eyes will be on the big US banks as they kick off the first quarter reporting season later today. The potentially dicier outlook for US institutions means the Federal Reserve may have to prioritise its role in preserving financial stability over pursuing further rate hikes to firmly stamp out inflation. Consequently, the market is now pricing in at least one more rate hike from the UK versus no more from the Fed in the near-term.

“The euro also hit a one-year high against the dollar, whose weakness was also good news for gold which shone brightly and neared record levels.

“The precious metal is also being supported by expectations the rate hiking cycle is nearing an end, reducing the relative attractiveness of alternative assets like bonds and cash. These are not likely to see further material increases in their respective income streams, with income being an attribute gold does not offer.

“It feels like there are few areas the big tech companies don’t compete these days and Amazon has entered the generative-AI race with the launch of its new platform Bedrock.

“The company is remaining fairly neutral in this battle for now, unlike Microsoft and Alphabet, merely providing the computing power through its Amazon Web Services cloud business and the ability for clients to access AI start-up technology.”

Superdry

“High street fashion brand Superdry’s soggy sales outlook and decision to withdraw profit guidance suggests it is really struggling against a backdrop where shoppers are becoming more careful with their money.

“Blaming the weather for poor performance is never something likely to endear a business to investors and yet Superdry reaches for this excuse as it seeks to explain a downturn in sales in February and March.

“Today’s update is only likely to fuel the argument that the brand is just no longer as relevant as it once was, with fewer people prepared to pay a premium for its faux-Japanese stylings.

“Reducing costs will help in the short term but reducing the number of clothing ranges could diminish its appeal further. Closing shops is also sensible but suggests things are only going one way. Its destiny could be the same as the likes of Joules and Cath Kidston, with the brand owned by a third party and its high street presence being diminished or disappearing entirely.”

AO World

“After a rollercoaster of a time around the pandemic when initially the company enjoyed huge share price gains before crashing back down to earth, investors will be pleased with AO World’s latest update.

“The online electricals seller expects full year profit at the top end of expectations as consumers have proved to be more resilient than feared and, significantly, margins are holding up.

“The company is making tangible progress in reducing costs and this latest update has to be chalked up as a serious achievement given how tough it is to sell larger ticket items right now.”

888

“Troubled William Hill owner 888 provided some relief to suffering shareholders as it pointed to higher earnings and the company is confident the business will hit targets out to 2025.

“What may get in the way are the company’s ongoing regulatory issues. The biggest ever fine from the gambling watchdog handed to William Hill a month or so ago suggests there is a danger the company may lack the necessary controls to avoid further trouble.”

These articles are for information purposes only and are not a personal recommendation or advice.