Tech lifts US markets, European equities in the red, GSK settles Zantac case and the bubble bursts on podcast platform Audioboom

“It’s tech to the rescue once again as a strong showing from names such as Amazon and Apple helped Wall Street to record a positive session last night,” says Danni Hewson, Head of Financial Analysis at AJ Bell.

“Federal Reserve chairman Jerome Powell gave the market the message it wanted to hear – while US rates have not hit the top of the current cycle, the central bank will proceed with caution. That was enough to convince investors to keep bidding up shares in the mega cap tech names, which in turn gave a near-1% lift to the Nasdaq last night.

“Europe didn’t share the same enthusiasm, with all the main indices in the red on Friday morning. The FTSE 100 slipped another 0.7% to 7,450 as investors dumped shares in miners, housebuilders and banks – all economically-sensitive sectors.

“Germany’s Dax index fell 0.7% after a disastrous update from Siemens Energy, whose share price fell by more than 30% after flagging major problems with its wind turbine division. That caused a knock-on effect across other companies in the same space, including a 4% share price decline in both Nordex and Vestas.”

GSK

“News pharmaceutical giant GSK has settled a case in California alleging its Zantac heartburn medication caused cancer, while crucially admitting no liability, is not a full stop on the saga but is the latest punctuation point in what shareholders will hope is its final stanza.

“Once the world’s best-selling drug, there have been a series of lawsuits brought in the US implying a link between Zantac and cancer but, so far, GSK has been able to navigate its way through these choppy waters. A court ruling in Florida before Christmas, which provided a comprehensive dismissal of the plaintiffs’ arguments, proved a bit of a lode star for the company.

“As it begins to put this issue behind it, focus will turn to its efforts to catch up with its close UK peer AstraZeneca which has drastically outperformed it in share price terms in recent years. Over the last decade AstraZeneca has achieved a total return in excess of 300% while GSK’s own total return through this period is less than 50%. AstraZeneca even stole its thunder in vaccines, typically a GSK specialism, during the pandemic.

“The spin-off of its consumer health arm as Haleon should have created a more focused business and it now needs to deliver on its flagship drugs like shingles vaccine Shingrix and its next generation HIV treatments.”

Audioboom

“Only those living under a rock will have been ignorant to the podcasting boom of the past five years. The pandemic accelerated the trend with people bored at home looking for something to keep themselves busy. The idea that anyone with a laptop can record a show with the click of a button made the podcast industry boom in a relatively short space of time.

“When you have a hot theme investors look for ways to play it and Audioboom couldn’t have had a better name. Its share price shot up from circa £1.50 to more than £22 in just two years, helped by chatter that Amazon wanted to buy the business.

“Hype has since turned to reality with the share price crashing back down as a key source of earnings has disappointed and investors question the edge Audioboom has on other podcast platforms. The advertising market continues to be weak as corporates watch their pennies for fear of an economic downturn, which means Audioboom once again cannot hit earnings forecasts.

“Spotify’s big podcast strategy rethink suggests the format isn’t the sure-fire winner that many previously thought. By axing Harry and Meghan and cutting jobs in its podcast operation, it’s clear that Spotify needs to fine-tune its model and that might apply to the broader podcast industry.

“In strong economic conditions Audioboom should in theory thrive thanks to greater advertising income, but it needs to show that its business can be profitable in more uncertain times. Until there is proof, it could be a tough ride for the company on the stock market.”

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