BT soars, Roche excites on weight-loss breakthrough and EasyJet boss to leave

“After a sparkling session on Wall Street last night amid hopes that the latest inflation data raises the chances of a US interest rate cut, European markets didn’t share the joy. The FTSE 100, Dax, CAC 40 and IBEX 35 were all down in early trading amid mixed corporate news,” says Russ Mould, Investment Director at AJ Bell.

“The FTSE 100 was dragged down by weakness in Shell and BP, and Sage slumping 8% after trimming its annual revenue guidance.

“Weight-loss drugs remain a hot topic and investors are latching on to any positive news in the broader space. Roche is the latest name to turn heads after reporting positive early-stage trial data for an obesity drug.

“Big share price gains have already been recorded with weight-loss champions Novo Nordisk and Eli Lilly so investors are keen to find new ways to play the theme. Roche’s shares have been considerably weaker than many of its peers, hence why today’s big news is being touted as a potential turning point for the stock.

“Two previously beaten-up mid-caps enjoyed a strong bounce back on the market. Watches of Switzerland jumped 13% after a reassuring trading update, providing a huge sigh of relief to investors amid concerns that it was still caught up in the luxury goods sector downturn.

“Previous news flow from the company around a slowdown in luxury retail spending dragged on the share price, leaving many fund managers with red faces as the stock had been a favourite among professional investors running mid-cap portfolios. The fact life isn’t getting worse was enough to trigger the relief rally.

“Media group Future soared by 22% ¬¬after sweetening investors with news of a new £45 million share buyback programme.”

BT

“There is a surge of energy running through BT after the telecoms group announced it had reached an inflection point. New guidance for significantly increased cash flow, more cost savings and a higher dividend for shareholders all combined to deliver a bumper package of good news.

“Many people assumed BT would continue to be weighed down by the hefty investment into upgrading its infrastructure and that ongoing takeover speculation would be the only catalyst to move the share price higher. Instead, it has knocked the market for six with one of the most bullish statements from the company in a long time. The share price shot up faster than the average download speed for BT’s superfast broadband.

“It's the kind of statement that could encourage a large number of investors to start reappraising the business. The market focus is very much on the future rather than the past, particularly as the latest set of results don’t exactly paint a picture of a company in its prime. Profit fell sharply, blamed on a variety of factors including higher costs.

“The positive share price reaction will have also caught some big investors off guard. There has been a notable increase in institutional investors betting against BT since September 2023, with the amount of stock on loan to short sellers rising from 0.5% to 2.74% over this period.

“BT has been criticised widely in the past for poor levels of growth and service and having high levels of debt, elements that tend to attract short sellers looking to profit from any decline in the share price.

“BlackRock, Canada Pension Plan Investment Board and AKO Capital are among the biggest short sellers of BT, according to FCA data, and they might be shocked at the new guidance unveiled alongside full-year results. Certainly, the share price is now travelling in the opposite direction they wanted, and the short sellers may decide to close out those trades if market sentiment has now improved for BT.”

Easyjet

“EasyJet cannot win over the market despite bouncing back from the pandemic and riding the boom in the travel sector. The launch of new routes, ongoing success with its package holidays arm and making more profit per seat are three examples of business success, yet investors aren’t buying it.

“The airline’s shares have taken another lurch downwards on the latest results and news that chief executive Johan Lundgren is stepping down next year. He’s being replaced by finance boss Kenton Jarvis, which suggests a smooth passing of the baton and no change to corporate strategy. The negative share price reaction implies that the market doesn’t approve of the appointment and that investors wanted an outsider to come in and shake things up.

“One of the key goals for airlines is to make sure planes are as full as possible each flight. EasyJet expects its planes to be fuller this summer and says it is on track to hit a medium-term target of more than £1 billion pre-tax profit. Normally such news would be reassuring, but it’s just not enough to please the market.”

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