Stock market indices ended August in disarray, but September is off to a better start, it seems. Futures were firmly in the green after the release of the job report. At the start of the week, the sharp recovery in stock market indices could have reversed the downward trend accumulated at the beginning of the month. But the rebound failed to hold, and August was indeed tinged with red on Western markets. The S&P500 lost 1.8% and the Nasdaq 1.6%. The Stoxx Europe 600 fell -2.8%. Even so, the correction was fairly minimal, and the 2023 gains remain impressive on some indices, with the Nasdaq 100 posting +41%, for example.

Today, on top of good job data, we got new announcements in China. The central bank reduced the foreign currency reserve requirement ratio for financial institutions to support the yuan, while the government introduced measures to allow the country's major cities to ease payment conditions for property buyers. At the same time, banks responded to the authorities' call by lowering rates on existing mortgages. The surprise of the day was the Chinese manufacturing PMI calculated by Caixin, which came out stronger than expected in August, and even entered the expansion zone at 51 points.

To round off the week, a few words on a reader's recent question about the huge discrepancies between analysts' price targets on certain issues. It's true that there are sometimes considerable discrepancies, which are not always easy to justify at first glance. I browsed the Stock Screener, the stock selection and comparison tool familiar to MarketScreener subscribers. One of the tabs classifies listed stocks according to the gap between their extreme price targets. Based on stocks followed by a substantial number of analysts, I obtained the following ranking in Europe: Wizz Air, EasyJet, UBS, Renault, Lufthansa, International Consolidated Airlines, Air France-KLM and Stellantis. First observation: European airlines are clearly the most controversial sector among analysts. This is not illogical, since this is a highly cyclical sector, whose shares are therefore extremely sensitive to the macroeconomic adjustments made by research firms. Logically enough, we also find carmakers. In this case, Renault and Stellantis. Here again, the cyclical nature of the business is one explanation, as is the ongoing transformation of the industry with electrification and the arrival of new entrants. Sharing a cake of 100 that was divided into 20 until recently creates a few uncertainties! The case of UBS is interesting. The bank is followed by around twenty analysts whose price targets range from simple to double (13.20 to 27.50 francs). UBS has been in a special situation since the somewhat forced takeover of Crédit Suisse, which created a major hazard. However, the latest results, published just yesterday, show that the company has probably done very well.

It will come as no surprise to learn that similar divergences exist in the United States, where they are also concentrated in consumer cyclicals and, above all, technology. The two most striking examples are Tesla and Nvidia, two of the top 10 controversial large caps. Targets range from USD 85 to 350 on the carmaker, which is quoted at USD 258 (around 40 analysts). On Nvidia, followed by 52 analysts, the lowest estimate is USD 439 and the highest USD 1100. The current price is USD 492. The discrepancies are therefore enormous, but less so than for Tesla.

Taking an interest in discrepancies of this kind enables us to identify particular issues which, in any case, give rise to debate and therefore potential investment ideas. I'm not sure I've answered the whole of the initial question, but let's just say that discrepancies can often be explained by differences in cyclical visions or disagreements over a company's potential. In the end, it all comes down to estimates of long-term earnings trajectories, which sometimes vary considerably.

Economic highlights of the day:

The final versions of the manufacturing PMI indices for the major economies are being released throughout the day. The monthly US employment figures have been published. The full agenda is here. 

The dollar is down 0.2% against the euro and the dollar to EUR 0.9202 and GBP 0.7870. The ounce of gold is stable at USD 1951. Oil climbs again, with North Sea Brent at USD 87.57 a barrel and US light crude WTI at USD 84.12. The yield on 10-year US debt is unchanged at 4.11%. Bitcoin falls back to USD 26,000.

In corporate news:

  • Dell Technologies reported second-quarter sales of $22.93 billion, against consensus of $20.85 billion. The company gained 9.2% in pre-market trading.
  • Tesla unveiled on Friday a restyled Model 3 with greater autonomy in China and other markets including Europe, the Middle East, Australia and Japan, but reduced the price of some of its models, which weighed on the stock, down 0.7% before the opening.
  • Broadcom was down 3.24% in after-hours trading, as the group forecast revenues of $9.27 billion for the current quarter, against consensus of $9.28 billion.
  • Paramount Global loses 0.5% after Moody's downgrades its senior unsecured debt to BAA3.
  • Booking Holdings planned €1.63 billion acquisition of Sweden's ETraveli Group is likely to be vetoed by EU antitrust authorities due to concerns about the online travel agency's market power, people familiar with the matter said on Friday.
  • Delta Air Lines said Thursday it had updated the radio altimeters in its d fleet to take account of potential interference from 5G.
  • Lululemon Athletica now expects full-year 2023 sales of between $9.51 and $9.57 billion, compared with a previous estimate of $9.44 to $9.51 billion.
  • EOS Energy Enterprises - The energy storage company is up 40% ahead of the open, after announcing the launch of a $500 million project backed by a $398.6 million conditional commitment from the Department of Energy.
  • Oxford Industries - The clothing manufacturer forecasts third-quarter net sales of between $320 and $335 million, against consensus of $352.5 million.
  • SentinelOne is up 7% in after-hours trading after raising its fiscal 2024 revenue forecast to $605 million, against previous estimates of $590 million to $600 million.
  • MongoDB - The data search company jumped 5.9% after reporting second-quarter adjusted earnings per share of $0.93, compared with a loss of $0.23 a year earlier.
  • Nutanix was up 18.7% after the close following the publication of fourth-quarter sales of $494.2 million, against consensus of $475.2 million, and the announcement of a $350 million share buyback program.

Analyst recommendations:

  • Centrica Plc: AlphaValue/Baader Europe maintains its add recommendation with a target price increased from 188 GBp to 191 GBp.
  • Big Yellow Group: Kempen maintains a buy recommendation with a reduced target price of GBp 1200.
  • Cvs Health Corp: Piper Sandler & Co maintains its overweight rating with a reduced target price of $82.
  • Dell TECHN-C: Credit Suisse maintains its outperform rating with a target price raised from USD 62 to USD 74.
  • Dollar General C: Citi maintains a neutral recommendation with a reduced target price of USD 146.
  • Ecolab Inc: Berenberg maintains its recommendation with a target price of USD 180.
  • Exxon Mobil Corp: Goldman Sachs maintains its neutral recommendation on the stock with a target price raised from 115 to USD 116.
  • Fair Isaac Corp: Goldman Sachs maintains its Buy rating on the stock with a raised target price from USD 978 to USD 1029.
  • Gulf Keystone PE: Canaccord Genuity maintains a speculative buy recommendation with a reduced target price of GBp 190.
  • Hewlett Packa: Daiwa Securities maintains its outperform recommendation with a raised target price of $19.
  • Jupiter Fund: Numis upgrades to add from hold. PT reduced from 135 to 115 GBp.
  • Man Group Plc/je: Numis maintains its hold recommendation with a reduced target price of GBp 220.
  • Marathon Petrole: Goldman Sachs maintains its buy recommendation with a target price raised from USD 153 to USD 163.
  • Polar Capital HO: Numis maintains its hold recommendation with a reduced target price of GBp 440.
  • Phillips 66: Goldman Sachs maintains its buy recommendation with a target price increased from USD 125 to USD 141.
  • Valero Energy: Goldman Sachs downgrades to sell from neutral. PT up 13.3% to USD 128.
  • Vmware INC-CL A: Mizuho Securities maintains a neutral recommendation with a target price raised from USD 158 to USD 165.
  • WH Smith Plc: Goodbody upgrades its recommendation from hold to buy and raises the target price from GBP 16.40 to GBP 17.50.