Stock of the day 05/05/2015 – J Sainsbury PLC/GlaxoSmithKline PLC/Tesla Motors Inc

Wednesday sees yet another busy day for earnings, with two British giants and a forward thinking (or unsustainably erratic, depending on your worldview) American company announcing their latest results.

First up is the orangest of all the UK’s supermarkets, J Sainsbury PLC, which announces its full year 2014/15 earnings. Steady, and fairly heavy, declines in 2014 saw the supermarket’s stock price fall from £3.81 to £2.43 over 12 months. Things weren’t much better at the start of 2015, as Sainsbury’s fell to £2.30 in the first week of January. Since then the supermarket has seen some marginal growth, reaching a £2.88 high in the middle of April, before falling to a current trading price of £2.72.


(Source: IT-Finance.com 05/05/2015)

Sainsbury’s is currently in the bizarre situation of having its CEO Mike Coupe sentenced in his absence to 2 years in jail in Egypt for attempted embezzlement, with his appeal hearing delayed until May 21st. Yet this news is just the tip of the sour iceberg for the supermarket. Sainsbury’s has been feeling the squeeze following the £150 million in price cuts implemented back in November, and forecasts are largely estimating a 17% decline in underlying pre-tax profits to £659 million. This would be the first time Sainsbury’s has posted a profits decline in a decade, and another sign, if one is needed, that the UK supermarket sector is in less than robust health.

With like-for-like sales falling for 5 quarters in a row, and Coupe previously warning that this could be a trend that lasts for the next few years, it is unsurprisingly that analysts are rather tentative surrounding Sainsbury’s, giving it a consensus rating of ‘hold’ with an average target price of £2.48.

Like Sainsbury’s, GlaxoSmithKline PLC saw a substantial fall in 2014 from £16.14 to £13.80 after a year full of patent troubles; it will be hoping to boost these figures with its Q1 2015 earnings release. After falling to £13.50 in the first week of January, Glaxo has seen a fairly sharp rise culminating in it hitting £16.55 in the middle of March, its highest price since the previous April. Since then Glaxo has fallen to a current trading price of £15.20, a fall off, but still far better than its position at the start of the year.


(Source: IT-Finance.com 05/05/2015)

Genericization is a key issue for Glaxo with Valtrex, Seroxat/Paxil, Zeffix, Combivir, Lovaza, and Trizivir all being affected by the arrival of cheaper alternatives. The most pronounced example of this trend is Glaxo’s asthma drug Advair, which accounted for 27% of its pharmaceutical revenue in 2014 but faces increasing competition from other off-brand options. There are also rumours that Glaxo’s previously announced plan to return £4 billion to investors may be abandoned in favour of supporting its dividend; it will be interesting to see in this eventuality how investors react to the change.

Despite all of this there is some good news, as the company claims it has fixed its supply issues that had plagued it throughout much of 2014, and it has a new shingles vaccine Zoster in development that is reportedly seeing high levels of efficacy. And whilst earnings per share are expected to fall to 15.2% year on year to $0.18, the pharmaceutical giant is forecast to see a very marginal 0.4% climb in year on year sales to $5.6 billion. Given the mixed nature of Glaxo’s recent news, analysts have the company at a consensus rating of ‘hold’ with a target price of £15.38.

Finally, Wednesday afternoon will then see something a bit different as Tesla Motors Inc releases its first quarter results after a disappointing full year announcement in February. Big growth in 2014 saw Tesla rise from $150.21 to $222.43 across the year, and despite analysts downgrading the company after the weak full year report, its stock price hasn’t suffered in the same way. Whilst nowhere near the $291 highs seen last September, Tesla is now trading at $237.64, a far cry from the $181.45 low seen towards the end of March.


(Source: IT-Finance.com 05/05/2015)

The catalyst for this rapid April growth was two-fold. Firstly at the start of the month Tesla announced a record 10,030 in the first 3 months of the year, a big boost considering the weak figures seen in the fourth quarter. Secondly, and perhaps more interestingly, Tesla announced the Powerwall, a home electric energy battery, saw big gains for the company, and shows Elon Musk’s intentions in stretching beyond the motor industry and could have huge ramifications for the energy industry as a whole.

In terms of its first quarter figures, revenue expected to grow by an impressive 46%, from $713 million to $1.04 billion; however the now ever-present fears of the stronger dollar are likely to have an impact on the company’s overall results. The somewhat erratic nature of Tesla’s business has led analysts to give the company a consensus rating of ‘hold’ with an average target price of $270.28.