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[theme music] >> Hello, I'm Greg Bonnell. Welcome to MoneyTalk Live, brought to you by TD Direct Investing.
Every day, I'll be joined by guests from across TD, many of whom you'll only see here.
We're going to take you through what's moving the markets and answer your questions about investing.
Coming up on today's show, we've got Nvidia on deck tomorrow for earnings, bit of caution in the market. We will discuss whether the run in big tech can continue.
TD Asset Management Evan Chen joins us.
MoneyTalk's Anthony Okolie will have a look at a new TD Economics report on the state of the housing market.
And in today's WebBroker education segment, Caitlin Cormier will show us where you can find that analysts are saying about a stock you're on the platform. So here's how you can get in touch with us.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Before we get to our guest of the day, let's get you an update on the markets.
We will start her at home with the TSX Composite Index.
We are down about one third of a percent, 78 points, nothing too dramatic. We are in the thick of bank earnings season here.
We are going to be getting some market reaction. The market reaction is not pleased with the Bank of Montréal, under some pressure at this hour, to the tune of about 6.5%, $111 and change per share.
Scotiabank also out with its earnings today. The street seemed more favourable with what they saw out of that name.
Scotia is up at 66 $77 per share, up a little shy of 2%. South of the border, there is a little bit of caution in the markets ahead of Nvidia. We've had a nice run recently for the broader market. Right now, we are pretty much dead flat.
The S&P 500 at 5617 points, up one fit of a point, percentagewise flat.
The tech heavy NASDAQ, compared to the broader market, nothing too dramatic, down about 1/10 of a percent.
Let's check in on Nvidia as we await those results tomorrow. Today you got the stock up modestly, $128.08 per share, your up 1.28%. And that's your market update.
The big tech names have been driving markets to new highs but with plenty of concerns about whether the run can continue, what are we actually hearing from those tech companies? Joining us now to discuss his Evan Chen, associate for portfolio research with TD Asset Management.
Welcome back.
>> Thanks. I feel like it's a regular appearance now.
>> Technology has been a hot topic for investors. We are seeing a bit of caution.
We know there are big stakes with Nvidia, but earning so far, we have heard from the other big tech names, what are they telling us?
>> You ever have a tough boss, when you can never do well by, you can never seem to please, imagine this. Your coworkers submitted a report a day early and your boss says, why not two days early? Your other coworkers says, I automated this task that's taking up an hour of our time, and the boss says, why did you do it earlier? But not you. You're the best employee we've ever had. You put your head down, you work hard, you do it all.
I want to like in those first two employees to Google and Microsoft and you are Meta. Let's dive into their earnings.
Google earnings were good and they beat expectations everywhere except for you two. Margins were also near all-time highs and they mentioned a good count for the second quarter in the row. What did that get them? A -6% day as we had worries over YouTube and margin compression in the second half. Microsoft, earnings were good as well. They beat expectations everywhere except in the core segment of Azure, the cloud platform. Growth was 30% instead of the expected 31 1/2%.
What did that get them? -7%, mostly recover the next day, but it goes to show you how scared the market was. Finally, Meta. There earnings are very good. They beat expectations everywhere, driven by upside add pricing as advertisers saw more return on spend.
The stock was up 8% the next day and has continued since.
Let's go over the financials now. All three companies are growing earnings around 15%, 50% higher than the S&P 500.
Margins are strong. We continue to see operating leverage.
However, margin expansion is probably at its end as we get higher charges from the capex coming into the income statement from the spending.
All this still leaves to double digits earnings growth and around market multiples, still pretty attractive.
>> You are talking about matter there, Mark Zuckerberg, AI. Used a word that stood out for me: tangible benefits. Is that becoming key now as we go through these companies that say, everyone likes to throw the phrase around, are they tangibly finding a way to capitalize on this opportunity?
>> The big theme of the quarter was a debate around AI related spend an capex.
Last time I was on the show, we were saying that capex for the hyper scalars was increasing 30 to 40% this year and early estimates of next year are around the same so that's a lot of money, maybe $200 billion. You can buy a lot of things.
What's actually getting you? Google and met and even micro soft and promote saying that the risk of underinvestment is greater than the risk of overinvestment when it comes to AI. Investors got kind of spooked by that and they got spooked because they took that statement to mean we have over invested and we don't have returns. That's pretty scary.
I would take the opposite side of this argument. I think we are beginning to see AI related returns in the cloud on the hyper scalars and engagement in Meta. So the cycle from money into the ground capex to revenue, will take at least 18 to 24 months. These data centres do not appear overnight. It takes a long time.
You got to build them, put everything in, test them, all of that before they come on. We have not seen a lot of returns yet because they are still building the thing that will get the returns.
>> People will ask about the run that we have seen in the markets and check if they have missed the boat and it seems like you're setting up an argument saying that it's still an interesting time to look into the space because we are in the early innings.
>> Yes, I have more examples about how AI is relating to these companies. The first is a lot of the features around AI for consumer facing and BTB are better summarization answers. That's not super exciting but it's a start and I think it's gonna broaden over time. To put some numbers behind it, Microsoft, there run rate for as related to AI benefits, that's near $89 billion. Amazon has their multibillion-dollar cloud AI related benefits, same with Google, multibillion-dollar AI related benefits on their cloud platform.
And copilot has had a $1.2 billion run rate so it's still early days we are beginning to see billions of dollars sloshing around with some of the spending.
The second is that while you may not have these consumer facing apps… >> Yeah, the killer app. We want the search to better but where is the killer app?
>> Right. I think you are seeing it in small fits and starts. Among Fortune 500 companies, a lot of the calls say they are seeing tangible benefits from AI. For example, Amazon has said it saved them 4500 develop or years in work. That's a lot of years. $260 million annual is.
Microsoft has said that they saved hundreds of millions of dollars in customer support using AI will and Goldman Sachs, a bank, have said that efficiency has increased at least 20%. These are benefits that exist and we are just at the start. I think the technology is just going to get better.
. >> If I think of the technology that we have now, I think of data centres. The heavy lifting, the heavy thinking. There is interest in the space. How is looking?
>> That trade has rolled off a little bit.
It has come down a little bit from the peak.
We have Nvidia tomorrow. We're gonna see what they say but I think the stocks are taking a breather. Some of them are up more than hundred percent, 20% drawdown, I'm not too worried. I think that long term trend is still there and I think we are going to see more being built out because the risk of underinvestment is greater than the risk… The risk of underinvestment is greater than the risk of overinvestment. I don't think they will pull back anytime soon.
>> Some of the software plays have been overlooked. What's that look like?
>> Stocks have been underperforming and software. Only up 6.5% year to date, underperforming the broader market. But are these businesses really impaired?
I would argue no. I think this is an interesting time to look at some of the software. Growth has not fallen off a cliff. So growth has decelerated for sure.
2021, things were growing 30+ percent on the top line, now maybe one or two companies are doing that but it's not like they are going into negative columns, they still have double-digit growth numbers. We had a little bit of a head fake in Q1 coming off a strong numbers from last year. A lot of the stocks with unique stories were better-than-expected and have performed as such.
While there are fears in the market, there's obviously still demanded certain spots that are attractive, companies such as service now and SAP. These companies have unique value propositions and they are still doing well.
>> If you put it all together, you get investors thinking about the technology space, it has seen a nice run, thinking about the passport, which is a need to keep in mind?
>> I think valuation is something to keep in mind. It's kind of boring but what I would say now is that valuation is fair for a lot of these M&A giants.
You are not paying too much more than market multiple for some of the stocks that are growing 50% higher, so that sounds pretty attractive to me but of course you need to be aware that you're on this AI trend, you could spend too much and eat up all your profits so it's a balance there but I think we are in an okay spot to have some pretty good forward returns.
>> Interesting stuff in a great start to the program. We are going to get your questions about technology stocks or Evan Chen from TD Asset Management in just a moment's time.
And a reminder that you can get in touch with us any time.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Right now, let's get you updated on the top stories in the world of business and take a look at how the markets are trading.
We have shares of Eli Lilly in the spotlight today. The drugmaker releasing a new version of its weight loss drug Zepbound. That's going to sell for half the price of the original.
Eli Lilly says it's making the move to improve access to the drug amid strong demand, also seeing a rise of copycat versions of their weight loss treatment.
Right now you got Eli Lilly up modestly, it was a little stronger earlier in the session, a little shy 1% right now. Click check in on Sony. It's boosting the price of its PlayStation 5 console in its home market of Japan.
The nearly 20% price hike for the gaming system, that flagship device turned four years old this year, it's birthday is in November. Enthusiasts and investors are waiting for an updated Consol from the company. Right now on the New York listing, Sony is up a little more than 3%.
There's more drama today around Paramount Global.
Edgar Bronfman Junior is now withdrawing his bid for the media giant, this clear this the way for Skydance Media to acquire paramount.
The company expects to multibillion-dollar Skydance deal to close in the first half of next year.
This has been a long and twisting tale.
Today, paramount down about 5.5%. Click check in on the markets. We will start on Bay Street with the TSX Composite Index.
Modest downside for us today, 92 points, little shy of half a percent. South of the border, as we await Nvidia, some caution in the markets. The S&P 500 down just one and 1/4 points were two ticks.
We are back now with Evan Chen, take your questions about technology stocks. Person for you here, close to home. What do you think of Constellation Software here in Canada?
>> Constellation Software is a really interesting company.
I think it's one of the best performers on the TSX over the last 25 years.
But investors have to be aware that it sort of a blackbox.
There are some risks to the unknown here.
What do I mean by that? Number one, they don't have a conference call. They don't really talk to investors. They have thousands of businesses and we don't know how each of them is doing.
What they do is they rule out the small software players, so you go to your golf tournament and they have a software that runs there, consolation probably on site.
Your boat marina software, they probably own that too. It just all these tiny businesses that roll up into one entity that's been doing really well for 25 years.
>> That's interesting. How do you do your homework on a blackbox company? If you really can't understand what's going on and they are not talking to investors, where do you begin?
>> The thing I value most about that is the cash in, cash out. Cash doesn't lie.
That is audited and the bank account, if they are generating cash, we can see that and believe they are doing something well.
That's the number one thing I think to view there is what they are doing with the cash, how they are employing it in with the returns are.
>> We talked about the fact that they will pull out of the smaller companies, is there still opportunity for consolation or other names in this market for acquisition?
>> I think there are opportunities. There are subscale players and software that maybe the founder is getting older, they they want to cash out and they want their team to be intact so what Constellation provides is a good home for a company.
Some other players the market may come into a company, slash and burn all the people, raise prices on everyone, consolation will undo that. They will treat people well, they will leave the leadership team intact and they will ensure a smooth transition so they get some attractive prices based on that.
>> Interesting name there that we talk about not a lot on the show but is been a big performer on the TSX. Another question from the audience. Back to artificial intelligence. Will AI disrupt current software leaders?
>> This is an interesting one because there's a lot of VC money pouring into the AI space and I can't really speak to all, but on the software side, like a developing tool, I think the advantage that people don't quite fully understand is the ability to sell into an organization. So you may have the best feature possible but if you don't have the best salespeople, it doesn't matter. A lot of the current software leaders, these billion-dollar companies, have good sales teams with processes in place to what they call land and expand. You sell one killer feature and then use it to sell auxiliary services everywhere else to increase your margins and dollars in the organization.
If you're a small startup, we see this all the time, you're going to get may be acquired into a large organization that uses that killer feature but it's very tough to break into these really big companies and start selling because there are gatekeepers there and you need the expertise and connections to make it happen.
>> Sometimes people don't think about if you think about technology is disruptive, new players come onto the scene, new ideas, but the big traditional players, they have very deep pockets. They are proven already with their spending on the hardware side, I can't imagine they would hesitate to spend on the software side as they thought that could really compete against us, let us make a part of our team.
>> Yeah.
>> Interesting stuff on that space.
Another question from the audience. Going back to July, I hate this happened when I was away for a week. It was quite a week.
What happened to CrowdStrike stock after the outage?
>> I hope you weren't on a plane.
>> I was sitting outside, staring at the hills.
>> They had the outage for the day and it blue screen Microsoft computers, less than 1% of them, but they had to manually restart them. This is a big deal and the stock was down maybe 50% that day and continued to bleed the next couple of days as CrowdStrike was the leader in cybersecurity and all of a sudden, it shows that maybe it's not a vulnerability but we can't fully depend on it. Going forward, it's going to be tough to see what happens. I don't think anyone knows because when you have competing views within an organization, if you're an organization, you're the chief security officer for instance, you know CrowdStrike is the best technology but your Board of Directors and your CEO are saying, we cannot have this rotational risk. What if it happens again? When you happened before, we can have it happen again. There are alternatives. I think that conversation is happening in a lot of organization that is going to drive maybe discounting, maybe turn in the share price of this going to be some volatility in the stock for sure.
>> Struggling with the CrowdStrike story as well is the fact that we build these defences because we are worried about bad actors trying to get after our systems, no matter what kind company we are running, and this is just an update and we sort of messed it up.
>> Yeah, and the report tomorrow, so it will be interesting to see how conciliatory they are on the call, hey guys, we put these processes in place to mitigate this or prevent this from happening in the future but you never know what goes on in an organization and if it happened once, it could happen again.
>> Interesting stuff there on CrowdStrike.
As always, make sure you do your own research before making any investment decisions.
we will get back your questions for Evan Chen on technology stocks in just a moment's time.
And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com.
Now, let's get our educational segment of the day.
If you are looking to see what analysts think of a particular stock, WebBroker has tools which can help.
Joining us now to discuss, Caitlin Cormier, senior client education instructor with TD Direct Investing.
Always great to see you. Let's talk about where investors can find out what the analysts are saying about the stocks here.
>> Yes, absolutely! Analysts are one piece of the puzzle. If we are going through the process of researching a stock, we might want to see what the experts are saying when we are doing our research. What we are going to do is take a look at our analyst Centre for individual securities.
This is assuming that we already have a security in mind that we are looking for.
Let's hop into the platform here.
We are going to click research, we are going to go under stocks and we are going to click their. This will bring up our page for information about the stock.
There's lots of information available here. If I scroll down a bit, I can see sort of the idea for what the ratings are for the stocks, whether it's a hold or buy.
Here's the 12 month price history on the stock as well as the projection for the price of the next 12 months.
You can see here that this is from 34 analysts and they are offering that 12 month projection so the high for the stock is 300, the average around 247 and the low of 186.
On the right, we can do the majority of analysts are saying this is a buy, 24 analysts are saying it's a bye, nine think is a hold and one saying it to sell. As we scroll down here, you can see the individual analysts who have actually made these ratings. You can see when the rating was made, what the rating is, whether was increased or decreased and what is their price target.
If you click on the analyst, you can see what their when lost rating is. This analyst has had 265 ratings and out of those 265, sorry, 499 and out of those, 265 have been successful meaning that the stock moved in the same direction that the analyst predicted.
Lots of information that you can find out on the analyst Centre. Just to give you a bit more perspective on what the experts are saying with regards to a stock.
>> As you go through that information, you see an analyst and you start to wonder, what other stocks do they cover? How do we figure that out?
>> Absolutely.
Because we see the win lost rating, we can maybe be interested in say I wonder what other stocks this analyst covers, I feel active got a pretty good deal for the market so I want to know what else they might be covering so in that case, we will hop in to web broker and we can see maybe you will choose something different here, we will click. This individual is 232 successful out of almost 400, a little bit better of a win lost rating there for us.
What we are going to do is click view profile and what that brings us to is actually the profile that shows their success rating, their average return, the analyst ranking, so this particular analyst is 487/9000 analysts and it's showing us here are the other companies that they cover so we can see that this individual also covers Dell and new Chantix as well so you can see what the ratings are as well. The interesting thing is if you do decide to follow this analyst, if you wanted to keep track of them in the future, you can click the follow button and right here you will notice there is a followed analyst tab and this is where you can see all of the analysts that you have gone ahead and followed and you can click on them and see what companies they are covering, when they last made the ratings. Lots of information here. If you are interested in what analysts are saying and want to be more in the know about it, the analyst Centre for individual stocks can be a helpful spot to start.
>> Great stuff as always. Thanks for that.
>> Thanks.
>> Caitlin Cormier, senior client education instructor at TD Direct Investing. And for more educational resources, you can check out the learning centre on web broker or use this QR code that will navigate to TD Direct Investing's YouTube page. Once there, you will find more informative videos.
We are back with Evan Chen, taking your questions about technology stocks. Another one close to home. What do you think of Shopify?
>> I think Shopify is interesting. They had a really good quarter. I will walk you through what has happened so far. On the revenue side, they beat expectations. They had stronger than anticipated gross market value and they had strength in a lot of their vendors there. Higher strength than people expected.
There are some worries in the market, we may go into a recession or we may not.
On the expense side, they were spending a lot of money on marketing, so advertisements, may be walk to work and see a Shopify out, hey guys, start a store, come on our platform. They are spending a ton of money on this. What they showed in the past is that they don't actually need to spend as much money, they found sufficient ways to do it pulled back and free cash flow was at more than expected so that was what led to that 20% pop leaving is almost flat at the year.
>> When I think about Shopify, obviously, it is a technology company but as you said, the business is people selling stuff to consumers and you tie back to the economy.
What you give more weight to it a name like this, the technology play or the fact that it's a play on the economy?
>> That's interesting. The point on the economy, they are doing better than the broader one, why is that? One, the tools are helping vendors sell more things but also they are taking a share from other platforms and that's what's helping their growth. So it's not all the economy with their taking a share there. The technology is also very good. I think it's an attractive platform they have great technology and it's only getting better.
>> When I think about Shopify it sort of interesting that it's still around us and some company. There are obviously powerful competitors, Amazon having tools, stuff like that. How does that competitive landscape look like and what will happen if a tech giant says I want Shopify?
>> I think Amazon could eat up Shopify.
They would. We are seeing a lot in the news, the DOJ and FTC investigating antitrust, antimonopoly practices. I don't think Amazon or any of the tech giants would be able to buy Shopify. If they could, I think for sure they would have tried to but they kind of reached that point in a company's market Or level of clout in the market, they exist as their own company and I think they will remain so for their lifetime.
>> What is going on a Disney?
>> Disney results have been tough. There's two parts to the story.
The first part is Disney Plus. They made this big bet to kind of join Netflix and what Apple TV have been doing and start their own platform. They have a lot of content. It kind of made sense to start their own platform but I think they are discovering that it's harder than it looks to put some videos online and have people purchase that so they are a little bit behind in technology, recommendation system, content, they are a little bit behind. Right now, that statement is becoming breakeven. People were excited about that. The other part of the story was there parks business. Everyone knows Disneyland, you go with your kids once every three or four years and it's very expensive.
The last couple of years since the pandemic, it's been doing very well, high occupancy, high prices. People thought that that would last forever. It's a new normal, people are travelling and all that but I think we are seeing in the broader market the travel is rolling off a little bit. Disney call this out first. They said they are seeing normalization in parks usage. What does that mean? It means that we are kind of going back to pre-pandemic levels which was lower than what we have experienced in the last three or four years and I think that's people and people because the kind of viewed the parks as the anchor to the stocks. Getting hit by both sides, I think Disney Plus needs a little bit more time and parks needs to normalize little bit.
>> More time on the Disney Plus side, they have a huge library. I remember when they launched and said we are Disney, think will the classic movies.
I have Disney Plus and I watch the Lady and the tramp and a few other cloth six but we are not going to be watching them over and over again, there needs to be a program to bring on the platform but that's expensive.
>> Exactly. You would think they had such a large content library that they could put everything on and that would be up but we are seeing that some of the newer stuff they are putting on his not resonated with the viewer and what they have done is in order to try to make it breakeven is they have reduced content spending. It's a double edged sword there where you get a little bit more profit but you're mortgaging the future where unless those shows they were spending less on, you spend more time, they're gonna be hits, it's about your making that your producers and your content generation engine is going to be good and I think that we have seen some stumbles recently from them so that's another part I'm cautious on.
>> Are there any interesting off the radar stocks internationally that we might be missing?
>> Regionally, I think there's a lot of interesting stocks and markets. Shopify was one of those on the international scene for a long time.
Now it's broken into kind of the global viewpoint. For the long time, Shopify was a Canada only kind of stock, a hidden gem, so to speak.
There a lot of these are in the world. In Australia, there is a company called from Medicus. It sells basically upgraded MRI software to hospitals in the US. That has done very well.
As a premium there. Not a lot of tech companies in Australia. They have another one called… There's a similar one in Sweden. It basically it's real estate software that 98% of the people in the countries. They've under charge for it for a long time, 18 years, and they are beginning to start to take price slowly and slowly and that means that you have five, 10% price increases every year that people are okay with because they have been under charge for so long, it's a small part of your property and I think that's an interesting one to look at.
>> If investors want to do research on these overlooks names, I mean it's pretty hard. You go to the major business portals, I do that every morning to see what's going on, we are talking about Nvidia, the markets, the big ones.
If you want to start doing a deeper date, what should someone be looking at?
>> It's interesting because with that hidden gem internationally, if you go to location, I think investors would know it.
How do you compete with that? I think the best way to do it is go straight to the source. Go to the company website, investor relations, annual report, hopefully there will be a translation, get it straight from the horses mouth. You can make decisions that way.
I think that's the best way of doing it, go straight to the source.
>> We are winning about your questions for Evan Chen on technology stocks in just a moment's time.
As always, make sure you do your own research before making any investment decisions.
and a reminder you can get in touch with us at any time.
Do you have a question about investing or what's driving the markets?
Our guests are eager to hear what's on your mind, so send us your questions.
There are two ways you can get in touch with us.
You can send us an email anytime at moneytalklive@td.com or you can use the question box right below the screen here on WebBroker. Just write in your question and hit send.
We'll see if one of our guests can get you the answer right here at MoneyTalk Live.
Let's talk borrowing costs. We have seen to rate cuts from the Bank of Canada over the summer and another is expected maybe next week. Summer is almost over. But the housing market, has it really been reacting to these lower rates? Anthony Okolie looking at a new TD Economics report on the Canadian housing market and what we are thinking. What are we thinking?
>> TD Economics has updated their forecast for the housing market into 2025 and the reason being we have seen this with repricing of bond yields as markets pulled forward, timing and size of rate cuts both here in Canada and in the US. So far, the data is mixed in terms of how the housing market is reacting to those lower rates.
When we look at June sales, they are up 4% month over month but preliminary data for July points to a giveback and markets, particularly in some of the larger areas like Calgary, Vancouver and Toronto.
So what's happening? TD Economics is that there are two opposing forces impacting their forecasts. On the plus side, part of their upgrade of the near term forecast is due to what they call compositional forces, that's when some of the pricier properties are outselling some of the more affordable ones, and that is lifting average housing prices. TD expects the strength to continue in the near term but they point out that while Canadian average home prices are up about 2% in the first half of this year, the benchmark prices when you exclude these compositional forces, the higher priced homes outselling more affordable ones, the benchmark price fell about 2%. The other factor is the Toronto stressed condo market will play a key role in shaping overall dynamics and currently GTA active condo listings are the highest on record.
The surge of new condo projects have come alongside elevated interest rates and that's really hurt the ability for buyers to close mortgages. In addition to that, more investors are becoming cash flow negative and that's likely adding to the glut of properties that we are seeing on the markets.
GTA benchmark condo prices are down 2% from the fourth quarter of 2023 to the second quarter of this year and TD Economics predicts that further drops are likely needed to clear this glut of inventory we are seeing in the housing market.
However, TD Economics does say that economic resilience, pent-up demand and solid population growth as well as falling rates should support positive price growth in the GTA housing market overall. In addition to that, they note that condos were about 30% of resale activity and that fact alone should help keep GTA price growth positive in the coming months.
>> You mentioned the cost of borrowing, the key is this is the biggest purchase for most people in terms of the home.
We've had to rate cuts so far, was the thinking on that going forward?
>> We got about three more meetings. TD Economics believes that the Bank of Canada will match the Fed over the next three policy announcements they expect to be a seed to cut interest rates three-quarter percentage points over the next three meetings and that will lower the benchmark rate to 3.75% by year end.
>> Interesting stuff. Thanks for that.
>> My pleasure.
>> MoneyTalk's Anthony Okolie.
Now, for an update on the markets.
We are having a look at TD's Advanced Dashboard, platform designed for active traders available from TD Direct Investing. This is the heat map function, and expect to hear of the market movers.
We know that on the top line TSXV are down modestly about 1/3 of a percent the last time I checked in. What's happening under the surface? TSX 60, Latona and a little bit, clear of the picture. The financial space, we are seeing some activity, we are in the sake of bank earnings season here in Canada. We had VMO and Scotiabank reporting this morning. You can see the market reaction to both those results. You got Scotia up modestly a little shy of 2% and VMO on this and selling pressure, down to the tune of almost 7% right now. Across the rest of the board, not a lot happening.
Very volatile trade when it comes to crude oil, American benchmark crude, West Texas intermediate down about 2% today. It jumped yesterday. Sort of been a bit of a jumpy ride, but of weakness and energy names, Suncor pulling back about 2%, Cenovus about the same. South of the border, we await Nvidia.
Nvidia has become part of that club now, we wait Fed minutes, we await rate decisions, we await anything that comes out of Jerome Powell's mouth and we wait for Nvidia.
It's turn comes up tomorrow. Today, some modest movement. It's taking up a lot of real estate, that means that in terms of trading activity, it's so trending the rest of the board, it's up about 1.5%.
It's a pretty mixed picture across the rest of the stocks, as we see.
We are back now with Evan Chen from TD Asset Management, let's get back to your questions. Someone wants to know, what happened with Google and the DOJ, the Department of Justice across the border?
And read through to Apple?
>> The DOJ sued Google saying they have monopoly practices and the judge sided with the DOJ. Pacifically what they were upset about was on Apple devices, Google was the default search engine. For this, Google pays Apple $20 million. That's pure profit, right? That's pretty good for Apple.
On first blush, it's negative for Apple but I think that Apple will find a way to make up that money. That's pretty crazy saying because $20 billion is and appear out of know where. On Google side, it could be a little bit scary. There is revenue there. Perhaps this agreement says okay, choose your search engine.
Maybe Google, whatever else is out there.
But there are some whispers in the market that the judge may try to break up Google, so Chrome or android, break that off from the main platform. I think that's pretty unlikely and if that does happen it would be appealed for years.
>> Interesting on the specifics of this case. Beyond that, we have seen the administration and Washington willing to bring antitrust against the tech giant.
What is the space look like going forward?
>> Makes it tougher for acquisitions. The DOJ is currently looking into the way that the big tech companies are doing kind of acquisition hires. They know they can't go out and acquire all these companies because of antitrust but what they are doing is that they may have a licensing agreement with the company or they will just take the CEO and all the important people and place them in their company, so an acquisition higher.
These practices may be allowed in the future but something to watch out for and is something the DOJ and FDC will try to stop.
>> Another question now from the audience.
Talking about artificial intelligence, someone wants to know, are there any interesting Canadian AI stocks?
>> There are not many at first blush.
There are companies that may use AI.
Shopify, for instance, has some products that use AI. They have an assistant that's quite good.
You're starting a story, your light, high, which a person product at and how should I presented to the customer?
And it'll have a database of related queries that will give you the answer.
They use AI on the platform but I wouldn't say it's the main driver of the stock.
Other than that, I think based on plays like semiconductors don't really exist in Canada, you have to go south of the border or international to find those.
>> Interesting insights on that one. I've got one more question to squeeze in.
Someone wants your view on talent here?
>> Talent here is an interesting one. Just like Constellation, people viewed as a Black box. No one really knows what it does. Maybe they do or down.
I will try to simplify.
On a high level, what they do is they find high-level engineering talent for may be entities that cannot recruit them themselves. Target software engineers to work in places other than big tech. So what they do is allow companies that cannot recruit those kind of talent and give it to them.
A big customer for them is the US military or US government, so they hire engineers to go work on projects for the government.
Another one is say you want to have data analytics in your platform, it's hard to get that engineering talent and maybe you don't need it permanently so they will hire Pelletier and say we need a couple guys or maybe a whole team to work on this project for us and that's what happens. So they have some tailwinds there, big data, data analytics and everyone sort of needs the software engineers.
>> That's one of the best explanations of Pelletier I've ever heard. Nice and straightforward. Before we let you go, at the start of the show, we talked about a bit of caution in the markets.
Nvidia is on deck, AI. What are you watching for which we be thinking about going forward?
>> I think for big tech, cloud is the number one thing to look for because that's where the AI benefit will show up.
All these big tech companies create their own internal tools with AI and they are cross-selling them through their platforms and saying hey, you're already on the platform, why don't you try this thing, it's AI, why don't you see how it works? I think that's important. The strength of digital ads is also important to look out for for Google and Meda. That's doing pretty well right now.
As long as that continues. And then, of course, and op ex, so headcount, is echoing out, our people hiring like crazy and is it going to lead to higher than market earnings growth?
>> Interesting stuff indeed. Thanks for joining us. I look forward to the next time.
>> Thank you.
>> Our thanks to Evan Chen, associate for portfolio research at TD Asset Management.
As always, make sure you do your own research before making any investment decisions.
if we did not have time to get your question today, we are going to aim to get it into future shows. Stay tuned for tomorrow show. Kevin Hebner, global investment strategist with TD Epoch will be our guest. He wants to take your questions about market trends.
A reminder that you can always get a head start with your questions for us.
Just email MoneyTalkLive@TD.com.
That's all the time we have for the church today. Thanks for watching.
We will see you tomorrow.
[theme music]
Every day, I'll be joined by guests from across TD, many of whom you'll only see here.
We're going to take you through what's moving the markets and answer your questions about investing.
Coming up on today's show, we've got Nvidia on deck tomorrow for earnings, bit of caution in the market. We will discuss whether the run in big tech can continue.
TD Asset Management Evan Chen joins us.
MoneyTalk's Anthony Okolie will have a look at a new TD Economics report on the state of the housing market.
And in today's WebBroker education segment, Caitlin Cormier will show us where you can find that analysts are saying about a stock you're on the platform. So here's how you can get in touch with us.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Before we get to our guest of the day, let's get you an update on the markets.
We will start her at home with the TSX Composite Index.
We are down about one third of a percent, 78 points, nothing too dramatic. We are in the thick of bank earnings season here.
We are going to be getting some market reaction. The market reaction is not pleased with the Bank of Montréal, under some pressure at this hour, to the tune of about 6.5%, $111 and change per share.
Scotiabank also out with its earnings today. The street seemed more favourable with what they saw out of that name.
Scotia is up at 66 $77 per share, up a little shy of 2%. South of the border, there is a little bit of caution in the markets ahead of Nvidia. We've had a nice run recently for the broader market. Right now, we are pretty much dead flat.
The S&P 500 at 5617 points, up one fit of a point, percentagewise flat.
The tech heavy NASDAQ, compared to the broader market, nothing too dramatic, down about 1/10 of a percent.
Let's check in on Nvidia as we await those results tomorrow. Today you got the stock up modestly, $128.08 per share, your up 1.28%. And that's your market update.
The big tech names have been driving markets to new highs but with plenty of concerns about whether the run can continue, what are we actually hearing from those tech companies? Joining us now to discuss his Evan Chen, associate for portfolio research with TD Asset Management.
Welcome back.
>> Thanks. I feel like it's a regular appearance now.
>> Technology has been a hot topic for investors. We are seeing a bit of caution.
We know there are big stakes with Nvidia, but earning so far, we have heard from the other big tech names, what are they telling us?
>> You ever have a tough boss, when you can never do well by, you can never seem to please, imagine this. Your coworkers submitted a report a day early and your boss says, why not two days early? Your other coworkers says, I automated this task that's taking up an hour of our time, and the boss says, why did you do it earlier? But not you. You're the best employee we've ever had. You put your head down, you work hard, you do it all.
I want to like in those first two employees to Google and Microsoft and you are Meta. Let's dive into their earnings.
Google earnings were good and they beat expectations everywhere except for you two. Margins were also near all-time highs and they mentioned a good count for the second quarter in the row. What did that get them? A -6% day as we had worries over YouTube and margin compression in the second half. Microsoft, earnings were good as well. They beat expectations everywhere except in the core segment of Azure, the cloud platform. Growth was 30% instead of the expected 31 1/2%.
What did that get them? -7%, mostly recover the next day, but it goes to show you how scared the market was. Finally, Meta. There earnings are very good. They beat expectations everywhere, driven by upside add pricing as advertisers saw more return on spend.
The stock was up 8% the next day and has continued since.
Let's go over the financials now. All three companies are growing earnings around 15%, 50% higher than the S&P 500.
Margins are strong. We continue to see operating leverage.
However, margin expansion is probably at its end as we get higher charges from the capex coming into the income statement from the spending.
All this still leaves to double digits earnings growth and around market multiples, still pretty attractive.
>> You are talking about matter there, Mark Zuckerberg, AI. Used a word that stood out for me: tangible benefits. Is that becoming key now as we go through these companies that say, everyone likes to throw the phrase around, are they tangibly finding a way to capitalize on this opportunity?
>> The big theme of the quarter was a debate around AI related spend an capex.
Last time I was on the show, we were saying that capex for the hyper scalars was increasing 30 to 40% this year and early estimates of next year are around the same so that's a lot of money, maybe $200 billion. You can buy a lot of things.
What's actually getting you? Google and met and even micro soft and promote saying that the risk of underinvestment is greater than the risk of overinvestment when it comes to AI. Investors got kind of spooked by that and they got spooked because they took that statement to mean we have over invested and we don't have returns. That's pretty scary.
I would take the opposite side of this argument. I think we are beginning to see AI related returns in the cloud on the hyper scalars and engagement in Meta. So the cycle from money into the ground capex to revenue, will take at least 18 to 24 months. These data centres do not appear overnight. It takes a long time.
You got to build them, put everything in, test them, all of that before they come on. We have not seen a lot of returns yet because they are still building the thing that will get the returns.
>> People will ask about the run that we have seen in the markets and check if they have missed the boat and it seems like you're setting up an argument saying that it's still an interesting time to look into the space because we are in the early innings.
>> Yes, I have more examples about how AI is relating to these companies. The first is a lot of the features around AI for consumer facing and BTB are better summarization answers. That's not super exciting but it's a start and I think it's gonna broaden over time. To put some numbers behind it, Microsoft, there run rate for as related to AI benefits, that's near $89 billion. Amazon has their multibillion-dollar cloud AI related benefits, same with Google, multibillion-dollar AI related benefits on their cloud platform.
And copilot has had a $1.2 billion run rate so it's still early days we are beginning to see billions of dollars sloshing around with some of the spending.
The second is that while you may not have these consumer facing apps… >> Yeah, the killer app. We want the search to better but where is the killer app?
>> Right. I think you are seeing it in small fits and starts. Among Fortune 500 companies, a lot of the calls say they are seeing tangible benefits from AI. For example, Amazon has said it saved them 4500 develop or years in work. That's a lot of years. $260 million annual is.
Microsoft has said that they saved hundreds of millions of dollars in customer support using AI will and Goldman Sachs, a bank, have said that efficiency has increased at least 20%. These are benefits that exist and we are just at the start. I think the technology is just going to get better.
. >> If I think of the technology that we have now, I think of data centres. The heavy lifting, the heavy thinking. There is interest in the space. How is looking?
>> That trade has rolled off a little bit.
It has come down a little bit from the peak.
We have Nvidia tomorrow. We're gonna see what they say but I think the stocks are taking a breather. Some of them are up more than hundred percent, 20% drawdown, I'm not too worried. I think that long term trend is still there and I think we are going to see more being built out because the risk of underinvestment is greater than the risk… The risk of underinvestment is greater than the risk of overinvestment. I don't think they will pull back anytime soon.
>> Some of the software plays have been overlooked. What's that look like?
>> Stocks have been underperforming and software. Only up 6.5% year to date, underperforming the broader market. But are these businesses really impaired?
I would argue no. I think this is an interesting time to look at some of the software. Growth has not fallen off a cliff. So growth has decelerated for sure.
2021, things were growing 30+ percent on the top line, now maybe one or two companies are doing that but it's not like they are going into negative columns, they still have double-digit growth numbers. We had a little bit of a head fake in Q1 coming off a strong numbers from last year. A lot of the stocks with unique stories were better-than-expected and have performed as such.
While there are fears in the market, there's obviously still demanded certain spots that are attractive, companies such as service now and SAP. These companies have unique value propositions and they are still doing well.
>> If you put it all together, you get investors thinking about the technology space, it has seen a nice run, thinking about the passport, which is a need to keep in mind?
>> I think valuation is something to keep in mind. It's kind of boring but what I would say now is that valuation is fair for a lot of these M&A giants.
You are not paying too much more than market multiple for some of the stocks that are growing 50% higher, so that sounds pretty attractive to me but of course you need to be aware that you're on this AI trend, you could spend too much and eat up all your profits so it's a balance there but I think we are in an okay spot to have some pretty good forward returns.
>> Interesting stuff in a great start to the program. We are going to get your questions about technology stocks or Evan Chen from TD Asset Management in just a moment's time.
And a reminder that you can get in touch with us any time.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Right now, let's get you updated on the top stories in the world of business and take a look at how the markets are trading.
We have shares of Eli Lilly in the spotlight today. The drugmaker releasing a new version of its weight loss drug Zepbound. That's going to sell for half the price of the original.
Eli Lilly says it's making the move to improve access to the drug amid strong demand, also seeing a rise of copycat versions of their weight loss treatment.
Right now you got Eli Lilly up modestly, it was a little stronger earlier in the session, a little shy 1% right now. Click check in on Sony. It's boosting the price of its PlayStation 5 console in its home market of Japan.
The nearly 20% price hike for the gaming system, that flagship device turned four years old this year, it's birthday is in November. Enthusiasts and investors are waiting for an updated Consol from the company. Right now on the New York listing, Sony is up a little more than 3%.
There's more drama today around Paramount Global.
Edgar Bronfman Junior is now withdrawing his bid for the media giant, this clear this the way for Skydance Media to acquire paramount.
The company expects to multibillion-dollar Skydance deal to close in the first half of next year.
This has been a long and twisting tale.
Today, paramount down about 5.5%. Click check in on the markets. We will start on Bay Street with the TSX Composite Index.
Modest downside for us today, 92 points, little shy of half a percent. South of the border, as we await Nvidia, some caution in the markets. The S&P 500 down just one and 1/4 points were two ticks.
We are back now with Evan Chen, take your questions about technology stocks. Person for you here, close to home. What do you think of Constellation Software here in Canada?
>> Constellation Software is a really interesting company.
I think it's one of the best performers on the TSX over the last 25 years.
But investors have to be aware that it sort of a blackbox.
There are some risks to the unknown here.
What do I mean by that? Number one, they don't have a conference call. They don't really talk to investors. They have thousands of businesses and we don't know how each of them is doing.
What they do is they rule out the small software players, so you go to your golf tournament and they have a software that runs there, consolation probably on site.
Your boat marina software, they probably own that too. It just all these tiny businesses that roll up into one entity that's been doing really well for 25 years.
>> That's interesting. How do you do your homework on a blackbox company? If you really can't understand what's going on and they are not talking to investors, where do you begin?
>> The thing I value most about that is the cash in, cash out. Cash doesn't lie.
That is audited and the bank account, if they are generating cash, we can see that and believe they are doing something well.
That's the number one thing I think to view there is what they are doing with the cash, how they are employing it in with the returns are.
>> We talked about the fact that they will pull out of the smaller companies, is there still opportunity for consolation or other names in this market for acquisition?
>> I think there are opportunities. There are subscale players and software that maybe the founder is getting older, they they want to cash out and they want their team to be intact so what Constellation provides is a good home for a company.
Some other players the market may come into a company, slash and burn all the people, raise prices on everyone, consolation will undo that. They will treat people well, they will leave the leadership team intact and they will ensure a smooth transition so they get some attractive prices based on that.
>> Interesting name there that we talk about not a lot on the show but is been a big performer on the TSX. Another question from the audience. Back to artificial intelligence. Will AI disrupt current software leaders?
>> This is an interesting one because there's a lot of VC money pouring into the AI space and I can't really speak to all, but on the software side, like a developing tool, I think the advantage that people don't quite fully understand is the ability to sell into an organization. So you may have the best feature possible but if you don't have the best salespeople, it doesn't matter. A lot of the current software leaders, these billion-dollar companies, have good sales teams with processes in place to what they call land and expand. You sell one killer feature and then use it to sell auxiliary services everywhere else to increase your margins and dollars in the organization.
If you're a small startup, we see this all the time, you're going to get may be acquired into a large organization that uses that killer feature but it's very tough to break into these really big companies and start selling because there are gatekeepers there and you need the expertise and connections to make it happen.
>> Sometimes people don't think about if you think about technology is disruptive, new players come onto the scene, new ideas, but the big traditional players, they have very deep pockets. They are proven already with their spending on the hardware side, I can't imagine they would hesitate to spend on the software side as they thought that could really compete against us, let us make a part of our team.
>> Yeah.
>> Interesting stuff on that space.
Another question from the audience. Going back to July, I hate this happened when I was away for a week. It was quite a week.
What happened to CrowdStrike stock after the outage?
>> I hope you weren't on a plane.
>> I was sitting outside, staring at the hills.
>> They had the outage for the day and it blue screen Microsoft computers, less than 1% of them, but they had to manually restart them. This is a big deal and the stock was down maybe 50% that day and continued to bleed the next couple of days as CrowdStrike was the leader in cybersecurity and all of a sudden, it shows that maybe it's not a vulnerability but we can't fully depend on it. Going forward, it's going to be tough to see what happens. I don't think anyone knows because when you have competing views within an organization, if you're an organization, you're the chief security officer for instance, you know CrowdStrike is the best technology but your Board of Directors and your CEO are saying, we cannot have this rotational risk. What if it happens again? When you happened before, we can have it happen again. There are alternatives. I think that conversation is happening in a lot of organization that is going to drive maybe discounting, maybe turn in the share price of this going to be some volatility in the stock for sure.
>> Struggling with the CrowdStrike story as well is the fact that we build these defences because we are worried about bad actors trying to get after our systems, no matter what kind company we are running, and this is just an update and we sort of messed it up.
>> Yeah, and the report tomorrow, so it will be interesting to see how conciliatory they are on the call, hey guys, we put these processes in place to mitigate this or prevent this from happening in the future but you never know what goes on in an organization and if it happened once, it could happen again.
>> Interesting stuff there on CrowdStrike.
As always, make sure you do your own research before making any investment decisions.
we will get back your questions for Evan Chen on technology stocks in just a moment's time.
And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com.
Now, let's get our educational segment of the day.
If you are looking to see what analysts think of a particular stock, WebBroker has tools which can help.
Joining us now to discuss, Caitlin Cormier, senior client education instructor with TD Direct Investing.
Always great to see you. Let's talk about where investors can find out what the analysts are saying about the stocks here.
>> Yes, absolutely! Analysts are one piece of the puzzle. If we are going through the process of researching a stock, we might want to see what the experts are saying when we are doing our research. What we are going to do is take a look at our analyst Centre for individual securities.
This is assuming that we already have a security in mind that we are looking for.
Let's hop into the platform here.
We are going to click research, we are going to go under stocks and we are going to click their. This will bring up our page for information about the stock.
There's lots of information available here. If I scroll down a bit, I can see sort of the idea for what the ratings are for the stocks, whether it's a hold or buy.
Here's the 12 month price history on the stock as well as the projection for the price of the next 12 months.
You can see here that this is from 34 analysts and they are offering that 12 month projection so the high for the stock is 300, the average around 247 and the low of 186.
On the right, we can do the majority of analysts are saying this is a buy, 24 analysts are saying it's a bye, nine think is a hold and one saying it to sell. As we scroll down here, you can see the individual analysts who have actually made these ratings. You can see when the rating was made, what the rating is, whether was increased or decreased and what is their price target.
If you click on the analyst, you can see what their when lost rating is. This analyst has had 265 ratings and out of those 265, sorry, 499 and out of those, 265 have been successful meaning that the stock moved in the same direction that the analyst predicted.
Lots of information that you can find out on the analyst Centre. Just to give you a bit more perspective on what the experts are saying with regards to a stock.
>> As you go through that information, you see an analyst and you start to wonder, what other stocks do they cover? How do we figure that out?
>> Absolutely.
Because we see the win lost rating, we can maybe be interested in say I wonder what other stocks this analyst covers, I feel active got a pretty good deal for the market so I want to know what else they might be covering so in that case, we will hop in to web broker and we can see maybe you will choose something different here, we will click. This individual is 232 successful out of almost 400, a little bit better of a win lost rating there for us.
What we are going to do is click view profile and what that brings us to is actually the profile that shows their success rating, their average return, the analyst ranking, so this particular analyst is 487/9000 analysts and it's showing us here are the other companies that they cover so we can see that this individual also covers Dell and new Chantix as well so you can see what the ratings are as well. The interesting thing is if you do decide to follow this analyst, if you wanted to keep track of them in the future, you can click the follow button and right here you will notice there is a followed analyst tab and this is where you can see all of the analysts that you have gone ahead and followed and you can click on them and see what companies they are covering, when they last made the ratings. Lots of information here. If you are interested in what analysts are saying and want to be more in the know about it, the analyst Centre for individual stocks can be a helpful spot to start.
>> Great stuff as always. Thanks for that.
>> Thanks.
>> Caitlin Cormier, senior client education instructor at TD Direct Investing. And for more educational resources, you can check out the learning centre on web broker or use this QR code that will navigate to TD Direct Investing's YouTube page. Once there, you will find more informative videos.
We are back with Evan Chen, taking your questions about technology stocks. Another one close to home. What do you think of Shopify?
>> I think Shopify is interesting. They had a really good quarter. I will walk you through what has happened so far. On the revenue side, they beat expectations. They had stronger than anticipated gross market value and they had strength in a lot of their vendors there. Higher strength than people expected.
There are some worries in the market, we may go into a recession or we may not.
On the expense side, they were spending a lot of money on marketing, so advertisements, may be walk to work and see a Shopify out, hey guys, start a store, come on our platform. They are spending a ton of money on this. What they showed in the past is that they don't actually need to spend as much money, they found sufficient ways to do it pulled back and free cash flow was at more than expected so that was what led to that 20% pop leaving is almost flat at the year.
>> When I think about Shopify, obviously, it is a technology company but as you said, the business is people selling stuff to consumers and you tie back to the economy.
What you give more weight to it a name like this, the technology play or the fact that it's a play on the economy?
>> That's interesting. The point on the economy, they are doing better than the broader one, why is that? One, the tools are helping vendors sell more things but also they are taking a share from other platforms and that's what's helping their growth. So it's not all the economy with their taking a share there. The technology is also very good. I think it's an attractive platform they have great technology and it's only getting better.
>> When I think about Shopify it sort of interesting that it's still around us and some company. There are obviously powerful competitors, Amazon having tools, stuff like that. How does that competitive landscape look like and what will happen if a tech giant says I want Shopify?
>> I think Amazon could eat up Shopify.
They would. We are seeing a lot in the news, the DOJ and FTC investigating antitrust, antimonopoly practices. I don't think Amazon or any of the tech giants would be able to buy Shopify. If they could, I think for sure they would have tried to but they kind of reached that point in a company's market Or level of clout in the market, they exist as their own company and I think they will remain so for their lifetime.
>> What is going on a Disney?
>> Disney results have been tough. There's two parts to the story.
The first part is Disney Plus. They made this big bet to kind of join Netflix and what Apple TV have been doing and start their own platform. They have a lot of content. It kind of made sense to start their own platform but I think they are discovering that it's harder than it looks to put some videos online and have people purchase that so they are a little bit behind in technology, recommendation system, content, they are a little bit behind. Right now, that statement is becoming breakeven. People were excited about that. The other part of the story was there parks business. Everyone knows Disneyland, you go with your kids once every three or four years and it's very expensive.
The last couple of years since the pandemic, it's been doing very well, high occupancy, high prices. People thought that that would last forever. It's a new normal, people are travelling and all that but I think we are seeing in the broader market the travel is rolling off a little bit. Disney call this out first. They said they are seeing normalization in parks usage. What does that mean? It means that we are kind of going back to pre-pandemic levels which was lower than what we have experienced in the last three or four years and I think that's people and people because the kind of viewed the parks as the anchor to the stocks. Getting hit by both sides, I think Disney Plus needs a little bit more time and parks needs to normalize little bit.
>> More time on the Disney Plus side, they have a huge library. I remember when they launched and said we are Disney, think will the classic movies.
I have Disney Plus and I watch the Lady and the tramp and a few other cloth six but we are not going to be watching them over and over again, there needs to be a program to bring on the platform but that's expensive.
>> Exactly. You would think they had such a large content library that they could put everything on and that would be up but we are seeing that some of the newer stuff they are putting on his not resonated with the viewer and what they have done is in order to try to make it breakeven is they have reduced content spending. It's a double edged sword there where you get a little bit more profit but you're mortgaging the future where unless those shows they were spending less on, you spend more time, they're gonna be hits, it's about your making that your producers and your content generation engine is going to be good and I think that we have seen some stumbles recently from them so that's another part I'm cautious on.
>> Are there any interesting off the radar stocks internationally that we might be missing?
>> Regionally, I think there's a lot of interesting stocks and markets. Shopify was one of those on the international scene for a long time.
Now it's broken into kind of the global viewpoint. For the long time, Shopify was a Canada only kind of stock, a hidden gem, so to speak.
There a lot of these are in the world. In Australia, there is a company called from Medicus. It sells basically upgraded MRI software to hospitals in the US. That has done very well.
As a premium there. Not a lot of tech companies in Australia. They have another one called… There's a similar one in Sweden. It basically it's real estate software that 98% of the people in the countries. They've under charge for it for a long time, 18 years, and they are beginning to start to take price slowly and slowly and that means that you have five, 10% price increases every year that people are okay with because they have been under charge for so long, it's a small part of your property and I think that's an interesting one to look at.
>> If investors want to do research on these overlooks names, I mean it's pretty hard. You go to the major business portals, I do that every morning to see what's going on, we are talking about Nvidia, the markets, the big ones.
If you want to start doing a deeper date, what should someone be looking at?
>> It's interesting because with that hidden gem internationally, if you go to location, I think investors would know it.
How do you compete with that? I think the best way to do it is go straight to the source. Go to the company website, investor relations, annual report, hopefully there will be a translation, get it straight from the horses mouth. You can make decisions that way.
I think that's the best way of doing it, go straight to the source.
>> We are winning about your questions for Evan Chen on technology stocks in just a moment's time.
As always, make sure you do your own research before making any investment decisions.
and a reminder you can get in touch with us at any time.
Do you have a question about investing or what's driving the markets?
Our guests are eager to hear what's on your mind, so send us your questions.
There are two ways you can get in touch with us.
You can send us an email anytime at moneytalklive@td.com or you can use the question box right below the screen here on WebBroker. Just write in your question and hit send.
We'll see if one of our guests can get you the answer right here at MoneyTalk Live.
Let's talk borrowing costs. We have seen to rate cuts from the Bank of Canada over the summer and another is expected maybe next week. Summer is almost over. But the housing market, has it really been reacting to these lower rates? Anthony Okolie looking at a new TD Economics report on the Canadian housing market and what we are thinking. What are we thinking?
>> TD Economics has updated their forecast for the housing market into 2025 and the reason being we have seen this with repricing of bond yields as markets pulled forward, timing and size of rate cuts both here in Canada and in the US. So far, the data is mixed in terms of how the housing market is reacting to those lower rates.
When we look at June sales, they are up 4% month over month but preliminary data for July points to a giveback and markets, particularly in some of the larger areas like Calgary, Vancouver and Toronto.
So what's happening? TD Economics is that there are two opposing forces impacting their forecasts. On the plus side, part of their upgrade of the near term forecast is due to what they call compositional forces, that's when some of the pricier properties are outselling some of the more affordable ones, and that is lifting average housing prices. TD expects the strength to continue in the near term but they point out that while Canadian average home prices are up about 2% in the first half of this year, the benchmark prices when you exclude these compositional forces, the higher priced homes outselling more affordable ones, the benchmark price fell about 2%. The other factor is the Toronto stressed condo market will play a key role in shaping overall dynamics and currently GTA active condo listings are the highest on record.
The surge of new condo projects have come alongside elevated interest rates and that's really hurt the ability for buyers to close mortgages. In addition to that, more investors are becoming cash flow negative and that's likely adding to the glut of properties that we are seeing on the markets.
GTA benchmark condo prices are down 2% from the fourth quarter of 2023 to the second quarter of this year and TD Economics predicts that further drops are likely needed to clear this glut of inventory we are seeing in the housing market.
However, TD Economics does say that economic resilience, pent-up demand and solid population growth as well as falling rates should support positive price growth in the GTA housing market overall. In addition to that, they note that condos were about 30% of resale activity and that fact alone should help keep GTA price growth positive in the coming months.
>> You mentioned the cost of borrowing, the key is this is the biggest purchase for most people in terms of the home.
We've had to rate cuts so far, was the thinking on that going forward?
>> We got about three more meetings. TD Economics believes that the Bank of Canada will match the Fed over the next three policy announcements they expect to be a seed to cut interest rates three-quarter percentage points over the next three meetings and that will lower the benchmark rate to 3.75% by year end.
>> Interesting stuff. Thanks for that.
>> My pleasure.
>> MoneyTalk's Anthony Okolie.
Now, for an update on the markets.
We are having a look at TD's Advanced Dashboard, platform designed for active traders available from TD Direct Investing. This is the heat map function, and expect to hear of the market movers.
We know that on the top line TSXV are down modestly about 1/3 of a percent the last time I checked in. What's happening under the surface? TSX 60, Latona and a little bit, clear of the picture. The financial space, we are seeing some activity, we are in the sake of bank earnings season here in Canada. We had VMO and Scotiabank reporting this morning. You can see the market reaction to both those results. You got Scotia up modestly a little shy of 2% and VMO on this and selling pressure, down to the tune of almost 7% right now. Across the rest of the board, not a lot happening.
Very volatile trade when it comes to crude oil, American benchmark crude, West Texas intermediate down about 2% today. It jumped yesterday. Sort of been a bit of a jumpy ride, but of weakness and energy names, Suncor pulling back about 2%, Cenovus about the same. South of the border, we await Nvidia.
Nvidia has become part of that club now, we wait Fed minutes, we await rate decisions, we await anything that comes out of Jerome Powell's mouth and we wait for Nvidia.
It's turn comes up tomorrow. Today, some modest movement. It's taking up a lot of real estate, that means that in terms of trading activity, it's so trending the rest of the board, it's up about 1.5%.
It's a pretty mixed picture across the rest of the stocks, as we see.
We are back now with Evan Chen from TD Asset Management, let's get back to your questions. Someone wants to know, what happened with Google and the DOJ, the Department of Justice across the border?
And read through to Apple?
>> The DOJ sued Google saying they have monopoly practices and the judge sided with the DOJ. Pacifically what they were upset about was on Apple devices, Google was the default search engine. For this, Google pays Apple $20 million. That's pure profit, right? That's pretty good for Apple.
On first blush, it's negative for Apple but I think that Apple will find a way to make up that money. That's pretty crazy saying because $20 billion is and appear out of know where. On Google side, it could be a little bit scary. There is revenue there. Perhaps this agreement says okay, choose your search engine.
Maybe Google, whatever else is out there.
But there are some whispers in the market that the judge may try to break up Google, so Chrome or android, break that off from the main platform. I think that's pretty unlikely and if that does happen it would be appealed for years.
>> Interesting on the specifics of this case. Beyond that, we have seen the administration and Washington willing to bring antitrust against the tech giant.
What is the space look like going forward?
>> Makes it tougher for acquisitions. The DOJ is currently looking into the way that the big tech companies are doing kind of acquisition hires. They know they can't go out and acquire all these companies because of antitrust but what they are doing is that they may have a licensing agreement with the company or they will just take the CEO and all the important people and place them in their company, so an acquisition higher.
These practices may be allowed in the future but something to watch out for and is something the DOJ and FDC will try to stop.
>> Another question now from the audience.
Talking about artificial intelligence, someone wants to know, are there any interesting Canadian AI stocks?
>> There are not many at first blush.
There are companies that may use AI.
Shopify, for instance, has some products that use AI. They have an assistant that's quite good.
You're starting a story, your light, high, which a person product at and how should I presented to the customer?
And it'll have a database of related queries that will give you the answer.
They use AI on the platform but I wouldn't say it's the main driver of the stock.
Other than that, I think based on plays like semiconductors don't really exist in Canada, you have to go south of the border or international to find those.
>> Interesting insights on that one. I've got one more question to squeeze in.
Someone wants your view on talent here?
>> Talent here is an interesting one. Just like Constellation, people viewed as a Black box. No one really knows what it does. Maybe they do or down.
I will try to simplify.
On a high level, what they do is they find high-level engineering talent for may be entities that cannot recruit them themselves. Target software engineers to work in places other than big tech. So what they do is allow companies that cannot recruit those kind of talent and give it to them.
A big customer for them is the US military or US government, so they hire engineers to go work on projects for the government.
Another one is say you want to have data analytics in your platform, it's hard to get that engineering talent and maybe you don't need it permanently so they will hire Pelletier and say we need a couple guys or maybe a whole team to work on this project for us and that's what happens. So they have some tailwinds there, big data, data analytics and everyone sort of needs the software engineers.
>> That's one of the best explanations of Pelletier I've ever heard. Nice and straightforward. Before we let you go, at the start of the show, we talked about a bit of caution in the markets.
Nvidia is on deck, AI. What are you watching for which we be thinking about going forward?
>> I think for big tech, cloud is the number one thing to look for because that's where the AI benefit will show up.
All these big tech companies create their own internal tools with AI and they are cross-selling them through their platforms and saying hey, you're already on the platform, why don't you try this thing, it's AI, why don't you see how it works? I think that's important. The strength of digital ads is also important to look out for for Google and Meda. That's doing pretty well right now.
As long as that continues. And then, of course, and op ex, so headcount, is echoing out, our people hiring like crazy and is it going to lead to higher than market earnings growth?
>> Interesting stuff indeed. Thanks for joining us. I look forward to the next time.
>> Thank you.
>> Our thanks to Evan Chen, associate for portfolio research at TD Asset Management.
As always, make sure you do your own research before making any investment decisions.
if we did not have time to get your question today, we are going to aim to get it into future shows. Stay tuned for tomorrow show. Kevin Hebner, global investment strategist with TD Epoch will be our guest. He wants to take your questions about market trends.
A reminder that you can always get a head start with your questions for us.
Just email MoneyTalkLive@TD.com.
That's all the time we have for the church today. Thanks for watching.
We will see you tomorrow.
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