Daily Market Analysis and Forex News

Unless you are a passionate gamer, you may not have heard of Discord.

The platform provides free voice, video and text chat services to tens of millions of people ages 13+. With people trapped at home during the pandemic, it started being used for various virtual gatherings.

Discord currently has 140 million monthly active users - more than half of the population of Nigeria!

So, what’s going on?

According to media reports, Microsoft Corp. is in talks to acquire Discord Inc.

People familiar with the discussion say no deal is imminent but one could see why Microsoft would desire such a platform – even at a hefty $10+ billion price tag.

It’s worth keeping in mind that Discord themselves approached Microsoft to gauge interest and have also approached different companies for offers.

Why is this important?

The possible acquisition of Discord by Microsoft could help drive Microsoft’s Xbox Game Pass subscriptions by combining the platform’s premium subscriptions into its gaming service. While San Francisco-based Discord offers free services, the premium Nitro offering allows bigger file uploads, HD live streaming, server boosts and more.

Microsoft’s gaming segment has been quite active, it was only last year that the tech giant announced an acquisition of ZeniMax media – the owner of video game publisher Bethesda for $7.5 billion. Given how sales of video games were boosted significantly during the pandemic last year, it’s not hard to see why Microsoft is so keen.

Will this be a right fit?

The nature of Discord and the services it offers goes in line with Microsoft’s gaming console and its Xbox Live multiplayer services which have been rebranded Xbox Network.

Despite the tech giant's failed attempts to gobble up Tiktok last summer, it remains ambitious to including social media elements in its gaming segment. Microsoft also approached Pinterest in recent months about a deal…but talks are “currently not active”. Another thing to keep in mind is that the acquisition of Discord could keep it out of the hands of a rival like Amazon. For a company that seems to have an abundance of cash, loves buying things, and wants to expand its gaming segment, this could be a nice fit.

What could go wrong?

Discord is not yet profitable.

Although sales shot up from $45 million in 2019 to $130 million in 2020, the company still has a long way to reach breakeven.

The response from gamers has not been encouraging. Twitter was full of people asking Discord not to sell earlier in the week.  Some channels were even created on the Discord platform with negative reactions to the idea of the acquisition. Should this acquisition move forward, it remains uncertain how the gaming community will respond.

What about Microsoft shares?

The tech giants’ shares are currently up more than 3% this week and over 6.8% year-to-date.

Prices remain bullish on the daily charts as there have been consistently higher highs and higher lows. A solid move above $240 could open the doors towards fresh all-time highs beyond $246.01. If $240 proves to be reliable resistance, a decline back towards $229.26 could be on the table.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

The largest retailer in the US is due to announce its latest quarterly results before US markets open on Thursday, 18 February.

In the lead up to the earnings announcement, Walmart’s share prices have breached the resistance that had been offered by its 50-day simple moving average (SMA). Walmart’s share prices must climb back above its January high of $149.77 in order to send a strong message to markets that it can arrest its downward trend from the past couple of months.

With its 50-SMA is now threatening to cross below its 100-day counterpart, this stock is in need of a positive catalyst to prevent a significant widening of the 4.67% gap from its highest-ever closing price of $152.79 which was registered on 30 November.

What are analysts expecting for Walmart’s Q4 results?

• For the three months ending 31 January, markets are expecting a 4.7% year-on-year growth to Walmart’s top line, even as quarterly revenue moves closer to that psychologically-important $150 billion mark.
   
• Its earnings per share (EPS) for the period is slated to come in at $1.50, which would mark an 8.3% increase compared to the fourth quarter of its 2020 fiscal year.
   
• Same-store sales in the US may have increased by 5%, which is about half of the growth seen in its fiscal first quarter (February-April), as the pandemic tailwinds taper off.

A digital focus amid the pandemic

Walmart’s e-commerce sales are expected to have surged by 66%, as the retail behemoth focuses on its omnichannel push. With the pandemic having driven consumers to purchasing their groceries online, coupled with shoppers being more budget-conscious amid the economic uncertainty, that should serve as a major boost to its digital revenue streams.

That should help propel Walmart’s net income for its entire 2021 fiscal year to a record high of $17.9 billion for the 12 months ending 31 January.

How do Walmart stocks tend to react on earnings day?

Market participants are already pricing in a single-day absolute move of 4.06% for Thursday. Over the past decade, the stock has averaged a 3.08% absolute move (either upwards or downwards) on earnings day.

However, note that Walmart’s stock has fallen after 4 out of the past 5 earnings announcements, suggesting that shareholders tend to indulge in some profit-taking on the day.

What other key factors/events are moving Walmart’s share price?

• The sale of TikTok’s US operations appears to have hit a snag, after the Biden administration said that the deal is still being reviewed. The plan was for a group which includes Walmart to make the acquisition, allowing the mega retailer to leverage on TikTok’s user base and boost Walmart’s digital reach to consumers (imagine buying groceries via social media). Should this plan be officially declared dead, that could prompt the unwinding of some of Walmart’s gains, as markets dampen their optimism surrounding the retailer’s social-media synergies.
   
• The Department of Justice’s lawsuit against Walmart regarding alleged opioid dispensing violations may result in a financial settlement totalling hundreds of millions of dollars, even though the DOJ is seeking civil penalties in the billions. For context, back in December, the US government accused Walmart of contributing to the opioid crisis by unlawfully dispensing and distributing prescription opioids via Walmart’s 5000 in-store pharmacies. This nationwide lawsuit comes on top of the more than 2,000 suits brought by states, cities, and counties that are contending with the fallout of the opioid crisis. The risk of such a financial hit may dampen the stock’s upside, even as observers await the trial’s commencement, which is slated for October 2021.

Although the conclusion to either the TikTok acquisition or DOJ lawsuit appears far off at this juncture, it could still cast a cloud over Walmart’s share prices in the interim.

Walmart bulls are likely to focus on the company’s fundamentals, especially its push into the digital and fintech realms, in order to keep the stock’s uptrend intact.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Investors will have a lot to digest today, with several key themes set to play out ahead of the weekend. Risk assets are taking a breather from recent gains, with Asian stocks and currencies mostly in the red, while US equity futures dipping into negative territory at the time of writing.

US lawmakers are battling against a self-imposed Friday deadline, and against one another, in a bid to pass the next stimulus package for the US economy. Geopolitical tensions have also been stoked by the Trump administration’s decision to reimpose 10 percent tariffs on some aluminium products imported from Canada beginning August 16, and his executive order to ban TikTok and WeChat in the US in 45 days from now. There’s also the keenly awaited July US non-farm payrolls, which is forecast to show some 1.48 million jobs being added to the US economy last month.

The S&P 500 is currently just over one percent away from its record high, due partly to the optimism that more fiscal stimulus can be agreed upon and passed, potentially by next week. Unemployed Americans could do with a fresh injection of financial support, given that jobless benefits under the previous package ended last month, in order to preserve hopes that the world’s largest economy can keep its still-fragile recovery intact. With President Trump threatening to bulldoze his own plan through, investors are gearing up for a matter of when, rather than if, the next round of fiscal stimulus comes pouring in, which should bode well for US equities.

The upcoming non-farm payrolls print may help shed light on how much more stimulus could be needed in the future. The July jobs figures is expected to unveil a marked slowdown in hiring compared to stunning gains seen in the prior two months, which may fuel concerns that the US recovery is losing its momentum.

Still, Thursday’s better-than-expected weekly jobless claims figure of 1.19 million, which is the lowest number of applications for US jobless benefits since March, offers hope that the US economy can continue moving into the post-pandemic era. If the jobs market can stage a sustainable recovery from here, that could spur more risk-on market activity while offering relief for the beleaguered Dollar.

Gold should soon hit $2100

As things stand, the global investment landscape only spells more upside for Gold, which has been on a tear this quarter. The precious metal has surged by over 15 percent since June 30, with the $2100 psychological level within its near-term grasp.

Promises of more incoming stimulus speaks to the persistent economic frailties around the world, which should hearten Bullion bulls, and heightened geopolitical tensions only serve to fuel risk aversion. As ever, Gold stands ready to pounce on any Dollar weakness. The precious metal is expected to face little resistance in exploring new record highs in the mid-$2000 region over the coming months.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.