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Nvidia’s reassuring results have brought a sense of calm to markets following a wobbly few days. Europe enjoyed a nice bounce, including a 0.7% gain from the FTSE 100 led by tech stocks, banks and natural resources firms.
Investors had been cautious ahead of Nvidia’s results, fearing that the slightest bit of negative news from the chip giant could cause a proper market pullback. Fortunately, Nvidia’s figures were as comforting as a warm cup of tea on a cold day, providing investors with the energy to increase their risk appetite and giving a nice glow to the market once again.
Games Workshop
A typically short but ultimately sweet trading update from Games Workshop has fired up enthusiasm for the stock in the market today. Despite a difficult economic backdrop, the company expects to deliver meaningful growth in profit and revenue in the first half of its financial year.
Games Workshop’s resilience is underpinned by dedicated fans who collect figures and play its games. This success has led to a valuable library of intellectual property, from which it has been able to drive extra revenue. Some may be impatient with the pace of Games Workshop’s efforts to tap into this potential but the company, quite rightly, is protective of its IP and hesitant about agreeing deals which might alienate devotees and tarnish its reputation.
A slowdown in licensing revenue had been well flagged as royalties associated with the highly successful Warhammer 40,000: Space Marine 2 video game die down. The nature of licensing revenue is it will be lumpier and more inconsistent than the core business.
Longer term, Games Workshop’s tie-up with Amazon giving exclusive rights to produce Warhammer 40,000 film and TV content has the potential to be highly significant, particularly given there is an option to extend these rights across the wider Warhammer universe after the initial projects.
Not only could this generate an attractive stream of income but it should also boost awareness of Games Workshop’s roster of fantasy worlds and add to its devoted fanbase. However, this is not a story for the near future, with projects likely to take years to bring to fruition.
JD Sports Fashion
A big part of what had been, until fairly recently, a highly successful strategy for JD Sports has involved targeting a youthful demographic who, unlike those burdened by outgoings like childcare costs or a mortgage, have more disposable income to splash on trainers and leisurewear.
However, recent figures suggest this cohort has been disproportionately hit in a slowing jobs market and, sure enough, JD flags unemployment as a key factor as it warns that profit will be at the lower end of expectations.
The market reaction is fairly muted, with the shares seeing a weak run heading into the third-quarter update. Like-for-like sales for the third quarter were down 1.7%, with performance particularly weak in the UK. Only the nascent Asia Pacific business showed any growth and this only makes a small contribution to the wider group for now.
Any retailer is likely to see some ups and downs as it navigates fluctuations in the economy. What investors may be more nervous about is signs of shifting consumer tastes, particularly any waning of the athleisure trend which has been such a boon for the likes of JD.
Guiding the market accordingly ahead of a crunch festive trading period seems sensible on the part of management. Time will tell if they have been conservative enough.
Dr Martens
Dr Martens is taking baby steps to put the business on a profitable path. Its turnaround efforts are underway, but this could be a slow recovery rather than a giant leap back to normality.
There are some glimmers of hope in its half-year results, with more products being sold at full price rather than discounted, losses narrowed, and a much stronger showing from the Americas which has previously been a problematic region.
Unfortunately, the market is not blown away by the figures, and a falling share price in early trading indicates investor disappointment.
Russ Mould: Investment Director
Russ Mould is AJ Bell's Investment Director. He has a Master's degree in Modern History from the University of Oxford and more than 30 years' experience of the capital markets.
He started out at Scottish...
