The latest Market Talks covering Equities. Published exclusively on Dow Jones Newswires throughout the day.
1018 GMT - Dutch semiconductor-equipment maker ASML Holding has scope to grow more as it seeks to boost output of its machines for which clients are prepared to pay higher prices, UBS analysts write in a note to clients. The company is looking at ways to increase production of its machines beyond a previously announced 30% boost to meet robust demand from chip makers. It is also raising prices as a tight market gives it greater negotiating power. Analysts say ASML's gross margin could reach 60% by 2028. "In our view, the market still underestimates the earnings leverage from higher volumes, pricing and mix," they say. They raise their price target for the stock to 2,400 euros from 2,350 euros. ASML shares trade 5.1% lower at 1,449.80 euros amid a broad selloff of stocks exposed to AI. (mauro.orru@wsj.com)
1010 GMT - European banks' earnings momentum remains positive, but concerns around sovereign risks--those arising from a government's struggle to pay back its debt--could weigh on share price performance, Barclays analysts write. Sovereign risks can cause spreads on government-issued bonds to widen and weigh on sentiment in turn, but Barclays sees a limited near-term fundamental impact on European banks. The impact should be lower than previous shocks due to more diversified portfolios and stronger balance sheets, Barclays says. Third-quarter results should be a positive catalyst for the sector, as the impact of higher interest rates on earnings and guidance should be positive. However, upcoming European elections mean political uncertainty might persist and limit short-term share gains. (michael.hennessey@wsj.com)
0954 GMT - LVMH's results limit visibility on the timing and strength of a recovery, AlphaValue's Jie Zhang writes in a note. The French luxury-goods conglomerate reported third-quarter sales of 18.50 billion euros. That was up 1% from the same period last year but slowing from the 3% increase the company booked over the second quarter. A sustained rerating of the shares will require clearer evidence of stabilizing demand in China, renewed momentum at Louis Vuitton, and improving margin visibility, the analyst says. "We remain constructive on the longer term value of LVMH's portfolio, while taking a more cautious view of the timing and pace of recovery," she says. The current share price remains highly attractive, Zhang adds. Shares are up 1.6% at 395.80 euros. (andrea.figueras@wsj.com)
0946 GMT - The luxury sector's recovery in the Chinese market remains some way off, Berenberg analysts say. This is due to multiple factors, including weak economic data, the rise of the second-hand market and higher competition from Chinese brands, the analysts write in a research note. The start of the fourth quarter in China appears to remain sluggish for the luxury sector, following a disappointing Golden Week--a key period for consumer spending--the analysts say, citing comments from a senior executive at a Chinese luxury department store. "Our expert now expects no recovery in China before 2028 at the earliest, against a prior 2027 forecast," Berenberg says. (andrea.figueras@wsj.com)
0932 GMT - The luxury sector should focus on product innovation to capture customers' interest at a time when the industry continues to suffer from sluggish demand, BofA Global Research analysts say in a note. A number of high-end brands implemented changes in their creative teams to reignite momentum and new designs are becoming more visible in the product mix, the analysts say. "In our view, this is the key for engagement and desirability in the sector," the analysts say. Brands with "newness" are the ones driving growth in digital metrics, which track online consumer interest, they add. "The winner in the creativity race is Chanel," BofA says. (andrea.figueras@wsj.com)
0931 GMT - ASML Holding's gross margin could face hurdles if the supply tightness that is permeating the semiconductor industry eases in 2028, Jefferies analysts write in a note to clients. The Dutch supplier of semiconductor-making equipment is looking at ways to boost production of its machines in coming years to meet robust demand from chip makers. However, analysts say it is too early to predict the industry's strength in 2028 and that supply tightness could ease by then. If so, they estimate ASML's gross margin--a closely watched metric of pricing power and profitability--could be 58.2% in 2028. For this year, ASML is projecting a margin of about 56%. ASML shares trade 5% lower at 1,452.60 euros amid a broad selloff of stocks exposed to AI. (mauro.orru@wsj.com)
0926 GMT - Singapore banks' 3Q profit likely dropped from 2Q as fee-and-trading income moderate off a high base, says Macquarie Capital's Jayden Vantarakis in a note. The lending and rates environment remains favorable for DBS Group, Oversea-Chinese Banking Corp. and United Overseas Bank, though trading income trends seem mildly unfavorable on headwinds from rising bond yields and subdued volatility, he says. The three banks' underlying 3Q net profit growth is estimated to come in at 6% on year, slower than the 13% gain in 2Q. Macquarie names its top sector pick as UOB, citing the easiest base for earnings in 3Q and cuts its rating on OCBC to neutral from outperform, while retaining an outperform rating for UOB and DBS. (megan.cheah@wsj.com)
0906 GMT - Oversea-Chinese Banking Corp.'s 3Q net profit likely declined sequentially due to the Singapore lender's insurance business, say CGS International analysts in a note. Long-term yields likely affected the contribution from insurance subsidiary Great Eastern, as the rise in long-term U.S. yields likely translated to mark-to-market losses for fixed-income assets and mitigated any mark-to-market gains from equities. Net interest income is also likely to be flat on quarter, as potentially robust loan growth offsets any net interest margin compression, they add. Still, CGSI raises its target price to 30.40 Singapore dollars from S$29.80 after rolling forward valuations. The brokerage reiterates its hold rating. Shares drop 0.3% to S$28.92. (megan.cheah@wsj.com)
0855 GMT - Dutch semiconductor-equipment maker ASML Holding has good demand visibility and revenue opportunities that should allow it to grow strongly over the medium term, Citi analysts write in a note. They say ASML expressed confidence in the supply chain's ability to support output-expansion plans for its chip-making machines in 2027 and 2028. Meanwhile, they say the group should benefit from growing demand for upgrades and maintenance of machines that customers have already bought. That generates revenue for ASML. Analysts raise their target price for the stock to 2,300 euros from 2,200 euros. ASML shares trade 5.2% lower at 1,449 euros amid a broad selloff of stocks exposed to artificial intelligence. (mauro.orru@wsj.com)
0848 GMT - Yangzijiang Shipbuilding's order wins this year could beat its guidance, says DBS Group Research's Pei Hwa Ho in a note. Maersk is reportedly planning a US$8.9 billion program for 42 liquefied natural gas dual field container ships, she says. Securing part of this would lift Yangzijiang's order wins and reinforce its credentials in such container ships, the analyst adds. The shipbuilder expects its order wins to exceed its US$4.5 billion target in 2026, while its current order book should keep it busy through 2029, Ho adds. A healthy order intake should sustain its backlog visibility, supporting a higher valuation multiple. DBS raises its target price to 6.60 Singapore dollars from S$5.60 and reiterates its buy rating. Shares fall 2.9% to S$5.00. (megan.cheah@wsj.com)
0847 GMT - Mondi seems poised to book smaller gains from price increases in the fourth quarter than initially hoped due to higher input costs, analysts at J.P. Morgan say in a research note. The London-listed paper and packaging group reported third-quarter underlying Ebitda of 196 million euros, below both JPM's estimate of 207 million euros and investor expectation of around 200 million euros, the analysts say. Its result was hit by higher-than-expected costs related to energy, and the recent moves suggests the effect of Mondi's price increases on its fourth-quarter results will likely be minimal, they add. JPM cuts its target price on Mondi to 790 pence from 890 pence. Shares fall 12% to 721 pence. (adria.calatayud@wsj.com)
0838 GMT - Squeezed by inflation and sputtering economic growth, consumers in many markets are increasingly turning to smaller formats like premixed cocktails, Pernod Ricard's executive vice-president for finance says. The French spirits group has recently launched a fresh wave of ready-to-drink products, including punches made with Malibu coconut rum in individual portions. Affordability is one of the key factors driving drinkers toward those smaller formats, Mauve Croizat tells analysts in a call following the group's quarterly sales update. And the popularity of ready-to-drink products offers boons beyond their direct sales, she says, pointing to the latest launch as an example. "Malibu Punch is supporting the rebound of the franchise," Croizat says.
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