Friday’s business diary is exceptionally quiet, with no FTSE 350 companies scheduled to report but some UK macro data the only thin gruel for news-hungry investors.
There would have been some interesting news on the coronavirus-hit hospitality sector but pub chain Wetherspoon (LON:JDW) has pushed back its planned update to next Friday.
The UK gross domestic product report, which will be released at 7am on Friday, is expected to show economic growth rose only 4.6% in August, down from 6.6% in July.
This, said economists at Pantheon Macroeconomics, “looks set to reinforce the downward pressure on government bond gilt yields by making it even more likely that the MPC will extend its QE programme later this year”.
Time to ring the bell for Stagecoach?
Bus, coach and tram operator Stagecoach (LON:SGC), which dropped out of the FTSE 250 back in the summer, will be putting out an update on trading since its early May year-end, having suffered from the lack of traffic amid the coronavirus but been propped up by the government.
With the shares currently down around three quarters since the start of the year and down 88% over five years, not doing much for the wealth of founder director Brian Souter and his sister Ann Gloag, who own over a quarter of the shares.
Analysts at RBC Capital Markets said there was a lack of positive catalysts in the near-term and wondered “if the family could take it private given the (low) share price”.
Not yet, reckoned broker Liberum, however, said Stagecoach and its travel peers were seeing the transition back to normality taking longer than originally expected, but remain cash generative to date thanks to government assistance, with analysts suggesting the current valuation implied “a significantly worse outturn” than the broker considered “improbable”.
Liberum suggested Stagecoach has the potential for upside from the return to normality due to its large exposure to UK regional buses, where it is underpinned at around breakeven “but with upside potential as passenger revenues recovery”.
Big game day
For investors in US stocks and the video games sector, a big event on Friday is Electronic Arts Inc’s (NASDAQ:E) UK launch of its massively popular FIFA 21 football game.
Already with around 90% of the football gaming market, online streaming rather than buying a physical game offers EA a prime opportunity to further capitalise on its audience, says Bertie Thomson, portfolio manager at Brown Advisory.
“We view sports content as being unique and misunderstood by investors. In football, EA has the premium content – can you imagine, in effect, a global version of Sky Sports and BT Sports in the video game world? A new edition of the franchise each year breeds annuity style consumption and high levels of engagement.
With EA Live Services representing around 53% of full year bookings, the company has a “key monetisation mechanic” and the high margin FIFA Ultimate Team is central to this offering, he adds, with returns also improving from the gradual shift from physical game sales to digital downloads.
“This potential is recognised by peers in the video games industry but not, we believe, by investors,” Brown Advisory believes.
Significant announcements expected on Friday 9 October:
Economic data: UK trade balance, UK GDP, UK production