Donald Trump’s Truth Social made a rip-roaring start to life as a publicly traded company under the name The Trump Media & Technology Group yesterday.

The stock traded as high as $79.38, valuing it at around $10bn. It closed the day at $58.

It is being likened to a meme stock in as far as fanatic Trump supporters are clubbing together to buy the stock out of their love for Trump as opposed to the prospect of shareholder returns.

The fundamental argument for shorting The Trump Media & Technology Group is compelling. The company only generated $3.3m in revenue in the first nine months of 2023 and lost $50m.

Last night’s closing price gives Trump’s social media company a price-to-sales ratio of around 2,400x. This is eye-wateringly high compared to another recent social media listing, Reddit.

As Hargreaves Lansdown’s Susannah Streeter details below, there is a monumental disparity between the two in terms of valuation on both an earnings basis and per user.

“There is likely to be significant volatility ahead as a share buying frenzy among his supporters may wane, and investors dig deeper into the fundamentals. Truth Social now has a market cap of just shy of $8 billion with around 5 million active web and mobile users,” Streeter said.

“By contrast Reddit, which went public last week now has a market cap of $10.3 billion but has 73 million active users, a number that’s steadily increased over the years. The floatation will mean $300 million can be poured into the platform, which is set to serve as a pulpit and willing audience for his electoral sermons but it’s hard to see where growth will come to justify this price tag.”

Trump is locked in for six months. One would think that as this date approaches, traders and investors would sell the stock in anticipation of Trump doing the same at his first opportunity.

But this is the United States we’re talking about. Technology stocks thrive with little attention paid to short-term earnings-based valuations. US markets have the ability to look past any short-term losses to the long-term growth story.

However, the disconnect between Truth Social’s valuation and its peers and the wider market isn’t likely to last for long as traders dive in on the opportunity to short the stocks and take it back down to a more sensible valuation.

In addition, the general operating environment for a new social media platform is challenging given the loyalty users have for existing platforms and the lack of innovation Trust Social offers.

“The site will have its work cut out to compete against more established platforms which keep attracting eyes on screen due to the network effect of already having high numbers of users,” Susannah Streeter said.

The Lloyds share price has had a good run but now poses a problem for investors as it resides around the key resistance level of 50p.

Lloyds shares have consistently failed in the 50p region over the past two years, with only a brief foray to 54p back in early 2022.

The 50p level for Lloyds is reminiscent of the Lord of the Rings scene in which the grey wizard Gandalf fights off a fire-breathing monster declaring ‘You Shall Not Pass’.

Yet, the stock has broken through the 50p mark and trades at the dizzy heights of 51.6p. From a technical perspective, the bulls will want to see a retest of the psychological 50p mark before concluding Lloyds shares can continue to trend higher.

Lloyds is entrenched in a trading range between 40p and 50p and it’s going to take an awful lot to see it break convincingly in either direction. 

The direction of Lloyds—and other UK banks—will be dictated by the wider macro environment. As both a direct facilitator and beneficiary of the UK economy, the ongoing resilience of the UK property market, inflation, and consumer strength will decide whether Lloyds will touch 60p or 40p next.

The Lloyds dividend is a huge attraction that prevents it from breaking below 40p and the lingering fears of a soft UK economy caps the Lloyds share price at 50p.

The macroeconomic picture isn’t on Lloyd’s side. Although it has navigated the cost-of-living crisis largely unscathed, its profit growth has been enhanced by the higher interest rate environment, which will end this year. 

Lloyds profits won’t fall off a cliff because rates won’t go back to near zero, but lower rates will act as a significant headwind. Ultimately, it will come down to the timing of interest rate cuts and the state of the UK economy at that point.

In reality, Lloyds has become a trader’s dream, and those inclined to seek out shorting opportunities will be licking their lips at the prospect of opening a position in the 50p region.

That said, a major break above 50p and a successful retest of that level could open up the doors to 60p.

As the Bank of England reminds us, they are data-dependent. The economic data the BoE relies on for its interest rate decisions will determine Lloyds’ share price performance and must be watched closely.

The FTSE 100 was trading almost flat in mid-afternoon trade in London as fresh concerns about US-Chinese relations hit sentiment.

Investors held back from launching an attack at the FTSE 100’s record highs above 8,000 after news broke of a Chinese cyber hacking campaign that targeted millions of US citizens. The index traded at 7,924 shortly after 2pm.

“The wait and see mood on the markets is continuing with recent exuberance fading, as investors look ahead to key consumer inflation data stateside, while they assess the implications of the latest ‘chip wars’ between the US and China,” said Susannah Streeter head of money and markets, Hargreaves Lansdown.

While the cyber attack, in isolation, has little direct economic consequence, the geopolitical implications will be a concern after China said it would not permit US chips in its government’s systems.

“Shares in a number of semi-conductor specialist Advanced Micro Devices and Intel slipped after Beijing signalled that foreign company chips would be phased out of government computers and services and replaced with home produced versions,” Streeter said.

“This latest chip skirmish isn’t not going to stop the AI juggernaut in its tracks, but it highlights one of the risks ahead for demand in the world’s second largest economy.”

Concerns about Chinese demand inevitably hit the FTSE 100 and the China-centric mining sector.

“Mining stocks were helping to clip the wings of the UK market amid growing tensions between major commodities consumer China and the West over hacking by Chinese spies,” said AJ Bell investment director Russ Mould.

Kingfisher was the FTSE 100’s top gainer as the DIY retailer continued yesterday’s rally on hopes the worst of the falling revenue is behind them.

Ocado was 2.5% higher after the company announced positive sales in its retail partnership with Marks & Spencer.

Autotrader fell 5% and was the FTSE 100’s top faller after Goldman Sachs cut its price target.

Good Energy’s profit before tax increased in 2023 as the renewable energy services company delivered on its strategy to become an end-to-end microgeneration specialist.

The 2023 full year marked a year of transformation for Good Energy, in which it transitioned to operating as an end-to-end renewable energy services business providing a one-stop shop for climate-conscientious households.

During the period, Good Energy completed the acquisition of Wessex EcoEnergy enabling them to enhance their solar installation service. The deal adds to similar acquisitions that bolster heat pump installations.

Customers can use Good Energy for energy supply, installation of heat pumps and solar panels, smart metering, and the capability to sell their energy back to the network.

The company has now installed 47,000 smart meters, meaning that around 58% of the company’s domestic customers now have them installed. 

Despite a volatile year for energy prices, Good Energy produced a 2.4% increase in revenue and increased gross margin to 17.4% helped by power purchase agreements. 

“Against a backdrop of continued volatility in the energy market, 2023 saw Good Energy undergo a transformation from pure renewable supply and Feed-in-Tariff administration to a fully-fledged clean energy services business,” said Nigel Pocklington, CEO, Good Energy Group.

“Following multiple acquisitions in the heat and solar space we can now offer customers premium services across supply, export, heat pumps, solar PV, storage and EV charging.

“Alongside this, we are now a leader in smart export for small scale solar and have trialled innovative flexibility services for businesses and consumers to shift their demand to cut their carbon further. Good Energy is establishing itself as the microgeneration specialist for the premium end of a rapidly growing market, offering everything a home or business needs to go greener, from a trusted brand with unparalleled expertise.”

The 2.4% increase in revenue reflected substantially lower wholesale prices at the start of 2023 compared to the end. Good Energy sees energy prices trending lower through 2024 leading to both lower revenue and cost of sales.

Reported profit before tax of £5.7m in 2023 compared with an underlying profit before tax of £1.4m in 2022. Good Energy recorded a one-off gain in 2022, meaning the reported profit before tax was £9.2m.

Good Energy’s balance sheet is exceptionally strong. Cash and equivalents grew to £41m in the period and total liabilities fell to £69m. Trade and other receivables also fell to culminate in £42m total equity at the end of the period.

In terms of the EV/EBITDA ratio used to assess the true value of the business, Good Energy trades at a material discount to peers.

After a substantial rally in Good Energy shares in the runup to results, investors booked profits on Tuesday sending shares lower in early trade.

Ocado Retail Ltd, the joint venture between Ocado Group plc and Marks & Spencer Group plc, has released its trading statement for the 13 weeks to 3rd March 2024.

The release was well received by investors and Ocado shares spiked higher on the open before falling back to trade 1.9% higher at the time of writing.

The company reported an 8.1% year-on-year growth in volumes, driving a 10.6% increase in Q1 Retail revenue to £645.3m.

“Sales were up and not just because of rising prices. The venture is actually seeing significant volume growth as it wins market share. This is partly because it saw less price inflation than the wider market,” said AJ Bell investment director Russ Mould.

“This positive trading comes after a long period of disappointing performance and you can understand Marks & Spencer’s frustration – when it agreed the tie-up with Ocado in 2019 it set targets which have subsequently not been met.”

Ocado Retail’s online market share, according to Nielsen, rose to 13.5% at the end of February, a 0.7% increase over the year.

The average number of orders per week grew by 8.4% compared to Q1 2023, reaching 414,000, reflecting a 6.4% increase in active customers to 1.02 million at the end of the quarter. W

While the average basket value increased by 2.1%, the basket size in terms of the number of items remained stable year-on-year.

As a premium retailer, Ocado Retail has set about tackling perceptions of value with a pricing strategy that resulted in a modest 2.2% growth in average selling price, significantly lower than the market.

“Ocado now needs to stay on this trajectory, keep narrowing their losses and winning more market share on their road to profit. With shares trading 85% lower than their 2021 record high and even 50% lower than just last July, many investors may well be putting some stock in their baskets looking at the potential upside,” said Adam Vettese analyst at investment platform eToro.

ZOO Digital shares surged on Tuesday after the media services to the global entertainment industry said orders has returned following the US writers’ trike.

Noting clarity on project timelines, Zoo said it is now receiving orders for work on feature films and TV shows completed after the industry strikes of 2023. January saw the highest invoicing month since April 2023 and Zoo sees acceleration in its pipeline.

Zoo Digital shares were 25% higher at the time of writing.

ZOO Digital anticipates surpassing revised market guidance for FY24, with projected revenues of at least $40 million. Consequently, the expected EBITDA loss will be mitigated. Net cash is forecasted to be at least $3 million, exceeding revised market expectations. While the Company currently holds no debt, it plans to renew its existing undrawn facilities upon expiration.

Enhanced Visibility

Investors will be pleased momentum is returning to Zoo Digital providing enhanced visibility of work, some of which will extend through September 2024. A considerable number of orders are in progress, with a growing pipeline of projects confirmed for the upcoming period. The order book for FY25 Q1 has seen a notable increase of 30% compared to FY24 Q4, underscoring expectations of a robust revenue recovery in FY25 H1.

Zoo Digital said market expectations for FY24 revenue is $37.6 million and EBITDA $14m.

Towards the end of February the £528m capitalised Greencore Group (LON:GNC) completed its second share buyback programme, taking out 15.4m shares at an average of 97.16p each over a four month period.

That takes the food group’s buyback spend up to £50m in total since late May 2022, in its effort to value return those funds to shareholders.

Now, I am not a fan of share buybacks because I believe that firms with efficient management should be able to make a far better use of such funds.

Others will, no doubt, argue that the reduction of equity inevitably helps to increase share prices, if earnings continue to accrete.

However, after some tough remedial work in the recent efficiency drive it looks as though far better times are ahead for this group, suggesting that its shares are too cheap.

The Business

The Dublin-based business is a real ‘biggie’ in the convenience food sector.

With some 13,600 employees, it has over 16 manufacturing and 18 distribution centres in the UK.

It is the world’s largest fresh pre-packaged sandwich maker, making over 779m sandwiches and other food to go items each year.

The company supplies a range of chilled, frozen and ambient foods to some of the retail and food service customers in the UK.

It also supplies convenience and travel retail outlets, discounters, coffee shops, foodservice and other retailers.

Its 645 vehicles make over 10,400 ‘direct to store’ deliveries each day as it supplies all of the supermarkets in the UK, with over 1,600 of its products spanning across 20 categories.

Its UK convenience food categories, including sandwiches, salads, sushi, chilled snacking, chilled ready meals, chilled soups and sauces, chilled quiche, ambient sauces and pickles and frozen Yorkshire Puddings, as well as an Irish ingredient trading business.

Each year it manufactures some 132m chilled prepared meals, 245m bottles of cooking sauces, pickles and condiments, 155m salads, 439m Yorkshire puddings, 28m quiche, and 45m of chilled soups and sauces.

Sales Per Business and Region

On a sales per business basis its ‘Food To Go’ side had a £1.25bn turnover in 2023, representing 65.5% of group revenues, while ‘Other Convenience’ made up £661m, 34.5%.

On a per region basis the UK represented £1.83bn of sales, 95.8%, while Ireland made up the balance £80m, 4.2%.

Q1 2024 Trading Update

Towards the end of January this year the group announced a Q1 Trading Update for the 13 weeks to 29^th December 2023.

Taking into account that the group has cut out a number of non-performing contracts, together with disposal activity, creating a 6% decrease impact, it actually showed a strong start for the current year to end September 2024.

CEO Dalton Philips stated that:

“I am extremely encouraged by the strong start to the year for our business.

Our manufactured like for like volume growth of 0.5% in the quarter, continued to outperform the market in the key categories in which we operate.

This performance has once again been supported by our outstanding operational service levels to ensure availability of products to our customers. 

Our focus as a team is to provide fresh and healthy foods to our customers and consumers each and every day.

Our progress as a business has been delivered through continued effective operational and commercial initiatives, as detailed in November, this has supported improved profit conversion and a strong profit outturn in the quarter.

We are committed to continuing to drive profitability through commercial discipline and are investing in several initiatives to develop a robust platform for future growth.

While we remain mindful of the seasonally important second half of the year, we are confident that the Group will deliver a full year outturn in line with current market expectations.”

The Shareholders

The group has some 468m shares in issue.

Major holders include Polaris Capital Management (13.39 %), Rubric Capital Management (5.85%), Brandes Investment Partners (5.42%), Fidelity Management & Research (4.92%), Black Creek Investment Management (3.38%), Utah Retirement Systems (3.30%), Gartmore Investment (1.37%), Cobas Asset Management (0.59%) and Dimensional Fund Advisors (0.43%).

Analyst Views

There are some eight analysts that closely follow this group.

Taking a consensus average of their views it appears that they are estimating current year sales to end September 2024 of £1.89bn (£1.91bn), with adjusted operating profits of £83.1m (£76.3m), generating 9.3p (9.3p) in earnings per share.

For the coming year they look for £1.94bn sales, £92.7m in profit and earnings of 11.0p per share.

There are currently estimates out for some 13.5p of earnings per share having been pencilled-in for September 2026.

My View – totally under-rated

What I find interesting, perhaps giving some caution on value, is the analyst’s consensus average Target Price on the shares is only 113.5p – I think that they are far too conservative.

We will have to wait until 21^st May to get the interims results for the six months to 29^th March and the next corporate update on current year trading, showing through the combination of the group’s recent efficiency drive and its new contracts.

As I see it, this group is a real generator of value, it has a commanding position in its sector and its shares at just 112.90p, are under-rated and offering a bargain for new investors.

The FTSE 100 fell on Monday as geopolitical risk aversion returned to equities after an attack on a Russian concert hall raised fears of an escalation in Russia’s aggression against Ukraine.

Although Russia has not yet made any suggestions it would retaliate, Russia’s comments that the attackers were heading towards Ukraine have raised fears Putin will use the Moscow attack as an excuse for escalation in the war, which is now in its third year with no sign of resolution. Ukraine denied any involvement.

Oil prices ticked higher, and European stocks declined. The FTSE 100 was down 0.1% at the time of writing in a broad selloff that sent most industry sectors lower.

“Heightened tensions between Ukraine and Russia have brought a halt to the rally in equity markets seen last week,” said Russ Mould, investment director at AJ Bell.

“Investors were nervously watching proceedings from the side lines, particularly as oil prices crept up once again, including a 0.5% rise in Brent Crude to $85.84 a barrel. The commodity price has been strengthening amid concerns about tighter global supplies and a falling US rig count which implies less exploration and production activity.

“Asian markets were mostly down on Monday, including a 1.2% drop in the Nikkei 225 amid notable weakness in the real estate and healthcare sectors.”

Kingfisher disappoints

Kingfisher was the FTSE 100’s top riser after the DIY retailer failed to construct a recovery in 2023/24, hampered by the ongoing cost of living crisis and weakness in Europe. The company started Monday deep in the red before staging a monumental turnaround as the sessions progressed.

Kingfisher shares were 2.4% higher at the time of writing.

“As is often the case, profit warnings have come in threes for B&Q-owner Kingfisher. The company is being held back by its overseas operations and investors can only hope the progress the group has recently made with its UK business can be replicated in France and Poland,” Russ Mould said.

“The company and the wider DIY sector did well during the pandemic as one of the few elements of physical retail able to continue trading. Pent-up demand for home improvements during lockdown, driven by people being stuck indoors and wanting to enhance their environment, was a strong driver of growth.”

As Russ Mould mentioned, profit warnings tend to come in threes, and investors may now be confident the worst is behind Kingfisher.

Ocado was the top faller as the risk-off sentiment hit the food technology company. Ocado shares were 4% lower at the time of writing.