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Luke Kawa

Opendoor price target raised to a Wall Street high of $6 at Morgan Stanley

Morgan Stanley analysts raised their price target on Opendoor Technologies to the highest on Wall Street. However... they’re still not actually bullish on the online real estate company.

In a wide-ranging note on internet stocks as the Q3 earnings season heats up, analysts Brian Nowak and Matthew Cost (who covers Opendoor) wrote:

“While we see limited fundamental justification for OPEN’s recent outperformance, we also see the opportunity for a pivot back to home-buying (and significant operating leverage) should there be a stronger housing market recovery. Moreover, similar situations with other stocks have shown that higher valuations are not only often more sustainable than expected, but also create the opportunity for companies to raise capital and address challenges with the support of an enthusiastic shareholder base. With that in mind we mark our base case price target to market at $6.”

Morgan Stanley’s previous price target was $2. Analysts kept their “market perform” (or “hold”) rating on the company intact.

The obvious corollary here is GameStop, a company that has had a high value ascribed to the value of its cash based on the idea that CEO Ryan Cohen would be able to do a lot to transform the company with that money. Opendoor bulls are similarly enthused by the company’s turnaround prospects under its new management. Its biggest one-day gain on record came after news that cofounders Keith Rabois and Eric Wu were being added to the board of directors and that Shopify COO Kaz Nejatian was coming in to serve as CEO.

GameStop, without doing anything too revolutionary, has managed to turn around its business since its initial run as a meme stock, and has now strung together five consecutive quarters of positive operating cash flows for the first time in its history.

The sell side is pretty downbeat on Opendoor, with just one “buy” (or “buy” equivalent), five “hold,” and five “sell” ratings among analysts tracked by Bloomberg.

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Luke Kawa, Tasha Matsumoto
44m
Stocks fall in another volatile trading session as the war in Iran continues into its fourth day

Stocks pared steeper losses after President Trump said in a Truth Social post that the US Navy would escort tankers through the Strait of Hormuz.

Bear Roar
markets
Luke Kawa

Oil to lows and stocks to highs of day after President Trump says US will insure and escort oil tankers through the Gulf

West Texas Intermediate futures dipped to their lowest level of the day while the SPDR S&P 500 ETF continued to pare losses after US President Donald Trump ordered immediate action to improve the flow of oil to global markets after the US-Iran conflict caused shipments through the Strait of Hormuz to slow to a crawl.

In a Truth Social post, the president said the US Development Finance Corp would provide “political risk insurance and guarantees for the Financial Security of ALL Maritime Trade, especially Energy, traveling through the Gulf,” adding that the US Navy would escort tankers through the Strait of Hormuz as soon as possible, if necessary.

Bloomberg’s Javier Blas explained that having oil-producing countries in the region able to reload crude on tankers is critical to avoiding production shut-ins.

Of course, there is a risk of unintended consequences from a heightened US presence in the region’s most strategically important area, from the perspective of global markets, during a time of kinetic military action. US naval escorts through the strait could dramatically increase the risk of an incident that massively escalates the conflict.

Luke Kawa
5h
War has pushed global markets into the danger zone

Correlations within the US stock market and between asset classes are rising.

Screaming Man
markets
Max Knoblauch

Versant climbs in its first quarter after spin-off, announces dividend and $1 billion stock buyback

Versant Media, the owner of cable TV assets including CNBC, MS Now, and Golf Channel, reported its first earnings since spinning off from Comcast earlier this year. The stock climbed 3% after markets opened.

Investors appear to like Versant’s $1 billion stock buyback plan and its newly announced quarterly dividend of $0.375 per share.

Versant reported Q4 revenue of $1.55 billion, shy of the $1.56 billion expected by analysts polled by FactSet. The company posted earnings of $0.72 per share in the quarter, below estimates of $0.96 per share.

MS Now, formerly MSNBC, was the most watched news channel on election night in November, Versant said. The network will launch a direct-to-consumer platform later this year.

markets
Luke Kawa

Energy price spike on Mideast war has traders betting on no Fed cuts through June

A war in the Middle East, and the resultant upward pressure on oil prices, has caused traders to reverse bets that the Federal Reserve will cut interest rates in the first half of this year.

The prediction market-implied odds of a rate cut in June are less than 45% on Tuesday morning. Last week, the odds of a rate cut in June were around 60%. This comes as US national average gasoline prices rose 3.7% on Monday, their biggest one-day jump since 2005, according to data from the American Automobile Association.

(Event contracts are offered through Robinhood Derivatives, LLC — probabilities referenced or sourced from KalshiEx LLC or ForecastEx LLC.)

In the short term, higher energy prices put upward pressure on inflation and downward pressure on economic activity. Higher gasoline prices reduce households’ ability to spend more on other discretionary goods and services.

Normally, Fed officials would want to “look through” the impact of higher energy prices as a temporary source of upward pressure on inflation that is not indicative of the underlying trend. That’s why energy (and food) prices are stripped out of core inflation. However, this time might be different:

  • Inflation has run above the Federal Reserve’s target for a prolonged period.

  • The central bank is a little scarred by the un-transitory and severe postpandemic inflation (which was meaningfully accelerated by Russia’s invasion of Ukraine).

  • Monetary policymakers were already signaling that the stabilization in jobs data and previous cuts, which brought their policy rate closer to a neutral setting, meant the bar for additional easing was higher.

“I think the Fed will be reluctant to elevate growth over inflation risks right now,” wrote Neil Dutta, head of US economics at Renaissance Macro Research. “Cuts have been a close-call as it is; thus, it’s tough to look through inflation when you are coming off a period of high inflation.”

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