Online retailers set to cream the holiday season

It appears the best way to burn off the turkey, sweet potatoes and pumpkin pie is to sink into the couch and whip out the laptop. Because that’s exactly what US consumers did this Thanksgiving – collectively racking up a record $4 billion in online sales. That’s a rather spectacular 14.5% spike on last year’s total! They then followed it up with roughly $7 billion on Black Friday.

All signs point to a monster holiday shopping season in 2019, with the National Retail Federation hollering out for a 4% bump in sales on the back of low unemployment and some decent wage growth this past year. There's talk of a massive $143 billion set to be spent with online retailers this holiday season, with analysts suggesting that over 40% of this spending will be channelled through Amazon. 

The silly season is off to a good start with solid earnings results from a few major retailers this month, with electronics retailer Best Buy (BBY) and Dick’s Sporting Goods (DKS) smashing it out of the park. Then Walmart (WMT) goes and beats Wall Street expectations with its third-quarter results and a share price that has risen 28% to date in 2019. And yes, you guessed it, much of this was down to its growth in online sales. How do you like them apples?

Pharma opioid investigations ramp-up

The Wall Street Journal dropped a bomb this past week, revealing US feds have launched a criminal investigation into opioid manufacturers. Companies that have received subpoenas include Teva, McKesson, AmerisourceBergen, Johnson & Johnson, Amneal and Mallinckrodt. Shares in all six took a dip following the news. Prosecutors are looking at whether the drug companies breached the Federal Controlled Substances Act for failing to report signs that opioids were being used for non-medical purposes.

The latest investigation follows settlements in civil suits launched against pharma firms that have netted $280 million to date, and the major probe underway into Purdue Pharma which has seen its owners, the Sackler family, offer up a $12 billion settlement and file for bankruptcy. 

There are now 2,500 opioid lawsuits in play, with nearly every US state filing some form of separate litigation as well. The economic damage of the opioid crisis is enormous, with some estimates suggesting it could hit $1 trillion. More troubling is the human cost:  almost 400,000 Americans are reported to have died as a result of opioid use over the past two decades. Cities most affected by the opioid crisis began filing lawsuits against drug companies back in 2014, and we suspect the repercussions of the opioid crisis will remain a hot topic for years to come.

Can KLA keep the chip on its shoulder?

It might have a terribly boring name reminiscent of a Soviet-era firm a Bond villain would set up, but KLA Corporation (KLAC) has been one of the surprise stories of 2019. KLA is a supplier of process control and yield management solutions for the semiconductor and related nanoelectronics industries, which in English means it makes the equipment that is used to make small, powerful logic and memory chips. 

KLA is top dog in this particular area and has benefited from a pretty chunky surge in demand thanks to the need for specialised chips for 5G applications and high-performance computing. This, in turn, kicked its share price into overdrive – doubling it this year alone, before a few analysts decided its run couldn’t continue and advised investors to sell out and take the gains. As a result, KLA’s share price took a bit of a dive.

But there’s still some enthusiasm in the market for it, with other analysts leaping to the company’s defence and estimating share price targets above $200, well beyond its current $160ish range. They appear to be encouraged by KLA’s positive earnings per share projections out to 2023. There are of course question marks around the cyclical nature of the chip industry, but it’s one analysts agree will be worth keeping an eye on.