Stock Markets
Analysis-Struggling economy awaits winner of British election
By William Schomberg
LONDON (Reuters) – The winners of Britain’s election on July 4 will have to tackle an economy that looks stuck in a rut of slow growth with high levels of debt limiting the next government’s ability to spark a significant recovery.
After the blow dealt by the global financial crisis of 2007-09, the world’s sixth-biggest economy has been buffeted by the 2016 decision to leave the European Union, the COVID pandemic and a surge in energy and food prices in 2022.
Britain’s economic performance since the coronavirus crisis has been the weakest among the Group of Seven economies with the exception of Germany, which was also hit hard by the jump in energy prices following Russia’s invasion of Ukraine.
And the country’s inability to keep up with its peers in terms of productivity growth has contributed to a gap in living standards compared with other European countries.
Middle-income people in Britain are 20% poorer than their peers in Germany and 9% poorer than those in France, according to research by the Resolution Foundation, the Centre for Economic Performance and the Nuffield Foundation.
Prime Minister Rishi Sunak, who is struggling to turn around a huge opinion poll deficit, has sought to lift the mood of voters by saying the economy is turning a corner after a short, shallow recession in the second half of last year.
In his speech to announce the election, Sunak pointed to a fall in inflation to almost 2% in data published earlier on Wednesday – down from a peak above 11% in 2022 – as proof that his plans were working.
“Economic stability was only ever meant to be the beginning,” he said. “The question now is how and who do you trust to turn that foundation into a secure future for you, your family and our country.”
Gross domestic product grew strongly in the first quarter of 2024 and the fall in inflation has raised the prospect of the first Bank of England interest rate cuts since 2020.
But the recovery looks likely to be halting. The International Monetary Fund this week predicted growth of 0.7% in 2024 and 1.5% in 2025, well below its 2.75% average before the global financial crisis.
LOW INVESTMENT, HIGH DEBT
The main opposition Labour Party, riding high in the polls, blames Sunak’s Conservatives for what looks set to be the first fall in living standards between one national election and the next since at least the 1950s.
Labour leader Keir Starmer claims he will turn Britain into the fastest-growing Group of Seven economy by attracting private investment that he says has been held back by the political upheaval since the Brexit vote under the Conservatives.
In 2022, British business investment was below its level in 2016, a contrast with other G7 economies that experienced a 14% average increase during the period.
For all the upbeat talk of both party leaders, whoever occupies 10 Downing Street after the election will face major impediments to getting the economy on a stronger growth path.
Public debt levels are their highest since the 1960s when the public finances were still under strain from the costs of World War Two.
That limits the ability of the Conservatives to follow through on talk of further tax cuts by Sunak or Labour’s hopes of borrowing to fund big investments in the green economy.
Both parties have committed to a fiscal target of getting public debt falling as a share of gross domestic product at the end of a rolling five-year period, a goal that the government is barely on course to meet at the moment.
The IMF was blunt in its assessment of how Britain should meet the challenge of fixing the public finances and getting the economy growing again: higher taxes and politically sensitive reforms to relax restrictions that have thwarted the construction of homes and new infrastructure.
“Right now, too many businesses and households still face rising costs which delay investment decisions and dampen consumer spending,” Rain Newton Smith, head of the Confederation of British Industry, said.
Britain’s next government must also find a way to tackle deep problems in its labour market.
The country is the only one in the G7 where the share of working-age people outside the workforce remains higher than before the pandemic, which contributes to the slow pace of economic growth and puts pressure on inflation.
Rob Wood, chief UK economist at consultancy Pantheon Macroeconomics, said Labour’s plans would provide a modest boost to growth, raising Britain’s economic speed limit to 1.75% a year from 1.5%.
“The most sure-fire way of boosting UK productivity and potential growth would be a major improvement in the UK-EU trading relationship,” Wood said in a note to clients.
But Starmer has ruled out a major shift to rejoin the EU’s single market or a customs union, “which means only small improvements in trading relations with the EU are possible,” Wood said.
In a turbulent market environment, Five9 (NASDAQ:) Inc’s stock has touched a 52-week low, reaching a price level of $28.74. This significant downturn reflects a broader trend for the cloud software company, which has seen its shares plummet by -58.79% over the past year. Investors are closely monitoring Five9’s performance as it navigates through a period of heightened volatility and shifting industry dynamics, which have contributed to the stock’s current valuation at this low point. The company’s efforts to rebound from this position will be under scrutiny in the coming quarters as market participants look for signs of a strategic turnaround or further indications of market pressures.
In other recent news, Five9 Inc . has achieved an annual revenue run rate exceeding $1 billion in Q2, a significant milestone despite lowering its annual revenue guidance by 3.8% due to customer budget constraints. The company’s adjusted EBITDA margin rose to 17% of revenue, contributing to a strong operating cash flow of $126 million. The company also confirmed plans to reduce its global workforce by approximately 7% by the end of 2024, a strategic move projected to cost between $12 million and $15 million.
Five9’s recent acquisition of Acqueon, a firm specializing in proactive outbound omnichannel customer engagement, aims to expand its AI offerings and bolster its growth. This move is in line with the company’s focus on managing expenses and improving profitability, with initiatives like FedRAMP and expansion into India anticipated to improve gross margins.
In their analysis, Piper Sandler maintained an Overweight rating for Five9, with a steady price target of $47.00, while Needham and BTIG both maintained a Buy rating with price targets of $48.00 and $45.00 respectively. These ratings reflect the firms’ confidence in Five9’s strategic positioning and potential for growth, despite the current challenges and workforce reduction.
InvestingPro Insights
Amid the current market conditions, Five9 Inc’s recent performance can be put into perspective with select data from InvestingPro. The company’s market capitalization stands at roughly $2.15 billion, indicating the size and scale of the business amidst its challenges. Despite the stock’s decline, analysts are showing a hint of optimism, with 20 analysts having revised their earnings estimates upwards for the upcoming period. This could signal a potential turnaround in sentiment or underlying business performance.
Importantly, Five9’s liquid assets are reported to surpass short-term obligations, suggesting that the company maintains a degree of financial flexibility to navigate its current difficulties. Furthermore, while the stock is trading near its 52-week low, it’s worth noting that the relative strength index (RSI) suggests the stock is in oversold territory, which can sometimes precede a rebound in share price. Investors looking for comprehensive analysis and additional InvestingPro Tips on Five9 can find more insights, including 14 other tips, at https://www.investing.com/pro/FIVN.
In terms of financial health, the company operates with a moderate level of debt and is expected to become profitable this year, according to analysts’ predictions. These elements may offer some solace to investors considering the stock’s substantial price fall over the last year. For those seeking a deeper dive into Five9’s valuation and future prospects, the InvestingPro platform provides a fair value estimate of $45.04, which is considerably higher than the current trading price, suggesting potential undervaluation.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.
TD Cowen reiterated its Buy rating on shares of Terns Pharmaceuticals (NASDAQ:TERN), following the company’s investor call. The call was held to manage expectations for the upcoming Phase 1/2 CARDINAL study data for chronic myeloid leukemia (CML). The firm noted the challenges in measuring the efficacy endpoint (EP) due to disease progression and the absence of treatment switch guidelines, which makes major molecular response (MMR) a challenging efficacy endpoint for Phase 1/2 trials.
The interim Phase 1/2 data aims to evaluate descriptive efficacy signals, considering patients’ baseline BCR-ABL levels and treatment history. The analyst highlighted that the once-daily (QD) dosing and the lack of food effect could potentially enhance the quality of life for patients compared to other allosteric tyrosine kinase inhibitors (TKIs).
Terns Pharmaceuticals has been focusing on the development of improved treatment options for CML. The company’s approach to dosing, which does not require food intake, may offer a more convenient alternative for patients, potentially leading to better adherence and outcomes.
The topline data from the 6-month Phase 1/2 CARDINAL study is anticipated to be available in 2025. This data will provide further insights into the treatment’s efficacy and safety, which are critical factors in the ongoing development and potential approval process.
Investors and stakeholders in Terns Pharmaceuticals are expected to closely monitor the progress of the CARDINAL study, as it could have a significant impact on the company’s future prospects and position in the CML treatment landscape.
In other recent news, Terns Pharmaceuticals has experienced significant developments. The biopharmaceutical company reported robust earnings and revenue results, with Mizuho Securities maintaining an Outperform rating on Terns shares, citing strong enthusiasm for the company’s drug, TERN-701, a potential treatment for chronic myeloid leukemia.
The firm expects the first interim Phase 1 CARDINAL study data for TERN-701 in December.
Terns also announced the appointment of Elona Kogan as its new chief legal officer, a move that underscores the company’s strategic development and pipeline advancement.
The company also secured an extension of its office lease in Foster City, California, through 2027, reflecting Terns Pharmaceuticals’ operational stability and long-term planning.
In terms of clinical trials, Terns has made progress in its ongoing Phase 1 study of TERN-701, with interim findings suggesting the drug can be administered once daily with or without food.
This development, coupled with the forthcoming Phase 1 data for another of Terns’ drugs, TERN-601—an oral GLP-1 receptor agonist for obesity—expected next month, underscores the company’s commitment to innovative therapies.
These recent developments, from financial performance to executive appointments and clinical trials, highlight Terns Pharmaceuticals’ ongoing efforts to advance its strategic objectives and deliver on its mission. The company’s activities are closely watched by investors and industry analysts, including those from Mizuho Securities, who continue to support the company’s potential.
InvestingPro Insights
As Terns Pharmaceuticals (NASDAQ:TERN) navigates the complexities of its Phase 1/2 CARDINAL study, investors are keeping a keen eye on the company’s financial health and stock performance. According to InvestingPro, Terns holds more cash than debt, which is a positive signal for financial stability. Additionally, with five analysts revising their earnings upwards for the upcoming period, there is a sense of optimism about the company’s potential performance.
However, it’s important to note that Terns is not currently profitable and has been quickly burning through cash, which may raise concerns about long-term sustainability. The company’s P/E Ratio stands at -5.71, reflecting these profitability challenges. Despite these hurdles, Terns has managed a 1 Year Price Total Return of 45.42%, indicating some investor confidence in the company’s growth prospects. The anticipated fair value from analysts stands at 15 USD, while the InvestingPro Fair Value is calculated at 5.8 USD, highlighting a divergence in valuation perspectives.
For those looking for more in-depth analysis, additional InvestingPro Tips on Terns Pharmaceuticals can be found at https://www.investing.com/pro/TERN, offering a comprehensive look at the company’s financial details and stock performance.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.
PARIS (Reuters) – French President Emmanuel Macron discussed the importance of maintaining support for Ukraine and the need for a ceasefire in Gaza during talks on Friday with German Chancellor Olaf Scholz, said the French presidency.
Regarding Ukraine, the two leaders expressed their determination to support the country “for as long and as intensively as necessary” in its war against Russia, the Elysee said.
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