Inflation slows in the U.S.

Your portfolios in brief

This week, we're talking about the stock of e-commerce platform Shopify, which last week unveiled better-than-expected results. The Canadian company reported a profit of US$68 million, compared to a net loss of US$1.4 billion for the same period last year. Earnings per share were 5 cents U.S., compared with a loss per share of $1.17 a year earlier. Revenues were up 25% to US$1.5 billion compared to last year.

However, the company announced the elimination of about 20% of its workforce, after reducing its workforce by 10% last July. The news was well received by investors, who see a cash saving for the next few months, which will possibly be profitable for the next quarter.

"Technological progress always moves toward simplicity, and entrepreneurs are more successful when they simplify. But we are now at the dawn of the age of artificial intelligence and the new capabilities that are being unlocked are unprecedented. Our core quest asks us to build the best thing that is now possible, and that just changed completely," said Tobi Lutke, CEO of Shopify.

Like most technology companies, Shopify is trying to figure out how to invest in artificial intelligence to improve the customer experience and lower its operating costs.

"Shopify continues to dominate and take market share from small retailers looking for an easy and inexpensive way to sell their products online. In the long term, the acquisitions made by Shopify around their payment system and their investment in AI reinforce our confidence in the company and its management," said Philippe Pratte, President and Portfolio Manager.

Its stock closed last Thursday's session up 37% in the three days from Tuesday to Thursday. Its stock has posted year-to-date gains of 70%, making it a good performer in our portfolio.

Stock markets in brief

It was a directionless start to the week for the various indices as investors awaited the inflation data released on Wednesday. The figures announced turned out to be better than expected, with a 50% decrease since last summer. However, inflation remains too high. According to the CPI index, consumer prices rose 4.9% year-over-year in April, up from 5.0% in March. Investors were pleased with these numbers, hoping that the Fed will pause in its rate hike decision.

Food prices fell for a second consecutive month, allowing consumers to lighten their grocery bills as the supply chain continues to normalize.

Indices reacted well on Wednesday following the release of the data, except for the Dow, which ended slightly lower. The NASDAQ recorded gains of 1.04% supported by the rebound of stocks from the FAANG group, including Alphabet (+4.02%) which presented its new advances in the AI world on Wednesday, delighting investors

Airbnb stock had a rough session, down more than 10% after announcing lowered guidance. Despite strong results for the quarter, the company revealed that it would see slower growth in the second quarter. Airbnb reported an increase in bookings in the first quarter, accumulating revenue by more than 20 percent. However, the company estimates that it will see a decline in bookings in the next quarter, compared to the same quarter last year as the world emerged from the covid era.

Disney also announced disappointing quarterly results. Its subscriber base continued to decline in the last quarter. In the first four months of the year, the Disney+ platform lost over 4 million subscribers. Disney, however, reported increased revenues, generating $21.8 billion, a 13% increase. The stock was down 5% in after-hours trading and ended Thursday's session down 18.73%.

On Thursday, the markets were still distressed by the banks' woes as Pacific West Bank announced that several customers had withdrawn deposits since the beginning of the month. Its stock fell 22.70 percent to $4.70 after being suspended several times. Its tumble dragged down the stocks of other regional banks such as Zions (-4.51%), Comerica (6.79%) or KeyCorp (-2.36%).

Initial U.S. jobless claims rose to their highest level since October 2021, while producer prices rose 0.2% in April when analysts expected a 0.3% increase.

"This week's inflation numbers came in slightly below investors' expectations. Investors are still digesting this week's positive economic news without creating a sudden and unexpected increase in volatility in the markets. The next point of focus will be the debt ceiling, which will continue to create uncertainty in the markets until it is resolved," said Philippe Pratte.

Here is the average for the week of the three main indexes at 1 p.m. Friday.

And here's the average for the week for the TSX in Canada.

Pratte Portfolio Management is a firm registered with the Autorité des marchés financiers (AMF) and the Ontario Securities Commission (OSC).

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