Twitter stock slumps after Musk pulls out of takeover deal

In today’s headlines, Elon Musk backs out of the $44bn Twitter acquisition and Google takes measures to ward off an antitrust lawsuit. Meanwhile, cannabis stocks rally, China ETFs see record inflows and oil prices could bring tailwinds for electric vehicles.

Musk pulls out of Twitter

Shares in Twitter [TWTR] slumped Monday as Elon Musk reneged on the $44bn acquisition deal. The social media giant is taking legal action in what has been described by Wedbush analyst Dan Ives as “a code red situation”. The problem, tweeted Ives over the weekend, is that any legal battle won’t help solve questions investors have around advertising headwinds and the true number of daily active users. He cut his price target from $43 to $30. 

Google ad spinoff offer

The Wall Street Journal has reported that Google [GOOGL] has offered to spin off its advertising business in an attempt to ward off a second antitrust lawsuit from the US Department of Justice, first rumoured towards the end of last year. Google’s digital advertising practices have been under scrutiny and it’s been accused of abusing its dominant position. The company is currently preparing for a trial for a separate lawsuit brought against it by a number of states. 

Analysts see economic benefit in EVs

Rising prices at the pump are turbocharging the case for electric vehicles, and the economic benefits could cancel out any headwinds from surging electricity prices. This is according to a report by Raymond James analysts led by Pavel Molchanov, seen by CNBC. “For a typical consumer, a car buying decision tends to be heavily influenced by what’s happening with energy prices at the time of the purchase,” the analysts wrote. 

Chinese ETFs see record inflows

With Beijing’s sentiment on China’s tech companies appearing to soften, investors have been pouring money into Chinese equities and funds. BlackRock data seen by the Financial Times shows that US-listed, China-focused ETFs netted $4bn in June, while those domiciled elsewhere saw inflows of $1.8bn. Phillip Wool, managing director of emerging market-focused asset manager Rayliant, told the FT that China tech stocks were oversold partly because growth outlook had “soured” recently. 

Value in pot stocks

Cannabis stocks rallied last week amid an air of optimism that a recession could be avoided. The AdvisorShares Pure US Cannabis ETF [MSOS] climbed 7.5%, although it’s down 56.6% year-to-date. According to Cantor Fitzgerald analyst Pablo Zuanic, flaws in federal cannabis reform have meant “the group does not seem to find a bottom”. However, the MSOS stocks are now trading at an attractive value, he wrote in a note seen by Barron’s. 

Earnings preview: Pepsi

With the rising cost of living squeezing consumers, investors will be paying close attention to whether inflation has popped Pepsi’s [PEP] bubble when the company reports its Q2 earnings later today. Even if it disappoints, the soft drink maker is confident on its full-year outlook, recently upgrading 2022 revenue growth from 6% to 8%. The stock offers investors a strong and reliable dividend, which yields 2.7%. 

Budget airlines struggle to take off

Budget airline passengers in Europe have been facing cancellation headaches and this has seen the shares prices of Easyjet [EZY.L], Wizz Air [WIZZ.L] and Ryanair [RYA.L] nosedive since the end of May. On top of the disruption, there’s also been the impact of rising oil prices. Wizz Air, for example, was unhedged when the price spiked after the start of the war in Ukraine.