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Shares of Berkshire Hathaway surged following a substantial increase in profits, bringing Warren Buffett’s conglomerate closer to a valuation of $1 trillion.

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Berkshire Hathaway experienced a rise in its shares on Monday following robust fourth-quarter earnings, as reported over the weekend by Warren Buffett’s conglomerate. The premarket trading for Berkshire Class B shares showed a 2.3% increase, further building on the already impressive 17% gain for the year. As of Friday’s close, Berkshire held a market value of $905.5 billion, according to FactSet.

The conglomerate disclosed operating earnings of $8.481 billion for the fourth quarter, marking a 28% increase compared to the previous year’s $6.625 billion. This growth was primarily attributed to significant gains in its insurance sector. Berkshire’s cash reserves also reached a record high, reaching $167.6 billion in the fourth quarter, surpassing the prior quarter’s record of $157.2 billion.

Despite the positive outlook, an analyst cautioned that the stock might already be fairly valued, suggesting that the optimistic earnings expectations are already factored into the stock price. Edward Jones’ James Shanahan noted that Berkshire’s shares have outperformed financial services peers in 2023, driven by a robust earnings outlook, but he believes the current share price adequately reflects these positives.

Warren Buffett, in his annual letter released over the weekend, conveyed a tempered perspective on future performance. He anticipates only a slight outperformance compared to the average company, especially as Berkshire approaches a net worth equivalent to 6% of the total S&P 500 companies. Buffett mentioned that the conglomerate’s mix of businesses positions it to do slightly better than the average American corporation, operating with lower risk of permanent capital loss. However, he cautioned against expecting anything beyond a modest improvement, stating that such expectations would be wishful thinking.

Buffett also noted that only a handful of businesses are likely to significantly impact Berkshire through acquisitions, highlighting that the conglomerate’s last major deal was in 2022 when it acquired insurer and conglomerate Alleghany for $11.6 billion.

El-Erian, Krugman, and various economists hold divergent views regarding the challenges faced by China’s economy.

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China’s economic troubles are evident as its property market crumbles, deflationary pressures spread, and the stock market experiences significant volatility. The CSI 300 index has lost around 40% of its value from the 2021 peaks. January PMI numbers revealed the fourth consecutive month of contraction in manufacturing activity due to declining demand.

This pessimistic data has fueled skepticism about the second-largest global economy. Allianz has revised its optimistic view, forecasting a lowered average growth rate of 3.9% for Beijing’s economy between 2025 and 2029. Eswar Prasad, a former IMF official, suggests a diminishing likelihood of China surpassing the U.S. in GDP.

Despite these challenges, Chinese leader Xi Jinping remains optimistic about the nation’s economic resilience. However, experts like Nobel laureate Paul Krugman foresee an era of stagnation, attributing China’s struggles to issues like poor leadership and high youth unemployment.

The property market crisis is a significant concern, with the IMF anticipating a 50% drop in housing demand over the next decade. Hedge fund manager Kyle Bass compares China’s property market issues to the U.S. financial crisis on steroids, stating that the basic architecture of the Chinese economy is broken.

While some, like the Institute of International Finance, believe that China has the policy capacity to drive economic growth, others emphasize the need for structural reforms and demand-side stimulus. Clocktower Group’s Marko Papic offers a short-term optimistic view, predicting a 10% to 15% rally in Chinese equities. JPMorgan Private Bank also outlines bullish scenarios, highlighting China’s resilient role as a global manufacturer, despite challenges in the stock and property markets.

Looking ahead, China faces hurdles, and its ability to overcome them remains uncertain.

SoftBank’s Vision Fund records its largest gain in nearly three years at $4 billion, as tech valuations recover.

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SoftBank, in the December quarter, achieved its most substantial gain in nearly three years at its flagship tech investment arm, the Vision Fund, driven by a rebound in technology company valuations. Here’s a breakdown of SoftBank’s performance against LSEG estimates:

  • Net sales: 1.77 trillion Japanese yen ($11.9 billion) versus the expected 1.8 trillion Japanese yen.
  • Net income: 950 billion Japanese yen versus the expected 196.5 billion yen.

The Vision Fund reported a gain on investment of 600.7 billion Japanese yen, marking a continued recovery from record losses in the previous fiscal year. This gain is the highest since the March 2021 quarter.

Notably, SoftBank achieved its first quarterly profit in five quarters, marking a turnaround from four consecutive losses.

In the prior fiscal year ending in March, the Vision Fund faced challenges, posting a record loss of around $32 billion due to a decline in tech stock prices and setbacks in some Chinese business ventures.

The Vision Fund has shown positive results in the last three quarters, with rising valuations from key investments in Didi, the Chinese ride-hailing app, and ByteDance, the owner of TikTok.

SoftBank founder Masayoshi Son announced a shift to “defense” mode in 2022, slowing investments and adopting a cautious approach. However, in June, Son indicated a move to “offense” mode, expressing excitement about the potential of artificial intelligence technology, an area where the Vision Fund has investments, including in China’s SenseTime.

In the December quarter, SoftBank gained $5.5 billion from the sale of shares of its majority-owned chip designer, Arm, which went public in the U.S. last year. SoftBank’s CFO, Yoshimitsu Goto, highlighted Arm’s significant contribution to the global AI evolution.

SoftBank has undergone a strategic shift from being “Alibaba-centric” to an “AI-centric” portfolio. The company has reduced its stake in Alibaba, with the Chinese giant accounting for nearly zero percent of SoftBank’s assets at the end of the December quarter, down from 50% at the end of December 2019. In contrast, Arm’s contribution to SoftBank’s assets has increased from 9% to 32% during the same period.

As the lock-up period for Arm shares post-IPO expires in March, there is speculation that SoftBank might consider a buyback of its own shares by selling Arm stock. Goto emphasized SoftBank’s reduced investment exposure to China, indicating a shift in the company’s focus.

AMD experiences a drop in stock value following a less-than-anticipated first-quarter forecast.

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AMD announced its fourth-quarter earnings, aligning with analyst predictions. Although the company exceeded revenue estimates, the stock witnessed a more than 6% decline in after-hours trading due to a first-quarter forecast that fell short of expectations. Despite AMD’s positive update on the swift sales of its new AI chips, concerns arose.

Here’s a breakdown of AMD’s Q4 performance against LSEG’s consensus estimates:

  • Earnings Per Share (EPS): 77 cents per share (adjusted), meeting the expected 77 cents per share.
  • Revenue: $6.17 billion, surpassing the anticipated $6.12 billion.

Looking ahead to the first quarter, AMD projected sales of approximately $5.4 billion, plus or minus $300 million, whereas analysts had expected revenue to reach $5.73 billion. AMD acknowledged an expected sequential decline in major businesses, including PC chips, and predicted flat data center revenue. This projection factored in declines in server CPUs, offset by GPU sales crucial for training and deploying generative artificial intelligence models.

AMD CEO Lisa Su commented on the outlook for 2024, expressing expectations of a mixed demand environment. In the fourth quarter, net income reached $667 million, or 41 cents per share, a substantial increase from $21 million, or 1 cent per share, in the previous year.

While Nvidia dominates the GPU market, AMD aims to challenge its position with new AI chips introduced in the previous year. The company provided a positive update on AI chip sales, revising its 2024 server GPU sales projection from $2 billion to $3.5 billion under its “Instinct” brand. AMD highlighted collaborations with major cloud customers like Microsoft, Oracle, and Meta in deploying Instinct GPUs for internal AI workloads and external offerings.

AMD’s data center business, comprising server CPUs and AI chips, experienced a 38% YoY increase, reaching $2.28 billion in sales and becoming the company’s largest segment. The growth was attributed to robust sales of Instinct graphics processors used in AI applications.

AMD’s traditional focus on CPUs for PCs and servers has faced challenges, with the semiconductor industry experiencing flat or shrinking growth. However, the client segment, featuring chips for PCs and laptops, saw a notable 62% YoY rise to $1.46 billion in sales. The gaming segment, including processors for Microsoft Xbox and Sony PlayStation consoles, witnessed a 17% sales decline, with expectations of a significant double-digit percentage decline in the current quarter. The embedded segment, covering networking chips, reported $1.1 billion in sales, marking a 24% YoY decrease.

McDonald’s is on the verge of announcing its financial results. Here’s what you can anticipate.

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McDonald’s is anticipated to disclose its fourth-quarter earnings on Monday before the opening bell. According to analysts surveyed by LSEG (formerly Refinitiv), the expected figures are:

  • Earnings per share: $2.82
  • Revenue: $6.45 billion

The company had a strong start in 2023 with double-digit same-store sales growth and increased traffic in the first half. However, in the third quarter, McDonald’s noted a decline in spending from low-income consumers, impacting traffic to U.S. restaurants. Analysts predict a continuation of challenges in the fourth quarter.

Projections indicate a modest 4.7% growth in quarterly same-store sales, significantly lower than the 10.9% reported a year ago. McDonald’s has experienced a slowdown in price hikes, and the industry witnessed decreased foot traffic in November and December.

CEO Chris Kempczinski highlighted the negative impact of the Israel-Hamas conflict on sales, affecting regions both within and outside the Middle East. Calls for a boycott on social media emerged after McDonald’s Israeli franchisee offered discounts to soldiers.

Similar to McDonald’s, Starbucks faced boycotts related to the Middle East, resulting in a decline in U.S. traffic as occasional customers avoided its cafes.

For the year 2024, Wall Street projects McDonald’s to earn $12.53 per share, marking a 6.1% increase from the previous year, with an anticipated revenue of $27.14 billion, reflecting a 6.3% rise.

Despite challenges, McDonald’s stock has seen a 12% increase in the past year, reaching a market value of approximately $215 billion.

A judge prohibits the JetBlue-Spirit merger following the Department of Justice’s antitrust challenge.

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A federal judge on Tuesday blocked JetBlue Airways’ acquisition of Spirit Airlines, responding to the Justice Department’s antitrust lawsuit. The judge argued that the merger would lead to increased fares for price-sensitive consumers by removing the discount carrier, Spirit, from the market.

The proposed $3.8 billion purchase aimed to create the nation’s fifth-largest airline, with JetBlue and Spirit intending to enhance growth and competitiveness against larger rivals like Delta and United.

In his decision, U.S. District Court Judge William Young expressed concerns that JetBlue planned to convert Spirit’s planes to its own layout and charge higher average fares, harming cost-conscious travelers who rely on Spirit’s low fares. The ruling is seen as a victory for the Justice Department, which has actively opposed deals deemed anti-competitive.

Attorney General Merrick Garland stated that the decision protects consumers from higher fares and limited choices. The Justice Department’s lawsuit, filed in March, argued that JetBlue’s acquisition would eliminate Spirit and a significant portion of ultra-low-cost airline seats, leading to higher fares for many passengers.

Spirit Airlines, known for its no-frills model offering cheap fares and additional fees, faced a substantial stock decline of 47% after the ruling, while JetBlue’s stock gained approximately 5%.

JetBlue and Spirit expressed disagreement with the ruling, emphasizing their belief that the merger would enhance competition and choice by offering low fares and excellent service. The decision leaves JetBlue considering its next steps, with the incoming CEO, Joanna Geraghty, tasked with navigating the airline’s future direction.

This legal development follows a previous ruling in Massachusetts where a different U.S. District Court judge supported the Justice Department in blocking JetBlue’s regional alliance with American Airlines in the Northeast. JetBlue and Spirit, in a joint statement, asserted that their termination of the Northeast Alliance and commitment to significant divestitures addressed any anti-competitive concerns raised by the Justice Department.

Struggling Aerospace Company Virgin Orbit Ceases Operations and Lays Off 90% of Its Employees

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Virgin Orbit, the small satellite launch service company founded by Richard Branson, has announced that it will be halting operations “for the foreseeable future” due to its inability to secure additional funding to keep the company afloat. This decision comes after the company had furloughed nearly its entire workforce as it paused operations for a week to shore up cash through an investment plan. The company is also laying off 90% of its workforce, cutting 675 jobs and leaving only around 100 employees.

In an all-employee meeting, CEO Dan Hart stated that the company was unable to find funding that would provide a clear path for the company’s future. Hart also told employees that he hopes this move will help to attract new investors and enable the company to eventually resume operations. However, the immediate future of the company remains uncertain.

Virgin Orbit had raised $55 million as a stopgap measure by selling convertible notes to Branson’s Virgin Investments, including $10 million in January. Despite this, the company’s financial woes were significantly more burdensome. In November 2022, the company reported a $43 million third-quarter loss, which raised concerns about the company’s ability to continue operations. The company has sold $10.9 million in convertible notes to Branson’s Virgin Investments, which will help the company in the short term, but its stock price has dropped significantly following news of the company’s financial struggles.

Virgin Orbit is a separate company from Branson’s space tourism company, Virgin Galactic. Branson founded Virgin Orbit as a launch service for small satellites in 2017, working in partnership with Virgin Galactic. The company went public on the Nasdaq last year but has been struggling financially ever since. This latest announcement is a significant setback for the company, which has been working to establish itself as a leader in the small satellite launch service industry.

The layoffs will affect many areas of the company, including engineers, technicians, and administrative staff. Virgin Orbit had been working on several projects, including a project to develop an air-launched rocket system for the U.S. Air Force. It is unclear what will happen to these projects now that the company has ceased operations. The immediate future of the company and its employees remains uncertain, but the hope is that this move will enable Virgin Orbit to eventually resume operations and continue to work towards its goal of making space more accessible for small satellites.

”The Entrepreneur Times Magazine Publication is a leading source of business and entrepreneurship insights, dedicated to sharing the stories of successful businesses and entrepreneurs from around the world.
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