3 big oil stocks to watch as market decouples from crude, as per BofA

Investing.com - Banks, insurance, and consumer durables are currently the most overweight Chinese sectors in a model designed by UBS that aims to forecast industry rotations in the country.

The most underweight sectors were semiconductors, capital goods and materials, the analysts led by Cathy Fang said in a note to clients.

"The model screens sectors with good fundamental profiles and that have high exposure to domestic media and retail
investors, and where institutional investors are overweight and increasing weight," the analysts noted.

UBS’s report comes as the MSCI China index, a benchmark of 580 Chinese stocks, ended the first quarter up by 16%, reflecting a recent flight away from U.S. stocks to overseas options.

Investors have been hopeful that local officials in China will roll out more stimulus measures to bolster an economy that is facing renewed U.S. tariff pressure, sluggish consumer spending activity, and an ailing property market.

Technology firms have been among the most sought after in China, fueled by a rush of interest in the domestic development of artificial intelligence. Underlying the trend was the emergence earlier this year of Chinese start-up DeepSeek, which launched an AI model that displayed similar performance to U.S. rivals like OpenAI’s ChatGPT at a fraction of the cost.

Chinese President Xi Jinping even held a rare meeting with local tech leaders, urging them to "show their talent" as they move to build out the country’s AI capabilities.

E-commerce giant Alibaba (NYSE:BABA) Group has spiked by nearly 60% so far this year, while Shenzhen-headquartered conglomerate Tencent has surged by more than 21%. The Hang Seng Tech Index has subsequently become one of the best performing benchmarks in 2025.

A buying spree in Hong Kong was also spurred on by blockbuster initial public offerings, including the debut of Chinese bubble tea chain Mixue that raised $444 million from the sale of 17 million shares.

(Reuters contributed reporting.)

Investing.com -- Global equities ended their worst quarter since 2023, with the MSCI All-Country World Equity Index down 4.4% in March.

U.S. stocks were the hardest hit, as the S&P 500 fell 5.6% during the month and 4.3% for the quarter—its steepest drop since 2022. Escalating trade tensions, rising stagflation fears, and uncertainty over the future of AI monetization weighed heavily on sentiment.

Markets were jolted by faster-than-expected tariff announcements from the U.S. New levies on imports from Mexico, Canada, and China were followed by a 25% tariff on foreign autos.

Another sweeping round of trade measures is expected from the White House on April 2.

“Although investors had been bracing for an increase in trade levies under a second Trump administration, this moved faster and went further than investors had anticipated,” UBS strategists said in a note.

But despite the recent sell-off, UBS maintains a positive outlook on U.S. equities, citing solid economic fundamentals and prospects for tax legislation.

The bank expects the Federal Reserve to cut rates if labor markets weaken and believes that structural growth in AI remains strong.

“Our view is that the news flow will improve in coming months; after the White House announcement on tariffs on 2 April, negotiations can get underway in earnest to soften the blow.”

In this uncertain environment, UBS recommends three investment strategies for 2025.

First, investors should take advantage of U.S. market volatility. The bank expects U.S. equities to outperform globally, driven by robust structural growth, easing tariff risks, and healthy earnings.

UBS suggests “approaches to phase in and buy on dips in broad U.S. equities and companies featured on our ‘AI’ list.”

Second, the firm advises being selective in non-U.S. markets. While Europe and Asia started the year strongly, renewed trade tensions and geopolitical uncertainty may limit gains.

Within Europe, UBS favors names tied to fiscal spending and smaller-cap stocks. In Asia, they highlight Taiwan’s structural appeal and defensive plays in China, alongside long-term potential in the power and resources sectors.

Third, investors should navigate political risk with hedges. Demand for gold is rising, and UBS expects it to continue serving as a safe haven.

“We expect gold, now above $3,000/oz, to continue serving as a hedge against geopolitical and inflation risks.”

Oil, also seen as a geopolitical hedge, is forecast at $80 per barrel by year-end. UBS also encourages capital preservation strategies to balance exposure and manage volatility.

Investing.com -- Fitch Ratings has revised its outlook for Bumble (NASDAQ:BMBL) Inc. and Buzz Finco LLC, collectively known as Bumble, from positive to negative. Despite this, the Long-Term Issuer Default Rating (IDR) has been affirmed at ’BB-.’ Buzz Finco LLC’s senior secured issue rating remains at ’BB+’ with a Recovery Rating of ’RR1’.

The revised outlook is due to significant execution risks associated with Bumble’s strategic product refresh. The refresh is expected to cause a decrease in revenue and contraction in margins in FY25. This coincides with a management transition that could disrupt the product refresh roadmap and delay a return to revenue growth.

Bumble’s IDR takes into account its strong liquidity and free cash flow (FCF) generation, supported by conservative leverage and high interest coverage. However, the company’s reliance on its core apps, along with intense sector competition, highlights the risks associated with its limited product diversification and potential vulnerability to market shifts.

Bumble’s planned product refresh is expected to result in low-single-digit revenue declines and margin contraction for FY25. The refresh is part of Bumble’s broader strategic objectives to improve the long-term health of the Bumble user ecosystem.

Furthermore, Bumble is undergoing a management transition period, including the appointment of founder Whitney Wolfe Herd as CEO. Fitch believes the management transition and product refresh may result in some platform disruption and higher-than-expected subscriber and market share losses. Fitch assumes high-single-digit revenue declines in FY25 and low single revenue growth for FY26 through FY28 to reflect these risks.

Fitch expects EBITDA margins to contract by approximately 300 basis points in FY25, reversing the gains made in FY24. This is due to increased investments in product development and AI features. As a result, Fitch-calculated leverage will increase by half a turn to 2.6x for FY25 before falling below 2.5x in FY28. Interest coverage will be maintained above 5.5x throughout the rating horizon.

Fitch has reduced its U.S. growth forecasts for 2025 and 2026 due to substantial import tariff increases by the new U.S. administration, which will likely weaken consumer confidence and spending. Fitch believes this may deepen Bumble’s revenue declines if consumers pull back on discretionary expenses. Further deterioration in macroeconomic conditions could delay Bumble’s revenue growth until mid-FY26 or later.

Bumble operates in a highly competitive industry, with Match Group (NASDAQ:MTCH), owner of Tinder and Hinge, as its main competition. Fitch believes multiple competitors can coexist, as users often engage with and pay for several apps simultaneously. While Bumble’s emphasis on female empowerment and safety may offer a competitive advantage, Fitch questions the long-term sustainability against competitors with substantial financial resources and similar initiatives.

As of April 2024, Blackstone (NYSE:BX) holds combined voting power of 62.9% in Bumble due to its ownership of class A shares and beneficial ownership of common units. Fitch regards the ownership structure as neutral in terms of impact. However, we acknowledge that the potential for exerting control exists, and there is increased likelihood of large debt-financed payouts to shareholders.

Fitch equalizes the IDRs for Bumble Inc. and Buzz Finco L.L.C. to reflect a stronger parent and high legal, strategic and operational incentives.

Bumble’s ’BB-’ IDR reflects its strong market position as a safe and female-friendly dating application, a relatively conservative leverage profile, and robust FCF generation. These strengths are offset by high execution risks associated with its product refresh initiatives, which are expected to result in short-term revenue declines and margin degradation.

Bumble is similar in scale to Quartz AcquireCo, LLC (BB-/Stable), a company specializing in enterprise experience management software, but Bumble has lower leverage and significantly stronger EBITDA and FCF margins. RingCentral (NYSE:RNG), Inc. (BB/Positive), which provides cloud-based business communication solutions, has a larger scale and higher FCF margins than Bumble. However, Bumble has higher EBITDA margins and lower EBITDA leverage.

Bumble is also larger in scale compared to MeridianLink, Inc. (BB-/Stable), a software solutions provider for banks and other financial services companies. While MeridianLink has higher FCF and EBITDA margins, it exhibits lower coverage and higher leverage metrics.

Factors that could lead to a negative rating action or downgrade include steeper than expected revenue declines due to platform disruptions and/or slowing consumer spend on dating apps in the U.S., competitors taking material market share from Bumble, resulting in poor operating performance and depressed profitability, and sustained low single-digit FCF margins.

Fitch could resolve the Negative Outlook within its typical 12- to 24-month time frame if Bumble’s revenue and EBITDA margins are stabilized, particularly a return to positive revenue growth in FY26.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Investing.com -- Moody’s Ratings has affirmed Nexi (BIT:NEXII) S.p.A.’s Ba1 long-term corporate family rating (CFR) and the Ba1-PD probability of default rating (PDR). The ratings for the senior unsecured instruments issued by the company have also been affirmed at Ba1. The outlook for the company has been revised to positive from stable.

The rating action reflects Nexi’s robust performance, emphasizing its strong position as a payment solutions provider in Europe. The company’s commitment to enhancing its financial policy, as previously indicated and reiterated in its 2024 results call, has also been considered. These factors increase the likelihood of Nexi achieving and maintaining credit metrics in line with the guidance for a higher rating in the next 12 months.

Nexi recently reaffirmed its commitment to gradually reducing net leverage to 2.0-2.5x on a company-defined EBITDA basis, down from 2.7x as of December 2024. The company has made clear that maintaining strong credit metrics is a priority for its capital allocation. Moody’s-adjusted gross leverage improved to 3.7x in 2024, down from 4.7x in 2023, driven by positive performance and gross debt reduction. The company expects further EBITDA growth and gross debt reduction in 2025, which could improve Moody’s-adjusted leverage to within the expectations for a higher rating level.

In terms of shareholder remuneration, Nexi has established a dividend policy that plans a €300 million distribution in 2025, with gradual growth expected over time. The company also plans to execute another share buyback program during the year, with an additional €300 million. Moody’s assesses that the dividend policy provides sufficient flexibility for the company to improve and maintain strong credit metrics, especially if performance is weaker than expected.

Nexi is expected to continue its disciplined acquisition strategy, likely consisting of small, cash-funded bolt-ons. Any significant divestment would likely consider the company’s commitments to improving and maintaining strong credit metrics. However, significant disposals could also limit the company’s scale and business profile and could constrain further upward pressure.

Nexi’s Ba1 rating is supported by its leading position in key markets, high barriers to entry in the payment processing market, good free cash flow (FCF) generation, and scale. However, the rating is constrained by Nexi’s geographical concentration, with the majority of revenue generated in Italy and Nordic countries, a certain degree of product line and customer concentration, and intense competition.

Nexi’s positive rating outlook reflects the expectation that upward rating pressure could build over the next 12 months if the company develops a track record of improving and maintaining credit metrics in line with the expectations for a higher rating for a sustained period. This outlook assumes that there will be no significant increase in leverage from any future debt-funded acquisitions and that the company will maintain good liquidity.

As of December 2024, Nexi maintained very good liquidity, backed by cash and equivalents on the balance sheet around €1.5 billion, strong FCF generation capacity, and a fully undrawn €1 billion revolving credit facility (RCF). The company also has dedicated clearing and overdraft facilities to cover working capital needs, consisting of factoring lines of up to €4.2 billion and up to €2.4 billion of bilateral credit facilities. These facilities are used to manage Nexi’s working capital needs due to the timing differences of settlement between counterparties in the merchant acquiring business and the funding of customer receivables on behalf of its co-issuer banks in the issuing business. Some loans, mainly maturing in 2025 and 2026, are subject to a net leverage-based financial maintenance covenant currently set at 5.25x. It is expected that the company will maintain ample headroom to this threshold.

All of Nexi’s debt instruments rank pari passu as unsecured liabilities of the company. Therefore, the instruments rated by Moody’s have also been affirmed at Ba1, the same level as the CFR. This reflects the relatively small size of the liabilities of operating subsidiaries, including trade payables, pensions, and operating leases that rank ahead.

Positive rating pressure could develop if Nexi’s revenue, EBITDA, and geographical diversification continue to improve; the company builds a track record of balanced financial policy with company-defined net leverage reaching and stabilizing at its target around 2.0x-2.5x, such that Moody’s-adjusted gross leverage improves towards 3.0x on a sustained basis; and good FCF generation and liquidity are maintained.

Negative rating pressure could develop if Nexi’s revenue and EBITDA development is weaker than anticipated; there is a change in financial policy target or priority from debt repayment to M&A or shareholder remuneration such that Moody’s-adjusted gross leverage is forecast to weaken to above 4.0x on a sustained basis or for a longer period; or FCF generation or liquidity deteriorate.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Investing.com -- Fitch Ratings has lowered the Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) of Grupo Nutresa S.A. to ’BB+’ from ’BBB’, with a stable outlook. The downgrade comes after Jaime Gilinski, the majority shareholder, acquired Nugil S.A.S., which owns 34.81% of Nutresa’s shares. Following this transaction, Gilinski now has possession of 84.5% of Nutresa’s shares. The acquisition was financed through a $2 billion bridge loan from Nutresa, a move that Fitch believes strains the company’s capital structure and negatively impacts its corporate governance.

The revised ratings reflect Nutresa’s weakened financial profile after the transaction. Despite this, the ratings still incorporate the company’s strong business profile, which is supported by a robust brand portfolio and an extensive distribution network, enhancing its competitive position. The company is currently implementing efficiency and optimization strategies to significantly improve profitability.

The $2 billion debt increase to fund Gilinski’s acquisition has put pressure on the company’s credit metrics. Gross leverage, defined as adjusted debt to EBITDAR, is expected to rise to 4.8x, with net leverage reaching 4.5x by 2025, up from 2.3x and 1.8x at the end of 2024, respectively. This increase considers share repurchases and the Alcora transaction. Fitch anticipates that Nutresa may gradually reduce gross leverage to around 3.0x by 2028, depending on the results of efficiency plans and potential investments.

Nutresa’s EBITDAR margins are slightly above its peers. The company is working on several initiatives to improve profitability, mostly focused on logistics, commercial execution, plant efficiencies, segments restructuring, and price adjustments. Fitch projects profitability margins could rise by 2 percentage points and EBITDAR might reach COP 3.1 trillion by the end of 2025.

In Colombia’s food industry, Nutresa holds a strong competitive position, generating 60% of 2024 revenue, with a 50% market share. It maintains nearly a 50% share in key segments, contributing over 65% of its consolidated EBITDA. This strength is supported by recognized brands, innovation, and an extensive distribution network. Internationally, it ranks first or second in markets like Chile and Mexico, with significant market shares in Instant Cold Beverages.

Nutresa has a more robust business profile than Alicorp in terms of geographical and product diversification, but higher prospective leverage. Fitch anticipates Nutresa’s net leverage to increase to 4.5x in 2025 and for Alicorp to remain in the 2.0x-2.5x range during the next couple of years. Nutresa has a smaller scale, less diversification of products and brands, and a weaker credit profile when compared to Nestle SA (SIX:NESN) and Grupo Bimbo, S.A.B. De C.V. Both Nestle (NSE:NEST) and Bimbo also have a greater geographic presence than Nutresa.

Fitch has made several key assumptions including an average revenue growth of 8.5% over the projection horizon; total volume remains stable in 2025 compared to 2024; average EBITDA margin of 14.5% (after adjustment for IFRS 16 defined by Fitch) and EBITDAR margin of 15.9%; EBITDA and EBITDAR improve due to the execution of efficiency plans and optimization initiatives. Other assumptions include a capital investment intensity (capex/revenue) of 2.8% on average; dividend payment in line with management’s projections; 30% of EBITDAR between 2026-2028; disbursement of a bridge loan for USD 2 billion; Bridge loan of USD2 billion is refinanced in 2025 with a USD2 billion 144A/ Reg S bond offering; USD2 billion is deposited in a bank as a CD; Alcora’s capitalization; shares repurchase of 4.580.000 shares at a price of COP130.000; average exchange rate of COP4,412 per US dollar; average YE rate of COP4,456 per US dollar.

Factors that could lead to a negative rating action or downgrade include dividend distribution or value extraction mechanisms from the company that pressure leverage and makes the FCF negative on a sustained basis; lower than anticipated operating performance, including a decline in the company’s revenues and margins; more aggressive growth policy that includes acquisitions financed mainly with debt; net debt/EBITDAR above 4.0x on a sustained basis. Factors that could lead to a positive rating action or upgrade include net debt/EBITDAR below 3.0x on a sustained basis; increased geographic diversification in investment-grade countries; FCF margin over 3% on a sustained basis.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.