The end of the week has been a bright spot for small caps amid worrying results from U.S. mega-caps.
The latest results from Apple, Amazon and Alphabet are indicative of plummeting demand and the effectiveness of higher borrowing costs on consumers.
Apple’s sales undercut analyst estimates, and Amazon’s revenue came in lower on decreasing online purchases and slowing growth at AWS. At the same time, Alphabet missed estimates on weaker ad sales tied to its search engine.
The reasons behind these results include supply-chain constraints, layoffs to offset excessive hiring during the pandemic, as well as the war in Ukraine and global economic uncertainty about the probability of a recession.
Amazon closed down by 8.79 per cent, Apple was up by 2.48 per cent, and Alphabet lost 2.88 per cent. The Nasdaq as a whole fell by 1.59 per cent.
These less-than-stellar results suggest a market reorientation is taking place, with the once unquestionable tech giants making room for smaller, more sparsely covered companies to realize their intrinsic value as investors sharpen their due diligence.
TMH readers are likely to find prospective opportunities of this kind in Canada, as signs of economic weakness are also evident on this side of the border.
Our economy’s growth in Q4 2022 came in at roughly half the pace of Q3, influenced by lower activity in construction, accommodation, food services, energy and retail trade, pointing to an even softer upcoming reading from Statistics Canada. Home sales in Toronto, Canada’s largest city, are down 49 per cent YoY.
This trajectory has contributed to losses of 31 per cent over the past year for former darling Shopify and milder 5-12 per cent YoY losses for RBC, TD and BMO.
As the Bank of Canada’s benchmark lending rate – which has soared by 425 basis points since last March – continues to dampen production and consumption, financially unstable companies of all sizes are set up to drag down their healthier counterparts into attractive valuations, with special emphasis on under-the-radar small cap issuers more prone to dislocations.
With this thesis in mind, here are three of the week’s most trafficked stories on The Market Herald Canada:
Noram Lithium (TSXV:NRM) significantly increases estimated mineral resources at Zeus Lithium Project
Noram reported an increase of 190 per cent in Measured and Indicated lithium carbonate equivalent resources from its August 2021 estimate on the Nevada project.
This amounts to 5.17 million tonnes of lithium carbonate equivalent (1,034 Mt at 941 ppm lithium at a 400 ppm Li cut-off).
The figure makes the company favourably positioned against peer deposits in terms of grade and contained resources.
CEO Greg McCunn sat down with Sabrina Cuthbert to discuss the news.
Noram’s large-scale deposit is situated at surface and suitable for conventional mining methods.
It has completed 82 drill holes (4,942 m) to date, most of which ended in mineralization.
With preliminary metallurgical tests achieving up to 90-per-cent lithium recovery, Noram offers investors tangible potential at capitalizing on global electrification, given lithium’s key role in advances in battery technology.
Noram Lithium is a Canadian-based junior exploration company focused on developing lithium deposits.
Noram Lithium (NRM) closed up by 15.07 per cent over the past week, trading at $ 0.84 per share.
Trillion Energy (CSE:TCF) to commence 3D seismic reprocessing project for SASB gas field
The new seismic model will enable more accurate mapping of individual gas reservoir units and improve imaging of gas trapping faults.
It will also help to identify and define the many stratigraphic exploration gas prospects on the SASB that have yet to be drilled.
CEO Arthur Halleran joined Sabrina Cuthbert to discuss the news.
The reprocessing may lead to extensions of existing structurally trapped gas pools and the discovery of new gas pools, allowing the company to increase revenue at a time of record-high fuel prices due to pandemic reopening demand and the shunning of Russian supply by most of the Western world.
The news follows a new gas pay discovery at SASB and US$ 2,342,633 in December revenue after royalties.
Trillion is an oil and gas-producing company with multiple assets throughout Turkey and Bulgaria.
Trillion Energy (TCF) closed down by 1.28 per cent over the past week, trading at $ 0.38 per share.
Datametrex (TSXV:DM) announces competitor to ChatGPT
Datametrex subsidiary, Nexalogy, has unveiled a new API engine similar to ChatGPT.
The engine is currently in use with a partner company and government organizations.
Datametrex CEO Marshall Gunter sat down with Coreena Robertson to discuss Nexalogy’s new advancement.
Given technology’s rising headwinds, as evidenced by reeling U.S. tech giants, consumers tightening their belts in response to higher prices, and businesses curtailing activity in line with slipping demand, Datametrex represents a diversified opportunity in the space.
The company has exposure to artificial intelligence and machine learning through Nexalogy’s data analytics offering centred on social media content.
Its healthcare division offers a subscription-based telehealth service and a multidisciplinary medical centre.
Finally, Datametrex is active in the electric vehicle market through a suite of charging stations and services.
The company ended the year with a strong cash position to support growth initiatives in 2023.
Datametrex (DM) closed up by 45 per cent over the past week, trading at $ 0.14 per share.
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A potential catalyst for small caps