BGC and Shell 1Q22 schedules and more ?4

11:12 19-Apr-22

Some quick follow-ups on this note, while we wait on earnings, the Fed, and the war...

The rebate rate on XEBEF topped out at 65% yesterday and is now back to 41%.  This, together with the complete lack of volume on American exchanges, leads me to think that we are unlikely to see further immediate upside in the stock, despite my current fair value assessment being 20% higher than the current $1.85 price tag.  Additionally, hydrocarbons have retraced with Henry Hub gas at $7.08.  That's still more than high enough for the purposes of any of my picks in the sector, but Xebec is likely to require the most patience of all.

The same approach goes for Polestar, where my anecdotal checks indicate continued poor analysis by Americans toward change, bolstered by the labor issues brought about bad immigration policy.  That will change as corporations do better analysis and build out infrastructure, though.

BGC Partners has scheduled its first quarter report for the evening of Monday, May 2nd with the conference call to follow at 8am the next morning.  This is a different schedule then the company has used historically and that increases my anticipation of what else will change.  The average of 3 analyst estimates is 21 cents of EPS from $520M of revenue, declining to $475M this quarter.  In the absence of a more dramatic announcement, we'll see how much the company touts crypto progress and how stock was repurchased, which probably determines whether or not my beat by a penny prediction is accurate.

Shell has also issued its reminder about its first quarter report on the morning of May 5th.  Average analyst estimates are for $1.93 of EPS from $98.3b of revenue, increasing to $110b this quarter.  It will be a busy time and the report probably won't get all that much attention from me as I favor New Fortress and even Clearway at the recently reduced stock price.

It's easy to get distracted in the current market, but the driving forces are clear and unchanged.  Henry Hub gas topped $7 overnight and is holding that level so far.  Shell is still more correlated to Brent, which is now at $107.48, but continues to jump around as it has trouble holding its $5 spread over WTI.  For the short term, I note XEBEF has exceeded $2 and that the rebate rate jumped to 34% yesterday and another 5% this morning.  We'll have to see how it fairs surrounding options expiration this weekend to get a better read on whether there are any legs to the short squeeze, but gas prices mean increased profitability for Xebec's potential customers.

That also should be accelerating the push toward electric vehicles over the medium term, though.  I plan to update the chart introduced here in addition to market leverage, on a monthly basis to monitor the rate of change, and thus when the natural gas opportunity will eventually wane.  Structurally speaking that's years off, but we'll see how the market prices KNTK and NFE over the coming weeks and months.  Change is in the air, and I suspect that the volume on KNTK may support options introduction quite soon.  That and the SPAC conversion of GGPI to PSNY both have potential to unleash the stock prices, despite persistent danger to market indexes.