(BFM Bourse) – The fall of Novo Nordisk of more than 20% last Friday further marked the decline of European heavyweights against large American capitalizations. The seven largest European capitalizations recorded an average increase of 6% over the whole year. That's ten times less than the Magnificent Seven of Wall Street.
Around 90 billion euros. This is what the Danish pharmaceutical laboratory Novo Nordisk, the largest listed company in Europe, lost in a single session, in terms of market capitalization.
The group's shares plunged by more than 20% (-20.7%) last Friday, following disappointing clinical results for Cagrisema, a potential treatment for obesity on which the market had high hopes. The Barclays bank, for example, has modeled a peak annual sales of $49 billion in 2038.
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“If we compare the loss of market capitalization of Novo Nordisk (…) with the maximum sales of Cagrisema expected at around 20 billion dollars, we consider that the market reaction today (Friday November 20, Editor's note) is greatly exaggerated,” Alphavalue wrote.
Novo Nordisk shares gained 5.7% on the Copenhagen Stock Exchange on Monday. But over the whole of 2024, the title of the Danish pharmaceutical group now loses 10.8%.
The fall of the Danish company on the stock market accentuates a significant trend: the large European groups listed on the stock exchange are being squeezed out, in 2024, by the mega-capitalizations of Wall Street.
More precisely by the “Magnificent Seven” of the New York Stock Exchange, which brings together Apple, Amazon, Meta, Microsoft, Tesla, Nvida and Alphabet.
An increase ten times lower
Let's take the seven largest market capitalizations in Europe, namely Novo Nordisk, LVMH, the Dutch group specializing in photolithography (a key technology for reducing semiconductors) ASML, the professional software publisher SAP, Hermès, the pharmaceutical group Roche and the food giant Nestlé.
Over the whole of 2024, the average increase
of these seven European heavyweights amounts to…6.37%. In comparison, the Magnificent Seven jumped by 65.8% over the same period, and by 71% including the semiconductor group Broadcom, which, according to some observers, deserves to become the “magnificent eight”. So it's ten times more…
Among the seven largest European capitalizations, only SAP shows an increase (+69.5% in 2024) comparable to that of the Magnificent Seven. Hermès holds its place (+20.3%) but LVMH (-14%), ASML (+1%) Nestlé (-24%) and Novo Nordisk disappoint while Roche does little (+2.7%) .
In comparison, the progressions range from 15.8% (Microsoft) to 182% (Nvidia) for the Magnificent Seven.
Tech, the sector that changes a lot of things
The explanations for such a performance gap are quite numerous. The most obvious remains the sectoral composition. The Magnificent Seven only brings together tech groups. However, thanks in particular to the rise of artificial intelligence, this sector continued to have the wind in its sails in 2024, after having already been propelled into 2023.
So much of the rise in American markets was generated by the Magnificent Seven.
“Approximately 50% of the performance of the S&P 500 index has come from the 'Magnificent Seven' over the last three years. In 2025, we would like to remain invested in artificial intelligence which constitutes a major trend but it is necessary to broaden its exposure to the 493 other stocks in the S&P 500 which display an attractive discount and attractive profit growth prospects”, Stavya Epstein pointed out last week, of Indosuez Wealth Management.
“Part of the valuation discount in Europe at the benchmark level is due to sector composition. The region has far fewer technology stocks than the US market, and therefore has not benefited from the optimism of investors linked to AI”, explain for their part the strategists of JP Morgan AM. “Instead, European indices contain more industrial, financial and commodities companies, which have faced difficulties linked to weak global demand for goods, fears of non-performing loans and the weakness of the Chinese economy”, they continue.
Innovation and the Trump effect
American “bigtechs” have also benefited from anticipations of favorable measures from US President-elect Donald Trump, who notably plans to reduce corporate taxes in the United States to 15% from 21%. This particularly helped Tesla, while, according to the American media, Donald Trump's team intends to take steps favorable to autonomous vehicles, technology on which Tesla has bet heavily.
American groups have also delivered good results and are not letting up their efforts in terms of innovation.
Alphabet, for example, recently unveiled a quantum chip capable of solving in minutes a mathematical problem that major supercomputers would have taken millions of years to solve. Its action, which lagged a little behind the other “magnificents”, gained more than 10% in two sessions. This quantum chip highlighted “Alphabet's long history of innovation” with the addition of “a successful track record in monetization”, appreciated Bank of America. This capacity for innovation “is underappreciated” in the valuation of the market,” explains the American bank.
In comparison, several large European caps had a lackluster year. LVMH was penalized by the slowdown in demand for luxury products, particularly in China. ASML, for its part, plunged 15.6% in a single session in October, weighed down by disappointing order intake. This is due to the weakness of its markets, excluding those linked to artificial intelligence. Nestlé, for its part, suffered in 2024. The Swiss company was notably forced to lower its outlook for 2024 in July and delivered several disappointing publications. The group cited weak consumption to explain these bad trends and changed its general manager in August.
Conversely, it is not surprising that SAP, the only “real” tech group present among the seven largest European capitalizations, signs the best performance of the lot. The company has taken the shift towards generative artificial intelligence head on. At the beginning of January, the overseas group announced a major reorganization centered on AI which should “affect” between 9,000 and 10,000 positions, either by redeploying staff or causing voluntary departures. “SAP has established itself as the only proxy for exposure to AI” in Europe, Alphavalue recently judged.
The calculation was stopped on Tuesday December 24 at the beginning of the afternoon and carried out by us, after the European close.
Julien Marion – ©2024 BFM Bourse
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