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https://finnhub.io/api/news?id=5d296f06b8c9153238bb1b622f45ae324a9d8f1adba34cce5096a73d40a40294 | Weekly Roundup | After a week that included jobs data, Fed chatter and a massive bank failure, let's take stock of what happened, and how it affected the portfolio. | 2023-03-10T15:50:00 | Yahoo | Weekly Roundup
After a week that included jobs data, Fed chatter and a massive bank failure, let's take stock of what happened, and how it affected the portfolio.
After a week that included jobs data, Fed chatter and a massive bank failure, let's take stock of what happened, and how it affected the portfolio. | MSFT |
https://finnhub.io/api/news?id=c0ed5b7557a7f14722ed1f4876bd198a685df2676fa97afe36368fb2280eb71d | 2 Hypergrowth Stocks to Buy in 2023 and Beyond | These companies have provided investors with stellar stock growth over time and that's likely to continue. | 2023-03-10T14:00:00 | Yahoo | 2 Hypergrowth Stocks to Buy in 2023 and Beyond
These companies have provided investors with stellar stock growth over time and that's likely to continue.
These companies have provided investors with stellar stock growth over time and that's likely to continue. | MSFT |
https://finnhub.io/api/news?id=dc54a769f89e15dae27ca6e272e5fb8eebf37b90544d5e3c41fe4fef4dc06c48 | GM explores using ChatGPT in vehicles | General Motors Co is exploring uses for ChatGPT as part of its broader collaboration with Microsoft Corp, a company executive told Reuters. | 2023-03-10T11:37:20 | Reuters | GM explores using ChatGPT in vehicles
March 10 (Reuters) - General Motors Co (GM.N) is exploring uses for ChatGPT as part of its broader collaboration with Microsoft Corp (MSFT.O), a company executive told Reuters.
"ChatGPT is going to be in everything," GM Vice President Scott Miller said in an interview last week.
The chatbot could be used to access information on how to use vehicle features normally found in an owners manual, program functions such as a garage door code or integrate schedules from a calendar, Miller said.
"This shift is not just about one single capability like the evolution of voice commands, but instead means that customers can expect their future vehicles to be far more capable and fresh overall when it comes to emerging technologies," a GM spokesperson said on Friday.
The news was first reported by website Semafor, which said that the American automaker was working on a virtual personal assistant that uses AI models behind ChatGPT.
Earlier this year, Microsoft announced a multi-billion dollar investment in ChatGPT-owner OpenAI and said it aims to add the chatbot's technology into all its products.
Microsoft, like other big tech companies, has been ramping up its efforts to embed more technology in vehicles, from infotainment systems to automated driving to operating systems that control battery performance and multiple other functions of a vehicle.
GM in 2021 partnered with Microsoft to accelerate the commercialization of driverless vehicles.
Shares of GM were down about 2% on Friday amid a broader drop.
Our Standards: The Thomson Reuters Trust Principles. | MSFT |
https://finnhub.io/api/news?id=53b0404bcca226510905953159c1eeffd86ac3dd46026be73dd75737abfe5547 | UPDATE 1-GM explores using ChatGPT in vehicles | General Motors Co is exploring uses for ChatGPT as part of its broader collaboration with Microsoft Corp, a company executive told Reuters. "ChatGPT is going to be in everything," GM Vice President Scott Miller said in an interview last week. The chatbot could be used to access information on how to use vehicle features normally found in an owners manual, program functions such as a garage door code or integrate schedules from a calendar, Miller said. | 2023-03-10T11:31:59 | Yahoo | UPDATE 1-GM explores using ChatGPT in vehicles
(Adds GM comment)
March 10 (Reuters) - General Motors Co is exploring uses for ChatGPT as part of its broader collaboration with Microsoft Corp, a company executive told Reuters.
"ChatGPT is going to be in everything," GM Vice President Scott Miller said in an interview last week.
The chatbot could be used to access information on how to use vehicle features normally found in an owners manual, program functions such as a garage door code or integrate schedules from a calendar, Miller said. "This shift is not just about one single capability like the evolution of voice commands, but instead means that customers can expect their future vehicles to be far more capable and fresh overall when it comes to emerging technologies," a GM spokesperson said on Friday.
The news was first reported by website Semafor, which said that the American automaker was working on a virtual personal assistant that uses AI models behind ChatGPT.
Earlier this year, Microsoft announced a multi-billion dollar investment in ChatGPT-owner OpenAI and said it aims to add the chatbot's technology into all its products.
Microsoft, like other big tech companies, has been ramping up its efforts to embed more technology in vehicles, from infotainment systems to automated driving to operating systems that control battery performance and multiple other functions of a vehicle.
GM in 2021 partnered with Microsoft to accelerate the commercialization of driverless vehicles.
Shares of GM were down about 2% on Friday amid a broader drop. (Reporting by Nathan Gomes in Bengaluru and Joseph White in Detroit; Editing by Maju Samuel) | MSFT |
https://finnhub.io/api/news?id=31c58cfb962a29cc71b6ead0f423f34a13ad7619ba1b1df15d4b151ed1dd9d21 | CORRECTED-GM explores using ChatGPT in vehicles | General Motors Co is exploring uses for ChatGPT as part of its broader collaboration with Microsoft Corp, a company executive told Reuters last week. | 2023-03-10T11:17:31 | Reuters | GM explores using ChatGPT in vehicles
March 10 (Reuters) - General Motors Co (GM.N) is exploring uses for ChatGPT as part of its broader collaboration with Microsoft Corp (MSFT.O), a company executive told Reuters.
"ChatGPT is going to be in everything," GM Vice President Scott Miller said in an interview last week.
The chatbot could be used to access information on how to use vehicle features normally found in an owners manual, program functions such as a garage door code or integrate schedules from a calendar, Miller said.
"This shift is not just about one single capability like the evolution of voice commands, but instead means that customers can expect their future vehicles to be far more capable and fresh overall when it comes to emerging technologies," a GM spokesperson said on Friday.
The news was first reported by website Semafor, which said that the American automaker was working on a virtual personal assistant that uses AI models behind ChatGPT.
Earlier this year, Microsoft announced a multi-billion dollar investment in ChatGPT-owner OpenAI and said it aims to add the chatbot's technology into all its products.
Microsoft, like other big tech companies, has been ramping up its efforts to embed more technology in vehicles, from infotainment systems to automated driving to operating systems that control battery performance and multiple other functions of a vehicle.
GM in 2021 partnered with Microsoft to accelerate the commercialization of driverless vehicles.
Shares of GM were down about 2% on Friday amid a broader drop.
Our Standards: The Thomson Reuters Trust Principles. | MSFT |
https://finnhub.io/api/news?id=0859f5b01c059d35cadf1430e4443b5b9fa2c5b6c1e90b7e6175f2803828c00c | Microsoft Federal’s Rick Wagner discusses the competition with other industry giants — and what he sees for 2023 | He's a nearly 40-year contracting industry veteran who spent time on both sides of the procurement table. | 2023-03-10T10:30:10 | Yahoo | Microsoft Federal’s Rick Wagner discusses the competition with other industry giants — and what he sees for 2023
He's a nearly 40-year contracting industry veteran who spent time on both sides of the procurement table.
He's a nearly 40-year contracting industry veteran who spent time on both sides of the procurement table. | MSFT |
https://finnhub.io/api/news?id=ca9ff3718b378e4dcff62fc1834c545b5bacec1197557961ddef5a42f7ac7a4a | Scammers are creating fake “ChatGPT” and “Bing” crypto tokens—here’s how to protect yourself | Scammers are trying to take advantage of increased interest in A.I. chatbots by creating fake crypto tokens with "ChatGPT" or "Bing" in their name. | 2023-03-10T08:55:53 | CNBC | Scammers are creating fake “ChatGPT” and “Bing” crypto tokens—here’s how to protect yourself
Scammers are trying to cash in on the hype surrounding popular artificial intelligence chatbots including OpenAI's ChatGPT and Microsoft's Bing AI.
A search on DEXTools, an interactive crypto trading platform that tracks prices, reveals about 287 tokens that mention "ChatGPT" in their name.
However, Microsoft nor OpenAI, the developer of ChatGPT, have announced an official launch into cryptocurrency.
Turns out, these digital coins aren't actually associated with the viral AI tools and many could be "pump and dump" schemes meant to dupe investors.
A "pump and dump" scheme, also known as a "rug pull," happens when scammers generate a lot of interest in a particular coin that's trading for a low price. They then promote the coin and convince investors to pour money into it in order to drive the price higher.
When the price reaches a certain level, the scammer then floods the market by selling their portion of the coin at the inflated price and rakes in the profit. Traders, on the other hand, are left with a coin that is rapidly decreasing in value due to the increased supply.
Peckshield, a blockchain security firm, detected dozens of newly created "BingChatGPT" tokens, the company said in a tweet on Feb. 20. The firm has identified at least one of those digital coins as having been created by a user notorious for "pump and dump" crypto schemes.
Why are tokens allowed to falsely use ChatGPT and Bing's names?
Legally, fraudsters aren't allowed to name their token after ChatGPT, Bing or any other trademarked name without being affiliated with those companies, but it's difficult to crack down on the practice.
"These things move so fast, by the time a lawyer's letter reaches the right people, the people behind the tokens have likely moved on to something else," James Ledbetter, editor and publisher of fintech newsletter "FIN", tells CNBC Make It.
Scam crypto tokens are commonly deployed on "permissionless blockchains" also known as public blockchains, says Chen Arad, chief operating officer at Solidus Labs, a cryptocurrency risk monitoring and market surveillance company. This means anyone can issue any token (using any name) to users on the platform without needing to be granted permission from an administrator or moderator.
"On the one hand, no one needs to allow activity, which potentially allows accessibility and more open financial services," Arad says. "On the other hand, it creates new challenges like this, where scammers take advantage of openness and new tools are needed to simplify and assess risks like fake impersonation tokens."
How investors can protect themselves
Crypto investors should be wary of newly created tokens that use the name of popular products or celebrities.
For cyber thieves, it can be an effective way of getting the attention of investors looking to make a quick gain, and get them to make FOMO-driven decisions without much thought, says Arad.
One of the most notable examples is the Squid Game token, which billed itself as a "play-to-earn" cryptocurrency, in which users purchase crypto and put it into a virtual wallet connected to an online or mobile game.
A March 9 public service announcement from the FBI warned that some scammers advertise tokens as play-to-earn, telling victims they will earn more in-game rewards by depositing more crypto into their wallet. However, when users stop depositing digital funds, criminals then drain the victim's wallet using a malicious program that the victim unknowingly activated when they joined the game, the FBI warns.
The Squid Game token, however, turned out to be a "rug pull" scheme instead. The developers abruptly abandoned the project before the game was set to launch and managed to steal over $3 million from investors in late 2021, says Arad. And they did this simply by using the name of the famous show at the right time when it was trending, he adds.
The best way to avoid these scams is to stay out of crypto altogether, says Ledbetter. Otherwise, similar to investors in other assets, crypto traders should do their research before purchasing any new token.
Fraudsters are counting on investors making quick, uneducated decisions based on the fear of missing out, says Arad. So, one red flag to watch for is if a cryptocurrency promises that you'll make a lot of money by investing in it.
"Only scammers will guarantee profits or big returns," the Federal Trade Commission's website warns. "Don't trust people who promise you can quickly and easily make money in the crypto markets."
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Don't miss: As NFT trading surges, a ‘golden key’ prize from Yuga Labs’ limited-time game sold for $1.6 million | MSFT |
https://finnhub.io/api/news?id=c156709394ba998a77db1327a826e0bab0786c7cac6544869d147ed1a5954d91 | Microsoft Corp. stock underperforms Friday when compared to competitors | Shares of Microsoft Corp. shed 1.48% to $248.59 Friday, on what proved to be an all-around poor trading session for the stock market, with the S&P 500 Index... | 2023-03-10T08:31:00 | MarketWatch | Shares of Microsoft Corp.
MSFT,
+0.19%
shed 1.48% to $248.59 Friday, on what proved to be an all-around poor trading session for the stock market, with the S&P 500 Index
SPX,
+0.67%
falling 1.45% to 3,861.59 and Dow Jones Industrial Average
DJIA,
+0.93%
falling 1.07% to 31,909.64. This was the stock's fourth consecutive day of losses. Microsoft Corp. closed $67.36 short of its 52-week high ($315.95), which the company achieved on March 30th.
The stock demonstrated a mixed performance when compared to some of its competitors Friday, as Apple Inc.
AAPL,
-0.28%
fell 1.39% to $148.50, Alphabet Inc. Cl C
GOOG,
+0.72%
fell 1.78% to $91.01, and Alphabet Inc. Cl A
GOOGL,
+0.59%
fell 1.83% to $90.63. Trading volume (28.3 M) remained 2.4 million below its 50-day average volume of 30.6 M.
Editor's Note: This story was auto-generated by Automated Insights, an automation technology provider, using data from Dow Jones and FactSet. See our market data terms of use. | MSFT |
https://finnhub.io/api/news?id=848b8722fa51658e05ee02bede9d44f43cc2658208cb5e43e6a4d1d8a88202cf | Dow Jones Slides On Strong Jobs Report; Silicon Valley Bank Crashes 66% On Bank Run Fears | The Dow Jones dropped Friday on a strong jobs report. Silicon Valley Bank crashed 66% on growing fears of a bank run. | 2023-03-10T07:23:00 | Yahoo | Dow Jones Slides On Strong Jobs Report; Silicon Valley Bank Crashes 66% On Bank Run Fears
The Dow Jones dropped Friday on a strong jobs report. Silicon Valley Bank crashed 66% on growing fears of a bank run.
The Dow Jones dropped Friday on a strong jobs report. Silicon Valley Bank crashed 66% on growing fears of a bank run. | MSFT |
https://finnhub.io/api/news?id=813c4977dbf026f0d2f14571c63aeb9903981ecb0613bac5297b58738e9b0231 | Microsoft (MSFT) Is Considered a Good Investment by Brokers: Is That True? | The average brokerage recommendation (ABR) for Microsoft (MSFT) is equivalent to a Buy. The overly optimistic recommendations of Wall Street analysts make the effectiveness of this highly sought-after metric questionable. So, is it worth buying the stock? | 2023-03-10T06:30:02 | Yahoo | Microsoft (MSFT) Is Considered a Good Investment by Brokers: Is That True?
When deciding whether to buy, sell, or hold a stock, investors often rely on analyst recommendations. Media reports about rating changes by these brokerage-firm-employed (or sell-side) analysts often influence a stock's price, but are they really important?
Let's take a look at what these Wall Street heavyweights have to say about Microsoft (MSFT) before we discuss the reliability of brokerage recommendations and how to use them to your advantage.
Microsoft currently has an average brokerage recommendation (ABR) of 1.48, on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell, etc.) made by 29 brokerage firms. An ABR of 1.48 approximates between Strong Buy and Buy.
Of the 29 recommendations that derive the current ABR, 22 are Strong Buy and two are Buy. Strong Buy and Buy respectively account for 75.9% and 6.9% of all recommendations.
Brokerage Recommendation Trends for MSFT
Check price target & stock forecast for Microsoft here>>>
While the ABR calls for buying Microsoft, it may not be wise to make an investment decision solely based on this information. Several studies have shown limited to no success of brokerage recommendations in guiding investors to pick stocks with the best price increase potential.
Are you wondering why? The vested interest of brokerage firms in a stock they cover often results in a strong positive bias of their analysts in rating it. Our research shows that for every "Strong Sell" recommendation, brokerage firms assign five "Strong Buy" recommendations.
This means that the interests of these institutions are not always aligned with those of retail investors, giving little insight into the direction of a stock's future price movement. It would therefore be best to use this information to validate your own analysis or a tool that has proven to be highly effective at predicting stock price movements.
Zacks Rank, our proprietary stock rating tool with an impressive externally audited track record, categorizes stocks into five groups, ranging from Zacks Rank #1 (Strong Buy) to Zacks Rank #5 (Strong Sell), and is an effective indicator of a stock's price performance in the near future. Therefore, using the ABR to validate the Zacks Rank could be an efficient way of making a profitable investment decision.
Zacks Rank Should Not Be Confused With ABR
Although both Zacks Rank and ABR are displayed in a range of 1-5, they are different measures altogether.
Broker recommendations are the sole basis for calculating the ABR, which is typically displayed in decimals (such as 1.28). The Zacks Rank, on the other hand, is a quantitative model designed to harness the power of earnings estimate revisions. It is displayed in whole numbers -- 1 to 5.
It has been and continues to be the case that analysts employed by brokerage firms are overly optimistic with their recommendations. Because of their employers' vested interests, these analysts issue more favorable ratings than their research would support, misguiding investors far more often than helping them.
On the other hand, earnings estimate revisions are at the core of the Zacks Rank. And empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.
Furthermore, the different grades of the Zacks Rank are applied proportionately across all stocks for which brokerage analysts provide earnings estimates for the current year. In other words, at all times, this tool maintains a balance among the five ranks it assigns.
There is also a key difference between the ABR and Zacks Rank when it comes to freshness. When you look at the ABR, it may not be up-to-date. Nonetheless, since brokerage analysts constantly revise their earnings estimates to reflect changing business trends, and their actions get reflected in the Zacks Rank quickly enough, it is always timely in predicting future stock prices.
Is MSFT a Good Investment?
In terms of earnings estimate revisions for Microsoft, the Zacks Consensus Estimate for the current year has remained unchanged over the past month at $9.34.
Analysts' steady views regarding the company's earnings prospects, as indicated by an unchanged consensus estimate, could be a legitimate reason for the stock to perform in line with the broader market in the near term.
The size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, has resulted in a Zacks Rank #3 (Hold) for Microsoft. You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>
It may therefore be prudent to be a little cautious with the Buy-equivalent ABR for Microsoft.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Microsoft Corporation (MSFT) : Free Stock Analysis Report
To read this article on Zacks.com click here. | MSFT |
https://finnhub.io/api/news?id=46dc9a3d31b5265e3e35ff7aeaf7dd52f3578011707b52757079e39fe5452ef7 | 1 Way You Can Invest in OpenAI | OpenAI is the talk of the tech industry, and it's starting to be deployed by companies like Shopify, Snap, and Microsoft (NASDAQ: MSFT). But only one company has a large ownership stake in OpenAI, and it's the one way investors can get a piece of this disruptive company. | 2023-03-10T04:45:00 | Yahoo | 1 Way You Can Invest in OpenAI
OpenAI is the talk of the tech industry, and it's starting to be deployed by companies like Shopify, Snap, and Microsoft (NASDAQ: MSFT). But only one company has a large ownership stake in OpenAI, and it's the one way investors can get a piece of this disruptive company. | MSFT |
https://finnhub.io/api/news?id=ad3508bf8c3bed061cc8809392ede63a1398457185c18e75225e47f676a8af02 | 3 Index Funds to Buy for March | Looking for stock market analysis and research with proves results? Zacks.com offers in-depth financial research with over 30years of proven results. | 2023-03-10T04:26:00 | InvestorPlace | This page has not been authorized, sponsored, or otherwise approved or endorsed by the companies represented herein. Each of the company logos represented herein are trademarks of Microsoft Corporation; Dow Jones & Company; Nasdaq, Inc.; Forbes Media, LLC; Investor's Business Daily, Inc.; and Morningstar, Inc.
Copyright 2023 Zacks Investment Research | 10 S Riverside Plaza Suite #1600 | Chicago, IL 60606
At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors. This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system. Since 1988 it has more than doubled the S&P 500 with an average gain of +24.17% per year. These returns cover a period from January 1, 1988 through May 15, 2023. Zacks Rank stock-rating system returns are computed monthly based on the beginning of the month and end of the month Zacks Rank stock prices plus any dividends received during that particular month. A simple, equally-weighted average return of all Zacks Rank stocks is calculated to determine the monthly return. The monthly returns are then compounded to arrive at the annual return. Only Zacks Rank stocks included in Zacks hypothetical portfolios at the beginning of each month are included in the return calculations. Zacks Ranks stocks can, and often do, change throughout the month. Certain Zacks Rank stocks for which no month-end price was available, pricing information was not collected, or for certain other reasons have been excluded from these return calculations.
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https://finnhub.io/api/news?id=6537e2d6a83987d76db42b7eedbd942d165b3f9594208ab27909c2e7eefa76cb | Most Active Equity Options For Midday - Friday, March 10 | Looking for stock market analysis and research with proves results? Zacks.com offers in-depth financial research with over 30years of proven results. | 2023-03-10T03:42:00 | TalkMarkets | This page has not been authorized, sponsored, or otherwise approved or endorsed by the companies represented herein. Each of the company logos represented herein are trademarks of Microsoft Corporation; Dow Jones & Company; Nasdaq, Inc.; Forbes Media, LLC; Investor's Business Daily, Inc.; and Morningstar, Inc.
Copyright 2023 Zacks Investment Research | 10 S Riverside Plaza Suite #1600 | Chicago, IL 60606
At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors. This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system. Since 1988 it has more than doubled the S&P 500 with an average gain of +24.17% per year. These returns cover a period from January 1, 1988 through May 15, 2023. Zacks Rank stock-rating system returns are computed monthly based on the beginning of the month and end of the month Zacks Rank stock prices plus any dividends received during that particular month. A simple, equally-weighted average return of all Zacks Rank stocks is calculated to determine the monthly return. The monthly returns are then compounded to arrive at the annual return. Only Zacks Rank stocks included in Zacks hypothetical portfolios at the beginning of each month are included in the return calculations. Zacks Ranks stocks can, and often do, change throughout the month. Certain Zacks Rank stocks for which no month-end price was available, pricing information was not collected, or for certain other reasons have been excluded from these return calculations.
Visit Performance Disclosure for information about the performance numbers displayed above.
Visit www.zacksdata.com to get our data and content for your mobile app or website.
Real time prices by BATS. Delayed quotes by FIS.
NYSE and AMEX data is at least 20 minutes delayed. NASDAQ data is at least 15 minutes delayed.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply. | MSFT |
https://finnhub.io/api/news?id=64ded2cb4fcc7bd283fd12b7fa066a46056cf65e05ad5954e91dca598285476c | TQQQ: Still Waiting And Watching | TQQQ is a leveraged ETF that has been on my watchlist. Read why I don't think the valuations for most of the largest stocks in the index are attractive today. | 2023-03-10T03:30:04 | SeekingAlpha | TQQQ: Still Waiting And Watching
Summary
- TQQQ is a leveraged ETF that has been on my watchlist, but I don't think the valuations for most of the largest stocks in the index are attractive today.
- I talk a bit about inflation and how I think commodities, energy, and real assets will outperform the tech sector.
- Of the top 10, I only find Amazon and Broadcom attractive today, and I actually bought a put option on Tesla after its massive share price run to start 2023.
While I typically avoid ETFs due to the fees, an ETF that has been on my watchlist for more than a year is the ProShares UltraPro QQQ ETF (NASDAQ:TQQQ). I have seen comments asking when I plan to buy, or if I bought any steep declines like the one last fall. I want to talk briefly about some of the characteristics of TQQQ (and other leveraged ETFs) before getting into the largest holdings.
My plan for potentially buying a tiny position of TQQQ would probably have a one to six-month timeframe, basically a short- to medium-term strategy. I would probably be looking for another 20% decline (or more) in the major indices before buying TQQQ. If we see that, combined with a potential return of the Federal Reserve money gun, TQQQ could be an interesting short-term trade.
TQQQ offers more speculative upside than QQQ on a smaller position size, and I would rather buy TQQQ than use leverage to buy QQQ. You pay the ETF management fees, but I think it's more attractive than borrowing to buy QQQ at current margin rates.
Disclaimer
The risks with TQQQ include beta slippage, but also short-term volatility that can be stomach-turning. For example, a big market decline can cut an investment in TQQQ by 20% or 30% in a week, so investors should go into an investment in TQQQ with eyes wide open to those risks. Investors that are unfamiliar with the potential risks might want to spend a couple of minutes to read what the SEC has to say about leveraged ETFs.
ProShares UltraPro QQQ® (the "Fund") seeks daily investment results, before fees and expenses, that correspond to three times (3x) the return of the Nasdaq-100® Index (the "Index") for a single day, not for any other period. A "single day" is measured from the time the Fund calculates its net asset value ("NAV") to the time of the Fund's next NAV calculation.
The return of the Fund for periods longer than a single day will be the result of its return for each day compounded over the period. The Fund's returns for periods longer than a single day will very likely differ in amount, and possibly even direction, from the Fund's stated multiple (3x) times the return of the Index for the same period. For periods longer than a single day, the Fund will lose money if the Index's performance is flat, and it is possible that the Fund will lose money even if the level of the Index rises.
Longer holding periods, higher Index volatility, and greater leveraged exposure each exacerbate the impact of compounding on an investor's returns. During periods of higher Index volatility, the volatility of the Index may affect the Fund's return as much as or more than the return of the Index.
The Fund presents different risks than other types of funds. The Fund uses leverage and is riskier than similarly benchmarked funds that do not use leverage. The Fund may not be suitable for all investors and should be used only by knowledgeable investors who understand the consequences of seeking daily leveraged (3x) investment results of the Index, including the impact of compounding on Fund performance. Investors in the Fund should actively manage and monitor their investments, as frequently as daily. An investor in the Fund could potentially lose the full value of their investment within a single day.
Inflation & The Next Decade
The biggest problem I see with TQQQ is the concentration in the large tech companies, which is also a problem for Invesco QQQ ETF (QQQ), which TQQQ follows. While that worked great for investors until late 2021, I think markets have begun to shift over the last couple of years. I'm of the opinion that commodities, energy, and companies with real assets will outperform over the next decade. I was watching for inflation starting in 2020 for several reasons, but I think the idea that inflation will come down to where it was over the last decade is wishful thinking.
That doesn't mean I'm predicting hyperinflation or anything drastic like that, but I think we will see inflation stop and start for years, and I think inflation will probably be 5% or higher for years. That's just CPI, and if you want to go down the rabbit hole on inflation, you should check out shadowstats.com. Their website tracks inflation using old measurements, which shows how understated CPI is compared to actual inflation. I will do brief overviews of each company in the top 10, but on the whole, I don't think the largest parts of TQQQ represent attractive risk/reward prospects today.
Apple & Microsoft
Like any market cap weighted index or ETF, Apple (AAPL) and Microsoft (MSFT) will make up a large portion of the fund. While this is true for S&P 500 indices like (SPY) or (VOO), these two companies have an even larger weighting in TQQQ. Both have well over 10% weightings, but I'm not going to go into too much detail because I wrote articles on both in the last couple of months (here and here). Apple has a market cap of $2.4T, while Microsoft has a market cap of $1.9T, which will probably be a drag on forward returns. I don't find either attractive simply due to the valuations, which I talked about in those articles, and I have my doubts on how much either can grow from here. Another thing that I'm not a huge fan of is how both companies continue to buy back large amounts of stock regardless of the valuation.
Amazon
Amazon (AMZN) and its $972B market cap account for another 6% of the ETF. I have been bullish on Amazon because of AWS, but I have been wondering if it might be worth selling my small position in Amazon to buy something else. I still think the company is in a good position with their core businesses, especially AWS, but if the right opportunity comes along, I might part ways with my Amazon shares. Of the largest components of TQQQ, I think Amazon is still the most attractive today.
The Ad Giants - Google & Meta
These two are companies I'm not really interested in owning for several reasons, but I don't think the coming years are going to be a great environment for advertising businesses like Google (GOOG) (GOOGL) and Meta (META). Google has a P/E of 20.5x and a market cap of $1.2T, and accounts for about 7.5% of TQQQ. I'm curious to see how ChatGPT and other developments, including smaller video platform competitors for YouTube, impact Google's search engine monopoly, but I don't think the next decade will be as good for their business as the last one was.
Meta has had a massive run since the beginning of November, and shares now trade at an earnings multiple of 21x. This puts the market cap at $480B and is 2.5% of TQQQ. I have my doubts about the Metaverse strategy, and I have been critical of the company's buybacks a couple of years ago as the CEO was dumping a huge number of shares. Like Google, I think the next decade will not be like the last one for Meta.
Pie In The Sky Valuations - Nvidia & Tesla
Both these companies have had massive runs to start 2023, and I think the valuation is so rich that I would honestly rather be short these two than own them. I actually bought a put option on Tesla (TSLA) when shares were around $205, so we will see if that pays off. The contract expires near the end of April with a strike of $150. I don't gamble much, but I watched the absurd move Tesla made to start the year, and it looked like short-covering and speculative buying instead of an actual fundamental improvement in the business. If shares keep dropping, I will probably look to exit the trade in the next couple of weeks.
Nvidia (NVDA) also had its own massive move, including a large jump after earnings. They can talk all they want about AI in their earnings calls, but I don't see how investors owning Nvidia today generate attractive forward returns. I could be wrong, but unless Nvidia can grow rapidly through the next couple of cycles for the semiconductor industry, buying at the current valuation is not attractive in my opinion. Between the two companies, they account for about 6% of TQQQ, which means there is another sizable chunk of the ETF that find unattractive.
Rounding Out The Top 10 - Pepsi & Broadcom
Pepsi (PEP) is the only non-tech company in the top 10, with a 2.3% weight. While I don't think the downside is as big as some of the other stocks in the top 10, it's not a business I would pay over 25x earnings for, despite a 2.7% dividend. It's a slow-growth business, and I don't find their business mix to be all that attractive. It's basically just a mix of different junk foods and drinks, and I think people will start to pay more attention to their diet and health in the coming years.
Broadcom (AVGO) would probably be my first choice to buy in the top 10 today, but it only accounts for just over 2% of the ETF. The company has a P/E of just over 16x and a dividend yield of 2.9%, and a history of being a very successful operator in the semiconductor industry. They operate in a different part of the industry than Nvidia, but the valuation is much more attractive. The market cap is $264B, so they might not grow as fast as the last decade, but Broadcom is a solid dividend growth stock.
Conclusion
I'm sure some commenters will talk about their trades in TQQQ (which I love to hear about, by the way), but I'm just not at a point where I'm comfortable buying the ETF today. TQQQ has a different risk profile than QQQ, including potential systemic issues and massive volatility with leveraged ETFs, but if your timing is good, you get a lot more bang for your buck buying the leveraged TQQQ ETF. I have said in the past that I'm looking for capitulation and panic, but I will still look elsewhere as long as the valuations for the largest stocks in the index stay rich. There are only a couple of stocks in the top 10 I find attractive today, but TQQQ could still have a huge run if the market takes off. While TQQQ is still on my watchlist, it is staying on the backburner while I focus on other sectors that I find more attractive today.
This article was written by
Analyst’s Disclosure: I/we have a beneficial long position in the shares of AMZN either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Also short TSLA via put options.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.
Comments (18)
TQQQ is great macro play setup right now. Interest rate hikes will be done shortly. Pause on deck and with slowing growth and weak GDP on deck that means they will then start to lower rates maybe as early as the end of this year, or 2024 for sure.
Will be fun to revisit articles and comments when the end of 2023 rolls around.
The announcement of just a pause from Powell could send TQQQ up substantially in a very short time.
21.02 +0.14 (+0.67%) After hours: 05:09PM ESTManaged to buy right into this bear action yesterday @ 22.85.
Made .41 cents selling calls.
Been waiting months for the 'coming recession'.
Not sure if it's happening now.I'll be selling more calls next week. | MSFT |
https://finnhub.io/api/news?id=1af2ad292e2feeb6c69b087c1ed1491ec26d245b2e3f3e3fba7a37210e198699 | CrowdStrike: Valuations Finally Reasonable For This Cybersecurity Leader | CrowdStrike's technology differentiation has enabled the company to generate exponential growth in its subscription customer base. Read more here. | 2023-03-10T03:15:19 | SeekingAlpha | CrowdStrike: Valuations Finally Reasonable For This Cybersecurity Leader
Summary
- CrowdStrike's technology differentiation has enabled the company to generate exponential growth in its subscription customer base.
- The company is operating above the rule of 60 as it continues to show solid revenue growth while generating strong margins, providing sustainability in the business in the long-term.
- CrowdStrike did very well in its 4QFY23 even as the macro backdrop was difficult and even became more aggressive against its competitor, SentinelOne.
- The TAM of the company continues to look promising and grow while management has been driving cost down through operating leverage and cost optimization efforts.
- My 1-year price target for CrowdStrike is $166, implying a 30% upside from current levels.
- This idea was discussed in more depth with members of my private investing community, Outperforming the Market. Learn More »
This article was first posted in Outperforming the Market on 9 March 2023.
Investment thesis
I recently shared with members of Outperforming the Market that I am ready to buy CrowdStrike (NASDAQ:CRWD) on a pullback and provided them with the price level at which I am looking to enter a position in the company. In this article, I hope to share with you why I am optimistic about the company even as the macroeconomic conditions appear bleak as I find that CrowdStrike's valuation is finally looking reasonable.
I think that CrowdStrike is one of the best positioned pure play cybersecurity companies today. I do like CrowdStrike because it operates at more than the rule of 60, far surpassing the gold standard of the rule of 40 for software companies. This means that CrowdStrike is able to generate strong revenue growth, while doing so sustainably as it continues to have a strong and improving margin profile.
With an expansion in TAM in the next few years as a result of its new product roadmap, new initiatives and organic growth of its current TAM, I expect that CrowdStrike can continue to increase penetration in a very large cybersecurity market.
The company's stellar net retention rates highlight strong customer retention and expansion while its customer base continues to grow, with the largest companies amongst its customer base.
Lastly, I expect CrowdStrike to see margin improvements as a result of operating leverage and cost optimization efforts.
Introduction
CrowdStrike was founded in 2011 and it is currently run by its co-founder, George Kurtz.
Falcon provides protection to a wide range of devices, including laptop, server, IoT devices, amongst others, from cyber-attacks as it is backed by intelligence from frontline incident response services.
Its flagship Falcon suite is one of the industry's first SaaS endpoint security platforms.
Today, Falcon has more than 22 modules across endpoint, workload security, cloud security, IT operations, amongst others.
Technology leadership
Gartner Magic Quadrant recognized CrowdStrike as a leader in Endpoint Protection Platforms.
CrowdStrike scored well in innovation and market understanding, which was underpinned by the company's comprehensive offering. It also scored well for customer experience and overall viability.
Where CrowdStrike did not do so well is in pricing as its prices are in general higher than the average for competitors in the Magic Quadrant and it also gave less discounts.
This ability to price higher and with less discounts tells me that CrowdStrike has some sort of differentiation that enables this pricing differential.
Gaining market share
As a result of this strong technology leadership as a key differentiation factor for CrowdStrike, the company has been gaining market share in its key Endpoint Security market.
As can be seen below, CrowdStrike had only 3% market share in 2018. By 2021, CrowdStrike grew its market share to 12.6%, more than four times its market share in 2018 in just four years.
In 2022, CrowdStrike continued to gain market share to 17.7%, up about five percentage points from the prior year.
I think that based on history in the perimeter security space, we could see CrowdStrike continue to gain substantial share from current industry incumbents. Palo Alto Networks (PANW) was able to disrupt the perimeter security space as it brought new capabilities like next generation firewalls that displaced industry incumbents. That led to Palo Alto's market share growing from 6% to 26%. Industry incumbents like Cisco (CSCO) and Juniper Networks (JNPR) saw their combined market share drop from 70% to less than 50% with gains from new leaders Palo Alto Networks and Fortinet (FTNT).
CrowdStrike's structural moat to enable continued share gains
At the end of the day, I think that CrowdStrike can continue to disrupt the corporate endpoint security market and gain share from the industry incumbents. As a result of the industry incumbent's delayed responses to the changing needs of customers, CrowdStrike's offering will enable a subscription model based on scalable cloud solutions.
The first thing I would note that changed the industry dynamics was that the cyber threats were increasing in evasiveness and complexity. As a result, companies needed fast, sophisticated and analytically grounded threat detection, prevention, and response capabilities.
This is best served by cloud delivered solutions, which means that organizations globally are starting to move towards SaaS endpoint security. Cloud solutions are increasingly sought after by organizations as a result of its ease of use, time to value, ongoing overhead costs, efficacy, and innovation agility, which have become increasingly obvious to organizations.
This set the perfect storm for CrowdStrike as the company's cloud native architecture and cloud administered flagship Falcon platform helps to level up the endpoint security landscape and bridge this technological gap which was not available previously in the market.
As a result of its cloud delivered solutions, CrowdStrike was able to use the large quantity and quality of security data collected, which is analyzed and helps enhance the platform's threat detection capabilities and prevention efficacy.
For reference, there are 6 trillion events streamed onto CrowdStrike's cloud infrastructure each week.
This has led to a structural moat for CrowdStrike which is able to provide such an unrivalled technical feat at a superior total cost of ownership as organizations no longer need to maintain servers for this purpose.
Strong growth in subscription customers
For CrowdStrike's fiscal year 2023, its subscription customers grew by 41% to 23,019. Of its customers, many of them are the largest and most established in their fields. More than half of the Fortune 100 and Fortune 500 are customers of CrowdStrike. 75% of the top 20 banks are customers of CrowdStrike.
Large and expanding total addressable market
As can be seen below, management expects that its current portfolio's TAM will expand to $98 billion by 2025. By calendar year 2026, management expects the company's TAM to expand to $158 billion as a result of organic growth in TAM, new product roadmap, future initiatives and cloud security opportunities.
In terms of track record in growing its TAM, the figure below illustrates that clearly. From its original corporate workload security market, it has a TAM of $22 billion with six modules. In 2023, management has grown the TAM to $76 billion, an increase of 245% as a result of entry into new markets like IT Operations Management, Managed Security Services and added more than 15 modules along the way to add to its capabilities and offerings.
Operational metrics and financials
The CrowdStrike story is impressive because of the exponential growth in subscription ARR over the years. In the fourth quarter of the fiscal year of 2023, CrowdStrike continued to grow subscription ARR by 48% year on year. More importantly, looking at the big picture, subscription ARR has grown by 35 times since the first quarter of the fiscal year of 2018.
For the fiscal year of 2023, CrowdStrike's revenue grew to $2.2 billion, with subscription revenue growing 55% year on year. More impressively, 62% of CrowdStrike's subscription customers today use five or more modules, 39% use six or more modules and 22% use seven or more modules.
For the fiscal year 2023, CrowdStrike generated $677 million in free cash flows. This was up 53% year on year and amounts to a solid 30% free cash flow margin.
In addition, I like that CrowdStrike is seeing improvement in operating leverage over time as the subscription model scales up. As a result, sales and marketing expenses, research and development expenses and general and administrative expenses have fallen from 87%/46%/21% to 33%/19%/7% respectively.
One of the most impressive things about CrowdStrike is their retention rates, in my view. Based on its own 120% benchmark for net retention rates, the company has managed to achieve at least 120% net retention rate for the last 20 quarters. Since net retention includes customer expansions as well, this highlights CrowdStrike's strong ability to retain existing customers and expand its business. At the same time, gross retention has stayed above 97% for the last 19 quarters, which is impressive, in my view, and shows the resilience of subscriptions from customers.
CrowdStrike targets to achieve more than 30% free cash flow margin, 20% to 22% operating margin and 77% to 82% subscription gross margin in the longer term. As of its 2023 fiscal year, it has already achieved 30% free cash flow margin, which was impressive, in my view, and shows that management is able to control costs and drive margins upwards.
As a result of its strong margins and revenue growth, CrowdStrike is operating a business model that continues to show sustainability while growing strongly. Whether CrowdStrike uses the free cash flow margin or non-GAAP operating margin, it is operating at the rule of 63 and 81 respectively, far above the rule of 40, which is the gold standard for software companies.
Competitive landscape
Firstly, as highlighted by research compiled by JP Morgan, CrowdStrike has the best-in-class unit economics amongst cybersecurity peers. When looking at the customer Lifetime Value ("LTV") to Customer Acquisition Cost ("CAC") ratio, it shows the relationship between the company's lifetime value of its customer and the cost it takes to acquire that customer. As can be seen below, CrowdStrike has the highest LTV to CAC ratio of 4.9x as of its recent quarter and is a league on its own as it is almost 15% higher than the other leading cybersecurity companies.
Secondly, as can be seen below, I think that it is very telling that CrowdStrike is not only able to gain share in the endpoint security market but do so at a pace that is faster than a mega-cap company like Microsoft (MSFT). That said, I think that the modern endpoint security market could see a stronger consolidation in the near-term as the stronger players continue to gain share of players that are lagging the market in terms of innovation and product offerings.
Thirdly, in order to reach the $98 billion TAM by 2025, CrowdStrike needs to expand into and do well in the adjacent cloud security market. The company achieved public cloud ARR of $224 million in the recent quarter, making up 9% of total ARR. I think that we are seeing the early days of CrowdStrike's cloud security business as can be seen below, where it is ranked the fifth most popular cloud solution.
Lastly, I need to address the risk that Microsoft brings to the table for CrowdStrike. Microsoft has seen momentum in the security space as a result of its dominance in operating systems, server and endpoint platforms. The key risk is that Microsoft may potentially commoditize security as part of its bundle. In my conversations with organizations, this is more prevalent for smaller organizations that are on the Microsoft stack. That said, I think that Microsoft sees the security market as an upsell potential for its Office 365 bundles. At the end of the day, it is less focused on gaining wallet share within endpoint security, in my view.
Recent 4QFY23 results
For the fourth quarter of FY2023, CrowdStrike saw strength in bookings although there were pressures from macro conditions as RPO grew 49% year on year to $3.4 billion, an acceleration of five percentage points sequentially. This was impressive, in my view even as sales cycles remain elongated in the quarter and with the absence of the usual fourth quarter budget flush. Billings were also well ahead of the market expectations of $884 million.
There was also a record net new customers of 1,873 this quarter, which was up 14% year on year, which is strong given the weak macro environment. Management also disclosed more than 400 customers with at least $1 million ending ARR. This group of customers has an average of 57% ARR growth year on year and an average of 10 modules.
Capital expenditures guidance for FY2024 was 6% to 8%, down from the 10% we saw in FY2023. This implies that the company did frontload some of its capital expenditures to manage their supply chain.
In terms of the fourth quarter FY2023 performance, management notes that there was an incremental sales cycle elongation compared to the prior quarter, but the team's strong pipeline management efforts and strong focus on top of the funnel activities helped bring the strength in the fourth quarter FY2023.
I think that management addressed that its Managed Security Service Provider ("MSSP") business looks to become more competitive with SentinelOne (S) as CrowdStrike looks focused on being more aggressive in the business with the hiring of Daniel Bernard from SentinelOne who played a big part in the successful MSSP franchise in SentinelOne.
Lastly, CrowdStrike's emerging products business posted strong growth, with ARR growing 116% year on year. Emerging products made up 13% of total ARR compared to 9% in the prior fiscal year.
Valuation
CrowdStrike is trading at 31x FY2024 EV/FCF. Even at FY2023 FCF, CrowdStrike trades at 41x EV/FCF.
I value CrowdStrike using EV/FCF method. I assume 30x FY2024 EV/FCF for CrowdStrike, which is at a discount to its peer group of enterprise software companies which are trading between 35x to 60x EV/FCF.
My one-year price target for CrowdStrike is $166, implying a 30% upside from current levels.
Risks
Competitive landscape
The competition is gradually getting less intense as most specialist challengers have been eliminated from the market in the last three years. That said, the main competitive pressure today comes from large players, which may bring more fierce competition. These large players include players like Microsoft.
Valuation or beta risk
As a company with relatively higher beta and multiples, this may cause the stock to be more sensitive to market movements. Furthermore, there is a risk that multiples may compress further, which is a risk for all higher multiple companies.
Cloud workload protection risks
As the cloud workload protection market is currently in what I call a gold rush phase, the market is fragmented and highly competitive. There are risks that CrowdStrike may not see as much stickiness or pricing power in these new use cases. Furthermore, there are many other competitors in the space, which makes it much more competitive for CrowdStrike. Solution suite expansion means run-ins with "superstore" cyber players - carving out solution depth in security orchestration and automation (SOAR), as well as extended detection and response (XDR) pain points increase the likelihood of run-ins with larger, deeper-pocketed security "superstores" like PANW, and even MSFT who typically use a combination of incumbency, account control, and pricing as competitive cudgels.
IT spending
As a result of IT budgets having been brought forward in the covid-19 pandemic, there are risks that the IT spending in the near-term could normalize and be weaker than what we have seen in the last few years. As a result, this might cause some risk to the top line in the near-term for CrowdStrike. Furthermore, weakness in the macroeconomic environment could also sour business sentiment and result in smaller spending on IT in the near-term.
Conclusion
CrowdStrike is a leading cybersecurity company that has demonstrated its ability to grow strongly and at the same time, do so sustainably as it has generated positive operating margins and free cash flow margins. As a result, it is operating far above the rule of 40 and the business continues to have room to grow.
Also, I expect revenues to accelerate as CrowdStrike continues to expand its TAM and introduce new products and new initiatives. At the same time, margins have improved significantly over the years as a result of its strong cost optimization efforts and operating leverage, which has contributed to reductions in sales and marketing, research and development and general administrative expenses as a percentage of revenues.
In addition, CrowdStrike has a large and growing customer base filled with established companies while it has high net retention rates, showing the company's resilience in terms of retaining and expanding subscription ARR. I also found it impressive that the recent fourth quarter FY2023 results continued to be strong even as the macro backdrop was weak, and the operating conditions were challenging for CrowdStrike.
My one-year price target for CrowdStrike is $166, implying a 30% upside from current levels.
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This article was written by
I am a portfolio manager with experience working for a hedge fund and a long-only equity fund with more than $1 billion in assets under management and I have a track record for outperformance in my portfolio. I have been writing consistently, with an article published each day on Seeking Alpha and on my Marketplace service.
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I will be running a Marketplace service, Outperforming the Market, where I will share with you The Barbell Portfolio, which consists of high conviction growth and value stocks to help you outperform in the long-term, as well as The Price Target Report, which tells subscribers how much discount the stock is trading to intrinsic value and the upside potential. Lastly, subscribers will be able to get direct access to me and can ask me anything about the investment process or stock picks.
CFA charter holder and graduated with degrees in Finance and Accounting.
Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.
Comments (5) | MSFT |
https://finnhub.io/api/news?id=d5a49b60d23583d62c09d668dfc281c237c4e0875f2b6931106ffc8e12779ee8 | ChatGPT Says These 5 Tech Stocks Can Make You Rich in 5 Years | Looking for stock market analysis and research with proves results? Zacks.com offers in-depth financial research with over 30years of proven results. | 2023-03-10T03:04:00 | InvestorPlace | This page has not been authorized, sponsored, or otherwise approved or endorsed by the companies represented herein. Each of the company logos represented herein are trademarks of Microsoft Corporation; Dow Jones & Company; Nasdaq, Inc.; Forbes Media, LLC; Investor's Business Daily, Inc.; and Morningstar, Inc.
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https://finnhub.io/api/news?id=21d41a8be2da149c69ec4bc05fe42c2a116ea0e368c965f377ee2b037e0a7c82 | A Bull Market Is Coming: 2 Reasons to Buy Microsoft Stock | The stock market is showing signs of recovery, making now the perfect time to invest in this tech giant. | 2023-03-10T02:15:00 | Yahoo | A Bull Market Is Coming: 2 Reasons to Buy Microsoft Stock
The stock market is showing signs of recovery, making now the perfect time to invest in this tech giant.
The stock market is showing signs of recovery, making now the perfect time to invest in this tech giant. | MSFT |
https://finnhub.io/api/news?id=069a9b52cb1a0403dfaffa838dbe26b249bde945360412447bf567db1aa37005 | What Is ChatGPT? What to Know About the AI Chatbot | What to know about the AI chatbot and its underlying technology, which powers Microsoft’s Bing, has triggered a new AI race and may reshape the future of work. | 2023-03-10T01:46:00 | Yahoo | What Is ChatGPT? What to Know About the AI Chatbot
The AI chatbot is part of a wave of generative AI that has shaken up Big Tech and is set to transform industries and the future of work.
The AI chatbot is part of a wave of generative AI that has shaken up Big Tech and is set to transform industries and the future of work. | MSFT |
https://finnhub.io/api/news?id=00e7c32c4f81f0ac319ecd7d33c6a3ae8fa34d3d5531f0f2fa97229146cf783f | Microsoft: Beware Of AI Hype, Prepare For Recession | Market participants expecting strong earnings growth from the Cloud, AI and PC segments in the near future could be in for a rude awakening, given Microsoft's cyclicality. Read more here. | 2023-03-10T01:26:23 | SeekingAlpha | Microsoft: Beware Of AI Hype, Prepare For Recession
Summary
- Market participants expecting strong earnings growth from the Cloud, AI and PC segments in the near future could be in for a rude awakening, given Microsoft's cyclicality.
- We present a macro overlay why Microsoft's stock could experience both margin compression and multiple compression.
- Investors seem to be factoring in fairly high earnings growth, given the high P/FCF and EV/EBITDA ratios, contrary to the macroeconomics that point to a recession.
- We currently have Microsoft as a hold, and outline the point where we see Microsoft as a buy again, also from a technical perspective.
Investment Thesis
Microsoft (NASDAQ:MSFT) has had a great year so far, with a return of about 5.21% YTD, thanks mainly to a strong ChatGPT response since its launch in December. This was particularly evident in their earnings call, where AI was mentioned a staggering 29 times.
We will address why investors should be very cautious when considering Microsoft, as we think it may be some time before the AI tailwinds become apparent, while in the meantime a mix of higher CapEx and strong macroeconomic headwinds could curb those rosy expectations more than investors currently expect. Especially at current share prices, which we believe are historically priced very high.
Fortunately, Microsoft has been around for quite some time, and we can see what the stock has done during the last three recessions, so we can also estimate what its performance would look like in this prospective recession.
Is This Time Really Different?
The four most dangerous words in investing go something like this: "this time it's different". Yet, in the current landscape, it does seem like market participants and the Federal Reserve again do believe this time it will be different, and we'll see a "soft landing".
But when we actually look at arguably the most important market in the world, the US treasury market, the yield curve tells a different story. The 2-10 yield curve is currently inverted -1.07%, the most inverted since 1981. An inverted yield curve usually means trouble ahead, more specifically a recession. A deeply inverted curve however, as we have today, has always and every single time in recent history meant recession.
It even brings into question the idea of "there is no alternative" (TINA), which gained momentum after 2008 with 10-year real yields on treasuries being virtually 0.
But now that interest rates are rising, an alternative is available, more specifically short-term Treasury bonds. Even looking at Microsoft from a macro perspective, the company's earnings yield is the most expensive since the early 2000s. Below, we have taken Microsoft's operating earnings yield and subtracted from it the 10-year Treasury bond yield. Currently, Microsoft has an operating earnings yield of 4.35%, compared to a 10-year Treasury yield of about 4%.
In other words, if you buy Microsoft today, you are risking capital purely for growth. If we take the spread with the earnings yield instead of the operating yield, the correlation is already negative, meaning the 10-year treasury is higher than Microsoft's earnings yield.
And if we look at the front end of the yield curve, the contrast becomes even more drastic. It remains a mystery to us why Microsoft is trading at a P/E ratio of 28.19 or an earnings yield of 3.55%, when the 2-year treasury yield exceeds 5%, for example.
Microsoft's earnings for the past quarter were already soft, especially when looking at segments like personal computing and intelligent cloud in terms of operating income, which we will discuss later. If we put it in macroeconomic terms, investors at these multiples predict that Microsoft will see significant earnings growth over the next two years, as you currently get a 1.5% higher yield from 2-year treasuries compared to Microsoft's earnings yield.
But that contradicts the reality that in a recession, earnings are usually depressed along with multiples. Let me put it this way: you have a 3.55% earnings yield, which could drop like a stone over the next two years in a recession, versus a 5% risk-free rate over the same period.
Note that we also do not claim that Microsoft is a bad company. On the contrary, we think it is a very strong and diversified company that has stood the test of time.
We would rather buy an excellent company at a fair price than a fair company at an excellent price. But currently Microsoft is not fairly priced in our opinion, especially for the next two years as mentioned, which removes our margin of safety. A higher multiple might be warranted if Microsoft sees higher growth, although we should all recognize that past performance is not indicative of future results. And historically looking, Microsoft may be trading sideways for quite some time.
If we look at operating income, we see that Microsoft is actually quite cyclical, and can be broken down into several growth phases. After the 2000 recession, operating income bottomed out in 2002. In the following six years, it tripled from $8.27BN in 2002 to about $24BN at its peak in 2008.
But then came another recession, and operating income remained virtually flat for the next decade as Microsoft laid the foundation for its cloud segment and expanded Azure. That growth got realized again over the last six years, with operating income tripling exactly again between 2016 and 2022.
Now, in 2023, Microsoft's cloud segment seems to be at its peak and once again paving the new path of technology in AI. But if we follow the trend and cyclicality, it would mean that operating results could go sideways for quite some time until AI actually becomes largely monetizable and scalable.
Microsoft's cloud segment is actually one that most investors still expect a lot of growth from, given the popularity of cloud computing. Over the past two quarters, however, cloud revenue has grown, but operating income has remained flat, meaning that scaling up could be less lucrative than some expect.
The Storm Is Here
Currently, however, it is mainly the personal computing segment that is depressing profitability, as global PC sales have declined over the past few quarters.
However, it seems perfectly rational, as we have departed from a situation where PCs were in extremely high demand in 2020 and 2021 and more capital was spent while working from home became the norm. Now a return to the office combined with a macroeconomic slowdown could, in our opinion, hold back this segment for quite some time.
As some know, global PC sales fell a remarkable 27.8% year-on-year in the fourth quarter. Even for fiscal year 2022, shipments fell 15% year-on-year. And yet, for investors expecting a rosy 2023, we are yet to see much improvement.
Quite the opposite, in fact, as IDC just lowered its outlook for PC sales in 2023, from 429.5 million units shipped to just 402.1 million units. The figures they display predict that sales of traditional PCs will fall 10.7% year-on-year, following an already sluggish 2022.
The memo also states that this could reverse in 2024 and 2025 due to the "sunsetting" of Windows 10 by then. We are convinced that these headwinds in Personal Computing and Cloud Computing, combined with the CapEx boom of setting the stage for AI, could give Microsoft tough times ahead. Perhaps things will get worse before they get better.
Since AI is already currently favoring Microsoft's Bing in terms of gaining market share, the cost of a search using AI is estimated to be 10 times more expensive than a regular search, making it more of a headwind for Alphabet (GOOG) than a tailwind for Bing.
We estimate that, as with cloud, it may be some time before AI becomes widely magnetizable, and will continue to be a drag on Free Cash Flow, which is already starting to soften in recent quarters. The $10BN investment in OpenAI's ChatGPT, which expects $200M in revenue by 2023, is a case in point.
Still, we think these investments could also help Microsoft tremendously in their Productivity and Business Processes segment, by creating opportunities to even integrate search into applications such as Word, Excel and other programs, eliminating much of the search altogether.
Both Sides Of The P/E Ratio
Now that we have looked at earnings and our estimates on why earnings could be lower than expected for a while, it is also important to look at both sides of the equation.
Not only could Microsoft experience margin compression in a recession, it could experience multiple compression as liquidity is taken out of the economy as the Federal Reserve raises interest rates and rolls securities off its balance sheet. In recent history, investors have felt very comfortable just looking at multiples, as earnings of the S&P 500 have risen across the board over the past 15 years and were mostly taken as a given.
Yet looking at those multiples, Microsoft is still trading quite expensive in terms of EV/EBITDA, EV/EBIT and P/FCF. We think this again indicates that investors are mistakenly expecting strong earnings growth for the next few years, which is at odds with the yield curve that expects a recession.
Especially on a P/FCF basis, in which Microsoft returned to a P/FCF multiple of less than 12 times during and after the last recession in 2008 after profits went sideways for quite some time. Currently, paying a 31.74 times free cash flow multiple could be a rude awakening for investors if earnings stagnate or decline outright over the next few quarters.
Nor is it a foregone conclusion that Microsoft will have a monopoly on AI in the future. Indeed, they are currently paving the way forward by making meaningful investments in AI. Although it cannot be denied that other large cap tech is doing the same, such as Tesla (TSLA) with Dojo and FSD, Meta (META) with LLaMA, Alphabet with Bard and many other small-caps with dedicated teams.
The future expectations in terms of high earnings growth, accommodative monetary policy, margin growth seem to weigh too heavily on us at the moment and take away our margin of safety.
Therefore, we currently see Microsoft as a hold. Also from a technical perspective, we see Microsoft continuing to trade in a downward channel. We think the previous lows around $220 will be retested, which would give us a better opportunity to enter with a larger margin of safety. On a technical basis, there also seems to be major support at the $220 level.
In fact, we would even go as far as to wait until the $180-$210 level to take a significant position, again referring to our macroeconomic outlook that the U.S. will enter a recession later this year or early 2024. That would bring the stock back to its baseline on a Fibonacci Retracement, where it was when it entered 2021.
The Bottom Line
We currently have Microsoft as a "hold", based on an overly optimistic outlook for earnings growth, a very potential earnings recession and increased historical multiples, along with increased capital spending on AI growth, which we expect could take a while to become monetizable.
We think the stock could be trending sideways for quite some time, after the exponential rise we saw in 2020 and 2021 thanks to an overly accommodative monetary policy. In short, we would be very skeptical of the current AI hype, continue to focus on earnings and fundamentals and we are following our recessionary playbook.
This article was written by
Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.
Comments (13)
3/17 msft/spy pair continues it upward trajectory..the pair which was 2 sigma cheap in january and now a clear double bottom is now approaching 1 sigma rich ..on absolute basis seems were headed towards 294
As a background thing, I expect the SP500 to rise above 5000 before the Nov-24 election by hook or by crook so I would think MSFT would be 315+ in that scenario. Nadella is smart. If he buys here and there some cheap bolt-ons, I think he sets the table for the next 10-20 years. I will be bold and suggest it will 5x in the next 10 years (vs 10x in the last decade) which would make it a $10tr stock. By then, Apple might be $15tr, who knows. As of now, yeah, I would buy on any dips to 225-235 and would load the boad even more if we get to 200 but I doubt we get that far. Be nice if we did. | MSFT |
https://finnhub.io/api/news?id=5c52569f14ee8de4d59cee3796e617ad870eabf2be37bd559afaaf779422af22 | Meta Platforms Up 104.12% Since November And Could Have Strong Upside | Based on a FCF valuation analysis of 32 of the largest companies in the S&P 500, Meta is at least 30% undervalued. See more analysis of META stock here. | 2023-03-10T01:00:00 | SeekingAlpha | Meta Platforms Up 104.12% Since November And Could Have Strong Upside
Summary
- Based on a FCF valuation analysis of 32 of the largest companies in the S&P 500, Meta is at least 30% undervalued.
- Meta Platforms continues to see engagement increase across its platforms, and more than 1/3rd of the global population utilizes its applications.
- META has some tailwinds including $40 billion of authorized buybacks which could boost EPS and a ban on TikTok which could be a revenue driver.
Meta Platforms (NASDAQ:META) was a market favorite over the past decade, appreciating by 1,192.92% from its IPO in June 2012 to the fall of 2021. Despite negative headlines and being hauled in front of congress and congressional committees, shares of META appreciated from $31.91 to $380.66. Over the next 13 months, from September 2021 to October 2022, the wheels came off, and META lost -76.94% of its value, falling from $382.05 to $88.09 for a loss of $293.96 per share. The downward decline was immense and unpleasant for many shareholders, such as myself. Things have been looking positive for META lately, as Mr. Zuckerberg has been making tough decisions regarding costs, slashing prices for VR headsets, and realigning his focus on profits. The market has been receptive, and over the past 4 months, shares of META have appreciated 104.12% as they have gone from $88.91 to $181.43 for an increase of $92.57 per share. Despite shares more than doubling, they are still off their highs by a considerable amount, and I feel shares are at least 30% undervalued and could finish 2023 well above $250 per share.
META produced a solid Q4 which consisted of increased engagement
Facebook isn't dead, Instagram isn't slowing, and WhatsApp is still utilized. META reached more than 3.7 billion people monthly across its family of apps in 2022. Meta's Family Daily Active People (DAP) increased by 1.02% QoQ to 2.96 billion people, while Family Monthly Active People (MAP) increased by 0.81% to 3.74 billion people. From an active user perspective, Daily Active Users (DAU) increased by 0.81% to 2 billion people, while Monthly Active Users (MAU) increased to 2.96 billion, up 0.17% MoM. There is no shortage of engagement across META's family of apps, as more than 1/3rd of the global population utilizes its platforms each month. In Q4 2022, ad impressions delivered across META's apps increased 23% YoY. In 2022 META saw its Ad impressions increase 18% YoY.
These numbers illustrate how embedded META's family of applications continues to be throughout our civilization. More than a decade later of going public, engagement is still growing at META. META is a global brand that continues to play a critical role in how communication and connection is achieved in 2023. If there was a drop off in engagement, there would be a serious issue because that could correlate to lower revenue and earnings potential. That's not the case , and over the previous 2 years, META has gained 155 million users. With the looming TikTok ban META's applications could see a boost in engagement in both time spent using their platforms in addition to an increased user count in the U.S. This would probably provide a boost to their earnings potential as 46.27% of their advertising revenue ($52.58 billion / $113.64 billion) came from the U.S ad Canada in 2022.
META is taking its medicine and focusing on profitability
On the Q4 conference call, Mr. Zuckerberg was clear that 2023 would be the year of efficiencies. META closed out 2022 with a large round of layoffs and restructured some teams to optimize their operations. Mr. Zuckerberg went as far as to indicate that this would be the beginning of META's focus ad not the end regarding efficiency. The next step would be flattening META's org structure and removing layers of middle management in addition to deploying A.I. tools to boost productivity from engineering. META will also focus on capital allocation regarding CapEx ad be proactive about cutting projects that aren't performing. Recently on March 6th 2023, a report was released that META is set to cut thousands of additional jobs as part of a newly planned round of layoffs. META had cut 13% of its workforce, roughly 11,000 people in November of 2022, and thousands of more employees will supposedly be let go as early as this week. META has reportedly asked directors and V.P.s for lists of employees that could be cut and are tied to financial targets senior leadership has put in place.
META is projecting that in Q1 of 2023, they will generate between $26 billion to $28.5 billion in revenue, which takes into consideration approximately 2% headwind in foreign currency due to exchange rates. In Q1 2022, META generated $27 billion in revenue, so if they are able to achieve $28 billion in Q1 of 2023, that would be a YoY increase of 3.7%. What's interesting is that META has provided full-year guidance on the expenses side. META has lowered their total expense guidance from $94 billion to $100 billion to $89 billion to $95 billion due to slower anticipated growth in payroll expenses and cost of revenue. META has also lowered its CapEx spending from $34 billion to $37 billion to $30 billion to $33 billion. For all of the negative publicity in 2022, META was still wildly profitable, driving net income of $23.2 billion, which is a profit margin of 19.9%.
Currently, how large of a success VR/AR and the Metaverse will be is purely speculation. What isn't speculation is that there are now over 200 apps running on META's V.R. devices that have generated in excess of $1 million in revenue. META plans on bringing its discovery engine, ads, business messaging, and generative A.I. to the future platforms for the Metaverse. META has also cut the price of the Quest Pro to about $999 and reduced the price of the Quest 2 256 GB model to about $429. The Metaverse won't be a winner take all situation, but it could be a winner-take-most scenario. META is a clear leader in the space, and with the amount of capital their allocating, Reality Labs could be a huge success in the future.
I believe META is undervalued by roughly -32%
built a model on how I like to determine a company's fair market value. Some may agree, and some may not. I start with the total equity of a company. Total equity is simply total assets minus total liabilities. This is my baseline because if a company was to dissolve itself, theoretically, the total equity is what would be left for the shareholders to chop up among themselves after all liabilities are zeroed out. After the baseline for total equity is established, I look toward profitability, specifically FCF. I look at the closest peers, and similar-sized companies to find the average multiple on FCF the market is valuing companies at. Then I will add the total equity by the company's current FCF multiplied by the market multiple to determine a fair value for the company to determine if it's under or overvalued.
In META's immediate peer group of Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), Tesla (TSLA), and NVIDIA Corporation (NVDA), the average price to FCF is 55.79x. I didn't use Amazon (AMZN) because they have negative FCF. META trades at the 2nd lowest price to FCF at 25.18x of this peer group. Using the average P/FCF plus equity, META should have a market cap of $1.19 trillion, making it -59.64% undervalued based on its current market cap. Now, I want to also look at META vs. the largest companies in the S&P 500, so I compared META in the same fashion to 32 of the largest companies. In addition to the immediate peer group I added Berkshire Hathaway (BRK.B), Visa (V), Exxon Mobil (XOM), UnitedHealth (UNH), JPMorgan Chase (JPM), Johnson & Johnson (JNJ), Walmart (WMT), Mastercard (MA), Procter and Gamble (PG), Chevron Corporation (CVX), Home Depot (HD), Eli Lilly (LLY), AbbVie (ABBV), Merck & Co. (MRK), Broadcom (AVGO), Coca-Cola Company (KO), Oracle (ORCL), PepsiCo (PEP), Thermo Fisher (TMO), McDonald's (MCD), Salesforce (CRM), Danaher (DHR), Abbott Labs (ABT), Linde (LIN), and Wells Fargo (WFC) to my analysis.
The larger peer group has an average P/FCF of 30.49x, significantly lower than the immediate peer group average of 55.79x. META currently trades at a -18.64% discount to the peer group average P/FCF as their P/FCF is 25.18x. When META's equity is combined with the average P/FCF multiple it creates a market cap of $715.12 billion which puts its current market cap at a -32.94% discount. I have selected companies across each sector, and there is little to no reason in my mind why META should be trading at this large of a discount.
$40 billion in buybacks will increase shareholder value and should increase EPS
In Q4 of 2022, META repurchased $6.91 billion of their common shares, bringing their repurchases to $27.93 billion in 2022. META announced they were increasing their buyback authorization by $40 billion. With a current market cap of $479.56 billion, META would be repurchasing an additional 8.34% of its common shares. At the rate META repurchased shares in 2022, they could fulfill this repurchase authorization over the next 2 years.
When people think about value they usually associate it with price per share. Another way to look at it is what your shares represent. In 2022, META generated $8.63 per share of EPS and had 2.61 billion shares outstanding. If META buys back 8.34% of the common shares and still generates the same earnings as they did in 2022, their EPS would increase to $9.68 without adding a single dollar of earnings. This is why buybacks are so powerful because they increase EPS and increase the amount of revenue and EPS that each share is entitled to, granted that revenue and earnings don't decline YoY. The analysts are already estimating that META will generate $9.29 of EPS in 2023 and $11.35 of EPS in 2024. Depending on how quickly META repurchases shares, these estimates could be low and META could be setting up for some interesting earnings beats in the future.
Conclusion
I believe shares of META are undervalued by at least 30%. When I look at the largest companies in the S&P 500, the average P/FCF is 30.49x, and META trades at 25.18x. META still generates over $20 billion annually of pure profit, and Mr. Zuckerberg has made it clear that profitability is front and center. Between cost efficacy measures such as layoffs and prioritization of projects in addition to $40 billion of additional buybacks, META could exceed analyst estimates for EPS, causing the share price to increase. If TikTok gets banned in the U.S it will create a huge tailwind for shares of META. As it stands, I think Meta is at least 30% undervalued prior to any growth in 2023. Engagement clearly isn't declining, and META is an exciting name for the remainder of the year.
This article was written by
Analyst’s Disclosure: I/we have a beneficial long position in the shares of META, AAPL, GOOGL, TSLA, AMZN, XOM, KO, VZ, ABBV, ORCL either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Disclaimer: I am not an investment advisor or professional. This article is my own personal opinion and is not meant to be a recommendation of the purchase or sale of stock. The investments and strategies discussed within this article are solely my personal opinions and commentary on the subject. This article has been written for research and educational purposes only. Anything written in this article does not take into account the reader’s particular investment objectives, financial situation, needs, or personal circumstances and is not intended to be specific to you. Investors should conduct their own research before investing to see if the companies discussed in this article fit into their portfolio parameters. Just because something may be an enticing investment for myself or someone else, it may not be the correct investment for you.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.
Comments (18)
And I still think Whatsapp is going to be huge for META in the next 5 years with regards to revenue. | MSFT |
https://finnhub.io/api/news?id=e3c0e10a2b2165d7e477739ee6cb0f7f1c52c8c8e659ae7d6f9691a55d1e3c4f | Will 2023 Rally In Software Growth Stocks Fizzle Out Amid Inflation Watch? | Software growth stocks are still looking for a catalyst as the sector lags the S&P 500. Guidance for 2023 will be key for software stocks. | 2023-02-20T09:25:49 | Yahoo | Software Stocks To Watch Amid AI-Generated Rally
Software growth stocks outperformed in the first half of 2023. But will the artificial intelligence-driven rally be sustainable for software stocks?
Software growth stocks outperformed in the first half of 2023. But will the artificial intelligence-driven rally be sustainable for software stocks? | MSFT |
https://finnhub.io/api/news?id=1753cfe7ab811ea49e343ed6bbf9bfa180a08bd56099ec5b3d805658d1c77c2d | How to invest in the A.I. boom: 11 stocks and 4 funds to buy now | Generating returns in your portfolio from the growing field of artificial intelligence. | 2023-04-07T08:45:00 | Yahoo | How to invest in the A.I. boom: 11 stocks and 4 funds to buy now
When it comes to A.I., investors have a torturous choice to make: Believe the hype and jump in headfirst, or ignore the hype and potentially miss out on a once-in-a-generation tech transformation. “It’s the early days in terms of picking winners and losers” of the A.I. boom, explained Scott Helfstein, head of thematic solutions at Global X ETFs. “We’re not sure yet of the different ways that we’re going to be able to monetize this technology. Some are obvious, and some are not obvious—and it might be that the ones that are not obvious become more important over time,” he said. According to analysts at PricewaterhouseCoopers, A.I. could add up to $15.7 trillion in global GDP in 2030, which is more than the current output from India and China combined.
But experts caution that investing in generative A.I. is far more nuanced than just buying Big Tech stocks that have integrated the technology. “This could be another one of those moments where we’re getting to the peak of the hype cycle, so companies are going to spend the money, but they’re going to find it’s a lot harder to build something truly compelling,” explained Peter Cohan, business professor at Babson College. “Microsoft has a big investment in OpenAI, and they also have GitHub, which has a lot of the software that can be used for developing A.I., yet I still don’t know if that’s going to generate enough revenue for Microsoft for A.I. itself to become a significant part of its business,” he noted.
But it’s impossible to ignore that in an era of high inflation and subpar index returns, companies and funds that focus on A.I. and machine learning have strong growth potential. For example, the Global X Robotics and Artificial Intelligence ETF (BOTZ), which tracks 44 holdings of companies involved with industrial robotics and automation, nonindustrial robots, and autonomous vehicles, is up 18% year to date, while the S&P 500 is just up 7%. For investors who want to get in on this burgeoning area, here are the smartest ways to approach investing in A.I.
Big Tech
A plethora of companies across sectors are integrating A.I. into their operations, from Land O’Lakes to Microsoft to cybersecurity firm SentinelOne. So you may already be indirectly investing in A.I. Big Tech is leading the charge from both investment and innovation standpoints. “A.I. is being defined actively by leading tech giants,” explained PitchBook tech analyst Brendan Burke, citing the leaders as Microsoft (MSFT), Alphabet (GOOGL), Amazon (AMZN), and Meta (META). “Those companies have the research labs and the operational tools to bring basic innovations in A.I. algorithms to market,” he said.
If you want to bet on Big Tech, Microsoft has forged ahead the furthest with its $10 billion investment in OpenAI and the subsequent rollout of revamped search service Bing with new A.I.-powered search features. While Bing’s features have debuted with some bizarre and disturbing interactions with users, if the technology does successfully upend Google’s search, Microsoft has a huge market share to gain. “We believe incorporating ChatGPT capabilities into Bing may provide Microsoft with a once-a-decade opportunity to unseat Google’s Search dominance,” wrote D.A. Davidson software analyst Gil Luria in a recent research note. Luria increased Microsoft’s price target from $270 to $325 and gave the firm a buy rating. “While Google has announced a project to add [generative] A.I. to Google Search, we believe Bing’s head start could create a permanent share shift,” Luria wrote. Yet with the speed bumps in the rollout of Bing, it is clear that generative A.I. chatbots still have a long way to go.
Bank of America analysts, on the other hand, wrote in a recent report that Meta’s stock has the most to gain from A.I. implementation, citing the company’s incorporation of A.I. into its Reels video feature. “We expect an outsized impact from the adoption of A.I. given rich consumer data sets and massive ramp-up in A.I. investments, led by Alphabet, Meta, and Amazon,” the report detailed. Bank of America gave Alphabet and Amazon buy ratings in its forward-looking 2023 report.
Comparing the A.I. boom to the dotcom boom of the early 2000s, it is clear that if you pick the right companies you can still make out very well. “Even if you bought Amazon at the height of the dotcom boom, you still would have made a lot of money,” said Tom Taulli, a startup advisor and A.I. author.
But the giants have a problem—they’re huge. “It’s harder to move the needle for [Big Tech] as opposed to some of these smaller or midsize companies that are going to wind up playing in space that is going to be significant,” Helfstein said. “Maybe they won’t be as recognizable, but they have better growth potential, which can turn into investment returns,” explained Helfstein.
The “picks and shovels” of the A.I. boom
During the California gold rush, some of the savviest investors eschewed chasing gold itself and made a mint investing in the picks and shovels that those looking for riches needed for their search. Cohan sees an analogy in A.I. “It might well be that the initial beneficiaries of A.I. expansion are going to be in the hardware space, instead of the software space,” Helfstein predicted.
So what “picks” do experts recommend? PitchBook’s Burke explained: “A.I. growth is based on the improved efficiency and the decreased cost of [graphics] processing units (GPUs). The most basic enabler for these new models is the latest hardware innovations coming from chip giants such as Intel (INTC), Advanced Micro Devices (AMD), and Nvidia (NVDA).” Semiconductors are necessary for A.I. software to function, and the companies that produce them will supercharge its expansion.
Nvidia is currently the leading chip producer in the A.I. space. “A lot of capital is going to go into these generative A.I. startups,” said Cohan. “And the question for investors is: What technology will they be using to build their APIs? The answer is that they’re very likely to be using Nvidia chips.”
“It’s the early days in terms of picking winners and losers.”
Scott Helfstein, head of thematic solutions at Global X ETFs
Beyond chips, there is software infrastructure to support the huge volume of data that the A.I. explosion will rely on. “The next layer up, there’s a need for enterprises to integrate their data into centralized data warehouses to improve the performance of their A.I. models,” Burke explained. “That’s where database management vendors, such as Snowflake (SNOW) and Alteryx (AYX) can help enterprises,” he said. Zacks gives both companies buy ratings.
Dynatrace (DT) is another cloud-computing infrastructure firm that could have upside. The company operates a software intelligence platform that uses A.I. and automation. Bank of America thinks the stock, which is up 1% year to date, has further to run, giving it a buy rating.
Another winner could be Palantir Technologies (PLTR), which is projected to increase its market share and revenue as one of its biggest clients, the U.S. government, expands its military A.I. implementation. In October 2022, the company signed an $85 million contract with the U.S. Army Materiel Command to use its software to increase military A.I. capabilities. The company was founded in 2003 by a group of VCs including Peter Thiel, Nathan Gettings, Joe Lonsdale, Stephen Cohen, and Alex Karp. While the stock is up 31% year to date, analysts (like those at BofA who have a “buy” rating on the stock) expect it can further capitalize on the A.I. boom.
A.I.-focused funds
Though A.I. technology has had a breakthrough year, there are already a robust number of funds and ETFs that give you exposure to the sector, which is a win for investors. “With these emerging technologies, people are better off playing a basket of companies, rather than putting their chips in a single one,” said Helfstein. He drew a comparison to Tesla in the electric vehicle industry. While Tesla was first out of the gate to dominate the EV market, competitors are now lining up to surpass the reigning EV king: “I don’t think we’re gonna live in a world that’s dominated by a single A.I.—it’s going to be a competitive market.” Not to mention the inherent unpredictability of an industry evolving at warp speed. “This can be a volatile space; you never know what could happen tomorrow, so diversification is important,” explained Taulli.
A solid option is the Global X Robotics and Artificial Intelligence ETF (BOTZ), which is up 18% year to date and has $1.64 billion in assets under management. Its top holdings include Nvidia, Intuitive Surgical, Upstart Holdings (UPST), Keyence (KYCCF), and ABB (ABB).
BlackRock’s iShares Robotics and Artificial Intelligence Multisector ETF (IRBO) is another option, which has 118 holdings and around $288 million in assets under management. Year to date, the fund is up 15%, solidly outpacing the S&P 500.
A widely diversified option is the ROBO Global Robotics and Automation Index ETF (ROBO), which holds 79 stocks with the top five holdings representing just 9% of the fund’s value. Year to date, the ETF is up 12%.
The Defiance Machine Learning and Quantum Computing ETF (QTUM) has roughly $116 million in assets under management, and its top holdings include Nvidia and Alteryx. Year to date, its return is roughly 16%, and the fund received a five-star rating from Morningstar Research in December 2022.
Overall, experts advise caution—and patience—when it comes to investing in generative A.I. “Investors should keep in mind that breakthroughs tend to be nonlinear,” explained Helfstein. Having just seen a period of what he calls “exponential innovation,” don’t be shocked if now we “level off for a little bit” before the next surge.
A version of this article appears in the April/May 2023 issue of Fortune with the headline, “Buying the A.I. boom.”
This story was originally featured on Fortune.com
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https://finnhub.io/api/news?id=77f8aa688c4829482cea9d5eed95d24f9ab500eb69e9f6228fd6ffd981edefdb | 4 things could shield stocks as Goldman warns of worst earnings season since pandemic | The outlook for corporate profits during the first quarter is looking pretty gloomy. | 2023-04-07T06:46:00 | MarketWatch | The outlook for corporate profits during the first quarter is looking pretty gloomy.
But a team of analysts at Goldman Sachs Group see hope for individual companies that could manage to buck the trend by delivering on four areas of critical importance to investors.
Analysts cut their outlook pretty aggressively as the economic outlook deteriorated during the first quarter. As a result, operating profits are expected to have shrunk by 6.8% last quarter, according to an average of Wall Street forecasts compiled by FactSet.
If this comes to pass, it would mark the second consecutive quarter of earnings contraction, and the worst quarterly performance since the third quarter of 2020, when corporate profits cratered by more than 30% as COVID-19-inspired lockdowns rocked the global economy. S&P 500 earnings contracted by 4.6% during the fourth quarter of 2022, according to FactSet data.
As traders brace for earnings season to be a crucial test for stocks, some equity analysts are advising clients on strategies that could help to protect their portfolios if a flood of dour corporate results sends stocks careening lower.
Profit margins will be key
Corporate profit margins are being squeezed by the worst bout of inflation in four decades. Last quarter, margins for S&P 500 firms retreated by 11.2% at the index level, surpassing expectations for an 11.1% drop.
Because of this, companies that have a credible plan for protecting their margins should expect to be rewarded by investors, according to the Goldman team, led by David Kostin, the bank’s chief U.S. equity strategist.
Related: The Fed has it wrong: Corporate greed is to blame for inflation, not rising wages, SocGen analyst says
“With margins projected to contract by a greater amount than in any other quarter since the pandemic, investors will focus on which companies manage to preserve margins and by what means,” the team said.
Strategies for improving pricing power, enacting cost cuts or imposing more disciplined expense-management will likely be rewarded.
Are companies using AI to cut costs and improve efficiency?
The rise of ChatGPT has helped make artificial intelligence one of the most closely followed investment trends of 2023, according to MarketWatch’s James Rogers.
Perceived dominance in the AI space has helped fuel a market-leading rally in megacap tech names like Microsoft Corp.
MSFT,
So it probably shouldn’t come as a surprise that companies might be able to paper over weakness in profits and sales with a convincing pitch about how they plan to use AI to their advantage — especially if it helps boost profit margins by making their workforce more efficient, the Goldman team said.
“One new potential boon to margins could be the gradual adoption of generative artificial intelligence by companies to automate manual tasks and boost labor efficiency,” they said.
Belt-tightening will remain in focus
Signs that corporations are cutting back on spending are beginning to materialize, the Goldman team said.
Share buybacks via Goldman’s buyback desk declined by more than 20% compared with 2021 during the fourth quarter, and activity has remained weak, the analysts said. What’s more, several leading economic indicators suggest companies are paring back spending on capital projects and research and development.
So expect investors to pay close attention to any and all signs of belt-tightening during quarterly reports and the ensuing analyst calls with top executives.
Is China’s reopening making a difference?
Chinese officials including President Xi Jinping have promised a powerful reopening. Amid signs of slowdown in the all-important U.S. services sector, as well as in other parts of the economy, companies could look to China for a boost.
“We expect investors will keep their ears perked for discussion around how much this has boosted earnings,” the team said.
Strategies for protecting your portfolio
Highflying megacap tech names have been keeping indexes like the S&P 500 aloft, while value-oriented names have lagged the broader market after outperforming during 2022.
Technically, when corporate earnings shrink for two quarters in a row, it qualifies as an “earnings recession.” But while an earnings recession typically coincides with a broader economic recession, it doesn’t always have to be that way, according to Ed Yardeni, president of Yardeni Research.
Historically, S&P 500
SPX,
“It might be different this time, however: earnings could fall without an economywide recession,” he said.
But regardless of what happens with the broader economy, some expect weak corporate earnings could drive the S&P 500 back toward its lows from October, when it closed below 3,600.
Phil Orlando, chief equity market strategist at Federated Hermes, is one of them.
“We continue to advocate a tactical defensive investment posture, with a focus on less-expensive value, small-cap and international stocks and sectors with lower betas and higher dividend-yield support. We also still like cash and Treasurys,” he said in emailed commentary shared with MarketWatch.
The bulk of S&P 500 companies will report their results from the January through March quarter in the coming weeks. By May 5, 87% of S&P 500 firms will have reported, according to Goldman’s earnings calendar. | MSFT |
https://finnhub.io/api/news?id=387f7c633c844442f643aa722c8c64a1a806f97e899f388a36db5e7d458bf982 | These 4 things could protect stocks as investors brace for worst earnings season since pandemic, Goldman says | Looking for stock market analysis and research with proves results? Zacks.com offers in-depth financial research with over 30years of proven results. | 2023-04-07T05:47:00 | MarketWatch | This page has not been authorized, sponsored, or otherwise approved or endorsed by the companies represented herein. Each of the company logos represented herein are trademarks of Microsoft Corporation; Dow Jones & Company; Nasdaq, Inc.; Forbes Media, LLC; Investor's Business Daily, Inc.; and Morningstar, Inc.
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https://finnhub.io/api/news?id=8caff52ca01bda805f5f9ef67431db0a197b7fcc2da4170cebb7229ed473922b | With the unemployment rate now down to 3.5%, is this this your last chance to jump ship? | Looking for stock market analysis and research with proves results? Zacks.com offers in-depth financial research with over 30years of proven results. | 2023-04-07T04:45:00 | MarketWatch | This page has not been authorized, sponsored, or otherwise approved or endorsed by the companies represented herein. Each of the company logos represented herein are trademarks of Microsoft Corporation; Dow Jones & Company; Nasdaq, Inc.; Forbes Media, LLC; Investor's Business Daily, Inc.; and Morningstar, Inc.
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At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors. This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system. Since 1988 it has more than doubled the S&P 500 with an average gain of +24.17% per year. These returns cover a period from January 1, 1988 through May 15, 2023. Zacks Rank stock-rating system returns are computed monthly based on the beginning of the month and end of the month Zacks Rank stock prices plus any dividends received during that particular month. A simple, equally-weighted average return of all Zacks Rank stocks is calculated to determine the monthly return. The monthly returns are then compounded to arrive at the annual return. Only Zacks Rank stocks included in Zacks hypothetical portfolios at the beginning of each month are included in the return calculations. Zacks Ranks stocks can, and often do, change throughout the month. Certain Zacks Rank stocks for which no month-end price was available, pricing information was not collected, or for certain other reasons have been excluded from these return calculations.
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https://finnhub.io/api/news?id=c2102422ddab3dda73d9f030e10e2daaa43f261752c9810f20c6473b795f3fa5 | Microsoft Unleashes AI-Powered Image Generator | Looking for stock market analysis and research with proves results? Zacks.com offers in-depth financial research with over 30years of proven results. | 2023-04-07T04:45:00 | TalkMarkets | This page has not been authorized, sponsored, or otherwise approved or endorsed by the companies represented herein. Each of the company logos represented herein are trademarks of Microsoft Corporation; Dow Jones & Company; Nasdaq, Inc.; Forbes Media, LLC; Investor's Business Daily, Inc.; and Morningstar, Inc.
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At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors. This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system. Since 1988 it has more than doubled the S&P 500 with an average gain of +24.17% per year. These returns cover a period from January 1, 1988 through May 15, 2023. Zacks Rank stock-rating system returns are computed monthly based on the beginning of the month and end of the month Zacks Rank stock prices plus any dividends received during that particular month. A simple, equally-weighted average return of all Zacks Rank stocks is calculated to determine the monthly return. The monthly returns are then compounded to arrive at the annual return. Only Zacks Rank stocks included in Zacks hypothetical portfolios at the beginning of each month are included in the return calculations. Zacks Ranks stocks can, and often do, change throughout the month. Certain Zacks Rank stocks for which no month-end price was available, pricing information was not collected, or for certain other reasons have been excluded from these return calculations.
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At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors. This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system. Since 1988 it has more than doubled the S&P 500 with an average gain of +24.17% per year. These returns cover a period from January 1, 1988 through May 15, 2023. Zacks Rank stock-rating system returns are computed monthly based on the beginning of the month and end of the month Zacks Rank stock prices plus any dividends received during that particular month. A simple, equally-weighted average return of all Zacks Rank stocks is calculated to determine the monthly return. The monthly returns are then compounded to arrive at the annual return. Only Zacks Rank stocks included in Zacks hypothetical portfolios at the beginning of each month are included in the return calculations. Zacks Ranks stocks can, and often do, change throughout the month. Certain Zacks Rank stocks for which no month-end price was available, pricing information was not collected, or for certain other reasons have been excluded from these return calculations.
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https://finnhub.io/api/news?id=2f153403c47380be2fa60aa5e8e843a98e748b400a844a3dcecd270edec62f9a | 3 Stocks That Have the Most to Lose With an AI Pause | A recently circulated open letter, which was signed by various politicians, university professors, industry leaders like Tesla CEO Elon Musk, and tech pioneers like Apple co-founder Steve Wozniak, calls on all AI labs "to immediately pause for at least 6 months the training of AI systems more powerful than GPT-4." Just a few months ago, not many people knew what generative AI was or had used an AI chatbot as powerful as OpenAI's ChatGPT. Now, some thought leaders believe the technology has gone too far without adequate guardrails in place. | 2023-04-07T02:17:00 | Yahoo | 3 Stocks That Have the Most to Lose With an AI Pause
A recently circulated open letter, which was signed by various politicians, university professors, industry leaders like Tesla CEO Elon Musk, and tech pioneers like Apple co-founder Steve Wozniak, calls on all AI labs "to immediately pause for at least 6 months the training of AI systems more powerful than GPT-4." Just a few months ago, not many people knew what generative AI was or had used an AI chatbot as powerful as OpenAI's ChatGPT. Now, some thought leaders believe the technology has gone too far without adequate guardrails in place. | MSFT |
https://finnhub.io/api/news?id=95c2957ce38732ec797956743c13b849cb1688ee443f42ba4571c3f9518ed1fd | China's Alibaba invites businesses to trial AI chatbot - media | Tech giant Alibaba is seeking companies to test its Tongyi Qianwen AI chatbot, business publication STAR Market Daily reported on Friday, joining the rush to emulate the explosive success of ChatGPT. | 2023-04-07T02:01:36 | Reuters | China's Alibaba invites businesses to trial AI chatbot -media
SHANGHAI, April 7 (Reuters) - Tech giant Alibaba (9988.HK) is seeking companies to test its Tongyi Qianwen AI chatbot, business publication STAR Market Daily reported on Friday, joining the rush to emulate the explosive success of ChatGPT.
The free-to-use ChatGPT, a large language model (LLM) application created by Microsoft-backed (MSFT.O) OpenAI, was released to the public last November and can generate articles and essays on demand in response to user prompts.
Alibaba has opened up registration for businesses to conduct testing for its AI application, STAR Market reported without specifying details.
A source close to the matter confirmed to Reuters that the application was an LLM targeted at business users.
Alibaba's cloud computing division published a teaser on Friday, posting a message on social media simply stating: "Hello, my name is Tongyi Qianwen, this is our first time meeting, I welcome your feedback."
The official website for the chatbot application merely has boxes to enter phone numbers and email addresses to request an invitation but provides no specific details about its exact use.
Alibaba Cloud did not respond immediately to an emailed request for comment.
A formal launch is expected at an Alibaba Cloud event on Tuesday. Daniel Zhang, CEO of Alibaba Group as well as the company's cloud division, is scheduled to speak at the event.
Others to have joined the AI chatbot race include Baidu Inc (9998.HK), with its Ernie Bot application open only to trial users at the moment.
On Saturday network gear maker Huawei Technologies (HTW.UL) is due to stage an event unveiling Pangu, its natural language processing (NLP) AI model.
SenseTime is also holding an event next week to showcase "cutting-edge advancements in artificial intelligence software".
Last week Alibaba announced that it will restructure into six standalone divisions, each with its own board and CEO. Zhang is set to stay as the cloud division's CEO.
Our Standards: The Thomson Reuters Trust Principles. | MSFT |
https://finnhub.io/api/news?id=4285f98b2bb8aacb0ed76f4a1e3239facc6e3eac3f490e297784607e276bf10c | Dividend Growth Investing Like Peter Lynch | Although Peter Lynch wasn't explicitly a dividend growth investor, his principles and advice are highly applicable to a dividend growth strategy. Read more here. | 2023-04-07T02:00:00 | SeekingAlpha | Dividend Growth Investing Like Peter Lynch
Summary
- Although Peter Lynch wasn't explicitly a dividend growth investor, his principles and advice are highly applicable to a dividend growth strategy.
- Certain categories and sectors of stocks work better for dividend growth investors than others.
- Lynch's advice from 30 years ago on investing through a bear market or recession is both simple and timeless.
- Looking for more investing ideas like this one? Get them exclusively at High Yield Landlord. Learn More »
"The dividend is such an important factor in the success of many stocks that you could hardly go wrong by making an entire portfolio of companies that have raised their dividends for 10 or 20 years in a row." --Peter Lynch, "Beating The Street"
Peter Lynch: famed manager of the highly successful Fidelity Magellan Fund from 1977 to 1990, author of bestselling investing books, and... dividend growth investor?
Well, not really. Lynch never exclusively or even primarily focused on dividend stocks per se, but his investment strategy and philosophy are highly conducive to dividend growth investing.
Back in December, I wrote an article titled "Dividend Investing Like Peter Lynch" that discussed how four of Lynch's key investing principles can be applied by DGIers:
- Invest in what you know
- Know what you invest in
- Focus on growth at a reasonable price
- Know what categories of stocks your portfolio is concentrated in
Using that first article as an informational foundation, in this article I want to delve more into Peter Lynch's investing process and principles and explore how they can be useful to dividend growth investors in particular.
The Best Categories of Stocks For Dividend Growth Investors
Here's how I labeled many of my own dividend stock holdings in Lynch's six stock categories back in that December article:
|Slow Growers||W. P. Carey (WPC), National Retail Properties (NNN), Spirit Realty (SRC), Enterprise Products Partners (EPD), Kinder Morgan (KMI), Enbridge (ENB), Conagra Brands (CAG), Unilever (UL), Verizon (VZ)|
|Stalwarts||Agree Realty (ADC), Clearway Energy (CWEN.A), Crown Castle (CCI), Essential Properties Realty (EPRT), Medtronic (MDT), Brookfield Renewable (BEP), Mid-America Apartment (MAA)|
|Fast Growers||NextEra Energy Partners (NEP), Medifast (MED), Innovative Industrial Properties (IIPR), National Storage Affiliates (NSA), Booz Allen Hamilton (BAH), Snap-on (SNA), EastGroup Properties (EGP)|
|Cyclicals||Avient Corporation (AVNT), Packaging Corporation of America (PKG), TotalEnergies (TTE), Whirlpool (WHR), Leggett & Platt (LEG)|
|Turnarounds||Intel (INTC), Algonquin Power & Utilities (AQN)|
|Asset Opportunities||VICI Properties (VICI), Armada Hoffler Properties (AHH), Bar Harbor Bankshares (BHB)|
In that last article, I didn't offer much commentary on this other than to point out that most of my holdings fall into the categories of "fast growers," "slow growers," and "stalwarts." I like it this way. In fact, add in the "cyclicals" category, and these four types of stocks are the primary, perhaps only, ones that DGIers should consider.
Why not turnarounds?
The two I listed in December were Intel (INTC) and Algonquin (AQN). Both stocks had already been beaten down by whirlwinds of bad news. Both businesses had gotten themselves in trouble for various reasons. But if management could navigate the storm, the turnarounds could generate massive returns!
Turnaround stories always sound compelling and exciting. Intel is building semiconductor fabrication plants to help end the world's reliance on Taiwan for specialized chips! Algonquin is rapidly expanding its portfolio of tax credit-backed renewable energy assets that will save the world from becoming a giant fireball!
But turnarounds are not easy. And dividends rarely survive them.
After that article was written, both INTC and AQN cut their dividends, the former by 66% and the latter by 40%.
When a company needs to turn things around in a major way, the dividend is often one of the most obvious ways to reset costs lower and preserve cash for investment.
How about "asset opportunities"?
The three I listed above as asset opportunities (VICI, AHH, and BHB) are not, upon further thought, really asset opportunities. The assets may be stronger than the market gives them credit for, but that doesn't mean the market has completely overlooked them. VICI and BHB are probably better categorized as stalwarts, while AHH is most likely a slow grower.
A true asset opportunity is usually found in niche industries that few understand. Lynch cites the examples of miners, certain corners of oil & gas, newspapers, TV stations, and patented drugs.
An obvious asset opportunity today might be EPR Properties (EPR). The REIT derives about 40% of revenue and 50% of NOI from movie theaters, which worries investors because of the continuing problems theater operators face today. But half of NOI and over half of revenue derives from other entertainment and experiential properties with fewer tenant issues. These include ski resorts, water parks, and Top Golf locations.
One could certainly make the argument that, based on valuation, an investor who buys EPR today is basically just buying the non-theater assets and getting whatever upside remains from the theaters for free. That, in my estimation, is a true asset opportunity.
But for the most part, long-term DGIers focused on safely and steadily compounding their total dividend income would do well to fish in other ponds besides asset opportunities.
You might think that DGIers should avoid cyclicals as well, based on the elevated risk of dividend cuts during the down legs of whatever cycle in which they participate.
But as illustrated by the example of Leggett & Platt (LEG), a Dividend King with a 51-year dividend growth record, companies operating in cyclical industries can certainly make consistent long-term dividend growers through conservative cash management and prudent capital allocation. I discussed this in my recent "Strong Buy"-rated article on LEG.
Avoidance of Tech Stocks
In 2000 (the peak year for the dot com bubble), Lynch wrote in the introduction of the Millennium Edition of "One Up On Wall Street":
[S]o far the Internet has passed me by. All along I've been technophobic. My experience shows you don't have to be trendy to succeed as an investor. In fact, most great investors I know (Warren Buffett, for starters) are technophobes. They don't own what they don't understand, and neither do I. ("One Up On Wall Street" pg. 11)
But while Lynch avoided the tech stocks that are driven higher by investor euphoria and FOMO, he wasn't at all ignorant about the benefits that come from technological innovations. The key point Lynch recognized is that "users of technology are the biggest beneficiaries of high-tech."
As Lynch puts it elsewhere in the book:
Instead of investing in computer companies that struggle to survive in an endless price war, why not invest in a company that benefits from the price war? ("One Up On Wall Street" pg. 142)
I gave two examples of this (users rather than proprietors of technology) in a December article titled "Forget Robotics Stocks - Buy These 2 High Yield Stocks Instead." Given the seemingly permanent labor shortage now before us, robots and automation may very well become the next hot sector to invest in.
But rather than buy the robot maker who has to compete on price with dozens of other players in this space, I'd prefer to own a REIT like W.P. Carey (WPC), which owns high-tech, Class A manufacturing facilities that make use of these robots.
DGIers have another reason to be skeptical about owning the hottest tech stocks.
There's the obvious reason that many of them, like Alphabet/Google (GOOG) and Meta/Facebook (META), don't pay dividends at all. Moreover, there are no indications that these companies are going to start paying dividends anytime soon. If you are disciplined about sticking to any particular investment strategy, you have to live with the fact that there will be some solid companies you don't own simply because they don't fit your strategy.
But there are some venerated tech companies that do pay dividends but do not make good dividend growth investments. This may be controversial, so let me explain it.
Take the example of Microsoft (MSFT). Few would dispute that this is one of the highest quality companies in the world by practically any metric you'd like to use. And it pays a regularly growing dividend! But MSFT still isn't a good dividend growth stock.
Just think through the math. MSFT currently offers a very low dividend yield of 0.93%. Yes, you say, but the growth makes up for it!
In the last ten years, MSFT's dividend has grown at a CAGR of 12%. If MSFT raises its dividend at the same pace over the next decade, buyers at today's price will end up with a 10-year yield-on-cost of... 2.9%. What if MSFT's dividend growth rate increases all the way to 20% per year? You'd still end up with a 10-year YoC of only 5.8%.
Investors primarily concerned with generating strong total returns may do very well with MSFT. But those primarily concerned with optimizing their portfolio for dividend income will have to look elsewhere.
The same goes for Apple (AAPL). This world-changing company sports a dividend yield of 0.56%. In the past decade, it has grown its dividend at a CAGR of 12.5%. If that same pace continued for the next decade, buyers today would end up with a 10-year YoC of 1.8%. That's about the same as what the S&P 500 (SPY) yields today!
What if AAPL doubles its dividend CAGR to 25%? Buying today, you'd still only end up with a 10-year YoC of 5.2%.
Again, I am not disputing AAPL's quality, nor do I necessarily think it's overvalued. But if one's goal is to retire in 10 or 15 years on their portfolio income without having to sell the principal, AAPL probably isn't the place to look.
Lynch's Advice For Investing In Bear Markets
If you define "bear market" as the period when the stock market falls at least 20% and has not yet regained a new high, then we've been in a bear market for about a year now.
If you're anything like me, you spend most of the time during bull markets looking forward to bear markets, and most of the time during bear markets worrying about how bad things could get with your holdings. But if you have done your homework and chosen good businesses with strong balance sheets and enduring fundamentals, the real danger in losing money during bear markets comes from yourself.
The key to making money in stocks is not to get scared out of them. This point cannot be overemphasized. ("Beating The Street" pg. 36)
Even some of the best companies see stock price declines during bear markets. A necessary skill of investors is the ability to sit on paper losses, even big ones, without selling, so long as the long-term investment thesis remains intact.
And every long-term investment thesis must include the assumption of economic cycles: ups and downs in GDP growth, inflation, and interest rates. If you believe your holdings are resilient in the face of these swings, then you will have more of a mind to go on offense in scary times rather than remain on defense.
A stock-market decline is as routine as a January blizzard in Colorado. If you're prepared, it can't hurt you. A decline is a great opportunity to pick up bargains left behind by investors who are fleeing the storm in panic. ("Beating The Street" pg. 306)
This is why contrarianism is so celebrated in stock investing. If the market is euphoric and can't see any problems whatsoever, it's probably time to be cautious.
If an investor feels a panicky urge to buy a stock right away because the price used to be $100 and now is up to $150, the market gods are trying to teach them a lesson about patience. If, on the other hand, an investor feels a panicky urge to sell because the price keeps dropping and, despite all research, can't see why, it may simply be a melodramatic mood swing in the market.
This contrarian ability to be happy when the market is sad and sad when the market is happy played a big part in Lynch's success.
Recessions, I figure, will always end sooner or later, and in a beaten-down market there are bargains everywhere you look, but in an overpriced market it's hard to find anything worth buying. ("Beating The Street" pg. 142)
In conclusion, I believe Lynch's advice to DGIers would be:
- Fish in the ponds that work best for your strategy.
- Avoid the most popular, the most sexy, and the most cutting edge techy names about which people say that "valuation doesn't matter" or "just 1% of the total addressable market would represent massive growth."
- Invest at the intersection of attractive yield and attractive growth.
- When the bear smiles at you, don't run. Smile back.
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I write about high-quality dividend growth stocks with the goal of generating the safest, largest, and fastest growing passive income stream possible. My style might be called "Quality at a Reasonable Price" (QARP) in service to the larger strategy of low-risk, low-maintenance, low-turnover dividend growth investing. Since my ideal holding period is "lifelong," my focus is on portfolio income growth rather than total returns.
My background and previous work experience is in commercial real estate, which is why I tend to heavily focus on real estate investment trusts ("REITs"). Currently, I write for the investing group, High Yield Landlord.
Analyst’s Disclosure: I/we have a beneficial long position in the shares of WPC, NNN, EPD, KMI, ENB, CAG, UL, VZ, ADC, CWEN.A, CCI, EPRT, MDT, BEP, MAA, NEP, MED, IIPR, NSA, EGP, PKG, WHR, LEG, VICI, AHH, BHB either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.
Comments (39)
Best Luck
John
Great investors & management should just be owned & not traded
And depending on which stage of the investment lifecycle that an investor resides in, a simple handful ETFs portfolio can satisfy the criteria needed for each stage. Starting with five principles of investing that greatly increase the odds of investment and compounding success ( with academic research cited ):1) Holding period ( Seigel, Ellis ) hold equity assets for 20+ year periods https://imgur.com/a/0Th38G32) "Value" stocks ( Fama ) hold equity asset classes that have shown highest return premia in excess of risk free rate ( small & large cap value https://imgur.com/a/L3mXAl5 )3) Diversification ( Malkiel, Bessembinder ) hold a widely diversified portfolio of small and large value stocks by investing in passively managed, low expense, exchange traded value funds4) Fees. avoid annual wealth management AUM fees ( Sharpe, Malkiel ). If you absolutely have to use a wealth manager, pay hourly fees or not more than .25% fee annually5) Watch "behavior" . Trading / gambling effects, overconfidence, fear of missing out, loss aversion, etc. ( Shiller, Kahneman)For an investor in their "accumulation stage", a decent diversified low expense ETF portfolio falling under the guise of these principles, adds the Nasdaq 100 index (QQQ) to principles # 2 and 3: https://tinyurl.com/2wn5cvm6 .When the investor approaches / enters the "deccumulation" or "income" stage, they can transition out of the QQQ allocation, and into Berkshire Hathaway, as the addition of BRK to the "value" allocation ( as opposed to a duration asset allocation ) adds the unique conglomerate operations specific to BRK - those of which "thrown off" cash and which translates into a higher share price. Research shows that this portfolio has sustained between a "3.5% - 7%" inflation adj annual withdrawal rate ( "sale of shares", dividends internally reinvested ), accompanied by terminal portfolio growth, over eighteen rolling 20 year periods since 1986 https://tinyurl.com/3z5vnfyr .
I believe it’s been shown that lower yielding, faster growing dividend stocks can payoff more than higher yielding, slower growth stocks.You can then convert to higher yielding securities when you get older. VIG, who I don’t own would be a good example for faster growing dividend stocks.
I am 70, so I am past those days, but for a younger investor, faster growing dividend stocks could be good to own.
You can own as long as you want | MSFT |
https://finnhub.io/api/news?id=97ff151328fdec5ed753050458efa1e892f958c3ec58d73a72e81eed612fe794 | U.S. economy adds more jobs, slightly fewer than expected. Is this your last chance to jump ship? | Looking for stock market analysis and research with proves results? Zacks.com offers in-depth financial research with over 30years of proven results. | 2023-04-07T00:47:00 | MarketWatch | This page has not been authorized, sponsored, or otherwise approved or endorsed by the companies represented herein. Each of the company logos represented herein are trademarks of Microsoft Corporation; Dow Jones & Company; Nasdaq, Inc.; Forbes Media, LLC; Investor's Business Daily, Inc.; and Morningstar, Inc.
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At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors. This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system. Since 1988 it has more than doubled the S&P 500 with an average gain of +24.17% per year. These returns cover a period from January 1, 1988 through May 15, 2023. Zacks Rank stock-rating system returns are computed monthly based on the beginning of the month and end of the month Zacks Rank stock prices plus any dividends received during that particular month. A simple, equally-weighted average return of all Zacks Rank stocks is calculated to determine the monthly return. The monthly returns are then compounded to arrive at the annual return. Only Zacks Rank stocks included in Zacks hypothetical portfolios at the beginning of each month are included in the return calculations. Zacks Ranks stocks can, and often do, change throughout the month. Certain Zacks Rank stocks for which no month-end price was available, pricing information was not collected, or for certain other reasons have been excluded from these return calculations.
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https://finnhub.io/api/news?id=52018cd7ec01515b008f7163db723b962c05c6aea2a6bceced3d00e1ed0e0892 | 10 Blue-Chip Tech Stocks For Growing Dividends | Looking for stock market analysis and research with proves results? Zacks.com offers in-depth financial research with over 30years of proven results. | 2023-04-06T22:00:00 | TalkMarkets | This page has not been authorized, sponsored, or otherwise approved or endorsed by the companies represented herein. Each of the company logos represented herein are trademarks of Microsoft Corporation; Dow Jones & Company; Nasdaq, Inc.; Forbes Media, LLC; Investor's Business Daily, Inc.; and Morningstar, Inc.
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https://finnhub.io/api/news?id=0e3d0900ebb9bd0bc90e76b4419a161f7b836b203e8954e54a52e91828164d7a | Tech Stocks Have Been on Fire. Earnings Could Spell Trouble. | The first quarter was a profitable one for tech stocks, but now Big Tech has to report earnings—and investors might not love what they see. | 2023-04-06T20:00:00 | MarketWatch | Ah, April. The crack of the bat. The smell of fresh-cut grass. The frantic search for year-old receipts. And the sound of conference calls ringing in the air. It’s baseball season. It’s tax season. And even better, it’s first-quarter earnings season.
The first quarter of 2023 was a remarkably profitable one for tech investors, helping to turn the corner on a nightmarish 2022. Stocks that were pummeled last year have rebounded with strong gains. The seven tech companies with market values above $500 billion— Apple (ticker: AAPL), Microsoft (MSFT), Alphabet (GOOGL), Amazon.com (AMZN), Nvidia (NVDA), Tesla (TSLA), and Meta Platforms (META)—have each rallied at least 20% in 2023, outstripping a 7% gain for the S&P 500 index. Investors think the Federal Reserve is nearly finished tightening monetary policy—and they anticipate steady and then declining rates. As a result, miserable first-quarter results—and they almost certainly are going to be pretty bad—might not matter.
You could see that dynamic in the recent earnings report from memory-chip producer Micron Technology (MU). With PC and smartphone demand flagging—and many customers oversupplied with inventory—Micron’s financial results cratered. For its quarter ended March 2, Micron’s revenue plunged 53% from a year earlier. But Micron said customers are cleaning up their inventory issues and predicted that results will show sequential growth from here. By 2025, Micron said, its total addressable market would be at a record level, aided by growth in automotive and industrial applications. “It was a tough quarter, but we are seeing good, positive signs for the future,” Sumit Sadana, Micron’s chief business officer, tells me.
Read More
I suspect that’s going to be the theme running through first-quarter earnings season: Conditions aren’t great, but they should get better soon. The question is how much improvement has already been discounted in stocks—after buying the rumor, it might be time to sell the news.
Here are some key questions and themes to look for in the weeks ahead.
The New Netflix. The streaming-video service kicks off tech earnings season on April 18 with a quarter that will mark a fundamental shift in its reporting practices. Starting with the 2022 fourth quarter, Netflix (NFLX) stopped providing specific guidance on subscriber growth—although it will still report its total subscribers at the end of the quarter. That could lead to surprises around subscriber numbers and more volatility for the stock. Meanwhile, investors will be looking for signs of progress on the company’s two big initiatives—advertising and a crackdown on password sharing. Netflix has projected “modest” positive net subscriber growth in the quarter, with revenue of $8.2 billion—growing just 4%—and profits of $2.82 a share. Another change: This will be the first call without Reed Hastings, who last quarter gave up the CEO role to become executive chairman.
The Year of Efficiency, Part III. Shares of Meta Platforms have surged nearly 80% this year, thanks to CEO Mark Zuckerberg’s decision to placate investors and rein in spending. Meta, which operates Facebook, Instagram, and WhatsApp, cut 11,000 jobs shortly after a poorly received third-quarter earnings report, and recently chopped 10,000 more. On the last Meta earnings call, Zuckerberg declared 2023 to be “the year of efficiency,” talked up artificial intelligence, and largely ignored the metaverse, the initiative that he once considered so important that he changed the company’s name.
Meta investors will be looking for updates on efficiency moves—and any evidence that they will spur the company’s sagging growth. Wall Street sees a 1% year-over-year first-quarter revenue dip, reflecting a still weak advertising market. Shareholders await updates on monetizing Reels, the company’s TikTok competitor, particularly given recent pressure in Washington to ban TikTok. Zuckerberg will surely continue to talk about AI, and probably not so much about the metaverse.
Thin Cloud Cover. Amazon shares have rallied 24% this year, and Microsoft is up 20%—no thanks to their cloud businesses. Amazon Web Services and Microsoft Azure continue to dominate cloud computing, but both have suffered a multiquarter deceleration, as customers tighten budgets. This past week, research firm IDC trimmed its 2023 enterprise spending forecast for the fifth month in a row. According to FactSet, analysts see March-quarter AWS growth of 17%, down from 20% in December and 27% in September; for Azure, consensus estimates call for 28% growth, down from 31%, 35%, 40%, and 46% growth, respectively, over the four prior quarters. But as with Micron, the thinking on the Street is that things get better from here—that recession or no, the transition to cloud computing will continue. There are some near-term worries: for Microsoft, soft PC demand; for Amazon, sluggish online-shopping growth.
Cashing Out. Apple is almost certainly going to raise its dividend and expand its stock-buyback program when the company reports next month. But there are tough questions for Apple about reviving growth. Wall Street sees revenue declining 4% in the March quarter and 1% for the full year. This past week, Apple contract manufacturer Foxconn said it expected business to decline in the second quarter.
For Apple investors, the focus is on this fall’s release of the iPhone 15 and, before that, an expected launch of virtual- and mixed-reality products. The outstanding question is how Apple is planning to take advantage of AI. I’ll have to ask ChatGPT.
Write to Eric J. Savitz at eric.savitz@barrons.com | MSFT |
https://finnhub.io/api/news?id=d538292812cbadee4f1c25e9530832e43e5d340e5e63afaf6453792ac03a2ae2 | Tech Stocks Have Turned the Corner. Why Earnings Could Still Spell Trouble. | The first quarter was a profitable one for tech stocks, but now Big Tech has to report earnings—and investors might not love what they see. | 2023-04-06T20:00:00 | MarketWatch | Ah, April. The crack of the bat. The smell of fresh-cut grass. The frantic search for year-old receipts. And the sound of conference calls ringing in the air. It’s baseball season. It’s tax season. And even better, it’s first-quarter earnings season.
The first quarter of 2023 was a remarkably profitable one for tech investors, helping to turn the corner on a nightmarish 2022. Stocks that were pummeled last year have rebounded with strong gains. The seven tech companies with market values above $500 billion— Apple (ticker: AAPL), Microsoft (MSFT), Alphabet (GOOGL), Amazon.com (AMZN), Nvidia (NVDA), Tesla (TSLA), and Meta Platforms (META)—have each rallied at least 20% in 2023, outstripping a 7% gain for the S&P 500 index. Investors think the Federal Reserve is nearly finished tightening monetary policy—and they anticipate steady and then declining rates. As a result, miserable first-quarter results—and they almost certainly are going to be pretty bad—might not matter.
You could see that dynamic in the recent earnings report from memory-chip producer Micron Technology (MU). With PC and smartphone demand flagging—and many customers oversupplied with inventory—Micron’s financial results cratered. For its quarter ended March 2, Micron’s revenue plunged 53% from a year earlier. But Micron said customers are cleaning up their inventory issues and predicted that results will show sequential growth from here. By 2025, Micron said, its total addressable market would be at a record level, aided by growth in automotive and industrial applications. “It was a tough quarter, but we are seeing good, positive signs for the future,” Sumit Sadana, Micron’s chief business officer, tells me.
Read More
I suspect that’s going to be the theme running through first-quarter earnings season: Conditions aren’t great, but they should get better soon. The question is how much improvement has already been discounted in stocks—after buying the rumor, it might be time to sell the news.
Here are some key questions and themes to look for in the weeks ahead.
The New Netflix. The streaming-video service kicks off tech earnings season on April 18 with a quarter that will mark a fundamental shift in its reporting practices. Starting with the 2022 fourth quarter, Netflix (NFLX) stopped providing specific guidance on subscriber growth—although it will still report its total subscribers at the end of the quarter. That could lead to surprises around subscriber numbers and more volatility for the stock. Meanwhile, investors will be looking for signs of progress on the company’s two big initiatives—advertising and a crackdown on password sharing. Netflix has projected “modest” positive net subscriber growth in the quarter, with revenue of $8.2 billion—growing just 4%—and profits of $2.82 a share. Another change: This will be the first call without Reed Hastings, who last quarter gave up the CEO role to become executive chairman.
The Year of Efficiency, Part III. Shares of Meta Platforms have surged nearly 80% this year, thanks to CEO Mark Zuckerberg’s decision to placate investors and rein in spending. Meta, which operates Facebook, Instagram, and WhatsApp, cut 11,000 jobs shortly after a poorly received third-quarter earnings report, and recently chopped 10,000 more. On the last Meta earnings call, Zuckerberg declared 2023 to be “the year of efficiency,” talked up artificial intelligence, and largely ignored the metaverse, the initiative that he once considered so important that he changed the company’s name.
Meta investors will be looking for updates on efficiency moves—and any evidence that they will spur the company’s sagging growth. Wall Street sees a 1% year-over-year first-quarter revenue dip, reflecting a still weak advertising market. Shareholders await updates on monetizing Reels, the company’s TikTok competitor, particularly given recent pressure in Washington to ban TikTok. Zuckerberg will surely continue to talk about AI, and probably not so much about the metaverse.
Thin Cloud Cover. Amazon shares have rallied 24% this year, and Microsoft is up 20%—no thanks to their cloud businesses. Amazon Web Services and Microsoft Azure continue to dominate cloud computing, but both have suffered a multiquarter deceleration, as customers tighten budgets. This past week, research firm IDC trimmed its 2023 enterprise spending forecast for the fifth month in a row. According to FactSet, analysts see March-quarter AWS growth of 17%, down from 20% in December and 27% in September; for Azure, consensus estimates call for 28% growth, down from 31%, 35%, 40%, and 46% growth, respectively, over the four prior quarters. But as with Micron, the thinking on the Street is that things get better from here—that recession or no, the transition to cloud computing will continue. There are some near-term worries: for Microsoft, soft PC demand; for Amazon, sluggish online-shopping growth.
Cashing Out. Apple is almost certainly going to raise its dividend and expand its stock-buyback program when the company reports next month. But there are tough questions for Apple about reviving growth. Wall Street sees revenue declining 4% in the March quarter and 1% for the full year. This past week, Apple contract manufacturer Foxconn said it expected business to decline in the second quarter.
For Apple investors, the focus is on this fall’s release of the iPhone 15 and, before that, an expected launch of virtual- and mixed-reality products. The outstanding question is how Apple is planning to take advantage of AI. I’ll have to ask ChatGPT.
Write to Eric J. Savitz at eric.savitz@barrons.com | MSFT |
https://finnhub.io/api/news?id=b555c30093e3a51a66ae9e8dfeed360e00fd69d933822d85c54497038fa5904d | Tech companies are hiring ��� a lot ��� despite recent wave of layoffs | Looking for stock market analysis and research with proves results? Zacks.com offers in-depth financial research with over 30years of proven results. | 2023-04-06T19:01:00 | MarketWatch | This page has not been authorized, sponsored, or otherwise approved or endorsed by the companies represented herein. Each of the company logos represented herein are trademarks of Microsoft Corporation; Dow Jones & Company; Nasdaq, Inc.; Forbes Media, LLC; Investor's Business Daily, Inc.; and Morningstar, Inc.
Copyright 2023 Zacks Investment Research | 10 S Riverside Plaza Suite #1600 | Chicago, IL 60606
At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors. This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system. Since 1988 it has more than doubled the S&P 500 with an average gain of +24.17% per year. These returns cover a period from January 1, 1988 through May 15, 2023. Zacks Rank stock-rating system returns are computed monthly based on the beginning of the month and end of the month Zacks Rank stock prices plus any dividends received during that particular month. A simple, equally-weighted average return of all Zacks Rank stocks is calculated to determine the monthly return. The monthly returns are then compounded to arrive at the annual return. Only Zacks Rank stocks included in Zacks hypothetical portfolios at the beginning of each month are included in the return calculations. Zacks Ranks stocks can, and often do, change throughout the month. Certain Zacks Rank stocks for which no month-end price was available, pricing information was not collected, or for certain other reasons have been excluded from these return calculations.
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https://finnhub.io/api/news?id=3027a3115726cfaf297afda435021f8a0217f8cb175de701293afdd35e29cde8 | With the unemployment rate now at 3.5%, is this your last chance to jump ship? | Looking for stock market analysis and research with proves results? Zacks.com offers in-depth financial research with over 30years of proven results. | 2023-04-06T19:00:00 | MarketWatch | This page has not been authorized, sponsored, or otherwise approved or endorsed by the companies represented herein. Each of the company logos represented herein are trademarks of Microsoft Corporation; Dow Jones & Company; Nasdaq, Inc.; Forbes Media, LLC; Investor's Business Daily, Inc.; and Morningstar, Inc.
Copyright 2023 Zacks Investment Research | 10 S Riverside Plaza Suite #1600 | Chicago, IL 60606
At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors. This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system. Since 1988 it has more than doubled the S&P 500 with an average gain of +24.17% per year. These returns cover a period from January 1, 1988 through May 15, 2023. Zacks Rank stock-rating system returns are computed monthly based on the beginning of the month and end of the month Zacks Rank stock prices plus any dividends received during that particular month. A simple, equally-weighted average return of all Zacks Rank stocks is calculated to determine the monthly return. The monthly returns are then compounded to arrive at the annual return. Only Zacks Rank stocks included in Zacks hypothetical portfolios at the beginning of each month are included in the return calculations. Zacks Ranks stocks can, and often do, change throughout the month. Certain Zacks Rank stocks for which no month-end price was available, pricing information was not collected, or for certain other reasons have been excluded from these return calculations.
Visit Performance Disclosure for information about the performance numbers displayed above.
Visit www.zacksdata.com to get our data and content for your mobile app or website.
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https://finnhub.io/api/news?id=fc4e87ccf78251422abc64f6d20dbb962e96e3492a23902c61608b354daae5c3 | Catalyst Watch: Eyes on inflation data, big bank earnings | Looking for stock market analysis and research with proves results? Zacks.com offers in-depth financial research with over 30years of proven results. | 2023-04-06T18:17:00 | Seeking Alpha | This page has not been authorized, sponsored, or otherwise approved or endorsed by the companies represented herein. Each of the company logos represented herein are trademarks of Microsoft Corporation; Dow Jones & Company; Nasdaq, Inc.; Forbes Media, LLC; Investor's Business Daily, Inc.; and Morningstar, Inc.
Copyright 2023 Zacks Investment Research | 10 S Riverside Plaza Suite #1600 | Chicago, IL 60606
At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors. This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system. Since 1988 it has more than doubled the S&P 500 with an average gain of +24.17% per year. These returns cover a period from January 1, 1988 through May 15, 2023. Zacks Rank stock-rating system returns are computed monthly based on the beginning of the month and end of the month Zacks Rank stock prices plus any dividends received during that particular month. A simple, equally-weighted average return of all Zacks Rank stocks is calculated to determine the monthly return. The monthly returns are then compounded to arrive at the annual return. Only Zacks Rank stocks included in Zacks hypothetical portfolios at the beginning of each month are included in the return calculations. Zacks Ranks stocks can, and often do, change throughout the month. Certain Zacks Rank stocks for which no month-end price was available, pricing information was not collected, or for certain other reasons have been excluded from these return calculations.
Visit Performance Disclosure for information about the performance numbers displayed above.
Visit www.zacksdata.com to get our data and content for your mobile app or website.
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https://finnhub.io/api/news?id=421b004ab2b380c633d272f36bde111da23ed9ef2a03bc7a648a8ab91b5e16d8 | Fintech Jack Henry Is Safe From Banking Turmoil. Buy the Stock While It’s Cheap. | Financial-software provider Jack Henry & Associates, at its cheapest valuation in years, can keep prospering even if banks continue to stumble. | 2023-04-06T18:00:00 | MarketWatch | In any short-term market turbulence or panic, babies are inevitably thrown out with the bathwater—companies whose stocks are dragged down by association with more-troubled businesses.
March’s banking turmoil is one such episode of investors throwing out the bathwater: The S&P 500 financials sector has lost 13% of its value since mid-February, led by a 28% decline for bank stocks in the index. Financial-software provider Jack Henry & Associates (ticker: JKHY) is the baby.
Investors can be forgiven for their “shoot first, ask questions later” trading. Jack Henry’s customer base includes some 8,000 small banks and other financial institutions—the group at the very center of the recent turbulence. Jack Henry’s shares have declined 15% this year—to their cheapest valuation in years—after returning 18% annually over the prior decade.
Analysts’ consensus price target is now about $175, or some 20% above the stock’s recent $148. Jack Henry has a market value of about $11 billion and minimal debt, and the stock carries an annual dividend yield of 1.4%.
The long-term trends in Jack Henry’s business remain intact—banking crisis or not. Its core business is providing the software that runs a bank’s everyday operations. That means the information-technology systems that banks rely on to open and keep track of customer accounts, process checks, and manage loans and deposits—all of the nondiscretionary services for banks that are akin to keeping the lights on.
“Almost everything you need to run a bank or credit union in the U.S., you can get from Jack Henry,” says David Foss, the company’s CEO and chairman.
The Monett, Mo.–based firm competes with the likes of Fidelity National Information Services (FIS) and Fiserv (FISV). Jack Henry’s sweet spot is with banks and credit unions ranging from about $500 million to $50 billion in assets. Foss pegs its market share at about 19% of U.S. banks and 14% of credit unions, including nearly half of those with at least $1 billion in assets.
Short of widespread bank and credit-union failures among Jack Henry’s massive and diverse customer base, the company’s revenue won’t be affected much as a result of the past six weeks’ action. More than 80% is recurring on a subscription basis, with contracts that average seven years in length. Those sales may be tied to a bank’s total assets or quantity of accounts, or to the number of members at a credit union. Some revenue is more transaction-based, including debit-card or check payments—and management warned earlier this year about the potential for that business to slow this year. Importantly, none of Jack Henry’s contracts tie its sales to the total value of deposits.
“I believe there’s a misconception in the market right now that if deposits potentially move over to the largest banks, then Jack Henry will be negatively affected,” says UBS analyst Rayna Kumar. “But no—as long as the bank exists, Jack Henry will still get paid because its model isn’t based on deposits.”
Kumar has a Buy rating and a $184 price target on Jack Henry stock—25% above its recent price. Even during the 2008-09 global financial crisis, the company still managed to report positive revenue growth of 11.5% in its fiscal 2008—which ended in June—and 0.4% in fiscal 2009.
In fact, the company stands to marginally gain from the recent banking fallout, should depositors spread their cash across more distinct banks to keep accounts under the $250,000 Federal Deposit Insurance Corp. insurance limit. That could mean an increase in the portion of Jack Henry’s revenue that depends on the number of accounts at its banking and credit-union customers.
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That same dependability of sales and visibility into the future—paired with steady growth—has earned Jack Henry stock a relatively rich valuation multiple in recent years. The early-2023 declines present an attractive entry point.
“Given the stickiness of its products and services, we think investors have really overreacted,” says Lori Keith, a portfolio manager of the $5.8 billion Parnassus Mid Cap fund (PARMX), which holds Jack Henry shares.
The stock now trades for about 28 times its forecast earnings over the coming year—its lowest valuation in six years, and compared with an average of 36.5 times over the past five years. Jack Henry trades at a 60% premium to the S&P 500 index’s valuation, versus an average of a 100% premium and a low of 50% over the past half-decade.
Jack Henry’s prospects for growth remain solid. Analyst consensus calls for high-single digit percent annual revenue increases and about 10% earnings-per-share growth in the coming years.
That’s after a relatively weak forecast for fiscal 2023: Wall Street sees EPS of $4.82, down 2% from fiscal 2022, on a roughly 6% increase in revenue, to $2.1 billion. Management said earlier this year that early contract-termination fees would be down in fiscal 2023 due to slower bank mergers-and-acquisitions activity than in the previous year. That is lumpier, one-time revenue that is less important than Jack Henry’s subscription-based services.
Even if financial tremors continue and profits are crimped, banks will continue to invest in their IT systems to remain competitive, become more efficient, and replace paper-based processes with digital alternatives. A UBS survey of technology executives at 100 banks and credit unions last year found that 78% planned to increase their spending on the core IT services offered by Jack Henry, while none expected to decrease spending. In addition to growing its business with existing clients, Jack Henry had been adding more than 50 customers a year.
On the core services side, where Jack Henry offers more than 100 different products, the long-term story is a transition from on-premises computing to a private-cloud environment, and then an eventual shift to public-cloud providers like Amazon.com’s (AMZN) AWS and Microsoft’s (MSFT) Azure. That modernization process means more revenue for Jack Henry and greater capabilities for banks, says Foss.
Jack Henry is also pushing complementary services that should generate revenue incremental to its core business. Those include Banno, a white-label digital-banking platform for small banks to keep up with larger, better-resourced banks in the digital era. Revenue there is tied to active users, and the software offerings have economies of scale—as more banks and users get on board, profit margins will expand.
For those weary of banking drama and concerned about more to come, Jack Henry is a way to invest in a supplier to the industry—while staying out of the fray.
Write to Nicholas Jasinski at nicholas.jasinski@barrons.com | MSFT |
https://finnhub.io/api/news?id=e899a07b77d756395950c4f59d82ba17b4f3e1bef56f35d79e8afff06aa776b3 | First Mover Asia: Ethereum's Merge Starts to Hit Gaming Chip Prices | Prices for graphics processing units (GPUs) for personal computers are tumbling as the Ethereum blockchain's upcoming shift to a proof-of-stake network reduces demand for the chips from cryptocurrency miners. | 2022-09-05T15:28:13 | Yahoo | First Mover Asia: Ethereum's Merge Starts to Hit Gaming Chip Prices
Good morning. Here’s what’s happening:
Prices: Bitcoin waffles around $20K for the ninth straight day. Binance plans to halt exchange support for three stablecoins that rival its own BUSD.
Insights: With an end to Ethererum proof-of-work mining on the horizon, thanks to the upcoming Merge and its shift to a proof-of-stake blockchain system, prices for GPUs are dropping like a rock, Sam Reynolds reports.
Catch the latest episodes of CoinDesk TV for insightful interviews with crypto industry leaders and analysis. And sign up for First Mover, our daily newsletter putting the latest moves in crypto markets in context.
Prices
●Bitcoin (BTC): $19,726 −0.7%
●Ether (ETH): $1,593 +1.4%
●S&P 500 daily close: 3,924.26 −1.1%
●Gold: $1,721 per troy ounce +0.7%
●Ten-year Treasury yield daily close: 3.19% −0.07
Bitcoin, ether and gold prices are taken at approximately 4pm New York time. Bitcoin is the CoinDesk Bitcoin Price Index (XBX); Ether is the CoinDesk Ether Price Index (ETX); Gold is the COMEX spot price. Information about CoinDesk Indices can be found at coindesk.com/indices.
Bitcoin Waffles Around $20K and Binance
By Bradley Keoun
Bitcoin (BTC) waffled around the $20,000 mark for the ninth straight day, with traditional markets mostly closed in the U.S. in observance of Labor Day.
As of press time the largest cryptocurrency by market value was changing hands around $19,800, down 0.7% over the past 24 hours. Ether (ETH), the second-largest cryptocurrency, was up 1.7% to $1,598.
Crypto analysts were looking at a pattern in blockchain data known as "dormant supply peaks," suggesting that bitcoin might be poised for a bull run. Another metric called the Puell Multiple indicates that long-term investors have been adding to their stashes as prices declined.
Binance, the world's largest crypto exchange by volume, said it would move to stop supporting the stablecoins USDC, USDP and TUSD, with a plan to automatically convert users' holdings of those coins into its own stablecoin, BUSD, on Sept. 29.
Poolin, one of the largest bitcoin mining pools, suspended withdrawals as part of an effort to preserve assets and stabilize liquidity.
A Brazilian financial regulator barred the Singapore-based crypto exchange Bybit from brokering securities.
Biggest Gainers
Asset
Ticker
Returns
DACS Sector
Terra
+7.0%
Chainlink
+2.2%
Ethereum
+1.4%
Biggest Losers
Asset
Ticker
Returns
DACS Sector
Loopring
−4.3%
Cosmos
−3.0%
Shiba Inu
−2.9%
Insights
Prices for GPU Computer Chips Slide Toward MSRP as Ethereum Merge Approaches
By Sam Reynolds
As cryptocurrency entered the mainstream, the price of graphics processing units (GPU) for personal computers was often tied to the fate of the crypto market because they became popular for cryptocurrency mining. Now, with an end to Ethererum proof-of-work mining on the horizon thanks to the upcoming Merge and its shift to a proof-of-stake blockchain system, prices for GPUs are dropping like a rock.
A bull market for crypto has, in the recent past, come with a bull market for GPU prices. At the height of ether’s 2021 rally, some of the most powerful GPUs were retailing for an average of 114% over their manufacturer’s suggested retail price (MSRP). After all, for proof-of-work-based protocols — what Ethereum uses currently, since its launch in 2015 — GPUs and their parallel processing ability have been essential for mining.
But that was before The Merge. Ethereum’s shift away from computationally intensive proof-of-work to proof-of-stake means that the tens of millions of GPUs purchased over the last four years to mine ether no longer have a use. Some miners are considering moving their operations to Ethereum Classic, but despite the protocol being around for nearly six years it just hasn’t garnered the network effect needed to allure a critical mass of decentralized apps, non-fungible tokens (NFT) or decentralized finance (DeFi).
GPU prices are reflecting this. According to published data from industry analyst house Jon Peddie, overall GPU unit shipments decreased by 15% from last quarter. Part of this comes from a softening PC market, with analysts at IDC forecasting a 12.8% year-over-year decline for 2022. The rapid quarter-over-quarter drop in GPU prices puts the blame squarely on evaporating demand from crypto miners.
According to GPUTracker.eu, prices for some of the most popular GPUs are down by double-digits. The RTX 3080 Ti, a once-favorite for miners, has seen its average selling price drop by 45% in the last quarter, putting it almost at MSRP. In February, the card was being sold for around $2,000; now it's just over $1,100.
In China, wholesalers can’t get rid of these cards fast enough as inventory piles up from mining farms trying to offload supply.
All this is being felt on Nvidia’s (NVDA) bottom line. During recent earnings, the company said its gaming line (read: GPUs that were being used for mining) was down 33% on the year to $2.04 billion – sharper than executives anticipated. Its dedicated crypto mining chip revenue also fell, but sales of these chips represent a small fraction of the silicon the company sold to miners.
In many ways, executives at Nvidia couldn’t be happier. Jensen Huang, Nvidia’s CEO, never was too comfortable with miners pilfering what he thought should have been for gamers or other users of the chips.
“Gaming is growing, workstation is growing, AI hyperscale data center is growing, high-performance computing is growing. Quite frankly, I'd prefer that our GPUs were built to be used in those areas," he was quoted as saying at the company’s annual technology conference in 2018. "My preference would be, of course, that we allocate them for the people we build them for, but there's a logical reason for why [miners use] Nvidia GPUs, because it's the world's largest distributed supercomputer."
It looks like Huang and Nvidia will get their way. They just need the grit to deal with a few quarters of decline that comes just as the broader PC sector comes off its COVID-19 supercycle. The question is, will it recover as quickly without mining? Investors, and the U.S. Securities and Exchange Commission, would like to know.
Headlines
Ether Eyes Price Rally After 'Wedge' Breakout: Ether looked north, having exited a falling wedge pattern last week, analysts said. Buyers remained on the sidelines early Monday as Europe's worsening energy crisis zapped risk appetite.
Citi: Ether Extends Rally Ahead of the Merge Despite Bitcoin Weakness: There are key differences between previous upgrades to the Ethereum blockchain and now because, for the first time, digital assets are facing tightening financial conditions, the bank said.
Parabolic Bitcoin Bull Run Likely After Dormant Coin Supply Peaks, Past Data Suggests: Dormant supply peaks are springboards for upwards price action, one observer said.
Poolin, One of the World's Biggest Bitcoin Mining Pools, Acknowledges Liquidity Issues: Poolin CEO and founder Kevin Pan assured users that funds are safe and said the company might look to debt to solve its liquidity troubles.
LG Picks Lesser-Known Hedera Blockchain for Television NFTs: The consumer electronics company, which has served on the Hedera Governing Council since 2020, is bringing NFTs to television screens through a platform built on the Hedera network.
Australian Federal Police Forms Cryptocurrency Unit to Tackle Money Laundering, Offshoring: The unit was set up after the force's criminal asset confiscation command had seized more than $600 million from the proceeds of crime since its inception in February 2020. | NVDA |
https://finnhub.io/api/news?id=74295f0247b71748f387dad62031886bb330a96e2b60418daa7e5fda24570deb | Tech stocks: MATANA is the new FAANG, analyst says | It's time to rethink who's at the top of the Big Tech food-chain, Constellation Research Principal Analyst & Founder Ray Wang told Yahoo Finance Live. | 2022-09-05T07:55:11 | Yahoo | MATANA is the new FAANG, analyst says
It's time to rethink who's at the top of the Big Tech food-chain, Constellation Research Principal Analyst & Founder Ray Wang told Yahoo Finance Live (video above).
Wang argued that MATANA — Microsoft (MSFT), Apple (AAPL), Tesla (TSLA), Alphabet (GOOG, GOOGL), Nvidia (NVDA), and Amazon (AMZN) – is an upgrade to FAANG by dropping Meta (META) and Netflix (NFLX) while adding Microsoft, Tesla, and Nvidia.
In 2013, when Jim Cramer of CNBC's "Mad Money" coined the term FAANG, many of those companies were thought of as upstarts who'd taken their respective markets by storm. This was especially true of Meta — then Facebook — and Netflix. But now, Wang said, both should be re-assessed. Meta, in particular, needs a new plan.
"Facebook has got to do something besides ads," he told Yahoo Finance. "Once again, they're taking a beating for it. So, is it going to be the glasses? Is it going to be the metaverse? We're not there yet and that's really kind of what the challenge is."
For Netflix, it's a question of growth, and what is and isn't on the table. And because the company's operating on a subscription model, Wang has questions about how much further they could go.
"The reason they're out is because, how many more subscribers? How many more subscriptions are you going to handle?" he said. "Product placement should be where they are, plus the ability to do IP licensing. Look at how Disney makes its money."
Wang stressed that Microsoft, which is often viewed as one of tech's leading legacy names, should be included in the group of tech's most elite leaders (and sometimes has been with the bulky FAAMNG acronym).
"Microsoft has more than just business-to-business and consumer – they've been able to manage both," he said. "They're positioned well for the metaverse. They're positioned well for the cloud and, of course, they've got their gaming business."
Rounding out the new grouping would be Tesla — a well-known success story at this point — and Nvidia.
"Nvidia is a lot more than just the chips that we look at and more than the data center or gaming," Wang said. "They're sitting at the edge between AI, the metaverse, the future of computing, and the way they do their partnerships, they're set up in a way that's going to be dominant for quite some time."
Allie Garfinkle is a Senior Tech Reporter at Yahoo Finance. Follow her on Twitter at @agarfinks.
Download the Yahoo Finance app for Apple or Android.
Follow Yahoo Finance on Twitter, Facebook, Instagram, LinkedIn, and YouTube. | NVDA |
https://finnhub.io/api/news?id=0b9a4215f7a6406648b896df3f303b22aff02add3655bcc904a5c3cd1b4917b7 | Nvidia's China Ban: How Big a Hit Is It? | In this video, I will be talking about the recent China ban imposed on Nvidia (NASDAQ: NVDA) by the U.S. government and how bad it actually is. Nvidia could lose as much as $400 million in sales to China due to new export requirements on its data center chips. | 2022-09-05T07:30:00 | Yahoo | Nvidia's China Ban: How Big a Hit Is It?
In this video, I will be talking about the recent China ban imposed on Nvidia (NASDAQ: NVDA) by the U.S. government and how bad it actually is. Nvidia could lose as much as $400 million in sales to China due to new export requirements on its data center chips. | NVDA |
https://finnhub.io/api/news?id=f39c5ad4cfda811dc7fa588dbd1411ff6e9fea24212795728725af742f7c3e42 | PC Shipments Are Expected to Decline. Is This More Bad News for AMD, Nvidia, and Intel Stock? | Today's video focuses on Nvidia (NASDAQ: NVDA), Advanced Micro Devices (NASDAQ: AMD), and Intel (NASDAQ: INTC) and how each company could be affected by the weakness in PC shipments. Check out the short video to learn more, consider subscribing, and click the special offer link below. | 2022-09-05T07:00:00 | Yahoo | PC Shipments Are Expected to Decline. Is This More Bad News for AMD, Nvidia, and Intel Stock?
Today's video focuses on Nvidia (NASDAQ: NVDA), Advanced Micro Devices (NASDAQ: AMD), and Intel (NASDAQ: INTC) and how each company could be affected by the weakness in PC shipments. Check out the short video to learn more, consider subscribing, and click the special offer link below. | NVDA |
https://finnhub.io/api/news?id=cd465082b1521db76033b2fe9101cf9644a85554f961b347923abba6545e8199 | Why Nvidia Fell 16.9% in August | Shares of the largest chipmaker by market cap, Nvidia (NASDAQ: NVDA), swooned 16.9% in the month of August, according to data from S&P Global Market Intelligence. Like many other technology stocks, Nvidia had a nice July rally. Early in the month, Nvidia warned investors its second-quarter earnings would come in below expectations, especially its graphics segment. | 2022-09-05T05:45:00 | Yahoo | Why Nvidia Fell 16.9% in August
Shares of the largest chipmaker by market cap, Nvidia (NASDAQ: NVDA), swooned 16.9% in the month of August, according to data from S&P Global Market Intelligence. Like many other technology stocks, Nvidia had a nice July rally. Early in the month, Nvidia warned investors its second-quarter earnings would come in below expectations, especially its graphics segment. | NVDA |
https://finnhub.io/api/news?id=d7b0808e0e7944918d883b568ec41d74cdc1eb30c6eac3217e783233605ea90d | Nvidia (NASDAQ:NVDA) Stock Could Still Ride Out Tough U.S. Govt Licensing Norms, Says Top Analyst | Top-rated Needham analyst Rajvindra Gill was left disappointed recently by the U.S. Governmentâs hardened stance on chip exports to China and Russia, terming it a â... | 2022-09-05T05:07:00 | TipRanks | Top-rated Needham analyst Rajvindra Gill was left disappointed recently by the U.S. Government’s hardened stance on chip exports to China and Russia, terming it a “significant headwind” to Nvidia (NASDAQ:NVDA).
Shares of the company have been in a free fall the past month, dropping 28.1%, amid concerns that the new licensing requirements from the U.S. Government could adversely impact its sales to China by around $400 million in Q3 of FY23.
The analyst estimates that the U.S. Government is unlikely to soften its position anytime soon and has lowered his estimates for the U.S. chipmaker.
Data Center Sales Likely to Take a Hit
Analyst Gill believes that this stance is most likely to impact the sales of the A100 Data Centers, which contribute the most in terms of revenues to the Data Center business. He also pointed out that China now represents around 25% of NVDA’s overall data center revenues.
As a result, Gill remains concerned with the slowdown in the spending on data center buildouts by Chinese companies like Alibaba (BABA) and Baidu (BIDU). Moreover, he believes that the Chinese economy is in deterioration and expects this to continue for the rest of this year.
The analyst is of the view that while data center business is NVDA’s growth engine over the long term, competition in the business “will exert pressure on the company’s long-term positioning; however, we believe several industries will transition to AI [artificial intelligence]-based systems faster than before.”
Is NVDA a Buy, Sell or Hold?
The analyst remains bullish on the stock with a Buy rating but has lowered the price target from $185 to $170, implying an upside potential of 24.6% at current levels. However, other analysts on the Street remain cautiously optimistic about NVDA with a Moderate Buy consensus rating based on 23 Buys and eight Holds.
NVDA’s average price prediction of $209.60 implies 53.6% upside potential.
Similarly, financial bloggers are 83% Bullish on NVDA stock, compared to the sector average of 64%.
Concluding Remarks
Analysts are broadly expecting NVDA to take a hit in terms of revenues due to the tough stance of the U.S. Government. However, over the long term, the stock seems poised well and could even ride out this storm.
Read full Disclosure | NVDA |
https://finnhub.io/api/news?id=8fd779662f200bca65959936926a978369aadeacb2e4164bbb128159ff8de6b8 | Better Buy: Nvidia vs. Snowflake | When it comes to quality businesses that are growing rapidly, one company's current profits might give it the edge. | 2022-09-05T04:33:00 | Yahoo | Better Buy: Nvidia vs. Snowflake
When it comes to quality businesses that are growing rapidly, one company's current profits might give it the edge.
When it comes to quality businesses that are growing rapidly, one company's current profits might give it the edge. | NVDA |
https://finnhub.io/api/news?id=a7fff2ac69fe27276371aa5462b6904fabe6f6bb0af929f3f111052788eb8cc2 | 7 Growth Stocks That Could 10X by 2027 | It takes courage and conviction right now to snap up growth stocks to buy that could appreciate 10-fold over the next five years. | 2022-09-05T00:44:00 | InvestorPlace | MarketWatch published an article early in 2022 which highlighted last year’s best-performing S&P 500, mid-cap, small-cap, Nasdaq-100, and Dow 30 stocks. Some of the names on the five lists were cited by analysts as the top growth stocks to buy in 2022.
We know in hindsight that growth stocks weren’t the best bet over the past eight months. That distinction goes to energy stocks. The energy stocks in the S&P 500 jumped almost 45% in the first eight months of 2022. Out of the 11 sectors in the index, utilities is the only one besides energy in positive territory in 2022. The S&P 500’s utilities rose 3.4% through the first eight months of 2022.
For this article, I’m tasked with selecting seven growth stocks to buy that have a better-than-average shot of appreciating ten-fold over the next five years.
I’m going to take at least one name from each of the five MarketWatch lists.
And to qualify for this column, stocks will have to have an average rating of “overweight” or “buy” from Wall Street analysts.
|NVDA||Nvidia||$136.47|
|DKS||Dick’s Sporting Goods||$108.23|
|PRFT||Perficient||$73.49|
|MRNA||Moderna||$138.57|
|AAPL||Apple||$155.81|
|ORLY||O’Reilly Automotive||$702.70|
|CCRN||Cross Country Healthcare||$24.79|
Nvidia (NVDA)
Nvidia (NASDAQ:NVDA) gained 125.5% in 2021. It had tumbled 54% in 2022 through Friday.
However, the analysts remain bullish on NVDA stock. Of the 44 covering NVDA , 35 rate it a “buy” or an “overweight.” Only one analyst has a “sell” rating on it. Their average price target for the shares is $211.02, more than 50% above its current share price.
The chip maker’s three-year annualized average revenue growth is 32%.
That’s the good news. The bad news is that NVDA expects its Q3 revenue to fall by 17% compared to the same period a year earlier. Also, it took a $1.34 billion charge in Q2 to account for the inventory that it wrote down due to slower-than-expected revenue growth.
CEO Jensen Huang remains confident that the gaming market will rebound.
“While Gaming navigates significant short-term macroeconomic challenges, we believe the long-term fundamentals in Gaming remain strong,” Huang stated on the company Q2 earnings conference call.
“NVIDIA RTX has redefined computer graphics and is now supported by almost 300 games and applications. NVIDIA’s GeForce GPUs are the most coveted brand by gamers, representing 15 of the top 15 most popular GPUs on Steam.”
NVDA stock hasn’t been this low since April 2021, more than 17 months ago. I like the chances of its share price rising ten-fold over the next five years.
Dick’s Sporting Goods (DKS)
Dick’s Sporting Goods (NYSE:DKS) gained 116.4% in 2021. It has given 6% back in 2022.
Of the 26 analysts covering DKS stock, 13 rate it a “buy” or an “overweight.” Only one rates it a “sell,” and analysts’ average price target on the name is $124.78, about 16% higher than its current share price.
Investors who did not carefully read the retailer’s earnings report would likely have wrongly concluded that it had a dud of a quarter. It did not. That’s far from the truth.
The 5.1% decline in Dick’s same-store sales may scream “run for the hills,” but the retreat came on the heels of a 20% increase in SSS in Q2 of 2021. Even more impressively, Dick’s net sales of $3.1 billion last quarter were 38% higher than in the same period of 2019.
And, as Executive Chairman Ed Stack pointed out, its earnings before taxes (EBT) in Q2 was equal to its EBT for all of 2019.
“The state of our industry is strong, and we remain in a great lane. DICK’S is the clear market leader, and as a result of our transformation, we are well-positioned to extend our lead and deliver long-term sales and earnings growth,” Stack stated in the company’s quarterly press release.
Maybe DKS stock won’t appreciate ten-fold over the next five years, but you can be darn sure that you won’t lose much on the shares either. Their risk/reward outlook is excellent.
Perficient (PRFT)
Perficient (NASDAQ:PRFT) gained 171% in 2021. It’s down 43% in 2022.
The Missouri-based company is a consulting firm that helps its customers utilize digital technologies to better engage with their customers. It provides its services to healthcare, financial services, manufacturing, automotive firms, and companies in several other industries.
Over the past three years, its average annualized revenue growth was 15.2%. Out of nine analysts, seven rate it a “buy,” with two “holds” and no “sell” recommendations. Their average price target on the shares is $115.25, 52% versus its current level of $72.77.
The company’s Q2 results were excellent. Its revenues rose 21% year-over-year while its earnings per share, excluding some items, jumped 26%. For all of 2022, it expects revenue of $915 million at the midpoint of its guidance. On the bottom line, the midpoint of its outlook equates to adjusted EPS of $4.30
Based on the company’s 2022 guidance, it’s trading at 17.6 times its EPS and 2.9 times its sales. Those are both reasonable given its growth prospects.
In July, the company announced that it would expand in India by adding new locations in Hyderabad and Pune, and increasing the office space in three other cities. The move adds approximately 73,000 square feet of office space for almost 2,000 new employees.
These additions should meaningfully increase its revenue.
Moderna (MRNA)
Moderna (NASDAQ:MRNA) gained 143% in 2021. It’s down 45% in 2022.
August ended with some good news for MRNA. First, it announced on Aug. 31 that the U.S. Food and Drug Administration (FDA) approved the company’s emergency use authorization (EUA) application for its Omicron-targeting Covid-19 booster vaccine for adults 18 and over. A day later, Health Canada issued the same approval.
Moderna will initially supply 12 million doses to Canada, which will have an option to purchase an additional 4.5 million doses.
In early August, Moderna reported its earnings for the first six months of 2022. On the top line, its revenues rose 71% YOY to $10.8 billion. On the bottom line, it earned $6.7 billion from its operations, 56% higher than during the same period a year earlier.
Moderna is generating so much cash that it finished Q2 with $18.1 billion of cash and investments, up from $17.6 billion at the end of December. Moderna is trading at three times its cash. That’s a cheap valuation.
Despite its low valuation, analysts are lukewarm on MRNA. Of the 19 analysts covering its stock, only seven rate it “overweight” or “buy.” Most have “hold” ratings on it and one has an outright “sell” rating on the shares. However, the analysts’ median target price is $197.00, versus its current price of $138.
Moderna’s pipeline is substantial. It has 31 of its 43 development candidates in clinical trials. One or two of those are bound to pay off in a big way.
Apple (AAPL)
Apple (NASDAQ:AAPL) gained 34.6% in 2021. It’s down a little more than 12% in 2022.
A Barron’s article from August made an interesting point about Apple’s size being a big negative for AAPL stock.
“As the largest U.S. company by far—with a market capitalization more than $500 billion greater than the number-two, Microsoft (MSFT)—Apple is widely owned and has a tendency to drag around, and be dragged around by, the major indexes,” Barron’s contributor Jack Denton wrote.
“After all, it makes up more than 7% of the entire S&P 500. If Apple was its own sector, it would have the seventh-largest weighting out of 12 and be almost twice as large as the energy sector.”
Despite the concerns about China’s slowing economy hurting Apple’s sales, analysts remain relatively upbeat about its stock. Of the 41 analysts covering AAPL, 32 rate it “overweight” or a “buy.” Only two have an “underweight” or a “sell” rating on it.
Apple’s services business continues to be very profitable. In the first nine months of 2022, the gross margin of its services business was 72%, almost double that of its products business.
O’Reilly Automotive (ORLY)
O’Reilly Automotive (NASDAQ:ORLY) appeared in my July column, called the 7 Best Retail Stocks to Buy Now. ORLY made the list because it consistently grows its free cash flow. It’s up almost 20% in 2022 relative to the S&P 500. Over the past five years, it’s up four-fold compared to the index.
ORLY gained 56% in 2021. Analysts generally like the stock. Of the 24 covering it, 17 have “buy” or “overweight” ratings on it, and their average price target is $768.63, versus its current price of $701.50.
I know that doesn’t seem like much of a difference. However, the shares perform well over the long haul. Since 2000, they’re up 8,400%, representing a compound annual growth rate of 22.8%.
This little snippet from CEO Gregory Johnson’s Aug. 23 speech encapsulates the state of O’Reilly’s business:
“So when you look at a 2-year stack basis, that comp will be 21%; 3-year, 28.5%. Gross margin year-to-date 51.6%; operating margin, 21.1%. And we’ve opened 116 net new stores and are on track to meet our projection of 175 to 185 stores for the year,” Johnson stated.
“Diluted earnings per share came in at $15.94. We generated $1.2 billion in free cash flow and repurchased $2.2 billion worth of our stock year-to-date under the stock repurchase program.”
As I said earlier, O’Reilly knows how to grow its free cash flow, but it’s also better than most at allocating it. Over the long-term, you won’t do much better than ORLY.
Cross Country Healthcare (CCRN)
Cross Country Healthcare (NASDAQ:CCRN) gained 213% in 2021, so it’s not surprising that it’s cooled off in 2022. However, relative to the Russell 2000, it’s up more than 9% on the year.
Cross Country works with healthcare clients such as hospitals, outpatient clinics, ambulatory clinics, physician practice groups, and other healthcare-related facilities to recruit and staff their businesses. The demand for its services is very strong.
Over the last three years, its revenue has grown at an annualized rate of 27.1% , while its operating income rose by an average of 104.4% annually. That’s some pretty good growth–and I don’t think that the firm is going to stop growing anytime soon.
It’s fair to say that the sequential decreases in its financial results that occurred in Q2 will continue in the back half of the year as staffing shortages dissipate, returning to more normal historical levels.
For example, in Q3, the company expects revenue of $610 million at the midpoint of its guidance. That’s 62.5% higher than a year earlier but down 19% from the previous quarter. Its adjusted EPS should also fall in Q3 versus Q2.
The company’s biggest growth driver is its Managed Service Programs (MSPs). Between 2015 and 2021, the estimated revenue of these MSPs grew by $800 million to $1.1 billion. The annual run rate of its revenue in Q2 was $2.2 billion. It has approximately 100 customers across more than 550 facilities.
Investors should expect more moderate growth from CCRN– barring any significant M&A transactions — but not a return to the slower growth that it generated before the pandemic.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. | NVDA |
https://finnhub.io/api/news?id=d3aae24787cbd5980e30d2cecb702a38313deea47709d6e17cc7ee7564e40452 | Page Not Found :( | 2022-09-05T00:05:00 | TipRanks | Shares of tech giant Nvidia (NASDAQ:NVDA) have lost substantial value this year. A slowdown in growth and overall selling in tech stocks weighed on its share price. Despite the decline, NVDA stock has negative signals from hedge funds, corporate insiders, and retail investors, implying the stock could remain pressured in the short term.
But before reaching a conclusion, let’s examine why Nvidia stock is down and what’s on the horizon for its investors.
Why Is Nvidia Share Price Falling?
Nvidia manufactures ICs (integrated circuits) and high-end GPUs (graphics processing units). It witnessed an overwhelming demand for its products, leading to a rally in its stock price. Come 2022, Russia’s invasion of Ukraine, COVID-led restrictions in China, and macro weakness across many parts of the world weighed on Nvidia’s growth and dragged its stock down.
It’s worth mentioning that NVDA stock has lost over 50% of its value this year alone. While macro and geopolitical headwinds continue to play spoilsport, the U.S. government’s hardened stance to prevent technology transfers to China (including Hong Kong) and Russia and the new license requirement for exports to these countries further pose challenges.
What Is the Prediction for Nvidia Stock?
Analysts remain cautiously optimistic about Nvidia’s prospect, given the increase in headwinds and a slowdown in its business. NVDA stock sports a Moderate Buy consensus rating on TipRanks based on 23 Buys and eight Holds. Further, due to a noteworthy decline in its price, NVDA’s average price target of $209.60 implies 53.6% upside potential.
Moreover, as stated above, hedge fund managers, corporate insiders, and retail investors have lowered their exposure to NVDA stock.
Hedge funds sold 417.9K NVDA stock last quarter. Meanwhile, insiders sold NVDA stock worth 36M during the same period. Also, 0.8% of investors holding portfolios on TipRanks lowered their exposure to NVDA stock in the last 30 days. Overall, NVDA stock carries a Neutral Smart Score of four out of 10.
Bottom Line: Ongoing Headwinds to Limit Upside in the Short Term
The U.S. government’s license requirement for exporting its A100 and forthcoming H100 ICs to China and Russia, continued sales decline in the gaming and professional visualization segment, a slowdown in the data center revenues, and supply constraints could limit the upside in NVDA stock in the short term.
Read full Disclosure | NVDA |
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https://finnhub.io/api/news?id=f3fdcf68ee5c4476321b2bbd5e6fd32ba56e310d7d529009411e78677a165cd7 | Stock Market Analysis: AMZN, AAPL, NVDA, META, NFLX, TSLA, GOOGL | 2022-09-04T23:14:00 | TalkMarkets | Sorry, the page you are looking for has been removed. Let's find a better place for you to go. Back to Home | NVDA |
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https://finnhub.io/api/news?id=f9b2d78cd4c5cf7de4e1483dcb6c2d9ab93c3fb523fe5a259ba959693509d9c9 | Top Stocks To Invest In Now? 3 Tech Stocks To Watch This Week | Is now the time to invest in these top tech stocks? | 2022-09-04T17:51:19 | StockMarket | Are These The Best Tech Stocks To Invest In September 2022?
Many investors are keeping a close eye on technology stocks as we kick off September 2022. For the uninitiated, tech stocks have been on a roller coaster ride over the past year. Meanwhile, many analysts are predicting that they will continue to be volatile in the months ahead. While there is no sure way to predict the future of the stock market, there are a few factors that could impact tech stocks in the coming months. First, interest rates are expected to rise in the second half of the year, which could put pressure on stock prices.
Additionally, the ongoing trade war between the United States and China could also lead to volatility in tech stocks, as tensions between the two countries continue to escalate. This is evident with tech firms like NVIDIA Corporation (NASDAQ: NVDA) and Micron Technology Inc. (NASDAQ: MU). Shares of both companies have fallen recently in light of new export rules from the U.S. in regards to exporting chips to China.
Finally, earnings reports from major tech companies will also being digested by investors. With so much uncertainty on the horizon, it’s important to stay disciplined with your investment strategy and keep a diversified portfolio. Technology stocks may be volatile, but they can still offer opportunities for long-term growth. With that, here are three top tech stocks to watch in the stock market today.
Tech Stocks To Invest In [Or Avoid] Right Now
- Shopify Inc. (NYSE: SHOP)
- Microsoft Corporation (NASDAQ: MSFT)
- Roblox Corporation (NYSE: RBLX)
Shopify (SHOP Stock)
Next, Shopify Inc. (SHOP) is a Canadian e-commerce company headquartered in Ottawa, Ontario. In brief, the company offers online retailers a platform to buy and sell products. As well as a suite of tools to manage inventory, orders, and customers. Shopify is an e-commerce platform that enables businesses of all sizes to sell online. In July, the company reported a miss for its second quarter 2022 financial results.
In detail, Shopify reported a 2nd quarter 2022 loss of $0.01 per share, with revenue of $1.3 billion. Versus, Wall Street’s consensus earnings estimate of $0.03 per share, with revenue of $1.8 billion. Additionally, the company notched in a revenue increase of 16% during the same period, in 2021. Moreover, the company reported that its subscription solutions revenue was up 10% year-over-year at $366.4 million for the quarter.
“While commerce through offline channels grew faster in Q2, where our exposure is lower but growing, we continued to see increased adoption of our solutions, enabling our merchants to remain agile against a challenging macro environment and highlighting the breadth and resilience of our business model,” stated Amy Shapero, Shopify’s CFO. With that, shares of SHOP have been beaten down by over 77%. This comes after closing Friday’s trading session at $30.11 per share. Considering all of this, do you think SHOP is a good buy at these price levels?
[Read More] 5 Top Dividend Stocks To Watch In A Bear Market
Microsoft (MSFT Stock)
Next, Microsoft Corporation (MSFT) is an American multinational technology company with headquarters in Redmond, Washington. It develops, manufactures, licenses supports, and sells computer software, consumer electronics, personal computers, and related services. Most notably, some of its best-known software products are; Microsoft Windows, Microsoft Office suite, Internet Explorer and Edge web browsers. For a sense of scale, Microsoft is one of the largest information technology companies in the world.
In July, Microsoft reported its most recent Q4 2022 financial results. In detail, the company posted earnings of $2.23 per share. As well as revenue of $51.9 billion. This is in comparison to, analysts’ consensus estimates of earnings of $2.28 per share, on revenue of $52.9 billion.
“In a dynamic environment we saw strong demand, took share, and increased customer commitment to our cloud platform. Commercial bookings grew 25% and Microsoft Cloud revenue was $25 billion, up 28% year over year,” commented Amy Hood, executive vice president, and CFO of Microsoft. “As we begin a new fiscal year, we remain committed to balancing operational discipline with continued investments in key strategic areas to drive future growth.” With that, shares of MSFT stock are still down over 23% since the start of 2022. As of Friday’s closing bell, shares of MSFT stock are trading at $256.06 per share.
[Read More] Cheap Stocks To Buy Now? 3 Marijuana Stocks To Watch
Roblox (RBLX Stock)
Lastly, Roblox Corporation (RBLX) is an American technology company that develops and operates the Roblox platform, which is a social networking service for people to play games, create experiences and interact with other people. Just last month, the company announced its second quarter 2022 financial results.
Diving in, Roblox reported a loss of $0.30 per share on revenue of $591.2 million for the second quarter. This is in comparison with the consensus estimates of a loss of $0.23 per share and revenue of $658.5 million. Though, Roblox was able to notch in a revenue increase of 30.2% during the same period, last year. Meanwhile, the company announced its Average Daily Active Users grew 21% year-over-year to 52.2 million.
David Baszucki, CEO of Roblox commented in his letter to shareholders, “We are driving record levels of users and engagement globally as we execute on our innovation roadmap and broaden the appeal of Roblox across geographies and age groups. We continue to make progress on key operational and product initiatives to enhance the long-term value of the Roblox platform.” Moving along, shares of RBLX stock are down over 60%. Meanwhile, RBLX stock is looking to start off this shortened trading week at $37.94 per share. With this in mind, will you be watching RBLX stock in the stock market this week?
If you enjoyed this article and you’re interested in learning how to trade so you can have the best chance to profit consistently then you need to checkout this YouTube channel. CLICK HERE RIGHT NOW!! | NVDA |
https://finnhub.io/api/news?id=512c8dbfb4ff477a245208e7423cae0c99d8db173fa549051a679f242cb736d1 | Trading The Top 10 Stocks From 40 Large Hedge Funds: Trading Update 9/4/2022 | A strategy selecting 10 of the 50 stocks, equally weighted, would have increased total return to 178.0%, an active return of 61.6% vs. SPY. | 2022-09-04T17:24:20 | SeekingAlpha | Trading The Top 10 Stocks From 40 Large Hedge Funds: Trading Update 9/4/2022
Summary
- This portfolio strategy uses the quarterly 13F filings to extract 50 consensus stocks from 40 large hedge funds that have more than $3.5 billion in Assets Under Management.
- From 1/2/2016 to date investing in all 50 stocks, equally weighted, would have produced a total return of 78.5%, an active return of -37.8% when compared to SPY’s 116.3%.
- A strategy selecting 10 of the 50 stocks, equally weighted, would have increased the total return to 178.0%, an active return of 61.6% when compared to SPY.
- Here we report the most recent holdings and the trading signals for 9/6/2022.
Research from Barclays and Novus published in October 2019 found that a copycat stock selection strategy that combines conviction and consensus of fund managers that have longer-term views outperformed the S&P 500 by 3.80% on average annually from Q1 2004 to Q2 2019.
Based on that rational, we previously presented two trading models (in Article-1 and Article-2) that use the top 50 consensus stocks of 40 Large Hedge Funds (listed in Appendix A below), that historically outperformed the S&P 500. The iM-Top50(from 40 Hedge Funds) model holds all 50 stocks equally weighted and has a low turnover. The iM-Top10(from 40 Hedge Funds) model holds a subset of 10 stocks, also equally weighted, but with higher turnover which is rewarded by improved returns.
The performance simulation, and generation of trading signals, for these strategies is done using the platform Portfolio123 and reported below. For more comprehensive description of the 50 stock universe please refer to here.
Note: This update is published on Seeking Alpha, editor permitting, only if the model has generated trading signals.
Model Performance:
Note: The iM-Top10VariableWeight model (green line) is an experimental model. It holds the same stocks as the iM-Top10 model put position weights are adjusted to an inverse function of market capitalization, that is the higher the market cap of the stock the lower the position weight. As a consequence it is difficult to trade as market capitalization changes with the stock price.
Trade Signals for 9/6/2022
|iM-Top10(of 40 Large Hedge Funds)|
|Action||Ticker||Shares||Name|
|SELL||ADBE||67||Adobe, Inc.|
|BUY||QCOM||192||QUALCOMM, Inc.|
|iM-Top50(of 40 Large Hedge Funds)|
|No Trades|
The models trade on the first trading day of the week. Trading signals are published on a weekly basis here on Seeking Alpha (subject to model trading and editor’s acceptance) and on iMarketSignals. Next update on Sunday 9/13/2022
Holdings for iM-Top10(of 40 Large Hedge Funds) as of 9/2/2022
|Current Portfolio 9/2/2022||Cash Flow|
|Ticker||Number of Shares||Weight||Value now||Open Date||Open Costs||Rebal Costs | Return||Dividends Received||Gain to date|
|(AAPL)||179||10.03%||$27,890||08/22/22||($30,109)||—||—||($2,219)|
|(ADBE)||67||8.87%||$24,665||08/08/22||($29,199)||—||—||($4,533)|
|(CHTR)||67||9.81%||$27,278||08/22/22||($29,707)||—||—||($2,429)|
|(DHR)||103||9.98%||$27,750||06/13/22||($25,190)||—||$26||$2,586|
|(INCY)||411||10.38%||$28,856||08/22/22||($30,326)||—||—||($1,470)|
|(MA)||87||10.10%||$28,063||05/02/22||($27,266)||($3,816)||$37||($2,982)|
|(SCHW)||416||10.53%||$29,261||08/08/22||($28,585)||—||$92||$768|
|(TDG)||50||10.81%||$30,060||05/23/22||($28,158)||—||$925||$2,827|
|(TSM)||321||9.34%||$25,969||08/08/22||($28,268)||—||—||($2,299)|
|(V)||140||9.96%||$27,686||12/07/20||($30,865)||$1,269||$360||($1,549)|
Holdings for iM-Top50(of 40 Large Hedge Funds) as of 8/19/2022
|Current Portfolio 9/2/2022||Cash Flow|
|Ticker||Number of Shares||Weight||Value now||Open Date||Open Costs||Rebal Costs | Return||Dividends Received||Gain to date|
|(AAPL)||24||2.09%||$3,739||01/04/16||($2,109)||$4,982||$269||$6,881|
|(ADBE)||9||1.86%||$3,313||01/04/16||($2,118)||$3,218||—||$4,414|
|(ALTR)||69||1.88%||$3,358||08/22/22||($3,714)||—||—||($357)|
|(AMT)||14||1.97%||$3,512||01/04/16||($2,033)||$1,727||$480||$3,686|
|(AMZN)||30||2.14%||$3,825||01/04/16||($1,913)||$3,912||—||$5,825|
|(APP)||140||1.89%||$3,373||05/30/22||($3,147)||($2,402)||—||($2,176)|
|(BRK.B)||13||2.02%||$3,610||05/23/22||($4,343)||$144||—||($589)|
|(BSX)||96||2.18%||$3,887||02/24/20||($3,949)||$152||—||$90|
|(CHTR)||8||1.82%||$3,257||08/22/22||($3,547)||—||—||($290)|
|(CNI)||32||2.10%||$3,744||05/23/22||($4,410)||$819||$23||$175|
|(COUP)||55||1.76%||$3,134||08/19/19||($3,549)||($3,491)||—||($3,906)|
|(CRM)||20||1.72%||$3,074||05/22/17||($2,315)||$840||—||$1,599|
|(CRWD)||20||1.93%||$3,449||05/26/20||($4,210)||$5,621||—||$4,860|
|(DHR)||13||1.96%||$3,502||08/19/19||($3,547)||$3,433||$54||$3,442|
|(DOCU)||57||1.74%||$3,104||08/24/20||($5,118)||($4,258)||—||($6,272)|
|(ELV)||8||2.16%||$3,856||02/28/22||($4,503)||$854||$29||$237|
|(FATE)||133||1.99%||$3,554||02/16/21||($6,499)||($3,851)||—||($6,796)|
|(FIS)||38||1.92%||$3,419||08/22/22||($3,724)||—||—||($305)|
|(FISV)||44||2.50%||$4,463||11/18/19||($3,209)||($1,830)||—||($576)|
|(FOLD)||396||2.54%||$4,538||05/23/22||($4,407)||$1,277||—||$1,408|
|(GFS)||62||2.01%||$3,589||08/22/22||($3,680)||—||—||($92)|
|(GOOGL)||34||2.05%||$3,667||01/04/16||($2,281)||$2,932||—||$4,318|
|(INCY)||45||1.77%||$3,159||02/28/22||($4,566)||$1,507||—||$100|
|(INTU)||8||1.88%||$3,360||02/19/19||($3,523)||$3,219||$112||$3,168|
|(KMX)||39||1.91%||$3,415||05/24/21||($5,377)||$721||—||($1,241)|
|(MA)||11||1.99%||$3,548||01/04/16||($2,088)||$2,636||$144||$4,241|
|(MCO)||12||1.91%||$3,413||01/04/16||($2,044)||$2,791||$259||$4,419|
|(META)||22||1.98%||$3,527||01/04/16||($2,047)||($928)||—||$553|
|(MSFT)||16||2.29%||$4,097||01/04/16||($2,085)||$3,882||$366||$6,260|
|(MU)||62||1.96%||$3,492||08/22/22||($3,634)||—||—||($142)|
|(NFLX)||17||2.15%||$3,844||01/04/16||($2,092)||$687||—||$2,439|
|(NOW)||8||1.95%||$3,476||11/19/18||($2,825)||$3,001||—||$3,652|
|(NVDA)||21||1.61%||$2,866||02/24/20||($3,830)||$6,951||$16||$6,003|
|(QCOM)||24||1.73%||$3,084||08/24/20||($5,106)||$3,168||$238||$1,384|
|(SCHW)||58||2.29%||$4,080||02/28/22||($4,555)||($526)||$24||($978)|
|(SGEN)||24||2.05%||$3,656||01/04/16||($2,099)||$2,907||—||$4,465|
|(SNOW)||26||2.50%||$4,459||02/16/21||($6,487)||($89)||—||($2,117)|
|(SPGI)||10||1.95%||$3,476||05/23/22||($4,544)||$976||$20||($72)|
|(TDG)||6||2.02%||$3,607||01/04/16||($2,071)||$2,572||$1,023||$5,131|
|(TMO)||8||2.44%||$4,348||05/23/22||($4,446)||—||$2||($95)|
|(TMUS)||28||2.23%||$3,975||05/23/22||($4,395)||$704||—||$285|
|(TSLA)||18||2.72%||$4,864||05/26/20||($4,098)||$10,984||—||$11,749|
|(TSM)||43||1.95%||$3,479||11/22/21||($6,768)||$1,599||$61||($1,629)|
|(UBER)||137||2.23%||$3,980||05/23/22||($4,358)||$1,350||—||$972|
|(UNH)||7||2.02%||$3,614||05/22/17||($2,274)||$3,836||$314||$5,492|
|(UNP)||17||2.13%||$3,807||05/23/22||($4,331)||$670||$48||$194|
|(V)||17||1.88%||$3,362||01/04/16||($2,046)||$1,693||$170||$3,179|
|(W)||71||1.98%||$3,527||11/23/20||($5,390)||($5,138)||—||($7,001)|
|(WDAY)||25||2.22%||$3,964||05/26/20||($4,213)||$159||—||($91)|
Appendix A
Hedge Fund Filers:
- Akre Capital Management LLC
- Alkeon Capital Management LLC
- Altimeter Capital Management, LP
- Aristotle Capital Management, LLC
- Baker Bros. Advisors LP
- Barings LLC
- Calamos Advisors LLC
- Capital International Ltd
- Citadel Advisors LLC
- Coatue Management LLC
- D. E. Shaw & Company, Inc.
- Disciplined Growth Investors Inc
- DSM Capital Partners LLC
- Echo Street Capital Management LLC
- FMR LLC
- Fort Washington Investment Advisors Inc
- GW&K Investment Management, LLC
- Hitchwood Capital Management LP
- Jennison Associates LLC
- King Luther Capital Management Corp
- Kohlberg Kravis Roberts & Company LP
- Lone Pine Capital LLC
- Loomis Sayles & Company LP
- Matrix Capital Management Company, LP
- Meritage Group LP
- Panagora Asset Management Inc
- Perceptive Advisors LLC
- Pinebridge Investments, LP
- Redmile Group, LLC
- Renaissance Technologies LLC
- Riverbridge Partners LLC
- Ruane, Cunniff & Goldfarb LP
- Steadfast Capital Management LP
- TCI Fund Management Ltd
- Tiger Global Management LLC
- Verition Fund Management LLC
- Viking Global Investors LP
- Westfield Capital Management Company LP
- Whale Rock Capital Management LLC
- Winslow Capital Management, LLC
This article was written by
Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.
Comments (4) | NVDA |
https://finnhub.io/api/news?id=6e5a5b1a81f1f004c1641cc3352a99bc86f53200666feee1a6e918a7c8c09cbf | Is Nvidia Stock a Buy Now? | In late August, Nvidia (NASDAQ: NVDA) reported results for its fiscal second-quarter (ended July 31), and they weren't great. The long-term opportunity for Nvidia looks bright as semiconductors are rising in popularity, and the company is still seeing success in the industries with the highest potential. Second-quarter earnings results were a significant shift compared to Nvidia's previous quarters. | 2022-09-04T07:53:00 | Yahoo | Is Nvidia Stock a Buy Now?
In late August, Nvidia (NASDAQ: NVDA) reported results for its fiscal second-quarter (ended July 31), and they weren't great. The long-term opportunity for Nvidia looks bright as semiconductors are rising in popularity, and the company is still seeing success in the industries with the highest potential. Second-quarter earnings results were a significant shift compared to Nvidia's previous quarters. | NVDA |
https://finnhub.io/api/news?id=8510c14b6b28be6b8bb372577498f7f867ee2f01fca26c9534a5d0a71ddd4308 | 1 Growth Stock To Buy and Hold in a Market Downturn | Nvidia (NASDAQ: NVDA) has seen its share price fall 59% off its high. After soaring during the earlier stages of the pandemic, Nvidia's sales growth is slowing. Let's see why Nvidia could be an outstanding stock to buy if the broader-market declines take its share prices down even more. | 2022-09-04T07:34:00 | Yahoo | 1 Growth Stock To Buy and Hold in a Market Downturn
Nvidia (NASDAQ: NVDA) has seen its share price fall 59% off its high. After soaring during the earlier stages of the pandemic, Nvidia's sales growth is slowing. Let's see why Nvidia could be an outstanding stock to buy if the broader-market declines take its share prices down even more. | NVDA |
https://finnhub.io/api/news?id=c3efe70eca96a5d740e9c13e5c004869037bcb5b3df76ca275c9e1046044c429 | Worried About Nvidia? Buy This Tech Stock Right Now | Nvidia's (NASDAQ: NVDA) fiscal 2022 second-quarter results (for the three months ending July 31, 2022) sent shockwaves through the tech industry, as its tepid year-over-year growth, shrinking margins, and terrible outlook suggested that robust semiconductor demand may have come to an end. The 33% decline in revenue from sales of gaming graphics cards weighed heavily on Nvidia's quarterly results. The company had to contend with an oversupply of GPUs (graphics processing units) as cryptocurrency miners sold off their chips and demand from gamers weakened. | 2022-09-04T03:05:00 | Yahoo | Worried About Nvidia? Buy This Tech Stock Right Now
Nvidia's (NASDAQ: NVDA) fiscal 2022 second-quarter results (for the three months ending July 31, 2022) sent shockwaves through the tech industry, as its tepid year-over-year growth, shrinking margins, and terrible outlook suggested that robust semiconductor demand may have come to an end. The 33% decline in revenue from sales of gaming graphics cards weighed heavily on Nvidia's quarterly results. The company had to contend with an oversupply of GPUs (graphics processing units) as cryptocurrency miners sold off their chips and demand from gamers weakened. | NVDA |
https://finnhub.io/api/news?id=5ae205a97b1b8842b5feeec8f8ded70debc160197f29e538a6a9b1945878f7bb | The Fed Chief Speaks; Wall Street Reacts | And we talk with Harvard Business School professor Ranjay Gulati about key insights from his book "Deep Purpose: The Heart and Soul of High-Performance Companies." | 2022-09-03T06:00:00 | Yahoo | The Fed Chief Speaks; Wall Street Reacts
And we talk with Harvard Business School professor Ranjay Gulati about key insights from his book "Deep Purpose: The Heart and Soul of High-Performance Companies."
And we talk with Harvard Business School professor Ranjay Gulati about key insights from his book "Deep Purpose: The Heart and Soul of High-Performance Companies." | NVDA |
https://finnhub.io/api/news?id=286e322601cac148c4eff9d8bb464f910aa3c21a08c4fdc4ec6292f5642b5fa7 | How Much Revenue Does Nvidia Get From China? It's Complicated | The way Nvidia's gaming business works makes it hard to tell how important Chinese end users are. | 2022-09-03T05:50:00 | Yahoo | How Much Revenue Does Nvidia Get From China? It's Complicated
The way Nvidia's gaming business works makes it hard to tell how important Chinese end users are.
The way Nvidia's gaming business works makes it hard to tell how important Chinese end users are. | NVDA |
https://finnhub.io/api/news?id=dbcf5d5047d23c2c730aab97f34e57004c778f126ab47426d66f895be8ea9248 | 1 Big Reason Why Nvidia's Second-Quarter Earnings Results Underwhelmed Investors | Although this graphics processing unit manufacturer faces strong short-term headwinds, its long-term future remains bright. | 2022-09-03T03:01:00 | Yahoo | 1 Big Reason Why Nvidia's Second-Quarter Earnings Results Underwhelmed Investors
Although this graphics processing unit manufacturer faces strong short-term headwinds, its long-term future remains bright.
Although this graphics processing unit manufacturer faces strong short-term headwinds, its long-term future remains bright. | NVDA |
https://finnhub.io/api/news?id=a48047cd8d4c7afac9616944004e2bd0a0eb93ba335f4a6c39a21f5f116639d5 | Wall Street Breakfast: What Moved Markets | Listen on the go! A daily podcast of Wall Street Breakfast will be available this morning on Seeking Alpha, iTunes, Stitcher and Spotify. | 2022-09-03T00:58:09 | SeekingAlpha | Wall Street Breakfast: What Moved Markets
Listen on the go! A daily podcast of Wall Street Breakfast will be available this morning on Seeking Alpha, iTunes, Stitcher and Spotify.
The S&P 500 on Friday posted another week of hefty losses, falling 3.29% for the five-day session. The benchmark index has now posted a three-week losing streak after a four-week run of gains. The markets are closed on Monday for the Labor Day holiday. Muted investor sentiment carried on from last week after the U.S. Federal Reserve Chair at the Jackson Hole symposium indicated that policymakers were committed to raising rates in order to combat inflation. A trend of good-news-is-bad-news trading also weighed on the S&P 500, as economic data released during the week supported the case for a hawkish Fed. Investors digested job openings data that exceeded consensus expectations, a retooled ADP report that showed less-than-expected jobs were added in August, jobless claims figures, a stronger-than-expected ISM manufacturing PMI readout and an unexpected increase in the unemployment rate. The S&P 500 along with the broader market also took a hit from semiconductor stocks which fell after the U.S. prohibited Nvidia from selling some of its products to China. Oil prices ended the week higher on expectations that OPEC+ will discuss output cuts at a meeting next week. Brent crude futures settled at $93.02 a barrel, while U.S. West Texas Intermediate crude futures settled at $86.87 a barrel. Read Seeking Alpha's Catalyst Watch for a preview of some the big events scheduled for the week ahead.
As the fallout from Jackson Hole rippled through markets this week, investors had their eyes on more drama stemming from the central bank. The Federal Reserve began to raise the throttle of its quantitative tightening (QT) program by picking up the pace at which it unwinds its balance sheet. The move is a stark reversal of pandemic-era bond buying, which saw the central bank nearly double its balance sheet to nearly $9T from $4.2T over the past two years.
Bigger picture: Unlike the large rate hikes being broadcast by the Fed - which have been quick to capture investor attention - QT is a more opaque way of tightening financial conditions. Note that the central bank is not selling its Treasury holdings outright, but is rather letting them mature to shrink its balance sheet. After an initial few months at a slower pace, monthly caps for offloading Treasuries and mortgage-backed securities are set to double to $60B and $35B, respectively, compared to the peak combined rate of $50B the last time the Fed trimmed its balance sheet in 2017-2019.
The whole thing is somewhat of a complicated accounting process, involving settlement windows and redemption caps, but at a basic level, it ultimately reduces the supply of bank reserves and drains money from the financial system. Some safety valves have been implemented this time around, like the Standing Repo Facility, after chaos in the repo market prompted an early end to the last QT program in 2019. The new facility will allow primary dealers to borrow more reserves from the Fed against high-quality collateral, but some caution it might not be enough to stave off liquidity issues, and could complicate Chair Powell's plan to raise rates and bring inflation under control.
Commentary: "I don't think there is appreciation for QT, by markets or the Fed," said Solomon Tadesse, head of quantitative equities strategies North America at Societe Generale. "In the end, if QE mattered, so will QT. It might not be totally symmetrical, but there will be a meaningful impact." (9 comments)
Weeks after 'Big Short' investor Michael Burry said the "market silliness" is back, famed fund manager Jeremy Grantham issued a warning to "prepare for an epic finale" to the market cycle. He argued that the current "superbubble" in asset prices hasn't deflated yet and appears to be dangerously close to its "final act." Some have compared Grantham and Burry to "a broken clock" that is right twice a day, especially since they have been issuing "superbubble" warnings since the pandemic began, but the two have made serious money off bubbles in Japan in the late 1980s, the dot-com era and the U.S. housing market crash in 2008.
Quote: "One of those features is the bear-market rally after the initial derating stage of the decline but before the economy has clearly begun to deteriorate, as it always has when superbubbles burst," Grantham wrote in the fresh research note. "This, in all three previous cases, recovered over half the market's initial losses, luring unwary investors back just in time for the market to turn down again, only more viciously, and the economy to weaken. This summer's rally has so far perfectly fit the pattern."
"My bet is that we're going to have a fairly tough time of it economically and financially before this is washed through the system. What I don't know is: Does that get out of hand like it did in the '30s, is it pretty well contained as it was in 2000, or is it somewhere in the middle? The U.S. stock market remains very expensive and an increase in inflation like the one this year has always hurt multiples, although more slowly than normal this time. But now the fundamentals have also started to deteriorate enormously and surprisingly: Between COVID in China, war in Europe, food and energy crises, record fiscal tightening, and more, the outlook is far grimmer than could have been foreseen in January."
Outlook: Despite the warnings, an aggressive Fed tightening cycle and worries about the economy, most American retirement savers haven't made changes to their portfolios. Only 5% of 401(k) and 403(b) investors shifted their asset allocations during the second quarter, according to Fidelity Investments, and the majority of those investors only made one switch to more conservative assets. Set it and forget it? Don't time the market? (167 comments)
1 in 6 Americans are smoking marijuana these days, a new high in the latest Gallup poll, which painted how the times are rapidly changing. Only 1 in 8 Americans were toking last year, and that drops down to 7% of the population when going back to 2013. The trend has picked up as recreational use of cannabis becomes legal in nearly half of all U.S. states (with 38 states approving it for medical purposes), supported by shifting attitudes and cultural trends of the American public.
Putting it in perspective: Nearly a third of adult respondents under the age of 35 told Gallup that they smoke marijuana, while nearly half (a total of 48%) of Americans have tried pot at some point in their lifetime. That's up from 4% of the U.S. population that took a hit during the height of the hippie movement in 1969, 24% by 1977, 33% in 1985 and 38% in 2013. Another interesting find is that regular cannabis usage has surpassed cigarette use for the first time, with only 11% of Americans saying they smoke stoges in the poll conducted in July.
"The future of marijuana use is, I would say, somewhat up in the air, but the probability is higher that its use will increase rather than decrease," wrote Gallup Senior Scientist Dr. Frank Newport. "Those who have tried marijuana are particularly likely to say marijuana has positive effects, and the majority of Americans are not convinced that marijuana use is harmful either for its users or for society. In contrast, it should be noted, some authorities argue that marijuana is quite dangerous, particularly for young adults, and it is possible that attitudes toward its use could change if focus on the downsides of marijuana increases in the years ahead."
Legislative front: While Congress is looking to advance cannabis legislation at the federal level, there are still some strong headwinds to the measures being pitched on Capitol Hill. In July, the Cannabis Administration and Opportunity Act was introduced in the Senate to remove marijuana from the list of Schedule I controlled substances, but there are slim odds that the bill will pass. Back in April, the House also passed the Marijuana Opportunity Reinvestment and Expungement Act - which would erase prior marijuana convictions and conduct resentencing hearings - though the measure still needs approval in the Senate. (431 comments)
The shorts appear to be winning the recent battle at Bed Bath & Beyond (BBBY). A drubbing on Wednesday means investors can now buy the stock with the company's famous "20% off" coupon, and things didn't fare better the rest of week, with BBBY sliding to the $8 level. Shares were already deflating after meme mania pushed them up to the $23 range in mid-August, but they have shaved off nearly $1B in market value over the past two weeks.
The latest: Bed Bath unveiled a plan to reduce a third of its in-house home goods brands and cut 20% of jobs across corporate and the supply chain. It also announced commitments for more than $500M of new financing, while potentially raising capital by selling as many as 12M new shares. Following a strategic review, it will retain the buybuy BABY banner, but the company will shutter 150 "lower-producing" locations.
"While there is much work ahead, our road map is clear and we're confident that the significant changes we’ve announced today will have a positive impact on our performance,” said interim chief executive Sue Gove, after years of competition from the likes of Target (TGT) and Amazon (AMZN).
Burning through cash: Many of Bed Bath's efforts are aimed at steadying its balance sheet, which ended May with around $100M, compared to $1.1B a year earlier. The retailer also predicts it used up another $325M in cash during Q2, which is closer to the amount analysts forecast the company would use over two quarters. It also means the cash burn over the last half a year was north of $800M, not a great sign especially when BBBY's market cap is now around $760M. (76 comments)
Longtime Starbucks (SBUX) CEO Howard Schultz is passing over the reins again after returning as the head of the company for the third time in April. Schultz was previously CEO from 1986 to 2000, when his specialty coffee shop called Il Giornale merged with Starbucks (and eventually went public), and from 2008 to 2017, when he succeeded Jim Donald during the financial crisis. His latest stint followed the retirement of Kevin Johnson, though it was an interim position until a new CEO was found.
The new face of Starbucks: Hailing from consumer goods giant Reckitt Benckiser (OTCPK:RBGPF), Laxman Narasimhan will join Starbucks on October 1. The 55-year-old is credited for navigating the Lysol and Durex maker through the pandemic, and revitalizing the company following a sales slump that even led to a raise in annual guidance earlier this year. His move to Starbucks will be somewhat of a long onboarding process, with Narasimhan relocating from London to the Seattle area to work closely with Schultz, before assuming the CEO role and taking the helm in April 2023.
"Laxman is a strategic and transformational leader with deep experience in building powerful consumer brands," Schultz wrote in a letter to employees. "He is uniquely positioned to shape this work and lead the company forward with his partner-centered approach and demonstrated track record of building capabilities and driving growth in both mature and emerging markets."
Outlook: During the six-month onboarding process, Narasimhan will specifically dive into Starbucks' "Reinvention" program, which includes better pay for baristas and reimaging stores and the customer experience. Over the past year, more than 200 Starbucks stores in the U.S. have been unionized, with workers pushing for better benefits, wages and welfare. The cost of ingredients and labor is also surging along with inflation, while China's zero-COVID strategy has slowed business in one of the chain's largest overseas market. (44 comments)
U.S. Indices
Dow -3.% to 31,318. S&P 500 -3.3% to 3,924. Nasdaq -4.2% to 11,631. Russell 2000 -4.8% to 1,808. CBOE Volatility Index -0.4% to 25.47.
S&P 500 Sectors
Consumer Staples -2.4%. Utilities -1.6%. Financials -2.5%. Telecom -2.4%. Healthcare -1.8%. Industrials -3.6%. Information Technology -5.%. Materials -5.%. Energy -3.3%. Consumer Discretionary -2.7%.
World Indices
London -2.% to 7,281. France -1.7% to 6,168. Germany +0.6% to 13,050. Japan -3.5% to 27,651. China -1.5% to 3,186. Hong Kong -3.6% to 19,452. India -0.1% to 58,803.
Commodities and Bonds
Crude Oil WTI -6.2% to $87.25/bbl. Gold -1.6% to $1,722.6/oz. Natural Gas -4.2% to 8.902. Ten-Year Bond Yield -0.2 bps to 3.195.
Forex and Cryptos
EUR/USD -0.06%. USD/JPY +1.96%. GBP/USD -1.99%. Bitcoin -0.5%. Litecoin +15.6%. Ethereum +4.9%. XRP -1.8%.
Top S&P 500 Gainers
DXC Technology (DXC) +13%. Cardinal Health (CAH) +5%. Bath & Body Works (BBWI) +4%. Ulta Beauty (ULTA) +3%. Dollar General (DG) +3%.
Top S&P 500 Losers
NVIDIA (NVDA) -16%. PVH (PVH) -15%. Seagate Technology Holdings (STX) -12%. Catalent (CTLT) -12%. Freeport-McMoRan (FCX) -12%.
Where will the markets be headed next week? Current trends and ideas? Add your thoughts to the comments section.
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Comments (6)
Get it!
Check out these other 19 EV's.
2. Probably anybody in the market needs to smoke some marijuana with everything getting whacked including bonds. Too bad cannabis companies cannot make money like regular drug dealers, maybe paying CEOs that don't know how to make money too much and or getting high on their own supply.
3. Apes should learn their lesson, don't buy doo doo just because other apes are buying doo doo. BBBY will gladly sell more and more stock to dumb apes so it has more cash to burn and stay afloat in the bathtub, management will always get paid no matter what.
We recognize that politics often intersects with the financial news of the day, so we invite you to click here - seekingalpha.com/... - to join the separate political discussion. | NVDA |
https://finnhub.io/api/news?id=4d634e6d87dffb2c01101cd5fef21003334eb13c9b5dad835fab2fcc83f01420 | Cryptocurrency News & Price Wrap-Up For Sept. 2, 2022 | It's been a busy week, from Ethereum and Bitcoin price action to Crypto.com backing out of its $495 million UEFA Champions League sponsorship, Snap (SNAP) scrapping its web3 team and analysts' latest views on Coinbase (COIN). Scroll down to catch up on all things crypto with IBD's weekly cryptocurrency news wrap-up. Be sure to also check this week's coverage of... | 2022-09-02T15:25:32 | Yahoo | Cryptocurrency News & Price Wrap-Up For Sept. 2, 2022
It's been a busy week, from Ethereum and Bitcoin price action to Crypto.com backing out of its $495 million UEFA Champions League sponsorship, Snap (SNAP) scrapping its web3 team and analysts' latest views on Coinbase (COIN). Scroll down to catch up on all things crypto with IBD's weekly cryptocurrency news wrap-up. Be sure to also check this week's coverage of... | NVDA |
https://finnhub.io/api/news?id=54fd8973dc75e1b22a82751813497225aab0af48e22c4ac87efa19d9e93117f8 | Stocks to watch in after hours: AMD, Twitter, WTI crude oil, Peloton | Seana Smith checks out several stocks and sectors trending in the after-hours trading session, including the semiconductor industry following President Biden's export restrictions on China. | 2022-10-07T14:04:42 | Yahoo | Stocks to watch in after hours: AMD, Twitter, WTI crude oil, Peloton
Seana Smith checks out several stocks and sectors trending in the after-hours trading session, including the semiconductor industry following President Biden's export restrictions on China.
Video Transcript
SEANA SMITH: Let's take a look at some of the biggest movers of the week. Investors have been on quite a roller coaster ride here. So let's kick it off with some of the biggest moves that we've seen play out in the markets. Let's start with the chip stocks because it has been a rude awakening for investors who thought that the sector may have bottomed. Signs of slowing demand and supply chain issues have some worried about a prolonged downturn.
You can see the Semiconductor Index moving to the downside here on the five-day chart. Samsung reported a 32% dive in operating income. AMD lowered its revenue guidance for the third quarter. That was enough to drag down some of its competitors. Intel and Nvidia both moving to the downside. You can see the move over the last 48 hours or so.
Also part of this are regulations from the Biden administration, clamping down on China's access to chip technology with new export rules. AMD dropping 14% today, the biggest drop that we have seen in this stock since March 2020, closing the week at 58.44.
Next up, let's talk about Twitter, this stock up just about 12% over the past five days, a revived chance of Elon Musk's takeover. But this deal is very far from being over. They now seem to have stalled, in part over a debt financing contingency. This is according to reports. Yesterday, a Delaware judge granted Musk's request to delay his trial with Twitter, giving both sides until October 28 to complete the deal. Over the past five days, you can see it up just about 12%, closing at 49.18, so below that deal price that Musk initially wanted to pay for Twitter at 54.20 a share.
Let's talk about oil, recording the biggest weekly rally that we have seen since March, as worries over supply offset some of those demand concerns. On the supply side, OPEC+ announcing its biggest output cut since the start of the pandemic, the move coming ahead of the impending European sanctions on Russian oil imports. It's a massive reversal from what we've seen in crude as of late. Over the past three months, you can see crude off just over 10%, coming off the worst quarter that we have seen since 2020, but really rallying on the news that we got this week.
Let's round it out with Peloton, the stock surging more than 20%. Two big announcements-- we started off the week with a partnership with Hilton. And then we heard about another round of cuts. CEO Larry Barry McCarthy announcing plans to cut about 12% of the workforce, its fourth round of layoffs this year, saying, quote, "He needs to do it to save the company."
One of the ways that they're trying to save the company and increase business is through new partnerships. The agreement with Hilton will put its bikes in 5,400 Hilton-owned hotels throughout the US. You can see Peloton moving to the upside for the past five days, up just around 25%. You can see it did close the day in negative territory, but for the week, closing at $8.69 a share. | NVDA |
https://finnhub.io/api/news?id=004cf610bc2156cfbc6a7852ce715e2195c1b65d4becc2b299a22c8e8e5dfab5 | 15 Most Valuable Companies In History | In this article, we will take a look at 15 of the most valuable companies in history. If you want to see some more of the most valuable companies in history, go directly to 5 Most Valuable Companies In History. Many of the most valuable companies in history dominate their industries. Some of the most […] | 2022-10-07T13:57:00 | Yahoo | 15 Most Valuable Companies In History
In this article, we will take a look at 15 of the most valuable companies in history. If you want to see some more of the most valuable companies in history, go directly to 5 Most Valuable Companies In History.
Many of the most valuable companies in history dominate their industries. Some of the most valuable companies in history dominated oil and gas. Some are leaders in information technology and computing. All of the companies created a lot of value for their shareholders.
In terms of what creates the most valuable companies in history, the size of the country's economy that a company is from is a key component. If a company's parent country is a small country, it is harder for that company to reach the scale needed to be considered among the most valuable in history. If the company's parent country is a nation with a huge economy, on the other hand, there are likely more markets that have the scale to allow companies to grow to reach very valuable status.
In the 16th century, the Dutch were the leading economic power. As things changed, the British became the leading economic power in the 18th and 19th century. As a result, some Dutch and British companies have made it to the list of 15 Most Valuable Companies In History.
In the 20th century, the United States became the leading economic power. Immediately after World War II, the United States had around half the world's GDP and much of the world's wealth. With much of the world's wealth, many American companies had the capital necessary to expand overseas and gain substantial market share. With much of the world as potential markets, American companies can gain more revenue and potentially more profits. As a result of the dominance of the United States economically, many American companies make this list.
Another factor that helps companies make it to the list of 15 Most Valuable Companies In History is the era that they operate.
In terms of eras, modern day companies are more likely to be more valuable given the growth in the global economy. Because economies have advanced so much over the past 100 years, the markets today are much larger than the markets 100 years ago. With globalization, modern day companies also have opportunities at a larger market.
The emergence of technology has also created many valuable companies, some of which also make the list of the 15 Most Valuable Companies In History.
With technology, companies can grow very quickly and potentially capture a monopoly on very valuable markets that many people use. Microsoft is one example with Windows. Given that technology may not cost all that much to produce after it's first created, some tech sectors can also have higher margins than other industries. With higher margins and larger markets, it can be easier for some tech companies to be considered very valuable.
In terms of the composition of the 15 Most Valuable Companies In History, the majority are tech companies and many exist today.
Pixabay/Public Domain
Methodology
For our list of 15 Most Valuable Companies In History, we used peak market cap to rank the companies since some of the most valuable companies no longer exist today. Some have also fallen in market cap from their peaks. For companies that existed hundreds of years ago, we used subjective measures to rank them.
For the peak market cap, we used data from Ycharts.
15 Most Valuable Companies In History
15. NVIDIA Corporation (NASDAQ:NVDA)
Peak Market Capitalization: $834.40 billion
NVIDIA Corporation (NASDAQ:NVDA) is a leader in GPUs which is in some ways better suited for some AI applications than traditional CPUs. Given the huge anticipated growth in AI, investors sent NVIDIA Corporation (NASDAQ:NVDA) to a peak market capitalization of over $830 billion before the stock eventually fell to its current valuation of around $300 billion.
If the company maintains its lead in the AI chip market, however, NVIDIA Corporation (NASDAQ:NVDA) could have upside. In terms of hedge funds, Fisher Asset Management was one of the top hedge fund holders with a holding of almost 7.6 million shares at the end of Q2.
14. Alibaba Group Holding Limited (NYSE:BABA)
Peak Market Capitalization: $858.50 billion
Given its market share in e-commerce and the cloud in China, Alibaba Group Holding Limited (NYSE:BABA) achieved a peak market capitalization of over $850 billion before its stock fell due to the Chinese government beginning to reign in the tech giants in the nation. With China's economy weaker and the broader weakness in the market, Alibaba Group Holding Limited (NYSE:BABA) has a market capitalization of around $220 billion. There is a chance that Alibaba Group Holding Limited (NYSE:BABA) stock could be delisted if China and the United States can't agree on accounting terms.
13. PetroChina
Peak Market Capitalization:$1 trillion
PetroChina achieved the $1 trillion mark briefly when it debuted in 2007. As a result, PetroChina became the first company to break through the $1 trillion mark. Since its IPO, however, PetroChina stock hasn't done very well and the company actually withdrew its listing on the NYSE.
12. International Business Machines Corporation (NYSE:IBM)
Peak Market Capitalization: $1 trillion
International Business Machines Corporation (NYSE:IBM) was worth $258.6 billion in 1967, which assuming the growth in the stock market, could easily be considered worth $1 trillion or even more today. As a result, International Business Machines Corporation (NYSE:IBM) is ranked #12 on our list of 15 Most Valuable Companies In History.
Back then International Business Machines Corporation (NYSE:IBM) was one of the most dominant mainframe computing companies with substantial market share.
Today, International Business Machines Corporation (NYSE:IBM) is overshadowed by bigger companies in computing but still has potential upside if the economy doesn't slow as much as expected.
11. Meta Platforms, Inc. (NASDAQ:META)
Peak Market Capitalization: $1.078 trillion
At its peak, Meta Platforms, Inc. (NASDAQ:META) was worth $1.078 trillion as the market anticipated substantial future earnings growth from the company given its billions of daily users and many different ways of monetizing those users.
Given competition from TikTok as well as the worsening economy, however, Meta Platforms, Inc. (NASDAQ:META) is worth around $375 billion as of October 7.
There is potential upside in Meta Platforms, Inc. (NASDAQ:META) if it can maintain its user base and grow earnings. Although the market isn't very optimistic about the metaverse, Meta Platforms, Inc. (NASDAQ:META) could also benefit if the metaverse does become a huge market as CEO Mark Zuckerberg expects. Renaissance Technologies owned almost 5.5 million shares at the end of Q2.
10. Tesla, Inc. (NASDAQ:TSLA)
Peak Market Capitalization: $1.239 trillion
Although it isn't the largest auto maker in the world, Tesla, Inc. (NASDAQ:TSLA) achieved the highest peak market capitalization of all auto makers with a peak value of $1.239 trillion. With a market capitalization of over $750 billion as of October 7, Tesla, Inc. (NASDAQ:TSLA) is still by the most valuable car company in the world.
As the electric vehicle leader, investors expect substantial earnings growth in Tesla, Inc. (NASDAQ:TSLA)'s future. Given its CEO in Elon Musk, many expect Tesla, Inc. (NASDAQ:TSLA) to be among the leaders in autonomous driving. ARK Investment Management was one of the top holders of Tesla, Inc. (NASDAQ:TSLA) at the end of the second quarter.
9. Amazon.com, Inc. (NASDAQ:AMZN)
Peak Market Capitalization: $1.888 trillion
Amazon.com, Inc. (NASDAQ:AMZN) has been one of the best growth stocks over the last twenty years. As a result of its growth, Amazon.com, Inc. (NASDAQ:AMZN) has achieved the number one position in both e-commerce and the cloud, both of which are huge markets. With its positions, Amazon.com, Inc. (NASDAQ:AMZN) achieved a peak market capitalization of $1.888 trillion. That ranks the company as #9 on our list of 15 Most Valuable Companies In History.
Although its market cap is around $1.25 trillion as of October 7, the stock could still have upside if it continues its earnings growth.
8. Alphabet Inc. (NASDAQ:GOOG)
Peak Market Capitalization: $2.001 trillion
Alphabet Inc. (NASDAQ:GOOG) has also been one of the best growth stocks since its IPO in 2004. Thanks to its leading market share in search and also its smart acquisition of YouTube, Alphabet Inc. (NASDAQ:GOOG) has become one of the most profitable companies in the world. As one of the world's leading tech giants, Alphabet Inc. (NASDAQ:GOOG) also achieved a peak market cap of $2 trillion. TCI Fund Management owned almost 2.5 million shares at the end of Q2.
7. Saudi Aramco
Peak Market Capitalization: $2.43 trillion.
Saudi Aramco is the world's biggest oil company and also the leading company in Saudi Arabia. Given its huge oil reserves and substantial profits, Saudi Aramco is also one of the most valuable companies in history with a peak market capitalization of over $2.4 trillion. Given the higher oil prices, Saudi Aramco reported that is net income rose 90% to $48.4 billion in Q2 2022.
6. Microsoft Corporation (NASDAQ:MSFT)
Peak Market Capitalization: $2.576 trillion
Microsoft Corporation (NASDAQ:MSFT) has also been one of the best growth stocks in history since its founding in 1975. As a result, Microsoft Corporation (NASDAQ:MSFT) achieved a peak market capitalization of $2.576 trillion, which ranks it #6 on our list of 15 Most Valuable Companies In History. Although it's valued under $2 trillion now due to the broader market decline, Microsoft Corporation (NASDAQ:MSFT) could have upside if it continues to grow its earnings.
Click to continue reading and see 5 Most Valuable Companies In History.
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Disclosure: None. 15 Most Valuable Companies In History is originally published on Insider Monkey. | NVDA |
https://finnhub.io/api/news?id=76d2c5de84bc06590853bf68df10eca92492b23ef14daea262e08adb353f1519 | Semiconductor stocks 'have a way of smelling' future market downturns ahead of time: Analyst | Bank of America Senior Semiconductor Analyst Vivek Arya assesses the outlook of semiconductor stocks amid waning demand and export restrictions on China | 2022-10-07T12:57:45 | Yahoo | Semiconductor stocks 'have a way of smelling' future market downturns ahead of time: Analyst
Bank of America Senior Semiconductor Analyst Vivek Arya assesses the outlook of semiconductor stocks amid waning demand and export restrictions on China
Video Transcript
RACHELLE AKUFFO: Well, chip stocks are falling today after the Biden administration announced clamping down on China's access to chip technology. Meanwhile, the world's top maker of memory chips, AMD and Samsung, are sparking fears that a slump in semiconductor demand could be much worse than expected.
Let's bring in Vivek Arya, Bank of America senior semiconductor analyst to take a look at all of this. So Vivek, welcome back to the show. What should we take from this? When we look at some of the chipmakers that are down the most year-to-date, led by NVIDIA, what is it that concerns you about the trend you're seeing right now?
VIVEK ARYA: Yeah, thank you very much for having me. I think the semiconductor industry is one that makes us feel very profitable and productive for three years in a row, and then just makes us feel awful in that fourth year. And it seems like we are in that fourth year. The specific things that are causing the headwinds this year are threefold.
First, there is just enormous pressure on the consumer because of all the inflationary issues, because of all the turmoil in Europe, because of the lockdowns in China. Secondly, we have the specter of rising rates, which is never good for valuations in high beta, high multiple sector. And then on top of it, as you mentioned, there are some additional restrictions on semiconductor companies in terms of shipping to China.
And look, China is the largest customer for semiconductors, then it's never good to have friction between the largest designer of semis, which is the US, and the largest customer. So I think where we are today, when I put it all in the context, is the semiconductor stocks have a way of smelling the turn in the economy 6 to 9 to 12 months before it happens.
So last November when semiconductor stocks peaked, there was no talk of recession. The same way, there is no talk of an upturn or the next cycle today. So our assumption is that compare stock to get easier for the sector next year. And if that is the assumption, and if that's the right assumption, we think semiconductor stocks can try and find a bottom sometime in Q4. And meanwhile, the valuations are starting to look very interesting for what is a very profitable industry.
SEANA SMITH: So Vivek, that's interesting just in terms of what you said to export restrictions, and then taking that in coupling that with your predictions here, your expectations for this space going into 2023. So it sounds like you view it as a challenge here in the near term, but you don't think it's going to have a significant impact in terms of sales. Is that right?
VIVEK ARYA: Yeah. So let's talk about those restrictions. So first of all, as I mentioned, friction is never good between the largest designer and the largest buyer of semiconductors. But when you take a step back, the majority of chips that are shipped to China are actually for a lot of consumer applications.
They are for smartphones, they are for PCs, they are for a lot of low end consumers, speakers, and so forth. Like the largest buyers of semis in China are not supercomputing or military companies. They are companies like Oppo, Vivo, Xiaomi, Lenovo, ZTE. So it's not really supercomputing.
In fact, if I take the entire supercomputing and military end use market for semiconductors globally, it is not more than 5% or 10% of in demand. And even if you assume half of it is in China, which is a very big number, it still says that there is not more than a 5% or so headwind.
Second point I would mention is that we have to be careful when we use the term restriction. So what is happening is that there is a set of rules that now forces a lot of semiconductor companies to first go and ask for approvals. So they are not actually banned outright from shipping. They have been given this extra step to go and verify that the end customer is not a military end use customer or a supercomputing customer that might be on an entity list.
Which is why we think that, yes, it's a headwind and it doesn't help when the sector is already facing a lot of the macro pressures. But in terms of specifically this incremental headwind, we don't think it's more than 5% to 7% incremental. And that, it's only apply to very specific set of companies.
RACHELLE AKUFFO: And Vivek, I want to draw your attention to something that we saw from Truist Securities in talking about Tesla perhaps being a dark horse when it comes to AI and perhaps a rival for NVIDIA, saying that they actually see it-- obviously, though, NVIDIA is the leader in this space. They see a path for Tesla to build its own business to compete with it. What's your take on perhaps the role that some of these non-traditional chipmakers like Tesla might play in this space?
VIVEK ARYA: Sure. Absolutely. Look, first, when it comes to the field of artificial intelligence, we are still in the first innings. You know, that means if I take all the servers that were shipped in the world in the last year, less than 15% of them actually had an AI accelerator in them. And the majority of them used an NVIDIA product.
And then if I couple that with the automotive industry, where Tesla participates, the entire automotive industry is only 8% of the semiconductor market. So I think we have to keep a lot of these things in context of what the sizes of these markets are.
So we really like NVIDIA. And the reason is that their specific technology of AI accelerators, it's not just a chip. They're not just designing a chip. They're actually designing a complete end-to-end system and a stack of software and a big number of developers, 3 and 1/2 million developers that have been trained on using this product.
So I would say that Tesla use case is a very, very specific one, maybe less than 1% of the entire semiconductor industry. But it is a rising tide, many companies will participate, but we think NVIDIA is on a different-- not say different planet, but I think in a different solar system when it comes to the application and the benefits of AI.
SEANA SMITH: Vivek Arya, always great to get your perspective of Bank of America. Thanks so much for joining us today.
VIVEK ARYA: Thank you. | NVDA |
https://finnhub.io/api/news?id=05fd2f4f6196b6cd885bcb0373c6a4018efebc1e089902d5a4ebf012567aa0cb | UPDATE 1-Chip industry grapples with new U.S. curbs on China sales | Companies around the world on Friday began to wrestle with the impact of wide-ranging U.S. curbs on selling chips and chip manufacturing equipment to China. South Korean memory chip maker SK Hynix Inc said on Friday it would seek a license under new U.S. export control rules for equipment to keep operating its factories in China. American officials on Friday published a sweeping set of rules that restrict the export of some U.S.-made semiconductor manufacturing equipment to China, but provided exemptions for companies from the United States and its allies to seek a license. | 2022-10-07T10:56:18 | Yahoo | UPDATE 2-Chip industry grapples with new U.S. curbs on China sales
(Adds closing prices, info on semiconductor manufacturing equipment makers)
By Stephen Nellis and Jane Lanhee Lee
Oct 7 (Reuters) - Companies around the world on Friday began to wrestle with the impact of wide-ranging U.S. curbs on selling chips and chip manufacturing equipment to China.
The sweeping rules have hit chip stocks, with the Philadelphia Semiconductor Index (.SOX) falling nearly 6% by the end of the day. American semiconductor equipment makers Lam Research Corp, Applied Materials Inc and KLA Corp were all down more than 4%.
Applied Materials said it was assessing the new rules, while Lam and KLA did not immediately respond to requests for comment.
South Korean memory chip maker SK Hynix Inc said on Friday it would seek a license under new U.S. export control rules for equipment to keep operating its factories in China.
American officials on Friday published a sweeping set of rules that restrict the export of some U.S.-made semiconductor manufacturing equipment to China, but provided exemptions for companies from the United States and its allies to seek a license.
"SK Hynix is ready to make its utmost efforts to get the U.S. government's license and will closely work with the Korean government for this," the company said in a statement. "We're also ready to operate our fabrication plants in China smoothly, while complying with the international order."
Officials on Friday also introduced rules against selling a broad swath of chips for any use in "supercomputer" systems in China. Supercomputers can be used in developing nuclear weapons and other military technologies. U.S. companies Nvidia Corp and Advanced Micro Devices Inc both said last month they had been told to stop exporting their top-tier chips to China.
The rules define a supercomputer as any system with 100 or more petaflops of so-called double precision computing power, or 200-plus petaflops of single precision computing power, within a 41,600 cubic feet area. A petaflop is a measure of a computer's processing speed.
Nvidia, which said last month the rules could affect $400 million of its current-quarter sales in China, said Friday it did not expect any further impact on its business.
"These regulations impose on the broader industry controls on processors meeting certain thresholds that we were already subject to. We don't expect the new controls, including restrictions on sales for highly dense systems, to have a material impact on our business," the company said in a statement.
AMD did not respond to a request for comment. (Reporting by Stephen Nellis in San Francisco and Jane Lanhee Lee in Oakland; editing by Jonathan Oatis and Richard Chang) | NVDA |
https://finnhub.io/api/news?id=65d550c8642a898d29e196704a00d01fea1c24b0a18221ef48bb6be1e6021325 | Chip industry grapples with new U.S. curbs on China sales | (Reuters) -Companies around the world on Friday began to wrestle with the impact of wide-ranging U.S. curbs on selling chips and chip manufacturing equipment to China. South Korean memory chip maker SK Hynix Inc said on Friday it would seek a license under new U.S. export control rules for equipment to keep operating its factories in China. American officials on Friday published a sweeping set of rules that restrict the export of some U.S.-made semiconductor manufacturing equipment to China, but provided exemptions for companies from the United States and its allies to seek a license. | 2022-10-07T10:05:44 | Yahoo | Chip industry grapples with new U.S. curbs on China sales
By Stephen Nellis and Jane Lanhee Lee
(Reuters) -Companies around the world on Friday began to wrestle with the impact of wide-ranging U.S. curbs on selling chips and chip manufacturing equipment to China.
The sweeping rules have hit chip stocks, with the Philadelphia Semiconductor Index (.SOX) falling nearly 6% by the end of the day. American semiconductor equipment makers Lam Research Corp, Applied Materials Inc and KLA Corp were all down more than 4%.
Applied Materials said it was assessing the new rules, while Lam and KLA did not immediately respond to requests for comment.
South Korean memory chip maker SK Hynix Inc said on Friday it would seek a license under new U.S. export control rules for equipment to keep operating its factories in China.
American officials on Friday published a sweeping set of rules that restrict the export of some U.S.-made semiconductor manufacturing equipment to China, but provided exemptions for companies from the United States and its allies to seek a license.
"SK Hynix is ready to make its utmost efforts to get the U.S. government's license and will closely work with the Korean government for this," the company said in a statement. "We're also ready to operate our fabrication plants in China smoothly, while complying with the international order."
Officials on Friday also introduced rules against selling a broad swath of chips for any use in "supercomputer" systems in China. Supercomputers can be used in developing nuclear weapons and other military technologies. U.S. companies Nvidia Corp and Advanced Micro Devices Inc both said last month they had been told to stop exporting their top-tier chips to China.
The rules define a supercomputer as any system with 100 or more petaflops of so-called double precision computing power, or 200-plus petaflops of single precision computing power, within a 41,600 cubic feet area. A petaflop is a measure of a computer's processing speed.
Nvidia, which said last month the rules could affect $400 million of its current-quarter sales in China, said Friday it did not expect any further impact on its business.
"These regulations impose on the broader industry controls on processors meeting certain thresholds that we were already subject to. We don't expect the new controls, including restrictions on sales for highly dense systems, to have a material impact on our business," the company said in a statement.
AMD did not respond to a request for comment.
(Reporting by Stephen Nellis in San Francisco and Jane Lanhee Lee in Oakland; editing by Jonathan Oatis and Richard Chang) | NVDA |
https://finnhub.io/api/news?id=daab989fd8d723f978f8d2e2961ecb94bd8faffde99c5bc1dbf91bb2f6b05381 | Why Chip Stocks Were Falling Today | The near-term weakness in semiconductors will open up long-term investment opportunities for value investors. | 2022-10-07T10:00:07 | Yahoo | Why Chip Stocks Were Falling Today
The near-term weakness in semiconductors will open up long-term investment opportunities for value investors.
The near-term weakness in semiconductors will open up long-term investment opportunities for value investors. | NVDA |
https://finnhub.io/api/news?id=76282a7034749064567a4301886222ab2e7bb3f11ecc2d751fa8edbb96fb13d8 | AMD: Another Man Down | AMD reported a big miss on Q3 revenue due to a weak PC market, which again should not come as a surprise. Learn why the read-through is negative for most chipmakers, from Intel to Nvidia. | 2022-10-07T09:56:44 | SeekingAlpha | AMD: Another Man Down
Summary
- AMD pre-announced a big miss on Q3 revenue due to a weak PC market, which again should not come as a surprise.
- The read-through is negative for most chipmakers, from Intel to Nvidia.
- On the bright side, AMD's Data Center business posted strong growth and will likely continue to take share from Intel even if demand slows.
- I expect more bad news and choppy price actions in the near term.
Huge Q3 miss on the top line
Advanced Micro Devices, Inc. (NASDAQ:AMD) announced preliminary 3Q22 results that were materially below management's previous expectations communicated in August. Q3 revenue is now expected to be ~$5.6 billion (+29% YoY), ~$1 billion less than previous guidance of $6.7 billion +/- $200 million (+55% YoY at the midpoint). Additionally, Q3 gross margin will come in at 50% vs. previously guide of 54%. OPEX will be $100 million lower thanks to lower variable compensation expenses. Management will hold a conference call on 11/1.
The 16% difference between reality and expectations on the revenue side is largely a result of a soft Client segment (microprocessors, processing units and chipsets that go into desktop and notebook PCs) that is currently going through heavy inventory corrections. Like many companies dealing with a broad-based slowdown in the PC market, AMD is not immune. Q3 Client revenue of ~$1 billion (18% of revenue) represents a YoY decline of 40%. As mentioned in my article on Microsoft (MSFT), PC makers from ASUS to Lenovo have all noted weakness in end demand.
On the bright side, Data Center (29% of revenue) growth remained positive with revenue up 45% to $1.6 billion. While the server market (expected to still grow 10% in 2022 and 5% in 2023) is not immune to an overall slowdown, AMD stands well to take market share from Intel as ARM-based products continue to threaten the x86 architecture. Additionally, Intel's delay in Sapphire Rapids until 1Q23 is also a positive for team Red.
In terms of Gaming (29% of revenue), Q3 is usually the best season, driven by strong console demand. However, it's worth noting that historically, console unit sales tend to start declining in the 4th year of the typical 7-year cycle, so the Gaming business could experience some pressure in 2023 (year 4).
Last, growth in the Embedded segment (23% of revenue) was primarily due to the Xilinx acquisition in early 2022.
Industry heavyweights also feeling the pain
In July, Intel (INTC) reported a Q2 net loss of $454 million as revenue fell 22% YoY, the largest decline in more than a decade as management noted PC inventories were being cut at a record rate. The Client Computing Group (CCG) segment saw revenue down 25% YoY to $7.7 billion, while operating income was down 73% YoY. For 2022, Intel expects revenue to decline by 9-13% YoY, gross margin to contract by 9.1 points, and EPS down 57% to $2.30.
Samsung (OTCPK:SSNLF) also recently reported a disastrous 3Q22 where operating profit fell by 32% to $7.7 billion, noting a weaker-than-expected consumer electronics market with elevated inventory levels and order cuts even from data center clients. Per the below graph, South Korean chip inventory build is at a record high. Aside from supply-demand dynamics, management highlighted increasing geopolitical risks, as a U.S. ban on AMD and Nvidia (NVDA) chips sold to China will impact memory earnings.
Then there's Nvidia, which reported a 33% decline in 2Q22 Gaming revenue to $2 billion (30% of total sales) driven by challenging crypto prices and weak GPU demand post-Covid. Q3 revenue outlook of $5.9 billion (-17% YoY) at the midpoint was also materially below the $8.4 billion consensus before the 8/24 warning, due to ongoing softness in Gaming and Professional Visualization. Data Center and Auto were the only bright spots, where DC revenue grew 61% to $3.8 billion in Q2, but a slowdown should be reasonably expected going forward.
Good news and bad news
The bad news is overall PC softness is likely to stretch into 1H23, so it shouldn't be surprising to see further weakness in AMD's Client segment in the next few quarters. Just like the memory business (see recent analysis on Micron (MU)), the current PC downturn will lead to aggressive price competition to get rid of excess inventory. This will weigh on margins even if sales volumes recover in the near term.
The good news, however, is that the PC problem looks increasingly de-risked, as investors have a better grasp of the magnitude of the slowdown. Despite falling PC sales, AMD has been steadily gaining market share, where its desktop unit share reached 20.6% and Mobile unit share in the notebook market reached 24.8% in 2Q22. In the server market, AMD's Epyc products have also taken a meaningful share from Intel's Xeon offerings with a ~14% share vs. a little over 1% in 2018. Given server is a higher-margin business, it should provide AMD with some cushion on the bottom line.
Final thoughts
Shares of AMD are down 50% YTD (vs. -35% (SOXX)), so markets have digested the majority of bad news while looking for early signs of a recovery in the broader semiconductor space. As painful as the current downturn may be, AMD remains a convincing share-gain story as its biggest rival Intel continues to struggle with timely delivery of new technology. That said, investors will probably have to deal with more bad news and choppy price actions in the near term as the Fed embraces a hawkish attitude on the back of inflation.
This article was written by
Analyst’s Disclosure: I/we have a beneficial long position in the shares of NVDA, SOXX, MSFT either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.
Comments (37)
Down the road the CPU industry will regroup, but I believe you will need to be a long term investor, unless the companies intentionally low ball there expectations so that they come out looking better than the would otherwise. Maybe less so for the memory business since that is needed in a wide variety of products.
So I sold 20 Put Contracts at $80 strike, expiring Jan 17, 2025 and collected $44,000 in premium, expecting to buy back the Puts on a little bump in the underlying.
I am now now down $3.00 per share on the LEAP puts, another $6,000.
Can't get much on covered calls unless I lower the strike well below $80 and take a loss, haven't done that yet.
Looking at buying 20 LEAP long call contracts expiring Jan 17, 2025 at $60 strike and just waiting it out.
Any of Ya'll see a way out of this mess?
Yes, just wait. I only bought 500 shares at $78. I'm probably going to buy more. It's a great company, they just released a really good set of new products, with more on the way. They're gaining market share like crazy, and probably will continue to for at least 2 years. It gets more uncertain in 2024 and especially 2025, when Intel is supposed to leapfrog TSMC's transistor tech. But interest rates should be back down before then, and AMD stock much higher. The reason AMD stock is down now, doesn't have anything to do with the company, Powell and the Dems screwed up the economy bad, but we'll get over it, in a year or two.
I've done good in oil this year, which helps me stick with AMD.
www.protocol.com/...
Once in a bear market, the real rapid correction starts, that will happen early next year when Market goes from
- Show me increasing losses or I BUY
to
- Show me increasing profits or I SELL (and that is after a massive sell between December end and January)
"Intel has once again delayed the launch of its 4th Generation Xeon Scalable server processors, codenamed Sapphire Rapids. Although the company has previously disclosed the need to alter Sapphire Rapids design due to security bugs, documents obtained by Igor's Lab suggest these problems were severe. In total, Intel is said to have needed to address almost 500 distinct bugs affecting its next-generation Xeon chips, contributing to the delay of the launch to spring of 2023."If Intel can't even get its data center processors out the door, no one is going to care whether Intel is developing silicon photonics for some future product(s).
\ | NVDA |
https://finnhub.io/api/news?id=321dad739cfa409ca37313d457caecf3fe8ae8b8636d96221723aebe58e549dc | Nvidia says it does not expect new U.S. export hit its business | Nvidia said the it had already been made subject to rules, which it disclosed to investors last month, saying that they could impact $400 million of its sales in China for its current fiscal quarter. "We don’t expect the new controls, including restrictions on sales for highly dense systems, to have a material impact on our business," the company said in a statement. | 2022-10-07T09:50:44 | Yahoo | Nvidia says it does not expect new U.S. export hit its business
(Reuters) - Nvidia Corp on Friday said it does not expect new U.S. export control rules against sending chips to Chinese supercomputing systems to have a material affect on its business.
Nvidia said the it had already been made subject to rules, which it disclosed to investors last month, saying that they could impact $400 million of its sales in China for its current fiscal quarter.
"We don’t expect the new controls, including restrictions on sales for highly dense systems, to have a material impact on our business," the company said in a statement.
(Reporting by Stephen Nellis in San Francisco) | NVDA |
https://finnhub.io/api/news?id=9c345c2ce15acb936371d356263f2f3c5e81ef8767bbc705387e681b6070c9de | AMD Stock: Does Q3 Earnings Miss Impact The 5 Year Outlook? | Investors are panicking after AMD missed on its third quarter results. Read more to see bull and bear cases for AMD over the next five years. | 2022-10-07T09:23:21 | SeekingAlpha | AMD Stock: Does Q3 Earnings Miss Impact The 5 Year Outlook?
Summary
- Investors are panicking after AMD missed on its third quarter results.
- I model bull and bear cases for AMD over the next five years.
- Overall, AMD is likely to be a good buy today.
- I do much more than just articles at Tech Investing Edge: Members get access to model portfolios, regular updates, a chat room, and more. Learn More »
Thesis
Advanced Micro Devices, Inc. (NASDAQ:AMD) is not one of the widest-moat semiconductor companies available, and there's little room for more of the multiple expansion that drove a large part of the stock's returns over the past decade. Nevertheless, AMD remains in an improving competitive position with strong secular tailwinds at its back and will likely be a market-beating investment from the current valuation. That doesn't change even after a wide miss on Q3 earnings expectations.
Author's Note: Investors who are unfamiliar with the semiconductor industry and AMD's position in it can read my semiconductor deep dive for more information.
Q3 Earnings Pre-Announcement
On October 6th, it was reported that AMD will miss its Q3 estimates by a wide margin of about 17%, largely due to weak PC demand. Client (PC) revenue was down 53% since last year, but AMD's other segments (data center, gaming, and embedded) were still up year-over-year. That includes strong 45% year-over-year growth in data center, which passed client revenue this quarter to become AMD's largest segment.
Given the weak near-term outlook and the panic that investors might be feeling as a result, it's worth stepping back to consider a longer-term thesis. In this article, I'll look at where AMD could be in five years and whether investors should expect strong returns going forward.
Is AMD Expected To Continue Growing?
As most readers probably already know, AMD has done extremely well over the last decade because investors underestimated its ability to compete in logic semiconductor design with its chief rival Intel (INTC). They also underestimated the growth of emerging applications for semiconductors like the data center.
Unlike Intel, AMD is fabless, meaning that it outsources manufacturing to Taiwan Semiconductor Manufacturing Company Limited (TSM) ("TSMC"). Because TSMC is able to manufacture more advanced (smaller) nodes than Intel, AMD was able to work with TSMC to leapfrog Intel in many capabilities. Market share gains against Intel have allowed AMD to become a leader in logic chip design for PCs, and also in higher growth use cases like the data center.
Earlier this year, AMD passed Intel in market share of desktop CPUs and has gained market share rapidly since 2016. Going forward, AMD will likely continue to gain some share in PCs, but now that it has over 50% share there's less room for rapid growth in this mature market.
The big growth story going forward is now the data center segment. Even in Q2 (which had stronger client segment growth), data center was growing over twice as fast as the client/gaming segments (the embedded segment growth is currently boosted by an acquisition but will likely grow slower than data center going forward):
Adjusting for AMD's recently announced Q3 results, data center is now the largest segment in addition to being the fastest growing. Data center becoming the largest segment could actually set AMD up for faster growth in the future, as the data center chip market is expected to continue growing rapidly, at a 9.4% CAGR through 2025. On the other hand, the client segment is expected to struggle in the short term and grow more slowly over the next five years because the PC market is mature.
According to Seeking Alpha, analysts expect AMD to grow revenue at a 10.76% CAGR through 2025, which presumably will be driven in large part by success in the data center. In my opinion, this estimate is likely too conservative relative to the 30% revenue CAGR that AMD achieved over the last five years. Although AMD is growing off of a larger revenue base in a potentially weaker economy, I still believe that growth between 15% and 19% is achievable over the next five years. Assuming that growth lands somewhere in the 11-19% range, AMD is still positioned for respectable growth going forward, even as client revenue has fallen off a cliff.
AMD Stock Key Metrics
With respect to Seeking Alpha's factor grades, AMD actually does very well, especially considering that hardly any stocks have good momentum during this market crash.
AMD currently has a P/E of 27. If AMD manages to grow revenue at an 11% CAGR, then its EPS CAGR may be closer to 15%, especially if the company continues to beat analyst estimates as it often has in the past. If the revenue CAGR nears 20%, then the bottom line could grow at a much faster 25-30%. That puts AMD's PEG somewhere between 1 and 2, which is the range that I would consider fairly valued for a mature but high quality company.
Using past and future 5 year EPS CAGR from Finviz, here's a comparison of AMD's valuation and growth expectations relative to peers:
|Ticker||P/E||CAGR Last 5 Yrs||CAGR Next 5 Yrs||PEG|
|AMD||29||45%||26%||1.1|
|NVDA||43||43%||23%||1.9|
|TSM||16||12%||24%||0.7|
|ASML||34||31%||30%||1.1|
|MU||6||84%||-4%||-|
|KLAC||15||30%||11%||1.4|
Source: The Author (EPS CAGR forecast from Finviz)
Aside from Nvidia, the semiconductor industry appears fairly valued relative to its estimated growth, with PEG ratios between 0.7 and 1.4. AMD is right in the middle of the pack at 1.1. Thus, investors are primarily choosing between these companies based on their qualitative market position, as quantitatively they all look quite similar.
Where Will AMD Stock Be In 5 Years?
While the semiconductor industry (SOXX) has crushed the market over the last 10 years with a return of 593%, AMD and its peer Nvidia (NVDA) are in a league of their own, with 10 year returns of 2378% and 4067%, respectively. However, investors shouldn't expect this level of returns over the next five years.
Over the last 10 years, AMD's P/S ratio expanded from 0.3 to 4.34. That 14x multiple expansion accounts for over half of AMD's total return during the past decade. Ten years ago, AMD was not consistently profitable and thus had a rock bottom multiple. Today, AMD boasts industry-leading ROI and will remain consistently profitable for the foreseeable future. That makes it more of a blue chip than a high risk/high reward investment. While there is perhaps some room for further operating margin improvement and further P/S multiple expansion that would likely accompany it, there's simply no way that AMD's P/S or P/E multiple will 14x again in the next decade.
That said, AMD could still produce respectable and market-beating returns of a more modest form. If we assume that AMD grows revenue at 15% over the next five years with a 2% buyback yield, and assume that profit margins expand from 15% to 22% with a terminal P/E of 20, my valuation model estimates a market cap of $237B in 5 years, implying 14% annualized returns.
Here are a couple other possible scenarios based on my model:
|In 5 Yrs||Bear||Avg||Bull|
|Estimated Annualized Return||-19%||14%||43%|
|P/E||10||20||30|
|Profit Margin||15%||22%||30%|
|Revenue CAGR||3%||15%||25%|
|Buyback Yield||0%||2%||3%|
Source: The Author
Based on these estimates, we can see that there's a wide range of possibilities for AMD stock. In the worst case, perhaps due to an extremely poor macro environment impacting the cyclical semiconductor industry and/or unexpected success from AMD's competition, AMD fails to generate much growth and has a very negative return due to multiple contraction. In the best case, AMD extends the massive growth it experienced over the past decade for another five years and crushes the market. In my view, neither of these outcomes is particularly likely compared to the average case, which I discussed above.
Final Thoughts
In the short term, AMD stock may continue to see downward pressure as a result of its recent Q3 earnings miss. It's likely that some analysts will lower their future growth expectations for AMD and thus downgrade their rating on AMD stock, potentially causing more selling. Of course, the short term is very unpredictable.
Regardless of what happens in the short term, AMD should get back on track alongside the rest of the economy in the next couple years, and it will probably beat the market over the next five years if that happens.
Considering that most of the industry is valued similarly, I recommend other semiconductor stocks instead of AMD to members of my private investing community Tech Investing Edge. This is mostly because I believe that other options have wider moats and more predictable revenue streams. However, there are valid reasons to pick AMD, such as:
- The data center segment that accounts for most of AMD's revenue may have more growth potential than other parts of the industry
- AMD currently has lower profit margins than other peers of similar quality, and thus may have more room for margin expansion
- AMD was one of the industry's biggest winners in the past, and winners tend to keep winning.
For investors who want to own AMD, now may be a good time to dollar-coast average ("DCA") by buying a few more shares.
I hope you enjoyed my research. I'm the author of Tech Investing Edge, a premium service focused on growth stocks for investors with a 10+ year time horizon. I use my "edge" from working in the tech sector to understand tech companies' long term growth potential and share my best investment ideas in cloud, SaaS, crypto, cybersecurity, semiconductors, and more with members. I'm currently offering a two week free trial to new members, so I hope you'll check it out!
This article was written by
Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.
Comments (14)
INTC has to wait for the node and transistor change to work to make next gen chips.
AMD would show up with backlog ready to go.
" banned by our government so that it could haircut China market revenue?"AMD's China revenue ($2.33 billion)
Intel enjoyed $21.1 billion net revenue from China in 2021INTC has far more to worry about there
seekingalpha.com/..."AMD's sales to China made up the second largest region, second only to the US in FY21. AMD's Chinese revenue comprised 25% of overall revenue, growing 76% over 2020. This shows AMD isn't in the clear in terms of being insulated from Chinese revenue"
There is more revenue now than 2020 so % is less.
2.33 billion over 9.7 = 24%
2.33 billion over 26 = 9%The govt only finalized the letter to NVDA and AMD on high end chips to China and AMD already answered 400mill hit.The bulk of AMD chips to China are low level and not covered.
I would not expect any extra hit at allFor the full year 2022, AMD continues to expect revenue to be approximately $26.3 billion
AMD revenue for the twelve months ending June 30, 2022 was $21.576B, a 61.74% increase year-over-year.
AMD annual revenue for 2021 was $16.434B, a 68.33% increase from 2020.
AMD annual revenue for 2020 was $9.763B, a 45.05% increase from 2019.
AMD annual revenue for 2019 was $6.731B, a 3.95% increase from 2018.
With just the title of this article we have to be getting close to the bottom - this is just getting absurd. | NVDA |
https://finnhub.io/api/news?id=ddf99448a991089ae4804fec69922a9e74837f3df80f15350b290ce4c4c079ca | AMD Joins The Ranks Of Its Peers, Time To Start Buying | AMD finally had the shoe drop as it pre-announced a substantial downward revision to guidance. Read what could happen next with this semiconductor giant. | 2022-10-07T08:35:54 | SeekingAlpha | AMD Joins The Ranks Of Its Peers, Time To Start Buying
Summary
- AMD finally had the shoe drop as it pre-announced a substantial downward revision to guidance.
- However, all this does is join AMD to the ranks of its peers, peers who had the exact same troubles.
- But relatively speaking, AMD is the best suited to recover as growth remains positive while its valuation remains well below peers like Nvidia.
- The market can now begin pricing in the bottom and look toward the recovery, making this an opportunity to start buying.
- Looking for a helping hand in the market? Members of Tech Cache get exclusive ideas and guidance to navigate any climate. Learn More »
It seemed as if AMD (NASDAQ:AMD) was going to escape the clutches of the weak retail/PC market after issuing a softer but very respectable revenue guide in early August. After Intel (INTC) in late July and Western Digital (WDC), Micron (MU), and Nvidia (NVDA) in early August all issued disappointing reports or pre-announcements, AMD stood out as the sole high-growth semiconductor to buck the trend. For a bit, I thought AMD would offset the weakness in the retail end markets because by flexing its strength in its market share advancement. In the end, however, AMD was hit as badly as the rest. But the result for investors is not to flee AMD but instead begin accumulating shares, as the bottom is now within sight.
Recapping The Pain
Intel's bombshell of a report and guide in July reeked of its typical internal business chaos. After all, its data center division was down 16% year-over-year, and no one was calling for data center weakness through the summer. So while putting investors on alert, it was hard to take Intel seriously as it hadn't shown itself to be the bellwether it once was.
But it did start making one think more about Qualcomm's (QCOM) poor FQ4 guide a day earlier.
The truth began pouring in the following week, though, as other companies started reporting their own bad news; one after the other, each seemingly worse than the next.
First, it was Western Digital with its topline miss in its report and very staggering downside guidance - coming in at $3.7B in revenue vs. expectations for $4.79B. Then, three days later, Nvidia pre-announced it would miss its guidance, missing an $8.1B consensus by $1.4B. A day later, Micron pre-announced it would come in at or below the low end of its guidance - just five weeks after issuing said guidance.
Five companies were all seeing the same end-market weakness - large, big-name companies.
In between Intel and Western Digital, AMD reported and provided light but materially intact guidance. It seemed as if AMD was going to get by largely unscathed.
But the overall bad semiconductor news didn't end there.
Nvidia and Micron then officially reported and guided well below consensus estimates for the current quarter. Nvidia, for its part, at the end of August, guided $1B below consensus, adding to the pain of its pre-announcement. Micron saw the worst of it as it guided just a week ago for $4.25B in revenue vs. expectations for $5.68B - after already signaling a weak upcoming quarter.
All the while, AMD continued to buck the trend through silence. But, as we now know, the company will ultimately miss its quarter by a large margin, missing $6.71B estimates by over $1.1B. In a few weeks, we'll likely see the fallout of a below consensus guide, finishing off the pain.
Opening The Barn Doors Now
But not following the stock's performance over the last two months would not be seeing the whole picture. Additionally, not considering the bottom is finally beginning to be carved out with the downside pre-announcement would mean missing out on the opportunity to build a long-term position for the retail market rebound.
For those who haven't been picking up AMD during this falling knife scenario and now have a full position, the barn doors have just opened to welcome the horses back in.
Among the ones I've mentioned in this article, the best near-term opportunity is Micron, as the bottom in memory will happen more swiftly than logic chips due to the lever of controlling supply. It's one of several factors, including others, I've outlined for my subscribers. But beyond this accelerated timetable for Micron is AMD's fabless structure and well-managed, well-executing business. So if this retail end-market inventory correction will impact all of these names, AMD is at the top of my list for wanting to be in the recovery end of this downturn.
This pre-announcement takes estimates down so the market's anticipatory senses can begin seeing at the bottom, but, more importantly, the shift in estimate revisions back up. This is a six-to-nine-month look ahead mechanism the market employs. Therefore, as long as the recovery is within the next three quarters, the market will begin laying the bottom in the stock. Once the market is within two quarters of the recovery and earnings revisions have leveled off, the stock will start making headway higher.
Keeping Valuation Relative
Considering AMD is now the worst performing of the semiconductors I mentioned year to date, second only to Nvidia, the opportunity becomes the best value in this region. Moreover, comparing fabless peers' valuations (as peers with fabs have inherently lower valuations due to the higher capital costs) shows AMD is well within both relative buy range and absolute buy range.
Now, I'm well aware of the danger of using the forward valuations of these companies as their earnings estimates continue to decline. The idea is to also use the historical averages and find the buffer of how undervalued the stock may be. For this, I reference F.A.S.T. Graphs as it charts out the valuation relative to both future expectations and past performance. There hasn't been a valuation time like this in the last ten years for AMD.
Beyond just the basics of earnings, one has to keep in mind the growth rates still expected for AMD relative to peers like Nvidia, where growth is going solidly negative.
You would expect Nvidia to have the lower valuation as it has lower forward growth rates, but the exact opposite is true. AMD has a higher expected growth rate but a lower valuation. The market may be expecting a more significant turnaround for Nvidia as it currently expects growth to return a quarter sooner than AMD (going back to my point about the bottom being closer) or further downward revisions for AMD, but the gap in valuation does not make up for the risk between the two.
Finally, The Shoe Dropped
AMD's pre-announcement is disappointing but is in no way surprising considering its peers had entire novels written on the wall. The market was waiting for the AMD shoe to drop so it could begin pricing in the extent of the earnings cuts. With it now in the rearview, a comparison among peers is much easier to work through. It comes down to the company's ability to push through the retail and inventory correction downturn to the other side.
As I said earlier, Micron will be the first of the group to see upside return, but AMD is at the top of the list when it comes to a less risky semiconductor business structure. As a result, it isn't just a relative performance issue, it's also a meaningful difference in relative and absolute valuation. Over the last decade, AMD hasn't been at this low of a valuation, while Nvidia remains at valuations well over double it.
The least risky, more undervalued play among the semis is AMD. And with the downside pre-announcement out of the way, the market can begin to look to the other end of this challenging environment. It makes this dip into the $50s a serious first opportunity to buy the recovery as a long-term investor.
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This article was written by
Education and Investment Background
Joe has a Bachelors of Science in Computer and Electrical Engineering. He follows technology related companies as well as blue chip industrials and consumer products. Joe writes mainly about technology companies, especially ones that he uses and consumes. Knowing the technical side of the products helps him in his analysis of what the product impact is to consumers and the markets they reach. Joe's interests lie in tech and growth stocks.
Work Experience
Joe works for a technology contracting company as a Release Manager working with Dev/Ops tools and integrating CI/CD systems. This entails automating workflows and deploying compiled artifacts using change control/version control software and deployment automation tools. The sector of his work is governmental and deals with the department of health. He previously worked in the IT field of the healthcare industry for a major teaching hospital and practice group working mostly with integration engines for use with hundreds of systems as well as end user application access and security including single sign-on.
A Little About Joe...
Joe enjoys a variety of hobbies including playing drums and building racecars made for the ice and asphalt. He raced nationally in college for Baja SAE and continues to build racecars and race on a regional level both on road courses and frozen lakes.
Analyst’s Disclosure: I/we have a beneficial long position in the shares of AMD, INTC, MU, NVDA, QCOM either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.
Comments (64)
what do you estimate AMD's organic growth rate was recently without the acquisitions Xilinx and Pensando ?
(After reading numerous reports on AMD here on SA, NOT ONE has addressed this issue.)
Pls state when they were acquired, what the TTM rev growth of each pre-acq was, and what your best estimate of AMD's organic growth rate was recently, without them
Thanks in advance.
no response ? re above ?
so where have i already ans it ?
seekingalpha.com/...
AMD
QCOM
ARCC
BX
CLF
PERI (small cap, just pre announced beat)
AVGO
PRU
ABBV
SPGI actually have more. But these are ones I really like at right price. Patience and Discipline.
https://schrts.co/agtCfUxb | NVDA |
https://finnhub.io/api/news?id=e82ac3a822e6964d43c74103b6804a1b2780cd85cae00a80a29b38b4be1f03db | PC weakness hitting semi stocks like AMD, says BofA's Vivek Arya | Vivek Arya, Bank of America Securities senior semiconductor analyst, joins 'Power Lunch' to discuss the individual company factors that're companies like Nvidia and AMD to stumble, how big a headwind export controls will be for American producers and more. | 2022-10-07T08:12:57 | CNBC | Credit Cards
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https://finnhub.io/api/news?id=8cb735aae8377161ad4786994837c420b2d760d3e455fc22c612991eb05b778e | AMD Stock Is Hitting Lows. Here's When to Buy. | AMD stock is hitting 52-week lows as it reports disappointing preliminary revenue results. Here's when to buy the chipmaker's shares. | 2022-10-07T07:41:00 | Yahoo | AMD Stock Is Hitting Lows. Here's When to Buy.
AMD stock is hitting 52-week lows as it reports disappointing preliminary revenue results. Here's when to buy the chipmaker's shares.
AMD stock is hitting 52-week lows as it reports disappointing preliminary revenue results. Here's when to buy the chipmaker's shares. | NVDA |
https://finnhub.io/api/news?id=5294e5403becc3ef126d878ccce42a5b4c780fdbd1a0522ef0e010b98cf03567 | 12 Best Fintech Stocks to Buy After The Selloff | In this article, we discuss 12 best fintech stocks to buy after the selloff. If you want to read about some more fintech stocks, go directly to 5 Best Fintech Stocks to Buy After the Selloff. The fintech industry has taken a beating in the past few months due to soaring inflation and rising interest […] | 2022-10-07T07:27:20 | Yahoo | 12 Best Fintech Stocks to Buy After The Selloff
In this article, we discuss 12 best fintech stocks to buy after the selloff. If you want to read about some more fintech stocks, go directly to 5 Best Fintech Stocks to Buy After the Selloff.
The fintech industry has taken a beating in the past few months due to soaring inflation and rising interest rates, a combination that has pushed investors towards value offerings at the stock market. However, the slowdown has also created incredible buying opportunities in the fintech sector that looks set to rise given the advancements being made in the fields of artificial intelligence, robotic process automation, smart contracts, DeFi, and virtual reality. Fintech is no doubt the biggest disruptor in the finance industry.
This disruptive force has already won the hearts of tech giants like NVIDIA Corporation (NASDAQ:NVDA), Mastercard Incorporated (NYSE:MA), and Alphabet Inc. (NASDAQ:GOOG), all of whom have pledged hundreds of millions into the development of fintech products over the next few years. As the fintech market evolves from a disruptive one to an established one, as indicated from the more than 26,000 fintech firms in existence, it looks ready to capture a huge chunk of the $4 trillion global e-commerce market by 2027.
Some of the key trends shaping the fintech industry include the introduction of new features, the expansion of machine learning algorithms to beat fraudulent practices, and the gradual phase out of cash and physical cards that are being replaced with virtual cards secured with robust biometric technology. According to Fintech Magazine, about 30% of all banking customers use at least one financial service offered by a non-traditional provider, and this number looks set for explosive growth in the coming years.
Our Methodology
The companies that operate in the fintech sector were selected for the list. In order to provide readers with some context for their investment choices, the business fundamentals and analyst ratings for the stocks are also discussed. Data from around 900 elite hedge funds tracked by Insider Monkey in the second quarter of 2022 was used to identify the number of hedge funds that hold stakes in each firm.
Photo by Clay Banks on Unsplash
Best Fintech Stocks to Buy After The Selloff
12. Futu Holdings Limited (NASDAQ:FUTU)
Number of Hedge Fund Holders: 9
Futu Holdings Limited (NASDAQ:FUTU) operates an online brokerage and wealth management platform in Hong Kong and internationally. It is one of the best fintech stocks to invest in. The stock has gained in the past few weeks after reports suggested that the US and China had reached a tentative auditing deal that would allow independent access to the accounting books of Chinese firms, in line with new US regulations in this regard.
On August 31, JPMorgan analyst Katherine Lei upgraded Futu Holdings Limited (NASDAQ:FUTU) to Overweight from Neutral with a price target of $62, up from $55, noting that the Q2 results of the company beat expectations on the back of stable client growth.
At the end of the second quarter of 2022, 9 hedge funds in the database of Insider Monkey held stakes worth $153 million in Futu Holdings Limited (NASDAQ:FUTU), compared to 11 in the preceding quarter worth $124 million.
Just like NVIDIA Corporation (NASDAQ:NVDA), Mastercard Incorporated (NYSE:MA), and Alphabet Inc. (NASDAQ:GOOG), Futu Holdings Limited (NASDAQ:FUTU) is one of the best fintech stocks to buy now according to hedge funds.
11. Upstart Holdings, Inc. (NASDAQ:UPST)
Number of Hedge Fund Holders: 15
Upstart Holdings, inc. (NASDAQ:UPST) operates a cloud-based artificial intelligence (AI) lending platform in the United States. It is one of the top fintech stocks to invest in. The company recently announced that it had allowed Vantage West Credit Union to offer personal loans to new and existing members across Arizona. Vantage West is a credit union with over 170,000 members and assets amounting to more than $2.6 billion.
On July 17, Piper Sandler analyst Arvind Ramnani maintained a Neutral rating on Upstart Holdings, Inc. (NASDAQ:UPST) stock and lowered the price target to $25 from $44, highlighting that over the next 6 to 18 months, enterprise technology spending could be pressured as macro headwinds persist.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in Upstart Holdings, inc. (NASDAQ:UPST), with 2.7 million shares worth more than $84 million.
In its Q2 2022 investor letter, Vulcan Valve Partners, an asset management firm, highlighted a few stocks and Upstart Holdings, inc. (NASDAQ:UPST) was one of them. Here is what the fund said:
“Upstart Holdings, inc. (NASDAQ:UPST) was a material detractor for the quarter. It was a mistake, and we sold our position. Upstart is an artificial intelligence (AI) and cloud-based lending platform. The company uses AI models that are designed to underwrite superior loans with lower interest rates, lower default rates, higher approval rates, and increased underwriting automation. When we purchased Upstart, we believed the company had an excellent product and the addressable market was large.
Upstart’s results during 2021 were impressive. In the first quarter of 2022, the company reported solid results but lowered guidance and, more importantly, used its balance sheet to warehouse loans temporarily. The company’s decision to use its balance sheet to finance its growth surprised us and other market participants, and its stock price decreased dramatically. While we admire the management team, we are less confident in the company’s long-term prospects.
It will be more difficult than we anticipated for Upstart to extend its competitive advantages with smaller banks into adjacent markets such as auto loans and mortgages. As a result, our value for Upstart is unstable and the company no longer qualifies for investment. We are following our discipline and reallocating capital into companies with more stable values.”
10. SoFi Technologies, Inc. (NASDAQ:SOFI)
Number of Hedge Fund Holders: 22
SoFi Technologies, Inc. (NASDAQ:SOFI) provides digital financial services. It is one of the premier fintech stocks to invest in. The company recently announced that it had signed Justin Herbert, a quarterback for the Los Angeles Chargers, on a three year partnership. Under the terms of the deal, Herbert will take part in a new brand campaign and television ad.
On September 14, Bank of America analyst Mihir Bhatia upgraded SoFi Technologies, Inc. (NASDAQ:SOFI) to Buy from Neutral with a price target of $9, up from $8, backing the firm to drive user growth and engagement in the coming months.
At the end of the second quarter of 2022, 22 hedge funds in the database of Insider Monkey held stakes worth $337.6 million in SoFi Technologies, Inc. (NASDAQ:SOFI), compared to 22 in the preceding quarter worth $475 million.
In its Q4 2021 investor letter, Altron Capital Management, an asset management firm, highlighted a few stocks and SoFi Technologies, Inc. (NASDAQ:SOFI) was one of them. Here is what the fund said:
“We have been building our position in SoFi Technologies, Inc. (NASDAQ:SOFI) over the last two quarters but have not yet written about our thesis until now. SoFi is an online financial technology company that started off refinancing student loans. This segment remains a big part of the company’s business, but they have more recently expanded their products to offer an entire suite of financial services including personal banking, investing, and credit. While their collection of products is still evolving and not yet complete, we believe the company is in the early stages of its inflection. The company nearly doubled its member count over the past year and is growing 50%+ despite its loan refinancing business taking a hit due to the COVID-related loan moratorium. Furthermore, the company is close to obtaining a bank charter through its acquisition of Golden Pacific Bancorp, a community bank based in Sacramento. A bank charter would allow SoFi to take in its own customer deposits, lowering its cost of capital and expanding the company’s breadth of financial offerings (…read more)
9. Affirm Holdings, Inc. (NASDAQ:AFRM)
Number of Hedge Fund Holders: 27
Affirm Holdings, Inc. (NASDAQ:AFRM) operates a platform for digital and mobile-first commerce in the United States, Canada, and internationally. It is one of the elite fintech stocks to invest in. The company recently announced that it would extend the services it offers on Amazon with the introduction of pay-over-time option to customers in Canada. This addition will enable shoppers to pay in installments.
On September 7, investment advisory Morgan Stanley maintained an Overweight rating on Affirm Holdings, Inc. (NASDAQ:AFRM) stock and lowered the price target to $53 from $80. Analyst James Faucette issued the ratings update.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in Affirm Holdings, Inc. (NASDAQ:AFRM), with 4.1 million shares worth more than $74 billion.
In its Q2 2022 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Affirm Holdings, Inc. (NASDAQ:AFRM) was one of them. Here is what the fund said:
“We recently covered our short position in Affirm Holdings, Inc. (NASDAQ:AFRM) after a rapid decline brought the share price to ~$30 – down from our entry point above $100 – in only 7 months. We discussed Affirm in our Q4 letter, saying the following:
Affirm is a “Buy Now, Pay Later” (BNPL) company founded by former PayPal CTO and cofounder Max Levchin. They provide installment loans to consumers, partnering with retail companies looking to drive higher sales. They have two primary products: a zero-fee installment loan for consumers with the best credit scores, and a more traditional product with 20%+ interest rates for subprime borrowers. Their stated plan is to disrupt the credit industry with more transparent, lower-fee loans. At a roughly $28b market cap at the start of 2022, AFRM stock was priced at more than 20x trailing sales, a steep price for a money-losing lender. While their early lead in online BNPL transactions and partnerships with fast-growing retailers like Peloton has fueled significant historical growth, a wave of competition has arrived… While the stock has already fallen sharply from where we initiated our short position, we think it could fall another ~40% to trade at 8x FY2022 sales."
8. Coinbase Global, Inc. (NASDAQ:COIN)
Number of Hedge Fund Holders: 29
Coinbase Global, Inc. (NASDAQ:COIN) provides financial infrastructure and technology for the crypto economy. It is one of the most prominent fintech stocks to invest in. On September 29, the company announced that it had teamed up with investment management software provider SS&C to expand the digital asset trading capabilities of the latter. Through the partnership, SS&C clients will gain access to the institutional crypto trading platform, Coinbase Prime.
On September 14, investment advisory JPMorgan maintained a Neutral rating on Coinbase Global, Inc. (NASDAQ:COIN) stock and raised the price target to $78 from $64. Analyst Kenneth Worthington issued the ratings update.
At the end of the second quarter of 2022, 29 hedge funds in the database of Insider Monkey held stakes worth $1.2 billion in Coinbase Global, Inc. (NASDAQ:COIN), compared to 46 in the preceding quarter worth $2.3 billion.
In its Q2 2022 investor letter, Miller Value Partners, an asset management firm, highlighted a few stocks and Coinbase Global, Inc. (NASDAQ:COIN) was one of them. Here is what the fund said:
“Coinbase Global Inc. Ordinary Shares (NASDAQ:COIN) fell during the quarter as the crypto markets continued to suffer. While the company reported disappointing results, it committed to capping EBITDA losses at $500M even in the event of “a prolonged market downturn”. COIN’s ample liquidity ($6b in cash on hand) should enable them to survive a prolonged “crypto winter” and invest to strengthen the business in the downturn. While the crypto market is early in its adoption, Coinbase is focused on building the platform for crypto not only supporting trading, and cold storage, but moving into NFTs, staking, and crypto derivatives. We see tremendous upside potential for COIN over the next decade if they are able to successfully execute on their platform strategy.”
7. Opendoor Technologies Inc. (NASDAQ:OPEN)
Number of Hedge Fund Holders: 39
Opendoor Technologies Inc. (NASDAQ:OPEN) operates a digital platform for residential real estate in the United States. The company recently announced that it would expand the Opendoor Finance App to three more states in the US. The Opendoor Finance App, available only in California, will now launch in Georgia, Arizona, and Texas, promising consumers pre-approval letters in 60 seconds or less.
On September 23, investment advisory Credit Suisse maintained an Outperform rating on Opendoor Technologies Inc. (NASDAQ:OPEN) stock and a price target of $16. Analyst Stephen Ju issued the ratings update.
Among the hedge funds being tracked by Insider Monkey, Hong Kong-based firm Sylebra Capital Management is a leading shareholder in Opendoor Technologies Inc. (NASDAQ:OPEN), with 30.5 million shares worth more than $143.8 million.
In its Q4 2021 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Opendoor Technologies Inc. (NASDAQ:OPEN) was one of them. Here is what the fund said:
“The Fund invests in secular growth and innovative businesses across all market capitalizations, with the bulk of the portfolio landing in the large-cap zone. The Fund is categorized as US Large Growth by Morningstar. As of the end of the fourth quarter, the largest market cap holding in the Fund was $2.5 trillion and the smallest was $791 million. The median market cap of the Fund was $27.5 billion. The Fund had $1.7 billion of assets under management. The Fund had investments in 63 securities. The Fund’s top 10 positions accounted for 45.4% of net assets. Fund inflows were positive for 2021.We sold Opendoor Technologies Inc. (NASDAQ:OPEN) because we identified issues relating to our long-term theses in the company, and we decided to exit the positions to fund other purchases.”
6. Fiserv, Inc. (NASDAQ:FISV)
Number of Hedge Fund Holders: 59
Fiserv, Inc. (NASDAQ:FISV) provides payment and financial services technology worldwide. The firm recently revealed that merger-related synergy work had caused expenses to increase in the first half of the year. The statement was made by Frank Bisignano, the CEO of the firm, who also said that the company should reap benefits in the remainder of the year as those costs wind down.
On August 11, Evercore ISI analyst David Togut upgraded Fiserv, Inc. (NASDAQ:FISV) to Outperform from In Line with a price target of $149, up from $101, noting that the company was embracing a new growth playbook.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Harris Associates is a leading shareholder in Fiserv, Inc. (NASDAQ:FISV), with 23 million shares worth more than $2 billion.
In addition to NVIDIA Corporation (NASDAQ:NVDA), Mastercard Incorporated (NYSE:MA), and Alphabet Inc. (NASDAQ:GOOG), Fiserv, Inc. (NASDAQ:FISV) is one of the best fintech stocks to buy now according to hedge funds.
In its Q4 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Fiserv, Inc. (NASDAQ:FISV) was one of them. Here is what the fund said:
“While the threat of disruption risk to these established payment companies should not be taken lightly, it is important to note that many of these emerging disruptors are small relative to the massive global payments network and heavily reliant on the very payment infrastructure they are trying to disrupt. This led us to initiate a position in Fiserv, Inc. (NASDAQ:FISV), whose stock dropped to a level that embedded projections for negative long-term growth despite no current evidence of disruption. We think Fiserv will continue to grow despite perceived disruption risks given its scale and efficiency. Fiserv also owns cloud-based payments hardware and software system Clover, which is both bigger and faster growing than Square; this provides an additional degree of protection against further disruption risk.”
Click to continue reading and see 5 Best Fintech Stocks to Buy After The Selloff.
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Disclosure. None. 12 Best Fintech Stocks to Buy After The Selloff is originally published on Insider Monkey. | NVDA |
https://finnhub.io/api/news?id=3dad04abdb259bc8c686b7aa1b711c8d2a5d23ecfcc9985d47812eb44c9b82d9 | 11 Best Long-Term Stocks To Buy Now | In this article, we will look at the 11 best long-term stocks to buy now. If you want to explore similar stocks, you can also take a look at 5 Best Long-Term Stocks To Buy Now. The current market situation is not ideal for short-term investors and day traders. As of October 5, the S&P […] | 2022-10-07T06:31:21 | Yahoo | 11 Best Long-Term Stocks To Buy Now
In this article, we will look at the 11 best long-term stocks to buy now. If you want to explore similar stocks, you can also take a look at 5 Best Long-Term Stocks To Buy Now.
The current market situation is not ideal for short-term investors and day traders. As of October 5, the S&P 500 has tanked over 21% year to date, the tech-heavy Nasdaq is down 30% for the year, and the Dow has lost 17.35% since the beginning of 2022. The stock market is in shambles, but for long-term investors, it has started to look like an attractive entry point.
Wharton’s Jeremy Siegel: “If You’re a Long-Term Investor, I Would Absolutely Buy Now”
Jeremy Siegel is a professor of finance at the Wharton School of the University of Pennsylvania and is a notable commentator on the economy and capital markets. Mr. Siegel recently appeared on CNBC’s ‘Squawk Box’ where he discussed his view on why now is an attractive buying opportunity for long-term investors. Here are some comments from the professor of finance at one of the top business schools in the world:
“If you’re a long-term investor, I would absolutely buy now. I think these are absolutely great long-term values. Could it go down more? Of course in the short-run and in bear markets (historical), it has gone down more. But when you’re talking about 16 times earnings and even if they are clipped by a recession, you shouldn’t just base it on recession earnings you should base it on longer-term earnings, which I think are very favorable looking beyond the dip. I think these are just absolutely excellent values. Short-term, anything can happen in the short term.”
While short-term investors are unwinding their positions and triggering major sell-offs, they are in fact creating a buying opportunity for long-term investors. Some of the best long-term stocks to buy now include Johnson & Johnson (NYSE:JNJ), NVIDIA Corporation (NASDAQ:NVDA), and Microsoft Corporation (NASDAQ:MSFT).
Photo by Roberto Júnior on Unsplash
Our Methodology
To determine the 11 best long-term stocks to buy now, we picked out blue chip companies with track records of profitability and strong balance sheets. We picked stocks from a variety of sectors including consumer staples, healthcare, and technology. Along with each stock, we have mentioned the hedge fund sentiment, analyst ratings, and salient features that make it a good candidate for long-term investors. The hedge fund sentiment was derived from Insider Monkey's database, which tracks roughly 900 elite hedge funds.
Best Long-Term Stocks To Buy Now
11. Colgate-Palmolive Company (NYSE:CL)
Number of Hedge Fund Holders: 55
Colgate-Palmolive Company (NYSE:CL) is one of the best long-term stocks to buy now because of its rich dividend history, defensive business model, and strong pricing power due to a solid brand image in global markets. On September 9, Colgate-Palmolive Company (NYSE:CL) declared a quarterly cash dividend of $0.47 per share. The dividend is payable on November 15, to shareholders of record on October 21. As of October 5, the stock is offering a forward dividend yield of 2.64%.
On August 1, Wells Fargo analyst Chris Carey raised his price target on Colgate-Palmolive Company (NYSE:CL) to $80 from $71 and upgraded the stock to Equal Weight from Underweight. This August, Barclays analyst Lauren Lieberman raised his price target on Colgate-Palmolive Company (NYSE:CL) to $74 from $71 and maintained an Equal Weight rating on the shares.
At the end of Q2 2022, 55 hedge funds held stakes in Colgate-Palmolive Company (NYSE:CL). The total value of these stakes amounted to $2.93 billion, up from $2.59 billion a quarter ago, with 50 positions. The hedge fund sentiment for the stock is positive.
As of June 30, First Eagle Investment Management is the largest investor in Colgate-Palmolive Company (NYSE:CL) and has stakes worth $899 million in the company.
Here is what First Eagle Investments had to say about Colgate-Palmolive Company (NYSE:CL) in its second-quarter 2022 investor letter:
“Shares of consumer staples giant Colgate-Palmolive have performed well as investors rotated into more recessionary-resilient defensive stocks amid the broader selloff during the second quarter. The company raised revenue guidance for 2022 but lowered its margin outlook because of higher costs for raw materials, packaging and logistics; we believe that the company’s size and market share provide it with options to mitigate the inflation challenges it faces. We continue to like Colgate- Palmolive’s dividend and previously announced $5 billion stock buyback program.”
10. The Coca-Cola Company (NYSE:KO)
Number of Hedge Fund Holders: 60
The Coca-Cola Company (NYSE:KO) has the ability to drive long-term shareholder value and is one of the best long-term stocks to buy now. The company has been awarding shareholders with dividends for roughly 6 decades. At the close of the second quarter of 2022, 60 hedge funds were long The Coca-Cola Company (NYSE:KO) and held stakes worth $28.3 billion in the company. This is compared to 64 hedge funds in the previous quarter that had stakes worth $29 billion in the company.
Wall Street is bullish on The Coca-Cola Company (NYSE:KO) and sees upside to the stock. This July, Deutsche Bank analyst Steve Powers raised his price target on The Coca-Cola Company (NYSE:KO) to $65 from $64 and maintained a Hold rating on the shares. On September 6, HSBC analyst Carlos Laboy raised his price target on The Coca-Cola Company (NYSE:KO) to $76 from $72 and reiterated a Buy rating on the shares.
As of June 30, Berkshire Hathaway is the largest shareholder in The Coca-Cola Company (NYSE:KO) and owns 400 million shares. Warren Buffett has owned the stock for over a decade and the investment covers 8.38% of his hedge fund's second-quarter 2022 investment portfolio.
Some of the top blue-chip companies that should be on long-term investors' radars include The Coca-Cola Company (NYSE:KO), Johnson & Johnson (NYSE:JNJ), NVIDIA Corporation (NASDAQ:NVDA), and Microsoft Corporation (NASDAQ:MSFT).
9. Costco Wholesale Corporation (NASDAQ:COST)
Number of Hedge Fund Holders: 64
On September 22, Costco Wholesale Corporation (NASDAQ:COST) released earnings for the fourth quarter of fiscal 2022. The company reported earnings per share of $4.20 and generated a revenue of $72 billion, up 15% year over year, and ahead of Wall Street estimates by $90 million. As of October 5, the stock has gained 6.8% over the past twelve months.
Costco Wholesale Corporation (NASDAQ:COST) is one of the best long-term stocks to buy now because the company has a track record for profitability and financial growth. Over the past ten years, Costco Wholesale Corporation (NASDAQ:COST) has returned 20% to investors, outperforming the S&P 500's return of 12% for the same time period.
Shortly after the company's earnings release, Jefferies analyst Corey Tarlowe reiterated his $610 price target and Buy rating on Costco Wholesale Corporation (NASDAQ:COST) and also said that the stock remains his "top pick".
At the end of Q2 2022, 64 hedge funds were bullish on Costco Wholesale Corporation (NASDAQ:COST) and held stakes worth $4.76 billion in the company. This is compared to 61 hedge funds in the preceding quarter with stakes worth $5.41 billion.
As of June 30, Fisher Asset Management is the leading shareholder in Costco Wholesale Corporation (NASDAQ:COST) and has stakes of more than $2 billion in the company. The investment covers 1.47% of Ken Fisher's 13F portfolio.
8. Walmart Inc. (NYSE:WMT)
Number of Hedge Fund Holders: 67
Walmart Inc. (NYSE:WMT) is one of the largest retailers in the world by revenue and is one of the best long-term stocks to buy now. Walmart Inc. (NYSE:WMT) is a cash-rich and profitable business that can meet its long-term financial goals and drive long-term shareholder value. As of July 31, Walmart Inc. (NYSE:WMT) has a debt-to-equity ratio of 0.58. The company has a trailing twelve-month operating margin of 4% and has free cash flows of $5.4 billion.
Analysts see upside to Walmart Inc. (NYSE:WMT). This August, Morgan Stanley analyst Simeon Gutman raised his price target on Walmart Inc. (NYSE:WMT) to $150 from $145 and maintained a buy-side Overweight rating on the shares. On September 14, KeyBanc analyst Bradley Thomas started coverage of Walmart Inc. (NYSE:WMT) with an Overweight rating and a $155 price target.
Walmart Inc. (NYSE:WMT) is a prominent backer of the metaverse. On September 26, the company launched two new experiences, Walmart Land and Walmart's Universe of Play, in Roblox Corporation's (NASDAQ:RBLX) metaverse platform. The Walmart Land and Walmart's Universe of Play feature Walmart's aisles in a virtual world.
At the end of Q2 2022, 67 hedge funds disclosed ownership of stakes in Walmart Inc. (NYSE:WMT). These funds held collective stakes of $3.78 billion in the company. As of June 30, GQG Partners owns more than 9.8 million shares of Walmart Inc. (NYSE:WMT) and is the most prominent investor in the company.
7. The Procter & Gamble Company (NYSE:PG)
Number of Hedge Fund Holders: 71
The Procter & Gamble Company (NYSE:PG) is one of the best dividend-paying long-term stocks to buy now. The company's defensive business model makes it less vulnerable to changes in economic cycles and allows it to maintain its profitability. The Procter & Gamble Company (NYSE:PG) has a trailing twelve-month operating margin of 23.3% and has free cash flows of $13.5 billion. Over the past ten years, The Procter & Gamble Company (NYSE:PG) has returned 9.68% to investors.
The Procter & Gamble Company (NYSE:PG) has a consensus Buy rating among Wall Street analysts. On August 2, Barclays analyst Lauren Lieberman revised her price target on The Procter & Gamble Company (NYSE:PG) to $154 from $157 and maintained a buy-side Overweight rating on the shares.
At the end of the second quarter of 2022, 71 hedge funds were eager on The Procter & Gamble Company (NYSE:PG) and held stakes worth $5.53 billion in the company. As of June 30, Bridgewater Associates is the largest shareholder in the company and has stakes worth $970 million. The investment covers 4.1% of Ray Dalio's 13F portfolio.
Like The Procter & Gamble Company (NYSE:PG), other profitable cash-rich companies include Johnson & Johnson (NYSE:JNJ), NVIDIA Corporation (NASDAQ:NVDA), and Microsoft Corporation (NASDAQ:MSFT).
6. Merck & Co., Inc. (NYSE:MRK)
Number of Hedge Fund Holders: 79
Merck & Co., Inc. (NYSE:MRK) is presenting an attractive entry point for long-term investors and is trading at bargain levels. As of October 5, the stock has a trailing twelve-month PE ratio of 13.47 and is offering a forward dividend yield of 3.15%. Merck & Co., Inc. (NYSE:MRK) has consistently grown its dividends for the past decade and the stock is one of the best undervalued long-term stocks to buy now.
Analysts are bullish on Merck & Co., Inc. (NYSE:MRK). On August 25, Erste Group analyst Hans Engel upgraded Merck & Co, Inc. (NYSE:MRK) to Buy from Hold. The analyst noted that the company is leading its sector and has above-average profitability. On September 14, Berenberg analyst Luisa Hector raised her price target on Merck & Co., Inc. (NYSE:MRK) to $100 from $95 and upgraded the stock to Buy from Hold. As of October 5, Merck & Co., Inc. (NYSE:MRK) has gained 14.75% year to date and has a trailing twelve-month operating margin of 34.9%.
At the close of Q2 2022, 79 hedge funds were bullish on Merck & Co., Inc. (NYSE:MRK) and held stakes worth $6.11 billion in the company. This is compared to 84 hedge funds in Q1 2022 with stakes worth $5.86 billion.
As of June 30, Fisher Asset Management owns more than 12 million shares of Merck & Co., Inc. (NYSE:MRK) and is the largest investor in the company. The investment covers 0.78% of Ken Fisher's 13F portfolio.
Here is what Chartwell Investment Partners had to say about Merck & Co., Inc. (NYSE:MRK) in its second-quarter 2022 investor letter:
“In the Dividend Equity accounts, the three best performers in Q2 includes Merck (NYSE:MRK, 3.6%), up 12.0%. Merck, like other pharma companies, is in a defensive business, but the stock also did well as peak-sales estimates for their flagship drug, Keytruda, have gone up (JPMorgan estimates $32 billion in sales by 2026).”
Click to continue reading and see 5 Best Long-Term Stocks To Buy Now.
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Disclosure: None. 11 Best Long-Term Stocks To Buy Now is originally published on Insider Monkey. | NVDA |
https://finnhub.io/api/news?id=b4fa4ae4b6dfa08a823a89f327621c0222a07ed4bdd15d6e81e97f0ecba72f34 | Stocks making the biggest moves midday: CVS, Credit Suisse, AMD, Lyft and more | These are the stocks posting the largest moves in midday trading. | 2022-10-07T06:30:01 | CNBC | Check out the companies making headlines in midday trading Friday.
Ambac Financial Group – Shares of the municipal bond insurer shot up 15.7% on news of settlements with Bank of America that would bring Ambac $1.84 billion. The settlements come out of lawsuits related to the bond insurance policies Ambac used for Bank of America prior to the 2008 financial crisis. Bank of America was down about 2.4%.
Levi Strauss – Levi's dropped 11.7% to a 52-week low after cutting its full-year sales and profit outlook Thursday, as the clothing maker cited issues stemming from the supply chain and the stronger U.S. dollar.
DraftKings – Shares of DraftKings rose 3.3% on a Bloomberg report that the online sports betting company is close to a partnership deal with ESPN.
Lyft – The rideshare company slid 8.7% after RBC downgraded the stock to sector perform from outperform. RBC said competitor Uber, which was down about 4.5%, had "structural advantages."
CVS Health – Shares of CVS dropped 10.5% following a report that the health care giant is in "exclusive talks" to buy Cano Health. The company had already been falling after the Centers for Medicare and Medicaid Services downgraded one of its Aetna Medicare Advantage plans in its annual ratings. Shares of Cano gained 9%.
Tesla, Twitter – The two businesses continued to move following a week of news on Elon Musk reviving his high-profile plans to purchase Twitter. Tesla fell 6.3%, while Twitter lost 0.2%. On Thursday, a judge said Musk needs to complete his purchase by Oct. 28 to avoid a trial.
Credit Suisse – The European bank was up 13.1% after offering to buy back $3 billion in debt securities Friday and sell a famous hotel it owns. It marks another day of tumult for shares of the stock — which hit an all-time low earlier in the week — as market observers questioned the bank's health.
DexCom – Shares of the manufacturer of glucose monitoring devices jumped 7.3% after the Centers for Medicare and Medicaid Services updated a local coverage determination related to such devices. The move could boost the bottom line for DexCom, a key player in the continuous glucose monitoring space.
Apple – The tech giant was down 3.7% despite Morgan Stanley reiterating the stock as overweight, noting elevated lead times for the iPhone. People following the company have raised concern over the performance of the new line of iPhones compared to previous rollouts as Apple yanked plans to increase production.
Meta – The Facebook owner also slid 4% despite being reiterated as a buy by Citi, which noted an appealing risk/reward outlook as Reels revenue increases and new ad formats come into play. The stock hit a 52-week low.
Cannabis companies – Shares of cannabis companies were all down, after initially soaring on news that President Joe Biden wants a review of how marijuana is classified under federal law. Biden also announced he'll pardon thousands convicted of marijuana possession. Tilray Brands, which reported a larger-than-expected quarterly loss on Friday, was down 18.8%. Canopy Growth plunged more than 25.6%, Aurora Cannabis fell 12.8% and Cronos Group lost 15.6%.
Advanced Micro Devices – Shares of Advanced Micro Devices plummeted 13.4% after the semiconductor company issued disappointing preliminary results for the third quarter and said it expects revenue to fall short of its previous $6.7 billion dollar forecast. AMD blamed the shortfall on weakening PC demand and supply chain constraints. Shares of other chip companies including Intel and Nvidia fell on the news.
Unity Software – Shares of Unity, known for its software for three-dimensional design, dropped 8.6%. It contrasts with Needham earlier Friday initiating the stock as a buy with an upside of 39%.
Provention – Shares of the biopharmaceutical company leaped 11.3%, continuing to rally on news Thursday of plans to launch a drug candidate for type 1 diabetes.
— CNBC's Samantha Subin, Michelle Fox, Carmen Reinicke, Tanaya Macheel and Yun Li contributed reporting. | NVDA |
https://finnhub.io/api/news?id=3a61310dc09564bcdc6e1c302c6122a60a6acc2b14effe9e3136b10688b98763 | 11 Best FAANG Stocks To Buy Now | In this article, we will be taking a look at the 11 best FAANG stocks to buy now. To skip our detailed analysis of these stocks and the technology sector, you can go directly to see the 5 Best FAANG Stocks to Buy Now. In spite of the Fed jacking up interest rates, the technology sector […] | 2022-10-07T06:24:03 | Yahoo | 11 Best FAANG Stocks To Buy Now
In this article, we will be taking a look at the 11 best FAANG stocks to buy now. To skip our detailed analysis of these stocks and the technology sector, you can go directly to see the 5 Best FAANG Stocks to Buy Now.
In spite of the Fed jacking up interest rates, the technology sector is continuing to attract investor attention in 2022. With rampant inflation still plaguing the market, the sector was expected to suffer from a loss in popularity. However, its cheaper valuation in a time of economic recession is managing to work in its favor. According to a Bloomberg article published this September, The Nasdaq 100 Index was 35% cheaper than its peak in 2020. Some of the best FAANG stocks like Apple Inc. (NASDAQ:AAPL) still continued to rake in cash and maintain their earnings outlooks, inspiring confidence as far as investors were concerned.
What are FAANG stocks?
The acronym FAANG refers to the top five American technology companies in the market today: Facebook (now known as Meta Platforms, Inc. (NASDAQ:META)), Amazon.com, Inc. (NASDAQ:AMZN), Apple Inc. (NASDAQ:AAPL), Netflix, Inc. (NASDAQ:NFLX), and Alphabet Inc. (NASDAQ:GOOG). With Netflix, Inc. (NASDAQ:NFLX) losing the favor of many investors with its performance this year, Microsoft Corporation (NASDAQ:MSFT) is steadily becoming a new member of this group of stocks.
Investors' approach to the markets this year has demonstrated that staying away from the best FAANG stocks like Amazon.com, Inc. (NASDAQ:AMZN) and Microsoft Corporation (NASDAQ:MSFT) is not an option. The sheer size of the tech industry alone makes it the largest of its kind in the S&P 500, making up almost 27% of the index. As a result, many investors are now being pulled towards durable businesses like the FAANG stocks.
According to a Reuters article published this July, Microsoft Corporation's (NASDAQ:MSFT) earnings results added to investor confidence in the tech sector, as they showed that the FAANG stocks were well-equipped to deal with a recession. Microsoft Corporation (NASDAQ:MSFT) rose by about 3.1% in July after the company mentioned it was targeting double-digit growth in fiscal revenue.
Let's now take a look at the 11 best FAANG stocks to buy now.
Our Methodology
We have selected renowned tech stocks that are comparable to the Big Tech companies. These stocks were popular among the 895 hedge funds tracked by Insider Monkey in the second quarter of 2022. They have also reported positive latest earnings and demonstrate growth potential based on projected EPS growth, revenue growth, and free cash flow growth, among other factors. We have ranked these stocks based on the number of hedge funds holding stakes in them, from the lowest to the highest. We have also mentioned analyst ratings and price targets for these stocks.
Best FAANG Stocks To Buy Now
11۔ International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 40
International Business Machines Corporation (NYSE:IBM) is an information technology company providing integrated solutions and services across the globe. The company offers hybrid cloud platform and software solutions, software for business automation, data and artificial intelligence solutions, and more. It is based in Armonk, New York.
An Overweight rating was reiterated on shares of International Business Machines Corporation (NYSE:IBM) on October 6, by analyst Erik Woodring at Morgan Stanley. The analyst also placed a $152 price target on the stock.
The company's revenue has grown by 27.28% year-over-year, and its EPS is expected to grow by 8.97% over the next three to five years. International Business Machines Corporation (NYSE:IBM) has a one-year dividend growth rate of 0.77% as well. Its EPS in the second quarter of 2022 was $2.31, beating estimates by $0.02. International Business Machines Corporation (NYSE:IBM) also brought in $15.54 billion in revenue, beating estimates by $359.15 million.
Citadel Investment Group was the largest stakeholder in International Business Machines Corporation (NYSE:IBM) in the second quarter, holding 2.9 million shares worth about $420.9 million. In total, 40 funds were long the stock, with a total stake value of $948 million.
International Business Machines Corporation (NYSE:IBM), like Amazon.com, Inc. (NASDAQ:AMZN), Apple Inc. (NASDAQ:AAPL), and Microsoft Corporation (NASDAQ:MSFT), is one of the top tech stocks hedge funds are pouring into today.
10. Intel Corporation (NASDAQ:INTC)
Number of Hedge Fund Holders: 65
Intel Corporation (NASDAQ:INTC) is a semiconductor company working to design, manufacture, and sell computer products and technologies across the globe. It offers platform products like central processing units and chipsets. It is based in Santa Clara, California.
Ross Seymore at Deutsche Bank has a Hold rating on Intel Corporation (NASDAQ:INTC) shares as of September 8. The analyst also placed a $35 price target on the stock.
Intel Corporation (NASDAQ:INTC) has a forward dividend per share growth rate of 4.21%, and a one-year dividend growth rate of 5.17%. The company has been investing large sums in research and development, manufacturing, and packaging technologies, a move that will benefit it in the long run. This March, Intel Corporation (NASDAQ:INTC) announced plans to invest $85 billion in the above areas.
In total, there were 65 hedge funds long Intel Corporation (NASDAQ:INTC) in the second quarter. Their total stake value was $2.5 billion.
9. QUALCOMM, Incorporated (NASDAQ:QCOM)
Number of Hedge Fund Holders: 71
QUALCOMM, Incorporated (NASDAQ:QCOM) is a semiconductor company working to develop and commercialize foundational technologies for the wireless industry worldwide. The company operates through its Qualcomm CDMA Technologies (QCT), Qualcomm Technology Licensing (QTL), and Qualcomm Strategic Initiatives (QSI) segments. It is based in San Diego, California.
On September 26, Samik Chatterjee at JPMorgan reiterated an Overweight rating on shares of QUALCOMM, Incorporated (NASDAQ:QCOM). The analyst also placed a $185 price target on the stock.
QUALCOMM, Incorporated's (NASDAQ:QCOM) EPS is expected to grow by 23.02% over the next three to five years. The company's revenue has grown by 29.36% year-over-year, and its forward free cash flow per share growth rate is 50.65%. QUALCOMM, Incorporated (NASDAQ:QCOM) also has a one-year dividend growth rate of 6.08%. Analyst Chatterjee sees a substantial upside in the stock in light of the stock's current valuation.
QUALCOMM, Incorporated (NASDAQ:QCOM) was found among the 13F holdings of 71 hedge funds in the second quarter, and 73 funds in the previous quarter. Their total stake values were $2.8 billion and $3.6 billion, respectively.
8. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 84
NVIDIA Corporation (NASDAQ:NVDA) is another semiconductor company providing graphics, compute, and networking solutions in the US, Taiwan, China, and internationally. It offers game streaming services and related infrastructure, solutions for gaming platforms, and automotive platforms for infotainment systems. It is based in Santa Clara, California.
Joseph Moore at Morgan Stanley holds an Equal Weight rating on shares of NVIDIA Corporation (NASDAQ:NVDA) as of September 21. The analyst also maintains a $182 price target on the stock. Moore believes NVIDIA Corporation (NASDAQ:NVDA) will benefit in the near future, since gaming revenues are set to recover in 2023, seeing how prices in the sector are 28% higher than the baseline price from two year ago. NVIDIA Corporation (NASDAQ:NVDA) had revenue of $6.7 billion in the fiscal second quarter of 2023, beating estimates by $3.47 million.
There were 84 hedge funds long NVIDIA Corporation (NASDAQ:NVDA) in the second quarter, with a total stake value of $3.3 billion. Of these funds, Citadel Investment Group was the largest stakeholder in the company, holding 17.7 million shares worth $2.7 billion.
7. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Number of Hedge Fund Holders: 87
Advanced Micro Devices, Inc. (NASDAQ:AMD) is another information technology company operating in the semiconductor industry. The company offers chipsets, discrete and integrated graphics processing units (GPUs), data center and professional GPUs, and development services, among more. It is based in Santa Clara, California.
An Overweight rating was maintained on shares of Advanced Micro Devices, Inc. (NASDAQ:AMD) on October 5, placed by analyst Aaron Rakers at Wells Fargo. The analyst also placed a $90 price target on the stock.
Advanced Micro Devices, Inc.'s (NASDAQ:AMD) working capital growth year-over-year stands at a rate of 61.17%. The company's EPS is expected to grow by 30.95% over the next three to five years, and its revenue has grown by 61.74% year-over-year. This October, Advanced Micro Devices, Inc. (NASDAQ:AMD) also led chip stocks higher for the third straight day of gains this month.
Out of 895 funds, 87 funds were long Advanced Micro Devices, Inc. (NASDAQ:AMD) in the second quarter, with a total stake value of $4.8 billion. In comparison, 83 funds were long the stock in the previous quarter, with a total stake value of $6.9 billion.
6. Alibaba Group Holding Limited (NYSE:BABA)
Number of Hedge Fund Holders: 106
Alibaba Group Holding Limited (NYSE:BABA) is an internet and direct marketing retail company operating in the consumer discretionary sector. The company provides technology infrastructure and marketing reach to help merchants, retailers, and businesses to engage with their consumer bases in China and internationally. It is based in Hangzhou, China.
On October 3, Jiong Shao at Barclays kept an Overweight rating on Alibaba Group Holding Limited (NYSE:BABA) shares, while placing a $135 price target on the stock.
This October, Alibaba Group Holding Limited (NYSE:BABA) led Chinese tech stocks in the broader market, rising 4.6% on October 4. The company's revenue has grown by 10.87% year-over-year, and its EPS is expected to grow by 1.74% over the next three to five years. In the fiscal first quarter of 2023, Alibaba Group Holding Limited (NYSE:BABA) had an EPS of $1.74, beating estimates by $0.18, while its $30.46 billion revenue also beat estimates by $296.3 million.
Alibaba Group Holding Limited (NYSE:BABA) had 106 hedge funds long its stock in the second quarter, with a total stake value of $7.4 billion. Fisher Asset Management was the largest stakeholder in the company, holding 14.5 million shares worth $1.6 billion.
Distillate Capital Partners LLC, an investment management firm, mentioned Alibaba Group Holding Limited (NYSE:BABA) in its second quarter 2022 investor letter. Here's what the company said:
“Changes & Regional Weights: The largest new position is Alibaba Group Holding Limited (NYSE:BABA), which underperformed considerably and has seen its enterprise value fall by almost two thirds from its peak despite a net cash position on its balance sheet.”
Alibaba Group Holding Limited (NYSE:BABA), like Amazon.com, Inc. (NASDAQ:AMZN), Apple Inc. (NASDAQ:AAPL), and Microsoft Corporation (NASDAQ:MSFT), has been on the rise in the tech sector for many year, attracting positive investor attention.
Click to continue reading and see the 5 Best FAANG Stocks to Buy Now.
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Disclosure: None. 11 Best FAANG Stocks to Buy Now is originally published on Insider Monkey. | NVDA |
https://finnhub.io/api/news?id=378b65fc26384c7ab958af3a586c5789cbfcd911f12f7ab67cfc15e53ae20c50 | Chip stocks slide as Samsung, AMD expect steep fall in demand | AMD, Nvidia Corp, Intel Corp, Qualcomm Inc and Micron Technology Inc were down between 1.2% and 6.0%, weighing on smaller peers such as Marvell Technology Inc and Applied Materials Inc. Samsung, the world's top maker of memory chips, smartphones and televisions, is a bellwether for global consumer demand and its disappointing preliminary results add to a flurry of earnings downgrades and gloomy forecasts. | 2022-10-07T05:59:31 | Yahoo | Chip stocks slide as Samsung, AMD expect steep fall in demand
(Reuters) - Dire forecasts from Samsung Electronics Co Ltd and Advanced Micro Devices Inc sent chip-related shares lower on Friday, sparking fears that a slump in demand for semiconductors could be much worse than expected.
AMD, Nvidia Corp, Intel Corp, Qualcomm Inc and Micron Technology Inc were down between 1.2% and 6.0%, weighing on smaller peers such as Marvell Technology Inc and Applied Materials Inc.
Samsung, the world's top maker of memory chips, smartphones and televisions, is a bellwether for global consumer demand and its disappointing preliminary results add to a flurry of earnings downgrades and gloomy forecasts.
The chip sector has been grappling with weak demand, spurred by decades-high inflation, rising interest rates, geopolitical tensions and pandemic-related lockdowns in China, hitting the PC and smartphone market as businesses and consumers rein in expenses.
Nearly a dozen analysts cut their price targets on AMD's shares by as much as $50 after the U.S.-based chipmaker slashed its third-quarter revenue outlook by about a billion dollars.
"We believe AMD's warning will have the most negative read-across for PC peer Intel, but also somewhat for Nvidia and related memory and data center peers," BofA Securities analyst Vivek Arya said.
Memory chip buyers such as smartphone and PC makers are holding off on new purchases and using up existing inventory, leading to lower shipments and ushering in an industry downcycle.
"We still think the industry is heading for its deepest downcycle in a decade, thanks to high supply chain inventories and falling end demand," Jefferies analysts said.
Global chip sales grew just 0.1% in August, making it the 15th month of a downcycle since June 2021, when sales rose more than 30%, according to Jefferies.
Shares of major U.S. chipmakers have already lost between a third and half of their value so far this year, following huge gains last year when Nvidia was inching closer to a trillion-dollar valuation.
(Reporting by Eva Mathews and Nivedita Balu in Bengaluru; Editing by Shounak Dasgupta) | NVDA |
https://finnhub.io/api/news?id=b0aa698af42c47329dafbbdeb2f4fe4052500b32515e05bf97db95dc20b941d1 | AMD: Of Course There Is A Profit Warning | AMD announced preliminary third quarter results and disappointed the market with a weak performance. Here's a trade recommendation on AMD stock. | 2022-10-07T05:14:38 | SeekingAlpha | AMD: Of Course There Is A Profit Warning
Summary
- AMD announced preliminary third quarter results and disappointed the market with a weak performance.
- AMD estimates that Q3 sales will likely fall around $5.6 billion, which is $1.1 billion lower than what the company expected only 3 months ago.
- Investors should consider that AMD's preliminary Q3 results have been released in context of a global slowdown.
- AMD is slowly approaching a valuation that offers investors a reasonable risk / reward opportunity.
- Following the profit warnings, and given elevated volatility levels (61.2% IV), investors could consider writing January 20-dated $60 Strike PUTs.
Thesis
On October 6th, Advanced Micro Devices, Inc. (NASDAQ:AMD) announced preliminary third quarter results and disappointed the market with a weak performance. But honestly, at this point who has not expected it? After a disastrous Q2 for Intel (INTC), almost all leading chip developers including Micron (MU), Nvidia (NVDA) and Samsung (OTCPK:SSNLF) have warned that Q3 results will miss expectations. Of course now there is a profit warning also for Advanced Micro Devices.
Following the announcement, AMD shares are down approximately 5% (extended trading hours reference). And the company's valuation is slowly approaching an attractive risk/reward set-up. But for now, I advise to "HOLD."
For reference, AMD shares are down almost 55% YTD, versus a loss of "only" 22% for the S&P 500 (SPX).
AMD's preliminary Q3 Results
Advanced Micro Devices, which is expected to announce official Q3 2022 results on November 1st, released preliminary results that the company will likely miss earnings estimates as compared to the company's prior guidance (Q2 guidance). The company estimates that Q3 revenues will likely fall around $5.6 billion, which is $1.1 billion lower than what the company estimated only 3 months ago. Moreover, AMD's profitability has materially contracted, as the company expects gross profit margin to fall by about 4 percentage points to 50%.
The press release highlighted multiple reasons for the profit warning, including "lower revenue driven by lower Client processor unit shipments" as well as the realization of a "lower average selling price." AMD also commented on operating expenses, which have negatively been influenced by approximately $160 million of inventory related and pricing related charges.
AMD's Chief Executive Officer Dr. Lisa Su commented (emphasis added):
The PC market weakened significantly in the quarter ... While our product portfolio remains very strong, macroeconomic conditions drove lower than expected PC demand and a significant inventory correction across the PC supply chain.
As we navigate the current market conditions, we are pleased with the performance of our Data Center, Embedded, and Gaming segments and the strength of our diversified business model and balance sheet. We remain focused on delivering our leadership product roadmap and look forward to launching our next-generation 5nm data center and graphics products later this quarter.
Notably, AMD's client segment is expected to have lost about 40% of revenues year over year, and 53% quarter-over-quarter. However, the chip-developer's other segments such as gaming, data centers and embedded solutions remained relatively resilient (see below).
Thoughts About The Semi Industry
Investors should consider that AMD's preliminary Q3 results have been released in the context of a global slowdown for chip demand. Notably, after a disastrous Q2 performance from Intel, almost all major chip developers have highlighted challenges, including Micron and Nvidia. On Friday morning October 7th, even Samsung has issued a profit warning.
Accordingly, AMD's results should not surprise the market. The fact that AMD shares are nevertheless down about 5% (pre-market reference) is in my opinion more a reflection of a mechanical selling response following a profit warning than a sincere repricing of new information.
In my opinion, the profit warning from AMD does not signal any notable danger -- given that the demand slowdown appears much more industry-related than company-specific. Investors should note, however, how rapidly and aggressively the slowdown has materialized versus AMD managements' Q3 guidance in July.
A Buying Opportunity?
AMD is slowly approaching a valuation that offers investors a reasonable risk / reward opportunity. As of October 7th, AMD is priced at a one year forward P/E of x16, a P/B of x1.9, and a P/S of x4.
I would like to point out, however, that most of AMD's price multiples still imply a premium to the sector median valuation within the semiconductor sector, while AMD's profitability and growth do not necessarily justify such a premium.
That said, I remain slightly cautious investing in AMD stock short-term -- I don't think there is a need to rush. But I acknowledge that, long term, AMD could be an attractive investment pick. Investors should consider that the structural tailwind for higher chip consumption remains strong -- given trends in automotive, IoT connectivity, VR/AR and gaming. In fact, the global demand for semiconductors is expected to surpass $1 trillion by 2030, growing at a CAGR of about 10%. And there is little doubt that AMD will manage to capture a sizeable share of this opportunity.
Trade Recommendation - Selling Puts
There could be an interesting trade opportunity for investors who are comfortable trading options and seeking to accumulate AMD stock despite the ongoing weakness in the chip industry. Specifically, given the elevated volatility levels (61.2% implied volatility), investors could write January 20th dated $60 Strike PUTs and collect a $6 premium (about 10%, and 39.5% annualized). In my opinion, the premium that an investor receives from writing PUTs would either provide investors with a nice margin of safety if the stock is assigned, or generate an attractive return if the options expire worthless.
This article was written by
Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
not financial advise
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.
Comments (40)
or even 40. Jan $60 is an extremely poor call, IMHO. | NVDA |
https://finnhub.io/api/news?id=9dc981f4effb5088c65f10db358fe34ab3c9e151a1628599a46c66bf8247b3ba | Samsung: Q3 Profit Drop Doesn't Change Deep Value Thesis | Samsung Electronics released guidance for Q3 2022 results and flagged the first year over year quarterly profit decline in almost three years. Read more here. | 2022-10-07T03:20:21 | SeekingAlpha | Samsung: Q3 Profit Drop Doesn't Change Deep Value Thesis
Summary
- Samsung Electronics released guidance for Q3 2022 results and flagged the first year-over-year quarterly profit decline in almost three years.
- Samsung Electronics expects consolidated operating profit of approximately 10.8 trillion Korean won, vs. 11.8 trillion Korean won expected.
- The slowdown is expected to be temporary and the structural tailwind for chip consumption remains strong -- given trends in automotive, IoT connectivity, VR/AR and gaming.
- In my opinion, there is no sound reasoning why one of the world's leading chip and consumer electronics company should trade at x2.9 EV/EBITDA.
Thesis
On October 7th, Samsung Electronics Co., Ltd. (OTCPK:SSNLF) released guidance for Q3 2022 results and flagged the first year-over-year quarterly profit decline in almost three years. Given slowing demand for chips, Samsung Electronics expects consolidated operating profit of approximately 10.8 trillion Korean won, versus about 15.8 trillion Korean won for the same period one year prior.
Although the global slowdown in consumer electronics products and semiconductors is likely to persist for a few more quarters, I remain highly confident in Samsung's long-term prospects. On the backdrop of a structural market expansion for semiconductors, I view the current cyclical downturn as a buying opportunity. Reiterate "Strong Buy."
Samsung's Q3 Preliminary Results
Samsung Electronics, which is expected to announce official Q3 2022 results on October 27, preliminary released that the company will likely report as follows: consolidated revenues between 75 and 77 trillion Korean won; and operating profit between 10.7 and 10.9 trillion Korean won.
As compared to Q3 results one year prior, Samsung's operating income is down about 31% year over year, reaching the lowest quarterly profit in almost 3 years. Moreover, Samsung's preliminary results could be viewed as a profit warnings -- given that analysts had expected operating income about 8.5% higher, at 11.8 trillion Korean won (Source Bloomberg).
Thoughts About The Semi Industry
As one of the world's largest chip makers and electronics company, Samsung is Electronics is highly sensitive to the global economy. And the global economy is slowly slipping into a recession. Moreover, Samsung's preliminary Q3 results have been released in context of a global slowdown for chip demand in particular, and come after warnings and earnings from Micron (MU), Nvidia (NVDA), Intel (INTC), and Advanced Micro Devices (AMD) have already painted a gloomy picture for the global semiconductor industry.
But the slowdown is expected to be temporary. Investors should consider that the structural tailwind for higher chip consumption remains strong -- given trends in automotive, IoT connectivity, VR/AR and gaming. In fact, the global demand for semiconductors is expected to surpass $1 trillion by 2030, growing at a CAGR of about 10%.
Buy The Dip
Samsung's quarterly profit drop looks more like a cyclical fluctuation than a structural challenge, as there are no strong arguments to doubt that Samsung's position as a leading chipmaker and electronics consumer company is challenged. In fact, Samsung Electronics remains innovative, cost competitive, and relatively shielded from geopolitical tensions.
Investors should also consider that Samsung stock is down about 30% YTD and trades at incredible valuation levels. Moreover, semiconductor manufacturers and consumer electronics companies are preferably bought on a cyclical downturn -- and accordingly on weakness.
That said, I argue that investors should appreciate the negativity as a buying opportunity, accumulating SSNLF shares at an incredibly attractive valuation -- priced at x2.9 EV/EBITDA.
I would like to highlight that following the "profit warning," Samsung stock lost less than 0.2% (South Korea listing reference: Samsung Electronics Co., Ltd. (005930.KS))
Risks
Personally, I believe Samsung stock is strongly de-risked at current valuation levels, given that the risk of every investment opportunity is a function of price. But investors should consider a few challenges that might pressure SSNLD stock for a longer period of time:
First, slowing global consumer confidence could provoke an extended depression of Samsung's revenues, given a slowdown in the consumption of consumer electronics products and chip sales.
Second, as a technology company, a loss of competitive advantage in various business segments such as smartphones could materially influence Samsung's long-term industry position.
Third, higher than expected R&D investments in order to realize new product initiatives and/or to defend competitive positioning could pressure operating profitability.
And finally, investors should consider that currently much of Samsung's share price action is driven by investor sentiment. Accordingly, investors may need to stomach price volatility even though SSNLF's fundamental business outlook remains unchanged.
Conclusion
I like to consider SSNLF as a deep value stock. In my opinion, there is no sound reasoning why one of the world's leading chip and consumer electronics company should trade at x2.9 EV/EBITDA. For reference, even Intel is valued at a x5.8 one year forward EV/EBITDA.
I would like to highlight , that despite the global economic slowdown Samsung is still highly profitable -- and the "profit warning" is actually quite positive: Samsung estimates Q3 quarterly operating profit at about 10.8 trillion Korean won (about $7.7 billion). Reiterate "Strong Buy."
This article was written by
Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
not financial advise
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.
Comments (5)
I have been a very very long time investor in Samsung, but just this time I have had the idea to sell it due to its very bad performance.
I did sell because I though the decline was due to the taxes that the heirs of the founder has to pay, and the way to do it is by raising money via selling stocks.
¿what do you think about this possibility? | NVDA |
https://finnhub.io/api/news?id=43862604dbd2716b4aeacdd602f57b2e31aa3c459c710074a3453b3e67012940 | AMD shares fall more than 10% on weak outlook | AMD shares were down more than 10% on Friday after the chipmaker issued a weak outlook, blaming declining PC demand and supply chain issues. | 2022-10-07T02:35:54 | CNBC | - Investors continued to sell shares of AMD on Friday after the chipmaker issued weak preliminary third-quarter results.
- AMD pointed to slumping PC demand and overall supply chain issues.
- Shares of other chipmakers, including Intel and Nvidia, were also down.
AMD shares were down 13.9% on Friday as investors digest the company's disappointing preliminary third-quarter results Thursday that were well below its initial guidance.
The chipmaker cut its sales forecast on Thursday for the third quarter, blaming a larger-than-expected decline in the personal computer market and supply chain issues.
AMD now expects preliminary quarterly revenue of about $5.6 billion thanks to "reduced processor shipments." That's more than $1 billion below the $6.7 billion it had previously forecast as the midpoint of its revenue expectations for the quarter.
The company also said its non-GAAP gross margin is expected to come in around 50%, while it had previously expected gross margin to be closer to 54%.
Several firms, including Piper Sandler, Stifel, KeyBanc Capital Markets and Mizuho Securities cut their price targets for AMD in notes to clients Friday, though each of those maintained a buy or overweight rating.
Shares of other chipmakers like Intel and Nvidia were also down, more than 5% and 8%, respectively, as weak PC demand and supply chain issues could weigh on other semiconductor players.
WATCH: AMD's third quarter cut was deeper than the market expected, says Bernstein's Stacy Rasgon | NVDA |
https://finnhub.io/api/news?id=63693f4d18f8d0506b897b9c9ea4421265b724f98a558380b82bfe745bed01e5 | 3 Stocks to Buy Before the Bear Market Ends | When bear markets come around, panic tends to ensue. As the move lower accelerates, stress levels rise as investors worry about the economy, their jobs and their money. But bear markets are precisely the time when investors should be looking for stocks to buy. Truth be told, bear markets aren’t all that common. The long-term performance of the S&P 500 tends to heavily favor the upside. So even though bear markets are scary, they have historically always been an opportunity. There are a couple of | 2022-10-21T12:41:59 | Yahoo | 3 Stocks to Buy Before the Bear Market Ends
When bear markets come around, panic tends to ensue. As the move lower accelerates, stress levels rise as investors worry about the economy, their jobs and their money. But bear markets are precisely the time when investors should be looking for stocks to buy.
Truth be told, bear markets aren’t all that common. The long-term performance of the S&P 500 tends to heavily favor the upside. So even though bear markets are scary, they have historically always been an opportunity.
There are a couple of caveats with that, though. The first is that the statement bear markets “have historically always been an opportunity” applies to the broader indices, not necessarily individual stocks. Plenty of stocks never go on to recover to their prior highs. The second caveat is that we don’t know when the market will bottom or how far it will fall before it does.
InvestorPlace - Stock Market News, Stock Advice & Trading Tips
Yet, as investors wait for a bottom, there are a few obvious stocks to buy.
Palo Alto Networks (PANW)
Source: Sundry Photography / Shutterstock.com
Inflation, currency headwinds and fears of a recession have led to weakening demand across most industries as businesses and consumers rein in spending. However, that’s not been the case with cybersecurity.
In August, cybersecurity firm Palo Alto Networks (NASDAQ:PANW) reported better-than-expected revenue and earnings for its fiscal fourth quarter. Revenue jumped 27% year over year to $1.55 billion, while billings were up 44% to $2.7 billion. Management also delivered upbeat guidance. For its fiscal 2023 year, which is just getting started, they forecasted 25% revenue growth and that the company would be profitable on a GAAP basis.
Despite increasing macroeconomic uncertainty, management said customers are making longer-term commitments to Palo Alto Networks. They also noted how many companies are carrying on with their long-term investments despite short-term volatility.
PANW stock has fallen 13% year to date to trade around $162. As I wrote recently, shares are a bargain if they get down to the $130 level and would be an outright steal below $110.
Microsoft (MSFT)
Source: NYCStock / Shutterstock.com
I recently included Microsoft (NASDAQ:MSFT) on a list of blue-chip stocks to buy. In that article, I noted that the company is expected to deliver double-digit percentage earnings and revenue growth annually from now through FY26 and that its operating margins were better than all of the FAANG names.
In the current bear market, Microsoft has suffered a peak-to-trough decline of 37%, hitting a low of $219.13 on Oct. 13. Shares have bounced back to around $242 currently.
To put it bluntly, I’m a buyer all day long when a company with a balance sheet as strong as Microsoft’s sees its share price take a nearly 40% haircut. I consider $210 to $215 an attractive “panic price” entry for long-term investors. However, anytime shares dip below $225, you should consider getting long.
Nvidia (NVDA)
Source: Shutterstock
Of today’s three stocks to buy before the bear market ends, Nvidia (NASDAQ:NVDA) is the riskiest of the bunch. Shares of the semiconductor company are down more than 57% year to date and suffered a peak-to-trough drop of 69%. For a company like Nvidia, that’s a monumental decline.
Nvidia dominates the high-end chip market. Betting on Nvidia is a bet on technology itself. Its end markets include data centers, the cloud, artificial intelligence, gaming, automotive and autonomous driving, robots, drones, supercomputing, graphics and much more. For that reason, I know the recovery in Nvidia stock is a question of “when” rather than “if.”
The company’s most recent earnings report was not very encouraging, as guidance missed expectations by a wide margin. While growth is being pressured this year, a Piper Sandler analyst said Nvidia’s business is close to bottoming and shares are ready for a comeback. I have to agree.
On the date of publication, Bret Kenwell held a long position in NVDA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.
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The post 3 Stocks to Buy Before the Bear Market Ends appeared first on InvestorPlace. | NVDA |
https://finnhub.io/api/news?id=c2b02d48c21e11a43af26d3f30cfaa50ccaab392255bbfac62e662183e734fbd | The real trade war with China has begun | A new embargo on advanced semiconductor sales is the most aggressive move yet by any US president against China. | 2022-10-21T10:37:31 | Yahoo | The real trade war with China has begun
Former President Trump launched a “trade war” with China in 2018 that mostly produced a series of economic skirmishes and logistical workarounds. Trade between the two nations continued, with some collateral damage where Trump lobbed a tariff, or China lobbed back retaliatory measures.
With far less fanfare, the Biden administration has launched a new broadside against China that could do far more damage to its economy than anything Trump contemplated, and trigger unprecedented retaliation by China. On Oct. 7, the Biden administration surprised the world with new export controls that effectively prohibit the sale of advanced American computer chips and chipmaking technology to China. While several nations make advanced chips, much of the technology behind that production is American, which means the Biden ban will impede China’s ability to develop artificial intelligence, supercomputers, advanced weaponry and other crown jewels of the modern digital economy.
“These new controls [are] a genuine landmark in US-China relations,” Gregory Allen of the Center for Strategic and International Studies wrote in a recent analysis of the new rules. “These actions demonstrate an unprecedented degree of US government intervention to begin a new US policy of actively strangling large segments of the Chinese technology industry—strangling with an intent to kill.”
Until now, Biden’s China policy had been fuzzy. He kept in place the Trump tariffs on some $350 billion worth of Chinese imports, without saying whether he might review them as part of a broader strategy or continue Trump’s piecemeal approach to China. What’s clear now is that Biden plans to treat China as more of a military and economic threat than any of his predecessors. Some economic ties will undoubtedly continue, but the US government is now practicing a kind of economic containment strategy—subordinating trade and commerce to national security for the first time since China joined the World Trade Organization in 2001 and became the “world’s factory.”
The growing risks China poses
US relations with China have been fraying since the Obama administration, as China developed an aggressive program of stealing Western technology, using government subsidies to grab market share in key global industries, and building a muscular military able to enforce China’s communist ideology in Asia and beyond. At the same time, it became apparent that the mass movement of factory work to China had hollowed out America’s blue-collar labor force, with little or nothing to replace millions of lost jobs.
[Follow Rick Newman on Twitter, sign up for his newsletter or sound off.]
Trump focused mostly on the US trade deficit with China, which economists broadly regard as a misdirected way to address the growing risk China poses. The Trump tariffs were supposed to stimulate new American manufacturing, by raising the cost of Chinese imports and making US production more competitive. But there’s been no meaningful change in US industrial production since the Trump tariffs went into effect. There has been one other notable change, however: Many imports of tariffed goods from China have been replaced with imports of non-tariffed goods from other countries, as Chad Bown of the Peterson Institute for International Studies has demonstrated. That’s just a shuffling of import flows, which doesn’t do anything to boost the US economy or create American jobs.
In the aftermath of the 2020 COVID pandemic, which revealed an alarming US over-dependence on imported goods from China and elsewhere, Biden vowed to strengthen domestic supply chains for critical products and technologies. The Inflation Reduction Act, for instance, incudes high domestic content requirement for electric vehicles in order to qualify for federal subsidies. It also includes powerful incentives for the domestic development of critical minerals such as lithium, cobalt and nickel.
The CHIPs+ Act, which Congress passed in July, was an unusual bipartisan effort to boost US production of semiconductors. Most Republicans and some Democrats normally oppose such “industrial policy,” deeming it better for private-market incentives to determine who builds what where. But there’s a growing consensus on the need to combat government support for key industries in China and even some democratic nations with similar programs here at home.
In September, National Security Adviser Jake Sullivan gave a speech in which he signaled a change in long-standing US policy on technology exports. “We have to revisit the longstanding premise of maintaining ‘relative’ advantages over competitors in certain key technologies,” he said. “Given the foundational nature of certain technologies, such as advanced logic and memory chips, we must maintain as large of a lead as possible.”
Sullivan’s remarks got tech companies’ attention, but nobody was sure what he meant, exactly, until the government announced the new export controls on Oct. 7. Gregory Allen of CSIS detects four main thrusts to the new Biden policy, which broadly seeks to disrupt China’s artificial-intelligence industry: denying access to advanced chips, the software used to design those chips, the equipment used to produce those chips, and the components that go into the production equipment. There's also a restriction on "US persons" working with Chinese companies—as vendors or consultants, say—in the targeted industries.
“In summary,” Allen concludes, “the United States does not want China to have advanced AI computing and supercomputing facilities. In weaponizing its dominant chokepoint position in the global semiconductor value chain, the United States is exercising technological and geopolitical power on an incredible scale.”
'Something significant will happen in terms of retaliation'
The effect has been immediate. US chip suppliers such as Intel (INTC), Nvidia (NVDA), AMD (AMD), KLA (KLAC), Applied Materials (AMAT) and LAM Research (LRCX) have halted deliveries to China as they figure out what’s allowed under the new rules and what’s not. Apple (AAPL) has dropped a plan to use chips made by Chinese firm YMTC in upcoming iPhones, according to Nikkei Asia. Tech giants based in other countries, such as Taiwan’s TSMC, are likely to be affected as well, given close ties with US industry. Tech stocks, which have had a bad year, sold off further after the Oct. 7 announcement.
China will likely respond. “I’m assuming something significant will happen in terms of retaliation, because the impact of this rule is quite significant,” Kevin Wolf, former Assistant Commerce Secretary for Export Administration, said on a recent podcast. China could block US imports of critical minerals from China or punish US companies doing business in China, which would be muscular forms of escalation. It could also target US allies that must comply with some elements of the new US rule, including South Korea, Japan and Taiwan. Chinese President Xi Jinping will likely cite the move as evidence of America's effort to keep China down, perhaps fueling nationalistic sentiment.
There are risks to this economic containment effort. There will still be openings for firms from other nations to fill the gap with their own chip technology, for instance. American officials say they’ll spend the next year or two trying to get allies to join the Chinese chip embargo, but some nations could see it as a chance to turbocharge the development of their own chip industries. China could also defy expectations and make more technological progress on their own than expected.
Politically, however, the new Biden restrictions seem likely to stick, no matter which party wins the White House in 2024. China’s militant capitalism and hostility toward Taiwan and other neighbors have left it with few friends in Washington, and no “soft on China” wing in either party willing to advocate moderation. As Biden has kept Trump’s tariffs in place, the next president will probably cement Biden’s chip embargo, and perhaps look for other ways to tighten the screws on China.
Trade wars aren’t good, but some may be necessary.
Rick Newman is a senior columnist for Yahoo Finance. Follow him on Twitter at @rickjnewman
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Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn, and YouTube | NVDA |
https://finnhub.io/api/news?id=1a61477953a6a90118111687ae95fe09553719272b478c91896e52ddeb15bdf3 | NVIDIA Corp. stock rises Friday, still underperforms market | Shares of NVIDIA Corp. rallied 2.23% to $124.66 Friday, on what proved to be an all-around great trading session for the stock market, with the S&P 500 Index... | 2022-10-21T10:13:00 | MarketWatch | Shares of NVIDIA Corp.
NVDA,
+0.53%
rallied 2.23% to $124.66 Friday, on what proved to be an all-around great trading session for the stock market, with the S&P 500 Index
SPX,
+0.67%
rising 2.37% to 3,752.75 and the Dow Jones Industrial Average
DJIA,
+0.93%
rising 2.47% to 31,082.56. This was the stock's fifth consecutive day of gains. NVIDIA Corp. closed $221.81 below its 52-week high ($346.47), which the company reached on November 22nd.
The stock underperformed when compared to some of its competitors Friday, as Microsoft Corp.
MSFT,
+0.19%
rose 2.53% to $242.12, Intel Corp.
INTC,
+1.71%
rose 3.41% to $26.97, and Texas Instruments Inc.
TXN,
-0.35%
rose 3.90% to $159.72. Trading volume (60.7 M) eclipsed its 50-day average volume of 59.1 M.
Editor's Note: This story was auto-generated by Automated Insights, an automation technology provider, using data from Dow Jones and FactSet. See our market data terms of use. | NVDA |
https://finnhub.io/api/news?id=b4ba078f89de603dca263f011aade9408acf74966baf66c503be36bdcdb9e3f5 | Why Nvidia Stock Rallied This Week | Week to date, shares of Nvidia (NASDAQ: NVDA) were up 7% as of 11:20 a.m. ET on Friday, according to data provided by S&P Global Market Intelligence. Nvidia's return outperformed the Nasdaq Composite's return of 2.6% over the last week. A new partnership with Oracle gave Nvidia a much-needed boost. | 2022-10-21T09:34:05 | Yahoo | Why Nvidia Stock Rallied This Week
Week to date, shares of Nvidia (NASDAQ: NVDA) were up 7% as of 11:20 a.m. ET on Friday, according to data provided by S&P Global Market Intelligence. Nvidia's return outperformed the Nasdaq Composite's return of 2.6% over the last week. A new partnership with Oracle gave Nvidia a much-needed boost. | NVDA |
https://finnhub.io/api/news?id=3807c6814887a9083a6b4faea94a00a46eb65eee7a084618211268d848a103ea | NIO, Li, XPeng Overview: President Xi's Support Is Not Enough | Chinese EV stocks have been caught in a volatile rut this year. Click here to read more about them. | 2022-10-21T08:57:02 | SeekingAlpha | NIO, Li, XPeng Overview: President Xi's Support Is Not Enough
Summary
- Chinese EV stocks have been caught in a volatile rut this year, with their valuations blighted by headwinds spanning regulatory risks, geopolitical tensions, and a dampening global economic outlook.
- Despite President Xi's recent call for further support on the growth of innovative technology, including core green initiatives like the EV sector, related stocks found little respite.
- The following analysis will provide an overview on the performance and key focus areas on Chinese EV upstarts NIO, Li Auto and XPeng, and discuss near-term implications on their prospects.
- Looking for more investing ideas like this one? Get them exclusively at Livy Investment Research. Learn More »
COVID disruptions and protracted industry-wide supply chain constraints were key themes in 2Q22 for the electric vehicle ("EV") and broader auto sector. However, the situation has rapidly evolved away from said themes after production volumes staged a rapid recovery in June after China lifted lockdown orders in key production hub Shanghai, with focus zeroing-in on potential implications from a deteriorating macroeconomic outlook and the Inflation Reduction Act ("IRA") during 3Q22.
While supply chain constraints remain a lingering factor that has been gating production volumes, consensus points to continued easing, though not as substantial as expected - specifically, component and raw material supply/demand is not expected to find a meaningful balance until mid- to late-2023 or 2024 given much of the supply chain is still under development while the EV market is ramping up at a rapid pace. Easing supply constraints are further corroborated by gradual improvements to inventory levels reported by automakers. But auto sales remain muted q/q, flashing early warnings of demand destruction amid a looming economic downturn.
As mentioned in our 2Q22 EV preview, investors will continue to focus on management commentary on inflationary pressures and recession risks in the upcoming earnings season for clues on OEMs' near-term growth and profitability trajectory. Given valuation multiples across the EV sector have come down substantially in the first nine months of the year with no immediate catalyst in sight to stage a rebound, any signs of real demand destruction in the near-term would make it harder for investors to justify any bullishness under the current risk-off environment for equities.
The sector's fragility is further corroborated by weakness observed recently in Tesla's stock (TSLA) after it missed 3Q22 delivery and revenue expectations, and Rivian stock's (RIVN) short-lived rally after reiterating its full-year production guidance. Declines in shares of their Chinese counterparts, including NIO (NYSE:NIO), Li Auto (LI) and XPeng (NYSE:XPEV) were even sharper, as they grapple with potential demand risks amid a slowing Chinese economy, as well as roadblocks to their respective international aspirations given intensifying geopolitical tensions. Even the cohort's latest rally following supportive commentary from Chinese President Xi last weekend failed to sustain momentum, underscoring elevated investors' angst over China's rapidly deteriorating economy.
Let's take a deeper look into the Chinese EV market, which currently boasts the best penetration rate and commands the largest share of global EV sales. While EV demand in the region continues to outpace supply availability by wide margins, China's near-term macroeconomic outlook - which has been stifled by stringent COVID restrictions and a property crisis - remains a key focus area in the coming months as deteriorating consumer confidence could very reasonably drive a deceleration in order book growth, even with the help of financial incentives aimed at shoring up the sector.
An Overview of China's EV Market in 3Q22
China's passenger vehicle sales continue to recover from 2Q22 lows observed during the height of the region's COVID outbreak and ensuing lockdowns. Power disruptions during August in Sichuan province resulted in a 1.5% m/m decline in passenger vehicle sales during the month, but recovered quickly with no material impact to quarterly volumes. To put that into perspective, wholesale production volumes in China fell only 2% y/y during the week of August 22 to 28 when the power cut was implemented, and resumed swiftly the week thereafter to a 45% increase y/y.
EV sales continued to take the lead on new car registrations - representing a record 28% penetration in August and 31.8% in September - with favourable policy support being a key driver of take-rates still, especially given rising prices at the pump. Domestic brands drove more than half of September's EV sales, with premium EV makers accounting for about a third of volumes, beating "mainstream joint venture brands" led by foreign legacy automakers.
Increased production capacity recently announced by Chinese EV maker NIO with start of productions at its new NeoPark manufacturing hub, and Tesla with its completed upgrades at Giga Shanghai are expected to make a more evident contribution to China EV output volumes in 4Q22 and through 2023. However, it is currently uncertain whether accelerating take-rates observed through 3Q22 will continue as China's economic growth slows.
President Xi's Support for Domestic EV Development
Ramping up investments in innovation and technology was a key theme in a speech by President Xi during the twice-a-decade Communist Party congress that kicked off last weekend. This underscores "expectations that more supportive policies" will be implemented to boost development of sectors core to the country's economic and emissions reduction goals, including EVs:
The commitment to tech and green sectors looks strong, meaning these sectors are the rare darlings with favourable government policies.
Source: Natixis
While the remarks lifted sentiment in Chinese EV stocks earlier this week, it was insufficient to overcome broader concerns over the central government's unwavering commitment to COVID Zero, which has been a significant drag on China's economic growth this year. The muted response to supportive policy packages aimed at salvaging China's latest property sector slump has also added to investors' angst, as it points to a looming macroeconomic crisis in the region that risks stalling demand in the Chinese EV market.
What this Means for Up-and-Coming Chinese EV Makers like NIO, LI, and XPEV
This means more Chinese EV makers will not only be focused on domestic growth in the near-term but also making inroads across fast-expanding overseas markets for EV adoption. Following earlier expansion of reputable home-grown Chinese auto brands like MG Motor (owned by SAIC Motor) and BYD (OTCPK:BYDDF/OTCPK:BYDDY) to overseas markets, which pioneered local demand for China-built cars across Europe and the U.S. in recent years, many more Chinese EV upstarts have started to follow their footsteps in recent years - today, Chinese automakers have penetrated 5% of the European EV market, and is expected to account for 9% to 18% of Europe's total EV sales by mid-decade.
Looking ahead, investors will not only be focused on the domestic growth prospects of up-and-coming Chinese EV makers like NIO, Li Auto and XPeng, but also on their overseas expansion progress. Diversification and growth of global market share would be key to supporting the respective stocks' longer-term valuations, as well as their competitive stance against global peers like industry leader Tesla, and China's auto leader BYD.
NIO
3Q22 Production and Deliveries: NIO delivered 31,607 vehicles in the third quarter (+29% y/y; +26% q/q), underscoring a rapid recovery from earlier production challenges stemming from COVID disruptions, as well as positive progress on ramping up output at its new facility at NeoPark.
The company's newest offerings, including the ET7 sedans and ES7 SUVs built on its newer higher-margin NT 2.0 platform, continued to demonstrate acceleration in terms of both productions and deliveries. More than 8,500 ET7s were delivered in the third quarter despite protracted supply chain constraints that included a shortage of casting parts in July, making positive progress from 6,749 units delivered in the second quarter and 163 units in the first quarter. NIO also recently began customer deliveries on the ET5 sedan, with third quarter results including revenues generated from the sale of 221 units of the model. The results highlight NIO's strength in navigating through protracted industry-wide supply chain bottlenecks, while also partially compensating for the near-term increase in new vehicle and new facility (i.e. NeoPark) ramp-up costs with increasing sales of its more profitable models.
Key Focus Areas:
- Europe expansion: NIO has recently outlined its ambitions in becoming a prominent Chinese EV brand in the European EV market during its "A New Horizon" keynote event in Berlin earlier this month. The Chinese EV maker, known for its goals to create a seamlessly integrated ecosystem and simplified car ownership experience for its loyal customer base, introduced "monthly subscription and leasing options" to prospective European buyers as part of efforts to better serve the needs of different markets. NIO will establish a presence across Germany, Denmark, Sweden and the Netherlands to complement its existing sales hub in Norway, and introduce three vehicle models to the European market - namely, the ET7, ET5 and EL7 (equivalent to the ES7 SUV in China) - by the end of the year to better penetrate the region's growing premium segment. Then, it plans to further penetrate five additional countries across the European EV market by 2023, with further expansion into the U.S. EV market by mid-decade. As part of NIO's Europe strategy, it will be offering vehicle subscriptions "ranging from one to 60 months" in the region, starting at 1,295 euros ($1,265) per month. The business model will not only appeal to retail customers looking to experiment with the Chinese EV brand, but also allow NIO to capitalize on growth opportunities stemming from corporate fleet demand in the midst of their transition to electric. Investors will likely be looking to management commentary at NIO's upcoming earnings call to better understand how it plans to manage roll-out costs and their related impact on the bottom-line amid a macroeconomic environment where profits are preferred over growth. Management will also be expected to provide commentary on how it plans to navigate through an anticipated slowdown in auto demand across Europe as the region deals with a rapidly deteriorating economy with rising inflation and recession fears. While Europe's EV sales continued to increase despite an overall slowdown in auto sales due to protracted supply chain constraints, demand in the segment is starting to show deceleration. Specifically, EV sales in Europe increased by more than 26% y/y in 4Q21, but decelerated to an average of about 20% y/y in 1H22, while its share of total new passenger vehicle sales also fell from 11.8% in the first quarter to 11.3% in the second quarter, underscoring potential demand risks. However, as mentioned in the earlier section, we view NIO's strategic entry to the European market with its subscription model an attractive offering for increasingly budget-conscious consumers in the region. The pricing model is also expected to partially compensate for the near-term demand slowdown in the region and build brand awareness for NIO.
- Mass market penetration: As NIO has mentioned in recent quarters, it has already made meaningful progress in penetrating the premium market across China's wealthier tier 1 and tier 2 cities, and is looking to better capture share in the tier 3 and 4 cities within the foreseeable future. And this is what drives its upcoming roll-out of two new mass market sub-brands, including one that is speculated to offer an EV at under $15,000. We view this as a prescient undertaking by NIO, which first focused on ramping up production and sales of premium higher-margin vehicles, then capitalize on mass market opportunities once brand reputation is established. The roll-out of the two planned sub-brands aimed at penetrating mass market opportunities also comes in a timely manner, as much of China's EV demand is now entrenched in the price-sensitive mass market. This is further corroborated by industry-leading EV sales by mass market automakers BYD and SAIC-GM-Wuling, which together account for seven of the top 10 best-selling EV models in China this year. As such, positive commentary on the timely and on-budget development of NIO's two mass market sub-brands will be critical for buoying its near-term valuation prospects, as it underscores further market share gains within the increasingly competitive EV landscape over coming years.
- Profit margins: In addition to demand outlook and market share gains, NIO's profitability trajectory is another key focus area in the near-term, especially under the current market climate where investors are skeptical over long-duration assets with cash flow realization timelines still being far out in the future. We see three major factors influencing NIO's profit margins in the near-term - namely, 1) NeoPark ramp-up costs; 2) NT 2.0 contributions; and 3) favourable policy support. On NeoPark, which has only recently come online to facilitate productions of the ET5, we expect related early-stage ramp-up costs to weigh on NIO's auto margins (~17% in 2Q22) in the near-term. However, the more efficient design of the newer NT 2.0 platform in which the ET5 is built on, paired with the sedan's higher pricing are expected to partially compensate for some of the ramp-up cost headwinds. And over the longer-term, given the Chinese government's heightened focus on making tech and innovation a core driver of its economy, we expect continued policy support for the ongoing build-out of China's EV economy, which would be a tailwind to NIO's profitability timeline.
Financial Forecast: Although we had previously expected NIO's valuation to benefit from improved demand sentiment in China, and the removal of a regulatory/delisting risk overhang, it seems that looming macroeconomic concerns paired with intensifying geopolitical tension are near-term challenges to the stock which cannot be ignored. As such, we are revising the 12-month PT for NIO from $27 to $17 (constant currency from previous coverage: $19), which would represent upside potential of 55% based on the shares' last traded price of $10.97 on October 20.
The PT is computed through a discounted cash flow ("DCF") analysis that draws on our latest fundamental forecast for NIO, adjusted for its actual 3Q22 delivery progress as well as recent developments surrounding its demand and cost environment. The analysis assumes a perpetual growth rate of about 3% (previous forecast: 5%) and WACC of 9%, which is consistent with China's longer-term economic expansion rate as well as NIO's capital structure and risk profile.
NIO_-_Forecasted_Financial_Information.pdf
Li Auto
3Q22 Production and Deliveries: Li Auto delivered 26,524 vehicles in the third quarter (+62.5% y/y; -8% q/q), outperforming its revised guidance of 25,500 vehicles (original forecast 27,000 to 29,000 vehicles) citing acute supply chain constraints. August was an outlier - the company had only delivered a little more than 4,500 vehicles during the month, compared to preceding output monthly volumes between 20,000 and 30,000 vehicles. And in September, the company delivered 10,123 units of the newest L9 SUV during the model's first full month of sales; meanwhile, the legacy Li ONE SUV sales dropped from more than 10,422 units in the beginning of the second quarter to merely 1,400 units by September. The results have drawn investors' concern that the L9 - alongside the roll-out of the L8 and L7 SUVs later this year and in 1Q23, respectively - is starting to "cannibalize" demand for the Li ONE, which already boasts positive gross margins averaging 22% in 1H22.
Key Focus Areas:
- Li ONE demand cannibalization: As mentioned in the earlier section, Li Auto's legacy Li ONE plug-in hybrid SUV sales have come down significantly since the launch of the L9 six-seater full-size SUV. While the L9 boasts a higher price of about RMB 460,000 compared to the Li ONE's MSRP of about RMB 338,000, it is currently unknown of the newer full-size model's gross margins - especially given early-stage ramp-up costs as well as the recent increase in input costs. Yet, the Li One has already boasted impressive gross margins of 22% on average in 1H22, matching closely to industry leader Tesla's 26%+ (ex-credits). Under the current macroeconomic environment where profitability takes the driver's seat for valuations, the near-term ramp-up costs pertaining to new models, paired with an imbalanced mix may spell some near-term challenges to Li Auto's bottom-line, and inadvertently, pressure on its shares' performance ahead of its next earnings release.
- New vehicle launch: Drawing on the above concerns about mix and margins, Li Auto's upcoming start of deliveries on the L8 six-seat large-size SUV in November, which is priced at a similar range as the Li ONE at under RMB 400,000, and the even-lower priced L7 five-seat SUV in 1Q23 bring on some short-term headwind on margins. But overall, the planned launch of the L-series (including the L6 five-seat mid-size SUV launching at a later date) is a welcomed endeavour that will likely improve Li Auto's scale and market share over the longer-term. The build-up of consumer interest in the new models - which is further corroborated by Li Auto's recent decision to fast-track the L8's launch - underscores the plug-in hybrid SUV specialist's appeal despite rising concerns of demand risk in the Chinese EV sector. SUVs represent a lucrative vehicle segment in China, accounting for close to half of the region's passenger sales. Paired with increasing momentum in EV take-rates across China, Li Auto's rapid diversification of its product pipeline is expected to improve its competition compared to premium electric SUV rival NIO and others over the longer-term, while expanding its total addressable market across different vehicle types and pricing segments.
- Supply chain constraints: While the broader auto industry - from legacy OEMs to EV upstarts - is sounding a unanimous chime that acute supply chain constraints are finally showing structural evidence of easing, Li Auto says otherwise. The company announced prior to the end of its third quarter that it will be taming its delivery expectations for the three months through September due to ongoing supply chain constraints. This is consistent with the sporadic COVID disruptions in Jiangsu province where Li Auto's Changzhou manufacturing facility, as well as key auto suppliers, are located. In addition to looming demand risks, Li Auto's underperformance in managing the supply chain snarls compared to peers as observed by its muted August deliveries draws intense scrutiny from investors ahead of its upcoming earnings release, with many now paying attention to whether the company can make up for the lost volumes before the end of the year.
Financial Forecast: Despite concerns over Li Auto's sales mix and related impact on its profit margins over coming months as it begins customer deliveries on the remainder of the L-series, we remain optimistic that the company will be able to achieve GAAP-based net income sooner than its domestic peers. Specifically, Li Auto's experience in ramping up productions, and earlier focus on a single-vehicle business model has allowed it to scale its operations better, albeit slowing its market share gains compared to peers like NIO and XPeng which boasts multiple models and services various vehicle segments. We are projecting narrowing operating and net losses over the next two years as the company's R&D spending remains elevated to support the roll-out and ramp-up of the L-series models, with nominal net income realization of about RMB 166.5 million by the end of next year and auto sales driven operating profit of RMB 3.3 billion by 2024.
On the valuation front, we are maintaining a conservative view given the same external headwinds faced across its domestic EV peers - namely, macroeconomic deterioration, regulatory overhang, and geopolitical risks - as well as protracted supply chain constraints that appear more acute to Li Auto relative to peers. Applying a perpetual growth rate of about 3% to our DCF analysis for Li Auto - which is similar to the one applied for NIO to reflect its operating environment - and WACC of 9.5% to account for the company's greater risk profile and highly leveraged capital structure, we are setting a base case PT of $18 (constant currency from previous coverage: $20) for the stock. This would represent upside potential of 16% based on the shares' last traded price of $17.30 on October 20.
Li_Auto_-_Forecasted_Financial_Information.pdf
XPeng
3Q22 Production and Deliveries: XPeng delivered 29,570 vehicles in the third quarter (+15% y/y; -14% q/q), slightly outperforming its guided range of 29,000 and 31,000 vehicles. The company started its first batch of customer deliveries on the all-new G9 SUVs in September after reservations began in August, marking its initial foray in the best-selling vehicle segment. However, consistent m/m delivery declines across all of its models during the third quarter is starting to raise concerns of whether the company is inadequately handling the roll-out and ramp-up of output after adding the G9 to its line-up (i.e. operational and cost inefficiencies), while also increasing worries over demand risks as consumer sentiment in China wanes.
Key Focus Areas:
- G9 SUV: Sales and reservation volumes on the G9 SUV is a key focus area for investors, as it would infer XPeng's progress in gaining market share via expansion into a new vehicle segment. The last official disclosure from the company indicated that the G9 had acquired more than 22,800 reservations on the first day that it became available for pre-order in China. The company delivered 184 units in September, representing a weekly run-rate of about 48 vehicles. Continued acceleration in G9 deliveries and reservation volumes would be critical to XPeng's fundamentals, as 22,800 reservations alone already represent an estimated value of RMB 8 billion. As discussed in our previous coverage on the stock, not only does the G9 open opportunities for XPeng to compete for share in the largest and fastest-growing SUV segment, but also allowed the company to better compete for share against domestic premium electric SUV leader NIO, given comparable technological capabilities. Alongside initiating customer deliveries on the G9, XPeng has also recently rolled out "City NGP" ("Navigation Guided Pilot"), its newest ADAS system, as part of a pilot program composed of select P5 customers in Guangzhou. City NGP essentially enables next-generation ADAS capabilities - such as autonomous driving / cruising based on a set destination on the navigation system - with "coverage from highways and parking lots to much more complex city driving scenarios". City NGP is part of XPeng's "XPILOT 3.5" ADAS, which will roll into "XPILOT 4.0" debuting with the G9.
The G9 makes a key differentiator for XPeng against rivals within the increasingly crowded Chinese EV landscape. From a technology perspective, the G9 boasts the fastest charging speed - the vehicle is built on XPeng's newest "XPower 3.0 powertrain", which features an 800-volt battery pack that can add more than 120 miles of range in under five minutes. The G9 also features XPeng's next-generation "XPILOT 4.0" advanced driving assistance system, which leverages best-in-class software enabled by "NVIDIA DRIVE Orin-X" chips (NVDA). As discussed in a previous coverage, the combination of newly introduced technological features in XPeng's newest SUV accordingly puts it on par with competitive offerings observed in rival EV makers, such as NIO's "Power Swap", which switches out a dead battery for a fully charged one in under three minutes, and "NIO Autonomous Driving" ("NAD"), which also leverages the "NVIDIA DRIVE" platform.
Source: "XPeng: Moment of Truth"
- Restructuring speculations: As mentioned in the earlier section, recent observations of delivery volume declines across XPeng's line-up is drawing up investors' angst over demand risks and operating inefficiencies. Based on a recent report released by Chinese outlet Jiemen, the company is currently undergoing early stages of a restructuring process to arrest the recent decline of demand and underperforming sales rate across its line-up - including the G9 SUV that boasted robust reservation volumes in August, as well as the P5 sedan. Specifically, the report indicated that the G9 had fallen short of users' expectations, with sales underperforming expectations. Meanwhile, take-rates on the P5 sedan introduced last year are also stalling. The speculated restructuring efforts would aim at improving demand for the two models, which are heavily relied on to expand XPeng's total addressable market in the increasingly competitive Chinese EV market, while also improving its sales mix and profit margins. The report also pointed to the fact that the bulk of XPeng's sales are currently coming from the P7 sedan introduced almost three years ago, with limited feature upgrades. This could potentially explain the delivery declines observed in recent quarters for the P7, as limited feature upgrades make it a difficult contender among an increasing slate of EV options on the market - including NIO's newest ET7 and ET5 premium electric full- and medium-size sedans. As such, increased clarity on XPeng's forward strategy on managing its brand appeal, and ramping up sales and production volumes would be critical to restoring investor confidence in the stock.
Financial Forecast: Adjusting our previous forecast on XPeng for its actual 2Q22 results and 3Q22 deliveries, we are forecasting vehicle sales of RMB 30.3 billion by the end of the year with anticipation for volumes to pick up in 4Q22. Specifically, the assumption is consistent with anticipated pent-up demand before the end of year for all Chinese EV makers due to pulled-forward consumer purchases before the EV subsidy ends on December 31, barring any material disruptions to productions/supply chains given the region's fluid COVID situation. Paired with expectations for the continuation of cost patterns observed in 1H22 to support continued R&D developments (e.g. XPILOT 3.5 / XPILOT 4.0), alongside impact from near-term inflationary pressures that have been partially offset by the y/y increase in higher-priced sales (by value and by volume), the company is expected to experience increased net losses from RMB 4.9 billion in 2021 to RMB 7.8 billion in 2022.
Drawing on the above fundamental forecast, we are placing a near-term PT of $11 on the stock, which has been downward adjusted from the previous PT of $36. The significant downward adjustment to valuations is the result of increasingly prominent external and internal operating headwinds, spanning company-specific risks over demand and inadequate sales mix impact on margins, as well as macroeconomic and geopolitical factors that are weighing on the broader Chinese EV sector's valuation multiples.
XPeng_-_Forecasted_Financial_Information.pdf
Final Thoughts
While battered valuations across Chinese EV stocks today - primarily NIO, Li Auto and XPeng - could imply a compelling entry opportunity, external factors such as regulatory and geopolitical risks harbingers further volatility over coming months. This is especially true given the rapidly deteriorating global economic growth outlook, which has already been weighing on market sentiment this year, hence the violent selloff observed across almost all industries.
Until each of NIO, Li Auto and XPeng can address and resolve internal issues that investors are raising concerns over - whether it is demand risks, cost and operating inefficiencies, supply chain constraints, and/or a lack of clarity on forward strategies to gain market share / achieve profitability - and external headwinds subside, the stocks' valuations will likely find difficulty in sustaining momentum.
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Comments (6)
Taiwan conflict is inevitable imo. That being said I do not expect it to happen in the short/medium term to worry.
China is still at the military readiness for an all out invasion. Whilst the Russian saga and the west's response, will make China pause to deliberate their actions. | NVDA |
https://finnhub.io/api/news?id=c1abb4eec0800b4518c9c2aa569265daafed48edd20dca0035e75aed3539b9f3 | Cathie Wood Snags Tesla Shares, Unloads Nvidia | Wood's Ark Innovation ETF has plunged 64% so far this year, and is down 78% from its February 2021 peak. | 2022-10-21T08:20:00 | Yahoo | Cathie Wood Snags Tesla Shares, Unloads Nvidia
Wood's Ark Innovation ETF has plunged 64% so far this year, and is down 78% from its February 2021 peak.
Wood's Ark Innovation ETF has plunged 64% so far this year, and is down 78% from its February 2021 peak. | NVDA |
https://finnhub.io/api/news?id=69d6dfc0ddd82a3d0deaa2844c7ca56c13d851c62827e84af0b4fc09fd0f5e39 | Intel: The Bad Can Get Better | Intel has been caught up in the bear perfect storm. Financials are deteriorating due to weakened demand. See why we rate INTC stock a buy. | 2022-10-21T07:58:43 | SeekingAlpha | Intel: The Bad Can Get Better
Summary
- Intel has been caught up in the bear perfect storm: the financials are deteriorating due to weakened demand just as Intel is going all-in on investing in fabs and R&D.
- The thesis remains that investors may be overly bearish due to extrapolating Q2/Q3 figures which include a one-time inventory correction.
- Contrary to popular opinion, the dividend is likely not at risk, although it may depend on how fast there will be a recovery in demand.
- While others may be ridiculing the collapsed Mobileye IPO valuation, this presents a very compelling entry point (in the bull case its robotaxi business becomes more profitable and hence valuable than Uber).
- Raptor Lake has a very strong CPU line-up, and the Arc launch represents a milestone for Intel's XPU strategy.
Investment Thesis
As discussed extensively in previous articles, Intel Corporation (NASDAQ:INTC) earnings are down for a variety of reasons, both macro- and micro-economic. This has resulted in a perfect bear storm.
In the near-term, as this article previews Intel’s Q3 report, due Thursday, October 27, the “big” question is if Intel’s forecast for a recovery in Q4 will materialize. On the one hand, Intel claimed it has been vastly under-shipping the market due to the inventory correction. On the other hand, the results and guidance of other companies such as Micron (MU) aren’t exactly inspiring either.
On the balance, my view remains that Intel has become undervalued under $30 since investors are willing to pay only for immediate profits, despite that there is much leverage built into Intel’s multi-year plan (which is impossible to predict exactly and therefore not present in any analyst “gospel” estimates). This means Intel’s earnings have the potential to multiply over time, and with that the stock.
Earnings preview
The model below isn't so much a model, as it is just extrapolating the Q2 results going forward. When I saw that this resulted in just below $65B revenue for the year (the low-end of the guidance), I was satisfied with the exercise.
|DCAI||NEX||AXG||IFS||MBLY||CCG||CCG Adj||Sum|
|22Q1||6,034||2,213||219||283||394||8600||694||18437|
|22Q2||4649||2333||186||122||460||7040||625||15415|
|22Q3||4649||2333||186||122||460||7040||625||15415|
|22Q4||4649||2333||186||122||460||7040||625||15415|
|19981||9212||777||649||1774||29720||2569||64682|
Looking over these results, if this is indeed what Intel will report, then this would be just horrible:
- DCAI reported its lowest revenue since (at least) Q1'21 (given the new segment reporting, results from earlier quarters aren't available). For reference, the highest DCAI revenue yet was in Q4'21, just below $6.5B. Although there have been periods of weakness in the past (2019 and early 2021), those periods ("cloud digestion") were after periods of high growth.
- CCG (excluding the adjacencies) reported its worst result since Q2'16.
While the other segments are a bit more resilient, they are still small, and even if they improve from the Q2 results, aren't going to move the needle:
- NEX is the highlight as the one not-very-small segment that seems to continue to grow to new all-time highs, confirmed by Intel's comments.
- The expected AXG ramp is delayed due to the delays in the ramp of Arc and Ponte Vecchio.
- IFS, as expected, remains in the buildout phase.
- Mobileye had a great Q2 and will likely continue to grow, but will likely need its autonomous (L4) product and its robotaxi business to become a material business for Intel's overall financials.
This is how these results would fit in the long-term trends:
|CCG||DCAI||NEX||AXG||MBLY||IFS|
|2019||37938||21696||6829||606||879||461||68409|
|2020||40535||23413||7132||651||967||715||73413|
|2021||41067||22693||7976||774||1386||786||74682|
|2022||32289||19981||9212||777||1774||649||64682|
Overall, CCG will likely see a ~$10B or 25% hit, while DCAI would lose closer to 10%, for a large part attributable to market share losses. Revenue would drop firmly below 2019 levels.
For some further discussion, in ordinary times it just seems nearly impossible that Intel would report three straight quarters of multi-year low results in both DCAI and CCG, but of course these aren't ordinary times. Since Pat Gelsinger said in early September that the results are trending towards the lower end of the guidance (but still within the guidance), there is no reason to model in any sort of recovery.
Nevertheless, one thing investors should be aware of is that Intel was quite firm in Q2 on noting that part of the results was a "once in a decade" inventory correction. So, at the time, Intel did actually guide to some recovery in Q4. Given how the macro environment hasn't really improved since July, even if demand continues to soften, at least there should be some less inventory burn, both of which might to first approximation cancel out each other.
Hence, since (1) the "model" above indicates that Intel hardly needs any recovery to report full-year results within its Q2 guidance range, as well as (2) given Pat Gelsinger's comment about being in the guidance range, and (3) given how bleak the Q2 results were to begin with, contrary to some investors, I do not necessarily expect a further downside guidance revision (although perhaps the top-end of the range may be reduced).
As case in point, the PC sale numbers that have been reported for Q3 certainly were not post-apocalyptic, and within pre-pandemic levels. Of course, there may have been some market share and average selling price changes since then.
On the other hand, though, a revenue shrink of "just" around 25% would actually be quite strong compared to what we've seen from AMD and Nvidia recently. In that sense the glass could be seen as either half full or half empty.
Lastly, for reference, my Q3 "prediction" (extrapolation) is in-line with the Street estimate, while for Q4 the estimates are modelling in a ~$1B sequential improvement.
Investment Thesis: Revisited
Given the discussion above, it can be concluded that revenue has indeed likely bottomed. If that is indeed the case, then Intel may have reached the financial bottom, and hence also the stock bottom since the stock has simply followed the earnings estimates. This is no guarantee for a quick recovery, but at least the Q4 guidance will either confirm or disprove this thesis by next week already.
Just given how weak the Q2 results were, the upside at this point seems a lot larger than any potential further downside, especially since none of this factors in any of the three "new" growth businesses/segments ((AXG, IFS, MBLY)), which currently still represent a rounding error in the overall results.
Business updates
There have been several moving pieces over the last quarter, which warrants a review (see below for a summary).
1. Raptor Lake and Zen 4 launch
At the time of writing, Raptor Lake has been announced but not yet launched, just a few weeks after Advanced Micro Devices (AMD) launched its own Zen 4 CPUs. This means there are only reviews yet of the AMD part, although as usual there have been plenty of leaks and Intel has disclosed its own benchmark measurements. Contrary to some investors’ (outdated) opinions, Intel has been very competitive again since the Alder Lake launch, and this remains the case.
Background
As a reminder, Intel launched Alder Lake less than a year ago with the game-changing feature of adopting big. Little (hybrid architecture), which is common in smartphones. However, Intel is using this feature to be able to deliver both single-threaded and multi-threaded leadership. The P-core (performance core) team is charged with developing the highest IPC (instructions per clock cycle) and highest clocking architecture, while the E-core team is focused on delivering the highest performance per mm2 of silicon. Note that contrary to smartphone little cores, the Intel E-cores are actually much closer to smartphone big cores; Intel has compared the Alder Lake E-core to its 14nm Skylake CPUs in terms of performance, but at just a fraction of the power. (Intel should perhaps have called them large X-core and small S-core.)
Raptor Lake
The top-end Alder Lake was equipped with an 8+8 config of P+E cores, but Raptor Lake doubles the E core count to 16. Intel has also tuned the process and circuits to improve the frequencies, which have also improved slightly. Overall, Intel is claiming low double digit single-threaded and around 40% multi-threaded improvement.
Zen 4, comparison and verdict
Although this is quite substantial, AMD’s Zen 4 claimed a similar (or even slightly higher) multi-threaded improvement, and a nearly 30% single-threaded improvement. This was achieved due to a combination of IPC and frequency.
Hence, the general expectation is that Zen 4 (Ryzen 7000) and Raptor Lake are closely matched in terms of performance, as the multi-threaded comparison isn’t changing much while Zen 4 is catching up a bit in terms of single-threaded performance. However, pricing is heavily in favor of Intel, especially considering that the Intel platform still supports DDR4 memory, unlike Zen 4. This means both cheaper motherboards and RAM.
Hence, despite being at a process node disadvantage, Intel will likely actually end up slightly edging out AMD in terms of performance per dollar.
So, overall, Intel’s competitive position in the PC market remains solid. Of course, though, Intel still has a substantial market share advantage due to its incumbency position; it could perhaps be argued that simply being roughly on par might not be enough for Intel in order not to be vulnerable to continued market share erosion over time.
Power consumption
A specific remark should go to power consumption. Last generation, Intel received quite a lot of criticism with Alder Lake for its supposed lack of efficiency. However, power consumption scales linearly to quadratically at best and cubically at worst with frequency. This means that the last few percentages of performance are responsible for the vast majority of the total power consumption. Hence, in the pursuit of the performance crown, Intel sacrificed power consumption, even though at lower power consumption the performance per watt improves substantially.
As case in point, Intel has claimed that Raptor Lake at 65W delivers the same performance as Alder Lake at 250W. This claim has already been verified at least at 80W.
This generation, with Zen 4 and the new AM5 platform (as the AM4 platform was capped at around 140W), AMD had opted to follow into Intel’s footsteps. As mentioned above, the majority of the Zen 4 performance improvement comes courtesy of higher frequency, which is inefficient.
Tests have indeed shown that this has offset pretty much all of the supposed benefit of the 5nm process technology. In the worst-case, the performance per watt (energy per instruction) is pretty much the same as Zen 3. Even worse, for gaming the fps per watt (energy per frame) has deteriorated substantially.
Surely AMD bulls will point out the eco modus in Zen 4, but the point remains that out of the box, both Intel and AMD are now sacrificing power (efficiency) in pursuit of the highest performance for their flagship CPUs. In other words, this shows that the efficiency of an architecture/CPU is not something inherent, but obviously depends on its specific operating condition; both Intel and AMD CPUs can be both efficient or inefficient.
2. Arc debut
As discussed in previous article, Intel is – to no one’s surprise given the specifications and time to market – playing the performance per dollar game in the mid-range segment in order to capture market share as it enter the GPU market.
Overall, this launch is a substantial milestone for what should be a new growth segment for the next decade.
For a more technical discussion (feel free to skip), the major issue with Arc is that the GPUs do not live up to their theoretical capabilities (as measured in TFLOPS), likely due to immature drivers and/or architectural bottlenecks. In principle, the A770 should or could have a performance between the, both much more expensive, GTX 3060 Ti and 3070, while in reality it falls short of the GTX 3060 Ti and actually rather competes against the 3060, where the . The reason this is in issue is because AMD still exists and actually already competes favorably against Nvidia (NVDA) based on performance per dollar, which further reduces any performance per dollar advantage that was left in the Nvidia comparison. Hence, reviewers tends to recommend AMD at best.
Nevertheless, in a recent discussion, although not really surprising, Intel said most of its engineers are working on Battlemage now, as well as that Intel isn’t planning on repeating the mistakes it made with Alchemist. Intel remains committed to its roadmap.
In particular, while it is currently leveraging Taiwan Semiconductor (TSM) ("TSMC"), given Intel’s highly outspoken target of regaining process leadership, a Celestial GPU on 18A in 2025 could in principle be highly compelling, given that especially GPUs can very effectively use additional transistors that are available with a process node advantage. As Pat Gelsinger said, even a mediocre architecture with a leading transistor will still a leadership product.
Although, as last technical remark, one criticism that I have had about Intel’s architectures over the years is that Intel often tends to use design libraries with relatively low density, far below the theoretical maximum transistor density of the node. This means that even if Intel is one node ahead, if it then uses a library that is 2x less dense than what AMD and Nvidia are using, then this offsets the theoretical advantage. Indeed, a comparison I saw passing on Twitter (but couldn’t find) compared the Arc GPUs against AMD and Nvidia in terms of transistor count and silicon area vs. performance. In simple terms, the 400mm2 Arc GPU has trouble competing against much smaller chips from the competition, which also refers back to the point above that Arc doesn’t even deliver the performance (TFLOPS) that it theoretically has in the first place.
3. Mobileye IPO
Although the IPO is receiving most attention, the real news is that Mobileye Global (MBLY) is nearing the initial launch of its robotaxi service, although no formal announcement has been made yet. A few years ago, the CEO had stated early 2022 launch, so there is a bit of a delay. Since Mobileye had said it is waiting for regulatory approval to launch its driverless service, it seems the delay is due to regulation and not technology.
A few years ago, I had put out a moonshot goal for Mobileye revenue to reach $4B to $5B by 2023. Although for this to happen to growth rate would have to accelerate to more than triple digits, the premise of the robotaxi service opening a large new growth market for Intel remains. In the bull case, robotaxi takes over all ride-hailing, becoming larger (as well as more profitable given the lack of driver opex) than the likes of Uber (UBER).
Regarding the IPO itself, it has been ridiculed by investors for the valuation collapse over the last year. However, I wonder what investors are complaining about, as this provides a great investment opportunity. Given how disruptive robotaxis will be (or at least can be in theory), there is a likelihood Mobileye revenue could surpass its IPO market cap over the coming decade.
4. IFS update
Capacity corridors and system foundry
A new tidbit of information came out about Intel Foundry Services. Intel is establishing dedicated capacity corridors for its foundry customers. No one, not even Intel, will be able to touch these corridors. Intel said the MediaTek corridor is a few thousand wafers per week. Depending on the wafer price assumed, a few thousands wafers per week at a few thousand dollars each starts to approach the $1B annual revenue mark, from just one customer. Note that MediaTek has so far only signed a deal for Intel 16, so the opportunity for land and expand remains strong.
Overall, a few billion revenue from about half a dozen large customers (Intel is engaged with 6 of the top 10, according to Pat Gelsinger in July) is exactly the recipe to build a large foundry business.
In addition, Intel has propagated a new marketing terms for all its foundry initiatives together (including things like packaging and its ecosystem investments): systems foundry. Together with the capacity corridors, this shows that Intel is taking the steps to become at least on equal to footing to pure play foundries such as TSMC. For example, one often heard criticism remains that some customers supposedly would avoid IFS since Intel would be competing against its own foundry customers.
Twitter.
However, this argument doesn’t make a lot of sense since for the competitiveness of some product, the only thing that matters is the transistor, not who made the transistor. As case in point, although it could be interpretated otherwise since Apple (AAPL) did eventually switch to TSMC, Apple had been a Samsung foundry customer for quite a few years. That was, effectively, as if AMD would use IFS to manufacture its CPUs.
In addition, since IFS was set up as a separate business, it actually does not compete against any of its customers, just like TSMC. And since Intel has also addressed some of the other criticisms (such as lack of ecosystem and EDA support), the decision for fabless customers will simply come down to things like process leadership, packaging and pricing – all of which Intel is well-positioned to compete on going forward.
TSMC already pressured
TSMC seems to be feeling the competitive pressure from IFS already.
Twitter.
TSMC indicated it is challenged by “overseas fab expansions”. While certainly Intel isn’t the only “overseas” foundry, nor the only one busy with fab expansions, it is the most logical candidate, especially since, indeed, Intel’s foundry business is still in the phase of building the fabs.
For comparison, it took something like 3-4 years after the launch of Ryzen/Epyc for Intel to acknowledge that the competitive environment was intensifying.
Gross margin de-risked
When Intel announced the foundry business, one concern was that only few companies can really attain high gross margins, as even market leader TSMC achieved “only” around ~50%, so it was questioned if Intel could make this a profitable business.
However, in the most recent quarter, TSMC gross margin reached a record ~60%, driven by price increases in the wake of the shortages. The operating margin was around 50%. Hence, even assuming that Intel is willing to sacrifice a bit of margins to lure customers, both TSMC metrics are much higher than what Intel has reported most recently.
Financial engineering: Internal foundry model and Brookfield
I recently discussed Intel’s new internal foundry model, which warrants some follow-up discussion as there seems some misunderstanding.
First, as it relates to the general topic of financial engineering, one comment said that I had misunderstood the previous piece of Intel financial engineering, namely the Brookfield deal, which I summarized as Intel building two fabs for the price of one, but also only getting profits for one fab. The commenter said that Brookfield’s maximum profit is purportedly capped. No source was provided, though, and Intel never mentioned anything like this, so my opinion stands.
Secondly, the misunderstanding about the internal foundry model seems to be that people think that it is only now that Intel is starting to apply IP protection/firewalls and a separate P&L for its foundry business.
Twitter.
This is simply factually wrong. Intel Foundry Services was conceived from day one as a separate entity with its own P&L. This is obviously mandatory to be a foundry in the first place. Investors may know that a common criticism is that Intel is (or would be) competing with its own foundry customers, so obviously IFS cannot just be allowed to give its customers’ IP to Intel.
Hence, this is the wrong way to look at things. Imagine you’re Apple or Nvidia, for example, and given the standards you as a company adhere to, as well as what your shareholders demand anyway, you must build the most competitive silicon out there. Especially in the case of Nvidia, if you can build a better GPU, you can charge higher prices and maintain a higher market share.
But since you’re a fabless company, you can freely go shopping around looking for foundries that make the best transistors. In the case of Apple or Nvidia, or even AMD, that means comparing the offerings of the three leading edge foundries (i.e., Intel, TMSC, and Samsung), and then picking based on features likes pricing and power/performance. Of course, if for some reason you have a prejudice against one company, fine, but then you risk not making the best silicon possible.
This has been true from day one for IFS. What the internal foundry model changes, though, is that now Intel itself also becomes an IFS customer. I suppose this entails that for example Intel’s client and data center groups will get the same wafer pricing as other foundry customers. In this way, Intel design groups will get apples-to-apples comparisons against pricing of other foundries, and hence Intel’s process development teams are challenged with providing and getting a lower cost than foundries.
While this sounds like a neat exercise and obviously will require some organizational changes to do this, my argument was that it doesn’t change any fundamental economics. It is just accounting. Even if IFS charges Intel’s client group with some arbitrary wafer price, this is just internal money that gets shuffled around inside Intel.
Twitter.
Dividend sustainability
Some recent articles argued that Intel’s dividend is unsustainable given the recent trends such as FCF. However, investors who analyze Intel purely based on its financials, as argued in a recent article, are probably the reason Intel is currently as cheap as it is. In other words, the argument is that investing in Intel purely based on the numbers is misleading.
In summary, Intel’s FCF has been negative in 2022 due to large fab investments in preparation for a return to growth in the coming years, while (coincidentally) revenue is also excessively underperforming due to unsustainable inventory burn and lowered demand. Nevertheless, in the case that there would be no growth, the fab investments would obviously decline significantly. In addition, there is further long-term (gross margin) upside as the investments to regain process leadership progress. Lastly, many of these articles seem to rely on estimates as if these are gospel. The reality is that given all the variables involved (for example, what if the robotaxi, GPU or foundry business becomes successful?), no one can reasonably predict Intel’s mid-term earnings and FCF (although obviously Intel as discussed at investor meeting does have some guardrails which they are managing).
As one more note, I would nevertheless not commit to any bet that Intel will certainly not cut its dividend, but such a thing would in my opinion depend more on the evolution of the overall PC and data center demand, rather than AMD. As case in point, AMD’s pre-announced Q3 PC financials were objectively far worse than Intel’s Q2. Intel reported a COVID-hangover combined with inventory burn, while AMD reported a total collapse.
Layoffs
Seeing the damage that the 2016-2017 reorganization did to the company, certainly I am no fan of the latest round of layoffs. However, one must also admit they are perhaps just the simple financial reality:
Intel cut its annual sales forecast from $79 billion to $67 billion in July amid a steep decline in PC demand and a softening data center market.
Intel hired on the order of 18k net new employees over the last 18 months, so it is unlikely there will be a complete reversal, but with around ~$15B in lower sales than expected (the low end of the guidance range is $65B), something has to give. So if as discussed above Intel is unwilling to cut the dividend, then apparently it are the employees. Nevertheless, the article that details the layoff plans mentions that Pat Gelsinger noted Intel's low current gross margin profile, but Intel has only itself to blame for falling behind in process technology and the low yield of 10nm and 7nm. This is something that can only be fixed by Intel's employees.
Summary
Some of the key points:
- Intel’s earnings may be bad in the near-term, but that can (almost certainly?) only get better.
- The dividend is not at risk.
- Intel has been competitive in the PC market since Alder Lake, which has been ramping in 2022, and despite the process disadvantage over the next year, the competitive environment isn’t changing materially over the next year due to Raptor Lake being a strong improvement.
- AMD has been pushing the power envelope of its highest-end CPUs (at the expense of efficiency), just as Intel has been doing for several generations node.
- Arc is not delivering the performance one might expect based on theoretical FLOPS (an issue that had been expected and readily admitted by Pat Gelsinger and the GPU team itself). In addition, since AMD was already competing favorably on performance per dollar vs. Nvidia, the value proposition of Arc isn’t quite as large as Intel portrayed.
- While the downspecced Mobileye IPO is at the expense of the amount of money Intel can raise, perhaps in order to fund the fabs, R&D and dividend, it provides a compelling entry point for investors to buy the stock. There is no reason to complain.
- The argument that Mobileye’s valuation has remained stagnant because of its current bear market valuation is nonsensical, and at best could be applied to many, many more companies that have seen their valuation being compressed like a souffle under a sledgehammer.
- Intel has been and continues to build a highly credible foundry business, offering a complete systems portfolio (including leading edge process technology as well as more niche offerings from the upcoming Tower acquisition), which even includes dedicated capacity corridors.
- IFS is open to all customers, including AMD, Nvidia and Apple, and given the rising wafer prices and accordingly gross margins that TSMC has been charging since the chip shortages (as well as its half a decade of standstill with N3 and N2), surely leading edge fabless companies have every reason to check out its offerings.
Investor Takeaway
Referring back to my relatively recent discussion about the Intel stock and financial trends, the thesis was that, in hindsight, due to underinvestment Intel might actually have been overvalued when it was trading for $50-60, as it was not reinvesting enough profits back into R&D. In addition, the gross margin erosion might cost another $10 or so in stock price.
However, the forward-looking thesis was that the gross margin weakness should improve over time, so with the stock price now firmly below $30 due to recessionary cautiousness, Intel is trading below any reasonable steady-state valuation. Moreover, if Intel does not revise its guidance downward, then this would be proof of the bottom.
In addition, there is much further upside that no analyst estimates will recognize (or would even be able to predict) until it actually materializes, namely (1) regaining process technology leadership, and, more directly, (2) the three new emerging businesses (robotaxi, GPU and foundry). Therefore, estimates should be taken with a grain of salt.
As discussed here, Intel is in-line on robotaxi (it is not sure if any delays are due to regulation or technology), a bit behind on GPU (but no fundamental roadblocks as it now comes down to improving the software stack further over time and executing on the roadmap), and a bit ahead on foundry.
Given Intel's mid-quarter confirmation that it was performing within guidance, the thesis of Intel bottoming seems substantially de-risked, so investors don't have to wait until the earnings to buy the stock. Although Intel does have a history of dropping after its earnings reports.
This article was written by
Analyst’s Disclosure: I/we have a beneficial long position in the shares of INTC either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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Comments (43)
Ignore the AMD fans who come to INTC articles to convince you to dump your shares. Intel closed the gap for high-end chips. AMD will have to lower prices.PC World Review
https://youtu.be/RptMO7GUDwc
www.tomshardware.com/..."Intel i9-13900K and i5-13600K review: Beating AMD at its own game"
arstechnica.com/...
www.reddit.com/...
[Aaron, in reviewing the behavior and performance reported by yesterday's written reviews, there seems to be an immense disparity in how motherboard manufacturers have implemented "unlimited power" across PL1/PL2/ICCMax. Can you clarify which of these problems is contributing to the broad misunderstanding by reviewers and consumers regarding the efficiency of the i9-13900k?Of the 25+ reviews posted yesterday, it seems that only ArsTechnica and Derbauer had time to dig into the motherboard settings. What they found was that when used with sane voltages, the i9-13900k performed significantly more efficiently than the 7950X. If you can score 38k in Cinebench R23MT at 253W (and default voltages), why are so many reviewers reporting 300+ W?]Here's the Der Bauer review mentioned. The Core i9-13900K easily beating the 7950X in gaming. What he also shows is that even limiting the 13900K to 90 watts it still easily beats the 7950X. An amazing efficiency result.
youtu.be/...
Blender doesn't represent a lot of server workloads, as most server workloads aren't trivially parallel. That's the only area the 7950X leads the i9-13900k.Techpowerup did a page on "server and workstation" benchmarks and on the database benchmarks the 7950X did poorly.
www.techpowerup.com/...Igor's Lab found the same result on the AutoCAD benchmarks which also don't parallelize easily.
www.igorslab.de/...Also see the Der Bauer results I posted in a comment above, as most motherboard manufacturers for the DIY build market let the Core i9-13900K run full throttle. They know the PC enthusiasts they're targeting don't care about the power consumption of less than 60W lightbulb. In servers they'll dial back the power consumption and still get the vast majority of the performance.
youtu.be/...
[Our 13th Gen Intel Core content creation review is live!Pretty much a straight win for Intel, with 13th Gen beating AMD Ryzen 7000 in almost every instance.]
Below is what they wrote. They're looking across all skus and they're looking at price/performance as well. You also have your numbers wrong. The 8% was from Unreal Engine. So yes, their conclusion it's a straight win is justified, with the only caveat that in some benchmarks the 7950X outperforms the i9-13900K, but at a much higher price point (which is actually higher than they indicate because of the AMD AM5 platform costs - they're only referring to cpu price when they talk about $100 premium).Keep in mind they are specifically looking at content creation, which is a small part of the desktop market. For gamers and single-thread performance it's a clear win for Raptor Lake, but you have to look for other reviews which focus on those use cases.[These improvements lead intel to be the top performer when comparing CPUs at similar price points. The lower-end CPUs, specifically the 13600k and 13700K have a greater than 50% lead over AMDs latest CPUs. Intel’s top new CPU, the 13900k is on average 20% faster than the Ryzen 7900X, however 6% slower than the 7950X. This means the absolute top performance in this category does go to AMD’s Ryzen 7950X, though at a $100 premium.Rounding out our testing was Unreal Engine, which can be used in a variety of industries including game development, virtual production, and real-time visualization. Once again, the gen-over-gen improvement is massive, with 13th Gen coming in at around 25-29% faster than the 12th Gen depending on the specific CPU model. Interestingly, just like with CPU rendering, Intel holds a lead when comparing similar priced CPUs, with the 13600K, 13700K, and 13900K beating Ryzen 7600X, 7700X, and 7900X respectively. However, AMD takes the crown with its Ryzen 7950X, though only by 8%.Overall, the 13th Gen Intel Core processors show some impressive gains over the previous generation. AMD manages to hold into a slim lead in a few areas, but almost every single instance where Ryzen 7000 was significantly faster than Intel 13th Gen came from the Ryzen 9 7950X, which is a more expensive CPU than anything currently in the 13th Gen lineup. That does mean that you can sometimes get more performance out of the Ryzen platform than Intel Core, but in terms of dollar-for-dollar, Intel 13th Gen scored on par or significantly higher in every single benchmark we ran.]
Intel Debt/Equity hasn't changed since 2015.A couple of questions. Any idea why AMD's imaginary "goodwill" and "acquisition related intangibles" has spiked to $50.4B, a 17,339% increase YoY from $289M? Would this explain the ballooning gap between AMD's falling GAAP and non-GAAP earnings?
I see you are a hard-core Intel fan boy, commenting on every Intel article zealously while bashing any other chipmaker.
So your ignorance is justified. | NVDA |
https://finnhub.io/api/news?id=5dda417972885f34bdcc14293bf46b4d591a7fe9d9565a9c40707b53912c90e1 | Netflix's cloud gaming plan is a tall order — just ask Google | Netflix might be getting into the cloud gaming business. But it'll be hard to pull off. | 2022-10-21T07:39:04 | Yahoo | Netflix's cloud gaming plan is a tall order — just ask Google
Netflix (NFLX) is diving deeper into gaming. During TechCrunch Disrupt earlier this week, VP of gaming Mike Verdu said it's “seriously exploring a cloud gaming offering.”
Sounds like a surefire win right? Not necessarily. Take a look at Google (GOOG, GOOGL), which announced last month it’s axing its own cloud gaming service Stadia due to a lack of players.
Cloud gaming is still in its early stages. It requires huge infrastructure, no latency, and plenty of games. Consumers generally tolerate a bit of lag when starting up a show, but that won’t fly with cloud gaming. Even the slightest slowdown or lag in your connection can ruin your gaming experience. And while Netflix is a massive organization with huge resources at its disposal, even that isn’t enough to win over gamers
"Google has a lot of things theoretically in place that would make you think they could succeed at a cloud streaming gaming service,” IDC research director of gaming, eSports and VR/AR Lewis Ward told Yahoo Finance. “Even [Amazon’s] (AMZN) Luna, 18 months past its official launch date, isn't exactly crushing it either with all of Amazon's resources."
He added, "So I just think it's very tough to make these things succeed.”
Cloud gaming is more difficult than streaming movies
While cloud gaming might be a powerful way to keep customers from ditching their subscriptions when they finish their favorite shows, running a successful cloud gaming business poses major challenges.
Cloud gaming allows users to stream games to low-powered devices like Chromebooks, phones, and smart TVs. The latency issue can be huge. Imagine you’re in a tense standoff with another player and just as you’re about to make your move, your connection freezes for two seconds. Next thing you know, your character is dead and the 11-year-old you were playing is laughing at you in your headset.
Even if companies have the technology, success in cloud gaming has proven relatively elusive.
Microsoft (MSFT) and Nvidia (NVDA) seem to be performing well in the area, though they don’t release exact user numbers. Microsoft’s cloud games augment its library of downloadable games, giving users more options to play and a better reason to stick around. Nvidia lets you stream games you already own.
Both services essentially give you the option of playing games on your console or PC and then jumping to the cloud when you don’t have an available TV or are on the go.
Still a growth opportunity
If Netflix does get into cloud gaming, it’s going to need to ensure it has the technology to do so, and provide gamers with something akin to Microsoft or Nvidia’s services.
But if Netflix can pull it off, a cloud gaming offering could boost a company that's just now pulling out of a post-COVID tailspin that sent customers fleeing and shares plummeting 57% over the last 12 months.
During the pandemic, when millions became one with their couches, Netflix saw its user numbers explode. In the first quarter of 2020, the company had 182.86 million global subscribers. By the fourth quarter of 2021, it had 221.84 million. But that growth was untenable; between the first and second quarter of 2022, Netflix lost 1.17 million subscribers.
While Netflix added 2.41 million subscribers in the third quarter, it's going to need to keep working to retain the subscribers it has. That’s where gaming comes in.
“The challenge is when the content schedule is a little more uneven, when there's not content that people are urgently wanting to watch, that’s where you see churn tick up, and people cut off their service for a while,” Dave Heger, Edward Jones senior equity analyst, told Yahoo Finance Live.
Gaming could keep people engaged with Netflix during those lulls between show debuts. It’s not just about holding on to existing subscribers, though. Netflix could also use its cloud gaming business to attract younger consumers who are more interested in gaming than simply watching TV and movies.
“They're looking at trends of where people are spending their entertainment time — they're seeing gaming rise faster than linear TV shows, or streaming TV shows, [video on demand],” Ward said. “And, oh, by the way, the demographics looking forward are going to favor gaming in the sense that those users tend to be younger overall.”
That combination has likely led Netflix to view cloud gaming as a growth opportunity — even with its challenges.
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https://finnhub.io/api/news?id=f2fcd6ad7b5ca8a5dd5e8ff9f00b2b869817a9daefdfefd6a8f3f66fce593b3d | Why Nvidia, AMD, ASML, and Other Semiconductor Stocks Were Up Thursday Morning | Today's video focuses on ASML (NASDAQ: ASML), Lam Research (NASDAQ: LRCX), and key points from recent earnings that might have been driving semiconductor stocks up early Thursday morning. Numerous headwinds are affecting the semiconductor market, but future projections from these semiconductor giants might have investors questioning if things are as bad as they seem. | 2022-10-21T07:30:00 | Yahoo | Why Nvidia, AMD, ASML, and Other Semiconductor Stocks Were Up Thursday Morning
Today's video focuses on ASML (NASDAQ: ASML), Lam Research (NASDAQ: LRCX), and key points from recent earnings that might have been driving semiconductor stocks up early Thursday morning. Numerous headwinds are affecting the semiconductor market, but future projections from these semiconductor giants might have investors questioning if things are as bad as they seem. | NVDA |
https://finnhub.io/api/news?id=f0e42d1d9afa1d620f1dfb011cb77ca4ebd799168c9759ec3feaa21f7e4066d0 | Here's Why the Competition Is Intense Between AMD and Intel | Today's video focuses on new products released by Advanced Micro Devices (NASDAQ: AMD), Intel (NASDAQ: INTC), and Nvidia (NASDAQ: NVDA). It is impressive how AMD continues to battle two semiconductor giants in different technologies. | 2022-10-21T07:00:00 | Yahoo | Here's Why the Competition Is Intense Between AMD and Intel
Today's video focuses on new products released by Advanced Micro Devices (NASDAQ: AMD), Intel (NASDAQ: INTC), and Nvidia (NASDAQ: NVDA). It is impressive how AMD continues to battle two semiconductor giants in different technologies. | NVDA |
https://finnhub.io/api/news?id=1c8d1ed3c67cfac886a023e2d2d68aab3ac61ab938f4f70125ad6715ce80f4f0 | NVIDIA (NASDAQ:NVDA) Knows How To Allocate Capital | To find a multi-bagger stock, what are the underlying trends we should look for in a business? Typically, we'll want to... | 2022-10-21T06:00:25 | Yahoo | NVIDIA (NASDAQ:NVDA) Knows How To Allocate Capital
To find a multi-bagger stock, what are the underlying trends we should look for in a business? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. With that in mind, the ROCE of NVIDIA (NASDAQ:NVDA) looks attractive right now, so lets see what the trend of returns can tell us.
What Is Return On Capital Employed (ROCE)?
For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on NVIDIA is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.26 = US$9.4b ÷ (US$43b - US$7.6b) (Based on the trailing twelve months to July 2022).
So, NVIDIA has an ROCE of 26%. That's a fantastic return and not only that, it outpaces the average of 15% earned by companies in a similar industry.
Check out our latest analysis for NVIDIA
In the above chart we have measured NVIDIA's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free report for NVIDIA.
How Are Returns Trending?
In terms of NVIDIA's history of ROCE, it's quite impressive. The company has consistently earned 26% for the last five years, and the capital employed within the business has risen 328% in that time. Now considering ROCE is an attractive 26%, this combination is actually pretty appealing because it means the business can consistently put money to work and generate these high returns. If NVIDIA can keep this up, we'd be very optimistic about its future.
In Conclusion...
In summary, we're delighted to see that NVIDIA has been compounding returns by reinvesting at consistently high rates of return, as these are common traits of a multi-bagger. And the stock has done incredibly well with a 152% return over the last five years, so long term investors are no doubt ecstatic with that result. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.
If you want to continue researching NVIDIA, you might be interested to know about the 1 warning sign that our analysis has discovered.
If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets here.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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https://finnhub.io/api/news?id=c3e8cad69e7e911577726208615447164275d018d7dfda4791d7c036a8e8eaed | One Chinese Chip Startup Shows Key Gap in Biden Export Curbs | (Bloomberg) -- One of China’s most promising chip designers has already navigated through the Biden administration’s export restrictions and concluded it will be able to continue tapping Taiwan Semiconductor Manufacturing Co. to produce its advanced silicon.Most Read from BloombergChina Summons Chip Firms for Emergency Talks After US CurbsTrump Deposed in Suit by Investors Claiming Fraud in ‘Apprentice’ Videophone PitchesLiz Truss Odds: The Front-Runners to Replace the Prime MinisterWeed Is Comi | 2022-10-20T23:45:37 | Yahoo | Chinese Chip Startup Shows Key Gap in Biden Export Curbs
(Bloomberg) -- One of China’s most promising chip designers has already navigated through the Biden administration’s export restrictions and concluded it will be able to continue tapping Taiwan Semiconductor Manufacturing Co. to produce its advanced silicon.
Most Read from Bloomberg
Biren Technology develops artificial intelligence chips and is considered a promising domestic contender to compete with graphics chips from Nvidia Corp., which has said it can no longer sell its most advanced AI products into China. The US measures were designed to limit China’s development of technology that may be used in aid of its military, and appeared to rule out access to advanced fabrication, but Biren believes its AI chips produced by TSMC are not covered by the sanctions, according to people with direct knowledge of the matter.
Shanghai-based Biren, founded in 2019, made bold claims in the summer about its chips outperforming Nvidia’s market-leading A100 AI accelerator -- the very product that can no longer be sold in China. But after reviewing the designs, TSMC and Biren concluded that the specs of the Chinese chip don’t meet the criteria for restriction, according to one of the people, who asked not to be named discussing a sensitive matter. That suggests Washington’s controls may not capture all alternatives to Nvidia’s hardware.
“Biren has a chip fortunately just below the threshold and the chip hence can still be made by TSMC,” Bernstein analysts led by Mark Li wrote in a report that analyzed chips against the export control.
The US Commerce Department’s Bureau of Industry and Security, which plays a key role in designing and enforcing export controls, announced the semiconductor restrictions on Oct. 7.
“While BIS cannot comment on company-specific actions, we expect all companies to comply with export controls,” a Commerce Department spokesperson said in an emailed response to a Bloomberg query. “Since the release of the rule on October 7, BIS has been undertaking a vigorous outreach effort to educate those impacted by it to aid compliance efforts.”
TSMC, the world’s largest contract chipmaker, complies with all relevant rules and regulations and “will continue to serve all customers around the world,” Chief Executive Officer C.C. Wei said in response to a question about China during its earnings call last week.
Biren believes everything it’s doing is in compliance with legal regulations, according to one of the people. TSMC is reviewing products from other Chinese chip developers to see whether it can continue their production under the new export controls, another person said.
Representatives for Biren and TSMC declined to comment.
As the US banned exports of Nvidia and Advanced Micro Devices Inc.’s high-end AI-training chips to China, it set a performance threshold above which no semiconductors made with US technology can be sold in the country. The metrics include a combination of connectivity speeds and operations per second. Bernstein’s analysis shows the Biren BR100 falls just shy of that control cutoff.
Bernstein’s Li saw limited revenue exposure for TSMC from the new controls, stressing that “only very high-end compute chips are restricted” and estimating a hit of 0.4% to the Taiwanese company’s 2023 sales.
Still, while Biren may continue building its current generation of semiconductors, Washington’s curbs are likely to effectively cap its progress up the technology ladder. Additional improvements from Biren are liable to fall foul of the high-performance silicon restriction.
Biren, backed by the likes of IDG Capital and Walden International, was seeking new funds earlier this year at a valuation of $2.7 billion, Bloomberg News reported. Its flagship BR100 and BR104 processors are designed along similar lines to the graphics chips that Nvidia and AMD have adapted to AI purposes and are used to train artificial intelligence models and algorithms. Those include computer vision, natural language processing and conversational AI.
Washington’s latest salvo of restrictions triggered a selloff in Chinese tech stocks and narrowed the ability of international suppliers to sell or support chipmaking equipment in China. Netherlands-based ASML Holding NV withdrew support by US employees due to a new measure that precludes US citizens or green card holders from helping to make semiconductors that may have a military use in China. American suppliers like KLA Corp. and Lam Research Corp. also distanced themselves from the country’s top chip plants.
China’s Ministry of Industry and Information Technology summoned representatives from across its semiconductor sector to review the fallout from the latest US restrictions. Lawyers and executives at those firms are still assessing the full impact of the measures.
--With assistance from Eric Martin.
(Updates with Commerce Department comment in sixth paragraph)
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©2022 Bloomberg L.P. | NVDA |
https://finnhub.io/api/news?id=63a5ecffb0d3ea20297dea7d730829a2f3cae905efef41984c8ab1650ae91a3d | Is Doom And Gloom In Store For Tech Stocks This Earnings Season? | The earnings calendar for tech stocks kicks into high gear in coming days as one analyst draws comparisons with two difficult years. | 2022-10-21T05:15:18 | Yahoo | Is Doom And Gloom In Store For Tech Stocks This Earnings Season?
The earnings calendar for tech stocks kicks into high gear in coming days as one analyst draws comparisons with two difficult years.
The earnings calendar for tech stocks kicks into high gear in coming days as one analyst draws comparisons with two difficult years. | NVDA |
https://finnhub.io/api/news?id=b2e2bc9341e901c1e572b3afbc5df6836bd23619978b6bb703682aa42f72d3b8 | EXD: Premium Is Rising | When buying closed-end funds, we often want to see discounts before picking up funds, but for EXD, the fund has come to a premium now. Click here to read more. | 2022-10-21T03:41:43 | SeekingAlpha | EXD: Premium Is Rising
Summary
- When buying closed-end funds, we often want to see discounts before picking up funds.
- For EXD, the fund has come to a premium now, but history suggests it might not have to be a sell.
- The overall equity slump makes it a fairly compelling time to start putting capital to work.
- This idea was discussed in more depth with members of my private investing community, CEF/ETF Income Laboratory. Learn More »
Written by Nick Ackerman, co-produced by Stanford Chemist. A version of this article was published to members of the CEF/ETF Income Laboratory on October 7th, 2022.
Eaton Vance Tax-Managed Buy-Write Strategy Fund (EXD) has bumped up to a premium since the last time we covered it. To be fair, though, the fund was only at a slight discount when we last touched on it. This premium has expanded quite materially in just the last week or so. Either way, that has actually helped it dodge some of the downturn we saw in the broader market. At least on a share price total return basis.
Now that the fund is at a premium, it still might not be time to panic out of the fund. It remains fairly attractive compared to its sister fund at this time or a "Hold." However, with equities down across the board, putting some capital to work in a quality name such as EXD could be a compelling option for long-term investors.
The Basics
- 1-Year Z-score: 2.56
- Premium: 9.76%
- Distribution Yield: 8.58%
- Expense Ratio: 1.26%
- Leverage: N/A
- Managed Assets: $89.5 million
- Structure: Perpetual
EXD's strategy is to "invest in a diversified portfolio of common stocks and write call options on one or more U.S. indices on a substantial portion of the value of its common stock portfolio to seek to generate current earnings from the option premium. The Fund's portfolio managers use the adviser's and sub-advisers internal research and proprietary modeling techniques in making investment decisions. The Fund evaluates returns on an after-tax basis and seeks to minimize and defer federal income taxes incurred by shareholders in connection with their investment in the Fund."
EXD is on the smaller side, even for closed-end funds. This can be a risk to larger investors that need a lot of liquidity. It is just over $93.7 million in total managed assets. For a larger fund that's virtually similar, one could consider its ~$1.341 billion sister, Eaton Vance Tax-Managed Buy-Write Opportunities Fund (NYSE:ETV). ETV's premium is even higher than EXD's at this time. A point we'll explore in the next section.
Another benefit of EXD compared to other closed-end fund choices at this time is the lack of leverage. Instead, they operate with an option writing strategy against indexes.
Performance - Still Offering Some Shelter
The fund's options strategy would have also reasonably been assumed to provide at least some slight benefit beyond the benefit of an expanding premium. That's what we noted earlier in the year in that previous update. This continues to be the case as the fund benchmarks against the S&P 500 and Nasdaq 100. Below is a YTD comparison of the performance against the SPDR S&P 500 (SPY) and Invesco QQQ Trust (QQQ).
With a tilt towards a heavier tech exposure, a comparable fund without an options writing strategy could be expected to perform somewhere in the middle. However, EXD has held up on a total NAV return basis, better than both benchmarks. That being said, it has been running quite close with SPY. A heavier positioning into the mega-cap tech names could also be seen helping this fund.
For the fund's premium, we can see above that the 1-year z-score puts it well above the usual level. In the last week or so alone, this has ramped up significantly. If we look at the longer term, the fund is more elevated than we've seen in the last several years. At least, going back to when the fund converted to a wildly different fund. Stanford Chemist published an article about when the conversion took place that explains it more in-depth.
That might not be a fair comparison, though, simply because it had taken some time for investors to realize the fund had changed. Additionally, with COVID in 2020, CEF discounts widened out significantly too. Instead, a better look could be provided by looking at ETV. The sister fund has the same strategy. Albeit holdings are slightly different. We can see that the fund has sustained a higher premium for quite a few years.
For ETV, we can see the premium is even higher at this time. However, even ETV would be elevated at this point. It could suggest, though, that EXD is still fine to hold for now, as ETV isn't going to be an attractive alternative. It also could suggest that some small premium could be appropriate for EXD. Ideally, it would probably be below the current level to be an attractive buy candidate. Of course, the usual caveat of "past performance never guarantees future results" is present here too.
Distribution - When Gains Are Hard To Come By
When the strategy change took place, EXD switched to a monthly distribution. Since that time, it hasn't been cut. To note, ETV hasn't cut since ~2010.
The distribution yield currently works out to 8.58%, with the NAV rate pushing 9.42%. As an equity fund, they'll rely heavily on capital gains to fund their payouts. We know those are becoming harder to come by in this type of market.
Once again, we go back to the options writing strategy, though. With the contracts expiring worthless, they are pocketing that premium. That results in capital gains being realized for the fund. For the first six months, this equated to nearly $8 million in option premium "income."
It wasn't enough to offset the total unrealized losses in the portfolio, which is why the fund still declined in value. However, the premium collected was enough to cover the distributions paid out. That's despite the negative net investment income the fund regularly generates.
One reason why this could be seen as a negative is come tax time. When writing options that expire worthlessly, those gains are short-term capital gains. This can be remedied in two manners, though. This is a "tax-managed" fund, after all.
For one, the fund could realize more losses in its underlying portfolio, offsetting the gains and classifying the distribution as return of capital.
The second way is from carryforward losses from prior years. The fund generated significant losses under its prior strategy, and that can be helpful for shareholders holding the fund now. Fortunately, Douglas Albo recently covered that subject exactly for EXD in his fantastic write-up.
With that being the case, I suspect that the majority, if not all, of EXD's distribution will continue to be classified as tax-deferred return of capital.
EXD's Portfolio
Since the fund's transition, the turnover of the fund has been incredibly low. This is something we've seen in ETV too. Another symptom of trying to stay tax-managed is limiting those realized gain potentials. As the market was strong for most of the preceding decade, gains were plentiful, and there was no real reason to sell positions.
Last year the turnover for the entire year was 3% for EXD. In the last semi-annual report (six months), the turnover rate exploded to 6%. Exploded is hyperbole. On a percentage basis for the difference, that is quite a large leap, regardless. With the market in turmoil, it would make them more flexible to shift the portfolio around without worrying about running into lots of gains.
All that being said, we still haven't seen any meaningful changes in the top ten allocations of the fund.
In fact, the only changes I can see are that Alphabet Class A (GOOGL) has swapped spots with NVIDIA (NVDA) and Adobe (ADBE) has swapped spots with Meta Platforms (META) since we saw the holdings earlier this year. Here was the performance of these positions in that specific period. ADBE and GOOGL holding up better in this period would contribute to this result.
For META, the fund had increased the number of shares they held to 10,843 at the end of June from earlier in the year at the end of March. At the end of March, they held 10,375 shares. ADBE's share count was reduced from 4564 to 4229. They don't provide a share count for the end of August besides showing the percentage weightings I've included above. However, it gives us a glimpse into how the managers shifted some positions.
NVDA's and GOOGL's share counts stayed the same in that time period.
Since the end of August, NVDA has been slammed even further by a warning from Advanced Micro Devices (AMD) that they will miss revenue by a huge margin.
The heavy tilt towards technology comes thanks to the Nasdaq 100 exposure the fund tries to mimic. That puts the weighting of tech in the portfolio at a commanding allocation. Perhaps not too surprising after seeing the top ten list of the fund.
Conclusion
It's a tough market out there in 2022, no doubt about it. A longer-term investor looking for places to put money or at least building up a watchlist could be appropriate. I think that while EXD isn't overly attractive in terms of its discount/premium, it also isn't overly extended to cause me to sell either. Combing that with the latest declines makes it a fairly interesting choice at this time. An equity fund that seems to be more than able to generate the gains needed despite the downturn is a place I'm quite content.
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I provide my work regularly to CEF/ETF Income Laboratory with articles that have an exclusivity period, this is noted in such articles. CEF/ETF Income Laboratory is a Marketplace Service provided by Stanford Chemist, right here on Seeking Alpha.
Analyst’s Disclosure: I/we have a beneficial long position in the shares of EXD either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.
Comments (37) | NVDA |
https://finnhub.io/api/news?id=7ddb6e45318cb27a00055f3adab17010ce2df253ad68fb53181a2b05d420a839 | Dogecoin leads drops as largest cryptocurrencies start mixed | The largest cryptocurrencies were mixed during morning trading on Friday, with Ripple seeing the biggest move, rising 2.95% to 45 cents. Dogecoin led the... | 2022-10-21T03:00:00 | MarketWatch | The largest cryptocurrencies were mixed during morning trading on Friday, with Ripple XRPUSD seeing the biggest move, rising 2.95% to 45 cents.
Dogecoin DOGEUSD led the decreases with a 1.27% drop to 6 cents.
Five other cryptocurrencies saw increases Friday. Ethereum ETHUSD climbed 0.31% to $1,285.71, and Bitcoin Cash BCHUSD rose 0.27% to $106.20.
Cardano ADAUSD rose 0.17% to 34 cents, and Litecoin LTCUSD climbed 0.12% to $51.12.
Bitcoin BTCUSD saw the smallest increase, climbing climbed 0.06% to $19,034.03.
In addition to Dogecoin, two other currencies posted drops. Uniswap UNIUSD dropped 1.27% to $6.01, and Polkadot DOTUSD sank 0.61% to $5.89.
In crypto-related company news, shares of Coinbase Global Inc. COIN rose 0.47% to $63.89, while MicroStrategy Inc. MSTR rallied 1.22% to $223.71. Riot Blockchain Inc. RIOT shares rose 0.72% to $5.62, and shares of Marathon Digital Holdings Inc. MARA increased 1.28% to $11.06.
Overstock.com Inc. OSTK climbed 0.68% to $23.85, while Block Inc. SQ declined 2.08% to $54.04 and Tesla Inc. TSLA rose 0.88% to $209.11.
PayPal Holdings Inc. PYPL slipped 0.59% to $84.28, and Ebang International Holdings Inc. Cl A EBON shares declined 1.14% to 32 cents. NVIDIA Corp. NVDA climbed 0.32% to $122.33, and Advanced Micro Devices Inc. AMD dropped 0.59% to $57.09.
In the fund space, blockchain-focused Amplify Transformational Data Sharing ETF BLOK rose 0.03% to $17.91. The Bitwise Crypto Industry Innovators ETF BITQ, which is focused on pure-play crypto companies, declined 1.04% to $5.72. Grayscale Bitcoin Trust GBTC, which tracks the Bitcoin market price, slid 0.84% to $11.18.
Editor's Note: This story, which tracks nine of the top cryptocurrencies and excludes stable coins, was auto-generated by Automated Insights, an automation technology provider, using data from Dow Jones, FactSet and Kraken. See our market data terms of use. | NVDA |
https://finnhub.io/api/news?id=0f564401f2c52d2244b82c3ae04c1e511ade6d9497fed87f7474218be0340f4b | Nvidia: 3 Reasons To Buy | Nvidiaâs launch of the RTX 4090 graphics card flagship has salvaged what could have been an ugly quarter. Learn why I remain long NVDA and rate it a Buy. | 2022-10-20T19:08:24 | SeekingAlpha | Nvidia: 3 Reasons To Buy
Summary
- Upgrading my rating of Nvidia from Hold to Buy after the Ethereum merge proves less impactful than expected.
- Reason #1: the successful GeForce RTX 4090 launch.
- Reason #2: GeForce Now thrives while Google Stadia dies.
- Reason #3: Omniverse grows while Meta’s Metaverse declines.
- Investor takeaways: Nvidia has proven that it isn’t just about crypto.
- This idea was discussed in more depth with members of my private investing community, Rethink Technology. Learn More »
Nvidia’s (NASDAQ:NVDA) launch of the RTX 4090 graphics card flagship has salvaged what could have been an ugly quarter following the end of Ethereum (ETH-USD) mining. The 4090’s performance proved skeptics wrong, and the card was an instant sell-out. Nvidia’s GPU prowess has translated into adjacencies such as game streaming and the metaverse. Nvidia has thoroughly disproven the myth that its success relied mainly on crypto.
Upgrading my rating of Nvidia from Hold to Buy after the Ethereum merge proves less impactful than expected
In my recent article on the impact of the Ethereum Merge on Nvidia, I was fairly cautious and maintained a Hold rating on the company. The end of Ethereum mining would, I calculated, put roughly 11 million used cards on the market, most of which were high end current generation GPUs from Nvidia and AMD (AMD). This would suppress demand for new cards of the same generation.
It certainly seems to have done that, judging by the drop in prices for new RTX 30 series cards. A new 3090 Ti, which originally cost upwards of $2,000 can be had on eBay for about $1,000.
Then Nvidia did something that no one expected: it launched the RTX 4090 flagship graphics card that turned out to be vastly superior to the previous generation. While the Ethereum Merge has depressed prices for the RTX 30 series, it has had little impact on demand for the new RTX 4090, which sold out of all sources in the US in a matter of minutes.
The Ethereum Merge could have little or no impact on RTX 4090 sales for the simple reason that there were no used graphics cards that could touch it in performance. The 4090 was in a class by itself.
Together with other developments I discuss below, I decided to lift my Hold on Nvidia and informed subscribers on October 17 that I now rated Nvidia a Buy. I resumed buying the stock on October 19.
Reason #1: the successful GeForce RTX 4090 launch
Nvidia’s CEO Jensen Huang launched the RTX 4090 with the claim that it offered a 50% performance uplift for non-ray traced (rasterized) games and as much as 2-4 times improvement in ray traced games compared to the RTX 3090 Ti. Here, gaming performance is measured in frames per second (FPS).
Not surprisingly, there was considerable skepticism about the claims, with some YouTube tech reviewers even going so far as to claim that Nvidia was lying and that the RTX 4090 was just a scam.
In fact, I can’t remember ever seeing so much hostility towards an Nvidia product launch. The messaging was uniformly pro-AMD: Nvidia is lying about the performance gains of the 4090; Nvidia is gouging consumers with a launch price that is a whole $100 (!) over the launch price of the RTX 3090; Nvidia is evil and consumers should wait for AMD to come to their rescue.
That all changed once the review embargo was lifted on October 11. Even reviewers who had been openly hostile had to grudgingly acknowledge that Nvidia had delivered on its 4090 performance claims. A good example is the review by Paul’s Hardware.
I’ve gone over numerous reviews on YouTube and traditional tech review sites and their conclusions are basically all the same. For display resolutions of 4K UHD and above, FPS performance is limited by the graphics card and not the CPU. In that regime, the 4090 delivers on its performance claims. A couple of examples from one of the best PC reviewers in the business, Guru3d:
Rasterized performance:
Ray tracing performance:
Many reviewers still concluded by questioning whether the card is worth the $1,599 list (for the Nvidia Founders Edition), often imploring their audience to wait until the launch of AMD’s next generation GPUs on November 3.
This is not unreasonable advice, but frankly, I don’t expect AMD’s next generation GPUs to match the performance of the 40 series in ray tracing. AMD has tended to de-emphasize this in favor of rasterization performance.
And the advice has seemed to fall on deaf ears for customers of the 4090. On October 12, the cards sold out within minutes on all venues. Almost certainly, Nvidia was too cautious and underestimated demand.
In addition to inadequate supply, the launch was also marred by a marketing faux pas. Nvidia had announced two versions of the RTX 4080 set to go on sale in November. The lower priced version used a different GPU chip and less video RAM, and it was obvious that it should have been called the RTX 4070.
Once again, it was evil Nvidia trying to deceive the public. Here, I think Nvidia was not so much evil as just plain stupid from a marketing standpoint. On October 14 Nvidia announced that it was “unlaunching” the lower end 4080, prompting much gloating among Nvidia’s critics.
Reason #2: GeForce Now thrives while Google Stadia dies
At Nvidia’s fiscal 2023 Q2 conference call, CFO Colette Kress noted that Nvidia’s game streaming service, GeForce Now, had surpassed 20 million registered users. GeForce Now offers over 1350 games, some of which are included in the subscription, but most can only be played if the user has bought the game elsewhere, such as through Steam.
As such, GFN deviated from the classic streaming model of all content being available for a monthly fee. The GFN user was paying for the privilege of being able to play Windows PC games on a wide variety of other devices or through a web browser.
The saving grace of GFN was that even though users were required to buy most games, the games were portable to Windows PCs. Users weren’t required to keep their games on GFN and didn’t have to worry about losing them if GFN folded.
Not so Google (GOOG) Stadia. Google wanted users to treat Stadia as a gaming platform comparable to consoles or Windows PCs. Users would buy games for Stadia, and they would reside on Stadia, being available nowhere else. “Free” games were also included in the subscription, but most games had to be purchased outright.
On September 29, Phil Harrison, VP and General Manager of Stadia, announced that Stadia would be shut down. Stadia just became the latest in a long line of projects killed by Google.
There had always been concern among gamers about Google’s tendency to kill projects and questions about Stadia’s long-term viability. Google confirmed many gamers’ fears about the platform but did the right thing by refunding all hardware and game content purchases.
In retrospect, Stadia just had the wrong business model. Ideally, one would like the content of a streaming service to be available for an all-inclusive price. Game streaming just isn’t there yet, which I think is mainly due to the publishers. Unlike much of the software industry, game publishers have not embraced the subscription model.
This is probably due to the fact that no individual publisher has a large enough user base to be able to make the transition from outright purchases to subscriptions. The initial phase of such a transition involves some cash crunch. Adobe (ADBE) and Microsoft (MSFT) could afford to make the transition for key products such as Creative Suite and Office, but that’s the kind of scale that’s required.
Even Sony (SONY) PlayStation Plus, which does offer streaming for an inclusive price, restricts title availability to previous generation games, PS 2, 3, and 4, only. Here, it’s easy to see why the game publishers would go along with this. They’re not selling a lot of the older generation games, so this is just a nice source of residual income.
GeForce Now has turned out to be a savvy adaptation to the financial needs of the game publishers. Not all of them are on board with it. After GFN exited beta, some publishers bailed out and refused to authorize streaming of their games on the service. This was despite the fact that users would have purchased the games they were streaming for the most part, so no loss of revenue to the publisher.
This may have been more about political alignments between GFN and Stadia. Now that Stadia is no more, I expect GFN to continue to grow content and subscribers.
Reason #3: Omniverse grows while Meta’s Metaverse declines
These days, we’re hearing a lot of hype about the “metaverse”. The metaverse will replace today’s internet with an all-encompassing immersive 3D experience. The concept is not new and has been the stuff of science fiction since William Gibson invented it in Neuromancer. He called it, The Matrix. Yes, that’s where the movie title came from, but Gibson’s Matrix was fully consensual and had simply evolved out of the internet.
Under the limits of today’s technology, our ability to create a simulated world falls well short of The Matrix. Virtual reality goggles don’t make you feel like you’ve been inserted into a virtual reality but more like you’ve been inserted into a video game. Kind of like Mark Zuckerberg’s avatar that was recently demonstrated for the Meta Connect 2022 event:
Part of the problem with Meta Platforms’ (META) concept may be that it’s so often cartoonish, not even up to current video game standards. More like console or mobile device games of a decade ago.
And perhaps that’s why people seem to be losing interest, according to the Wall Street Journal:
While Mr. Zuckerberg has said the transition to a more immersive online experience will take years, the company’s flagship metaverse offering for consumers, Horizon Worlds, is falling short of internal performance expectations.
Meta initially set a goal of reaching 500,000 monthly active users for Horizon Worlds by the end of this year, but in recent weeks revised that figure to 280,000. The current tally is less than 200,000, the documents show.
Most visitors to Horizon generally don’t return to the app after the first month, and the user base has steadily declined since the spring, according to the documents, which include internal memos from employees.
Nvidia’s Omniverse has a different focus. Instead of trying to replace the internet, Omniverse is intended mainly as a tool for workplace collaboration. This collaboration can take many forms, including architectural design, mechanical engineering, robotics simulation and game creation.
Always there is an emphasis on ray-traced realism and real-time simulation. At the RTX 40 series launch event, Nvidia also demonstrated the power of Omniverse as a game creation tool. A small team of 30 developers were able to create the Racer X demo in just 3 months. Racer X is fully ray traced and physics simulated with no pre-baked visuals and runs in real time on an RTX 4090. A screen grab from the Racer X video is shown below:
With Omniverse, we see the convergence of a number of Nvidia technologies, including GPU hosted ray tracing, game streaming from the cloud, and AI. All of it knitted carefully together with very extensive software development.
Although Omniverse doesn’t have the aspirations of the Metaverse, it could well become it. Omniverse has already attracted numerous partners:
Investor takeaways: Nvidia has proven that it isn’t just about crypto
I still occasionally come across comments to the effect that Nvidia is totally dependent on crypto. This is despite the fact that Data Center revenue exceeded Gaming revenue in fiscal Q1, when Gaming revenue was $3.6 billion and presumably still augmented by crypto.
Even as Gaming segment revenue declined in fiscal Q2 to $2.042 billion, Data Center revenue continued to grow to $3.806 billion, far greater than AMD’s Data Center revenue for Q2 of $1.4866 billion. While many have tended to focus on the battle for data center CPU market share between Intel (INTC) and AMD, Nvidia has been the stealth disrupter of the data center market.
Nvidia has created a virtuous cycle of innovation in which continued performance improvements in its GPUs are funneled into its data center business. Advances in the data center are then folded back into the consumer space through cloud services such as GeForce Now and Omniverse.
If Nvidia can move quickly to meet demand for the RTX 40 series, it will emerge relatively unscathed from the end of Ethereum mining and resume growth in the Gaming segment. Fortunately, Nvidia has a much better manufacturing partner for the 40 series in TSMC (TSM) than it had in Samsung (OTCPK:SSNLF) for the 30 series. TSMC has the scale to meet the demand for the 40 series.
I still expect it to take a few quarters to work through the GPU inventory glut, but in the meantime Nvidia will be able to sell every 4090 and 4080 card it and its board partners can make. That should take the sting out of the lost crypto revenue and lay to rest once and for all the myth of Nvidia’s crypto dependence. I remain long Nvidia and rate it a Buy.
Consider joining Rethink Technology for in depth coverage of technology companies such as Apple.
This article was written by
Analyst’s Disclosure: I/we have a beneficial long position in the shares of NVDA, TSM, MSFT either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.
Comments (12) | NVDA |
https://finnhub.io/api/news?id=c8f0541cc25b578bd6ecd3427e0efb87b0ef8d58ad2706e12672cd2211286ea5 | NVIDIA Corp. stock rises Thursday, outperforms market | Shares of NVIDIA Corp. rose 1.19% to $121.94 Thursday, on what proved to be an all-around dismal trading session for the stock market, with the S&P 500 Index... | 2022-10-20T10:13:00 | MarketWatch | Shares of NVIDIA Corp.
NVDA,
+0.53%
rose 1.19% to $121.94 Thursday, on what proved to be an all-around dismal trading session for the stock market, with the S&P 500 Index
SPX,
+0.67%
falling 0.80% to 3,665.78 and Dow Jones Industrial Average
DJIA,
+0.93%
falling 0.30% to 30,333.59. This was the stock's fourth consecutive day of gains. NVIDIA Corp. closed $224.53 short of its 52-week high ($346.47), which the company reached on November 22nd.
The stock outperformed some of its competitors Thursday, as Microsoft Corp.
MSFT,
+0.19%
fell 0.14% to $236.15, Intel Corp.
INTC,
+1.71%
rose 0.31% to $26.08, and Texas Instruments Inc.
TXN,
-0.35%
rose 0.70% to $153.72. Trading volume (65.0 M) eclipsed its 50-day average volume of 59.0 M.
Editor's Note: This story was auto-generated by Automated Insights, an automation technology provider, using data from Dow Jones and FactSet. See our market data terms of use. | NVDA |
https://finnhub.io/api/news?id=5e811fdfcc199fea010a3a5b11be8017167907a858ed5c66e4736409e9c3582d | Why Shopify, Nvidia, and Roku Stocks Rallied Early Thursday | This helped many stocks gain ground, riding the coattails of the broader market indexes as they climbed higher. Many technology stocks have been beaten down over the past year, and investors are increasingly looking for bargains amid the rubble, particularly on the off chance that the worst of the bear market is behind them -- and evidence suggests they may be right. As a result, Shopify (NYSE: SHOP) surged 8%, Nvidia (NASDAQ: NVDA) jumped 4.9%, and Roku (NASDAQ: ROKU) gained 4.4% as of 11:47 a.m. ET. | 2022-10-20T09:53:00 | Yahoo | Why Shopify, Nvidia, and Roku Stocks Rallied Early Thursday
This helped many stocks gain ground, riding the coattails of the broader market indexes as they climbed higher. Many technology stocks have been beaten down over the past year, and investors are increasingly looking for bargains amid the rubble, particularly on the off chance that the worst of the bear market is behind them -- and evidence suggests they may be right. As a result, Shopify (NYSE: SHOP) surged 8%, Nvidia (NASDAQ: NVDA) jumped 4.9%, and Roku (NASDAQ: ROKU) gained 4.4% as of 11:47 a.m. ET. | NVDA |
https://finnhub.io/api/news?id=0e55e5126ba23b20f8975b9617936c2284e7d7e6032a5631380064599b941c3f | SK Telecom: AI Expansion Is A Strong Tailwind | SK Telecom's declining revenue performance is not going to last a decade. SKM's foray into AI semiconductor products is very promising. Read more here. | 2022-10-20T09:36:34 | SeekingAlpha | SK Telecom: AI Expansion Is A Strong Tailwind
Summary
- The declining revenue performance of SK Telecom is not going to last a decade.
- SK Telecom’s foray into AI semiconductor products is very promising. The AI processor industry touts 46.03% CAGR.
- The partnership with Amazon Web Services is boosting the AIaaS future of SK Telecom.
- The overall global AI business was worth $93.5 billion last year. This industry touts 38.1% CAGR until 2030.
- SKM is trading well below its 52-week high of $48.47. Go long on SKM while it trades below $20. A bounce-back is highly probable.
The fast-growing $93.5 billion Artificial Intelligence industry is why I have a buy rating for SK Telecom Co., Ltd (NYSE:SKM). Its subsidiary, Sapeon, markets an Artificial Intelligence chip that is reportedly much faster than Nvidia's (NVDA) GPU A2 Tensor Core product. Going forward, the Sapeon X220 AI inference chip could boost SKM's 9% net income margin.
Aside from data center purposes, the Sapeon X220 is being used inside U.S. digital TV broadcasting systems.
The AI processor market was worth around $10.25 billion last year. It is growing at 46.03% CAGR. This venture into AI processors/accelerator products could help reverse SKM's declining annual revenue. It is the bane of all telecom firms to have low or negative revenue CAGR. Sapeon AI processors might help SKM reverse that projected -9.21% forward revenue growth.
Yes, it will take time before Sapeon becomes a threat to Nvidia. On the other hand, SK Telecom's $50 billion spending plan for its U.S. subsidiaries include California-based Sapeon. SK Telecom's sister company, SK Hynix owns factories that could manufacture Sapeon processors. Nvidia is still a fabless firm.
Sapeon AI processors also power SK Telecom's Artificial Intelligence as a Service (AIaaS) platform. The AIaaS industry is estimated to have a CAGR of 56.25%. It could have a market size of $77 billion by 2025. SKM has a bright future ahead if it could develop more paid AI services like its X Caliber pet dog diagnostic system.
Why You Should Care
AI processors and AIaaS expansions could fortify the consistent profitability of SK Telecom. Take note, the decreasing annual revenue did not prevent SKM from achieving increased profitability during 2019 to 2021. This feat should be another good reason to go long on this AI-enhanced company.
Amazon.com (AMZN) Web Services recently signed a partnership with SK Telecom. They will jointly develop computer vision services. SK Telecom will provide the AI models and AWS will contribute its edge computing, IoT, data and storage capabilities. Amazon's acceptance of SK Telecom as an AI partner is a long-term tailwind. The global AI computer vision market size was $9.04 billion in 2021. Its CAGR is 46.9%. It will be worth $98.05 billion by 2027.
SK Telecom's technology collaboration with Canada can also fast-track deep learning optimization for Sapeon X220 and X330 processors.
Sapeon Is Competitive
The principle of presumption of regularity compels me to believe the stated performance numbers below. The mega-cap founding members of MLCommons (responsible for MLPerf Benchmarks) are not going to allow Sapeon Inc. to publish this graphic showing the X220 outperforming the Nvidia A2. Nvidia also uses MLPerf benchmark scores to promote its products. Nvidia is a founding member of ML Commons.
The 28nm 8GB Sapeon X220's spec sheet said its INT8 performance could reach 100 Tera OPS using Boost Mode. The 8nm 16B Nvidia A2's INT8 performance is 36 Tera OPS.
Sapeon will launch the X330, X340, and X350 AI processors next year. The X430 will come in 2025. The upcoming Sapeon X350 might be able to match the 660 Tera OPS INT8 capability of the Nvidia A100.
A big-budget marketing campaign for Sapeon X220 could make it harder for Nvidia to sell its A2 product. SK Telecom should imitate the $1 billion U.S. marketing campaign of Flutter Entertainment (OTCPK:PDYPF, OTCPK:PDYPY). This aggressive advertising helped the Flutter-owned FanDuel become the no. 1 sports betting platform in the U.S. It takes money to make money.
Spending $1 billion to promote Sapeon X220 could make data center operators rely less on Nvidia. Nvidia's data center segment's quarterly revenue is $2.94 billion. There's big money in supplying AI processors to the data center market.
Battered-Down to Bargain Status
SKM's 6-month price return is -30%. This stock trades at 10.34x TTM P/E. Investing in an AI-enhanced company that trades at 10x P/E seems is judicious.
SKM is relatively undervalued against its sector peers. Seeking Alpha's Quant System only gives SKM a hold rating, but it gives it a valuation rating of A+. This is due to SKM's TTM P/E of 10.34x being 29% lower than the Communication Services sector's average of 14.57x. The TTM Price/Sales valuation of SKM is also only 0.58x. This is 40% lower than the sector average of 1.14x.
The bargain status of SKM is even greater when you consider its good profitability grade. The 9% net income margin is 60% higher than the sector median of 5.66%. Being more profitable than its peers is why SKM deserves a higher valuation than 10.65x forward P/E.
SKM's handicap is its dependence on wireless and wired communications segments. It is very unappealing that SKM's Others segment contributes almost nothing. Selling AI processors and the subscription fees from AI-as-a-Service could boost the Others segment's revenue.
Final Thoughts
The high CAGR AI chips industry (46.03%) and AI-as-a-Service (56.25%) are emerging catalysts for SK Telecom. These two expansion ventures should help SKM avoid prolonged decline in annual sales.
Promoting SKM as an AI-enhanced company might help its stock rebound near its $48.47 52-week high. Seeking Alpha is still the best platform to disseminate the good qualities of under-followed stocks.
Sapeon AI hardware and SK Telecom software solutions are probably why SKM has higher valuation ratios than its Wireless Telecommunication Services peers. AT&T (T) and Verizon (VZ) are not yet selling AI processors. On the other hand, SKM's valuation stats are still way lower than NVDA's.
Three years from now, SKM could probably generate 10% of its annual revenue from AI hardware and AIaaS. This is feasible thanks to its AI partnership with Amazon Web Services. That AI partnership started in computer vision. However, AI has other applications in the cloud.
Given enough time, AI processors and AIaaS could contribute $1 to $2 billion to SKM's annual sales.
This article was written by
Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.
Comments (1) | NVDA |
https://finnhub.io/api/news?id=04231427d89b3fab49cc3ade44b0d3283f2ac838397542cc4fa9986153fdd291 | Government bonds are eroding crypto's appeal for investors seeking rich yields. But some are staying. | A weekly look at the most important moves and news in crypto and what's on the horizon in digital assets. | 2022-10-20T08:48:00 | MarketWatch | Hello, welcome back to Distributed Ledger, our weekly crypto newsletter that reaches your inbox every Thursday. I’m Frances Yue, crypto reporter at MarketWatch. I’ll walk you through the latest and greatest in the digital asset world this week.
Find me on Twitter at @FrancesYue_ to send feedback, or tell us what you think we should cover. You can also reach me through email to share your personal stories with crypto.
Crypto in a snap
Bitcoin BTCUSD advanced about 1.3% during the past seven days, and was trading at around $19,087 on Thursday, according to CoinDesk data. Ether ETHUSD gained 3% over the seven-day stretch to around $1,289. Meme token Dogecoin DOGEUSD gained 2.6% while another dog-themed token, Shiba Inu SHIBUSD, went up 3.5% from seven days ago.
Crypto Metrics
|Biggest Gainers||Price||%7-day return|
|Frax Share||$6.13||27.4%|
|WhiteBIT Token||$13.61||21.8%|
|Trust Wallet||$1.12||16.8%|
|Casper Network||$0.04||16.6%|
|Lido DAO||$1.48||16.6%|
|Source: CoinGecko as of Oct. 20|
|Biggest Decliners||Price||%7-day return|
|EthereumPoW||$6.32||-19.8%|
|Klaytn||$0.14||-18.3%|
|Axie Infinity||$10||-13.4%|
|Terra Luna Classic||$0.0002||-13.2%|
|Radix||$0.05||-9.9%|
|Source: CoinGecko as of Oct. 20|
Should you stake your ETH?
Last month, Ethereum completed its historical transition to proof-of-stake from proof-of-work, meaning that the network is now secured by stakers, or ether holders who lock up their crypto, instead of miners.
Read: The Ethereum Merge is completed. What’s next? Here are three things you should watch
Through staking, ether holders could help secure the network while receiving rewards, currently with a 4% yield annually, according to the Ethereum Foundation. The amount of ether staked has been growing, up to over 14 million on Wednesday from 8 million at the start of the year, according to data from Ethscan. Ether’s staking rate, or the amount of staked ether to that of ethers’ total supply, went up to about 11.5% from 7.4% at the beginning of this year, according to CryptoQuant.com.
However, with the 10-year Treasury BX:TMUBMUSD10Y bills yielding more than 4% annually, higher than ether’s current staking rewards, why are some investors still staking their coins?
As the crypto bear market continues, most ether holders are investing in the potential of blockchain technology, instead of drawn by the near-term yields, analysts said. Ether has lost more than 65% of its value year-to-date, according to CoinDesk data.
“Ether holders are long the ‘platform’ and are framing the investment as a venture-like bet or thesis trade and want to capture the yield along the way,” said Brian Mosoff, chief executive at Ether Capital. “They have a low time preference by default,” Mosoff noted. Stakers won’t be able to withdraw their ether until the completion of the Shanghai upgrade, which is expected to happen at some point in 2023.
“A U.S 10-year Treasury is more suited for investors that prefer minimum risk,” said Konstantin Boyko-Romanovsky, chief executive and founder of validator node hosting platform Allnodes.
“But for investors that invest in crypto for blockchain technology, nothing can be compared to hosting their own node, supporting the Ethereum network, and decentralization while receiving staking rewards for their contribution,” Boyko-Romanovsky said.
Still, ether holders face several challenges and risks when staking their coins.
They may lose a large amount of ether and be forced out of the network due to “slashing”, when a staker’s activity is recognized as malicious. “Slashing happens when you accidentally run two instances of your own node in two different places,” noted Boyko-Romanovsky.
Stakers should also be alert for any scams, especially when they are asked for private keys, Boyko-Romanovsky said.
Regulators are also paying increasing attention to crypto staking. In September, Gary Gensler, chairman of the U.S. Securities and Exchange Commission, said that cryptocurrencies or intermediaries that allow holders to stake their coins may pass the Howey test, which is used by courts to determine whether an asset is a security. Gensler said he wasn’t referring to any specific cryptocurrencies, but the comments raised concerns whether the classification of ether would be changed.
Bitcoin’s bottom is in?
Bitcoin may have already reached the bottom, based on a comparison with previous bear markets and on-chain data, according to analysts at Arcane Research.
In June, the crypto reached a yearly low of $17,601, according to CoinDesk data. Bitcoin is trading at around $19,087 on Thursday, down 0.6% over the past 24 hours.
It has been more than 340 days since bitcoin reached its all-time high of $68,990 in November, as the crypto went down more than 70% from its peak, according to CoinDesk data.
Looking back at the previous bear markets, bitcoin saw a drawdown in 2018 of up to 84%, and it took 364 days for the crypto to go from cyclical peak to bottom. In 2014, the downturn lasted 407 days, with a maximum drawdown of 85%.
Meanwhile, several on-chain metrics also showed that the worst for bitcoin may have passed, according to the analysts.
I’ve written more about it here.
Mastercard’s new crypto offering
Mastercard Inc. on Monday said it’s launching Crypto Source, a program to help financial institutions offer secure crypto trading capabilities and services to their customers. Mastercard’s financial institution partners will be able to engage in buy, hold and sell services for select crypto assets, according to a statement.
The payment-processing company is expanding its partnership with Paxos Trust, which will provide crypto-asset trading and custody services on behalf of the banks, according to the statement.
Crypto companies, funds
Shares of Coinbase Global Inc. COIN was flat Thursday at around $63.21 on Thursday, and were down 8.8% over the past five trading sessions. Michael Saylor’s MicroStrategy Inc. MSTR shares lost 2.2% Thursday to $221.09, while they are up 0.3% over the past five days.
Mining company Riot Blockchain Inc. RIOT shares lowered 1% to $5.62 Thursday, and they were down 12.1% over the past five days. Shares of Marathon Digital Holdings Inc. MARA dipped 0.5% to $11.03, while down 1.8% over the past five days. Another miner, Ebang International Holdings Inc. EBON tanked 5.5% to $0.30 on Thursday, while down 16% over the past five days.
Overstock.com Inc. OSTK’s shares were mostly unchanged at $23.58. The shares traded 0.3% lower over the five-session period.
Shares of Block Inc. SQ, formerly known as Square, added 2% to $55 and were down 2.2% for the week. Tesla Inc. TSLA shares dropped 7% to 206.55%, down 6.9% over the past five days.
PayPal Holdings Inc. PYPL edged up 0.1% to $84.53, up 0.6% over the five-session stretch. Nvidia Corp. NVDA shares went up 1.2% to $121.92, looking at a 1.9% gain for the past week.
Advanced Micro Devices Inc. AMD shares picked up 0.7% to $57.61 on Thursday, down 2.1% from five trading days ago.
Among crypto funds, ProShares Bitcoin Strategy ETF BITO slipped 1% to $11.74 Thursday, while its Short Bitcoin Strategy ETF BITI rose 1% to $38.91. Valkyrie Bitcoin Strategy ETF BTF went down 0.8% to $7.3, while VanEck Bitcoin Strategy ETF XBTF edged up 0.4% to $18.84.
Grayscale Bitcoin Trust GBTC added 0.2% to $11.27.
Must Reads
- Cracks At Kraken: Crypto’s Near Empty C-Suite (Forbes)
- Retail investors become vigilantes in hunt for crypto’s most wanted man (Financial Times)
- A Crypto Alchemist Made Me an Accidental Billionaire (Wired)
- Texas regulator probes crypto platform FTX and CEO Sam Bankman-Fried (The Washington Post)
- Fidelity’s Crypto Platform to Add Ether Trading for Institutional Clients (CoinDesk)
- JPMorgan Adds Crypto Policy Head After Dimon’s ‘Ponzi’ Quip (Bloomberg Law) | NVDA |
Subsets and Splits