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Market Outlook

Rate cut could be on the table at the September meeting, Fed Chair Powell says 

  • A rate cut could be on the table as soon as September, if inflation continues to progress toward the Federal Reserve’s 2% goal, Federal Reserve Chair Jerome Powell said at his post-monetary policy decision press conference. 
  • In the labor market, supply and demand have come into better balance and have returned to about where they were before the pandemic — “strong, but not overheated,” he said. 
  • The second quarter’s data has strengthened confidence that inflation is heading sustainably toward the Fed’s 2% goal, he added. It’s waiting for additional data to further strengthen that confidence before the FOMC reduces the federal funds rate target range. 
  • “We have made no decisions about future meetings, and that includes the September meeting,” he said.
Categories
Stocks

Meta Platforms jumps

Meta Platforms jumps as it sees sales boost amid AI spending

Meta Platforms stock (NASDAQ:META) rose sharply postmarket immediately after posting second-quarter earnings where the company beat expectations on top and bottom lines, though it noted that its spending on tech (notably including artificial intelligence) would keep inching higher.

The company posted earnings per share of $5.16, easily topping views for $4.78, and revenue of $39.07B cleared the Street’s bar of $38.31B (20% growth).

It also guided to sales in the current quarter of $38.5B-$41B, vs an expected $39.2B.

Investors’ eyes were planted on Meta’s expense guidance after the company raised spending forecasts for the year in its first-quarter earnings — and indeed it bumped the bottom end of its range, now seeing 2024 capital expenditures coming in at $37B-$40B from a previous $35B-$40B (and vs. estimates compiled by Bloomberg for $37.6B).

The company also said it should see “significant” growth in capex for 2025.

“We had a strong quarter, and Meta AI is on track to be the most used AI assistant in the world by the end of the year,” said founder/CEO Mark Zuckerberg in his typically terse early reaction. “We’ve released the first frontier-level open source AI model, we continue to see good traction with our Ray-Ban Meta AI glasses, and we’re driving good growth across our apps.”

Categories
Stocks

Lam Research

Lam Research (LRCX) $896 

Hold, waiting for a better price to add. Long Term story remains good.

Post earnings call, the stock dropped 2.5% to $896.

Earnings call suggested that the growth in mature semiconductor lines for memory was still slow and recovering, but the growth from high memory was not enough to stem that weakness. Management wasn’t convincing enough, so this could drag. The other worry was the China exposure, which is a common feature for semis, and tech.

No point chasing yesterday’s rise, we should wait for a decent entry point, there were no ratings downgrades from analysts in the morning, but a couple of price target declines.

Categories
Pharmaceuticals Stocks

Pfizer (NYSE:PFE) Maintaining Pfizer As A Buy On Declines.  

The dividend yield of 5.4% is good and Q2 results beat expectations…. 

Pfizer (NYSE:PFE) topped expectations with its second quarter results and raised its full-year outlook, driven by strength in its oncology portfolio and continued efforts towards realigning its cost base. 

The New York-based pharma giant generated adjusted earnings of $0.60 a share on revenue of $13.28B that grew 2.2% year-over-year. 

This marked Pfizer’s (PFE) first quarter of topline revenue growth, on a year-over-year basis, since the fourth quarter of 2022 when our COVID revenues peaked. Both metrics topped analysts’ projections for the quarter. 

Revenues grew 3% operationally year-over-year despite anticipated decline in revenues from its COVID-19 products, Comirnaty and Paxlovid. Comirnaty vaccine marketed with BIoNTech (BNTX) added $195M in revenue with a ~87% drop while COVID-19 pill Paxlovid generated $251M indicating a ~79% YoY growth. 

Excluding contributions from Comirnaty and Paxlovid, revenues grew 14% operationally to $12.8B, amid a strong performance from blood thinner Eliquis, which Pfizer (PFE) markets with Bristol Myers (BMY). Pfizer (PFE) also achieved exceptional growth in its oncology portfolio, with strong revenue contribution from its legacy-Seagen products. 

The drugmaker raised its full-year 2024 revenue guidance by $1B at the midpoint to a range of $59.5 to $62.5 billion (consensus estimate: $60.58B) and adj. diluted EPS guidance by $0.30 at the midpoint to $2.45 to $2.65 (consensus estimate: $2.37). Including the contribution from Seagen and excluding revenues from Comirnaty and Paxlovid, the firm now expects to achieve full-year 2024 operational revenue growth of 9% to 11% Y/Y. 

The company also said it is on track to deliver at least $4B in net cost savings by the end of 2024 from its previously announced cost realignment program. 

Categories
AI Industrials Stocks

Microsoft Disappoints Markets 

Microsoft (MSFT) shares fell nearly 7% in extended hours trading on Tuesday after the tech giant reported fiscal fourth-quarter results that topped expectations, but Azure growth was weaker-than-expected or simply the expectations were too high. 

For the period ending June 30, Microsoft earned $2.95 per share – above $2.93 guidance as revenue rose 15% year-over-year to come in at $64.7B – above 64.52 guidance 

Included in that was $28.52B from its Intelligent Cloud division, which consists of its Azure cloud unit. Microsoft said Azure revenue grew 29% year-over-year and 30% in constant currency. 

The company previously said it expected Azure to grow between 30% and 31% in constant currency, and some analysts previously said they expected more than 30% growth. 

Guidance for the Sep quarter will come in with the call. 

Categories
Semiconductors Stocks

AMD Bucks The Trend – The Stock Is Up 5% 

  • Advanced Micro Devices press release (NASDAQ:AMD): Q2 Non-GAAP EPS of $0.69 beats by $0.01. 
  •  
  • Revenue of $5.84B (+9.0% Y/Y) beats by $120M. 
  •  
  • Record Data Center segment revenue of $2.8 billion was up 115% year-over-year primarily driven by the steep ramp of AMD Instinct™ GPU shipments, and strong growth in 4th Gen AMD EPYC™ CPU sales. Revenue increased 21% sequentially primarily driven by the strong ramp of AMD Instinct GPU shipments. 
  •  
  • Client segment revenue was $1.5 billion, up 49% year-over-year and 9% sequentially primarily driven by sales of AMD Ryzen™ processors. 
  • Gaming segment revenue was $648 million, down 59% year-over-year and 30% sequentially primarily due to a decrease in semi-custom revenue. 
  •  
  • For the third quarter of 2024, AMD expects revenue to be approximately $6.7 billion vs. $6.61B consensus, plus or minus $300 million. At the mid-point of the revenue range, this represents year-over-year growth of approximately 16% and sequential growth of approximately 15%. Non-GAAP gross margin is expected to be approximately 53.5%. 
Categories
Stocks Utilities

Avoid Buying Plug Power – (PLUG) $2.40 

Terrible history of losses, unproven technology, poor execution and shareholder unfriendly because of constant dilution to raise cash. 

High risk of Obsolescence 

  • Technological advancements in next generation Electrolyzers offer more hope for a green hydrogen economy,  
  • Incumbent Electrolyzer producers like Plug Power are at a disadvantage due to technological inefficiencies and financial instability, making them a risky investment. 
  • Hydrogen can be an alternative source of energy, but Plug may not be the right player, its conversion efficiency is supposedly lower in the 75% range compared to newer technologies offering 95%. 
Categories
Market Outlook

June PCE Report 

Personal Consumption Expenditures (PCE) Numbers for June 2024  

The numbers are fairly benign. 

PCE 0.1% MoM as expected 

PCE 2.6% YoY V 2.5% expected. 

Core PCE 0.2% MoM as expected, and 2.6% YoY as expected. 

Revisions – minor 

No surprises, the S&P 500 futures are up 0.86%, Nasdaq Comp up 1%. The 10 year is down to 2.23%. 

Categories
AI Stocks

Serve Robotics (SERV) – $12.60 Is A Speculative Trade  

I remember this now; it came out with this headline – Serve Robotics skyrockets as Nvidia takes stake. 

It’s an UBER spin off with robots for food delivery or other consumables, was going nowhere till the Nvidia stake was disclosed, which they bought from an early investment in a convertible primary note. The stake is about 10%. Interestingly, two others have investments as well including 7-11, and Delivery Hero based out of Germany. 

Delivery Robots could work for the last mile, there is potential and its similar to drone delivery. 

This business will need a lot of cash to stay alive and keep developing robots so another big risk is dilution – they will have to keep coming to the market and issuing shares for funding needs. 

Its hugely speculative and risen from $2.50 this year, if one caught it early around 4 a tiny speculative position wouldn’t have been bad, on a bad day this one could easily drop 50%. 

Categories
Market Outlook

Don’t Catch A Falling Knife 

After the disastrous 3.6% drop in the Nasdaq composite and 2.3% drop in the S&P 500, yesterday, don’t be in a hurry to jump back in. Or as they say on Wall Street – don’t catch a falling knife. 

Analysts were right to badger Google’s management on monetization of AI, and Google’s inability to give straight answers made them realize that all that spending is going to see returns a few years out. It was a cue to offload and led to the overbought M-7 and tech crashing. Tesla didn’t help either with the usual vagueness – an inherently risky stock with a lot of promises.  

The other big reason for the fall yesterday was algorithmic trading, or computerized trading. Algo trading uses the VIX (The Volatility Index) as a trigger for selling/buying. The VIX is often known as the Fear Gauge, and it was pretty fearful on Wednesday shooting up from 14.72 to 18.04 – a 23% jump! For the most part of 2024, the VIX has stayed steady between 12-14, so this was way out in uncertain territory. 

As of writing the VIX is at 19.17, up 6%. If you recall we had another 2%, drop last week, at that time the VIX had shot up to 16.52. 

THE DOOM LOOP – When markets are over leveraged, overbought or over concentrated a big fall sends it into a doom loop. An example of this would be a mutual or Index fund manager or ETF having to sell stocks because of redemptions – so he/she’s selling and driving prices down, which further leads to investors knocking on the door for more redemptions…and so on. Similarly, if you’re trading in a margin account you have to sell to meet the margins…this is self-perpetuating – a doom loop. 

For Algo traders its worse, the triggers to buy and sell are preset – “stop loss limits”, the speed is too fast to have any human control, and most computerized trading firms will not allow overrides. 

I would wait for the dust to settle. The S&P 500 is down almost 5% from its all-time high and the Nasdaq 8.5%. These could head to correction territory, especially the Nasdaq, which again is not the end of the world – we had a great first half of the year. There are big earnings next week – MSFT, AMZN, AAPL, META, will update then.