| From: Julius Wong | 10/12/2024 8:02:48 AM | | | | | | Top ‘Phase 2’ AI infrastructure stocks that are still high-conviction
Oct. 11, 2024 1:09 PM ET
By: Monica L. Correa, SA News Editor
 imaginima/iStock via Getty Images
Investors continue to have high convictions in stocks that are continuing to spend in artificial intelligence and its related infrastructure.
Goldman Sachs said there are four phases of AI implementation, starting with Nvidia ( NVDA), followed by infrastructure, then enabled revenues, and productivity as the fourth. The typical “phase two” AI infrastructure stock is up 27% year-to-date.
Analysts said they expect these stocks’ prices to growth due to earnings growth rather than valuation expansion.
In addition, starting valuations for these stocks are above average while Nvidia’s ( NVDA) sale surprises, its hyper-scaler capex spending, and corporate AI mentions have slowed.
The “phase two” stocks include those in semiconductors, cloud providers, data center REITs, hardware and equipment, security software, and utilities. It also includes the mega-caps – Amazon ( AMZN), Alphabet ( GOOGL), Meta ( META), Microsoft ( MSFT), and Oracle ( ORCL) — which have announced capex investments in AI north of $215B in 2024 and $250B in 2025.
“While many factors besides AI affect near-term fundamentals, Phase 2 share prices have rallied beyond forward EPS expectations and suggest incremental investor optimism about the potential boost from AI,” said Ryan Hammond, vice president of Goldman Sachs U.S. Equity Strategy, in a note.
However, future returns could be constrained by elevated starting valuations, he added. Currently, valuations for the “phase two” stocks are above average. Compared to the S&P 500 ( SP500), these stocks trade 0.4 standard deviations more expensive relative to the past 10 years.
So, while these stocks seem more expensive, “it is possible that the demand for AI leads the mega-cap tech stocks to spend even more on AI-related capex than investors and analysts currently expect,” said Hammond.
These are the top “phase two” stocks, ranked by year-to-date return:
- Vistra Corp. ( VST) – YTD return: 235%
- Palantir Technologies Inc. ( PLTR) – YTD return: 141%
- Constellation Energy Corporation ( CEG) – YTD return: 140%
- Coherent Corp. ( COHR) – YTD return: 125%
- Vertiv Holdings Co. ( VRT) – YTD return: 123%
- ARM Holdings PLC ( ARM) – YTD return: 91%
- NRG Energy, Inc. ( NRG) – YTD return: 84%
- Credo Technology Group Holding Ltd. ( CRDO) – YTD return: 73%
- Arista Networks, Inc. ( ANET) – YTD return: 70%
- Oracle Corporation ( ORCL) – YTD return: 67%
- Taiwan Semiconductor Manufacturing Co., Ltd. ( TSM) – YTD return: 64%
- Broadcom Inc. ( AVGO) – YTD return: 64%
- Super Micro Computer, Inc. ( SMCI) – YTD return: 60%
- Belden Inc. ( BDC) – YTD return: 53%
- Public Service Enterprise Group Inc. ( PEG) – YTD return: 53%
- Corning Inc. ( GLW) – YTD return: 50%
- Pure Storage, Inc. ( PSTG) – YTD return: 47%
- Monolithic Power Systems, Inc. ( MPWR) – YTD return: 47%
- NetApp, Inc. ( NTAP) – YTD return: 46%
- Onto Innovation, Inc. ( ONTO) – YTD return: 37%
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| From: Julius Wong | 10/16/2024 7:19:09 AM | | | | | | Bitcoin hits 2-month high above $67,000 after ‘monster’ inflows into spot bitcoin ETFs
Oct. 15, 2024 12:03 PM ET
By: Carla Mozee, SA News Editor
 Olemedia/E+ via Getty Images
Bitcoin ( BTC-USD) on Tuesday surpassed $67,000 for the first time in more than two months, building on its move above $65,000 a day earlier, buoyed by big inflows into spot bitcoin exchange-trade funds.
Bitcoin ( BTC-USD) hit an intraday high of $67,938.85, the strongest price since July 28 when it traded above $67,800. The price then pulled back in Tuesday trade, down 0.3% at $65,643. Bitcoin ( BTC-USD) is up ~49% this year.
In an eye-catching move, $559.9M flowed into 11 spot bitcoin ETFs on Monday, the largest amount since early June, according to data from London-based Farside Investors. BlackRock's iShares Bitcoin Trust ETF (NASDAQ: IBIT), the largest bitcoin fund, drew in $79.5M of that total.
“Monster day for spot btc ETFs,” with +$550M of inflows, said Nate Geraci, president of The ETF Store, in a post on X (formerly Twitter) late Tuesday, adding that the market is approaching $20B in net inflows in 10 months.
“It’s advisors & institutional investors continuing to slowly adopt,” Geraci said.
Standard Chartered in a note pointing to Polymarket data said that digital assets were starting to move higher on the prospect that former President Donald Trump, who has embraced crypto projects, will win the White House in November. Standard Chartered is also seeing “topside BTC calls at the 80K level (for 27 Dec expiry)”.
Further illustrating crypto’s growing reach, Vice President Kamala Harris, as part of outreach to Black men in her White House run, on Monday proposed policy supporting a regulatory framework for cryptocurrency and other digital assets. Her outreach paper said more than 20% of Black Americans own or have owned cryptocurrency assets.
BlackRock CEO Larry Fink, in addressing a question on its Q3 earnings calls last week, said he was “not sure either president -- or other candidate would make a difference,” for the digital asset landscape.
“I do believe the utilization of assets are going to become more and more of a reality worldwide,” Fink said. “Conversations we're having with institutions worldwide, conversations about how should they think about digital assets, what type of asset allocation there should be, I mean, we believe bitcoin is an asset class in itself,” he said, according to a transcript.
Here are some other bitcoin-backed ETFs: ( ARKB), ( GBTC), ( BRRR), ( BTCO), ( HODL), ( BTCW), ( FBTC), ( BITB), and ( EZBC). |
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| From: Julius Wong | 10/19/2024 9:55:49 AM | | | | | | Notable analyst calls this week: Etsy, Zoom and Enphase among top picks
Oct. 19, 2024 9:37 AM ET
By: Tiyashi Datta, SA News Editor
 peshkov
The S&P500 ( SP500) closed in the green on Friday, amid focus on the arrival of a fresh earnings season. For the week, Nasdaq ( COMP:IND) fell 0.7%, while Dow ( DJI) advanced 0.4%.
Wall Street had a slew of upgrades and downgrades from analysts. Here are some of the major calls for the week:
Goldman Sachs turns bearish on Etsy
Goldman Sachs downgraded Etsy (NASDAQ: ETSY) to Sell rating from Neutral, saying the online retail stock could lose market share over the next few years.
Analyst Eric Sheridan said that while the current Street estimates reflect more normalized growth levels in a better backdrop for discretionary consumer spending, the visibility remains low on the timing of a recovery of that sort.
On the profit line, Etsy ( ETSY) is seen facing margins headwinds, which could lead to earnings disappointments, the brokerage said.
Caterpillar downgraded by Morgan Stanley
Morgan Stanley downgraded Caterpillar (NYSE: CAT) Underweight from Equal weight and cut PT on the maker of heavy equipment to $332 a share from $349.
“While we have been cautious on U.S. non-residential construction activity all year long and increasingly cautious on Caterpillar ( CAT) earnings, we now see rising evidence of a potential de-stocking downturn for U.S. construction equipment,” Angel Castillo, analyst at Morgan Stanley,
Wedbush upgrade Zoom, Dynatrace; hikes PT for other software names
Wedbush upgraded Zoom (NASDAQ: ZM) and Dynatrace (NYSE: DT) to Outperform from Neutral.
"Zoom's broad product portfolio allows it to address the market in multiple areas of communications and collaboration where the company sizes its addressable market growing to ~$235B by 2028 addressing Unified Communications, Contact Center, Webinars, Virtual Events and Sales Intelligence," said Wedbush analyst Daniel Ives and pushed PT up to $85 from $80.
The brokerage said Dynatrace's hybrid model makes it well suited to larger enterprises and increased PT to $67 from $55. Wedbush also increased PT for other software names including CrowdStrike (NASDAQ: CRWD), MongoDB's (NASDAQ: MDB) and SentinelOne's (NYSE: S).
Enphase gets downgraded by RBC, Susquehanna; Guggenheim hikes rating
Enphase Energy (NASDAQ: ENPH) was in focus after RBC cut its recommendation to Sector Perform from Outperform, citing "competitive market dynamics" that should result in a slower pace of growth next year not yet reflected in consensus estimates.
Susquehanna's Biju Perincheril also downgraded the stock to Neutral from Positive with a $104 price target, cut from $147, citing the slower than expected recovery in U.S. residentials and market share concerns, coupled with the stock's premium valuation.
However, Guggenheim raised Enphase Energy ( ENPH) to Neutral from Sell.
Mizuho upgrades Duke Energy, CMS Energy gets downgraded to Neutral
Mizuho upgraded Duke Energy (NYSE: DUK) to Outperform from Neutral, viewing the drop-off related to the recent hurricanes in Florida and North Carolina as "a great buying opportunity."
Mizuho analyst Anthony Crowdell views Duke ( DUK) as "a premium utility" that will trade at a double-digit P/E premium, as the company has resolved rate cases in North Carolina, South Carolina, and Florida, and approaches the upcoming Q4 earnings call with a capital refresh as a catalyst for the re-rating.
CMS Energy (NYSE: CMS), however, received a downgrade at Mizuho to Neutral from Outperform, with analyst Anthony Crowdell seeing limited opportunity for significant multiple upsides from current levels. The analyst also says consensus estimates already reflect growth at the top of the guidance range.
UBS sees potential second-half recovery for Datadog
Datadog (NASDAQ: DDOG) was upgraded by UBS Buy from Neutral, citing industry checks that showed "green shoots" of a potential second-half recovery.
Analyst Karl Keirstead upped PT on the stock to $150 from $125 and raised his revenue growth estimates for 2025 and 2026 to the 25% to 30% range from the current 25% to 26% range. Keirstead sees a potential strong medium-term growth for the AWS/Azure cloud infrastructure sector and believes these trends could help Datadog maintain or even modestly accelerate its mid-20% growth rate in the coming quarters.
Wells Fargo downgrades Capri Holdings as investors awaits Tapestry court ruling
Capri Holdings (NYSE: CPRI) was cut to equal weight from overweight at Wells Fargo as investors await a court decision on its planned sale to Tapestry (NYSE: TPR).
Wells Fargo analyst Ike Boruchow said believes the risk reward is balanced at current levels.
"While admittedly we leave upside on the table if the deal is approved by the judge (takeout price is $57), we still believe there is a chance that the FTC wins the lawsuit," Boruchow wrote.
Truist has downgraded Amgen (NASDAQ: AMGN) from Buy to Hold saying that the potential for obesity asset MariTide is already included in the biotech's stock price.
Bernstein started coverage of Eli Lilly (NYSE: LLY), Gilead Sciences (NASDAQ: GILD) and Amgen ( AMGN) with outperform ratings.
Mizuho downgraded Fortinet (NASDAQ: FTNT) to Underperform from Neutral. The analysts said that their third quarter checks were solid, but with some puts and takes. Cybersecurity demand was healthy, and Generative AI adoption is showing more encouraging signs; however, consumption data points were mixed, the analysts added. |
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| From: Julius Wong | 10/20/2024 8:30:02 AM | | | | | | UBS upgrades view on U.S. stocks to attractive - here are its top picks
Oct. 18, 2024 11:35 AM ET
By: Carla Mozee, SA News Editor
 da-kuk
UBS Global Wealth Management said it now has an attractive view on U.S. equities, supported in part by growing adoption of artificial intelligence technology, and the investment bank has listed its top picks in the market.
The firm sees further gains ahead of the market, whose benchmark, the S&P 500 ( SP500), has risen +22% this year, including 46 record-high closes. UBS previously had a neutral view on U.S. stocks, but favorable domestic and global factors, such as China’s recent stimulus measures, prompted UBS’s upgrade.
“From a macro perspective, the combination of slowing but durable economic growth, healthy earnings growth, and continued Fed rate cuts are all supportive,” David Lefkowitz, head of equities Americas at UBS GWM, said in its Equity Compass note released this week. While economic growth is slowing, the country’s labor market is “healthy,” with real wages rising, he said.
AI adoption is broadening, with 5.9% of companies reporting using AI as of Q3, up from 3.7% in Q3 2023, UBS said, citing the U.S. Census Bureau. “From a single stock perspective, we think many of the large U.S. tech companies offer appealing long-term upside, especially those that have leading positions in the AI value chain, including Nvidia (NASDAQ: NVDA), Microsoft (NASDAQ: MSFT), and Meta Platforms (NASDAQ: META),” the firm said.
But risks facing the U.S. equity market include potential restrictions of U.S. semiconductor exports, eroding pricing power in the Consumer Staples sector and likely range bound oil prices for the Energy sector.
Here are UBS's top U.S. market picks by sector. Accompanying S&P 500 ( SP500) SPDR Select Sector ETFs are listed.
- Communication Services ( XLC)
- Meta Platforms ( META)
- Consumer Discretionary ( XLY)
- Home Depot (NYSE: HD)
- Ralph Lauren (NYSE: RL)
- Yum Brands (NYSE: YUM)
- Consumer Staples ( XLP)
- Coca-Cola (NYSE: KO)
- Colgate-Palmolive (NYSE: CL)
- Energy ( XLE)
- ConocoPhillips (NYSE: COP)
- ExxonMobil (NYSE: XOM)
- Suncor Energy (NYSE: SU)
- Financials ( XLF)
- Bank of America (NYSE: BAC)
- Truist Financial (NYSE: TFC)
- Health Care ( XLV)
- Abbott Laboratories (NYSE: ABT)
- Merck & Co. (NYSE: MRK)
- Thermo Fisher Scientific (NYSE: TMO)
- Industrials ( XLI)
- AECOM (NYSE: ACM)
- Boeing (NYSE: BA)
- Norfolk Southern Corp. (NYSE: NSC)
- Information Technology ( XLK)
- Adobe Systems (NASDAQ: ADBE)
- Microsoft ( MSFT)
- Salesforce.com (NYSE: CRM)
- Materials ( XLB)
- Air Products & Chemicals (NYSE: APD)
- Corteva (NYSE: CTVA)
- Freeport-McMoRan (NYSE: FCX)
- Real Estate ( XLRE)
- American Tower (NYSE: AMT)
- Equity Residential (NYSE: EQR)
- ProLogis (NYSE: PLD)
- Utilities ( XLU)
- Entergy (NYSE: ETR)
- NextEra Energy (NYSE: NEE)
- Sempra Energy (NYSE: SRE)
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| From: Julius Wong | 10/22/2024 8:06:19 AM | | | | | | Top small-cap stock picks from Morgan Stanley following the group's upgrade to neutral
Oct. 21, 2024 2:52 PM ET
By: Carla Mozee, SA News Editor
 Luis Alvarez
Morgan Stanley has listed its top picks among small-cap stocks ( RTY)( SP600), a group that’s recently benefitted from broader market rotation, but the investment firm said it's looking for some macro developments before it can turn outright bullish on the cohort.
The Russell 2000 ( RTY) gauge of small-caps has advanced ~0.7% in October, seeing some upside momentum in part into the U.S. presidential election. Small-caps tend to gain 25% on an absolute basis over the 12 months after White House races, Morgan Stanley (MS) said in a Monday note, outperforming large caps by 6%.
The investment firm recently upgraded small-caps to neutral versus the large-cap trade ( SP500)( COMP:IND)( DJI) following the blowout September jobs report and the Federal Reserve’s large half-point interest-rate cut last month. “For us to get outright bullish on Small caps overall, leading macro indicators would likely need to show that a clear acceleration in growth is coming,” Morgan Stanley said, echoing MS Equity Analyst Nicholas Lentini's October 16 note.
An upgraded view on small-cap stocks would need upward GDP revisions for 2025 and 2026, further improvement in leading surveys such as ISM and PMIs, improvement in consumer health, and in earnings revisions breadth, the firm said.
Here are Morgan Stanley’s top picks within small-caps, listed by sectors, accompanied by SPDR Select Sector ETFs:
Health Care ( XLV)
- LifeStance Health Group (NASDAQ: LFST)
- 10x Genomics (NASDAQ: TXG)
- Axsome Therapeutics (NASDAQ: AXSM)
- Bicara Therapeutics (NASDAQ: BCAX)
- Biohaven (NYSE: BHVN)
- CG Oncology (NASDAQ: CGON)
- Dyne Therapeutics (NASDAQ: DYN)
- Legend Biotech (NASDAQ: LEGN)
- Rhythm Pharmaceuticals (NASDAQ: RYTM)
- Structure Therapeutics (NASDAQ: GPCR)
- Viking Therapeutics (NASDAQ: VKTX)
Industrials ( XLI)
- Bloom Energy (NYSE: BE)
- Embraer (NYSE: ERJ)
- Kornit Digital (NASDAQ: KRNT)
- RBC Bearings (NYSE: RBC)
- Alaska Air (NYSE: ALK)
- American Airlines (NASDAQ: AAL)
- ArcBest ( ARCB)
- Knight-Swift Transportation (NYSE: KNX)
Consumer Discretionary ( XLY)
- BorgWarner (NYSE: BWA)
- Chewy (NYSE: CHWY)
- Group 1 Automotive (NYSE: GPI)
- Valvoline (NYSE: VVV)
- Hasbro (NASDAQ: HAS)
- Planet Fitness (NYSE: PLNT)
Financials ( XLF)
- Prosperity Bancshares (NYSE: PB)
- Bridge Investment (NYSE: BRDG)
- Evercore (NYSE: EVR)
- Lazard (NYSE: LAZ)
Information Technology ( XLK)
MKS Instruments (NASDAQ: MKSI)- Blackline ( BL)
- Unity Software (NYSE: U)
- Vertex (NASDAQ: VERX)
Materials ( XLB)
- Alcoa (NYSE: AA)
- Summit Materials (NYSE: SUM)
- United States Steel (NYSE: X)
Real Estate ( XLRE)
- Agree Realty (NYSE: ADC)
- American Healthcare REIT (NYSE: AHR)
Energy ( XLE)
- Antero Resources (NYSE: AR)
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| From: Julius Wong | 10/26/2024 12:00:51 PM | | | | | | Notable analyst calls this week: McDonald's, Apple and Enphase Energy among top picks
Oct. 26, 2024 9:37 AM ET
By: Tiyashi Datta, SA News Editor
 Mikko Lemola
The S&P500 ( SP500) closed in the red on Friday, after investors navigated an eventful week that was dominated by earnings from companies including Tesla (NASDAQ: TSLA), IBM (NYSE: IBM) and American Airlines (NASDAQ: AAL).
For the week, the Nasdaq ( COMP:IND) lost 0.7%, while Dow ( DJI) fell 1.3%.
Wall Street had a slew of upgrades and downgrades from analysts. Here are some of the major calls for the week:
McDonald's in Wall Street radar following link to E. coli outbreak
McDonald's (NYSE: MCD) was in focus this week after an E. coli outbreak in Colorado and Nebraska was linked to the hamburger chain’s Quarter Pounder.
Baird downgraded McDonald's ( MCD) to a Neutral rating from Outperform.
"While we are confident MCD ultimately can effectively manage through the E. coli issue successfully, the elevated risk related to the near-term demand outlook for the U.S. gives us some pause at the same time we are seeing signs of an increasingly challenging economic backdrop outside the U.S.," warned analyst David Tarantino.
TD Cowen analyst Andrew Charles said it is only natural to expect a short-term impact on sales. The firm sees a worst-case scenario hit to Q4 EPS of $0.37. Meanwhile, J.P. Morgan said it is buyers of the restaurant stock.
Apple downgraded on iPhone sale concern
KeyBanc downgraded Apple (NASDAQ: AAPL) to Underweight from Sector Weight, with the brokerage saying that its consumer survey "disproves one major bull case" that the iPhone SE is not purely additive to iPhone sales.
The analysts think this shows the iPhone SE is not incremental, and could possibly be cannibalistic to iPhone 16 sales. The analysts also cited data points surrounding U.S. iPhone upgrades, a reason for the rating cut.
Snap upgraded by JMP ahead of quarterly results
Snap (NYSE: SNAP) was upgraded to "market outperform" from "market perform" by JMP Securities. The firm believes Simple Snapchat can drive Spotlight and engagement growth, while impression growth should increase in 2025 with Sponsored Snaps, which would help grow U.S. and North American engagement and drive greater ad load.
JMP sees Q3 revenue for Snap to come in at $1.36B and adjusted EBITDA of $97.9M.
Coherent downgraded by Rosenblatt on valuation concern
Coherent (NYSE: COHR) was downgraded by Rosenblatt Securities to Neutral from Buy, citing the strong run in the stock since the start of the year.
Rosenblatt analyst Mike Genovese said the company’s shares have doubled so far this year, but management may want to be prudent in giving guidance for fiscal 2025, and investors may be disappointed. The brokerage, however, upped PT to $105 from $76.
Texas Instruments in spotlight after third quarter results
Texas Instruments (NASDAQ: TXN) was upgraded by Summit to Buy following a third-quarter beat, noting it expects the company to outperform its analog peers in 2025. The analysts anticipate earnings outperformance in 2025 as cyclical demand recovery gains momentum.
Meanwhile, Morgan Stanley kept its Underweight rating, but raised PT to $167 from $154. The brokerage said consensus estimates carried a better-than-seasonal snapback, which the buy side was already discounting. TD Cowen kept a Hold rating and $200 price target on the shares.
Guggenheim downgrades Enphase Energy on Europe challenge
Guggenheim downgraded Enphase Energy (NASDAQ: ENPH) to Sell from Neutral, after the company reported much weaker than expected Q3 earnings and revenues, and forecast Q4 revenues below Street estimates.
The brokerage set PT to $73 and cited significant challenges in Europe for the downgrade. Guggenheim said that management offered an unconvincing explanation for the weak results and outlook.
Canaccord Genuity cut shares to Hold from Buy and slashed PT to $95 from $140, while RBC Capital lowered PT to $85 from $100.
Canada Goose gets downgrades from both Goldman Sachs, Wells Fargo
Canada Goose (NYSE: GOOS) was downgraded by Goldman Sachs to Sell from Neutral on supply disruptions, seasonal patterns, and weaker sales trends.
“We believe a tougher backdrop could weigh on the company’s ability to execute against strategic initiatives, and we see risk to the rate and pace of both sales growth and operating margin expansion within the company’s guidance,” Roach said in Monday’s research note. The company also attracted a downgrade from Wells Fargo to Underweight from Equalweight.
TD Cowen downgraded SolarEdge Technologies (NASDAQ: SEDG) to Hold from Buy, citing deteriorating demand in Europe and continued uncertainty over the company's interim CEO and potential for an additional capital raise. The brokerage also slashed PT to $16 from $35.
Wedbush dropped its rating for Alto Neuroscience (NYSE: ANRO) to Neutral and lowered PT to $4 from $29, after the company announced its psychiatric drug ALTO-100 had failed a key clinical study. |
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| From: Julius Wong | 10/27/2024 7:52:04 AM | | | | | | For investors looking to track the elections through market instruments, here are some politically driven Republican and Democratic exchange-traded funds:
- God Bless America ETF ( YALL)
- American Conservative Values ETF ( ACVF)
- Point Bridge America First ETF ( MAGA)
- Democratic Large Cap Core ETF ( DEMZ)
- Unusual Whales Subversive Democratic ETF ( NANC)
- Unusual Whales Subversive Republican ETF ( KRUZ)
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