| To: Johnny Canuck who wrote (60339) | 10/10/2024 11:46:11 AM | | From: Johnny Canuck | | | | Stellantis is struggling. Here’s why
Published Thu, Oct 10 20248:00 AM EDT
Robert Ferris @in/robert-ferris-a482061/ @RobertoFerris
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Here’s why Stellantis is struggling
In this article
American car brands Jeep, Ram, Dodge and Chrysler are struggling under their new owner.
The European-American giant Stellantis is the world’s fifth-largest automaker by volume, according to S&P Global Mobility. The 2021 merger of the French maker Groupe PSA and the American-Italian Fiat Chrysler promised billions of dollars of savings in synergies and new opportunities for brands spanning two continents to share the burden of developing costly new technologies such as electric vehicles and software.
Some of those promises came to fruition.
“At first, the market was quite doubtful whether Stellantis could pull off the $5 billion in synergies between the two companies that they had announced,” said Daniel Roeska, managing director at Bernstein.
But Stellantis did better than that.
“They managed to pull off $8 billion,” he said. “And then they stopped counting.”
2023 was a banner year: record sales, record profits, record free cash flow.
Behind those results, all kinds of problems lurked.
Customers balked at high prices. Products grew stale, while competitors refreshed their own lineups. Product quality complaints dogged the company, especially on new Jeep models with price tags that ran above $100,000 — new territory for the brand.
Sales in the first half of 2024 fell 14% and profits plummeted by nearly half, the company said . Shares of the stock have also fallen, from an all-time high of $29.51 in March to just above $13 in early October.
At the heart of this are high inventories in North America, the home of the Jeep and Ram truck brands, estimated by RBC Capital to make up about 50% of Stellantis’ profits.
Out of all brands in the U.S., Stellantis vehicles have some of the highest inventories of vehicles on dealer lots, according to Cox Automotive. That means they aren’t selling.
“North America operations were highly profitable and kind of seen as a little bit of a cash cow,” said Stephanie Brinley, director of the AutoIntelligence unit at S&P Global Mobility. “Maybe the idea was it could run itself with not much influence. But it still needed support.”
Now dealers are furious — the company’s council of dealers in North America sent an open letter to Stellantis’ top management, including CEO Carlos Taveres, accusing them of ignoring warnings and making mistakes that have led to the company’s struggles.
The United Auto Workers union is threatening to strike again. Disputes with suppliers have ended up in the courts.
“The whole discussion on Stellantis has basically collapsed,” Roeska said. “We’re not talking about free cash flows. We’re not talking about long-term EV strategy. We’re not talking about market position or the China Leapmotor joint venture. We’re only talking about how much will it cost the company to get rid of the U.S. inventory.”
Stellantis does have a lot of new products expected in the next few years, and a highly flexible platform that can accommodate multiple powertrains — EVs, hybrids and old-fashioned gas-burning cars. That could help it weather an uncertain time in the auto industry when demand for EVs is rocky and unpredictable.
But the next six to 12 months could also be quite rocky.
Watch the video to learn more.
In this article
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| To: Johnny Canuck who wrote (60340) | 10/10/2024 11:59:58 AM | | From: Johnny Canuck | | | | |
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| Morgan Stanley just met with Nvidia’s CEO and came away even more confident in their top pick |
Published Thu, Oct 10 2024•11:33 AM EDT
Pia Singh @in/piasingh72/ @pia_singh_
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Nvidia remains at the forefront of AI innovation, with new opportunities to gain market share, Morgan Stanley said. Analyst Joseph Moore reiterated his overweight rating on the chipmaker and said meetings with Nvidia’s CEO and other management reinforced the firm’s view that it is the top pick in semiconductors. Morgan Stanley hosted the company for a three-day non-deal road show this week. “We remain very bullish longer term, but would concede given the rally that shorter-term upside from here raises the bar on earnings somewhat,” Moore said in a Thursday note to clients. His $150 price target implies about 13.1% potential upside for the stock, which has skyrocketed nearly 167% this year. “This is still an exceptional situation, with AI the most important trend in technology, and NVIDIA unquestionably the biggest beneficiary of those investments,” he said. Long-term confidence in Nvidia’s growth remains high, the analyst said. Management highlighted opportunities in evolving generative AI inference that will scale exponentially involving “long thinking” — or inference interactions that require substantially more computation. Moore explained that these tasks will require a “much richer mix of hardware” that will provide Nvidia with a new avenue for growth. “NVIDIA’s upcoming rack scale products as an optimal solution,” Moore said. “The longer term vision is that deep thinking will allow every company in the world to hire large numbers of ‘digital AI employees’ that can execute challenging tasks.” According to Moore, Nvidia’s Blackwell systems NVL36/72 are the optimal solution for those challenges, as he believes they provide a more capable processor to the AI markets, with the GB200 systems potentially being the most important innovation as they have a “full rack” approach. Under that approach, Nvidia enables 36 or 72 GPU racks to simultaneously communicate with other graphic processing units, enhancing the ability to treat the entire rack as one massive system. “Our view continues to be that NVIDIA is likely to actually gain share of AI processors in 2025, as the biggest users of custom silicon are seeing very steep ramps with NVIDIA solutions next year,” Moore said. The analyst is also confident that the Blackwell rollout is on schedule, with orders booked out roughly 12 months, which also drives strong-short term demand for Nvidia’s Hopper GPU architecture. “In the shorter term, the Blackwell ramp appears to be quite strong, with no major changes to the roadmaps and every indication that business remains robust with very high forward visibility,” Moore said. NVDA YTD mountain Nvidia stock this year. To be sure, even as Morgan Stanley doubles down on its Nvidia bull case, the company’s near-term growth story has some skeptics. Citi analyst Atif Malik maintained his buy rating on the artificial intelligence darling, but said he’s expecting Nvidia’s margins to bottom out early next year as its Blackwell platform will take time to fully ramp up. The stock will likely remain range bound, he said. Some analysts, including Fairlead Strategies’ Katie Stockton, also want to see Nvidia surpass its intraday high around $140 before adding new exposure. Shares closed down slightly on Wednesday at $132.65, just short of the stock’s closing high of $135.58 met in June.
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| To: Johnny Canuck who wrote (60341) | 10/10/2024 12:31:58 PM | | From: Johnny Canuck | | | | Groceries are more affordable now than in 2019. So why are people still so mad about prices?For the average worker, grocery prices are about as affordable as they were pre-pandemic. But the costs are still a sore spot for consumers — and a focus in the 2024 election.
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Hannah Erin Lang
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Last Updated: Oct. 10, 2024 at 9:39?a.m. ET
First Published: Oct. 10, 2024 at 6:00?a.m. ET
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 By one measure, groceries are back at pre-pandemic levels of affordability. But it might not feel that way.Photo: MarketWatch photo illustration/iStockphoto
For more than two years now, higher prices have been pinching consumers’ wallets and testing their patience — but there’s at least one part of their monthly budget that has more breathing room these days: For the average U.S. worker, it now takes fewer hours of work to afford a week’s worth of groceries than it did five years ago, in August 2019.
That’s according to a MarketWatch analysis of wage and inflation data that shows how the price of food relative to wages has fluctuated in recent years.
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MarketWatch Live: How could the latest CPI data affect the presidential race?
In other words: Despite substantial postpandemic increases in food costs, wages have now more than caught up with prices in this crucial spending category. And it’s easier for the average American worker to put food on the table than it was a couple of years ago.
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Groceries are getting more affordableWhen you factor in rising wages, groceries cost about as much today as they did in?the pre-pandemic years.Hours of work to afford a week's worth of groceries:Source: Bureau of Labor StatisticsNote: Based on the average wage for production and non-supervisory employees and the 2019 annual?spending of a middle-quintile household on food at home, adjusted for inflation.
'05'10'15'201980'85'90'9520003.253.503.754.004.254.504.75
But many consumers may not feel that way.
Absolute prices themselves — the dollar amount you pay for eggs, milk and other items at the store — are still higher than they were before. That’s caused a long-lasting case of sticker shock for consumers.
Food price increases did pick up slightly in September, according to the latest consumer price index report from the Labor Department. The annual inflation rate for food at home was 1.3%, lower than the inflation rate for prices across the economy, which was 2.4%.
Groceries are a lot more affordable than other expenses like rent and insurance costs, economists say, and they sometimes don’t paint a particularly meaningful picture of the economy, or of Americans’ financial burdens.
In spite of that, food prices have remained top of mind for consumers, as well as in this year’s presidential election, as both Donald Trump and Kamala Harris have pledged to make spending on this staple more affordable for voters.
“This is a narrow sliver of what people spend their money on. But it’s something that is very memorable,” said Jeremy Horpedahl, an economist and director of the Arkansas Center for Economic Research. “It keeps hitting them in the head as they see these high prices, but we are headed in the right direction.”
Why are higher grocery prices still so painful? The annual inflation rate for groceries, which the government calls “food at home,” has slowed significantly since peaking at about 13.5% in August 2022.
But the impact of those price increases will reverberate for years, economists said.
That’s partly because most of us had gotten used to pretty consistent prices at the grocery store. Starting in the late 1990s, the “real,” or inflation-adjusted, cost of food actually fell consistently. Prices were steady as wages increased — meaning that, for years, weekly grocery hauls effectively got cheaper.
There’s also a classic disconnect in how economists analyze inflation in data sets versus how the majority of people experience it in their own lives. Policy makers look at the rate of change in prices, and are looking for slower increases, not lower price levels.
Inflation rate, food at home:Source: Labor Department via St. Louis FedNote: Seasonally adjusted.
RECESSION2010'15'20-5.0-2.502.55.07.510.012.515.0%
“Consumers,” in contrast, ”see prices, not inflation rates,” explained Paul Shea, an economist at Bates College in Maine. Even as the inflation rate comes down, and workers earn more, consumers remain anchored to the 2019 numbers — before the pandemic and the widespread supply-chain and supply-and-demand imbalances of the following years impacted them — they remember.
Grocery prices are a hot buttonEspecially compared with other regular expenses, grocery costs seem to be one piece of household budgets coming back into balance. Some stores have even taken the unusual step of lowering prices.
But that isn’t the case for every line item on your monthly budget. Rent and other housing costs, for example, have risen at a clip that the average American’s pay cannot keep up with, economists said. A similar dynamic is at play with insurance — for cars, homes and healthcare.
That puts additional strain on Americans’ wallets — and can make something like more expensive groceries feel even more distressing, Horpedahl explained.
‘The simple answer is that these are prices that they see the most frequently.’
— Economist Paul Shea on why grocery prices remain so important to consumers
You might not see car insurance come up very often on the campaign trail (though occasionally, it has). Food costs, though, have been a hot-button issue in the 2024 presidential race, being painted, and reinforced, as more or less dire depending on one’s media preferences.
Inflation has ranked among the most important issues in the election this year. Both major-party candidates have addressed food costs specifically.
Trump, a Republican, posted a graphic listing higher prices for items like salmon, chicken and coffee, stating that the figures were “the cost of Kamala,” referring to his Democratic rival, the current U.S. vice president.
Some prices listed on the Trump graphic don’t match those recorded by the Bureau of Labor Statistics. For example, the former president’s graphic stated that the price of eggs has increased to $4.99. The average price of a dozen eggs is currently $3.30, according to the BLS.
See: Trump and Dave Ramsey talk about ‘$8 eggs, $5 gas, 7% interest rates’ and unaffordable housing
In response to a request for comment on Trump’s post, his campaign provided a statement from Republican National Committee spokesperson Taylor Rogers, who said that Harris’s “dangerously liberal“ economic agenda has “sent food costs soaring”
“From cereal, baked goods, chicken and beef, eggs, and milk, Americans are paying the price of Kamala’s failed polices,” Rogers said in a statement.
Harris has included a plan to lower grocery costs in her economic-policy agenda, including a proposed federal law against price gouging at grocery stores and food suppliers, and a more aggressive approach to combating overconsolidation in the food industry.
“We all know that prices went up during the pandemic when the supply chains shut down and failed, but our supply chains have now improved and prices are still too high,” the vice president said while outlining her economic plan at a campaign event this summer.
But the candidates may be giving outsized attention to an aspect of inflation that, from an economist’s point of view, seems to be coming back into balance after the pandemic.
So what explains the focus on groceries? “It’s more psychological than economic,” Shea explained.
Most consumers visit the grocery store and the gas station on a regular basis. Those two recurring purchases, for the majority of consumers, serve as the best gauge of how the economy is treating them — and they remain front of mind. “The simple answer is that these are prices that they see the most frequently,” Shea said.
Interestingly enough, these two price categories — energy and food — are among the volatile readings that economists and policy makers often strip out when evaluating inflation data.
This doesn’t mean consumers’ interpretations of their own economic reality are invalid or incorrect, Shea said. Higher price levels will be a source of frustration until some impossible-to-guess point in time when we collectively adjust to a new “normal.”
But it does mean that, though food costs have become much more affordable as paychecks grow, grocery prices will remain a significant focus — at the very least through Election Day.
“For me, the big question is ‘How long before people get used to these higher prices?’ ” Shea said. “At some point, $4 for a gallon of milk becomes normal. I don’t know when that is.”
What personal-finance issues would you like to see covered in MarketWatch? We would like to hear from readers about their financial decisions and money-related questions. You can fill out this form or write to us at readerstories@marketwatch.com. A reporter may be in touch to learn more. MarketWatch will not attribute your answers to you by name without your permission. |
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| To: Johnny Canuck who wrote (60342) | 10/10/2024 12:44:53 PM | | From: Johnny Canuck | | | | AMZN Option Trade Could Unlock a 17% Annualized Profit
Gavin McMaster - Barchart - Thu Oct 10, 6:00AM CDT Follow this Author
Dollars and Wallets - stimulus money in the mail by Goir via iStock
Amazon ( AMZN) stock bounced nicely off the 50-day moving average and is also sitting above a rising 200-day moving average.
Amazon currently has a historically low PE Ratio of 43.30.
By using a combination of option strategies, we could potentially buy the stock for a significant discount, or achieve a healthy profit if the stock trades sideways.
Here’s the trade:
Sell to open the AMZN December 20 put with a strike price of $170, which was trading around $4.25 yesterday.
Then, add a bear call spread:
Sell to open the AMZN December 20 call with a strike price of $205, which was trading around $4.05 yesterday.
Buy to open the AMZN December 20 call with a strike price of $210, which was trading around $2.95 yesterday.
The sold put brings in around $425 in option premium, and the bear call spread adds another $110 in premium. In total, the combination of the two trades generates $535 in premium.
Here’s how the trade looks at trade initiation. The blue line represents the profit or loss at expiration and the purple line shows the trade as of today.
 The position starts with a delta of 19, meaning it is roughly equivalent to owning 19 shares of AMZN stock. This figure will change as the trade progresses.
This is how the trade could look in around one month’s time.
 Looking pretty good as long as the stock is above $175.
Possible Scenarios For This AMZN Stock Option Trade
Let’s work through a couple of scenarios of how this trade could look at expiration on December 20.
- If AMZN stock trades sideways and finishes between $170 and $205, the sold put and bear call spread will both expire worthless. The total profit will be equal to the premium received of $535.
- IF AMZN falls below $170 at expiration, we will be assigned on the sold put and will be forced to buy 100 shares at $170. However, our net cost basis will be $164.65, thanks to the $535 in option premium received. That is 11.08% below the closing price on Wednesday.
- If AMZN rallies above $210, the bear call spread will suffer a full loss of $500, but this will be fully offset by the $535 premium received, leaving the trade with a small profit of $35.
Company Details
The Barchart Technical Opinion rating is a 56% Buy with an Average short term outlook on maintaining the current direction.
Long term indicators fully support a continuation of the trend.
Of 46 analysts covering AMZN stock, 42 have a Strong Buy rating, 3 have a Moderate Buy rating and 1 has a Hold rating.
Implied volatility is 38.76% compared to a twelve-month high of 49.28% and a low of 22.12%. That gives AMZN stock an IV Percentile of 80% and an IV Rank of 61.25%.
Not that earnings are scheduled for October 24th which means this trade would have earnings risk if held through that date.
Amazon.com is one of the largest e-commerce providers, with sprawling operations spreading across the globe. Its online retail business revolves around the Prime program well-supported by the company's massive distribution network. Further, the Whole Foods Market acquisition helped Amazon establish footprint in physical grocery supermarket space. Amazon also enjoys dominant position in the cloud-computing market, particularly in the Infrastructure as a Service space, thanks to Amazon Web Services, which is one of its high-margin generating businesses. Amazon has also become a household name with its Alexa powered Echo devices. Artificial Intelligence backed Alexa is helping the company sell products and services. The company reports revenue under three broad heads'North America, International and AWS, respectively. Amazon targets three categories of customers - consumers, sellers and website developers.
Summary
While this type of strategy requires a lot of capital, it is a great way to generate an income from stocks you want to own.
If you end up being assigned, you can start selling covered calls against the stock position.
You can do this on other stocks as well, but remember to start small until you understand a bit more about how this all works.
Mitigating Risk
With any option trade, it’s important to have a plan in place on how you will manage the trade if it moves against you.
Some traders like to add a deep out-of-the-money long put to reduce risk. For example, a December 20 put option with a strike price of $130 could be purchased for around $65. Buying this put, would cap losses below $140 and reduce total capital at risk.
Please remember that options are risky, and investors can lose 100% of their investment.
This article is for education purposes only and not a trade recommendation. Remember to always do your own due diligence and consult your financial advisor before making any investment decisions. |
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| To: Johnny Canuck who wrote (60343) | 10/10/2024 12:54:37 PM | | From: Johnny Canuck | | | | Personal Finance
Here’s the inflation breakdown for September 2024 — in one chart
Published Thu, Oct 10 202410:52 AM EDTUpdated 44 Min Ago
Greg Iacurci @GregIacurci
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Key Points
- The consumer price index rose by 2.4% in September 2024 on an annual basis, according to the Bureau of Labor Statistics.
- Inflation declined amid a pullback in gasoline prices and moderation in housing inflation.
- There were some trouble spots, however, such as groceries and car insurance.
David Paul Morris/Bloomberg via Getty Images
Inflation fell in September as lower gasoline prices combined with other waning price pressures in areas such as housing to bring relief to consumers’ wallets, according to the U.S. Bureau of Labor Statistics.
The consumer price index, a key inflation gauge, was up 2.4% last month from September 2023, the bureau said.
That figure is a decline from 2.5% in August, meaning price growth slowed. It’s also the smallest annual reading since February 2021.
The September CPI figure was slightly higher than economists predicted, however.
There were some trouble spots, such as an uptick in categories including clothing, car insurance and groceries. Most appear to be “one-off” increases, though, said Mark Zandi, chief economist at Moody’s.
“The trend on inflation remains very positive,” Zandi said. “This month was a blip and I don’t think it will be sustained.”
The CPI measures how quickly prices are rising or falling for a broad basket of goods and services, from car repairs to peanut butter and living room furniture.
Inflation has pulled back significantly from its pandemic-era peak of 9.1% in June 2022. It’s moving toward policymakers’ long-term annual target, near 2%.
“We have made substantial improvement over the past two years,” said Sarah House, senior economist at Wells Fargo Economics.
That said, a slowdown in the labor market has concerned economists more than inflation in recent months.
The U.S. Federal Reserve, which had raised interest rates sharply to combat high inflation starting in early 2022, began cutting them in September to take pressure off the labor market and economy.
Prices fall at the gas pump
A pullback in gasoline prices has helped inflation throttle back.
A gallon of regular gasoline cost $3.21 in September, down 16% from $3.84 a year ago, according to the U.S. Energy Information Administration.
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Gasoline prices declined about 4% during September alone, according to CPI data.
Gasoline is refined from crude oil. Oil prices hit a nearly three-year low in September amid weak demand in China, the world’s largest importer, and concerns of oil supply outstripping demand. Prices have jumped in October, however, due to factors such as heightened geopolitical risk in the Middle East and Hurricane Milton.
Annual food inflation is ‘fairly tame’
Frederic J. Brown | AFP | Getty Images
Food inflation over the past year has also been “fairly tame,” House said.
Grocery prices are up 1.3% since September 2023, according to the CPI.
Prices for agricultural commodities — a “major input cost” for food — have either fallen or look “more stable,” House said. Examples of agricultural commodities include corn, wheat, coffee and soybeans.
Wage growth has slowed, reducing labor costs to transport or prepare food, for example, House said. And grocery stores have offered more price incentives and promotions as consumers become more concerned about their spending, she said.
watch now
VIDEO04:41
Consumer prices rose 0.2% in September, hotter than expected; annual rate increased 2.4%
That said, grocery inflation did see a large jump on a monthly basis from August to September, to 0.4% from 0%.
“I don’t think that will be sustained going forward,” Zandi said.
Individual food items have their own unique supply-and-demand dynamics that can affect pricing.
For example, egg prices rose by more than 8% from August to September, and by 40% since September 2023, largely due to another outbreak of avian flu, a contagious and lethal disease that affects chickens and other birds, said economists.
Housing inflation is declining
Housing accounts for the largest share of CPI — and has been the biggest stumbling block in getting inflation back to its target level, economists said.
“It’s a huge component,” House said. “What happens there can really move the dial when it comes to overall inflation and core inflation.”
CPI shelter inflation — which includes rental prices and an equivalent measure for homeowners — has gradually declined but remained stubbornly high. That has puzzled many economists, since real-estate data shows that growth for average rents of new tenants has been muted for about two years.
In September, shelter inflation throttled back on a monthly basis, to 0.2% from 0.5% in August.
That’s among the most encouraging signals in the latest CPI report, economists said.
“Shelter inflation is now definitively moderating,” Zandi said. “And that’s such a key part of the CPI.”
‘Slower to recede’
Housing falls into the “services” category of the economy.
Inflation for goods has largely throttled back from pandemic-era nosebleed levels as out-of-whack supply-and-demand dynamics unwind, economists said.
But services inflation “has still been pretty slow to recede,” House said.
Largely, that’s been because of shelter. But other categories also remain elevated.
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Many services “rely heavily” on prices in other parts of the economy, House said. For example, insurers are now raising car insurance premiums following an earlier surge in new and used car prices.
Prices for motor vehicle insurance increased 1.2% from August to September and about 16% since September 2023, according to the CPI.
It typically takes a while for such dynamics to filter through, on paper, to the services side, she said.
“Services inflation was slower to peak on the way up and likely to be slower to recede on the way down,” she said. |
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| To: Johnny Canuck who wrote (60346) | 10/10/2024 6:01:44 PM | | From: Johnny Canuck | | | |
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These stocks have high dividend growth + high free cash flow yield
Oct. 10, 2024 3:20 PM ET| S&P 500 Index (SP500)| LEA, HPQ, IPG, TPR, BBWI, AMGN, KBH, QCOM, CVS, PHM, DOX, MRK, WYNN, SWKS, ADM, AMKR, CI, SNX, LEN, MCK, EME, RS, SNA, DAL, OC, WCC, TEL, CF, AGCO, SSNC, NXPI, WWD, MTDR, BERY, BCC, FOXA, HPE, PR, DELL, VST, LW, CWEN, SIRI...|By: Monica L. Correa, SA News Editor| 6 Comments
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Stocks with high dividend growth and high free cash flow yield can generate more returns than stocks seeing high dividend growth alone, according to a Wolfe Research note.
This defensive strategy has historically outperformed the S&P 500 ( SP500) by 500 basis points annually, said Chris Senyek, chief investment strategist.
The following are companies with high dividend growth in a last-twelve-month basis, and a high unlevered free cash flow yield.
- Twenty-First Century Fox ( FOXA) – 2024 FCF yield: 8.9%; Last 12-month dividend growth: 4%
- The Interpublic Group of Companies ( IPG) – 2024 FCF yield: 8.6%; Last 12-month dividend growth: 7%
- Sirius XM Holdings ( SIRI) – 2024 FCF yield: 8.9%; Last 12-month dividend growth: 12%
- Wynn Resorts ( WYNN) – 2024 FCF yield: 6.6%; Last 12-month dividend growth: 300%
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| To: Johnny Canuck who wrote (60347) | 10/10/2024 6:27:26 PM | | From: Johnny Canuck | | | | Skip to content
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Palantir: It's Time To Get Off The Train (Rating Downgrade)
Oct. 09, 2024 8:30 AM ET Palantir Technologies Inc. (PLTR) Stock XLK 76 Comments
JR Research
Investing Group Leader
(7min)
Summary- Palantir stock has surged over 120% in the past year, outperforming the market.
- PLTR's recent inclusion in the S&P 500 has driven another surge as investors rushed in.
- I explain why its frothy valuations are increasingly challenging to justify, notwithstanding the buoyant market sentiments.
- Palantir's go-to-market strategy and ability to scale its AI platform have been validated. But has too much optimism been priced in?
- I explain why it's time for investors sitting on significant gains to consider selling and cashing in before the dominoes potentially collapse.
- I am JR research, an opportunistic investor who identifies attractive risk/reward opportunities supported by robust price action to potentially generate alpha well above the S&P 500. I run the investing group Ultimate Growth Investing.
hapabapa
Palantir Investors Have Gone On A Rampage Palantir Technologies Inc. (NYSE: PLTR) investors have helped the stock go on a blistering run as it briefly broke above the pivotal $40 level last week. As a result, PLTR has continued its stellar market outperformance since its bottom in December 2022. Accordingly, the stock delivered a total one-year return exceeding 120%, lifting its valuations further into "nosebleed" levels. The AI platform has likely turned the corner in its government business, even as it ramps up its commercial offerings through its AIP boot camps. Hence, investor sentiments on PLTR have surged through the roof, bolstered by its recent S&P 500 inclusion.
Notwithstanding the relative caution demonstrated by Wall Street analysts on PLTR, investors have confidently brushed aside signs of froth. Despite that, PLTR's buying sentiments are likely nearing "irrational exuberance" levels. Palantir's inclusion in the S&P 500 has validated the sustainability of Palantir's earnings profile. However, it's also hard to argue that the market hasn't priced in the optimism, given its incredible surge. PLTR's nearly 50% public ownership has also been a significant source of support for the stock. However, the recent insider sales have also reached "feverish" highs, as CEO Alex Karp and Peter Thiel unloaded significant holdings, capitalizing on the market's optimism.
In my previous Hold rating on PLTR, I argued that the company's solid Q2 report underscored its remarkable turnaround and highlighted the AI platform's value proposition. Its novel boot camp concept has also proven its go-to-market strategy, as more than 100 organizations signed up for its AIPCon in September 2024. However, investors must question whether getting on board PLTR's train at the current levels still makes sense. In addition, should investors sitting on significant gains consider leveraging the recent surge to take some profits and reallocate?
PLTR Stock: Valuations Have Reached Frothy Levels
 PLTR Valuation Metrics (Seeking Alpha)
As seen above, PLTR's forward adjusted EBITDA multiple has surged close to 90x, significantly above its tech sector ( XLK) median of 14.4x. It's also markedly above its software peer median of 20x (according to S&P Cap IQ data). As a result, I find it increasingly challenging to justify the market's optimism on PLTR, notwithstanding its continued outperformance.
I assess that Palantir's AI platform has won critical acclaim from well-established technology reviewers. Coupled with the improved traction from its boot camp as it demonstrated its platform's efficacy and use cases, it could lift its operating metrics further. In addition, Palantir has upped the ante as it seeks new growth optionalities in edge AI use cases, broadening potential industry adoption. Hence, it could accelerate its growth momentum as the company aims to leverage its platform advantages over its peers.
In addition, Palantir has also demonstrated the inherent flexibility and scalability of its multi-agent systems in its Customer Service Engine. The company aims to help manage complex customer queries more effectively while scaling the systems without reconfiguring them extensively. Coupled with Palantir's ontology-driven capabilities, it helps to provide the appropriate context for effective enterprise deployment, improving the reliability and accuracy of its CSE. Coupled with the platform's ability to leverage multiple LLMs, customers are not limited to a single foundation model, allowing them to exploit the strengths of various models within the same platform.
Palantir's "Irrational Exuberance" Is Hard To Justify
 Palantir free cash flow margins estimates % (TIKR)
In addition, Palantir has also delivered more contractual wins recently, corroborating the improved buying sentiments on the stock. However, investors are urged not to throw caution to the wind, as its valuation has reached frothy levels that could be highly challenging to justify.
The company's free cash flow margins are expected to continue scaling up, supporting its recent optimism. Despite that, can investors expect Palantir to deliver significant revenue growth rates over the next ten years to justify its current valuation? Let's use a simple reverse DCF model to assess the "irrational exuberance."
| Assumptions | Metrics | | Annual hurdle rate | 15% | | Current valuation | $89.6B | | Required FCF yield after 10 years | 4.5% | | Assumed FCF margin after 10 years | 42% | | Target valuation after 10 years | $362.5B | | Required annualized revenue growth rate | 30.3% | PLTR stock reverse DCF model. Data source: Author, S&P Cap IQ data
As seen above, a hurdle rate of 15% for a high-growth stock like PLTR shouldn't be construed as too aggressive. Given its valuation, a lower hurdle rate might not attract growth-oriented investors, as they could consider allocating to the Nasdaq ( QQQ) ( NDX) or the S&P 500 at significantly lower valuation levels.
Therefore, investors investing in PLTR at the current levels are likely anticipating an annualized revenue growth rate above 30% over the next ten years. While that's not impossible, I believe it requires near-perfect execution to deliver such growth rates consistently without disappointing investors. In other words, the margin of safety at the current levels is seemingly non-existent.
Consequently, I assess investors who joined the bandwagon recently as possibly ending up with massive disappointment, as PLTR's valuations have baked in significant growth prospects over the next ten years. If you are sitting on substantial gains, it's timely to consider taking profits.
Rating: Downgrade to Sell.
Important note: Investors are reminded to do their due diligence and not rely on the information provided as financial advice. Consider this article as supplementing your required research. Please always apply independent thinking. Note that the rating is not intended to time a specific entry/exit at the point of writing unless otherwise specified.
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This article was written by
JR Research
36.92K Followers
JR Research is an opportunistic investor who identifies attractive risk/reward opportunities supported by robust price action to potentially generate alpha well above the S&P 500. He tends to avoid overhyped and overvalued stocks while capitalizing on battered stocks with significant upside recovery possibilities. He runs the investing group Ultimate Growth Investing, which specializes in identifying high-potential opportunities across various sectors. The group is designed for aggressive investors seeking to capitalize on high-growth opportunities, and investors looking for growth opportunities at a reasonable price. Learn more. Take advantage of my expertise and join the Ultimate Growth Investing community today. Benefit from my market insights, investment recommendations, and in-depth analyses to enhance your portfolio and navigate the investing landscape with confidence. Learn more about how Ultimate Growth Investing can help you today.
Analyst’s Disclosure: I/we have a beneficial long position in the shares of QQQ 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.
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AMD dips after unveiling new AI chip, CPU at showcase event
Oct. 10, 2024 2:12 PM ET| Advanced Micro Devices, Inc. (AMD) Stock| MSFT, ORCL, INTC, NVDA, LNVGY, LNVGF, META...|By: Ravikash Bakolia, SA News Editor| 23 Comments
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JHVEPhoto/iStock Editorial via Getty Images
Advanced Micro Devices' (NASDAQ: AMD) stock fell about 4% on Thursday amid CEO Lisa Su unveiling new artificial intelligence processors at its Advancing AI 2024 event in San Francisco on Thursday, stepping up efforts to challenge market leader Nvidia ( NVDA).
The company showed off its new Turin EPYC data center CPUs and an Instinct MI325x AI accelerator. Su also unveiled Ryzen AI PRO 300 Series, the first Microsoft ( MSFT) Copilot + laptops designed for enterprise, according to the company.
AMD touted MI325x to be better than Nvidia's H200 HGX on several parameters. Meanwhile, the company called the fifth generation AMD EPYC the world's best CPU for Cloud, Enterprise and AI.
AMD noted that the EPYC 5th Gen 9965 is the industry's highest performing server CPU, by showing that it is better than the company's 4th Gen 9754 and Intel's ( INTC) Xeon 5th Gen 8592+.
At the Computex 2024 show in Taipei in June, the company introduced its latest AI processors and provided a roadmap to develop AI chips over the next two years. Su had unveiled the AMD Instinct MI325X accelerator, and the AMD Instinct MI350 series accelerators based on AMD CDNA 4 architecture.
At the Advancing AI event, AMD reiterated its commitment to the GPU roadmap, which includes MI325X in 2024, MI350 in the second half of 2025, and MI400 in 2026. These would potentially compete with Nvidia's upcoming Blackwell GPUs. At the Computex event, AMD had revealed plans to deliver performance and memory leadership on an annual basis for generative AI, similar to plans by rival Nvidia ( NVDA) to shorten its release cycle to an annual basis.
Su noted that data center AI accelerator market is expected to grow to $500B in 2028 from the $45B it was in 2023, a growth of 60% CAGR. She had previously forecast the market to be $400B in 2027.
AMD also invited several speakers from its partners, including tech giants Microsoft ( MSFT), Meta Platforms ( META), and Oracle ( ORCL).
Kevin Salvadore, VP of Infrastructure and Engineering at Meta, noted that the company has deployed over 1.5 million EPYC CPUs.
The race to develop generative AI products has resulted in a rising demand for the advanced chips used in AI data centers. Companies developing large language models, or LLMs, rely on advanced processors to train these models as they require high computational power, among other things.
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