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While investors are still getting used to the artificial intelligence (AI) era, the market is intrigued by the next technological evolution, quantum computing. Many emerging pure-play quantum computing stocks, including D-Wave Quantum (QBTS), IonQ (IONQ), and Rigetti Computing (RGTI) are attracting a lot of attention, but they are still volatile investments. However, International Business Machines (IBM), also known as IBM, could be a safer bet for investing in this evolving industry.
With a market capitalization of $241.6 billion, IBM has been a driving force in technological innovation for over a century. IBM has constantly evolved in response to technological advancements and changing market demands. Jim Cramer, host of CNBC’s Mad Money, believes that CEO Arvind Krishna “has reinvented the company.”
The company recently reported strong fourth-quarter results, with its stock up nearly 20% so far this year, outperforming the Dow Jones Industrial Average Index ($DOWI) and the broader market. Let’s find out if this old tech giant is a worthwhile AI and quantum computing investment.
www.barchart.comIBM’s Growth Has Been SteadyThe AI landscape is rapidly evolving, with competitors such as Microsoft (MSFT), Meta (META), and Nvidia (NVDA) investing heavily in large-scale AI models. These tech giants are experiencing hypergrowth. Conversely, for IBM, while growth hasn’t been explosive, it has been steady. Under the leadership of CEO Arvind Krishna, IBM’s strategic pivot toward AI and hybrid cloud computing has yielded positive results.
In the recent fourth quarter, IBM reported revenue of $17.6 billion, marking a 1% year-over-year increase. Adjusted earnings per share (EPS) of $3.92 also increased 1% year-over-year. Both revenue and earnings surpassed consensus estimates. More robust 10% growth in the software segment driven by heightened demand for AI solutions led to this performance. Its acquisition of Red Hat for $34 billion in 2019 has been instrumental in strengthening the company’s hybrid cloud capabilities, allowing clients to manage workloads across various environments seamlessly. Revenue from Red Hat grew 16% in the quarter. Furthermore, the company’s GenAI book of business has grown to over $5 billion since its inception.
Negatively, the consulting segment declined by 2% while infrastructure revenue decreased by 8% in the quarter.
Despite these challenges, IBM’s focus on AI and cloud computing has bolstered investor confidence. For the full year 2024, revenue grew 1% while adjusted earnings rose 7%. In 2024, it generated $12.7 billion in free cash flow and distributed $6 billion in dividends. It expects to generate $13.5 billion in free cash flow in 2025, which will support its strategic growth plans while maintaining its dividend policy. IBM earned the title of Dividend Aristocrat after paying and increasing dividends for 29 years. It has a forward yield of 2.5%, which exceeds the tech sector average of 1.4%.
Looking ahead, management anticipates revenue growth of at least 5% in 2025, up from the consensus estimate of 3.6%. Furthermore, analysts expect IBM’s earnings to rise by 3.8% in 2025, followed by another 6.4% in 2026.
A Clear Quantum Computing RoadmapIBM is rapidly expanding its quantum computing division through technological advancements, industry partnerships, and commercialization efforts. The company has a clear roadmap for scaling up its quantum processors. Between 2020 and 2023, the company concentrated on single-chip scaling, improving its quantum processors through a series of ground-breaking developments. These efforts resulted in the IBM Quantum Falcon, Hummingbird, Eagle, Osprey, and Condor chips, which all represent incremental improvements in qubit count and system performance.
IBM has successfully released its Heron chip capable of running 5,000 quantum gates, showing significant improvements in stability and operational power. The company plans to explore the “full power of quantum-centric supercomputing by 2033.” Furthermore, its open-source quantum software, Qiskit, is widely used by researchers and developers to build quantum applications.
As of 2024, the IBM Quantum Network includes over 250 organizations, including Fortune 500 companies, startups, and research institutions. Management stated during the fourth quarter that about 75 quantum systems have been deployed worldwide, revealing their commitment to this emerging technology.
While still in its early stages, IBM’s quantum computing roadmap, cloud integration, and industry partnerships have the potential to help the company thrive in the quantum computing race.
What Does Wall Street Say About IBM Stock?Overall, IBM stock is a “ Moderate Buy” on Wall Street. Of the 18 analysts covering the stock, six rate it a “Strong Buy,” one says it is a “Moderate Buy,” nine rate it a “Hold,” and two suggest it is a “Strong Sell.” The stock is trading above its average analyst target price of $250.98. However, its high price estimate of $320 implies upside potential of 22.2% over the next 12 months.
www.barchart.comThe Bottom Line on IBM StockInvestors with a high-risk, high-reward investment strategy may find growing pure-play quantum companies more appealing. However, for risk-averse investors, IBM is a more stable, diversified investment that provides exposure to AI and quantum computing while avoiding the high risk associated with pure-play quantum startups. As of this writing, IBM stock is trading at $263.56 per share, with a forward price-earnings (P/E) ratio of 22.9x.
While IBM's long-term prospects in AI and quantum computing appear promising, the stock appears to be overvalued at the moment. Long-term investors, particularly those seeking a safety margin, may want to wait for a better entry point, such as between $200 and $202.
On the date of publication, Sushree Mohanty did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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Rigetti Computing Stock Faces Heat From Chinese Quantum Startup. Is RGTI a Buy or Sell? Wajeeh Khan -Barchart - Tue Feb 18, 2:21PM CST Columnist + Follow
A concept image with a brain on top of a blue circuit board_ Image by Gorodenkoff via Shutterstock_
Rigetti Computing ( RGTI) is down more than 10% on Tuesday following reports that a China-based startup Origin Quantum has surpassed 20 million in remote visits to its prototype machine.
www.barchart.comThe company’s third-generation “Wukong” is a 72-qubit quantum computer with fully independent intellectual property.
Origin Quantum is already being compared to DeepSeek, the Chinese artificial intelligence (AI) startup that erased $1 trillion from the U.S. stock market with the launch of its low-cost, super-efficient AI model in late January.
Origin Quantum Is Not a Threat to Rigetti ComputingWhile the Origin Quantum development is drawing significant attention on Tuesday, there’s reason to believe it’s not an immediate threat to Rigetti Computing stock.
For starters, the China-based startup is not a publicly listed company, which means it’s not in direct competition for investor capital with the likes of RGTI. Plus, the DeepSeek episode has already taught us that startups being posed as serious competition to established names often prove to be more hype than substance.
This is evidenced in the swift recovery in Nvidia (NVDA) stock following the short-lived DeepSeek-driven selloff in the final week of January.
RGTI Is Ahead of Origin Quantum in TechnologyShares of Rigetti Computing may be worth buying on the weakness also because Origin Quantum’s prototype machine that made headlines today is a 72-qubit quantum computer.
In comparison, RGTI has already launched an 84-qubit Ankaa-3 system, which means it’s already ahead of the Chinese startup in terms of technology. Moreover, Rigetti generated $2.4 million in revenue in its latest reported quarter. In comparison, Origin Quantum is a pre-revenue company at the time of writing.
Finally, titans, including Nvidia and Microsoft ( MSFT), have partnered with Rigetti Computing, which, for investors, mean a huge mark of confidence in its future prospects.
Should You Buy the Dip in Rigetti Computing Stock? All in all, the Origin Quantum news on Tuesday does rather little to disrupt the long-term bullish momentum in Rigetti Computing stock.
Wall Street currently has a consensus “Strong Buy” rating on RGTI shares. While the mean target of $11 suggests potential upside of 5% from current levels, the high target of $17 signals the possibility of a 63% rally from here.
www.barchart.com On the date of publication, Wajeeh Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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Warren Buffett Sold This High-Yield Dividend Stock. Should You? Mohit Oberoi -Barchart - Tue Feb 18, 6:30PM CST Columnist + Follow
Berkshire Hathaway Inc_ Warren Buffett-by Kent Sievers via Shutterstock
Berkshire Hathaway’s (BRK.B) fourth-quarter 13F filing revealed that Warren Buffett continued his selling spree in the final quarter of the year. Based on the trades in Q4, the conglomerate’s cash pile looks set to have hit yet another record high after rising to $325 billion at the end of Q3.
There were some key takeaways from Berkshire’s Q4 13F. It built a new stake in Constellation Brands (STZ) during the quarter while exiting Ulta Beauty (ULTA). The Oracle of Omaha left his Apple (AAPL) stake unchanged after selling the iPhone maker’s shares relentlessly over the previous few quarters.
Warren Buffett Sold Citi Stock in Q4Buffett trimmed the company’s stake in Bank of America(BAC) and also sold 70% of its stake in Citigroup (C) as he continued selling financials in Berkshire’s portfolio. While Buffett has been selling BAC for the last several quarters, he sold Citi shares for the first time. Citi was a relatively recent investment for Berkshire as the conglomerate first bought a stake in 2022. The purchase came amid the bank’s transformation under CEO Jane Fraser, who is trying to lower its cost base.
www.barchart.comCiti has one of the highest dividend yields among financial companies and while the yields have come down amid the rally in its shares, its current yield of 2.65% is twice what an average S&P 500 Index ($SPX) constituent pays. In this article, we’ll examine whether it would be prudent to sell Citi and follow Buffett or whether investors would be better off sticking with the stock.
Why Is Buffett Selling Stocks?It wouldn’t be fair to single out Citi, and if anything, Buffett kept the stock in Berkshire’s portfolio even as he exited other banks like JPMorgan Chase (JPM), Bank of New York Mellon (BK), U.S. Bancorp (USB), Wells Fargo (WFC), and Goldman Sachs (GS). Moreover, the selling is not limited to financials. Buffett sold the majority of his stake in Apple last year. In a previous article, I noted the various reasons behind Buffett’s stock-selling spree. These range from fears of a capital gains hike, Buffett expecting a market crash, or even leaving powder dry for his successor.
We should learn more about the reasoning behind these stock sales in Buffett’s annual letter, which will accompany the annual report that's scheduled for later this month. This will be followed by the shareholder meeting in May. Incidentally, at last year’s meeting, Buffett alluded that an expected hike in capital gains was among the reasons he was selling Apple shares.
Coming back to Citi, we can be reasonably sure that Berkshire will soon exit the company based on selling in Q4.
Bank Stocks Have Performed Well Since Trump’s ElectionWhile Buffett might have his reasons for dumping Citi shares in Q4, the stock has continued to rally in 2025 and is up around 20% in the year to date, outperforming the Financial Select Sector SPDR Fund (XLF). Notably, while President Donald Trump has accused banks including BAC and JPM of what’s known as “debanking” and alleged that they don’t serve conservatives, banking stocks have gained in his tenure.
Citi stock too has gained significantly since Trump’s election in hopes of an easier regulatory environment. The bank has faced regulatory scrutiny much more frequently than some of its peers, which has been among the factors that have weighed heavy on its share price. During Citi’s Q4 earnings call last month, CFO Mark Mason alluded to possible regulatory changes under Trump and said that the bank would determine its capital actions as the “regulatory environment evolves.”
Should You Sell Citi Stock?Citi is a play on a valuation rerating amid its turnaround. The company had a tangible book value of $89.34 at the end of 2024, which is slightly below its current price levels. However, the discount between stock price and book value has narrowed gradually over the last two years amid the rally in C shares. While Citi still trades at a discount to its banking peers, almost all of which trade well above their book value, the stock's margin of safety is much lower now than it was a few quarters ago.
www.barchart.comCiti continues to progress in its transformation and is working to improve its profits, and by extension return metrics. Management has set a return on tangible common equity target of between 10% and 11% in 2026, which while below the 11%-12% that it was previously targeting, is “a waypoint, not a destination,” per Fraser. During the Q4 earnings call, she added, “We intend to improve returns well above that level and deliver Citi’s full potential for our shareholders.”
All said, while Citi remains a relatively undervalued pick in the banking space, it won't hurt to take some profits off the table after the over 37% rally in the preceding 6 months.
On the date of publication, Mohit Oberoi had a position in: C , AAPL , BRK.B . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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Key Points
Broadcom and Taiwan Semiconductor Manufacturing are potentially weighing independent deals that could split embattled chipmaker Intel, The Wall Street Journal reported.
Intel has shed billions in market value as it fell behind on the artificial intelligence tailwinds that have swept up the broader semiconductor sector.
With Tuesday’s gains, shares are up 29% this year following a 60% slump in 2024.
The stock closed at $27.39 and notched its best day since March 2020.
The Wall Street Journal reported that Broadcom may consider a play for the company’s chip design and marketing segment, citing people familiar with the matter, while TSMC is interested in a stake or complete control of Intel’s factories. The companies have not filed bids and talks are largely informal, the Journal reported.
The iconic American chipmaker’s stock has continued to sink lower in recent years, shedding billions in market value. Intel fell behind on the artificial intelligence tailwinds that have swept up the broader semiconductor sector.
In August, shares suffered their worst day on the stock market in 50 years and hit their lowest level since 2013 after the company posted disappointing quarterly results. Intel also said it would axe 15% of its employees.
By September, CNBC confirmed that competitor Qualcomm had approached the company about a potential takeover, citing a person familiar with the matter. The Intel board ousted CEO Pat Gelsinger in December as the stock underperformed and confidence dwindled in his ability to turn around the embattled chipmaker.
Last week, shares popped 6% after Vice President JD Vance said America will protect AI technologies from foreign adversaries and promised that more AI chips would be made on U.S. soil.
With Tuesday’s gains, shares are up nearly 31% this year following a 60% slump in 2024. Broadcom shares dipped 1.9%, while Taiwan Semi dipped less 0.6%.
Why Walmart Is Trading Like a Big Tech Stock On WSJ’s Take On the Week, co-host Telis Demos talks with Aaron Back, WSJ’s Heard on the Street column editor, about the latest inflation report and what it could mean for the Federal Reserve. They also discuss upcoming earnings from Chinese tech company Alibaba and retail behemoth Walmart.
Later on the show, Telis talks about all things retail with Dana Telsey, CEO and founder of Telsey Advisory Group, a brokerage firm focused on the consumer sector. They chat about what’s behind Walmart’s winning retail strategy—from its inroads with higher-end customers, affordable luxury offerings like the viral “Wirkin” bag, and its e-commerce play. They also get into what’s going on with the luxury market, including with high-end juggernaut Hermès, Louis Vuitton parent company LVMH, Chanel, Burberry, and others. Before they sign off, Telis asks Dana: What’s up with Target?
This is WSJ’s Take On the Week where co-hosts Gunjan Banerji, lead writer for Live Markets, and Telis Demos, Heard on the Street’s banking and money columnist, cut through the noise and dive into markets, the economy and finance—the big trades, key players and business news ahead.
Have an idea for a future guest or episode? How can we better help you take on the week? We’d love to hear from you. Email the show at takeontheweek@wsj.com.
Full TranscriptThis transcript was prepared by a transcription service. This version may not be in its final form and may be updated.
Telis Demos: Hey everyone. We would love to hear from you about what you think about our show. Leave us a comment on your favorite platform or just send us a note to takeontheweek@WSJ.com. Hey everyone, I'm Telis Demos. I write for the Wall Street Journal's Heard on the Street, and this is WSJ's Take On the Week where we give you a leg up on the worlds of money and investing. Each week we bring you conversations with insiders and from inside the Wall Street Journal's newsroom about all that good stuff. And this week joining me is my colleague Aaron Back. He's filling in while Gunjan Banerji is away. Aaron, welcome.
Aaron Back: Good to be here.
Telis Demos: Aaron is the editor of the Journal's Heard on the Street column, and so we've worked together a ton over the years.
Aaron Back: Indeed.
Telis Demos: This will not be our first conversation about markets, but it might be one of our most interesting. The hot topic. Let's start with what is trending this week. Inflation. The CPI report came in this past week and inflation, it's not slowing down anymore. What is going on?
Aaron Back: Yeah, so inflation came in at 3% up from 2.9% the prior month. Not a big difference, but the story here I think is for a long-time inflation was coming down, it peaked around 10% and it was slowing, but for several months now it's basically been stuck around 3% and that means that the Fed might have a hard time justifying cutting rates from here.
Telis Demos: So the last report, the December report was, I think that the headline number was 2.9% year-over-year growth.
Aaron Back: Yep.
Telis Demos: Now it's at 3% as of January, so not a huge pickup, but the wrong direction.
Aaron Back: So the Fed's target is two and for a long time they can make the case that it's moving down towards two, but it's been around this level for several months now at three. So it doesn't appear to be coming down anymore.
Telis Demos: Well, what's interesting to me is though the market's reaction initially was negative, it really hasn't derailed the bull market, which is what you might think would've happened given past history about how the market feels about how many Fed cuts are coming, right?
Aaron Back: Yeah.
Telis Demos: Usually the market is very bearish when it doesn't feel like the Fed is coming in with additional cuts. I mean, it seems to me, look, investors are greedy. They're still hoping for a big kind of fast growth deregulatory Trump agenda that will lead to more M&A that will unleash financial services and other industries. So it just doesn't seem like people are ready to give up on that.
Aaron Back: Yeah, that's right. And so far the tariff news hasn't been terrible. It's been on again, off again, and that's the one thing that could maybe derail this whole thing but hasn't yet.
Telis Demos: Yeah, yeah. Yeah, it seems like the market is still kind of in the mode where it thinks that what President Trump says about tariffs are more a negotiating tactic than this is actually the policy. But speaking of tariffs and China, I want to bring up a Chinese company's earnings that are coming up in this coming week, and that is Alibaba. I feel like that's a company we were talking a ton about a few years ago, but it's fallen off the radar a little bit. But Aaron, I know you're following that one closely. Why?
Aaron Back: Yeah. Well, there's been a renewed interest in Chinese tech stocks since this whole DeepSeek thing, which was, of course, a Chinese AI that appeared at least to make a lot of advancements on the cheap. And so since that news, Chinese tech stocks have rallied. Alibaba's up around 37% so far this year.
Telis Demos: Wow, okay.
Aaron Back: But that's particularly notable because a lot of these stocks were kind of dead money for years. There was a Chinese sort of regulatory crackdown on the tech sector. Those stocks were deeply out favor for a long time.
Telis Demos: And that's been true kind of across the Chinese market. I mean last, year the Chinese Stock Market, the CSI 300, one of the main indexes, had a little momentum, it was up like 15%-ish in 2024, but that was after several years of falling.
Aaron Back: Yeah, so a lot of the Chinese tech stocks are listed in Hong Kong or New York, not in the Mainland Shanghai index. That's a lot of state-owned enterprises and things like that in the Mainland indexes. So that's not really benefiting yet from this rally in Chinese tech stocks. But that's another reason why the Alibaba earnings may be interesting because their main business is this domestic e-commerce marketplace, Taobao. And so that'll give a read on the Chinese consumer who has been suffering for years from lower property prices and just a generally weak economy. So if the Chinese consumer is doing a little better, that would be a good sign for the broader Chinese market. If it's more of the same sort of struggling Chinese consumer, then not so much.
Telis Demos: Interesting. And, of course, the Chinese consumer is not just important to the Chinese economy, but to the global economy as well. I mean, they're buyers of imported goods from all over the world, especially in the luxury market, they've been a huge part of that. And speaking of retail, I wanted to also move on to one of the big things coming up in the coming week, and that is Walmart's earnings report. Walmart has reclaimed its crown as the king of retail lately. What has been going on with that stock? It's gangbusters, isn't it?
Aaron Back: Yeah, so Walmart is up around 80% the last year. It's trading like a tech stock and they're really the king of retail right now. They're gaining share in sort of high-end consumers, low-end consumers. They're doing well in e-commerce. It's maybe the biggest success story in retail right now.
Telis Demos: Is it something about the consumer or is it something about their business, do you think?
Aaron Back: It's something about their business. I mean, they're trading at around 33 times forward earnings. That's a tech stock multiple. It's not a retail stock multiple. So investors are excited about Walmart specifically.
Telis Demos: And you mentioned their e-commerce operations.
Aaron Back: That's right.
Telis Demos: I mean that's something that I think we should look closely for any sort of news on how much of their business now is coming in through Walmart.com and some of their other kind of digital offerings. So interesting. Aaron, this has been great. Thank you so much for joining me to talk about what's hot in the markets this week.
Aaron Back: Yeah, my pleasure.
Telis Demos: We're going to pivot to a conversation that I had this past week about the state of the retail industry. Dana Telsey is joining us. She is the CEO and founder of the Telsey Advisory Group, and she joined us to talk about how the consumer's doing and also what's going on with Walmart and also the broader luxury market and maybe whether Walmart is the real winner in retail these days. After all, if people aren't splurging on luxury goods and they're also paying 53% more for eggs than they were a year ago, yeah, that's a real number, that's from the Consumer Price Index, the January CPI, then maybe the basics are the sweet spot right now. So we're going to take a break and after we come back, let's have that interview with Dana Telsey. Today, it's great to have with me here, Dana Telsey. She is the CEO and founder of Telsey Advisory Group. Hi, Dana. How are you? Welcome.
Dana Telsey: Hi. Thank you so much for having me.
Telis Demos: Tell us about what is Telsey Advisory Group? How would you describe it?
Dana Telsey: Telsey Advisory Group has been around for nearly 20 years. We are the consumer research firm that basically covers all of consumer along with having a banking and asset management arm also.
Telis Demos: It's a great time to talk and I'm interested in now talking about the retail earnings season that's coming up. We have some big company earnings like Walmart and Target as well as just lots going on about the state of the consumer and in particular, I want to drill down a little bit into what's been going on in the sort of luxury market.
Dana Telsey: So just a little bit to frame it. Overall, what we saw during the pandemic is a real increase in luxury goods sales, partially because in the US, the stimulus payments that aspirational customers got, they didn't have anywhere to go, they were spending on luxury goods. Then fast-forward, pandemic kind of ends, luxury goods soar, and you saw many of the brands taking price increases. Some of them were definitely consumers rebelled and are not really accepting of the price increases and others where the exclusivity of the product makes the difference. Today, where we are is-
Telis Demos: Is so the fancier more expensive product you had, it was almost like you had more pricing power because-
Dana Telsey: You did.
Telis Demos: ... you had something that everyone wanted and they couldn't get anywhere else
Dana Telsey: And there's not enough supply.
Telis Demos: What's an example of that? What's an example of something that raised its price a lot during the pandemic?
Dana Telsey: So Hermès raised its prices, even post-pandemic, and it continues to be more demand where the double-digit sales increases are continuing.
Telis Demos: Hermès, the like a luxury French-
Dana Telsey: You can't access the goods because they don't produce enough. On the flip side, you've had others, potentially like the Chanels of the world, raise their prices almost to try to be similar to Hermès, but you're not getting the same reaction. And then you've had other brands in the luxury world, and a lot of these European luxury, where they may have raised prices, they don't have the same upscale nature in terms of price points that an Hermès has and the fact that the Chinese aren't traveling like they used to.
Telis Demos: Chinese consumers are not. Okay, yeah, yeah.
Dana Telsey: The Chinese consumers are not buying. That's been the impact of the LVMH as the world. So all of a sudden what you're seeing out there is the luxury world sales growth is moderating from what it had been, and you're still not seeing the consumer from China traveling. They're spending within China and potentially even on some local brands from China.
Telis Demos: So why has Walmart though been the sort of the superstar stock of the past year? I mean their shares are up way more than pretty much any of the other major players in shopping and retail and among the luxury brands and stuff like that. As people stop that kind of spending, are they doing more of Walmart type spending?
Dana Telsey: So a couple things in Walmart. First of all, they're really have a diversification of where they get their revenues, whether it's the Walmart discount stores, whether it's Sam's, keep in mind 60% of Walmart sales are grocery. So the essential spend that you have there, people are going there. In addition, for them where some of their highest growth has come from is some of their higher-income consumers. The ability of to get what you need when you need in a convenient format matters. Target is more discretionary than Walmart. But the other area that you've seen grow significantly is off price. TJ Maxx, Ross Stores, Burlington, brands at value prices matter, and you're certainly seeing companies like the off prices delivering that while Walmart's delivering value and essentials and really stepping up their pipeline of what's new and interesting. We still have work to do on Target because they're typically known as where they have collaborations that are very appealing on discretionary and there's more that's coming there.
Telis Demos: Yeah, I want to ask more about Target in a second because I think they're very interesting. And you mentioned Walmart having growth at the higher end of their consumer base, and so there are a couple of things that have been going on with Walmart that really fascinate me that I want to see if you can help explain what that might mean for investors. One is the Walmart+ membership I feel like has become a very successful product and it's sort of ubiquitous, right? So Walmart+, of course, is like a subscription kind of like Amazon Prime, many people are familiar with, and what's interesting to me about Walmart+ is that it really seems to be aimed, again, at both people who are on government assistance like EBT, they can get a Walmart+ deal, right? But also I know that American Express offers it, right? So you have consumers really at both ends of the spectrum kind of coming together and saying, "Yeah, we see value in Walmart+", which, of course, gives them access to the e-commerce as well as other things. Seeing those two barbells of the consumer succeed with that product, what does that tell us?
Dana Telsey: I think overall you can see higher-income consumers gravitate for the essentials. There is a convenience to having physical stores attached to the online sales too, both in terms of delivery and in terms of returns, and it shows the awareness of the Walmart name to consumers of all income levels in all regions. The data that Walmart has allows them to accelerate the community bond they have and really learn what should they be offering that consumers want. Marketplaces matter, the diversification of their sales and where they get it from is making them more essential to all different income and age groups of consumers.
Telis Demos: Marketplaces, you mean where lots of sellers can sort of sell goods through one website?
Dana Telsey: Yep. Where you can reach the most consumers.
Telis Demos: What has Walmart been doing to appeal more to higher-end or to wealthier customers? I know I've read a little bit about their sort of private labels and things like that. What else have they done? CEO, Doug McMillon has said that they're really making inroads with high-end shoppers. What's been behind that?
Dana Telsey: I think the awareness and the marketing, I think the physical store locations, I think the loyalty programs, the essential nature of their goods, the ease of shipments that they've been delivering, they've been on time, and they really showcase that this is not the Walmart of 30 or 40 years ago. Look what they did in their name. They took away the name Walmart stores because they're all channels in terms of appealing to the consumers.
Telis Demos: Yeah, the e-commerce seems like they've really succeeded there. And again, a few years ago, people would've said, "Oh, nobody can compete with Amazon," and yet here they are.
Dana Telsey: They can.
Telis Demos: One episode for Walmart recently that I want to get your thoughts on is the "Wirkin" bag social media moment. And it brings in a couple of themes. One, the sort of the dupe sort of theme in luxury, and I certainly don't want to call this particular product a dupe, but I'll just explain to people who weren't following it. There was recently a bag for sale, like a purse for sale on Walmart's website from a third-party seller, and it sufficiently gave kind of Birkin bag, the Hermès thousands of dollars bag. It sufficiently gave Birkin vibes that people flocked to it as an affordable alternative and it went viral on social media. People were TikToking about, it got a nickname. The bag is not called the "Wirkin", it's called something else, but people nicknamed it that. I also saw a couple of times the "Walmés" bag as well. What does that anecdote tell us about what's going on in luxury? And also, so it's got the e-commerce angle there and are people sort of dropping down from the... They're like, "You know what? I don't need an Hermès bag. I'll get this "Walmés" bag.
Dana Telsey: So imitation is always the most sincere form of flattery, and definitely the Hermès buyer who's buying that bag, that, as you said, is thousands of dollars, is not trading down to the "Wirkin" bag. The awareness of it. It gives others who want to view that style and that type an opportunity to access it at a much lower price. There's no need for a Hermès to even make any comments on it because when you look at other styles where there are interpretations of what is popular at higher price points, that's what this is doing. If anything, it only creates even more awareness of Hermès if it's a bag and a style trend that should be emulated. But what it also shows is you have value that matters, it is garnered a wider appeal. Social media has fast awareness that goes global and you're seeing trends be able to be deciphered quickly. I wouldn't necessarily say the Birkin is a trend given how long it's been around.
Telis Demos: Exactly, exactly.
Dana Telsey: It's been a desired item, not only by the wealthy, but those who aspire to have it also.
Telis Demos: I mean, I feel like that the Birkin bag and Hermès exist really at the very highest tier of luxury, right? I mean these are things that can cost many, many thousands of dollars.
Dana Telsey: And are even more valuable on resale.
Telis Demos: Exactly. So it's an heirloom item. So let's put that maybe in its own little tier. But I want to talk about what's going on in the rest of the luxury market. And that can include companies like Burberry, Kering, which owns Gucci, LVMH, which is, of course, the parent of Louis Vuitton. These companies have a more maybe diversified sort of luxury strategy where they have the very highest end and then a little bit of what you might call affordable luxury kind of micro luxuries that have been a little bit cheaper. What's going on with that market and what happens to people who don't necessarily have their Hermès' cachet but are still considered luxury?
Dana Telsey: So there's always that aspirational consumer who wants to be in that lifestyle. Yes, we had a slowdown in luxury sales recently, and we just actually put out a primer on luxury and are expecting an increase in luxury sales this year. We've had-
Telis Demos: Okay, so you think it was a short-lived slowdown maybe?
Dana Telsey: Yeah.
Telis Demos: Okay, okay.
Dana Telsey: It may not be at the same rates that it had been, but it should grow. And when you think about the lifestyle selling of luxury brands from entry points in cosmetics to high end, whether it's ready to wear jewelry or leather goods. But what's changing lately, we have a change in designers for some of them, a change in management teams. We have a customer base that's changing and also where they're opening stores. Many of these European luxury goods companies want to open stores in the US. Take a look on Fifth Avenue where there are these Louis Vuitton trunks that are on 57th and 5th where they're redoing their building. It is probably one of the most Instagram pictures and photos that's out there.
Telis Demos: That you see people always stopping.
Dana Telsey: You're seeing restaurants put into some of these luxury goods stores where there's waiting lists, so access to entry in the brand. Also, we're seeing in some cases, outlet centers. You look at Woodbury Commons here in the Northeast, you look at Desert Hills on the West Coast and they'll have entry points to luxury goods from the luxury goods brands at discounted prices. So styles value, but there's always a demand because of the aspirational nature that people want to interpret from others who they admire.
Telis Demos: If I'm driving past the strip mall and I see a Gucci sign, should I be thinking, "Uh-oh, they're going down market, time to sell my stock."? Or should I be thinking, "Wow, they've grown their audience here."?
Dana Telsey: They're controlling their customer base. It's less than 10 malls that they could open in. So that's what I mean. It's not ubiquitous.
Telis Demos: Got it.
Dana Telsey: But also wouldn't you rather have that than be shown in third parties?
Telis Demos: Yeah.
Dana Telsey: And some don't even ever discount their goods because they will reuse some of the materials and make it into something else?
Telis Demos: Yeah. I do have to talk about Washington and policy, and I know that tariffs are something that obviously matter for retail and luxury in particular, and import business, right? We're talking about European goods, European companies selling to China, Chinese consumers shopping in the US, et cetera. What does that mean for retailers and for how consumers might kind of feel the effect of tariffs?
Dana Telsey: It's a headwind. Tariffs are a headwind. They're a headwind to companies. The accelerated diversification of supply chains costs money and the element of increasing prices to the end consumer, which we saw last time, is a headwind and it's a concern.
Telis Demos: We're going to take a little break and when we come back, we're going to have one last question for Dana Telsey. Welcome back. So we talked a little bit about Target at the top of the show. We talked about how Walmart has been really going gangbusters lately. Their stock has been doing great, they're doing terrific with both the sort of the more kind of price-sensitive customer and the higher-end customer. But let's go back to Target. Target was once synonymous with kind of affordable luxury, right? You mentioned discretionary spending. Tar-Jay was the nickname I remember. But now it's struggling. The stock is not doing as well. It just seems to have lost some of its momentum of late. In 30 seconds or less, tell us, do you see a Target comeback in the near future?
Dana Telsey: Yes, I do see a Target comeback in the near future because I think the discretionary spend is getting more appealing for them. I think they're doing more innovative projects, doing more enhancements in their stores. I think it's going to make it more interesting as we go through the next year.
Telis Demos: Okay. A target for investors to consider. Dana, thank you so much for being here with us. This has been a great conversation.
Dana Telsey: Thank you so much for having me.
Telis Demos: Thanks so much. And that's everything you need to know to take on your week. This show is produced by Trina Mannino, Michael LaValle, and Jessica Fenton with help from Jess Jupiter. Michael LaValle and Jessica Fenton are our sound designers, and Michael also wrote our theme music. Aisha Al-Muslim is our development producer, Scott Saloway and Chris Zinsli are the deputy editors, and Philana Patterson is the head of news audio for the Wall Street Journal. For even more, head to WSJ.com. I'm Telis Demos.
Aaron Back: And I'm Aaron Back. Until next time.
Telis Demos: Alliterating anchors anxiously await. Okay. All right, here we go. Does anybody get that joke? I always do that. Broadcast News, any big fans?
Aaron Back: I wasn't listening.
Telis Demos: Don't worry about it.
Aaron Back: What was the joke?
Speaker 4: Say it again.
Telis Demos: Broadcast News, Albert Brooks.
Aaron Back: I don't know what you're talking about.
Telis Demos: Never mind.
Technical analysis for shorts & longs | Stock Discussion ForumsShare
At the 2 minute mark cash levels at the hedge funds are at record lows so they don't have the ammunition to drive the market higher. The need to do some profit taking. Observation outside of the video: We saw a bit of that today on META as we saw start to see off and then accelerate into the close on no news.
At the 4 minute mark there is the suggestion that recession only are triggered only after earning margins start peak and start to go down. There is only one time in the 80s where this was not true. So 40 years of data to draw from and it makes sense as margin contract mean pricing power has failed due to problems with the economy.
Technical analysis for shorts & longs | Stock Discussion ForumsShare
SP500 spent most the second half of the day on the defensive but managed to finish up to a new 52 week high. The key is whether there is a follow through day tomorrow with increase volume.
DOW still lagging the SP500 but it has managed to stay close to the 52 week high so it may follow the SP500 up if the move in the SP500 is confirmed and sustain. Note that the SP500 could also see off because as note most hedge funds are at record lows in cash.
Dow transports still playing catch up. It is on the verge of breaking one of the last two remaining resistance levels before the 52 week high. This current level is more significant than the minor one above it.
DOW utilities short term trend is up and intermediate trend is still down. Traders are having problems figuring out the direction of long bonds temporarily.
TLT still say long bond rates are head up over the next few weeks and maybe months.
USD bouncing near a major 106 support zone. Watch to see if is a dead cat bounce.
COMPQ also setting a new 52 week high. Watch to see if confirms tomorrow.
Semiconductor still in the mid-range of the sideways channel of the last few months.
Financials near the 52 week high. Watch to see if it also sets a 52 week high to confirm the SP500 and COMPQ new highs.
Energy still moving to test the top of the long term sideways channel. It has a little more ways to run before resistance.
Gold still managing to set a new 52 week high. The momentum is start if slow down though.
Consumer discretionary still on the defensive. It is on a short and intermediate sell signal still.
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Technical analysis for shorts & longs | Stock Discussion ForumsShare
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