Intel Struggling at Support after Q2 Warning

Dow component Intel Corp. (INTC) is trading lower by more than 4% after meeting Q1 2022 estimates and guiding Q2 results below consensus. The chip giant posted a profit of $0.87 per-share during the quarter while revenue fell 6.6% year-over-year to $18.4 billion. The company reaffirmed fiscal year 2022 numbers but the mixed outlook didn’t sit well, with rising inflation, chronic supply chain issues, and long-term instability in Eastern Europe weighing on sentiment.

Bad Year for Chip Stocks

The chip sector has struggled so far in 2022, posting year-to-date losses across the board. PHLX Semiconductor Index is down 23% and showing no signs of stabilization, with sector leaders that include Advanced Micro Devices Inc. (AMD) and NVIDIA Corp. (NVDA) sitting at 9-month lows. Intel is outperforming the sector with a 10% loss but has lost a stomach-churning 35% since April 2021 while accumulation has dropped to a 9-year low.

CEO Pat Gelsinger chatted up the mixed report, insisting that Q1 “was a strong start to the year, exceeding expectations on both the top- and bottom-line. With a $1 trillion market opportunity ahead of us, we remain laser focused on our IDM 2.0 strategy. We executed well against that strategy in Q1, delivering key product and technology milestones and announcing plans to expand our manufacturing capacity in both the US and Europe to meet the continued demand for semiconductors and drive a more balanced, resilient global supply chain.”

Wall Street and Technical Outlook

Wall Street consensus stands at an apathetic ‘Hold’ rating based upon 7 ‘Buy’, 2 ‘Overweight’, 22 ‘Hold’, and 3 ‘Underweight’ recommendations. In addition, six analysts now recommend that shareholders close positions and move to the sidelines. Price targets currently range from a low of $40 to a Street-high $75 while the stock is set to open Friday’s session more than $5 below the median $50 target. Further downgrades at this point could trigger a rapid decline into the low target.

Intel sold off from 75.81 to 12.06 between 2000 and 2009 and has traded within those boundaries for the last 13 years. A slow motion uptick reversed at the .786 Fibonacci selloff retracement level in January 2020 while an April 2021 test triggered a reversal that’s relinquished more than 23 points into Friday’s opening bell. The stock is now sitting on horizontal support that’s been tested multiple times since 2017, with each occurrence raising odds for an historic breakdown.

Catch up on the latest price action with our new ETF performance breakdown.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Intel Launches Energy Efficient Crypto Mining Chip Blockscale

Key Insights:

  • The new chip will be more energy efficient than those from rival Bitmain. 
  • Blockscale will deliver up to 580 GH/s with as much as 26 J/TH.
  • Major mining firms have already put in orders for the new chip.

The microchip manufacturer has doubled down on its environmental, social, and governance (ESG) commitments with a new processor focused on energy efficiency and sustainability.

The new Blockscale chip announced on April 4 will provide up to 580 gigahashes per second (GH/s) of hash rate with as much as 26 joules per terahash (J/TH). This makes it more efficient than the flagship Bitmain equivalent when used in an array.

General manager of Blockchain and Business Solutions at Intel [INTC], Jose Rios, commented:

“The Intel Blockscale ASIC is going to play a major role in helping bitcoin mining companies achieve both sustainability and hash rate scaling objectives in the years ahead,”

ASIC refers to an application-specific integrated circuit which is a system designed specifically for a particular task, in this case, crypto mining.

Greener Mining Solutions

Bitcoin [BTC] and its proof-of-work brethren have recently come under a lot of scrutiny over the power demands of the mining process. As a result, many mining operations are seeking renewable energy sources or more efficient hardware.

Balaji Kanigicherla, Intel vice president and general manager of Custom Compute in the Accelerated Computing Systems and Graphics Group, commented on solutions that can deliver a balance of hashing throughput and energy efficiency, adding:

“Intel’s decades of R&D in cryptography, hashing techniques, and ultra-low voltage circuits make it possible for blockchain applications to scale their computing power without compromising on sustainability.”

The company stated that the new Intel Blockscale chip shipments would begin in the third quarter of 2022. The first companies to develop new systems based on the architecture include Argo Blockchain, Block (formerly Square), Hive Blockchain Technologies, and GRIID Infrastructure.

Following Bonanza Mine

The new addition to Intel’s ASIC lineup follows the launch of the Bonanza Mine chip in February. Blockscale is essentially just the chip, whereas Bonanza Mine was marketed as a complete mining system with 300 chips delivering up to 40TH/s at 3,600 watts of power consumption.

The crypto mining industry is currently suffering from a chip shortage due to pandemic-induced supply chain problems.

Intel Struggling to Hold Deep Support

Dow component Intel Corp. (INTC) bounced in the mid-40s when Russia invaded Ukraine, marking the seventh bounce at this four-year support level. The chip giant has now booked zero returns except for dividends since 2017, a painful accomplishment for one of the largest tech operations in the world. Even so, the company’s massive investment in local fabrication could pay off, with international sources coming under political pressure.

Notebook Sales Slowing Down

Sadly, other divisions may underperform badly before those plants come on line in the next five years. Notebook sales mark the latest headwind, with Citi warning that February shipments were down 11% month-over-month, much worse than expectations for a 5% decline. Of course, low component inventories drove part of this shortfall but the broad PC market is clearly overbought after two years of double-digit growth and is overdue to a retrenchment.

Citi analyst Christopher Daley just issued a ‘Neutral’ rating and listed his concerns about 2022 notebook sales, stating that “We see notebook shipment weakness as another yellow flag after Intel stated it sees an inventory correction in the notebook end market during its last earnings call.” Morgan Stanley  went a step further at the end of February, downgrading the stock to ’Underweight’ and cutting the price target from $55 to $47.

Wall Street and Technical Outlook

Wall Street consensus is downright dreary, with a ‘Hold’ rating based upon 7 ‘Buy’, 2 ‘Overweight’, 22 ‘Hold’, and 3 ‘Underweight’ recommendations. In addition, six analysts recommend that shareholders close positions and move to the sidelines. Price targets currently range from a low of $40 to a Street-high $70 while the stock is set to open Monday’s session more than $7 below the median $53 target. Sustained upside is unlikely in the short-term, given weak investor sentiment.

Intel topped out within six points of 2000’s all-time high in January 2020 and failed a breakout above resistance in the upper 50s during the pandemic decline. It then settled into a choppy trading range, with a horizontal floor in the mid-40s that was first crossed in 2017. The long-term pattern looks like a complex top that will eventually yield a steep bear market decline. The company is racing against time to avoid this fate through its massive expansion of US manufacturing capacity.

Catch up on the latest price action with our new ETF performance breakdown.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Bitcoin Mining Firm HIVE Blockchain to Buy Intel ASIC Chips

Key Insights:

  • Bitcoin mining firm HIVE Blockchain announced plans to buy Intel’s new ASIC chip – ‘Bonanza Mine.’
  • The deal is expected to increase the firm’s aggregate BTC mining hashrate by up to 95%.
  • HIVE also plans to host 100 megawatts of mining capacity in Texas.

On March 7, the Canada-based HIVE Blockchain Technologies announced plans to buy Intel’s new ASIC chip to go ‘greener.’

Going, Greener

HIVE Blockchain is a publicly-traded crypto mining company that owns green energy-powered data center facilities in Canada, Sweden, and Iceland.

The firm recently announced a deal to buy ASIC chips from semiconductor manufacturer Intel. HIVE would use the ASIC chips in the firm’s new custom mining devices to offer ‘greener’ mining to customers.

According to a statement issued by the company, the recent deal, alongside a manufacturing agreement with an original design manufacturer (ODM), is expected to increase Hive’s aggregate Bitcoin mining hashrate by up to 95%.

HIVE anticipates that the new devices could almost double its aggregate BTC mining hash rate from 1.9 to 3.8 Exahashes per second (Eh/s). For now, the firm expects the devices to be ready for use in the second half of 2022.

The Canadian company has arranged for a third-party custom design manufacturer to integrate Intel chips into new air-cooled BTC mining devices.

The American multinational corporation and technology company, Intel, stated in its patent that the chips are called ‘Bonanza Mine.’ These chips could reduce the power consumption of mining operations by 15%.

Notably, the reduction in power usage could let HIVE deploy more devices, helping it increase its hash rate contribution even more in the future.

HIVE’s Growth

Apart from the green mining initiative, HIVE also laid out its plans to host 100 megawatts of mining capacity in one of Compute North’s Texas renewable energy data center facilities.

As per reports, the Texas operation would mark the company’s first foray into the US market.

In August 2021, Hive ordered 4,000 machines from Canaan, a China-based publicly-listed Bitcoin mining hardware manufacturer. In February, HIVE announced record quarterly revenue of $68 Million, up by 397% from the same quarter last year.

HIVE’s facilities are already operational in Canada, Iceland, and Sweden, where the company mines BTC, Ethereum (ETH), and Ethereum Classic (ETC).

NVIDIA Could Test January Low

NVIDIA Inc. (NVDA) is trading lower by more than 2% in Thursday’s pre-market, despite beating Q4 2021 estimates and raising Q1 2022 revenue guidance. The chipmaker posted a profit of $1.32 per-share, $0.10 better than expectations, while revenue rose 52.8% year-over-year to $7.64 billion, about $200 million higher than consensus. The Q1 increase was substantial, raising estimates from $7.28 billion to the $8.00 billion range. The company fired on all cylinders in Q4, reporting strong growth in gaming, pro visualization, automotive, and data center divisions.

Worries About Valuation and Growth

Even so, the sell-the-news reaction wasn’t a surprise because chip stocks have traded poorly in 2022, dumping the PHLX Semiconductor Index (SOX) more than 10% since Dec. 31st. Chronic supply constraints have impacted the group’s performance while over-valuation has emerged as a potent headwind, with the SOX’s 41% return in 2021 lifting many components to unsustainable levels, especially with rising inflation putting a damper on growth.

Analysts were obsessed with the abandoned deal to acquire Arm Holdings, looking to the acquisition to justify NVIDIA’s astonishing 81.75 price-to-earnings-ratio (P/E). Business is nearly as good as it gets after two years of taking market share from Intel Corp. (INTC) but the stock is already priced for perfection, discouraging sidelined investors from opening new positions. All in all, it’s a perfect formula for a major correction and weak annual performance.

Wall Street and Technical Outlook

Wall Street consensus has eased from extreme bullishness, with an ‘Overweight’ rating based upon 28 ‘Buy’, 6 ‘Overweight’, 7 ‘Hold’, 1 ‘Underweight’, and 1 ‘Sell’ recommendation. Price targets currently range from a low of $200 to a Street-high $400 while the stock is set to open Thursday’s session more than $90 below the median $350 target. Analysts has been quiet since last night’s report, with a single downgrade by a boutique firm, but another round of bullish table pounding may not convince many investors to pull the trigger.

NVIDIA rallied above 2018 resistance at 73 in May 2020, entering a powerful uptrend that stalled below 150 in September. The stock cleared that barrier in June 2021, more than doubling in price into November’s all-time high at 346.47. The subsequent decline stretched to 40% in January while February’s bounce to 50-day moving average resistance failed to yield a breakout, ahead of this morning’s selloff. A long-term sell cycle is expanding at the same time, raising odds for another round of testing at 200-day moving average support near 200.

Catch up on the latest price action with our new ETF performance breakdown.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Bitcoin Network Hash Rate Reached a New All-Time High

Security is one of the most important things when it comes to a network. With higher security, it becomes more resilient, and it is harder to attack it.

This is where the Hash Rate comes in the crypto world. It means the sum of all computing power of a network through crypto mining, such as the Bitcoin network. 

Crypto mining is the process through which miners (computational power) verify transactions and secure the network. That is why if more computing power is contributed, it will be more secure. 

On February 12, the Bitcoin network Hash Rate reached a new all-time high of 248.11 million terahashes per second (TH/s). In the last hours, the Bitcoin Hash Rate has been around 209.6M TH/s, according to Blockchain.com data.

Does the Bitcoin Hash Rate Reflect on BTC Price?

The next chart shows the BTC’s price and the Bitcoin’s Hash Rate since January 2021, according to the Bitcoin on-chain analyst Willy Woo.

In April 2021, the BTC Hash Rate dropped from 198.514M TH/s to 106.676M TH/s, a 46% decline, and the BTC price fell by 23% from $63,600 to $49,040. In May 2021, China banned crypto mining and the BTC Hash Rate fell from 190.552M TH/s to 58.461M TH/s, a 69.3% decline, and the BTC price fell by 49.3% from $58,770 to $29,780, as you can see below:

BTC Hash Rate and Price Chart. Source: Willy Woo.

After China’s news, BTC’s price recovered and reached a new all-time high in November 2021 of almost $68k and started declining until late January 2022. But, when it comes to BTC Hash Rate, it keeps rising reaching new all-time highs as you see above. 

Since late January, both price and Hash rate has been on the rise.

What’s Been Happening With the Crypto Mining Industry?

Last month, Intel, the giant manufacturer of semiconductor computer circuits, entered the BTC mining space with the release of a new mining equipment named Bonanza Mine.

Erik Thedeen, the vice-chair of the European Securities and Markets Authority (ESMA), made a call to ban crypto mining in the European Union (EU). 

A number of countries are experiencing energy crises, such as Kazakhstan and Kosovo, which are affecting cryptocurrency mining.

It looks like European countries are not in favor of crypto mining. As of August 2021, University of Cambridge data showed the U.S. controlled 35.40% of the total Bitcoin Hash Rate, being the largest after the China news.

The BTC Hash Rate and BTC’s price are not always correlated, but the Hash Rate gives important metrics as well as network strength. Let’s see what the price of BTC will do, based on its fundamentals.

Intel on a Slow Boat to Nowhere

Dow component Intel Corp. (INTC) reports Q4 2021 results after Wednesday’s closing bell, with analysts forecasting a profit of $0.91 per-share on $18.36 billion in revenue. If met, earnings-per-share (EPS) will mark a 40% decline in profits compared to the same quarter last year. The stock fell 11.7% in October after missing Q3 revenue estimates and lowering Q4 EPS guidance, and has traded sideways below 200-day moving average resistance for the last three months.

Competitors Take Market Share

Intel’s problems are well documented, with poor management causing rollout delays in key product lines. The failures have allowed competitors NVIDIA Inc. (NVDA) and Advanced Micro Devices Inc. (AMD) to take market share that’s unlikely to return in the next three to five years. INTC has responded by shifting focus to foundry construction, in order to meet the worldwide chip shortage.  Although vital to the industry’s survival, this segment will generate lower margins going forward.

KeyBanc Capital Markets analyst John Vinh just posted a cautious outlook, noting “While we are still optimistic INTC will ultimately be able to turn things around long-term, IDM 2.0 and IFS represent long-lead time initiatives that we believe will take longer than we had originally anticipated to yield proof points. Additionally, with Sapphire Rapids being delayed again, we see limited catalysts for the stock on the horizon. While INTC does have an analyst event in February, we’re skeptical any announcement can change the bearish narrative.”

Wall Street and Technical Outlook

Wall Street consensus stands at a ‘Hold’ rating based upon 8 ‘Buy’, 2 ‘Overweight’, 21 ‘Hold’, and 3 ‘Underweight’ recommendations. More importantly, 6 analysts recommend that shareholders close positions and move to the sidelines. Price targets currently range from a low of $40 to a Street-high $80 while the stock will open Wednesday’s session about $3 below the median $55 target. These metrics are telling bulls and bears to lower their expectations, heading into the report.

Intel broke out above long-term resistance in the 30s in 2017, lifting into the upper 50s in 2018. It mounted that barrier in 2020 but the rally failed, yielding a decline that found support at a nearly horizontal 4-year trendline in the mid-40s. The stock failed an April 2021 breakout attempt and is now situated about 6 points above trendline support. Sadly, it’s now trading at the same level first hit in February 2018, yielding zero returns before dividends.

Catch up on the latest price action with our new ETF performance breakdown.

Disclosure: the author held no positions in aforementioned securities at the time of publication.

Key Events This Week: All Eyes on the Fed, Tech Titans Release Earnings

The highlight will be the Federal Reserve meeting on 26 January, sandwiched between key economic data releases and tech earnings:

Monday, January 24

EUR: Eurozone January PMI
GBP: UK January PMI

Tuesday, January 25

AUD: Australia 4Q inflation and December business confidence
IMF updates World Economic Outlook
Microsoft earnings

Wednesday, January 26

US crude: EIA crude oil inventory report
USD: Fed rate decision
CAD: Bank of Canada rate decision
Tesla earnings
Intel earnings

Thursday, January 27

CNH: China December industrial profits
USD: US weekly initial jobless claims and 4Q GDP
Apple earnings

Friday, January 28

NZD: New Zealand January consumer confidence
EUR: Eurozone January economic confidence, Germany 4Q GDP
USD: US December PCE deflator, personal income and spending, and consumer sentiment

The FOMC is expected to signal a rate hike in March and the immediate end of its bond buying programme, brought forward from the current mid-March end point.

Markets are now pricing in four Fed hikes of 25bp this year with a good chance that we will see more than two rate hikes in the first half of 2022, or alternatively a 50bp hike. Most notably, bond yields have moved higher with stable to lower inflation expectations, resulting in a sharp move higher in real rates. This has been the key driver of souring risk appetite and will determine market direction going forward, in what is becoming quite an aggressive path for Fed action.

Stock markets brace for tech sector results

Company earnings will be in focus with many investors hoping the releases stop the strong selloff we have seen in tech stocks and the broader US equity markets.

Anxiety over rising US interest rates has seen investors flee global stocks this year with the tech-heavy Nasdaq suffering its biggest slide since the pandemic rocked markets in March 2020.

NASDAQ 100 daily chart

The broader blue-chip S&P 500 index shed 5.7% last week with more than two-thirds of the companies within the index now in a technical correction – or down at least 10% from their record high – including 149 stocks that have fallen by 20% or more. Some of the world’s biggest companies report in the next fortnight, including Microsoft after the US market closes on Tuesday, Tesla and Intel mid-week and Apple after US markets close Thursday, while Amazon and Facebook release their latest earnings next week.

The pressure is on many of last-year’s high-flying tech companies to refuel investor confidence and stop the contagion from the tech drawdown.

That said, the S&P500 is still higher now than it was in September, even though equities remain richly valued. An alignment of financial markets and conditions with the Fed’s more hawkish rhetoric and outlook has been on the cards for some time.

S&P 500 daily chart

Bank of Canada set to pull the rate hike trigger

Hours before the Fed meeting on Wednesday, policy makers at the BoC are likely to raise interest rates 25bps, with at least three more rate hikes predicted by markets this year. Inflation is at 30-year highs and the economy is at record employment, while Covid restrictions are set to ease at the end of the month.

With some analysts predicting as many as five rate rises in 2022, the Canadian dollar should continue to outperform, especially against those currencies whose central banks are in no rush to tighten monetary policy, like the ECB and BoJ.

USD/CAD daily chart

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Monstrous Earnings Ahead: IBM, Microsoft, Intel, Tesla, Apple, Visa in Focus, Along With The Fed

Investors will focus on Q4 earnings for stocks that are economically sensitive, which should show better profits than technology stocks. Increasing Treasury yields and risk aversion could also hit the stock market hard next week, making the big tech earnings that much more critical. In addition, investors will closely monitor the latest news on the rapidly spread Omicron coronavirus variant in order to see how it impacts earnings in 2022. The following is a list of earnings slated for release January 24-28, along with a few previews.

Earnings Calendar For The Week Of January 24

Monday (January 24)

IN THE SPOTLIGHT: IBM

The Armonk, New York-based technology company, International Business Machines, is expected to report its fourth-quarter earnings of $3.39 per share, which represents year-over-year growth of over 60% from $2.07 per share seen in the same period a year ago.

The world’s largest computer firm’s revenue would decline over 21% to $1.96 billion from $20.37 billion a year earlier. It is worth noting that the technology company has beaten earnings in most of the quarters in the last two years, at least.

International Business Machines (IBM) 4Q earnings will be focused on standalone model mechanics and whether Software revenue can re-accelerate while Consulting demand sustains. However, we believe the setup becomes more attractive in 2H21. We update our estimates to reflect IBM standalone post-KD spin,” noted Katy Huberty, equity analyst at Morgan Stanley.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 24

TICKER COMPANY EPS FORECAST
BRO Brown & Brown $0.38
BOH Bank of Hawaii $1.39
BMRC Bank of Marin Bancorp $0.57
CR Crane $1.12
HAL Halliburton $0.34
HMST HomeStreet $1.3
IBM International Business Machines $3.39
PETS PetMed Express $0.3
SMBK SmartFinancial $0.48
STLD Steel Dynamics $5.66
TRST Trustco Bank $0.74
ZION Zions Bancorp $1.33

 

Tuesday (January 25)

IN THE SPOTLIGHT: MICROSOFT

The Redmond, Washington-based global technology giant, Microsoft, is expected to post its fiscal second-quarter earnings of $2.28 per share, which represents year-over-year growth of over 12% from $2.03 per share seen in the same period a year ago.

The world’s largest software maker would post revenue growth of nearly 17% to around $50.3 billion. It is worth noting that with a track record of always beating earnings per share estimates in the last five years, Microsoft is one of the best FAANG stocks in terms of earnings surprises.

“We model Azure growth of 45% cc & see 2-3% of upside, translating to steady growth vs. 48% last qtr. We see potential for strong M365 demand ahead of price hikes, as well as continued execution from LNKD, PowerApps & Dynamics ERP. Although tougher PC/Server dynamics, we expect strengthening trends for C22. Expect Mar Q guide slightly above Street,” noted Derrick Wood, equity analyst at Cowen.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 25

TICKER COMPANY EPS FORECAST
MMM 3M $2.07
AGYS Agilysys $0.13
AXP American Express $1.75
ADM Archer Daniels Midland $1.19
BXP Boston Properties $1.51
CNI Canadian National Railway $1.25
COF Capital One Financial $5.15
FFIV F5 $1.97
GE General Electric $0.84
JNJ Johnson & Johnson $2.12
LMT Lockheed Martin $8.04
LOGI Logitech International $1.23
NAVI Navient $0.81
NEE NextEra Energy $0.41
VZ Verizon Communications $1.28
WSBC WesBanco $0.67

 

Wednesday (January 26)

IN THE SPOTLIGHT: FOMC MEETING CONCLUDES, INTEL, TESLA

Tuesday and Wednesday will mark the first meeting of the Fed’s policymaking arm in 2022. At around 7:30 pm GMT on Wednesday, Jerome Powell will conduct a press conference. This is expected to be the biggest market event since investors expect more details about the central bank’s plan to raise interest rates.

INTEL: The California-based multinational corporation and technology company is expected to report its fourth-quarter earnings of $0.9 per share, which represents a year-over-year decline of about 40% from $1.52 per share seen in the same period a year ago. The company’s revenue would fall nearly 8% to $18.39 billion.

Intel remains controversial. Long-term skepticism remains and share losses will continue until products ramp on the Intel 4 node (old 7nm), but with a new CFO, improving PC and server market outlooks, cash inflows from the US Govt, Mobileye on the horizon, and a February analyst day now reconfirmed, we are cautiously optimistic sentiment can continue to gradually improve. Still LOTS to prove,” noted Matthew D. Ramsay, equity analyst at Cowen.

TESLA: The California-based electric vehicle and clean energy company is expected to report its fourth-quarter earnings of $2.31 per share, which represents year-over-year growth of 180% from $0.80 per share seen in the same period a year ago.

“Q4 results on 26 Jan are critical to validate (or not) the Q3 profit dynamics that could see Tesla 1) carve out meaningful share from legacy OEMs busy protecting their own share by ramping up BEVs and 2) claim a disproportionate share of the industry profit pool. We raise 2021-23 EBIT and FCF 10%, mostly on higher volume,” noted Philippe Houchois, equity analyst at Jefferies.

The high-performance electric vehicle manufacturer would post revenue growth of over 50% to $16.65 billion. The electric vehicle producer has beaten earnings estimates only twice in the last four quarters.

Tesla 4Q deliveries were 20% above our forecast, annualizing to over 1.2mm units, which is already above our prior FY22 forecast. We raise our forecasts and target to $1,300 on this ‘opening act’ and look for more in FY22,” noted Adam Jonas, equity analyst at Morgan Stanley.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 26

TICKER COMPANY EPS FORECAST
ABT Abbott Laboratories $1.16
ANTM Anthem $5.11
AZPN Aspen Technology $1.41
T AT&T $0.76
KMB Kimberly-Clark $1.29
LRCX Lam Research $8.46
RJF Raymond James Financial $1.77
STX Seagate Technology $2.21
NOW ServiceNow $0.22
SIMO Silicon Motion Technology $1.56
SLG SL Green Realty $1.56
URI United Rentals $6.97
VRTX Vertex Pharmaceuticals $2.92
WHR Whirlpool $5.84

 

Thursday (January 27)

IN THE SPOTLIGHT: APPLE, VISA

APPLE: The consumer electronics giant would post its fiscal first-quarter earnings of $1.88 per share, which represents year-over-year growth of nearly 12% from $1.68 per share seen in the same period a year ago.

The iPhone manufacturer would post revenue growth of 6% to $118.13 billion. It is worth noting that with a track record of always beating earnings per share estimates in the recent five years, Apple is the best FAANG stock in terms of earnings surprises.

Apple is expected to report 1QFY22 earnings after market on Thursday, January 27th and host a call with investors at 5:00 PM ET. In our view, the recent strength in shares is a reflection of investors’ willingness to reward Apple for entering new markets, including electronic vehicles (EV) and the metaverse (with an augmented reality/virtual reality product). Now, we look for comments from management on its future product roadmap to justify the increase in share price,” noted Tom Forte, Senior Research Analyst at D.A. DAVIDSON.

“We are reiterating our BUY rating for Apple (AAPL) and putting our price target of $175 under review ahead of the company reporting 1QFY22 earnings.”

VISA: The world’s largest card payment company is expected to report its fiscal firth-quarter earnings of $1.70 per share, which represents a year-over-year decline of about 20% from $1.42 per share seen in the same period a year ago.

The global technology payment company would post revenue growth of nearly 19% to $6.8 billion. It is worth noting that the company has beaten earnings in most of the quarters in the last two years, at least.

Visa (V) is one of our preferred stocks, as it is a key beneficiary of resilient global consumer spend growth, the ongoing shift from cash to electronic payments, and broadening merchant acceptance. Global Personal Consumption Expenditure and secular growth drivers should support low double-digit revenue growth in the near-to-medium term,” noted James Faucette, equity analyst at Morgan Stanley.

“While Covid-19 headwinds are likely to persist, we see upside opportunity from the faster-than-expected recovery of travel. Continued investment in longer-term initiatives (faster payments, P2P, B2B) and partnerships continue to increase its TAM and offer an opportunity for compounding double-digit earnings growth for the foreseeable future.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 27

TICKER COMPANY EPS FORECAST
AOS A.O. Smith $0.77
ALK Alaska Air Group $0.21
BX Blackstone $1.3
CNX CNX Resources $0.5
CMCSA Comcast $0.73
DOW Dow $2.16
EMN Eastman Chemical $1.88
HCA HCA Healthcare $4.57
IP International Paper $1.02
JBLU JetBlue Airways $-0.39
MA Mastercard $2.2
MCD McDonald’s $2.32
LUV Southwest Airlines $-0.39
X U.S. Steel $5.12
V Visa $1.7

 

Friday (January 28)

TICKER COMPANY EPS FORECAST
ALV Autoliv $1.18
BAH Booz Allen Hamilton $0.97
CAT Caterpillar $2.23
CHD Church & Dwight $0.59
CL Colgate-Palmolive $0.79
RDY Dr. Reddy’s Laboratories $0.64
GNTX Gentex $0.33

 

Can Intel Dominate the Bitcoin Mining Industry With the Bonanza Mine?

The University of Pennsylvania recently announced Intel’s intention of releasing a new Bitcoin mining ASIC chip which will be released during the 2022 IEEE International Solid-State Circuits Conference on February 23.

The Bonanza Mine

Described as an Ultra-Low-Voltage Energy-Efficient Bitcoin Mining ASIC, the chip titled Bonanza Mine will make Intel the first major semiconductor company to jump into producing traditional Bitcoin mining ASICS.

Although AMD has been a part of the crypto mining industry for a while now owing to its super-powered GPUs, it never witnessed any competition as such.

But since Intel has a higher production capacity, and both ASICs as well as GPUs are priced almost similarly, Intel could bolster the production to give AMD serious competition.

But for Intel, the concern is bigger than just AMD since there are already better established ASIC production companies in the market. Bitmain, Bitfury, etc are some such companies that have dominated the ASIC-specific mining rig manufacturing industry for most parts.

However, Intel might have actually made this decision at the right time. The mining industry just a week ago finally recovered from the effects of The Great Migration and is currently growing at a quick pace.

Hash Rate marked an all-time high a few days ago after taking 7 months to recover from the dent made by China’s mining ban.

Bitcoin Hash Rate is at an all-time high | Source: Glassnode

Additionally, at the moment, miners are now entering the market. Chinese educational company Midland International is one of the most recent ones.

The company had already secured 147 cryptocurrency mining rigs and AGMH shipped another 1335 BTC mining rigs which are set to be operational this month.

Additionally, the success of mining Bitcoin is pushing companies to go public. Rhodium Enterprises is one such company, valued at $1.7 billion which is about to go public tomorrow.

So if Intel can tap the market properly, it could gain footing in the mining industry.

How Is Bitcoin Performing Though?

These developments are yet to have any major impact on the king coin’s price action since Bitcoin is still stuck in the lower $42k zone. Although price indicators do show an uptrend, we are yet to see how far up it could take Bitcoin.

Bitcoin yet to recover from $42,000 – Source: FXEMPIRE

Intel Enters the Bitcoin (BTC) Mining Space amidst Rising Concerns over Mining and the Environment

Crypto mining, natural resources, and the environment are hot topics for governments and the crypto market at present.

China’s ban on Bitcoin (BTC) mining put the spotlight on crypto mining and the environment. While governments have taken greater interest, manufacturers of crypto mining equipment have yet respond to the increased level of scrutiny, until now…

Crypto Mining and the Environment

Last summer, China’s outright ban on crypto mining was in support of the government’s carbon neutral goal by 2060.

Amidst an ongoing energy crisis in Kosovo, the Kosovo government was forced to impose a blanket crypto mining ban at the start of the year. The government imposed the ban to curb energy consumption.

In terms of Bitcoin hashrates, Kosovo only accounted for 0.01% of Bitcoin’s global hashrate in August 2021. According to Cambridge Centre for Alternative Finance, the United States was the largest Bitcoin mining nation, accounting for 35.4% of the total Bitcoin mining hashrate as at August 2021.

The U.S had accounted for just 16.85% of the total hashrate in April 2021. Mainland China had been the largest crypto mining nation before the summer 2021 ban.

For governments with carbon neutral aspirations, the impact of Bitcoin mining on the environment is significant. Such is the extent of energy consumption that, if Bitcoin were a country, it would be a top 30 energy consumer.

Considering energy consumption and climate impact, some key mining stats are worth considering:

  • According to Columbia Climate School, Bitcoin is thought to consume 707KwH per transaction. In addition, there are also mining computers that heat up and need cooling.
  • The University of Cambridge estimated that Bitcoin mining consumes 121.36 terawatt-hours (TWh) per year.
  • According to estimates, Bitcoin mining yields 22m to 22.9m metric tons of CO2 emissions each year.
  • In terms of global warming, Bitcoin mining could push global warming above 2 degrees centigrade in less than 3-decades.

U.S Government Climate Goals

It therefore comes as little surprise that Bitcoin mining has appeared on the radar of the U.S government. Optically, inaction as the world’s largest Bitcoin mining nation would go against the U.S emissions goals.

In April 2022, President Biden announced a new target for the U.S “to achieve a 50-52% reduction from 2005 levels in economy-wide net greenhouse gas pollution in 2030”. Upon taking office, President Biden rejoined the Paris Agreement, aiming to tackle the climate crisis both domestically and abroad. The U.S has a goal of reaching net zero emissions by 2050.

With Biden’s new U.S target, tomorrow’s U.S Congress subcommittee hearing on cryptos will draw plenty of interest.

When considering China’s ban and the increased interest in crypto mining, more energy efficient mining equipment would be a next step in addressing environmental concerns.

Intel Looks to Deliver a Major Breakthrough in Bitcoin Mining

Overnight, news hit the wires of Intel (INTC) entering the Bitcoin mining space. According to the news, Intel plans to introduce a new “Ultra-Low-Voltage-Energy-Efficient Bitcoin Mining Asic”. Reportedly called Bonanza Mine, Intel plans to introduce the mining Asic next month. The Bonanza Mine is said to “reduce overall power consumption by approximately 15%”.

A 15% reduction in power consumption is a step in the right direction. Intel’s move into the Bitcoin mining space will also likely force other mining equipment manufacturers to look at improving power consumption inefficiencies.

Such an outcome would be positive, not just for Bitcoin miners, but also for the environment.

QQQ: The Downside Risks on the Nasdaq Seem Exaggerated

The performance of the Nasdaq now encompasses a higher degree of volatility as seen by the 5.5 to 9% corrections in the Invesco QQQ Trust (QQQ) which has now become the new normal in a macroeconomic environment where hawkish Fed hiking interest rates is seen as being unfavorable to high-valued and unprofitable tech stocks.

Source: Initial chart from Trading View

For investors, QQQ tracks the Nasdaq-100 Index which features Apple (APPL), Alphabet A (GOOGL), Alphabet C (GOOG), Microsoft (MSFT), NVIDIA (NVDA), Meta labs (FB), Amazon (AMZN), Tesla (TSLA), Adobe (ADBE) and PayPal (PYPL). These are the main holdings out of a total of 102.

Assessing the risks

There are certainly risks in 2022 in the context of being invested in tech equities, but, I would like to bring to the attention of investors that despite all the volatility, QQQ has gained 6%, and this shows that the market’s repositioning (amid the rotation from growth to value names) does not seem commensurate with the forthcoming pace at which interest rates will increase.

Exploring further, trades are no longer crowded as in 2021 as people look for income or other asset classes to diversify. However, this diversification away from tech seems not to have hit QQQ’s main holdings which constitute 52.73% of the portfolio. As per my observation, this has been the case from April through December this year when most of the market gains were just from AAPL, MSFT, NVDA, TSLA, and GOOGL.

Source: Ycharts.com

Given the fact that the rotation has lacked in breadth, I see the corrections in tech as a rather muted market reaction, and this also prompts me to discard fears that tech stocks will suffer in the same way as during the bursting of the Internet bubble back in 1999-2000. At that time, in the first phase of the bear market, the large-caps names were doing fine but a large percentage of Nasdaq’s other components crashed by more than 50%. Ultimately, all the components crashed.

However, that was a completely different Nasdaq with the top stocks of the time being Cisco (CSCO) followed by Microsoft then Intel (INTC), or from the networking, software and semiconductor sectors respectively. Today, it is more about social media, online advertisement, internet marketplaces, electric cars, the cloud, smartphones, and virtual reality. In short, tech is now fully integrated into all spheres of economic and social life compared to twenty-two years ago.

Considering the inflation factor

Moderating slightly, QQQ’s other holdings seem to be impacted as investors become more selective, putting more emphasis on quality (free-cash-flow, balance-sheet, economic moat, etc) and valuations. Still, here also, rising inflation, currently at above 7% compared to 3.75% in 1999-2000 could prove to be more difficult for value stocks like banks as their customers suffer from rising prices and are faced with the rising cost of doing business. For this matter, as shown in the chart below, Bank of America (BAC) and Berkshire (BRK.B) saw a more pronounced dip in their total return level in August 2008 than Apple or Microsoft when inflation was above 5%.

https://static.seekingalpha.com/uploads/2022/1/14/49663886-16421719831560977.png

Source: Ycharts.com

Industrials are also likely to suffer from soaring raw material and labor costs. As for tech, they should better withstand high inflation with their ability to make use of software, AI, and automation tools more rapidly than companies from other sectors of the economy. These tools enable them to reduce operating costs and better circumvent wage inflation. Examples are FinTechs like PayPal’s (one of QQQ’s current underperformers) ability to reduce money transfer fees for customers compared to traditional banks and companies making use of cloud-based collaboration instead of having to invest in costly infrastructure.

Tech should continue to outperform as digital transformation enablers

Furthermore, with relatively less dependency on physical interactions caused by variant-related uncertainty, tech stocks are less likely to see a reduction in profitability. Here, some will note that Apple’s revenue share from its App Store ecosystem is increasing more rapidly than for devices and Tesla is considered as an internet-of-cars company.

Historically, as shown in the chart below, big tech’s gross profit margins have either increased or remained constant during the last five years, which include 2021, a year characterized by rapidly rising inflation.

https://static.seekingalpha.com/uploads/2022/1/14/49663886-16421723117351067.png

Source: Ycharts.com

Thus, inflationary pressures grappling the economy as from 2022 is likely to put valuations on the backstage, with tech, especially the more profitable ones, likely to continue seeing positive returns. This said tech remains highly dependent on semiconductors, a sector that needs to be watched closely for some short term pain when some of the big names report earnings on the last week of January. Finally, looking at the performance of the Nasdaq in 2020 and 2021 when it gained 43.64% and 21.39% respectively, even a 10-12% gain in 2022 would put it in positive territory.

Disclosure: I am long Apple. This is an investment thesis and is intended for informational purposes. Investors are kindly requested to do additional research before investing.

Advanced Micro Devices Completes Head and Shoulders Top

Advanced Micro Devices Inc. (AMD) completed a two-month head and shoulders topping pattern on Monday, raising odds for a breakdown that targets psychological support at 100. Accumulation, as measured by On Balance Volume (OBV), has dropped steadily since the stock carved the left shoulder in November, in another sign that shareholders are taking profits and moving back to the sidelines. Of course bulls could save the day, as they often do, but its best to prepare for a volatility surge as market participants react to the set-up.

Semiconductors Under Pressure

Chip stocks have had a tough time so far in 2022, with the PHLX Semiconductor Index dropping nearly 10% in five sessions into Monday’s midday low.   The decline is worse than it looks at first glance because 400-lb gorilla and perennial laggard Intel Corp. (INTC) has gained 7% so far this year, skewing broad sector averages. NVIDIA Corp. (NVDA) highlights typical damage to 2021’s biggest winners, dropping 13% before Monday’s bounce.

Advanced Micro Device’s 2022 outlook remains strong but fundamentals may not power the upside because growing worries about rising inflation could undermine buying interest. CEO Lisa Su outlined the bull case in a Monday interview, noting her expectations for a strong year, powered by new chips for laptops and commercial PCs. She also confirmed “very strong” demand that’s forced AMD to ramp up supply and chatted up new investments in artificial intelligence.

Wall Street and Technical Outlook

Wall Street consensus stands at a ‘Moderate Buy’ rating based upon 19 ‘Buy’, 4 ‘Overweight’, 15 ‘Hold’, 1 ‘Underweight’, and 0 ‘Sell’ recommendations. Price targets currently range from a low of $115 to a Street-high $180 while the stock is set to open Tuesday’s session about $9 below the median $144 target. A short-term bounce looks likely, given this humble placement, but a rally above 155 is needed to negate the bearish pattern now in play.

Advanced Micro Devices cleared 20-year resistance in July 2020, entering a multi-legged advance that lost steam above 155 in November 2021. A breakout attempt three weeks later failed, carving the head of the H&S pattern, while the December bounce failed at the early November peak. The selloff since that time has reached the neckline in the mid-120s, with 20 to 25-point downside potential into the 100 level, which also marks support from the July breakout.

Catch up on the latest price action with our new ETF performance breakdown.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

SMH: Portfolio Rebalancing Is a Positive to Navigate Uncertainty While Metaverse Demand Materializes

The reason is simply that required technologies, be it augmented reality (“AR”), AI, 5G, or blockchain, all require the utilization of semiconductors. The pie chart below shows the relative revenue per sector, with Computing and Wireless with a combined portion of more than 60% seen as the main beneficiaries of metaverse-related investments.

Source: Chart prepared by author to highlight metaverse demand using data from IEEE Spectrum

For this purpose, the VanEck Semiconductor ETF (NASDAQ:SMH) provides exposure to a portfolio of semiconductor stocks ranging from the equipment makers like Applied Materials (NASDAQ:AMAT) to designers of graphics processing units like NVIDIA (NASDAQ: NVDA) who are fabless, or without foundries where the chip are manufactured. It also includes the world’s largest producer, Taiwan Semiconductor Manufacturing (TSM), which, according to the Wall Street Journal planned to raise prices by 10% to 20% back in August depending on the type of chips.

This is due to the supply crunch not only implying that chips have become unavailable, but more expensive too. The increases, expected to be applied towards the end of the year or from 2022 will also impact large customers, marking the end of discounts applied on big orders. The Taiwanese company also revealed that it faced a steep rise in the cost of raw materials and has to incur a three-year $100 billion investment plan aimed at increasing production in view of current shortages and developing chips.

Now, a change in the costs of raw materials in an industry already impacted by supply imbalance can have unforeseen effects on the price of finished goods, in the form of everything from consumer electronics, smartphones, Bitcoin mining equipment, cars, etc. Added to these are inflationary concerns not auguring well for next year. It is precisely here that portfolio rebalancing as effected by VanEck, SMH’s fund manager becomes handy.

In this case, with 25 holdings, SMH is an actively managed fund carrying an expense ratio of 0.35% and tracking the performance of the MVIS US Listed Semiconductor 25 Index (MVSMHTR), which provides exposure to semiconductor production and equipment. As for the rebalancing act, I noticed a crucial change between the holdings as of July 31 and December this year. The changes pertain to the percentage of assets for TSMC which has been reduced from 13.62% as shown in the table to the left to 9.89% (right-side table). This constitutes a significant reduction and is not only appropriate in an environment characterized by increasing geopolitical tensions between the U.S. and China but also to navigate short-term turbulence in the industry.

https://static.seekingalpha.com/uploads/2021/12/23/49663886-1640312564473821.png

Source: Tables built with data from vaneck.com

Conversely, this reduction in TSMC’s assets has resulted in the portfolio being relatively more exposed to NVidia, thereby benefiting SMH’s price performance from the end of October (blue chart below). Now, whether its GPU-based computing power is produced for gaming or for crypto mining, the company should benefit from more sales in 2022, as long as it is able to source raw materials in a profitable way. Still, in the event that it is not able to do so, SMH as an ETF provides for investment diversification by encapsulating other plays in the chip ecosystem.

Another key player, Advanced Micro Devices (NASDAQ:AMD) could lessen chip supply woes by outsourcing some production to other foundries like Samsung Electronics (OTCPK:SSNLF), which is investing heavily in its foundry business in a bid to win more clients. Here, I also like VanEck cautiously increasing exposure to Intel (NASDAQ:INTC), from 4.66% to 5.14%, in light of the latter investing $20 billion to set up two plants in Arizona.

Description: https://static.seekingalpha.com/uploads/2021/12/23/49663886-164027899237196.png

Source: Table prepared by author from data in finance.yahoo.com

Furthermore, as seen by the dotted blue line, the VanEck’s fund is on an upwards trajectory and should reasonably cross the $325 level in the first quarter of 2022, with this forecast supported by data from the Worldwide Semiconductor Trading Statistics which predicts that the market is expected to increase by 25.6% in 2021, and continue to grow by 8.8% in 2022. This prediction does not take into consideration chip requirements to build augmented reality around Facebook’s social media platform, Microsoft’s (NASDAQ:MSFT) work-oriented “metaspaces”, and blockchain-powered metaverses like Decentraland, which require enormous computing power for millions of digital coins to be mined (produced) and where virtual plots of land are priced at millions of dollars.

Pursuing on a cautionary note, investors should beware of short term volatility, especially in the first week of January 2022 when the Semiconductor Industry Association (“SIA”) which represents a large chunk of the U.S and foreign chip firms covering all regions of the world will reveal sales figures for the month of November 2021. In this case, any global or even major regional shortcomings may cause a dip in SMH’s, in contrast to the more than 5% surge on December 6, when the SIA announced upbeat news for the month of October.

Finally, with fewer holdings compared to the SPDR S&P Semiconductor ETF (XSD) but bearing the same expense ratio, SMH carries more concentration risks, but, despite all the volatility grappling the stock market in 2021, it has outperformed its peer by 2.38% during the last year. Consequently, looking forward to 2022, with a higher dose of market volatility to be potentially induced by factors like more intensive “metatalks”, geopolitics, Omicron spread, and regulatory scrutiny impacting cryptocurrency like Bitcoin, SMH is a better choice for the longer term.

 

Why Harley-Davidson Stock Is Up By 12% Today

Harley-Davidson Stock Rallies After Announcement Of SPAC Deal For Its EV Unit LiveWire

Shares of Harley-Davidson gained upside momentum after the company announced that it will take its EV division LiveWire public via a SPAC deal. LiveWire is expected to trade under the ticker LVW.

The recent IPO of Rivian Automotive highlighted strong demand for EV producers. Investors and traders look ready to buy shares of anything EV-related regardless of valuation as they want to establish positions in the hot segment of the market.

It remains to be seen whether this trend will remain intact when the Fed begins to raise rates in 2022. At this point, investors are confident that Harley’s EV division will get higher valuation on a standalone basis.

What’s Next For Harley-Davidson Stock?

Analysts expect that Harley-Davidson will report earnings of $3.7 per share this year and $3.53 per share in the next year, so the stock is trading at roughly 12 forward P/E. This is cheap for the current market environment, but traders should keep in mind that the company’s earnings are projected to decline next year.

S&P 500 is close to all-time high levels, and the market remains focused on growth. In this environment, a cheap stock like Harley-Davidson may not get enough support from buyers if the company’s earnings are moving lower. In this light, it’s not surprising to see that Harley-Davidson stock lost upside momentum in May and has been under pressure until the announcement of the SPAC deal.

I’d also like to highlight a recent example of a similar move, when a company made an attempt to unlock value for shareholders by taking public its unit in the “hot” market segment. Intel stock enjoyed strong support after the company announced that it would take Mobileye public, but traders used higher prices as an opportunity to take some profits off the table. It remains to be seen whether Harley-Davidson stock will find itself under similar pressure, but it’s a risk that should be closely monitored.

For a look at all of today’s economic events, check out our economic calendar.

Why Intel Stock Is Up By 4% Today

Intel Stock Rallies As Traders Cheer The Company’s Decision To Take Mobileye Public

Shares of Intel gained strong upside momentum after the company announced that it would take Mobileye public.

Intel stated that Mobileye’s revenue should increase by more than 40% in 2021 compared to 2020. The company noted that it would maintain majority ownership of Mobileye and that Intel and Mobileye would “continue co-development of solutions and technologies to further both companies’ interests in the automotive tech market”.

The success of Rivian Automotive IPO and the recent rally of Apple stock, which was triggered by speculations about the company’s potential autonomous car, showed that market’s appetite for bets on the future of mobility remained very strong.

In this environment, Mobileye’s listing may unlock value for Intel shareholders. Intel stock lagged peers in the tech space, and it looks that management felt pressured to improve performance and show that the company is focused on delivering value to shareholders.

What’s Next For Intel Stock?

Analysts expect that Intel will report earnings of $5.28 per share in 2021 and $3.7 per share in 2022, so the stock is trading at roughly 14 forward P/E. This is cheap for a tech stock, but traders are mostly focused on growth when buying stocks in this market segment, so it’s not surprising to see that Intel stock has been under pressure for many months.

In order to break the downside trend, Intel stock needed upside catalysts, and it looks that Mobileye may serve as such a catalyst. Mobileye’s value was “hidden” inside Intel story, but now traders who were not comfortable with betting on Intel as a whole could purchase Mobileye shares. In such situations, the pool of potential investors increases, which should provide additional support to Intel stock.

It should be noted that Intel stock pulled back from $55 to $53 during today’s trading session as some traders decided to take profits off the table, but the stock should have a good chance to develop additional upside momentum in the upcoming trading sessions.

For a look at all of today’s economic events, check out our economic calendar.

Samsung to Spend $17 Billion on a New Chip Plant in Texas

Tech giant Samsung has concluded plans to build a semiconductor factory in Texas over the next few years.

Samsung’s New Chip Plant Will be in Taylor

South Korean tech conglomerate, Samsung, has announced earlier today that it will build a semiconductor factory in Taylor, near Austin, Texas. The plant will be built over the next three years as Samsung looks to increase its effort in manufacturing chips and to address the current global chip shortage.

The company announced that the plant would be a 5 square meter facility, and it will aim to boost the production of advanced logic semiconductors, used mostly in smartphones and computers. This latest development doesn’t come as a surprise as Samsung, like other major chip manufacturers, needs to boost its capacity.

There is currently a global chip shortage, which has affected numerous industries, including smartphones, computers, automobiles and more. Samsung said work is expected to commence in the first half of 2022, and it intends to start operating by the second half of 2024.

The $17 billion allocated to the plant is Samsung’s largest investment in the United States to date. The amount includes buildings, property improvements, machinery and equipment. Samsung has been planning this investment for the past few months.

Samsung Continues to Expand in the United States

The South Korean tech giant has been operating in the United States since 1978 and currently employs more than 20,000 people in the country. Its latest investment brings its total investment in the United States to more than $47 billion, the company added.

In addition to Samsung, other leading semiconductor manufacturers, including Intel, Nvidia, Qualcomm and AMD, could boost their chip production capacity over the coming years after President Joe Biden said earlier this year that domestic semiconductor manufacturing is a priority for his administration.

Kinam Kim, vice chairman and CEO of the Samsung Electronics Device Solutions Division, pointed out that the company is optimistic that the new facility will help Samsung to better serve the needs of its customers and boost the global semiconductor supply chain.

Dow Posts Record Closing High, Stocks Gain for 3rd Week; Dollar Dips

On the day, MSCI’s broadest gauge of global shares was flat, and the S&P 500 and Nasdaq ended lower.

Stocks came under pressure after Federal Reserve Chair Jerome Powell said the U.S. central bank was “on track” to begin reducing its purchases of assets.

Intel’s stock fell 11.7% and was among the biggest drags on the S&P 500. Late Thursday, Intel reported sales that missed expectations and pointed to shortages of chips holding back sales of its flagship processors.

American Express Co’s stock gained, boosting the Dow after the company beat profit estimates for the fourth straight quarter.

Next week brings reports from several key mega-cap names including Amazon.

The dollar pared losses after Powell’s comments, but the dollar index was last down 0.10% at 93.64, and is off from a one-year high of 94.56 last week.

“There’s a bit of a positioning unwind taking place. We’ve obviously seen a firmer dollar since the September” Fed meeting, said Mazen Issa, senior FX strategist at TD Securities in New York. “That also dovetails with the seasonal tendency for the dollar to soften into the end of the month.”

Investors also digested news that China Evergrande Group appeared to avert default with a source saying it made a last-minute bond coupon payment.

The Dow Jones Industrial Average rose 73.94 points, or 0.21%, to 35,677.02, the S&P 500 lost 4.88 points, or 0.11%, to 4,544.9 and the Nasdaq Composite dropped 125.50 points, or 0.82%, to 15,090.20.

The pan-European STOXX 600 index rose 0.46% and MSCI’s gauge of stocks across the globe shed 0.03%.

The MSCI index posted gains for a third straight week along with the three major U.S. stock indexes.

In the U.S. bond market, yields on longer-dated U.S. Treasuries slid.

The yield on 10-year Treasury notes was down 1.6 basis points to 1.659% after rising to a five-month high of 1.7064% late Thursday.

Oil rose and ended up for the week, near multi-year highs. Brent crude futures rose 92 cents to settle at $85.53 a barrel, and registered its seventh weekly gain. U.S. crude futures gained $1.26, to settle at $83.76, and rose for a ninth straight week.

Spot gold was up 0.6% at $1,793.82 per ounce.

Among cryptocurrencies, bitcoin last fell 2.21% to $60,841.96.

For a look at all of today’s economic events, check out our economic calendar.

(Additional reporting by Simon Jessop in London, and Karen Brettell, Sinead Carew and Herbert Lash in New York and Kevin Buckland in Tokyo; Editing by Hugh Lawson Mark Potter and David Gregorio)

Corporate Earnings To Drive Sentiment

This will a big week for equity markets as the third-quarter earnings season gets in full swing. Since corporate results officially kicked off last week, the reports have painted a positive picture with major US banks smashing analyst forecasts. Big names like Netflix, Tesla and Intel among many others will be under the spotlight this week as investors pay close attention to their earnings.

The key questions on the minds of investors will be what impact higher inflation, supply chain disruptions and labour shortages have on third quarter numbers. Should we have another solid week of results, this may inject S&P500 bulls with enough confidence to venture into uncharted territory beyond its all-time high.

Currency spotlight – GBPUSD

It has not been a great start to the week for sterling which has weakened against most G10 currencies. Bulls struggled to draw inspiration from Bank of England Governor Andrew Bailey’s hawkish remarks over the weekend with expectations rising over the Bank of England raising interest rates at its November meeting. However, concerns around economic growth and stagflation fears continue to weigh on the pound. All eyes will be on Governor Bailey’s speech this afternoon which could provide more hints on interest rate moves.

Looking at the technical picture, the GBPUSD is up this morning on the back of a weaker dollar. Prices are approaching the 100-day Simple Moving Average around 1.3810. A strong move above this point could push the GBPUSD towards the 200-day Simple Moving Average around 1.3850.

Commodity spotlight – Gold

Gold prices are advancing this morning, gaining roughly 0.7% thanks to a weaker dollar and lower Treasury yields. The precious metal is likely to be influenced by conflicting forces this week as investors juggle growth concerns and inflation fears amid prospects of tighter monetary policy.

Should the dollar continue to weaken, gold has the potential to rechallenge $1800, a level just above the 100-day and 200-day Simple Moving Average. In the meantime, intraday bulls seem to be in the driving seat with the first level of interest at $1784. If the 50-day Simple Moving Average offers resistance and weakens bullish momentum, prices could decline back towards $1760.

By Lukman Otunuga Senior Research Analyst

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Earnings Week Ahead: Steel Dynamics, NetFlix, Tesla, AutoNation and Honeywell in Focus

Earnings Calendar For The Week Of October 18

Monday (October 18)

IN THE SPOTLIGHT: STEEL DYNAMICS, STATE STREET

STEEL DYNAMICS: The U.S-based domestic steel producer and metal recycler is expected to report its third-quarter earnings of $4.62 per share, which represents year-on-year growth of over 800% from $0.51 per share seen in the same period a year ago.

The third-largest producer of carbon steel products in the United States would post revenue growth of over 114% to around $5.0 billion. The company has consistently beaten consensus earnings estimates for the last four quarters.

The company updated its earnings guidance for the third quarter of 2021 in September. For the period, earnings per share (EPS) were expected to be between $4.880-$4.920.

Steel Dynamics is nearing the end of a multi-year investment cycle centered around the construction of a new, state-of-the-art steelmaking mill which comes online in mid-2021, positioning STLD’s FCF generation to increase from 2021 onwards. The company has a proven track record of shareholder returns, and is poised to deliver greater returns for investors, especially through share buybacks,” noted Carlos De Alba, equity analyst at Morgan Stanley.

STATE STREET: The second oldest continually operating United States bank is expected to post third-quarter earnings of $1.92 per share, which represents year-on-year growth of over 30% from $1.45 per share seen in the same period a year ago. The revenue is expected to increase around 6% to $2.95 billion.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE OCTOBER 18

Ticker Company EPS Forecast
STT State Street $1.92
ACI AltaGas Canada $0.45
ELS Equity Lifestyle Properties $0.33
STLD Steel Dynamics $4.62
PACW Pacwest Bancorp $1.03
HXL Hexcel $0.08
SFBS ServisFirst Bancshares $0.96
FNB FNB $0.29
ACKAY Arcelik ADR $0.68
PHG Koninklijke Philips $0.62
ZION Zions Bancorporation $1.36

Tuesday (October 19)

IN THE SPOTLIGHT: NETFLIX, JOHNSON & JOHNSON

NETFLIX: The California-based global internet entertainment service company is expected to report its third-quarter earnings of $2.57 per share, which represents year-over-year growth of over 45% from $1.74 per share seen in the same period a year ago.

The streaming video pioneer would post revenue growth of over 16% to around $7.5 billion. In the last two years, the company has beaten earnings per share (EPS) estimates just thrice with a surprise of nearly 21%.

NetFlix’s better-than-expected third-quarter earnings results could help the stock hit new all-time highs. The company’s shares surged over 17% so far this year and it hit a record high of $646.84 on October 7.

NetFlix (NFLX) stock has emerged from its slump, jumping ~22% in <2 months. Estimates have remained relatively flat and NFLX now trades at 8.5x 2022E Rev, the top of its 3-year range. We expect 3Q net adds of 3.5MM and a 4Q guide of ~7-8MM. Squid Games has demonstrated the impact of a successful international strategy and, if done right, games like Oxenfree could achieve a similar Zeitgest moment. We remain ‘Buy’ rated with a price target of $737, representing 8.5x 2023 JEF Rev,” noted Andrew Uerkwitz, equity analyst at Jefferies.

JOHNSON & JOHNSON: One of the world’s largest and most comprehensive manufacturers of healthcare products is expected to post third-quarter earnings of $2.36 per share, which represents year-on-year growth of over 7% from $2.20 per share seen in the same period a year ago. The revenue to expected to increase over 12% to around $23.6 billion.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE OCTOBER 19

Ticker Company EPS Forecast
FMBI First Midwest Bancorp $0.42
DOV Dover $1.85
SBNY Signature Bank $3.70
MAN ManpowerGroup $1.91
JNJ Johnson & Johnson $2.36
PM Philip Morris International $1.56
BK Bank Of New York Mellon $1.01
TRV Travelers Companies $1.91
ERIC Ericsson $0.17
FITB Fifth Third Bancorp $0.91
SYF Synchrony Financial $1.51
KSU Kansas City Southern $2.09
CBSH Commerce Bancshares $0.98
ONB Old National Bancorp $0.36
AMX America Movil Sab De Cv Amx $6.43
AMOV America Movil Sab De Cv $0.31
FULT Fulton Financial $0.33
NFLX Netflix $2.57
ISRG Intuitive Surgical $1.17
CNI Canadian National Railway USA $1.42
OMC Omnicom $1.37
UAL United Airlines Holdings -$1.51
IBKR Interactive Brokers $0.75
WTFC Wintrust Financial $1.52
WDFC Wd 40 $1.24
UCBI United Community Banks $0.66
HAL Halliburton $0.28
SNV Synovus Financial $1.07
PG Procter & Gamble $1.59
IRDM Iridium Communications -$0.02
RNST Renasant $0.66

Wednesday (October 20)

IN THE SPOTLIGHT: TESLA

TESLA: The California-based electric vehicle and clean energy company is expected to report its third-quarter earnings of $1.52 per share, which represents year-over-year growth of 100% from $0.76 per share seen in the same quarter a year ago.

The high-performance electric vehicle manufacturer would report revenue of $13.16 billion. The electric vehicle producer has beaten earnings three times in the last four quarters.

“We expect Tesla will be upbeat in 3Q21 given record deliveries beating estimates by ~20k announced in early October. Furthermore, the company announced record sales of 56,000 in China with a total of 133,248 or 55% of total deliveries for the quarter coming from their Shanghai facility,” noted Jeffrey Osborne, equity analyst at Cowen.

“We look forward to management’s commentary on Tesla’s internal chip production strategy and capacity expansion plans. We also look forward to an update on the opening of the Berlin Gigafactory. Additionally, we look forward to an update on Tesla’s 4680 cells and the incremental deployment of its beta FSD. Finally, we look forward to an update on the timeline for Semi and Cyber truck release.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE OCTOBER 20

Ticker Company EPS Forecast
ASML ASML $4.61
ABT Abbott $0.94
NEE NextEra Energy $0.73
BIIB Biogen $4.14
NDAQ Nasdaq Omx $1.71
NTRS Northern $1.67
BKR Baker Hughes Co $0.21
MTB M&T Bank $3.50
MKTX MarketAxess $1.46
LAD Lithia Motors $9.24
FHN First Horizon National $0.35
KNX Knight Transportation $1.06
BOKF BOK Financial $1.78
NEP Nextera Energy Partners $0.61
WSO Watsco $3.49
UNF UniFirst $1.81
SCL Stepan $1.42
TSLA Tesla $1.52
CSX CSX $0.38
CCI Crown Castle International $0.77
DFS Discover Financial Services $3.49
PPG PPG Industries $1.59
EFX Equifax $1.73
GGG Graco $0.64
REXR Rexford Industrial Realty $0.12
OMF OneMain Holdings $2.30
FR First Industrial Realty $0.22
THC Tenet Healthcare $1.03
LSTR Landstar System $2.46
SLM SLM $0.18
VMI Valmont Industries $2.49
SLG SL Green Realty -$0.12
LVS Las Vegas Sands -$0.18
SEIC SEI Investments $0.96
GL Globe Life Inc $1.90
TBK Triumph Bancorp $1.08
RUSHA Rush Enterprises $0.98
RLI RLI $0.59
UMPQ Umpqua $0.44
CNS Cohen & Steers $0.89
FTI FMC Technologies $0.02
TCBI Texas Capital Bancshares $1.10
STL Sterling Bancorp $0.52
ANTM Anthem $6.39
LRCX Lam Research $8.23
IBM IBM $2.53
KMI Kinder Morgan $0.24
URI United Rentals $6.84
CFG Citizens Financial $1.15
CMA Comerica $1.64
EXPO Exponent $0.40
MTG MGIC Investment $0.44
WGO Winnebago Industries $1.96
CVBF CVB Financial $0.37
CP Canadian Pacific Railway USA $0.93
MSM MSC Industrial Direct $1.27
UFPI Universal Forest Products $1.55
FCFS FirstCash $0.81
SNBR Scs Group Plc $1.43

Thursday (October 21)

IN THE SPOTLIGHT: AUTONATION

The Fort Lauderdale-based automotive retailer AutoNation is expected to report its third-quarter earnings of $4.16 per share, which represents year-over-year growth of about 75% from $2.38 per share seen in the same period a year ago.

In the last four consecutive quarters, on average, the company has delivered an earnings surprise of over 47%. The automotive retail giant would post revenue of $6.5 billion.

“We are optimistic about the trajectory for new CEO, Mike Manley, previously in various leadership roles at FCA and Stellantis where he demonstrated leadership of highly complex organizations going through transformation changes in scale, scope and technology,” noted Adam Jonas, equity analyst at Morgan Stanley.

“Omni-channel strategy unclear and may result in loss of share. For New Vehicles, historically, market share & gross profit per unit have declined. For Used Vehicles, the standalone used car business model was unsuccessful in the late 1990s. The business mix/growth/margins are similar to the other traditional auto dealers, and the stock trades at a discount to its historical average and vs the dealer average.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE OCTOBER 21

Ticker Company EPS Forecast
CROX Crocs $1.84
IQV IQVIA Holdings Inc $2.12
WAL Western Alliance Bancorporation $2.23
PSMT PriceSmart $0.73
SIVB SVB Financial $5.53
OZK Bank Ozk $0.97
CE Celanese $4.73
FFBC First Financial Bancorp $0.52
INTC Intel $1.11
TPH Tri Pointe Homes $0.91
OLN Olin $1.98
WRB W.R. Berkley $0.95
CSL Carlisle Companies $2.75
SNAP Snap -$0.10
MAT Mattel $0.72
VICR Vicor $0.46
CMG Chipotle Mexican Grill $6.30
ASB Associated Banc $0.44
INDB Independent Bank $1.02
GBCI Glacier Bancorp $0.71
SAP SAP $1.68
LUV Southwest Airlines -$0.27
VLO Valero Energy $0.86
WHR Whirlpool $6.11
PBCT People’s United Financial $0.33
AAL American Airlines -$1.09
FCX Freeport-McMoran $0.82
ALK Alaska Air $1.05
GPC Genuine Parts $1.64
AN AutoNation $4.16
SASR Sandy Spring Bancorp $1.09
ABB ABB $0.37
BCS Barclays $0.37
ATLCY Atlas Copco ADR $0.47
DHR Danaher $2.14
FAF First American Financial $1.82
BKU BankUnited $0.87
MMC Marsh & McLennan Companies $1.00
IPG Interpublic Of Companies $0.49
T AT&T $0.78
ALLY Ally Financial $1.95
WBS Webster Financial $1.08
NUE Nucor $6.93
UNP Union Pacific $2.49
EEFT Euronet Worldwide $1.42
TRN Trinity Industries $0.18
SAFE 3 Sixty Risk $0.35
GATX GATX Corp $1.07
KEY KEY $0.56
RCI Rogers Communications USA $0.81
PPBI Pacific Premier Bancorp $0.82
EWBC East West Bancorp $1.51
BX Blackstone $0.89
POOL Pool $3.85
DGX Quest Diagnostics $2.71
ALLE Allegion $1.30
HOMB Home Bancshares $0.44
TSCO Tractor Supply $1.64
SNA Snap-On $3.37
SON Sonoco Products $0.90
WSFS Wsfs Financial $0.88
RHI Robert Half International $1.40

Friday (October 22)

IN THE SPOTLIGHT: HONEYWELL INTERNATIONAL

The company which manufactures parts for planes made by Boeing and Airbus SE, Honeywell, is expected to report its third-quarter earnings of $1.99 per share, which represents year-over-year growth of about 28% from $1.56 per share seen in the same quarter a year ago.

In the last four consecutive quarters, on average, the company has delivered an earnings surprise of about 5%. The Charlotte, North Carolina-based company would post revenue growth of about 12% to $8.7 billion.

Last week, the company lifted its guidance for business jet deliveries and said the industry has almost completely shaken off the effects of the COVID-19 pandemic.

The worldwide technology and manufacturing company in its 30th annual Global Business Aviation Outlook forecasts up to 7,400 new business jet deliveries worth $238 billion from 2022 to 2031, up 1% in deliveries from the same 10-year forecast a year ago.

“We think that Honeywell (HON) stock currently is a better pick compared to Rockwell Automation stock, despite Rockwell’s revenue growing at a faster pace over the recent years. Honeywell trades at about 4.4xtrailing revenues, compared to 5.1x for Rockwell. Although both the companies saw a decline in revenue due to the pandemic, Rockwell has seen a sharp recovery aided by new orders and impact of ASEM, Kalypso, and Fiix acquisitions,” noted equity analysts at TREFIS.

Honeywell, on the other hand, is still seeing slower revenue growth, primarily due to its exposure to the aerospace segment, which was one of the worst-hit businesses during the pandemic. However, there is more to the comparison. Let’s step back to look at the fuller picture of the relative valuation of the two companies by looking at historical revenue growth as well as operating margin growth.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE OCTOBER 22

Ticker Company EPS Forecast
VFC VF $1.16
GNTX Gentex $0.40
SAM Boston Beer $4.26
IHG Intercontinental Hotels $0.20
ALV Autoliv $0.82
AXP American Express $1.76
SLB Schlumberger $0.35
ROP Roper Industries $3.83
HCA HCA $3.96
CLF Cliffs Natural Resources $2.21
HON Honeywell International $1.99
RF Regions Financial $0.53
STX Seagate Technology $2.21
AIMC Altra Industrial Motion $0.82