S&P 500 Drops 2.5% As Powell Says It Is Premature To Pause Rate Hikes

Key Insights

  • Powell’s comments pushed stocks to weekly lows. 
  • The Fed remains ready to raise rates aggressively. 
  • A move below the support at 3760 will push S&P 500 towards the next support level at 3725.

S&P 500 Retreats As Powell Stays Hawkish

S&P 500 found itself under strong pressure and moved towards the 3760 level after Powell’s comments at the press conference. Nasdaq Composite was down by 3.36%.

Today, the Fed raised the interest rate by 75 basis points, in line with the analyst consensus. The original reaction to the FOMC statment was positive as the Fed noted that it would take into account the lags with which monetary policy affected economic activity and inflation. Traders interpreted this statement as a sign that Fed would move cautiously after raising rates aggressively.

However, Powell’s comments indicated that the Fed remained hawkish. The Fed Chair said that it was very premature to pause rate hikes. He also promised that the Fed would stay the course until the job was done.

Powell noted that over-tightening would not be a big problem as the Fed had the tools to provide significant support to the economy. At the same time, raising interest rates to an insufficiently restrictive level could lead to entrenched inflation and hurt the economy. The Fed Chair also noted that soft landing chances have narrowed.

Not surprisingly, these comments put significant pressure on the stock market. The sell-off was led by stocks like Apple, Microsoft, Alphabet, Amazon, and Tesla, which were down by 3-5% in today’s trading session.

After the market close, traders focused on the Qualcomm report. The company reported revenue of $11.4 billion and adjusted earnings of $3.13 per share, mostly in line with the analyst estimates. The company cut its guidance and expects to report revenue of $9.2 billion – $10 billion and adjusted earnings of $2.25 – $2.45 per share in the first quarter of the fiscal year 2023. The market did not like the guidance cut, and the stock was down by more than 5% in the post-market session.

S&P 500 Tests Support At 3760

S&P 500

S&P 500 is currently trying to settle below the support level at 3760. In case this attempt is successful, it will move towards the next support, which is located at 3725. A successful test of the support at 3725 will open the way to the test of the support at 3690.

On the upside, S&P 500 needs to get back above the 3760 level to have a chance to gain upside momentum in the near term. The next resistance level is located at 3805. If S&P 500 moves above this level, it will head towards the resistance at 3835.

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

S&P 500 (SPY) Rebounds After Testing New Lows

Key Insights

  • S&P 500 found support below the 3600 level and moved towards the resistance at 3640.
  • The rebound is broad as traders buy stocks from various industries near yearly lows. 
  • A move above 3640 will push S&P 500 towards the resistance at 3675.

S&P 500 Gains Ground As Treasury Yields Pull Back

S&P 500 gained upside momentum after testing new lows near 3570 as traders rushed to buy stocks after the strong pullback.

The yield of 10-year Treasuries failed to settle above the 4.00% level and pulled back below 3.90%, providing additional support to stocks.

While the rebound is broad, it is important to note that semiconductor stocks remain under pressure. Qualcomm, Qorvo, ON Semiconductor and other stocks in this market segment are moving lower as traders react to the recent export controls imposed on China.

Meta and NVIDIA tested new lows today but managed to move away from yearly lows amid a broad rebound in the stock market.

From a big picture point of view, today’s rebound looks technical. S&P 500 moved from the 3800 level to 3575 in just four trading sessions, so it’s not surprising to see that some traders were ready to buy stocks at a material discount to recent levels.

The market will soon get tested by the earnings season. Big banks, including JP Morgan Chase, Wells Fargo, Citigroup, and Morgan Stanley, will present their results at the end of this week, and their reports will have a significant impact on market mood. Trading may stay choppy ahead of these important reports.

S&P 500 Tests Resistance At 3640

S&P 500

S&P 500 managed to settle back above 3615 and is trying to settle above the next resistance level at 3640. In case this attempt is successful, it will head towards the resistance at 3675. A move above the resistance at 3675 will push S&P 500 towards the 3700 level.

On the support side, the nearest support level for S&P 500 is located at 3615. If S&P 500 declines below this level, it will move towards the next support level at 3585. A successful test of the support at 3585 will push S&P 500 towards the next support level at 3560.

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

Uncertainty Remains in the Chip Industry

Even though US inflation eased slightly in July, especially on lower oil prices, the CPI index is still extremely high at 8.5% year over year. As inflation continues to plague numerous industries across the globe, the impact it’s having on the semiconductor industry continues to cause concern as experts fear it may be heading into a possible downturn.

This past Tuesday, the 9th of August, Micron Technology Inc, the U.S Semiconductor manufacturer, dramatically reduced its current-quarter revenue forecast, citing a recent slowdown in the demand for personal computers and smartphones. Meanwhile, on the Monday prior, the U.S tech company Nvidia also advised of a decline in its gaming business, which has caused its second-quarter revenue to drop by a dramatic 19%.

In immediate light of the news, Nvidia’s shares dropped 8%, and on Tuesday, Micron’s shares fell 5.7%, pushing the Philadelphia SE Semiconductor index, composed of 30 members who are largely engaged in the creation of semiconductors as well as their distribution, manufacturing, and retail sales, down 4.3%. Since then, they’ve all bounced back to their pre-fall levels. Sony, Advanced Micro Devices, Qualcomm, and Intel have also all reported a softening in demand.

Daily charts of Nvidia and Micron – Source: ActivTrader platform

Micron has even warned of a negative free cash flow situation in the next few months as a result, a condition not seen since the beginning of 2020. The company now has plans to spend less on new manufacturing plants and equipment and is cutting the number of chips they create in response, to ensure the integrity and stability of their chip prices.

The company’s chief business officer, Sumit Sadana, told Reuters in late June that the shift from high to low demand had been “bigger than anyone was anticipating.” And that the changes would already be rippling through the ecosystem.

A highly cyclical business

In the last few months, the decline in orders has mostly been seen in chips that are used in technologies for smaller consumer products and gadgets, but more recently it’s been broadening to other markets too, including industrial, automotive, and data centers.

Some companies were understandably banking on a surge in demand post-covid, with the population supposedly heading back to work and experiencing better economic conditions, but inventories of chips and accessories continue to pile up in factories as sales stagnate.

After years of shortages across the globe, when wait times for certain chips were around six months at one point, and major companies like Apple lost out on countless millions of dollars worth of sales as a result, investors are now anxiously watching the industry as it experiences a sharp market correction, the likes of which have not been seen in around a decade.

During the height of the pandemic, smartphones, personal computers, and other technology were in unusually high demand, as the population moved to working and studying from their own homes. Naturally, companies worked hard to meet this new boom in demand, putting more and more capital into technology, manufacturing, and data centers to support the massive shift in consumer spending.

Now it seems that the tables have turned since the worst of the pandemic has apparently passed, and an oversupply of stock and other expenditures for many companies may cause consistent losses in the coming months while they make adjustments and/or divest.

As the cost of everyday living also skyrockets as a result of growing inflation, and interest rates continue to be increased worldwide, consumers are re-working their household budgets and weighing up the importance of spending their disposable income on leisure activities such as gaming and keeping up-to-date with new devices and technology if what they have is already working fine.

Innovation helps growth

One company that has apparently skirted the latest downward industry trends, according to their July earnings report, is the Taiwan Semiconductor Manufacturing Co. (TSMC). The company boasted its second record-breaking month with a 6.2% sales bump in July above the previous month, with US$6.23billion.

Analysts credit the revenue increase to the superior processes that have been developed to meet the demand for emerging technologies in computing and automotive electronics, such as the 5-nanometer and 7-nanometer processes currently in use, and the new 3-nanometer and 2-nanometer processes to be developed and produced in the near future.

U.S set to boost local production

Despite the current waning demand, the U.S will now provide $52.7 billion in subsidies to boost its local production, research, and technology in a bill signed by President Biden on Tuesday the 9th of August. The bill aims to push the U.S to be more competitive with China and will affect industries including automotive, white goods, video games, and weapons systems, among others, while also creating thousands of jobs.

Companies out of Taiwan, such as the Taiwan Semiconductor Manufacturing Co. were responsible for around 60% of chip foundry revenue around the globe last year, and there are fears that the U.S is far too dependent on them for its key industries.

President Biden called it “a once-in-a-generation investment in America itself.” But skeptics argue that the grants for private businesses would be treated as blank checks. As expected, many of the major U.S Semiconductor company CEOs were present at the signing.

Best Undervalued Stocks to Buy Now for August 2022

When this happens, it can pull in even the best stocks. That means the bad, unprofitable stocks and the best-in-breed stocks are sold off. They become undervalued – and that’s bargain time for long-term investors.

Markets and Big Money in the Last Six Months

When trying to make sense of markets, I look to data. So, what does the data say?

Well, my research firm, MAPsignals, follows the Big Money because we believe it moves markets. We created the Big Money Index (BMI), a 25-day moving average of Big Money buys and sells. It recently hit oversold levels twice (below the green line), meaning selling has been driving down markets big time:

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Oversold territory doesn’t occur often. But when it has in the past, it’s almost always been a bullish indicator. For a recent example, look at what happened after the BMI hit oversold in early 2020 (the start of the pandemic) – a monster rally:

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Going back to 2011, history suggests that oversold BMI instances indicate being at or near market bottoms. Looking at the chart below, we can see that the BMI hitting the green line often corresponds with a market low. We can also see how rallies tend to follow:

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While these metrics are not guarantees, history suggests markets rise over time after the BMI hits oversold. So, this puts us on the lookout for quality stocks that will rise as buyers return and markets trend upward again. We want fundamentally sound companies with good histories and discounted prices. Right now, that points to the technology, discretionary, financial, and staples sectors. Here are our best undervalued stocks to buy now for August 2022: TGT, SBUX, LOW, MA, and QCOM.

Target Corporation (TGT) Analysis

Up first is Target, which is one of the biggest retail chains around.

Even though great companies’ stocks can be volatile, like TGT over the past year, they’re worthy of attention, especially on pullbacks. Check out Target:

  • Year-to-date performance (-31.0%)
  • Recent Big Money sell signals

To show you what our Big Money signals look like on a stock, have a look at all the buys and sells in TGT over the past year:

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Looking more broadly, Target has been a high-quality stock for years, and it pays a current dividend of more than 2.8%. The blue bars in the chart below show when TGT was a high-ranking Top 20 stock likely being bought by a Big Money player, according to MAPsignals. When you see a lot of blue, it can be very bullish:

Chart Description automatically generated

Source: www.MAPsignals.com

Those blue signals indicate Big Money buying and solid fundamentals. As you can see, Target’s sales growth has been strong and the expected earnings outlook is solid, making it worthy of attention:

  • 3-year sales growth rate (+12.2%)
  • 2-year vs. 1-year EPS growth estimate (+41.3%)

Starbucks Corporation (SBUX) Analysis

Next up is Starbucks, the coffee giant.

Check out these technicals for SBUX:

  • Year-to-date performance (-29.0%)
  • Recent Big Money sell signals

It’s been getting sold heavily, creating a big downtrend:

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Now let’s look long-term. Below are the Top 20 buy signals for Starbucks since 2004. The Big Money has been on SBUX for a while and loves its dividend (currently near 2.4%):

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Source: www.MAPsignals.com

Let’s look under the hood. As you can see, Starbucks has grown sales well and the outlook for future earnings looks good:

  • 1-year sales growth rate (+23.6%)
  • 2-year vs. 1-year EPS growth estimate (+19.8%)

Lowe’s Companies, Inc. (LOW) Analysis

Another potential growth name is Lowe’s, the enormous home improvement retailer.

Strong candidates for growth usually have Big Money buying the shares. Lowe’s has historically had that. Until December 2021, it was a gem. But it’s seen big selling since, which could be an opportunity:

  • Year-to-date performance (-27.0%)
  • Historical Big Money signals

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Below are the blue Top 20 Big Money buy signals LOW has made since 1990. It’s clearly a Big Money favorite. That’s the JUICE!

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Source: www.MAPsignals.com

Now let’s dig deeper. Sales growth for Lowe’s has been impressive. I expect more of the same in the coming years. Its earnings estimate and profit margin bode well for the future too. LOW also pays a current dividend of more than 2.2%.

  • 1-year sales growth rate (+7.4%)
  • 2-year vs. 1-year EPS growth estimate (+8.8%)
  • Profit margin (+8.7%)

Mastercard Corporation (MA) Analysis

Number four on the list is Mastercard, the huge credit card company.

Here are the technicals important to me:

  • Year-to-date performance (-5.0%)
  • Historical Big Money signals

MA has chopped along over the past year, with lots of Big Money selling and buying:

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But Mastercard is a Big Money favorite, and it pays a current dividend of almost 0.6%. Below are the Big Money Top 20 buy signals for MA since 2006:

Chart, histogram Description automatically generated

Source: www.MAPsignals.com

Let’s look under the hood. Despite the price slide, Mastercard’s sales and earnings have jumped quite a bit:

  • 1-year sales growth rate (+23.4%)
  • 3-year EPS growth rate (+19.8%)

QUALCOMM, Inc. (QCOM) Analysis

Our last growth candidate is  QUALCOMM, which is a large semiconductor company.

Last winter it was being bought up. But since then there’s been lots of Big Money selling as technology stocks have been slammed:

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Check out these technicals:

  • Year-to-date performance (-19.0%)
  • Historical Big Money signals

But QCOM is a high-quality stock since it’s made the MAPsignals Top 20 report. Right now, it pays a current dividend of more than 2.0% and it’s on a pullback. So, QCOM could be an opportunity. As you can see, it’s been a Big Money favorite for years:

Chart Description automatically generated

Source: www.MAPsignals.com

Now let’s look below the surface a bit. Sales have been growing and the profit margin is solid:

  • 1-year sales growth rate (+42.6%)
  • Profit margin (+26.9%)

Bottom Line and Explanatory Video

 

TGT, SBUX, LOW, MA, and QCOM represent the top undervalued stocks for August 2022. They’ve been sold a lot lately…perhaps too much. Strong, fundamentally-sound stocks seeing near-term sell signals are worthy of extra attention because of their long-term potential.

To learn more about MAPsignals’ Big Money process please visit: www.mapsignals.com

Disclosure: the author holds long positions SBUX and QCOM in personal and managed accounts, and LOW in managed accounts.

Contact

https://mapsignals.com/contact/

Take Aggressive NVIDIA Profits

NVIDIA Corp. (NVDA) posted outstanding gains last week, lifting more than 25% to a four-week high. The turnaround erupted at the 200-day moving average, raising hopes for a sustained bottom and end of the downtrend that started in November. However, long-term cycles are refusing to cooperate, suggesting a buzzsaw of selling pressure as price action navigates the 270s and 280s.

Mixed Semiconductor Industry Outlook

PHLX Semiconductor Index is flashing the same message, squeezing higher after a rapid descent to a 10-month low. Supply chain issues persistent throughout the industry while the Russian invasion will make it harder to obtain some fabrication materials. China’s obsession with Taiwan isn’t helping matters because that small nation dominates the world’s foundry market, building chips for tech giants that include NVDA, Apple Inc. (AAPL), and Qualcomm Inc. (QCOM).

Cowen analyst Matthew Ramsay examined the company’s long-term growth last week, noting “As NVIDIA has transformed from a GPU hardware company to an accelerated computing HW/SW platform provider, and now we would argue into an application-specific compute (including NPU and CPUs) and software ecosystem, sizing these opportunities has inevitably become more complex… Given the significant pullback YTD and the correspondingly more attractive valuations, we make NVIDIA our new top pick”.

Wall Street and Technical Outlook

Wall Street consensus stands at an ‘Overweight’ rating based upon 30 ‘Buy’, 6 ‘Overweight’, 6 ‘Hold’, 1 ‘Underweight’, and 2 ‘Sell’ recommendations. Price targets currently range from a low of $210 to a Street-high $400 while the stock closed Friday’s session about $75 below the median $350 target. Targets and ratings have barely budged in the last three months because Omicron and Ukraine have made it harder for the stock to resume its long-term leadership role.

NVIDIA settled near 150 in September 2020 and carved a narrow trading range, ahead of a May 2021 breakout that hit an all-time high at 346.47 in November. It broke down from a small head and shoulders top in January, entering a correction that reached the 200-day moving average a few weeks later. The stock has been testing that support level for the last two months, lifting weekly relative strength readings into a buy cycle. However, the bearish monthly cycle remains firmly in place, forecasting mixed action into the second quarter.

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. 

Best Oversold ETFs to Buy Now for March 2022

When looking at Big Money ETF buys and sells below from MAPsignals.com, the deep red bars on the right side of the chart reflect the recent selling. In fact, this is the most ETF selling we’ve seen since the COVID-19 pandemic hit markets hard in March 2020:

Source: www.mapsignals.com

When markets move like this, the hysteria can entrap great assets and cause them to be sold off. To identify those “unfairly hit,” long-term investors need to look for ETFs (and their stocks) with great setups.

Remember: ETFs are just baskets of stocks, so we need to look at them in detail. MAPsignals specializes in scoring more than 6,500 stocks daily. If I know which stocks compose the ETFs, I can apply stock scores to the ETFs. Then I can rank them all from strongest to weakest.

Let’s get to the five best oversold ETFs to buy for March 2022.

#1 Consumer Discretionary Select Sector SPDR Fund (XLY)

This ETF has been getting hammered this year. That isn’t surprising given the overall growth slide and other headwinds. XLY has been caught in the flood. But Big Money has been buying XLY in chunks over the last year:

Despite the recent decline, XLY holds several solid stocks. One example is its second-largest holding, Telsa Inc. (GOOGL). Here is the Big Money action on GOOGL since 2017 – look at that rise:

#2 Vanguard Information Technology ETF (VGT)

When there are unusually big sells on otherwise fundamentally strong ETFs, it’s usually a time to buy. That could be the case now with VGT. It holds some of the biggest, most successful tech stocks out there. Their ability to bounce back is appealing, as is the growth of VGT:

One great stock among the VGT top holdings is NVDIA Inc. (NVDA). It’s a long-time Big Money favorite with awesome fundamentals, as the multi-year Top 20 chart below shows:

#3 iShares U.S. Home Construction ETF (ITB)

If you want to ride the U.S. housing wave, ITB is a reliable vehicle. Big Money likes this construction ETF because it holds tremendous housing stocks. Given its quality, I think this could be a great opportunity to get a solid ETF at a discount price:

The largest holding within ITB is D.R. Horton, Inc. (DHI). It’s an outlier stock that has been a Top 20 Big Money buy many times since 2015:

#4 iShares Semiconductor ETF (SOXX)

Semiconductors are in pretty much everything modern humans use daily, and they’re in short supply right now, so demand should be strong for a while. SOXX is full of solid growth companies under selling pressure and could be an opportunity:

One company within this ETF that’s been uneven but could still flourish is Qualcomm Inc. (QCOM). Big Money loves it. The multi-year QCOM chart of Big Money activity says don’t bet against it:

#5 First Trust Cloud Computing ETF (SKYY)

This ETF has been dropping since November 2021, but it still has lots of potential. SKYY holds solid companies focused on a critical business need with big growth potential. So, it may still be an outlier.

One great stock in SKYY is Alphabet Inc. Class A (GOOGL), Google’s parent company. Like many tech stocks, it’s fallen back lately, but it still has a phenomenal long-term trend and is SKYY’s top holding. Looking at the Top 20 buys, it’s clear Big Money has loved GOOGL since it began trading:

Here’s a Big Money recap:

  • When Big Money buying pours in, stocks tend to go up
  • Red selling on great quality can be a tremendous opportunity
  • Repeated buying usually means outsized gains

Fair or not, all these ETFs have been hit hard this year due to their growth-oriented focus. But that doesn’t change the fact they hold great stocks that could rise in the future. That’s why I think these oversold ETFs represent great potential bargains.

The Bottom Line

XLY, VGT, ITB, SOXX, and SKYY are my best oversold ETFs to buy now for March 2022. These picks are poised to do well going forward, in my opinion, largely because they each hold great stocks. They may be experiencing selling pressure, but on quality assets, deep red days often prove to be fire sales over time.

To learn more about MAPsignals’ Big Money process please visit: www.mapsignals.com

Disclosure: at the time of publication, the author holds no positions in XLY, VGT, ITB, SOXX, SKYY, TSLA, NVDA, or DHI, but does have long positions in QCOM and GOOGL in managed or personal accounts.

Investment Research Disclaimer

https://mapsignals.com/contact/

 

Brace Yourself For Another Wild Month In Stock Markets

For the year, the Dow is down -6%, the S&P 500 is down just over -9%, and the Nasdaq has lost -14.7%. The previous record-holder is January 2009, an ugly moment for the economy, when the stock market fell -8.6%. In addition, the VIX – aka the CBOE Volatility Index – has actually dropped back to around 31 after topping 37 earlier this week, its highest point since November 2020.

Keep in mind, the index isn’t registering anywhere close to levels reached during other periods of “extreme” volatility. For example, the index, which is measured between zero and 100, hit its highest point of almost 83 during the financial crisis in 2008. Its most extreme point during the pandemic was around 66 in March 2020. So, by comparison, this week’s volatility has been rather mild.

Federal Reserve

Some insiders equate the wild swings in stock prices to investors, particularly “big money,” trying to establish a new baseline for stock valuations minus the Fed’s easy money policies that have driven a massive amount of cash into markets since the pandemic began in 2020.

At its height, the Fed was pumping as much as +$120 billion per month into the system via its asset purchase program, ballooning its balance sheet to now nearly $9 trillion.

At the same time, the Fed has held its benchmark rate at near-zero and, before that, hadn’t even attempted to raise rates since 2018, and then only briefly. The last full-cycle of rate hikes was 2015. What’s more, investors haven’t really had to factor for inflation since the early 90s and it hasn’t been this high since the 80s.

Bottom line, whatever the new “normal” ends up looking like, it will be dramatically different from the pre-pandemic investing landscape. I’ve heard several large stock traders saying it seems to be the return of Alpha instead of the race to levered Beta. I hear others on Wall Street referencing it to a bit of league recreational youth baseball team where everybody now gets an award simply for participation, but then kids run into a rude awakening when performance really starts to matter.

It feels like we are there in the stock market; every business that was coming into the market was simply being rewarded with participation points, now people are starting to keep a real scorebook and counting the strikeouts and runs scored.

Economy still roars

The good news is that the U.S. economy continues to roar. Historically, a combination of moderate inflation and moderate interest rates has led to some of the biggest boom times for U.S. Last week, the Commerce Department said Q4 Gross Domestic Product (GDP) grew at an annualized rate of +6.9%, stronger than Q3’s +2.3% and well above Wall Street expectations of around +5.7% growth.

Consumer spending climbed at a +3.3% annual pace led by a +4.7% increase in services spending. But the real stand out was private investment which rocketed +32% higher, boosted by a surge in business inventories as companies stocked up to meet higher customer demand. Rising inventories, in fact, contributed nearly +5% to Q4 GDP growth.

On the one hand, the inventory build is positive because it indicates an easing of supply chain dislocations that should in turn help with inflation pressures. On the other hand, many economists note that the big boost from retailer and wholesaler restocking is not likely to be repeated.

Companies will also likely start to unwind at least some of that inventory in the quarters ahead, which could drag overall 2022 GDP, especially if consumer spending also drops off. And investors are more closely tracking consumer behavior as inflation continues to rise.

With consumer spending accounting for about 70% of the U.S. economy, any signs that belts are tightening or moods are getting overly pessimistic will likely set off some alarm bells.

Data to watch

Turning to next week, it will be another busy one for both key economic data as well as earnings. The main economic data highlight will be the January Employment Situation on Friday. Other key data includes ISM Manufacturing, Construction Spending, and the JOLTS report on Tuesday; ADP’s private payrolls report on Wednesday; Productivity & Costs, Factory Orders, and the ISM Non-Manufacturing Index on Thursday.

Earnings wise, results are due from NXP Semiconductor and Trane on Monday; Advanced Micro Devices, Alphabet, Amgen, Chubb, Electronic Arts, Exxon, General Motors, Gilead Sciences, Match Group, PayPal, Sirius XM, Starbucks, and UPS on Tuesday; AbbVie, Aflac, Allstate, Boston Scientific, CNH, Corteva, D.R. Horton, Ferrari, Humana, Johnson Controls, Meta (Facebook), MetLife, Novartis, Novo Nordisk, Qualcomm, Siemens, Thermo Fisher, TMobile, and Waste Management on Wednesday; Activision Blizzard, Amazon, Biogen, Carlyle Group, Check Point, Cigna, Clorox, ConocoPhillips, Deckers Outdoors, Eli Lilly, Estee Lauder, Ford, Hanesbrands, Hershey, Honeywell, Ingredion, Merck, Pinterest, Quest Diagnostics, Royal Dutch Shell, Snap, SnapOn, Wynn Resorts, and Xylem on Thursday; and BristolMyersSquibb, CBOE, Phillips 66, Regeneron, and Sanofi on Friday.

Bottom line, brace for another huge week of extreme volatility.

Wall Street Week Ahead Earnings: Alphabet, PayPal, Exxon Mobil, Meta, Qualcomm and Amazon in Focus

Investors will focus on December quarter earnings for stocks that are economically sensitive, which should show better profits than technology stocks. Increasing Treasury yields and risk aversion will 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 to see how it impacts earnings in 2022.

Earnings Calendar For The Week Of January 31

Monday (January 31)

TICKER COMPANY EPS FORECAST
CBT Cabot $1.06
CRUS Cirrus Logic $1.91
FN Fabrinet $1.28
HLIT Harmonic $0.09
NXPI NXP Semiconductors $2.67
PCH PotlatchDeltic $0.48
RYAAY Ryanair Holdings $-0.15
SANM Sanmina $0.91
TT Trane Technologies $1.31
WWD Woodward $0.83

 

Tuesday (February 1)

IN THE SPOTLIGHT: ALPHABET (GOOGLE), PAYPAL, EXXON MOBIL

ALPHABET: The parent of Google and the world’s largest search engine that dominates internet search activity globally is expected to report its fourth-quarter earnings of $26.71 per share, which represents year-over-year growth of about 20% from $22.3 per share seen in the same period a year ago.

The Mountain View, California-based internet giant would post revenue growth of nearly 27% to $72.133 billion from $56.9 billion a year ago. It is worth noting that the company has consistently beaten consensus earnings estimates in the last two years, at least.

“Key Alphabet (GOOG) ’22 Ad Buyer Survey conclusions: i) Google Search remains highest ROI platform; ii) YouTube expected to gain ad share ’21-’23; & iii) GOOG Search & YouTube are the top platforms for ad buyers reallocating budget due to iOS changes. We est. GOOG’s share of WW Digital adv. (x-China) goes from 41% to 37% ’22-’27. We extended model to ’27, PT to$3,500 vs. prior $3,360, reiterate Outperform,” noted John Blackledge, equity analyst at Cowen.

PAYPAL: The digital payments company is expected to report its fourth-quarter earnings of $0.86 per share, which represents year-over-year growth of about 15% from $0.75 per share seen in the same period a year ago. The San Jose, California-based company would post revenue growth of over 12% to around $6.9 billion.

EXXON MOBIL: The oil company will see its earnings rise multi-fold in the fourth quarter thanks to higher energy prices and a waning pandemic that helped it bounce back after a tough period in 2020.

The Irving Texas-based company is expected to report its fourth-quarter earnings of $1.73 per share, which represents year-over-year growth of over 5,666%, up from $0.03 per share seen in the same period a year ago.

The U.S. largest publicly traded oil company is expected to report a 97.3% increase in revenue to $91.845 billion from $46.54 billion a year ago. On Dec 30, the Irving Texas-based company in its regulatory filing said that higher oil and gas prices would enable it to achieve annual profitability starting in 2021 with an operating profit increase of up to $1.9 billion.

The U.S. largest publicly traded oil company hinted that oil and gas earnings could decrease by up to $1.2 billion as a result of one-time charges for asset impairments and contractual costs. Exxon announced late last year announced that a sharply higher operating profit in oil and gas, prompting Credit Suisse, Scotiabank, and JPMorgan to raise their fourth-quarter earnings estimates.

“Improving FCF outlook and dividend sustainability. With a more constructive commodity price outlook, lower capital spending, and additional cash operating cost savings, the dividend is covered in 2021 and averages >100% over the next 5-years on our estimates. Improving dividend sustainability supports yield compression for Exxon Mobil (XOM) relative to CVX,” noted Devin McDermott, Equity Analyst and Commodities Strategist at Morgan Stanley.

“Cost cuts defend the dividend. In 2020, Exxon Mobil (XOM) reduced 2022-25 spending plans to $20-25B from $30-35B (recently extended to 2027), improving dividend sustainability while limiting further pull on the balance sheet. Additionally, Exxon Mobil (XOM) is targeting $6B in structural operating cost reductions by 2023 which should put upward pressure on consensus FCF estimates.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 1

TICKER COMPANY EPS FORECAST
AMD Advanced Micro Devices $0.69
AMCR Amcor $0.18
ASH Ashland Global Holdings $0.93
CTLT Catalent $0.79
CB Chubb $3.34
EA Electronic Arts $2.81
XOM Exxon Mobil $1.73
GM General Motors $0.84
NMR Nomura Holdings $0.2
SBUX Starbucks $0.8
UBS UBS Group $0.24
UPS United Parcel Service $3.05

 

Wednesday (February 2)

IN THE SPOTLIGHT: META PLATFORMS (FACEBOOK), QUALCOMM

META PLATFORMS (FACEBOOK): The world’s largest online social network is expected to report its fourth-quarter earnings of $3.78 per share, which represents a year-over-year decline of over 2% from $3.88 per share seen in the same period a year ago.

The Menlo Park, California-based social media conglomerate would post revenue growth of over 30% to around $33.04 billion. The social media giant has consistently beaten consensus earnings estimates in most of the quarters in the last two years, at least.

QUALCOMM: The world’s biggest mobile phone chipmaker is expected to report its fiscal first-quarter earnings of $2.77 per share, which represents a year-over-year decline of over 40% from $1.97 per share seen in the same period a year ago.

The chip manufacturer would post revenue growth of nearly 27% to $10.45 billion. It is worth noting that the company has consistently beaten consensus earnings estimates in the last two years, at least.

Qualcomm forecasts GAAP revenue in the first quarter of fiscal 2022 to be between $10 billion and $10.8 billion. On a non-GAAP basis, earnings will likely range from $2.90 to $3.10 per share, while GAAP earnings will likely range from $2.53 to $2.73 per share, according to ZACKS Research.

“After underperforming the SOXX for most of 2021 until a sharp rally late in the year, we see a strong setup for a now Apple-overhang-free Qualcomm in 2022 as investors begin to appreciate the diverse revenue drivers beyond Wireless. Expect solid print and guide, with focus on execution and growth in the connected intelligent edge and update our estimates accordingly,” noted Matthew Ramsay, equity analyst at Cowen.

“We reiterate our price target of $210 based on 17.5x our F2023 EPS estimate of $12.0 and our Outperform rating.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 2

TICKER COMPANY EPS FORECAST
EAT Brinker International $0.5
CHRW C.H. Robinson Worldwide $1.85
CPRI Capri Holdings $1.67
CTSH Cognizant Technology Solutions $1.03
RACE Ferrari $1.08
FB Meta Platforms $3.78
MET MetLife $1.63
TMUS T-Mobile $0.2

 

Thursday (February 3)

IN THE SPOTLIGHT: AMAZON

The e-commerce leader for physical and digital merchandise, Amazon, is expected to report its fourth-quarter earnings of $3.9 per share, which represents a year-over-year decline of over 70% from $14.09 per share seen in the same period a year ago.

However, the Seattle, Washington-based multinational technology giant would post revenue growth of about 10% to around $138 billion. The company has beaten earnings per share (EPS) estimates most of the time in the two years.

“We are reiterating our BUY rating and our price target to $3,900. Our price target is based on our updated discounted cash flow model, including our long-term adj. EBITDA margin forecast of 22.0% versus 13.7% in 2020,” noted Tom Forte, MD, Senior Research Analyst at D.A. DAVIDSON.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 3

TICKER COMPANY EPS FORECAST
ABB ABB $0.38
ALL Allstate $2.72
COP ConocoPhillips $2.23
LLY Eli Lilly $2.37
HON Honeywell International $2.09
PRU Prudential Financial $2.44
SU Suncor Energy $0.95
SYNA Synaptics $2.63

 

Friday (February 4)

TICKER COMPANY EPS FORECAST
APD Air Products & Chemicals $2.51
AON Aon $3.33
BMY Bristol Myers Squibb $1.85
CBOE Cboe Global Markets $1.41
ETN Eaton $1.73

 

Qualcomm Likely to Post Double-Digit Growth in Q1 Earnings and Revenue

The world’s biggest mobile phone chipmaker, Qualcomm, is expected to report its fiscal first-quarter earnings of $2.77 per share, which represents a year-over-year decline of over 40% from $1.97 per share seen in the same period a year ago.

The chip manufacturer would post revenue growth of nearly 27% to $10.45 billion. It is worth noting that the company has consistently beaten consensus earnings estimates in the last two years, at least.

Qualcomm forecasts GAAP revenue in the first quarter of fiscal 2022 to be between $10 billion and $10.8 billion. On a non-GAAP basis, earnings will likely range from $2.90 to $3.10 per share, while GAAP earnings will likely range from $2.53 to $2.73 per share, according to ZACKS Research.

Qualcomm will release its first-quarter fiscal 2022 results on Wednesday, February 2.

Qualcomm stock traded 1.20% higher at $163.25 on Friday. The stock fell over 10% so far this year after surging over 20% in 2021.

Analyst Comments

“After underperforming the SOXX for most of 2021 until a sharp rally late in the year, we see a strong setup for a now Apple-overhang-free Qualcomm in 2022 as investors begin to appreciate the diverse revenue drivers beyond Wireless. Expect solid print and guide, with focus on execution and growth in the connected intelligent edge and update our estimates accordingly,” noted Matthew Ramsay, equity analyst at Cowen.

“We reiterate our price target of $210 based on 17.5x our F2023 EPS estimate of $12.0 and our Outperform rating.”

Qualcomm Stock Price Forecast

Twenty-one analysts who offered stock ratings for Qualcomm in the last three months forecast the average price in 12 months of $198.11 with a high forecast of $225.00 and a low forecast of $160.00.

The average price target represents a 20.36% change from the last price of $164.60. Of those 21 analysts, 12 rated “Buy”, nine rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $215 with a high of $258 under a bull scenario and $138 under the worst-case scenario. The investment bank gave an “Overweight” rating on the semiconductor company’s stock.

“We see an improvement in smartphone demand in 2021 after declining 5% in 2020 due to Covid-19. We also see 5G adding greater dollar content and supporting industry-wide handset volume growth. Qualcomm’s (QCOM) leadership in cellular technologies (3G/4G/5G) puts the company in a favorable position to maintain leading market share,” noted Joseph Moore, equity analyst at Morgan Stanley.

“The potential elimination of a major competitor in the Chinese market, HiSilicon, should benefit Qualcomm as Huawei currently does not pay royalties. To the extent competitors that do pay royalties are able to pick up market share, that would be beneficial for Qualcomm.”

Several other analysts have also updated their stock outlook. Barclays raised the target price to $185 from $180. Citigroup lifted the price target to $180 from $165. CFRA upped the target price to $190 from $160. Jefferies increased the target price to $180 from $160.

Technical analysis suggests it is good to buy as 100-day Moving Average and 100-200-day MACD Oscillator signals a buying opportunity.

Check out FX Empire’s earnings calendar

Sector Themes In Play In The Markets For 2022

Years like 2021 saw a solid broad-based performance in many stock market sectors. Relatively simple approaches such as Indexing and Sector Rotation did well. But with macro changes in play and many uncertainties for 2022, we may very well see broad indexes underperforming while individual sectors dominated by a few stocks really shine.

Dips will continue to be bought unless something significant changes. But let’s not forget that we’re long overdue for a substantial correction. Significant risk catalysts are:

  • Fed actions.
  • International conflicts (i.e., Russia and China).
  • Pandemic developments that are not currently known.

There’s always the risk of the unknown – the literal definition of a “Black Swan” event. We shouldn’t get too complacent, knowing that we may need to get defensive to protect capital suddenly. When it’s time to be defensive, let’s not forget that CASH IS A POSITION!

Sector theme DRIVERS FOR 2022

Many uncertainties about Covid and the lingering effects on the economy remain. Inflation has roared back to 30-year highs. Strong employment numbers and consumer spending are fueling significant growth in corporate earnings. We also have a shift in bias at the Fed on interest rates and quantitative easing. These are the “knowns” and are theoretically priced in.

For these reasons and more, we should expect more of a “Stockpicker’s Market” in 2022. Certain sectors will do well and weather corrections better than the broader markets.

Even short-term traders can gain an edge by paying attention to what sectors are strongest. Traders tend to benefit most from playing the strongest stocks in the strongest sectors for bullish trades and choosing the weakest stocks in weaker sectors for bearish trades. That “tailwind” can make a significant difference in results.

Let’s look at some sector themes and individual names to keep an eye on in 2022.

ECONOMIC NORMALIZATION

A long-anticipated return to a “normal” economy will continue to be a theme — we just don’t know if that will be Post-Covid or Co-Covid. Or when. Air travel, theme parks, hotels, cruise lines, etc., have all suffered in the persistent Pandemic. What does seem to be changing is the idea of a “new normal” where virus variants may be with us for years to come. We will adjust socially and economically to that for the foreseeable future. DAL, UAL, LUV, AAL are airlines to watch, and the JETS ETF may be a good way to play a general recovery in this sector.

5G INTERNET

The much-hyped rollout of 5G network technology had its share of setbacks and technology disappointments. But 2022 should see the 5G deployment start to take off as technical issues are worked out, and the promise of widespread coverage with transformational performance becomes real. In the background supplying the 5G infrastructure are AMD, QCOM, ADI, MRVL, AMT, XLNX, and KEYS. Along with infrastructure and testing companies, shares of major carriers T, TMUS, and VZ languished for much of the second half of 2021 and looked poised for recovery in the coming year.

ARTIFICIAL INTELLIGENCE

In all its various forms (including autonomous vehicles), AI will remain a developing trend. Big players in the space to watch include MSFT, AMAT, GOOGL, NVDA, AAPL, and QCOM.

EVs and AUTONOMOUS VEHICLES

Electric Vehicles (EVs) are nearing an inflection point where widespread adoption is poised to take off. Technology and cost competitiveness has improved where some EVs will reach price parity with their traditional internal combustion counterparts.

While there are many smaller players in the EV space, automotive stalwarts F, GM, and TM are investing very heavily. TSLA has been grabbing the headlines, but many others want to stake out their territory in the space, including whole tiers of manufacturers and infrastructure enablers like WKHS, XPEV, NKLA, and CHPT.

MATERIALS and MINING

Gold, silver, and related miners underperformed for much of 2021 and now look poised for a recovery year as inflation, and monetary concerns grow. GLD, SLV, GDX, GDXJ, SIL, SILJ look good as both longer and mid-term plays. Metals and miners may get hit initially with a significant downturn in stocks but could ultimately demonstrate their safe-haven potential.

Specific to the growth in EVs, battery technology, etc., copper, lithium, and related basic materials should see stronger demand ahead. FCX looks particularly interesting as a dual play on gold and copper. LIT may be a good ETF play on lithium battery technology.

SEMICONDUCTORS

The market for chips is primed for exponential growth. EV’s have about ten times the number of specialty semiconductors as conventional vehicles. AI, crypto, 5G, mobile devices, and ubiquitous computing should drive growth in the semiconductor sector for some time to come.

REAL ESTATE

Real Estate and Homebuilders should continue to do well while employment numbers remain strong and if interest rates don’t rise too quickly. The inventory shortage in most real estate markets will likely persist well into the new year.

Storage REITs like PSA, LSI, and CUBE have been big winners in the Covid economy and still have room to run.

SUMMARY

Many sectors still look bullish after gains in 2021. But there are “storm clouds” on the horizon, and we must not take future performance for granted.

Lastly, one of the simplest ways to assess how sectors are measuring up is to watch the charts for the S&P SPDR series sector ETFs and a few others. Here are some notable ones to watch:

https://www.thetechnicaltraders.com/wp-content/uploads/2021/12/Dec-31-article.png

These can give us a good starting place to look for leading stocks in winning sectors as the year unfolds.

Let’s remain vigilant for possible market corrections and may the wind be at our backs!

Want to learn more about our Options Trading Service?

Every day on Options Trading Signals, we do defined risk trades that protect us from black swan events 24/7. Many may think that is what stop losses are for. Well, remember the markets are only open about 1/3 of the hours in a day. Therefore, a stop loss only protects you for 1/3 of each day. Stocks can gap up or down. With options, you are always protected because we do defined risk in a spread. We cover with multiple legs, which are always on once you own.

If you are new to trading or have been trading stock but are interested in options, you can find more information at The Technical Traders – Options Trading Signals Service. The head Options Trading Specialist Brian Benson, who has been trading options for almost 20 years, sends out real live trade alerts on actual trades, such as TSLA and NVDA, with real money. Ready to check it out, click here: TheTechnicalTraders.com.

Enjoy your day!

Chris Vermeulen
Founder & Chief Market Strategist
TheTechnicalTraders.com

 

A Divergence Between S&P 500 and the Stock Market Breadth May Signal a Market Top

SPX Daily Chart

Based on the comparison between the Percentage of stocks above 200-Day average and the SPX for the past 10 years, the divergence happened since Feb 2021 as the SPX continue to trend higher, the number of stocks participated in the uptrend is getting lesser, deteriorated from 90% to 42% as of last Friday since Feb 2021.

In fact, many growth stocks such as Affirm Holdings (AFRM), CrowdStrike Holdings (CRWD), Fiverr International (FVRR), MercadoLibre (MELI), Sea (SE), Twilio (TWLO), DocuSign (DOCU), Roku (ROKU), PayPal Holdings (PYPL), etc…experienced big drawdowns range from 32%-65% from their all time high.

There are only a handful of outperforming stocks like Apple (AAPL), Microsoft (MSFT), Lam Research (LRCX), Broadcom (AVGO), Qualcomm (QCOM), etc… supporting the S&P 500 index.

The divergence between the SPX and the stock market breadth are certainly not a healthy sign for the bull market especially it has been persisting for nearly 10 months. It might only take a few early capitulations from the funds to trigger a broad market sell-off when the market is at the vulnerable point.

It can be noticed from the chart that 50% level is a support. When the percentage of stocks above 200-Day average dropped below 50%, there was a relatively sharp sell-off in SPX, as highlighted in orange color in 2011, 2014, 2015 and 2018. The market breadth is often acted as a leading indicator before the damage hits the SPX.

Current Market Outlook on S&P 500

S&P 500 did have a rally after an oversold condition at the support area while there was presence of demand as pointed in last week’s article. Detailed analysis can be found by watching the price volume analysis for the market outlook on YouTube.

As shown in the screenshot on 8 Dec from my private Telegram Group for Mastering Price Action Trading course above, the four US major indices – S&P 500 (SPX), Dow Jones (DJI), Nasdaq (IXIC) and Russell 2000 (RUT) are likely in a consolidation with high volatility to both sides.

It is obvious that there was an increase of supply on the down wave since Black Friday selloff, which is yet to be tested. As S&P 500 approaches the resistance zone at 4700, it could be vulnerable for a correction when the sellers step in to lock in profit or initiate short positions. Should a correction happen, the previous swing low near 4500 is a natural area for buyers to step in for bargain hunting.

It is critical to judge the supply level together with the characteristics of the price action (spread and velocity) to anticipate next move. For a bearish scenario, watch out for a Wyckoff up thrust (false breakout) with increasing supply followed by a break below 4650. For bullish case, S&P 500 needs to commit above the resistance level at 4720.

Based on the market breadth and the Wyckoff phase analysis on SPX, a trading range between 4500-4700 is expected. There could be other headwind ahead such as Fed’s tapering of the bond-buying program and an urgency for interest rate hike, which I will be discussing in my weekly live session on Sunday. Click here to visit TradePrecise.com to get your weekly market insights straight to your inbox for free.

Best Cheap Stocks to Buy Now December 2021

Oftentimes, big money buying is institutional activity. We’ll go over what that looks like in a bit. But, the 5 stocks we see as undervalued candidates are SIMO, AKAM, AMAT, QCOM, & ADI.

At my research firm MAPsignals, we believe that big money trading can alert you to the forward fundamental picture of a stock. We want the odds on our side when looking for the highest quality stocks.

Up first is Silicon Motion, Inc. (SIMO), which is a leading developer of integrated circuits for NAND flash storage devices like the microSD cards used in smartphones.

The best candidates tend to have strong performance. Check out SIMO:

  • YTD performance (+88.0%)
  • Historical big money signals

Just to show you what our big money signal looks like, have a look at the top buy signals Silicon Motion has made the past few years.

Blue bars are showing that SIMO was likely being bought by a big money player according to MAPsignals.

When you see a lot of them, I call it the stairway to heaven:

Source: www.MAPsignals.com

But, what about fundamentals? As you can see, Silicon Motion looks strong under the hood:

  • Forward P/E = 15.1
  • 1-year sales growth rate (+45.9%)

Next up is content delivery network company Akamai Inc. (AKAM), which delivers online content (like videos) efficiently and securely.

Check out these technicals for AKAM:

  • YTD performance (+6.7%)
  • Historical big money signals

Let’s look long-term. These are the top buy signals Akamai has made since 2015. Clearly the big money has been liking it for years:

Source: www.MAPsignals.com

Let’s look under the hood. As you can see, Akamai has grown earnings massively:

  • Forward P/E = 19.4
  • 3-year earnings growth rate (+29.6%)

Another name to consider is Applied Materials, Inc. (AMAT), which is a semiconductor supplier whose technologies are used to build complex memory chips and displays.

Strong candidates for growth usually have big money buying the shares. Applied Materials has that. Also, the stock has been a rocket:

  • YTD performance (+82.3%)
  • Recent big money signals

Below are the big money signals AMAT has made since 2015:

Source: www.MAPsignals.com

Now let’s look under the hood. Applied Materials’ earnings growth is impressive. I expect more growth in the coming years:

  • Forward P/E = 19.4
  • 3-year earnings growth rate (+29.6%)

Number four on the list is wireless chipmaker Qualcomm Holdings, Inc. (QCOM).

Here are the technicals jumping out at me:

  • 1-month performance (+10.1%)
  • Historical big money signals

Below are the big money signals for QCOM since 2005. While there isn’t much recent activity, it’s a big money favorite over time:

Source: www.MAPsignals.com

Let’s look under the hood. QCOM has been growing earnings nicely:

  • Forward P/E = 16.9
  • 3-year earnings growth rate (+50.5%)

Our last cheap candidate is Analog Devices, Inc. (ADI), which designs, makes, and sells signal processing circuits found in all kinds of electronic equipment.

Check out these technicals:

  • YTD performance (+26.1%)
  • Historical big money signals

Analog Devices has shown up with top big money signals a lot since 2015:

Source: www.MAPsignals.com

Now look at these juicy growth numbers:

  • Forward P/E = 24.7
  • 1-year sales growth rate (+30.6%)

The Bottom Line

SIMO, AKAM, AMAT, QCOM, & ADI represent top cheap stocks for December 2021. Strong fundamentals and big money buy signals make these stocks worthy of extra attention.

To learn more about MAPsignals’ big money process please visit: www.mapsignals.com

Disclosure: the author holds long positions in AKAM, QCOM, and ADI in managed accounts, long positions in SIMO and QCOM in personal accounts, and no positions in AMAT at the time of publication.

Investment Research Disclaimer

https://mapsignals.com/contact/

 

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.

Qualcomm’s Stock Price Surges by 12% After Company Reports Strong Earnings

There has been a shortage of chips globally in recent months, but chip manufacturer Qualcomm has reported excellent earnings in the third quarter of the year.

Qualcomm Reports Strong Earnings

Qualcomm, one of the world’s leading chip manufacturers, reported its fiscal fourth-quarter earnings earlier today, beating analysts’ estimations. The company’s earnings soared despite the continued shortage of chips globally.

The company was expected to generate $8.86 billion and earnings per share of $2.26 during the previous quarter. However, Qualcomm trumped the estimations, with earnings per share of $2.55 and revenue of $9.3 billion.

Qualcomm’s chip business generated $7.7 billion in the fiscal fourth quarter, up by 56% from the same period last year. CEO Cristiano Amon told CNBC’s “Squawk on the Street” earlier today that supply worked exactly as planned for the company.

“Scale helps, we addressed the issue early … we put capacity plans in place, and it’s working exactly as we planned. The reality is if we look at where we are today, we had a great Q4 quarter, but we’re still short. We’re going to see supply substantially improving at the end of the calendar year as well as when we get into 2022, but there’s more demand than supply,” the CEO added.

Qualcomm has benefited from the boost in the handset business, and the CEO said the company has been focusing on that area. For the fiscal first quarter, Amon said Qualcomm would focus on growth, especially in new revenue streams and other areas outside handsets.

QCOM Surges by More Than 12%

The chip manufacturer is set to become the latest company to enter the metaverse space. The CEO said virtual reality and augmented reality devices are potential growth drivers for Qualcomm in the coming months.

Qualcomm
QCOM stock chart. Source: FXEMPIRE

QCOM is up by more than 12% since the company announced its earnings result earlier today. At the time of writing, QCOM is trading at $156.22 per share. The stock has been performing well in recent weeks, adding 23% to its value in the past month.

QCOM could rally higher over before the end of the year if the chip manufacturer maintains its level of growth as we head into the holiday period.

Chip Manufacturer Qualcomm Agrees To Buy Veoneer For $4.5 billion

Qualcomm is diversifying its business to include automobiles and has made a crucial acquisition that could help it gain ground in the new market.

Qualcomm To Acquire Veoneer

Tech giant Qualcomm has agreed to acquire part of auto components supplier Veoneer. The acquisition deal is expected to be worth around $4.5 billion. Qualcomm has partnered with investment firm SSW Partners to ensure the deal goes through.

In a press release earlier today, Qualcomm said it would work with SSW Partners to acquire Veoneer’s Arriver business. Qualcomm will take over Arriver, the sector of the business that focuses on computer vision, drive policy, and driver assist. Furthermore, SSW will retain the rest of Veoneer and sell it in pieces.

Qualcomm said, “At closing, SSW Partners will acquire all of the outstanding capital stock of Veoneer, shortly after which it will sell the Arriver business to Qualcomm and retain Veoneer’s Tier-1 supplier businesses. SSW Partners will lead the process of finding strong, long-term strategic partners. This transaction structure facilitates the long-term success of all Veoneer’s businesses.”

The deal would see Qualcomm and SSW part with $37.00 per share in an all-cash transaction, bringing Veoneer to a total valuation of $4.5 billion. Veoneer had previously agreed to be acquired by Magna International for $31.25 a share. However, the deal will no longer be possible after Qualcomm and SSW offered $37 per share. As such, Veoneer will pay Magna a termination fee of $110 million.

Qualcomm Is Pushing Into The Automobile Sector

Qualcomm has been making efforts to enter the automobile market after losing ground in the mobile phone market. Google is set to ditch Qualcomm and start manufacturing its own smartphone processors before the end of the year. As such, Qualcomm has to look to other markets.

Last month, Qualcomm announced that it would be supplying a crucial computing chip in a new Renault SA electric vehicle. Qualcomm said the computing chip is for the digital dashboard on Renault’s latest electric vehicle.

QCOMM stock chart. Source: FXEMPIRE

With the acquisition of Veoneer, Qualcomm intends to become a bigger player in the automobile chip manufacturing industry. The shares of Qualcomm are down by more than 2% over the past 24 hours.

QCOM is currently trading at $126 per share, down by 2.01% since the US market opened. YTD, QCOM has underperformed, dropping from the $146 level at the start of the year to now trading above $126.

Chinese Tech Execs Support ‘common prosperity’, Helping SMEs at Internet Summit

Alibaba Group CEO Daniel Zhang, a prime target of the broad crackdown, told a conference organised by China’s top internet regulator that his company’s $15 billion plan to boost common prosperity in China was “steadily advancing”.

Common prosperity – China’s term for narrowing the gap between rich and poor – is “not just a number”, Zhang said, stressing the importance of helping local talent in poor regions to “teach a man to fish”.

The World Internet Conference in Wuzhen in eastern China is organised by the Cyberspace Administration of China. The conference in the past has drawn such foreign executives as Tim Cook and Sundar Pichai, but overseas attendance was hurt this year by COVID-19 protocols and souring U.S.-China relations.

Qualcomm Inc CEO Cristiano Amon, Intel Corp CEO Patrick Gelsinger and Tesla Inc founder Elon Musk provided taped remarks.

China’s regulatory crackdown has hit sectors from cryptocurrencies and the internet, to entertainment, education and property, wiping hundreds of billions off the market value some of its largest companies and putting investors on alert over who may be next.

The listing of Alibaba’s financial affiliate was halted and the e-commerce giant was fined a record $2.75 for anti-competitive behaviour.

Policymakers and executives at the conference did not address the crackdown directly, though Liu He, China’s vice premier, said the digital economy can at times stifle competition. Common prosperity has re-emerged as a slogan this year after President Xi Jinping used it in public remarks.

Xiaomi Corp CEO Lei Jun called on large tech companies to help more small and midsize firms, saying they must “not let any group fall behind”.

In videotaped remarks, Neil Shen, the founding partner of Sequoia Capital China, which has backed tech giants such as ByteDance and Didi Global Inc, praised a planned tech bourse in Beijing as helping smaller firms.

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

(Reporting by Josh Horwitz; Editing by William Mallard)

Mobile Phone Is Not Enough. Qualcomm Is Expanding Its Chips Game Into The Vehicle Sector

Qualcomm is known as one of the leading chips manufacturers for mobile phones, but the company is now expanding into the vehicle sector and is set to supply another set of automobile chips.

Qualcomm To Supply Computing Chip To Renault

Chip manufacturer Qualcomm revealed earlier today that it would be supplying a crucial computing chip in a new Renault SA electric vehicle. The company announced this earlier today, adding that the computing chip is for the digital dashboard in the electric vehicle.

Qualcomm has made a name for itself as the biggest smartphone chip manufacturer in the world. However, the company has been expanding into manufacturing chips for electric vehicles and has landed another client.

The chip manufacturer stated that Renault’s Mégane E-TECH Electric would use Qualcomm’s chips. The chips will power the electric vehicle’s infotainment system using software designed by Google.

This latest development means that Qualcomm has landed another client in the electric vehicle sector. Qualcomm announced a deal with General Motors earlier this year. The deal would see General Motors use Qualcomm’s chips on its vehicles.

The Mégane E-TECH Electric is expected to go on sale by next year. However, it will be unveiled at September’s IAA Mobility 2021 automotive trade show in Munich.

Qualcomm And Others Need To Be Innovative

Qualcomm’s move into the automobile sector is important considering the fact that it is set to lose a chunk of its business in the mobile phone industry. Apple is already developing chips for its mobile devices, and Google is also working on developing chips for its mobile phones.

With phone manufacturers already developing their own chips for their mobile devices, chip manufacturers such as Qualcomm, Nvidia, and Intel will have to be innovative and explore new markets.

QCOM stock chart. Source: FXEMPIRE

The shares of Qualcomm are down by 0.32% over the past 24 hours. QCOM is trading at $144.65 per share at the moment. Year-to-date, QCOM has underperformed. QCOM started 2021 trading at $150 per share, but it is now trading at $144.

Western Digital-Kioxia In Talks to Create Chipmaker Giant

The companies could reach an agreement as early as mid-September, and Western Digital CEO David Goeckeler would run the combined firm, the person said, requesting anonymity to discuss confidential matters.

The Wall Street Journal reported the talks earlier on Wednesday. Kioxia Holdings Corp and Western Digital both told Reuters they do not comment on speculation about mergers.

A combination of the two would rewrite the competition to capture robust demand for memory chips that has been driven by 5G expansion and a pandemic-fueled rise in work from home.

While Samsung dominates with over a third of the NAND market, according to research firm TrendForce, Kioxia has a nearly 19% share and Western Digital 15%. South Korea’s SK Hynix Inc and U.S. firms Micron Technology Inc and Intel Corp are the other large players.

“Such a deal would be a defensive, but prudent, move by Western to reinforce its competitive position in the swiftly consolidating chip market,” Morningstar analyst William Kerwin said in a research note.

“In the long term, we expect the NAND market to … consolidate down to about three leading players for a largely commodity-like product,” Kerwin said.

The memory chip industry is already consolidating, with Hynix agreeing to buy Intel’s NAND business for $9 billion last year, a deal still awaiting anti-trust clearance.

A Western Digital-Kioxia merger is also likely to draw anti-trust scrutiny in several countries, including in the United States and China.

Monopoly concerns and a years-long trade conflict between the United States and China have scuppered deals in the past few years.

Qualcomm Inc, for instance, walked away from a $44 billion deal to buy NXP Semiconductors after failing to secure Chinese approval in 2018, and Nvidia Corp’s planned $40 billion acquisition of British chip designer ARM hit a major hurdle last week in the UK.

Chinese antitrust watchdog State Administration for Market Regulation did not immediately respond to a request for comment on approval for a potential Western Digital-Kioxia deal.

KIOXIA OWNERS

In Japan, the two companies jointly produce NAND chips, which don’t need power to retain data and are used in smartphones, TVs, data center servers and public announcement display panels.

“For privately held Kioxia, we think $20 billion or more would secure a solid return,” Morningstar’s Kerwin said.

Kioxia, sold by Toshiba Corp in 2018 to a consortium led by Bain Capital for $18 billion as Toshiba Memory Corp, shelved plans last year for what would have been Japan’s largest initial public offering in 2020.

An IPO is still a possibility should Kioxia fail to reach a deal with San Jose, California-based Western Digital, the source told Reuters. Financial magazine Diamond in June said Kioxia was planning an IPO as early as September.

Kioxia said in its statement to Reuters on Thursday that it was considering the appropriate timing for an IPO.

Toshiba, which still owns about 40.6% of Kioxia, is in talks with at least four global private equity firms to seek their ideas for a new strategy, Reuters reported on Wednesday, citing sources.

Toshiba’s shares were up 1.3% in afternoon trading.

Western Digital’s shares closed up 7.8% on Wednesday, giving it a market capitalization of more than $20 billion.

Toshiba said it was not involved in the management of Kioxia and not in a position to comment. It said it continues to consider the most appropriate approach to its investment in Kioxia to maximize shareholder value.

Bain was not immediately available for a comment.

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

(Reporting by Eva Mathews in Bengaluru, Krystal Hu in New York and Makiko Yamazaki in Tokyo; Additional reporting by Brenda Goh in Shanghai; Writing by Sayantani Ghosh; Editing by Stephen Coates and Tom Hogue)

Google To Ditch Qualcomm And Develop Its Own Smartphone Processors This Year

Search engine giant Google has announced that it would no longer be using Qualcomm’s processors on its smartphones as it would start building its own processors this year.

Google To Start Building Its Processors This Year

Tech giant Google revealed earlier today that it would start building its own smartphone processors this year. According to its announcement, the processor would be called Google Tensor, and it will serve its new Pixel 6 and 6 Pro phones set to be released later this year.

This latest development means that Google will no longer be using chips manufactured by Qualcomm. However, Qualcomm pointed out that it would continue to work with the search engine giant on existing and future products based on its Snapdragon platform.

The Google Tensor processor is expected to power the company’s new flagship phones, which are expected to be launched in October. The Pixel 6 and 6 Pro phones will see Google move away from offering affordable smartphones to high-end products. Google is looking to compete with Apple and Samsung by offering more high-end products to its customers.

GOOGL stock chart. Source: FXEMPIRE

The move by Google is similar to that of Apple. The iPhone manufacturer ditched Intel and began manufacturing its own processors. Similar to Apple, Google will use Arm-based architecture for its processors. Arm processors are usually lower power and are mostly used across the industry for mobile devices, such as phones, tablets and laptops.

Qualcomm And Google Shares All Up As The Market Opens

The shares of Qualcomm and Google are both up as the United States market opens today. QCOM is up by 0.05% today despite the news that Google will no longer be using its smartphone processors. Year-to-date, QCOM has remained rather flat as it began the year trading at $150, and it is now trading at $149.90 per share.

QCOM stock chart. Source: FXEMPIRE

GOOGL, on the other hand, is up by 0.08% so far today. Google is one of the best-performing stocks this year, up by 53% year-to-date. Google began 2021 trading at $1,752 per share, but an extended rally has seen it gone up by nearly $1,000 as it is now trading at $2,696.

Nvidia Is Struggling To Get The Arm Deal Done. Qualcomm Is Looking In

U.S. chip manufacturer Qualcomm has offered to invest in U.K. chip designer Arm if the company’s $40 billion acquisition by Nvidia fails to go through due to regulatory concerns.

Qualcomm ready to invest in Arm

Nvidia has tabled a $40 billion offer to purchase U.K. chip designer Arm. However, the deal is facing some regulatory uncertainties and could be blocked from happening. If that happens, U.S. chip manufacturing giant Qualcomm has revealed that it would be ready to invest in Arm.

Qualcomm’s incoming CEO, Cristiano Amon, stated that the company is willing to buy a stake in Arm alongside other major investors. However, the deal depends upon SoftBank, Arm’s current owners, not selling the company to Nvidia.

NVIDIA stock price. Source: FXEMPIRE

Amon said pointed out that if Arm has an independent future, then there would be a lot of interest from numerous companies within the sector, including Qualcomm, who are ready to invest in Arm. If Arm is no longer under SoftBank and moves to become a publicly traded company, it would have numerous companies investing in it and that would ensure great possibilities for Arm, he added.

The incoming CEO said Qualcomm is open to the idea of investing in Arm, and he has held discussions with certain companies that feel the same way.

An IPO would not be enough for Arm

Although Qualcomm is in support of Arm becoming an independently listed company, Nvidia believes the move would not be enough to support Arm’s growth. Arm’s energy-efficient chip architecture is used in 95% of the world’s smartphones. The company also licenses its chip designs to hundreds of companies globally that use the designs to develop their own chips.

Nvidia believes Arm needs more than an IPO to help with its growth. Instead, Nvidia said it would welcome Qualcomm’s help in creating new products and technologies for Arm.

Qualcomm stock price. Source: FXEMPIRE

Qualcomm’s stock price is up by less than 1% since the news broke out, while Nvidia’s stock is also up by less than 1% since the market opened.