Low Expectations Ahead of Intel Report

Dow component Intel Corp. (INTC) reports Q2 2021 earnings after Thursday’s closing bell, with analysts expecting a profit of $1.07 per-share on $17.8 billion in revenue. If met, earnings-per-share (EPS) will mark an 18% profit decline compared to the same quarter in 2020. The stock sold off more than 5% in April after beating Q1 2021 estimates and lowering Q2 guidance. The 6.2% year-over-year revenue decline noted in that release stoked longstanding fears of market share losses to more nimble rivals.

Competition Grabbing Market Share

The semiconductor shortage is expected to have an adverse impact on Q2 earnings at the same time that Intel is committing major capital to foundry construction and expansion in the United States and overseas. Those plans now include more than $20 billion in investments for two plants in Arizona. The company is also engaged in talks to buy New York-based GlobalFoundries for an estimated $30 billion, in an attempt to add even more capacity as China redirects its vast chip resources into local production.

Competition has grown exponentially in the last two years while production and innovation have faltered, yielding market share losses that have contributed to poor stock performance. Advanced Micro Devices Inc. (AMD) and NVIDIA Corp (NVDA) processing chips have grown popular with formerly loyal customers while Taiwan Semiconductor Manufacturing Co. LTD (TSM) and Samsung Electronics Co. are spending a combined $216 billion to grow manufacturing capacity. None of these developments bode well for Intel in coming years.

Wall Street and Technical Outlook

Wall Street consensus has deteriorated from modestly bearish levels so far in 2021, with a ‘Hold’ rating now based upon 12 ‘Buy’, 1 ‘Overweight’, 17 ‘Hold’, and 3 ‘Underweight’ recommendations. More importantly, 8 analysts are recommending that shareholders close positions and move to the sidelines. Price targets currently range from a low of $40 to a Street-high $85 while the stock is set to open Thursday’s session about $11 below the median $67 target.

Intel sold off from 76 in 2000 to 12 in 2009 and remains within those boundaries, more than 12 years later. The long-term recovery mounted the .786 Fibonacci selloff retracement level in January 2020 and failed the breakout during the pandemic decline. Bounces above this harmonic barrier in June 2020 and April 2021 also failed, reinforcing a nearly impenetrable barrier above 60. The stock is now trading at the dead center of the 18-month trading range, unlikely to reward longs or short sellers with a sustained trend.

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

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

Nasdaq Ends Lower as Investors Sell Big Tech

Amazon, Apple Tesla and Facebook all fell. Nvidia tumbled around 4%.

The S&P 500 technology sector index ended a four-day winning streak. Earlier this week, investors’ favor for heavyweight growth stocks pushed the S&P 500 and the Nasdaq to record highs.

The S&P 500 energy sector index fell more than 1% and tracked a drop in crude prices on expectations of more supply after a compromise agreement between leading OPEC producers.

Fresh data showed the number of Americans filing new claims for unemployment benefits fell last week to a 16-month low, while worker shortages and bottlenecks in the supply chain have frustrated efforts by businesses to ramp up production to meet strong demand for goods and services.

Federal Reserve Chair Jerome Powell told lawmakers he anticipated the shortages and high inflation would abate. Yet many investors still worry that more sustained inflation could lead to a sooner-than-expected tightening of monetary policy.

“People are very nervous and concerned about inflation, tax rates and the (2022 midterm) election. Those three things are very much on people’s minds,” said 6 Meridian Chief Investment Officer Andrew Mies, describing recent phone calls with his firm’s clients.

Unofficially, the Dow Jones Industrial Average rose 54.52 points, or 0.16%, to 34,987.75, the S&P 500 lost 14.29 points, or 0.33%, to 4,360.01 and the Nasdaq Composite dropped 101.82 points, or 0.7%, to 14,543.13.

Morgan Stanley dipped as much as 1.2% after it beat expectations for quarterly profit, getting a boost from record investment banking activity even as the trading bonanza that supported results in recent quarters slowed down.

Second-quarter reporting season kicked off this week, with the four largest U.S. lenders – Wells Fargo & Co, Bank of America Corp, Citigroup Inc and JPMorgan Chase & Co – posting a combined $33 billion in profits, but also highlighting the industry’s sensitivity to low interest rates.

Blackstone said late on Wednesday it would pay $2.2 billion for 9.9% stake in American International Group’s life and retirement business. AIG and Blackstone both rallied.

Johnson & Johnson dipped after it voluntarily recalled five aerosol sunscreen products in the United States after detecting a cancer-causing chemical in some samples.

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

(Reporting by Noel Randewich; Additional reporting by Devik Jain and Shreyashi Sanyal in Bengaluru; Editing by Maju Samuel)

 

Why NVIDIA Stock Keeps Moving Higher

NVIDIA Stock Gains Ground As Market Remains Focused On Growth Story

Shares of NVIDIA have recently tested a new all-time high level at $818.24 as the stock continued to move higher amid optimism about the company’s future performance in the world that is hungry for chips.

Analysts estimates for NVIDIA keep moving higher which is bullish for stock. Currently, NVIDIA is expected to report a profit of $15.83 per share this year. In the next year, the company’s profit is projected to increase to $17.25 per share as demand for NVIDIA’s products continues to grow.

The stock is trading at roughly 47 forward P/E, but the market ignores valuation concerns as it remains focused on NVIDIA’s growth prospects.

Analyst raise their price targets together with their earnings estimates so the stock is boosted by multiple upgrades. Analysts from BMO have even issued a price target of $1,000 per share.

What’s Next For NVIDIA Stock?

NVIDIA shares are up by more than 50% year-to-date, and the stock has significantly outperformed S&P 500. The company’s market capitalization has recently exceeded $500 billion, and it looks that mega cap stocks continue to attract investors’ interest regardless of valuation levels.

Traders remain focused on the rapid digitalization of the world which was triggered by the pandemic and are ready to look beyond the next few years, so near-term earnings estimates do not have a major impact on NVIDIA’s share price performance.

The key question for traders right now is whether the trade is getting crowded as other crowded trades in the tech space like Tesla had some trouble this year when some traders decided to take profits after the major rally.

However, it remains to be seen whether the stock is ready for a pullback as analyst price targets keep moving higher while the company’s valuation has not reached extraordinary levels.

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

Best ETFs For July 2021

That’s why I spend my time crafting portfolios chock full of outlier stocks. If you choose right, you’ll have enormous gains on your hands in the years to come.

Now, I pick my ETFs perhaps a bit differently than other people. I can find outlier ETFs by tracking the Big Money. But that alone isn’t enough: when I catalog the components and find outlier stocks underneath… that’s the winning recipe.

That’s how I found the best big-money ETFs for July.

First, I looked at all ETFs making Big Money signals by going to MAPsignals.com and scanning the Big Money ETF Buys and Sells chart. I looked for recent days with heavy buying (the bright blue spikes):

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Once I knew which ETFs Big Money was buying, then I wanted the best opportunities. Remember: ETFs are just baskets of stocks. MAPsignals specializes in scoring more than 6,000 stocks daily. Therefore, if I know which stocks make up the ETFs, I can apply the stock scores to the ETFs. Then I can rank them all strongest to weakest.

Once the ETFs were sorted, I noticed Real Estate funds at the top. That’s why this month the top ETF is IYR.

#1 IYR – iShares U.S. Real Estate ETF

As we can see- there was a lot of Big Money buying plowing into this ETF over the last year. It accelerated noticeably since February:

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IYR holds some great stocks. One fine example is PLD (Prologis, Inc.). Below are Big Money signals for PLD:

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#2 BOTZ – Global X Robotics & Artificial Intelligence ETF

A.I. and Robotics are undoubtedly a huge part of our future. Big Money thinks so too. Look at the buying of BOTZ over the last year below.

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One great example stock that BOTZ holds is Intuitive Surgical. They make the surgical robot called DaVinci. It allows remote surgery- a phenomenal technology.

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#3 VDE – Vanguard Energy Sector ETF

Energy was an unloved sector last year. But it’s having a sudden resurgence. Big Money has been buying VDE:

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VDE holds a bunch of great energy stocks. One such stock that has been a Big Money darling in the past is FANG which is seeing a rebirth:

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#4 LIT – Global X Lithium ETF

Like it or not, lithium is the power of the foreseeable future for EVs. Look at all that green last year:

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And LIT holds some great stocks. One of them is the best-known EV manufacturer which is very reliant on lithium: Tesla Inc.

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#5 ARKQ – ARK Industrial Innovation ETF

The media has recently heaped scorn upon Cathie Wood, CEO of ARK Invest after she was Wall Street’s darling last year. The proof is ultimately not in the headlines, but in the Big Money buying. Here we can see clearly that Big Money loved ARKQ last year. The question is: when we see selling (red) should we worry?

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The answer lies in which stocks the ETF holds. And ARKQ holds some great ones. One such outlier is Teradyne:

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Let’s summarize here: the top 3 ETFs (IYR, BOTZ, and VDE) for July score well in terms of MAPsignals’ scores. That means Big Money has been pouring into them:

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LIT and ARKQ however, rank lower on our list of ETFs. This is because of weak technicals. These weaker ETFs represent great potential bargains.

So, there we have the 5 best ETFs for July.

The Bottom Line

IYR, BOTZ, VDE, LIT, & ARKQ represent top ETFs for July 2021. Real Estate, Energy, and Robotics stocks have performed well lately, which should continue. Lithium has an interesting story too. Paying attention to the fundamental quality of ETF constituents is paramount.

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

Disclosure: the author holds long positions in TER in managed accounts, but no positions in IYR, BOTZ, VDE, LIT, ARKQ, PLD, ISRG, FANG, or TSLA at the time of publication.

Charts Source: www.mapsignals.com, FactSet, End of day data sourced from Tiingo.com

Investment Research Disclaimer

Why NVIDIA Stock is Up By 3% Today

NVIDIA Stock Gains Ground As Analysts See More Upside

Shares of NVIDIA gained strong upside momentum and tried to get above the $775 level despite the weakness of the general market after the stock was upgraded by Jefferies with a price target of $854.

NVIDIA stock was very strong in June as traders continued to bet on the semiconductor sector. Earnings estimates have been also moving higher in recent weeks, which provided additional support to the stock.

Currently, analysts expect that NVIDIA will report earnings of $15.73 per share in the current year. Next year, earnings are projected to increase to $17.16 per share, so the stock is trading at almost 45 forward P/E.

This is a rich valuation, but the stock managed to move higher even when the market became worried about potential rate hikes in 2022 – 2023.

What’s Next For NVIDIA?

Technically, NVIDIA shares are overbought, and the risks of a pullback are increasing. Fundamentally, the stock is trading at a rich valuation but the market is ready to pay a rich premium for companies with solid potential in the current environment. For example, Tesla stock trades at roughly 100 forward P/E.

It remains to be seen whether the market will pay any attention to risks of higher rates which can put more pressure on tech stocks. At this point, Treasury yields are declining despite recent commentary from the Fed, which is bullish for tech stocks including NVIDIA.

The market will continue to wait for the ARM merger which is facing some regulatory delays. However, the market remains optimistic that the merger will be approved, which is bullish for the stock.

In the near term, NVIDIA shares may pull back due to technicals and lofty valuation, but the stock’s long-term upside trend and the fundamentals behind it remain strong.

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

Tech-Heavy Nasdaq Ignores Hawkish Fed News to Advance

The performance of the tech-heavy Nasdaq was in stark contrast to the S&P 500 and Dow, which slumped as investors reacted negatively to the Fedeignoral Reserve’s unexpectedly hawkish message on monetary policy on Wednesday.

Chipmaker Nvidia Corp jumped 5.4%, leading the charge among technology behemoths after Jefferies raised its price target on the stock.

Technology shares, which generally perform better when interest rates are low, powered a rally on Wall Street last year as investors flocked to stocks seen as relatively safe during times of economic turmoil.

The group has come under pressure this year on fears that rising inflation would lead the Fed to hike interest rates sooner than expected. The central bank on Wednesday moved its first projected rate increases from 2024 into 2023.

Still, shares of Apple Inc, Microsoft Corp, Amazon.com Inc and Facebook Inc reversed premarket declines to rise between 1.4% and 2% as investors bet that a steady economic rebound would boost demand for their products in the long run.

“Yes there is rising inflation but the market is focusing more on the positives of improving earnings, robust GDP growth and the wider economy getting stronger,” said Randy Frederick, vice president of trading and derivatives at Charles Schwab in Austin, Texas.

“Today’s action is indicative that the Fed hasn’t said anything that the market didn’t already know.”

The Nasdaq briefly advanced to within 16 points of its lifetime peak achieved on April 29, before pulling back a touch.

By 1:55PM ET, the Dow Jones Industrial Average fell 198.57 points, or 0.58%, to 33,835.1, the S&P 500 gained 0.24 points, or 0.01%, to 4,223.94 and the Nasdaq Composite added 127.04 points, or 0.9%, to 14,166.73.

Interest rate-sensitive bank stocks slumped -3.8% as longer dated U.S. Treasury yields dropped.

The strengthening dollar, another by-product of the previous day’s Fed news, pushed U.S. oil prices down from the multi-year high hit earlier in the week. The energy index, in turn, fell more than 3%, the biggest laggard among the 11 main S&P sectors.

Other economically sensitive stocks including materials and industrials fell 2.4% and 1.5% respectively, as data showed jobless claims rising last week for the first time in more than a month. Still, layoffs appeared to be easing amid a reopening economy and a shortage of people willing to work.

“In the balance of June and into the summer we anticipate continued volatility as we get more signals from economic data, Fed policy and as we get into the earnings season,” said Greg Bassuk, chief executive officer at AXS Investments in New York.

In corporate news, U.S.-listed shares of CureVac NV sank 41.5% after the German biotech said its COVID-19 vaccine was 47% effective in a late-stage trial, missing the study’s main goal.

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

(Reporting by Shashank Nayar and Medha Singh in Bengaluru; Editing by Sriraj Kalluvila, Anil D’Silva, Maju Samuel and Dan Grebler)

 

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.

Best Stocks For July 2021

Here’s how I found the top stocks to own in July of 2021. I went to MAPsginals.com and I found all the Top 20 stocks since 2012. I then just sorted for the most frequently occurring stocks in descending order. This is what I found:

Source: MAPsignals.com

Outlier stocks are the ones that account for a lion’s share of the gains of the stock market. One thing they have in common is the same ones keep showing up over and over. These were the top 5.

To show why they are great quality stocks, I wanted some quick metrics. I looked up the following key fundamentals I look for:

  • 1 Year Sales Growth
  • 3 Year Sales Growth
  • 1 Year Earnings Growth
  • 3 Year Earnings Growth
  • Profit Margin
  • Debt/Equity

The best quality stocks being bought by big money is what I look for and these fit the bill. Look at these stunning fundamentals:

Source: FactSet

The real test is if Big Money is buying the stocks. By finding the ones most frequently on the Top 20 report, we get a quick filter for the best of the best. In order to even get on one instance of a MAP Top 20 report, the stock needs to have superior fundamentals and get some Big Money Buy Signals. The Top 20 stocks are the best 20 out of over 6,000 every week. So imagine what it means to be on a report 70 or 80 times!

Here’s what it looks like… below we are the instances when each stock saw Big Money buying and made our rare Top 20 report. The key to finding outlier stocks is the repeating Buy signals.

Up first is Facebook, Inc (FB):

Source: MAPsignals, end of day data sourced from Tiingo.com

Now, Align Technology, Inc. (ALGN):

Source: MAPsignals, end of day data sourced from Tiingo.com

And Fortinet, Inc. (FTNT):

Source: MAPsignals, end of day data sourced from Tiingo.com

Number 4 is Adobe Systems Inc. (ADBE):

Source: MAPsignals, end of day data sourced from Tiingo.com

Finally, NVIDIA Corp. (NVDA):

Source: MAPsignals, end of day data sourced from Tiingo.com

So there you have it: a power packed list of the best stocks for July 2021. I’d like to say this is a quick and dirty way to find the best stocks out there, but there’s nothing dirty about it. MAPsignals uses quantitative analysis of mounds of daily stock data. Thirty years of it says two clear things:

  1. Outliers keep appearing time and time again.
  2. When they do, those are the best in show.

When Big Money is buying the best quality stocks, we should always pay attention. But when they do it year after year, it’s a message we don’t want to miss.

The Bottom Line

FB, ALGN, FTNT, ADBE, & NVDA represent the best stocks for July 2021. Based on strong fundamentals and Big Money buy signals year after year, these are worth further investigation.

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

Disclosure: the author holds no positions in FB, ALGN, ADBE, FTNT, & NVDA at the time of publication.

Investment Research Disclaimer

https://mapsignals.com/contact/

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

Nvidia Asks Chinese Regulators to Approve $40 Billion Arm Deal – FT

The application was made in recent weeks and sets in motion a period of scrutiny that could take up to 18 months, according to Chinese antitrust lawyers, the FT report https://on.ft.com/3w4hY8j added.

Nvidia said last month it expects to close the Arm acquisition by March 2022, after having struck a deal with SoftBank Group in September 2020.

The Japanese conglomerate, meanwhile, is in talks with banks for a loan of about $7.5 billion tied to the Arm sale, Bloomberg News reported https://bloom.bg/3cps3Fk on Tuesday, citing sources, with Mizuho Bank Ltd coordinating the deal.

In February, Bloomberg reported that the U.S. Federal Trade Commission had opened an in-depth probe into Nvidia’s agreement to buy Arm.

Nvidia Chief Executive Jensen Huang had told the Financial Times last month the U.S. chip company had “started the process” of engaging with Chinese regulators and was confident the deal would be cleared within the time frame set by Nvidia.

(Reporting by Nandakumar D and Kanishka Singh in Bengaluru; Editing by Ramakrishnan M.)

NVIDIA Shares Ease After Topping Earnings Forecasts

NVIDIA Corporation (NVDA) shares slipped in Wednesday’s extended-hours trading session despite the chipmaker surpassing Wall Street’s top and bottom-line expectations.

The Santa Clara-based company posted a first-quarter profit of $3.66 per share, easily exceeding analysts’ expectations of $3.28 a share. Meanwhile, revenue for the period came in at $5.66 billion, with the figure coming in comfortably ahead of the $5.41 billion consensus mark and growing 84% from a year earlier on the back of a surge in demand for graphics chips driven by pandemic gaming. Moreover, the company said it expects sales in the current quarter to increase 62% from a year ago.

However, news that supply issues look like continuing for the foreseeable future spooked investors. “We expect to remain supply-constrained into the second half of the year,” chief financial officer Kress said, per MarketWatch. The company said it planned to manage the shortage by adding software to deter cryptocurrency miners from using its gaming chips. During the quarter, processing chips designed specifically for digital currency generated $155 million in revenues.

Through Wednesday’s close, the NVIDIA share price has a market capitalization of $391 billion, offers a tiny 0.10% dividend yield, and trades 20.26% higher on the year. By comparison, the tech-heavy Nasdaq index has gained 6.59% over the same period. From a valuation standpoint, the stock trades 24% above its five-year average forward earnings multiple of 36.69 times.

Wall Street View

Susquehanna’s Christopher Rolland reiterated his ‘Positive’ rating and $700 price target after Nvidia’s quarterly report. Rolland told investors that demand for the chipmaker’s GPUs remains robust, but he sees sales slowing in the second half of the year as reopenings and physical activities resume across the United States.

Broker coverage remains firmly in the bull camp elsewhere on Wall Street also. The stock receives 29 ‘Buy’ ratings, 5 ‘Overweight’ ratings, 4 ‘Hold’ ratings, 1 ‘Underweight’ rating, and 1 ‘Sell’ rating. Twelve-month price targets range from a Street-high $800 to $380 low, with the median pegged at $675.

Technical Outlook and Trading Tactics

NVIDIA shares have traded within a $175-point range since early September, with the bulls nor the bears able the take control of price action.

Given Wednesday’s after-hours weakness, active traders should consider opening a short position near the trading range’s upper trendline resistance area at $645, while looking to cover near the range’s lower trendline at $470. Protect capital by exiting the trade if the stock breaks out to a new all-time high on above-average volume.

For a look at today’s earnings schedule, check out our earnings calendar.

NVIDIA Split Announcement Raises Red Flag

NVIDIA Corp. (NVDA) reports Q1 2021 earnings in Wednesday’s post-market, with analysts expecting a profit of $3.22 per-share on $5.2 billion in revenue. If met, earnings-per-share (EPS) will mark a 78% profit increase compared to the same quarter last year, when the pandemic triggered worldwide shutdowns. The stock sold off more than 8% in February, despite beating Q1 2020 top and bottom line estimates and issuing higher revenue guidance.

Why Announce Split Just Before Earnings?

The systems chip manufacturer announced a four-for-one stock split on Friday morning, effective on July 20th. The timing raises a red flag, given the close proximity of this week’s report, triggering speculation the company is attempting to manage potential disappointment ahead of a less-than-spectacular quarter. Even so, the long string of better-than-expected releases is unlikely to defer investor interest ahead of the news.

KeyBanc analyst John Vinh upgraded the stock from ‘Sector Weight’ to ‘Overweight’ on May 20, one day before the split announcement, setting a $700 price target. He noted NVIDIA “is best positioned to monetize one of the fastest and highest value-added workloads in the data center in artificial intelligence/machine learning.” Vinh downgraded rival Intel Corp (INTC) at the same time, highlighting the chip behemoth’s loss of market share to the juggernaut in the last year.

Wall Street and Technical Outlook

Wall Street consensus stands at an ‘Overweight’ rating based upon 28 ‘Buy’, 5 ‘Overweight’, 4 ‘Hold’, 1 ‘Underweight’, and 1 ‘Sell’ recommendation. Price targets currently range from a low of $380 to a Street-high $800 while the stock closed Friday’s session about $75 below the median $675 target. This low placement suggests Main Street investors are more worried than professional analysts about high valuation and the continued worldwide chip shortage.

NVIDIA completed a breakout above 2018 resistance at 293 in May 2020 and entered a powerful uptrend that carved a straight-line channel into the September peak at 589. February and April 2021 breakout attempts failed while the stock is now engaged in a third attempt. This mixed action has carved an expanding wedge pattern that should limit momentum until buying pressure clears 680, which is more than 13% above the current price.

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

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

Earnings to Watch Next Week: AutoZone, Nvidia, Medtronic and Costco Wholesale in Focus

Earnings Calendar For The Week Of May 24

Monday (May 24)

Ticker Company EPS Forecast
NDSN Nordson $1.64

Tuesday (May 25)

IN THE SPOTLIGHT: AUTOZONE

The Memphis, Tennessee-based auto parts retailer is expected to report its fiscal third-quarter earnings of $20.02 per share, which represents year-over-year growth of about 39% from $14.39 per share seen in the same period a year ago.

The United States’ leading retailer and a leading distributor of automotive replacement parts and accessories would post revenue growth of 17% to $3.26 billion. In the last four quarters, on average, the company has beaten earnings estimates over 12%.

AutoZone (AZO) could comp ~30% in F’Q3 with a boost from the stimulus, and a flat comp is possible in F’Q4 on a tougher compare. However, these beats may not fully flow through to F’22. Risk/reward looks positive but less favorable after the stock’s recent run. Stay ‘Overweight’ with a $1,640 price target,” noted Simeon Gutman, equity analyst at Morgan Stanley.

AZO is our top pick in DIY Auto. We see it as a high-quality retailer with the ability to compound earnings/FCF growth over time. While not immune to a tougher macro backdrop (fewer miles driven), we believe AZO is best positioned through any recession given its leading exposure to the more defensive DIY segment (~80% of sales). In addition, its DIFM growth was accelerating pre-COVID and we think it can gain more share in that segment going forward. In our view, ongoing share gains coupled with solid expense management should allow AZO to overcome headwinds from less driving in the near- to medium-term.”

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

Ticker Company EPS Forecast
SHB Shaftesbury £0.64
VSAT Viasat $0.22
CBRL Cracker Barrel Old Country Store $0.27
AZO AutoZone $20.02
HTHT Huazhu Group Limited -$1.61
DY Dycom Industries $0.06
URBN Urban Outfitters $0.17
HEI Heico $0.48
TOL Toll Brothers $0.79
A Agilent $0.83
INTU Intuit $6.52
JWN Nordstrom -$0.58
VNET 21Vianet -$0.43
BYG Big Yellow £22.76

Wednesday (May 26)

IN THE SPOTLIGHT: NVIDIA

The Santa Clara, California- based multinational technology company is expected to report its first-quarter earnings of $3.28 per share, which represents year-over-year growth of over 80% from $1.80 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 10%. The company, which designs graphics processing units for the gaming and professional markets, as well as system on a chip unit for the mobile computing and automotive market would post year-over-year revenue growth of over 70% to $5.4 billion.

“For the first quarter of fiscal 2022, NVIDIA anticipates revenues of $5.3 billion (+/-2%). Non-GAAP gross margin is projected at 66% (+/-50 bps). Non-GAAP operating expenses are estimated to be $1.20 billion. Capital expenditures are expected to be approximately $300-$325 million,” noted equity analysts at ZACKS Research.

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

Ticker Company EPS Forecast
VAR Varian Medical Systems $1.10
NVDA Nvidia $3.28
BMO Bank Of Montreal USA $2.17
CPRI Capri Holdings Ltd $0.01
ANF Abercrombie & Fitch -$0.41
DKS Dick’s Sporting Goods $1.16
UHAL Amerco $5.07
WDAY Workday $0.73
SNOW Intrawest Resorts -$0.16
AEO American Eagle Outfitters $0.47
DXC DXC Technology Co $0.70
LI Li Auto -$0.14
WSM Williams Sonoma $1.72

Thursday (May 27)

IN THE SPOTLIGHT: MEDTRONIC, COSTCO WHOLESALE

MEDTRONIC: An American Irish-domiciled medical device company is expected to report its fiscal fourth-quarter earnings of $1.42 per share, which represents year-over-year growth of over 140% from $0.58 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 44%. The Fridley, Minnesota-based medical company would post year-over-year revenue growth of over 35% to $8.14 billion.

“Peer results and commentary suggest ~33-34% organic growth (the upper end of mgmt guidance) is achievable, and we expect FY22 guidance in-line with Cns with room for raises. We continue to see valuation as attractive and Risk/Reward positive into FY22 recovery,” noted Cecilia Furlong, equity analyst at Morgan Stanley.

Medtronic is well aligned with our 2021 pro-recovery thesis, and we see sustainable 5%+ organic growth driven by the company’s ~5% WAMGR and supported by pipeline product launches & tuck-in M&A contributions. CEO Geoff Martha has committed to initiatives to smooth bulk purchasing and deliver more consistent results, and redeploy $450mn annual OpEx savings toward innovation & product reinvestment.”

COSTCO WHOLESALE: The world’s fifth-largest retailer is expected to report its fiscal third-quarter earnings of $2.31 per share, which represents year-over-year growth of over 20% from $1.89 per share seen in the same period a year ago.

The Fridley, Minnesota-based medical company would post revenue of $43.6 billion.

COST’s results have consistently been among the best in Retail. Over the past decade, COST has delivered ~6% comps and ~10% EBIT growth on average. It is rare to find a business with COST’s solid comp/membership growth, while relative e-commerce insulation differentiates its value proposition from other retailers,” noted Simeon Gutman, equity analyst at Morgan Stanley.

“We are Overweight even as the stock trades at an elevated valuation given COST’s scarcity value, safety, and scale. In the near-term, we expect incremental sales uplifts from COVID-19 disruption, and earnings power looks stronger despite COVID-19 expenses.”

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

Ticker Company EPS Forecast
EGFEY Eurobank Ergasias S.A. ADR $0.01
SAFM Sanderson Farms $2.44
DG Dollar General $2.13
ADSK Autodesk $0.94
CM Canadian Imperial Bank Of Commerce USA $2.49
DLTR Dollar Tree $1.39
TD Toronto-Dominion Bank $1.39
RY Royal Bank Of Canada $2.06
MDT Medtronic $1.42
BBY Best Buy $1.34
BURL Burlington Stores $0.80
ULTA Ulta Salon Cosmetics Fragrance $1.93
CRM Salesforce.com $0.88
VMW VMware $1.58
HPQ HP $0.88
BOX BOX $0.17
PLAN Progressive Planet -$0.09
VEEV Veeva Systems $0.78
GPS Gap -$0.06
COST Costco Wholesale $2.31
ASND Ascendant Resources -$1.83
YY YY -$0.06

Friday (May 28)

Ticker Company EPS Forecast
BIG Big Lots $1.67
For a look at all of today’s economic events, check out our economic calendar.

Why Nvidia Stock Jumped After Announcement Of Four-For-One Split?

Nvidia Video 21.05.21.

Nvidia Announced A Four-For-One Split Of Its Stock

Shares of Nvidia opened with a gap up today after the company announced a four-for-one split of its common stock. The company stated that the move will make stock ownership more accessible to investors and employees.

In case the split is approved by the company’s shareholders at the annual meeting on June 3, 2021, each NVIDIA shareholder of record at the close of business on June 21, 2021 will get three more shares of Nvidia’s common stock.

The company anticipates that the stock would begin to trade on a split-adjusted basis on July 20.

With the price of roughly $600 per share, Nvidia stock is not easily accessible to some investors who do not have a big account and want to hold a diversified portfolio. When the price of one share drops after the split, the stock will become more attractive for a larger pool of potential investors, which is bullish for Nvidia.

What’s Next For Nvidia?

Nvidia is expected to report its quarterly results on May 26, after the market close. Analysts expect that the company will report earnings of $3.27 per share. For the full year 2021, Nvidia is expected to report earnings of $13.59 per share, while the company’s earnings are projected to grow to $15.37 per share in 2022.

At current levels, the stock is trading at 39 forward P/E for 2022 which is not cheap. However, such valuations are often seen in high-flying tech stocks.

The company’s graphic cards experienced huge demand from crypto miners at the beginning of this year, and Nvidia was even forced to reduce hash rates at some cards so that these cards can find their way to gamers. General supply shortages in the semiconductor industry have also provided support to the company’s shares this year.

At this point, the main risk for Nvidia is presented by rising interest rates which could put pressure on tech stocks. However, bond traders have managed to shrug off inflation worries in recent weeks, and Nvidia’s shares have a good chance to gain momentum ahead of the earnings release.

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

The $217 Million Dollar Pizza: Don’t Let These 3 Stocks Get Away Like Bitcoin

Price is what you pay, value is what you get.

The infamous Warren Buffett quote sums up investing vs trading perfectly.

The short-term trade is all about instant gratification. Take a pizza for instance. We all know it’s bad for us, but it tastes so good. Maybe that’s why Americans eat 3 billion pizzas and spend $38 billion on them each year.

Short-term trades feel great when we win, just like pizza feels great going down. But later, that pizza might not feel so great. And long-term, we know it clogs arteries and does all sorts of other damage. So, when we tee-up a quick trade poised to clip a profit, the greed center of our brains is hoping to get to the pleasure center.

Short-term traders are often looking for free money.

Maybe this was what Laszlo Hanyecz was thinking on May 22nd, 2010. He was hungry and bought two pizzas in Jacksonville, Florida. Only he made the first real-world bitcoin transaction paying 10,000 BTC for them. Surely, at the time it felt like free money – or rather – free pizza. Who foresaw bitcoin’s future?

Maybe the pizza seller did. Because now those two pizzas are worth $217 million each.

If ever there was an example of someone who likely regretted the short-term trade and wish they’d held for the long-term, it might be poor Laszlo.

There are two sides to every coin (except perhaps bitcoin). What the short-term trade offers in terms of quick excitement, the long-term trade severely lacks. Buy-and-hold investing has a stuffy stigma. Let’s face it, being patient and waiting years for monster gains is boring. Not many want to do it.

That is until one looks up 5, 10, or 30 years from now at someone else’s successful long-term investments.

Imagine you had sold 2 pizzas for 10,000 bitcoins 11 years ago. And then never did anything with the cryptocurrency. Naturally, you’d have forgone a fast in-and-out trade trying to clip a few percent. You also would need the long-term view on bitcoin’s potential. But had you done nothing, you would have turned roughly $16 bucks into nearly half-a-billion dollars.

That, my friends, is the power of long-term investing.

At MAPsignals, we see the investing-world through the lens of stocks: specifically, outliers.

What’s an outlier?

An outlier stock is a stock that makes insane gains, more than most other stocks. Professor Hendrick Bessembinder proved that for the past nearly 100 years, only 4% of all stocks accounted for 100% the gains above treasuries. That 4% represents the outliers.

If you missed the bitcoin boat, don’t worry- I did too. But I did catch some monster outliers that helped me get closer to my long-term investing goals. And today, you’re in luck, because I’m about to share 3 outlier stocks with close ties to bitcoin and cryptocurrency. These stocks represent a great way to own awesome businesses, and simultaneously get exposure to cryptocurrency.

Nvidia Corporation (NVDA)

NVDA is a Technology stock focused on specialized semiconductors. It has great sales and earnings growth and a juicy 62% gross profit margin. It has reasonable debt levels and a reasonable P/E ratio. Their chips are popular with bitcoin miners.

Now, let’s take a look at the Big Money data. What’s that? We have a process that looks for high-quality stocks seeing buy activity in their shares. Only the best ones show up on our weekly Top 20 reports.

What we want to see is a repeat offender. Look how Nvidia has been a Big Money magnet over the years:

Times on the Top 20 since July 1st, 2014: 54

Outlier status: OUTLIER

First signal: 2000-06-05

Performance since first signal: +5433.85%

Here’s a chart of all of those rare signals:

 

Source: www.mapsignals, End of day data sourced from Tiingo.com

Next up is PayPal Holdings, Inc. (PYPL)

PYPL is a Financials stock focused on Consumer Finance Services. It has great sales and earnings growth and a juicy 55% gross profit margin. It has reasonable debt levels and a reasonable P/E ratio. They also own the popular digital payments app, Venmo.

Recently, PayPal has allowed their users (and Venmo users) to transact in bitcoin.

Now, let’s look at the Big Money profile for PYPL.

BIG MONEY DATA:

Times on the Top 20 since July 1st, 2014: 45

Outlier status: OUTLIER

First signal: 2016-09-20

Performance since first signal: +520.53%

 

Source: www.mapsignals.com, End of day data sourced from Tiingo.com

Lastly, there’s Square, Inc. (SQ)

SQ is a Discretionary stock focused on Retail Industry Software. It has great sales and earnings growth and a juicy 28% gross profit margin. It has high debt levels and a high P/E ratio.

They have point-of-sale technology for merchants and the popular Cash App. The latter allows users to transact in bitcoin.

Let’s look at the historical Big Money profile for Square.

BIG MONEY DATA:

Times on the Top 20 since July 1st, 2014: 12

Outlier status: MATURING

First signal: 2017-10-17

Performance since first signal: +535.82%

Source: www.mapsignals.com, End of day data sourced from Tiingo.com

Here’s the bottom line: If you missed out on bitcoin’s massive run, there are stocks that are correlated to the cryptocurrency’s success. If you’re looking for stock exposure that can benefit from the rise in bitcoin, consider Nvidia, PayPal, & Square.

Disclosure: the author holds long positions in PYPL & SQ in personal accounts and PYPL in managed accounts, but no position in NVDA at the time of publication.

Learn more about the MAPsignals process here: www.mapsignals.com

Disclaimer

https://mapsignals.com/contact/

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

Worried About A Market Crash? Consult The Big Money Index

And Consider These Stocks When It Does

They get cranky, roll over, fall out of bed, and hit their heads on the floor. It’s part of life, and most people don’t like when it happens.

But what if I told you there’s a tool that can alert you before markets roll-over?

It may sound too good to be true. But here I’ll introduce you to my favorite indicator that can do exactly that. I’ll show you how it works, what it’s saying now, and I’ll even show you examples of outlier stocks that weather the inevitable storms particularly well over the long-run.

The Big Money Index (BMI) is a great market timing indicator. It was developed by MAPsignals, a research firm dedicated to tracking Big Money investors in real-time. The idea is this: JPMorgan did a study estimating that 10% of all daily stock trading volume is due to fundamental discretionary traders. The lion’s share of trading is institutional.

If we can identify when huge investors are moving in and out of stocks in an unusual way, we can try and be ahead of the crowd. This way we can have a possible advantage and ride their coattails. We used our Wall Street experience of handling big stock orders to help us create this indicator. It’s our best guess of where the Big Money is heading on a daily basis.

When we add up all the daily buy and sell signals and smooth them out over a 25-day moving average, we get the Big Money Index.

Right now, it’s indicating higher prices for stocks. When it rises, like now, usually the market follows:

It looks like this:

MAPsignals.com

We’ve back-tested this indicator going back over 30 years. When overbought, (80% or more) markets crest shortly thereafter often preceding a market correction. These are rare occurrences: The BMI was overbought just 20% of the last 3 decades.

Rarer still is an oversold BMI: only 4% occurred the last 30 years. When the Big Money Index goes deeply oversold, that’s when history says stocks are bound to rise. Markets usually rocket higher weeks and months later.

Here are some recent examples of the Big Money Index accurately foreshadowing market peaks and troughs:

  • January 2018 peak
  • December 2018 trough
  • February 2020 peak
  • March 2020 trough
  • September 2020 peak
  • October 2020 Election volatility
  • November 2020 rally

If a deeply oversold Big Money Index is great for identifying buy opportunities, then how do we know when to side-step a market drop?

Below is the same BMI chart. Only we’ve added periods where the 10- day average was below 65%. That just basically means, the BMI was weakening. Here’s what we saw over the last three years:

When red comes, it generally lasts a while. This also corresponds to a falling then recovering index. When red starts, indexes usually fall. Red can only stop when Big Money buying lifts the average above 65%.

To summarize, when the BMI is falling, the S&P 500 is mostly flat:

From 2012, we see similar:

To avoid being left holding the bag when the next market drop comes, watch for a falling Big Money Index. Remember, Big Money means we’re trying to track institutional investors. They usually have an edge over everyone else. They tend to have the best market information out there. So, it’s best to watch them!

Now you know about the BMI. You know you can use it to potentially manage your risk. You know you should watch out for a falling BMI to alert you of danger ahead.

They say the best defense is a good offense. I told you I’d let you know which stocks to hold when that inevitable cranky stock market comes. To find them, I went back over the following periods of market turmoil:

Each of these drops was preceded by a falling Big Money Index. And each time the market troughed, I went and looked at which stocks came out with flying colors.

Market volatility is inevitable. But when it comes, we’ve found the best defense is owning outlier stocks. These stocks are the best of the best. They have growing sales, earnings, and profits. And they are also getting scooped up by Big Money investors.

Hidden in MAPsignals buy and sell signals are high-quality stocks that can offer opportunity when things get bumpy.

You’ll notice in the 6-year charts below, the green bars indicate Big Money buying when stocks have superior fundamentals. These are mother-outliers. All that green, we call the stairway to heaven. But even through periods of wicked volatility, these stocks do incredibly well over the long run.

Facebook Inc. (FB) rose 293% since 2015:

Source: MAPsignals, end of day data sourced from Tiingo.com

Mastercard Inc. (MA) rose 378% over the same period:

Source: MAPsignals, end of day data sourced from Tiingo.com

Nvidia Corp. (NVDA) rose an astounding 3,067% since 2015:

Source: MAPsignals, end of day data sourced from Tiingo.com

Compare those stocks with the SPY SPDR S&P 500 ETF which gained 129%.

These outlier stocks are ones I would want to own when the next market rough patch comes.

So, there you have it: a detailed playbook on how to forecast, avoid, and even defend against the next market crash. We all know it’s coming eventually, but now you can be armed with tools to help you through.

The next time markets get cranky, you just might already be out of sight avoiding it until happier days.

The Bottom Line

Trying to understand what the Big Money is doing is important. Currently the Big Money Index is pointing higher, which is near-term bullish. When it heads lower, I’ll be paying attention. I believe in looking for quality companies in times of turmoil.

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

Disclosure: the author holds no positions FB, MA, NVDA, & SPY at the time of publication.

Investment Research Disclaimer

https://mapsignals.com/contact/

Bears in Charge Ahead of AMD Report

Advanced Micro Devices Inc. (AMD) reports Q1 2021 earnings after Tuesday’s closing bell, with analysts expecting a profit of $0.44 per-share on $3.20 billion in revenue. If met, earnings-per-share (EPS) will mark a 240% profit increase compared to the same quarter in 2020. The stock sold off 6.5% in January after beating Q4 2020 estimates and has continued to underperform into the second quarter.

Posting Year-To-Date Loss

AMD and NVIDIA Corp. (NVDA) posted impressive 2020 returns in reaction to multiple missteps at Dow component Intel Corp. (INTC). INTC sentiment has improved substantially in 2021 but that didn’t stop NVDA from posting an all-time high just two weeks ago. Sadly, AMD has failed to match the performance of either rival, slumping to an 8% year-to-date loss while entering the third month of dead price action at the 200-day moving average.

Raymond James analyst Chris Caso outlined the bull case last week, noting “the stock’s pullback has been driven by improved sentiment that Intel will solve their manufacturing challenges, which will reverse AMD’s successes. We’re taking the other side of that view. Now that Intel has committed to internal manufacturing, we think it’s unlikely that Intel ever regains a transistor advantage vs. AMD, and the current roadmaps ensure an advantage for AMD/TSMC through at least 2024”.

Wall Street and Technical Outlook

Wall Street consensus matches this analyst’s view, with an ‘Overweight’ rating based upon 17 ‘Buy’, 4 ‘Overweight’, and 12 ‘Hold’ recommendations. However, three analysts now recommend that shareholders close positions and move to the sidelines. Price targets range from a low of $70 to a Street-high $120 while the stock closed Friday’s session more than $20 below the median $105 target. This low placement reflects skepticism about the chipmaker’s ability to compete with larger rivals.

AMD completed a breakout above the 2000 high in the 40s in July 2020 and entered a trend advance that lost steam in the 90s in September. It posted an all-time high at 99.23 in January 2021 and eased into an intermediate correction that reached the 200-day moving average in February. Price action has gone comatose while a monthly Stochastic sell cycle still hasn’t hit the oversold level. In turn, this tells us that bears remain in firm control of the ticker tape.

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

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

Mixed Outlook Ahead of Intel Report

Dow component Intel Corp. (INTC) reports Q1 2021 earnings after Thursday’s closing bell, with analysts looking for a profit of $1.14 per-share on $17.97 billion in revenue. If met, earnings-per-share (EPS) will mark a 21% profit decline compared to the same quarter last year.  The stock gave back a 6.5% advance after beating Q4 2020 top and bottom line estimates in January but performed well into early April, posting a 15 month high.

Investing in Local Fabrication

Investors have forgiven the chip giant after 2020 missteps forced loyal customers to cut deals with competitors Advanced Micro Devices Inc. (AMD) and NVIDIA Inc. (NVDA). NVIDIA, in particular, is rolling out highly-competitive products at a lightning pace, ready to build even greater market share in coming years. Intel has shifted gears to meet the challenge, investing billions to become a major foundry supplier. That effort could pay off, given worldwide chip shortages this year.

Needham analyst Pat Gelsinger posted upbeat comments about the initiative in March, noting “With most of the world’s leading edge foundry capacity now concentrated in Asia, Intel also launched Intel Foundry Services (IFS) to address the industry’s capacity constraints and need for more geographically balanced manufacturing capacity, with manufacturing locations in the U.S. and Europe. Intel also announced it will be spending $20 billion to build two new fabs in Arizona, which will support its current products as well as its foundry customers.”

Wall Street and Technical Outlook

Wall Street sentiment remains mixed despite share gains, with a consensus ‘Hold’ rating based upon 15 ‘Buy’, 1 ‘Overweight’, 15 ‘Hold’, and 2 ‘Underweight’ recommendations. More importantly, 8 analysts still recommend that shareholders close positions and move to the sidelines. Price targets currently range from a low of $40 to a Street-high $90 while the stock is set to open Thursday’s session about $6 below the median $70 target. This low placement could support rapid upside in reaction to a strong report.

Intel topped out in the upper 50s in 2018 and eased into a complex pattern, ahead of a 2020 rally and failed breakout during the pandemic decline. Steep declines have posted four lows in the mid-40s in the last three years, draining bullish sentiment and shareholder patience. The stock rallied within a point of 2020’s multiyear high this month but accumulation-distribution has failed to recover, setting off a bearish divergence that raises odds for another steep downturn.

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

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

NVIDIA at Cusp of Major Breakout

NVIDIA Inc. (NVDA) is testing February’s all-time high after raising Q1 2021 revenue estimates above consensus during Monday’s Analyst Day, predicting “good visibility” and “another strong year”. In addition to rising Data Center income, the company raised estimates for a new industrial-scale cryptocurrency mining product from $50 million to $150 million, highlighting intense demand for digital assets. It topped off the bullish guidance by insisting that demand will “exceed supply for much of this year”.

Cutting Edge Product Line

The graphics giant announced a flurry of new high tech computing products at the event, including BlueField-3, a next generation data processing unit that “delivers the equivalent data center services of up to 300 CPU cores”, and the NVIDIA DRIVE Atlan system-on-a-chip for autonomous vehicles. The company also revealed a host of partnerships and collaborations for Arm computing, AI-capable supercomputers, and AI-on-5G solutions.

Cowen analyst Matthew Ramsay raised his target to $675 on Tuesday, noting “NVIDIA’s Analyst Day discussed its expanding accelerated compute portfolio, as well as a broadening set of business models to extract value in gaming, autos and datacenter. The announcement of the Project Grace CPU was the surprise of the day given the ARM acquisition is still under review. An $8B auto funnel and Q1 pre-announcement were also positives.”

Wall Street and Technical Outlook

Wall Street consensus stands at an ‘Overweight’ rating after 2020’s outstanding 122% return, based upon 26 ‘Buy’, 5 ‘Overweight’, 5 ‘Hold’, 1 ‘Underweight’, and 1 ‘Sell’ recommendation. Price targets currently range from a low of $380 to a Street-high $800 while the stock is set to open Tuesday’s session about $55 below the median $662 target. New highs are likely between now and the May earnings release, given this modest placement.

NVIDIA broke out above 2018 resistance in the 290s in May 2020 and took off in a powerful trend advance that topped out near 600 in September. November and February 2021 breakout attempts failed while downturns have held rectangular support near 460. The stock traded within 80 cents of range resistance on Monday while accumulation readings have lifted to new highs, setting the stage for a breakout that could reach 800 in the next two to three months.

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

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

NVIDIA Tests All-Time High After Rosy Revenue Outlook

 

Shares in NVIDIA Corporation (NVDA) gained over 5% Monday after the Santa Clara chipmaker said that its sales for the current quarter sit ahead of previous forecasts. The upward revision comes after its total fourth quarter (Q4) revenues grew by 61%.

Although management did not provide a specific figure, it now expects Q1 revenue to come in above its earlier estimate of between $5.19- and $5.41 billion. “While our fiscal 2022 first quarter is not yet complete, Q1 total revenue is tracking above the $5.30 billion outlook provided during our fiscal year-end earnings call,” Nvidia’s CFO Colette Kress said in a statement cited by CNBC. Meanwhile, analysts expect sales during the period to reach $5.32 billion.

Earlier in the day, Chief Executive Jensen Huang told investors at the annual GTC developers conference that the company was launching its first data-center CPU that uses artificial intelligence. The new chip that powers computer servers is likely to intensify competition with key rival Intel Corp. (INTC), which controls over 90% of the CPU data-center market.

Through Monday’s close, NVIDIA stock has a market value of $377 billion, offers a small 0.11% dividend yield, and trades 131.36% higher over the past twelve months. By comparison, the industry’s largest exchange-traded fund (ETF) – the iShares PHLX Semiconductor ETF (SOXX) – has gained 103.13% over the same period.

Wall Street View

In late February, Raymond James analyst Chris Caso raised the investment firm’s price target on Nvidia to $700 from $600 while reiterating his Outperform rating. Caso pointed to “strong” revenue in the company’s gaming segment for the upgrade.

Coverage elsewhere on Wall Street also remains overwhelmingly favorable. The stock receives 26 ‘Buy’ ratings, 5 ‘Overweight’ ratings, 5 ‘Hold’ ratings, 1 ‘Underweight’ rating, and 1 ‘Sell’ rating. Twelve-month price targets range from $380 to $800, with the median target pegged at $660. Look for additional upgrades in the coming weeks as analysts revise revenue forecasts.

Technical Outlook and Trading Tactics

NVIDIA shares have oscillated within a 130-point range since early September. More recently, the price has rallied from the closely-watched 200-day simple moving average (SMA), with the stock closing just below its all-time high (ATH) at $614.90 in Monday’s trading session. Yesterday’s move on above-average volume indicates the involvement of larger market players, which may see the stock breakout into price discovery in the near future.

Active traders who position for such a move should use a fast period moving average as a trailing stop to capitalize on the bullish momentum. To use this technique, remain in the trade until the stock closes beneath the indicator.

For a look at today’s earnings schedule, check out our earnings calendar.

Bitcoin Mining Adds to Existing Shortage in Semiconductor Market, Chip Prices Surge

Bitcoin is now a trillion-dollar market thanks to an impressive rally that propelled the oldest cryptocurrency to a fresh all-time high at over $61,000. While market participants enjoy the bullish run, some industries are suffering because of the inflated price of chips.

Everyone is talking about how Bitcoin mining affects the environment due to the huge demand for electricity and the giant carbon footprint. What few people know is that crypto mining impacts the costs of chips, which have been recently booming in price.

Chip Shortages Affecting Entire Industries

Chips are indispensable in so many devices and industries – think about laptops, smartphones, TVs, or cars. The semiconductor industry has already been struggling with supply chain disruptions caused by the COVID-19 pandemic, the winter storm in Texas, and fires at factory sites. But Bitcoin mining is putting even more pressure on the chip market, creating an additional shortage and boosting the price of chips.

The profitability of mining depends on the cryptocurrency’s price, which has rallied for the last few months, surging well above the 2017 peak. The huge competition among miners is prompting an increasing demand for advanced chips. This results in a price boom for chips and thus affects the other industries relying on semiconductors.

CW Chung, head of research at Nomura in Seoul, told Financial Times:

“Added demand from cryptocurrency miners is coming when the chip industry is dealing with simultaneous crises — from supply constraints to a structural shortage of high-end chips. The squeeze should last through the end of the year.”

The problem is so severe that Toyota and Volkswagen – the world’s two biggest carmakers by the number of vehicles manufactured – were forced to cut production due to the shortage of chips. Elsewhere, smartphone makers have no choice but to delay the launches of new devices.

Chung explained that crypto demand might have a great impact on the chip market. For example, during the last Bitcoin rally, demand from miners represented a tenth of the entire sales of TSMC – the third-largest chipmaker in the world.

Nvidia Makes Sure New Chip Is Not Miner-Friendly

The situation is affecting the gaming industry as well, forcing Nvidia to program one of its new chips – GeForce RTX 3060 – to reduce mining efficiency by 50% when it spots mining activity.

Elsewhere, chipmaker Advanced Micro Devices (AMD) told PC Gamer that it had no plans to restrict its graphic cards from being implemented for crypto mining. The truth is that AMD might have no choice at all, as all its drivers are open source.