- Dow Jones Industrial Average is flat
- S&P 500 is down 0.1%
- Nasdaq 100 is down 0.1%
The mood is cautious today, with the S&P 500 lingering at its lowest level in five weeks, ahead of the key event in the economic calendar, which is the release of the minutes of the last FOMC meeting. Markets are keeping an eye out for anything that suggests strong bets on interest rates being left untouched in September could be too optimistic.
The Fed raised rates by 25bps in the last meeting but has said the future will depend on how the economic data pans out. Fed members appear to have become more divided over what the central bank should do next, with some suggesting rates are approaching their peak while more hawkish members have said more hikes are likely to be needed.
Most discussed Reddit stocks
Below is a list of the top 10 most mentioned US stocks on the WallStreetBets thread on Reddit over the last 24 hours, according to data from Quiver Quantitative. Exchange-Traded Funds (ETFs) and other instruments have been excluded:
- US Steel
- AMC Entertainment
Most active US stocks before the bell
Below are the most active stocks with a valuation of at least $500 million before the bell, based on trading data taken from Bloomberg:
- Akamai Technologies
- Lucid Group
- AMC Entertainment
- Virgin Galactic
US premarket winners and losers
Here are the stocks worth at least $500 million experiencing the sharpest movements in premarket trade, according to data from Bloomberg:
Jack Henry & Associates
ZIM Integrated Shipping
Top US stocks to watch
Let’s have a look at the top stocks to watch today.
Target stock: Strong earnings counter weaker outlook
Target is up 8.8% and rebounding from three-year lows this morning, with the retailer set to open at its highest level since the start of August, after reporting impressive profit growth in the latest quarter despite a drop in sales.
The bar was low for Target following the slump in its share price ahead of the results and news that adjusted EPS soared to $1.80 from just $0.39 the year before impressed, especially as Wall Street had only pencilled-in $1.50. That was even more impressive considering sales were down 5.4%, much sharper than the 1.8% drop forecasted by analysts. Demand for discretionary items remains subdued as consumers tighten their belts, and this is only being partly countered by resilient demand for basics like food and essentials. Meanwhile, the ongoing fall in inventory levels, which caused severe problems last year, is also helping margins.
The strong lift to profits also allowed investors to shrug off the fact it lowered its full year outlook, saying that sales will experience a mid-single-digit decline in 2023 and that adjusted EPS will be in the range of $7 to $8. The midpoint of that new earnings target range is about $0.75 lower than the previous guidance.
Its larger rival Walmart, which is up 0.6% today, reports results on Thursday and investors have set a much higher bar for the stock than it did Target.
TJX stock: Lifts profit outlook
TJX Companies is up 3.3% and at fresh all-time highs after performing better than management expected in the latest quarter, as higher footfall and strong demand for clothing and accessories prompted it to raise its earnings outlook for the rest of the year.
The retailer, which owns stores including TJ Maxx, HomeGoods, Sierra and HomeSense, said comparable store sales were up 3% in the first quarter of its financial year, at the top-end of its guidance. That was just ahead of the 2.9% increase forecast by Wall Street. Marmaxx reported stronger growth of 5% thanks to solid demand for apparel. Margins also came in better than anticipated, resulting in EPS jumping to $0.76 from $0.49 the year before.
TJX said it is still forecasting annual comparable sales will be up 2% to 3% in 2023, but nudged-up its adjusted EPS goal for the year.
Intel stock: Tower Semiconductor takeover is off
Intel shares are down 0.1% after agreeing to mutually terminate its $5.4 billion takeover of Israeli firm Tower Semiconductor. That decision was reached after the pair failed to secure regulatory approvals in a timely manner.
Intel had agreed to buy Tower Semiconductor in 2022 and will now need to pay a termination fee of around $353 million. Analysts flagged that securing approval in China, amid strained US-China relations, may have been the barrier.
NVIDIA stock: Yet another boost
NVIDIA is up 0.6% at $442 as brokers continue to become more bullish on the chipmaker ahead of its quarterly results due out next week.
Piper Sandler became the latest to signal that the recent pullback in NVIDIA shares provides an opportunity as it lifted its price target to $500 from $450 this morning.
That comes just days after Morgan Stanley analyst Joseph Moore said the company remains his Top Pick ahead of the results with a price target of $500, while UBS said investors should ‘stay the course here and remain bullish amid the recent pullback’ as it raised its price target on NVIDIA to $540 from $475. Wells Fargo also upped its view on NVIDIA yesterday to $500 from $450.
NVIDIA is forecast to report quarterly revenue of $11 billion, which would mark a new quarterly record as the new demand from AI takes off. That would be up 65% from the year before and mark a significant jump from the $7.2 billion in sales we saw in the previous quarter. Adjusted earnings are forecast to quadruple from the year before!
US Steel stock: Who will win the bidding war?
The battle for US Steel continues, with the stock up 0.2% at $30.30 this morning as companies vie to buy the steelmaker.
There are currently two interested parties that we know of. Cleveland-Cliffs was the first to emerge and tabled a $7.3 billion deal, half in cash and half in stock, but this was rejected by US Steel. Since then, a private company named Esmark has steeped up and placed a higher bid of $7.8 billion, which is also all in cash.
While Esmark has the higher offer, questions have been raised about how it would finance the all-cash deal. The CEO, James Bouchard, has said he has $10 billion in his bank account to fund the deal and said he is working with an unnamed international bank that would be willing to loan him funds if needed, although provided no more details. Cleveland-Cliffs is arguing that it can afford its offer because of the stock-based element, and has won the support of the United Steelworkers union, which has said it is only willing to back the Cleveland-Cliffs proposal.
US Steel has now invited both companies to take part in a strategic review designed to find the best solution for the company, and there is still potential for more bids, or bidders, to surface.
PayPal stock: Sinks after Elliott dumps stake
PayPal shares are up 0.2% after closing at their lowest level in around two-and-a-half months yesterday, as news that activist investor Elliott Investment Management dumped its stake in the payments company during the second quarter prompted a selloff.
The investor is thought to have dumped about 1 million shares in the company during the period, showing that it no longer believes it is a solid investment and spooking the markets. The share price found some support earlier this week on the news that Alex Chriss will become its new chief executive on September 27, but this was quickly reversed by the disclosure yesterday.
Visa stock: Price target increased
Visa shares are flat today at $239.83 after Daiwa Capital Markets lifted its price target on the payments company to $255 from $245 this morning.
US banks: Downgrade threat lingers
US banks will remain under the spotlight today after they took a heavy tumble yesterday, when fears about potential rating downgrades and tighter regulations spooked the markets. The KBW Bank Index fell 2.8% yesterday.
Fitch Ratings recently warned it may downgrade several large US banks, not long after agency Moody’s downgraded 10 small-to-mid-sized players and also placed some bigger ones under review. Meanwhile, new rules to overhaul large regional banks are on the way, according to the Federal Deposit Insurance Corporation that was responsible for handling the collapse of several banks earlier this year.
JPMorgan, Bank of America, Wells Fargo and Citigroup are all down 0.1% to 0.5% this morning.
Tesla stock: Will more price cuts hit profitability?
Tesla is down 2.1% and poised to open at fresh two-month lows this morning after cutting prices yet again in China, causing concerns that its market-leading profitability will be eroded by the ongoing price cuts.
The electric vehicle maker has vowed to put growth over profits and has been slashing prices and introducing cheaper models in the hope of widening its appeal. IT has cut the price of the Model S sedan and the Model X SUV by up to RMB70,000, equal to about $9,600, according to statements issued on Chinese platforms. That comes just two days after it reduced the price of its long-range and performance versions in the country.
That is stoking fears that the price war in China is escalating, although Tesla’s superior margins gives it more wiggle room than most others that will find it more difficult to compete the lower prices go. As a result, the news is hurting its smaller Chinese rivals, with NIO, XPeng and Li Auto all down 2.1% to 5.6% today.
The latest price cuts appear to be geared toward shifting existing inventory levels. We already know that shipments out of its Shanghai factory were over 30% lower in July than June after Tesla warned third-quarter output would be hit by factory upgrades, but it is still fuelling concerns that demand is waning and that even more price cuts will be necessary.
VinFast stock: Relentless demand for new EV maker
VinFast Auto, Vietnam’s first electric vehicle maker, surged higher on its first day as a public company yesterday, popping over 250% to end the day at just over $37 per share, giving it a valuation of around $85 billion! However, it is set to tunble today with the stock trading at $32.46 before the bell.
It went public after merging with special purpose acquisition vehicle (SPAC) Black Spade Acquisition. Black Spade was listed on the NYSE but it delisted and become a subsidiary of VinFast, which is listed on the Nasdaq, upon completion. The valuation means VinFast is worth more than major US automakers like Ford ($48 billion) and General Motors ($46 billion). It also means that it is one of the most expensive electric vehicle stocks considering the valuations at the likes of Rivian and Lucid, which are both worth less than $20 billion.
However, VinFast only has a small number of shares floated, meaning it is more prone to volatile movements. The company is still ultimately controlled by Pham Nhat Vuong, who is the wealthiest man in Vietnam.
VinFast is Vietnam’s first domestic automaker. Its first EV models were motorcycles, and its first car was the VF e34, which reached customers in December 2021. Its first electric SUV vehicles were delivered in September 2022. Like most players, it is unprofitable.
Tencent stock: Earnings miss as Chinese economy sputters
Tencent shares are trading lower today and poised to open at their lowest level in over two months after strong growth in the latest quarter fell short of expectations.
Revenue was up 11% from last year in the second quarter at RMB149.2 billion, but this fell short of the RMB152.0 billion forecast by analysts. Net income jumped 41% to RMB26.2 billion but this too grew slower than anticipated, with analysts looking for RMB33.4 billion. While strong, Tencent is facing easy comparatives from the rout we saw last year, when Tencent’s earnings were hit hard by lockdowns and the government crackdown on tech companies.
The miss shows Tencent’s recovery this year isn’t as speedy as hoped, similar to the fact the wider Chinese economy has also put in a lacklustre performance since reopening after abandoning its fight against Covid-19. All of Tencent’s core businesses, from gaming and advertising to financial services, are growing but the uncertain economic outlook in China threatens the outlook for the second half, when comparatives will also become more difficult.
Tencent Music stock: Profits jump 55%
Meanwhile, Tencent Music is flat today at $6.19. The company, which was spun-out of Tencent back in 2019, reported a 55% jump in net profit in the latest quarter as paying subscribers grew despite higher prices, and thanks to a tight control on costs.
Revenue was up 5.5% from last year to RMB7.3 billion, driven by its online music and subscription services. Overall user numbers were down, but the number of paying subscribers was up over 20%! That growth comes despite Tencent Music hiking prices of its services. That, twinned with a more than 11% drop in expenses, led to the jump in profit. Its social entertainment division remains the weak spot of the business and it has warned revenues will be down over the full year, although it said it hopes the division will be more profitable.
Jefferies trimmed its target price on the stock to $8.70 from $9.80 yesterday, while Benchmark lowered its view to $9.00.
JD.com stock: Keeps attracting merchants
JD.com is down 5.7% and at its lowest level in over two months despite beating expectations in the latest quarter as it continues to attract merchants to its marketplace. The miss from Tencent will add shine to the results given it suggests JD.com may be navigating the tough environment better than its rival. The performance, combined with the beat delivered by Alibaba last week, suggests ecommerce is faring better than other sectors.
Revenue rose 7.6% from last year to RMB287.9 billion and adjusted earnings per ADS was up 33% at RMB5.39. That was comfortably ahead of the RMB279.1 billion in sales and RMB4.90 in earnings pencilled-in by analysts. That quarterly sales growth comes during the peak shopping season in China and is a welcome acceleration from the tepid 1.4% growth reported in the first quarter, which was the slowest pace on record!
‘We are also encouraged to see the number of our marketplace merchants more than doubled and reached a new record during the quarter, reflecting out efforts to build a superior marketplace ecosystem, one of our priorities to provide customers with enriched supplies at better prices,’ said CEO Sandy Xu.
Sea stock: Is profitability under threat?
South-east Asian firm Sea is down 3.3% at $39.25 and set to open at its lowest level since March 2020 this morning after sales grew slower than expected, with Shopee reporting its slowest rise on record, and the company signalled it will raise investment in ecommerce, prompting concerns that its renewed focus on profitability could be under threat.
Sales were up 5.2% from last year in the second quarter at $3.1 billion, but this came in short of the $3.2 billion estimate. Shopee revenue rose 21%, marking the slowest gain on record, while its digital entertainment arm significantly lower sales as its gaming arm struggled. Digital financial services remained the strong point, with revenue jumping over 53%.
Sea reported its third consecutive quarter of profit, with net income of $331 million turning from the $931.2 million loss we saw the year before. However, Sea said it plans to raise investments in ecommerce in order to expand and this is stoking fears that its new-won self-sufficiency is under threat that it could sink back into the red.
A number of brokers cut their target price on the stock this morning, including Jefferies to $83, Bernstein to $70 and Benchmark to $95. Citigroup downgraded the company to Neutral and lowered its target to $50.
AMC stock: Retail traders fight against APE conversion
AMC Entertainment shares are up 1.6% today at $3.74 after they popped 8.6% higher yesterday, widening the gap between its APE preferred shares, which are up 0.7% at $2.12.
The gap between the two sets of shares had hit its narrowest point on record earlier this week after a court approved the company’s plan to convert the APE shares into ordinary stock, diluting existing shareholders. However, the gap has now widened again as retail traders place their bets. News that another group of AMC investors have launched a new lawsuit challenging the conversion plan will have also thrown fresh doubt. The lawsuit argues APE investors have been unfairly treated by the agreement signed last week, which agreed to pay AMC shareholders around $129 million in compensation in order to settle the dispute over the conversion plan – but there is now an argument that APE investors were left out.
The ability to sell APE shares and eventually convert them into ordinary AMC stock is key for the company as it needs to keep raising funding as it continues its long recovery from the pandemic. However, unlike normal fundraisings, AMC does not need approval to issue more APE shares.
Coinbase stock: Green light for US crypto futures
Coinbase shares are up 2.9% and rebounding from one-month lows after the company secured approval to offer cryptocurrency futures to US retail customers on its platform, marking an important win for the company that is under pressure from the Securities & Exchange Commission.
Approval has been secured by the National Futures Association and Coinbase said it was a ‘critical milestone’. It took nearly two years to secure the green light.
Cisco stock: Will growth slow in the new financial year?
Cisco shares are up 0.2% ahead of fourth quarter results due out after markets close today. The company continues to grow as businesses need to keep investing in key infrastructure even as they tighten their overall IT spending. Revenue is forecast to rise 15% from last year to $15.0 billion and adjusted EPS is expected to jump 27.6% to $1.06.
A healthy order backlog and increasing recurring revenue sets it up well for the new financial year, and the outlook will be key in deciding how markets react. Wall Street believes first quarter revenue growth will slow to 6.9% to $14.6 billion and forecast adjusted EPS will rise 15% to $0.99. For the full year, analysts believe Cisco can deliver tepid topline growth of 2.6% and a 6.4% rise in annual adjusted EPS to $4.05.
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