Top Reddit stocks to watch
Below is a list of the top 10 most mentioned US stocks on the WallStreetBets thread on Reddit over the last 24 hours on September 30, 2022, according to data from Quiver Quantitative. Exchange-Traded Funds (ETFs) have been excluded.
- Micron Technology
- Advanced Micro Devices
- Bed Bath & Beyond
US futures are trading higher this morning as the selloff that has rocked financial markets this week takes another breather against a backdrop of growing fears about slower economic growth and a recession. The Dow Jones Industrial Average is up 0.3%, while the S&P 500 and the Nasdaq 100 are both trading 0.4% higher.
Nike shares are down over 10% this morning at $85.70 – at its lowest level in over two years - after yesterday’s results sparked fresh concerns that a build-up in inventory levels and a strong US dollar will erode profitability and weigh on its topline. The sportswear maker said full year gross margins will be down 200 to 250 basis points this year as it introduces discounts to reduce inventory, which sat some 44% higher than a year ago at the end of the quarter. ‘We are taking decisive action to clear excess inventory’, said CFO Matt Friend, who added that the pressure this will have on margins is ‘far outweighed by the benefit of clearing marketplace capacity’. Meanwhile, the strong greenback, which has a major impact considering Nike makes over half of its revenue outside North America, will knock around $4 billion off annual revenue, more than double the hit it previously anticipated. The fact sales in China continued to decline in the quarter, this time by 16%, also soured sentiment as a recovery here underpins its guidance. That overshadowed its results in the second quarter which saw revenue jump 4% to significantly outpace the tepid 0.6% forecast by Wall Street, with EPS falling 20% to $0.93 to come in just shy of the $0.94 forecast. A string of brokers cut their target price on Nike after the results, including Piper Sandler to $95 from $115, Cowen & Co to $114 from $127, Credit Suisse to $110 from $124, Jefferies to $115 from $130, JPMorgan to $120 from $130 and RBC to $115 from $125.
Micron Technology shares are up 1.3% after the memory chipmaker convinced Wall Street that the supply glut that is weighing on sales and profits will be a short-term headwind that should start to unwind in 2023, although things will remain tough until then. The company missed its own sales guidance after revenue fell 23% in the latest quarter, although adjusted EPS dropped slightly less than forecast. Its outlook for the first quarter of the new financial year was also hugely disappointing, with the $4.25 billion sales target coming in well below the $6.02 billion pencilled-in by analysts. Adjusted EPS guidance was also soft at just $0.04, nowhere near the $0.87 forecast. ‘What has been surprising is the extent of the sharp decline’ in demand, said chief business officer Sumit Sadana after the firm warned current market conditions are ‘unprecedented’. It is now pulling back on production to try to rebalance the market and, despite the grim near-term outlook, analysts believe the inventory correction will happen next year. Evercore ISI said Micron said the supply-demand dynamic should improve in the second half of 2023 before returning to more favourable levels in 2024. Summit Insights Group raised the stock to Buy on the belief the correction will happen earlier in the first half of 2023. Some were more cautious, with JPMorgan believing the problems will persist throughout 2023 even though it expects the pullback in supply to be completed in the second quarter.
Micron, which was the first to flag the slowdown in demand for consumer electronics earlier this year, further downgraded its expectations for the remainder of 2022 and said it now expects PC sales to decline by a high-teen percentage while smartphone sales will be down by a high single-digit percentage. That follows on from reports this week that Apple is backing off plans to increase production of the new iPhone 14 this year after an anticipated surge in demand failed to materialise, according to Bloomberg. Unnamed sources said Apple was aiming to lift deliveries by as many as 6 million units in the second half but has now abandoned that goal amid weaker demand in the current climate, putting it on course to deliver around 90 million units – in-line with the level of iPhone 13 shipments last year. That prompted a downgrade from Bank of America yesterday to Neutral from Buy, warning that demand is weakening. Apple is trading marginally lower before the bell, pushing it to fresh 11-week lows.
Meanwhile, other semiconductor stocks are also being hit by this week’s developments, which have added to an already long-list of woes for the sector. Advanced Micro Devices is down 0.3% and at fresh two-year lows, NVIDIA is down 0.2% and at fresh 18-month lows, and Intel is trading marginally higher after sinking to its lowest level in seven years. Susquehanna said yesterday that AMD is continuing to gain market share in the PC market, but that has done little to allay fears about the slowdown in overall demand and the pressure this is expected to have on earnings, prompting a cut in target price to $95 from $115. ‘Overall, we are cutting estimates for AMD, INTC and NVDA to reflect our new PC shipment forecast and weakening PC industry checks’, including the recent ban on exporting advanced AI chips to China, the broker said. It predicts that laptop sales will fall 20% in 2022 while PC sales will fall 17%.
Tesla shares are up 0.4% today after plunging 6.8% yesterday as electric vehicle stocks succumbed to fears around slower growth. The company is holding its AI Day 2 today, when it is expected to unveil the progress that has been made with an array of projects unveiled at the event last year, including its humanoid robot named Optimus and its Dojo supercomputer, as well as other projects such as its self-driving technology. The event starts at 1700 PT and run until 2300 PT, although reports suggest only the first part of the event will be live streamed. CEO Elon Musk has warned the event will be ‘highly technical’ considering it is aimed at experts. ‘AI/robotics engineers who understand what problems need to be solved will like what they see,’ Musk tweeted.
Netflix shares are up 0.1% this morning. The stock has lost some ground since hitting a five-month high this week as brokers continue to warm to the prospects of its new ad-supported tier. Atlantic Equities raised the streaming service to Overweight from Neutral this week on the belief that the contribution from the new tier is not yet reflected in consensus estimates and could improve overall average revenue per user, even if people trade down from pricier options, and add some $6.7 billion in revenue in the first three years after launch.
Palantir has returned to the top 10 after a lengthy absence, with the Big Data stock up 0.5%. The company said the US Army Research Laboratory has extended a contract for the company to deliver artificial intelligence and machine learning capabilities to all armed services and special forces. The contract was initially signed in 2018 and the one-year extension is worth $229 million. Bloomberg reported that this is part of the controversial programme named Project Maven, which was previously being run by Alphabet until it backed out following pressure from employees, allowing Palantir to take over. Palantir has an open ambition to support the US and its allies on the defence front and won a five-year extension to a contract to support the US Homeland Security Investigations worth $95.9 million over a five-year period.
Bed Bath & Beyond shares are down 1.3% today and building on the 4.2% drop seen yesterday after it released its latest set of results that failed to install confidence that the new turnaround plan can get the financially stricken homeware and baby retailer back on its feet. Sales declined 28% in the latest quarter and came in just shy of expectations while its adjusted Ebitda loss of $168 million was twice as large as Wall Street anticipated. Its buybuy BABY brand, regarded as the one bright spot of the business, also posted a sharp decline in sales thanks to tough comparatives from last year. It unveiled a plan to raise fresh funds, close down under-performing stores and shake-up its inventory this month but warned things would remain bleak for a while, reiterating expectations that comparable sales will be down around 20% this year. Bed Bath & Beyond may have secured a cash injection but it is already burning through fresh funding with a cash outflow of $320.5 million in the quarter. It ended August with just $135.3 million in cash on its books. The company said it hopes operating cashflow to be breakeven by the end of the current financial year and that it has started to unwind the build-up in inventory. Wells Fargo said the ‘results were indefensible’ and that management ‘has a lot of wood to chop to improve underlying trends’.
Fellow meme stock favourite GameStop is up 0.3% in premarket trade, while AI software provider C3.ai is up 0.5% and hoping to rebound from fresh all-time lows.
Other US movers to watch
Boeing shares are up 0.4% today after US regulators said it has not met the requirements needed to re-certify the 737 MAX 7 before December, according to Reuters. Citing a letter sent by the Federal Aviation Administration, the report said key safety assessments needed to be submitted by mid-September if there was any hope of it being given the green light by December, but the regulator said just 10% of them were received by this deadline.
Peloton shares are down 0.1% and eyeing fresh all-time lows after announcing it will start selling its equipment in Dick’s Sporting Goods, which is down 2.6% in early trade. That makes Dick’s the first physical retailer to stock Peloton’s treadmills, bike and other equipment as the exercise machine maker shifts away from its direct-to-consumer strategy, having already started selling online through Amazon.
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