Reddit Stocks: What meme stocks are trending today? – August 9, 2023

US futures fall

• Dow Jones Industrial Average is up 0.2%
• S&P 500 is up 0.3%
• Nasdaq 100 is up 0.3%

US futures are higher today as they cautiously look to rebound from the sell-off seen yesterday after Moody’s downgraded a group of banks, feeding a risk-off appetite ahead of key US inflation data out tomorrow as markets become hopeful that Federal Reserve is turning dovish.

The first mention of rate cuts has been made since the Fed embarked on its rate hike cycle after the president of the Philadelphia Fed, Patrick Harker, said the central bank could be at a stage where interest rates can be left unchanged and hinted rates could start to be cut in 2024. Still, others have remained more steadfast after governor Michelle Bowman said more interest rate increases could be on the way due to elevated inflation.

Currently, economists believe the Fed will leave interest rates unchanged when it next meets in September, with an outside chance of another 25bps hike, according to the CME FedWatch Tool. They are hopeful that we have already seen the last interest rate hike, but the inflation data has the potential to change the mood.

China enters deflation

China’s inflation rate was down 0.3% in the year to July, falling into deflation for the first time since January 2021 but coming in below the 0.4% drop forecast by markets. Producer prices were down for a 10^th consecutive month, this time by 4.4%, ahead of the 4.1% drop anticipated by analysts. It was the first time consumer and producer prices have both contracted since November 2020.

‘That’s a big deal with China being a key export nation, as importers and consumers of their trade partners stand to benefit from lower prices. And with lower inflationary pressures overseas, it removes pressure from central banks to continue hiking interest rates (and dare we say, stoke hopes of interest rate cuts). On the other hand, it also points to lower growth for China and the rest of the world. But we are at the point where lower growth is a necessary evil to achieve lower inflation, with central banks aiming for a soft landing over an outright global recession,’ said our analyst Matt Simpson. You can read more in Will CPI Keep Falling as China Enters Deflation?

That follows on from disappointing trade data out of China yesterday that showed both domestic and international demand is faltering.

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:

1. Visa
2. Rivian
3. NVIDIA
4. Palantir
5. Apple
6. C3.ai
7. Tilray
8. Upstart Holdings
9. Eli Lilly
10. Lyft

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:

1. Nikola
2. Penn Entertainment
3. Tilray
4. Rivian
5. DraftKings
6. Palantir
7. IonQ
8. Lucid Group
9. Tesla
10. Coupang

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:

Top US stocks to watch

Let’s have a look at the top stocks to watch today.

US bank stocks: Rebounding after Moody’s assurances

US banks are recovering some of the ground lost yesterday when agency Moody’s downgraded ratings on 10 small-to-medium sized banks and warned several larger players have been placed under review and could be downgraded in the future, injecting fresh fears into the sector following the banking crisis earlier this year.

However, we are seeing a rebound today with the likes of Bank of America and Citigroup up 0.1% to 0.3% today, after Moody’s said the sector is still strong despite the downgrade. ‘What we’re doing here is recognising some headwinds – we’re not saying that the banking system is broken,’ Ana Arsov from Moody’s said yesterday. ‘We are not raising major concerns that the system is majorly undercapitalised or underfunded.’

Rivian stock: Upgrades annual production goal

Rivian shares are up 0.4% at $24.90 before the bell after the electric vehicle maker bumped-up its production goal for 2023 and said annual losses this year will be around $100 million smaller than previously anticipated.

The stock had rallied over 87% in the six weeks before the results, setting a high bar ahead of the results. Rivian said it will now produce 52,000 vehicles this year, up from its previous goal of 50,000, but deliveries continue to lag deliveries and inventory levels are building. It warned adjusted losses will be around $4.2 billion in 2023. Second-quarter losses of $1.08 per share came in better than the $1.37 forecast. It ended the period with over $10 billion in cash.

Several brokers raised their target price on Rivian this morning, including Wells Fargo to $24, Cannacord Genuity to $44 and Piper Sandler to $22.

Lyft stock: Green shoots, but still trailing Uber

Lyft shares are down 6.6% at $45.16 after the ride-hailing service reported its slowest revenue growth in two years as it continues to significantly underperform its larger rival Uber.

Revenue was up just 3% from last year at $1.02 billion in the second quarter, meeting expectations. Adjusted Ebitda of $41 million was ahead of the $28.3 million forecast. Still, there was not a lot to get excited about considering Uber reported just last week that its ride-hailing service saw a 38% jump in revenue in the latest quarter. Lyft has been cutting prices to improve its competitive position, leading to a 5% drop in revenue per user. That helped drive an 8.2% rise in users and sent them to their highest level in three years, suggesting it is winning back riders and drivers, although this could delay its path to profitability.

Some brokers raised their target price on the stock this morning, including Roth MKM to $11, Evercore ISI to $13 and RBC to $12. Others lowered them, including Credit Suisse to $18 and TD Cowen to $10.

WeWork stock: ‘Substantial doubt’ over survival hopes

WeWork shares are down 23.7% and at fresh all-time lows after warning there is ‘substantial doubt’ about its ability to survive and that it will need to significantly improve liquidity and profitability over the coming 12 months.

The flexible office provider has been under pressure due to the drop in demand for space, an excess supply, increasing competition and ‘macroeconomic volatility’. Revenue in the latest quarter did grow 4% and its net loss narrowed to $397 million.

It said it now focused on reducing rent and tenancy costs, lowering customer churn, limiting expenses and plotting to raise fresh capital to get the business back on the right path. The warning marks a fall from grace for WeWork, which is now worth just $170 million after seeing its valuation slump since peaking over $8 billion soon after it listed in late 2021.

That came as WeWork appointed four new board members to provide a ‘fresh perspective’ after seeing multiple executives resign earlier this year, including its CEO and CFO. However, it still seeking for a new permanent CEO.

Coupang stock: Profitable growth accelerates

Coupang shares are up 5.5% and at fresh 2023-highs of $18.87 after beating expectations and posting its fourth consecutive quarterly profit, while customer numbers start growing at a faster pace and hit record highs.

The South Korean firm said revenue was up 16% in the latest quarter at $5.8 billion, meeting estimates, but its EPS came in slightly above estimates as net income of $145 million turned from the $75.5 million loss seen a year ago. Active customer numbers rose to a record 19.7 million and Coupang said its ‘flywheel is accelerating’.

A number of brokers raised their target price on Coupang in wake of the results, including Bernstein to $11.60, Mizuho to $22 and JPMorgan to $27.

Eli Lilly stock: Can it set new all-time highs?

Eli Lilly is trading marginally higher today at $522 after hitting fresh all-time highs yesterday, driven higher by an impressive set of results and signs its weight-loss drug could be a game-changer for the company.

Eli Lilly hiked its full year profit outlook this week after beating expectations in the latest quarter, underpinned by a big beat from its weight-loss drug named Mounjaro, where sales came in over $230 million above estimates. It is currently only being sold as an off-label treatment but Eli Lilly is hoping to secure approval for it treat obesity to unlock more value. News out from Novo Nordisk (more below) that its rival weight loss drug also helped reduced the chance of strokes and heart disease has also provided a boost.

Several brokers sweetened their view on the pharmaceutical giant today, with Jefferies upgrading it to Buy and hiking its price target to $615. Others also raised their target price, including JPMorgan to $600, Credit Suisse to $580, Cantor Fitzgerald to $630 and Barclays to $590.

Novo Nordisk stock: High bar ahead of results

Meanwhile, Danish giant Novo Nordisk is down 1.9% after it popped to all-time highs yesterday after revealing its weight-loss drug Wegovy reduced the risk of major cardiovascular events such as a stroke by 20% in overweight or obese people.

That has set the bar high ahead of quarterly results due out tomorrow, suggesting it will need to deliver a big beat to impress the markets and prevent a pullback. Wegovy sales growth is accelerating, mostly thanks to adoption in the US, but a big beat from Eli Lilly’s weight loss drug raises the pressure for a beat. Elsewhere, its ability to grow sales of Ozempic will depend on its ability to ramp-up output amid supply shortages.

Find out what to expect from the Novo Nordisk results, including all the consensus numbers you need and our latest technical analysis, in our Novo Nordisk Q2 Earnings Preview.

Disney stock: House of Mouse needs a catalyst

Disney shares are up 1.4% ahead of third quarter results due out after the close, with the home of Mickey Mouse in desperate need of a new catalyst considering it has underperformed the market this year and continues to trade at a discount. That is unsurprising considering Disney is facing an array of headwinds. The brakes have been coming down on sales growth over the past year and earnings have been in decline for four consecutive quarters.

CEO Bob Iger has recently agreed to stay on for another two years after being brought back in late 2022 to put the magic back into Disney – a job that is yet to be achieved considering he has some big tasks to complete in that time, including finding a successor. We could see him lean into M&A to help revive Disney’s fortunes and refocus the business.

We heard just yesterday that ESPN has struck a deal to create a new sports betting business named ESPN Bet with Penn Entertainment, which is up 15% this morning and at three-month highs after securing 10-year rights to use the name in the US. Truist Securities said Penn Entertainment will become a ‘major player’ in the online sports betting market as a result while Morgan Stanley described it as a ‘game-changer’ for the company. Notably, DraftKings is down 4.4% as fears grow that it will have a new and powerful competitor.

Disney’s streaming operations remain in the red and becoming profitable as soon as possible is key, with markets believing it is still some way away despite having booked over $11 billion in losses to date. However, slumping subs at Disney+ is not making this any easier. Find out what to expect in our Disney Q3 Earnings Preview.

Tilray stock: Buying brands from AB-InBev

Tilray shares are down 2.3% and falling from five-month highs after it announced yesterday that it is buying eight beer and beverage brands from the owner of Budweiser, Anheuser-Busch InBev, for $85 million, to expand its portfolio of alcoholic drinks.

Tilray is best know for dealing in cannabis but it has interests in alcoholic beverages, with this acquisition set to turn it into the fifth largest craft beer brewer in the US with around 5% share of the market. Tilray is buying Shock Top, Breckenridge Brewery, Blue Point Brewing Co, 10 Barrel Brewing Co, Redhook Brewery, Widmer Brothers Brewing, Square Mile Cider Co and HiBall Energy.

Jefferies estimated the brands will boost annual revenue by around $180 million. TD Cowen said the move creates a more balanced mix in revenue as it tries to make $1 billion in annual revenue, stating this will come from about 30% cannabis, 30% alcohol, 30% from medical distribution and 10% from health & wellness.

Apple stock: Snaps 5-day losing streak

Apple shares snapped a five-day losing streak yesterday and are up 0.7% today, potentially signalling that the stock has tumbled enough to attract buyers back into the market. The iPhone maker has lost severe ground since releasing its latest set of results last week that showed it is feeling the pressure from the slump in smartphone demand, causing Apple to miss what was quite a high bar and wiping off around $300 billion off its market cap.

Amazon stock: Joins list of potential Arm investors

Amazon shares are up 0.3% after unnamed sources told Reuters that it could join the list of big names planning to invest in Arm when it conducts its initial public offering (IPO) this September.

Reports from the Nikkei this week said Apple, Samsung, NVIDIA and Intel were plotting to buy substantial stakes in Arm. Amazon currently uses Arm’s design for its own processing chip. Arm is hoping bringing on major cornerstone investors will help stabilise its price after the IPO, which looks set to take place at a challenging time for the market that is seeing most IPO contenders delay their plans and wait for better conditions.

NVIDIA stock: Can it cement leadership in AI?

NVIDIA shares are up 0.2% after unveiling a slew of updates during the Siggraph conference in Los Angeles yesterday, including a updated AI processor that can improve the speed and capacity of its existing AI chips. It plans to begin producing the chip, named GH200, in the second quarter of 2024.

NVIDIA has dominated the space for AI and proven to be the chipmaker of choice for those upgrading their systems, but this has given a huge premium over its rivals and this is starting to narrow as investors look for better opportunities elsewhere, given that AI is too much of a game-changer for just one company to hold a monopoly.

Palantir stock: Losing ground for 6^th straight session

Palantir shares are down 0.9% and at two-week lows as they continue to lose ground after an earnings beat, raised outlook, a new $1 billion buyback and fresh hype around its AI prospects failed to meet what was a high bar. The stock had more than doubled in value in the three months before the results, meaning it was hard for Palantir to impress and prevent a pullback. This would mark the sixth consecutive day of losses if it closes down today, having tested the 50-day moving average briefly before appearing to draw some buyers back into the market.

Upstart stock: Banks ‘super cautious’ about lending

Upstart Holdings shares are down 18.5% and at one-month lows of $43.05 after it issued a disappointing outlook and warned that banks are still ‘super cautious’ about lending. The company, which uses AI to help inform lending decisions, is finding it tough as higher interest rates and stricter criteria by banks harms the amount of loans being dished out.

Revenue fell less than anticipated and its latest quarterly loss was also smaller than forecast, but its outlook for $140 million in third-quarter revenue was disappointing compared to the $155 million pencilled-in by analysts.

Jefferies cut its price target on Upstart to $46 this morning while BTIG reduced its view to $64.

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