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

US futures

• Dow Jones Industrial Average is down 0.5%
• S&P 500 is down 0.6%
• Nasdaq 100 is down 0.7%

US futures are trading lower as markets react to fresh turmoil in the Middle East after the conflict between Israel and Hamas escalated over the weekend, leading to reports over 1,100 people have died over three days of fighting.

That has also seen Israel accuse Iran of being involved, a claim the latter has denied, and showing the threat that this could escalate further. The UAE has already warned of the risks of a spill-over into the wider region. The conflict has raised the geopolitical risks in an already fragile environment and is driving sharp price movements in everything from oil and gold to defence and tech stocks today.

The economic calendar is quiet at the start of this week. Eyes are on speeches from Federal Reserve officials Lorie Logan, Michael Barr and Philip Jefferson.

Oil and gold spike amid fresh geopolitical risks

The conflict has caused oil prices to spike and prompted investors to flood into safe haven assets. As a result, Brent and WTI are both up over 3% this morning, reviving fears that inflation could make a comeback, while gold is up 1% and at new October-highs of $1,850 an ounce.

That is amid a broader shift out of more risky assets like stocks and into safer plays, including bonds and the US dollar.

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. NVIDIA
2. RTX Corp
3. C3.ai
4. Visa
5. Lockheed Martin
6. Palantir
7. Tesla
8. Exxon Mobil
9. Boeing
10. Spirit Aerosystems

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. Mirati Therapeutics
2. Lucid Group
3. Nikola
4. Palantir
5. NVIDIA
6. Tesla
7. IonQ
8. Marathon Digital
9. Rivian
10. Anglogold Ashanti

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.

Middle East conflict turns eyes to defence stocks

The conflict between Hamas and Israel has prompted investors to buy defence stocks, with RTX, Lockheed Martin and Northrop Grumman all up 3.6% to 4.9% this morning, as markets add it to their list of geopolitical risks.

The Pentagon has said it is sending additional munitions to Israel and moving Navy warships closer to the conflict as a sign of support. Wells Fargo said the development is unlikely to meaningfully change the outlook for defence spending, but that this could change depending on how the conflict pans out.

Oil price spike boosts energy stocks

The escalation in conflict in the Middle East has also caused oil prices to spike today, with Brent and WTI up over 3% today after initially spiking much higher. That is feeding through to oil stocks today, with Exxon Mobil, Chevron, Occidental Petroleum and Marathon Oil all 2.6% to 3.9% higher today.

Exxon Mobil continues to stir discussion after being linked to a possible takeover of Pioneer Natural Resources last week, with reports suggesting it could splash out $60 billion to expand its presence in the Permian basin. No deal has been announced but markets remain confident considering Pioneer shares are building on 10% pop we saw on Friday by rising 1.6% before the bell today.

Meanwhile, a number of US airlines are trading lower today – with United Airlines, Delta Air Lines, American Airlines and Southwest Airlines all down 2% to 3.5% this morning - as several cancelled flights to and from Tel Aviv and because the spike in oil prices will hurt their profitability, with the group already having lowered their guidance for the third quarter because of higher fuel costs.

Middle East conflict hits Tower Semiconductor and Mobileye

There are other stocks that are also trading significantly lower today as investors worry about the impact of the conflict in the Middle East. This includes Israeli chip company Tower Semiconductor, which is down 4.5%, and Intel spin-off Mobileye, which is headquartered in Jerusalem and down 5% this morning.

Arm stock faces Wall Street judgement

Arm shares are down 0.7% at $53.72. This could be a big week for the  British semiconductor designer Arm, which completed its blockbuster IPO last month. Around 30 major banks are able to publish their view on the company from this week after the quiet period following Arm’s listing expired, and many have wasted no time in initiating coverage this morning.

All-in-all, the average target price on Arm now sits at $60, according to a Bloomberg-compiled consensus of 14 brokers. That is about 11% higher than where Arm shares ended play on Friday. For more context, the range now spans from as low as $46 to as high as $65. That suggests most believe Arm can sustain or even grow its premium valuation.

Find out the latest broker ratings and more insight into their view on its valuation in Wall Street Sees Upside Potential in Arm Stock Thanks to New Strategy.

Birkenstock next to test IPO waters

German sandal maker Birkenstock is expected to be the next big public listing this week, with reports surfacing this morning that it will target the high-end of its price range and earn a valuation of around $10 billion.

The company is thought to be leaning toward pricing its IPO at the top-end of its $44 to $49 price range, according to Reuters. A final decision is expected to be made tomorrow, with Birkenstock expected to start trading on the NYSE on Wednesday October 11.

That suggests Birkenstock will come to market with a valuation that is equal to about 7.4x annual sales and 49x full-year net income based on its fiscal 2022 results. The fact profits plummeted in the most recent interim period covering the six months to the end of March 2023 suggests the PE ratio would be even higher based on forward estimates. That looks elevated when compared to some other footwear companies on the market.

Find out more in Everything You Need to Know About the Birkenstock IPO.

Nelson Peltz revives push for change at Disney

Disney shares are up 1.4% after reports that shareholder Nelson Peltz has raised his stake in the company and is planning to push for multiple board seats at the House of Mouse, setting the stage for another proxy fight between management and the activist investor.

The Wall Street Journal reported the shareholder’s vehicle, Trian Fund Management, now has a stake worth over $2.5 billion after buying up shares in recent months. It now wants to push for change because it believes that Disney is undervalued, with the stock having recently sunk to levels last seen back in 2014! The stock has taken a beating over a lack of confidence in its turnaround plans as investors fret over its ability to make streaming profitable, waning demand at its parks and resorts at a time when it is significantly raising investment, and what to do with its legacy TV networks.

This is not the first time Peltz has intervened, having launched a proxy fight back in February before eventually caving-in and throwing his support behind CEO Bob Iger. However, it appears his patience has now been tested.

Bristol-Myers Squibb to buy Mirati

Bristol-Myers Squibb is down 1.3% after announcing over the weekend that it will buy cancer drug maker Mirati Therapeutics, which is trading down at $57.12 today. Importantly, Mirati already popped on speculation of the news last week.

Bristol-Myers Squibb will buy Mirati for $58 in cash per share, giving it a valuation of $4.8 billion. However, Mirati shareholders are also being given a non-tradeable contingent value right that could add another $12 in value per share, which could take the valuation up to $5.8 billion.

The deal will see Bristol-Myers Squibb acquire Mirati’s portfolio of drugs, including its lung cancer medicine named Krazati, which won US approval late last year. Bristol-Myers Squibb’s chief commercialisation officer Adam Lenkowsky said Mirati will compliment its oncology portfolio and “helps out commercially in the back half of the decade”.

Citigroup to sell China consumer wealth arm to HSBC

Citigroup is down 1.2% after announcing it is selling its consumer wealth portfolio in China to HSBC.

That will see Citigroup offload deposits and assets under management worth around $3.6 billion. That comes as Citigroup winds-down some international businesses as part of a major restructuring. Markets have not yet embraced the turnaround plan, but the news does help remove an uncertainty ahead of Citigroup’s quarterly results due out on Friday, when it will report alongside JPMorgan and Wells Fargo.

Citigroup has now exited consumer banking activities in eight markets, over half of the 14 it first outlined back in 2021. It is currently in the process of divesting from its consumer arm in Indonesia and other exits out of countries like Russia are still in progress.

Microsoft’s new AI chip puts spotlight on NVIDIA

Microsoft is down 0.7% amid reports it is planning to unveil its first chip designed for artificial intelligence applications at its upcoming developers’ conference, according to unnamed sources speaking to The Information.

The chip will allow Microsoft to reduce its reliance on NVIDIA, which currently supplies the GPUs needed to run the power-hungry chips needed for AI and large language models. NVIDIA is down 1.9% before the bell amid a broader selloff in chip stocks today.

Tesla sees China-made deliveries drop

Tesla shares are down 1.6% at $256.40 in premarket trade. We discovered over the weekend that the electric car maker’s factory in China shipped 74,073 vehicles in September, down 12% from what we saw in August according to the latest figures from the China Passenger Car Association. That was also down almost 11% from the year before. That came against a backdrop of industry-wide deliveries in China continuing to grow during the month.

That follows on from the weaker global delivery figures we saw a week ago. Shipments came in substantially lower than Wall Street’s forecasts and, while Tesla blamed this on factory downtime, investors are spooked that demand is waning and that it will need to keep cutting prices to ensure deliveries keep flowing out of its factories.

Wells Fargo said that may indeed be the case, warning more price cuts may be necessary if Tesla wants to hit its goal of delivering at least 1.8 million vehicles this year. That prompted the broker to trim its target price to $260 from $265.

Rivian delivered “gut punch” to investors

Rivian is down 2.8% at $18.40 and falling back toward the four-month lows hit last week when it announced it was issuing a $1.5 billion convertible loan note, causing investors to fret over dilution and funding and leading to its biggest daily-drop on record.

The stock partially recovered on Friday but its now under pressure again after Wedbush said the fundraising was “another gut punch to investors”. Still, the broker kept its Outperform rating and believes the selloff has been overdone even after lowering its target price to $25 from $32. Analyst Dan Ives said it is understandable Rivian will need more capital, but said “the Street’s low confidence in this management team around investor messaging and execution is a major problems for the stock and remains a huge overhang”.

Boeing rises on hopes of IAG order

Boeing is up 0.3% after reports surfaced late on Friday that London-listed International Consolidated Airlines Group, known for owning British Airways, is holding talks with the US planemaker and its European rival Airbus about ordering some new widebody aircraft, according to Bloomberg.

That is reinforcing hopes that demand for widebody jets is improving as demand for international travel remains buoyant. The report said IAG is looking to replace some of its older Boeing 777s and could order 20 aircraft or more.

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