Reddit Stocks: What meme stocks are trending today? – September 14, 2023

US futures

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

US futures are on the rise today as markets digest a wave of economic data and news…

ECB raises interest rates

The European Central Bank has raised interest rates by 25bps to 4.5% today. Markets had priced-in about a 66% chance of a hike, but that shows that a large chunk of the markets will be surprised by the decision.

Importantly, the ECB said its current assessment suggests interest rates could have peaked, but said it is determined to keep them this high for as long as is necessary.

The central bank said inflation is still seen as being too high for too long. It predicted inflation will run at 5.6% in 2023, 3.2% in 2024 and finally come down to 2.1% in 2025.

That will feed into the narrative that interest rates may need to remain higher for longer to bring inflation down to desired levels, even if there are hopes that this could be the last hike.

Meanwhile, the ECB forecast the euro area will see its economy grow 0.7% in 2023, 1.0% in 2024 and 1.5% in 2025. That marks a downgrade from previous estimates that had pointed to faster growth.

Attention now turns to the press conference that has just started.

US PPI hot but core comes in soft

US PPI was up 0.7% month-on-month in August, accelerating from the previous reading of 0.3% and coming in considerably higher than the 0.4% forecast. PPI was 1.6% higher than last year, also above the 1.2% pencilled-in by economists.

Core PPI was up 0.7% from the previous month, which was a more welcome reading considering this slowed from the previous reading of 0.8% and was way below the 1.2% forecast by economists.

US initial jobless claims rise

US initial jobless claims rose 220,000 in the week to September 9, marking a mild uptick from the last revised reading of 217,000. However, that was still below the 225,000 increase expected by economists, suggesting the labour market is still proving more resilient than anticipated.

US retail sales pop

US retail sales were up 0.6% in August compared to the month before, according to the latest data. That marked an acceleration from the 0.5% saw the month before and was much better than the 0.2% forecast, suggesting spending is holding-up more than anticipated.

Oil prices hit fresh 10-month highs

Oil prices are gaining ground for a fifth consecutive session today, with Brent and WTI both sitting at 10-month highs amid rising bets that the market will remain tight this year thanks to production cuts in Saudi Arabia and Russia whilst US inventories continue to plummet. WTI and Brent have both moved above $90 per barrel for the first time since November 2022 in recent days.

That, in turn, is prompting fears that oil could revive inflation rates and keep interest rates higher for longer.

Bitcoin tests September-highs

Bitcoin is gaining ground for a third consecutive day and trades at $26,491 today, on the cusp of setting a new September-high if it can move above $26,529. Cryptocurrency stocks like Marathon Digital and Riot Platforms are climbing higher today as a result.

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. Tesla
2. NVIDIA
3. Apple
4. C3.ai
5. Visa
6. Moderna
7. Netflix
8. Amazon
9. AMD
10. 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:

1. AMC Entertainment
2. Nikola
3. Tesla
4. Apple
5. Virgin Galactic
6. Grab
7. PureCycle
8. Amazon
9. Palantir
10. Tilray

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.

Arm IPO: Can it maintain its $54.5 billion valuation?

British semiconductor firm Arm launches its IPO on the Nasdaq in New York today. The company saw strong demand for its shares during the recent roadshow and this has allowed it to price its IPO at the top-end of its targeted range at $51. That gives Arm a valuation of $54.5 billion, and all eyes are on whether it can maintain this once markets open.

That will raise about $4.87 billion for Arm’s owner Softbank, which has floated less than 10% of Arm’s shares as part of the listing – with many thought to have been snapped up by big tech companies. Arm is hoping having major cornerstone investors can help keep its share price steady and justify its valuation, which is lofty based on its most recent earnings. It was reported that the IPO was as much as 10 times oversubscribed, enough so that Arm was considering raising its IPO price before deciding not to in an effort to ensure it makes a smooth debut.

Arm is shifting its strategy that aims to make it larger and more profitable, and this may help explain why there has been such demand at this valuation. Currently, it sells designs that make up just a fraction of the overall semiconductor chip that is ultimately made by its customers. These are generic and sold to multiple customers, providing scale that allows it licence its designs on the cheap. Now, Arm is looking to supply more comprehensive designs for specific applications, such as to run a datacentre or an electric vehicle. The plan is that it will add more value by focusing on more advanced designs and that more of Arm’s design will end up in the chip, which should increase royalties.

Watch out for our article this afternoon that will analyse whether Arm will be able to maintain its valuation. In the meantime, you can find out more about the listing in Everything You Need to Know About the Arm IPO, or read more on what it means for the broader market in Can Arm and Instacart Revive the IPO Market?

How will Arm IPO impact NVIDIA and AMD?

The Arm IPO has wider implications for the market today. Not only is it being seen as a test for the IPO market following a two-year drought, but it could also set the tone regarding valuations for other semiconductor firms like NVIDIA and AMD, both of which are up 0.6% to 0.7% today. Other chipmakers are also worth watching too.

If Arm is welcomed to the markets and can push its price higher upon listing, then this is likely to feed through to semiconductor stocks, while any negative response to its valuation may prompt more questions to be raised across the wider sector.

Apple stock suffers from uncertainty in China

Apple shares are trading marginally higher and hoping to snap a two-day rout as markets fret over its position in China.

China’s foreign ministry said it was aware of “media reports about security incidents concerning Apple phones” yesterday but said no “laws or regulations” have been introduced to ban government workers from using iPhones or other foreign tech. While that suggests an outright ban isn’t on the table, investors are still worried that government workers and Chinese citizens as a whole may still be discouraged from opting for Western-designed phones.

That is especially true after news broke this week that Huawei’s latest model is flying off the shelves and that it has raised its shipment target for the new Mate 60 Pro by 20% in the second half of 2023. Huawei is the fastest-growing smartphone brand in China and investors are worried Apple could fall further down the league table as a result of more intense domestic competition, with all eyes now on Huawei’s upcoming product launch event on September 25. China is Apple’s biggest foreign market and where the majority of its devices are made.

A spokesperson for the US National Security Council, John Kirby, said “we’re watching this with concern” and described any move to ban US devices as “the kinds of aggressive and inappropriate retaliation to US companies that we’ve seen from the PRC in the past”. He said there is not “perfect visibility on exactly what they’re doing and why”.

You can read more and find our latest technical analysis in How Will the New iPhone 15 and Threats in China Impact Apple Stock?

Can Adobe stock keep up the momentum?

Adobe shares up 0.4% ahead of third quarter results out later. Adobe has been one of the best performers in the Nasdaq 100 in 2023, with shares up 66% and lingering not far from levels that were last seen in late 2021! Adobe delivered record revenue and adjusted EPS in the previous quarter and is expected to break both of these when it reports results this week.

Adobe has not been immune to the slowdown in enterprise IT spending but it has proven more resilient than most thanks to strong demand for its array of software, while its high margins have also managed to defy the inflationary environment. The stock has also found support from artificial intelligence, which has become the hottest investment trend of the year. Adobe’s software, particularly its Firefly platform, is in a prime position to be among the first to benefit from the technology considering how well it fits the earliest applications of generative AI for images, text and voice.

Consensus figures and recent commentary from brokers suggest there is a chance of a beat and raise, although this may be necessary to impress given the surge in value this year has raised the bar.

Find out what to expect, including all the consensus numbers to look out for and our latest technical analysis on the stock, in our Adobe Q3 Earnings Preview.

Amazon stock hits 17-month high

Amazon shares are up 0.3% at $145.22 and poised to open at their highest level since April 2022, with the ecommerce and cloud computing giant having ripped almost 69% higher since the start of the year.

The stock popped yesterday after Morgan Stanley said the outlook for profitability is improving. Analyst Brian Nowak said he sees 20% to 60% potential upside from current levels if Amazon can return retail margins back to pre-pandemic levels by 2025 by using three levers, namely fulfilment and shipping costs, spending on digital content and margins on merchandise. For now, Morgan Stanley has a price target of $175 on Amazon, implying there is around 18% upside potential from here.

We also discovered yesterday that Amazon is investing a further $840 million into its delivery service partners, over half of which will be used to raise pay rates for delivery drivers. Meanwhile, gambling giant FanDuel picked Amazon Wed Services as its strategic cloud provider.

Netflix stock hit by growth comments

Netflix shares are down another 0.5% this morning, building on the ground lost yesterday when it plunged over 5%, marking the biggest daily fall for the streaming stock in almost two months!

The selloff came after chief financial officer Spencer Neumann spoke at a Bank of America conference, when he tempered hype around profitability and its ads business. He reiterated Netflix’s expectations for revenue to be “flat to slightly down” in the third quarter.

The main concern is the amount of revenue Netflix is earning from each user. For example, subscriber growth is being led in Asia, but this is also where it squeezes out the least revenue per user. Plus, it said some are still shifting to cheaper subscriptions as it continues to crackdown on password sharing, while its new advertising-supported tier is still not generating significant financial rewards. Ultimately, this will impact margins. Neumann said Netflix is aiming for an operating margin of 18% to 20%, which was disappointing compared to analyst forecasts of over 22%.

Can Tesla stock hit fresh 2-month highs?

Tesla shares are up 0.3% at $272.13 and on the cusp of testing fresh two-month highs today. It would need to close above $273.50 to set that new high.

The next big test could come at around $285, which would see the stock test the falling trendline that can be traced back to the all-time highs we saw back in November 2021! On the downside, we may see some support emerge at $258 considering the 20-day moving average and 61.8% retracement have converged at this price, which is also aligned with the ceiling that limited the stock’s gains in early September.

Nikola could start selling hydrogen trucks this month

Nikola shares are up 1.2% and rebounding from three-month lows after CEO Steve Girsky said the company will begin selling its hydrogen fuel-cell trucks in late September or early October at a Q&A session with investors yesterday.

Nikola, which has recently been hit by news of fires of some of its battery-powered trucks, has orders for about 210 of the hydrogen trucks on its books, with the company having started production earlier this summer.

American Airlines rebounds from 5-month low

American Airlines is up 0.6% and looking to rebound after sinking to five-month lows yesterday, when it lowered its guidance because costs are increasing as higher oil prices push up the cost of fuel.

American Airlines said adjusted EPS will now be between $0.20 to $0.30 in the third quarter, a huge slump from the previous outlook that said earnings would be as high as $0.90.

A flurry of other airlines have issued similar warnings regarding increased fuel costs including Southwest Airlines, United Airlines and Alaska Air. Spirit Airlines, which also lowered its guidance yesterday, is up 1.1% today after plunging over 6% yesterday.

Moderna stock bump doesn’t last long

Moderna shares are up 0.2% this morning. The stock popped as much as 9% yesterday after outlining hopes of potentially tripling annual sales over the coming years as it works on releasing new drugs. The share price tested the falling trendline that can be traced back to May before finding some resistance, which resulted in it giving back most of those gains to close up just 3%.

The company, known for its Covid-19 vaccine, is pushing to diversify and create new drugs and said it is aiming to add $10 billion to $15 billion to its annual sales within five years, in addition to the $8 billion to $15 billion in annual sales it is targeting from new respiratory drugs. They are some big targets for Moderna considering it is aiming to generate annual revenue of just $6 billion to $8 billion this year.

Visa stock falls from highs on share shake-up

Visa shares are down 2.7% before the bell, having briefly hit fresh all-time highs yesterday before pulling back. The payments giant announced yesterday that it is amending its share structure that will ultimately allow major banks that hold its Class B shares to sell down their stake in the payments giant.

Visa has had a unique share structure since it went public. It was owned by major banks before it went public in 2008 and the it developed a structure to ensure that they would remain liable to any costs stemming from potential litigation with some of its largest US merchants, including Walmart and Target. However, Visa said it has made “significant progress” on these litigation matters, which has prompted it to alter its share structure that would allow holders of Class B shares to sell up to half of their stakes in Visa.

Holders of all its share classes will need to approve the plan but, if given the green light, could see some major shareholders reduce their stake and cash in some profits considering the overall value of the Class B shares has erupted to $96 billion today from just $8 billion at the time of its IPO!

Analysts were mixed on what the impact could be. On the one hand, the scheme would allow major shareholders to reduce their stake, which could apply some selling pressure. On the other, it removes the overhang related to the uncertainty that has lingered over its Class B shares for many years.

HP falls as Berkshire Hathaway sells

HP is down 3.3% after Berkshire Hathaway, run by renowned billionaire investor Warren Buffett, sold 5.5 million shares in the company for around $158.5 million.

The revelation was made in a filing made today, with the transactions occurring on the 11^th, 12^th and 13^th of September. That represents the first time Berkshire Hathaway has lowered its stake in HP since buying its original holding back in early 2022, and leaves it with around 115 million HP shares.

Yum China eyes acceleration in growth

Yum China is up 3.2% after outlining plans to return $3 billion to shareholders and deliver double-digit EPS growth between 2024 and 2026 during an investor day in China. The new strategy will see it have 20,000 stores by the end of 2026, which will help system sales and EPS to grow a double-digit compound annual growth rate over the next two years compared to what is expected in 2023.

Grab stock rebounds after Ryde IPO

Grab is trading 1.1% higher and regaining some of the ground lost yesterday, when it closed down 6.9% as sentiment was hurt by regulatory pressure and the emergence of a new rival named Ryde that went public in Singapore.

Aletheia Capital told Bloomberg that Grab suffered yesterday because investors were pulling money out to put into Ryde as it offers a better valuation. Meanwhile, Singapore’s transport regulator said it was investigating supply in the ride-hailing and taxi industries in response to a shortage of options for consumers at certain times of day, such as late at night.

Virgin Galactic announces new spaceflight

Virgin Galactic is down 1.1% after announcing that its flight window for the ‘Galactic 04’ flight will open on October 5, marking its fifth spaceflight of 2023 and its ninth since inception as it tries to demonstrate that it can provide reliable and steady flights. The flight will take three astronauts – one from the US, another from the UK, and a third from Pakistan, alongside three crew members.

AMC pops from low-base after equity raise

AMC Entertainment is up over 8% at $8.92 after selling $325.5 million of new equity.

The cinema chain said the average price of the 40 million shares sold was $8.14, which appears to be providing hopes that this can provide a new floor for the stock following the 80% slump in value over the past month! The fresh funds will also be allaying any immediate fears over liquidity as it continues its prolonged recovery from the pandemic and deals with its heavy debt burden. That is especially important given the threat posed by the strikes in Hollywood to the film slate.

AMC also said the industry box office has surged 39% since the end of June and this should receive another boost from the upcoming Taylor Swift film.

Carnival rises on upgrade

Carnival is up 1.9% at $15.31 after the cruise line operator was upgraded to Buy from Neutral by Redburn, which has a $23 price target on the stock to imply there is huge upside potential from here. It said Carnival, as well as Norwegian Cruise Line, offer the best risk-reward in the sector.

Etsy jumps on broker rating

Ecommerce site Etsy is up 4.6% at $67.50 after Wolfe Research upgraded the company to Outperform from Peer Perform and set a target price of $100, implying there is some 55% potential upside from yesterday’s closing price.

Notably, Guggenheim lowered its target price on Etsy yesterday to $80 from $125.

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