🌟 3 Reasons Nvidia is on The Verge of a 4 Digit Stock Price

Market Movers Uncovered: $GOOGL, $NVDA, and $LULU Analysis Awaits ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­

Ticker Reports for May 19th

Baidu Stock Earnings Prove Ray Dalio Right about China?

Baidu Stock Earnings Prove Ray Dalio Right about China?

The year of the Chinese stock market could be approaching after the 2020-2023 timeframe offered nothing but headaches and frustration for shareholders. As the underlying economy shows signs of a potential recovery, investors could soon find out why stocks like Baidu Inc. (NASDAQ: BIDU) could become buy targets for mega investors already finding their way into China.

Wall Street legends like Ray Dalio have tagged along with the potential uprise in Chinese stocks, especially as the CSI 300 (China’s S&P 500) hit a near-decade low level. As news follows the stock price, the media found all sorts of justifications for why the Chinese index went that low; however, that all changes today.

Shares of Baidu are little changed this week, even after the company’s first quarter 2024 earnings results were announced. However, other peers like Alibaba Group (NYSE: BABA) are rallying by nearly 8% in a single day this week, all celebrating a common trend in the Chinese economy.

The Year of the Profit Dragon?

As dividend yields on the CSI 300 index surpassed the Chinese 10-year yield, Ray Dalio found no reason to stay outside of the iShares MSCI China ETF (NASDAQ: MCHI), and Michael Burry (yes, the guy who called the 2008 financial crisis), saw fit to make Alibaba and JD.com Inc. (NASDAQ: JD) one of his biggest portfolio positions today.

But first, investors must understand why Chinese stocks declined this much. A measure of how well an economy is doing can be found through inflation. Too calm a reading means little – if any -  business and consumer activity, which is – or was at least – the case in China.

After reporting flat to negative inflation during the third and fourth quarters of 2023, Chinese inflation has now read positive for three consecutive months to show the potential comeback in part of businesses and consumers. 

The Caixin Composite PMI index has been in expansion mode since November 2023, dragging stocks like Baidu along with it. Fundamentally, the story is that you should check out Baidu stock to see brighter days ahead. However, one more critical trend is coming that could push the stock even more.

Because Baidu is China’s version of Alphabet Inc. (NASDAQ: GOOGL), it handles vast amounts of data from consumers and businesses. Access to endless data could cross many checks off those lists looking for investment into artificial intelligence, and this technology stock starts to fit the description even more.

Stellar First Quarter

Knowing that the economy is one of the many factors pushing Baidu’s business forward, here’s a deeper look into how the company is affected today. According to Baidu’s press release, core revenue rose by 4% to reach $3.3 billion; if China’s economy is this supposedly stagnant, Baidu shouldn’t have pushed these numbers.

Because commerce is coming back into the game, as the Chinese government keeps injecting liquidity into the market in an attempt to rescue the economy, some of this money is ending up in the hands of advertising budgets.

Investors can see this at play by noticing Baidu’s online marketing revenue rise by 3% over the year, reaching $2.4 billion. In addition, Baidu’s artificial intelligence cloud business became a focus for management this quarter. 

Some reports indicate that Baidu’s ERNIE generative A.I. model is tied to Chinese military research, one of the many uses of artificial intelligence’s computing power.

Wall Street’s Take

Analysts at Citigroup Inc. see Baidu stock going as high as $176 a share. To prove these valuations right, the stock would need to rally by as much as 56.3% from where it trades today, giving investors another reason to start considering this stock for a potential watchlist.

Here is where investors can get an added bonus on top of this double-digit upside. Compared to the computer & data industry, Baidu’s 14.3x P/E ratio offers a discount of 77% to the sector’s 62.2x average valuation today. 

Even after rallying 18.8% in the past month, Baidu stock still trades at only 72% of its 52-week high. This shows investors how much gap this company could attempt to fill in delivering returns.

Not even those who are bearish in China are willing to risk more of their capital against stocks like Baidu. Over the past month, Baidu’s short interest fell by 7.4%, opening a more favorable playing field for bulls to continue the stock’s outperformance.

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Nvidia logo in three dimensions isolated on dark background. 3d illustration.

3 Reasons Nvidia is on The Verge of a 4 Digit Stock Price

It's been a solid year for shares of Nvidia Corporation (NASDAQ: NVDA). Having had a stellar 2023, they've already tacked on an impressive 100% value since January. Helped by a perfect combination of falling inflation, a market-wide risk-on sentiment and a booming AI industry, they've become one of the hottest stocks to talk about and own. 

With a high in yesterday's session of just under $960, expectations are growing for the tech titan's stock to hit 4 digits soon. This can be a big milestone in a stock's journey, and those that make it there are few and far between. Investors should be getting excited, though, and here are 3 reasons we think it's on the verge of happening. 

Strong Fundamental Momentum

First up are the fundamental drivers behind the company's growth and strong momentum. These include the strength of Nvidia's data center business and its bullish exposure to the AI industry. Just yesterday, the team at UBS Group included Nvidia near the top of a list of stocks they see as extremely well-positioned to benefit from the artificial intelligence boom in the coming years. 

With global AI revenue set to hit $400 billion by 2027, first-mover advantage counts more than ever, and Nvidia has that. It's one of the reasons the company has a current quarter-on-quarter revenue growth rate of more than 20%, which becomes nearly 400% yearly. 

And the most amazing thing is that Nvidia's valuation, as seen through its price-to-earnings (PE) ratio, isn't even that extended right now. At just 79, it's well below the 150 it spent much of last year at. 

Bullish Analyst Upgrades

The other factor to consider is all the analysts coming out with red hot Buy or Outperform ratings right now, even after all the recent gains. This past week alone, the teams at Wedbush, Wells Fargo and Jefferies Financial Group all reiterated their bullish ratings on the stock, while giving it a price target of $1,000 or above. 

Jefferies, for example, gave Nvidia a boosted price target of  $1,200, which was more than a 50% jump from where they had it previously. That's pointing to an immediate upside of 25%, which is not bad for a $2.3 trillion company. 

This isn't a new trend that simply echoes the rating updates and price target increases of recent weeks and months. Indeed, every price target update since the last week of March has been at $1,000 or more. This kind of bullish outlook should be reassuring for investors on the sidelines who might think that they missed the boat by not getting involved last year. In many ways, you could argue that Nvidia's growth story is still in its infancy. 

Impressive Technicals

The final reason to think that Nvidia will soon be trading for more than $1,000 is that the stock's relative strength index (RSI) is nowhere near overbought levels. This is remarkable after a 750% rally in the past 18 months. It helps that the broader market, in general, took a bit of a breather last month, as this removed any concerns about Nvidia's stock becoming frothy. 

But even with it having gained 25% since the back half of April, its RSI is still only around 60. This confirms the momentum is bullish while making it clear the stock still has much room to run before anyone could call it overbought. 

With less than a 10% jump needed to take it above $1,000 for the first time, you'd have to be exceedingly bearish to think we won't see this milestone being hit in the short-term and that the stock won't continue to rally north. 

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Lululemon Athletica retail mall location. Lululemon Athletica offers yoga and athletic apparel to men and women.

Bargain Alert: Lululemon Shares Could Be About To Hit Rally Mode

It’s been a tough year for shares of Lululemon Athletica Inc. (NASDAQ: LULU); there’s no getting around it. While the rest of the equity market has been enjoying a broad and diverse rally back towards highs, the athleisure company has been struggling to gain any momentum since its bombshell earnings last quarter. 

As a sign of just how quickly the stock can rally when it wants to, we saw Lululemon shares gain more than 40% in the final 2 months of last year as a risk-on sentiment swept across the market. But perhaps a muted start in January, where the divergence from the rest of the market really started, was a sign of what was coming. 

Recent Decline for Lululemon 

Late March saw the company report its Q4 earnings, but a beat on both headline numbers was nowhere near enough to make up for the dire profit warnings from management. The fact that it was a similar situation for Nike Inc (NYSE: NKE), arguably their closest competitor, didn’t help when it came to the damage to the stock, and an immediate 20% drop has turned into a 30% since then. 

You know you’ve messed up when some analysts, like Randal Konik from Jefferies, ask if “Lululemon headed for the same fate as Under Armour?”. But that’s where we are today as we head into the back half of May, with the benchmark S&P 500 index notching a record high in Thursday’s session, making things worse for Lululemon investors. 

Getting Involved in Lululemon 

But there could be an interesting opening opportunity for those on the sidelines who have avoided getting caught in this year’s downturn. Having sunk almost 35% since its last December peak, and with the stock back trading at 2020 levels, the question has to be asked if the Lululemon selloff has become overdone. 

There are several reasons to think so. Consider, for starters, the stock’s relative strength index (RSI). Based on recent trading history, the RSI is a popular tool for getting a quick sense of how overbought or oversold a stock. With it currently reading 34, having been down below 20 last month, the stock is clearly verging on extremely oversold levels. 

Several analysts have also been screaming that the stock is still a solid Buy, with a huge upside potential that’s only getting bigger as the downturn continues. For example, Oppenheimer reiterated their Outperform rating on Lululemon shares last month and said it was still their top pick in the athleisure space. This was based on what they called the “underlying growth and expansion potential for the brand” and an increasingly attractive valuation, largely thanks to the stock’s drop. 

With a price-to-earnings (PE) ratio of just 27 right now, this is the most attractively valued, on that key metric at least, Lululemon has been since 2017. It’s a far cry from the PE of 80 the stock had in 2020 or even 50 towards the end of last year. 

Last month also saw an Outperform rating on the part of Robert Baird, who while trimming their price target still had it at an attractive $505. From the $338 that shares closed at on Thursday, that’s pointing to an upside of some 50% from current levels. 

Final Considerations

Beyond these two updates last month, the team at BTIG Research took a similar bullish stance last week. They initiated their coverage of Lululemon with a Buy rating and a $425 price target. While lower than Baird’s, this suggests an upside of 25%. 

Investors should expect shares to hold their ground around the $330 mark, where the bears ran out of steam last month. If Lululemon can consolidate there ahead of its Q2 earnings at the end of the month, things could get interesting quickly. 

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