Ticker Reports for June 25th
Chipotle Mexican Grill Stock Split: Where Does it Go From Here?
Investors wondering where Chipotle Mexican Grill's (NYSE: CMG) stock price will go from here should be comforted to know this market will likely continue to rise. That is because the meteoric rise in the share price is driven by fundamental factors, including growth, margin, and an outlook for accelerating growth as the international expansion gains momentum. Because a stock split does not affect the underlying business, fundamentals are intact, and the stock price trend should continue.
What does the stock split mean for Chipotle and its investors? Simply put, it means there will be more shares in the market, but the ownership structure will remain unchanged, and business will continue as it has. Each person holding a share of CMG on 6/18 (yes, that’s right, the record date has passed, so it is too late to get into the name before the split) will hold 50 shares on 6/26. That’s true even if the owner of record on 6/18 sells on 6/19; whoever bought the shares will have 50x as many on June 26th.
Chipotle Split Its Stock to Increase Ownership and Reduce Market Volatility
The purpose of the split is to make the stock more accessible to smaller and retail investors, including the company’s employees. Trading above $1,000 per share, the price tag can be intimidating for smaller investors, although a 50% gain in $1,000 of a $1,000 stock equals a 50% gain in $1,000 of a $20 stock. The takeaway is that CMG’s stock split will open up a new class of investors and widen ownership of the stock, thereby supporting its price action and theoretically reducing the volatility. A broad base of buy-and-hold investors is known to reduce stock volatility because fewer holders are ready to sell at the drop of a headline.
And there is precedent to support the claim that this stock will continue to rise. Chipotle isn’t the first company to issue a split, nor the first this year, and those that have come before ended in gains for investors. NVIDIA (NASDAQ: NVDA) is among the most prominent this year, issuing a 10-for-1 split earlier this month. Its price action surged to a new high and has corrected since, but the pullback is a buying opportunity in light of the analysts. Analysts are leading NVIDIA to new highs, and they are doing the same for Chipotle.
Analysts Are Leading Chipotle Higher
The consensus estimate for CMG stock assumes the market is fairly valued, trading at nearly $3250. However, the trend in the price target is upward, and the sentiment firm at Moderate Buy suggests upward momentum will continue. The most recent revisions came out within the week, just days before the split, and include reiterated and raised targets that put the market in the range’s high end. The high target of $3880 ($77.75 split-adjusted) assumes only a small 5% to 20% upside but will likely move higher as the year progresses because of business performance.
The highlights from the last earnings report include top and bottom line strength in addition to industry-leading performance. The 14% top-line growth is triple the gain from fast-food leader McDonald’s (NYSE: MCD), and market-leading performance should continue. The company is leaning hard into store-count growth, building out the network of Chipotlanes, and widening its margin. It is also embarking on its international expansion. The company now has about 65 international locations, about 2% of its footprint, and plans to accelerate international growth in the coming years. That opportunity could more than double the operations from 2024 levels over the next ten years.
Chipotle Pulls Back Into a Mouth-Watering Buying Opportunity
CMG shares peaked earlier this month and have since corrected to lower prices. The caveat for bears is that the pullback aligns with the uptrend, and the market shows support at a critical level. The critical level coincides with highs set in May and the 30-day moving average, showing short-term traders are still bullish on this market. The stock price may come under pressure immediately after the split is complete due to profit-taking and opportunistic capital raising, but it shouldn’t last long.
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Arm Holdings and Micron: Top 2 AI Stocks to Buy and Hold
The semiconductor industry is the bedrock of the digital age. Semiconductors have provided the essential building blocks for computers, smartphones, and countless other electronic devices that power our modern world. As technology advances at an unprecedented pace, the demand for increasingly powerful and efficient semiconductors continues to surge. At the front of this technological revolution is artificial intelligence (AI), a transformative tech reshaping industries that is driving an insatiable need for specialized hardware. This combination of factors presents a compelling opportunity for long-term investors seeking to capitalize on the transformative growth of both the semiconductor industry and the AI market.
Long-Term Investing in Semiconductors
While the semiconductor industry is known for its cyclical nature, long-term investors understand that these cycles are temporary deviations from a more significant growth trajectory. By embracing a long-term perspective, investors can look beyond short-term market noise and position themselves to benefit from the industry's sustained expansion. A key to successful long-term investing in semiconductors is identifying companies with robust fundamentals, proven track records, and sustainable competitive advantages. These companies are better equipped to defy market fluctuations and emerge stronger from industry downturns.
The semiconductor sector thrives on innovation, consistently pushing the boundaries of what's possible in computing power, efficiency, and miniaturization. This constant drive for technological advancement creates a virtuous growth cycle, with each breakthrough fueling new applications and markets, further propelling demand for cutting-edge semiconductors. With its ability to process vast amounts of data and perform complex tasks, AI represents a paradigm shift in computing, demanding new processing power and memory capacity. This creates an unprecedented opportunity for semiconductor companies at the forefront of developing and manufacturing the specialized chips that power AI applications.
Arm Holdings: Architected for the AI Era
Arm Holdings (NASDAQ: ARM) operates with a unique, resilient business model centered on licensing intellectual property rather than manufacturing chips directly. Instead of competing in the volatile production market, Arm licenses its energy-efficient CPU designs to a vast network of partners like Qualcomm (NASDAQ: QCOM), Apple (NASDAQ: AAPL), and Samsung (OTCMKTS: SSNLF). This asset-light approach, generating recurring revenue through royalties on every chip produced using its technology, is reflected in its strong profitability metrics. The company boasts a 9.46% net margin and a 6.56% pretax margin, demonstrating its ability to convert revenue into profits effectively.
Arm's dominance in the mobile market, powering an estimated 99% of the world's smartphones, speaks volumes about its technological prowess and market penetration. This success stems from its architecture's inherent focus on energy efficiency and scalability, which are crucial for mobile devices and increasingly important for AI applications. Recognizing the vast potential of AI, Arm has positioned itself strategically, becoming a leading provider of AI-optimized chips. Its Armv9 technology, designed for enhanced performance and efficiency, is gaining rapid adoption in data centers, powering the cloud infrastructure behind AI applications. Further solidifying its position are strategic partnerships with leading cloud providers, including Google (NASDAQ: GOOG), Amazon (NASDAQ: AMZN), and Microsoft (NASDAQ: MSFT).
Beyond this, Arm is expanding into the PC market, leveraging its energy efficiency and performance to challenge x86 processors' dominance. This expansion and its firm grip on the mobile market create a compelling growth narrative for long-term investors. Furthermore, the company's financial prudence is evident in its low debt-to-equity ratio of 0.30, indicating a low reliance on debt financing and a stronger ability to weather economic downturns.
While Arm Holdings' high valuation might give some investors pause, its robust business model, dominant market share, strategic positioning in the AI ecosystem, and financial health warrant consideration. As AI becomes increasingly ubiquitous, Arm's technology is primed to play a central role, making it a compelling investment for those looking to capitalize on this transformative technology's long-term growth potential.
Micron Technology: Meeting the Memory Demands of AI
Micron Technology (NASDAQ: MU) is a leading provider of DRAM and NAND flash memory. These products are crucial for every modern electronic device and are at the heart of the data storage revolution. The demand for Micron's high-performance memory products has skyrocketed as AI becomes increasingly sophisticated. With their thirst for vast datasets and rapid processing, AI algorithms rely heavily on high-bandwidth memory modules for efficient training and deployment.
Recognizing this demand, Micron has strategically focused on developing cutting-edge memory solutions optimized for AI applications. The company's high-bandwidth DRAM and NAND flash memory are finding a ready market in data centers globally, powering the servers behind complex AI workloads. While the memory market is inherently cyclical and prone to oversupply and price fluctuations, Micron's strategic focus on AI-optimized memory puts it in a solid position to navigate these cycles. Further strengthening Micron's near-term prospects are current market dynamics characterized by strong demand and favorable pricing trends fueled by the surge in AI adoption.
Micron’s financial performance reflects this positive environment. In its most recent quarter, Micron reversed a year-over-year earnings-per-share (EPS) loss to a gain of $0.71, showcasing a potent turnaround. Notably, revenue surged 58% year-over-year in the same period, primarily driven by the data center market's robust demand.
Beyond this sector, Micron sees substantial growth opportunities in AI-enabled PCs and other consumer devices that are increasingly reliant on high-performance memory for AI-powered features. While the inherent cyclical risks of the memory market remain a consideration for long-term investors, Micron's strategic focus on high-growth segments like AI, coupled with its recent financial performance, makes it a compelling investment for those seeking exposure to the memory market's growth potential.
Embracing the Long-Term Vision
Long-term investing, while offering the potential for substantial returns, is not without risks. Market volatility, economic uncertainty, and unforeseen events can all impact investment performance. Investors in Arm Holdings should be aware of the company's high valuation, which implies significant growth expectations. Any slowdown in the adoption of AI or increased competition could put pressure on Arm's stock price. Micron Technology, operating in the cyclical memory market, faces risks related to potential oversupply and price fluctuations. Economic downturns could also impact demand for memory, potentially impacting Micron's revenue and earnings.
Diversification is critical to mitigating these risks. Investors should spread their investments across multiple companies, sectors, and asset classes to reduce the impact of any single investment's performance on their overall portfolio. Thorough research and due diligence are also essential before making any investment decision. Investors should carefully evaluate a company's financials, competitive landscape, and long-term growth prospects.
Long-term investing requires patience and willingness to ride out short-term market fluctuations. Investors can benefit from technology's transformative power and the semiconductor industry's enduring growth by focusing on companies with solid fundamentals, a commitment to innovation, and strategic positioning in high-growth markets like AI. Arm Holdings and Micron Technology, with their distinct strengths and strategic advantages, represent compelling opportunities for investors seeking to capitalize on this long-term growth story.
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Best Buy Stock May Be Best Bought Before the Holiday Season
Consumer electronics retailer Best Buy Inc. (NYSE: BBY) stock surged to 52-week highs following a robust fiscal Q1 2025 performance. The company offers a vast selection of hardline products, including laptops, desktop computers, appliances, televisions, cameras, mobile phones, video game consoles, music, and movies. It’s one of the few remaining brick-and-mortar showroom electronics chain stores in the nation. However, Best Buy has also grown its online sales and bolstered its technical support and services with its Geek Squad division.
Best Buy operates in the consumer discretionary sector and competes with electronics retailers like Amazon.com Inc. (NASDAQ: AMZN), Walmart Inc. (NYSE: WMT), Target Co. (NYSE: TGT), and Conn’s Inc. (NASDAQ: CONN).
Best Buy and AI Trends: Indicators of a Potential Recovery Cycle?
Consumer spending on big-ticket items has been soft, as evidenced by May month-over-month (M/M) retail sales growth of 0.1%, missing consensus estimates for a rise of 0.3%. Furniture and home furnishing took a 6.8% YoY drop. However, electronics and appliances saw a 1.8% YoY bounce. Best Buy is a pure-play benefactor, evidenced by its recent earnings beat and soaring stock price. This leaves investors to wonder if this could be the start of a recovery cycle in the consumer electronics industry. The artificial intelligence (AI) boom could be a factor driving consumers to upgrade computers and laptops acquired during the pandemic to AI-enabled devices.
BBY Stock Triggers a Bull Flag Breakout
The daily candlestick chart for BBY demonstrates a bull flag breakout pattern. BBY shares surged for five days in reaction to its fiscal Q1 2025 earnings results peaking at $88.96 on June 5, 2024. This was the flagpole. The flag formed on the parallel pullback comprised of lower highs and lower lows on the following six days. The bull flag triggered the breakout through the descending upper trendline at $88.07 on June 17, 2024, as shares surged to a 52-week high of $93.72 before peaking. The daily relative strength index (RSI) also peaked at the 78-band and fell back under the 70-band. Pullback support levels are at $88.07, $82.91, $77.40, and $74.92.
Best Buy Scores a Solid EPS Beat, But Revenues Fall Short in Q1
Best Buy reported fiscal Q1 2025 EPS of $1.20, beating consensus analyst estimates by 12 cents. GAAP diluted EPS rose 2% to $1.13. Non-GAAP operating income rate rose 40 bps to 3.8%. Non-GAAP diluted EPS rose 4% to $1.20. Revenues fell 6.5% YoY to $8.85 billion, which missed $8.96 billion consensus estimates. Enterprise comparable (comp) sales fell 6.1% YoY. International comp sales fell 3.3% YoY. Best Buy bought back $50 million in stock in the quarter and paid out $202 million in dividends. The company authorized a 94-cent quarterly cash dividend payable July 11, 2024, to shareholders of record as of the close of business on June 20, 2024.
Best Buy's Weakness in Appliances, Home Theater and Gaming Was Offset By Services and Laptops
Domestic sales fell 6.8% YoY to $8.20 billion. The largest drivers of comp sales decline on a weight basis were home theater, appliances, mobile phones, and gaming. These are offset by strength in services like Geek Squad membership offerings and laptops (AI-enabled). International revenues fell 3.3% YoY to $644 million.
Best Buy Reaffirms Guidance
Best Buy reaffirmed fiscal full-year 2025 EPS guidance of $5.75 to $6.20 versus $6.04 consensus estimates. Enterprise non-GAAP operating income rate is expected to be between 3.9% to 4.1%. Full-year revenues are expected between $41.3 billion and $42.6 billion versus $41.94 billion. Comp sales are expected to drop between 3% and 0%. Capital expenditures (CapEx) are expected to be around $750 million.
Best Buy CEO Sees the Glass More than Half Full
Best Buy CEO Corie Barry was upbeat during the earnings conference call, underscoring the "better-than-expected Q1 profitability" narrative. A combination of macro factors created a challenging sales environment. The weak sellers were phones, gaming, appliances, and home theater products. Strength can come from sales of services like installation and warranties and laptops. Digital sales comprised 31% of domestic sales, and 60% of its packages were delivered or made available for pickup within a day. In-store pickups are applied to 40% of its digital sales, and over 90% are available within just 30 minutes.
CEO Barry continues to see 2024 as a year of increasing industry stabilization. Several indicators showed favorability, including lower unemployment, decreasing inflation, and an encouraging trend in consumer confidence, coupled with the beginning of a recovery in the housing market.
Best Buy Sees Growth: AI Features Propel Laptop Sales
CEO Barry sees the computing category benefitting from early replacement and upgrade cycles gaining momentum, especially as new products featuring AI capabilities are released. Best Buy's laptop sales turned positive in Q4 and have continued into Q1. Microsoft Co. (NASDAQ: MSFT) announces Copilot Plus AI for laptops available on June 18, 2024. With faster speed, better battery life, and greater efficiency, AI features like summarization can quickly recap lengthy email threads and pages of documents.
Barry added exciting new use cases for AI laptops: “For example, there is a recall function that makes it very easy to find documents based on visual cues or help users easily navigate back to a website to find a specific item they shopped for three weeks ago. They also have a live language translation function that works in real-time on videos without requiring a connection to the Internet. And the co-create capability can take your rough sketches and turn them into works of art.”
Best Buy analyst ratings and price targets are at MarketBeat.
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