Ticker Reports for July 10th
This Stock's Price Shifts Into High Gear With Analyst Upgrades
A single analyst's upgrade can excite a market; a trend of upgrades can lift it, which is lifting Carvana (NYSE: CVNA)—a trend in upgrades signaling a shift in sentiment and a sustainable rally for this stock. The upgrade trend is strong enough to put CVNA on MarketBeat’s list of Most Upgraded Stocks, which is significant because Carvana has been prominent on the list of Lowest Rated Stocks for many quarters. The takeaway is that this once stalled investment is rebounding, and the rebound is shifting into high gear.
The latest revision comes from Needham. Senior Analyst Chris Pierce and team upgraded the stock to Buy from Hold, calling it a secular growth story with a cyclical kicker. The secular growth story involves the company’s digital-first operating model, under-utilized brick-and-mortar footprint, and an outlook for industry-leading growth. The growth will be driven by unit sales and increased market share in the retail and wholesale markets. The cyclical recovery kicker involves the analysts' sentiment. Needham views sentiment as bottoming and entering an upgrade cycle that could last several quarters. Needham’s new $160 is the new high target from analysts and may be reached soon.
Institutional Tailwinds Lift Carvana to Two-Year High
Analysts are not the only sell-siders interested in Carvana. The institutions, the largest group of investors in the market, have bought this stock on balance for six consecutive quarters and increased their holdings to over 55%. The Q2 action is noteworthy because of numerous large position increases, including a 40% gain for T. Rowe Price, which now owns 3.7% of the shares.
Vanguard holds about 5% of the stock in its funds and increased its holdings by 3%. The more significant activity is from the numerous smaller funds and private institutions that increased their holdings by triple digits. Those include the State Board of Administration of Florida Retirement System (+302%), Cetera Investment Advisors (+170%), and GAMMA Investing LLC (+127%).
The reason for the bullishness is the results. The company hit the skids in 2021 but bottomed in 2022 on an expectation that an industry cycle low had been reached. This year's catalyst was the Q1 results, which affirmed the outlook and gave a little more. The FQ1 results included top and bottom line strength, a return to growth, and record net income. Revenue growth topped 17%, outpacing consensus by 1200 bps on strength in units and pricing.
The earnings were another real shocker, reversing a loss posted in the prior year and outpacing the consensus reported by MarketBeat by nearly $1.00. However, the guidance has the market shifting into high gear. The company didn’t give specific guidance but is forecasting a sequential acceleration in the YOY growth pace and for earnings strength to continue.
Expectations Build for Carvana: Q2 Results Will be a Catalyst
The analysts are building solid expectations for Carvana’s Q2 results but may still underestimate the recovery. The ten revisions tracked by MarketBeat are all upward, but expect only 10% revenue growth at the consensus. Further, the consensus forecasts a quarter of GAAP and adjusted losses contrary to guidance. Q2 results are due at the end of July.
Short interest is another factor aiding the rally in this stock. Although short interest is falling, it was still a high 10% in mid-June, fueling a short-covering rally.
The technical picture for this automotive stock is robust. It is moving up off its bottom and regularly knocking out resistance levels. The latest analysts' upgrades have the market trading at a two-year high, supported by the 30-day moving average. With this trend in place, the stock will likely continue to move higher in 2024. The next target for significant resistance is near $150, which may be reached by mid-summer, assuming the Q2 results are good.
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AI Boosts Glass Tech Leader Stock: Shares Up 75% and More to Come
Corning Incorporated (NYSE: GLW) is a $38 billion business specializing in glass and ceramic-related technology. Its products are used in everything from flat-screen TVs, smartphones, and sensitive sensors for drug research, which might not seem that exciting, but don't be put off. At a time when investors are focused on finding anything artificial intelligence (AI) related, funnily enough, that's exactly what Corning's got going on.
Having watched its stock trend down to 45% from 2021's peak to November of last year, the New York-headquartered company has changed the narrative completely. It started, like with almost all equities, when the first signs of the Fed's victory over inflation started appearing towards the end of last year. Cooling inflation eventually means cooling interest rates, which in turn means cheaper money to fund growth and expansion.
While it momentarily returned to 1999 levels, this market-wide shift in investor sentiment turned Corning stock around and sent it trending up. Its shares have gained some 75% since then and are within a 5% move of topping 2021's multi-decade high.
Corning's Bullish Update: Strong Earnings and Upgraded Guidance
Much of these gains came on the back of solid if not a bit boring, good old-fashioned work. April's earnings report topped analyst expectations for both headline numbers, and a couple of analyst upgrades and boosted price targets in June helped push the stock even higher.
But the catalyst for the latest move, 16% this week so far, is the company's own updated forward guidance. While Corning shares had been cooling somewhat into the first week of July, Monday's update was enough to get them fired up again.
For the current quarter, Corning is now looking for its core sales to land around $3.6 billion, up from its previous estimate of $3.4 billion. On the earnings front, it's good news, too, as Corning is expecting its earnings to land at the high-end of the previously guided range of $0.42 to $0.46 per share. Considering last quarter's revenue came in around $2.9 billion, this would be Corning's first year-on-year revenue increase in years. This would be a solid statement to the market while justifying investors' bullishness in the stock over the past nine months.
AI Adoption Fuels Corning's Positive Outlook
But what was arguably the most interesting part of the update, and what has potentially fueled most of this week's push, was the reason for the bullish outlook. As Corning's CEO Wendell Weeks said, "The outperformance was primarily driven by the strong adoption of our new optical connectivity products for Generative AI. These results reinforce our confidence in 'Springboard'—Corning's plan to add more than $3 billion in annualized sales in the next three years as cyclical factors and secular trends combine."
Considering Corning is a 173-year-old business that is still headquartered in the small town it was founded in upstate New York, this was arguably the most exciting update from leadership in years. The team at HSBC immediately upgraded their rating on the stock, while the likes of Morgan Stanley, Deutsche Bank and Argus all upped their price targets.
Strategic Timing: When to Invest in Corning's AI Growth
Argus in particular made a statement with their street-high price target of $50, which, even including the move so far this week, points to further upside of some 12%. Notably however, this would also mean that Corning shares are at their highest level since the Dot Com bubble.
Investors should look for the stock to continue building on its gains into the end of the week, with any close above $47 confirming that the next phase of the rally has begun. The last time Corning broke through a historic all-time high, it went on to add another 30% of gains fairly easily. Who's to say that won't happen again this time?
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AI Partnership Boosts This Top Tech Stock: Ready for More Gains?
However, as every investment prospectus says, past performance does not guarantee future performance. Palantir has a loyal band of followers but seemingly an equal number of critics. Those naysayers will point to the stock’s 171x forward price-to-earnings (P/E) ratio and a price-to-sales (P/S) ratio of 27 to prove that Palantir is overvalued.
The only question that matters now is whether PLTR stock has room to move higher. Some recent developments suggest the answer may be yes.
A Partnership with Oracle Marries Cloud Services with Palantir's AI Platform
On July 9, Oracle Corp. (NYSE: ORCL) announced it would be using Palantir’s Foundry and Artificial Intelligence Platform (AIP) on its Oracle Cloud Infrastructure (OCI). This combination will allow businesses and governments to accelerate their AI initiatives.
One noteworthy reason this is significant for Palantir is that Oracle has over 300,000 customers that can now access Palantir’s software. And many of those are in the private sector. A common criticism of the company is that it’s too reliant on government business (which makes up about 53% of its revenue).
The Company Keeps Winning with the U.S. DOD
However, just because Palantir is growing its commercial business doesn’t mean that its government business is in danger of slowing down. In May, the U.S. Department of Defense (DOD) Chief Digital and AI Office awarded the company a $153 million contract to license its AI-enabled operating system. However, the contract may be worth up to $480 million in the next five years.
This is only the latest military contract that Palantir has received. In April, Palantir was awarded a $9.8 million contract from the Defense Information System Agency to deliver an Electromagnetic Battle Management – Joint Decision Support prototype.
The Third Time May Be a Charm With the S&P 500
In June, Palantir was rebuffed for inclusion in the S&P 500. However, the index will rebalance again in September. Palantir reports earnings in August. If the company delivers a strong report, as many expect, it will make it more difficult for the S&P 500 to keep it out of the index. And once that happens, the stock will almost certainly receive more institutional interest. For all the headlines the stock generates, only about 45% of the stock’s float is owned by institutions.
Palantir's Institutional Confidence: A Signal for Investors
A final thought to consider about the future of Palantir stock: the stock has surged over 18% in the last month, and there have been five different insider sales of PLTR stock by three different insiders.
However, each of these sales was pursuant to a Rule 10b5-1 trading plan. That means the individual was going to sell no matter the price. That's always important to watch, and that's why insider buying is more telling than insider selling.
That said, it’s fair to note that there have been no insider buys of PLTR stock in the last 12 months. However, institutions have bought $7.5 billion of Palantir while selling approximately $688 million. That should remind investors to follow what the institutions do more than what they say.
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