Ticker Reports for July 28th
Is Crypto Cool Again? What Stocks You Should Be Watching
Known as the risk-on and risk-off cycle in the market, investors can look at risky – or volatile – asset classes like cryptocurrency as something to invest or trade in when there are no better alternatives. A risk-on mentality is typically brought on by low interest rate environments when stock and property prices tend to go up historically. Cryptocurrency is now the new name on the block to come and tag along to this systemic rally.
With the Federal Reserve (the Fed) holding the promise of interest rate cuts to come before the end of 2024, investors can somewhat assume that a new risk-on cycle is about to hit the market, and that is fundamentally good for cryptocurrencies like Bitcoin, which has risen to $67,200 (near all-time high). The coin’s price action is going to directly benefit stocks like CleanSpark Inc. (NASDAQ: CLSK), MicroStrategy Inc. (NASDAQ: MSTR), and Riot Platforms Inc. (NASDAQ: RIOT).
CleanSpark Stock's Bitcoin Holdings Could Drive Price Higher
A stock’s book value is derived from the company’s balance sheet, a metric few investors take the time to dig into and analyze. To save time, investors should focus on the central holdings in CleanSpark’s balance sheet, which is Bitcoin, and lots of it.
As of the most recent data, CleanSpark holds up to 6,591 Bitcoin, which would translate into roughly $442.9 million, considering where Bitcoin is trading today. Markets today are willing to pay a price-to-book (P/B) ratio of up to 2.8x for CleanSpark’s balance sheet, which includes this Bitcoin holding valuation.
Compared to the rest of the finance sector, which trades at an average P/B ratio of 2.6x, CleanSpark commands a premium of over 8%. The stock also trades at 68% of its 52-week high, meaning there is much more room for markets to bid up the stock’s valuation based on bullish Bitcoin expectations.
Some on Wall Street agree with this outlook, as analysts at Cantor Fitzgerald boosted their price targets on CleanSpark stock to $28 a share as of July 2024, daring it to rally by 67.7% from where it trades today.
More than that, those at the Vanguard Group also boosted its stake in CleanSpark stock by 58.5% in the past quarter, bringing its net position to $270.5 million or 6.4% ownership.
Bitcoin Holdings Promise Double-Digit Upside for MicroStrategy
While markets are dipping their feet into the waters of premium valuations with CleanSpark, some dove head first into MicroStrategy’s balance sheet. The stock is now trading at over 13.0x P/B, nearly 15 times the industry average today.
There’s a reason why markets are willing to overpay for the stock, and Bitcoin holdings might be the answer to that. As of the first quarter of 2024 earnings results, MicroStrategy reported having up to 214,400 Bitcoins, which, at today’s price, would translate into $14.4 billion in addition to the company’s book value.
Considering that the company acquired 25,250 Bitcoins in the fourth quarter of 2023, investors can assume a similar buying rate for the two quarters that have passed since, which would add a roughly additional $5 billion to the company’s book value at today’s Bitcoin price.
Wall Street analysts have done the math and landed on a consensus price target of up to $2,017 a share, or nearly 20 upside from where the stock trades today. This bullish evidence caused MicroStrategy stock’s short interest to collapse by 12.4% in the past month, opening the way for bullish investors.
Riot Platforms Stock Farms Bitcoin Ahead of Harvest Season
Larry Fink, the CEO of the world’s largest asset manager BlackRock Inc., recently admitted that his view on Bitcoin was wrong. He mentioned that the cryptocurrency was better defined as digital gold, and just like any other commodity, it needs to be mined before companies sell it in bulk during an upcycle.
As of June 2024, Riot Platforms has released its production and Bitcoin holdings rate, and investors should take this information just as any other gold mining stock release. Riot upped its production (farming) rate by 19% monthly, as they know the low cost of mining the coin can yield astronomical returns at today’s market price when it’s sold.
As a result, Riot’s Bitcoin holdings have risen by 29% in the year, bringing the total to 9,334 Bitcoins, or a dollar value of $627.2 million today. The stock trades at the lowest P/B multiple in the group, only 1.3x. Still, investors can assume this is due to Riot having the lowest Bitcoin holding.
Financially, this means Riot can offer the highest growth potential, as revenues alone jumped by 55.3% in Riot’s Bitcoin mining segment. This momentum resulted in an earnings per share (EPS) jump of 645% on the year, reaching $0.82 EPS.
Analysts at Cantor Fitzgerald realized how much upside could lie ahead for Riot Platforms, so they reiterated their price targets on the stock to $23 a share, daring it to rally by 107% from where it trades today.
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Top 3 Small Cap Stocks Emerging as Rotation Winners
Investors who remained heavily invested in the technology sector should start watching the broader market’s behavior today, as names in artificial intelligence like NVIDIA Co. (NASDAQ: NVDA) are potentially coming out of favor. A rotation into other areas and asset classes has started in the past couple of weeks, and riding the momentum could prove beneficial for most today.
At the helm of the new market preference are stocks that historically have benefitted from a lower interest rate environment, and that has been the theme to start the summer. As the Federal Reserve promises to cut interest rates before 2024 ends, markets have been readying their capital rotation to reflect what now seems to be a priced-in reality.
The newly favored corners of the financial markets would include bonds, as lower interest rates would cause their prices to go up, and small-cap stocks, as smaller businesses typically rely on cheaper and flexible financing to get their growth strategies underway. Knowing this, investors should watch out for Groupon Inc. (NASDAQ: GRPN), Lovesac Co. (NASDAQ: LOVE), and LendingClub Co. (NYSE: LC), as they each carry fundamental merit beyond today’s rotation.
Consumers Hit by Inflation Find Hope in Groupon Stock
Acting as a platform that connects consumers and merchants, with a discount coupon in between, sounds like the perfect business model considering the higher levels of inflation experienced in the U.S. Economy today. Because of this fundamental fact, the stock has done well in the past few months.
Now trading within 10% of its 52-week high, investors can safely assume that bullish momentum favors Groupon stock. However, the evidence doesn’t stop there. Other metrics show investors why taking a second look at this company might be worth it.
For starters, Wall Street analysts forecast up to 50% earnings per share (EPS) growth in the next 12 months, which is reason enough for the stock to be trading this close to a new 52-week high. More than that, analysts at Northland Capmk initiated coverage on Groupon stock with a “Strong Buy” rating and a price target of $22 a share.
Groupon stock would need to rally by 25.7% from where it trades today to prove these targets right. Staring at double-digit upside potential, Mirae Asset Global Investments increased its stake in Groupon stock by 10.4% as of June 2024, bringing its net investment up to $1.3 million.
Homebuyer Demand Could Drive Up Potential for Lovesac Stock
Lower interest rates come with lower mortgage rates, which is good news for would-be homebuyers currently waiting on the sidelines to finally lock in a more reasonable rate on their mortgage (which is more than double the pandemic lows).
Logically speaking, when a new home is bought, the next best thing to do is to furnish it, and that’s where Lovesac stock comes into play. Facing this upcoming demand in homebuyers has led Wall Street analysts to forecast up to 60.5% EPS growth this year.
As these projections became more realistic, others on Wall Street decided to make their optimistic views public as well. Those at the Maxim Group decided to slap a $38 a share valuation on Lovesac stock, daring it to rally by 37.6% from today’s prices, enough of a potential prize to draw in buyers.
Among the $52.2 million in institutional capital that made its way into Lovesac stock over the past 12 months, Granahan Investment Management (Lovesac’s largest shareholder) boosted their positions by 15% well before the rotation started, a position that translates to $39.8 million in capital.
Alternative Finance Demand Boosts LendingClub Stock
When the banking stocks of the United States reported their second quarter 2024 earnings results, they all quoted higher credit card delinquency rates. Given that consumers are cash-strapped due to inflation, it shouldn’t come as a surprise to see these figures go up.
LendingClub offers alternative financing solutions, such as personal loans, loans based on collateral, and even unsecured loans. Just like Groupon, this stock provides a beacon of hope for consumers looking to weather the inflation storm today. This fundamental trend was enough to justify Wall Street’s EPS growth forecasts of over 122% for the next 12 months.
As bold as these predictions may be, Jefferies Financial Group thought they made sense. They recently (as of July 2024) boosted their price targets on LendingClub stock to $12 a share, roughly a 13.2% upside from today’s price.
Considering the stock now trades within 10% of its 52-week high, other analysts could take advantage of the bullish momentum and rate it accordingly.
Finding LendingClub’s thesis sound, the Vanguard Group decided to allocate 1.6% more to the stock, bringing their net investment up to $100.6 million today, or 10.3% ownership of the entire company.
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Bargain Alert: 3 Stocks Worth Watching While The Market Cools
Since closing at a record high less than 10 days ago, the benchmark S&P 500 index has been on the back foot. For the moment, it's not looking like a whole lot more than a healthy mid-rally correction. After all, it had logged almost 40% of gains this year so far, and some questions were starting to be asked about the short-term health of the rally.
An increasing reliance on a few heavyweight tech stocks over recent months, sketchy earnings in the past few weeks, and a cyclical shift from large-cap to small-cap have all combined to test the bulls. Yesterday's 2.3% drop for the S&P 500 alone made it its worst day since 2022.
But this is an entry opportunity for those of us on the sidelines who remain bullish on equities through the rest of the year and into 2025. Here are three tech stocks in particular worth considering at a discount.
Toast's Impressive Run Despite Recent Dip
Toast (NYSE: TOST), the restaurant software company, has been on a solid run since markets turned north en masse last November. Though an 8% drop in Wednesday's session wouldn't have made for pleasant viewing, the stock is still up more than 75% in that timeframe.
It's worth noting that only last week, the team at Mizuho raised their rating on Toast stock from Neutral to Outperform. This was interesting timing, as the stock was right on the edge of breaking through the upper end of the range it's been stuck in since bottoming out from 2022's drop.
The team there obviously sees little reason to doubt Toast's ability to achieve this milestone and gave the stock a fresh $33 price target. Thanks to the selloff over the past week, that's pointing to an attractive upside of some 30% from where Toast closed last night.
The Trade Desk Continues to Attract Bullish Analyst Sentiment
Shares of AdTech giant The Trade Desk (NASDAQ: TTD)have been trending upward since the start of 2023. By the start of this week, they'd gained an impressive 150%, and while yesterday's 11.5% drop will have been hard to stomach, several analysts have been weighing in on the Buy side recently.
Morgan Stanley, for example, reiterated its Overweight rating on the stock on Tuesday of this week while boosting its price target to $110. This echoed the note from the Wedbush team on Monday, who did the same.
Last week, Wolfe Research and Oppenheimer reiterated their Outperform ratings, the latter giving The Trade Desk a street-high price target of $120. Considering the stock closed below $90 last night, that's an upside target of more than 30%.
Broadcom: An Attractive Alternative to NVIDIA
To round off the list, we have another computer and technology stock. Broadcom (NASDAQ: AVGO) is known for its semiconductor products and was only this week singled out by Citi as one of the increasingly attractive alternatives to NVIDIA (NASDAQ: NVDA).
This may shed light on Broadcom's multi-year surge, which saw gains exceeding 350% from 2022 through last month, and its recent 20% decline. For those observing from the sidelines, now might be the ideal moment to get involved.
Like with the others on this list, several analysts have been clamoring over each other to call it a screaming buy. This month alone, Oppenheimer, Cantor Fitzgerald, TD Cowen, and Rosenblatt Securities have all reiterated their Buy or Outperform ratings on Broadcom. When it comes to the potential upside, it doesn't get much better; all gave it a price target of $200 or higher, with Rosenblatt's $240 suggesting they're targeting near-term gains of around 60%.
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