Ticker Reports for July 3rd
AbbVie Stock: A Perfect Dip for Investors to Buy
In a holiday-shortened week, shares of AbbVie Inc. (NYSE: ABBV) are down a little more than 3%. To put that in context, the drop in ABBV stock was more than that of biotech stocks such as Johnson & Johnson (NYSE: JNJ), which is down 0.68%, and Pfizer Inc. (NYSE: PFE), which is down 1.38%.
However, both JNJ and PFE were already down for the year. By contrast, ABBV stock is up about 7%. That's well above the sector ETF, which is flat for the year and slightly outpacing the S&P 500, up about 4%.
Without any obvious news, the question is, why? Shares of the iShares Biotechnology ETF (NASDAQ: IBB) have been down nearly 2% in the last five days, so this may be a case of some sector rotation. But with AbbVie getting ready to report earnings on July 25, it's a good time to check in on the stock and see what investors should be watching now.
AbbVie Welcomes a New CEO
Some will point to the change that was made in the C-suite. On July 1, Robert A. Michael assumed the role of chief executive officer. Michael succeeds Richard A. Gonzalez, who had held the role since 2013, when AbbVie spun off from Abbott Laboratories (NYSE: ABT).
However, this was a planned change, so that seems an unlikely reason for investors to waver on ABBV stock. Right now, this looks like a stock getting caught up in a slight sell-off in the overall biotech market.
AbbVie Investors Shrug Off Humira Concerns
Conventional wisdom suggests that AbbVie is having a prove-it moment. The company now faces generic equivalents to its blockbuster drug Humira in the United States and Europe. However, the company is optimistic that sales of drugs such as Skyrizi and Rinvoq will more than make up for any decline in revenue from Humira.
The company also has Vraylar, a drug that has indications for major depressive and bipolar 1 disorders, which generated almost $700 million in the first quarter. Analysts are also bullish on Elahere, which is now part of the AbbVie portfolio after its $10 billion acquisition of ImmunoGen in 2023. That drug could top $2 billion in sales by 2030.
That story will play out over several quarters. It hasn't had much impact on AbbVie stock, which is up 22.8% in the last 12 months. That's on par with the S&P 500 index and well ahead of the iShares Biotechnology ETF, which is up just 7% in that time. When you factor in the company's dividend, the total return for ABBV stock in the last 12 months is over 30%, which makes it one of the best medical stocks to own.
Piper Sandler Just Confirmed its ABBV Price Target
If you're looking for another bullish confirmation, on July 3, analysts from Piper Sandler reiterated their Overweight rating on ABBV stock as well as the firm's price target of $190.
That's about a 15% increase in the share price. Investors accustomed to the stock generating an average total return of over 35% in the last five years may believe the stock is looking overbought with the addition of more debt on its balance sheet.
That may keep traders at bay, but with the stock trading at just 14.8x forward earnings and a dividend that has grown for 52 consecutive years, ABBV stock still looks like a solid stock for value-oriented investors.
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Forget NVIDIA: Super Micro Computer Stock Leads in Momentum
That's right, the better stock to watch for those investors who value momentum over everything else in the technology sector is not actually NVIDIA Co. (NASDAQ: NVDA). Understanding that the artificial intelligence wave is only getting started, especially considering that chip and semiconductor technology will only advance according to Moore's law. But, if it's not NVIDIA, where can investors look to beat the momentum in the technology hype intoxicating markets today?
The half of the trading year is over, and performance is set in the books regarding percentage points. Over the past six months, NVIDIA stock delivered a stratospheric rise of 155% to surpass the $3 trillion valuation for the first time, placing it next to the likes of Microsoft Co. (NASDAQ: MSFT) and Alphabet Inc. (NASDAQ: GOOGL). However, one stock beat NVIDIA with a 188% six-month performance.
That stock is Super Micro Computer Inc. (NASDAQ: SMCI). Wall Street forecasts that the next few quarters could continue delivering a performance that leaves NVIDIA stock in the dark. This stock's still-in-the-darkness compared to NVIDIA is a good thing; it means that new investors will benefit from the pre-herd behavior of a stock, which happens when everyone stampedes into the same company.
Super Micro Computer Stock: Leading Industry Growth
One of the main drivers for stock prices is the earnings per share (EPS) growth that Wall Street forecasts for the next 12 months. Depending on that growth rate, markets will have a set multiple they would be willing to pay for that stock. The more growth, of course, the higher the multiple.
So, how is Super Micro Computer doing against competitors in this sense? Wall Street analysts forecast up to 43.6% EPS growth for the next 12 months. This compares to NVIDIA's EPS forecasted growth of only 25.3%, and investors can also take peer NetApp Inc. (NASDAQ: NTAP) as a sounding board against Super Micro Computer.
NetApp is forecasted to grow its EPS by 8.9% this year. Now that investors know Super Micro Computer is leading EPS growth, it should trade at the highest valuation metrics. That's not quite the case; this is where investors can get an advantage.
Super Micro Computer stock trades at 24.1x forward P/E. In contrast, NVIDIA trades at a much more expensive 36.2x forward P/E valuation, allowing investors to benefit from the ensuing rotation into a more realistic reflection of future growth.
How big can this gap be? Taking price action into account, investors already know that Super Micro Computer has outperformed NVIDIA over the past six months, but here's what that looks like over a year. NVIDIA stock trades at 87% of its 52-week high, while Super Micro Computer stock sits at only 67% of its 52-week high.
Elon Musk Backs Super Micro Computer Instead of NVIDIA
When Elon Musk, the man behind the market's leading artificial intelligence trends, picks a company to back his hardware needs to make innovation happen, investors should consider their own investment considerations.
Out of all the options in the market, Elon chose Super Micro Computer as his hardware supplier for his next artificial intelligence venture. If successful, this could spill over into providing hardware for Tesla Inc. (NASDAQ: TSLA) and even SpaceX.
Of course, this possibility is not baked into today's EPS projections. However, some analysts were not shy about letting markets know where they think the stock could be valued in a few quarters. Those at Loop Capital think the stock could be worth up to $1,500 a share, daring it to rally by as much as 80.3% from where it trades today.
Other analysts followed suit on this trend. Rosenblatt Securities slapped a $1,300 share valuation for Super Micro Computer stock, which may not be as bullish as Loop Capital. However, it still offers investors a 56.3% potential upside today.
Super Micro Computer's Financials Validate Wall Street's Confidence
Management was proud to report a 200% increase in revenue over the year, which was well above peers, according to the company’s third quarter 2024 earnings press release. Of course, that revenue growth led the company’s EPS to skyrocket.
EP was only $1.61 in the same quarter in 2023, but that metric jumped to $7.13 a year later to show investors where the industry’s growth really is.
Based on this financial momentum, management also felt comfortable projecting financials higher for the rest of the year according to guidance, giving analysts and Wall Street another point of reference to lean on. In light of this evidence, the Vanguard Group (the stock’s largest shareholder) boosted its stake in the company by 25.7%, bringing its net investment up to $6.3 billion today.
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GitLab Stock Rebounds: The Inside Story of Its Comeback
The market for GitLab (NASDAQ: GTLB) collapsed in late May when it announced high-severity flaws in its platform. The news was especially shocking coming from a DevSecOps platform, but the impact on the share price has been short-lived. The market is already rebounding from its lows and is likely to head higher because GitLab is a leader in secure developer operations. The truth is that no platform is entirely safe; cybersecurity is more about deterrence, the difficulty hackers face, than actual prevention, and GitLab has already issued its patches. The takeaways from the Q1 report are that enterprise-level clients continue flocking to the platform, outperformance is expected for Q2, and the growth outlook is robust.
GitLab is Building Momentum With AI
GitLab had a solid quarter with revenue, earnings, and guidance above consensus forecasts reported by MarketBeat.com. The company’s revenue performance was driven by growth in clients led by large clients producing more than $100,000 in annual revenue. Large clients grew by 35%, and services' deepening penetration compounds the strength. The net retention rate or measure of the revenue generated from existing customers was 125% of last year’s level, giving evidence of the platform's utility.
The guidance is also solid and potentially cautious, given the trend of outperformance, client growth, penetration of services, and remaining performance obligations. RPO is a measure of contracted business that has yet to be recognized, up 48%. Regardless, the guidance calls for another quarter of nearly 30% growth; the only downside is that growth will slow from Q1’s 33% to an average of almost 28% for the year. Looking forward, analysts expect the company to sustain growth in the mid-20% in 2025, and that outlook may also be light.
Analysts lowered their targets for the stock following the Q1 release and are setting the market up for a rebound. The analysts will likely start raising targets in the second half because the Q2 results will be strong, and further guidance improvement is also expected.
As it is, the 25 analysts tracked by MarketBeat show a high conviction for this enterprise tech stock and rate it as a Moderate Buy. The consensus is down compared to last quarter, but marginally, and is still nearly 30% above the current action, providing ample incentive to the market, and the low target is also significant. Several firms issued a low target of $50, the lowest target on record, a floor for the price action in this tech stock.
Insiders Sell GitLab Shares; Institutions Buy Them
Insiders have been selling GitLab, but there are so many offsetting factors that it doesn’t matter. To start, insider activity is light, the pace of selling has slowed sequentially for three quarters, and activity is spread among numerous execs, pointing to sales related to share-based compensation. Another offsetting factor is the institutional interest. The institutions have bought this stock on balance for five consecutive quarters, and the selling virtually dried up in Q2. Over the past twelve months, the activity has total institutional ownership up to 92% and is growing, providing a strong tailwind for the market.
GitLab Rebounds, Reversal in Play
Shares of GitLab are moving higher, confirming support at the $44 level. The price action has moved above the analysts' low $50 target, which should act as market support now. The next hurdle is the long-term moving average near $54. That level will likely be reached soon. The question is if the market will move above it quickly or enter a correction. In either case, this stock is a good buy and will likely move above $60 by the year’s end.
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