Ticker Reports for July 1st
These Top 3 Banks Raise Dividends After Passing Fed Stress Test
Every once in a while, the Federal Reserve has to step aside from its primary function of keeping markets safe and employment running strong - without too much inflation - to ensure banks are doing okay. What’s called the Fed’s “stress test” ended last week, and despite some concerns about the state of consumer credit, most banks passed with flying colors.
Passing the test means these banks have a new capital requirement to upkeep, set by the Fed after analyzing results. Often, the risk management departments at the banks overshoot the capital required before the test, which means they routinely have excess capital after the fact, which is the case today. So, what is management looking to do with this excess capital?
Bank of America Co. (NYSE: BAC), J.P. Morgan Chase & Co. (NYSE: JPM), and Citigroup Inc. (NYSE: C) have decided to reward their shareholders for sticking by them despite economic concerns. These rewards include a mix of increased dividend payouts, share buybacks, and good ole guidance increases likely to come in the following quarterly announcements.
Bank of America Gets an Upgrade: Here's Why
The bank passed the Fed’s stress test recently and announced a new path forward for its investors. According to management, the bank is now looking to pay a dividend that is 8% higher, sending it to $0.26 a share for the third quarter in dollar terms.
Because Bank of America is one of the banks with the most commercial exposure, meaning it derives much of its revenue and earnings from commercial products like credit cards and mortgages, others on Wall Street felt comfortable boosting the bank’s price target.
Those at Keefe, Bruyette & Woods saw it fit to place a $46 a share price target for Bank of America stock, daring it to rally by as much as 15.3% from where it trades today. By the way, today's price would bring investors close to a new all-time high, reiterating the markets' bullish momentum toward the financial sector.
Why? According to the CME's FedWatch tool, the Fed is also looking to announce interest rate cuts later this year, by September 2024. These potential cuts would bring an additional tailwind for consumer activity, translating into credit card interest income.
Also, mortgage rates could decrease slightly, creating new potential demand for mortgage originations and more interest income for Bank of America. Following these trends, Wall Street forecasts earnings per share (EPS) growth of nearly 10% in Bank of America stock for the next 12 months.
J.P. Morgan's Corporate Branches Hold a Market Premium
Consumers won’t be the only ones to benefit from potential rate cuts; businesses are, too. The stock market tends to become more active when rates go lower, a nice change from today’s low volatility index (VIX). J.P. Morgan has an extensive trading department, which means the bank can bring in more revenue from awakening markets.
After passing the stress test and knowing what could come down the road, management decided to boost the quarterly dividend to $1.25 from $1.15. In addition, up to $30 billion was allocated toward a share repurchase program.
However, because this bank has the most corporate finance exposure on today’s list, markets are willing to pay a premium valuation over peers. On a price-to-sales (P/S) basis, J.P. Morgan commands a 2.3x multiple, a premium of 34% over Bank of America’s 1.7x and 212% over Citigroup’s 0.7x.
Seeing analysts at the UBS Group boost the bank’s valuation to $224 a share makes more sense now, daring it to rally by 10.5% from where it trades today.
Citigroup's Risk Management Fuels Wall Street Growth Forecasts
Out of all the banks that passed the Fed’s test, Citigroup delivered the safest results, and now shareholders will be rewarded for it. Management has announced a $0.56 share dividend and an up-to-date buyback program. While this is not the most significant increase in payouts, there is another—better—way for investors to get the lion’s share of return on this stock.
Wall Street analysts now forecast EPS growth of 22.2% this year for Citigroup stock. Those at Oppenheimer now see a valuation of up to $86 a share for Citigroup, calling for as much as 35% from where the stock trades today.
New evidence may have driven Price T Rowe Associates, Citigroup’s largest shareholder, to boost their stake in the bank by 123.5% as of May 2024. That increase made the asset manager’s investment as big as $2 billion today.
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Hitch a Ride with Lyft Stock for Double-Digit Gains in 2nd Half
Lyft’s (NASDAQ: LYFT) efforts to improve efficiency while accelerating growth have caused a shift in sentiment that points to a double-digit upside for this stock. The latest results and guidance weren’t a blow-out but still stronger than expected, leading the analyst to upgrade the stock and raise their targets. The takeaway from the chatter is that tailwinds have begun to blow, the group is hopeful that improvement will be sustained, and the stock is cheap. Trading at $14, it is trading near the lowest target set this year and offers a 30% upside at the consensus.
Market Conviction Firms for Lyft; Helps Lift Share Prices
MarketBeat tracks 30 analysts with ratings on Lyft, so the rating has higher-than-average conviction. The consensus rating is a firm Hold with rising sentiment, and many of the latest updates include an upgrade to Buy or Strong-Buy equivalents, providing a tailwind for the market. That tailwind put LYFT stock on MarketBeat’s list of Most Upgraded names. The stock rose to the 7th position on the list, so the tailwind is strong.
The analysts' consensus price target implies a nearly 30% upside, but the fresh targets lead to the range's high end. The high-end target is another 25% above the consensus and may be reached by the end of the year. Because the company is expected to sustain improvement and analysts expect the revision trend to remain positive, the stock price should continue higher and complete a technical reversal by early 2025.
Lyft’s Stock Price Slips Despite Solid Results and Analysts' Support
Lyft's Q1 report was solid. The company reported top and bottom line strength and accelerating growth compared to last quarter and the prior year. The growth pace nearly doubled compared to last year and is expected to remain solid through year-end, although it will slow. Internal metrics include a 23% increase in rides on a 21% increase in bookings driven by a 12% increase in active users.
The growth in active users and revenue is aiding the bottom line. The company continues to post GAAP losses, but the burn decreased by 85% during the quarter. The salient detail is that the company posted its second consecutive quarter of free cash flow and is guiding for a full year of the same.
The balance sheet details are mixed but ultimately favorable to investors. The company reported a slight decline in its cash position and increased long-term debt. Still, assets are up and offset the increased liabilities, resulting in improved equity, and leverage remains low. The company’s long-term debt is about 2x equity and less than 2x cash, leaving it in a solid position to sustain operations.
Lyft Adds Fuel to the Fire
Lyft helped invigorate the market when it released its latest long-term targets. The company forecasts a 15% bookings CAGR through 2027 and an adjusted EBITDA margin of 4% in the final year. The targets were above the consensus at the time of release and viewed as easily beatable, provided tailwinds continue to blow. The risk is execution. With a three-and-a-half-year horizon, there is a risk the company will fail to deliver.
The technical action is favorable. The market fell following the Q1 release, but the action was light and remains consistent with a reversing market. As it stands now, the market has changed from a downtrend to a sideways trading range and is trading above a critical support target. That target is near $12.50 and lows set earlier this year. If the market sustains support at this level, it will likely rebound soon and reach the top of the range. The top of the range coincides with the analysts' consensus and may cap gains for this technology stock. However, if the market can set a new high, a move up to the high end of the range is likely.
Look what happened to Gold during these dates
Did you know gold has "hotspot dates" between December 12th - December 24th?
Meaning it's gone up on average during those dates for the past 34 YEARS!
Most people probably have no clue about these dates unless they have access to this former hedge fund manager's Data Mining Software….
As you can see, it would have alerted you ahead of time that gold was gearing up for a big move between these dates.
Eli Lilly Stock Up: GLP-1 Zepbound Targets Sleep Apnea Market
Global pharmaceutical giant Eli Lilly & Co. (NYSE: LLY) has made headlines with its leading GLP-1 weight loss drugs, Mounjaro and Zepbound. Mounjaro is prescribed for Type 2 diabetes but is often used off-label for weight loss. Zepbound is prescribed for obesity treatment. The active ingredient in both is Tirzepatide. Lilly submitted an application to the U.S. Food and Drug Administration (FDA) to expand the label for Zepbound to include treatment of obstructive sleep apnea (OSA) backed by its Phase 3 SURMOUNT-OSA clinical studies. OSA sufferers often use a continuous positive airway pressure (CPAP) machine to keep their airways open while they sleep to ensure they receive enough oxygen.
Eli Lilly’s List of Competitors Just Got Bigger
Eli Lilly operates in the medical sector and competes with GLP-1 weight-loss medication providers and developers, including Novo Nordisk A/S (NYSE: NVO), Viking Therapeutics Inc. (NASDAQ: VKTX), and Altimmune Inc. (NASDAQ: ALT). With its pending FDA application for OSA, ResMed Inc. (NYSE: RMD) and Inspire Medical Systems Inc. (NYSE: INSP) became the competitors, as evidenced by their 11.5% and 16% stock price drop, respectively, following news of Lilly’s trial results on June 21, 2024.
GLP-1 drugs were created to help Type 2 diabetes patients. A side effect was dramatic weight loss, especially among diabetes patients with obesity. Obesity has been linked to many health issues, including heart disease and stroke. Obesity can lead to OSA or worsen its symptoms.
Obstructive Sleep Apnea Impacts over 80 Million Americans
OSA is a breathing disorder experienced during sleep where the upper airway partially or completely collapses, resulting in apnea, decreased oxygen saturation, and waking up. The lack of efficient sleep can lead to more weight gain and other health issues. OSA impacts 80 million adults in the U.S., and over 20 million have moderate-to-severe OSA. OSA can lead to health problems, including hypertension, coronary heart disease, stroke, heart failure, atrial fibrillation, and Type 2 diabetes.
Eli Lilly Looks to Boost Zepbound Audience to Include Obstructive Sleep Apnea Patients
For this reason, GLP-1 drug makers are trying to expand their indications to broaden their user base suffering from health issues stemming from obesity. This has led Eli Lilly to study the effects of its GLP-1 obesity treatment, Zepbound (Tirzepatide), on obstructive sleep apnea. Eli Lilly conducted SURMOUNT-OSA phase 3 clinical trials on its impact on OSA.
The 52-week studies evaluated Tirzepatide injections in adults with moderate-to-severe OSA and obesity who were not on continuous positive airway pressure therapy (CPAP devices) and a second group of adults who were on CPAP devices. The apnea-hypopnea index (AHI) measures the number of times a person’s breathing is restricted or complete airflow blockage per hour of sleep. It’s used to determine the severity of OSA.
Zepbound Results in 55% AHI Reduction in OSA Patients without PAP Treatment
For the non-PAP patients, the Tirzepatide resulted in a mean AHI reduction from baseline of 27.4 events per hour compared to a mean AHI reduction from baseline of 4.8 events per hour with the placebo. Tirzepatide results in a 55% reduction versus 5% from baseline for placebo. It also led to a mean body weight reduction of 18.1% from baseline versus 3.1% for placebo.
Zepbound Results in 62.8% AHI Reduction for OSA Patients Using CPAP Machines
For the PAP patients, Tirzepatide led to a mean AHI reduction from a baseline of 30.4 events per hour compared to the mean AHI reduction from a baseline of 6 events per hour for the placebo. In key secondary outcomes, Tirzepatide resulted in a 62.8% AHI reduction compared to a 6.4% reduction for placebo in patients undergoing PAP therapy. They also had a mean bodyweight reduction of 20.1% from baseline compared to 2.3% for placebo.
The FDA Has Fast-Tracked a Decision on Zepbound Label Expansion to Include OSA
On June 24, 2024, Eli Lilly submitted an FDA application to expand the label for Zepbound to include treatment of OSA. The FDA has fast-tracked the application, leading to a quicker review process. Fast track is a designation for drugs that fill an unmet need or treat severe conditions. A decision from the FDA is expected by the end of 2024. This news sent shares of ResMed, the largest maker of CPAP machines, and Inspire Medical Systems plummeting over 10% each.
LLY Stock Continues its Parabolic Arc Pattern
The daily candlestick chart for LLY illustrates a parabolic arc pattern. LLY initially peaked at $800.78 on March 4, 2024. It formed a rounding bottom after hitting a low of $718.30 on April 25, 2024. Shares surged through the prior high to complete a cup pattern and continued to rise parabolically to new all-time highs on the run-up to $915.54.
Incidentally, the daily relative strength index surged up through the overbought 70-band on June 3, 2024, and it has been able to float above there ever since. Parabolic arc patterns are usually topping patterns, providing a buy-the-dip opportunity on the pullbacks as the RSI oscillates back down through the 70-band. The question is when, not if, it happens. Pullback support levels are at $870.13, $837.01, $800.78, and $766.12.
Eli Lilly & Co. analyst ratings and price targets are at MarketBeat.
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