Ticker Reports for October 30th
Boeing: Why Analysts Think Now's The Time To Be Brave
Boeing Co (NYSE: BA) shares have certainly seen better days, with the ongoing 45% slide from the end of last year speaks volumes. The company is tackling a seemingly never-ending list of challenges: leadership shifts, strike-related slowdowns, safety concerns, and the looming risk of a credit downgrade.
As we head into the last couple of weeks of the year, Boeing shares remain at their lowest levels since 2022. Based in Seattle, Boeing's current market cap of $95 billion places it as one of the aerospace giants, even amid these headwinds. And for those on the sidelines with a taste for risk, this may be a rare opportunity to get involved. Let's jump in and take a closer look.
Poor Fundamental Performance
Ripping the bandaid off first, the latest update from Boeing in terms of their financials was not great. Last week's earnings report showed the company missed analyst expectations for both EPS and revenue. This was, for the most part, driven by the ongoing strikes by the International Association of Machinists (IAM) and supply-chain hurdles. Yet new CEO Kelly Ortberg remains optimistic about turning things around and outlined plans to streamline operations, saying, "We're going through a portfolio process right now to look at the overall portfolio and seeing what we want to look like five years from now."
While Boeing's recent stock performance reflects its struggles, broader market performance could throw it a lifeline. The benchmark S&P 500 index has been hitting fresh highs, and with the Fed starting to cut rates, there's a distinct risk-on sentiment that increases investor appetite for companies with high upside potential. In terms of risk/reward profiles, Boeing's is certainly up there.
Bullish Analyst Updates
This theory is backed up by the fact that many analysts are exceedingly bullish on Boeing. Big names in the industry have recently given Boeing buy ratings. Royal Bank of Canada, UBS Group and Susquehanna have all reiterated their Buy ratings on the stock in the past week.
So have the teams from Robert W. Baird and Benchmark, who echoed their peers by honing in on the fact that the worst-case scenario is likely already priced into Boeing shares, and any kind of upside surprise could spark a recovery rally. Benchmark's $250 price target should be more than enough to get investors paying attention here, as from where Boeing shares closed on Tuesday, that's pointing to a targeted upside of around 60%.
Remaining Concerns
For all this optimism, though, there's no getting away from the fact that Boeing's reputation has taken a serious hit in recent years, and the company is going through what is arguably the toughest stretch it's ever faced.
Investors should keep in mind Morgan Stanley's recent Equal Weight rating, suggesting that the firm's problems aren't yet in the rear-view mirror, as well as Wells Fargo's outright bearish Underweight rating. Their $86 price target is a sobering reflection of just how bad things could get if Kelly Ortberg doesn't start delivering.
However, for those brave enough to take on some risk, there's no doubt this year's dip could be the start of a tempting entry opportunity, especially for those with a long enough time horizon.
Getting Involved
For investors who appreciate technical indicators, Boeing put in what's starting to look like a hard low, at least for the short-term, earlier this month. While shares opened down again yesterday, they bounced hard before breaking that recent low, a sign that perhaps there's a solid layer of buyers happy to snap shares up anywhere around the $150 mark.
The stock's Relative Strength Index (RSI) reading of 46 should also be encouraging. The RSI measures the strength and momentum of a stock's recent performance on a scale from 0 to 100, with a reading below 30 suggesting shares are oversold. At 46, Boeing's RSI is very much on the oversold side of things, further strengthening the risk/reward profile.
Investors getting involved should not be looking to make a quick buck here, and they may well have to pinch their noses. But on the whole, you can't help but feel there's a bargain to be had with Boeing right now, and it could well be the right time to be brave.
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Advanced Micro Devices is Building Momentum with AI: Buy the Dip
As slow as it is to build, Advanced Micro Devices (NASDAQ: AMD) is gaining momentum with AI and is well-positioned for long-term market share gains. The primary hurdle is its AI ecosystem, which lags behind NVIDIA’s (NASDAQ: NVDA) development, but the ecosystem is improving quarterly, aided by internal advances and acquisitions.
Today’s takeaway for investors is that this semiconductor company is growing due to its AI position, growth is accelerating, and the negative impact of legacy business will soon shift to a tailwind. The long-term outlook is bright because, once built, one AI-capable data center is as good as another for most applications, and AMD products are top-notch. Partnerships with Amazon, Google, Oracle, and Lenovo attest to that fact.
Advanced Micro Devices Share Price Suffers After Strong Q3
Advanced Micro Devices' share price plunged following the Q3 results because they failed to live up to the high bar set by the market and analysts' revisions. Even so, the $6.82 billion in revenue is up 17.2% yearly, accelerating from Q2’s nearly 9% advance and outpacing the consensus figure by 160 basis points. Q3 revenue is a record driven by record results in the Data Center segment, which grew by 122%, sustaining the triple-digit growth pace set in Q2. Data Center growth is centered on Instinct GPU and EPYC CPU sales. It is up 25% sequentially, showing solid momentum.
Client sales were also strong, up 29% year over year and 26% sequentially. The growth in this sector is driven by demand for the Zen 5 Ryzen processors for laptops and is not expected to diminish. Enterprises are shifting to AI-optimized laptops and PCs because of proven productivity improvements and their impact on the bottom line.
Weaknesses were seen in the gaming and embedded segments, but the news is not entirely bad. Gaming is down significantly on end-market normalization, with weakness amplified by macroeconomic headwinds, while Embedded is on the cusp of returning to growth. Embedded is down 25% YOY but only 8% sequentially compared to the 29% sequential decline in gaming due to improved demand in some end markets. The forecast for 2025 is for the segment to revert to growth, supported by the IoT industry, which is expected to accelerate. IoT growth is facilitated by a dual tailwind that includes AI and 5G. The 5G connection is vital for IoT performance, and the networks and applications are growing daily.
Margin news is mixed. Adjusted gross and operating margin improved by 300 basis points YOY but less than the market had hoped. The salient detail is that margin expanded, profitability improved, bottom-line results were leveraged, and gains are expected to stick. The $0.92 in adjusted EPS is only as expected regarding the analyst's consensus reported by Marketbeat. Still, it is up 33% YOY, sustaining a healthy cash flow, balance sheet and value gains despite increased investment and acquisitions.
Analysts Cap Gains for 2024, Pointing to AMD’s Potential for Long-Term Gains
The analyst response to AMD’s results is mixed. The bulk of revisions tracked by Marketbeat include reduced price targets, which are capping gains for the market. The consensus of revisions is near $178, down about $10 overnight, suggesting an 18% gain from critical support levels is possible. The group continues to rate with a consensus of Moderate Buy/Buy and shows a high conviction with 90% rating at Buy or better. Takeaways from the chatter are that AMD is executing well, and the AI business is good, but headwinds inducing legacy markets remain. Although momentum is slow to build, the roadmap for AI is solid and likely to gain traction in 2025 as the ecosystem is improved.
Advanced Micro Devices' share price fell nearly 10% following the release but may already be near the bottom. The move took the market to a critical support target that aligns with the low end of the analysts' target range, which is a potential floor for the price action. The critical target is near the $150 level and likely to produce a solid rebound if and when touched.
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Can Evolv Stock Recover From Its Massive Self-Inflicted Drop?
Shares of Evolv Technologies Inc. (NASDAQ: EVLV) are down approximately 45% after a group of independent board directors acknowledged accounting irregularities that would delay the company’s quarterly Form 10-Q filing.
The issue concerns misconduct by some of the company’s employees regarding sales practices. Specifically, the company recognized premature or incorrect revenue regarding sales that were subject to extra-contractual terms and conditions. The misconduct will cause Evolv to restate financial statements made over the two years spanning Q2 2022 and Q2 2024.
The company says the incorrect or premature revenue totals approximately $4 million to $6 million over the two-year period. To put that in perspective, in its fiscal year 2023, the company generated $80.42 million in revenue. And it’s on pace to beat that number in 2024.
The Company May Have Bigger Concerns
To be clear, accounting irregularities, even if done without intent, should be taken seriously. What makes these charges more serious is that employees seem to have had knowledge of their fraudulent sales practices.
The larger questions the investigation will have to determine are: What did the company know, and when did it know it?
But that news comes on the heels of more bad news that Evolv received this month. The company was conducting a pilot program with the city of New York. The program placed Evolv Express systems in select subway stations. However, in over 3,000 searches, the system registered 118 false positives and failed to detect any firearms.
This wouldn’t be the first time Evolv has faced scrutiny. Earlier this year, the company was cited in a class action lawsuit that raised questions about the effectiveness of its products and/or the veracity of its marketing claims.
However, some of the controversies is due to the fact that Evolv doesn’t put its products through regulatory testing, which the company says fails to reflect real-world conditions appropriately.
And the company cites an ever-increasing threat environment, poor visitor experience, costly security labor shortages, challenging worker retention, and a lack of security and visitor data as key reasons that the companies are looking for its products.
The company is also showing growth in annual recurring revenue (ARR). In its most recent quarter, 49% of booked ARR was from existing customers. These are customers that have tested and deployed Evolv’s products and are now choosing to expand their contracts.
Analyst Reaction Has Been Swift
Obviously, the company’s upcoming earnings report, due out on November 14, will play a key role in how investors feel about EVLV stock. However, analysts wasted no time in weighing in on the Evolv news.
The Evolv analyst forecasts on MarketBeat show four downgrades for EVLV stock. The most significant factor comes from TD Cowen, which downgraded the stock from a Strong Buy to a Strong Sell.
Getting Involved With EVLV Stock
If you have a short-term mindset, there are better options among technology stocks. Short interest is above 13%, and although it was down over 5% in the last month, short sellers may take an opportunity to put more pressure on the stock. However, as of midday trading on October 29, EVLV stock looks to be finding support around $2.40. That’s about 20% above the stock’s 52-week low.
That suggests the worst may be over. And a drop of over 40% on news that impacts a small fraction of the company's revenue seems like an overreaction. Buy-and-hold investors may see this as a buyable dip, but you may want to wait until after earnings to make that decision.
The picture looks a little clearer for traders, particularly options traders. The options chain shows a highly bullish puts-to-call (PTC) ratio in November and December. That suggests bullish sentiment. However, that sentiment reverses in January 2025 to become bearish. There could be many reasons for that, including concerns about how the economy may impact capital expenditures for the company’s customers.
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