Ticker Reports for October 15th
Goldman Sachs Earnings Reveal Market Moves Investors Can't Ignore
Now that the new earnings season has kicked off, investors would benefit from watching—and breaking down—what the earnings for some of the country’s biggest banks have to say about the rest of the economy and the stock market. The best way to gauge this is through the financial sector, as banking stocks release their latest earnings.
Today, investment bank giant Goldman Sachs Group Inc. (NYSE: GS) reports its latest quarterly results, showing investors and the rest of the market where the interest in profit-taking and profit-seeking activities may be today. Some pay millions in fees to these asset managers and banks to access their insights and advice, but investors can get a glimpse of it for free today.
By understanding where money flows in and out of Goldman Sachs’ businesses, investors can safely project what the market and the economy may look like a few quarters from now so that they can adjust their portfolios and land on the winning side of history. Without digging too much into indicators and financials, here’s the main trend Goldman Sachs reported as a result of client interest and activity.
Trading Profits Soar as Equity Underwriting Surges: What It Means for Stocks
There’s a reason Goldman Sachs stock rallied to start the day after the announcement, only to give up these gains throughout the trading day. While the bank generated some record fees, exceeding expectations, the rest of the business shows a warning sign for the stock market.
With a beat in trading revenues, investors can probably assume that Goldman Sachs traders were once again on the right side of the trend as the S&P 500 made a new all-time high (a few, actually) and also rode the tailwinds found in other asset classes like Gold.
This is why commodity fees also reached a record this quarter. Still, there’s one offset to the records being made in stocks and commodities. Fixed-income departments lagged, reporting a contraction in revenues of up to 12% over the year, while equities saw an 18% increase during the same period. Here’s what that means for investors.
As stocks become volatile and reach new all-time highs, people look to trade more actively in these products, which doesn’t say much. Where investors can find direction is through the underwriting activity in the banks.
Equity underwriting saw a 25% boom over the year, meaning companies are issuing more stock than last year. Now, companies typically issue stock when management believes it to be expensive relative to its intrinsic value, as the opposite is true when management buys back stock.
So, considering that no activity was made in debt underwriting compared to equity underwriting, investors should not be surprised to see the SPDR S&P 500 ETF Trust (NYSEARCA: SPY) falling by nearly 1%. The iShares 20+ Year Treasury Bond ETF (NASDAQ: TLT) was up almost 1% after the announcement.
Why? Goldman’s results mean corporations are issuing stock due to their perception of being expensive, while less debt is being issued because it’s considered cheap today. Following this trend, investors can assume that bonds might be a better deal today than stocks, at least on a relative valuation basis.
This view can be seen in another recent earnings report from BlackRock Inc. (NYSE: BLK), the world’s largest asset manager, which shows where its clients are being advised to invest. The bulk of the capital flows showed to favor bonds over stocks, which investors now need to internalize in their own strategies today.
Goldman Sachs Moves Away from Consumer Business on Weakness
Another major trend for investors to consider, which affects the consumer discretionary sector more than anything, is the way Goldman Sachs moved out of their consumer-based digital platforms as the state of the consumer began to weaken during the year.
The trend is amplified when investors note the bank reported up to $997 million in provisions for credit losses, an insurance against disaster that rose by 121% over the past 12 months. This is an industry-wide issue, as other commercial banks like Bank of America Co. (NYSE: BAC) also report rising loss provisions and credit delinquencies.
While banks are turning away from the consumer segment, they are now reporting higher investment banking fees as well, something to be expected from a corporate bank as interest rates come down. Dealmaking is dependent on flexible financing rates, so at least investors can deduce that the business cycle is running strong today.
These trends don’t mean investors should run away from all stocks. What investors need to carry forward is a sort of value-hunting mentality. Knowing that Goldman Sachs’ clients are ditching expensive stocks today probably means that the potential upside and returns in the market will be found in cheaper companies with high growth prospects.
Gold Surge Stuns Experts—What It Means for Your Savings
Welcome to the financial rollercoaster of 2024, where inflation is persistent, stock markets are overinflated and volatile, global conflicts are intensifying, and the national debt is reaching new heights.
These challenges aren't distant headlines; they're impacting your everyday finances.
AMD Gains Momentum With AI: Can It Beat Expectations?
Advanced Micro Devices (NASDAQ: AMD) is gaining traction with AI. NVIDIA (NASDAQ: NVDA) remains the leader because of its first-mover advantage, but there are other significant players, and AMD is the leader. While NVIDIA commands an estimated 95% of the AI data center market, AMD carries most of the remainder and can regain the share lost due to NVIDIA’s boom. That’s worth more than 1000 basis points in market share growth on top of robust organic industry growth to drive revenue, earnings, and shareholder value. Industry growth is still accelerating. AMD CEO Lisu Su upped her estimates at the investor day event, expecting a 60% CAGR over the next five years.
Aside from company commentary, there is solid evidence of the demand for AMD AI-oriented chips. Companies from Hewlett Packard Enterprises (NYSE: HPE) to Meta Platforms (NASDAQ: META) and Oracle (NYSE: ORCL) are using large quantities of them to build out enterprise-quality HPC applications requiring the lowest latency. Oracle’s news includes a supercluster that can link over 16,000 MI300Xs, using a suite of tools provided by AMD to operate them. Hewlett Packard Enterprise will package eight MI325X and two EPYC CPUs into its latest servers, the HPE Proliant XD685, for AI service providers and large model builders.
The suite of tools is critical to AMD’s success; the ROCm suite is comparable to NVIDIA’s CUDA, allowing programmers to harness the power of its GPUs for AI computing needs. The takeaway is that NVIDIA was first to the game. Still, AMD is positioned to catch up and will post accelerating results, outpacing consensus figures and driving shareholder value over the next four to eight quarters.
AMD Sets Low Bar With Q3 Guidance Despite 15% Growth Forecast
AMD's Q3 guidance is solid but sets a low bar to clear. The company forecasted $6.71 billion in net sales, a 15% gain and an acceleration from the previous quarter but slower than the pace of industry growth and AI peers. AMD growth will be supported by the data center segment, which grew at a triple-digit pace in Q2 and is expected to be sustained in Q3, offset by slower client segment growth and gaming segment normalization.
The data center is an increasingly important business segment, growing to nearly 50% of revenue in the year's first half, and contribution gains are expected to continue. Gaming revenue is likely to fall in Q3 compared to last year, but the headwind is diminishing. The pace of contraction should slow in Q3 and Q4 and revert to growth in 2025, becoming a tailwind for the business. Among the risks for AMD investors is government regulation. The U.S. government is considering export bans to risky countries to limit the spread of AI capability among bad actors, potentially limiting the global addressable market.
The guidance will drive the market regardless of growth and outperformance in Q3. The consensus for the year implies another 15% gain in revenue and a widening margin, likely underestimating demand for AMD products. Among the calendar Q3 news highlights is the launch of Ryzen AI Pro 300 series chips designed to enhance Microsoft Copilot AI Assist. The chips are 40% faster than the leading competition. They are expected to increase enterprise workload productivity by up to 14%, which is a compelling factor for IT budget managers and business planning. Other highlights include the Turin EPYC data center CPUs that rival NVIDIA’s Blackwell, which is expected to launch in Q1 2025.
Analysts Eye AMD’s Q3 Report as a Catalyst for Recovery
Analysts have been raising their estimates for AMD’s stock price while lowering estimates for earnings. The consensus is up more than 40% since late 2023 and rising ahead of the Q3 earnings release, forecasting a nearly 20% upside from the $160 level. The latest updates reaffirm targets raised following the Q2 release and put the stock in the $180 to $200 range to align with the consensus. A solid earnings report should catalyze the market to move higher.
The price action in AMD stock is tepid following the October investor day and product announcements. The market is falling, down nearly 10% from the recent peak, and may continue to fall until the earnings report is released. The critical support target is near $152.50 and will likely be reached soon, providing an attractive entry point for traders and investors. If market support is not sustained at that level and a lower low is set, a move to $140 is likely, and $120 is possible.
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Lithium Grab: 2 Lithium Stocks That Could Be Takeover Targets
Lithium stocks are getting interest again, driven by acquisitions and the entry of a major miner into the industry. On October 9, 2024, the world's second-largest mining company in the basic materials sector, Rio Tinto Group (NYSE: RIO), announced it would be acquiring Arcadium Lithium plc (NYSE: ALTM) for $5.85 per cash or $6.7 billion in an all-cash deal. Rio Tinto's subsidiary Rio Tinto BM Subsidiary Limited will be making the acquisition to become the largest lithium resource base in the world.
The buyout strengthens Rio Tinto's position in energy transition commodities and propels it into a leading role in lithium production, with lithium carbonate equivalent output set to reach 75,000 tons annually by 2028. While the deal is expected to close in the second half of 2025, investors jumped into lithium stocks in anticipation of potentially more deals to come. The battery-grade lithium will be used to power electric vehicles (EVs), mobile devices and consumer electronics worldwide. Here are two lithium stocks that could also be acquisition targets.
Sigma Lithium: The Eco-Friendly Sustainable Triple Zero Green Lithium Producer
Based in San Paolo, Brazil, Sigma Lithium Co. (NASDAQ: SGML) is specifically focused on using environmentally sustainable methods to mine and produce high-purity lithium concentrate in Brazil. It’s touted its Triple Zero Green Lithium, which is processed, producing zero carbon with zero (hazardous) chemicals and zero tailings as they get recycled. The company uses non-drinkable water designated for industrial use after being recycled in a production plant.
It has constructed a state-of-the-art Greentech lithium processing facility onsite at its flagship property. The plant was designed to produce high-quality, battery-grade lithium concentrate using sustainably efficient methods. Currently, the plant is producing nearly at full capacity.
Flagship Project: Grota do Cirilo
Sigma owns 100% interest in its flagship project, Grota do Cirilo, in the Minas Gerais state of Brazil. It also owns 100% interest in the Genipapo and Sao Jose projects. Its interests total 185 square kilometers with 29 mineral rights. Sigma has the largest lithium hard rock deposit in the Americas.
It’s Phase 1 is currently in operation with Phase 2 and Phase 3 being prepared for expansion. Phase 2 has secured financing for $86.5 million and is expected to more than double production capacity to 520,000 tons annually in 2025.
Sigma Lithium Is in Production
The company delivered its 11th shipment on August 13, 2024, for 22,000 metric tons of its Triple Zero lithium, bringing its year-to-date (YTD) total to 71,650 metric tons. It's also produced 100,000 metric tons of its ultra-fine lithium YTD. The company averages 22,500 metric tons of lithium monthly, equating to an annual production of up to 270,000 metric tons annually, depending on conditions. The company wants to bolster capacity up to 770,000 metric tons at the end of Phase 3. The proven and probable reserves are 54.9 million tons of 1.44% lithium oxide (Li2O). Its measured and indicated resources suggest 85.7 million tons of ore with 1.43% grading Li2O, including reserves.
Prior Takeover Speculation
Because of its eco-friendly green lithium and large resources, Sigma has been the subject of takeover speculation in the past. Bloomberg reported in February 2023 that Tesla Inc. (NASDAQ: TSLA) was interested in acquiring them for $3 billion. The current market cap is $631 million. There was also speculation that China was interested through its Ganfeng Lithium and Tianqi Lithium companies. Sigma flat out stated it was not for sale, and the company is focused on growing its business and capacity. But that's not to say a large buyer couldn’t make it an offer it can’t refuse in the future after the Arcadium Lithium buyout.
Lithium Americas: Big Potential in North America
Based in Vancouver, British Columbia, Canadian mining company Lithium Americas Co. (NYSE: LAC) plans to be a major domestic producer of battery-grade lithium. Its two flagship properties include the Thacker Pass project in Humboldt County, Nevada, and Cauchari-Olaroz in the Jujoy Province, Argentina.
Lithium Americas split into two companies with Lithium Argentina handling the Cauchari-Olaroz project.
The Thacker Pass Project
Lithium Americas is still working on financing the production of the largest known Measured and Indicated lithium resource in North America. General Motors Inc. (NYSE: GM) is an investor that already purchased $320 million in LAC stock and intends to complete the additional $330 million investment supporting its development. The United States Department of Energy (DOE) provided a conditional commitment for a loan of $2.26 billion under the Advanced Technology Vehicles Manufacturing Loan Program. Thacker Pass could produce enough lithium carbonate to power 800,000 EVs annually. Lithium Americas hopes to close the loan by year's end and begin production in the second half of 2026.
Cauchari-Olaroz Project
This is a joint venture with Lithium Argentina, with 44.8% interest, China’s Ganfeng Lithium, with 46.7% interest, and Jujuy Energia y Mineria Sociedad del Estado, with 8.5%, nearing the completion of its construction. Stage 1 capacity is 40,000 tonnes per annum (tpa). A metric ton weighs 2,204.6 pounds or 1,000 kilograms and is indicated by the spelling "tonne" versus a ton weighing 2,000 pounds spelled "ton." Stage 2 is expected to increase production by an extra 20,000 tpa.
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