Ticker Reports for October 19th
Oil Prices Fall, Sector Pulls Back: Time to Buy this Stock?
The energy sector and WTI crude oil prices spiked following the escalation in the Middle East after Iran launched a missile attack on Israel earlier this month. Initial fears of conflict disrupting global oil supplies, mainly through the vital Strait of Hormuz. This drove a rally across the energy market. However, with signs emerging that Israel will not retaliate by targeting Iranian oil fields, tensions have eased, and the sector has experienced a pullback.
Over the past week, WTI crude prices fell from nearly $76 per barrel to $70.25, while the energy sector, represented by the XLE ETF, declined by about 2%.
Despite the recent decline, the overall outlook for the energy sector remains positive. On October 1, when the conflict initially flared, the XLE ETF broke out of a lengthy consolidation phase and surged above several key moving averages, including the 200-day simple moving average (SMA).
This breakout signaled a shift in momentum, with many of the sector’s top holdings rallying alongside the ETF. Although prices have retraced recently, the XLE ETF continues to trade above its 200-day SMA, a sign that the recent dip may represent a healthy pullback within a new uptrend.
The Pullback Offers an Opportunity in XOM
One stock that offers a compelling buying opportunity during this pullback is Exxon Mobil (NYSE: XOM). Exxon Mobil, the largest U.S. oil company and the biggest holding in the XLE ETF has a market capitalization of $474 billion. Like the broader sector, XOM has retraced slightly, falling 2.27% over the past week.
However, it remains above a critical support level at $120, which previously served as resistance. This level’s newfound role as support suggests that the stock could be forming a higher low, indicating the potential start of an uptrend.
From a valuation perspective, Exxon Mobil looks appealing. The stock trades at a price-to-earnings (P/E) ratio of 14.41, with a forward P/E of 14.69, implying reasonable growth expectations. Additionally, Exxon offers a dividend yield of 3.16%, adding an income component to its investment appeal. This solid technical setup, attractive valuation, and reliable dividend combination make Exxon Mobil appealing for investors looking to benefit from the sector’s potential upside.
Analysts See Upside as Earnings Approach
Analysts remain optimistic about Exxon Mobil’s prospects, especially with geopolitical risks still present. Based on 20 analyst ratings, the stock holds a consensus Moderate Buy rating, with a consensus price target of $131.44, implying more than 9% upside. Some analysts are even more bullish. On October 10, Scotiabank upgraded the stock to Sector Outperform and set a price target of $145, forecasting nearly 20% upside. More recently, on October 17, Bank of America reiterated its Neutral rating with a $124 price target.
The company’s following earnings report on November 1 will be an essential catalyst for the stock. In its most recent earnings release on August 2, Exxon Mobil posted earnings per share (EPS) of $2.14, beating expectations by $0.10. The company also reported quarterly revenue of $93.06 billion, surpassing analyst estimates of $90.09 billion and reflecting a 12.2% increase year-over-year. With solid financial performance and steady revenue growth, Exxon Mobil is well-positioned to benefit from any future disruptions in global oil supply.
XOM is Positioned to Grow Despite Possible Disruptions
While tensions between Israel and Iran have de-escalated for now, the geopolitical situation remains uncertain. If conflict resurfaces and oil flows through the Strait of Hormuz are disrupted, Exxon Mobil’s extensive upstream business could benefit significantly. The company’s global footprint also provides a hedge against regional risks, allowing it to maintain production even during periods of geopolitical instability.
The energy sector’s pullback presents a potential buying opportunity for long-term investors who forecast upside. The sector’s strong technical positioning and resilient price action suggest that the recent dip may just be a pause in a new uptrend. With its solid fundamentals, attractive valuation, and dividend yield, Exxon Mobil stands out as a top option within the sector for individual stock pickers. Investors should watch for the company’s upcoming earnings report for additional insights into its financial outlook and growth potential.
Massive NVIDIA Sell-Off: Are We Headed for a Market Collapse?
You may have heard about NVIDIA's CEO dumping shares of his own company.
He sold 4.4 million shares this year.
But here's what's even more concerning...
AI Boom Fuels Demand for Dominion Energy Stock
The world stands at the cusp of a technological revolution fueled by the unparalleled power of artificial intelligence (AI). From self-driving cars to personalized medicine, AI is poised to transform industries and reshape our daily lives. But this technological leap comes with an insatiable appetite for energy, demanding reliable, scalable, and increasingly sustainable solutions. Dominion Energy (NYSE: D) is strategically positioned at the intersection of AI's energy demands and a cleaner energy future, making it a compelling prospect for investors interested in the energy and renewable energy sectors.
The Energy Demands of a Data-Driven World
The hunger for data processing and storage is driving an unprecedented surge in electricity consumption. The International Energy Agency projects that global electricity consumption from data centers alone will more than double by 2026, exceeding 1,000 terawatt-hours annually, which is enough to power roughly 70,000 homes for an entire year.
AI and machine learning are the driving forces behind this data center explosion because they require massive computational power. To meet this demand, tech giants are rapidly expanding their data center infrastructure. Take, for example, Amazon's (NASDAQ: AMZN) recent announcement to invest billions in developing a new data center hub in Northern Virginia, a region primarily served by Dominion Energy.
While Northern Virginia stands out as a primary AI hub within Dominion Energy's service area, other regions are beginning to cultivate their own AI ecosystems. Richmond, Virginia, home to Dominion's headquarters, benefits from a growing tech scene, a lower cost of living compared to Northern Virginia, and a pipeline of AI talent from universities like Virginia Commonwealth University and Virginia Tech.
The Raleigh-Durham area, anchored by the renowned Research Triangle Park, is close to Dominion's service territory and boasts a strong foundation for AI research and development fueled by institutions like Duke University, UNC-Chapel Hill, and North Carolina State University.
Further south, Charleston, South Carolina, is witnessing a surge in its tech sector, with a growing focus on cybersecurity and data analytics. These areas align well with the needs of the AI industry. While these regions are still in the early stages of AI development, their existing strengths and Dominion Energy's presence point to the potential for future growth in AI-related activities.
A Balanced Energy Portfolio for a Changing World
Dominion Energy stands out for its diversified approach to energy generation. While many companies focus on transitioning to renewables, Dominion recognizes the critical role of traditional energy sources like nuclear and natural gas in ensuring grid stability and providing the baseload power necessary to meet 24/7 energy demands, especially as renewables are increasingly integrated.
Dominion already possesses significant nuclear power capacity, giving it a distinct advantage in providing the reliable, high-volume energy essential for AI applications. The company recently made headlines with a groundbreaking partnership with Amazon to explore the development of Small Modular Reactors (SMRs) near its North Anna nuclear power station in Virginia.
SMRs: A Game Changer in Nuclear Energy
SMRs represent a new generation of nuclear reactors designed to address many concerns associated with traditional nuclear power plants. These reactors are significantly smaller, allowing for factory fabrication and modular construction, which reduces costs and construction time.
Moreover, SMRs incorporate passive safety features. This means they rely on natural forces like gravity and convection to cool the reactor core in the event of an incident, minimizing the risk of human error. This combination of enhanced safety, efficiency, and scalability makes SMRs a potentially game-changing technology for the future of clean energy.
Electrifying Performance Sparks Optimism
Dominion Energy’s earnings report for the second quarter of 2024 (Q2 2024) sent a jolt of excitement through the market. The company surpassed earnings per share (EPS) estimates, posting a healthy $0.65 against analyst projections of $0.56. This profitability underscores Dominion's ability to execute its strategic objectives and deliver value to shareholders.
However, the headline revenue figure of $3.49 billion fell slightly short of the anticipated $3.73 billion, prompting a closer look at the underlying drivers of Dominion's performance. Despite this minor setback, the company's year-over-year revenue still reflects a commendable 10.1% increase, hinting at the demand for Dominion's energy solutions within its key markets.
Dominion's strategic emphasis on providing reliable and resilient energy supplies is particularly noteworthy in today's energy sector. As businesses across various sectors, from data centers to manufacturing, seek consistent and dependable power sources, Dominion's focus on reliability becomes an increasingly valuable differentiator. This commitment is likely to translate into sustained growth, particularly in regions experiencing rapid technological advancement and increased energy demands.
Income-oriented investors will find Dominion's attractive 4.44% dividend yield another compelling reason to look at the company. While the slight revenue miss warrants careful monitoring, it's crucial to view Dominion's performance within a broader context. The company's strong earnings beat, double-digit revenue growth, and strategic emphasis on reliability position it favorably for sustained success. As the energy sector continues to evolve, Dominion Energy appears ready to overcome the complexities, capitalize on emerging opportunities, and deliver long-term value to its investors.
CNBC's 'Prophet' issues urgent Fed warning
"How I 6X-ed my wife's 401K in 1 year"
At the peak of the dot-com boom, a former hedge fund manager put all $20,000 of his wife's 401k into shares of just ONE stock. Everyone on Wall Street said he was crazy. But a year later, that $20,000 in his wife's account was worth $120,000. Today, he says: "If you thought the dot-com mania was intense, what's about to happen in the coming weeks could be even crazier and could open up a new window of opportunity for 500%-plus gains."
Cathie Wood Cuts Robinhood Holdings—Follow Her Lead or Stay Put?
Investors are reasonably worried when a mega investor decides to take action in a particular stock, especially when the action entails selling that stock. The problem is that markets will overreact to the news of someone getting out of a position without realizing that the meaning behind the decision might be more vague than they know.
Investors buy a stock with only one purpose: to make a profit. However, there can be several reasons for selling a stock. Selling can be done to lock in gains, improve a portfolio's tax burden, trim down an overweight position after a rally, or due to a shift in sentiment. Today, many are concerned about Cathie Wood from ARK Invest's recent selling of finance sector new riser Robinhood Markets Inc. (NASDAQ: HOOD) stock.
Now that the stock sold off by over 10% on the news and trades at only 87% of its 52-week high, investors who understand the true growth story in Robinhood stock might be looking at an opportunity to buy the dip and expose their capital to new potential gains in the market. However, a few of the fundamental tailwinds need to be covered first to decide whether Robinhood stock can, in fact, make a comeback rally.
Fundamentals Firing on All Cylinders Drive Robinhood Stock’s Value Higher
Investors need to justify future growth in Robinhood's business to form a potential bull case strong enough to buy the stock. Some of these metrics are common across any business, such as revenue, margins, and earnings. Starting with these simpler metrics, here's where Robinhood stands.
According to the latest quarterly earnings figures from Robinhood's press release, the company reported a record $682 million in revenues, a 40% jump over the past 12 months. With a high operating margin of 27.8% this quarter, the business was able to deliver impressive bottom-line profitability to shareholders.
Net income grew from $25 million in the same quarter last year to $188 million this recent quarter, a significant rise of up to 652%. Earnings per share (EPS) followed suit, of course, going from $0.03 a share to $0.21 in the same period.
Cathie Wood's selling of $5.7 million worth of Robinhood stock sounds counterintuitive given these massive growth figures, but there's more. A few other key performance indicators (KPIs) are driving today's (and tomorrow's) growth in Robinhood's business.
Here's the operating data report sent out by the company as of August 2024. Funded customers rose to 24.3 million this month, a one-million increase over the year and a 60,000 jump in the past month alone, showing momentum and growth in further adoption from retail investors.
Then, assets under custody (which allow Robinhood to further monetize on deposits) rose to $143.6 billion, up 60% over the year, driven by $37.5 billion worth of deposits. The more assets under custody Robinhood can keep attracting, the more fees and interest income it can generate, boosting EPS further.
Investors can see this trend in Robinhood's quarterly financial statements, where interest revenues rose to $539 million, up 22% from last year's $442 million. As each month reports higher assets under custody, this metric can be expected to grow as well.
All of this adds to the bull case that could push Robinhood stock’s value even higher, but how much higher?
Strong Momentum Continues for Robinhood's Business: Wall Street Is Watching
Robinhood is a controversial stock for Wall Street analysts to cover, as boosting its valuation and outlooks would essentially take attention – and capital – away from their own trading and brokerage platforms, but reality has to set in at some point.
Those at Bank of America seem to accept that reality, as analysts reiterated their Buy target on Robinhood stock as of August 2024. This time, the rating came with a price target boost as well, up to $32 a share, or a 20% upside from where the stock trades today.
While Cathie Wood was selling some of her Robinhood stake, those at Renaissance Technologies decided to add, this time boosting their holdings by 37.7% as of the last quarter, bringing their net position to a massive $173.8 million today.
Investors seem to have enough reason to call out Cathie Wood on her seemingly bad timing. Here’s one more tailwind for investors to watch as well:
As the Federal Reserve (the Fed) cuts interest rates further, yields on savings accounts are also set to decline, driving retail investors to platforms like Robinhood to put their money to work in hopes of better returns on their savings.
This is why management has recently launched their “Legend” web-based trading platform, accommodating the billions more in assets coming to Robinhood, boosting its future EPS growth further.
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