Time Is on Our Side
I saw her today at the market open, some Apple shares in her hand.
I knew she was opening her Robinhood app. At her feet was a Starbucks latte…
No, you can’t always get what you want.
The market rallied today, but we certainly aren’t dancing in the streets. There was practically nothing in the way of market-moving news, so Wall Street was left to roll the tumbling dice all by its lonesome.
With no real satisfaction to be had, here are a few of the biggest (and I use that word lightly) stock stories that didn’t make our cut today:
- We Un-Built This City: Citigroup Inc. (NYSE: C) will slash its workforce to cut costs ahead of risk-related reprimand. Oops?
- Hothouse Blues: Lennar Corp. (NYSE: LEN) beat third-quarter revenue and earnings targets and guided higher. But nothing could stop LEN profit-taking on the news.
- Smoke on the Water: Carnival Corp. (NYSE: CCL) will ditch 18 ships in its fleet — a capacity reduction of about 12%. It also projected a third-quarter loss of $2.9 billion, blowing estimates for a $1.66 billion loss out of the water.
- And Fire in the Sky: DraftKings Inc. (Nasdaq: DKNG) signed a multiyear agreement with Walt Disney Co.’s (NYSE: DIS) ESPN for exclusive daily fantasy sports content, including ESPN’s website and fantasy app.
Now, with those beasts of burden out of the way, let’s see what market news really got under my thumb today.
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Going: Curb Your Enthusiasm
Another Apple Inc. (Nasdaq: AAPL) event happened today. Honestly, I didn’t watch it, and it happened so late in the day (10 a.m. Pacific time — that’s 1 p.m. to those of us on Eastern time) that Great Stuff would’ve been delayed. And we can’t have that, now can we?
But don’t worry. We’ve both been around long enough to know how these things go.
Apple unveiled incremental improvements to its Apple Watch and its iPad lineups. It revealed software release dates and talked up improving demand heading into the holiday shopping season.
The company may have even hinted that the newest iteration of the iPhone would arrive in October. All the analysts are saying it will be October, so it must be true. And this iPhone will have — gasp! — 5G capabilities.
Once again, Apple is playing from behind on the technology front.
Android phones have had 5G for several months now. But cutting-edge technology isn’t why people buy Apple products. They buy for the ease of use. They buy for the design. They buy because all their friends have them — or so I’m told by some of my Apple friends.
Today’s Apple product launch event will accomplish all of these things. So, I guess that’s a good thing, if a boring thing for tech-enthusiast investors.
Going: Chips Need Ham
No, we’re not talking bacon — mmmm, bacon. We’re talking Needham Analyst Rajvindra Gill and his latest take on Nvidia Corp. (Nasdaq: NVDA).
I know it’s not pronounced “Need Ham,” but I can’t help but read it that way. And now you’re cursed as well. Mwahaha!
Yesterday, Nvidia agreed to acquire mobile chip giant Arm Holdings from SoftBank Group Corp. (OTC: SFTBY) for $40 billion.
That’s a lot of scrapple from Nvidia, but Needham’s Gill was unfazed. He reaffirmed his buy rating on NVDA and lifted his price target from $600 to $700.
Gill didn’t just ham it up with platitudes, however.
He believes the deal “will create the leading artificial-intelligence computing platform in the semiconductor industry,” and contribute significantly to Nvidia’s bottom line “once revenue growth accelerates.”
Meanwhile, Morgan Stanley Analyst Joseph Moore was more cautious on whether you should goetta in on NVDA. “It will take time to assess Nvidia’s objectives,” Moore noted, but “the opportunity appears most clear in the smartphone space, where … it seems clear that Nvidia can enhance Arm’s offerings.”
The takeaway is clear: If Nvidia can successfully leverage its graphics processing might with Arm’s smartphone expertise, we’re possibly looking at the new semiconductor sausage king of smartphones. Take that, Abe Froman.
Gone: Generally Speaking
If you didn’t get enough of yesterday’s issue of Great Stuff, you’re in luck. Not only did we just cover Nvidia again, we’re hitting up Nikola Corp. (Nasdaq: NKLA) … again.
Get comfortable, Great Stuff Picks readers, because this story won’t go away anytime soon.
Yesterday, Nikola responded to Hindenburg’s claims. Today, Hindenburg responded to Nikola’s response — with large, edgy bold font nonetheless.
Tomorrow will probably bring a response to the response’s response. Honestly, it’d be easier if they both just met on the playground at lunch at this point.
But Hindenburg’s gassy response to Nikola’s response isn’t the juicy tidbit of news that you need to know right now. That honor lies with General Motors Co. (NYSE: GM) — the new owner of an 11% stake in Nikola.
During a conference with RBC Capital Markets, GM CEO Mary Barra told attendees that GM “has worked with a lot of different partners and we’re a very capable team that has done the appropriate diligence.”
The statement both implies that GM is no slouch when it comes to making deals and that Nikola isn’t hiding anything — or, if it is, GM knows and deemed the risks acceptable.
The bottom line here is that while Nikola has the name, the ideas and the technology, GM runs the production show. GM could make this happen by itself. And with $2 billion on the line, there’s no reason to think it won’t. That’s good news for both NKLA and GM investors.
Despite GM’s assurance, NKLA traded down roughly 6% today. Apparently, many investors just found out about the Securities and Exchange Commission’s involvement — even though it was widely reported yesterday.
Once again, this weakness in NKLA works in your favor if you haven’t already gotten in on this major player in the electric vehicle market. And for Great Stuff Picks readers, continue to hold NKLA. I still believe you’ll be rewarded for your patience.
In today’s Quote of the Week, I show you how to see through the vague veneer of tech market BS.
It’s time to go sleuthing with Sony Corp. (NYSE: SNE). We all know Sony’s trying to show up Microsoft Corp. (Nasdaq: MSFT) in the new next-gen console race, and old rivalries never truly die, right?
And we know that tech companies are usually those “shoot for the moon” types that hype up their manufacturing might, right?
Heck yeah, Mr. Great Stuff, especially when it’s game-on time for new consoles.
Exactly right! Well today, reports came out that Sony cut its PlayStation 5 estimates from 15 million to 11 million units.
Oh no! That’s like … 4 million fewer PS5s in the works. Why?
I’ll stop replying to the voices in my head for the quote: Sony “has come up against manufacturing issues, such as production yields as low as 50% for its SoC.”
Let’s stop it right there so I can hit you with the red flags, quick and dirty:
- SoC: system on a chip. An all-in-one, can-do computer chip workhouse.
- “Yield” is a fancy shmancy figure that’s all the rage in the semiconductor biz, since it measures how many microchips function correctly inside one big chip. Lower yields, worse chips. Yes, this glosses over the nitty gritty nerdy goodness, but I said quick and dirty.
- Chip whiz and Great Stuff Pick Advanced Micro Devices Inc. (Nasdaq: AMD) designed those PlayStation 5 chips.
- Longtime chipmaker Taiwan Semiconductor Manufacturing (NYSE: TSM) built those PlayStation 5 chips.
- Neither has ever hit yields as low as 50% on production-level chips. No company in its right ethereal corporate mind would go into production with those results.
Something else is up, and it isn’t just Microsoft’s Xbox hopes. This probably has more to do with Sony’s side of the production street than AMD, TSM or anything else. In other words, if it smells like a classic case of “lower your expectations before we miss them” … then it probably is.
Now, one other note for your detective’s cap: Only Bloomberg has reported on this story … so far (I am but an email stuck in time, after all). And when I see Bloomberg’s only source is everybody’s favorite mysterious “people in the know,” I have about as much confidence in the whole situation as I do with gas station sushi.
Like Icarus, even Sony strays too close to the production sun sometimes.
Great Stuff: Feedback! Get Yer Feedback Here!
I told you that it was a grab bag of greatness today in the mixed market waters — and it’s all the more reason for us to hear from you! What stock soap operas and market malaise are you most interested in this week?
Any teeming thoughts while you’re looking at headlines these days?
Some of you have already written in to share your feedback and weird flak, and we love it all.
Oh, and thank you Aashish J. for what just might be the most heartwarming email we’ve seen in a sea of heartburn-inducing and jumpin’ jack geopolitical rants! (But you bet we get a kick reading those too.)
Whatever’s on YOUR mind, share it with GreatStuffToday@BanyanHill.com.
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Until next time, stay Great!
Editor, Great Stuff