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Source: Streetwise Reports (6/26/24)

Some financial experts say yes, others no. Read on to learn the rationale behind the conclusions and stance of several.

The movement of Nvidia Corp.’s (NVDA:NASDAQ) stock during June, rising to its all-time high and then plunging, has investors debating now whether to jump into it, bolster their existing position, or abandon it altogether. Whereas financial analysts and other experts generally agree the information technology (IT) stock has been overbought since early June, they differ, some radically, in their current recommendations on it.

“Nvidia has likely become one of the most overheated stocks we’ve witnessed in a quarter century,” Eric Fry of Fry’s Investment Report said in an InvestorPlace interview.

On June 18, Nvidia ousted Microsoft Corp. (MSFT:NASDAQ) from its spot as the world’s most valuable company, and last week, Nvidia’s stock peaked at US$140.76 per share. Since, it dropped to third place, therein suffering a loss of about US$500 billion ($500B) in value, Seeking Alpha reported on June 25. However, NVDA maintains about a 140% year-to-date gain and thus is the second-best performer in the Standard & Poor’s (S&P) 500 Index.

Is it OK To Buy?

None of the factors behind the stock’s recent descent into its current correction constitutes a sound reason to “turn gloomy on Nvidia,” Garfield Reynolds, Bloomberg’s Markets Live Asia team leader, wrote in a June 24 article. The five causes were expiring options, insider sales, the stock’s technically overbought state, investor reassessment of the stock after it dethroned Apple Inc. (AAPL:NASDAQ) and Microsoft, and a long squeeze.

“The bull case for the artificial intelligence (AI) darling along with the broader tech sector remains strong over the short to medium term, at the very least,” he wrote.

It would take a major event, such as a broad economic slump or a big earnings miss, to keep Nvidia down for long, asserted Reynolds.

Certainly, numerous analysts recommend Nvidia as a Buy. According to TipRanks, of the 41 analysts who rated the stock at some point in the last three months, 38 have it Buy, three Hold, and none Sell. Zacks Investment Research, for instance, has a Strong Buy rating on it.

“Even with those concerns about overconcentration lingering,” he added, “the selloff would need to extend significantly further to change the narrative away from the consensus call that the AI revolution will keep going and that Nvidia stands to benefit hugely as a result.”

As such, Reynolds expects new buyers of the stock on future price dips, he wrote.

Certainly, numerous analysts recommend Nvidia as a Buy. According to TipRanks, of the 41 analysts who rated the stock at some point in the last three months, 38 have it Buy, three Hold, and none Sell. Zacks Investment Research, for instance, has a Strong Buy rating on it.

In a June 22 article, The Motley Fool’s Edward Shelton suggested that investors should consider three points when deciding what to do regarding Nvidia.

One, Nvidia stock being overbought does not preclude it from climbing further. Case in point, he said, is the stock’s last pullback, in March, of 20%, after which the price soared to its highest point ever.

Two, NVDA is not in a bubble, despite what analysts say, because the fundamentals support its valuation.

Three, the company’s earnings per share (EPS) guidance for 2025 of US$3.61 could be conservative. Should earnings turn out to be higher (some analysts predict US$5), the stock would look cheap.

Ballanger Says Think Twice Before Buying

According to Michael Ballanger, editor & publisher of GGM Advisory Inc., investors should take seriously Nvidia’s recent shift into a correction. The stock is coming down from its peak “with a full bearish moving average convergence/divergence (MACD) rollover and ‘sell signal’ now complete,” he described in a June 24 email alert.

A sector rotation out of tech stocks and into more conservative Dow Jones Industrial Average blue chip stocks is underway, he noted, but the whiplashing of this a long-time market leader into a correction could be a harbinger of what is to come.

“If ‘AI’ starts to correct,” Ballanger warned, “the entire market is going with it, including the Dow and the S&P 500.”

Newsletter Writers Say Do Not Buy Now

Chris Johnson, Money Morning qualitative specialist, implied that it might be better to wait to Buy Nvidia as there is a good chance the stock will present a short-term opportunity to do so on a future pullback.

“If ‘AI’ starts to correct,” Michael Ballanger of GGM Advisory Inc. warned, “the entire market is going with it, including the Dow and the S&P 500.”

These opportunities often arise with heavily traded stocks after they experience persisting overbought conditions and the pullbacks that typically follow.

“Investors looking for a deeper correction in the stock should consider the US$100 price target as an ideal price for longer-term support for Nvidia shares,” he noted in a June 24 article. (At close today, the tech company was at US$126 per share.)

Kimberley Koenig with Investor’s Business Daily flat out advised against buying Nvidia right now. Instead, she recommended on June 25, “Wait for selling to subside and another base to form or follow-on buy point to present itself to buy the AI chip stock.”

One Expert Says Sell It All Today

The advice of Technical Analyst Clive Maund, based on his interpretations of the stock’s 10-year and two-year charts, is to sell Nvidia.

“The main takeaways for us are that Nvidia should be ‘avoided like the plague’ simply because it has gone up so much and is massively overbought,” he wrote in a June 23 report. “Anyone holding should, of course, take profits soon.”

He explained that on the charts, the MACD indicator shows the stock has become “insanely overbought.” However, he noted, “Recent volume does not look terminal as it has not (yet) risen to become climactic, and the accumulation line remains strong.” These indicators suggest that rather than immediately plunging, the stock may form a large top pattern over some months, during which time it could even creep higher.

Eric Fry of Fry’s Investment Report suggested investors follow the lead of the country’s billionaires and unload not just Nvidia stock but also the other tech giants’ stock now because, he said, an entire tech market crash is coming.

“There’s an undeniable tension gripping the markets right now, and if your gut is telling you that something monumental is lurking just over the horizon, trust me, your instincts are dead on,” he said.

Fry likened Nvidia stock today to Cisco stock in the 1990s. Though Cisco then had nearly twice the earnings power of Nvidia today, he said, when the dot-com bubble burst, it dropped about 87% from its peak.

Yes, there is room for growth in the AI market, and yes, Nvidia could be an AI star over the long term, said Fry. However, world-changing stocks go through their own boom and bust periods.

“I do want people to be aware of the cyclical risks involved here, at these crazy valuations,” he added.

Fry forecasted a future “tidal wave of selling to engulf the tech titans of Wall Street — Nvidia, Apple, Microsoft, Google, Meta and more” — in what he’s calling The 2024 Tech Reset. Billionaires, including Jeff Bezos, Warren Buffet, Elon Musk, and Mark Zuckerberg, have already started selling tech stocks, even their own company’s stock. They are moving their money into next-gen stocks, which Fry defined as “stocks of businesses that are essential for the growth and prosperity of society as a whole.”

This massive selloff Fry predicted will cause tech stocks to plummet from their record highs and will, in the process, drag down thousands of other stocks, he warned. It will “erase years of investors’ gains, in the blink of an eye.”

Sector to Hit $29 Trillion by 2030

Currently IT is facing some challenges, and in the short term “the demand environment remains uncertain as enterprises add more scrutiny to the budgeting process and reduce discretionary IT spending,” CIBC wrote in a June 20 report. The current environment has dampened the expectation held since last year that demand would start improving in H2/24.

The report asserted that the initial “gen AI boom” is in the rear-view mirror, and what is happening now is a “period of resetting expectations.” Despite most companies knowing they need AI strategies, they are still deciding on what these will be, the analysts said.

The long-term outlook for IT is brighter. Growth for the IT market is forecasted up to 2030, at a 15% compound annual growth rate, according to Exactitude Consultancy, a market research and consulting services firm. By 2030, the market is projected to increase to US$28.99 trillion ($28.99T) in value from US$10.9T in 2023.

Accelerated advancement in AI, cloud computing, the Internet of Things and cybersecurity is the primary growth driver, noted Exactitude.

Ownership and Share Structure

According to Reuters, 4.23% of the company is held by management and insiders.

0.05% is with strategic investors. Milestone Resources Group Ltd. has 0.02%, with 4.39 million, and Banco Santander SA has 0.01%, with 2.10 million.

67.70% is held by institutions. The VanGuard Group Inc. has 8.63%, with 2,122.88 million shares. BlackRock Institutional Trust Company N.A. has 4.82%, with 1,186.45 million. Fidelity Management & Research Company LLC. has 4.51%, with 1,109.18 million.

The rest is with retail investors.

Nvidia has 24.6 billion (24.6B) shares outstanding and 23.5B free float traded shares.

The company’s market cap is US$3.1 trillion. Its stock has traded between US$39.23 and US$140.76 per share over the past 52 weeks.

Important Disclosures:

1. Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor.
2.  This article does not constitute investment advice and is not a solicitation for any investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Each reader is encouraged to consult with his or her personal financial adviser and perform their own comprehensive investment research. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company.

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By The Ino.com Team

Despite the industry challenges, Chevron Corporation (CVX) and NextEra Energy, Inc. (NEE) are both gaining significant traction and rewarding shareholders with reliable dividends. But if you had to choose between them, which would be the better buy?

Chevron’s Dividend Strength Over 37 Years

Chevron is one of the largest integrated energy majors globally, with operations spanning oil production, transportation, and processing. This strategic spread helps cushion the inherent volatility in oil and gas markets, ensuring stability and sustained growth.

Recently, oil prices dipped after hitting seven-week highs. Brent crude futures slipped to $85.27 a barrel, while U.S. West Texas Intermediate crude dropped to $81.47 per barrel. Despite the cyclical nature of the oil sector, Chevron’s solid operational and financial performance continues to shine through.

In its latest earnings release, the company reported a double-digit increase in worldwide production and returned $6 billion in cash to shareholders. CVX beat first-quarter earnings estimates, with an adjusted EPS of $2.93, surpassing analysts’ expectations of $2.87. U.S. production surged to 1.57 million barrels of oil and gas per day, a 35% increase from a year ago, thanks to strong output from the Permian and Denver-Julesburg basins.

What truly sets Chevron apart is its financial muscle. The company’s debt-to-equity ratio is a mere 0.12, the lowest among its peers. This low leverage gives CVX the flexibility to support its operations and sustain its dividends even during downturns, providing a significant competitive advantage.

In the first quarter of 2024, Chevron’s return on capital employed exceeded 12%, reflecting efficient management and strategic investments. The company increased its quarterly dividend by 8% sequentially to $1.63 per share and repurchased nearly $3 billion worth of its shares.

With 36 consecutive years of dividend growth and a forward dividend yield of 4.16%, Chevron offers investors a compelling mix of income and growth potential. CVX has a four-year average yield of 4.35%, and its dividend payouts have grown at a CAGR of 6.4% over the past three years.

Moreover, the company aims to grow its annual free cash flow (FCF) by nearly 10% through 2027, even if Brent crude prices fall to $60 per barrel. With Brent crude currently around $83 per barrel, Chevron has ample room for growth. CVX’s strategy focuses on improving ROCE by investing in high-return areas like the Permian Basin, expected to drive substantial cash flow growth.

Increasing cash flow and robust dividend growth make CVX an attractive long-term investment. The company’s ability to navigate market fluctuations and maintain financial stability positions it as a top choice for investors seeking security and growth in the energy sector. Shares of CVX have gained over 4% over the past six months and nearly 5% year-to-date.

How Is NEE Positioned to Reward Shareholders?

NextEra Energy is a dual force in the energy sector, uniquely positioned with substantial operations in regulated utilities and renewable energy. As one of the largest regulated utility companies in the U.S., NEE enjoys stable earnings through its main subsidiary, Florida Power & Light (FPL).

FPL’s recent expansion efforts, including the addition of 1,640 megawatts of new solar capacity, underscore its commitment to clean energy and meeting the growing electricity demands. In the first quarter that ended March 31, 2024, FPL reported a net income of $1.17 billion or $0.57 per share, reflecting an increase of 9.5% and 7.5% year-over-year, respectively.

Simultaneously, NextEra Energy Resources, the company’s renewable energy arm, continues to advance in sustainable energy production. The segment had a record quarter, adding approximately 2,765 megawatts of new renewables and storage projects to its backlog. Its adjusted earnings for the quarter were $828 million and $0.40 per share, up from $732 million and $0.36 per share in the first quarter of 2023.

Financially, NEE’s performance remains robust. During the quarter, the company’s adjusted earnings amounted to $1.87 billion or $0.91 per share, reflecting an increase of 11.6% and 8.3%, respectively. Its adjusted EBITDA was $462 million, and $164 million cash was available for distribution. Moreover, its revenue and EPS have grown at respective CAGRs of 16.6% and 20.2 over the past three years.

Looking forward, NEE sees significant growth potential in the U.S. renewables and storage market, expecting it to triple over the next seven years from 140 gigawatts to around 375-450 gigawatts. With an existing 74-gigawatt operating fleet, split between FPL and Energy Resources, the company aims to expand to over 100 gigawatts by 2026, further strengthening its operational scale and creating additional value for its stakeholders.

On June 17, NEE paid its shareholders a quarterly dividend of $0.52 per share. With 28 consecutive years of dividend growth and a forward dividend yield of 2.84%, NEE offers an attractive proposition for income-oriented investors seeking exposure to the clean energy sector. Also, it has a four-year average dividend yield of 2.23% and has grown its dividend payouts at a CAGR of 10.2% over the past three years.

All said, NEE stands at the forefront of the energy transition, leveraging its dual strengths in regulated utilities and renewable energy to drive sustainable growth and value creation. The stock has gained over 21% over the past six months and over 19% year-to-date.

Should You Buy Chevron or NextEra Energy?

Analysts are bullish on these dividend-paying giants, each presenting significant upside potential. So, how do these two stack up?

Mizuho gave Chevron a Buy rating and raised the price target from $200 to $205, implying a substantial 23.59% upside from the current price of $156.64. This sentiment is echoed by other prominent analysts, with HSBC and Scotiabank setting price targets of $178 and $195, respectively. This results in an average price target of $186.95, suggesting a potential 16% upside.

On the other hand, NextEra Energy has also caught the eye of analysts. BMO Capital recently maintained an Overperform rating on the stock and raised the price target from $78 to $79, suggesting an 8.3% upside from the current price of $72.46.

In terms of dividend yield as a rough measure of value, CVX’s 4.2% yield is far more attractive compared to NEE’s modest 2.8%. While both stocks historically offered higher yields during oil downturns, NextEra Energy’s current yield is comparatively lower. This positions CVX as a stronger income play and suggests it may be the more attractive stock between the two.

By Ino.com – See our Trader Blog, INO TV Free & Market Analysis Alerts

Source: Chevron vs. NextEra Energy: Which Dividend Stock is the Better Buy?

By The Ino.com Team

Broadcom Inc. (AVGO), a prominent player in the semiconductor industry, announced a 10-for-1 forward stock split set to take effect on July 15, 2024, taking advantage of a rally in its shares this year. This decision comes on the heels of an outstanding second-quarter performance, underscoring Broadcom’s strategic positioning amid the burgeoning artificial intelligence (AI) revolution.

Understanding Stock Split Mechanics and Strategic Implications for Broadcom

A stock split involves dividing each existing share into multiple shares, effectively lowering the share price proportionally while maintaining the company’s total market capitalization. In AVGO’s case, each shareholder will receive nine additional shares for every one share held, resulting in a tenfold increase in the number of outstanding shares.

The primary objective of a stock split is to make shares more affordable and accessible to a wide range of retail investors by reducing the nominal share price. Given Broadcom’s share price surpassing $1,800 recently, the split aims to address perceived affordability barriers that may have deterred investors.

The increased accessibility can broaden AVGO’s investor base, potentially stimulating demand for its shares. Consequently, a higher number of outstanding shares resulting from the stock split typically leads to higher trading volumes. This enhanced liquidity can benefit both existing and new investors, allowing for easier entry and exit from positions.

Comparison with NVIDIA’s Recent Similar Move

Broadcom’s stock split mirrors a similar move by NVIDIA Corporation (NVDA), its rival in the AI hardware market. With more individual investors gaining access to Nvidia’s shares post-split, which came into effect at the close of trading on June 7, increased trading activity and demand were observed, potentially driving share prices higher.

NVIDIA’s stock is trading above its 50-day and 200-day moving averages of $99.28 and $68.61, respectively. NVDA’s successful split this month was preceded by significant market gains, highlighting the strategic timing of Broadcom’s decision to capitalize on investor sentiment surrounding the AI and semiconductor sectors.

Historically, stock splits are viewed as a bullish signal. According to data from BofA research, total returns for companies announcing stock splits are about 25% in the 12 months after a stock split compared to 12% gains for the S&P 500 index.

Broadcom’s Unprecedented Growth Amid the AI Boom

With a $839.05 billion market cap, AVGO is a technology leader that develops and supplies semiconductor and infrastructure software solutions. The company manufactures sophisticated networking chips for handling vast amounts of data used by AI applications such as OpenAI’s ChatGPT, positioning it as one of the beneficiaries of increased enterprise investments in the boom.

According to Grand View Research, the global AI market is projected to reach $1.81 trillion by 2030, growing at a CAGR of 36.6% during the forecast period (2024-2030). As AI continues to revolutionize industry verticals, including automotive, healthcare, retail, finance, and manufacturing, chipmakers like Broadcom are at the forefront, providing the essential chips that power AI applications.

Broadcom’s second-quarter results were primarily driven by AI demand and VMware. For the quarter that ended May 5, 2024, AVGO’s net revenue increased 43% year-over-year to $12.49 billion. Its revenue surpassed the consensus estimate of $12.01 billion. Revenue from its AI products was a record $3.10 billion during the quarter. Broadcom reported triple-digit revenue growth in the Infrastructure Software segment to $5.29 billion as enterprises increasingly adopted the VMware software stack to build their private clouds.

AVGO’s gross margin grew 27.2% from the year-ago value to $7.78 billion. Its non-GAAP operating income rose 32% year-over-year to $7.15 billion. Furthermore, the company’s non-GAAP net income came in at $5.39 billion or $10.96 per share, up 20.2% and 6.2% year-over-year, respectively. Its EPS exceeded the analysts’ expectations of $10.84.

Also, the company’s adjusted EBITDA grew 30.6% from the prior year’s quarter to $7.43 billion. It reported a free cash flow, excluding restructuring and integration, of $4.45 billion, up 18% year-over-year. As of May 5, 2024, AVGO’s cash and cash equivalents were $9.81 billion.

After an outstanding financial performance, Broadcom raised its fiscal year 2024 guidance. The company expects full-year revenue of nearly $51 billion. Its adjusted EBITDA is expected to be approximately 61% of projected revenue.

Favorable Analyst Estimates

Analysts expect AVGO’s revenue for the third quarter (ending July 2024) to grow 45.6% year-over-year to $12.92 billion. The consensus EPS estimate of $12.11 for the current quarter indicates a 14.9% year-over-year increase. Moreover, the company has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.

For the fiscal year ending October 2024, Street expects Broadcom’s revenue and EPS to grow 43.4% and 13% year-over-year to $43.37 billion and $47.74, respectively. In addition, the company’s revenue and EPS for the fiscal year 2025 are expected to increase 15.3% and 25.6% from the previous year to $59.22 billion and $59.95, respectively.

Bottom Line

As AI continues to revolutionize several sectors, chipmakers such as Broadcom are at the forefront, offering essential semiconductor and infrastructure software solutions powering this technology. Driven by robust AI demand and VMware, AVGO reported solid second-quarter performance, exceeding analysts’ estimates for revenue and earnings.

The management expressed confidence in the company’s growth prospects by raising the company’s fiscal year 2024 guidance for revenue to $51 billion and adjusted EBITDA to 61% of revenue. Moreover, AVGO’s strong financial health enabled it to approve a quarterly dividend of $5.25 per share, payable on June 28, 2024.

The company pays an annual dividend of $21 per share, which translates to a yield of 1.17% on the current share price, while its four-year average dividend yield is 2.69%. Its dividend payouts have grown at CAGRs of 12.9% and 17.5% over the past three and five years, respectively. Broadcom also raised its dividend payouts for 13 consecutive years.

In the last quarterly earnings release, AVGO announced a ten-for-one forward stock split of its common stock, making ownership of Broadcom stock more accessible to investors. The company’s decision to execute a stock split represents a strategic move to enhance shareholder value and broaden investor participation.

By making its shares more accessible and increasing liquidity, Broadcom positions itself to attract a diverse array of investors keen on capitalizing on the AI-driven semiconductor boom. The stock split is a pivotal catalyst that could propel AVGO’s growth trajectory forward, cementing its status as a critical player in the evolving tech industry.

In a report released on June 16, William Stein from Truist Financial maintained a Buy rating on AVGO, with a price target of $2,045. Further, Oppenheimer’s Rick Schafer increased the price target on Broadcom from $1,500 to $2,000 while maintaining a Buy rating on the stock.

In addition to Oppenheimer’s rating update, other analysts adjusted their price targets for AVGO. Goldman Sachs’ Toshiya Hari raised the price target from $1,550 to $1,850 and maintained a Strong Buy rating. Also, JP Morgan’s Harlan Sur raised the price target from $1,700 to $2,000 and maintained a Strong Buy rating on the stock.

In conclusion, for investors eyeing opportunities in the dynamic intersection of AI and semiconductor sectors, Broadcom’s ten-for-one stock split presents a compelling avenue to consider, backed by sound fundamentals and strategic foresight.

By Ino.com – See our Trader Blog, INO TV Free & Market Analysis Alerts

Source: Why Broadcom’s (AVGO) 10-for-1 Stock Split Could Attract a New Wave of Investors

By Elliott Wave International

“12345-ABC.” That’s a basic Elliott wave pattern in a nutshell. That “12345” is a so-called impulse, and it’s a key price pattern to know, because impulses point in the direction of the larger trend. In this clip from a recent Trader’s Classroom lesson, host Favio Poci shows you step-by-step how to spot an impulse and know when it’s likely over. (Market in focus: EUR/CHF, but you can apply this to any liquid market.)

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