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Shares of Splunk Inc. jumped 12% in extended trading Wednesday after the software company reported quarterly results that topped analysts’ revenue and earnings estimates.
Splunk
SPLK,
reported a fiscal second-quarter net loss of $63.2 million, or 38 cents a share, compared with a net loss of $209.7 million, or $1.30 a share, in the year-ago quarter. Adjusted earnings were 71 cents a share.
Revenue increased 14% to $910.6 million from $798.7 million a year ago.
“Through our ongoing focus on accelerating innovation and harnessing AI, we unveiled many important advancements during the quarter to help customers strengthen their overall digital resilience and security posture,” Splunk Chief Executive Gary Steele said in a statement announcing the results.
Analysts surveyed by FactSet had expected, on average, net earnings of 46 cents a share on revenue of $889 million.
Splunk offered third-quarter revenue guidance of between $1.02 billion and $1.035 billion, topping FactSet analysts’ estimates of $982 million.
Splunk’s stock has gained 16% this year, while the broader S&P 500 index
SPX
has increased 15%.
Options traders are bracing for an outsize swing in Nvidia Corp.’s stock price after the chip giant’s earnings report Wednesday afternoon.
So-called straddle prices in the options market can be used to calculate an implied move for an underlying stock. A straddle is an options strategy in which a trader buys a call option and a put option at the same strike price with the same expiration date.
In the case of Nvidia
NVDA,
the market is pricing in a roughly 11% move in response to the coming earnings, according to Garrett DeSimone, the head of quantitative research at OptionMetrics. He said the average move for Nvidia is between 7% and 8%, “so this is definitely outside the norm.”
The implied move translates to a stock price of about $507 on the upper end and $406 on the lower end, DeSimone told MarketWatch. Someone who employed the straddle would make money if Nvidia’s stock finishes Thursday’s session above the upper point or below the lower point.
Nvidia earnings: What Wall Street expects from the AI-chip giant
There is more at stake with Nvidia’s report than just the company’s own stock price, however, according to DeSimone.
“There’s been a lot of bullish sentiment surrounding Nvidia,” he said. “A lot of market correlation hinges on this.”
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Given a belief that artificial-intelligence fervor has helped power the market higher in the past year, disappointing news “could be the start of something not so great.”
Nvidia is expected to clear its current quarterly revenue record by a wide margin when it delivers results, and demand doesn’t seem to be an issue for the company. Rather, amid rumblings of supply constraints, analysts will be looking to see how the company is striking a balance and gauge management’s expectations for its ability to meet demand for Nvidia hardware.
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What happened
After skyrocketing by more than 108% yesterday, shares of VinFast Auto (VFS 0.84%) are highly volatile after initially plunging back to earth today. The stock dropped 19% in early Wednesday trading, but reversed course to a gain of 11.7% as of 9:53 a.m. ET.
So what
The Vietnamese electric vehicle (EV) company soared more than 68% on its first day of trading publicly on the Nasdaq exchange after going public through a special purpose acquisition company.
The highly volatile trading can be explained by multiple factors. First and foremost, only about 1% of the company’s shares were made publicly available to trade. The remaining 99% are controlled by founder Pham Nhat Vuong. The other factor is likely just investor FOMO — fear of missing out — on the newest public EV company.
Now what
Even with today’s decline, VinFast is still valued much higher than both Ford and General Motors. But investors also might want to compare it just to other EV start-ups.
VinFast only sold about 11,000 vehicles in the first half of 2023. For perspective, Rivian Automotive and China-based Nio delivered about 20,500 and 55,000 vehicles, respectively. Yet VinFast was recently trading at a price-to-sales (P/S) ratio of nearly 150 compared to about Rivian’s 6.2 and Nio’s 2.4.
The company is planning a factory in North Carolina, with the capacity for 150,000 units per year in its first phase. It is expected to begin production in 2025.
But too many EV investors seem to be chasing too few VinFast shares right now. And that’s for a start-up that hasn’t yet proved it can operate at the scale needed to be successful. Those looking to speculate on EV stocks should look more at Rivian, Nio, or others before jumping into the hype from VinFast’s public debut.
Howard Smith has positions in Nio and Rivian Automotive. The Motley Fool has positions in and recommends Nio. The Motley Fool recommends General Motors and recommends the following options: long January 2025 $25 calls on General Motors. The Motley Fool has a disclosure policy.
What happened
Applied Digital (APLD 10.42%) stock gained ground during Tuesday’s trading. The data-center company’s share price ended the daily session up 4.1%, according to data from S&P Global Market Intelligence.
Applied Digital status published a press release this morning announcing that it had been designated as an “elite partner” by Nvidia (NVDA 3.17%). While Applied Digital still ended the day with significant gains, investors were initially much more bullish about the news.
So what
Applied Digital is a provider of data-center services and uses Nvidia’s hardware. The company is now included as an elite partner in the Nvidia Partner Network (NPN) — a designation that signifies that it’s delivering high levels of performance. Through the NPN, Nvidia customers can find other partners that are using the semiconductor leader’s products and services, and find ideal collaboration and business opportunities.
Early in Tuesday’s trading, Applied Digital stock had been up as much as 17.6% following the expanded Nvidia partnership announcement. But as the market digested the news, investors took a less jubilant stance on the development. Even so, the stock is up roughly 211% year to date thanks to excitement surrounding its opportunities in computation services for artificial intelligence applications.
Now what
Nvidia is at the forefront of semiconductor hardware powering advanced AI applications. The company’s graphics processing units (GPUs) are used to power OpenAI’s ChatGPT and other leading artificial intelligence services, and it looks like the company is poised to maintain a leadership position in its corner of the market. The fact that Applied Digital has been given elite-partner status within the NPN is a positive development, but it remains to be seen just how much of a performance driver its inclusion in the category will be.
Applied Digital may be able to score new contracts or collaborations thanks to its new status in the Nvidia Partner Network, but it’s not clear that the development will be a major performance catalyst. It seems like investors may have initially interpreted the news as an indication that Applied Digital and Nvidia are expanding a contractual partnership and that the latter company would see a significant sales boost as part of the potential deal. Applied Digital’s new elite-partner designation could open some valuable doors, but it remains to be seen how things play out on that front.
Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
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The S&P 500’s big plunge in August caught most investors off guard. So it’s quite a win if you scooped up the handful of gainers in the tough month.
X
Eight stocks in the S&P 500 — including Eli Lilly (LLY), Arista Networks (ANET) and Global Payments (GPN) — jumped 8% or more during the historically difficult month of August so far, says an Investor’s Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. That’s a solid gain when the S&P 500 itself is down more than 4% this month.
It’s a stock picker’s kind of month — and finding winners is especially tough. More than 85% of the stocks in the S&P 500 are down this August so far. Stocks are struggling as investors can score 5% or more just holding cash.
“Stocks are going to have a hard time if real yields continue to rally,” said Edward Moya of Oanda. “Not only are surging borrowing costs bad for the economy, it is also providing some extremely alternatives for short-term investments.”
Finding Winners In The S&P 500’s Wreckage
The S&P 500’s seemingly small 4% drop during the month hides some real pain. Many of the biggest losses center around giant megacap tech stocks that surged earlier in the year.
And those drops are inflicting sizable losses. Apple (AAPL) alone, the most valuable stock in the S&P 500, is down more than 10% this month. That lands this critical stock in a correction. And it also erases a mind-boggling $360 billion in market value — in just one month. And Apple’s pain is far from unique. Most of the so-called Magnificent Seven stocks are down this month so far.
That’s why finding winners this month is all the more impressive.
Eli Lilly: Biggest S&P 500 Winner In A Bad Month
Talk about a solid month. Shares of Eli Lilly are up 21% so far in August. That makes the health care giant the No. 1 performer in the S&P 500 this month. In fact, Eli Lilly stock’s gain this month outstrips the S&P 500’s 14.9% gain for the entire year.
And that’s just the tip of what’s been a stellar 2023 for Eli Lilly stock so far. It’s up more than 50% just this year. Investors are bullish on the company’s pipeline, including neurological treatments. The company on Aug. 8 reported a quarterly profit of $2.11 a share, beating forecasts by nearly 6%. And for the year, the company is on pace to make $9.50 a share, up nearly 20% from the prior year.
August hasn’t been a great month for the giant tech stocks. But computer networking firm Arista Networks is the only S&P 500 stock in the information-technology sector that’s up 8% or more in the month. Shares of Arista are up 16.4% during the month. Again, there’s a strong fundamental story. The company on July 31 reported a nearly 10% higher-than-expected quarterly profit of $1.58 a share. And for the year, analysts see profit rising nearly 35%. That’s miles ahead of Apple’s expected 1% drop in earnings this fiscal year.
August isn’t over yet. But it has already reminded investors why it’s a tough month — unless you pick the right S&P 500 stocks.
Top S&P 500 Stocks In August So Far
| Company | Symbol | August change | Sector |
|---|---|---|---|
| Eli Lilly | (LLY) | 21.0% | Health Care |
| Arista Networks | (ANET) | 19.1 | Information Technology |
| Regeneron | (REGN) | 13.8 | Health Care |
| Global Payments | (GPN) | 12.1 | Financials |
| Amgen | (AMGN) | 11.3 | Health Care |
| Constellation Energy | (CEG) | 9.8 | Utilities |
| Jacobs Solutions | (J) | 8.6 | Industrials |
| APA | (APA) | 8.4 | Energy |
Sources: S&P Global Market Intelligence, IBD
Amazon.com Inc. is the poster child for online shopping, but its core e-commerce business is still “underappreciated” on Wall Street — at least according to a Wedbush analyst.
Scott Devitt joined a pair of other Wedbush analysts in beginning coverage of Amazon
AMZN,
with an outperform rating Monday, as part of his broader initiation of internet names. But only Amazon earned a place on Wedbush’s best-ideas list.
Amazon’s e-commerce business has faced tough comparisons with pandemic-era periods, and the company has also endured some growing pains within its fulfillment operations. But with comparisons easing and fulfillment utilization on the rise, “Amazon’s core business is now well positioned with an industry-leading fulfillment infrastructure delivering 4x as many same-day or next-[day] orders in the U.S. versus 2019,” Devitt wrote.
The company gets the benefit of an improving e-commerce landscape, in Devitt’s view, but other aspects of its business are compelling as well. For one, Amazon’s AWS cloud-computing business is showing a stabilization as it laps a period when customers started optimizing their spending to manage expenses.
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“With recession fears fading in the U.S. and interest rate increases moderating, Amazon is beginning to see stabilizing AWS growth and noted that its customer base is now mostly optimized for costs,” Devitt wrote.
AWS is “well positioned competitively in our view and we expect sustainable double digit AWS growth in the intermediate term as more workloads shift to the cloud and demand for generative AI creates incremental spending in the coming years,” he continued.
Devitt also weighed in positively on Amazon’s advertising business. The company is “the clear leader among retail media networks given its wealth of transaction data and the scale of its site traffic,” and Amazon’s advertising business should continue to expand more quickly than its gross merchandise volume going forward, in Devitt’s view.
Read: ‘Magnificent Seven’ stocks are losing some of their shine, but their bonds are doing fine
He’s even intrigued by Amazon’s grocery initiatives after the company announced plans to merge grocery offerings into a single cart. “We believe Amazon’s fulfillment
expansion and improving delivery speeds are a catalyst for grocery category growth, as an increasing percentage of American consumers can get a variety of grocery and everyday essentials delivered same-day or next-day,” he wrote.
Buying individual stocks can be a smart way to build wealth over time. However, the reality of the situation is that it’s exceptionally difficult to consistently beat the market averages over time. One way to increase your odds of success is to buy shares of high-quality companies that sport strong competitive advantages, solid growth prospects, and attractive valuations. Biotech giant Amgen (AMGN -0.43%) ticks many of these boxes. Read on to find out more about this top dividend-paying biotech stock.
Competitive moat
Amgen has several competitive advantages that make it stand out from its peers in the biotech industry. First, Amgen has a diversified portfolio of products that span multiple therapeutic areas, such as oncology, cardiovascular, immunology, nephrology, and neuroscience.
Some of its leading drugs include Enbrel, Neulasta, Prolia, Xgeva, Otezla, and Repatha, which encapsulate a wide variety of conditions and market opportunities. These drugs also generate billions of dollars in annual revenue in aggregate and have strong market positions in their respective segments.
Second, Amgen has a robust pipeline of new drugs that can drive future growth. Amgen has over 40 molecules in clinical development, with 20 compounds in late-stage development. Some of the most promising candidates include the cardiology drug olpasiran and the cancer drug bemarituzumab. These clinical candidates have the potential to address large unmet medical needs and generate significant sales if approved.
Third, Amgen has a proven track record of innovation and scientific excellence. Amgen has been at the forefront of biotechnology research and development for over 40 years and has pioneered many breakthroughs in the field.
For example, Amgen was among the first companies to develop and commercialize recombinant human erythropoietin (EPO) for anemia, recombinant human granulocyte colony-stimulating factor (G-CSF) for neutropenia, and monoclonal antibodies for cancer and inflammatory diseases. Amgen has also invested heavily in cutting-edge technologies such as gene editing, bispecific antibodies, and cell therapy.
Growth Prospects
Amgen has a decent near-term growth outlook. Although analysts expect Amgen to post negative top-line growth in 2023, the biotech is forecast to return to mid-single-digit growth in 2024. The main drivers behind Amgen’s return to form will be its newer lineup of products and line extensions, such as the KRAS inhibitor for lung cancer known as Lumakras, and the asthma drug Tezspire.
Amgen’s recent acquisition of Horizon Therapeutics (HZNP 1.08%) is also expected to contribute positively to the biotech’s top- and bottom-line growth over the balance of the decade, although the Federal Trade Commission is currently challenging this deal.
If this bolt-on acquisition falls through, Amgen will probably pursue alternative options to further boost its pipeline and product portfolio. The biotech, after all, is entering a challenging period characterized by multiple patent expires, price compression, and the advent of potent new competitors in high-value areas such as immunology and cancer.
Valuation and dividend
Amgen stock is currently trading at a reasonable valuation compared to its peers and the broader market. As of Aug. 21, Amgen stock was trading at 13.9 times projected earnings. By comparison, the average large-cap pharma stock currently trades at 18.2 forward earnings, and the average S&P 500-listed equity trades at 19.6 times projected earnings.
On top of its attractive valuation, Amgen also offers a generous dividend yield of 3.23%, which is higher than the industry average of 1.5% and the S&P 500 average of 1.54%. The biotech has been raising its dividend since 2011 and has a payout ratio of 54.8%, which leaves room for further growth.
The one wild card is its future business development activity. Another large deal in excess of $10 billion — on top of this proposed Horizon Therapeutics transaction — could force management to rethink its capital allocation strategy, including its shareholder rewards program.
Speaking to this point, Amgen’s debt-to-equity ratio of roughly 907% is far from ideal, and additional debt will only exacerbate the problem. De-leveraging, in turn, will more than likely become a top priority for the biotech in the second half of the decade.
Verdict
Amgen screens as a top buy-and-hold stock for long-term investors looking for a combination of growth, income, and value. The company has several competitive advantages that give it an edge over its rivals, a robust pipeline that can fuel future growth, along with a reasonable valuation. Lastly, Amgen pays a reliable and growing dividend that can reward shareholders while they wait for the company to move beyond its patent headwinds.