Qualcomm Seen Missing AI Gains, Gets Rating Cut by KeyBanc

/ / Technology /

Qualcomm used to look like an edge AI play thanks to its position in handsets and PCs, but since these end markets haven’t yet materialized meaningfully, it isn’t seen benefiting from a replacement cycle or getting a market premium until that happens, KeyBanc Capital Markets says in a note, cutting its rating on the stock to sector weight. Apple is seen ramping up its internal modem in stages in coming years, and this could be tough to overcome, with full impact of the modem coming out representing a $1.55-$1.65 headwind to earnings, KeyBanc adds. In addition, price competition means Qualcomm will start to lose market share to Mediatek in mid-to-low-end smartphones. Qualcomm shares rise 0.3% at $167.42.

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Boeing Delivered Handful Of 737 MAX Jets Last Month

/ / Industrials /

Boeing managed to deliver a small number of 737 MAX jets after a strike by machinists shut down the Renton, Wash., factory that builds the planes. But deliveries are expected to slow substantially as the walkout stretches into its second month. The jet maker delivered 33 planes last month, including 28 737s. That’s down form 40 jets overall in August and 32 737s. The company says it was able to slip out some delivery-ready planes after the strike started September 13. Analysts estimate Boeing built 10 737s in September, well off the company’s goal of 38 per month.

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Open AI Losses to Drag on Microsoft in 2025

/ / Technology /

Slow AI adoption may be a bigger drag on Microsoft performance than previously expected. Oppenheimer’s Timothy Horan says in a report that Open AI losses for Microsoft could be in the $2 billion-$3 billion range in 2025 and may mean that current consensus estimates for revenue and EPS are also too high. “We reiterate the Street is likely overestimating near-term AI revenues as enterprise adoption and infrastructure remains a bottleneck,” Horan says, who downgrades the its rating to perform from outperform. This may be only a near-term issue however, since Microsoft is investing in a once-in-a-generation technology which could deprioritize expanding margins in the short-term.

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Lockheed Martin Remains ‘Prime’ Defense Stock Amid Escalating Global Tensions, RBC Says

/ / Industrials /

Lockheed Martin (LMT) is the “prime” defense stock to own amid escalating global tensions, while the company’s recently increased share repurchase authorization supports an expected improvement in free cash flows, RBC Capital Markets said. The war in the Middle East “has elevated the global threat level, which we believe will support greater urgency around the (2025 US Department of Defense) budget process and could contribute to higher international sales,” the brokerage said in a client note emailed Monday. Historical trends show that the defense industry usually outperforms during periods of monetary easing by an average of 23%, with “greater outperformance 12 months after the start of easing,” RBC analyst Ken Herbert wrote. Last month, the Federal Reserve cut its benchmark lending rate by 50 basis points to a range of 4.75% to 5%. “We believe the beginning of a new easing period, coupled with increased geopolitical tensions recently, will increase

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DOJ To File Remedies Framework Against Google: JP Morgan Sees Alphabet EPS To Drop 10%, ‘Negative Headlines’ Likely

/ / Technology /

JP Morgan analyst Doug Anmuth expects negative headlines for Google’s parent-company Alphabet, Inc. (NASDAQ:GOOG) (NASDAQ:GOOGL) when the Department of Justice (DOJ) proposes a broad and punitive set of potential remedies against the company this week. The DOJ is expected to file a high-level framework for potential remedies on Tuesday in its search distribution trial against Google. Anmuth said he expects the DOJ to file a “wide-ranging and far-reaching set of potential remedies, most likely more than the DOJ thinks it could ultimately win.” The JP Morgan analyst sees five potential remedies which could include: No exclusive default search agreements for Google across all browsers, OEMs and carriers The separation of Android & Chrome from Google The separation of Google Search ads from Google Limitations on how Google can implement AI in search Data sharing, including providing API or patent access to search competitors Anmuth predicted Google could see up to a 10% hit on

DOJ To File Remedies Framework Against Google: JP Morgan Sees Alphabet EPS To Drop 10%, ‘Negative Headlines’ Likely Read Post »

Netflix Earnings Are in 10 Days. Analysts Are Mixed on the Stock.

/ / Consumer Discretionary /

Netflix stock was downgraded by one analyst and upgraded by another on Monday, 10 days before the streaming company reports third-quarter earnings. Netflix stock has gained 48% this year, and that increase has helped push its valuation higher. Shares are now trading at 32.6 times the earnings expected over the next 12 months, which is higher than the S&P 500’s 21.7 times. Barclays analyst Kannan Venkateshwar wrote in a research note on Monday that the stock’s valuation is based on the assumption that Netflix’s revenue growth will remain in the low double digits for the foreseeable future. “Even if the company gets to its revenue growth goal, valuation is implicitly pricing in more than a doubling of sub [subscriber] base from present levels,” Venkateshwar wrote. He downgraded shares to Underweight from Equal Weight while maintaining a target of $550 for the price. Netflix introduced major changes to its business model

Netflix Earnings Are in 10 Days. Analysts Are Mixed on the Stock. Read Post »

Lockheed Martin’s $3 Billion Buyback Increase to Drive Positive Sentiment, RBC Says

/ / Industrials /

Lockheed Martin’s (LMT) recently approved $3 billion increase in its buyback program will drive positive investor sentiment as it supports the company’s confidence in improving free cash flow, RBC Capital Markets said in a note Monday. The investment bank increased its price target on Lockheed’s stock to $675 from $600. “We believe a shareholder-friendly capital allocation strategy on the back of the strong FCF generation will continue to be a positive for sentiment,” RBC said, noting that the company is guiding to $6.2 billion free cash flow for 2024, just flat from a year earlier. This comes alongside major margin opportunity from Lockheed’s ongoing deliveries of the F-35 fighter jets, and as defense stocks are expected to outperform at a time of lower interest rates, RBC said. Additionally, Lockheed’s Q3 results are expected to be positive and well-received by investors, according to the note. The results are scheduled for release

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Apple’s Stock Draws a Downgrade as AI Optimism May Be Very Premature

/ / Technology /

By Emily Bary A Jefferies analyst says it will take time for smartphone technology to truly support AI. That means sales expectations for the iPhone 16, and perhaps even the iPhone 17, may be too high. Hoping the iPhone 16 will drive a big wave of device upgrades? That view looks “premature,” in the view of one analyst. Jefferies’ Edison Lee assumed coverage of Apple Inc. shares (AAPL) over the weekend, and in doing so, downgraded the stock to hold from buy. By his assessment, it will take some time for artificial intelligence to improve the smartphone experience. “Smartphone hardware needs rework before being capable of serious AI, with likely timeline of 2026/27,” Lee said. He noted that “smartphones lack high-speed memory and advanced packaging tech” that facilitate rapid data transfers, and he said that while companies are trying to improve in this regard, it could take several years before

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PepsiCo Third-Quarter Results Unlikely to Post ‘Material’ Upside to Expectations, RBC Says

/ / Consumer Staples /

PepsiCo’s (PEP) third-quarter financial results are not expected to see a “material” upside to projections, while its full-year organic sales outlook could face some pressure amid continued sluggish domestic trends, RBC Capital Markets said Friday. The beverage and snacks company is scheduled to report third-quarter results Tuesday. RBC lowered its adjusted earnings expectations to $2.28 a share from $2.31 and its revenue outlook to $24.02 billion from $24.34 billion. Wall Street is looking for $2.30 and $24 billion, respectively. “We are expecting (PepsiCo’s) quarter to look like recent prints, with modest topline results and in-line to slightly better EPS, and don’t see material upside overall,” RBC co-Head of Global Consumer and Retail Research Nik Modi said in a note to clients. The company’s international business is once again expected to lead the growth amid “muted” domestic trends,” Modi wrote. Although Frito volumes have improved sequentially, they’re still not “overly robust”

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Pepsico Faces Questions Over FY Organic Revenue Guidance

/ / Consumer Staples /

Pepsi seems to be facing growing investor pressure, with its 2024 organic revenue guidance close to potentially proving to be aspirational, UBS analysts say in a research note. The embedded improvement in trends isn’t playing out as many would have anticipated, the analysts say. There are also questions as to whether the maker of soft drinks and owner of snack brands such as Lay’s and Doritos will need to pull additional levers to drive an improvement in volume consumption, which may result in greater investment/lower bottom line growth looking ahead, the analysts add. Shares fall 0.6% to $167.45.

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Nike’s Q1 Earnings Beat Overshadowed by Weak Q2 Outlook, Withdrawn Full-Year Guidance, Morgan Stanley Says

/ / Consumer Discretionary /

Nike’s (NKE) Q1 earnings beat was overshadowed by a disappointing Q2 outlook and the withdrawal of full-year guidance, Morgan Stanley said in a Wednesday note. “Decent [Q1] headline overshadowed by downbeat tone & forward outlook, in our view leaving bears with more to point to than bulls exiting 1Q,” Morgan Stanley said, adding that “FY guidance withdrawal & postponed Investor Day, in our view, highlight limited visibility & ongoing strategy uncertainty.” Morgan Stanley said recent developments reinforce its equal-weight thesis and suggest “a range-bound stock for some time.” While Nike beat Q1 earnings per share expectations at $0.70, challenges like weak retail sales and excess inventory led to a projected 8% to 10% year-over-year sales decline and an implied EPS of about $0.63 for Q2, below Street estimates, Morgan Stanley said. The Wall Street firm now projects fiscal 2025 EPS at $2.60, down from the previous $2.77, mainly due to

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Alphabet’s Stock Has Never Been This Cheap Relative to Meta’s. How to Play That.

/ / Technology /

By Emily Bary A Bernstein analyst says it’s still ‘difficult to defend’ pitching Alphabet shares with conviction given various regulatory and competitive risks Are Alphabet Inc. shares a bargain – or justifiably cheap? That’s a question Bernstein analyst Mark Shmulik recently explored, as he noted some striking data points. For one, Alphabet shares (GOOG) (GOOGL) are trading at nearly their largest-ever discount to the S&P 500 SPX when looking at forward price-to-earnings multiples, and the actual record discount was set just a few weeks ago. The stock is also trading at its largest discount to Meta Platforms Inc. shares (META) on record. If you looked at the Google parent company’s forecasts without knowing the company behind them, you would likely be tempted to buy, Shmulik said. Shares are trading at 19 times forward earnings estimates but the company is projected to grow revenue at a 11% annual clip through 2027.

Alphabet’s Stock Has Never Been This Cheap Relative to Meta’s. How to Play That. Read Post »

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