News and analysis

PepsiCo reported quite a bit better figures than what the market consensus expected for the first quarter. The soft drinks and snacks giant delivered $1.61 of EPS (equity per share) in the Q1 2024 against $1.52 in Wall Street analyst pool estimates. Despite this was less than 80% of a $2.04 average income during the previous three quarters of 2023, the situation with a poorer start from January to March is very ordinary. It is repeated year after year. Instead, the focus is usually shifted to a year-on-year comparison, particularly with Q1 2023 and Q1 2022 results, and such a fair comparative study gives an unbiased observer a 7.3% and a 24.8% growth from reference plans, which were calculated one and two years ago, respectively.

The company's sales amounted to $18.25 billion vs $17.85 in Q1 2023 and $16.2 in Q1 2022, a 41.7% above the pre-pandemic record of $12.88 for the first quarters. In fact, Q1 2024 was the best in any financial aspect, including profit margins, among all initial quarters ever for the business of PepsiCo. Because of smart regional diversification, international demand for most of its sodas and snacks (Cheetos, Doritos etc), including Europe, Asia Pacific and China, served as a reliable driver for growth even though a slowdown in North America took place. Globally distributed business is now about 40% from the whole revenue of PepsiCo. New items like its Celsius energy drink flavored and Quaker instant oats help further global expansion, while Quaker Foods sales in North America lost 24% due to a sudden product recalling there because of a potential salmonella contamination risk. The company's financials are moving forward showing a very good pace, despite all these odds and temporary headwinds.

"We've had three years of ... massive consumer inflation and that has to be absorbed and I think the cumulative impact of that puts a bit of strain on the consumer. But we expect that to abate as time goes on," PepsiCo CFO Jamie Caulfield commented on the results. PepsiCo's organic volume sold is 2% lower YoY, against a higher 4% drop in Q4 2023 vs Q4 2022, yet the company got better income despite a rather reasonable price increase of nearly 5% in Q1 2024 vs Q1 2023. The way how its management coped with the inflation pressure challenge, improving efficiency and return by successfully raising selling prices and competitiveness in its product line, deserves respect at least, if not immediate appreciation of the crowd.

Based on strong and growing fundamentals, an actual 2.25% decrease in PepsiCo share price seems not absolutely logical in the first five hours after the release. The only normal explanation for this effect could lie in reaching technically a 7-month ceiling after the price climbed by almost 6% already in the previous week. Combined with edging higher two slowly in terms of the S&P 500 broad market index recovery after last Friday's nervous stress and expectations of more clear overall direction from the top giants like Meta, Microsoft, Google, Apple and Amazon, the delay in further growth of successfully reported consumer businesses like PepsiCo could be justified but temporary. If so, we consider that more jumps to retest widely expected target prices within the range of $185-$195 are only a matter of time.

The generative AI (artificial intelligence) segment's darling, NVIDIA, has suddenly provided an outstanding opportunity to buy its shares on local dips below $760 at some point of a sharp technical correction last Friday, April 19. A situational sell-off in banking and energy stocks led to another round of decline in the S&P 500 broad market indicator, but only within a couple of percentage points during the day. However, when combined with a much smaller Super Micro Computer company's stock crashing by 23%, which announced its next earnings date without providing any preliminary financial results, as well as a simultaneously negative background from Taiwan Semiconductor Manufacturing, this caused a massive profit taking among NVIDIA shareholders.

The bullish camp could be a little tired from the lasting AI rally, yet a more than 20% price discount compared to the all-time highs at $974 in March, immediately sparked a wave of renewed optimism. As a first result, NVIDIA price added more than 5% after the weekend and surfaced above $800 per share. Growing, and then easing geopolitical concerns over the Israeli-Arabian conflict also contributed to this volatility on Wall Street. One may guess that ship has sailed, yet NVIDIA stock is still trading with a pretty large discount, which makes it an attractive speculative object.

Few private investors in this market may dare to expect a re-test of substantially deeper lows for NVIDIA at $600, while chances of exceeding $1,000 per share is still being considered by all major investment houses that continue to maintain their Buy ratings for the absolute world leader in graphics chip manufacturing, without even changing it to Hold or Overbought. We adhere to exactly this point of view, feeling NVIDIA and some of its satellite chip stocks, including AMD, as the best group of assets to pick up, using each and any lower price opportunity.

A shift change, starting from May and ending in mid-summer, is another possible scenario for NVIDIA and other semiconductor stocks, but only to extend these buying chances. GPU (graphic processing units) shortages may ease to some extent during the product transitional period from NVIDIA's "old" (2022) and H100-based Hopper generation of microarchitecture to the new one on the newest Blackwell chip series. "As Blackwell ramps, starting in August, it is likely to be in short supply for several quarters," Morgan Stanley client's note says. “This still leaves Hopper doing some heavy lifting through early 2025 as we still see the majority of revenue from Hopper until next year, and there is, of course, some anxiety about a Blackwell pause... but we simply are not hearing about that right now, as our contacts assure us that Hopper demand continues to grow and that the company can manage the transition to Blackwell effectively,” the reputable group added.

Meanwhile, the Bank of America said semiconductor stocks have been "dented but not deterred", as “we are only in quarter 3 of what is usually an average 10 quarter upcycle”. “We continue to believe some semis will face a headwind until June/July when it could become apparent estimates are about to go up again and we believe this is a buying opportunity for our buy-rated names,” Citigroup echoed. If so, the last but not the least is simply that nobody abolished the principle of doing things which most billionaire funds advised the crowd to do. We believe that buying dips in NVIDIA could make investing portfolios even stronger.

Basic Attention Token (BAT) has gained 2.7% to $0.266 this week, inching closer to its target of $0.300. In the previous week, BAT struggled to regain ground above the $0.250 support level following a significant 36% decline to $0.202. The token faced six consecutive days of trading below this support, indicating a potential further decline. However, it managed to stage a recovery last Saturday. Collaborations with Dow Jones Media, Quant, Cheddar, and other entities may offer some support to prices, although their impact is heavily influenced by market conditions. With Bitcoin (BTC) staging a fragile recovery from $60,000, BAT's upward momentum may falter if it fails to swiftly breach the $0.300 resistance level.

Synthetix (SNX) is adding 3.2% to $3.150 this week It is struggling to hold above its crucial support at $3.000 per token after a huge 49% slump in the first half of April. This support is fundamental for the token to recover towards $4.000. The recovery of Bitcoin (BTC) prices helps the token. The Synthetix Community Governance Call in late April will discuss project updates, staking rates, which could also support token prices.