News and analysis

Folks, I would totally agree with a Citigroup analyst Christopher Danely when he estimated Micron Technology (MU) stock as being still underperformed so far. He mentioned at least three particular cases of why this was happening. These three reasons included allegedly high capital expenditures on DRAM (dynamic random access memory, which is a type of semiconductor memory that is typically used for the data or program code needed by a computer processor to function), so that some equipment makers verbally stoked fears of overcapacity, high market valuation already and continuing negative comments by Micron's rival Rambus, even though the two semiconductor businesses officially ended their lasting license battle more than ten years ago. Yet, Citi’s sources re-checked DRAM order rates and found they only have increased from the server end market, the analyst wrote in a research note. As to the DRAM capex rising, Citi argued that even if it increases 20% more, it would still be 30% below the peak burden of 2022. On valuation, again, the counter argument was that Micron share price is lagging behind the average pace for the chip segment. Therefore, City has a Buy rating for Micron, with a target price at $95, against a $90-92 current range. Yet, I would personally see the target area well above $100 per share for Micron, as many analysts seemingly overlooked one specific but crucial thing, which is direct joining of Micron to the NVIDIA AI party.

Micron Technology (MU) added more than 6% to its market in the first half of this week responding to its official announcement that the company will increase production of its HBM3E (High Bandwidth Memory) chips, which will be used in NVIDIA's last generation of H200 GPUs (graphic processing units), specially designed for artificial intelligence applications. The HBM3E model consumes 30% less power than rival offerings, which is important for powerful generative AI purposes. The HBM-type chips market is led by larger NVIDIA's supplier SK Hynix, but Micron would be the second in this scale, especially since SK Hynix already sold out its 2024 inventory. HBM is Micron's most profitable product, due to its relative complexity involved in its construction. Micron now says it is going to deliver these increased performance memory chips in the next quarter. I feel, when more news would be revealed on the matter, for example during NVIDIA's GTC developer conference next month, the uptrend in Micron share price could be accelerated. Anyway, producing advanced memory chips for the AI chip king NVIDIA, and maybe also for AMD soon, would be considered by the market crowd as a privilege which may boost the market value of Micron as well, when the crowd is so mad from the entire AI agenda. So, I would also consider it a privilege to add this stock to my portfolio. Again, the third approach to peaking prices of 2021-2022 on charts is good for a potential breakthrough, according to theoretical considerations of the technical analysis. A small discount on today's pre-market trading also looks favourable to choose the right moment for a purchase.

This week, Harmony (ONE) experienced a 2.5% rise to $0.02340 and encountered a strong resistance level at $0.0250 on February 27. This marks the second attempt at a breakthrough in recent days, though it has been unsuccessful so far. Despite this, the altcoin has shown an impressive 75.0% increase in February.

The previous issue involving Harmony Bridge, where an extra $2.2 million was issued, seems to have been forgiven by the investing crowd. However, the coin is currently facing a robust resistance at $0.0250, posing a significant challenge for further upward movement. It is likely that prices could take a pause in the range of $0.02000-0.02500.

Lowe’s Companies (LOW) released its Q4 2023 results and immediately continued to climb, adding nearly 3% during the first half-hour after the opening bell on February 27. One of the U.S. major retail chains that focuses on items for do-it-yourself (DIY) activity of decorating, building, and making repairs at home showed better-than-feared decline in both profit and sales lines of the report.

The impact of sticky inflation and still high borrowing costs on consumers' behaviour is here, yet some retailers handle it getting less damage in income than others. Many portfolio investors are still adding new stakes in this kind of stocks, so that Lowe's market value already rose by more than 27%, or by $50 per share, only for the last four months. Lowe's larger rival Home Depot (HD), which is the number one home improvement goods retailer in North America, demonstrates similarly positive market trending.

Lowe's EPS (equity per share) of $1.77 in Q4 2023 came out almost at the same level as it was at a similar period two years ago. However, it represents a lower level of profit, compared to $2.28 in Q4 2022 and especially against a very positive background of $3.83 on average during the first three quarters of 2023. Comparable sales fell by 6.2% QoQ, yet expert consensus on Wall Street expected some larger decline. Poll of forecasters called for $18.47 billion in total sales, and the actual number was at $18.60 billion.

"This quarter we delivered strong operating profit and improved customer satisfaction, despite the continued pullback in DIY spending," Lowe's CEO Marvin Ellison stated, warning that a full-year outlook for 2024 would be tempered by "near-term macroeconomic uncertainty". Nevertheless, the company's forward guidance of posting only a 2% to 3% decline in comparable sales compared to 2023, with a total revenue of $84 billion to $85 billion, and diluted EPS of about $12.00 to $12.30 for the year, clearly sought to cheer shareholders.

The crowd probably supposed the guidance could be beatable, so that a 10% climb to historical highs of November 21 above $263 with a chance of even challenging those peaking prices looks as a baseline scenario when one watches the new record peaks on the S&P 500 broad market barometer.

The market value of pet food company Freshpet (FRPT) suddenly jumped by nearly 20% since the beginning of the week. The reason was that Freshpet substantially improveв its profitability, according to its latest quarterly earnings report. Its EPS (equity per share) of $0.31 on revenue of more than $215 million far exceeded $0.08 of consensus expectations on $204.33 million of revenue, especially as it took place after twelve consecutive quarters of loss-making. It looks like the six years with greater than 25% growth in terms of sales volume ultimately bore fruits, giving a solid portion of new hope to shareholders. Revenue numbers amounted to $65.75 in February 2020 and added another impressive 30% for the last year.

"We believe Freshpet has reached an inflection point on its journey toward becoming not only a sizable but profitable business," the company's CEO Billy Cyr commented. He added that Freshpet delivered the strong growth investors came to expect from its business development, being on the way "toward delivering the kind of profitability and cash flow one would expect of a market leader". Since 2017, the manufacturer has mostly used a "Feed the Growth strategy" for scaling the business first before most of rivals entered the fresh pet food market, yet later it proclaimed a transition to an approach meaning that it has already achieved sufficient scale to focus more directly on profitability. Now it feels a "significant opportunity to drive further profit improvement". A strong advertising presence and household penetration is going to provide better results in nearest quarters. Logistics costs reportedly decreased to 6.3% of net sales from 9.4% in 2022 and 6.8% in Q3 2022, which strengthened the foundation for higher estimates for 2024.

A record 5,251 fridge placements in 2023 brought Freshpet to a total of 34,274 fridges at retail, as of December 31, 2023, so that its production now could be found in 26,777 stores, which is a great expansion. Besides, its digital business for order on a phone or desktop, including purchases through Amazon and customers' pick-up options, increased 58% YoY. Projections show this digital segment is going to exceed $100 million in 2024. According to NielsenIQ, the total pet food market is estimated as a $52 billion category, including a $36 billion dog food category, while Freshpet just occupied a 3% market share, leaving a vast window of opportunities.

Freshpet is an American company, founded in 2006 and went public on the Nasdaq exchange in 2014. Its products for cats and dogs are marketed as fresh and healthy, having no preservatives and need to be kept refrigerated. It was a good growth story during the two corona pandemic years of 2020-2021 when the Freshpet's business assessment by Wall Street crowds has tripled at some moment. This was followed by a lasting period of price correction, so that Freshpet share price turned into the next recovery stage only in the last Christmas season of 2023. Nevertheless, one could easily calculate that investors who bought a $1,000 worth stake in Freshpet about five years ago would still now have an investment worth more than $2,800. Yet, Freshpet is trading at a 40% discount when compared to its peaking price of May 2021, while its current financial indicators may leave enough room for further revival.