News and analysis

This autumn earnings season on Wall Street was dominated by varying bets on NVidia release. As a bright example, Barclays analysts shared their views that the heightened anticipation surrounding NVidia's results was a reflection of the outsized impact of the AI agenda to become the "defining market catalyst of the year", eclipsing regular macroeconomic news including US inflation dynamics and Federal Reserve decisions. And now, when the hyping chipmaker, which is also the world's largest issuer in terms of market caps, eventually posted its blowout numbers and forward guidance, on record highs as usually, I am personally pleased, being calm about the overall bullish trend in most techs and generally in the S&P 500. Investors may set higher goals after NVIDIA simply took a firmer foothold in the direct vicinity of its all-time peaking price in what I might call the natural and normal way of self-effacingly thanking the market crowd for its kind attention. With no sharp fluctuations to follow the report, NVidia price has hovered between 0.3% and 2.0% in after-hours activity, literally a small step below its closing level at $145.89 on the previous regular session on November 20. Just stepping up to the occasion was enough to grow above $148, which corresponds to +1.5%, at the very first moment of today's pre-market activity. A fresh all-time peak at $152.88 has been shown immediately when the regular session began, which is setting the next standard bar, even though the price retracement back to $145 area or below would still be O.K. without spoiling the overall mood. Another real feat for the AI glory is taken casually by most in the market.

NVidia did not provide another jump in terms of market prices, yet it technically build another to-the-moon-bridge. The company's CEOs officially announced Q3 EPS (earnings per share) of as much as $0.81 (more than doubling its profit achievements at $0.402 in the same quarter of 2023) on revenue of $35.1 billion (against $18.12 billion only one year ago and $30 billion in the previous quarter of 2024). We know that human greed knows no bounds, and so nobody could be fully satisfied with a new historical record by NVidia, which is a clear reason for the market's muted response, but the pool of high-rated analysts at leading media agencies including Reuters and Bloomberg anticipated EPS of $0.75 on revenue of $33.09 billion. The actual results from NVidia were 8% better in profit and 6% higher in terms of revenue. Meanwhile, NVidia updated its own forecast for revenue of $37.5 billion, plus or minus 2%, for the current quarter, which means additional 5% to 9% of growth in nearest three months, compared with previous consensus estimate of $37.09 billion (+5,66%) on average, according to data compiled by LSEG.

NVidia actually readmitted that only supply snags is the factor to temporarily limit growing deliveries amid the boom of demand. And so, I could raise my personal target for NVIDIA well above $220. Maybe not everybody on Wall Street was impressed, but I am surely not the only market dreamer who admired the recent NVidia business performance and its further plans. Analysts from Rosenblatt Securities are even greater optimists as the reputable financial group even raised its price target for NVidia share to $220, maintaining a Buy rating, of course. They especially noted "a positive outlook for the January quarter", primarily because of "higher-than-anticipated demand for its Hopper products", while Blackwell wafers line is "also anticipated to experience a significant supply ramp-up, as it is expected to be sold out for the next several quarters".

The new line of processors "has been embraced by NVidia's customers", with the company going to exceed its initial projections "of several billion dollars in sales" of the new generation of processors in Q4, NVidia's Colette Kress confirmed during a conference call. When asked about media reports that NVidia's latest Grace Blackwell liquid-cooled server containing 72 of the new chips allegedly met overheating issues during initial testing, CEO Jensen Huang commented there were no issues like that and NVidia large customers including Microsoft and Oracle are already updating the systems. The bottleneck for more chip supply is just the limited capacity for advanced manufacturing techniques at the company's fabrication partners like TSMC. As Jensen Huang said, when ramping Blackwell chips up, more production lines would be available to improve the yield, which is usually considered as the number of working chips per wafer, as well as the cycle time. I was fully satisfied with these comments, and what about you?

Synthetix (SNX) is up 3.0% this week, trading at $1.650, lagging behind the broader market where Bitcoin (BTC) surged 10.0% to a new all-time high of $97,890. Earlier in the week, SNX rallied by 19.7% to $1.909 but failed to sustain those gains, retreating after hitting the middle of its ascending channel.

While an upside recovery remains the likely scenario, it faces a strong resistance zone at $1.900-$2.000. If SNX manages to break through this level, it could gain significant momentum, potentially rising by 50% to reach $3.000.

Unfortunately, some leading U.S. retailers failed to inspire investors. While Walmart (WMT), Costco (COST) and Home Depot stocks continued to rise in November, Lowe’s Companies (LOW) lost nearly 5% this week, despite improved forward guidance and nominally better than expected quarterly results in both top and bottom lines, yet it was a peanut compared to a 18% plunge in the market value of Target Corporation (TGT) in today's pre-market trading.

Lowe’s is a well-known big box home improvement chain, which operates over 1,700 stores and employs about 300,000 associates. The stock became clearly overbought by mid-October as its market value increased by almost a third since the beginning of 2024. That's why updating historical records at $287 per share led to a natural price correction, which accelerated its pace when Q3 numbers confirmed that the chain's revenue and profit came down YoY, even though moderately beating consensus estimates. Overall, further sliding below $250 per share, or even to $225-235 per share, is our baseline scenario at the moment, with the stock's potential to willingly resume its uptrend after bottoming out.

Lowe’s provided net sales of $20.2 billion in the recent three months, better than $19.95 billion averagely expected by expert polls but 1.5% below its achievements in the same quarter of 2023. Same store sales lost 1.1% YoY, hit by big-ticket items, especially large "do-it-yourself" projects. Online sales and loyalty programs grew to soften the damage. Another portion of good news is that the company's management coped well with the task of cutting costs of sales, which came down 1.5% to $13.4 billion, while administrative and other expenses only added 1.7% to $3.8 billion. This helped to improve additional losses of profit, which were reduced to 11.5% vs potentially worse analyst projections.

Based on this data, the company's own guidance for the whole year of 2024 was adjusted to a higher range of $83.0 to $83.5 billion, vs $82.7 to $83.2 billion in August estimates, but it was still below the $84 billion to $85 billion range, which was set at the beginning of the year. The guidance for same store sales drop has been lowered in Q2 from the 2% to 3%, and now it is raised to a range between 3.0% and 3.5%. It is still better than the previous estimate of a 3.5% to 4.0% loss in same store sales.

More complicated scenarios could be related with Target stock recovery after the chain of hypermarkets surprisingly generated only $1.85 of quarterly EPS (equity per share) vs $2.10 in the same period of 2024, $2.57 in Q2 2024 and $2.30 in consensus projections for the recent quarter. The revenue of 25.67 billion was only slightly lower but mostly in line with average forecasts around $25.87 billion. This means that the discount policy was good enough in maintaining sales, not profits. Potential dip buyers and mid-term bulls may be terrified by currently entering into Black Friday, then Cyber Monday and finally launching the Christmas season, with growing chances of exacerbating the overall pattern. Target CEOs commented on potential holiday quarter sales by revealing their profit forecast of $1.85 to $2.45 per share, compared to the Wall Street's analyst pool hopes for $2.66 per share, with flat comparable sales projections YoY, instead of consensus bets for 1.64% gains.

"We are seeing the consumer become increasingly resourceful and strategic on how they shop," the chief commercial officer at Target, Rick Gomez, said, following the chain's cutting its prices on thousands of essential and gift items, as well as food, beverages and toys. According to Gomez, only apparel sales were weaker than normally with warmer-than-usual weather across the United States. Spending on other items was strong but the seller probably benefited from lower prices less than consumers did. Again, persistent weakness in selling higher-margin items like home decor and electronics is still here for Target when more families are watching their budgets.

While Amazon, Walmart or even TJX are performing better plus raising their inner predictions for holidays, Target looks to be more careful by moderating its 2024 forecast to between $8.30 and $8.90 in terms of EPS (equity per share) from its own previously forecasted range of between $9.00 and $9.70.

Shopper visits were O.K. to gain 2.4% in the last three months ended November 2, with a 10.8% jump in digital sales being also detected. This means that consumers still love shopping in Target, and so the root cause of solving trouble with earnings lies in price policy and may be logistics. "We encountered some unique challenges and cost pressures that impacted our bottom-line performance," Target CEO Brian Cornell said. He mentioned a three-day strike of U.S. dock workers and port operators in early October to partially shut down shipping on the East Coast and Gulf Coast, so that Target had to carry additional costs to reroute some shipments before the key season.

We think this promises the transitory nature of unearned profits, with Target share price to recover sooner than later. Yet, the stock may first come through re-testing of a below $120 area, plus potentially 3 to 6 more months wait for renewal of the crowd's enthusiasm, before coming back to $150+ and then targeting $180+ again.