News and analysis

This week's jump through hoops performed by Micron Technology (MU) was like a well expected surprise for me. As I already said in late February, the stock was poised for a take off to clear the $100 hurdle. Micron's joining the NVidia party, sooner or later, would provide a stimulating effect on its market value, and that is exactly what happened when Micron surged over 15% during one day on a much-better-than-expected quarterly numbers. Its sales came out at $5.82 billion, which was 9% above the analyst pool consensus and 23% beyond the previous quarter results. It showed an EPS (earnings per share) of $0.42 instead or predicted $0.25 cent losses to demonstrate Micron handles rising cost challenges. Again, the company's management freshly shared an optimistic outlook by setting its own sales projections at $6.6 billion for the next quarter, against average expectations of nearly $6 billion.

Besides touching uncharted lands above the $110 parallel, Micron immediately got price target hikes to $124 by Mizuho Securities, to $130 by Piper Sandler and Wedbush and to a new Wall St high of $225 by Rosenblatt. These were more than serious statements from several reputable investment houses as some of them characterised the current situation as an early stage of broad-based memory demand growth or as an uptick in the memory cycle at least. "This momentum is expected to sustain, attracting a broad spectrum of investors including mutual funds, momentum and passive strategies, and retail investors," Mizuho analyst said, adding that Micron now "looks and feels like the next best AI related semi long trade after NVDA”, even though "there really is no other NVDA". They considered possible concerns about the risks of buying Micron stock after a 15-20% single-day surge as premature, and this fully coincides with my personal point of view. Moreover, investors may partially shift from NVidia to other AI semiconductor stocks, even as the new Blackwell chips by NVIDIA were presented this Tuesday.

Micron could be one of their substantial preferences, because Micron's next generation DRAM (dynamic random access memory) is now selling with NVidia's H100 and H200 AI-capable GPU (graphic processing units), and probably the same productive combination would be achieved soon with the newest NVidia's B100 chip. So, when investors think about NVidia, they should think of Micron at the same moment.

Meanwhile, another favourite of mine and of Wall St crowds, Broadcom (AVGO) added more than 5.5% to its market value after its very nice performance at the Broadcom's corporate "Enabling AI in Infrastructure" event, where Broadcom freshly confirmed its AI-related sales forecast of over $10 billion in the fiscal year of 2024, a 140% YoY jump, in sync with revealing the addition of its new AI ASIC customer. Focus on AI component supply will boost its AI sales to over $14 billion by the calendar year of 2026, its CEOs noted. Broadcom also showed expansion in high-speed Ethernet switches, which are critical for supporting an explosive growth in AI accelerator clusters. Therefore, the Bank of America's group of analysts maintained a Buy rating with $1,680 share price target for Broadcom, while Bernstein maintained an Outperform rating with a $1,600 price target, compared to nearly $1350 at the moment. Goldman Sachs group said its team came away from the event "with a better appreciation of Broadcom's strategy, competitive moat, and growth opportunity across Networking and Compute Acceleration within the context of AI". For me, just testing the next psychological resistance area at $1500 looks like a pretty conservative scenario, doesn't it?

Overall, a set of good resumes for sticking to my Buy and Hold strategy concerning not only Micron and Broadcom, but also many other related stocks like Crowdstrike (CRWD), Qualcomm (QCOM) and so on.

Chipotle Mexican Grill Inc (CMG) seeks to attract more small investors by approving a 50-for-1 stock split. The burrito chain never did it before in its history, since it launched its IPO (initial public offering) in January 2006 at only $22 per share. Now, Chipotle Mexican Grill's stock price touched $3,000 per share on March 20, after nearly doubling its market value for the last 12 months. A spectacular success among other restaurant segment companies and large income for its faithful shareholders for many years, yet few private traders can handle such an expensive part for only one company in their portfolios, and so many just prefer to skip the CMG option. Who has extra $3,000 for Mexican food on a trading account? This is why the amount of those investors is much less compared to the number of rice bowl eaters and lovers of tacos. Chipotle's board is ready to fix the problem. This split would happen at the moment when the stock is "experiencing an all-time high driven by record revenues, profits, and growth," Jack Hartung, its CFO argued. He hopes the move would make CMG stock accessible to the chain's own employees and "a broader range of investors". Each CMG investor as of June 18, 2024 would get 49 additional shares for each share held. And the split shares for new attracted investors will be done after the Wall St closes on June 25, 2024. So, everybody would be able to purchase some stake in Chipotle Mexican Grill, starting from $60 or maybe a little more, depending on the post-split quotes of the company at that moment.

The Chipotle Mexican Grill stock was trading around $2,800 before the opening bell on March 19, when the split announcement came immediately sending the price to a new range between $2,900 and $3,000. CMG shares may continue to rally, especially after the split would be accomplished, to hit fresh record levels propelled by the current bullish sentiment. Such expectations are based on strong earnings due to a solid demand in more than 3,400 locations only across the United States. Chipotle Mexican Grill forecasted a 34.4% YoY growth for the current fiscal year and may become a top pick for growth investors at a low cost price soon. In early February 2024, CMG beat consensus numbers once again in both top and bottom lines, while projecting its full year comparable sales growth in the mid-single digit range.

A brief but eventful history. In 1993, the first Chipotle Mexican Grill opened in Denver, Colorado. In 1998, the first restaurant outside of Colorado started in Kansas. In the same year, McDonald's became a minority investor in the company to become Chipotle's largest investor by 2001. The business expanded to over 500 food points in 2005. In October 2006, McDonald's fully divested from Chipotle, as a part of a larger initiative to divest its non-core business restaurants. Ironically, some twenty years after this, Chipotle Mexican Grill shares may become a part of almost every investment portfolio.

Encouraging verbal signs and interest rate path projections after the Federal Reserve meeting last night clearly provided greater support to the broad S&P 500 indicator than to its leading core consisting of the AI-related businesses. The S&P 500 just ended the regular session on March 20 by nearly 0.9% higher to close above 5,200 points for the first time ever and then added another 0.5% in the pre-market trading today, while most AI-leaders, including NVidia and AMD, stood in the vicinity of their previous heights. At the same time, even some stocks that were lagging behind in recent months like Tesla (+2.5%) or banking stocks cheered up more visibly. The Bank of America added 2% in one day, as an example. Several consumer discretionary stocks rose too. A very much understandable effect, as the AI core, or tech stocks at the bigger picture, represented a major group, which successfully climbed upstairs even without any doping help from central bankers. Meanwhile, most stocks need stronger pillars like lower borrowing costs and soft landing hopes to grow further. And so, the market has been granted that wish.

Surely, the Fed left its fund rates steady for the fifth time in a row, yet it mentioned three "planned" rate cuts before the end of 2024. The chair Powell said before that March was "too soon" to have "enough confidence" from incoming economic data to cut rates, but now most investing houses are betting for June. The Fed also saw more rate cuts to drop to 3.9% in 2025 and 3.1% in 2026. For me, they are using a kind of gaslighting tactic, as initially they pushed the market to suppose up to six rate cut moves this year. In fact, the Fed did zero moves, while inflation is trending up again, and so the Wall Street is now happy with only a suggestion of three rate cuts soon. This is not dovish yet is perceived as being dovish. That was a neat trick with our minds yet it worked well to make almost everybody keep bullish positions. This happens exactly when most households and business owners continue to suffer from too expensive credit money, yet this would not prevent mega caps and now broader markets to enjoy new peaks. Well, all of us will work with what we all have, still expecting the S&P 500 at 5,500 or so in few months. And I will buy and hold when others are buying and holding, why not?

Ethereum (ETH) faced a weekly decline of 2.8%, trading at $3535. However, the altcoin experienced a significant drop of 16.0% to $3054 earlier in the week, nearing crucial support levels at $3000. The decline coincided with broader market trends, as Bitcoin (BTC) also saw a 10.8% decrease to $60,817 on Wednesday.

The major contributing factor to the downward pressure on Ethereum was the news of the U.S. Securities and Exchange Commission (SEC) delaying the approval of a spot ETH-ETF, which was anticipated on May 23. This announcement added to the negative sentiment in the cryptocurrency market.

However, Ethereum saw a notable recovery after the Federal Reserve hinted at potential interest rate cuts in June, despite ongoing concerns about inflation. The Fed's assurance regarding monetary policy provided a sense of relief to investors, leading to a market-wide rebound.

With the Fed's announcement, Ethereum has an opportunity to regain momentum and potentially reach $4000 per coin if it can surpass the resistance level at $3500.