News and analysis

Keeping a mind cold and distant from political preferences is one of the essential qualities to succeed in the market. And so, be it another revolutionary and boosting Trump rally or just a simple Kamala's "no major changes, continue to buy" trend, it's clear for me from every angle that most popular retail networks would form a kind of safe haven for a wary part of the crowd on Wall Street. Even if you don't, personally, visit budget shopping centres like Walmart (WMT) and Target (TGT) or you don't have family dinners at fast-food restaurants like McDonald's (MCD), then many other people will try to minimize their daily spending needs in this way. Life becomes more expensive to help discount stores in their business. Beside these considerations, big holiday savings with early Black Friday and Thanksgiving sales season to buy must-have gifts long before Christmas signify not a little.

As a good example, shares of Target (TGT) are now pricing with a double-digit discount even against their summer highs, which was a quick response to solid earnings on August 21. I guess this fundamental gap may be filled soon, even on bright expectations before the store chain's Q3 report, which is scheduled on November 20. Although Walmart (WMT) is currently trading with no discount but rather near its all-time highs, the bullish positioning in it still provides me with a dreamy smile because of refreshing historical records month by month. As I believe, the next pair of Walmart's announced quarterly earnings and its own updated forecasts on November 19 and in the middle of February 2025 is not going to disappoint the bulls. Improving profit based on more or less effective cost reductions in supply chains and growing AI assistance for online customers will accumulate much of the latest achievements of autumn and winter sales season. If so, I just keep my price target at $100 for Walmart (with more than 20% of an additional award to bless me), plus set $175 to $195 (16% to 30% vs the current price) as a midterm area to climb for Target shares.

As for McDonald's, the best-ever numbers of profit only a week ago corresponded to a 8.7% surplus QoQ on record three-month revenue of $6.87 billion. And only the impact of temporary negative effects from the E. coli outbreak, which had been revealed several days before that, prompted MCD share price to retrace further from its recent highs around $318 to around $290. This formed an 8.5% discount on MCD shares. I believe that the E.coli story would be short-lived. It was reportedly linked to Quarter Pounder burgers that killed one person and sickened nearly 50 others. The menu item was "rather quickly" (according to the U.S. Centers for Disease Control and Prevention) excluded from a fifth of 14,000 restaurants across a dozen U.S. states. The onion used was blamed later. Many expect fast rebuilding for consumer trust with further progress in capturing a wider market share. Therefore, the price may not only recover back to $318 but climb further to $325 at least, in my humble opinion. Meanwhile, some large investment funds are keeping their price goals for McDonald's even in a higher range up to $340.

In the past, two notable E. coli outbreaks at Chipotle Mexican Grill in 2015 and Jack in the Box in 1993 had hurt sales at those chains. Chipotle needed about a year-and-a-half to stabilize the number of its visitors, while Jack in the Box sales declined for four straight quarters. Chipotle shares kept the negative mood until 2018, but due to some more cases of norovirus infections after the initial E. coli outbreak in 2015. To estimate possible damage for the market dynamics in MCD shares, most analysts now expect that the Christmas quarter sales of McDonald's could experience some pressure, but it probably would not be as hard as the previous two E. coli cases that I mentioned here. Therefore, my personal conclusion was to buy some stocks of MCD in the current range from $290 to $295, with an intention to add more if the price may go to retest the levels around $275 or a bit lower. I do not believe seriously in larger damage to the stock.

Instead of worse expectations, I bet on McDonald's ability to introduce a comprehensive and attractive value platform, plus new limited-time offerings (LTOs), already in the first quarter of 2025 to boost customers' visits. Analysts at Goldman Sachs follow the same strategy, saying that "subdued international consumer demand" might pressure sales, but McDonald's is expected to emerge as a "winner" by gaining its market share "compared to its quick service restaurant (QSR) peers", supported by "the growth of its loyalty program and increased digital engagement". Their ratings for MCD now reflects an approximately 10% potential upside to the stock, based exactly on my $325 price target, but over "the next 12 months", while I expect MCD will hit before the end of winter of in the beginning of spring maybe, helped by lower interest rates environment and price conscious consumers. By the way, MCD price added more than one percentage point today, despite all odds. I would not be surprised if all the assets listed above, including MCD, would perform a rapid surge in share prices very soon after the election fever will be over.

My best regards to all of you, folks, have a good weekend. I'll not waste much of your time with a long read today. I just came to say ... I love you, like Stevie Wonder... of course, that's true, but... I also came to say that I have my personal shortlist of stocks, which I feel comfortable to purchase as soon as this Wall Street's rough and nervous mood will ultimately disappear. I mean, I am going to buy stocks from the list when more or less clarity on the U.S. elections outcome would finally replace currently increased levels of market volatility. In case of already existing trades, I mean an opportunity to seize the right moment to add more to my volume of stakes in particular stocks at better prices. Today, I share the first point from the list - to be continued next week...

Advanced Micro Devices (AMD) justifiably gathered its bullish momentum to climb by nearly 18% for the last two months, but wasted all of the gains in the couple of days after its quarterly report at the end of October. Today's price is well below $145 vs AMD's summer high at $187.28. Some accidental touching of September's low at $132.11 or even a re-test of annual dips below $122 cannot be ruled out. A profit/risk ratio is better than 2:1 even nominally, if we count it based on the current annual range. Yet, any kind of a bearish turn in the mid-terms is not demanded by logic. Now I'll tell you why. The second most important chipmaker after the AI darling NVIDIA actually posted its nearly record EPS (earnings per share) of $0.92 for Q3, and a full measure of AMD's sin in this context was being in line with consensus projections, with the excited crowd being clearly hungry for more. Again, the Data Centre segment of AMD's business more than doubled YoY to achieve $3.5 billion, but another fault was that AMD previously provided a too rosy forecast of selling more than $4.5 billion worth of AI processors in 2024, which would not be the case anymore.

The firm's own Q4 revenue forecast of $7.5 billion, plus or minus $0.3 billion, should not trail investing hopes as the midpoint of AMD's guidance range was only $0.05 billion below the analyst estimates of $7.55 billion on average, while Q3 revenue came in at $6.82 billion. The number beat the same analyst pool's prediction of $6.71 billion to set a new historical high, providing a 22% increase YoY. Therefore, AMD sees "significant growth opportunities across our data centre, client and embedded businesses driven by the insatiable demand for more computing," according to AMD Chair Dr. Lisa Su. She noted that it was mostly supply chain constraints that hampered the manufacturer's ability to grow faster, while demand for AI chips is still growing strongly. So, investors have no reason for a bitter cry.

I would describe a few more ideas from my shortlist in a few more days. We have enough time for this as the votes counting on the other side of the pond is going to be long. Right now your "Scheherazade" is going to take a rest in this All Hallows' Eve of Friday and wishes you to do the same.

VeChain (VET) is down 4.7% this week, trading at $0.02100, underperforming the broader crypto market as Bitcoin (BTC) continues to rally with a 3.2% gain to over $70,000. VET has remained within a tight trading range of $0.02000-$0.02500 over the past three months, and it is currently nearing the lower support of this range. A rebound from this level could occur if buying interest strengthens.

The recent launch of VeChain's Blockchain-Powered Digital Passport has bolstered security, a positive development for long-term utility. However, this feature also introduced additional complexity for users, potentially impacting adoption and putting pressure on VET's price.

One of the major pharmaceutical manufacturers in the world, which showed 10x growth in value for the last 5 years, dropped by double digit percentage this week. Eli Lilly lost more than $200 per share, or nearly 20% of its peaking market caps, compared to the company's all-time highs at $972.5 in August. This story gives us a tremendous opportunity to acquire a clearly attractive asset at a very good price. A fast bounce back to the northern border of the new range above $850, from the opening price below $800 on October 30 with local intraday dips detected at $769.75, freshly confirmed a flurry of interest among the investing crowd for a stronger recovery potential. At the same time, a wide daily range already in the first hours after Eli Lilly's earnings' report gives everyone additional time to choose a better price to enter the market, as we may expect more dips below $800 or even an attempt to slide further with an exclusively brief visit to the levels between $700 and $750, where risk-on strategies may even strengthen bullish positioning.

The reason behind Eli Lilly's sharp plunge was that its weight-loss drug sales substantially missed overly optimistic expectations. Analyst polls forecasted $4.20 billion for quarterly sales of diabetes treatment Mounjaro and $1.69 billion for Zepbound, which is another brand name for the same medication tirzepatide, regulatory approved for weight management in the U.S. and some other countries. Consensus saw the drug may provide the company with $19 billion of revenue before the end of this year. Now the market found that this would not happen, because sales of Mounjaro from July to September was $3.11 billion only, while sales of Zepbound were $1.26 billion. Of course, the firm posted EPS (earnings per share) of $1.18 only for Q3, failing much of the consensus at $1.45. Its total revenue came in at $11.44 billion instead of $12.09 billion, even though the number rose by 20% YoY.

Lilly commented this still reflected "continued strong demand", yet had to cut its full-year profit projection from the previous range between $16.10 and $16.60 per share to a much lower range between $13.02 and $13.52. Eli Lilly tried to reference $2.8 billion acquisition-related charges in the third quarter, yet also "higher manufacturing costs" was cited as well. The company kept the lower end for supposed sales range at $45.4 billion but lowered the upper end by $600 million to $46 billion.

As to the two tirzepatide-based drugs, Eli Lilly's CEO David Ricks admitted "there is an excess supply... but we haven't been stimulating demand the way we had originally planned," adding that his company delayed plans to advertise weight-loss drug Zepbound while also postponing international launches of production and distribution to focus on "increasing inventory levels in the U.S." Thus, sales of both Mounjaro and Zepbound "decreased by mid-single digits", derailed by "inventory changes" after Eli Lilly reportedly invested $7 billion in its Indiana site and facilities in Ireland to expand production. From our point of view, this may be a planning error that led to a partial deflation of a vast bubble of expectations, but it does not mean that the whole project was something like a big bubble. Discounting market price may reflect only a temporary and rather small trouble with marketing promotion plans for very popular new products, which are still in a bid demand. And so, a 20% or 25% correction of market value could be enough to revive the investment interest for the stock. Eventual recovery to the levels above $950 looks almost inevitable.