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Uranium stocks surge
Prices for the commodity itself, on the other hand, have fallen. Uranium was trading at $31.35 per pound on Monday, after breaking above $50 in September. Because the market is small, trading volume is low.
Aberdeen Standard Investments’ director of investment strategy, Robert Minter, stated that investors are interested in the space because nuclear energy, like fossil fuels, can provide baseload power, or electricity 24 hours a day, seven days a week. Solar and wind, on the other hand, are intermittent power sources because they cannot be ramped up and down at will.
According to Minter, the surge in nuclear power-related stocks indicates that investors want longer-term exposure to the nuclear theme as the global power crisis demonstrates the need for energy security.
According to FactSet data, the Global X Uranium fund has received $170 million in the last month and $675 million this year, bringing its assets under management to $1th an additional billion. The NorthShore fund has raised approximately $198 million in the last month, wi$603 million expected in 2021, bringing its total asset base to $847 million.
Lotus Resources Limited, Toro Energy, and Consolidated Uranium were among the top gainers on Monday, with market capitalizations of less than $300 million. Among the larger players, National Atomic Company increased by more than 4%, while Cameco Corporation increased by 5.9%.
On Monday, NexGen Energy, Paladin Energy, and Denison Mines all saw significant gains.
Last week, French President Emmanuel Macron announced plans to invest one billion euros in the development of mini modular reactors as part of a larger clean energy push. According to Reuters, Japan’s prime minister stated that restarting the country’s nuclear power plants is critical.
Sprott Asset Management began aggressively buying uranium stocks earlier this year, driving up prices for the commodity and companies involved in nuclear power development.
Car production fell 18 percent year on year in the third quarter due to a semiconductor shortage, according to analysts led by Patrick Hummel in an Oct. 8 research note — chips are used in a wide range of auto parts, from entertainment systems to power steering. Analysts at the bank, on the other hand, predict a recovery next year: “The low point in the global production run-rate is possibly already behind us… and car demand continues to outstrip supply. “It’s time to increase exposure to auto stocks,” the analysts concluded.
While the bank predicted that third-quarter earnings would be “bad” (automakers began reporting earnings this month), it predicted that next year’s would be significantly better. “Consensus earnings growth in 2022 appears to be significantly understated.” We forecast a 15% increase in global production to 88 million cars in 2022… autos will likely be among the sectors with the highest earnings momentum over the next 12 months,” they added.
Renault, which the bank anticipates will have “further group margin momentum towards 4.5-5 percent next year, helped by cost savings and product mix.”
Michelin is a tire manufacturer. “Michelin’s exposure to the current chip shortage risk is limited.” Furthermore, higher prices should benefit the company,” the analysts stated.
Faurecia, a parts supplier, is forecasting “strong outperformance” for fiscal year 2021.
Gestamp is a Spanish autoparts manufacturer. “We anticipate a positive tone from management in FY [financial year] 2022,” the analysts said.
UBS expects Stellantis to announce a “rock-solid” outlook for its North American business. “Against the backdrop of tight supply and the positive impact of merger synergies, we believe Stellantis had little difficulty dealing with higher commodity prices, and we expect Stellantis to maintain its high level of profitability,” the analysts wrote.
Valeo is a car supplier. The bank reduced its earnings forecast for 2021 due to lower global production levels, but it expects a “sharp” increase in EBIT margin next year.
Volkswagen. UBS stated that it is “still on track” to achieve a 6 percent to 7.5 percent operating margin in 2021 and that it has a “strong” order backlog.
Daimler, which has a “strong” outlook for 2022, according to the bank. Analysts added that it has a “compelling” strategy for luxury electric vehicles.
Tesla, which delivered 241,300 electric vehicles in the third quarter, is rated neutral by the bank. “Order books are fully covered until the end of next year.” “We raise our 2021 delivery estimate to 894k (from 860k), implying another Q4 delivery record of 267k vehicles,” the analysts wrote.
Walmart (WMT) forecast look promising
Analyst Kate McShane added Walmart to Goldman’s conviction buy list, a list of the firm’s analysts’ top picks. McShane stated in a client note on Monday evening that recent improvements should result in an increase in a key earnings metric and cash levels, and that Walmart stock forecast looks very promising.
According to Goldman, the company’s massive scale should give it an advantage over other retailers as the US economy continues to work through supply chain issues.
“WMT’s proactive approach to its supply chain and inventory supported solid results last quarter and positions the company well for 2H21. Walmart’s stock has fallen 1.7 percent this year and is expected to fall further in 2020. Walmart’s price target has been raised to $196 per share from $184 per share.
To make room for Walmart, Goldman removed Target from the conviction list, but the firm still rates the retail stock as a buy.
Buy Teladoc (TDOC) before earnings investors say
Analysts Stephen Baxter and Stan Berenshteyn initiated coverage of Teladoc at overweight, stating in a note to clients Monday evening that the company has developed a well-rounded offering for virtual health.
“We like that TDOC has exposure to several key telehealth product categories and believe the company is well positioned to support its client base’s virtual care ambitions as a one-stop shop.” The pull-forward of telehealth growth due to COVID-19, as well as the company’s increasing complexity, make forecasting TDOC somewhat more difficult, but we expect 20 percent+.
According to the Teladoc stock forecast made by Wells Fargo, Teladoc’s total addressable market, or TAM, is at least $120 billion.
Cathie Wood’s flagship Ark Innovation fund has Teladoc as its second largest holding. This month, the widely followed innovation investor has been adding to her position.
Following a surge in new members during the pandemic, the company expects paid membership growth to be flat to slightly higher in the second half of the year, with year-end guidance ranging from 52 million to 54 million. Wells Fargo, on the other hand, stated that the company still has room to grow in the coming years.
“While this’slowdown’ may be giving investors pause, we believe the rate of member growth over the last few years was clearly not sustainable.” “However, we believe TDOC still has a significant opportunity (65M) to expand membership through existing health plan relationships,” the note stated.
The stock more than doubled in 2020 as telehealth boomed, but it has since dropped by more than 30% this year.
Wells Fargo set a price target of $156 per share on Teladoc, which is 14.5 percent higher than where the stock closed on Monday.
Will Apple’s (AAPL) earnings results convince investors?
In a note to clients on Tuesday, analyst Samik Chatterjee, who has an overweight rating on the stock, said that weak guidance during Apple’s quarterly report could overshadow strong earnings.
In a note discussing Apple stock forecast Samik Chatterjee says: “We expect F4Q results and qualitative guidance for F1Q22 to feel similar to the last earnings call, with a beat accompanied by guidance for lower than typical seasonality for F1Q22, driven by supply constraints.”
Apple’s fiscal fourth-quarter results are set to be released after the market closes on Oct. 28.
Chatterjee expects Apple to report $1.30 in adjusted earnings per share in the fiscal fourth quarter, aided by strong sales of the old iPhone 12 series. However, due to supply chain issues, JPMorgan reduced its fiscal first-quarter estimates for iPhone sales and revenue.
Reports of production problems have weighed on Apple’s stock in recent weeks, but shares appear to be gaining traction, rising 4% in the last three trading sessions.
According to JPMorgan, factory issues have begun to be resolved, but production remains below normal levels.
“The primary bottleneck relative to iPhone 13 production worth monitoring was related to the camera module,” the note said. “Checks indicate that while COVID-19-related lockdown in Vietnam has passed the worst point, production continues to face yield challenges in the near term.”
Despite the potential delays, Chatterjee believes that strong customer demand will eventually boost Apple’s stock price. JPMorgan’s price target of $180 per share is roughly 23% higher than where the stock closed on Monday.
Bank of America’s favorite picks
According to the September producer price index, prices for final-demand wholesale goods increased 0.5 percent from the previous month. The index increased 8.6 percent year on year, setting a new high since the data series began in 2010.
“Although margins expanded to record highs in the second quarter, companies reported increasing difficulty passing through cost inflation.” “Things have gotten worse since then,” said Savita Subramanian of Bank of America in a note. “We also saw a near-record number of profit warnings in the third quarter (third highest since 2011), primarily due to supply issues.”
The ability of a company to raise prices without losing business is referred to as pricing power. Companies with pricing power fare better than competitors during inflationary periods because they can pass on higher costs to customers.
“The most common screen request we get is for companies with pricing power,” Subramanian explained.
Bank of America looked for companies with positive two-year sales and EBIT (earnings before interest and taxes) margin growth in the second, third, and fourth quarters. The firm identified the companies with a positive historical sensitivity to the consumer price index from that pool. The bank also identified companies with lower-than-median labor intensity — the ratio of employees to sales — and higher expected market share in 2021 compared to 2019.
Take a look at five of their recommendations:
Companies can have pricing power if they provide a unique value proposition or sell necessary goods or services.
Consider Apple, which appears on the screen of Bank of America. The iPhone is a one-of-a-kind product that distinguishes Apple from competitors.
The streaming service Netflix is also on the bank’s list. Analysts frequently commend Netflix for its industry-leading content, most recently the international phenom “Squid Game,” which became the platform’s largest series launch ever.
“We expect some of the highly-viewed and highly-rated Netflix TV shows to continue to drive subscriber growth,” says Nat Schindler of Bank of America.
Oil company ConocoPhillips, food processing and commodities trading corporation Archer-Daniels-Midland, and chip maker Advanced Micro Devices are among the companies that have contributed to the bank’s screen.
Next year stock forecast
At the Milken Institute Global Conference, Minerd told Brian Sullivan that stocks were about to make a significant move higher after a rough few months.
“I think the stocks will do well,” Minerd said in an exclusive interview. “There’s the short run, which is the seasonal correction we just experienced. That, I believe, is now complete. For the time being, I believe we have a solid foundation under stocks. Stocks will rise by 10 to 20 percent over the next year.”
He also predicted that the S&P500, which was trading near 4,480 on Monday, would rise to 5,000.
Minerd, who correctly predicted a pullback in the 10-year Treasury yield earlier this year, predicted that bond yields would not rise significantly in the near term, providing support for equities.
“Our research shows that, given the amount of leverage in the system, the Fed, even if it starts raising rates, can’t get rates much higher than 2% before the economy starts to stall,” Minerd said. The 2% level, he believes, should serve as a “pretty much a cap” for the 10-year Treasury yield.
The central bank has hinted that it may begin to reduce its asset purchases later this year. As of the Federal Reserve’s September meeting, an increasing number of members expected a rate hike in 2022.
Minerd, who has previously stated that the bond market is still experiencing a decades-long decline in yields, believes that the 10-year yield’s “center of gravity” is lower than where it is currently trading, near 1.6 percent. Yields move in the opposite direction of prices.
He went on to say that rising inflation would be a “scare,” comparing it to the short-lived price increases that have occurred in the aftermath of major wars in the past.
“I don’t believe it’s six years, and I don’t believe it’s six months,” he said. “We need to figure out what’s causing the supply chain disruption.” [However], we are already seeing deflationary pressures emanating from industries such as hospitality [and] airlines.”