Ticker Reports for October 17th
Taiwan Semiconductor Soars on Earnings With More Room to Run
Many investors still hold high regard for the technology sector in the United States today, which makes sense as the services PMI index is carrying most—if not all—of the economic growth left in the country, compared to the 23-month contraction in the manufacturing sector, as seen in that PMI index. However, not all technology sectors are equal.
The semiconductor and chipmaking niche of the sector receives special attention, which has been present all of 2024 and extrapolated since the shortages seen since the COVID-19 pandemic. In recent quarters, all the pressure seems to have been placed on shares of Taiwan Semiconductor Manufacturing Co. (NYSE: TSM), the global leader in chip sales with major customers all over the sector.
However, investors might have been concerned after seeing NVIDIA Co. (NASDAQ: NVIDIA) sell-off after its last quarter, which announced a state of “lots and lots of supply,” according to its CEO, which would ultimately hurt margins and earnings per share (EPS). More recently, ASML Holding (NASDAQ: ASML) stock sold off by over 17% in a single day after missing booking guidance.
Taiwan Semiconductor Stock Soars 12%: Strong Earnings and Growing Demand Fuel Rally
To ease some of the ASML and NVIDIA concerns, Taiwan Semiconductor stock rallied by over 12% in a single day following the blowout earnings results posted. This may have caused a surprise figure to outperform some of its peers during the quarter.
Investors would have been ready for this rally by looking at a few metrics beforehand. Some of these metrics include the monthly revenue growth rate and the fact that markets were willing to pay a premium valuation only to get exposure to the company’s future earnings, which is often a bullish sign.
Building on these views that investors enjoyed the rally, here’s what investors can now keep in mind moving forward and decide whether there is still further upside left in Taiwan Semiconductor stock. To start with revenue, the company’s earnings press release shows a jump of 39% over the past 12 months.
Then, investors can lean on the fact that the company’s net income jumped by 54% during the quarter to significantly boost potential valuation targets from Wall Street analysts. But that’s all in the past; in order to accurately predict the stock’s value, investors need to look into the future.
Easing some of the fears of demand from the industry, the company’s CEO said, “Demand is real, and I believe it’s just the beginning,” speaking of other peers in the space like NVIDIA. These words were quantified further after the statement, though management guidance to blow most expectations out of proportion.
Revenue projections, even after a 54% jump over the past quarter, are still expected to outpace current guidance projections. For the next quarter, Taiwan Semiconductor management expects to deliver up to $26.9 billion in revenues compared to the estimate of $24.9 billion.
Not only is revenue expected to rise by another double-digit rate, but here’s where valuations can be boosted in the coming months. Gross margins are guided to land nearer to 57% against the former consensus of 54.7%, which speaks to the state of pricing power present in the industry as demand outpaces supply to help costs and prices.
Wall Street Weighs in on Taiwan Semiconductor Stock: What Investors Can Expect Next
Recently, analysts at Needham & Co. decided to reiterate their “Buy” rating on Taiwan Semiconductor stock on the day of earnings. Still, their valuations seem a bit out of touch. They see the stock going to $210, which is still roughly a dollar lower than where it rallied.
More significant is the previous price target set by those at Susquehanna in August 2024. Those analysts saw a “Positive” rating for the stock, this time boosting their targets and valuation up to $250 a share to call for a further 18.5% upside from where the stock trades today.
Realizing that the demand trends might favor more profitability and margins in the industry, bearish traders decided to step away from the market during the past quarter. Taiwan Semiconductor stock’s short interest has declined from $5.6 billion at the peak of last quarter to $4.5 billion today.
As the stock rallies by double-digits this week, more short sellers might be forced to cover their positions and add additional buying pressure to a stock whose bullish momentum seems to just be getting started.
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Is Lucid Group Nearing the Bottom? What Investors Should Know
If you’ve been wondering when Lucid Motor's (NASDAQ: LCID) downtrend will resume and how deep the stock price can go, the answers are soon and much deeper. The latest news is more of the same as what was issued earlier in the year, resulting in increased dilution and reduced investor confidence. The news is the public offering of 262,000,000 million shares and an offsetting issuance to Lucid’s largest shareholder. That’s worth another 375,000,000 shares and sufficient to dilute shares by 30%. The critical takeaways are that this cash will be burned like so much has been burned before it, used for “general corporate” purposes, i.e., the high cost of developing, ramping production, and marketing its electric vehicles.
Lucid on Track to Produce Losses in Q3
Lucid’s Q3 production and delivery numbers were not impressive. Although automobile deliveries ramped higher, the increase is unsustainable due to the sequential decline in production. The company produced only 1,805 vehicles, missing the consensus by more than 450 or nearly 20%. The Q3 results will be released in early November; analysts forecast a sequential decline in revenue to $195.2 million, up 30% compared to last year, and for losses to widen. There is a chance for outperformance due to the low bar set by analysts and strength in deliveries, but it will likely be insufficient to sustain upward movement in the share price.
Other than the Saudi PIF, which is invested heavily in Lucid’s success, owning about 58% of the stock, the sell-side support is shaky at best. MarketBeat data shows institutional ownership at only 11%, with analysts reducing their sentiment ratings and price targets in 2024. The trend in sentiment revisions has the consensus at Hold verging on Reduce with a price target of $3.70. The $3.70 target implies a 40% upside from recent action but is well below critical resistance points and down by 50% in the last 12 months. That trend is not expected to end until there is a clear path to profitability; profitability isn’t expected until 2027, and the forecasts are dimming.
Lucid’s Dilutive Actions Play Into the Hands of Short-Sellers
The short interest in Lucid stock is down from its highs in 2021 but remains high at nearly 30%. Because there have been no bullish catalysts and the share sales are a dilutive influence, investors should expect the short interest to remain high for the foreseeable future, if not increase. Other reasons to expect Lucid’s short interest to remain high include stalled growth, lack of profits, and the incredibly high valuation. The stock trades at 10x this year’s sales, a nearly 50% higher valuation than Tesla, which makes money.
Among the risks for investors in Q4 is the outlook for 2025. The analysts' consensus forecast reported by MarketBeat implies a 130% increase in sales that may not become a reality. The forecast for 2025 hinges on three things: the ramp of Lucid Air production, the start of production for Lucid’s Gravity SUV model, and competition. As it is, Air production growth is underwhelming, Gravity has yet to be released, and competition is growing. Although the major OEMs have scaled back their EV plans, production is accelerating in 2025, including numerous offerings to compete directly with Lucid’s higher-priced vehicles.
The Technical Outlook for Lucid Stock Is Bearish
The technical outlook for Lucid’s stock is bearish because it is in a downtrend, and the trend is intact. The share sale news sparked a 15% decline in the market, putting the stock at a multi-month low, below a critical support target. That target is near $2.80, and lows set in August when the Q2 results were released. Assuming the market cannot close above that level, it will likely continue to the bottom of the long-term range. The bottom of the long-term range is near $2.50; a move below it would open the door to a significant decline that could lead this stock into the $1.00 range.
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90% Gain Possible? Analysts Are Bullish on Joby Aviation
As we turn the corner into the final few weeks of the year, there are not going to be many stocks offering the kind of upside that Joby Aviation Inc (NYSE: JOBY) is. What’s interesting is that its outlook hasn’t been this bullish in a while. The California-based electric air taxi company, which boasts a market cap of $4 billion, went through a 60% sell-off earlier this year, and the stock has been trading mostly flat since April.
However, investors have been eagerly waiting for signs of recovery, and there are several reasons to think now might be the perfect time to consider getting involved.
Joby's Forward Momentum
While Joby’s earnings report in August raised some concerns about its path to profitability, analysts have remained bullish that the company is on the verge of reaching a critical inflection point. Joby has a strong lineup of milestones ahead, which should help the bull’s case. Initial aircraft deliveries and certification processes are both underway, while the company is also gearing up to launch commercial operations across markets in the U.S. and Middle East and even a deployment with the Department of Defense.
Joby’s vertically integrated manufacturing strategy has also impressed, as it allows the company to maintain tighter control over production, which should translate into superior product quality and operational efficiency.
Bullish Analyst Updates Highlight Joby’s Growth Potential
These have been the main reasons the stock has received so many bullish updates from analysts in recent weeks. In a note to clients earlier this month, the team over at Canaccord Genuity reiterated their Buy rating on Joby shares, along with a price target of $10.50, nearly 90% above where Joby shares were trading after Thursday’s open.
This bullish outlook echoed that of HC Wainwright, who also reiterated its Buy rating earlier this month, and Cantor Fitzgerald, who did the same at the end of September. There’s a general feeling of optimism about the company’s progress, particularly its ability to reach near-term production targets of one aircraft per month by the end of 2024. Considering Joby’s shares are still picking themselves up after an eye-watering selloff earlier this year, you can’t help but feel there’s a bargain to be had right now.
Potential Concerns: Joby’s Upcoming Earnings Report Is Critical
Investors thinking about getting involved should know that there’s a good bit riding on the company’s upcoming earnings report at the end of the month. Investors will be watching closely to see whether Joby can meet its ambitious production goals while managing high capital expenditures and research and development costs to ensure it has enough runaway. Additionally, pursuing a vertical integration strategy, while beneficial for manufacturing control, may lengthen certification timelines with the FAA, something that’s been noted by analysts.
Still, with long-time investor Toyota recently making a fresh $500 million investment in Joby, the company should have more than enough financial backing to achieve its near-term goals.
Getting Involved: Joby’s RSI Signals Plenty of Upside Potential
Beyond the positive analyst updates and optimistic outlook, there’s also the stock’s technical setup to consider, which, in the case of Joby’s relative strength index (RSI), is also bullish. For context, the RSI measures a stock's recent momentum on a scale of 0 to 100, with readings above 70 indicating extremely overbought conditions and below 30 signaling the opposite. Joby’s RSI of 55 shows that the stock is very much in neutral territory, meaning there’s a ton of room for it to run to the upside before it could be considered to be running a little hot.
This isn’t the kind of stock to be going all-in on; it’s far too small and speculative right now. However, the potential upside should justify Joby’s inclusion on the watchlist at the very least. Despite some ongoing concerns over capital expenditures and regulatory hurdles, there are a lot more reasons to get involved versus staying away.
Let’s see if the stock can continue to tick upwards into their earnings later this month. Assuming no nasty surprises with that update, the upside could get interesting pretty quickly.
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