TickerTalk Headlines for June 12th
In this newsletter:
Beyond GME: Top 3 WallStreetBets Stocks Better Than GameStop
The Reddit community WallStreetBets is synonymous with the meme stock movement. A distinguishing feature of this online community is its members' preference for stocks that have a high short-selling risk. The community's founder, Jaime Rogozinski, has said his goal was to build a community "for people to talk about high-risk trades in an unapologetic way for people to make some short-term money with disposable income."
This strategy achieved national prominence in 2021 with the explosive short squeezes on stocks like GameStop Corp. (NYSE: GME) and AMC Entertainment Holdings Inc. (NYSE: AMC). However, this strategy does not suit every investor.
That said, not all WallStreetBets stocks are high-risk stocks. In fact, Tesla Inc. (NASDAQ: TSLA) and Nvidia Corp. (NASDAQ: NVDA) are two of the most popular stocks in the community based on the number of member posts in the past few months.
The bottom line is that even if you never watch a live stream from someone with the handle “Roaring Kitty,” you may want to keep an eye on the stocks this community is watching. Here are three that look like solid stocks to own.
C3.ai May Be Turning into Less of a Heavy Lift
C3.ai (NYSE: AI) helps organizations develop and deploy AI software solutions. The company's strength lies in leveraging an organization’s data to perform predictive analysis using pre-built AI models for industry-specific solutions.
While that may be a tantalizing premise, it hasn’t been reflected in the AI stock price. Like many smaller artificial intelligence stocks, it fell victim to not being Nvidia. When investors soured on the idea of an imminent interest rate cut, small, unprofitable companies quickly got sold off. That was particularly true of companies without strong institutional backing. For example, the AI stock price was cut by nearly 50%.
But in the last three months, retail investors have jumped in, boosted by a strong earnings report confirming the company’s profitability. As of June 11, 2024, institutions own just 38.9% of the stock’s float, but its strong movement suggests that it may be heading higher. If so, AI stock will start to look very attractive.
CrowdStrike Will Soon Be Part of the S&P 500
Every three months or so, the S&P 500 rebalances the stocks that make up its underlying index. On June 7, 2024, the cybersecurity company CrowdStrike Holdings Inc. (NASDAQ: CRWD) was named one of the newest additions to the S&P 500 index. It will begin trading as part of the index on June 24, 2024.
For some companies, inclusion in the index generates institutional interest from fund managers whose funds track stocks included in the index. That may not be as significant for CrowdStrike, which already has 71% institutional ownership. However, in a competitive sector like cybersecurity, receiving this distinction can separate CRWD stock from a crowded field.
It’s also significant to note that CrowdStrike will enter the index in the first quarter it was eligible. This recognition may confirm that investors need to keep bidding up a stock that’s up 150% in the past 12 months and 46.7% in 2024.
Lululemon Is Giving Investors a Profitable Pullback
So far, in 2024, Lululemon Athletica Inc. (NASDAQ: LULU) has delivered two earnings reports. In both cases, it not only beat analysts’ estimates for revenue and earnings but also posted numbers that were higher than the prior year.
You wouldn’t know that by looking at LULU stock, which is down 37.9% in 2024. That’s taken away all of the stock's 12-month gains and has it trading near its 52-week low.
In the company’s fourth quarter 2023 earnings report in March, management warned of lower earnings as its consumer base fell under pressure. That wasn’t the case in the first quarter of 2024, and it’s not reflected in the company’s guidance.
The culprit for the moment is short interest, which spiked higher in the fourth quarter of 2023. While it’s down significantly, it’s still at elevated levels. But with analysts forecasting a 10% earnings upside, it would seem this growth stock could be a good buy for value-hunting investors.
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Top 4 Fastest Growing S&P 500 Dividends: Buy, Sell, or Hold?
Dividends are a leading reason to buy a stock because the stock pays you to own it. Growing dividend distributions are more valuable than those that aren’t; by extension, distributions growing faster than average are even more valuable. Or so goes the theory. This is a look at the four S&P 500 stocks with the hottest three-year distribution growth and whether they are a buy, sell, or hold.
Morgan Stanley Tops the List With 32% Dividend Growth in 3 Years: Hold
Morgan Stanley (NYSE: MS) is the fastest-growing dividend on Wall Street. The company kicked its dividend into high gear in 2021 and is sustaining a solid growth pace today. The payout has increased by more than 30% in the last three years because of the accelerated growth in 2021, but the growth pace has slowed. The last two increases are strong, nearly 11%, but not 30%.
Investors can expect increases to continue at this pace because of earnings quality and the growth outlook. Revenue growth has also slowed, but it is still sound. The consensus for this year is for a low-to-mid-single-digit advance and for the margin to widen. Analysts rate this stock a Hold and see it advancing less than 5% at the midpoint. The consensus target is up compared to last year, but the trend has flattened for the last quarter and provides no tailwind for the market.
Goldman Sachs Stock Is the 2nd Fastest Growing Dividend on Wall Street: Hold
Goldman Sachs's (NYSE: GS) dividend is similar to Morgan Stanley's. Dividend growth accelerated in the wake of the pandemic but has slowed since. The payout has increased more than 30% in the last three years, but the last two increases were in the 10%-12% range, where the next will likely fall. The differences are the payout ratio and the yield, which are lower.
Goldman only pays about 30% of its earnings, and the yield is correspondingly lower, about 2.45%, with shares near record highs. Another difference is the analysts' sentiment. The analysts rate this stock as a Moderate Buy but view it as valued fairly. The latest updates are leading to the high end of the target range, but the market may have difficulty getting there without another catalyst. That could be the FOMC decision or earnings due in July.
Thermo Fisher Science Is Strategically Increasing Distributions: Hold
Thermo Fisher (NYSE: TMO) is the 3rd fastest-growing company on a three-year basis, increasing its distribution by nearly 18% annually. Among the differences with this payout are that the pace of increase can vary from year to year, either faster or slower, and that the pace of growth tends to run hotter, above 12%, over the long term, and it is sustainable. The company is paying less than 10% of its earnings, but there is a catch: the yield is very low. The yield is so low that it is little more than a token gesture that allows dividend-only investment funds to buy in.
Income investors looking to buy this stock for its distribution growth will be disappointed by the yield of about 0.25%. Analysts are another headwind for this market. The 18 tracked by MarketBeat rate the stock at Moderate Buy but see it advancing only 5% at consensus, and the consensus target has been trimmed since last year.
Oracle Accelerates Dividend Growth: AI Is in the House: Buy
From the dividend growth perspective, Oracle (NYSE: ORCL) is the most attractive S&P 500 stock. The company pays an average of 1.35% in yield but is growing the distribution at a 15% CAGR and growth is accelerating. The pace of growth hit 25% last quarter and may sustain at a high level for the next few years due to the low 30% payout ratio, an expectation for earnings growth, and the tailwind provided by AI.
Oracle is among the leading players in generative AI due to its position in the cloud and AI infrastructure. This position should drive growth over the next five to ten years as the industry matures and its business completes the shift to cloud-based services. Analysts rate Oracle a Moderate Buy and see it advancing 5% at the consensus midpoint, enough to set a fresh all-time high.
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Samsara Gains on IoT Trends Despite Stock Dip
Samsara Inc. (NYSE: IOT) is a leading industrial Internet of Things (IoT) provider offering hardware, software, and cloud platforms complete with data analysis tools as a one-stop shop. Samsara caters to a number of industries ranging from construction, logistics, utilities, field services, education, transportation fleet management, and government agencies. Samsara utilizes artificial intelligence (AI)-powered tools to improve product performance, automate tasks, generate insights, and boost customer satisfaction. Despite a solid fiscal Q1 2025 earnings report, shares still plummeted 12%, possibly providing an entry opportunity for interested investors.
Samsara operates in the computer and technology sector, competing with IoT providers like Impinj Inc. (NASDAQ: PI), Trimble Inc. (NASDAQ: TRMB), Alphabet Inc. (NASDAQ: GOOGL) Google Cloud IoT, and Microsoft Co. (NASDAQ: MSFT) Azure IoT.
What is the Internet of Things (IoT)?
The IoT is a network of connected devices that exchange real-time data with each other over the Internet without human intervention. IoT devices usually have sensors and a unique identifier (UID). The connected devices can range from industrial tools, cameras, smart appliances, vehicles, and smart beds to lights, robots, accessories, wearables, and thermostats. Massive amounts of data can be collected and analyzed to spot trends and patterns and derive valuable, actionable insights optimized with AI. Samsara provides asset tracking systems used in the transportation industry and fleet management.
IoT is Caught in a Descending Triangle Pattern
The daily candlestick chart on IOT illustrates a descending triangle pattern. The descending trendline commenced at $42.28 on May 15, 2024. IOT continued to make lower highs on bounce attempts, falling to the flat-bottom support lower trendline at $29.70 on its fiscal Q1 2025 earnings release. The daily relative strength index (RSI) has fallen below the oversold 30-band level. Pullback support levels are at $29.70, $27.65, $25.42, and $21.89.
Samsara reported fiscal Q1 2025 EPS of 3 cents, beating consensus estimates by 2 cents. Revenues surged 37.4% YoY to $280.7 million, beating $272.42 million consensus estimates as well. Annual recurring revenues (ARR) popped 37% to $1.18 billion. Customers generating over $100,000 in ARR surged 43% YoY to 1,964.
Comparing Samsara's Guidance with Consensus Estimates
Samsara provided conservative fiscal Q2 2025 EPS guidance of flat to a penny versus consensus estimates of a penny. Revenues are expected to be between $288 million and $290 million versus $287.25 million. For fiscal full year 2025, Samara expects EPS of 13 cents to 15 cents versus consensus estimates of 12 cents. Full-year 2025 revenues are expected to be between $1.205 billion and $1.213 billion versus the consensus estimates of $1.2 billion.
Samsara CEO Sanjit Biswas on Large Customer Momentum
Samsara CEO Sanjit Biswas noted that large customer momentum is fueling its growth. In the last quarter, the company closed deals with the Department of Transportation for Kansas and Iowa. Fortune 500 company VINCI is a new construction company client with over 275,000 employees.
Biswas visited many of the company's largest customers in the United States, Canada, Mexico, and Europe to gain firsthand insights into their operations. He noticed these customers were operating at a scale in asset-heavy and labor-intensive industries. These customers are using legacy point solutions that have trapped data in silos. These customers faced common challenges, including workplace accidents, maintenance, insurance, and fuel savings. Customers across the board are investing in technology to achieve safer, sustainable, and more efficient operations.
Samsara's Impact on Company-Wide Savings
Around 130 of Samsara's customers were surveyed to assess the value of their platform. The results were published in a white paper titled "The Business Value of Samsara." One of its customers was quoted saying, "Every minute of efficiency gained is significant. Samsara is our most utilized company-wide business system and is responsible for millions in savings in our bottom line."
$2 Million of Savings Per Customer and Over 8x ROI
Biswas commented, “Looking more specifically at the findings, IDC estimated that Samsara customers realized more than an 8x ROI on average, representing $2 million of savings per customer per year. Samsara customers achieved these savings by reducing vehicle-related crashes and insurance costs, spending less on fuel, lowering maintenance costs and extending vehicle life spans, minimizing lost revenue associated with vehicle availability, and increasing driver productivity.”
Samsara analyst ratings and price targets are on MarketBeat.
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