Your portfolios in brief
Founded in 1993, Super Micro Computer (SMCI) is a global company specializing in high-performance, high-efficiency computing solutions. It is a leading IT solutions company, distinguished by its crucial role in the fast-growing artificial intelligence (AI) market. It is present in several countries and employs a large number of people worldwide, focusing on innovation and the provision of advanced technological solutions.
-Highlights in 2023
Annual guidance: Super Micro Computer delivered an impressive performance in its latest quarterly results, raising its sales forecast for fiscal 2024 to a range of $10 to $11 billion. Its previous range was $9.5 to $10.5 billion.
Sales for the quarter: The company reported sales of $2.12 billion for the quarter, up 14% year-on-year, despite challenges in supplying key components and GPUs for AI. The company's net profit was $157 million, compared with $194 million in Q4 2023 and $184 million in Q1 2023.
-Why is this a stock to watch?
Super Micro Computer has enjoyed remarkable growth since the start of the year, posting a spectacular year-to-date increase of 247% with a market capitalization of $15 billion. This impressive rise testifies to the company's success in key sectors such as artificial intelligence, cloud computing and high-performance data processing. The company's ability to innovate and respond to changing market needs, particularly in the field of AI, played a crucial role in this exceptional appreciation, making it a strategic choice for investors.
Super Micro Computer is well positioned to benefit from the AI revolution, which is set to have a significant impact in a variety of sectors. The company stands out for its advanced AI solutions and innovative cooling capabilities. What's more, its ongoing investment in R&D and the expansion of its production capacities demonstrate its commitment to long-term growth and meeting evolving market needs.
-Conclusion
Super Micro Computer is emerging as a strategic and dynamic player in the age of artificial intelligence, embodying innovation and sustainable growth. Its solid financial performance and steady growth, combined with astute positioning in booming technology sectors, reinforce its appeal to investors.
The optimism surrounding Super Micro Computer's future is well-founded, as the company not only meets current market requirements, but also anticipates future trends, placing itself at the forefront of the technological revolution. The company is experiencing huge growth and accelerating profits this year, as its energy-saving, highly customizable servers have been the great beneficiaries of the AI boom.
At Pratte Gestion de Portefeuille, we remain confident in the potential of Super Micro Computer, a company that represents a perfect marriage of innovation, growth and long-term vision. Although the stock has proved rather volatile in recent weeks, it remains an important position in our portfolios.
Monday
- Precariously balanced clues
The New York Stock Exchange closed with mixed results, reflecting investor caution ahead of the release of the US consumer price index.
Dow Jones: +0.16% to close at 34,337.87 points.
NASDAQ: -0.22% to close at 13,767.74 points.
S&P 500: -0.08% to close at 4411.55 points.
This expectation is centered around inflation, a key determinant of future interest rate decisions by the US Federal Reserve.
- Market reaction to Moody's opinion
On Friday, Moody's highlighted the "very large" US fiscal deficits and partisan paralysis in Washington as factors contributing to the outlook revision. The agency reaffirmed the USA's AAA credit rating, the highest level. This comes three months after Fitch downgraded the US long-term foreign currency credit rating from AAA to AA+, also citing expected fiscal deterioration.
Bond yields remained stable despite this negative outlook. The yield on 10-year Treasury bonds rose slightly to 4.638%.
Greg Bassuk, CEO of AXS Investments, notes that investor reaction to the Moody's opinion is mixed, but there is also nervousness around the major developments expected this week, including inflation data and the Fed's subsequent policy.
- Stockss in brief
Boeing (+4.01%): A surge following the announcement of a major order from Emirates at the Dubai Air Show, totaling $52 billion for 95 aircraft.
Spirit AeroSystems (+1.94%): A notable gain for this Boeing supplier, testifying to renewed confidence in the aerospace sector.
ExxonMobil (+1.05%): The oil company announced its ambition to become a leader in the production of lithium for electric vehicle batteries by 2027, a project in Arkansas.
- Focus on the consumer
Investors' gaze remains fixed on the consumer, with several chain stores posting declining performances. Burlington (-3.96%), Urban Outfitters (-3.25%), Boot Barn (-4.84%), Macy's (-2.10%) and eBay (-2.81%) all suffered losses, reflecting market uncertainties.
Tuesday
-Wall Street reacts to slowing inflation
Dow Jones: +1.43% to 34,827.70 points.
NASDAQ: +2.37% to 14,094.38 points.
S&P 500: +1.91% to 4495.70 points.
Wall Street is optimistic following the release of lower-than-expected inflation data, suggesting a possible end to rate hikes by the Federal Reserve.
- Stockss in brief
Home Depot (+5.46%): Despite lower sales and earnings, results were better than expected, leading to a significant rise in the share price.
Tesla (+6.12% to $237.41): Strong share price growth, supported by the general enthusiasm for electric vehicles and the company's solid performance.
Bank of America (+5%): Banks benefited from the positive momentum, with a notable rise in their shares following encouraging news on inflation and interest rates.
Snap Inc (+7.5%): Share price jumps following the announcement of a partnership with Amazon, enabling direct purchases via the Snapchat app.
- The influence of slowing inflation on markets
The latest inflation data from the United States had a notable impact on the financial markets. The CPI (Consumer Price Index) remained stable last month, whereas economists were expecting a 0.1% month-on-month rise. Core inflation, which excludes food and energy prices, was also below expectations, rising at the slowest pace in two years. This trend sparked optimism in the market, fuelling hopes that the Federal Reserve might finally end its rate hike campaign.
The 10-year Treasury yield, which had shocked investors by reaching over 5% in October, fell below 4.5% following the moderate inflation report.
Wednesday
- A day of moderate confidence on the markets
The New York Stock Exchange ended the session on a positive note overall, buoyed by encouraging data on inflation and consumer spending in the United States.
Dow Jones : The index gained 0.47%, closing at 34,991.21 points.
NASDAQ: The NASDAQ edged up 0.07%, ending the day at 14,103.84 points.
S&P 500: The S&P 500 index gained 0.16%, closing at 4,502.88 points.
The session was marked by the publication of the Producer Price Index (PPI), which showed an unexpected decline of 0.5%, suggesting a disinflationary trend. At the same time, October retail sales edged down 0.1%, less than analysts had feared, indicating stable consumption.
Complementing the positive US data, figures from China also exceeded expectations. Retail sales in China rose significantly in October, recording their fastest growth in five months. This rise, which reached 7.6% on an annual basis, compared with 5.5% in September, was boosted by a prolonged series of public holidays at the beginning of the month.
- Stockss in brief
Target (17.87%): The department store chain rose sharply after exceeding analysts' expectations for its quarterly sales and results.
Macy's (7.58%): The retailer benefited from positive momentum.
Kohl (9%): Kohl recorded a significant increase, in line with the positive trend in the retail sector.
Bank of America (1.39%): The bank saw its shares rise, reflecting the healthy state of the banking sector.
Citigroup (1.17%): Citigroup also recorded a rise, with a 1.17% increase in its shares.
Thursday
- Index break
Dow Jones: The index fell by 0.13%, closing at 34,945.47 points.
NASDAQ: The index gained 0.07% to close at 14,113.67 points.
S&P 500: The broad index gained 0.12%, closing at 4,508.24 points.
The session proved rather quiet, with investors taking a moment to assess the latest economic data and quarterly results from major companies. This pause in trading activity reflects a more considered and cautious approach to the changing economic and financial landscape.
-Stockss in brief :
Cisco Systems (CSCO.O): shares fell 9.8% after the company cut its annual revenue and profit forecasts due to slowing demand for its networking equipment.
Walmart (WMT.N): Shares plunged 8.1%, even after raising its annual sales and profit forecasts, signaling that US consumers are spending cautiously due to inflation.
Alibaba (BABA): shares fell 9.14% to $79.11 following the announcement that the company had abandoned plans to spin off its cloud business.
Macy's (M): Shares rose 5.67% after reporting better-than-expected quarterly earnings despite a 7% year-on-year drop in sales.
Cisco (CSCO): Shares fell 9.83% to $48.04 following a downward revision of the group's sales and annual profit forecasts.
Palo Alto Networks (PANW.O) : The stock fell by 5.4% after its second-quarter billing forecasts came in below expectations.
- Falling oil prices: Economic slowdown in China and the United States raises concerns
Influenced by the economic slowdown in China and the USA, oil prices recorded a significant drop. North Sea Brent fell by 0.32% to $80.92 a barrel, while US West Texas Intermediate (WTI) was down 0.35% to $76.39 a barrel. This downward trend is attributed to fears of a recession, which could limit oil consumption.
Overall demand growth is expected to slow to 930,000 barrels per day in 2024, due to increased energy efficiency, the rise of electric vehicles, and the weakening effects of the post-COVID-19 economic rebound. In the United States, the inflation rate eased in October, thanks in part to lower gasoline prices, while in China, the fall in new housing prices for the fourth consecutive month is impacting demand prospects.
Saudi Arabia could extend its production cuts until 2024 to keep prices above $80 a barrel. Current OPEC+ cuts total 1.6 million barrels per day. The next OPEC+ meeting is scheduled for November 26 in Vienna.
Over the past month, WTI crude oil has fallen by over 16%, while the price of Brent crude has dropped by over 14%. Current oil prices are around 22% below the 2023 peak reached at the end of September. Concerns about demand are growing against a backdrop of global economic slowdown.
Friday
-Stable markets await confirmation of monthly gains
Dow Jones: Up 0.20%.
NASDAQ: Slight decline of 0.04%.
S&P 500: Stable, with a variation of +0.00%.
Wall Street is seeing modest movement on Friday, as investors seek to consolidate the gains made during the month. Gap's better-than-expected third-quarter results led to an 18% rise in its shares, while ChargePoint fell 36% after changes in its management and a downward revision of its third-quarter revenue forecasts.
Conclusion
In summary, financial markets experienced moderate but significant fluctuations over the week, with all three major indices on track to close the week higher, maintaining their positive progression for the third consecutive week. Moderate U.S. inflation data fueled optimism, raising hopes of a slowdown in rate hikes by the Federal Reserve. The S&P 500, Dow and NASDAQ posted gains of 7.5%, 5.7% and 9.8% respectively in November, as we wait to see whether this positive trend will continue for the rest of the month.
As November draws to a close, the focus is on the markets' ability to maintain their gains in a complex and ever-changing economic environment. Caution remains the order of the day, but moderate optimism seems to prevail, with investors looking to economic signals and corporate performance to guide their future decisions.
PrattePM is registered with the Autorité des marchés financiers (AMF) and the Ontario Securities Commission (OSC).
Intended to provide general information on markets and securities and not to meet your specific needs, this newsletter is the result of the author's own research. The opinions (including recommendations, if any) expressed in this newsletter are those of the author only and do not necessarily represent those of Pratte Portfolio Management . They do not constitute investment advice intended to meet your specific needs.
The information contained in this newsletter has been obtained from sources believed to be reliable, but its accuracy and completeness cannot be guaranteed, and in providing it, the author and Pratte Portfolio Management assume no responsibility. This information was current as of the date of this newsletter, and neither the author nor Pratte Portfolio Management assumes any obligation to update it or to report any developments with respect to this information. This newsletter is intended for distribution in jurisdictions where the author and Pratte Portfolio Management are registered to trade in securities. Distribution or dissemination of this bulletin in any other jurisdiction is prohibited. The author,Pratte Portfolio Management its affiliates and their respective directors, officers and employees, as well as the companies with which they are associated may, from time to time, hold securities referred to in this bulletin.
