Day: September 21, 2024

Intel (INTC) stock jumped late Friday on a report that Qualcomm (QCOM) had approached the chip giant about a possible takeover.

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Qualcomm made its move in “recent days,” the Wall Street Journal reported, citing unnamed sources.

It’s unclear whether a deal was being considered, the report said.

But the report underlines the cloud of uncertainty surrounding what was once the most dominant semiconductor company in the world. Intel has struggled to keep up with rivals led by AMD (AMD) and Nvidia (NVDA), especially in the data center market and the fast-growing artificial intelligence trend.

A merger with Qualcomm will likely face intense antitrust scrutiny. Qualcomm is a major player in the market for smartphone chips and wireless communications technology.

The news also comes just days after Intel unveiled a major reorganization of its business, which included a plan to turn its manufacturing business into an independent unit with its own board. The Dow Jones chip giant also announced a $3 billion federal funding award to make chips for the Pentagon.

Mizuho Securities analyst Jordan Klein told clients in a note that the news “moves (the) patient from life support to critical condition.”

“If there was ever a company and stock in need of some positive news flow it was Intel,” Klein said. “Shares were down 60% year to date and grinding lower and lower vs. (the) semi sector up 34% year to date.”

Intel stock rallied more late afternoon trades, gaining 3.3% to close at 21.84. Qualcomm shed 2.9% to close at 168.92.

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Palantir Technologies, Inc. (NYSE:PLTR) co-founder, Joe Lonsdale, has expressed his support for Tesla and SpaceX CEO Elon Musk’s acquisition of Twitter, now rebranded as X.

What Happened: On Thursday, while appearing on CNBC’s Squawk Box, Lonsdale was asked about Musk’s sentiments toward his $44 billion purchase of Twitter.

Lonsdale responded positively, suggesting that Musk’s acquisition was a crucial step for the preservation of the West.

“If Elon hadn’t bought Twitter, if he hadn’t done this, the entire West would be at 10x the threat,” he said and went on to underscore the significance of free speech in maintaining our civilization.

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When probed about the financial implications of the acquisition, Lonsdale acknowledged a decrease in revenue due to brands pulling their support.

However, he contended that this was a result of illegal coordination and attacks, which he deemed “probably illegal.”

he stated that while brands have the right to withdraw their support, behind-the-scenes coordination to damage a company is inappropriate.

Musk also shared the clip from this discussion on X and said, “Thanks Joe.”

Why It Matters: Musk’s acquisition of Twitter has been fraught with controversy. Just earlier this month, it was reported that X is expected to see a drastic reduction in advertising expenditure in 2025, following a 26% decline in marketers’ ad spending on the platform.

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Last month, it was reported that since Musk’s acquisition, X’s revenue has plummeted by 84%. This number also reportedly sparked fears among Tesla investors that Musk might sell more of his Tesla stock to fill the financial gap.

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Previously, Meta Platforms Inc’s president for global affairs, Nick Clegg, also criticized X for becoming a “tiny” platform for elites that permits anyone to say anything.

He also noted that individuals banned from Meta’s platforms like Facebook and Instagram remain active on X and Telegram, and were involved in the far-right protests and riots in Britain last month.

Meanwhile, on Thursday morning, Palantir shares made a new 52-week high. This development came after the company got a new contract from the U.S. Army worth $99.8 million.

Keep Reading: 

This article Palantir’s Joe Lonsdale Backs Elon Musk’s Twitter Acquisition, Saying If He Had Not Bought It ‘The Entire West Would Be At 10x The Threat’ originally appeared on Benzinga.com

(Bloomberg) — Around Boeing Co.’s vast aircraft manufacturing hub in Seattle, the great belt tightening has begun as the planemaker and its factory workers settle in for a labor dispute that will test the resolve of both sides.

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Striking employees received their final Boeing paycheck on Thursday, and the company stops paying for their health insurance on Sept. 30. Both measures will pinch household finances, typically ratcheting up the pressure and stakes for union negotiators to reach an agreement on a new contract.

But as workers stare down the embattled manufacturer for better pay and benefits, the 33,000 members of IAM District 751 have the full benefit of a tight labor market and gig economy that provides a quick transition into jobs that help make ends meet. That gives the union bargaining leverage, potentially frustrating Boeing’s effort to swiftly end a conflict that’s costing it an estimated $100 million each day.

While the battle between one of the world’s largest exporters and its blue-collar workers may look like an uneven fight on its surface, Boeing finds itself in an increasingly untenable situation with its finances so dire that it can ill afford a drawn-out paralysis.

“I think everybody is ready for the long haul,” said Christopher Dahl, 38, who has worked at Boeing for 10 years, now testing flight-control systems. “I’ve gone through every strike because my parents were Boeing employees, so I know the game. And before, there wasn’t the options like we have to make money on the side.”

Companies like food-delivery provider DoorDash Inc. or Uber Technologies Inc. weren’t around 16 years ago, when Boeing’s largest union last walked off the job, shutting down its commercial airplane manufacturing for two months. Now, such companies, alongside a still-tight labor market, are providing possible options to sustain the strike.

Workers are once again digging in for a holdout after bucking their union leadership by voting overwhelmingly to reject a 25% pay raise. On picket lines outside the Renton factory where Boeing builds 737 Max jets, employees said they’ve been saving for years to strike for as long as it takes — without pay, aside from $250 weekly deposits from the IAM local.

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Contract talks are at a stalemate, with no new sessions scheduled after two days of federal mediation. Updates from IAM District 751 earlier in the week showed union leaders drawing a hard line around 40% pay raises and reinstating pensions.

“With a 96% strike vote, we thought Boeing would finally understand that IAM 751 Machinists are demanding more,” the union said in a scathing update posted after the initial day of talks on Sept. 17.

With Washington state’s unemployment rate running at 4.9%, it’s easy to pick up temporary work in construction or driving for Amazon.com Inc. Across the street from the Boeing gate where union members were grilling hot dogs and waving at cars honking in support, Topgolf Callaway Brands Corp. prominently posted a sign saying “Now Hiring.”

“There’s so many jobs all over the place,” said Luis Arteaga, 54, who’s been at Boeing for 18 years. “Red Robin is hiring, LA Fitness, any restaurant is hiring, FedEx, UPS — I mean, every place is hiring. ”

Arteaga said he started planning his finances for this strike at least two years ago, and could easily last as long as three months without a regular Boeing paycheck, especially if he picks up a side job.

Others on the 24-hour picket lines estimated they could hold out until Christmas. Carmen Kim, who was striking with her husband — like her a Boeing employee — is prepared to get by for an entire year without regular work.

Boeing, meanwhile, is launching into a broad set of cost cuts to conserve cash. The austerity measures include unpaid leave for tens of thousands of US workers, and a cutback in travel that requires senior executives to fly in economy cabin seats. The planemaker is even contemplating selling equity to supplement its rapidly dwindling cash and maintain its investment-grade credit rating.

“While we are disappointed the discussions didn’t lead to more progress, we remain very committed to reaching an agreement as soon as possible that recognizes the hard work of our employees and ends the work stoppage in the Pacific Northwest,” Kelly Ortberg, Boeing’s new chief executive officer, said in a message to employees on Friday.

The labor strife at Boeing is remarkable for themes that resonate across other American companies: lost pensions and frustration over stagnating wages that haven’t kept pace with inflation, said Brian Bryant, international president of the International Association of Machinists and Aerospace Workers.

“The entire labor movement is watching this closely,” Bryant said in an interview. “This isn’t just a Boeing issue. Workers in this country have been left behind. There’s a movement here. Workers have said enough is enough.”

The Biden Administration has been monitoring the strike as well, said Bryant, whose union represents almost 700,000 members across North America.

“They’ve reached out to see what the status is, what support they can give, anything they can do to get the parties back together,” he added.

Many machinists interviewed by Bloomberg News cited a strong sense of injustice over what they perceived as union-busting tactics in the wake of the 2008 strike. Among them, Boeing started a second assembly line for the 787 Dreamliner in South Carolina, eroding its Seattle manufacturing base.

“While new CEO Kelly Ortberg has taken a more conciliatory approach, there is 16 years of history pitched against him,” said Rob Stallard, an analyst at Vertical Research Partners, adding that “the gap between what the IAM union members want and what Boeing is currently offering is large.”

A controversial 2014 contract extension looms particularly large. IAM members were pressured into a long-term deal that froze their pensions, increased health care premiums and locked in modest pay increases in order to keep manufacturing of the 777X jet in the Seattle area. It’s the deal that expired on Sept. 12.

“For 10 years, the union had no room to maneuver and lost all their leverage,” said Leon Grunberg, a sociology professor emeritus at the University of Puget Sound. “That may be contributing to the sense of payback or retribution.”

Boeing can’t resort to the same playbook in these talks. It doesn’t have a new jet development program in the pipeline after five years of heavy financial losses. It also can’t shift more manufacturing to the Southeastern US, since unemployment is still hovering near record-low rates in that region.

In fact, striking Boeing workers say they are getting many online help-wanted ads from Airbus SE, the company’s European rival, along with rocket maker Blue Origin LLC. Both have manufacturing plants in Alabama, where unemployment stood at 2.8% in July.

Bruce McFarland, an instrumentation technician at Boeing and IAM officer, pointed to another change that’s transformed the union from the past strikes: the spread of social media accounts that allow union members to stay connected and keep morale high over what could be months without work.

While it’s early days, many of his colleagues are driven by an idealistic goal as well as pocketbook concerns, he said. They want a fair contract, but they’d also to rebuild Boeing’s culture so workers are treated with dignity.

“I love my job, I love the work,” McFarland said. “Sometimes you have to wonder what the company’s doing.”

–With assistance from Eric Johnson and Anne Cronin.

(Updates with Boeing CEO’s comment in 15th paragraph)

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©2024 Bloomberg L.P.

In this piece, I am evaluating two data center stocks: Super Micro Computer (SMCI) and IBM (IBM). A closer look leads me to establish a bearish view for Super Micro Computer and a neutral view for IBM.

Super Micro Computer (Super Micro) manufactures servers for cloud computing, data centers, big data, artificial intelligence, 5G, and the Internet of Things. It also offers other computer products, including energy-efficient computing technology. Meanwhile, IBM is of course a legacy computing giant that now offers servers for data centers and a wide range of enterprise software, networking equipment, and other computing needs.

Super Micro stock is still higher by 55% YTD after plummeting 52% over the past three months. The shares are also up 78% over the past year. On the other hand, IBM stock has soared 25% over the last three months, bringing its year-to-date return to 35%. Shares of ‘Big Blue’ have surged 53% over the last year.

(SMCI = green, IBM = black line)

Despite such different three-month performances, the respective valuations for Supermicro and IBM aren’t that far apart. We compare their price-to-earnings (P/E) ratios to assess their valuations against each other and that of their industry.

For comparison, the information technology industry is trading at a P/E of 44.5x, versus its three-year average of 67.9x.

Super Micro Computer

With a trailing P/E of 21.8x, Super Micro Computer is trading at a sizable discount to its sector. However, such a discount seems warranted given recent developments at the company. A bearish view seems appropriate, at least until things blow over and we receive some transparency into the situation.

A negative report on SMCI from short seller Hindenburg Research raised all sorts of red flags. The firm makes a variety of allegations against the company, including that it has manipulated its financials. Hindenburg alleged accounting issues along with undisclosed transactions between related parties, sanctions violations, and problems with export control. Short sellers benefit when a stock price plummets, so may be motivated to issue reports on the companies they’re shorting for that reason. However, on the other hand, Hindenburg Research has a pretty good track record, and was correct about fraud at Nikola (NKLA) in 2020.

Additionally, Super Micro has already had documented accounting violations in the past, having settled a previous case with the Securities and Exchange Commission in 2020 for $17.5 million. As a result, investors might want to steer clear of SMCI until additional transparency is available, especially after the company decided to delay the release of its annual report.

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What is the Price Target for SMCI stock? 

Super Micro Computer has a Hold consensus rating based on one Buy, 10 Holds, and one Sell rating assigned over the last three months. At $615.18, the average Super Micro Computer stock price target implies upside potential of 38.44%.

At a P/E of 23.7x, IBM is also trading at a deeply discounted valuation versus its sector, and also offers an attractive dividend yield. However, a review of the company’s valuation history reveals that the stock is trading at the top of its typical range going back to October 2019. Thus, a neutral view seems appropriate, as does monitoring for a buy-the-dip opportunity.

I’m cautious on IBM right now due to its valuation, even though there is much to like about this stock. Of course, IBM has been around for a long time, and it isn’t going anywhere anytime soon. It’s a stalwart, growing technology company, although it doesn’t post the level of revenue increases required to be considered a growth stock. Going back to October 2019, the company’s typical P/E range has been between about 17.5x and 25.1x. Therefore the stock does look a little pricey versus its historical range, suggesting that a buy-the-dip opportunity could surface before too long.

However, investors looking for technology exposure in their dividend portfolio may not find a better stock, as IBM’s dividend yield stands at around 3.1% with a healthy payout ratio of 65.4%, suggesting that the dividend is both appealing and pretty safe. Additionally, IBM has a 29-year history of raising its dividend annually, further sweetening the pot.

Finally, IBM’s long-term share-price appreciation demonstrates the stock’s appear as a buy-and-hold investment in a dividend portfolio. The shares are up 92% over the last three years, 101% over the last five, and 80.6% over the last 10. IBM has recently nudged into overbought territory with a Relative Strength Indicator of 73.8. Anything above 70 suggests a stock is overbought and that a correction to the downside could be near. I would simply wait for IBM stock to drop down to the lower end of its typical P/E range before potentially buying the shares.

What is the Price Target for IBM stock? 

IBM has a Hold consensus rating based on five Buys, six Hold, and two Sell ratings assigned over the last three months. At $197.46, the average IBM stock price target implies downside potential of 8.69%.

Conclusion: Bearish on SMCI, Neutral on IBM

On one hand, Super Micro could present a buy-the-dip opportunity right now due to the short-seller’s report. However, there’s usually fire where there’s smoke, and the short seller who’s targeting the company has a good track record thus far. The delayed annual report also enforces the major lack of transparency and can represent a serious breach of trust with shareholders, so investors may want to steer clear of Super Micro Computer at this time.

On the other hand, there is much to like about IBM, although the price for its stock is pretty high, relatively speaking. Even if someone were to buy shares at the current price, the dividend and long-term appreciation potential still make this a buy-and-hold stock for the long term. However, I believe that we could see a pullback in IBM before too long, so I think it’s best to wait before pulling the trigger.

Disclosure

If your gut tells you now is a good time to add some safe dividend payers to your investment portfolio, you’d be wise to listen. Between geopolitical turmoil, lingering inflation, unpredictable interest rates, rising loan delinquencies, and political uncertainty, the near future may not be a great environment for some — or maybe any — growth stocks.

However, these three high-yield dividend stocks are up to the job of providing investors with solid returns, and they should remain so indefinitely.

1. Altria Group

The United States’ tobacco industry is living on borrowed time. That’s the top takeaway from the World Health Organization’s (WHO) most recent look at the matter anyway, which suggests only 18.2% of the nation’s adult population will be regular tobacco users (smokers, mostly) in 2025. That’s measurably less than 2000’s figure of 23.3%.

The United States’ tobacco business may actually have more years ahead of it than you might expect, however. Also recognizing the smoking-cessation movement is slowing down, the same WHO report suggests 16.5% of U.S. adults will still be regularly using tobacco by 2030. People are picking up alternative vices like vaping and the use of e-cigarettes in droves in the meantime. The National Center for Health Statistics reports over 4% of the country’s adults use vape products regularly, offsetting the shrinking number of smokers.

Connect the dots. Given the nation’s expected population growth between now and then (and beyond), there’s still plenty of opportunity to turn these common consumer habits into lots of cash.

The backdrop bodes well for Altria Group (NYSE: MO), parent to Philip Morris USA, which owns familiar U.S. cigarette brands like Marlboro, Virginia Slims, and others. And, even though cigarettes remain its top seller, it also owns vaping brand NJOY and oral nicotine pouch maker Helix Innovations. These other initiatives are softening the impact of tobacco’s slow demise on Altria, which has adopted the motto “Moving beyond smoking.” By accepting the gradual but inevitable decline of the cigarette market rather than resisting it, the company can continue generating good revenue by managing — and even steering — the transition to other nicotine products. More important to shareholders, managing this evolution lets Altria continue producing the profits that have supported 55 straight years of annual dividend increases.

It’s important for investors to understand that there won’t likely be any meaningful or sustainable capital appreciation here. Altria doesn’t even appear to be trying to muster growth. Its focus is entirely on maintaining the cash flow that funds its dividend payments.

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With a forward yield of 7.7% and a dividend that could continue growing and being paid for decades though, that’s not a bad trade-off.

2. Realty Income

Contrary to a common assumption, not all sections of the retail industry are on the ropes. The bulk of the weakness is limited to department stores and the malls where they’re typically found. Strip malls and neighborhood shopping centers are actually doing pretty well, catering to consumers where and how they like to shop.

Enter Realty Income (NYSE: O).

It’s not a retailer, although its fate is tied to a wide swath of that industry. It’s a real estate investment trust (REIT), renting brick-and-mortar properties to retailers, sparing its tenants some of the financial commitments of owning all those buildings.

That may still seem like a risky proposition on the surface. The landlord is still renting to companies in a retail industry that’s being pressured by the ongoing growth of e-commerce.

This overarching idea ignores a couple of important details though. One is that a great deal of retail consumption is still (for convenience and speed reasons) handled in person at stores. And the other reason? The bulk of Realty Income’s tenants are among the retailers with the most staying power, like Dollar General, Walgreens, 7-Eleven, and even Walmart. Once these chains have established a brick-and-mortar presence in a location, they’re unlikely to abandon it.

That’s what this REIT’s dividend track record suggests anyway. Not only has it distributed its monthly (yes, monthly) payments like clockwork ever since they began in 1969, those payouts have been raised 127 times. Those who buy the stock today would be stepping in while Realty Income’s forward dividend yield stands at 5%.

3. Whirlpool

Last but not least, add home appliance maker Whirlpool (NYSE: WHR) to your list of dividend stocks to consider buying while its forward yield stands at 7%.

It’s a suggestion that might raise a few eyebrows. Even if you don’t know for sure, intuitively, it doesn’t seem as if there’d be great demand for home appliances at this time. Growing competition from the likes of Samsung, Bosch, and LG further deflates the bullish argument for owning a stake in this iconic brand name.

Things may not be quite as challenging on this front as it seems they should be, though.

Unlike some other large purchases, the purchase of a major home appliance can’t always be put off. Appliances are also more affordable than cars or homes, for example, so getting financing is less of a hurdle. To this end, the Conference Board’s consumer sentiment measure ticked higher in August specifically because — in apparent defiance of the economic backdrop — more U.S. consumers said they intend to purchase a refrigerator, washing machine, or TV within the next six months. It was the fourth straight month these purchasing plans improved.

Investors who already know Whirlpool will likely also know that while it has continued to make its dividend payments, it hasn’t increased them since 2022, when it raised the quarterly payout to $1.75 per share.

Keep things in perspective though, its ability to maintain its payout was never in question. The decision to halt its long-established cadence of dividend growth was rooted in an abundance of caution at an extraordinary time in modern history. The COVID-19 pandemic and the ripple effects from it not only temporarily up-ended purchases of appliances, they impeded companies’ ability to manufacture them. This year’s expected 14% revenue dip and subsequent profit setback should mark the end of these woes though. Analysts forecast that Whirlpool’s business will turn the corner next year. In the meantime, with the stock trades down 60% from its 2021 high and is valued at less than 9 times next year’s estimated earnings, the worst-case scenario is already priced in … and then some.

Should you invest $1,000 in Altria Group right now?

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James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Realty Income and Walmart. The Motley Fool has a disclosure policy.

Want Safe Dividend Income in 2024 and Beyond? Invest in These 3 Ultra-High-Yield Stocks. was originally published by The Motley Fool