Day: October 18, 2024

TAIPEI (Reuters) – The Taipei-listed shares of TSMC hit a record high on Friday after the world’s largest contract chipmaker posted forecast-beating third-quarter earnings and gave a rosy outlook for strong artificial intelligence (AI) demand.

Shares closed up 4.8% at T$1,085 ($33.77), surpassing the previous record of T$1,080 on July 11. That gives TSMC a market capitalisation of about $874 billion, the highest of any company listed in Asia. The benchmark index ended 1.9% higher.

The company, however, appeared to face some political uncertainty after U.S. media outlet the Information said the U.S. Commerce Department was investigating if it had been making AI or smartphone chips for China’s Huawei, whose access to non-Chinese chips has been curbed by U.S. export controls.

TSMC, which counts Apple and Nvidia amongst its customers, has benefited from a surge towards AI across a spectrum of industries.

TSMC reported a forecast-beating jump of 54% in quarterly profit on Thursday, raised its revenue forecast for the year and said the next five years would also be “healthy”.

The stock could go higher still, said Venson Tsai, an analyst at Cathay Futures Consultant in Taipei.

“TSMC’s share price hasn’t fully reflected the rising wave of AI long term,” he said.

After the report of the U.S. investigation, TSMC said on Friday it was a law-abiding company and committed to complying with laws and regulations, including export controls.

“If we have any reason to believe there are potential issues, we will take prompt action to ensure compliance,” it said.

Such action would include holding investigations and proactively communicating with parties such as customers and regulatory authorities as required, it added.

The U.S. commerce department declined to comment, as did Taiwan’s economy ministry, which is charged with making sure export controls are followed.

In July 2020, TSMC said it had stopped taking new orders from Huawei and did not plan to ship wafers after that September.($1=32.1190 Taiwan dollars)

(Reporting by Ben Blanchard; Additional reporting by Karen Freifeld in Washington; Editing by Muralikumar Anantharaman and Savio D’Souza)

NEW YORK (AP) — U.S. stocks are hanging around their records after Netflix jumped and CVS Health slid amid mixed reports on profits. The S&P 500 was up 0.2% in early trading Friday and flirting with its all-time high set early this week. The Dow Jones Industrial Average was down 76 points, or 0.2%, a day after setting its own record. The Nasdaq composite was up 0.5%. Netflix rose 8.7% after reporting stronger profit than analysts expected. That helped offset a 7.3% drop for CVS Health, which said it’s likely to report a profit for the latest quarter that’s well below what analysts had been expecting.

THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.

Trading on Wall Street was slightly mixed early Friday as markets try close out another week of gains with companies continuing to post their most recent profits.

Futures for the S&P 500 were up 0.2% before the bell, while futures for the Dow Jones Industrial Average retreated a modest 0.1%.

CVS Health slid about 11% in premarket trading after the retail pharmacy chain and health care company announced that CEO Karen Lynch has stepped down. Lynch will be replaced by David Joyner, who will attempt to steer the health care giant through a worsening environment of rising medical costs.

CVS cut its financial expectations for the third time in August with all major pharmacy chains attempting to navigate a drastically changed landscape, facing competition online and elsewhere.

Tesla shares fell less than 1% after the U.S. government’s road safety agency said it is again investigating the electric car maker’s “Full Self-Driving” system, this time after getting reports of crashes in low-visibility conditions, including one that killed a pedestrian.

Netflix shares climbed 6.5% in extended trading after the video streaming company reported better third-quarter sales and profit than Wall Street was expecting late Thursday, even as subscriber growth slowed dramatically. Netflix forecast revenue growth of 15% in the current quarter, matching the booming sales growth in the July-September period.

More strong economic data from the U.S. this week has boosted hopes that the economy could make a perfect escape from the worst inflation in generations, one that ends without a recession that many investors had seen as nearly inevitable. And with the Federal Reserve now cutting interest rates to keep the economy humming, the expectation among optimists is that stocks can rise even further.

But critics are warning that stock prices look too expensive given how much faster they’ve climbed than corporate profits.

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World markets mostly gained after China’s central bank released plans for supporting the stock market through share repurchases by companies and major shareholders.

The Chinese economy slowed further in the last quarter, data released Friday showed. That spurred expectations the government will ramp up its latest stimulus efforts.

The world’s second-largest economy expanded at a 4.6% annual pace in July-September, down slightly from 4.7% in the previous quarter. Growth so far this year has averaged to 4.8%, below the official target of about 5%, as weakness in the property market has continued to weigh on demand.

Meanwhile, the central bank issued guidelines for state banks to provide loans to companies and major shareholders for stock repurchases as part of an effort to stabilize China’s share markets, which have languished in recent years.

The loans, which can be made only by 21 designated financial institutions, will have a maximum interest rate of 2.25%, the People’s Bank of China said in a statement that underscored plans for strict oversight of the effort to support the markets.

The news helped drive a rally in Shanghai, where the Composite index gained 2.9% to 3,261.56. The benchmark for the smaller market in the southern city of Shenzhen jumped 4.1%.

Shanghai’s benchmark has gained 9% in the past three months, though it had surged much higher last month with the release of new measures to counter the slowdown, before falling back as investors registered their disappointment over a lack of big government spending initiatives.

Hong Kong’s Hang Seng index gained 3.6% to 20,804.11.

Elsewhere in Asia, Tokyo’s Nikkei 225 edged 0.2% higher to 38,981.75 and the Kospi in Seoul shed 0.6% to 2,593.82. Australia’s S&P/ASX 200 gave up 0.9% to 8,283.20.

The Taiex in Taiwan gained 1.9% and the SET in Bangkok lost 0.4%. India’s Sensex rose 0.3%.

At midday in Europe, Germany’s DAX rose 0.3%. In Paris, the CAC 40 gained 0.7% and in London, Britain’s FTSE 100 slipped 0.2%.

In other dealings early Friday, U.S. benchmark crude oil gave back 3 cents to $70.06 per barrel. Brent crude, the international standard, lost 10 cents to $74.34 per barrel.

The dollar fell to 150.05 Japanese yen from 150.21 yen. The euro rose to $1.0852 from $1.0827.

Netflix (NFLX) isn’t planning on hiking its US subscription prices just yet, despite streamers from Disney+ to Peacock all raising their respective prices this year.

“We try to think about our pricing, not in relationship to competitors, but from the value that we’re delivering to members,” Netflix co-CEO Greg Peters said Thursday during the company’s third quarter earnings call. “We want to have a range of price points. We think that that’s healthy.”

The company beat Q3 expectations across the board, adding another 5 million-plus subscribers in the quarter. The stock jumped as much as 5% in after-hours trading, lifting shares even closer to their record high of around $730.

Wall Street analysts have noted a price hike would be a positive catalyst for the stock in the near term, especially after its latest biannual viewership report showed subscribers watched over 94 billion hours on the platform from January to June.

“Given Netflix’s low cost per viewed hour, we see scope for the firm to raise US prices by 12% in 2025,” Citi analyst Jason Bazinet said in a note to clients ahead of the report.

Netflix last raised the price of its Standard plan in January 2022, upping the monthly cost to $15.49 from $13.99. It also raised the price of its Premium tier by $2 to $19.99 a month at the same time; the company again raised the cost of that plan last October to $22.99.

The company recently phased out its lowest-priced ad-free streaming plan, making the $15.49 Standard plan its cheapest offering for an ad-free experience.

Netflix has yet to raise the price of its ad-supported offering, introduced less than two years ago, which remains one of the cheapest ad plans among all of the major streaming players at $6.99 a month.

“We love the low price point and increased accessibility that comes with our ad plan,” Peters said. “It represents an incredible value.”

Netflix, which has raised the prices of its plans in countries like Scandinavia and Japan, said Thursday it plans to increase prices in Spain and Italy as well.

In regards to the US, the company said it will continue to look at metrics like engagement, acquisition, and retention in order to assess the best price point for consumers.

“We’ll continually try to offer consumers a spread of plan choices, the right features at the right price point, and evaluate that and evolve it based on what we think works,” Peters said.

Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.

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(Bloomberg) — US stock futures ticked higher as a recovery in Big Tech looked set to extend Friday, thanks to results from Netflix Inc. that eclipsed Wall Street’s expectations.

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Contracts on the tech-heavy Nasdaq 100 rose 0.5%, as Netflix jumped 7% in US premarket trading. The streaming company beat expectations on key metrics, including subscriber additions in the third quarter. Apple Inc. rose as data showed China sales of its latest iPhone increased 20% in the first three weeks compared with the 2023 model.

Treasuries steadied from their heavy selling after a batch of strong data on the US economy Thursday recast expectations for interest-rate cuts. Stronger than forecast retail sales underscored how consumer spending continues to power the American economy, lessening the urgency for the Federal Reserve to unwind restrictive rate policy.

One beneficiary of the improving US economic narrative has been small-cap stocks. The Russell 2000 index touched a 2024 high this week as weakening inflation spurs bets the Fed has room to cut rates, albeit not by as much as previously thought.

Small caps are also getting a boost from the so-called Trump Trade, according to Bank of America Corp. strategist Michael Hartnett. In a note, he said there are signs investors are positioning for presidential victory by Donald Trump, moving into banks, small-cap stocks and the dollar, assets that rallied in November 2016 in the wake of his last successful run.

Bitcoin, another Trump Trade, closed in on a fresh record.

A broadening out of the stock rally beyond tech megacaps would be a development that Gene Salerno, chief investment officer at SG Kleinwort Hambros Ltd., said he’d welcome.

“It’s something frankly we’ve wanted to see for some time,” he said.

Key events this week:

• US housing starts, Friday

• Fed’s Christopher Waller, Neel Kashkari speak, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.2% as of 8:22 a.m. New York time

• Nasdaq 100 futures rose 0.5%

• Futures on the Dow Jones Industrial Average fell 0.1%

• The Stoxx Europe 600 rose 0.3%

• The MSCI World Index was little changed

Currencies

• The Bloomberg Dollar Spot Index fell 0.2%

• The euro rose 0.2% to $1.0848

• The British pound rose 0.3% to $1.3045

• The Japanese yen rose 0.1% to 150.03 per dollar

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Cryptocurrencies

• Bitcoin rose 1.1% to $67,693.99

• Ether rose 0.9% to $2,620.52

Bonds

• The yield on 10-year Treasuries advanced one basis point to 4.10%

• Germany’s 10-year yield was little changed at 2.20%

• Britain’s 10-year yield was little changed at 4.09%

Commodities

• West Texas Intermediate crude rose 0.1% to $70.77 a barrel

• Spot gold rose 0.7% to $2,711.98 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Meg Short and Tatiana Darie.

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©2024 Bloomberg L.P.

The S&P 500 is regarded as the best overall benchmark of the U.S. stock market and consists of the 500 largest publicly traded companies in the country. Given the range of its member companies, it is considered to be the most dependable gauge of overall stock market performance. To become part of the S&P 500, a company must meet the following prerequisites:

• Be a U.S.-based company.

• Have a market cap of at least $8.2 billion.

• Be highly liquid.

• Have a minimum of 50% of its outstanding shares available for trading.

• Be profitable according to GAAP in the most recent quarter.

• Be profitable over the preceding four quarters in aggregate.

Palantir Technologies (NYSE: PLTR) is one of the most recent additions to the S&P 500, being added to the fold on Sept. 23. It’s also one of only 11 companies to make the grade so far this year. Since the advent of generative AI in early 2023, Palantir stock has surged 575%, its gains fueled by robust sales and profit growth.

Even after gains of that magnitude, some on Wall Street believe there’s more to come. Let’s review what has driven the stock higher and whether its lofty price has simply made it too risky.

AI solutions for the masses

Palantir made a name for itself serving the U.S. intelligence and law enforcement communities. The company’s first-of-their-kind algorithms could sift through mounds of data and connect seemingly disparate bits of information to track down would-be terrorists.

In more recent years, Palantir has applied its sophisticated algorithms to give enterprises a competitive edge by providing actionable business intelligence. Thanks in part to its decades of experience, the company quickly recognized the opportunity represented by generative AI and developed timely solutions to meet the need. Palantir’s Artificial Intelligence Platform (AIP) was born of those efforts. By leveraging existing company data, AIP can provide businesses with solutions tailored to specific needs.

The proof is in the pudding

Palantir’s go-to-market strategy for AIP is what helped set the company apart. The company offers boot camps that pair customers with Palantir engineers to help them fashion solutions to their unique challenges. This strategy has proven to be wildly successful.

Just last month, Palantir announced a new multi-year, multi-million-dollar contract with Nebraska Medicine, which used AIP to improve healthcare by harnessing technology. After what it describes as “a series of targeted bootcamps,” the health system was able to implement a new workflow that resulted in a more than 2,000% increase in its Discharge Lounge utilization, which freed up beds earlier and decreased the time needed to discharge a patient by one hour (on average).

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This is just one example of dozens of customer testimonials that show that AIP is saving customers time and money — which in turn boosts Palantir financial results. In the second quarter, it closed 96 deals worth at least $1 million. Of those, 33 were worth $5 million or more, while 27 were worth at least $10 million. Furthermore, many of these deals were inked within just weeks of a successful boot camp session.

Taking a step back helps illustrate the impact on the company’s overall results. In the second quarter, Palantir’s revenue grew 27% year over year to $678 million while also climbing 7% quarter over quarter. This also marked the company’s seventh successive quarter of profit generation. Consistent profitability was the final hurdle needed to secure its admission to the S&P 500. Furthermore, Palantir’s U.S. commercial revenue, fueled by the success of AIP, grew 55% year over year, while the segments customer count grew by 83%. Even more impressive was the segment’s remaining deal revenue (RDV) which soared 103%. When RDV is growing faster than revenue, it shows that future revenue growth is accelerating.

Most experts suggest this is still the early innings for the adoption of AI software. In Ark Invest’s Big Ideas 2024, Cathie Wood calculates the opportunity for generative AI software could balloon to $13 trillion by 2030. The bull case is even more eye-catching, at $37 trillion.

Given Palantir’s unique take on AI implementation and the magnitude of the opportunity, it’s clear the company can continue to prosper in an increasingly AI-centric world.

Wall Street’s biggest Palantir bull

I’m not the only one who thinks so. On the heels of its admittance into the S&P 500, Greentech Research analyst Hilary Kramer posited that Palantir “easily can be” a $100 stock. That represents potential upside of 130% compared to Monday’s closing price.

Kramer believes that given the company’s strong revenue and profit growth and increasing backlog, investment banks will eventually have to get on board and increase their estimates, which will cause others to look at the stock, fueling a virtuous cycle.

Despite the massive opportunity and stellar execution, some investors will be put off by Palantir’s frothy valuation. The stock is currently selling for 122 times forward earnings and 29 times forward sales. However, using the forward price/earnings-to-growth (PEG) ratio — which considers the company’s impressive growth rate — clocks in at 0.4, when any number less than 1 signals an undervalued stock.

In a case like this, when valuation is a stumbling block, dollar-cost averaging allows investors to ease into the stock over time, picking up more shares when the price is more reasonable.

Make no mistake: Palantir is positioned to profit from the AI revolution. Investors with a stomach for some volatility and a bit more risk should consider a position is this cutting-edge AI stock.

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Danny Vena has positions in Palantir Technologies. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.

Meet the Newest Addition to the S&P 500. The Stock Has Soared 575% Since Early Last Year, and It’s Still a Buy Right Now, According to 1 Wall Street Analyst was originally published by The Motley Fool