Day: October 23, 2024

McDonald’s stock (MCD) tumbled over 6% in early trading on Wednesday after the Centers for Disease Control and Prevention said the company’s Quarter Pounder burgers had been linked to an E. coli outbreak in some states, with most illnesses in Colorado and Nebraska.

“This is a fast-moving outbreak investigation,” the CDC wrote on its website. “Most sick people are reporting eating Quarter Pounder hamburgers from McDonald’s and investigators are working quickly to confirm which food ingredient is contaminated.”

The company’s stock sank as much as 10% in extended trading in the immediate aftermath of the news on Tuesday.

The CDC said McDonald’s has stopped using fresh slivered onions and quarter-pound beef patties in certain states while a source of the illness is confirmed.

One person has died from the outbreak, the agency said, and 10 hospitalizations have been reported across 10 states.

In an internal memo that McDonald’s shared on its website Tuesday evening, McDonald’s chief supply chain officer of North America Cesar Piña said the company is taking “swift and decisive action” and noted that the initial findings from the investigation “indicate that a subset of illnesses may be linked to slivered onions used in the Quarter Pounder and sourced by a single supplier that serves three distribution centers.”

“As a result, and in line with our safety protocols, all local restaurants have been instructed to remove this product from their supply and we have paused the distribution of all slivered onions in the impacted area,” the company said.

McDonald’s will temporarily remove the menu item from restaurants in the impacted areas, including Colorado, Kansas, Utah, and Wyoming, as well as portions of Idaho, Iowa, Missouri, Montana, Nebraska, Nevada, New Mexico, and Oklahoma. All other menu items are available.

“While the incident appears to be more contained than others we have seen in the industry, an expansion of the investigation or sustained publicity is what has the potential to weigh on consumer traffic,” BTIG analyst Peter Saleh wrote in a note to clients on Wednesday.

He added the incident could dampen the ongoing Chicken Big Mac and McRib limited-time offerings set to round out the year.

“We believe McDonald’s could reduce the advertising supporting these [limited-time offerings] receive in the near future, as the message may fall on deaf ears amid broader news coverage,” he explained. “The company may also want to shift its messaging to quality, and away from value, to reassure consumers about its food safety.”

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Ark Investment Management operates a portfolio of exchange-traded funds (ETFs) focused on innovative technology stocks. Its founder and chief investment officer, Cathie Wood, thinks software companies could be the next big opportunity in the artificial intelligence (AI) industry. In fact, she predicts they will eventually generate $8 in revenue for every $1 spent on chips from suppliers like Nvidia.

Since making that forecast last year, Wood has plowed money into leading AI software start-ups like OpenAI, Anthropic, and xAI through the Ark Venture Fund. Plus, Ark’s ETFs hold several publicly traded AI software stocks like Meta Platforms, Tesla, and Microsoft.

If Wood turns out to be right about AI software companies, here’s why C3.ai (NYSE: AI) could be one of the biggest winners.

C3.ai was founded in 2009 to help businesses unlock the power of predictive analytics, which is better known today as AI. It was the first company of its kind, and it now offers more than 40 turnkey and customizable AI applications to organizations in 19 different industries, including oil and gas, financial services, and manufacturing.

It takes a considerable amount of time, money, and expertise to build AI software from scratch, which is why many businesses turn to third parties — and C3.ai can deliver finished applications to customers within six months of an initial meeting.

Georgia-Pacific manufactures pulp and paper for consumer products, building supplies, packaging, and more. The company’s machines each have over 5,000 sensors that produce 1 billion data points every day. Georgia-Pacific uses C3.ai’s Reliability application to help with predictive maintenance, and so far, it has led to a 5% improvement in overall equipment effectiveness. Plus, C3.ai is so good at tracking technical issues that Georgia-Pacific employees now spend 80% of their time addressing problems instead of searching for them.

That story isn’t unique. Oil producer Shell has deployed more than 100 customized C3.ai applications to monitor more than 10,000 items of equipment, reducing carbon emissions and also the probability of catastrophic failures. Similarly, Dow, which is one of the world’s largest chemical manufacturers, has reduced equipment downtime by 20% thanks to C3.ai’s predictive capabilities.

Demand for C3.ai’s software is soaring. During the recent fiscal 2025 first quarter (ended July 31), the company closed 51 agreements through its partner network, which includes Alphabet‘s Google Cloud, Amazon Web Services, and Microsoft Azure. That was a whopping 151% increase from the year-ago period.

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C3.ai generated a record $87.2 million in revenue during Q1, which was a 21% increase from the year-ago period. That growth rate has now accelerated for six consecutive quarters, and 21% marked the fastest pace in almost two years.

The strong result stems from a change in strategy that C3.ai’s management implemented at the beginning of fiscal 2023 (which started on May 1, 2022). The company decided to switch from a subscription-based revenue model to a consumption-based model, which eliminated lengthy negotiating periods with potential customers, allowing them to sign up far more quickly.

The transition led to an expected slowdown in C3.ai’s business in the initial stages as it converted its existing customers to the new model, but it’s now paying off with faster acquisitions of new customers and accelerating revenue growth.

C3.ai is still losing money at the bottom line. Its net loss came in at $62.8 million during Q1, which was a slight improvement from $64.3 million in the year-ago period. However, on a non-GAAP (adjusted, and not meeting generally accepted accounting principles) basis (which strips out one-time and non-cash expenses like stock-based compensation), the company’s loss was just $6.8 million.

C3.ai’s revenue is growing much faster than its operating expense (21% versus 8.8% in Q1), and that trend is expected to continue, which could drive the company to profitability within the next few quarters.

C3.ai went public in December 2020, during a stock market frenzy that was fueled by record low interest rates and truckloads of pandemic-related U.S. government stimulus spending. Its stock peaked at $161 shortly after its initial public offering (IPO), and it’s currently trading 84% below that price.

Because C3.ai isn’t profitable, we can’t value its stock using the traditional price-to-earnings (P/E) ratio. Instead, we can use the price-to-sales (P/S) ratio, which divides the company’s market capitalization by its trailing-12-month revenue.

Based on that calculation, C3.ai stock trades at a P/S ratio of 9.6. That’s significantly below its peak of more than 80 back in December 2020, which was an unsustainable valuation.

However, 9.6 is also a slight discount to its three-year average P/S ratio of 10.2 — which excludes the 2020 period — suggesting the stock is relatively cheap at the moment:

C3.ai Chief Executive Officer Thomas Siebel believes AI is a mega-market event, comparable to the dawn of the internet and the smartphone. He says the AI software market is worth $450 billion at the moment, with the potential to grow to $1.3 trillion by 2032. So, Cathie Wood isn’t alone when it comes to her bullish perspective on AI software.

Based on C3.ai’s current revenue, the company hasn’t even scratched the surface of its opportunity. Considering its current stock price, now might be a great time to buy in for the long term.

Before you buy stock in C3.ai, consider this:

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool recommends C3.ai and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Cathie Wood Says Software Is the Next Big AI Opportunity — 1 Super Stock You’ll Regret Not Buying If She’s Right was originally published by The Motley Fool

Apple (NASDAQ: AAPL) stock is currently trading around $230, but I think it’s trading on borrowed time. By the end of the year, I wouldn’t be surprised if the stock was below $200, because the fundamentals don’t support Apple’s current stock price.

There is a lot of pressure on Apple’s business, and unless something drastic changes, the stock is due for a correction.

Apple’s business needs no introduction. Its devices are in the hands of millions (if not billions) of people, although Apple seems to have hit a peak in its revenue. Since 2022, Apple’s revenue hasn’t increased any.

Companies need growth to sustain an increasing stock price, and Apple hasn’t shown that. We’ll find out more about Apple’s latest results when it reports on Halloween night (a scary time to report earnings!), but early indications aren’t great.

Apple released the iPhone 16 during the quarter, and multiple reports have indicated that sales of the iPhone 16 aren’t what the company expected. Since iPhone sales make up about half of Apple’s total revenue, this segment must do well for the rest of the business to thrive. This reported weakness has caused Wall Street analysts to tweak their expectations for the upcoming quarter, as the consensus earnings per share (EPS) projection has declined from $1.60 30 days ago to $1.55 now.

Falling projections heading into earnings are never a good sign. If the rest of Apple’s results aren’t great, don’t be surprised if the stock takes a hit, as it’s trading at an incredibly pricey valuation.

Apple’s stock fetches a far greater premium than most investors realize. At 35 times trailing earnings and 31 times forward earnings, Apple’s stock is very expensive.

While other stocks are trading at more expensive valuations, those companies are posting impressive growth numbers.

Over the long haul, stock price movements are heavily correlated to earnings growth. So, when a benchmark index like the S&P 500 (SNPINDEX: ^GSPC) averages a 10% return per year, that’s the level of earnings growth a company typically needs to beat the market consistently, if the two securities trade at the same valuation.

Last quarter, Apple’s earnings per share (EPS) grew at a 10% pace. In fourth-quarter fiscal year 2024 (ending around Sept. 30), analysts expect 14% growth. Both figures are either right at the S&P 500’s long-term average or slightly higher. However, with the S&P 500 trading at 24.7 times trailing earnings and 23.8 times forward earnings, Apple holds a 43% and 32% premium to those respective valuation metrics.

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Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) is currently the fourth-largest company in the world, with a market capitalization of just over $2 trillion, and it achieved this stellar valuation thanks to its dominant position in the search engine and the digital advertising markets.

Despite the high market cap, Alphabet’s growth hasn’t been all that steady in recent years. The company faces growing competition in the digital ad space, while its artificial intelligence (AI) efforts have run into challenges.

This is probably why analysts expect Alphabet’s earnings to increase at a relatively slower pace of 20% a year for the next five years as compared to the 24% seen in the last five years.

There are other technology stocks that are clocking faster growth by making the most of the lucrative AI opportunity. In this article, we will take a closer look at one such name that could eclipse Alphabet’s market cap in the next five years.

Taiwan Semiconductor Manufacturing (NYSE: TSM), known popularly as TSMC, is a recent addition to the trillion-dollar market cap club. It is now the eighth-largest company in the world by market cap, and its valuation is just above $1 trillion.

TSMC’s latest results have played a key role in helping it become a trillion-dollar company. The stock surged 10% following the release of its third-quarter results on Oct. 17, with better-than-expected numbers and improved guidance.

The semiconductor foundry specialist reported a 36% year-over-year increase in revenue to $23.5 billion, while earnings shot up 50% year over year in U.S. dollar terms to $1.94 per share.

TSMC now expects to end 2024 with a 30% spike in revenue, up from the earlier expectation of mid-20% growth. More importantly, its status as the largest semiconductor foundry in the world puts it in a position to make the most of the secular growth of the industry it serves. TSMC fabricates chips for Nvidia, Intel, Advanced Micro Devices, Broadcom, Apple, and Qualcomm, among others.

This diverse customer base means that TSMC is set to benefit from multiple fast-growing end markets such as AI data center chips, generative AI smartphones, and personal computers. For instance, the size of the AI semiconductor market could grow to $846 billion in 2035. All the major players tap TSMC’s foundries to manufacture their chips, including market leaders Nvidia and Broadcom.

Apple and Qualcomm booked out TSMC’s advanced chip production capacity until 2026 because both companies want to make the most of the growing demand for AI-enabled smartphones and PCs. So analysts bumped up their growth expectations from TSMC for 2024, 2025, and 2026.

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TSMC dominates the foundry market, with Counterpoint Research estimating that it has a 62% share of the global foundry market as compared to the 13% share controlled by second-place Samsung.

This gives TSMC strong pricing power: It is expected to increase the cost of its semiconductor wafers by 10% next year, and customers have reportedly agreed to the increases, according to Morgan Stanley.

So TSMC should enjoy fatter margins, and it already has a stronger margin profile when compared to Alphabet, which should ideally pave the way for stronger earnings growth.

The following chart shows that TSMC’s earnings are expected to grow slightly faster than Alphabet’s in two of the next three years.

In 2026, TSMC is expected to generate $10.15 in earnings per share (EPS); Alphabet’s reading is expected to be just a shade under $10. Analysts expect TSMC’s earnings to increase by 21.5% annually over the next five years, slightly higher than Alphabet’s estimates as mentioned above.

And TSMC’s stronger margins and its leading position in a foundry market that’s benefiting from the booming demand for AI chips could eventually lead to much stronger earnings growth in the long run. Assuming its bottom line increases by 20% in both 2027 and 2028, its earnings could jump to $14.62 per share after five years (using 2026 earnings of $10.15 per share as the base).

Assuming the stock trades at 35 times earnings at that time (in line with its current earnings multiple but at a discount to the U.S. technology sector index’s price-to-earnings ratio of 47), share prices could hit $512. That would be a 156% jump from where the stock is right now, which would send its market cap to $2.66 trillion after five years.

That will be enough to easily surpass Alphabet’s current market cap and may be enough to top Alphabet’s market cap in five years, especially if Alphabet continues to underperform the broader stock market over concerns about how it is managing stiff competition in the digital ad and AI markets.

Before you buy stock in Taiwan Semiconductor Manufacturing, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Taiwan Semiconductor Manufacturing wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $880,670!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of October 21, 2024

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Apple, Nvidia, Qualcomm, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and Intel and recommends the following options: short November 2024 $24 calls on Intel. The Motley Fool has a disclosure policy.

Prediction: 1 Stock That Will Be Worth More Than Alphabet 5 Years From Now was originally published by The Motley Fool

The Internal Revenue Service (IRS) on Tuesday announced its inflation adjustments to tax brackets and deductions for the 2025 tax year, potentially giving Americans a chance to increase their take-home pay next year.

Each year, the IRS updates the federal income tax bracket as well as the standard deduction and other tax policies to avoid a phenomenon known as “bracket creep,” which occurs when taxpayers are pushed into higher tax brackets due to increasing income despite their purchasing power being unchanged or reduced because of high inflation.

While the IRS goes through the process of making inflation adjustments annually, the increases are more significant and impactful for taxpayers during periods of high inflation.

This year, the IRS is shifting brackets higher by about 2.75%. By comparison, last year’s adjustment was about 5.4% – which reflects the elevated inflation that was prevailing in the U.S. economy in the preceding year in comparison with the past year.

Chamber Of Commerce Wades Into Election Season By Spotlighting Risk Of 2025 Tax Hikes

The higher thresholds for where various tax rates take effect could result in savings for millions of workers across all income brackets. Here’s a look at the changes unveiled by the IRS that will take effect for the 2025 tax year and returns that are filed in 2026.

Read On The Fox Business App

Standard deduction:

The standard deduction, which reduces the amount of income Americans must pay taxes on, is claimed by a majority of taxpayers.

It’s set to increase by $400 to $15,000 for single taxpayers, while it will increase by $800 to $30,000 for married taxpayers who file returns jointly.

Heads of households will have a standard deduction of $22,500 for tax year 2025, up $600 from this year.

Mysterious $7B Estate Tax Payment Spurs Questions About Source Of Funds

Tax brackets for single individuals:

The IRS is increasing its tax brackets by about 2.75% for both individual and married filers across various income levels in tax year 2025:

• 10%: Taxable income up to $11,925

• 12%: Taxable income over $11,925

• 22%: Taxable income over $48,475

• 24%: Taxable income over $103,350

• 32%: Taxable income over $197,300

• 35%: Taxable income over $250,525

• 37%: Taxable income over $626,350

Tax brackets for joint filers:

• 10%: Taxable income up to $23,850

• 12%: Taxable income over $23,850

• 22%: Taxable income over $96,950

• 24%: Taxable income over $206,700

• 32%: Taxable income over $394,600

• 35%: Taxable income over $501,050

• 37%: Taxable income over $751,600

Irs Apologizes To Ken Griffin And Thousands Of Americans For Tax Data Leak

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Other tax provisions:

The IRS also increased the thresholds for other tax deductions and credits to account for inflation, including the Earned Income Tax Credit (EITC) which will rise to $8,046 in tax year 2025 for qualifying taxpayers with three or more qualifying children. That’s up from $7,830 in tax year 2024.

Exception amounts for the alternative minimum tax increased to $88,100 for individuals and begins to phase out at $626,350 for unmarried individuals. For married couples who file joint returns, the exemption rises to $137,000 and phases out at $1,252,700.

Workers can contribute an extra $100 to health flexible spending accounts, with the dollar limitation for employee salary reductions for contributions rising to $3,300. The minimum carryover amount for plans that allow unused funds to carry over to the following year will also rise to $660.

Original article source: IRS sets new tax brackets, raises standard deduction for 2025

On Wednesday, AT&T Inc (NYSE:T) reported third-q uarter 2024 operating revenues of $30.21 billion, down 0.5% year over year. It marginally missed the analyst consensus estimate of $30.44 billion.

The slow recovery in smartphone purchases affected the topline performance, Bloomberg reports.

Adjusted EPS of $0.60 beat the estimate of $0.57. The stock gained after the print.

Also Read: Verizon Q3 Earnings: Wireless Subs Boost with 5G Offers, $1.7B Severance Charge Hit To Profit, Reiterates Annual Outlook

As per Bloomberg, AT&T’s 403,000 postpaid phone net adds a quashed consensus of 394.6 thousand.

In the Mobility segment, AT&T clocked 617 thousand wireless net adds, including 429 thousand postpaid phone net adds.

AT&T’s mobility segment saw a postpaid churn of 0.93% versus 0.95% a year ago.

The Consumer Wireline segment had 226 thousand AT&T Fiber net adds, falling short of the analyst consensus of 265.4 thousand due to adverse weather and work conditions in Southeast.

The company reported 135 thousand AT&T Internet Air net adds, lagging consensus of 147 thousand.

AT&T’s adjusted EBITDA of $11.59 billion was up from $11.20 billion a year ago. It spent $5.3 billion on Capex.

Net income plunged to $0.1 billion versus $3.8 billion in the year-ago quarter due to a $4.4 billion non-cash goodwill impairment associated with its Business Wireline unit.

The company generated $10.24 billion in operating cash flow (down from $10.34 billion in the year-ago quarter) and $5.095 billion in free cash flow (down from 5.182 billion last year).

Currently, AT&T’s dividend yield stands at 6.10%. Higher free cash flows could translate into shareholder returns through higher stock buybacks and dividends.

Prepaid churn was 2.73% compared to 2.78% in the year-ago quarter. Postpaid phone-only ARPU was $57.07, up 1.9% compared to the year-ago quarter.

Operating Income: Operating income was $2.12 billion versus $5.78 billion a year ago.

The mobility segment’s operating income was up 3.5% year over year to $7.00 billion, with a margin of 33.3% compared to 32.7% in the year-ago quarter.

The Business Wireline segment operating margin was (0.9)% compared to 6.7% in the year-ago quarter. The Consumer Wireline segment operating margin was 5.7% compared to 4.8% in the year-ago quarter.

FY24 Outlook: AT&T reiterated Wireless service revenue growth in the 3% range, Broadband revenue growth of 7%+, and adjusted EPS of $2.15 – $2.25 versus the $2.20 consensus.

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Trump Media & Technology Group stock (DJT) extended gains on Wednesday, rising another 2% in premarket trading as investors bet on former President Donald Trump’s improved odds of winning the November election in less than two weeks.

The moves come after the stock hit its highest level since July on Tuesday, with shares closing up nearly 10%.

Shares in the company, the home of the Republican nominee’s social media platform Truth Social, have seen a recent surge as both domestic and overseas betting markets shift in favor of a Trump victory, with prediction sites like Polymarket, PredictIt, and Kalshi all showing Trump’s presidential chances ahead of those of Democratic nominee and current Vice President Kamala Harris.

National polls, however, show both candidates in an incredibly tight race, especially in key battleground states like Pennsylvania and Michigan, which are likely to decide the fate of the election.

The recovery in shares comes after the stock traded at its lowest level since the company’s debut following the expiration of its highly publicized lockup period last month. Shares had also been under pressure, as previous polling around early September saw Harris edging slightly ahead of the former president.

Trump’s recent campaign momentum, which just included a stop at a local Pennsylvania McDonald’s, follows an appearance by Elon Musk at his rally in Butler, Pa., earlier this month. It was the same location where the former president survived an assassination attempt in July.

Tech billionaire Musk, who serves as the CEO of Tesla (TSLA) and SpaceX and also owns social media platform X (formerly Twitter), has been outspoken about his support of Trump ahead of next month’s election. Trump has even said he would consider a Cabinet position for Musk but that the businessman likely would not be able to serve “with all the things he’s got going on.”

At the rally, Musk told the crowd that Trump is the only candidate who can “preserve democracy in America,” adding this will be “the last election” if Trump does not win.

Meanwhile, Harris has recently embarked on a flurry of media appearances in which she was pressed on how she would fund some of her proposals surrounding the economy and immigration.

Trump founded Truth Social after he was kicked off major social media apps like Facebook (META) and Twitter, now X, following the Jan. 6, 2021, Capitol riots. Trump has since been reinstated on those platforms. He officially returned to X in mid-August after about a year’s hiatus.

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But as Truth Social attempts to take on the social media incumbents, the fundamentals of the company have long been in question.

In August, DJT reported second quarter results that revealed a net loss of $16.4 million, about half of which was tied to expenses related to the company’s SPAC deal. The company also reported revenue of just under $837,000 for the quarter ending June 30, a 30% year-over-year drop.

Earlier this month, the company revealed that its COO had stepped down in September.

Trump maintains a roughly 60% interest in DJT. At current levels of above $33 a share, Trump Media boasts a market cap of about $6.7 billion, giving the former president a stake worth around $4 billion. Right after the company’s public debut, Trump’s stake was worth just over $4.5 billion.

Trump Media went public on the Nasdaq in late March after merging with special purpose acquisition company Digital World Acquisition Corp. But the stock has been on a bumpy ride since, with shares oscillating between highs and lows as the moves have typically been tied to a volatile news cycle.

Over the past six months, the stock has been off around 8% — a massive improvement on the heels of the rally after shares hit their lowest point last month.

Stakeholders, including the former president, were subject to a six-month lockup period before being able to sell or transfer shares. That lockup period expired on Sept. 19, although Trump said at the time that he would not sell his stake.

“I have absolutely no intention of selling,” the former president told reporters at a press conference prior to the lockup period expiration. “I love it. I use it as a method of getting out my word.”

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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