Year: 2024

• Renaissance Macro’s Jeff DeGraaf predicts a 10% stock market drop amid three bearish factors.

• Tech stocks may underperform after rate cuts, impacting market stability, according to DeGraaf.

• “There’s still a little longer fuse on this correction that’s likely to take place before we’re done,” DeGraaf said.

A trifecta of bearish factors could send stocks lower by about 10% within the next few weeks, according to Renaissance Macro Research founder and technical strategist Jeff DeGraaf.

In an interview with CNBC on Wednesday, DeGraaf said the Nasdaq 100 could trade to 17,000, a key technical level he is monitoring which represents 10% downside from current levels.

For the S&P 500, DeGraaf is closely watching the early August low of 5,120 for a potential retest of support. That level represents about 7% downside from current levels.

DeGraaf is concerned that sentiment remains in bullish territory, which isn’t typically seen when the market is at or near a bottom.

“When we look at where the sentiment is in terms of small speculators on the NDX futures, they’re still very very net long. In other words, they’ve been using this weakness as a buying opportunity. And that’s not usually the right behavior to create some kind of low,” DeGraaf said.

The S&P 500 is about 3% below its record high, while the Nasdaq 100 is down about 8%.

The bullish sentiment among traders is also contrasted by the fact that September has historically been a bad month for stocks.

Finally, DeGraaf said that technology stocks, which have been leading the market higher since the bull market started in October 2022, typically underperform in the three months following the Federal Reserve’s first interest rate cut.

“When we look particularly at technology, it does not fare well after the first rate cut. It’s very pro-cyclical, cyclicals tend to underperform for at least three months after the first Fed rate cut,” DeGraaf said.

“So even though it feels like the calvary is on the way and good things are likely to happen, the data probably continues to be weaker and I think that’s one of the things that’s kind of piling up on us here.”

As to how the decline plays out, DeGraaf said there could be further weakness toward the end of September, spilling over into early October.

Such a decline would create a two-month window of stocks seeing little movement, which can “become pretty disheartening for people,” DeGraaf said.

Another potential decline could come in the form of a quick flush of positioning among trend followers and “sheer panic” among investors, similar to what happened in early August amid the yen carry trade blowup.

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Until one of those two things happens, DeGraaf sees short-term stock market risks skewed to the downside.

“Neither one of those have we seen yet and that’s why we think there’s still a little longer fuse on this correction that’s likely to take place before we’re done,” DeGraaf said.

Read the original article on Business Insider

Carrie N Callahan
Claire's Place Foundation
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carrie@nashcallahan.com

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There’s no denying electric vehicles (EVs) aren’t quite as common as the world initially expected them to be by this point in time. Although they exist and have a place within the automobile industry, the International Energy Administration reports that a little less than 1-in-5 vehicles sold in 2023 are powered by an electrically driven motor (including plug-in hybrids). In the meantime, consumer interest in EVs is waning here and abroad, with many people citing a combination of range concerns and sheer cost as their chief purchase roadblocks. Far too many electric vehicle stocks have performed far too poorly as a result.

While it has fallen short of early expectations, the EV industry is still growing. Bloomberg Intelligence predicts last year’s worldwide EV sales of around 14 million will swell sales of 30 million in 2027, en route to 73 million EV sales in 2040. With trends working in their favor, several unprofitable EV manufacturers could grow their way out of the red and into the black, pushing their underperforming stocks much higher as a result. It’s this projected growth that has investors excited about the potential for millionaire-making returns.

Here’s a closer look at three potential millionaire-making EV stocks that risk-tolerant investors might want to consider.

1. Nikola

The discussion around EVs tends to focus on passenger vehicles, and for good reason — the world buys more than 70 million such automobiles every year. EVs’ underlying technology, however, isn’t limited to passenger-first automobiles. In many ways, are well suited to the hauling and logistics market. That’s mostly class-8 tractor-trailers (or “big rigs”) which are on the road for several hours per day for several days a week. Averaging just 6 mpg of diesel fuel, one truck can burn through tens of thousands of gallons of fuel every single year.

Enter Nikola (NASDAQ: NKLA). It makes battery-powered class-8 tractors — as well as hydrogen-powered versions of these haulers — that are proving efficient, and marketable. They’re on par with diesel in terms of total pulling power, trip distance, and operating costs, but markedly cleaner to operate, meaning they’re already meeting ever-rising emission standards. That’s why the company sold another 72 of its hydrogen fuel cell trucks last quarter, bringing total unit sales to 147 after just three quarters’ worth of availability. Buyers include outfits like Walmart. For perspective, roughly a quarter-of-a-million of these heavy haulers are sold every year in the United States alone, and the U.S. is only a fraction of the global market.

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Oh, Nikola also monetizes the tech by supplying the hydrogen needed to power its rigs. This network of fueling stations is expanding as well, as usage of its trucks grows.

The company isn’t yet profitable, which is perhaps the key reason its stock has dished out more frustration than gains since soaring in 2020 during the COVID-19 pandemic. With revenue growth this year and next year expected to exceed 200%, the losses are shrinking fast.

Analysts expect this trend to matter. Their current consensus price target over the next 12 months of $16.80 is more than 150% above the stock’s present price. Keep in mind though that Nikola is dealing with some serious capital (or lack thereof) problems of late. That means there’s above-average risk to consider here as well for investors.

2. Rivian Automotive

To be sure, ordinary passenger vehicles present a tremendous EV opportunity as well.

Tesla (NASDAQ: TSLA) mainstreamed the idea and, for years, was the only major player in the EV space. But good business ideas eventually draw newcomers. Founded as EV sports car maker Mainstream Motors back in 2009, the company became Rivian Automotive (NASDAQ: RIVN) a couple of years later and officially entered the EV market at scale in 2021 with all-electric pickup trucks, sports utility vehicles, and thousands of battery-powered delivery vans made for e-commerce giant Amazon.

Rivian’s product focus is savvy. Conventional sedans are marketable, but consumers love their trucks and SUVs. The National Automobile Dealers Association estimates about 80% of last year’s vehicle sales in the United States were light trucks — a category that includes SUVs and pickups. These bigger vehicles also sell surprisingly well in Europe, and increasingly, even in China. For now, Rivian only manufactures and markets its vehicles in North America, but it intends to enter Europe in the foreseeable future. China and other parts of Asia have been on the radar for some time as well.

Like Nikola, Rivian isn’t profitable. It probably won’t be profitable in the near future either.

It is making progress to that end though, and is positioned to capitalize on the EV industry’s long-term growth.

3. Toyota

Last but not least, add Toyota Motor (NYSE: TM) to your list of electric vehicle stocks that could help you eventually become a millionaire.

If it seems like Toyota hasn’t shown much focus on EVs in the past, you’re not imagining things. It hasn’t. While it does make battery-powered and hybrid vehicles, it’s not invested a ton of time and money in them. It’s instead remained largely focused on traditional combustion-powered vehicles while allowing other carmakers to go to the trouble and expense of blazing the EV trail.

Now that’s finally changing. With EV technology (mostly) optimized and charging infrastructure now falling into place, the company’s turning up the heat. Last year’s sales of Toyota EVs jumped 35%. That’s huge progress even if these vehicles still only account for about one-third of Toyota’s total unit sales.

However, there’s a twist here. Recognizing that car owners are increasingly worried a vehicle solely powered by charged batteries just doesn’t or won’t meet their needs, Toyota is doubling down on hybrid vehicles that also run on conventional gasoline once their battery’s charge has been depleted.

The plan seems to be working too. At a time when sales growth of conventional battery-powered EVs is slowing, Toyota saw accelerating growth from hybrid vehicles that already make up the vast majority of its EV production (up 24% last quarter). As it turns out, at least some drivers are comfortable with the idea of a vehicle that’s capable of burning gas when necessary.

This stock’s potential upside as an EV investment, though, isn’t rooted in Toyota’s capacity to pivot. It lies in the fact that Toyota is already a known and trusted name here and abroad. America’s best-selling cars in 2023 (and in prior years too) include its Camry, Rav4, Tacoma, and Corolla. While some consumers might be hesitant to purchase an EV from a newer company like Rivian or even Tesla, they’re more likely to be comfortable buying one from a manufacturer that’s seemingly been around forever.

Should you invest $1,000 in Rivian Automotive right now?

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

3 Electric Vehicle (EV) Stocks That Could Make You a Millionaire was originally published by The Motley Fool

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Palantir Technologies (NYSE: PLTR) stock shot up 110% in the past year, as investors bought shares of this software platform provider hand over fist, thanks to the rapidly growing demand for its artificial intelligence (AI) offerings. And yet, because it has already rallied so far, Wall Street doesn’t anticipate more gains in the coming year.

Palantir stock carries a median 12-month price target of $28 (per 24 analysts covering it). That implies an 11% drop from its current price. A third of those analysts recommend selling Palantir, with 38% rating it as a buy and the rest as a hold.

Does this divided analyst sentiment mean it’s time for investors to book profits in Palantir? Or can this high-flying AI stock sustain the rally and deliver more gains in the coming year? Let’s check if Palantir has what it takes to defy Wall Street’s expectations.

Palantir’s growth profile continues to improve

Palantir’s expensive valuation looks like a key reason why analysts are doubtful it can deliver more upside over the next 12 months. The stock’s price-to-sales ratio of 29 is admittedly expensive. It nearly quadruples the U.S. technology sector index’s average sales multiple of 7.7. Palantir’s trailing price-to-earnings ratio is also very expensive at 178. Its forward earnings multiple of 86 points toward a nice bump in its earnings over the next year, but it is still on the expensive side.

One way to justify buying Palantir stock despite its rich valuation is the acceleration in the company’s growth. In the second quarter, the company’s revenue increased 27% from the same period last year to $678 million. That was better than the 21% year-over-year growth Palantir reported in the first quarter of the year. The company’s top-line growth in the first half of the year indicates that it is well on track to exceed the 17% full-year revenue jump it delivered in 2023 to $2.2 billion.

The company expects to finish 2024 with almost $2.75 billion in revenue. That would be a 25% increase over last year. Analysts forecast its earnings will increase by 44% in 2024 to $0.36 per share. But it is worth noting that analysts have been raising their expectations of late.

Stronger-than-expected growth could send Palantir stock higher

Another thing worth noting in the chart is that despite a bump in Palantir’s revenue estimates for the next couple of years, analysts expect it to grow at a slower pace in 2025 and 2026. However, that may not be the case, as the recent acceleration in the company’s growth seems sustainable in the coming year.

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In simpler words, Palantir’s top-line growth could be much stronger than what analysts expect in 2025. That’s because its Artificial Intelligence Platform (AIP) is leading to robust growth in its revenue pipeline. The company’s remaining performance obligations (RPO) increased 41% year over year in Q2 to $1.37 billion.

Palantir’s RPO reflects the value of contracts that the company entered into with customers, which means that it is an indicator of its future revenue growth. However, Palantir points out that its RPO mainly consists of commercial contracts. The remaining deal value (RDV) is the metric to look at to get an idea of the potential top-line growth that Palantir could deliver. RDV is the total remaining value of all the company’s contracts at the end of a quarter. This metric was worth $4.3 billion in Q2, jumping 26% from the same quarter last year. It remains to be seen how quickly Palantir can translate those contracts into actual revenue, but it is worth noting that its RDV is significantly higher than its trailing-12-month revenue of $2.5 billion.

So there is a strong possibility of Palantir’s growth being better than expected in the next year, especially considering that it could continue to attract new customers toward its AI software offerings in light of the huge end-market opportunity available in this market. Market research firm IDC forecasts the market for AI software platforms that Palantir offers could clock a compound annual growth rate of 41% through 2028, generating $153 billion in annual revenue at the end of the forecast period.

Palantir is in a solid position to make the most of this opportunity. According to research firm Forrester, Palantir has been ranked as the No. 1 provider of AI software platforms. This is also evident from the fact that the company’s deal count has been increasing rapidly. For instance, it struck 123 deals with U.S. commercial customers in Q2, which was a 98% jump from the year-ago period.

More importantly, Palantir’s deal sizes are getting bigger, with the company closing 96 deals worth $1 million or more in the previous quarter, up from 66 such deals in the same period last year. What’s more, the number of $10 million-plus deals increased by 50% year over year to 27. So, as the adoption of Palantir’s AI platforms increases, its growth rate should also pick up.

Moreover, Palantir’s price/earnings-to-growth ratio (PEG ratio) is well below 1.

The PEG ratio is a forward-looking valuation metric calculated by dividing a company’s trailing P/E by its projected earnings growth. A reading of less than 1 means that a stock is undervalued in light of its potential growth. So, growth investors can still consider buying Palantir stock, as there is a good chance that its stronger-than-expected performance in the coming year could be rewarded with more gains on the market.

Should you invest $1,000 in Palantir Technologies right now?

Before you buy stock in Palantir Technologies, 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 Palantir Technologies 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 $661,779!*

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*.

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*Stock Advisor returns as of September 3, 2024

Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.

Where Will Palantir Technologies Stock Be in 1 Year? was originally published by The Motley Fool

C3.ai Inc AI posted upbeat earnings and sales results for its first quarter on Wednesday.

C3.ai reported first-quarter revenue of $87.2 million, up 21% year-over-year. The revenue figure beat a Street consensus estimate of $86.9 million, according to data from Benzinga Pro.

Subscription revenue was $73.5 million in the first quarter, up 20%. Subscription revenue made up 84% of the company’s total revenue in the first quarter.

The company reported a loss of 5 cents per share in the first quarter, beating a Street consensus estimate of a loss of 13 cents per share.

“We had a solid start to the fiscal year, with rising demand for Enterprise AI driving our sixth consecutive quarter of accelerating revenue growth,” C3.ai CEO Thomas Siebel said.

The company is guiding for second-quarter revenue in a range of $88.6 million to $93.6 million. Full fiscal-year revenue is guided to be in a range of $370 million to $395 million.

C3.ai shares fell 1.9% to close at $23.01 on Wednesday.

These analysts made changes to their price targets on C3.ai following earnings announcement.

Considering buying AI stock? Here’s what analysts think:

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