Yahoo Finance NVIDIA and GlobalFoundries have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – February 29, 2024 – Zacks Equity Research shares NVIDIA NVDA as the Bull of the Day and GlobalFoundries GFS as the Bear of the Day. In addition, Zacks Equity Research provides analysis on CSG Systems International, Inc. CSGS, Ramaco Resources, Inc. METC and Universal Display Corp. OLED.
Here is a synopsis of all five stocks:
Bull of the Day:
It should come as no surprise to my followers that NVIDIA did it again with another beat-and-raise quarter.
Despite the rumblings of an "AI bubble" or questionable vendor financing tactics, the Starship Jensen delivered real and sustainable growth that pushed the stock to a $2 trillion market cap.
Recall that was my forecast last spring...
Nvidia DGX: Workhorse of AI Will Drive NVDA to $2 Trillion
But even I didn't think it was going to happen this soon.
So what's going on?
You can review that video and article to understand the 2023 business mechanics and industry dynamics of GPUs stacked in DGX systems, running "massively parallel architectures" on CUDA.
I made that piece when NVDA shares were trading $400 to explain to investors why the stock launched in late May from $300 -- and would never look down again.
The pivotal moment came in late May at the Computex event in Taiwan when NVIDIA CEO Jensen Huang revealed that Microsoft, Alphabet, and Meta Platforms were all lined up for his latest DGX-GPU system, the GH200, a large-memory AI supercomputer that uses NVIDIA NVLink to combine up to 256 NVIDIA Grace Hopper Superchips into a single datacenter-sized GPU.
Since I had just published my special report on ChatGPT the day before NVIDIA's March GPU Tech Conference (GTC), I put two and two together... to get 200!
You see, when I published that report on March 20, I had no idea that Jensen would start talking about ChatGPT as "the AI heard round the world" and that this was AI's "iPhone Moment" of transformational demand.
And even though I didn't need any convincing to buy and hold NVDA shares (we had just scooped it near 18-month lows under $125 in October of 2022), something hit me when I heard that those 3 datacenter giants were the first big customers for GH200 systems...
If they were going to keep building and improving their own internal LLMs (large language models), then the other 997 corporations in the Fortune 1000 would be itching to do it too!
Make that the other 1,997 enterprises in the Global 2000.
From March to June, we saw NVIDIA sales projections for last year and this year essentially double. And I said in June that even those expectations were too tame.
Because the race was on for every enterprise to build and scale their own LLM for internal data mining, industry insights, and next-gen innovation.
If you want a copy of my ChatGPT report, Time to Become an AI Conversationalist, just email Ultimate@Zacks.com and tell 'em Cooker sent you.
What's Different Now?
Believe it or not, not much has changed. The demand is still off the charts and the GPUs keep getting better and faster.
And so that means only the important things have changed: the speed, power, names, and price of the GPUs.
Yep, as they get better, they keep getting pricier. And that's why NVIDIA was able to boast 76% gross margins last week in their quarterly report.
On Monday, I made a video using a recent NVIDIA presentation to highlight the secular drivers of this incredible AI revolution.
In that video, I showed over half-a-dozen slides that really communicate the transformation that is occuring for every sector of the economy.
And while some folks like to make fun of ChatGPT for what it can or can't do, this is about far more than generative AI questions and answers.
What I left out of my 7-minute video was a discussion of all the much more important transformations happening in science, engineering, medicine, agriculture, climate studies, and industrial productivity and automation.
Those are the most exciting areas where the "massively parallel architectures" of GPU-driven AI can make a difference and change the world.
Estimates: Up, Up, and Away
In the video, I also show the Zacks Detailed Earnings Estimates tables for NVDA with the stunning upward revisions that we are witnessing since their report last week.
For this fiscal year 2025 (began in February), the topline moved from $93 billion to $98.6 billion. But I said they would keep going higher, and as of Wednesday we're now looking at a consensus of $102.4B for a potential 68% annual leap, with the high estimate at $107B.
And next year is clocking in at over $117B with the high estimate at $136B. Again, I still expect these estimates to all move higher.
In the video, I explain why NVIDIA will likely hit $200 billion in revenues sometime by 2027.
And that means NVIDIA will be the next $3 trillion company.
Disclosure: I own shares of NVDA for the Zacks TAZR Trader portfolio.
Bear of the Day:
When I last wrote about GlobalFoundries in early July, as shares were trading near $65, I summed up that this "US-based Semi fabricator fights to draw new business in a global nanometer AI-chip war."
Well after their Q4 report two weeks ago, the story has not improved, with continued year-over-year declines in sales and profits and weaker guidance for both that has dropped the stock back into the cellar of the Zacks Rank.
My July article gives a good overview of where GlobalFoundries fits in the semiconductor ecosystem and what downward trends were already in motion last spring.
In that piece I explain what this $29 billion "chip builder" with $7 billion in revenues is relied on for. I also describe the landscape of "trailing node" and why GFS remains a key semiconductor player for many different types of industrial manufacturers.
Read that July piece to grasp the context of their long-term business and opportunities, even as the latest report signals more weakness ahead in the short term.
Metrics, Segments, and Guidance
GlobalFoundries delivered adjusted earnings of 64 cents per share in fourth-quarter 2023, beating the Zacks Consensus Estimate by 8.5%. However, the bottom line declined 56% on a year-over-year basis.
Revenues of $1.85 million topped the Zacks Consensus Estimate by 0.2%. However, the top line dipped 12% year over year.
Weakness across the smart mobile devices, communications infrastructure and datacenter, home and industrial IoT, and personal computing end-markets was a major concern.
Wafer shipments decreased 5% year over year to $552 million in the reported quarter, while stronger momentum in the automotive end market was a positive.
End-Market Details
Smart Mobile Devices: Revenues generated from the market fell 7% year over year to $765 million (41% of the total revenues).
Communications Infrastructure & Datacenter: Revenues from the market decreased 63% year over year to $144 million (8% of the total revenues) in the reported quarter.
Home and Industrial IoT: Revenues from the market were $322 million (17% of the total revenues), down 23% from the year-ago quarter.
Automotive: Revenues from the market were $318 million (17% of the total revenues), up 177% from the year-ago quarter.
Personal Computing: Revenues from the market were $84 million (5% of the total revenues), down 27% from the year-ago quarter.
Non-Wafer and Corporate Other Revenue: Revenues from this category were $221 million (12% of the total revenues), down 10% from the year-ago quarter.
GFS Guidance
For first-quarter 2024, GlobalFoundries expects revenues between $1.50 billion and $1.54 million. The Zacks Consensus Estimate for the same is pegged at $1.75 billion.
Gross profit is expected to be $329-371 million, with a gross margin of 23% at the mid-point.
Adjusted operating profit is anticipated between $120 million and $180 million, with an operating margin of 9.9% at the mid-point.
The company anticipates adjusted earnings per share between 18 cents and 28 cents. The Zacks Consensus Estimate for the same period was pegged at 45 cents.
In response to this company guidance, Wall Street semiconductor analysts lowered the Zacks Consensus for the 2024 topline to $6.77 billion, representing an 8.44% annual decline.
And the full-year EPS consensus dropped a whopping 41.5% from $2.24 to $1.31.
Bottom line on GFS: The continuing decline in growth may soon trough this year in the midst of historic AI-fueled demand for chips, but right now the stock will probably be stagnant given its valuation and trailing node specialties. The Zacks Rank will let you know about a possible turnaround.
Additional content:
3 Stocks in Focus That Recently Announced Dividend Hikes
After a solid 2023 and a great start to this year, volatility returned to Wall Street a couple of weeks ago as concerns grew over the Federal Reserve's timing for the first rate cut. Investors were expecting that the Federal Reserve would soon announce the first rate cut, but hopes dimmed after data showed that inflation increased in January.
The consumer price index (CPI) rose 0.3% month over month in January and 3.1% from a year ago, the Commerce Department reported. Also, core CPI, which excludes the volatile energy and food prices, rose 0.4% sequentially and 3.9% year over year in January.
The hotter-than-expected inflation reading has dented investors' confidence. Also, the minutes of the Federal Reserve's January FOMC meeting suggest that the central bank is in no rush to cut interest rates. It will go for the first rate cut only after the officials have "greater confidence" that inflation has eased.
The Federal Reserve had already ruled out a chance of a rate cut in March as inflation remains above its 2% target rate. Markets were expecting the first rate cut in May but now many believe that the first rate cut won't happen before the June FOMC meeting.
Markets are now pricing in just a 2.5% chance of the Federal Reserve going for a rate cut in March, according to the CME FedWatch tool. The probability was more than 90% in the first week of January.
Higher interest rates can keep markets volatile for a longer time.
Stocks in Focus
Given the current situation, investors looking to safeguard their portfolios may find dividend-yielding stocks a wise choice. It is advised to explore stocks that have recently increased their dividend payments.
Four such stocks are CSG Systems International, Inc., Ramaco Resources, Inc. and Universal Display Corp..
CSG Systems International, Inc. is a leading provider of outsourced billing, customer care, and print and mail solutions and services supporting the North American cable and direct broadcast satellite markets. CSGS' solutions support some of the world's largest and most innovative providers of bundled multi-channel video, Internet, voice and IP-based services. CSG Systems International has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
On Feb 25, CSG Systems International announced that its shareholders would receive a dividend of $0.30 a share on Mar 28, 2024. CSGS has a dividend yield of 2.08%. Over the past five years, CSG Systems International has increased its dividend six times, and its payout ratio at present sits at 38% of earnings.Check CSG Systems International's dividend history here.
Ramaco Resources, Inc. is an operator and developer of metallurgical coal primarily in southern West Virginia, southwestern Virginia and southwestern Pennsylvania. METC operates principally in Charleston, West Virginia. Ramaco Resources Inc. is based in Lexington, Kentucky.
On Feb 24, Ramaco Resourcesdeclared that its shareholders would receive a dividend of $0.14 a share on Mar 15, 2024. METC has a dividend yield of 2.76%. Over the past five years, Ramaco Resourceshas increased its dividend four times, and its payout ratio at present sits at 33% of earnings.Check Ramaco Resources' dividend history here.
Universal Display Corp. is a leading developer of technology and intellectual property for the Organic Light Emitting Diodes ("OLED") market. OLEDs are thin, lightweight and power-efficient solid-state devices that emit light.
On Feb 22, Universal Display Corporation declared that its shareholders would receive a dividend of $0.40 a share on Mar 29, 2024. OLED has a dividend yield of 0.81%. Over the past five years, Universal Display Corporationhas increased its dividend six times, and its payout ratio at present sits at 33% of earnings. Check Universal Display Corporation's dividend history here.
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NVIDIA Corporation (NVDA) : Free Stock Analysis Report
CSG Systems International, Inc. (CSGS) : Free Stock Analysis Report
Universal Display Corporation (OLED) : Free Stock Analysis Report
Ramaco Resources, Inc. (METC) : Free Stock Analysis Report
GlobalFoundries Inc. (GFS) : Free Stock Analysis Report
