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Meet the Suspicious 8: Dividends Over 6% With Plenty of Problems
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Verizon Mobile Customers Could Split $100 Million Settlement. Here’s How.
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Verizon mobile phone customers could share a proposed $100 million class action settlement over monthly fees that people suing the communications company claim were unfairly charged and improperly disclosed. But those who want to claim their share of that money need to act by April 15.
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The Russell 2000 Index has soared, but you might be better off looking elsewhere for quality small-cap stocks
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The Russell 2000 Index soared 12% in December, which might reflect investors’ exuberance about the state of the U.S. economy — it appears the Federal Reserve has won its battle against inflation.
But if you are looking to broaden your exposure to the stock market beyond the large-cap S&P 500
SPX,
buying shares of a fund that tracks the Russell 2000 Index
RUT
might not be the best way to do it. This is because the Russell 2000 isn’t selective — it is made up of the smallest 2,000 companies by market capitalization in the Russell 3000 Index
RUA,
which itself is designed to capture about 98% of the U.S. public equity market.A better choice might be the S&P Small Cap 600 Index
SML
because S&P Global requires companies to show four consecutive quarters of profitability to be initially included in the index, among other criteria.Below is a screen of analysts’ favorite stocks among the S&P Small Cap 600, along with another for the Russell 2000.
Watch for a “head fake”
Much of the small-cap buying in December might have resulted from covering of short positions by hedge-fund managers. This idea is backed by the timing of trading activity immediately following the Federal Open Market Committee’s announcement on Dec. 13 that it wouldn’t change its interest-rate policy, according to MacroTourist blogger Kevin Muir. The Fed’s economic projections released the same day also indicate three cuts to the federal-funds rate in 2024.
Heading into the end of the year, a fund manager who had shorted small-caps, and then was surprised by the Fed’s interest-rate projections, might have scrambled to buy stocks it had shorted to close-out the positions and hopefully lock in gains, or limit losses.
That buying activity and resulting pop in small-cap prices could set up a typical “head fake” for investors as the new year begins, according to Muir.
The long-term case for quality
Looking at data for companies’ most recently reported fiscal quarters, 58% of the Russell 2000 reported positive earnings per share, according to data provided by FactSet. In other words, hundreds of these companies were losing money. These might include promising companies facing “binary events,” such as make-or-break drug trials in the biotechnology industry.
In comparison, 78% of companies among the S&P Small Cap 600 were profitable, and 93% of the S&P 500 were in the black.
Here are long-term performance figures for exchange-traded funds that track all three indexes:
ETF Ticker 2023 3 years 5 years 10 years 15 years 20 years iShares Russell 2000 ETF IWM 17% 7% 61% 99% 428% 365% iShares Core S&P Small Cap ETF IJR 16% 25% 69% 129% 540% 515% SPDR S&P 500 ETF Trust SPY 26% 34% 108% 210% 629% 527% Source: FactSet An approach tracking the S&P Small Cap 600 has outperformed the Russell 2000 for all periods, with margins widening as you go further back.
Brett Arends: You own the wrong small-cap fund. How to get into a better one.
Looking ahead for quality… or not
For the first screen, we began with the S&P Small Cap 600 and narrowed the list to 385 companies covered by at least five analysts polled by FactSet. Then we cut the list to 92 companies with “buy” or equivalent ratings among at least 75% of the covering analysts.
Here are the 20 remaining stocks among the S&P Small Cap 600 with the highest 12-month upside potential indicated by analysts’ consensus price targets:
Company Ticker Share “buy” ratings Dec. 29 price Consensus price target Implied 12-month upside potential Vir Biotechnology Inc. VIR,
+4.47% 88% $10.06 $32.00 218% Arcus Biosciences Inc. RCUS,
+3.04% 82% $19.10 $41.00 115% Xencor Inc. XNCR,
+6.03% 92% $21.23 $39.83 88% Dynavax Technologies Corp. DVAX,
+2.86% 100% $13.98 $24.80 77% ModivCare Inc. MODV,
+0.95% 100% $43.99 $75.50 72% Xperi Inc XPER,
+1.81% 80% $11.02 $18.20 65% Thryv Holdings Inc. THRY,
100% $20.35 $32.75 61% Ligand Pharmaceuticals Inc. LGND,
+1.25% 100% $71.42 $114.80 61% Green Plains Inc. GPRE,
-1.67% 80% $25.22 $40.30 60% Patterson-UTI Energy Inc. PTEN,
+0.28% 75% $10.80 $17.00 57% Ironwood Pharmaceuticals Inc. Class A IRWD,
+8.48% 83% $11.44 $17.83 56% Catalyst Pharmaceuticals Inc. CPRX,
+1.78% 100% $16.81 $26.20 56% Payoneer Global Inc. PAYO,
-3.45% 100% $5.21 $8.00 54% Helix Energy Solutions Group Inc. HLX,
-2.63% 83% $10.28 $15.00 46% Arlo Technologies Inc. ARLO,
-3.05% 100% $9.52 $13.80 45% Pacira Biosciences Inc. PCRX,
-5.16% 100% $33.74 $48.40 43% Privia Health Group Inc. PRVA,
+2.95% 100% $23.03 $32.53 41% Semtech Corp. SMTC,
-1.23% 92% $21.91 $30.90 41% Talos Energy Inc. TALO,
+1.19% 78% $14.23 $20.00 41% Digi International Inc. DGII,
-1.21% 100% $26.00 $36.14 39% Source: FactSet Any stock screen should only be considered a starting point. You should do your own research to form your own opinion before making any investment. one way to begin is by clicking on the tickers for more about each company.
Moving on to the Russell 2000, when we narrowed this group to stocks covered by at least five analysts polled by FactSet, we were left with 936 companies. Among these, 355 have “buy” or equivalent ratings among at least 75% of the covering analysts.
Among those 355 stocks in the Russell 2000, these 20 have the highest implied upside over the next year, based on consensus price targets:
Company Ticker Share “buy” ratings Dec. 29 price Consensus price target Implied 12-month upside potential Karyopharm Therapeutics Inc. KPTI,
+4.18% 75% $0.87 $6.00 594% Rallybio Corp. RLYB,
+0.42% 100% $2.39 $16.50 590% Vor Biopharma Inc. VOR,
-0.89% 100% $2.25 $15.44 586% Tenaya Therapeutics Inc. TNYA,
-0.62% 100% $3.24 $19.14 491% Compass Therapeutics Inc. CMPX,
-5.13% 86% $1.56 $9.17 488% Vigil Neuroscience Inc. VIGL,
+2.66% 88% $3.38 $18.75 455% Trevi Therapeutics Inc. TRVI,
-2.99% 100% $1.34 $7.33 447% Inozyme Pharma Inc. INZY,
+1.64% 100% $4.26 $21.00 393% Gritstone bio Inc. GRTS,
+6.86% 100% $2.04 $10.00 390% Actinium Pharmaceuticals Inc. ATNM,
+4.72% 83% $5.08 $23.36 360% Lineage Cell Therapeutics Inc. LCTX,
86% $1.09 $4.83 343% Century Therapeutics Inc. IPSC,
+9.64% 86% $3.32 $14.67 342% Acrivon Therapeutics Inc. ACRV,
+1.83% 100% $4.92 $21.13 329% Avidity Biosciences Inc. RNA,
+1.22% 100% $9.05 $37.50 314% Longboard Pharmaceuticals Inc. LBPH,
+316.25% 100% $6.03 $24.17 301% Omega Therapeutics Inc. OMGA,
-1.33% 100% $3.01 $12.00 299% Allogene Therapeutics Inc. ALLO,
+12.77% 82% $3.21 $12.79 298% X4 Pharmaceuticals Inc. XFOR,
+5.21% 86% $0.84 $3.26 289% Caribou Biosciences Inc. CRBU,
-2.79% 89% $5.73 $22.25 288% Stoke Therapeutics Inc. STOK,
+11.41% 78% $5.26 $19.33 268% Source: FactSet That’s right — this Russell 2000 list is all biotech. And in case you are wondering if any companies are on both lists, the answer is no.
Don’t miss: 11 dividend stocks with high yields expected to be well supported in 2024 per strict criteria
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Vodafone Posts Lower Pretax Profit on Previous Business Disposals — Update
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By Najat Kantouar
Vodafone Group has reiterated its full-year guidance as it reported a much lower pretax profit for the first half of fiscal 2024, reflecting adverse foreign-exchange rate movements and business disposals in the prior year.
The U.K. telecommunications company said Tuesday that it expects to report underlying earnings before interest, taxes, depreciation, amortization and lease expenses of 13.3 billion euros ($14.23 billion) for the year ending March 31 compared with EUR14.7 billion in fiscal 2023. Adjusted free cash is seen at around EUR3.3 billion, from EUR4.84 billion.
Pretax profit for the six months ended Sept. 30 was EUR550 million compared with EUR1.69 billion for the same period a year earlier.
Adjusted earnings before interest, taxes, depreciation, amortization and lease expenses–which strips out exceptional and other one-off items–was EUR6.39 billion compared with EUR7.24 billion with organic growth of 0.3% despite a significant increase in energy costs.
Adjusted free cash outflow widened to EUR1.47 billion from EUR513 million, reflecting a fall in adjusted Ebitda after leases in the period, together with lower dividends from associates and joint ventures.
Group revenue fell to EUR21.94 billion from EUR22.93 billion despite service revenue growth in both Europe, excluding Turkey, and Africa by 1.5% and 9.0%, respectively.
The board declared an interim dividend of 4.50 European cents for the period, flat on year.
“During the first half of the year, we have delivered improved revenue growth in nearly all of our markets and have returned to growth in Germany in the second quarter. We have also announced transactions to strengthen our position in the U.K. and exit the challenging Spanish market in order to right-size our portfolio for growth.” Chief Executive Officer Margherita Della Valle said.
Write to Najat Kantouar at najat.kantouar@wsj.com
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These 20 stocks in the S&P 500 are expected to soar after rising interest rates have pushed down valuations
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Two things investors can be sure about: Nothing lasts forever and the stock market always overreacts. The spiking of yields on long-term U.S. Treasury securities has been breathtaking, and it has led to remarkable declines for some sectors and possible bargains for contrarian investors who can commit for the long term.
First we will show how the sectors of the S&P 500
have performed. Then we will look at price-to-earnings valuations for the sectors and compare them to long-term averages. Then we will screen the entire index for companies trading below their long-term forward P/E valuation averages and narrow the list to companies most favored by analysts.Here are total returns, with dividends reinvested, for the 11 sectors of the S&P 500, with broad indexes below. The sectors are sorted by ascending total returns this year through Monday.
Sector or index 2023 return 2022 return Return since end of 2021 1 week return 1 month return Utilities -18.4% 1.6% -17.2% -11.1% -9.6% Real Estate -7.1% -26.1% -31.4% -3.0% -8.8% Consumer Staples -5.4% -0.6% -6.0% -2.2% -4.4% Healthcare -4.2% -2.0% -6.1% -1.7% -3.3% Financials -2.5% -10.5% -12.7% -2.5% -4.7% Materials 1.3% -12.3% -11.2% -1.9% -7.0% Industrials 3.5% -5.5% -2.1% -1.8% -7.3% Energy 4.0% 65.7% 72.4% -1.9% -1.4% Consumer Discretionary 27.0% -37.0% -20.0% -0.6% -5.2% Information Technology 36.5% -28.2% -2.0% 0.8% -5.9% Communication Services 42.5% -39.9% -14.3% 1.1% -1.3% S&P 500
13.1% -18.1% -7.4% -1.1% -4.9% DJ Industrial Average
2.5% -6.9% -4.5% -1.7% -4.0% Nasdaq Composite Index
COMP28.0% -32.5% -13.7% 0.3% -5.1% Nasdaq-100 Index
36.5% -32.4% -7.7% 0.5% -4.2% Source: FactSet Returns for 2022 are also included, along with those since the end of 2021. Last year’s weakest sector, communications services, has been this year’s strongest performer. This sector includes Alphabet Inc.
GOOGL
and Meta Platforms Inc.
META,
which have returned 52% and 155% this year, respectively, but are still down since the end of 2021. To the right are returns for the past week and month through Monday.On Monday, the S&P 500 Utilities sector had its worst one-day performance since 2020, with a 4.7% decline. Investors were reacting to the jump in long-term interest rates.
Here is a link to the U.S. Treasury Department’s summary of the daily yield curve across maturities for Treasury securities.
The yield on 10-year U.S. Treasury notes
jumped 10 basis points in only one day to 4.69% on Monday. A month earlier the 10-year yield was only 4.27%. Also on Monday, the yield on 20-year Treasury bonds
rose to 5.00% from 4.92% on Friday. It was up from 4.56% a month earlier.Market Extra: Bond investors feel the heat as popular fixed-income ETF suffers lowest close since 2007
The Treasury yield curve is still inverted, with 3-month T-bills
yielding 5.62% on Monday, but that was up only slightly from a month earlier. An inverted yield curve has traditionally signaled that bond investors expect a recession within a year and a lowering of interest rates by the Federal Reserve. Demand for bonds pushes their prices down. But the reverse has happened over recent days, with the selling of longer-term Treasury securities pushing yields up rapidly.Another way to illustrate the phenomenon is to look at how the Federal Reserve has shifted the U.S. money supply. Odeon Capital analyst Dick Bove wrote in a note to clients on Friday that “the Federal Reserve has not deviated from its policy to defeat inflation by tightening monetary policy,” as it has shrunk its balance sheet (mostly Treasury securities) to $8.1 trillion from $9 trillion in March 2022. He added: “The M2 money supply was $21.8 trillion in March 2022; today it is $20.8 trillion. You cannot get tighter than these numbers indicate.”
Then on Tuesday, Bove illustrated the Fed’s tightening and the movement of the 10-year yield with two charts:
Odeon Capital Group, Bloomberg
Bove said he believes the bond market has gotten it wrong, with the inverted yield curve reflecting expectations of rate cuts next year. If he is correct, investors can expect longer-term yields to keep shooting up and a normalization of the yield curve.
This has set up a brutal environment for utility stocks, which are typically desired by investors who are seeking dividend income. In a market in which you can receive a yield of 5.5% with little risk over the short term, and in which you can lock in a long-term yield of about 5%, why take a risk in the stock market? And if you believe that the core inflation rate of 3.7% makes a 5% yield seem paltry, keep in mind that not all investors think the same way. Many worry less about the inflation rate because large components of official inflation calculations, such as home prices and car prices, don’t affect everyone every year.
We cannot know when this current selloff of longer-term bonds will end, or how much of an effect it will have on the stock market. But sharp declines in the stock market can set up attractive price points for investors looking to go in for the long haul.
Screening for lower valuations and high ratings
A combination of rising earnings estimates and price declines could shed light on potential buying opportunities, based on forward price-to-earnings ratios.
Let’s look at the sectors again, in the same order, this time to show their forward P/E ratios, based on weighted rolling 12-month consensus estimates for earnings per share among analysts polled by FactSet:
There is a limit to how many columns we can show in the table. The S&P 500’s forward P/E ratio is now 17.94, compared with 16.79 at the end of 2022 and 21.53 at the end of 2021. The benchmark index’s P/E is above its 10- and 15-year average levels but below the five-year average.
If we compare the current sector P/E numbers to 5-, 10- and 15-year averages, we can see that the current levels are below all three averages for four sectors: utilities, real estate, financials and communications services. The first three face obvious difficulties as they adjust to the rising-rate environment, while the real-estate sector reels from continuing low usage rates for office buildings, from the change in behavior brought about by the COVID-19 pandemic.
Your own opinions, along with the pricing for some sectors, might drive some investment choices.
A broader screen of the S&P 500 might point to companies for you to research further.
We narrowed the S&P 500 as follows:
- Current forward P/E below 5-, 10- and 15-year average valuations. For stocks with negative earnings-per-share estimates for the next 12 months, there is no forward P/E ratio so they were excluded. For stocks listed for less than 15 years, we required at least a 5-year average P/E for comparison. This brought the list down to 138 companies.
- “Buy” or equivalent ratings from at least two-thirds of analysts: 41 companies.
Here are the 20 companies that passed the screen, for which analysts’ price targets imply the highest upside potential over the next 12 months.
There is too much data for one table, so first we will show the P/E information:
Company Ticker Current P/E to 5-year average Current P/E to 10-year average Current P/E to 15-year average SolarEdge Technologies Inc. SEDG 89% N/A N/A AES Corp. AES 66% 75% 90% Insulet Corp. PODD 18% N/A N/A United Airlines Holdings Inc. UAL 42% 50% N/A Alaska Air Group Inc. ALK 51% 57% N/A Tapestry Inc. TPR 39% 49% 70% Albemarle Corp. ALB 39% 50% 73% Delta Air Lines Inc. DAL 60% 63% 21% Alexandria Real Estate Equities Inc. ARE 59% 68% N/A Las Vegas Sands Corp. LVS 96% 78% 53% Paycom Software Inc. PAYC 61% N/A N/A PayPal Holdings Inc. PYPL 33% N/A N/A SBA Communications Corp. Class A SBAC 27% N/A N/A Advanced Micro Devices Inc. AMD 58% 39% N/A LKQ Corp. LKQ 92% 44% 78% Charles Schwab Corp. SCHW 75% 54% 73% PulteGroup Inc. PHM 94% 47% N/A Lamb Weston Holdings Inc. LW 71% N/A N/A News Corp Class A NWSA 93% 73% N/A CVS Health Corp. CVS 75% 61% 67% Source: FactSet Click on the tickers for more about each company or index.
News Corp
NWSA
is on the list. The company owns Dow Jones, which in turn owns MarketWatch.Here’s the list again, with ratings and consensus price-target information:
Company Ticker Share “buy” ratings Oct. 2 price Consensus price target Implied 12-month upside potential SolarEdge Technologies Inc. SEDG 74% $122.56 $268.77 119% AES Corp. AES 79% $14.16 $25.60 81% Insulet Corp. PODD 68% $165.04 $279.00 69% United Airlines Holdings Inc. UAL 71% $41.62 $69.52 67% Alaska Air Group Inc. ALK 87% $36.83 $61.31 66% Tapestry Inc. TPR 75% $28.58 $46.21 62% Albemarle Corp. ALB 81% $162.41 $259.95 60% Delta Air Lines Inc. DAL 95% $36.45 $58.11 59% Alexandria Real Estate Equities Inc. ARE 100% $98.18 $149.45 52% Las Vegas Sands Corp. LVS 72% $45.70 $68.15 49% Paycom Software Inc. PAYC 77% $260.04 $384.89 48% PayPal Holdings Inc. PYPL 69% $58.56 $86.38 48% SBA Communications Corp. Class A SBAC 68% $198.24 $276.69 40% Advanced Micro Devices Inc. AMD 74% $103.27 $143.07 39% LKQ Corp. LKQ 82% $49.13 $67.13 37% Charles Schwab Corp. SCHW 77% $53.55 $72.67 36% PulteGroup Inc. PHM 81% $73.22 $98.60 35% Lamb Weston Holdings Inc. LW 100% $92.23 $123.50 34% News Corp Class A NWSA 78% $20.00 $26.42 32% CVS Health Corp. CVS 77% $69.69 $90.88 30% Source: FactSet A year may actually be a short period for a long-term investor, but 12-month price targets are the norm for analysts working for brokerage companies.
Don’t miss: This fund shows that industry expertise can help you make a lot of money in the stock market
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Arm Sets IPO Price at $51 a Share. The Stock Is Set to Open Higher.
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Arm is set to start trading today on the Nasdaq under the symbol ARM.
Chris Ratcliffe/Bloomberg
Arm Holdings
priced its initial public offering at $51 a share. That’s at the top of the expected range of $47 to $51, giving the chip design company a valuation of $54.5 billion on a f…[ad_2]
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Tech’s wild week: How Apple, Google, AI, Arm’s mega IPO could set the agenda for years
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The second week of September, as in the NFL, marks a kickoff of sorts for the tech year.
Headlined by Apple Inc.’s
AAPL,
+0.72%
seminal iPhone event on the second Tuesday of the month at Apple Park, and anchored by Salesforce Inc.’s
CRM,
+0.33%
wildly popular Dreamforce conference up the road in San Francisco, these several days set a tempo as well as establish a road map for the industry over the next 12 months. They also open the floodgates on tech conference season, with shows stacked up over the next several weeks for Facebook parent Meta Platforms Inc.
META,
+3.33% ,
Microsoft Corp.
MSFT,
+1.21% ,
and Oracle Corp.
ORCL,
+0.32% .Oh, and there’s that initial public offering from Arm Holdings Plc, the chip designer owned by SoftBank Group Corp.
9984,
+3.86%
that is expected to value Arm at $50 billion to $54.5 billion on a fully diluted basis. Another IPO candidate, delivery startup Instacart, also plans a public offering that would value it at $7.5 billion. Both deals could jump-start what has been a somnolent tech IPO market the past few years.For that reason alone, this jam-packed tech week might hold even more import, and consequences, than previous years. A confluence of legal tussles, macroeconomic conditions, a trade war with China, and regulatory bluster have raised the stakes.
“It’s a tale of two cities with this week’s events highlighting both the issues and opportunities in tech,” Silicon Valley analyst Maribel Lopez said in an interview, assessing the week. “Arm’s IPO showcases the strength of tech and AI at a time when the AI forum and Google-DoJ shine a light on the concern that a few companies are wielding tremendous power for the future of the world.”
Consider: Hours before Apple is expected to unveil a new crop of iPhones more noteworthy for pricing than features, Alphabet Inc.’s
GOOGL,
+0.51% GOOG,
+0.47%
Google faces off with the Justice Department in a federal court in Washington, D.C.Justice Department officials argue that Google illegally leveraged agreements with phone makers such as Apple and Samsung Electronics Co.
005930,
+0.71%
and with internet browsers like Mozilla to be the default search engine for their customers, thus preventing smaller rivals from gaining access to that business.“This is a backwards-looking case at a time of unprecedented innovation, including breakthroughs in AI, new apps and new services, all of which are creating more competition and more options for people than ever before,” Google General Counsel Kent Walker said in a statement.
The following day, Wednesday, Senate Majority Leader Chuck Schumer, D-N.Y., convenes an all-star panel of CEOs from Meta, Microsoft, Google, OpenAI and Palantir Technologies Inc.
PLTR,
+4.82% .As lawmakers ruminate on how to harness AI responsibly, bipartisan legislation is in the works. Sens. Richard Blumenthal, D-Conn., and Josh Hawley, R-Mo., are among those crafting a bill.
Even Apple and Salesforce aren’t immune from recent events: Apple has endured a relatively rough patch of disappointing (for them) revenue and iPhone sales while balancing risk/reward with its huge investment in China, and Salesforce CEO Marc Benioff has threatened to relocate Dreamforce to Las Vegas after more than two decades in his hometown of San Francisco if drug use and homelessness disrupt this year’s event.
The most pressing concern, when all is said and done, is AI — which hovers like the Death Star over the tech landscape.
“The biggest concern is the forum is behind closed doors, which could lead to regulatory capture, where dominant players in the industry help influence the regulations being imposed,” Kimberlee Josephson, associate professor of business administration at Lebanon Valley College (Pa.), said in an interview. “It’s almost as if it puts them in the hot while giving them a seat at the table at the same time.”
“At the very least, it sends the signal that something is being done,” she said. “Antitrust cases are so subjective. What constitutes barriers to entry? DoJ adds a level of seriousness.”
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Chip designer ARM targets IPO valuation of up to $55 billion: report
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Arm Holdings Ltd.’s initial public offering could give the company a valuation between $50 billion and $55 billion in what may be the biggest offering of the year.
The British chip designer, whose circuit designs lie inside billions of electronic devices, intends to start meeting as early as Tuesday with prospective investors ahead of its stock-market debut on the Nasdaq exchange the following week, according to a Wall Street Journal report, which cited multiple unnamed sources.
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AT&T and Verizon Stocks Are Out of Favor. That’s a Buying Opportunity, Citi Says.
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Chip designer Arm files for long-awaited IPO, as smaller transistors send costs skyrocketing
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Arm Holdings Ltd. filed its long-awaited initial public offering late Monday, following last year’s failed bid by Nvidia Corp. to acquire the U.K.-based chip architecture company.
Arm has reportedly been seeking to raise $8 billion to $10 billion at a valuation of $60 billion to $70 billion, making its IPO the biggest of the year so far, and a number of large tech companies, including Amazon.com Inc.
AMZN,
+1.10% ,
Intel Corp.
INTC,
+1.19%
and Nvidia
NVDA,
+8.47% ,
are reportedly in the mix to be anchor investors.In a late Monday filing with the Securities and Exchange Commission, Arm said it was offering to list its U.S. traded shares on the Nasdaq under the ticker symbol “ARM.”
Arm, which is owned by Japan’s SoftBank Group Corp.
9984,
+1.16% ,
was the target of an unsuccessful $40 billion acquisition by Nvidia last year. After Nvidia scrubbed the deal and paid a $1.36 billion breakup charge following the U.S. Federal Trade Commission’s unanimous decision to block it, Nvidia disclosed it paid Arm $750 million for a 20-year license to its technology.At the time of the breakup, chips sales had hit record highs in 2021, surging 26.2% to a record $555.9 billion, fueled by pandemic-triggered shortages. But the chip industry has since swung to a glut.
Arm listed Barclays, Goldman Sachs, JP Morgan, Mizuho, BofA Securities, Citigroup, and Deutsche Bank Securities among the IPO’s underwriters.
Recent reports said SoftBank was in discussions to purchase the 25% stake in Arm that it does not outright own, which is held by its Vision Fund 1, ahead of the IPO.
Read from Feb. 2022: Wall Street’s reaction to death of Nvidia-Arm deal: No duh
Arm reported net income of $524 million, or 51 cents a share, on revenue of $2.68 billion for fiscal 2023, which ended March 31, compared with net income of $549 million, or 54 cents a share, on revenue of $2.7 billion, in fiscal 2022, and $388 million, or 38 cents a share, on revenue of $2.03 billion in fiscal 2021.
Arm uses an architecture that is different from the once-standard x86 one built by Intel in the early days of computing.
The company said it has shipped more than 250 billion Arm-based chips since its started in 1990 as a joint venture between Acorn Computers, Apple
AAPL,
+0.77%
and VLSI Technology. In fiscal 2023, Arm said it shipped 30.6 billion chips.The company said it is going public as the “resources required to develop leading-edge products are significant and continue to increase exponentially as manufacturing process nodes shrink.” Transistors are expressed in scales of nanometers, with design costs running about $249 million for a 7-nanometer chip and about $725 million for a 2-nm chip.
“As the world moves increasingly towards AI- and [machine language]-enabled computing, Arm will be central to this transition,” the company said in the filing. “Arm CPUs already run AI and ML workloads in billions of devices, including smartphones, cameras, digital TVs, cars and cloud data centers.”
Arm said it is working with Alphabet Inc.
GOOG,
+0.64% GOOGL,
+0.71% ,
GM’s
GM,
+0.45%
Cruise, Mercedes-Benz
MBG,
+0.78% ,
Meta Platforms Inc.
META,
+2.35% ,
and Nvidia “to deploy Arm technology to run AI workloads.”[ad_2]
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SoftBank looking to buy remaining 25% stake in Arm from its Vision Fund: report
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SoftBank Group Corp. is reportedly in discussions to purchase the 25% stake in chip designer Arm Ltd. that is held by its Vision Fund 1, ahead of a highly anticipated IPO.
Reuters reported Sunday that Japan’s SoftBank
9984,
+0.37%
— which owns 75% of Arm — is negotiating a deal with VF1, the $100 billion investment fund it created in 2017, and noted that a deal could give VF1 investors a big boost after years of meager returns. Saudi Arabia’s Public Investment Fund and Abu Dhabi’s Mubadala Investment Co. are among VF1’s largest investors.SoftBank is planning to launch a long-awaited initial public offering for British chip designer Arm as soon as September. That will likely be the biggest IPO of the year on Wall Street, aiming to raise $8 billion to $10 billion at a valuation around $60 billion to $70 billion.
A number of large tech companies, including Amazon.com Inc.
AMZN,
-0.11% ,
Intel Corp.
INTC,
+0.61%
and Nvidia Inc.
NVDA,
-3.62% ,
are reportedly in the mix to be anchor investors in Arm’s IPO.Last week, SoftBank reported its tech-heavy Vision Funds turned a quarterly profit for the first time in 18 months
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AT&T’s stock soars toward best day in 3 years as lead-cable update sparks relief
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After failing to close in positive territory for a 10th session in a row Tuesday, AT&T Inc. shares were tracking toward a sizable gain in Wednesday’s trading activity.
The telecommunications stock was up 8.4% in morning trades as recent company commentary suggested to some analysts that AT&T’s
T,
+7.62%
exposure to lead-clad cables may not be as significant as feared. The company estimates that lead-clad cables represent less than 10% of its copper-cable footprint and that “a very small portion” of those run underwater.See more: AT&T to pause prior plans to remove lead cables under Lake Tahoe as it works with regulators
AT&T shares have taken a beating lately after reporting from the Wall Street Journal keyed in on lead-sheathed cables used historically by the telecommunications industry, which the story said posed health risks.
The stock had gone 10 full trading sessions in a row prior to Wednesday without notching a gain, factoring in one session of flat performance. It fell 16.6% over that 10-session stretch, AT&T’s longest without a daily increase since one of equal length that ended Oct. 21, 2020, according to Dow Jones Market Data.
AT&T shares were on track to log their largest single-day percentage gain since March 13, 2020, when they rose 10%, according to Dow Jones Market Data.
Read also: Verizon’s lead ‘overhang’ may limit dividend increases, analyst says in downgrade
The company late Tuesday held a call with analysts and released a legal filing that left Oppenheimer’s Timothy Horan with the sense that the company’s exposure to lead cable was less than Wall Street initially expected, meaning potential removal costs could be lower than he had anticipated.
“We think [AT&T] is being conservative, but less than 10% of its footprint [or about 200,000 miles] are lead-sheathed, three-fourths of which are conduits buried underground that should likely just remain in place,” Horan wrote. “Even cables that are not buried can be left for long periods of time when safely sealed up and labeled. We believe a small minority will need to be removed, but expect [AT&T] to give more details on its earnings call next week, sooner than expected.”
He now estimates that the company could incur $2 billion to $20 billion in costs related to its exposure to lead-coated cables, whereas he had thrown out a “best guess” of $5 billion to $50 billion before Tuesday’s updates.
Cowen’s Gregory Williams was also encouraged by the disclosures AT&T made late Tuesday.
“Naturally, AT&T could not provide definitive conclusions at this time; however the company summarized the data from the court filing and essentially provided a compelling framework around the allegations,” he wrote in a note to clients. “The framework suggests a high conviction that any lead-clad cable exposure will result in very minimal health, environmental, regulatory, and financial risks, if any risk at all, and something we had suspected over the past few days of our own conversations and research.”
Shares of Verizon Communications Inc.
VZ,
+5.18%
were rallying sharply as well, up 5.4% in morning action.Read on: Verizon CEO says the wireless market isn’t such a bad business after all
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Pinterest stock advances, Masimo shares slump on outlook and other stocks on the move
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Here are some of the biggest movers of the day:
Stock gainers:
Shares of Pinterest Inc.
PINS,
+3.64%
were gaining 4% after an Evercore ISI analyst moved to a bullish stance, cheering better advertising-market conditions and improvements made by Chief Executive Bill Ready, who is about a year into his stint.[ad_2]
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Yahoo CEO says the company plans a return to the public markets
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Yahoo, an early trailblazer of the Internet boom, is “very profitable,” and ready to return to public markets via an initial public offering.
That’s according to Chief Executive Jim Lanzone, who made the comment in an interview with the Financial Times published Tuesday. Yahoo soared to prominence in the 1990s, rising in the public consciousness alongside its share price — under the ticker symbol “YHOO” — during the dot-com boom.
Apollo Funds purchased the Yahoo business from Verizon Communications Inc.
VZ,
+0.24%
in 2021.The web services provider, which competes with the likes of Google parent Alphabet Inc.
GOOGL,
+0.17%
and Facebook parent Meta Platforms Inc.
META,
-0.33% ,
said earlier this year that more than 20% of its workforce would be laid off. At the time, Lanzone reportedly said that the cuts would be made in an unprofitable area of its business but that they would be “tremendously beneficial” to the company overall.“Whether it’s finance, or sports or news, that’s still what we do, and why we’re No. 1, or No. 2, in all these important categories all these years later,” Lanzone reportedly told the FT. “While the company has had struggles [at] different points in time, we’re still huge in traffic, and we have our best days ahead of us productwise.”
He said Yahoo would be aggressively looking at the chance to build businesses in related sectors via M&A — it recently bought Wagr, a sports-betting app. While Yahoo is still “too small” to take on Google and Microsoft’s
MSFT,
-0.75%
search engine Bing, Lanzone said he’s optimistic, and also sees AI offering up new opportunities for the company.[ad_2]
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Alibaba, Dice, Arcellx, Avis, PayPal, and More Stock Market Movers
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This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers visit http://www.djreprints.com.
https://www.barrons.com/articles/stock-market-movers-fb3791aa
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AT&T Gets an Upgrade. Why Analysts Are Still Cautious.
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AT&T ‘Has Led the Way Down’ for Telecoms. Why the Stock Still Grabbed an Upgrade.
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Altice UK Buys 650 Mln Shares in BT; Says It Won’t Make Bid for the Company
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By Joe Hoppe
Altice UK said Tuesday that it has purchased a further 650 million shares in BT Group for around 961 million pounds ($1.20 billion), bringing its ownership up to around 24.5% of the company’s issued share capital.
The telecommunications and mass media company said it has restated its position to the board of BT that it doesn’t plan to make an offer for the company and will be bound by that statement under U.K. takeover rules.
Based on BT’s closing share price of 147.85 pence on Monday, this implies Altice’s new purchase is worth around GBP961 million. Its full stake is now worth around GBP3.60 billion.
Write to Joe Hoppe at joseph.hoppe@wsj.com
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20 AI stocks expected to post the highest compound annual sales growth through 2025
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Things move quickly in the world of artificial intelligence. It is easy to sit back and complain about developments that could be disruptive, but sometimes investors are best served by putting emotions aside and observing new developments and how they affect markets. Could AI developments and related trends make you a lot of money?
Below is a new screen showing a group of AI-oriented companies expected to increase their sales most rapidly through 2025, based on consensus estimates among analysts polled by FactSet. Then we show expected revenue growth rates for the largest AI-oriented companies in the screen.
Over the long haul, many businesses might perform more efficiently by employing AI. Maybe this technology can create an economic revolution similar to the one that moved the majority of the working population away from agricultural labor during the 19th and 20th centuries.
Back in February, we screened 96 stocks held by five exchange-traded funds focused on AI and related industries and listed the 20 that analysts thought would rise the most over the following 12 months.
Three months is a long time for AI, and the shakeout hasn’t even started.
Read: Congress and tech seem open to regulating AI efforts, but that doesn’t mean it will happen
There is no way to predict how politicians will react to perceived or real threats of AI and machine learning. And the largest U.S. tech players are doing everything they can to employ the new technology and remain dominant. But that doesn’t mean they will grow more quickly than smaller AI-focused players.
A new AI stock screen
Once again we will begin a screen with these five ETFs:
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The Global X Robotics & Artificial Intelligence ETF
BOTZ,
+0.97%
BOTZ was established 2016 and has $1.8 billion in assets under management. The fund tracks an index of companies listed in developed markets that are expected to benefit from the increased utilization of robotics and AI. There are 44 stocks in the BOTZ portfolio, which is weighted by market capitalization and rebalanced once a year. Its largest holding is Intuitive Surgical Inc.
ISRG,
+0.53% ,
which makes up 10% of the portfolio, followed by Nvidia Corp.
NVDA,
+3.30%
at 9.4%. -
The iShares Robotics and Artificial Intelligence Multisector ETF
IRBO,
+1.64%
holds 116 stocks that are equal-weighted, as it tracks a global index of companies that derive at east 50% of revenue from robotics or AI, or have significant exposure to related industries. This ETF was launched in 2018 and has $304 million in assets. -
The $246 million First Trust Nasdaq Artificial Intelligence & Robotics ETF
ROBT,
+1.83%
has 107 stocks in its portfolio, with a modified weighting based on how directly companies are involved in AI or robotics. It was established in 2018. -
The Robo Global Artificial Intelligence ETF
THNQ,
+1.81%
has $26 million in assets and was established in 2020. I holds 69 stocks and isn’t concentrated. It uses a scoring system to weight its holdings by percentage of revenue derived from AI, with holdings also subject to minimum market capitalization and liquidity requirements. -
The newest ETF on this list is the WisdomTree Artificial Intelligence and Innovation Fund
WTAI,
+2.42% ,
which was established in December and has $13 million in assets and holds 73 stocks in an equal-weighted portfolio. According to FactSet, stocks are handpicked and selected companies “generate at least 50% of their revenue from AI and innovation activities, including those related to software, semiconductors, hardware technology, machine learning and innovative products.”
Altogether and removing duplicates, the five ETFs hold 270 stocks of companies in 23 countries. We first narrowed the list to 197 covered by at least nine analysts and for which consensus sales estimates are available through calendar 2025. We used calendar-year estimates because some companies have fiscal years that don’t match the calendar.
Here are the 20 screened AI-related companies expected by analysts to have the highest compound annual growth rates (CAGR) for sales from 2023 through 2025. Sales estimates are in millions of U.S. dollars. The list also shows which of the above five ETFs holds each stocks.
Company Ticker Estimated sales – 2023 ($mil) Estimated sales – 2024 ($mil) Estimated sales – 2025 ($mil) Two-year estimated sales CAGR through 2025 Held by BioXcel Therapeutics Inc. BTAI,
-2.47% $5 $39 $121 411.5% WTAI Luminar Technologies Inc. Class A LAZR,
+8.82% $86 $266 $588 161.0% ROBT, WTAI BlackBerry Ltd. BB,
+6.01% $685 $769 $1,925 67.6% ROBT Credo Technology Group Holding Ltd. CRDO,
+10.29% $183 $259 $363 40.9% IRBO SentinelOne Inc. Class A S,
+1.05% $619 $881 $1,176 37.9% WTAI Wolfspeed Inc. WOLF,
+5.02% $982 $1,323 $1,860 37.6% WTAI SK hynix Inc. 000660,
+1.66% $18,319 $27,899 $34,542 37.3% WTAI Mobileye Global Inc. Class A MBLY,
+1.67% $2,109 $2,782 $3,920 36.3% ROBT, WTAI Snowflake Inc. Class A SNOW,
+1.42% $2,811 $3,863 $5,139 35.2% IRBO, THNQ, WTAI Lemonade Inc. LMND,
+8.08% $395 $471 $712 34.2% THNQ, WTAI Nio Inc. ADR Class A NIO,
+1.39% $11,874 $16,733 $21,304 33.9% ROBT Stem Inc. STEM,
+4.88% $607 $833 $1,055 31.8% WTAI Upstart Holdings Inc. UPST,
+10.37% $547 $768 $938 31.0% BOTZ, WTAI Cloudflare Inc. Class A NET,
+5.84% $1,284 $1,669 $2,194 30.7% THNQ Samsara Inc. Class A IOT,
+1.42% $830 $1,062 $1,364 28.2% THNQ Ambarella Inc. AMBA,
+3.45% $287 $355 $472 28.2% IRBO, ROBT, THNQ, WTAI iflytek Co. Ltd. Class A 002230,
-1.34% $3,561 $4,582 $5,851 28.2% THNQ Tesla Inc. TSLA,
+4.41% $99,558 $128,412 $161,061 27.2% ROBT, THNQ, WTAI CrowdStrike Holdings Inc. Class A CRWD,
+2.40% $2,935 $3,793 $4,739 27.1% THNQ, WTAI PB Fintech Ltd. 543390,
+1.39% $358 $462 $573 26.5% IRBO Source: FactSet Click the tickers for more about each company or ETF.
Click here for Tomi Kilgore’s detailed guide to the wealth of information for free on the MarketWatch quote pages.
We have screened for expected revenue growth, rather than for earnings or cash flow, because in a newer tech-oriented business area, investors are most likely to consider the top line as companies sacrifice profits to build market share.
It is important to do your own research if you consider purchasing any individual stock, to form your own opinion about a company’s ability to remain competitive over the long term. Starting from the top of the list, BioXcel Therapeutics Inc.
BTAI,
-2.47%
is expected to show exponential sales growth, but that is from a low expected baseline this year.What about the largest AI-related companies held by these ETFs?
Here are the largest 20 companies in the screen by market capitalization, ranked by expected sales CAGR from 2022 through 2025. Once again the sales estimates are in millions of U.S. dollars, but the market caps are in billions.
Company Ticker Estimated sales – 2023 ($mil) Estimated sales – 2024 ($mil) Estimated sales – 2025 $mil) Two-year estimated sales CAGR through 2025 Market Cap ($bil) Held by Tesla Inc. TSLA,
+4.41% $99,558 $128,412 $161,061 27.2% $528 ROBT, THNQ, WTAI Nvidia Corp. NVDA,
+3.30% $29,839 $36,877 $46,154 24.4% $722 BOTZ, IRBO, ROBT, THNQ, WTAI Taiwan Semiconductor Manufacturing Co. Ltd. ADR TSM,
+5.83% $71,434 $86,284 $101,112 19.0% $445 ROBT, WTAI Advanced Micro Devices Inc. AMD,
+2.23% $22,976 $26,823 $30,359 15.0% $163 IRBO, ROBT, THNQ, WTAI ASML Holding NV ADR ASML,
+2.83% $28,974 $32,374 $37,796 14.2% $263 THNQ, WTAI Microsoft Corp. MSFT,
+0.95% $223,438 $251,028 $282,397 12.4% $2,318 IRBO, ROBT, THNQ, WTAI Samsung Electronics Co. Ltd. 005930,
-0.61% $200,595 $227,286 $252,129 12.1% $292 IRBO, WTAI Amazon.com Inc. AMZN,
+1.85% $559,438 $626,549 $702,395 12.1% $1,164 IRBO, ROBT, THNQ, WTAI Adobe Inc. ADBE,
+3.34% $19,470 $21,784 $24,276 11.7% $158 IRBO, THNQ Netflix Inc. NFLX,
+1.86% $33,915 $38,067 $42,275 11.6% $148 IRBO, THNQ Tencent Holdings Ltd. 700,
-0.58% $88,727 $99,212 $110,556 11.6% $422 IRBO, ROBT Salesforce Inc. CRM,
+2.37% $34,392 $38,273 $42,786 11.5% $205 IRBO, THNQ Alphabet Inc. Class A GOOGL,
+1.11% $299,810 $333,077 $369,195 11.0% $710 IRBO, ROBT, THNQ, WTAI Intel Corp. INTC,
-1.20% $51,060 $57,799 $62,675 10.8% $122 IRBO, ROBT Meta Platforms Inc. Class A META,
+1.53% $125,901 $139,545 $154,259 10.7% $528 IRBO, WTAI Alibaba Group Holding Ltd. ADR BABA,
+2.17% $134,140 $148,206 $162,199 10.0% $235 ROBT, THNQ Texas Instruments Inc. TXN,
+1.20% $17,941 $19,433 $20,799 7.7% $148 IRBO Apple Inc. AAPL,
+0.36% $390,845 $416,761 $445,956 6.8% $2,706 IRBO, WTAI Siemens Aktiengesellschaft SIE,
+2.55% $84,681 $89,145 $93,925 5.3% $130 ROBT Johnson & Johnson JNJ,
-0.20% $98,761 $100,990 $103,870 2.6% $414 ROBT Source: FactSet Tech-stock picks that are small and focused: This fund invests in unsung innovators. Here are 2 top choices.
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The Global X Robotics & Artificial Intelligence ETF
