For Immediate Release
Chicago, IL – November 24, 2023 – Zacks Equity Research shares
NVIDIA ( NVDA Quick Quote NVDA - Free Report) as the Bull of the Day and Lowe’s Companies ( LOW Quick Quote LOW - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Delta Air Lines ( DAL Quick Quote DAL - Free Report) , American Airlines ( AAL Quick Quote AAL - Free Report) and United Airlines ( UAL Quick Quote UAL - Free Report) .
Here is a synopsis of all five stocks:
NVIDIA delivered the goods this week with big Q3 beats and higher views of Q4.
For Q3, NVIDIA reported non-GAAP earnings of $4.02 per share, which beat the Zacks Consensus Estimate by nearly 20%.
Moreover, the reported figure soared a whopping 593% year-over-year while increasing 49% sequentially. The robust increase in earnings was mainly driven by higher revenues and improvement in gross margin.
Revenues more than tripled on a year-over-year basis and climbed 34% sequentially to $18.12 billion.
The robust growth in the top line was mainly driven by record sales in the Data Center end market and recovery across the Gaming and Professional Visualization end markets due to the normalization of channel inventory.
Datacenter was +280% at $14.5B!
The top line also beat the consensus projection of $16.19 billion by 12%.
The Path to $100 Billion in Revenues
You can review my June and September projections for NVIDIA to hit $100 billion in annual revenues in
this October report. Here's an excerpt...
Jensen Huang said this: "The world has something along the lines of about a trillion dollars' worth of data centers installed in the cloud and enterprise. And that trillion dollars of data centers is in the process of transitioning into accelerated computing and generative AI."
I think this translates into NVIDIA hitting $100 billion per year in revenue much sooner than my 2026 projection in June. So don’t miss your chance to buy NVDA under $450 again. I’m pretty sure you won’t see it below $400 ever again.
(end of excerpt from 10/6 report)
Investors got a big gift in late October with a market dive giving you chances to buy NVDA at $400!
And if anyone thought the party was going to stop, Jensen & Co. offered revenue guidance for the current quarter that is projected to cross $20 billion, over $2B higher than estimates.
The only blemish was Jensen's warning about export restrictions on sales to China. With 20-25% of revenues coming from China, it's a real concern.
As we would expect when it comes to the big unknown of government intervention, Jensen doesn't have good visibility on that horizon.
But many analysts believe him when he says that NVIDIA has work-arounds where they can still sell technology to China.
In the bigger picture, a lot of other nations could, and probably will, make up for any loss of sales to China.
The Bigger Picture
Jensen spoke Tuesday night of the global transformation to "AI factories." We've been watching this trend ever since BMW hired him in 2018 to build the future of intelligent manufacturing automation with AI-driven robotics design and application.
But this is also a nod to the "factory of data" that must be managed for all kinds of enterprises -- including Jensen's favorite future application: biology, medicine, and the healthcare benefits for people.
On Wednesday morning, BofA Semi analyst Vivek Arya appeared on CNBC's Squawk Box to explain why he raised his PT on NVDA to a Street high of $700.
He highlighted 3 big trends for NVIDIA architectures that you've heard me talk about for some time...
1. We are in a multi-decade transformation for AI, LLMs, and GenAI. This means enterprise datacenters must be revamped aggressively over the next several years to "accelerated" GPU-based computing. NVIDIA is the clear leader here.
2. NVIDIA is adding richer product mixes all the time, including CPU-integrated architectures and new system/software platforms to enhance CUDA.
3. Nations want "AI sovereignty" and by that he means they want to build their own platforms for advanced computing to manage their data and technology. Arya says NVIDIA has "the best turn-key solution" to do that.
More countries are experiencing the "big-data deluge" and the solutions are LLMs and GenAI.
Nations Need NVIDIA
This immediately made me think of my
State of Threat cybersecurity report from last month. While the "bad actors" will be ever present, there are many more nations looking for constructive uses of AI to enhance their economies and technology infrastructures.
I also saw Aaron Rakers from Wells Fargo, who raised his PT to $675, talk about his long-term earnings outlook based on industry domination in datacenter and AI software. He sees NVIDIA investors continuing to pay 30X EPS when earnings go above $20 next year.
Even as NVIDIA is able to turn the leverage and margin trim tabs, I still focus on the growth of revenues and how they are able to command a price/sales multiple of 15X which will get us above a $1.5 trillion market cap very soon in a $20 trillion TAM (total addressable market).
This is how NVDA has "grown into its valuation" as it inevitably approaches $100 billion in sales next year with 60%+ topline and bottomline growth!
And we are barely talking yet about the explosive growth markets of self-driving cars and all kinds of robotics after the success of the BMW buildout.
By the way, if you haven't explored the brains behind NVDA GPU chip design, check out
Cadence Design Systems as a major NVIDIA partner in AI simulation capabilities.
Disclosure: I own shares of NVDA and CDNS for the Zacks TAZR Trader portfolio.
Lowe’s Companies posted mixed results this week for their Q3, with the topline missing the Zacks Consensus Estimate while EPS fell in line with estimates. And both sales and earnings fell from the previous year’s quarterly readings.
Lowe’s has evolved as one of the world’s leading home improvement retailers, competing with
Home Depot and offering services to homeowners, renters and commercial business customers.
The company has been smartly enhancing the experience of its pro customers by upgrading pro-focused brands and revamping pro-service business website, LowesForPros.com.
But it's looking like the hey-days of the 2021-22 real estate scramble to "buy anything, at any price" and fix-to-flip are now solidly in the rearview mirror with housing prices extended and interest rates prohibitive.
This is showing up in the downward estimate revisions among the majority of analysts on LOW.
Quarter in Detail
Adjusted earnings per share (EPS) of $3.06 barely surpassed the Zacks Consensus Estimate of earnings of $3.05 per share but dipped 6.4% from the third-quarter fiscal 2022 tally.
Net sales of $20,471 million decreased 12.8% year over year and came below the consensus estimate of $20,974 million. Comparable sales (comps) fell 7.4% in the quarter under review, driven by lower DIY discretionary spending, partly offset by Pro customer comps. We had projected a comps decline of 4% for the quarter under discussion.
Gross profit slipped 11.9% year over year to $6,891 million, while the gross margin increased 36 basis points (bps) to 33.7%. We had expected a gross margin expansion of 10 bps year over year. Operating income amounted to $2,696 million, up from $924 million recorded in the year-earlier quarter. Also, the operating margin expanded to 13.2% from the year-earlier quarter’s reported figure of 3.9%.
Other Financial Aspects & Developments
LOW ended the quarter with cash and cash equivalents of $1,210 million, long-term debt (excluding current maturities) of $35,374 million and shareholders’ deficit of $15,147 million.
Lowe’s generated cash flow from operations of $7,032 million for the nine months of fiscal 2023. Capital expenditures amounted to $1,344 million for the aforementioned period. For fiscal 2023, LOW expects a capex of up to $2 billion.
In the reported quarter, Lowe’s bought back 7.3 million shares for $1.6 billion and paid out dividends of $642 million.
In the fiscal third quarter, it introduced a store and three Lowe's Outlet stores. As of Nov 3, 2023, Lowe’s operated 1,746 home-improvement stores.
For fiscal 2023, management revised the outlook on weaker-than-expected DIY sales. LOW now projects revenues of $86 billion versus $87-$89 million expected earlier and $97.1 billion delivered in fiscal 2022.
Comparable sales in fiscal 2023 are envisioned to be down 5% year over year versus the previous guided range of -2% to -4%. The adjusted operating margin is expected to be 13.3% compared with the earlier prediction of 13.4-13.6%.
Management anticipates EPS of $13.00 versus the earlier forecast of $13.20-$13.60 for the fiscal year versus earnings of $13.89 per share earned in fiscal 2022.
Additional content: 3 Airline Stocks to Keep an Eye on This Holiday Weekend
Americans are certainly expected to travel this Thanksgiving holiday span, thanks to a strong labor market and price pressures cooling from last year's record highs. Compared to last year, a greater number of Americans are likely to take to the skies for Thanksgiving.
As per the American Automobile Association (AAA), more than 55 million travelers are forecast to travel for Thanksgiving, which is an increase of 2.3% from last year. Most importantly, AAA predicted that 4.7 million travelers will be flying this holiday period, and that's 290,000 more compared to the same period last year.
This year, the number of those traveling by plane will be the highest since 2005, added AAA. Similarly, Airlines for America (A4A) predicts that almost 30 million travelers are expected to fly over the Thanksgiving traveling period (Nov 17-27), which is in itself a record high.
What's more, nearly 2.7 million Americans will be flying per day during the Thanksgiving traveling period, a 9% jump from last year. Precisely, the Sunday after Thanksgiving, or Nov 26, is expected to be the busiest day for the airports since a record-setting 3.2 million Americans will be flying on that day.
Now, with the Thanksgiving holiday span poised to be one of the most traveled periods by plane, airline stocks such as
Delta Air Lines, American Airlines and United Airlines could get the much-needed boost.
Thus, investors should keep a tab on these stocks at the moment. After all, these airliners have a strong network of domestic routes in the United States and are aggressively hiring people to fulfill the unparalleled travel volume.
Delta Air Lines has now begun to pay dividends to its shareholders following a coronavirus-induced hiatus. It has a dividend yield of 1.1%. In the past 5-year period, DAL has increased its dividend once, and its payout ratio presently sits at 6% of earnings. Check Delta Air Lines' dividend history here.
The company also has a heartening liquidity position. The company's expected earnings growth rate for the current year is 90.6%. DAL's projected earnings growth rate for the next five-year period is 10.7%. The company has a Zacks Rank #3 (Hold). You can see
the complete list of today's Zacks #1 Rank stocks here. American Airlines has posted encouraging earnings results in its latest reporting quarter. The company's consolidated traffic has increased in recent times amid high air travel demand.
The company's expected earnings growth rate for the current year is 378%. AAL's projected earnings growth rate for the next five-year period is 54.6%. The company has a Zacks Rank #3.
United Airlines' initiatives to constantly add fleets is a major tailwind at present, mostly due to the uptick in air travel demand. Its revenues for the first nine-month period of this year have already increased compared to last year.
The company's expected earnings growth rate for the current year is 286.9%. UAL's projected earnings growth rate for the next five-year period is 46.5%. The company has a Zacks Rank #3.
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