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NVIDIA, Barrick Gold, Devon Energy and NetApp as Zacks Bull and Bear of the Day

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For Immediate Release         

Chicago, IL – July 3, 2018 – Zacks Equity Research highlights NVIDIA (NVDA - Free Report) as the Bull of the Day and Barrick Gold (ABX - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Devon Energy (DVN - Free Report) and NetApp (NTAP - Free Report) .

Here is a synopsis of all four stocks:

Bull of the Day:                                              

Note: This is an updated and expanded version of my May 14 article Do You Buy NVIDIA at This Valuation? after EPS estimates rose further, making NVDA a Zacks #1 Rank yet again. Plus, the semi-annual TOP500 Supercomputer List was released last week, showing NVIDIA's continued dominance in hyper-scale data and machine learning applications. 

On June 25, the semi-annual TOP500 List was released and for the first time since November 2012, the US claimed the most powerful supercomputer in the world. And it should be no surprise that NVIDIA makes some of the key GPU (graphical processing unit) semiconductor hardware involved.

This key industry ranking found that an IBM-built supercomputer called SUMMIT, now running at the Department of Energy’s Oak Ridge National Laboratory, captured the number one spot with a performance of 122.3 petaflops on High Performance Linpack (HPL), the TOP500 List benchmark.

SUMMIT has 4,356 nodes, each one equipped with two 22-core Power9 CPUs, and six NVIDIA Tesla V100 GPUs. The nodes are linked together with a Mellanox (MLNX) dual-rail EDR InfiniBand network that can run bandwidth of 100G/sec.

What's a FLOP?

A "petaflop" is the ability of a computer to do one quadrillion floating-point operations per second (1,000 million million). For comparison's sake, the new Microsoft Xbox One X gaming system has 6 "teraflops" that allow it to perform 6 trillion floating point operations per second.  

So each SUMMIT is roughly equivalent to the processing power of over 20,383 Xbox One X consoles (assuming they were somehow connected).

 

But after going through the full TOP500 ranking, to say that NVDA GPUs are a key element of the number one supercomputer seems like an obvious understatement. Not only are NVDA chips in 5 of the top 10 systems, nearly 90% of listed supercomputers with GPU accelerators (98 of 110 out of the total 500) used its designs, up from 85.5% six months ago.

Stifel Nicolaus analysts commented on the broad trends in super-computing demand across industry, university research institutions, and government...

"We expect NVIDIA’s GPU initiatives, as well as AMD entering the high-end of the market with its Vega GPUs, will result in continued share gains for accelerated systems in future TOP500 lists, as supercomputers are increasingly custom-designed for unique workloads."

Bear of the Day:

I've written about large-cap gold miners like Barrick Gold many times over the years for the Bear of the Day feature, and most recently in April right before the company reported earnings that fell in line with analyst estimates.

Here's what I wrote on April 18...

The steadily eroding earnings outlook for these companies is no surprise, even as the price of gold rallies.

Since a summer of 2016 peak for the yellow metal near $1375, it has fallen to support at $1125 and rallied back to $1350.

Meanwhile, Barrick Gold shares have fallen over 40% from $23 to $13, and the Market Vectors Gold Miners ETF (GDX) fell 26%.

(end of April 18 Bear of the Day excerpt)

Since then, ABX has actually held its ground at $13 while its yellow metal has dropped over 8% as US interest rates rise and the dollar has rallied 6%.

But analyst EPS estimates for Barrick have fallen over 7% from 83-cents to 77-cents for the full year 2018.

Second Half of 2018 Begins: Global Week Ahead

This Global Week Ahead has gotten off on the wrong foot.

On Monday, Mainland Chinese stock indexes suffered through one of their most pessimistic days this year. This led to a knock-on decline across other Asian markets. The Asian sell-off then ripped up European sentiment, as trade war fears dominated the start of the second half of 2018, and the U.S. markets followed suit most of the day.

The CSI 300, a key index of big China stocks listed in Shanghai and Shenzhen, closed down -2.9%. This was its fifth-sharpest daily decline this year, according to Reuter’s data.

Japanese and South Korea stock markets both ended down more than -2.0%, while the Europe-wide Stoxx 600 was -0.7% weaker when I looked in.

For the remainder of this U.S. trading week, here are Reuters in London’s five big world market themes. These are likely to dominate the thinking of investors and traders.
I list them in order of importance to global equity markets.

(1) Second Half of 2018 Begins

It has been the worst first-half of a year for global stocks since 2010 as a mix of U.S.-China trade tensions, central banks turning off the money taps and cooling growth in Europe wiped a trillion dollars off MSCI’s 47-country world index.

But let us put that behind us — What lies ahead?

What is certain is that the U.S. Fed will raise interest rates again, at least once, possibly twice. The ECB will end its bond-buying at the end of December. The Bank of England, the Bank of Canada and some big emerging market central banks will also raise interest rates.

The question is whether more misery lies in store for assets such as Chinese stocks, which have entered bear-market territory. The yuan’s fate will be key to other emerging markets after losses of 5-8 percent on stocks and bonds.

So who will emerge the winner?

At this point it is the FAANG U.S. tech stocks, which collectively are up almost 40 percent.

Whether the gains continue may depend on trade politics and Fed policy — a more aggressive Fed could ensure 10-year yields rise above 3 percent again and stay there.

(2) Big Friday U.S. Non-Farm Payroll Print Happens

June’s U.S. unemployment data, due Friday, will be closely watched for further signs of a tightening labor market.

Unemployment data for May boosted markets, with the rate falling to an 18-year low, pointing to strength in the U.S. economy, and helping send stocks up around 1 percent that day.

Non-farm payrolls surged by 223,000 jobs during that month, as warm weather bolstered hiring at construction sites. June’s data is expected to show a 200,000 increase, according to a Reuters poll.

The closely watched hourly wages in May rose 0.3 percent, topping economists’ estimates. The same figure is expected in June.

(3) U.S.-China Trade War Shifts Up a Gear

The Sino-U.S. trade conflict is about to shift into a higher gear, with additional tariffs on Chinese imports kicking in on July 6.

Respective market moves indicate the United States has won Round One of the tariff war — the yuan just clocked up its worst month on record while China’s stock market suffered its deepest monthly slide since January 2016.

This week, the yuan will take center-stage as investors wonder what action, if any, Beijing might take to stem the currency’s slide. Chinese policymakers are known for their readiness to intervene in the economy and financial markets and economy at any opportunity but they seem less interventionist this time.

This could, of course, show commitment to a long-promised liberalization process. More likely though, authorities are signaling their readiness to use yuan weakness as a response to U.S. import tariffs.

The risk is that an extended sell-off feeds off itself, sparking capital outflows. Without an easing in trade tensions it’s hard to see the yuan moves reversing, unless manufacturing and service sector surveys next week provide some relief.

(4) Fallout from Presidential Elections in Mexico

The polls showed former Mexico City mayor Andres Manuel Lopez Obrador will be the next president, garnering over half of the votes.

This is the third bid for the key job by AMLO, as the leftist Lopez Obrador is commonly known; his popularity has grown hand in hand with Mexicans’ anger at the failure of traditional parties to end record levels of violence and corruption.

His history of protest politics has unnerved investors though and while throughout this campaign AMLO has courted Wall Street, he has still pledged to review a 2013 opening of the oil industry to private producers.

The vote comes at a delicate point for Mexico, which is at odds with the United States over migration and trade, while talks on reworking the NAFTA trade agreement are deadlocked. The new president will have to steer his country through these issues.

The peso sank to a 1 1/2-year low in June, though its weakness has mostly been blamed on a global emerging market sell-off. AMLO’s election win looks already priced in.

(5) EU Migration Deal Gets Closed

An EU deal to share out refugees on a voluntary basis and create “controlled centers” to process asylum requests has thrown a lifeline to German Chancellor Angela Merkel, whose coalition government has been teetering on the brink of collapse.

Bavaria’s Christian Social Union met on Sunday to decide whether that deal addressed its concerns. They will meet again on Monday night. If not, it could make good on a promise to unilaterally introduce tougher immigration controls, potentially shattering its alliance with Merkel’s Christian Democrats and toppling her three-month-old government.

But hopes a political crisis has been averted sent the euro and stock markets rallying on Friday. The gains could extend should the CSU give the agreement the thumbs-up.

Italian debt has been the other beneficiary from the migrant deal. Investors, possibly, have interpreted the compromise by Rome’s anti-establishment government with EU peers as boding well for similarly contentious talks on Italian budget policies later this year.

Top Zacks #1 Rank Stocks—

NVIDIA Corp.: This chip stock is stacking up to $143B in market capitalization. The Value score is F and the Growth score is A. You can call it either way, based on that.

Devon Energy: This is one of the biggest U.S. producers of natural gas. We haven’t seen a natural gas producer on this list for some time. It must be because WTI oil prices are rising above $70. The Value score is C and the Growth score is C.

NetApp: This is a $20B market cap Computer Storage Device stock. With a Zacks VGM score of B, this one may be worth picking up during the trade war sell-off, at some point.

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