MarketBites Daily Investment Commentary: Semiconductors Surge: Executive Order & Nvidia Earnings I Gap Is Making A Comeback

Stock Market Commentary for 2/25/2021:
  • The Big Picture:
    Fed Chair Jerome Powell reassured investors that he intends to maintain ultralow interest rates for the foreseeable future. Mr. Powell’s comments single-handedly lifted the market that had been selling off for 5-days, due to rising interest rates and inflation fears.
    House Democrats aim to pass their $1.9 trillion stimulus package on Friday.
    The FDA authorized Johnson & Johnson’s single-shot Covid-19 vaccine for emergency use, bringing a third vaccine into the U.S.

    – Rising yields, inflation fears, and pockets of overvaluation in certain market segments, remain the largest concerns for investors.


  • Stock Talk:
    The Winner of the Day: Gamestop
    $GME is back! The stock rallied late Wednesday, as retail investors show they aren’t going home just yet. Gamestop’s CFO Jim Bell, was pushed out of his position by board members- including Chewy’s co-founder Ryan Cohen. Trading was halted on the stock late in the day, and $GME is up as high as 70% after hours.What’s Moving Pre-Market: Scott’s Miracle Grow
    $SMG has had an exciting start to 2021. Between airing its first-ever Super Bowl ad and Covid tailwinds pushing the firm’s first Q1 profit, $SMG has been on an impressive run over the last year. It appears that after-hours, some investors are doubting the firm’s ability to continue that success.

    The Loser of the Day: Verisk Analytics
    Verisk Analytics ($VRSK) failed to meet analyst expectations Wednesday, as the stock’s earnings per share was three cents short. The firm reported 12.39% earnings growth year over year, but with the rate of growth slowing dramatically, Verisk finds itself far lower than its $210 52-week high.


  • The Data Room:
    – New home sales rose 19% annualized in January, faster than expected.
    – Per Johns Hopkins, the U.S. reported 72,660 new Covid-19 cases yesterday. So far, 44.5 million Americans have received their first round of vaccinations.

– By Raymond Kanyo

 


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Top Investment Story #1: Semiconductor Boom

What is Happening?

President Biden signed an executive order addressing the global chip shortage, potentially boosting U.S. semiconductor companies. Nvidia posted blowout quarterly numbers.

Why does this Matter?

While technology stocks have been selling off due to rising inflation and treasury yield concerns, the semiconductor industry has been thriving. The PHLX Semiconductor Index, is up nearly 14% so far this year, outpacing the Nasdaq Composite’s 5.5% gain. Why? The semiconductor industry is highly cyclical, meaning performance is more closely tied to the economy’s performance. As the global economy recovers from the pandemic, the semiconductor industry can’t keep up with demand – hence the global chip shortage.

To address this issue, and America’s over-reliance on Asian chip manufacturing, the White House will conduct a 100-day review of the situation. While it is still unknown how this will impact American semiconductor companies, some speculate that the order could lead to more government subsidies to boost American manufacturing.

The executive order came out just before Nvidia (one of the largest semiconductor companies) reported earnings.

Here’s how Nvidia did:

  • Earnings: $3.10 vs. $2.81 per share as expected by analysts.
  • Revenue: $5.00 billion, vs. $4.82 billion as expected by analysts.
  • Q1 2021 Revenue Forecast: $5.3 billion vs. $4.51 billion expected.

Nvidia is at the apex of multiple technology trends. They supply chips for smartphones, cloud computing machines, artificial intelligence, automobiles, and robots. The automotive segment was the only disappointment, dropping 23% in 2020. Despite heavy scrutiny, Nvidia also feels confident that it can acquire “ARM” for $40 billion (chip supplier for most of Nvidia’s competitors).

The Takeaway:

There are a lot of positives going for the semiconductor industry. While the President’s executive order isn’t clear, it may boost American chip manufacturing – aiding American semiconductor firms such as Intel, Applied Material, Micron, and many others.

Liked this story? Forward it to your friends 

– By Raymond Kanyo

– Published in MarketBites Daily Newsletter


Top Investment Story #2: Gap Is Back
What is Happening?

Amidst online success, Gap has announced plans to invest $140M into building a new distribution warehouse in Texas.

Why does this Matter?

Gap’s stock is up 44% over the last 12 months, as the Old Navy brand has seen great success online. As a result, the firm will be building an 850,000 square foot facility with the capacity to process one million packages per day. The project will create 500 full-time jobs by 2023, and over 1,000 in the years after.

Gap executives discussed their plan of 50% of the firm’s revenues to come from e-commerce by 2023. This warehouse construction is the largest step the firm has taken into making that goal a reality.

While headlines of store closures have plagued the firm for years, investors and analysts alike are optimistic and hopeful now, due to Gap’s leadership team. Despite a troubling year for retail, Gap announced that revenue was flat year over year for the quarter ending Oct. 31. Many brick-and-mortar retailers cannot say the same.

The Takeaway:

$GPS has enjoyed a healthy year during the pandemic, a surprise to many. As the firm enjoys new loyal consumers looking for comfortable clothing, some think Gap can return to its former glory in the future.

– Written By Jack Dunne

– Published in MarketBites Daily Newsletter


Meet the Authors

Raymond grew up in Budapest, Hungary, where he played tennis for the Hungarian Junior Davis Cup team. At the age of 16, he received the Davis United World College Scholarship, which was established by legendary investor Shelby Cullom Davis, allowing him to attend the Taft Boarding School in Watertown, CT. After Taft, Raymond received a Presidential Scholarship to the Robins School of Business at the University of Richmond, where he studied Quantitative Economics and Finance. Raymond is a CFA Level III Candidate. Prior to joining Taylor Hoffman, Raymond worked at various financial institutions in the insurance, asset management, and financial consulting space. Outside of the office, Raymond enjoys playing tennis at ACAC and Westwood Country Club.

Raymond Kanyo
Product Manager & Investment Analyst

Jack graduated from the Robins School of Business at the University of Richmond with concentrations in Marketing and Finance in 2019. Prior to joining Taylor Hoffman, he worked in high-growth B2B SaaS marketing; assisting Fortune 100 firms to improve their web performance experience. A Long Island New York native, Jack’s hobbies include passionately supporting the Mets and Islanders, and he enjoys skiing whenever he can.

Jack Dunne
Investor Education Specialist
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