Ticker Reports for December 19th
Micron Stock Under $100: Seize the AI-Driven Upside
The legacy business remains a problem for Micron. The global semiconductor inventory reset is taking longer than anticipated due to end markets, including PCs. Still, it is offset by strength in next-gen technologies: Micron’s advanced data center and AI products, including its industry-leading HBM3E memory chips. HBM memory is critical to AI because of the capacity and speed at which it operates. Micron’s HBM3E is the industry's most advanced, delivering significantly better performance with lower energy use, perfect for data centers and AI consumption.
Micron Delivers Mixed Results and Weak Guidance; Forecasts 35% Growth
Micron delivered mixed results and gave weak guidance for Q2, but let’s be fair. The company produced 84% year-over-year (YoY) revenue growth and a wider margin for record results, outperformed on the bottom line, and guided for another 35% YoY growth in Q2. The growth is slowing sequentially and on a YoY basis, but 35%, in addition to last year’s 50% gain, is solid, and the bar was set high. Analysts have been lifting their expectations all year as AI demand and data center business drove strength in peripheral markets such as memory. Given the trends, Micron’s guidance is likely cautious.
Segmentally, DRAM sales grew by 20% sequentially and 86% year over year due to demand for HBM3 and supporting technology. HBM sales more than doubled, and SSD sales were also strong. The company cites a market share gain in the SSD segment and forecasts additional gains in the coming quarters.
Margin news is strong. The company produced a 27.5% adjusted operating margin, 50 basis points better than MarketBeat’s reported consensus, up 500 basis points sequentially, reversing a loss posted in the previous year. The adjusted $1.79 is up significantly from last year’s $0.95 loss and nearly 200 basis points above forecasts. The takeaway is that Micron’s business is sustaining profits and improving profitability, with strengths expected to continue this year, providing positive free cash flow.
Micron Is Investing in Next Gen Technology and Growth
Micron’s balance sheet shows some changes, including a YTD cash reduction. However, the red flags are offset by increased spending on HBM technologies and ramping production to meet demand. The result is that cash is down, but the company remains well-capitalized and is building value for investors. The balance sheet highlights include increased receivables, current, and total assets only partially offset by increased liability. Assets rose by $2.05 billion or about 3%, while liabilities increased by less than $0.5 billion or about 1.5%, leaving equity up by 3.7%. Leverage remains low, with a total liability of about 0.5x equity, leaving the company in a robust financial position capable of executing its plans while paying its dividend.
The Analysts Are Underwhelmed by Micron’s Strong Quarter
The analyst's response to Micron’s results is mixed. The bulk of activity is negative, including numerous price target reductions and a downgrade to Hold from Bank of America. Still, the chatter is optimistic, citing both near-term headwinds and an expectation for strength to improve in the back half of next year when legacy business reverts to growth. And not all of the revisions are negative. Rosenblatt maintained its Buy rating and $250 price target, expecting a 150% stock price increase. The consensus sentiment for Micron is a Moderate Buy, and most analysts see it trading above $110.
The stock price pulled back by 12% in early pre-market trading but may not have much deeper to move. The stock trades at a deep-value level and above critical support at the long-term moving average. There is a risk that Micron could fall below the $85 level, but that is not expected due to the low 11x earnings multiple, strength in results, and long-term outlook for industry-leading results driven by HBM3 demand. The more likely scenario is that this market will regain traction quickly, confirming critical support levels as it rebounds from the post-release lows.
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Airship AI: Shares Rising and Analysts Still See Near Triple-Bagger Upside
Airship AI (NASDAQ: AISP) shares are on the rise big-time in 2024, up 86%. Airship AI analyzes unstructured data and formats it. A good example is in analyzing traffic video. The company's hardware and software can analyze video from surveillance cameras.
They can record the make, model, color, and license plate of a car that committed a traffic violation.
It then structures the information into a format that a spreadsheet or database can record.
Shares of the Redmond, WA-based firm have been on the rise this year as it has continually been winning government contracts. The agencies it is working with include the U.S. Department of Homeland Security, the Department of Justice, and the Chicago Police.
The company’s revenue in the last 12 months has been up 148% as of last quarter, and the firm is making strong progress in improving its margins. It expects free cash flow to be positive this year. If the company can close on a good percentage of its $130 million pipeline, shares could just be starting their way up. The pipeline is five times larger than its total revenue over the last 12 months. The average of price targets from Benchmark and Roth MKM implies shares could rise by 185%.
BigBear.ai: Increased Military Adoption and Enlistment Drop Provide Strong Potential
BigBear.ai (NYSE: BBAI) is another small stock that found success in 2024, with shares up by 59%. BigBear provides AI-driven analytics and intelligence solutions. The company targets three markets: national security, supply chain management, and digital identity.
Since October, the company has seen a particularly pronounced rise in shares after it received a five-year contract with the U.S. Army.
The contract, valued at $165 million, works to move the Army toward becoming a more data-centric fighting force.
A tailwind for BigBear.ai is the drop in military enlistment. From 1980 to 2020, military enlistment was down 59%. However, things do appear to be recovering, with recruitment up in fiscal year 2024. Still, this is a clear downward trend. It requires the armed forces to use more advanced technology to do their jobs with fewer people.
The company is also picking up nonmilitary customers. It recently finished installing its biometric verification technology at Denver International Airport. This follows the company's announcement of a master service agreement with Heathrow Airport in London, Europe's largest airport. Overall, BigBear.ai is showing solid progress, as military agencies and other notable organizations are working with the firm. Recent price targets from Cantor Fitzgerald and HC Wainwright imply the company's shares are close to fairly valued. However, that could change if new announcements influence a re-rating of this stock.
Rezolve AI: Tech Giants Help to Sell Its Gen-AI E-Commerce Solution
Rezolve AI (NASDAQ: RZLV) has seen its shares take a huge hit in 2024, down 69%. The company helps e-commerce platforms and merchants use Gen AI to boost customer engagement.
It uses a customized e-commerce large language model to make finding items customers want easier.
Its platform allows for conversational interactions where customers can type in a specific description of a product they want and get recommendations.
It can also recommend related products that can help e-commerce platforms drive higher revenues. A reason for excitement around this company is that it plans to commercialize its platform in Q4 2024 in Europe and in Q1 2025 in North America.
Rezolve also recently announced agreements with Alphabet (NASDAQ: GOOGL), Google's parent company, and Microsoft (NASDAQ: MSFT). The firms will help Rezolve distribute its platform to customers through the cloud computing infrastructure of these two tech giants. The company expects $100 million in annual recurring revenue by the end of 2025, compared to no revenue currently. If it can make good on that promise, shares of Rezolve AI could have an incredible year. The average of current Wall Street price targets implies a 37% upside in the shares.
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SolarEdge Stock Climbs Back: Goldman Sachs Sees 40% Upside
As years go by, 2024 has not been a great one for shares of SolarEdge Technologies Inc (NASDAQ: SEDG). The $800 million market cap stock is down 85% since the start of January, which means it’s back trading at 2016 levels. For any investor that was involved in SolarEdge in the 8 years since then, it’s been a rollercoaster of a ride, to say the least.
At one point during the mania of the pandemic-fuelled tech bubble, the stock was up almost 2,500%. But like so many of the hot stocks that came to characterize the market’s frothiness at that time, there was little substance behind it all. Hence, the eye-watering plunge since then.
However, for those of us who are looking at SolarEdge with a fresh pair of eyes, there are a few reasons to be excited, albeit cautiously. The stock has gained 40% in the past month, and while it’s still very much in a downtrend, it is now trading at a level of long-term support.
How Technical Support Levels Could Boost SolarEdge Stock
It was around the $14 mark that the bears ran out of steam 8 years ago, and it’s starting to look like they may be at risk of doing the same this time around. Leaving aside fundamental performance or broader market sentiment, technical levels like this can greatly impact a stock’s direction and can often be self-fulfilling prophecies.
When a beaten-down stock is approaching a key level of support, many investors expect it to hold, so the braver ones often start to buy a beleaguered stock as it approaches that level. This increased demand gives the stock a much-needed boost and puts the bears on the back foot. As it then appears that the line of support is indeed holding, more investors take this as a confirmation sign and begin to pile in. Before you know it, the bears have given up trying to take the stock down to fresh lows. They’re buying to cover their short positions, and the stock is surging, perhaps even with a short squeeze thrown in for good measure.
Goldman Sachs Upgrades SolarEdge from Sell to Buy
Now, we’re some time away from that being the case with SolarEdge, but the technical conditions are there. There’s also the fact that the stock just got a double upgrade from the team over at Goldman Sachs. Having previously had SolarEdge rated a Sell, this week saw Goldman up their rating to a straight Buy. In a note to clients, they said SolarEdge “represents a unique recovery story, in our view, that could be poised to benefit from a ‘shrink-to-grow’ strategy starting in 2025.”
Alongside their bullish outlook for the stock, their fresh $19 price target will certainly get investors excited. Considering SolarEdge closed out Wednesday’s session below $14, that’s pointing to a targeted upside of nearly 40%. Not bad for a stock that’s already gained that much in the past month.
Why SolarEdge’s Turnaround Story Could Offer Big Rewards
Of course, when looking at a stock that’s lost so much value over the course of a year that saw the broader market cruise to multiple all-time highs, there’s always going to be a heightened degree of risk. By Goldman’s own admission, this upgrade “is likely a bit early,” but for investors with a taste for outsized gains, the risk/reward profile here is quite attractive. There’s a lot to like about the company’s ongoing restructuring efforts, which look set to get the company back to profit in the coming quarters. There’s also fresh leadership at the helm, with the announcement earlier this month of Shuki Nir stepping in as the new CEO.
It will be some time yet before SolarEdge is back trading at the lofty heights it spent much of 2021 and 2022 at, but who doesn’t love a good comeback story? If the stock is going to choose a place to begin a recovery rally, this is where it will happen, and with Goldman’s bullish outlook, I’m not sure you’d want to be betting against SolarEdge for much longer.
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