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Identifying Opportunities in Bitcoin Amidst Market Turmoil

Posted on by The INO.com Team

The cryptocurrency market experienced heavy selling last week amid an unprecedented Iranian drone and missile attack on Israel. Bitcoin (BTC) was down nearly 8% late on Saturday as U.S. officials confirmed the ongoing attack. As one of the few risk assets trading over the weekend, digital coins reacted immediately to the escalating tensions in the Middle East.

The crypto market also faced a decline following recent data reported earlier last week that showed inflation well above the Fed's 2% target in the first quarter of the year, which was not conducive to market sentiment.

Bitcoin, which had been trading around $70,000 on Saturday evening, dropped below $62,000, according to data from the Bitstamp exchange. By Sunday morning, it had recovered slightly, trading above $64,000. Other cryptocurrencies like Ether (ETH) also saw heavy selling, falling by up to 10% in certain cases.

Zaheer Ebtikar, founder of the crypto fund Split Capital, said the crypto sell-off would continue to be “contingent on further escalation” and that people would wait to see how markets react before making more moves. He added that leverage “has gotten completely overwhelmed in the last three days, so that’s caused prices to materially deteriorate” in digital assets.

The sell-off for bitcoin marked the most significant drop in more than a year, as reported by Bloomberg, with the coin recently setting new records, driven by inflows into U.S. spot bitcoin ETFs that continue to drive the crypto’s price action.

In January this year, the U.S. Securities and Exchange Commission (SEC) approved 11 spot bitcoin ETFs, which helped make investing in the cryptocurrency more accessible by bringing more investors and assets into the crypto space.

Over the past few months, the market has benefited from billions of dollars of inflows to Bitcoin ETFs, and these significant inflows supported Bitcoin’s price surge above $73,000 around mid-March. Spot bitcoin ETF amassed net inflows of around $12.1 billion at the first-quarter end, as per BitMEX Research.

Blackrock’s iShares Bitcoin Trust (IBIT) has emerged as the top performer so far, accumulating more than $13.9 billion in inflows since trading began in January. However, Grayscale Bitcoin Trust (GBTC) is a key outlier with flow data, experiencing outflows of around $14.7 billion due to the relatively high fees associated with the offering.

Most Anticipated Crypto Event: The Bitcoin Halving

Investors in the cryptocurrency market are eagerly looking forward to the upcoming Bitcoin halving, scheduled to occur on April 20, which could potentially bring positive developments. This event will reduce the rate at which new coins are generated and thus lower the available amount of new supply, cutting mining rewards to 3.125 BTC.

Bitcoin halving roughly occurs every four years. It last halved on May 11, 2020, resulting in a block reward of 6.25 BTC from 12.5 BTC.

The event, the fourth in Bitcoin’s history, with previous halvings in 2012, 2016, and 2020, involves cutting miners’ rewards in half to control the introduction of new bitcoins until the maximum limit of 21 million bitcoins is reached. Historically, halving events have resulted in higher Bitcoin prices.

For instance, the first Bitcoin halving occurred in November 2012, when the block reward was reduced from 50 BTC to 25 BTC, and Bitcoin’s price surged from $12 to over $1000 within a year.

Similar trends were observed following the second halving in July 2026, when the reward was reduced from 25 BTC to 12.5 BTC, and the price climbed from about $600 to a peak of around $20,000 in 18 months. The most recent halving occurred in May 2020.

Although the initial price impact was not as significant as in past halvings, Bitcoin gradually trended upward in the subsequent months. By early 2021, Bitcoin reached unprecedented highs, exceeding $60,000 per coin, marking a five-fold increase from its pre-halving price of approximately $12,000.

Austin Arnold, a crypto market analyst and the founder of “Altcoin Daily,” projected a doubling of Bitcoin’s price within a year post-halving, potentially reaching between $100,000 and $150,000, guided by the fundamental principle of supply and demand dynamics.

Once April began, Bitcoin immediately marched toward the $73,000 mark it hit during the bullish crypto run in March. Almost all predictions made before April revealed this would be the case, as market sentiment grew bullish before the halving. However, the latest drop is scaring some investors.

Navigating Bitcoin's Uncertain Terrain: Strategic Insights for Investors Amid Regulatory Challenges and Price Volatility

Investing in Bitcoin carries inherent risks, primarily stemming from the high volatility of the cryptocurrency market. Price fluctuations can be dramatic and unpredictable, impacted by several factors, from regulatory developments to market sentiment.

Economic downturns, shifts in monetary policy, and geopolitical events can influence investor sentiment toward cryptocurrencies. For instance, bitcoin significantly declined last Saturday due to escalating geopolitical tensions. Following reports of Iran launching a massive air attack on Israel, the price fell from approximately $70,000 to $62,000, a more than 10% drop, with few altcoins declining 15% or more.

However, crypto markets recovered slightly the following day on news Israel and its allies shot down over 99% of the incoming drones, cruise missiles, and ballistic missiles. Also, Bitcoin’s latest crash demonstrates that cryptocurrencies are not even a haven during wartime.

So, an in-depth analysis of how these global factors impact the cryptocurrency market reveals a delicate interplay between economic trends and cryptocurrency valuations, emphasizing the importance of a macroeconomic perspective when investing in Bitcoin.

Tools and methods such as sentiment analysis, monitoring social media, and analyzing trends are used to assess market sentiment. Understanding market sentiment can offer investors valuable insights into potential price movements, as positive sentiment can drive prices up, while negative sentiment can trigger sell-offs.

Also, the increasing trend of institutional investment in cryptocurrencies reshapes the market landscape. This year, bitcoin surged to unprecedented levels with positive sentiment across the market, driven by institutional demand, spot Bitcoin ETFs growth, and the upcoming halving event. Although after hitting new all-time highs in March, it has seen some corrections.

To navigate uncertainties and risks, investors must adopt strategies such as diversification, implementing stop-loss orders, and maintaining a long-term perspective.

Bottom Line

The recent decline in Bitcoin due to geopolitical tensions has highlighted the high volatility of the cryptocurrency market. Over the past few months, the market has primarily benefited from billions of dollars of inflows to spot bitcoin ETFs. The influx of these funds contributed to boosting demand for Bitcoin, leading to a surge in its price that consistently broke records, surpassing $73,000 for the first time in history.

The latest trend reversal in Bitcoin has prompted uncertainty about future market conditions and underscores the importance of cautious investment strategies and risk management in the volatile cryptocurrency space.

It's crucial to closely monitor market trends, sentiment, and regulatory changes while avoiding excessive reliance on leverage, which can magnify losses during downturns. Diversification across different assets and maintaining a long-term perspective can also help mitigate risks and navigate through periods of market turmoil.

Overall, a prudent approach that combines careful analysis, risk assessment, and strategic decision-making is essential for investors looking to weather the challenges and capitalize on opportunities in the crypto market.

Anticipating Bitcoin's Halving Event and Investment Implications

Posted on by The INO.com Team

The cryptocurrency market remains highly active lately as investors are increasingly interested in new spot bitcoin (BTC) exchange-traded funds ahead of the upcoming bitcoin halving event in April. This event typically generates significant attention and anticipation in the crypto market.

Simultaneously, there’s a growing focus on the global digital asset regulatory environment. Last month, European regulators passed new anti-money laundering legislation, and the U.S. Securities and Exchange Commission (SEC) has initiated actions that could lead to Ethereum (ETH) being classified as a security ahead of a critical May deadline on various spot Ethereum ETF applications.

Historically, the period from February through April has shown strength in bitcoin prices, and investors are optimistic that the crypto rally observed in early 2024 will extend into the second quarter.

The cryptocurrency market has continued its strong upward trend this year, building on the significant gains seen in 2023, when Ethereum surged by 85% and bitcoin by more than 150% in 2023. Heading into April, bitcoin prices are up about 64% year-to-date, and Ethereum prices have rallied more than 51%.

During the first half of March, bitcoin prices surged to reach a new intraday all-time high of $73,750.16. However, the latter part of the month saw bitcoin trading within a broad range of approximately $60,000 to $72,000. By the end of March, bitcoin prices closed at $70,849, marking a monthly gain of 14%.

In contrast, Ethereum prices experienced a more modest increase of 5.8% for the month, ending at $3,611.

Spot Bitcoin ETFs in the Spotlight

Bitcoin’s price surged above $71,000 multiple times last week, and this increase was supported by significant net inflows exceeding $243.4 million into bitcoin exchange-traded funds (ETFs) on Thursday.

Notably, the Ark 21Shares Bitcoin ETF (ARKB) recorded net inflows of $200.7 million last Wednesday alone, making it the third bitcoin ETF to surpass the $200 million mark since the SEC approved the listing and trading of 11 spot bitcoin exchange-traded product (ETP) shares after years of repeated rejections in January.

Before ARKB, BlackRock’s iShares Bitcoin Trust (IBIT) and Fidelity Advantage Bitcoin ETF (FBTC) crossed this $200 million mark in a single day.

According to James Wo, founder and CEO of Digital Finance Group, the spot bitcoin ETFs continue to play a central role in the 2024 crypto rally.

“Bitcoin broke past its all-time high in March as the bitcoin ETFs saw a daily net inflow of over $1 billion, an amount higher than the inflow experienced from the launch date. As more participants seek to gain exposure to cryptocurrencies, the bitcoin ETFs provided easier access to this asset class, which fueled the strong demand in March, pulling up the rest of the crypto market with it,” Wo stated.

Bitcoin Halving Event: The Primary Catalyst for a Prolonged Climb in Cryptocurrency’s Value

Bitcoin’s recent surge and its overall value proposition are primarily driven by increasing anticipation surrounding the upcoming “Bitcoin halving” event, scheduled to occur on April 19, 2024. This event is a built-in feature of Bitcoin’s protocol that reduces the rate of bitcoin production, with the block reward expected to decline from 6.25 BTC to 3.125 BTC.

The halving event holds significance on multiple fronts. Firstly, it directly impacts the economics of Bitcoin mining. As the block reward decreases, miners earn fewer Bitcoins, potentially affecting the profitability of mining operations. This could lead some miners to cease operations if mining costs outweigh the rewards, resulting in adjustments to the network’s hash rate and mining difficulty.

Additionally, the halving sparks heightened speculation and interest from investors and traders. Historically, Bitcoin halving events have been linked to bull markets and price surges due to reduced supply and sustained or increased demand. The halving underscores Bitcoin’s deflationary nature and scarcity. With the issuance rate halved, Bitcoin becomes scarcer over time, potentially driving up demand and long-term price appreciation.

Historically, halving events have led to substantial price increases for Bitcoin. For instance, after the 2012 halving, Bitcoin’s price surged from $12 to over $900 within a year. Likewise, following the second halving in 2026, the price climbed from about $600 to $2,500.

Further, the third halving event held in May 2020 saw the price jump from around $8,000 to over $40,000 within a year.

In the past, bitcoin’s price typically showed stability before its halving events, often due to an uptick in supply available on exchanges. However, this time, there’s a notable difference, as pointed out by Austin Arnold, a crypto market analyst and the founder of “Altcoin Daily.”

He added that an unprecedented level of excitement and institutional fear of missing out (FOMO) surrounding Bitcoin, fueled by a quest for inflation-resistant assets, contributes to a potential supply-and-demand shock even before the actual halving occurs.

Arnold further projected a doubling of Bitcoin’s price within a year post-halving, potentially reaching between $100,000 and $150,000, guided by the fundamental principle of supply and demand dynamics.

Bottom Line

Several major cryptocurrencies experienced a rally lately, fueled by various potential catalysts such as significant net inflows into bitcoin ETFs, notable filings for spot Ether ETFs, and anticipation surrounding the upcoming “bitcoin halving” event scheduled on April 19.

The bitcoin halving event, which is the fourth in bitcoin’s history, with prior halvings in 2012, 2016, and 2020, involves cutting miners’ rewards in half to control the introduction of new bitcoins until the maximum limit of 21 million bitcoins is reached. Historically, bitcoin’s price has surged after each halving event, leading investors to speculate on a potential rally next month.

Analysts speculate that the current Bitcoin price of around $66,000 could potentially reach approximately $150,000 post-halving, highlighting the anticipation and impact of this event on Bitcoin’s market dynamics. The halving event brings significant attention to the crypto space, attracting new investors and contributing to increased trading activity.

While Bitcoin halving events have been associated with bull markets and substantial price rallies, past performance does not indicate future results. So, investors should exercise caution and conduct thorough analysis before making investment decisions, as the crypto market is known for its volatility and unpredictability.

Investing in Love: 4 Stocks That Capture Valentine's Day Sentiment

Posted on by The INO.com Team

Valentine’s Day is a time to celebrate love and romance, whereby people express their affection by exchanging candy, cards, flowers, jewelry, and other gifts with their special ones. This annual Lover’s Day has become extremely popular, and creative retailers are preparing to cash in on this event.

Americans really like to spend on their loved ones for Valentine’s Day. According to the annual survey released by the National Retail Federation (NRF) and Prosper Insights & Analytics, total spending on Valentine’s Day is expected to reach a new high of $14.20 billion in 2024, or a record $101.84 per person.

“Retailers are ready to help customers this Valentine’s Day with meaningful and memorable gifts,” said Matthew Shay, NRF President and CEO. “With consumers prioritizing their spouse or significant other this year, retailers expect to see a shift in spending for certain gifting categories.”

The top gift categories include candy (57%), greeting cards (40%), flowers (39%), an evening out (32%), jewelry (22%), clothing (21%) and gift cards (19%). New spending records are anticipated for jewelry (around $6.4 billion), flowers ($2.6 billion), clothing ($3 billion) and an evening out ($4.9 billion).

More than half of customers (nearly 53%) plan to celebrate Valentine’s Day this year, on par with 52% in 2023. Overall, consumers plan to spend a total of $25.8 billion to celebrate Valentine’s Day, on par with the previous year’s spending and the third highest in the survey’s history.

Now, let’s take a close look at the fundamentals of four key stocks that might thrive this Valentine’s Day:

Berkshire Hathaway Inc. (BRK.B)

Warren Buffett is widely considered one of the greatest investors of all time. One way to share in his success is by investing in his holding company, Berkshire Hathaway Inc. (BRK.B)v, whose market capitalization stands at $861.40 billion.

BRK.B owns a mix of businesses across several industries. The profits from these businesses accumulate on Berkshire Hathaway’s balance sheet, and Warren Buffett and his team use these funds to expand the company, make new investments, and so on.

Since 1972, Buffett’s leading conglomerate owns See’s Candies, a beloved brand for candies, particularly chocolates. Today, more than 50 years later, this candy brand has grown into a testament to the power of brand loyalty, high-quality products, and intelligent management.

With its steady growth, See’s Candies provided BRK.B with an income of nearly $2 billion, representing an impressive return of more than 8,000%, or approximately 160% a year. Beyond its financial triumphs, this brand holds a special place in Buffett’s heart as it embodies his investment philosophy, which prioritizes businesses with competitive advantage, reliable cash flows, and a focus on customer satisfaction.

For most people, chocolate and candy are the perfect way to celebrate Valentine’s Day as they associate them with emotional connections, primarily driving See’s Candies sales and ultimately giving a significant boost to BRK.B’s stock.

BRK.B’s trailing-12-month EBITDA margin of 31.46% is 49.4% higher than the 21.05% industry average. Moreover, the stock’s trailing-12-month ROCE, ROTC, and ROTA of 15.63%, 9.86%, and 7.52% are higher than the industry averages of 10.67%, 6.41%, and 1.09%, respectively.

For the first nine months that ended September 30, 2023, BRK.B’s total revenues increased 21.1% year-over-year to $271.11 billion. Its earnings before income taxes were $73.23 billion versus a loss before income taxes of $52.61 billion in the prior year’s period. Its net earnings came in at $59.39 billion, compared to a loss of $40.24 billion in the same quarter of 2022.

Analysts expect Berkshire Hathaway’s revenue and EPS for the fiscal year (ended December 2023) to increase 4.1% and 24.4% year-over-year to $314.42 billion and $17.39, respectively. Moreover, the company topped the consensus EPS estimates in three of the trailing four quarters.

BRK.B’s stock is already up nearly 11% over the past six months and has gained more than 28% over the past year. Further gains could come with a Valentine’s Day rally.

PayPal Holdings, Inc. (PYPL)

Another stock that could capture Valentine’s Day sentiment is PayPal Holdings, Inc. (PYPL). With a $63.14 billion market cap, PYPL operates as a technology platform enabling digital payments on behalf of merchants and consumers. As digital payments continue to rise across the globe, PayPal remains a strong player in the fintech industry.

Valentine’s Day might cause an influx of online transactions. Spending surges as consumers celebrate Valentine’s Day with memorable gifts for their friends and loved ones, propelling digital payments worldwide and benefiting PYPL considerably.

On January 25, 2024, PYPL announced six innovations to revolutionize commerce through artificial intelligence (AI) driven personalization for merchants and consumers. During the PayPal First Look keynote, President and CEO Alex Chriss introduced a completely new PayPal checkout experience; Fastlane by PayPal, a faster guest checkout experience; and Smart Receipts, giving customers AI-personalized recommendations from merchants.

Further, the company introduced the PayPal advanced offers platform so merchants can provide personalized, real-time offers to consumers and drive sales; a reinvented PayPal consumer app offering shoppers new ways to earn cash back; and Venmo’s enhanced business profiles so that small businesses can find and engage new customers and grow their businesses.

PYPL’s trailing-12-month ROCE, ROTC, and ROTA of 20.55%, 9.43%, and 5.17% favorably compared to the industry averages of 10.76%, 6.44%, and 1.08%, respectively. Also, the stock’s 18.40% trailing-12-month levered FCF margin is 3.2% higher than the industry average of 17.83%.

During the fourth quarter that ended December 31, 2023, PYPL’s non-GAAP net revenues increased 8.7% year-over-year to $8.03 billion. Its non-GAAP operating income grew 10.6% from the prior year’s quarter to $1.87 billion. Its non-GAAP net income and non-GAAP EPS came in at $1.60 billion and $1.48, up 13.2% and 19.4% year-over-year, respectively.

Furthermore, the company’s free cash flow was $2.47 billion, an increase of 72.3% year-over-year. Its fourth-quarter total payment volume (TPV) grew 15% from the year-ago value to $409.80 billion. Its payment transactions rose 13% year-over-year to $6.80 billion.

As per its financial guidance, PayPal expects net revenue to increase by nearly 6.5% and 7% on a foreign-currency neutral basis (FXN) for the first quarter of fiscal 2024. Its non-GAAP earnings per share are expected to grow in mid-single digits compared to $1.17 in the previous year’s period.

For the full year 2024, the company’s non-GAAP earnings per share are expected to be in line with $5.10 in the previous year.

Analysts expect PYPL’s revenue and EPS for the first quarter (ending March 2024) to increase 6.7% and 4% year-over-year to $7.51 billion and $1.22, respectively. Additionally, the company surpassed consensus revenue estimates in each of the trailing four quarters, which is impressive.

PYPL’s stock has surged more than 8% over the past three months.

Movado Group, Inc. (MOV)

With a $616.47 million market cap, Movado Group, Inc. (MOV) designs, markets, and distributes watches worldwide. The company offers its watches under the Movado, Concord, Ebel, Olivia Burton, and MVMT brands, along with licensed brands like Coach, Tommy Hilfiger, HUGO BOSS, Lacoste, and Calvin Klein. If your loved one appreciates luxury watches, Movado could be an exciting pick this Valentine’s.

The company has a robust capital allocation strategy. MOV paid a cash dividend of $0.35 for each share of the company’s outstanding common stock and class A common stock held by shareholders of record as of the close of business on December 12, 2023. Its annual dividend of $1.40 translates to a yield of 4.95% on the current share price. Its four-year average dividend is 4.22%.

Moreover, the company’s dividend payouts have increased at an 11.8% CAGR over the past five years.

Also, during the third quarter of fiscal 2024, Movado Group repurchased around 69,700 shares under its November 23, 2021, share repurchase program. As of October 31, 2023, the company had $18.60 million remaining available under the share repurchase program.

MOV’s trailing-12-month gross profit margin of 55.71% is 57% higher than the 35.48% industry average. Likewise, the stock’s trailing-12-month EBIT margin and net income margin of 9.86% and 8.34% are higher than the industry averages of 7.53% and 4.74%, respectively.

In terms of forward P/E, MOV is currently trading at 14.8x, 12% lower than the industry average of 16.83x. The stock’s forward EV/Sales of 0.78x is 36.7% lower than the industry average of 1.23x. Also, its forward EV/EBITDA of 7.36x is 27.3% lower than the industry average of 10.13x.

MOV’s reported net sales of $187.69 million for the fiscal 2024 third quarter ended October 31, 2023. Its net income came in at $17.67 million, or $0.77 per share, respectively. As of October 31, 2023, the company’s cash and cash equivalents were $200.97 million, compared to $186.67 million as of October 31, 2022.

Street expects MOV’s revenue and EPS for the fiscal year (ending January 2025) to increase 3.3% and 7.9% year-over-year to $689.90 million and $2.06, respectively. Also, the company has topped the consensus EPS estimates in all four trailing quarters.

Shares of MOV have surged more than 4% over the past three months and approximately 12.7% over the past nine months.

Signet Jewelers Limited (SIG)

The last stock, Signet Jewelers Limited (SIG), also tends to shine around Valentine’s Day. For those who want to go beyond chocolates, jewelry is a classic Valentine’s Day gift. Signet Jewelers, with a market cap of $4.56 billion, owns brands like Key Jewelers, Zales Jewelers, Diamonds Direct, James Allen, and Banter by Piercing Pagoda and could benefit from a surge in sales.

After all, SIG’s trailing-12-month EBIT margin and net income margin of 8.49% and 6.29% are higher than the respective industry averages of 12.73% and 32.77%. Similarly, the stock’s trailing-12-month ROCE, ROTC, and ROTA of 29.14%, 11.39%, and 7.61% are significantly higher than the industry averages of 11.43%, 6.08%, and 4.08%, respectively.

In terms of forward non-GAAP P/E, SIG is currently trading at 10.29x, 36.4% lower than the industry average of 16.17x. The stock’s forward EV/Sales of 0.81x is 34.1% lower than the industry average of 1.23x. Moreover, its forward Price/Sales of 0.63x is 31.9% lower than the industry average of 0.93x.

In the fiscal 2024 third quarter ended October 28, 2023, SIG’s reported sales of $1.39 billion. The company reported non-GAAP operating income and non-GAAP EPS of $23.90 million and $0.24, respectively. Its cash and cash equivalents totaled $643.80 million as of October 28, 2023, compared to $327.30 million as of October 29, 2022.

“We’re reaffirming guidance for FY2024 with the full year outlook updated for the profitable and strategic sale of 15 primarily luxury watch stores in the U.K. We continue to make progress expanding gross margin through merchandise and sourcing strategies and growth in services revenue,” said Joan Hilson, Chief Financial, Strategy & Services Officer.

“Cost savings initiatives are on track and healthy inventory enables product newness as we enter the holiday season and improved free cash flow, allowing Signet to return nearly $160 million to shareholders already this year,” he added.

For the fiscal year 2024, Signet expects total sales to be in the range of $7.07 billion-$7.27 billion. The company’s operating income and EPS are expected to be $397-$437 million and $9.55-$10.18, respectively.

SIG’s stock has climbed more than 28% over the past six months and is up nearly 34% over the past year.

Bottom Line

Every year on February 14, people celebrate love with their “valentine,” and most will break the bank by buying flowers, chocolates, jewelry, and other gifts for their beloveds. Today, this event is a big business. NRF survey shows that Valentine’s Day is returning to its romantic traditions, with total spending on significant others reaching a new record of $14.20 billion this year.

Therefore, it could be wise to add the featured stocks to one’s watchlist ahead of Valentine’s Day.

Is Walmart (WMT) Stock Split a Catalyst for Growth?

Posted on by The INO.com Team

Consumers have long relied on Walmart Inc. (WMT) for affordable goods, a key feature of the retail chain's offerings. Now, the company’s investors will also be offered 'value deals' as WMT initiates steps to make its equity more accessible.

On January 30, the retail giant declared its intention to effectuate its shares' affordability in line with increasing store managers' salaries and providing annual grants of up to $20,000.

The corporation announced a share-splitting strategy that awards shareholders in possession of WMT stock as of February 22 with three shares for each one owned. This move marks the first of its kind since 1999.

Stock splits often garner significant media attention, particularly when happening at corporations like WMT. The common stock volume would be increased from approximately 2.7 billion to roughly 8.1 billion. As a result, each share will hold a smaller percentage of the company, decreasing its nominal value.

Although this may give an impression of cheaper stock, it's important to note that the size of the overall business, whether calculated by earnings, cash flow, or revenue, remains constant. The stock splitting will not affect any valuation but will divide the company's metaphorical share pie into additional pieces. Hence, investors will maintain the same business percentage ownership as prior to the split.

This does not necessarily imply irrelevant implications for investors concerning WMT's 3-for-1 stock split; rather, it piques interest in the company's motivations for such a move.

WMT proposed that the stock split aims to incentivize employees to invest in their corporation's shares. The company highlighted that over 400,000 employees participate in its established Associate Stock Purchase Plan, enabling them to buy stocks through payroll deductions and benefit from a 15% match on the first $1,800 contributed annually. Regardless, how this split will impact the company's future trajectory and investor sentiment remains to be seen.

CEO Doug McMillon said of the decision: "Sam Walton believed it was important to keep our share price in a range where purchasing whole shares, rather than fractions, was accessible to all of our associates. Given our growth and our plans for the future, we felt it was a good time to split the stock and encourage our associates to participate in the years to come."

The stock market’s stellar performance in 2023, coupled with better-than-expected January job figures, has triggered a surge in retail investor activity. GenZ investors, having limited trading funds, could be attracted by WMT's strategic decision to split its shares.

There seems to be a correlation between stock splits and an outperforming stock. This trend may be attributable to the momentum leading up to the split, as such occurrences often follow substantial price gains or heightened investor interest. WMT anticipates that this move will spur increased purchasing among its employees, potentially driving the stock price upwards.

However, certain additional factors could also contribute to the surge in WMT's stock price:

WMT’s retail segment epitomizes stability, boasting over 10,000 stores and achieving a same-store sales growth (U.S. segment) of 4.9% in 2023's third quarter, resulting in a new record for its trailing-12-month revenue of $638.79 billion.

On top of this, WMT is pursuing overlooked growth opportunities, notably in the realm of advertising. In partnership with The Trade Desk, a leading advertising technology firm, WMT has seen swift progression in its advertising endeavors, a promising venture given e-commerce competitors' significant advertising revenue over the past year.

Over the past year, WMT’s stock climbed approximately 20% as the company enhanced its online shopping services and offered higher employee remuneration. E-commerce continues to thrive for WMT, demonstrated by a 24% year-on-year increase in U.S. online sales for the quarter that ended October 31, 2023. This boom can be seen throughout the year with similar growth across preceding quarters. WMT’s U.S. e-commerce sales grew 27.2% year-over-year in the first quarter and 24% year-over-year in the second quarter.

Moreover, WMT has announced plans to launch 12 additional stores and upgrade a smaller location to a Supercenter – an indicator of imminent growth.

Furthermore, WMT is set to publish its fiscal fourth-quarter earnings on February 20. Analysts anticipate its EPS to come at $1.63 and revenue at $169.24 billion. The fiscal fourth quarter that ended January of 2023 saw the company report quarterly earnings of $1.71 per share, and net sales reached $162.74 billion. If WMT reports another resilient quarter, it is likely to provoke a further increase in its stock price.

WMT shares sit slightly below $170 and trades above the 50-, 100-, and 200-day moving averages of $159.06, $160.27, and $157.91, respectively, indicating an uptrend.

Jefferies raised WMT’s stock price target to $195 from $190, thereby affirming a buy rating on the shares ahead of the earnings report. It anticipates a modest sales beat for WMT, with cautious guidance for fiscal 2025, factoring in the continued slowdown in inflation.

Bottom Line

WMT is a notable player on Wall Street, and its distinctive position is fueled by not only its status as one of the world's most extensive retail chains but also its resilience during diverse market situations. WMT has been considered a recession-proof stock due to the consistency of its revenues and sales, even amid various economic upheavals. People put away their discretionary purchases during tough times but continue filling their grocery baskets, often seeking cost-effective options, a specialty of WMT.

WMT's history also boasts of 11 two-for-one stock splits, which have created attractive entry points for investors previously unable to access the stocks due to high prices, potentially driving up stock costs with their participation. Employees, too, may find the affordability appealing for their Employee Stock Ownership Plan (ESOP) benefits, prompting additional stock procurement.

Investing in WMT the day after its last stock split in 1999 would have yielded a price return of approximately 268%, comparable with S&P's 274% return. With the inclusion of the dividend, this could have surpassed S&P over an equivalent duration.

Particularly for long-term investors seeking both growth and income, WMT can be a favorable bet, considering its global brand recognition and historically robust financial positioning. This is crucial as the company continually expands its operations.

Moreover, WMT has reliably paid dividends over 50 consecutive years, pointing toward dependable shareholder value creation. The annual dividend stands at $2.28 per share, which translates to a dividend yield of 1.35%, given the existing share prices. Its four-year average dividend yield is 1.57%. WMT's dividend payments have grown at a CAGR of 1.8% and 1.9% over the past three and five years, respectively.

WMT's anticipated stock split will not affect these dividends. Considering a 3-for-1 split, this would adjust the quarterly dividend to $0.19 per share (current $0.57 per share), equating to an annual return of $0.76 per share. With approximately 8.1 billion shares outstanding, WMT would need an annual free cash flow of nearly $6.16 billion for the yearly return. Based on free cash flow of $4.34 billion and net cash provided by operating activities of $19.01 billion for the nine months that ended October 31, 2023, it appears plausible that the dividends will remain adequately covered after the split.

Usually, a business opts for a stock split when the cost of its shares becomes high, creating a psychological barrier for retail investors who may find it impossible to purchase a single share. Nevertheless, almost every brokerage, including WMT's Associate Stock Purchase Plan, now offers the opportunity to buy fractional shares, rendering the nominal value of a single share less significant than before. However, post-split, the attraction lies in owning a larger number of shares at an equivalent total investment rather than a fractional portion.

Moreover, when WMT employees purchase company stock, they essentially become part owners. As such, their personal financial standing becomes interwoven with the company's long-term success, potentially sparking a profound investment in the company's future.

WMT's impending stock split could potentially foster an ‘ownership mentality’ among its workforce. Investors are advised to bear in mind insider ownership when researching stocks. While insider ownership does not guarantee successful investments, it can imply an alignment of interests between insiders and common shareholders. However, investors should always remember to prioritize the business's underlying health.

Nonetheless, WMT's recent stock split – the first in 25 years – may raise eyebrows. Considering that the last split in 1999 coincided with the dot-com burst, could it be possible that WMT is employing the split as a defensive strategy, ideally ensuring sufficient operational capital to weather potential storms? Hence, a certain level of unease may accompany the news of the split taking place at the current low price.

 

NVIDIA (NVDA) vs. Advanced Micro Devices (AMD): Which Stock Is Proving to Be the Better Long-Term AI Buy

Posted on by The INO.com Team

After its earnings release on May 24, the Santa Clara-based graphics chip maker NVIDIA Corporation (NVDA) stole the thunder by becoming the first semiconductor company to hit a valuation of $1 trillion.

NVDA has also blown away Street expectations ahead of its quarterly earnings release on August 23, with profits for the current quarter expected to be at least 50% higher than analyst estimates and the momentum expected to continue in the foreseeable future.

On the other hand, since its humble beginnings as a supplier for Intel Corporation (INTC), Advanced Micro Devices, Inc. (AMD) has come a long way. During its earnings release for the second quarter, despite persistent weakness in the PC market, the company’s result topped analyst estimates.

While NVDA has carved its niche and cornered a significant share of the GPU domain through advancements in parallel (and consequently accelerated) computing which began back in 2006 with the release of a software toolkit called CUDA, Chair and CEO Dr. Lisa Su is widely credited with AMD’s turnaround and transition from being widely dismissed due to performance issues and delayed releases to being the only company in the world to design both CPUs and GPUs at scale.

The New (Perhaps Only) Game in Town

As a general-purpose technology, such as the steam engine and electricity, Artificial Intelligence (AI) that has already been touching and influencing all facets of our life, including how we shop, drive, date, entertain ourselves, manage our finances, take care of our health, and much more.

However, late in November of last year, when OpenAI opened its artificial intelligence chatbot, ChatGPT, to the general public, all hell broke loose. The application took the world by storm. It amassed 1 million users in five days and 100 million monthly active users only two months into its launch to become the fastest-growing application in history.

The generative AI-powered application’s capability to provide (surprisingly) human-like responses to user requests equally fascinated and concerned individuals, businesses, and institutions with the possibilities of the technology. A large language model or LLM powers ChatGPT. This gives the application the ability to understand human language and provide responses based on the large body of information on which the model has been trained.

NVDA is reaping the rewards for all that invisible work done in the field of parallel computing. Parallel computing was ideal for artificial neural networks' deep (machine) learning. As a result of that head start in the AI tech race, its A100 chips, which are powering LLMs like ChatGPT, have become indispensable for Silicon Valley tech giants.

To put things into context, the supercomputer behind OpenAI’s ChatGPT needed 10,000 of NVDA’s famous chips. With each chip costing $10,000, a single algorithm that’s fast becoming ubiquitous is powered by semiconductors worth $100 million.

However, AMD isn’t too far behind either. According to Dr. Su, Data Center is the most strategic piece of business as far as high-performance computing is concerned. AMD underscored this commitment with the recent acquisition of data center optimization startup Pensando for $1.9 billion.

At the premiere, AMD’s ambitions to capitalize on the AI boom were loud and clear, with the launch of MI300X (a GPU-only chip) as a direct competitor to NVDA’s H100. The chip includes 8 GPUs (5nm GPUs with 6nm I/O) with 192GB of HBM3 and 5.2TB/s of memory bandwidth.

AMD believes this will allow LLMs’ inference workloads that require substantial memory to be run using fewer GPUs, which could improve the TCO (Total Cost of Ownership) compared to the H100.

The Road Ahead

The optimism surrounding both companies is justified.

With NVDA’s presence in data centers, cloud computing, and AI, its chips are making their way into self-driving cars, engines that enable the creation of digital twins with omniverse that could be used to run simulations and train AI algorithms for various applications.

On the other hand, AMD has also been training its guns to exploit the burgeoning AI accelerator market, projected to be over $30 billion in 2023 and potentially exceed $150 billion in 2027.

AMD is one of the few companies making high-end GPUs needed for artificial intelligence. With AI being seen as a tailwind that could drive PC sales, the company announced plans to launch new Radeon 7000 desktop GPUs at its quarterly earnings release. It is being speculated that the GPU will come with two 8-pin PCIe power connectors and four video out ports, including three DisplayPort 2.1 and one HDMI 2.1.

Caveats

AMD existed as both a chip designer and manufacturer, at least until 2009. However,  significant capex requirements associated with manufacturing, amid financial troubles in the wake of the Great Recession, compelled the company to demerge and spin off its fab to form GlobalFoundries Inc. (GFS), which has been focused on manufacturing low-end chips ever since.

Today, both NVDA and AMD operate as fabless chip companies. Hence, both companies face risks of backward integration by companies such as Apple Inc. (AAPL), Amazon.com, Inc. (AMZN), and Tesla Inc. (TSLA) with the wherewithal to develop the intellectual capital to design their own chips.

Moreover, almost all of the manufacturing has been outsourced to Taiwan Semiconductor Manufacturing Company Ltd. (TSM), which has yet to diversify significantly outside Taiwan and has become the bone of contention between the two leading superpowers.

With geopolitical risk being the potential Achilles heel for both companies, their efforts toward geographical diversification also receive much-needed political encouragement through the Chips and Science Act.

Dr. Su, who also serves on President Biden’s council of advisors on science and technology, pushed hard for the passage of the Act. It is aimed at on-shoring and de-risking semiconductor manufacturing in the interest of national security by setting aside $52 billion to incentivize companies to manufacture semiconductors domestically.

Bottom Line

Given its massive importance and cornucopia of applications, it’s hardly surprising that Zion Market Research forecasts the global AI industry to grow to $422.37 billion by 2028. Hence, this field has understandably garnered massive attention from investors who are reluctant to miss the bus on such a watershed development in the history of humankind.

Hence, in view of product diversification, increasing traction in the GPU segment, and relatively higher valuation comfort, investors in AMD could benefit from more sustained upside potential compared to NVDA.