Reddit Stocks: What meme stocks are trending today? – August 2, 2023

US futures

• Dow Jones Industrial Average is down 0.4%
• S&P 500 is down 0.5%
• Nasdaq 100 is down 0.8%

Fitch downgrades US credit rating

US futures are down today as global markets are being rattled by a surprise downgrade to the US’ credit rating by Fitch yesterday, to ‘AA+’ from ‘AAA’.

The ratings agency said it ‘expected fiscal deterioration over the next three years’ and cited a ‘high and growing general government debt burden’. The agency also flagged an ‘erosion of governance’ over the last 20 years and said this has ‘manifested in repeated debt limit stand-offs and last minute resolutions’.

The downgrade has essentially raised a new flag concerning US government spending as the federal deficit continues to climb, and could dent its reputation.

This is only the second time ever that Fitch has downgraded the US credit rating, but it did warn the rating was under threat earlier this year when politicians were busy wrangling over the debt ceiling. The initial reaction yesterday was muted, but we saw a deeply negative session in Asia overnight and that has carried into Europe today, with US futures set to follow.

‘The last time the US lost its triple-A status in 2011. The S&P 500 fell -6.5% the following day, although the market was already within an established bear market at the time,’ said our analyst Matt Simpson.

US treasury secretary Janet Yellen fought back against the downgrade and described as ‘arbitrary and based on outdated data’ while the White House also said it ‘strongly disagrees’ with the decision.

ADP Employment Change

We had the latest ADP employment figures out this morning that showed a 324,000 rise in July, following the last reading that showed a gain of 497,000. That was considerably higher compared to the 189,000 expected by economists.

That sets the stage ahead of initial jobless claims data out tomorrow and the more closely-watched non-farm payrolls (NFPs) that are due out on Friday, when economists believe there will be a mild uptick in job additions and an acceleration in wage growth, with unemployment forecast to hold steady.

Most discussed Reddit stocks

Below is a list of the top 10 most mentioned US stocks on the WallStreetBets thread on Reddit over the last 24 hours, according to data from Quiver Quantitative. Exchange-Traded Funds (ETFs) and other instruments have been excluded:

1. Advanced Micro Devices
2. C3.ai
3. Visa
4. Palantir
5. NVIDIA
6. Tesla
7. Apple
8. Yellow Corp
9. RTX Corp
10. Disney

Most active US stocks before the bell

Below are the most active stocks with a valuation of at least $500 million before the bell, based on trading data taken from Bloomberg:

1. Nikola
2. Advanced Micro Devices
3. Palantir
4. Tesla
5. SoFi
6. Lucid Group
7. Lumen Technologies
8. Cheetah Net Supply Chain Services
9. IonQ
10. Tilray

US premarket winners and losers

Here are the stocks worth at least $500 million experiencing the sharpest movements in premarket trade, according to data from Bloomberg:

Top US stocks to watch

Advanced Micro Devices is up 2% this morning at $120. The chipmaker beat expectations in the latest quarter and convinced investors it is making progress in catching up in the race for AI supremacy. ‘While we are still in the very early days of the new era of AI, it is clear that AI represents a multibillion-dollar growth opportunity for AMD,’ said CEO Lisa Su, who predicted that AI accelerators could become a $150 billion market by 2027! Still, AMD said it hopes to ramp-up production of its flagship AI chip, the MI300, in the fourth quarter of 2023, suggesting its AI catalysts will start to feed through more in 2024. AMD’s results in the latest quarter continued to suffer from lower demand for electronics, but its outlook suggests we may have hit the trough as the midway point of its revenue target range for the third quarter suggests it will return to growth after two years of declines. It is also hoping its data centre business will also rebound in the second half. That means AMD is set to see a recovery in current markets and has new prospects stemming from AI going forward, which is being embraced by markets. JPMorgan raised its target price on AMD to $130 this morning, Susquehanna bumped-up its view to $145, and Citigroup increased its target to $136.

Intel, one of AMD’s biggest rival when it comes to computer processors that reported a surprise profit last week as its data centre and PC businesses both performed better than anticipated as it too reached the trough in demand, is down 1.1% before the bell.

Wall Street’s favourite AI stock NVIDIA is down 1.6%. The company has carved-out an early lead by becoming the chipmaker of choice for those working on AI, but the breakthrough technology is too much of a gamechanger for any one company to dominate alone and we may be seeing some concerns that NVIDIA’s dominance will weaken as rivals like AMD catch up later this year. NVIDIA currently trades at a huge 50% premium over AMD because of this lead, but markets may now be starting to see better opportunities elsewhere.

Fellow semiconductor stock Qualcomm is down 0.6% before the bell and falling from six-month lows and will report third quarter earnings after markets close today. Revenue is forecast to fall 22% from last year to $8.5 billion and adjusted EPS is seen dropping 39% to $1.81. While its small but fast-growing automotive business is a bright spot, demand for its products used in smartphones remains under pressure. Demand for Android phones, particularly amid weakness in the likes of Europe and China, remains the key problem although the upcoming launch of Apple’s new iPhone in September provides some hope. Still, profitability could remain under pressure considering its Android business boasts better margins.

Wells Fargo is down 0.8% today amid reports it is preparing to repay $1.8 billion to help rebuild the government deposit insurance fund that has been drained of money in wake of the banking crisis earlier this year. That is also dragging down other banks, with the KBW Bank ETF also down 0.8%.

Starbucks is down 1.1% and at a three-week low after sales fell short in the second quarter. Comparable sales were up 10% at the coffee chain but this was not as fast as hoped, mainly due to a slowdown in the US. Adjusted EPS of $1 was, however, ahead of the $0.95 forecast. Its sales outlook for the current quarter was also just shy of what Wall Street was hoping for.

CVS Health is up 2% today after impressing Wall Street in the second quarter as it embarks on a new plan to restructure its business following a string of acquisitions, which should hopefully lead to lower costs. Adjusted EPS of $2.21 in the quarter was ahead of the $2.11 forecast.

Carlyle Group is down 6.9% after reporting a steep drop in earnings due to fewer asset sales, although it did beat expectations. The private equity firm said distributable earnings that are used to return cash to investors was down 26% in the latest quarter at $388.8 million, or $0.88 per share. Still, that was much better than the $0.67 forecast by Wall Street. Carlyle has sold fewer assets amid a broader slowdown in dealmaking across the private equity space.

Chemicals company DuPont is down 0.2% after adjusting its outlook for the remainder of the year. It upped its 2023 sales forecast to $12.45 billion to $12.55 billion from $12.3 billion to $12.44 billion beforehand, but lowered its annual EPS goal to a range of $3.40 to $3.50 from $3.55 to $3.70. That pushed its earnings goal below Wall Street’s expectations. Adjusted EPS in the latest quarter of $0.85 beat the $0.83 pencilled-in by analysts, mainly thanks to a tight control over costs.

Match Group is up over 10% and at six-month highs after beating expectations thanks to an impressive turnaround at dating app Tinder, which also led to it raising its outlook. ‘Due to Tinder’s growth and revenue acceleration – that surpassed even our own expectations – we’re very pleased to be able to report a record-setting quarter,’ said CEO Bernard Kim. Quarterly revenue rose 4% to $830 million, coming in ahead of the $811 million forecast and Tinder grew at an even faster pace of 6%. The sales outlook for this quarter also impressed. Quarterly EPS of $0.48 turned from an $0.11 loss last year.

PayPal is down 0.9% as the payments giant prepares to report results after the closing bell. The industry is holding up well as consumers keep spending, with payment volumes forecast to be up 9.6% in the second quarter. Net revenue is forecast to rise 7% from last year to $7.3 billion and adjusted EPS is predicted to rise 25% to $1.16. A surprise raise to guidance in the last quarter provides potential for a beat in this one. CEO Dan Schulman will leave by the end of this year, so we may hear some news about succession plans.

Shopify is down 1.8% and also reports later today. Revenue growth is expected to hold steady above 25% in the second quarter, as it has done for the last two periods, with sales to come in at $1.6 billion. Sales of services it provides to merchants on its platform are seen climbing 30%, while its subscription arm is forecast to see a 13.6% increase. Shopify is forecast to report an adjusted operating profit of $69.7 million. News in the last quarter that it is selling its logistics business, as well as the ongoing restructuring, may help boost margins. Shopify could be a dark horse in the AI race considering it has its own chatbot, which it describes as a ‘personal commerce assistant’, named Sidekick. Any signs this is being unleashed on clients would be welcomed.

DoorDash is down 1.8% and releases earnings after markets close today. The fact its rival Uber provided a welcome surprise by reporting its first-ever operating profit this week heightens the pressure on profitability across the industry, but this too could be a big quarter for DoorDash. Wall Street sees it squeezing out a net profit at the bottom-line of around $140,000 – marking a potential turning point. Orders are forecast to be over 20% higher than the year before and revenue is seen rising 28% to $2.05 billion. Its contribution profit is seen rising 46% to $555.4 million.

Robinhood is trailing 2.1% ahead of quarterly results out later today. The trading platform is still suffering from far less demand for cryptocurrency trading and this looks likely to remain the case in the second half. Still, revenue is forecast to be up 48% year-on-year in the second quarter at $472 million, although this will be solely down from the benefit of higher interest rates rather than any uptick in trading. Adjusted Ebitda is seen coming in at $132 million, which would cap off a year of positive earnings. Still, the biggest trend that needs to turn is the fall in engagement as user numbers continue to fall, although it is showing that those sticking around are using its platform more frequently. New offerings, such as its plans in the UK and its recent acquisition of credit card startup X1, may be topics on the conference call.

Apple is down 0.5% this morning at $194.67. JPMorgan became the latest to raise its target price on the stock ahead of third quarter results out tomorrow, bumping-up its view to $235 from $190. Apple is expected to report its third consecutive quarter of lower sales and earnings are expected to stay flat. While that suggests there is little to get excited about, Apple shares are still lingering near-all-time highs the iPhone, which accounts for almost half of its revenue, has remained far more resilient during the slump in demand for electronics and because there are several new potential catalysts on the horizon. Its premium valuation and stellar gains booked this year may leave it vulnerable to profit taking, although Apple is more than capable of delivering a beat. Find out everything you need to know in our Apple Q3 Earnings Preview.

Amazon is down 0.9% today and also reports results tomorrow. That means, alongside Apple, two of the three largest constituents of the Nasdaq 100 are in play, setting it up for a lively day. The outlook is improving for Amazon after a volatile few years but it remains highly sensitive to how the wider economy performs and the outlook for the remainder of this year remains uncertain. Ecommerce sales should have returned to growth, although there will be worries about how the erosion of savings and the restart of student loan repayments will impact spending in the second half. Most of the attention will be on its cloud-computing arm AWS and how it is coping with AI workloads. Amazon may be trailing its rival Microsoft in terms of workloads, but is likely to follow by raising investment to ensure AWS is ready for the influx of AI demand. Amazon, with a weaker profit profile than its rivals, may have to work extra hard to counter this with more cost cutting initiatives. Find out what you need to know in our Amazon Q2 Earnings Preview.

Tesla is down 2.1% and on the cusp of hitting a fresh one-month low before the bell today.

Palantir is down 3.3% X and falling from the 20-month highs hit yesterday, having jumped almost 22% in the last week alone after Wedbush said it could be a major winner from the AI revolution.

SoFi is down 2.8% at $10.06 after Mizuho raised its target price on the stock to $15 from $9, maintaining its Buy rating. It described its second quarter results as ‘flawless’ and pointed toward the restart of student loan repayments at the start of September.

Virgin Galactic is down over 5% today after sales came in soft in the latest quarter, disappointing investors soon after it began commercial space flights. Revenue of just $1.9 million was short of the $2.5 million pencilled-in by analysts, and its forecasts for the third and fourth quarter were also nowhere near expectations. Truist Securities said it expects the space firm to keep burning through cash until at least 2025 and warned it may have to raise more capital to keep investing. Jefferies said Virgin Galactic has enough cash to cover near-term investments.

Yellow Corp is down 3.3% this morning. The transportation stock soared 122% yesterday and hit a 10-month high. Shares popped after Bloomberg reported that creditors led by Apollo Global Management are nearing a deal to provide Yellow Corp with fresh cash and injecting hopes that it can save itself, having reportedly told employees that it was shutting down earlier this week.

Coinbase is down 1.5% while other crypto stocks like Marathon Digital and Riot Platforms are up between 0.5% and 0.9%. Bitcoin has taken a tumble today after the Wall Street Journal reported that Chinese users on the largest exchange in the world, Binance, traded crypto-related assets worth some $90 billion in just one month, despite the fact crypto trading has been illegal in China since 2021.

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