Reddit Stocks: What meme stocks are trending today? – September 20, 2023

US futures

• Dow Jones Industrial Average is up 0.3%
• S&P 500 is up 0.3%
• Nasdaq 100 is up 0.3%

FOMC preview: All eyes on the Federal Reserve

The Federal Reserve meets today to decide what to do with interest rates. Markets have priced-in a 99% chance that the central bank will hold rates steady today, according to the CME FedWatch Tool, but they still see scope for another hike before the end of the year.

“Strong US inflation numbers and surprising strength in some other key parts of the world’s largest economy have given rise to speculation that the Fed’s tightening cycle may not be over just yet. While no policy changes are expected at this FOMC meeting, traders will be looking for clues with regards to the next meeting,” said our analyst Fawad Razaqzada.

“So, keep a close eye on the policy statement and the latest dot plots, and hear what Powell says at the FOMC press conference. The Fed may indicate that one more hike is likely before the year is out – thanks to a slower disinflation process that has undoubtedly been boosted by a stronger US consumer and higher inflation expectations. The FOMC may upwardly revise the 2024 median plot to point to fewer rate cuts than the 100 bps it had projected previously,” he added.

Oil prices temper following recent rally

The rally in oil prices finally took a breather and has been tempering since yesterday after both Brent and WTI climbed to fresh 10-month highs. Prices have surged around 28% since the end of June, spurred on by rising bets that the market will remain tight this year because of extended production cuts by Saudi Arabia and Russia, declining inventories and shale output in the US, and hopes that demand from energy-hungry China could increase.

Goldman Sachs raised its 12-month forecast for Brent to triple digits today, to $100 per barrel from its previous forecast of $93, but said most of the rally is already behind us.

Can Bitcoin hold above $27,000?

Bitcoin is also facing some resistance after surging above $27,000 for the first time since the start of September yesterday. Sellers have re-entered the market when it has surpassed $27,200 during the past two days and prevented buyers from pushing the price higher, although buyers have managed to keep Bitcoin above that $27,000 threshold.

Cryptocurrency stocks are responding, with Marathon Digital and Riot Platforms trading 0.3% and 1.1% higher this morning, respectively.

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. Visa
2. Instacart
3. Tesla
4. NVIDIA
5. Arm
6. C3.ai
7. Apple
8. NIO
9. Amazon
10. Rocket Lab USA

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. ARS Pharmaceuticals
2. Nikola
3. Pinterest
4. Tilray
5. Tesla
6. Lucid Group
7. Instacart
8. IonQ
9. Apple
10. NVIDIA

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

Let’s have a look at the top stocks to watch today.

Can Instacart stock stay above its IPO price?

Instacart, officially trading as Maplebear, completed its IPO at $30 per share yesterday. The grocery tech stock climbed to as high as $42.95 when it started trading but swiftly pulled back to end the day at $33.70. The downward trajectory of shares yesterday will be unnerving for investors as it falls back toward its IPO price, with the stock down another 3.6% at $32.30 today.

Instacart has come to market with one of the most reasonable valuations we have seen for many years, but it is still boasting a premium over its rivals.

The rapid pandemic-induced growth delivered over recent years and 18 months’ worth of profits may have impressed the markets, but growth is slowing, competition is intensifying and it is already back in the red - all of which is set to keep testing its valuation.

You can read our analysis in Will Slower Growth and Losses Test Instacart’s Valuation?

Arm stock loses momentum after blockbuster IPO

British semiconductor designer Arm is down 0.4% at $54.95 and set to open at its lowest level since completing its blockbuster IPO last week. The stock has lost steam quickly and is on course to lose ground for a fourth straight session today, which is all the more significant considering it has only been public for five!

That is still above the IPO price of $51, but down heavily from the high of $69 we saw on the first day of trading. The first brokers to have revealed their view on the stock has also be uninspiring. Bernstein initiated coverage with an Underperform rating and a price target of $46, while Redburn rated Arm at Neutral with a target of $50.

The company has earned a premium valuation, trading at over 100x earnings. But this is underpinned by its new strategy and hype around AI rather than the business today, which is struggling to grow. That raises questions about whether Arm will be able to sustain this price tag.

You can read our analysis in Can Arm Stock Maintain or Grow its Premium Valuation?

Klaviyo IPO will be the next listing to test the markets

The IPOs are now starting to flood in following a two-year drought, with email marketing specialist Klaviyo set to test the waters went it begins trading on the NYSE later today.

Klaviyo priced its IPO yesterday at $30 apiece, which was higher than its original targeted range of $27 to $29. That will raise about $345.2 million for Klaviyo. That gives Klaviyo an initial valuation of about $9 billion, slightly below the price tag it earned during its last funding round back in 2021.

Klaviyo is an email marketing service for over 130,000 e-commerce brands that leverages its own customer data, so clients don’t have to rely on third-party providers to segment customers.

You can find out more in Everything You Need to Know About the Klaviyo IPO.

Infosys taps NVIDIA for generative AI

NVIDIA shares are down 0.3% this morning after Indian tech outfit Infosys said it is working with the US chipmaker to provide generative AI services, which it plans to use to help different industries improve productivity.

Infosys said it plans to train 50,000 of its workers how to use NVIDIA’s generative AI technologies at a new centre of excellence. The two companies also plan to co-develop tech covering other areas like 5G, cybersecurity and clean energy.

Apple stock falls from 1-week high

Apple shares are down 0.2% and falling from a one-week high.

Geopolitical tensions between the US and China continue to ramp-up, and smartphone companies are at the heart of the latest disputes. The Chinese Ministry of State Security accused the US National Security Agency of hacking Huawei’s servers back in 2009 and continually monitored the company. That came amid a broader accusation of the US “repeatedly” conducting cyber attacks on China.

Huawei, which was banned from supplying vital equipment in the US a couple of years ago, is emerging as the biggest threat to the Apple iPhone 15 in China, where reports suggest government workers are being told not to use iPhones or foreign-made tech at work.

Meanwhile, union workers at Apple stores in France have called to strike this Friday and Saturday – when the iPhone 15 is set to hit the shelves – as they push for higher pay and better conditions. The CGT Apple Retail union said on social media that it is calling for the strikes after management “decided to ignore our perfectly legitimate demands and concerns”.

Can Amazon stock snap 4-day losing streak?

Amazon shares are up 0.3% and hoping to rebound after falling for four straight sessions, marking its longest losing streak in almost two months.

The company said it plans to hire 250,000 seasonal workers for the busy holiday shopping season, which is about 67% higher than what it has hired over the past two years and fuelling hopes that it seeing stronger demand than retail rivals. It hired 150,000 workers last year.

Deloitte has forecast sales growth for US retailers this holiday shopping season will be about 3.5%, marking the slowest expansion in about five years. We have seen some retailers like Macy’s say they will hire fewer temporary workers this year as a result. Others, like Target, are hiring the same amount as they did last year at 100,000.

Pinterest stirs excitement at investor day

Pinterest is up 4.8% at $27.47 after markets were thoroughly impressed by its investor day event, leading to several brokers raising their view on the social media stock.

Citigroup upgraded the stock to Buy and lifted its target price to $36, stating it is “incrementally confident that engagement can continue to ramp, that ads innovation and its full-funnel approach to advertising can deliver improving monetisation trends, and that adjusted Ebitda margins can expand.”

DA Davison also upgraded Pinterest to Buy and lifted its target to $35, also citing increased confidence management can deliver their targets. It said the main job is no execution.

Baird described the event as a “modest positive” that could accelerate growth and improve margins, while KeyBanc agreed it has multiple growth levers to pull.

Tesla comes under more scrutiny

Tesla shares are up 0.3% before the bell today.

We discovered yesterday that the Republican chair of the House Ways and Means Committee, Jason Smith, issued a letter asking Tesla to disclose if it has any contracts, or is considering signing any, with Chinese battery maker CATL.

Reuters has previously reported that Tesla could be CATL’s biggest single customer, and Smith is concerned that US subsidies could be feeding through to foreign companies like CATL. He also said he was concerned that CATL may be trying to strike deals with Ford, which is planning to invest billions on a new US battery plant using CATL’s technology.

Meanwhile, the Wall Street Journal said US federal prosecutors have expanded their investigation into personal benefits that Tesla gave CEO Elon Musk to as far back as 2017. The report, citing unnamed sources, said they are now trying to find out information on transactions conducted between Tesla and Musk and flagged that it could signal prosecutors are seeking to bring criminal charges against the CEO.

Ford avoids disruption in Canada as strikes continue

Ford is up 0.3% after reaching a last-minute deal with the union that represents about 5,600 of its workers in Canada last night, as the strike action being taken by the United Auto Workers union in the US against Ford, General Motors and Stellantis continues.

Ford has struck a new three-year deal with the Unifor union in Canada, although details of the deal have not been revealed.

Still, that does little address the ongoing UAW strike, which could be expanded from three plants in (one at each of the Big Three) if a deal isn’t struck by later this week.

NIO shares plunge on dilution fears

Chinese electric vehicle maker NIO is up 2.9% this morning. The stock plunged over 17% yesterday, marking one of its worst daily falls on record and sending shares to their lowest level in three months.

The selloff, which saw trading volumes hit a 30-month high, was sparked by concerns that its new $1 billion in convertible loan notes will ultimately lead to dilution for existing shareholders. However, the conversion price of $11.12 is considerably higher than the current share price, which should mean the risk of the bonds being converted anytime soon is low – especially following yesterday’s heavy decline.

NIO said the proceeds will be used to repay debt and bolster the balance sheet, which had $4.3 billion in cash and equivalents at the end of June.

Coty jumps to 6-week high on rosier outlook

Coty shares are up 5.9% at $12.15 and set to open at their highest level in six weeks after it raised its outlook thanks to stronger than expected demand for fragrances. The company is now targeting annual like-for-like sales growth of 8% to 10%, up from its previous goal of 6% to 8%.

The improved guidance comes after the new Burberry Goddess fragrance is “setting new market records”, leaving it with three of the top-ten selling fragrances in the US within its portfolio.

General Mills narrowly beats expectations

General Mills is up 0.9% after reporting quarterly results that were just ahead of expectations, helped by inflation-driven price increases.

The food company said revenue was up 4% in the first quarter at $4.91 billion, just ahead of the $4.88 billion forecast. That was solely driven by higher prices considering volumes were down as consumers buy fewer goods as a result. Adjusted EPS was down 1% at $1.09 thanks to higher operating and interest costs, but this was also just ahead of the $1.08 forecast.

General Mills reaffirmed its full year outlook, which is seeing aim to grow organic net sales by 3% to 4% and increase adjusted EPS by 4% to 6% at constant currency.

Philip Morris could sell a stake in its pharma business

Philip Morris shares are up 0.1% on news it is thinking about selling a stake in its pharmaceutical unit Vectura in the hope of finding a partner that could help grow the business, according to reports from the Wall Street Journal.

The tobacco giant is also thought to be considering other options, like a licensing or deal involving royalties. Philip Morris bought Vectura, which makes asthma inhalers, just two years ago as it looked beyond tobacco for growth, while drawing criticism as the tobacco giant moved into healthcare.

FedEx stock in play ahead of Q1 earnings

FedEx is up 0.4% ahead of first quarter earnings out later today. The business remains under pressure, but this could be a turning point for the company following the fall in profits we saw in the recently-ended financial year.

Revenue is forecast to be down 5.8% from last year in the first quarter at $21.85 billion, marking the fourth consecutive quarter of declines. Volumes are set to fall at all three units, with FedEx Express and Freight forecast to be the biggest drags on the topline.

One potential upside could come from the collapse of Yellow Corp, which halted operations at the end of July and filed for bankruptcy in August. That will have left a sizeable hole in the ‘less-than-truckload’ market that carries goods for different customers on one truck. That could provide an opportunity for FedEx Freight to surprise on volumes, which is significant considering it is seeing the sharpest decline with analysts anticipating daily shipments will be down over 10% from last year.

On a brighter note, FedEx is expected to report an 8.6% rise in adjusted EPS to $3.74, marking the first growth in a year as comparatives iron-out and a sharper focus on costs improves margins, with FedEx attempting to shave $6 billion off its cost-base by fiscal 2027.

This will be the first set of results since John Dietrich was promoted from running Atlas Air Worldwide to chief financial officer at the start of August, having replaced Michael Lenz after he retired.

Disney stock sinks on $60 billion investment plan

Disney shares are up 0.4% after sinking 3.6% yesterday, when it said it plans to double investment into the theme parks and resorts over the next decade to an eye-watering $60 billion.

The idea of raising spending on the strongest part of the business has stoked mixed responses. There is an argument to up investment where it is finding success considering its TV and streaming businesses are under pressure, but others may be worried about increased spending as it struggles to turn the business around. The investment could see Disney develop over 1,000 acres of land to help it expand and capitalise on increased demand and spending at its resorts, parks and cruises.

Vital Knowledge said it was a “clear effort by Disney management to emphasise to investors its massive leisure franchise, a business that’s performed extremely well coming out of Covid and one that’s helped compensate for headwinds in the media units”. Citi said it will ultimately come down to how much incremental earnings it can squeeze out through the investment but said the selloff was “unwarranted for long-term investors”.

Rocket Lab USA sinks as satellite mission ends

Rocket Lab USA shares are down 1.2% at $4.60 after plunging over 7.5% yesterday when it said it “experienced an issue” during the launch of its 41^st mission, which has also prompted it to postpone its next mission pencilled-in before the end of the third quarter.

“Following lift-off from Launch Complex 1, the rocket successfully completed a first stage burn and stage separation as planned, before an issue was experienced at around T+ 2 minutes and 30 seconds into flight, resulting in the end of the mission,” Rocket Lab USA said in a short statement.

The disruption saw brokers cut their expectations after Rocket Lab USA said this will result in revenue coming in lower than anticipated in the third quarter. Wells Fargo cut its price target on the stock to $5.00 from $6.75 this morning, while Citigroup lowered its view to $5.75 from $7.40.

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