Top Rated Stocks To Watch This Week - Feb. 20, 2024
7min read In the stock market where opportunities and risks coexist, stock selection is of paramount importance for every smart investor. Here, we have some very good investment opportunities that can assist investors. Combines fundamental analysis and quantitative screens to uncover promising companies that have the potential to become market leaders.
Additions
There are several new additions to the Top Rated Stocks this week.
1.Nvidia (NVDA)
Nvidia, the world's most dominant artificial intelligence (AI) chipmaker, has disclosed its investments in various companies, including Arm Holdings, SoundHound AI, Recursion Pharmaceuticals, Nano-X Imaging, and TuSimple Holdings.
Nvidia's largest investment of $147.3 million was in Arm Holdings, the chip designer that it failed to buy due to antitrust hurdles two years ago. Nvidia had indicated interest in purchasing shares of Arm during the British company's Nasdaq debut last year. Shares of Arm, which offers processors that complement Nvidia's AI chips for data center work, were up 2.1%.
Nvidia also invested nearly $76 million in Recursion Pharmaceuticals (RXRX), a biotech firm that uses AI for drug discovery. The Silicon Valley megacap firm partnered with Recursion to speed up training of its AI models. Nvidia's investment in SoundHound AI (SOUN), a developer of conversational voice assistants, was nearly $3.7 million, and its stake in Israel-based medical device company Nano-X Imaging (NNOX) was valued at $3.67 million. Finally, Nvidia bought shares of TuSimple Holdings (TSPH), an autonomous driving technology company, for $3 million.
Nvidia's investments in these companies offer clues about its growth strategy. The chipmaker's collaboration with Recursion Pharmaceuticals, for instance, could help it develop AI-powered drug discovery platforms, while its stake in SoundHound AI could lead to the development of advanced voice assistants for various applications. Nvidia's investment in Nano-X Imaging could also contribute to the development of AI-driven medical imaging solutions.
The company's stake in TuSimple Holdings could help it expand its autonomous driving technology, while its investment in Arm Holdings could potentially give it access to cutting-edge chip designs. Nvidia's diverse portfolio of investments underscores its commitment to AI and its belief in the potential of these companies to drive growth in the sector. Click here to review the article.
2.Crocs (CROX)
Crocs, the renowned footwear brand, delivered impressive fourth-quarter results for 2023, with its earnings per share (EPS) reaching $2.58, surpassing analysts' predictions of $2.37 by 9%. The company's revenue increased by 1.6% year-over-year to $960.1 million, closely aligning with projections of $958.39 million.
This performance boost was largely attributed to the Crocs brand itself, which saw a 10% revenue surge driven by a robust mix of direct-to-consumer (DTC) sales and wholesale demand. The management highlighted Crocs' strong entry into 2024, emphasizing a commitment to ongoing innovation and fresh offerings throughout the year.
The financial achievements of Crocs are a beacon of optimism within the footwear sector, which has been grappling with declining demand. With an encouraging forecast for FY24, including a steady +3-5% revenue growth and a positive adjusted EPS outlook, Crocs demonstrates a strong potential for sustained growth and market dominance.
In summary, Crocs' solid Q4 2023 performance and optimistic outlook for FY24 suggest that the company is on a favorable trajectory despite the broader industry's hurdles. Its strategic emphasis on innovation, brand engagement, and retail expansion positions Crocs to further elevate its market presence and financial success in the foreseeable future. Click here to review the article.
3.Roku Inc. (ROKU)
One key driver of Roku's success is its position as the leading TV streaming platform, with more than 80 million active accounts. Roku's streaming hours on its platform continue to outpace traditional TV, with a 21% year-over-year increase in global streaming hours, compared to a 16% decline in hours spent on traditional TV in the U.S. Furthermore, the engagement per account globally increased to 4.1 hours per day in Q4 2023, up from 3.8 hours in Q4 2022 and 3.6 hours in Q4 2021.
Roku highlighted the significant opportunity in the TV streaming market, as there remains a significant gap between viewership and ad dollars allocated to streaming. U.S. adults aged 18-49 spent over 60% of their TV time on streaming in 2023, while advertisers only allocated 29% of their TV budgets to streaming. This gap presents a growth potential for Roku to capture a larger share of ad spending in the streaming industry.
The company's financials reflect these growth prospects, with total net revenue of $3.5 billion in 2023, up 11% year over year. Platform revenue, driven by streaming services distribution and video advertising, reached $3.0 billion in 2023, up 10% year over year.
Overall, Roku's Q4 earnings report showcases the company's strong user base growth, record-breaking streaming hours, and positive financial performance. While facing certain challenges, Roku remains optimistic about its ability to drive monetization and growth in the TV streaming industry. Investors will be closely monitoring how Roku capitalizes on its leading position and focuses on innovation and growth in the coming year. Click here to review the article.
4. CME Group (CME)
CME Group, a leading global derivatives marketplace, reported its Q4 2023 earnings on Thursday, which showed a strong performance driven by a 36% increase in interest rate volumes.
In the fourth quarter, the company reported earnings of $2.37 per share, beating the expected $2.28 by $0.09, with revenues climbing 19.2% year-over-year to $1.44 billion, just above the $1.43 billion forecast. This performance was largely fueled by a 36% surge in interest rate volumes, including a 46% increase in Treasury futures Average Daily Volume (ADV). Overall, the fourth quarter saw an ADV of 25.5 million contracts, a 17% increase from the previous year, with international volumes experiencing a notable 28% rise.
The company's total average rate per contract was $0.682, and market data revenue for the quarter totaled $167 million. CME Group's Q4 2023 average daily volume (ADV) was 25.5 million contracts, up 17% versus Q4 2022, including non-US ADV of 7.2 million contracts, up 28% compared with the same period in 2022. This growth was primarily due to increased investor interest in managing risk across asset classes, which drove a record 24.4 million contracts per day in 2023. Click here to review the article.
5.Robinhood (HOOD)
Robinhood Markets (HOOD), the trailblazer of commission-free trading apps, has reported impressive fourth-quarter results that exceeded analysts' expectations. With a 24% increase in net revenue. This marked the second profitable quarter since its IPO (4Q21) and a substantial improvement from the loss of 19 cents per share reported a year ago.
Robinhood's fourth-quarter net revenue of $471 million surpassed analysts' estimates of $457 million, highlighting the company's ability to capitalize on market opportunities. Robinhood posted a 41% year- over-year increase in net interest revenues, reaching $236 million. The online broker's revenue growth was driven by higher net interest and transaction-based revenue.
Revenue from transactions increased by 8% year-over -year, amounting to $200 million. This rise was primarily driven by cryptocurrencies revenue of $43 million, marking a 10% increase, and equities revenue of $25 million, a growth of 19%. However, options revenue experienced a slight decline of 2% to $121 million.
Robinhood's fourth-quarter results highlight its ability to generate substantial revenue growth and increase its customer base. With impressive net interest revenues, transaction-based growth, and positive net deposits, the company has demonstrated its potential to outpace its prior performance. As Robinhood continues to evolve and expand its suite of financial services, it is well-positioned to capitalize on emerging market opportunities. Investors should monitor the stock closely as it demonstrates significant growth potential. Click here to review the article.
Delletions
There are several deletions this week: WDC, VLO, NOW, TRV, CSX.
Last Week's Best Performing Stocks
1.Arm Holdings (ARM)
ARM has risen by 100.8% since being selected.
While Arm experiences increasing adoption, its stock price may not be justified by its current valuation. The stock currently trades at over 55 times next year's earnings estimates, which is significantly higher than Nvidia's forward multiple. Although Nvidia is adopting Arm for its Grace CPU chips, the majority of Nvidia's revenue is attributed to its core GPU products. Comparatively, other semiconductor players, such as Nvidia, exhibit lower valuation multiples.
Arm Holdings shows promising growth potential, backed by its dominant position in the chip architecture market and partnerships with industry-leading technology companies. The adoption of Arm's architecture by Nvidia for data center CPUs and the development of Arm-based chips for PCs indicate a growth trajectory. However, Arm's stock valuation appears relatively expensive compared to other semiconductor players. This information should be considered when making investment decisions related to Arm Holdings. Click here to review the article.
2.Supermicro (SMCI)
SMCI has risen by 89.75% since being selected.
The preliminary results released by SMCI exceeded market expectations, leading to a 5% increase in the company's share price. The projected sales for the second quarter are now expected to be between $3.6 billion and $3.65 billion, significantly higher than the earlier estimate of $2.78 billion. This demonstrates a substantial improvement in anticipated revenue and showcases the company's ability to generate strong sales. Analysts expect SMCI's revenue for the fiscal year 2024 to reach $14 billion.
Additionally, there is an optimistic outlook regarding earnings per share. The GAAP diluted net income per common share is projected to range between $4.90 and $5.05, surpassing the previous estimate of $3.75 to $4.24. The non-GAAP diluted net income per common share is also expected to be higher, with the new guidance ranging from $5.40 to $5.55, compared to the prior estimate of $4.40 to $4.88. These revisions imply a more positive perception of SMCI's profitability and indicate a stronger earnings performance than previously anticipated.
Wedbush noted SMCI's solid results were driven by deals related to artificial intelligence (AI). While it acknowledged some uncertainties, Wedbush remained confident about the correlation between SMCI's performance and the allocation of NVDA's graphics processing unit (GPU) chips. Despite the potential challenges posed by demand outpacing supply, Wedbush interpreted the surge in revenue as a positive indicator for NVDA's growth in the fourth quarter. Wedbush pointed out that Meta, the parent company of Facebook, also made significant investments in AI, which could indirectly benefit SMCI. As a substantial customer of SMCI in the past, Meta's commitment to AI could potentially contribute to SMCI's continued success. Click here to review the article.
3.Advanced Micro Devices (AMD)
AMD has risen by 34.87% since being selected.
AMD shares have been triangling sideways since fall 2021, ranging roughly between $50 and $150 in a wide-swinging consolidation over two years in the making. Zooming in a bit, the stock is currently trading above rising major MA's. It is flirting up against key resistance in the $125 area. Support sits below in the area around $105-110 where we see the 50- and 200-day MA's.
In conclusion, AMD is a promising long-term investment for those who are willing to accept the risks involved. The company's growth in revenue, strategic positioning in AI, and focus on innovation make it an attractive option for investors who believe in its ability to secure its future in a rapidly evolving tech landscape. However, it is essential to monitor the company's performance closely and make informed decisions based on the latest financial data and market trends.
In short, there are enormous risks in play here, but enormous upside potential is also within reach. It's a very interesting basket, but it's not a place to hold all your eggs. Click here to review the article.
Summary
Top Rated Stocks is savvy investor's proprietary quantitative system designed to uncover small, fast-growing companies that have the potential to become market leaders.
If you're new to this page, each Monday we publish an updated list of the growth stocks in the market. In-house focus list of the most compelling investment and trading opportunities in the eyes of savvy analytical team. Also incorporates periodic Special Situations reports on theme-based market opportunities.
