Reddit Stocks: What meme stocks are trending today? – August 25, 2023

US futures

• Dow Jones Industrial Average is up 0.3%
• S&P 500 is up 0.2%
• Nasdaq 100 is up 0.2%

Stocks have wiped out daily gains as quickly as they have made them this week and today will decide whether the Nasdaq 100 and S&P 500 will continue their rout and close down for a fourth consecutive week or snap the longest correction of 2023.

The Dow Jones Industrial Average looks highly likely to lose ground for a second consecutive week regardless of what happens today, which will mark the longest losing streak in three months.

Jackson Hole preview

The fate of the markets today is at the behest of how they react to the speech from Federal Reserve chair Jerome Powell at the Jackson Hole symposium this morning. All eyes are on his comments on the fight against inflation, the resilient US economy and the future path of interest rates.

“Looking through the volatility, the overriding seems to be consensus expects Powell will be hawkish. The only real debate is how hawkish? Will it be Jackson Hole 2022, delivering what was arguably the biggest slap to markets since Mario Draghi’s ‘whatever it takes’ moment a decade earlier? Or will he be more nuanced, maintaining the messaging most FOMC members have been running with recently? That is, that further tightening may be required depending on how the economy evolves. In my mind, the balance of probabilities skews heavily in favour of the latter,” said our analyst David Scutt.

“Even though recent US data has been resilient, markets are overlooking that monetary policy works with a lag. Powell had to roll out the heavy artillery last year as he knew not only was the Fed behind the curve, but markets were stealing the initiative by pre-emptively loosening financial conditions heading into the event. To say Powell must deliver something similar, when there’s clear evidence the labour market is cooling with disinflationary trends still in place, is questionable to say the least,” Scutt added.

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. NVIDIA
2. Visa
3. Advanced Micro Devices
4. C3.ai
5. AMC Entertainment
6. Tesla
7. Ulta Beauty
8. Disney
9. Apple
10. Affirm

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. NVIDIA
2. Hawaiian Electric Industries
3. Tesla
4. Nikola
5. AMC Entertainment
6. Palantir
7. Activision Blizzard
8. Lucid Group
9. Advanced Micro Devices
10. Affirm Holdings

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.

NVIDIA stock falls from all-time highs

NVIDIA shares are down 0.4% this morning at $470. The chipmaker briefly hit fresh all-time highs yesterday as markets digested record revenue, margins and earnings in the latest quarter and an upgraded outlook thanks to the eruption in demand for AI chips, but ended the day broadly flat.

The stock has already tripled in value since the start of 2023, suggesting some may have been encouraged to take some profits despite almost unanimous agreement across Wall Street that there is more upside to come following the blowout results. Analysts are about as bullish as it gets right now, with some believing it could more than double in value again over the next 12 months. Rosenblatt, which has the highest price target on Wall Street of $1,100, said the results were “epic” and warned it is “just getting started”. Jefferies, which upped its view to $610 this morning, said NVIDIA is set to become the dominant player amid a “tectonic shift” to a new computing era, while Morgan Stanley said it believes upgraded estimates are “still too conservative”.

The surprise $25 billion share buyback could also be muddying the waters. Buybacks are usually welcomed by markets as they return cash to investors and help inflate earnings per share. Management typically launch buybacks when they believe their stock is going cheap, signalling NVIDIA agrees with Wall Street’s bullish view – although some will find that a hard message to swallow following the meteoric rise we have seen this year. Plus, large sums of cash are usually returned from mature businesses and some are questioning why NVIDIA isn’t ploughing this money back into the business to fully capitalise on the AI opportunity.

Other semiconductor stocks initially rose with NVIDIA in wake of the results before reversing and closing down heavily for the day. The Philadelphia Semiconductor Index closed down 3.4%, with AMD and Qualcomm hitting its lowest level in three months and both trading lower again before the bell today.

Other smaller AI stocks such as Palantir and IonQ also originally surged higher thanks to the results but also closed down for the day, with the pair trading down 0.4% and 1.1%, respectively, today. C3.ai suffered its biggest daily fall in four months and is down another 0.3% today.

Marvell eyes return to growth

Marvell Technology is down 3.4% today and at a three-month low of $55.34 after failing to inspire the markets with its outlook that said it will return to growth in the third quarter as companies up spending on AI and cloud infrastructure.

Revenue was down 12% in the latest quarter at $1.34 billion and adjusted EPS of $0.33 fell from $0.57 the year before and came in just ahead of the $0.32 forecast. The company has suffered as companies delay upgrading equipment amid an uncertain outlook, but Marvell said revenue should rise about 5% year-on-year in the third quarter as AI demand steps up.

Analysts said they were surprised by the reaction as the AI tailwind builds, although some did trim their target price, including BofA Global Research to $75.

Ulta Beauty stock: Cosmetics remain in demand

Ulta Beauty is up 1.5% at $429 and rebounding from two-month lows after delivering a beat and raise late yesterday as shoppers continue to buy premium cosmetics and fragrances despite a broader pullback in consumer spending.

The company reported a 10% rise in sales in the latest quarter to $2.53 billion, which came in just ahead of forecasts, while adjusted EPS of $6.02 rose from $5.70 the year before and beat the $5.91 estimate.

Ulta Beauty is now aiming for annual revenue of $11.05 billion to $11.15 billion, up from its previous target of $11.00 billion to $11.10 billion. EPS should now be between $25.10 to $25.60, up from $24.70 to $25.40 previously.

“The beauty category has continued to deliver healthy growth, as consumers maintain their post-pandemic routines and expand their definition of beauty. Our proven business model, diverse assortment, best-in-class loyalty program, and outstanding teams have enabled us to deliver stronger-than expected results for the first half of fiscal 2023, and I remain confident we can deliver against our updated expectations for the rest of the year,” said CEO Dave Kimbell.

Barclays cut its target price this morning to $587 while DA Davidson lowered its view to $495.

Affirm stock: Strong beat overrides challenging outlook

Buy now, pay later outfit Affirm is up 7% at $14.77 today after beating expectations in the latest quarter, although it warned the outlook remains challenging.

Gross merchandise value, representing the total amount spent through its platform, was up 25% in the fourth quarter at $5.5 billion. Revenue increased 22% to $446 million, ahead of the $406.3 million forecast. Its net loss widened to $206 million from $186.4 million, which resulted in Affirm posting a wider annual loss too.

Affirm warned challenging conditions seen over the last year, driven by shifting consumer habits, weaker confidence and rising interest rates, will persist throughout the new financial year. The restart of student loan repayments in the US this October will also provide a “modest headwind”.

Wedbush bumped-up its target on Affirm to $10 this morning from its previous target of $9.

Novo Nordisk stock hit by Wegovy supply constraints

Novo Nordisk shares are down 0.4% after its chief executive said it plans to launch its popular weight-loss drug Wegovy in more countries, but that supplies will remain constrained for years to come. The announcement came as it reported new trial results that showed it substantially reduced the chance of heart failure in obese people.

Novo Nordisk, and others with their own weight-loss drugs, have been struggling to keep up with rampant demand in the US in recent years. Novo Nordisk has had to limit supplies to new patients to ensure it has enough for existing ones, and said it will “take quite some years” for it to be able to meet all the global demand.

The stock is struggling to gain ground as investors fret that it will take time for it to fully capitalise on the huge opportunity, and the fact shares hit all-time highs on Wednesday means the bar is also currently quite high.

Disney stock sinks to 9-year low

Disney shares are up 0.5% today. The House of Mouse suffered its sharpest daily fall in over three months yesterday and crashed to levels not seen since 2014 as it loses its allure amongst the markets as CEO Bob Iger struggles to turn things around. Its streaming services remain in the red and Disney+ is losing subscribers, while its theme parks and resorts are suffering from a slowdown.

The slump means Disney currently trades at 17.2x forward earnings based on estimates for the next 12 months, below its historic average and the 28.4x boasted by rival Netflix.

Buyers appear to be cautiously returning today, helped by reports that Amazon is in talks about working on the streaming version of EPSN that could see the company offer the service through its streaming services and take a minority stake in the brand. The report, from The Information, said ESPN could charge $20 to $35 a month for its streaming platform, making it among the most expensive on the market. Iger has admitted he is looking for partners, potentially several of them, to help develop ESPN and is also looking to offload its traditional TV channels as part of a shake-up.

Will India accommodate Tesla?

Tesla shares are down 0.5% this morning. India is considering introducing a new policy for electric vehicles that would reduce import taxes for companies that produce some of their vehicles locally following a proposal made by Tesla, according to unnamed sources speaking to Reuters.

India currently has a 100% import tax rate on electric vehicles imported to the country worth over $40,000 (and 70% below that), which has been an issue for Tesla as it tries to break into the country. The proposal could see that fall to as little as 15%.

AMC stock suffers ahead of APE conversion

AMC Entertainment shares are up 2.5% today at $14.73. The company completed its 1-for-40 reverse stock split yesterday and ended up closing down over 26%, sending it to its lowest level since before meme stock mania gripped the markets in early 2021.

The stock has plunged 60% this week alone, making it one of the worst weeks on record for the company. The reverse stock split was undertaken to accommodate its plan to convert APE preferred shares into ordinary stock today, diluting existing shareholders. That has also sparked more fears that investors will see their stakes watered down even further in the future if it issues more APE shares and converts them. AMC has been issuing APE shares to raise equity because it doesn’t need shareholder approval, having struggled to convince its retail investor base to give it the green light to raise more equity to fund its recovery from the pandemic.