Today's top stock ideas (October 2)

Despite facing headwinds such as weaker-than-expected 3Q23 results and persistent weakness in China, Qualcomm (QCOM), a leader in mobile and IoT technologies, maintains a strong market position with a renewed supply agreement with Apple to supply 5G chips through FY26. As 73% of QCOM's quarterly revenue comes from the Mobile segment, the renewal of this Apple deal is crucial. The cellular cycle's peak is expected in FY24, which QCOM anticipates will see consumers purchasing new phones at an accelerated rate. QCOM is also making headway in the Automotive and IoT sectors, particularly with the FY22 acquisition of Arriver, a computer-vision company, and its involvement in a joint venture targeting automotive chipsets. Nevertheless, there are risks, including US government restrictions on 5G chip exports to Chinese OEMs, revisions to the US Tax code impacting QCOM's R&D expenses, and a dispute with ARM that may affect the launch of Nuvia chips. Despite these challenges, QCOM's diversified portfolio and partnerships underline its growth potential amidst changing market dynamics. The analyst has projected an estimated fair value of $160 by FY26.

Read the full article here (5 free per month). Read time: 4 min

Senior Equity Analyst, David Swartz, holds a bullish perspective on Nike, a leading athletic apparel brand known for its innovative product, robust marketing and global focus. Despite facing North American market challenges and currency negatives, Nike's fiscal 2024 Q1 outshone estimates, with profits majorly backed by its solid competitive edge. The company's resilient inventory management strategy and superior margin navigation reinforce its market dominance. While predicting negligible Q2 sales growth, Swartz does not foresee heavy discounting, a sign of Nike's brand strength. At $89, Swartz points out the shares as undervalued, unusual for Nike in the past decade. Notwithstanding minor hiccups in the wholesale North American market and stronger competition in the Chinese sports market, he foresees constant long-term growth for Nike, especially in China. Risks include dealing with elevated inventory counts and inflation, but the analyst believes Nike’s premium pricing ability and share maintenance can combat these issues. Swartz also highlights the successful management of the brand online and offline, helping Nike to control the brand message more effectively and maintain the brand closeness to consumers. Even in an environment with an uncertain apparel demand, Nike’s growth targets are optimistic, backed by the high price points it can command due to its brand power and the success of its large e-commerce business. Swartz thus maintains a positive forecast for Nike, while emphasizing the company is not immune to global challenges such as geopolitics, shipping delays, currency volatility and high input costs.

Read the full article here (paywall). Read time: 12 min

The article presents a bullish outlook on Quest Resource Holding Corporation (QRHC), a provider of waste management and recycling services. The author highlights the company's strong positioning in the waste management market and its ability to leverage external regulatory and ESG directives to provide value-added services to clients. The company's commitment to double-digit percent gross profit growth over several years and its robust pipeline of potential clients also attracted the analyst's attention. QRHC's recent investments in data, reporting, and technology are predicted to enhance its scalability and competitive advantage over its larger counterparts. These investments aim to increase operational efficiencies, aid in waste hauler cost optimizations, and enable QRHC to possibly become the lowest cost provider, making the company attractive to investors. The analyst also notes the company's focus on deleveraging and hints at a potential uptick in research coverage, which could drive investor discovery. Moreover, the analyst discusses QRHC's Proganics offering, an underappreciated aspect of QRHC's business model, and a potential major driver for growth. Despite the competitive landscape, the analyst envisions QRHC achieving a multiple expansion and surpassing significant milestones in the near future. QRHC's astute management team and their ability to strategize acquisitions is evident from this stock pitch. The risks, while limited in the article, appear to center on QRHC's successful execution of strategic initiatives and increasing tipping fee.

Read the full article here. Read time: 8 min

The author is bearish on GigaCloud Technology (GCT), expressing skepticism in the company's operations, which they believe are vastly exaggerated. Among the criticisms raised, they particularly highlight GCT’s under-staffed warehouses, few employment advertisements compared to similar scale companies, inefficient last-mile delivery system, unexplained involvement of business-related entities, and suspicious activity reminiscent to that of the early 2010's 'China Hustle' stocks. They also allege GCT’s utilization of photoshopped marketing images to portray an efficient operation, which starkly contrasts the lack of activity observed at multiple warehousing locations. In addition, while GCT claims artificial intelligence technology is behind its 'economies of scale' efficiency, the author cites a lack of documented software development costs and AI technology developers, suggesting GCT’s AI claims may be empty platitudes. Relying on China-based auditors, storing of most of the company's cash offshore, and minimal interest income from its stated cash balances also contributes to the author's suspicions. The author implies that GCT’s IPO and their underwriter, Aegis Capital, - known for its history of supporting companies that eventually flop - are signs of possible impending failure. Finally, the author warns that as of 2023, GCT is no longer exempt from US reporting requirements, raising doubts about GCT's ability to meet these standards given the myriad of issues raised.

Read the full article here. Read time: 22 min

The author argues that Upstart's touted artificial intelligence and machine learning platform is questionable at best and even says its actual AI is uncompetitive and flawed. The author also cites regulatory issues and problematic partnerships with banks such as Cross River Bank and FinWise Bank that contribute to their bearish stance. Upstart, they say, relies heavily on these banks to purchase loans underwritten by Upstart's algorithm. The author points to significant revenue from banks with regulatory issues as a red flag and questions Upstart's claims of its AI system outperforming traditional credit models. They also voice concerns over increasing loan defaults and changing credit markets, potentially spelling trouble for Upstart's business model. The author considers Upstart's business model flawed with over-reliance on AI and problematic bank partnerships, suggesting this could lead to serious financial trouble for the company.

Read the full article here. Read time: 14 min

Graphite Bio (GRPH), a clinical-stage biotech, has been in turmoil after a serious adverse event resulted in the company stopping development of its lead asset, nulabeglogene. The company resorted to workforce reductions and sold its IP for nominal amounts. The CEO resigned and was replaced by Kim Drapkin who has experience with similar situations at Jounce Therapeutics. Drapkin's compensation includes an additional $200,000 if an agreement is reached within 3 months of her start date suggesting anticipation of a quick deal. Despite a net cash position exceeding $200MM, a major potential pitfall for Graphite Bio is its 120-month operating lease agreement for office and laboratory space in San Francisco, which they currently do not utilize, increasing its liabilities. While a reverse-merger is the default expectation in such scenarios, the possibility of a simpler cash deal is higher given Drapkin's experience at JNCE.

Read the full article here (paywall). Read time: 3 min