Today's top stock ideas (Thu, Dec 28)

Author

Connor Van Ooyen
December 28, 2023

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👋 Good Morning!

Welcome to the 103 new readers who joined yesterday!

Our AI read and summarized 71 stock ideas, 1131 news articles, and 125 insider trades and found:

  • An analyst believes $MU will hit $100 (featured stock idea)

  • New York Times sues ChatGPT maker (news)

  • A director with a 0% win rate sells $17M of stock (insider trade)

  • A Chinese live-streaming company with 129% upside (bonus stock ideas)

  • and much more…

Thanks for reading! Have a great day.

Connor

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FEATURED STOCK IDEA

ANALYST REPORT

$MU date with $100 soon

Micron Technology, Inc. is a leading global provider of semiconductor solutions. Through its worldwide operations, Micron manufactures and markets a full range of memory and storage products including DRAM, NAND, and NOR flash memory.

Ticker: MU | Price: $86.44 | Price Target: 100 (+16%) | Timeframe: N/A

⚡️ Semiconductor | 🏭 Manufacturing | 📈 Bullish Idea

Micron Technology ($MU) reported a strong quarter with revenue guidance at $5.3 billion, surpassing the street estimate of $4.96 billion, and beating both street and buyside expectations with a gross margin (GM) guidance of 11.5% to 14.5%, compared to the expected 6.4%. During the call, they emphasized disciplined supply management, supply-demand dynamics favoring pricing power, and recovery across key markets including PC, mobile, automotive, and industrial sectors. Notably, Memory and storage inventories are normalizing and Micron expects to increase High Bandwidth Memory (HBM) revenue throughout the upcoming year, starting in May. The optimistic outlook suggests that Micron is at the beginning of a robust memory cycle fueled by HBM launches and AI applications, with bulls targeting a stock price of $110 based on either 8-9x a peak EPS of $12 or 12x a $9 through-cycle EPS. Skeptics argue that the stock price already reflects these positives, and concerns about competitors such as Samsung and Hynix raising CapEx, potentially capping memory prices. Despite this, the narrative favors the bulls, indicating potential for Micron’s stock to reach $100, echoing previous valuation trends in market cycles. Micron's Q1 details include a 16% year-over-year increase in adjusted revenue to $4.73 billion, an adjusted loss per share of $0.95, and a 49% increase in cash flow from operations to $1.4 billion. Watch for the impact on Western Digital ($WDC) following Micron's updates.

Read the full article here. Read time: 2 min

POLL - FEATURED STOCK IDEA

+3 POINTS - WEEKLY TOURNAMENT

How do you rate the featured stock idea?

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Yesterday’s Rating (link):

Eversource Energy ($ES)

🟩🟩🟩⬜️⬜️ - Buy (35%)
🟥🟥⬜️⬜️⬜️ - Pass (34%)
🟨⬜️⬜️⬜️⬜️ - Watchlist (31%)

* There are more stock ideas later in the email!

MARKET OVERVIEW

Today’s market overview is sponsored by Behind the Markets. They are offering a special New Year Deal of a FULL YEAR of stock picks for just $9.

Are you short-term bullish or bearish on the market?

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Yesterday’s Poll Results: 57%

A tiny bit less bullish than yesterday, but everything is still quite bullish. As many readers (like bobcam***, emoj***, and kenny***) have mentioned, unless anything big changes, everything is pointing towards the year ending on a bullish run. The Fear v Greed index is down 2 points but still in the Extreme Greed zone, all of the indexes were green, the stock sentiment was very slightly down from the 7-day average, and Yellowbrick Road readers remained at the exact same bullish level.

STOCK MARKET NEWS

Today’s news is brought to you by IBD. When Wall Street isn’t looking out for you, IBD has your back. See why countless investors trust IBD Digital to give them an edge––get 8 weeks for only $8.

New York Times sues Microsoft, ChatGPT maker OpenAI over copyright infringement - CNBC 

Apple Watch import ban temporarily stopped by U.S. appeals court - CNBC 

Cytokinetics' heart disease drug meets main goal in study - Reuters 

Amazon Prime Video UK to show ads starting in February - Proactive Investors 

Tesla to roll out revamped Model Y from Shanghai plant - Bloomberg News - Reuters 

Exclusive: Two U.S. senators call for Tesla recalls after Reuters investigation - Reuters 

Toyota's global output surges to record in November on strong demand - Reuters 

QUIZ

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Who founded the American multinational technology company IBM?

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Yesterday’s Question (link): Which brand, famous for its motorcycles, originally started as a manufacturer of musical instruments?

Answer: Yamaha! Turns out we have a lot of (former) musical instrument players as readers who had Yamaha keyboards and guitars.

FEATURED INSIDER TRADE

The featured insider trade is brought to you by CEO Watcher (another free, weekly email I write). It’s the only newsletter that tracks insider returns to find the best ones. Subscribe here

Director at VORNADO REALTY TRUST ($VNO)

The Director sold 600,000 shares at $29.54/share ($17.72M total) which decreased their holdings by 38.2%. The current price is $30.14 (+2.0%). (trade link)

Historic Returns
1m returns: -31% weighted | -23% median | 0% win rate (0/3)
3m returns: -25% weighted | -25% median | 0% win rate (0/3)
6m returns: -29% weighted | -28% median | 0% win rate (0/3)
1y returns: -35% weighted | -35% median | 0% win rate (0/3)

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BONUS STOCK IDEAS

ANALYST REPORT

Huya Operates a Mediocre Business, but We See Value in Its Cash Balance

Huya is China's largest game livestreaming platform, boasting over 80 million monthly active users and maintaining market leadership through exclusive licensing deals with esports tournaments. Despite competitive challenges and investment costs weighing on profitability, the company seeks advantage through diversifying content and securing engaging esports broadcasts.

Ticker: HUYA | Price: $3.36 | Price Target: $7.70 (+129%) | Timeframe: N/A

🎥 Livestreaming | 🇨🇳 China | 📈 Bullish Idea

Huya, China's largest game livestreaming platform with over 80 million MAUs, has maintained its market leadership through exclusive esports content deals, but faces fierce competition and has seen slowing revenue growth. The company’s expansion into leisure games and other entertainment streams has been limited due to stronger presence of platforms like Kuaishou and Bilibili. Huya's competitive edge with exclusive esports content is threatened as licenses are bid upon aggressively at renewal times, and these exclusive deals do not provide long-term advantage due to short contract lengths without renewal options. Profitability is pressured by high fixed content costs, with average ROIC from 2019 to 2021 around negative 250% and gross margins lagging behind peers, as revenue-sharing costs with streamers and spending on content acquisition remain high. The company's strategic move to reserve cash for shareholders is represented in its $100 million share repurchase program. Ivan Su sets a fair value estimate of $7.70 per share, attributing $6.80 to net cash and $0.90 to free cash flow, assuming moderate revenue growth and breakeven operating profit over the next decade. The bull scenario suggests a $10.70 value if Huya can ramp up non-esports content, while the bear scenario, potentially involving a Tencent buyout, estimates only $0.50 per share, reflecting high risks from regulatory scrutiny, content cost control, and competition in securing exclusive streaming rights.

Read the full article here. Read time: 7 min

TWITTER

Clear signups increasing

Clear Secure, Inc. operates a secure identity platform which provides a fast, touchless experience at airports and beyond, using biometric technology to expedite identification processes and reduce wait times.

Ticker: YOU | Price: $21.75 | Price Target: N/A | Timeframe: N/A

🪪 Identity Platform | 📈 Bullish Idea

Ticker: $YOU. Clear supervisor at JFK said they’ve experienced 'a surge in new sign-ups from pre-Thanksgiving through the Christmas travel period.' Similarweb web traffic to their site shows a large acceleration in visits as well suggesting a potentially large Q4 earnings beat.

Read the full article here. Read time: 1 min

VALUE INVESTORS CLUB

TETRA TECHNOLOGIES INC/DE - TTI

TETRA Technologies, Inc. is a geographically diversified oil and gas services company. It offers water management, completion fluids, and services for the petrochemical and industrial end markets. The company is known for its completion fluids and products, which hold significant market share, and its services for the transfer, treatment, and recycling of water produced from oil and gas operations, particularly in the US.

Ticker: TTI | Price: $4.65 | Price Target: $7 (+51%) | Timeframe: N/A

🛢️ Oil/Gas Services | 📈 Bullish Idea

TETRA Technologies, Inc. (TTI) is currently undervalued with a stock price target of $7. TTI's recent 30% stock price drop due to project delays is viewed as a buying opportunity, not reflecting its core business strength or growth initiatives. The core business, including Completion Fluids & Products and Water & Flowback Services, accounts for 60% and 40% of EBITDA respectively, and is set to benefit from deepwater drilling and frac activity rebound. TTI holds a dominant market share in completion fluids, is a major player in water treatment in the Permian Basin, and has made cost-saving supply chain optimizations. Their stock is trading at 5.5x 2024 Adjusted EBITDA with a potential 50-100% upside. Significant growth initiatives that could catapult TTI's valuation include the development of desalination technology for produced water, which has a $175MM EBITDA potential in 3 years, and harnessing lithium and bromine reserves from their Arkansas Smackover Formation property, with an EBITDA potential of $160MN. Additionally, Zinc Bromide Battery Storage could generate $33M EBITDA. With strong liquidity and planned refinancing, TTI is well-positioned to invest in growth without diluting equity, aiming for stellar returns by 2026/27 based on an 8X EBITDA projection. The success of these growth initiatives remains a key catalyst for realizing TTI's full market value.

Read the full article here. Read time: 10 min

+3 POINTS - WEEKLY TOURNAMENT

Which bonus stock idea was the most compelling to you?

Login or Subscribe to participate in polls.

Yesterday’s Poll Results (link):

🟩🟩🟩⬜️⬜️ Tencent ($TCEHY) [41%]

🟨🟨⬜️⬜️⬜️ MGP Industries ($MGPI) [35%]

🟥⬜️⬜️⬜️⬜️ American Coastal Insurance Corp ($ACIC) [24%]

It’s interesting to see the sentiment shift on Tencent. The last couple of times a stock idea for Tencent was included, it finished in last place in voting because nobody wanted to touch Chinese stocks (many still don’t).

Your Thoughts:

  • 🥃 steven.w*** ($MGPI): The American whiskey market is exploding with higher-priced brands. They figured out how the scotch makers maintain higher prices through marketing

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Some other newsletters to check out if you want more things to read:

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