🤖📈 Top Trade Ideas for July 11

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Cognizant is seen as an attractive long-term investment opportunity with a fair value estimate of $91 and a 5-star rating. The market is undervaluing Cognizant's potential due to past execution and strategic mistakes, which the author believes are in the past. Cognizant is well positioned to offer higher-value technical offerings, such as digital engineering and AI solutions, as well as digital transformation consulting. The author predicts a five-year revenue compound annual growth rate of 8% for Cognizant, which is an acceleration from the previous five years. Despite delayed decision-making in the current environment, the author believes that demand for digital transformation projects will remain strong in the long run. Cognizant is focused on enhancing technical capabilities, strategy consulting operations, and diversifying its client base to reaccelerate growth. The company is aware of the need to distinguish itself as a cutting-edge IT service provider and has a healthy balance sheet to invest in its technical capabilities. Cognizant is expected to benefit from strong digital transformation trends. However, there are risks such as perception issues and distrust due to a bribery case and controversial outsourcing projects, as well as vertical specialization risks and attrition in the industry. Cognizant has a standard capital allocation rating and has returned to a growth focus by moderating share repurchases and increasing dividends.

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The author discusses the potential of AMD as an alternative to Nvidia in the AI market. They suggest that AMD may offer more value for money and higher returns to investors. Cloud providers and enterprise customers are looking for alternatives to Nvidia GPUs due to high demand and record margins. While Nvidia currently dominates with its proprietary API, CUDA, there are other APIs available, such as OpenCL and AMD's ROCm, which could be alternatives. AMD has developed tools to translate CUDA source code into HIP C++ for compatibility with their graphics cards. Companies like Amazon and Microsoft have shown interest in AMD's AI chips, and emerging players like Hugging Face and OpenAI have partnered with AMD instead of Nvidia. AMD recently introduced their Instinct product line, including the new MI 300X chip, which has shown promising performance. The author believes that AMD is undervalued compared to Nvidia and has the potential to reach new all-time highs. They assign AMD a "Strong Buy" rating.

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Alibaba Group Holding (BABA) has been trading within a range for a while and has struggled to break out. The stock rallied after the Ant Group fine came in lower than expected, but it only reached the upper end of its trading range. Despite low valuation multiples and strong earnings growth, the stock price has not reflected these qualities. However, catalysts in China's economy, such as buybacks, growing retail sales, and government measures to stimulate consumption, have the potential to lift Alibaba and other Chinese stocks. The author upgrades their rating on Alibaba from a buy to a strong buy due to improved prospects. The prospects of an Ant Group IPO have improved, as China finalized a smaller-than-anticipated fine and indicated no further fines or regulatory actions are likely. Alibaba's ramping up of buybacks suggests management is more willing to use authorized buyback space, which could increase the stock price and intrinsic value. With $75 billion in cash and short-term investments, along with two years' worth of free cash flow, Alibaba's stock price could potentially increase by 100%. The stock is priced cheaply compared to its fundamentals and U.S. tech stocks, with a lower P/E ratio and higher free cash flow yield. However, U.S./China tensions pose a risk to Alibaba investors, as differences on issues like Taiwan and computer chips could impact investor confidence and trigger commerce bans. Despite the risks, the author believes Alibaba's valuation and positive catalysts make it a bargain compared to other options in the market.

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