Market Snapshot
| Dow | 42544.22 | -29.51 | (-0.07%) | | Nasdaq | 19310.79 | -175.99 | (-0.90%) | | SP 500 | 5881.63 | -25.31 | (-0.43%) | | 10-yr Note | -2/32 | 4.57 |
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| | NYSE | Adv 1734 | Dec 999 | Vol 887 mln | | Nasdaq | Adv 1970 | Dec 2375 | Vol 8.8 bln |
Industry Watch
| Strong: Real Estate, Energy, Materials |
| | Weak: Information Technology, Consumer Discretionary, Consumer Staples, Utilities |
Moving the Market
-- Early buy-the-dip interest fading due to price action in Treasuries
-- 10-yr Treasury note yield moving sharply higher
-- Losses in the mega cap space limiting index performance
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Closing Summary
31-Dec-24 16:30 ET
Dow -29.51 at 42544.22, Nasdaq -175.99 at 19310.79, S&P -25.31 at 5881.63
[BRIEFING.COM] The stock market closed with losses at the index level on the final session of the year. The Nasdaq Composite, which surged 28.6% in 2024, logged a 0.9% decline compared to yesterday's close. The S&P 500 fell 0.4% and the Dow Jones Industrial declined 0.1% while the Russell 2000 outperformed, settling 0.1% higher.
The market was in rally-mode at the open following recent declines, but buying interest faded as the 10-yr yield moved higher. The 10-yr yield was at 4.53% when the stock market opened, but settled two basis points higher for the day at 4.57%. That's 69 basis points higher for 2024.
Losses the mega cap space related to profit-taking activity also contributed to weakness at the index level. The Vanguard Mega Cap Growth ETF (MGK) closed 1.0% lower today, but gained 32.3% this year. Meanwhile, the equal-weighted S&P 500 settled 0.2% today, and 11.1% higher this year.
The information technology (-1.0%) and consumer discretionary (-1.0%) sectors were among the worst performers today, but logged solid gains in 2024. The information technology sector is 35.7% higher in 2024 and the consumer discretionary sector sits on a 29.1% gain.
As a reminder, markets are closed tomorrow for New Year's Day.
- Nasdaq Composite: +28.6% YTD
- S&P 500: +23.3% YTD
- Dow Jones Industrial Average: +12.9% YTD
- S&P Midcap 400: +12.2% YTD
- Russell 2000: +10.0% YTD
Reviewing today's economic data:
- October FHFA Housing Price Index 0.4%; Prior 0.7%
- October S&P Case-Shiller Home Price Index 4.2% (Briefing.com consensus 4.2%); Prior 4.6%
Looking ahead to Thursday, market participants receive the following economic data: weekly initial and continuing claims at 8:30 ET, final December S&P Global US Manufacturing PMI at 9:45 ET, November Construction Spending at 10:00 ET, and weekly EIA Crude Oil Inventories at 10:30 ET.
Small and mid cap stocks outperform
31-Dec-24 15:40 ET
Dow -30.62 at 42543.11, Nasdaq -107.19 at 19379.59, S&P -16.74 at 5890.20
[BRIEFING.COM] The S&P 500 shows a 0.3% decline ahead of the close.
Small and mid cap stocks are outperforming on the final session of 2024. The Russell 2000 shows a 0.4% gain and the S&P Mid Cap 400 trades 0.3% higher.
Looking ahead to Thursday, market participants receive the following economic data: weekly initial and continuing claims at 8:30 ET, final December S&P Global US Manufacturing PMI at 9:45 ET, November Construction Spending at 10:00 ET, and weekly EIA Crude Oil Inventories at 10:30 ET.
Treasury yields new highs, stocks near lows
31-Dec-24 15:10 ET
Dow -69.03 at 42504.70, Nasdaq -151.11 at 19335.67, S&P -25.26 at 5881.68
[BRIEFING.COM] The major indices trade near their lows of the day. The S&P 500 sports a 0.3% decline and the Nasdaq Composite shows a 0.6% decline.
Treasury yields are near intraday highs. The 10-yr yield is at 4.57% and the 2-yr yield is at 4.24%.
As a reminder, markets are closed tomorrow for New Year's Day.
S&P 500 dips as cybersecurity stocks slide; Moderna leads biotech gains
31-Dec-24 14:30 ET
Dow -98.62 at 42475.11, Nasdaq -178.39 at 19308.39, S&P -31.36 at 5875.58
[BRIEFING.COM] The S&P 500 (-0.53%) is in second place on Tuesday afternoon, down about 31 points.
Briefly, S&P 500 constituents NRG Energy (NRG 90.06, -2.09, -2.27%), CrowdStrike (CRWD 341.44, -7.87, -2.25%), and Super Micro Computer (SMCI 30.09, -0.59, -1.92%) pepper the bottom of the standings. Cyber security stocks, including CRWD, are lower today following news of a hack connected to the Chinese government on the U.S. Treasury, while embattled IT firm Super Micro Computer is down now about -75% off the 2024 highs from back in early March.
Meanwhile, Moderna (MRNA 40.74, +1.36, +3.45%) is today's top gain getter, rising alongside fellow biotechnology stocks as chatter on the Street suggested select firms planned to raise drug and vaccine prices starting in 2025.
Gold advances to $2,641/oz, up 27% in 2025, even amid Nasdaq losses and dollar strength
31-Dec-24 14:00 ET
Dow -82.33 at 42491.40, Nasdaq -164.75 at 19322.03, S&P -28.56 at 5878.38
[BRIEFING.COM] With about two hours to go on Tuesday the tech-heavy Nasdaq Composite (-0.85%) hosts the steepest losses.
Gold futures settled $22.90 higher (+0.9%) to $2,641.00/oz, clearing gains of +27% on the year.
Currently, the U.S. Dollar Index is up about +0.3% to $108.49.
Alibaba ticks higher today; looking to slash AI-related prices as competition heats up (BABA)
Alibaba (BABA) is enjoying modest appreciation today after Reuters reported that the China-based e-commerce and cloud giant would be looking to enact an up to 85% price slash on large language models (LLMs), a popular type of conversational AI. The price cut would be aimed toward BABA's Qwen-VL, a multimodal LLM-based AI assistant that touts a technological edge over other LLMs, like GPT-4o, specifically surrounding video processing.
- The price cut underscores an increasingly competitive landscape as industries turn to the numerous AI-focused tech firms in China and internationally to enhance their competitiveness and efficiency. The AI frenzy has been a significant driver of BABA's improving Cloud segment revenue growth over the past few quarters, recently boasting a 7% jump in Q3 compared to a +6% and +3% improvement in Q2 and Q1, respectively. As such, other companies have rapidly developed LLMs of their own, looking to get in on lucrative AI action.
- Baidu (BIDU), often referred to as the Google of China, is focused on advancing its AI capabilities, serving as the cornerstone of its AI-driven transformation. The company's flagship ERNIE 4.0 Turbo model was recently shown to increase throughput by 48% compared to its debut in June, a significant improvement in just a few months. Likewise, Tencent (TCEHY), a prominent multi-media firm based in China, expressed its commitment to continuously investing in AI technology and tools.
- BABA was confident that its Cloud division would return to double-digit growth over the medium to long term. The company is constantly allocating capital to intensive R&D, aiming to be the leading cloud service provider for AI. Cutting prices, while adversely impactful to near-term revenue, may be the right move to ensure it can reach market dominance.
Shares of BABA have been in a slump since reaching one-year highs in early October following stimulus measures from the Chinese government, pulling back by around 28%. Moving into 2025, BABA must contend with increasing AI competition while battling a deteriorating economy, hindering growth in its e-commerce business. Competition is also intensifying in e-commerce, forcing BABA to battle headwinds on multiple fronts. As a result, the year ahead for BABA could bring considerable volatility, with future performance potentially dependent on further government stimulus.
Intapp caters to an underserved market and is growing in scale (INTA)
Intapp (INTA) has been a huge mover since mid-August when it reported robust Q4 (Jun) earnings. That was followed up with an impressive beat-and-raise in Q1 (Sep) in early November. Since the name is now well known, we wanted to provide some quick color on Intapp. It's a provider of subscription-based cloud software for the professional and financial services industry.
- Its clients are typically large partnership firms in legal, accounting, consulting, investment banking, private capital, and real assets. This is a generally underserved market. Intapp sees the professional and financial services industry as being historically overlooked by the traditional CRM/ERP enterprise companies because they are designed more for the manufacturing model and not for this partnership services oriented model.
- Intapp believes it operates in an attractive market because its clients are relatively separate from the business cycle. The lawyers always get paid. The accountants always get paid in good times and bad. These are relatively stable businesses. Intapp says its clients are also technologically pretty far behind. They have not benefited from basic cloud transformations, or the types of digital transformations that a lot of the rest of the economy has because there was not something really available that was purpose built for them.
- Intapp has successfully grown the business pretty consistently over many years. And it's finally getting to a scale where it can start to serve the big fish, the global institutional firms. This was one of the reasons INTA chose to bring the company public. Also, Intapp is growing internationally, comprising 34% of SepQ revenue, up from 31% a year ago.
- In SepQ, revenue grew a healthy 17% yr/yr to $118.8 mln, driven primarily by sales of its cloud platform. Of note, SaaS revenue growth was even more robust, up 30% yr/yr to $77 mln, driven by new client acquisitions, contract expansions, and the migration of on-premise products to the cloud. Approx 92% of its clients have adopted at least one cloud module. Cloud ARR was $309.1 mln, up 27% yr/yr and it represented 74% of total ARR vs 69% a year ago.
Overall, Intapp seems to be finally hitting more radar screens for investors. We like their niche target market that is underserved and is still in the early days in terms of migration to the cloud. What is nice is that its clients are the type of clients that always get paid even during a economic downturn. Also, Intapp is improving its AI functionality and has a nicely growing international business.
VeriSign up following another Warren Buffett purchase today; carrying momentum into 2025 (VRSN)
To close out 2024, VeriSign (VRSN +1%) is reaching 52-week highs, supported by Warren Buffet's Berkshire Hathaway (BRK.A) purchasing around $15.6 mln of shares today. Mr. Buffett is already a 10% owner of the company but has been actively buying recently, spending about $45.4 mln on shares on December 20 following a pullback from nine-month highs. The back-to-back purchases by BRK.A is a sign of confidence in the company's long-term growth prospects.
- What does VRSN do? While a lesser-known organization, nearly everyone pointing their web browser to a ".com" or ".net" address indirectly uses VRSN's services. The company provides registrations and policies for top-level domains (TLDs), such as ".com" addresses. VRSN is a wholesaler that works with registrars, the companies that sell domains to individuals and businesses. VRSN's contract with ICANN (the organization for assigned names on the internet) grants it exclusive rights to ".com" and ".net" domains.
- In September, VRSN raised the current ".com" wholesale price to $10.26 per registration, up roughly 7% from the previous price. Given its wide economic moat as the sole wholesaler for the ".com" domain alongside relative price inelasticity as ".com" remains the top choice when creating a website, this price hike significantly helps support revenue growth while maintaining profitability.
- During Q3, revenue climbed by 3.8% yr/yr to $390.6 mln, staying relatively consistent with growth over the past several years as VRSN tends to deliver low-single-digit growth each quarter. At the same time, VRSN registered a decent-sized earnings beat, extending its streak of bottom-line upside to ten straight quarters.
- However, there are some downsides to being a wholesaler, as VRSN has little control over registrars. For instance, VRSN has continued to see registrars prioritize average revenue per user (ARPU) over customer acquisition by upping their prices. Registrars also focus more on aftermarket sales while reducing their spending on marketing to new customers. As such, VRSN ended Q3 with 9.3 mln new registrations compared to 9.9 mln in the year-ago period. Meanwhile, renewal rates slipped by 120 bps yr/yr to 72.3%.
- China has also proven a drag, hindering renewal rates as the region battles challenging economic conditions.
- VRSN has been piloting new registrar marketing programs to counter these trends and return to domain name-based growth. Management mentioned in late October that while it has noticed a positive response to these new programs, it will take time for registrars to adopt and integrate them into their sales cycle. As such, VRSN cautioned that trends may not reverse course until sometime during 2025, causing it to narrow its FY24 domain name base growth forecast to negative 2.3-2.9%.
VRSN heads into 2025 with some decent wind in its sails, climbing by over +20% since 2024 lows reached in May and over +10% just in December following back-to-back purchases by Warren Buffett. While the immediate road ahead is still expected to be bumpy as registrars implement VRSN's initiatives to reenergize customer growth, the company's expansive economic moat, supporting consistently decent quarterly performances, bodes well over the long term.
NVIDIA advances higher today; robotics to potentially act as next growth lever (NVDA)
NVIDIA (NVDA +1%) is a sliver of light on a relatively dim trading session today, inching higher while most of its peers encounter meaningful selling pressure. Two headlines crossed this morning that are likely contributing to today's relative strength. FT reported that the GPU designer wants to step into the robotics industry, leaning on its established dominance in AI. Meanwhile, The Information stated that ByteDance, the company behind the popular social media platform TikTok, is looking to allocate $7.0 bln to NVDA's chips next year.
ByteDance's appetite for the most advanced AI chips is not overly surprising. As a video social networking site, TikTok can benefit from AI-generated features like filters, editing, and purely AI-generated video. In fact, TikTok already boasts many AI-powered tools, from automatic music suggestions to effects and text-to-speech. Nevertheless, ByteDance spending $7.0 bln on NVDA's chips showcases the AI titan's steady leadership position in the AI space, a characteristic that does not look likely to change in 2025.
NVDA's desire to move more aggressively into robotics also does not come as a shock. However, it might be the company's next major growth lever.
- A comment that stood out during NVDA's Q3 (Oct) earnings call last month was that the industrial AI and robotics industries were accelerating, supported by breakthroughs in AI models understanding the physical world. Meta Platforms (META) demonstrated how AI has shaped its "metaverse" with its Ray-Ban smart glasses, which interact with the physical world, labelling items in real-time; this technology can be applied to robotics.
- Management added that some of the most prominent global industrial manufacturers are adopting NVIDIA Omniverse -- its real-time 3D graphics platform -- to automate workflows. For instance, Foxconn, which manufactures electronics, uses digital twins (virtual models of a physical object) built on NVIDIA Omniverse to increase efficiency at its Blackwell factories. Meanwhile, U.S.-based companies like Amazon (AMZN) have already been leveraging NVIDIA's robotics simulation technology at a few of its warehouses across the U.S.
- NVDA referred to the robotics aspect of AI as physical AI, where the technology understands and interacts with the physical world. The company added that physical AI can predict the immediate future, anticipating the next event in a series.
As its competition gains ground in the AI chip race, such as Advanced Micro (AMD), NVDA is potentially turning to robotics to fuel its next wave of growth. As a result, if Data Center growth begins to slow meaningfully in 2025, especially if tariffs and export restrictions bottleneck China-related revenue, NVDA might be able to make up the shortfall through industrial AI and its Omniverse offering. This will be an interesting area to watch over the coming months.
Take-Two expected to set a new highscore in bookings in FY26 and FY27 as GTA VI hits shelves (TTWO)
As 2025 draws near, excitement over Take Two's (TTWO -1%) long-awaited successor in its Grand Theft Auto franchise is mounting. Today, FT reported that GTA VI is estimated to generate $3.0 bln in revenue next year, translating to over half of the company's FY24 (Mar) sales. The title is expected to be released in 2025, during TTWO's FY26 (Mar). However, highly-anticipated titles, particularly those produced by a prominent video game publisher like TTWO, often encounter delays, potentially pushing release into 2026 or closer to the end of FY26 or the start of FY27.
Still, TTWO assured shareholders in early November during its Q2 (Sep) earnings call that the game would launch in the fall of 2025. This comment helped fuel a breakout in the stock, which was stuck in a sideways pattern throughout much of 2024, outshining several weak points from the quarter, including a wide earnings miss and lowered FY25 guidance.
- Underpinning the enthusiasm over GTA VI is the extraordinary success of GTA V. Estimates place total revenue from the current title at over $8.0 bln since its 2013 release, supporting an eventual push above $10.0 bln. During its first few months on the shelves, the previous GTA title generated over $1.0 bln in revenue for TTWO.
- Meanwhile, despite over 11 years since first hitting stores and traversing a volatile macroeconomic backdrop lately, GTA V continues to support positive yr/yr revenue growth for TTWO. In Q2, video game sales outpaced internal expectations, helped by consistently fresh online content via Grand Theft Auto Online. A 35% yr/yr jump in GTA+ members (a subscription service to receive the latest online content) highlights the sustained demand for the series. Management added that engagement was strong, anticipating this to continue for the remainder of 2024.
- Given this, at $3.0 bln, the sales estimate for GTA VI could be considered somewhat conservative. However, this may be due to an uncertain economic situation domestically and overseas. During 2024, TTWO announced a restructuring plan, trimming its staff by around 5% and cancelling around $200 mln worth of projects in development, underscoring a wobbly economy. Meanwhile, reports projected that November U.S. consumer spending on video game hardware and software will be down 7% yr/yr, a sharp reversal from the 10% improvement in October.
TTWO is heading into one of the most anticipated years of the past decade due to the predicted success of its upcoming GTA title. Coinciding with this release next year are a few other popular franchises, including new Mafia and Borderlands titles, setting TTWO up for record net bookings in FY26 and FY27. The success of GTA VI could also spur significant console sales for Sony (SONY) and Microsoft (MSFT), as the upcoming title is slated for release exclusively on the latest PS5 and Xbox Series X/S. Nevertheless, a deteriorating economic picture could hinder sales trends, while delays would significantly impact TTWO's elevated FY26 and FY27 revenue expectations.
Copyright ? 2024 Briefing.com. All rights reserved.
 
Copyright ? 2024 Briefing.com. All rights reserved. |
