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Please enjoy this updated version of weekly commentary from the Reitmeister Total Return newsletter. Steve Reitmeister is the CEO of StockNews.com and Editor of the Reitmeister Total Return.Click Here to learn more about Reitmeister Total Return

SPY – Once again stocks flirted with the all time highs for the S&P 500 (SPY). This has happened 2 times recent both leading to failure and this 3rd time doesn’t seem to be the charm either. What is holding stocks back from making new highs? And what should an investor do to find better performance? 43 year investment veteran Steve Reitmeister shares his view including a preview of his 11 favorite stock picks now. Read on below for the answers…

In my recent commentaries I have speculated that we were due for a trading range to digest some of the rampant gains at the end of 2023. However, so far it has been more of a consolidation under the all time highs at 4,796 for the S&P 500 (SPY).
Consolidations are simply much tighter trading ranges. That investors refuse to have a serious sell off while also not being ready to climb higher. Kind of feels like cars revving up at the starting line of a race…lots of noise, but going nowhere.
We will discuss more of the reasons behind this consolidation and when stocks should be ready to race ahead.
Market Commentary
Stocks have tried twice over to make new all time highs above 4,800 for the S&P 500. And twice thwarted at that level followed by share pullbacks.
Yes it looks like Thursday’s action signals a 3rd such attempt. Yet that was a very hollow rally with the usual suspects in the S&P 500 doing well with small caps and other riskier stocks lagging. That is not the sign of a healthy bull. And give very low odds of breaking to new highs.
(1/20/24 update: Yes, the S&P 500 officially made new highs above 4,800 on Friday. I honestly thought it was a fairly hollow rally mostly led by the usual mega cap tech stocks and not such a broad rally. Meaning I do not believe this rally has staying power and likely will fall back below 4,800 this coming week. And at best we consolidate just above 4,800 with little true upside coming in the days ahead).
Some are pointing to economic data being too weak as the problem. Such as the horrific -43 showing for the Empire State Manufacturing Index on Tuesday.
While others are pointing to economic data being too strong like Retail Sales being above expectations on Thursday. This had 10 Year Treasury rates breaking further above 4% and also lowered the odds of the first rate cut coming at the March Fed meeting.
Sorry folks…you can’t have it both ways. And perhaps the answer is that neither of these theses are correct.
Meaning I don’t believe that investors are truly worried about a looming recession. Nor are they fearful of rates spiking again as they did in the Fall of 2023.
Simply, the market has come a long way from bear market bottom in October 2022. A total gain of 37% from that valley to now is a lot of profit in a short time when the long term average annual gain for the S&P 500 is only 8%.
So now is a healthy time for an extended pause. The same way you would take a long break after running a marathon.
Rest is what is needed. And then gaining the strength for the next run higher.
In the stock market world that typically comes hand in hand with a pullback in price leading to a trading range. Along with that you will see these investment terms show up more often:

Profit taking
Sector rotation
Change of leadership
Buy the Dip
The Pause that Refreshes
And so on…

Yet right now the most apt term is consolidation. As shared up top, that is simply a very tight trading range right under a point of resistance. Currently that resistance corresponds with the all time closing highs at 4,796…but for simplicity easier to think of it as 4,800.
The point is at this stage it is healthy and normal for stocks to relax after such a long run higher. Don’t be surprised if the consolidation does turn into a wider trading range with a subsequent test of the 50 day moving average at 4,628 being a likely downside target.

Moving Averages: 50 Day (yellow), 100 Day (orange), 200 Day (red)
A break below 4,600 is unlikely without some greater fundamental concerns arising. But let’s do appreciate the 2 next levels of price support rest at 4,488 for 100 day moving average and about 4,400 for the 200 day moving average.
Your trading plan should be to stay bullish. Use any subsequent pullback as a buy the dip opportunity. NOT for the stocks that led the charge in 2023. That game plan is played out.
Instead valuation and quality will be held in higher regard this year as the overall PE of the market is not cheap. GAARP is fine (Growth At A Reasonable Price)…but not growth at ANY price like last year.
If you want my favorite stock ideas for 2024, then read on below…
What To Do Next?
Discover my current portfolio of 11 stocks packed to the brim with the outperforming benefits found in our exclusive POWR Ratings model.
Yes, that same POWR Ratings model generating nearly 4X better than the S&P 500 going back to 1999.
Plus I have selected 2 special ETFs that are all in sectors well positioned to outpace the market in the weeks and months ahead.
These 13 top trades are based on my 43 years of investing experience seeing bull markets…bear markets…and everything between.
If you are curious to learn more, and want to see these lucky 13 hand selected trades, then please click the link below to get started now.
Steve Reitmeister’s Trading Plan & Top Picks >
Wishing you a world of investment success!
Steve Reitmeister…but everyone calls me Reity (pronounced “Righty”)CEO, StockNews.com and Editor, Reitmeister Total Return

About the Author

Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks.

Giant private asset manager BlackRock, Inc.’s (BLK) CEO, Mr. Larry Fink, made a modest prediction recently that the global economy might be on the brink of an “infrastructure revolution.” This forecast was made in the wake of BLK’s largest acquisition announcement in over 15 years.
With an initiative to invest in and own infrastructure, BLK is seeking to accelerate growth by announcing its plan to purchase Global Infrastructure Partners for $12.5 billion.
New York-based GIP owns and controls companies in sectors like energy, transport, water, and waste. If the acquisition goes ahead, it will be BLK’s largest since it procured Barclays’s asset management business in 2009.
GIP, led by Adebayo Ogunlesi, is considered the third-largest infrastructure investor worldwide, falling behind Macquarie in Australia and Brookfield in Canada. Its assets are quite diverse, ranging from Gatwick Airport to Melbourne’s Port.
The cash and stock transaction between these two investment manager titans is slated for completion in this year’s third quarter, pending federal antitrust approval in the U.S.
This assertive acquisition represents a significant strategic push by BLK into the alternative investment sector, further securing its position as a dominant player in global finance.
Most of GIP’s ownership resides with its six founding partners, five of which, including Bayo Ogunlesi (the CEO), will be joining BLK. Consequently, Ogunlesi will be tasked with leading BLK’s forthcoming infrastructure group while also becoming a board member and resigning from his position as the key director at Goldman Sachs.
BLK is strategizing to develop its private market operations, which suggests faster growth and higher possible returns when compared to its core business of trading down-priced passive investment products like exchange-traded funds. This deal will likely augment BLK’s private assets by roughly 30% and double the baseline management fees for its private markets.
With GIP, BLK is purchasing an infrastructure fund manager that manages around $100 billion, with a combined revenue of $80 billion from its portfolio companies.
After finalizing this acquisition, BLK aims to establish a separate Global Infrastructure Partners entity that melds the newly acquired firm with current BLK infrastructure teams.
The newly formed entity is projected to rank as the second-largest private infrastructure manager on a global scale, boasting over $150 billion worth of assets under its management – Brookfield Asset Management being the only firm outpacing this figure.
With government deficits on the rise, the demand for private financing for large-scale infrastructure projects has grown, and attractive investment subsidies may be key to meeting this need.
BLK’s CFO, Martin Small, expressed that BLK’s preference for acquiring GIP over opting for a traditional private equity buyout firm stems partially from the perception that the era of peak returns from private equity, facilitated by zero interest rates, might be on the decline.
BLK holds investments in several GIP funds, and there has been considerable competition for deals between the two entities. As Larry Fink propelled BLK to prominence in the field of traditional asset management, Adebayo Ogunlesi rose to head Credit Suisse’s investment banking and fostered GIP in 2006 with his pool of fellow alumni from the now-defunct bank, who will also join BLK.
Acquiring GIP will promptly double BLK’s management fees from private markets, highlighting that Fink appears to have found the prominent deal he has been seeking.
Nevertheless, BLK, as a publicly traded asset manager, faces the necessity to delicately balance the retention and motivation of GIP’s top talent with the interests of its shareholders.
As part of striking a balance, it was decided that BLK would receive all the management fees on GIP funds in addition to 40% of the performance fees accruing from all future funds. GIP employees would retain all the carried interest in its existing funds and those slated for future raising.
To acquire GIP, BLK agreed to an amount of $3 billion in cash and 12 million of its shares, approximately equating to around $9.5 billion.
GIP is predominantly owned by its six founding partners, who will collectively ascend to become some of BLK’s most significant shareholders, possessing about 8% of its outstanding shares.
BLK intends to distribute 7 million shares to the six GIP founders immediately and will add 5 million more in five years. A portion of this equity will be allocated to employees as a part of a retention strategy. As a result, the collective GIP team will ascend as the second-largest shareholder in BLK, binding them to the ongoing fortunes of their new proprietor.
But why is BLK pouring billions on infrastructure?
The evolution of the intervention of private investors in infrastructure began during the 1990s and early 2000s. Western governments burdened with mounting debts sought private investors to purchase and overhaul outdated infrastructure, from airports to water pipelines. Subsequently, numerous companies across industries, from energy providers to telecom operators, started selling assets such as pipelines and cell towers to these investors.
Presently, the demand for infrastructure investment is escalating, fueled by three significant trends:

Decarbonization: In order to achieve global climate objectives, approximately $8 trillion is required to be spent on developing renewable energy infrastructure, storage batteries and transmission lines within this decade. Significant investments are also needed in hydrogen facilities to manufacture carbon-free fuel for aviation and maritime transport and in carbon capture technology.
Digitization: While the software is increasingly dominating the world, it relies heavily on tangible assets, including fiber-optic cables, 5G networks, and data centers.
Deglobalization: A shift in supply chains away from China has spurred demand for capital-intensive factories and new transport infrastructure to facilitate overland and sea freight movement. This trend has been further galvanized by increased calls for energy security in Europe following Russia’s incursion into Ukraine, stimulating the construction of liquefied natural gas terminals to import fuel from less aggressive nations.

This skyrocketing demand for investment coincides with an era where government and corporate balance sheets are under significant stress. America’s federal debt, nearing $34 trillion, is projected to continue snowballing throughout the following years. Additionally, several European governments face daunting debt burdens.
Rising interest rates have made these liabilities more burdensome to service and pose challenges to corporations that have capitalized on inexpensive debt to boost shareholder yields. Consequently, their capacity to finance substantial investments will be curtailed in the ensuing years. As a result, infrastructure investors are set to bridge this gap, having expressed their readiness and willingness to invest heavily.
Private equity groups anticipate growing their footprints in sectors like debt or infrastructure investment – sectors that are expected to profit from higher interest rates – either by incorporating public shareholders or merging with larger organizations. This approach extends beyond merely corporate buyouts, an area experiencing deceleration due to soaring financing costs.
The swift surge in interest rates has instilled caution among many investors, tempering commitment to fresh funds and stunting the utilization of existing ones. These prevailing circumstances present compelling reasons for independent firms to contemplate seeking out more substantial partners.
Fund managers hoping to benefit from the predicted influx of wealth from affluent individuals into private markets must heavily invest in novel products and distribution networks. Additionally, significant financial input into technology is essential to adapt to the advances in artificial intelligence.
The acquisition potentially furnishes BLK with a strategy to broaden its investment portfolio, thereby decreasing its vulnerability to market volatility. This is mainly due to the generally lower correlation that infrastructure investments bear with divergent asset classes and their reduced sensitivity to economic fluctuations.
Moreover, availing BLK of a comprehensive array of infrastructure assets could confer it with significant advantages. These mostly stem from those assets’ capacity for long-term growth potential coupled with steady cash flows.
Following the acquisition, BLK is poised to emerge as a global leader, offering eminent infrastructure capabilities to its clientele. Clients who are persistently scouting for assets to counterbalance their extensive liabilities and diversify their portfolios may find solace in BLK’s offerings.
Especially factoring in the prevailing economic conditions, this acquisition could prove to be a significant milestone for BLK. It would empower the company to effectively utilize its combined platform to capture a larger slice of the market share, churn superior returns, and seamlessly address the growing challenges and demands of its clients amidst the swiftly transforming infrastructure landscape.
Bottom Line
Throughout 2023 and well into 2024, two key trends have emerged within the financial sector: the escalating importance of private capital for infrastructure projects and the growing appeal of infrastructure assets amid economic uncertainty.
The recent landmark deal acts as a quintessential example of the consolidation trend that industry insiders have been forecasting. BLK has strategically secured a robust position in a market valued at $1 trillion today. Moreover, infrastructure is projected to be one of the most rapidly expanding segments of private markets in the foreseeable future.
While some caution against possible cultural discrepancies and potential conflicts of interest, the early market response to the deal appears stable. Shares of BLK surged by 1.3% immediately after the announcement.
Mr. Fink maintains his belief that the driving force behind their acquisition strategy has always been growth. With the acquisition of GIP, he firmly believes a similar scenario will likely play out. The efficacy of Mr. Fink’s belief is pertinent not just for BLK’s shareholders but also for the entire industry that has billions invested in this premise.
The main query for BLK is whether this deal will finally serve as the key to unlocking a sector where it has previously found it challenging to gain substantial traction.
Besides the acquisition, there are numerous factors investors should consider during their assessment of the company. However, it might be prudent for them to wait and assess how this deal plays out.
Therefore, keeping BLK on the watchlist might be prudent at this juncture.

The New Year has just begun, and thousands of technology and startup employees find themselves unemployed. Layoff monitoring website, Layoffs.fyi, reports that by January 17, some 51 technology firms had terminated the employment of 7,528 individuals.
These terminations imply that 2024 might bring more hardships for the tech sector, following massive layoffs in the preceding year when over 1,150 tech companies laid off over 260,000 employees in 2023.
Alphabet Inc.’s (GOOGL) Google is reducing its workforce, dispensing with several team members from their digital assistant, hardware, and engineering sectors, as stated by the company.
A spokesperson from Google said, “Throughout the second half of 2023, a number of our teams made changes to become more efficient and work better, and to align their resources to their biggest product priorities. Some teams are continuing to make these kinds of organizational changes, which include some role eliminations globally.”
Affected staff include those associated with the voice-activated Google Assistant and the augmented reality hardware team. Additionally, professionals within the central engineering department are also bearing the brunt of these layoffs.
The initial layoff reports concerning the Google Assistant team came from Semafor, while 9to5 Google reported the structural changes affecting the hardware team first. Notifications of the termination have been sent to the involved staff members, with the opportunity extended to them to apply for other open positions within Google.
However, the Alphabet Workers Union, representing a portion of its workforce, has voiced displeasure over these job cuts. The union claimed that it was unethical of GOOGL to continue with the layoffs, especially during a period of significant profit growth for the company. For reference, the tech giant made $76.69 billion in revenues during the third quarter of 2023, recording a net income of $19.69 billion.
Google CEO Sundar Pichai told employees to anticipate more job cuts throughout the year. He further disclosed that the downsizing efforts for the current fiscal year are aimed primarily at eradicating complex levels to streamline execution and accelerate momentum in some areas. The move adds to signs that staff reductions will continue this year as numerous corporates proactively adopt AI and automation solutions to potentiate their operational efficiency.
But why direct resources to AI?
In 2023, GOOGL shares made a dramatic comeback, rocketing by an impressive 54%. This uptick marked a drastic shift from its disappointing 2022 performance, which saw the stock tumble by 39%.
The previous downswing was mainly triggered by a bear market, which severely impacted GOOGL’s primary revenue source: digital advertising. With the marketing budgets reduced to preserve financial health during harsh economic conditions, many companies cut back on ad spending, causing a significant drop in GOOGL’s year-over-year revenue. As a frontrunner in the online advertising landscape, GOOGL’s performance was particularly negatively affected.
However, with the economy rallying back in 2023, companies were more generous with their advertising budgets, prompting a rebound in spending that benefitted GOOGL. That said, it was the technological leaps in AI that truly catalyzed GOOGL’s renaissance.
While AI has been on the tech horizon for several years, GOOGL has successfully harnessed this technology to enhance the precision and applicability of its search engine, target digital advertisements, and streamline controls for its Waymo self-driving vehicles.
The advances in GenAI have opened new avenues of opportunity for GOOGL. GenAI is equipped to generate unique content, concise email replies, craft presentations, obtain relevant data from the internet and company databases, and even articulate and debug computer code.
GOOGL’s strategic investment in AI and GenAI fuels innovation and augments development for its suite of products and services, including Google Search, Assistant, Cloud, and Workspace.
Directing resources to AI could support the enhancement and expansion of GOOGL’s emerging functionalities. Moreover, GOOGL is committing to GenAI to develop revolutionary platforms and tools, like Google AI Studio and Bard that empower developers and users to modify and harness robust AI architectures.
This proactive move also aims to elevate and broaden the realm of AI R&D and fore-front discussions on the ethical and societal implications of AI technology.
What could be the probable impacts of the layoffs?
On a positive note, the impending layoffs at GOOGL have the potential to decrease operating expenses, secure considerable savings, and enhance earnings per share. This could also facilitate GOOGL’s increased focus on AI, a critical factor for future growth and attaining competitive leverage.
Conversely, these layoffs pose a risk to GOOGL’s innovative potential and capacity to retain talent. The company has garnered acclaim for its unprecedented and multifarious projects that necessitate significant investment and experimentation.
Moreover, these projects create valuable patterns of intellectual property and potential innovations. The workforce reduction may impede GOOGL’s long-term objectives and creative potency. It risks tarnishing the brand’s reputation as a preferred employer, making it challenging to entice and retain top-notch talent within the industry.
Layoffs can potentially diminish a firm’s competitive advantage – conveying a message of weakness or instability to consumers, investors, and rivals. Furthermore, they may pave the way for newcomers or startups who can employ those made redundant or exploit market gaps.
Ultimately, the aftermath of the layoffs is contingent upon GOOGL’s ability to navigate the transition effectively while harmonizing its short-term deliverables with long-term aspirations.
For the fiscal first quarter ending March 2024, GOOGL’s revenue and EPS are expected to increase 12.5% and 26.5% year-over-year to $78.48 billion and $1.48, respectively.
Wall Street analysts expect the stock to reach $155.91 in the next 12 months, indicating a potential upside of 8.4%. The price target ranges from a low of $140 to a high of $180.
Bottom Line
While the continued improvement of the economy has worked in GOOGL’s favor, it is the company’s increased interest in AI that has captured investors’ attention. The anticipated outcome of this venture, particularly the positioning of Gemini Ultra in comparison to competing brands, remains uncertain.
However, as AI and Language Model (LM) technologies are becoming increasingly ubiquitous, companies successfully implementing these into specialized enterprise verticals for productivity and service enhancements are poised to emerge as leaders. GOOGL is ideally positioned due to its ability to integrate these technologies intensively across myriad business verticals.
Concerns, nevertheless, persist. Reduction in search market share, a core revenue stream for GOOGL, is one such issue. An offsetting strategy could be advanced monetization techniques of emerging developments expected to supersede the search paradigm. Given their broad-based customer (individual and enterprise) network, the potential for effective monetization is promising.
Culture, though, is another concern. Critics have cast doubt on the sustainability of GOOGL’s innovative ethos, arguing that as a company grows becoming more bureaucratic, its innovative drive dwindles. A shift from a startup-oriented innovative approach, coupled with financial engineering strategies aimed at appeasing shareholders (including share buybacks) and the departure of employees, may have catalyzed cultural shifts. Notably, GOOGL has endured an exodus of talent into startup ventures and might witness more of it because of additional layoffs.
Beyond affecting employees and their families, layoffs can have a negative long-term impact on a company’s performance. Investor confidence in a company’s ‘going concern’ has a direct correlation to its share price.
Although there may be temporary upward spikes in share prices following job cuts, this usually reverses when unemployment surges, leading to a market recession.
Given these factors, investors might find it prudent to place GOOGL on their watchlist, awaiting an opportune moment for investment.

Please enjoy this updated version of weekly commentary from the Reitmeister Total Return newsletter. Steve Reitmeister is the CEO of StockNews.com and Editor of the Reitmeister Total Return.Click Here to learn more about Reitmeister Total Return

SPY – Stocks keep flirting with the all time highs for the S&P 500 (SPY) and keep falling short. Meaning this is proving to be a stubborn level of resistance at 4,800. Why is that happening? And when will stocks finally break above? 43 year investment veteran Steve Reitmeister shares his view including a preview of his favorite stock picks now. Read on below for the answers…

As suspected, the market is not ready to make new highs above 4,796 for the S&P 500 (SPY).
That was quite evident Thursday as stocks jumped out of bed in the morning to touch those previous highs only to find stubborn resistance with the broad market heading lower from there.
Why are stocks struggling at this level?
And what is an investor to do about it?
The answers to those vital questions will be at the heart of today’s commentary.
Market Commentary
Some investment writers will have a fairly short hand, and highly inaccurate, way to describe what happened on Thursday.
They will tell you that the CPI inflation reading was hotter than expected on Thursday morning. And that caused the stock market sell off that followed.
That is simply not true.
Here is what really happened. The CPI report came out an hour before the market open. And yet still the market leapt higher out of the gate. But once it touched the hem of the previous highs (4,796) a more than 1% intraday sell off that ensued.
That pain is not so evident in the late session bounce and modest loss for S&P 500. Yet is a lot more apparent in the -0.7% showing for the small caps in the Russell 2000 on the session.
Thus, the problem for lack of further stock advance is not about CPI report. Just a statement that investors are not prepared to breakthrough resistance to make new highs.
So, what is holding stocks back?
I discussed that in greater detail in my last commentary: When Will the Bull Market Run Again?
The essence of the story is that investors have less clarity on the next moves for the Fed than they had after the November and December meetings that sparked a tremendous end of year rally. Unfortunately, there has been a mixed bag of inflation and economic data that calls into question when rate cuts will begin.
At the earliest those cuts could come at the March 20th meeting. But I sense that the more readings we get like Thursday’s CPI report, or last Fridays stronger than expected employment report…the more likely those first cuts get pushed off to either the May 1st or June 12th Fed meetings.
Digging into the CPI reading we find that inflation was expected to come in at 3.1% yet spiked to 3.4% on this reading. Core CPI was even worse at 3.9% year over year. Just still too far away from the Fed’s target of 2%.
For the “wonks” out there you should dig into the Sticky Price resources created by the Atlanta Fed. To put it plainly, sticky inflation remains too sticky. The main elements are housing and wages that are not coming down as quickly as expected.
When you appreciate the conservative nature of the Fed…and that they state over and over again that they are “data dependent”, then its hard to look at the recent data and assume they are ready to lower rates any time soon.
Long story short, I don’t think that investors are ready for the next bull run to make new highs until they are more certain WHEN the Fed will finally start cutting rates. That delays the next upside move to March 20th at the earliest with May or June becoming all the more likely.
Hard to complain about settling into a trading range for a while given the tremendous pace of gains to end 2023. So this seems like a reasonable time for stocks to rest before making the next big move.
The upside of the current range connects with the aforementioned all time high of 4,796…but really easier to think of the lid as 4,800.
On the downside, that is a bit harder to infer. Typically trading ranges are 3-5% from top to bottom. So, for quick math let’s say around 4,600 on the bottom. This also represents the previous resistance point that took a long time to finally break above in early December.
The good news is that I expect quality stocks to prevail even in a range bound market. Meaning that last year pretty much any piece of beaten down junk was bid higher. That party is OVER!
Instead, when you have a pretty fully valued market as we have now, then there will be a greater eye towards quality of fundamentals and value proposition. I spelled that out pretty completely in last week’s article: Is 2024 Prime Time for Value Stocks?
The answer to the question posed in the headline is…YES. Meaning that 2024 is lining up nicely for value stocks.
Case in point being the early results this year with our Top 10 Value strategy up +3.70% through Wednesday’s close vs. breakeven for S&P 500 and -2.80% for the small caps in the Russell 2000.
I strongly believe that edge for value will continue as the year rolls on. And the best way to take advantage of that is spelled out in the next section…
What To Do Next?
Discover my current portfolio of value stocks packed to the brim with the outperforming benefits found in our exclusive POWR Ratings model.
This includes direct access to our Top 10 Value Stocks strategy that is hot out of the gates in 2024 with plenty more room to run.
If you are curious to learn more, and want to lean into my 43 years of investment experience, then please click the link below to get started now.
Steve Reitmeister’s Trading Plan & Top Picks >
Wishing you a world of investment success!
Steve Reitmeister…but everyone calls me Reity (pronounced “Righty”)CEO, StockNews.com & Editor, Reitmeister Total Return

SPY shares were trading at $475.88 per share on Friday afternoon, down $0.47 (-0.10%). Year-to-date, SPY has gained 0.12%, versus a % rise in the benchmark S&P 500 index during the same period.

About the Author

Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks.

The U.S. Securities and Exchange Commission (SEC) gave its approval to 11 spot bitcoin exchange-traded funds (ETFs) on January 10 after months of speculations. These newly approved ETFs diverge from previously dubbed “Bitcoin ETFs,” which were tied only to future contracts or shares of Bitcoin-entwined corporations. The current batch of sanctioned funds directly hold Bitcoins, aligning more accurately with the spot price of Bitcoin over time and offering a relatively simplified means of investment in the cryptocurrency compared to independent crypto wallets.
This endorsement by the SEC can be seen as a significant validation of Bitcoin’s prospective mainstream status. Cryptocurrency optimists are considering this regulatory green light as a potential booster for BTC’s price, possibly catapulting it to a six-figure high.
Since October’s end, with the growing buzz around the SEC’s decision, BTC has climbed over 60% and is currently trading at an almost two-year peak. Despite much anticipation, the market response post-approval remained muted, with the large-cap token witnessing a marginal rise on the following day – a pattern typically observed when investors ‘buy the rumor and sell the news.’
In the aftermath of the first wave of ETFs commencing trading on January 11, BTC’s price plunged, falling nearly 8% in just five days, estimating a value of roughly $42,700.
Predicting the volatility of BTC’s price remains challenging. Its historical best stands at approximately $69,000 during the apex of the crypto surge in November 2021, yet it plummeted to a mere $16,000 by 2022 end. Factors such as increasing interest rates deterring speculative investments, failure of various high-profile tokens and exchanges, and rising apprehensions over stricter crypto regulations largely contributed to this plunge.
However, 2023 witnessed BTC’s price soaring over 150% to over $42,000, spurred on by slower rate hikes and renewed market interest in cryptocurrency. This resurgence was also fueled by the anticipation of the SEC’s approval of Bitcoin’s maiden spot-price ETFs.
Consequently, the recent setback only wiped out BTC’s gains earned at the onset of 2024. The dip suggests quick-profit short-term traders possibly inflating the digital currency’s price in anticipation of recent ETF approvals, only to capitalize on the profits following the initial excitement.
Market observation currently highlights a heated contest between bullish and bearish forces. A significant recovery appears elusive for buyers of the currency, hinting at sustained pressure from bearish influences. Moreover, BTC is trading below the 10-day and 50-day moving averages, indicating a downturn and reassertion of control by bearish forces.
Typically, if BTC dips below the $42,000 threshold, accelerated selling could follow, potentially driving its value further down. As for those bullish on the asset, they will need to push BTC above the 10- and 50-day EMA to avert a negative outcome.
Moreover, Bloomberg ETF analyst Eric Balchunas said that the newly launched ETFs witnessed inflows of $1.4 billion. On the contrary, the Grayscale Bitcoin Trust (GBTC) saw an outflow of $579 million. However, the net inflows in two trading sessions across the ETFs were $819 million.
This initial flurry of activity aligns with James Seyffart’s earlier forecasts. He projects that Bitcoin ETFs could succeed in drawing in around $10 billion within their inaugural year on the market.
But are there any long-term catalysts?
While BTC’s price adjusts in response to the pressure of recent ETF approvals, prospects indicate a significant potential for the cryptocurrency’s growth.
The primary outcome of the ETF approvals is to enhance accessibility for large-scale institutional investors to accumulate Bitcoin in an open market setting. Investment powerhouse Fidelity, already having launched the Fidelity Wise Origin Bitcoin Fund (FBTC), has projected a soaring Bitcoin value, with expectations of a $1 billion valuation by 2038.
A similarly bullish stance lives within Standard Chartered, whose strategists postulate that spot ETFs could generate between $50 billion and $100 billion in inflows for Bitcoin within this year alone. They further predict a stunning price peak of $200,000 by the close of 2025.
Ark Investment’s Cathie Wood, managing the recently approved Ark 21Shares Bitcoin ETF (ARKB), anticipates that the price of Bitcoin could hit $1.5 million by 2030. But why such astronomical levels? Her projections stem from a belief in BTC’s value growing with increased institutional adoption, positioning it not merely as a preferred choice for encryption enthusiasts but also acting as a pivotal tool in robust, institutional-grade risk diversification.
The fixed supply cap on Bitcoin at 21 million coins sharply contrasts the inflating supply of fiat currencies, thus potentially amplifying its appeal as a deflationary asset.
The projected trajectory primarily hinges on the pronounced network effect within BTC, where its value heightens with an increase in blockchain users and transactions – supported by ongoing technological advancements and enhanced accessibility.
While certain aspects of these long-term forecasts may appear overly optimistic, it is logical to conclude that Bitcoin ETF approvals will introduce a modicum of stability to its volatile pricing structure. This stabilization could prompt return investment from larger entities and propel BTC prices closer to their historical peak levels.
Also, past trends hint toward any halving year being a catalyst for a bullish surge, traditionally followed by a bull run in the succeeding year. This pattern, chiefly attributed to expanding public interest, augmented risk activity, and heightened discourse surrounding digital currency futures, places Bitcoin squarely at a vantage point. Potential factors such as reduced Bitcoin supply due to halving and the prospects of fresh investments via ETFs could introduce unprecedented market dynamics.
Moreover, anticipation of interest rate reductions in the U.S. intensifies predictions for bullish BTC pricing in 2024. Furthermore, the looming shadows of sticky inflation may steer a wave of investors toward acquiring Bitcoin as safeguards against the devaluation of their fiat currencies.
Bottom Line
Pre-launch speculation surrounding Bitcoin spot ETFs had heightened anticipation. However, when regulatory approval did not spur an upward reaction, traders may have chosen to capitalize on profits, leading to a substantial market recoil.
Not all of the financial world is swayed by optimistic BTC price targets. For instance, former PIMCO CEO Mohamed El-Erian indicated in a recent post that although the SEC’s approval could be a pivotal moment for cryptocurrency, it would unlikely broaden Bitcoin’s utilization. The outlook remains more constrained.
The SEC itself voices reservations about BTC’s investment potential. In a separate announcement, Chair Gary Gensler dubbed Bitcoin as “primarily a speculative, volatile asset that’s also used for illicit activity including ransomware, money laundering, sanction evasion, and terrorist financing.”
While the markets can be unpredictable, lower price points might draw in long-term investors who keep a close watch on the Bitcoin halving and institutional influx into Bitcoin spot ETFs over the forthcoming weeks.
Despite the prevailing belief that institutional monetary allocation will take time to transpire, it is argued that the subsequent price dip wasn’t exactly favorable to capital inflows. Agreeingly, there was substantial conjecture around the concept of selling the fact, so maybe there would be a twist when or if Bitcoin prices begin to ascend again. But at this juncture, one would need to see it to believe it!
The ETFs have yet to gather steam in terms of trading volume fully. Investment giant  BlackRock has reportedly bought a staggering 11,500 BTC from the available supply during the latest dip since the launch of its spot Bitcoin ETF. This amount is significant, considering that only 900 BTCs are issued daily. BlackRock’s purchase effectively represents about 13 days’ worth of Bitcoin production taken on by a single entity, creating speculation of supply concerns.
The presumption pointed toward an immediate and dramatic financial inflow into the Bitcoin ETF may be misguided. There has always been the potential for Bitcoin to experience consistent – even if relatively slow – capital inflows.
The circumstance represents a quintessential pattern of overestimating short-term impacts while concurrently underestimating long-term potentials. The situation underscores a transition phase in market realignment, signaling a need for cautious optimism.
Given the current landscape, investors should proceed with caution venturing into this space.

Boeing Company’s (BA) best-selling MAX 737 aircraft experienced yet another setback last Friday as an Alaska Airlines-operated flight was forced to make an emergency landing. With 177 passengers onboard, the incident took place shortly after departed from Portland, Oregon. A cabin panel in the newly-minted 737 MAX 9 aircraft unexpectedly detached, resulting in a wide opening in the airplane’s side. Despite the distressing circumstances, no serious injuries or fatalities were recorded. Digital clips documenting the alarming mishap made their rounds online.
The 737 MAX 9 is one of four variants of the renowned aircraft model; many of its kind were subsequently grounded in response to the incident. This move was triggered by an earlier ordered inspection that had unveiled missing components in two variants.
In 2023, the U.S. aircraft manufacturer had an impressive run as it delivered 528 aircraft and booked 1,314 net new orders after allowing for cancellations, up from 480 deliveries and 774 net new orders in 2022, which was its third-best year.
When it came to dispatching the narrow-bodied 737 jets, BA met its revised target by delivering 396 units – accomplishing its adjusted objective of at least 375 single-aisle planes. However, it fell slightly short of its initial target of delivering between 400 to 450 jet units.
So far, the U.S. is the top recipient of 737 MAX, with most orders still to be fulfilled. Given the U.S.’s significant reliance on these planes, particularly the 737 MAX 9 variant, the fallout from this recent event is expected to affect the region severely.
Amid increasing scrutiny, regulators from the Federal Aviation Administration (FAA) have ordered a temporary grounding of most 737 MAX 9 planes awaiting an investigation into the incident. The directive, which primarily affects around 171 airplanes, resulted in scores of flight cancellations, notably from domestic U.S. operators Alaska Airlines and United Airlines.
Both carriers have discovered “loose bolts” on the doors of the MAX 9 models following a global inspection organized by BA in December. With each having a sizeable fleet of the same – Alaska Airlines owns 65, and United Airlines owns 78 – they have since halted all aircraft flights.
On the issue, BA’s CEO, Dave Calhoun, admitted to a “quality escape,” whereby the compromised plane somehow managed to pass all checks and validations. Despite the possible origins being traced back to aviation supplier Spirit Aerosystems, Mr. Calhoun segregated no details stating that the issue arose under BA’s purview, too; he maintained a collective responsibility toward rectifying this lapse.
Further emphasizing the seriousness of this quality lapse, Jennifer Homendy, the Chairwoman for the National Transportation Safety Board (NTSB), firmly recommended withholding these aircraft from service until the root cause is ascertained completely. This, she stated, would dictate the necessary inspections and repairs to prevent any such mishap from reoccurring.
It is not the first time BA’s MAX 737 aircraft encountered issues…
Over the past five years, BA has been contending with persistent quality and safety challenges, resulting in the prolonged grounding of certain aircraft and the suspension of deliveries.
Before the pandemic, catastrophic airplane crashes ripped the cover off a scandalous situation within the company. The 737 Max design was involved in two tragic accidents. The first took place in Indonesia in late 2018, and the second occurred in Ethiopia in March 2019. These combined incidents resulted in the loss of 346 passengers and crew members across both flights, which consequently led to a 20-month suspension of the company’s best-selling jets, costing BA upwards of $21 billion.
This chain of events sparked one of the most expensive corporate scandals in history, as subsequent investigations and publications, such as ‘Flying Blind: The 737 Max Tragedy and the Fall of Boeing’, laid bare BA’s close ties with the FAA.
Late last month, BA urged airlines to carry out inspections on 737 Max fleets due to a potentially loose bolt found in the rudder system, discovered after potential issues with a key aircraft part were raised by an airline.
However, BA’s issues extend beyond the troubled 737. The company found it necessary to suspend deliveries of its 787 Dreamliner twice: once for about a year starting in 2021 and again in 2023, attributed to concerns regarding quality as identified by the FAA.
Adding salt to the wound was the forced grounding of BA’s 777 jet following an engine failure during a United flight, resulting in debris from the engine raining onto residential areas and the ground below.
The Impact…
The aerospace titan continues to command a valuation of over $134 billion, which, albeit impressive, signifies a decline of over $100 billion since its all-time high valuation of $248 billion in 2019, a stark consequence of the fatal scenarios before the pandemic.
 
BA’s stock fell victim to the recent issues and wiped out over $9 billion in market value.
CEO Dave Calhoun is striving to execute a plan to make a strong comeback by 2024, fighting the tide of reputational damage that ensued from the Max scandal. The Alaska Airlines incident poses another significant threat to BA’s reputation, further straining relationships with airlines. However, it is crucial to note that BA shares a duopoly with Airbus in the marketplace worldwide, which would likely act as a buffer for the enterprise.
Bank of America analysts led by Ronald Epstein expressed their concern about what they describe as a “worrying start to the new year.” They anticipate that the recent incident will likely chip away at the precarious confidence surrounding the 737 Max. However, they predict that the impact on BA’s performance this year won’t be significant, given the duopoly held by BA and its European counterpart, Airbus SE, in commercial aircraft.
BA and Airbus SE have cornered about 90% of the total global commercial aircraft market share and occupy similar roles in both American and European economies. This situation leaves airlines, notably those in America, with limited alternatives to BA’s aircraft, with Airbus already operating at full capacity. Industry experts are confident that the recent Alaska incident will not drastically impact 737 Max orders due to the duopolistic structure of the industry.
BA, though currently in short supply, is making gradual yet consistent progress in addressing the internal shortcomings that contributed to its present state.
The recent Alaska mishap presents a formidable risk of disrupting the delivery of Max 9 to China and influencing the certification process of BA’s newest Max 7 and Max 10 aircraft. This incident could trigger reduced demand and further cancellations for BA’s 737 MAX planes as airlines and consumers question their safety and reliability.
Beyond tarnishing BA’s reputation and credibility, the Alaska flight debacle could also prompt lawsuits and inquests from passengers, airlines, regulatory bodies, and shareholders alike. Consequently, the company may come under increased scrutiny, escalating the pressure to ensure the safety and superior quality of its fleet.
Investors are advised to take note of two crucial military contracts recently landed by Boeing, which predict a prosperous outlook for the company. On November 28, the United States Air Force (USAF) commissioned an order for 15 Boeing KC-46A Pegasus Tankers — modeled on the Boeing 767 — with the contract valued at approximately $2.3 billion.
Adding to this, BA has been presented with a Foreign Military Sales Letter of Offer and Acceptance from the Canadian government for an undisclosed number of Boeing P-8A Poseidons. These aircraft are based on the next-generation Boeing 737-800 model. Though BA did not disclose the cost of the contract, the Canadian government estimates it to lie around CAD10.4 billion ($7.7 billion).
This acquisition, as spotlighted by BA, is projected to stimulate benefits amounting to almost 3,000 jobs and $358 million per annum in economic output for Canada, following an independent study conducted by the Ottawa-based Doyletech Corporation in 2023.
Bottom Line
The subsequent impact of the Alaska Airlines incident on the delivery of BA’s 737 Max 9 aircraft largely hinges on the outcome of ongoing investigations by the FAA, the NTSB, and international regulatory bodies.
The predicament poses a potential reputational threat for BA, emphasizing a need for caution and prudence in its actions. If the 737 Max series continues to face complications, this could trigger a loss of faith among aviation customers, adversely affecting sales.
Aircraft manufacturing, being a capital-intensive sector necessitating specialized technical expertise, possesses strategic importance for the U.S. government. The commercial sector is expected to grow at a pace surpassing global GDP, as per BA. Leading manufacturing entities, BA and Airbus, enjoy booked manufacturing capacities spanning several years. Their customer base displays a reluctance to alter preferences due to potential waits for newer models and the additional operational expenses arising from handling a diverse fleet.
Indeed, despite grappling with issues, BA continues to experience robust demand for its aircraft. Additionally, it sustains a thriving space and defense enterprise. The recent groundings might not inflict extensive damage, given that BA and its supplier Spirit AeroSystems may be able to confirm that these incidents don’t signal broader systemic problems.
Furthermore, BA has a backlog of over 5,100 planes, valued at $469 billion, at the third quarter’s end, with MAXs constituting a major portion of these undelivered aircraft.
Still, crises have detrimentally impacted BA’s standing. Although revenues are on an upswing, analysts forecast that the firm’s top line for fiscal 2023 and 2024 of $76.69 billion and $91.08 billion, respectively, will fall short of 2018’s remarkable $101.1 billion. Similarly, loss per share is projected at $6.21 for the fiscal year 2023, while EPS for the fiscal year ending December 2024 is anticipated to hit $4.06.
The company’s shares have experienced a downturn, with investors losing over 14% year-to-date and about 37% on their investment over the past five years. Moreover, the company’s debt as of September 30, 2023, exceeded $47 billion, nearly 4.7 times higher than five years back. This drags BA into an unfavorable paradox where it stands to gain largely yet continues a downward trajectory.
Under these circumstances, investors are advised to wait for a better entry point in the stock.

During the 12 months ended December 31, 2023, Alibaba Group Holding Limited (BABA) repurchased a total of 897.9 million ordinary shares for $9.5 billion. This includes the purchase of 292.7 million ordinary shares for a total of $2.9 billion during the fourth quarter.
The shares were purchased in both the U.S. and Hong Kong markets under its share repurchase program, the company said in a filing.
The Chinese e-commerce giant said that it had 20 billion ordinary shares outstanding as of December 31, 2023, compared to 20.7 billion ordinary shares from December 31, 2022. This indicates a net reduction of 3.3% in its outstanding shares.
The remaining amount that the company’s Board had authorized for its share repurchase program, which is effective through March 2025, was $11.7 billion as of December 31, 2023.
When a company buys back its own shares from the marketplace, it reduces the total number of shares outstanding. As a result, the value of the remaining shares increases. The company’s Board may feel that its shares are undervalued, making it a favorable time to purchase them. Meanwhile, investors often perceive a buyback as an expression of confidence by the management.
Therefore, in the case of Alibaba, a more than 3% reduction in outstanding shares will positively impact its shareholder value and give a significant boost to the stock’s performance this year.
Now, let’s review several other factors that could influence BABA’s performance in the near term:
Strategic Reorganization
Last year in March, BABA announced plans to split its business into six independent units in a strategic move to unlock shareholder value and advance competitiveness.
“This transformation will empower all our businesses to become more agile, enhance decision-making, and enable faster responses to market changes,” said Daniel Zhang, former CEO and chairman of Alibaba Group.
Under the restructuring, Alibaba will be split up into six newly formed business units: Cloud Intelligence Group, Taobao Tmall Commerce Group, Local Services Group, Cainiao Smart Logistics, International Digital Commerce Group, and Digital Media and Entertainment Group.
Each business unit will be overseen by its own chief executive and board of directors. Five of the new business clusters “will also have the flexibility to raise outside capital and potentially to seek its own IPO,” the company said.
As per the latest update on business group spin-offs and capital raisings, the recent expansion of U.S. restrictions on the export of advanced computing chips has created uncertainties for the Cloud Intelligence Group’s prospects.
The company believes that a complete spin-off of Cloud Intelligence Group may not achieve the intended effect of shareholder value enhancement. Correspondingly, it decided not to proceed with a full spin-off and instead will focus on developing a sustainable growth model for Cloud Intelligence Group under fluid circumstances.
In terms of Alibaba International Digital Commerce Group, it is in preparation for external fundraising. Further, Cainiao Smart Logistics Network Limited applied for an initial public offering in Hong Kong and submitted its AI filing to the Hong Kong Stock Exchange.
Capitalizing on the AI Boom
BABA’s newly appointed CEO, Eddie Wu, stressed putting AI and user experience at the top of the company’s priorities to reclaim customers and market share in an immensely competitive arena.
“Over the next decade, the most significant change agent will be the disruptions brought about by AI across all sectors,” Wu said in his note, reviewed by Bloomberg News. “If we don’t keep up with the changes of the AI era, we will be displaced.”
Wu added that Alibaba will reinforce strategic investments in the areas of AI-driven tech businesses, internet platforms, and its global commerce network.
On January 9, 2024, Alibaba.com, a leading platform for global B2B e-commerce and part of Alibaba International Digital Commerce Group, introduced its latest Smart Assistant features powered by AI at CES in Las Vegas, NV.
The Smart Assistant is an AI-powered sourcing tool that caters to newcomers and seasoned entrepreneurs in the dynamic world of global commerce, helping them discover new opportunities, stay up-to-date on trends, seamlessly track orders and more in a single, efficient touchpoint.
Also, in October 2023, Alibaba launched an upgraded version of its AI model as the Chinese tech giant looks to challenge its U.S. rivals, including Amazon.com, Inc. (AMZN) and Microsoft Corporation (MSFT).
BABA launched Tongyi Qianwen 2.0, its latest large language model (LLM). Tongyi Qianwen 2.0 “demonstrates remarkable capabilities in understanding complex instructions, copywriting, reasoning, memorizing, and preventing hallucinations,” the company said. 
Alibaba stated that Tongyi Qianwen 2.0 is a “substantial upgrade from its predecessor,” which was introduced in April. Also, the Hangzhou-based company announced the GenAI Service Platform, which allows companies to build their own generative AI applications using their own data.  
Solid Last Reported Financials
For the fiscal 2024 second quarter that ended September 30, 2023, BABA reported revenue of $31.04 billion, an increase of 8.5% year-over-year. The revenue slightly surpassed analysts’ estimate of $30.84 billion. Alibaba International Digital Commerce Group rose 53% year-over-year, while Cainiao Smart Logistics Network Limited and Local Services Group grew 25% and 16%, respectively.
Alibaba’s income from operations increased 33.6% from the year-ago value to $4.60 billion. The company’s adjusted EBITDA came in at $6.75 billion, up 13.7% from the prior year’s quarter. Also, its adjusted EBITA rose 18% year-over-year to $5.87 billion, primarily contributed by revenue growth and improved operating efficiency.
Furthermore, the Chinese tech giant’s non-GAAP net income for the quarter came in at $5.51 billion, an increase of 18.8% from the prior year’s period. It posted non-GAAP net income per share of $2.16, compared to the consensus estimate of $2.09, and up 21% year-over-year.
As of September 30, 2023, Alibaba’s cash and cash equivalents, short-term investments and other treasury investments, included in equity securities and other investments on the consolidated balance sheets, were $85.60 billion. During the quarter ended September 30, 2023, cash inflows from operating activities were $6.75 billion, up 4% from the same quarter of 2022.
Also, the company’s free cash flow was $6.20 billion, an increase of 27% year-over-year.
Impressive Historical Growth
Over the past five years, BABA’s revenue and EBITDA grew at CAGRs of 24.1% and 15.5%, respectively. The company’s net income and EPS rose at respective CAGRs of 17% and 17.3% over the same timeframe. Its levered free cash flow improved at 8.2% CAGR over the same period.
Moreover, the company’s tangible book value and total assets increased at CAGRs of 34.2% and 17% over the same timeframe, respectively.
Favorable Analyst Estimates
Analysts expect BABA’s revenue for the fiscal year (ending March 2024) to grow 8% year-over-year to $133.38 billion. The consensus EPS estimate of $9.20 for the ongoing year indicates an 18.6% year-over-year increase. Moreover, Alibaba has surpassed the consensus EPS estimates in each of the trailing four quarters, which is impressive.
For the fiscal year 2025, the company’s revenue and EPS are expected to increase 8.9% and 7.8% from the previous year to $145.27 billion and $9.92, respectively.
Low Valuation
In terms of forward non-GAAP P/E, BABA is currently trading at 7.83x, 50.1% lower than the industry average of 15.68x. The stock’s forward EV/Sales of 1.11x is 10.7% lower than the industry average of 1.24x. Likewise, its forward EV/EBITDA of 5.17x is 48.2% lower than the industry average of 9.99x.
In addition, the stock’s forward Price/Book multiple of 1.18 is 53.8% lower than the industry average of 2.55. Also, its forward Price/Cash Flow of 7.20x is 27.2% lower than the industry average of 9.88x.
Robust Profitability
BABA’s trailing-12-month EBIT margin of 14.66% is 92.9% higher than the 7.60% industry average. Moreover, the stock’s trailing-12-month levered FCF margin and net income margin of 14.17% and 56.87% are considerably higher than the industry averages of 5.37% and 4.52%, respectively.
Furthermore, the stock’s trailing-12-month ROCE, ROTC, and ROTA of 13.35%, 6.34% and 7.32% favorably compared to the respective industry averages of 11.40%, 6.05%, and 4%. Also, its trailing-12-month gross profit margin of 37.73% is 6.6% higher than the industry average of 35.38%.
Stock Upgrades
On November 24, 2023, Goldman Sachs analyst Ronald Keung maintained a Buy rating on BABA shares, with a price target of $134, suggesting that shares are anticipated to surge by nearly 73% over the coming year. The analyst stated that its FCF generation will fund ongoing buybacks and dividends. Also, he continues to view the stock’s valuation as attractive.
Bottom Line
BABA beat second-quarter analyst expectations for earnings and revenue. Revenue grew approximately 9% year-over-year in the last reported quarter, and the company posted expanded margins as its income from operations rose an impressive 24%. Also, the stock’s valuation is extremely attractive.
Alibaba further pleased its investors with last year’s announcement of plans to split its business into six separate units in a move to unlock more shareholder value and foster competitiveness. Also, the company continues to leverage AI across its operations. Its AI-powered systems optimize its pricing, marketing, and logistics, ultimately resulting in enhanced user experience.
As per Statista, the AI market in China is projected to reach a staggering $38.89 billion in 2024. In global comparison, the largest market will be in the U.S. ($106.50 billion this year). China’s AI market is further expected to show a CAGR of 18%, resulting in a market volume of $104.70 billion by 2030.
Alibaba’s AI leadership positions it to capitalize on the significant growth potential of the Chinese AI market. Also, the company has introduced its upgraded AI model to compete with its U.S. rivals, such as AMZN and MSFT.
“Through a more flexible organizational governance mechanism, we aim to capture brand new opportunities from the ongoing AI technological transformation and create more value for our customers,” said CEO Eddie Wu in BABA’s latest earnings release.
Notably, Alibaba’s 3.3% reduction in its outstanding shares because of a share buyback program will further create a greater value for its shareholders. Given BABA’s solid financials, accelerating profitability, attractive valuation, and bright growth prospects, this tech stock appears an ideal buy now.

Over the past year, generative artificial intelligence (GenAI) advancement has emerged as a key transformation within the tech industry. While conventional applications of AI continue to influence day-to-day activities like facial recognition, voice assistant technology, and e-commerce recommendations, GenAI presents breakthroughs in generating original content. This innovation transcends mere data analysis and interpretation.
The surge in GenAI technology is reinvigorating the tech industry following a period of reduced growth due to rising interest rates and the fallout from the pandemic boom. The industry grappled with lower earnings and layoffs throughout 2023.
Despite economic challenges, the industry saw unprecedented investments in GenAI startups – a stellar $10 billion globally in 2023, exhibiting a significant 110% surge as compared to 2021. The launch of OpenAI’s ChatGPT tool has particularly stimulated this growth, inciting an influx of venture capital funds into the groundbreaking sector.
Despite grappling with IT challenges in 2023, companies worldwide have actively been seeking opportunities to leverage GenAI for business transformation. According to the International Data Corporation, companies invested over $19.4 billion in GenAI solutions. As related infrastructural hardware, software, and IT and business services spending is set to double in 2024, estimates suggest an exponential rise to $151.1 billion by 2027, growing at an 86.1% CAGR.
Nevertheless, the widespread adoption and execution of GenAI remain weighed down by unanticipated complexities and concerns. The disruption of conventional operational structures and anxieties around employee and enterprise adaptability represent significant hurdles. Given geopolitical considerations, apprehensions around the potential misuse of technology are also prevalent. Nevertheless, these challenges do not obscure several opportunities that lie ahead.
As the world stands on the brink of an AI-driven transformation, the investment world is abuzz, anticipating the robust AI stocks poised to generate substantial wealth in 2024. As we delve deeper to discuss the AI behemoths, the investment potential of these enterprises can be deciphered from the intricate narratives of market dominance and innovative feats enshrined in their quarterly reports and strategic trajectories.
Some insights into each company’s AI initiatives and growth potential are discussed below:
Microsoft Corporation (MSFT)
MSFT has been leading the charge in the GenAI revolution, largely credited to its substantial investment into OpenAI – the developer of ChatGPT. The integration of AI into a broad cross-section of its products and services has also played a significant role. The company had an excellent operational year in 2023, with anticipations for growth rate acceleration extending into 2024.
During the fiscal year of 2023, MSFT made extensive investments in GenAI and Azure cloud deployment, with predictions indicating a similar trend for this year. With easing macroeconomic challenges and increased focus on AI cloud services, CEO Satya Nadela remains optimistic about the long-term growth driven by OpenAI, the AI-backed startup.
MSFT’s AI strategy is seeing fruition, with its intelligent cloud sector experiencing robust double-digit growth. This growth is largely attributed to AI advancements, contributing to a 21% increase in server products and cloud services in the fiscal first quarter of 2024.
The future for MSFT looks promising as AI integrations are only beginning to emerge. Marking one of the most significant shifts in the past three decades, MSFT commenced the new year with a major announcement reflecting the increasing influence of AI in daily life.
The tech giant launched Copilot, a suite of AI protocols to enhance productivity while using its products and services. The company’s first quarter (ended September 30) financial results for fiscal 2024 revealed that 40% of Fortune 100 companies had adopted Copilot through MSFT’s early access program.
With Copilot now available to its enterprise customers, investors are anticipating the manifold impacts of AI on MSFT’s results. Further expanding MSFT’s AI footprint, the “Copilot” key will be incorporated into the Windows PC keyboard, allowing users to launch Copilot instantly.
Furthermore, CFO Amy Hood suggests that the next-GenAI business could potentially be the swiftest-growing $10 billion business in history, with a bulk of this growth propelled by cloud technology.
During MSFT’s fiscal first quarter of 2024, Azure’s revenue saw a 29% year-over-year growth, surpassing some of its competitors. MSFT attributed “roughly three points” of Azure’s growth to the increased demand for AI services.
Research firm Canalys reported that before the recent uptick, Azure’s cloud growth had observed seven consecutive quarters of slower year-over-year growth. The report also indicated an increased demand following the debut of Copilot in September, reaffirming MSFT’s stance that AI is driving its current growth surge.
Analysts expect MSFT’s revenue and EPS to increase 15.2% and 5.8% year-over-year to $60.87 billion and $2.59, respectively, in the fiscal third quarter ending March 2024.
NVIDIA Corporation (NVDA)
The semiconductor industry leader NVDA’s considerable recognition for its AI advancements was evident when Microsoft-backed OpenAI’s ChatGPT seized global attention in late 2022 – a tool reportedly trained using 30,000 of NVDA’s A100 data center GPUs. Not surprisingly, the demand for NVDA’s AI chips increased dramatically, with its flagship product, H100 data center GPU – achieving considerable success by 2023.
NVDA has been capitalizing on AI’s substantial growth, high-performance computing, and accelerated computing, which have effectively bolstered its Compute & Networking revenues. The surge in demand for GenAI and large language models using GPUs based on NVDA’s Hopper and Ampere architectures is forecasted to enhance its data center end-market business.
NVDA witnessed an upsurge in Hyperscale demand while also noticing a robust uptake of AI-based smart cockpit infotainment solutions. Its strategic collaborations, particularly with Mercedes-Benz and Audi, are projected to essentially drive NVDA’s knack in autonomous vehicles and other automotive electronics spaces.
NVDA would be working with the Foxconn Group in a pioneering move toward the inception of modern factories and industries, with an emphasis on leveraging AI in manufacturing processes.
NVDA anticipates a shipment of 2 million units of the H100 model by 2024. The current fiscal year foresees the company securing revenues of $58.80 billion, suggesting that H100 could be a significant revenue catalyst in the upcoming fiscal year.
Nevertheless, NVDA has the potential to substantially increase its H100 shipments in the coming year due to the supportive efforts of its supply chain partners alongside the introduction of upgraded chips. Reinforcing this optimism, the semiconductor maker projects fourth-quarter fiscal 2024 revenues to hit $20 billion.
However, investors must remain aware of the potential impact geopolitical tensions may have on NVDA’s ability to maintain its powerful performance. Historically, China has been a major customer for NVDA, holding over 90% of China’s $7 billion worth AI chip market. U.S. export restrictions on high-end chips to China puts approximately $5 billion worth of orders at risk.
Also, NVDA currently trades at a forward non-GAAP P/E ratio of 40.09, illustrating that investors are paying a significant premium, potentially valuing the company’s stock. The forward PEG ratio of 0.95 can appear deceptively enticing, as though the stock is fairly valued; it simultaneously intimates that any downward revisions to the EPS might precipitate a substantial drop in stock value. So far, analysts have revised EPS estimates upwards. However, it should be noted that this trend may take a U-turn if these predictions fail to materialize fully.
UiPath Inc. (PATH)
PATH, identified as a forerunner in the workflow automation and process optimization space, effectively helps streamline manual operations via a user interface (UI) and application programming interface (API)-based automation.
PATH continues to incite discussion around its potential affiliation with GenAI and the implications this could have on its business growth or reduction. On the one hand, the prospective integration of gen AI into PATH’s pre-existing platform is considerable. Equally compelling, however, is the suggestion that such AI technology could simplify some of PATH’s specialist offerings.
The company announced the implementation of several AI-powered services to spur significant growth in its revenue by 2024. These advancements include enhanced features for their existing AutoPilot services and augmented cross-platform connectivity capabilities.
AutoPilot for Assistant, an AI auxiliary tool, is tasked with facilitating daily to-do lists. It employs cutting-edge GenAI alongside Specialized AI to ensure secure interaction with various systems and documents. Moreover, AutoPilot for Studio could augment productivity among seasoned professionals and novice developers by allowing them to integrate natural language into their projects.
The firm’s PATH Clipboard AI achieved notable recognition in November 2023 when it was awarded a place amongst TIME’s Best Inventions of 2023 in the Productivity segment. This notable AI tool eradicates the need for labor-intensive manual copy-pasting tasks, significantly streamlining productivity.
Longer-term projections see PATH well positioned to develop a foundational model designed to comprehend processes, tasks, screens, and documents – a method that drives automation.
Moreover, the software enterprise reported a robust fiscal result in its third quarter that ended November 30, 2023, leading it to achieve significant expansion in December. The dollar-based net retention rate during this period was an impressive 121%, indicating that existing customers had increased their purchases from PATH by 21% compared to the year-ago quarter – a testament to PATH’s beneficial automation suite.
Initial indications suggest that GenAI may not overcome more potent task-specific platforms such as PATH just yet. Meanwhile, PATH stands to direct GenAI toward a positive rather than negative impact. Long-term certainty is still elusive, necessitating continuous innovation from PATH. Investors would do well to remain informed about the evolving AI narrative as it concerns PATH and other enterprise Software as a Service (SaaS) companies.
William Blair analysts initiated research coverage on PATH with an ‘outperform’ rating. PATH focuses on complex, enterprise-grade processes, making its platform indispensable for its clientele. This is reflected by its high gross retention rate of 97%.
Analyst forecasts indicate a strong showing for PATH over the following years with continued growth and margin expansion. Furthermore, analyst Jake Roberge predicts an increase in the company’s EBITDA from $84 million in 2023 to a staggering $223 million in 2024 and up to $280 million by 2025.

Several sugar-sweetened drinks are packed with calories, which provide little to no nutritional value and can lead to chronic diseases, including obesity, heart disease, cancer, tooth decay, and type 2 diabetes. Further, higher consumption of sugary beverages has been associated with an increased risk of premature death.
According to a 2020 study published in the Journal of the American Heart Association, even one serving daily of a sugary soft drink is linked with a higher risk of cardiovascular disease.
Reducing Consumption of Sugar-Sweetened Beverages
Nearly nine U.S. jurisdictions and over 50 countries have implemented some form of consumer tax on sugar-sweetened drinks, particularly by taxing distributors who then pass the cost along to consumers, said Author Scott Kaplan, an assistant professor of economics at the US Naval Academy in Annapolis, Maryland.
Some U.S. cities have enacted taxes on sugary drinks at checkout, typically at the rate of 1% to 2%, Kaplan added. Other cities tax those beverages by the ounce, which increases the overall price of the product.
“Maybe you spend $1 on a 12-ounce can of soda,” he said. “If it’s a 2 cent per ounce tax, that’s an additional 24 cents on your dollar.”
The analysis, published Friday in JAMA Health Forum, evaluated per-ounce tax plans by ZIP code in Boulder, Colorado; Oakland, California; Philadelphia; Seattle; and San Francisco. The study analyzed how consumers change their consumption in response to price changes.
According to this new analysis of restrictions implemented in five U.S. cities, increasing the price of sugar-sweetened sodas, coffees, teas, and energy, sports, and fruit drinks by an average of 31% lowered consumer purchases of those drinks by a third.
“For every 1% increase in price, we found a 1% decrease in purchases of these products,” Kaplan said. “The decrease in consumer purchases occurred almost immediately after the taxes were put in place and stayed that way over the next three years of the study.”
William Dermody, Vice President of Media and Public Affairs for the American Beverage Association, told CNN that such taxes are “unproductive” and hurt consumers, small business, and their employees.
“The beverage industry’s strategy of offering consumers more choices with less sugar, smaller portion sizes and clear calorie information is working – today nearly 60% of all beverages sold have zero sugar and the calories that people get from beverages has decreased to its lowest level in decades,” Dermody added.
4 Beverage Stocks Which Might Be Vulnerable in the Aftermath of Raised Sugary Drink Prices
The Coca-Cola Company (KO), a world-famous beverage company, could face the heat after the impact of the sugar tax. Evolving consumer preferences with an enhanced focus on health and wellness coupled with sustainability have pushed soda makers across the globe to de-emphasize diet branding as they sharpen their focus on zero-sugar offerings.
KO sells its products under the Coca-Cola, Diet Coke/Coca-Cola Light, Cola Zero Sugar, Fanta, Sprite, and other brands. The company is constantly transforming its portfolio, from reducing sugar in its drinks to bringing innovative new products to the market.
Consumers worldwide are also turning to sparkling water as the low-sugar, low-calorie substitute for soda and other sugary drinks. On October 26, 2023, KO announced that its 500 ml sparkling beverage bottles in Canada will be made with recycled plastic by early 2024. This marked the first time sparking drinks will be sold in bottles made from 100% recycled plastic across the country.
Coca-Cola paid a dividend of 46 cents ($0.46) to shareholders on December 15, 2023. The beverage company has raised its dividend for 61 consecutive years. Its annual dividend of $1.84 translates to a yield of 3.08% on the current share price. The company’s dividend payouts have increased at a 3.4% CAGR over the past five years.
KO’s trailing-12-month gross profit margin of 59.14% is 75.4% higher than the 33.72% industry average. Likewise, its 31.46% trailing-12-month EBITDA margin is 179.4% higher than the industry average of 11.26%. Also, the stock’s 23.92% trailing-12-month net income margin is significantly higher than the industry average of 4.90%.
For the third quarter that ended September 29, 2023, KO’s non-GAAP net operating revenues increased 7.8% year-over-year to $11.91 billion. Its non-GAAP gross profit grew 10.2% year-over-year to $7.20 billion. Its non-GAAP operating income rose 8.5% from the previous year’s quarter to $3.54 billion.
In addition, the beverage giant’s non-GAAP net income came in at $3.21 billion, or $0.74 per share, up 6.6% and 7.2% year-over-year, respectively.
“We delivered an overall solid quarter and are raising our full-year topline and bottom-line guidance in light of our year-to-date performance,” said James Quincey, Chairman and CEO of The Coca-Cola Company.
As per the updated full-year 2023 guidance, KO expects to deliver non-GAAP revenue growth of 10%. The company’s non-GAAP EPS growth is expected to be 7% to 8%, versus $2.48 in 2022. It further anticipates generating a non-GAAP free cash flow of nearly $9.50 billion.
Analysts expect KO’s revenue and EPS for the fourth quarter (ended December 2023) to increase 4% and 7.6% year-over-year to $10.59 billion and $0.48, respectively. Moreover, the company surpassed consensus revenue and EPS estimates in each of the trailing four quarters.
Another beverage stock, PepsiCo, Inc. (PEP), might have to deal with the storm following the sugar tax impact. The company operates in seven segments: Frito-Lay North America; Quaker Foods North America; PepsiCo Beverages North America; Latin America; Europe; Africa, Middle East and South Asia; and Asia Pacific, Australia and New Zealand and China Region.
On November 14, PEP announced two new ambitious nutrition goals as part of PepsiCo Positive (pep+) – the company’s end-to-end strategic transformation – which aims at reducing sodium and purposefully delivering important sources of nutrition in the foods consumers are reaching for.
By 2030, PepsiCo aims for at least 75% of its global convenient food portfolio volume to meet or be below category sodium targets.
PEP’s trailing-12-month gross profit margin and EBIT margin of 54.03% and 14.59% are 60.2% and 73.1% higher than the industry averages of 33.72% and 8.43%, respectively. Also, the stock’s trailing-12-month levered FCF margin of 6.86% is 41.2% higher than the industry average of 4.86%.
PEP pays a dividend of $5.06 per share annually, translating to a 3% yield on the prevailing price. Its four-year average dividend yield is 2.72%. The company’s dividend payouts have grown at a CAGR of 7.1% over the past three years. PepsiCo has raised dividends for 51 consecutive years.
PEP’s net revenue increased 6.7% year-over-year to $23.45 billion in the third quarter that ended September 9, 2023. Its non-GAAP gross profit grew 8.8% from the year-ago value to $12.77 billion. Its non-GAAP operating profit increased 12.1% year-over-year to $4.03 billion.
Further, the company’s non-GAAP attributable net income came in at $3.11 billion and $2.25 per share, indicating increases of 13.7% and 14.2% year-over-year, respectively.
Street expects PEP’s revenue and EPS for the fourth quarter (ended December 2023) to increase 1.5% and 3.1% year-over-year to $28.42 billion and $1.72, respectively. Moreover, the company surpassed the consensus revenue and EPS estimates in each of the trailing four quarters, which is remarkable.
Third stock, Monster Beverage Corporation (MNST), known for its energy beverages and concentrates, could also be impacted by sugary drink taxes, which are resulting in a sharp drop in consumer sales.
On November 8, MNST’s Board of Directors authorized a new share repurchase program for the repurchase of up to an additional $500 million of the company’s outstanding common stock. As of November 7, nearly $282.8 million remained available for repurchase under the company’s previously authorized repurchase program.
MNST’s trailing-12-month gross profit margin of 52.58% is 55.9% higher than the 33.72% industry average. Its 28.81% trailing-12-month EBITDA margin is 155.8% higher than the industry average of 11.26%. Also, the stock’s 22.62% trailing-12-month net income margin is considerably higher than the industry average of 4.90%.
During the third quarter of 2023, the company continued the roll-out of its first flavored malt beverage alcohol product, The Beast Unleashed™, with the goal of being available in substantially all the U.S. by the end of 2023.  Further, Nasty Beast™, its new hard tea, will be launched initially in four flavors, in 12 oz. variety packs and 24 oz single-serve cans, early this year.
MNST’s net sales increased 14.3% year-over-year to $1.86 billion in the third quarter that ended September 30, 2023. Its gross profit was $983.76 million, up 18% from the prior year’s quarter. The company’s net income came in at $452.69 million, or $0.43 per common share, compared to $322.39 million, or $0.30 per common share, in the prior year’s period, respectively.
Analysts expect MNST’s revenue for the fourth quarter (ended December 2023) to grow 16.1% year-over-year to $1.76 billion. The consensus EPS estimate of $0.39 for the same period indicates an improvement of 36.5% year-over-year.
Lastly, Keurig Dr Pepper Inc. (KDP) could be vulnerable to the aftereffects of increased sugary beverage prices. From carbonated soft drinks to premium waters and everything in between, Keurig Dr Pepper provides a diverse portfolio of ready-to-drink beverages to satisfy every consumer’s need.
On December 7, KDP announced that its Board of Directors declared a regular quarterly cash dividend of $0.215 per share, payable on January 19, 2024. The company’s annual dividend of $0.86 translates to a yield of 2.69% of the current share price.
Also, on October 26, KDP and Grupo PiSA announced that Keurig Dr Pepper will sell, distribute, and merchandise Electrolit®, a premium hydration beverage, across the U.S. as part of a long-term sales and distribution agreement.
The long-term partnership extends KDP’s portfolio into sports hydration, a key white space category for the company, and is designed to considerably expand Electrolit’s distribution and continue the brand’s accelerated growth.
KDP’s trailing-12-month gross profit margin of 53.50% is 58.6% higher than the 33.72% industry average. Likewise, the stock’s trailing-12-month EBITDA margin of 26.64% is 136.6% higher than the industry average of 11.26%. Furthermore, its 13.16% trailing-12-month net income margin is 168.8% higher than the industry average of 4.90%.
For the third quarter that ended September 30, 2023, KDP’s net sales increased 5.1% year-over-year to $3.81 billion. Its gross profit grew 11% year-over-year to $2.11 billion. Its income from operations rose 127.4% from the year-ago value to $896 million. Also, net income attributable to KDP and EPS came in at $518 million and $0.37, up 187.8% and 184.6% year-over-year, respectively.
As per its guidance for the full year 2023, KDP expects net sales growth of 5% to 6%. The company’s adjusted EPS growth is projected to be 6% to 7%.
Analysts expect KDP’s revenue and EPS for the fourth quarter (ended December 2023) to grow 3.1% and 8.6% year-over-year to $3.92 billion and $0.54, respectively. Moreover, the company surpassed consensus revenue estimates in each of the trailing four quarters.
Bottom Line
According to a recent study conducted by JAMA Health Forum, five U.S. cities that imposed taxes on sugary beverages saw prices rise and a drop in consumer sales by 33%.
With sugar-sweetened drinks considered known contributors to several health issues such as obesity, diabetes, and heart disease, taxes on those drinks are implemented to lower consumption. Reduced consumer sales because of these taxes could be pretty alarming for several beverage stocks, including KO, PEP, MNST, and KDP.
The beverage industry is not just about traditional drinks anymore. With a significant surge in health awareness among consumers and the global shift toward sustainability, companies are innovating their products to meet the new demands.
Beverage firms are consistently working toward reducing sugar content in their products or are introducing zero-sugar offerings to cater to health-conscious consumers. Also, the introduction of additional healthy ingredients by different industry players is gaining traction. For example, probiotic drinks, green teas, and beverages infused with minerals and vitamins.
Like any other industry, the beverage sector has its share of opportunities and challenges. As the industry evolves, companies that fail to innovate or adapt to changing consumer preferences risk losing market share.
Given these factors, it seems prudent to wait for a better entry point in beverage stocks KO, PEP, MNST, and KDP. While the industry-wide challenges could impact these stocks in the near term, they appear in good shape to thrive in the long run.

During the winter months, energy prices typically experience favorable conditions due to increased heating demand in colder weather, which widens the gap between supply and demand. The use of natural gas tends to reach its peak at the beginning of the winter season as households and office buildings turn to heaters.
The Energy Information Administration (EIA) raised U.S. natural gas consumption estimates by 230 MMcf/d to 93.28 Bcf/d for the fourth quarter of 2023 and by 240 MMcf/d to 104.22 Bcf/d for the first quarter of 2024.
Colder U.S. Conditions Drive Energy Prices Higher
Natural gas prices yesterday added to Tuesday’s gains and reported a 4-week high. Gas prices surged Wednesday on forecasts for colder U.S. temperatures, which would drive heating demand for natural gas. Forecaster Maxar Technologies said that a storm next week will bring wintry conditions to the nation’s eastern half and snow in the Midwest from June 8 to June 12.
On the other hand, the U.S. Climate Prediction Center stated that there is a greater than 55% chance the present EI Nino weather pattern will remain strong in the Northern Hemisphere through March, keeping temperatures above average and weighing on gas prices. As per AccuWeather, El Nino will limit snowfall across Canada this season in addition to causing above-normal temperatures across North America.
Last Thursday’s weekly EIA report was bullish for natural gas prices as natural gas inventories for the week ended December 22 declined by 87 Bcf to 3,577 Bcf, a larger draw than expected 79 Bcf decline; however, less than the 5-year average draw of – 123 Bcf.
As of December 22, natural gas inventories were up 12.1% year-over-year and 10% above their 5-year seasonal average, signaling adequate gas supplies.
Record U.S. Oil and Gas Production and Exports
Winter weather can be a significant tailwind for natural gas prices, with colder temperatures more supportive of heating demand, particularly from residential and commercial segments. But with high gas inventories, a price rally may not persist this winter.
U.S. oil and gas production has grown at a much faster pace, offsetting most of the OPEC+ efforts to push up energy prices by coordinated supply cuts.
Earlier, various OPEC+ oil producers announced voluntary production cuts totaling 2.2 million barrels per day (bpd) for the first quarter of 2024. Leading the cuts is OPEC’s kingpin and the world’s biggest crude exporter, Saudi Arabia, which extended a voluntary oil output cut of 1 million bpd, priorly intended by the end of December 2023.
The U.S. is currently producing more than 13 million bpd of crude oil and is headed to a continued increase in the short and medium term. According to data from the EIA, U.S. output hit a new monthly record of 13.252 million bpd in September 2023 and kept the pace at 13.248 million bpd in October. As a result, the country’s crude oil exports also surged.
Meanwhile, U.S. LNG exports are breaking records. The U.S. exported more LNG during the first half of 2023 than any other nation, the EIA reported earlier this year. The average LNG exports during this period were 11.6 billion cubic feet per day (Bcf/d), up 4% from the first half of 2022. Also, October 2023 witnessed record LNG shipments, as per EIA data.
2 Natural Gas Stocks Which Could Benefit from Strong Winter Demand
With a $40.35 billion market cap, Cheniere Energy, Inc. (LNG) is an energy infrastructure company that mainly engages in liquified natural gas (LNG) related businesses in the U.S. The company owns and operates the Sabine Pass LNG terminal in Cameron Parish, Louisiana and the Corpus Christi LNG terminal near Corpus Christi, Texas.
In addition, Cheniere Energy owns the Creole Trail pipeline, a 94-mile pipeline interconnecting the Sabine Pass LNG terminal with several interstate pipelines and operates the Corpus Christi pipeline, a 21.5-mile natural gas supply pipeline interconnecting the Corpus Christi LNG terminal with various interstate and intrastate natural gas pipelines.
On November 29, 2023, LNG and Cheniere Energy Partners, LP (CQP) announced that Sabine Pass Liquefaction Stage V, LLC entered a long-term Integrated Production Marketing (IPM) gas supply agreement with ARC Resources U.S. Corp., a subsidiary of ARC Resources Ltd. (ARX), a prominent natural gas producer in Canada.
Under the IPM, ARC Resources agreed to sell 140,000 MMBtu per day of natural gas to SPL Stage 5 for 15 years, commencing with commercial operations of the first train of the Sabine Pass Liquefaction Expansion Project. This deal will allow Cheniere to deliver high quantities of Canadian natural gas to Europe.
“We are pleased to build upon our existing long-term relationship with ARC Resources, and further demonstrate Cheniere’s ability to construct innovative solutions that help meet the needs of customers and counterparties along the LNG value chain while delivering value to our stakeholders,” said Jack Fusco, Cheniere’s President and CEO.
On November 2, LNG’s subsidiary, Cheniere Marketing, LLC, entered a long-term liquified natural gas sale and purchase agreement (SPA) with Foran Energy Group Co. Ltd, a leading natural gas company based in China.
Under the SPA, Foran will purchase nearly 0.9 mtpa of LNG for 20 years from Cheniere Marketing on a free-on-board basis for a purchase price indexed to the Henry Hub price, plus a fixed liquefaction fee. Deliveries will commence upon the start of commercial operations of the second train of the SPL Expansion Project in Louisiana.
Also, on October 30, Cheniere’s Board of Directors declared a quarterly cash dividend of $0.435 ($1.74 annualized) per common share, up nearly 10% from the previous quarter, paid on November 17, 2023, to shareholders of record as of the close of business on November 9, 2023. The dividend increase reflects the company’s commitment to return enhanced value to its shareholders.
LNG’s trailing-12-month gross profit margin of 86.74% is 83.3% higher than the 47.32% industry average. Likewise, its trailing-12-month EBITDA margin and net income margin of 85.84% and 50.83% are considerably higher than the industry averages of 34.76% and 13.93%, respectively.
Furthermore, the stock’s trailing-12-month ROTC and ROTA of 41.15% and 29.82% favorably compared to the respective industry averages of 9.30% and 7.49%.
In the third quarter that ended September 30, 2023, LNG reported total revenues of $4.16 billion, while its LNG revenues came in at $3.97 billion. Its income from operations was $2.76 billion, compared to a loss from operations of $3.02 billion in the previous year’s quarter.
Also, the company’s net income attributable to common stockholders came in at $1.70 billion, or $7.03 per share, compared to a net loss attributable to common stockholders of $2.39 billion, or $9.54 per share in the prior year’s period, respectively.
During the quarter, the company generated a distributable cash flow of approximately 1.2 billion. As of September 30, 2023, Cheniere’s cash and cash equivalents stood at $3.86 billion, compared to $1.35 billion as of December 31, 2022.
For the full year 2023, the management expects consolidated adjusted EBITDA to be between $8.30 and $8.80 billion. The company’s distributable cash flow is projected to be in the range of $5.80-$6.30 billion.
CEO Jack Fusco commented, “Persistent volatility in commodity markets continues to reinforce the value of our commercial offering and the stability and visibility of our cash flows, and we are confident in achieving full year 2023 results at the high end of our guidance ranges.
“Looking ahead to 2024, construction on Corpus Christi Stage 3 continues to progress ahead of plan, and I am optimistic first LNG production from Train 1 will occur by the end of 2024,” Fusco added.
Analysts expect LNG’s EPS for the fiscal year (ended December 2023) to increase 519.5% year-over-year to $34.94. Further, the company’s EPS is expected to grow 23.3% per annum over the next five years. Moreover, Cheniere topped the consensus EPS estimates in all four trailing quarters, which is impressive.
Shares of LNG have surged more than 10% over the past six months and approximately 20% over the past year.
Another stock, Pioneer Natural Resources Company (PXD), could benefit from solid natural gas demand during the winter season. PXD operates as an independent oil and gas exploration and production company in the U.S. It explores for, develops, and produces oil, natural gas liquids (NGLs), and gas. The company has operations in the Midland Basin in West Texas.
During the third quarter of 2023, Pioneer’s continued operational excellence in the Midland Basin allowed the company to place 95 horizontal wells on production. More than 100 wells with lateral lengths of 15,000 feet or greater were placed for production during the first three quarters of last year.
In total, the company has more than 1,000 future locations with 15,000-foot lateral lengths in its drilling inventory.
On November 2, PXD’s Board of Directors declared a quarterly base-plus-variable cash dividend of $3.20 per common share, comprising a $1.25 base dividend and a $1.95 variable dividend. This represents a total annualized dividend yield of nearly 5.4%. The dividend was paid on December 22, 2023, to stockholders of record at the close of business on November 30, 2023.
PXD’s trailing-12-month gross profit margin of 52.23% is 10.4% higher than the 47.32% industry average. Moreover, its trailing-12-month EBITDA margin and net income margin of 48.07% and 26.22% compared to the industry averages of 34.76% and 13.93%, respectively.
Additionally, PXD’s trailing-12-month ROCE, ROTC, and ROTA of 22.32%, 14.57%, and 14.04% are higher than the respective industry averages of 19.99%, 9.30%, and 7.49%. The stock’s trailing-12-month levered FCF margin of 11.96% is 104.1% higher than the 5.86% industry average.
For the third quarter that ended September 30, 2023, PXD’s total production averaged 721 thousand barrels of oil equivalent per day (MBOEPD), near the top end of quarterly guidance. The company’s revenues and other income from the oil and gas segment came in at $3.46 billion. Cash flow from operating activities during the quarter was $2.10 billion, leading to a solid free cash flow of $1.20 billion.
However, the company’s net income attributable to common shareholders was $1.30 billion and $5.41 per share, down 34.4% and 31.8% from the prior year’s quarter, respectively.
As per the updated full-year 2023 guidance, Pioneer increased the midpoints of full-year 2023 oil and total production guidance with ranges of 370-373 MBOPD and 708-713 MBOEPD, respectively. But it decreased drilling, completions, facilities and water infrastructure capital guidance to $4.375-$4.475 billion.
Also, the company lowered full-year 2023 capital guidance for exploration, environmental and other capital to $150 million.
Street expects PXD’s revenue and EPS to decline 19.8% and 30.5% year-over-year to $19.50 billion and $21.25, respectively. But for the fiscal year 2024, the company’s revenue and EPS are expected to grow 14.8% and 8.8% from the prior year to $22.38 billion and $23.12, respectively.
PXD’s stock has gained nearly 12% over the past six months and more than 10% over the past year.
Bottom Line
Colder temperatures prompt households and office buildings to rely more heavily on natural gas as a heating fuel. As a result, natural gas prices witness a surge.
However, with natural gas inventors still above the five-year average, the prices may not witness a sustained rally this winter.
Despite relatively weaker prices, oil and natural gas production will continue to climb, creating ample growth opportunities for energy infrastructure companies. Amid this backdrop, investors could consider adding fundamentally sound energy stock LNG to their portfolio for potential gains.
However, given its mixed last reported financials and bleak near-term outlook, it could be wise to wait for a better entry point in PXD.