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NVDA's cycle forecast stretching back to Nov. 2023 is negative. NVDA will top out on June 17, then decline for as long as July 30 before rising again in August. He himself (Cramer) recently took profits, because NVDA has had such a monster run. That said, he himself remains a true believer in NVDA and still holds some shares. (He feels the same with Apple, which has had ups and downs this year.)
ASO is cheap at 7.7x forward earnings, however, results have been lagging year-to-date down 22% driven by a weak first quarter. ASO is also flat over the prior twelve months. The company has displayed a declining sales trend over the last few years. There are some marketing initiatives that the company is engaged in that could help drive sales in the latter half of the year, but the first quarter was quite weak. Debt has come down nicely over the last few years and while not low, it appears to be more managable now. We are not overly intrigued by ASO, but it is cheap and does pay a small dividend which gives it some appeal. In an upward sales cycle it could do better but the recent weakness shows otherwise.
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OLY’s earnings are quite sensitive to the movement of interest rates, with rates coming down, earnings could be under pressure in the near term. This sensitivity to interest rates is inherent and quite common among financial companies. In the near term, OLY’s earnings could face a headwind due to a decrease in rate and, therefore, limited prospect of significant dividend growth. That being said, OLY has done really well over the last interest rate cycle. Also, the company’s service revenue is more predictable. This is an inherent risk of investing in financial companies. OLY is a small cap and quite under the radar to most investors, but its management track record is really impressive, we like the name here and would be comfortable to hold over the long term.
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ROKU operates as an operating system to consolidate all streaming providers into one platform, a very favourable market position. In the last five years, revenue growth was healthy and consistently above 20%, although it slowed down in recent quarters to around low double-digits. The balance sheet is strong, with a net cash of $1.4B compared to the market cap of $7.8B. The company has been growing strongly over the years. As a stock, ROKU’s share price has underperformed partially due to a high starting valuation. We think ROKU at the current price is quite attractive if the company can manage to continue to grow and be more disciplined on the cost side. Based on consensus estimates, sales are expected to grow by 12% on average over the next few years. It does generate good cash flow ($456M last year) and thus we would not see solvency as a concern.
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Market Update:
The US consumer price index (CPI) for May rose 3.3% on an annual basis, and the consensus forecast for the annual inflation was 3.4%, showing a path to a rate cut over the next few months. In the Federal Reserve meeting in June, the Fed announced the decision to keep the policy rate unchanged in the range of 5.25%-5.5%. In addition, Fed policymakers see just one rate cut this year and 4 cuts in 2025. The Canadian dollar was 72.73 cents USD. The U.S. S&P500 ended the week up 1.4%, while the TSX was down 1.9%.
All but one sector ended the week in red. Materials slid by 4.4%, followed by energy which gave up 3.1%. Financials edged down by 1.9%, while consumer discretionary and real estate declined by 1.6%, each. Industrials and consumer staples fell by 1.4% and 0.8%, respectively. Technology ended the week up 2.4%. The most heavily traded shares by volume were Canadian Natural Resources, Bitfarms, and Corus Entertainment.
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A momentum stock can't withstand the kind of recent drop it's had. He prefers Constellation Energy.