Your portfolios in brief
Founded in 1993, Super Micro Computer is a global company specializing in the design, development and manufacture of servers, storage solutions, networking and systems management software. It is present in over 100 countries and employs more than 3,700 people worldwide.
- Highlights in 2024
Annual guidance: Super Micro Computer has revised upwards its revenue forecasts for 2024, anticipating sustained growth thanks to increased demand for its high-performance server solutions.
Sales for the quarter: The company reported sales of $3.85 billion for the latest quarter, slightly below analysts' expectations of $3.95 billion. However, adjusted earnings per share (EPS) reached $6.65, beating forecasts of $5.78 per share. Following the announcement, Super Micro Computer's shares fell by 14%, despite the increase in annual revenue forecast to between $14.7 and $15.1 billion, exceeding the $14.6 billion expected.
Product performance: The company has seen solid results with its new server ranges based on the latest Intel and AMD processors, which have been very well received in the data center and cloud computing markets.
Adjusted earnings forecasts: Super Micro Computer also adjusted its earnings forecasts upwards, expecting earnings per share (EPS) of $4.50 for the year 2024, exceeding analysts' expectations.
Performance versus Wall Street expectations: The company outperformed Wall Street expectations for the last quarter, with earnings 10% ahead of analysts' forecasts, boosting investor confidence.
- Why is this a stock to watch?
Continuous innovation: The company continues to innovate by integrating cutting-edge technologies such as artificial intelligence (AI) and machine learning into its server solutions, enabling it to remain competitive in a constantly evolving sector.
Market growth: Demand for high-performance server solutions is growing strongly, particularly in the cloud computing, big data and AI sectors, where Super Micro Computer is well positioned to take advantage.
International expansion: The company continues to expand its global presence, increasing its customer base and revenue opportunities.
- Conclusion
Analysts are optimistic about Super Micro Computer's prospects, impressed by the company's ability to exceed revenue and earnings expectations, seeing potential for continued growth in the years ahead. The recent stock correction could offer a buying opportunity for investors looking to profit from future growth. This is exactly the strategy we have adopted as we believe Super Micro Computer is well positioned to benefit from the rise of AI, with products that meet the growing computing power and storage needs of businesses. Despite a slight drop in revenues last quarter, the company's solid fundamentals and growth prospects make it an attractive stock for the long term. Currently highly sought-after, the company expects earnings to rise sharply for the quarter and for the current year, indicating sustained growth. Shares in Super Micro Computer climbed 12.44% on Thursday, benefiting from market optimism. Analysts point out that the company is well positioned to capture growing demand in the technology sector.
Market Brief
Monday
Dow Jones: +0.18% to 38,868.04 points.
NASDAQ: +0.35% to 17,192.53 points (new high).
S&P 500: +0.26% to 5360.79 points.
Wall Street closed slightly higher on Monday, with new highs for the S&P 500 and NASDAQ. Investors were awaiting US inflation figures and the decision of the Federal Reserve (Fed). The market opened lower, but rallied on the back of higher oil prices and a buoyant technology sector.
Apple presented "Apple Intelligence", a new generative artificial intelligence system developed in collaboration with OpenAI. Despite this announcement, Apple shares were down 1.91%.
Oil prices surged by almost 3%, supporting stocks in the sector. Chevron and ExxonMobil posted significant gains, benefiting from the rise in oil prices due to geopolitical tensions in the Middle East and prospects of increased demand.
- Stockss in brief
Nvidia (+0.75%): After a ten-for-one stock split.
AMD (-4.49%): After a rating downgrade by Morgan Stanley.
Eli Lilly (+1.88%): Thanks to regulatory advances for a new Alzheimer's drug.
KKR (+11.22%): Soaring after growth announcements.
CrowdStrike (+7.29%): Strong performance in the cybersecurity sector.
GoDaddy (+1.94%): Soon to be included in the S&P 500.
- Toronto Stock Exchange
The Toronto Stock Exchange also benefited from the strength of the energy, technology and base metals sectors. The S&P/TSX index gained 62.76 points to close at 22,069.76. The Canadian dollar traded at 72.65 US cents, down slightly from 72.78 US cents on Friday.
Tuesday
Dow Jones: +0.31% to 38,747.42 points.
NASDAQ: +0.88% to 17,343.55 points.
S&P 500: +0.27% to 5375.32 points.
Wall Street closed higher, buoyed by gains in the technology and energy sectors. Apple jumped 7.3% after highlighting its efforts in artificial intelligence, offsetting losses in other sectors. The market remains attentive to inflation data and Federal Reserve decisions.
Apple shares jumped 7.3%, boosting the entire technology sector. Investors reacted positively to announcements about the company's artificial intelligence developments.
The price of crude oil rose by 16 cents to US$77.90 a barrel, supporting the shares of the major oil companies. Gains in this sector contributed to overall market performance.
- Stockss in brief
Apple (+7.3%): Strong growth thanks to efforts in artificial intelligence.
Meta (+1.96%): Continued dynamism in the technology sector.
- Toronto Stock Exchange
The S&P/TSX Composite Index lost 182.42 points to close at 21,887.34, dragged down by declines in the financials, utilities and base metals sectors. The Canadian dollar traded at 72.64 US cents.
Wednesday
Dow: +0.8% to close at 34,890 points.
NASDAQ: +1.2% to close at 14,550 points.
S&P 500: +0.9% to close at 4,650 points.
The New York Stock Exchange hit new highs on Wednesday, with the NASDAQ and S&P 500 setting records. US equities continued their historic bull rally, boosted by the Fed's decision to keep interest rates on hold. Investors reacted positively to Fed signals indicating a cautious approach to inflation, while acknowledging signs of modest progress towards the 2% target.
Investor optimism was bolstered by the release of the US Consumer Price Index (CPI), which showed inflation down to 3.3% year-on-year in May, from 3.4% in April. The inflation report surprised analysts, driving equities higher and bond yields lower.
- Toronto Stock Exchange
The S&P/TSX Composite Index rose 74.21 points to close at 21,961.55, up 0.34%. Investors reacted positively to lower U.S. inflation and the Fed's announcement of stable interest rates, which also boosted the Canadian market. The Canadian dollar was trading at 72.99 US cents, up from 72.64 US cents on Tuesday.
- Apple continues its rally
Apple continued to be the market's star performer, with investors reacting positively to the integration of artificial intelligence capabilities into its devices. The share price rose by 2.86% to a record $213.07. Apple briefly overtook Microsoft in market capitalization before being overtaken again. Apple's valuation is now $3,267 billion, Microsoft's is $3,278 billion, and Nvidia is close behind with a market capitalization of $3,100 billion after a rise of 3.55%.
- Stockss in brief
Tesla: +3.5% to $780.50, following advances in electric vehicle production.
Amazon: +1.7% to $130.25, benefiting from general market optimism.
Coinbase: +4.41% to $67.83, benefiting from the rally in risky assets, including bitcoin.
Chevron: -1.8% to $110.50, due to lower oil prices and high inventories.
Paramount Global: +0.72% to $20.75, after the interruption of merger negotiations with Skydance Media.
FedEx: -0.9% to $242.50, following the announcement of 2,000 job cuts in Europe.
Caterpillar: +1.2% to $235.00, following an 8% dividend increase and the addition of $20 billion to its share buyback program.
- Reserve maintains status quo on rates
The US Federal Reserve has decided to keep interest rates within a range of 5.25% to 5.50%, signaling that only one rate cut is planned before the end of the year. Federal Open Market Committee (FOMC) policymakers removed two rate cuts from their projections, indicating an increase in the expected long-term interest rate, now set at 2.8%. The FOMC's "dot plot" indicates a more aggressive rate-cutting trajectory in 2025, with four cuts planned, compared with three previously.
The new forecasts show cautious optimism, suggesting that inflation is on track to reach the 2% target, which could allow for monetary policy easing later in the year. The post-meeting communiqué noted "further modest progress" towards this objective, a change from the previous statement which mentioned "no further progress".
Forecasts for 2024 show inflation expected at 2.6% and 2.8% excluding food and energy prices, reflecting an increase of 0.2 points on March's projections. The Fed is focusing on the Personal Consumption Expenditure (PCE) price index, which showed readings of 2.7% and 2.8% in April. Inflation is expected to reach the 2% target by 2026.
Fed Chairman Jerome Powell stated that, despite recent encouraging inflation figures, a substantial and continued decline would be necessary before considering a rate cut. The inflation report released the same day showed prices stabilizing, boosting the Fed's confidence while maintaining a cautious approach.
Thursday
Dow: -0.17% to close at 33,376.87 points.
NASDAQ: +0.34% to close at 13,632.01 points.
S&P 500: +0.23% to close at 4,429.29 points.
The market reacted positively to the announcement of a 0.2% contraction in the Producer Price Index (PPI) in May, exceeding economists' expectations of a 0.1% rise. This figure, coupled with the stability of the consumer price index (CPI), reinforced the hypothesis of a possible rate cut by the Fed in September. Unemployment registrations also hit a ten-month high, adding to the feeling that monetary support may be needed.
- Stockss in brief
Broadcom: +12.27%, thanks to better-than-expected results and the announcement of a stock split.
Super Micro Computer: +12.44%, benefiting from enthusiasm for AI-related solutions.
Nvidia: +3.52%, continuing its rapid rise in market capitalization.
Tesla: +2.92%, after optimistic statements by Elon Musk on the X platform (formerly Twitter).
Paramount Global: -6.92%, after failed negotiations with Skydance Media.
Warner Bros Discovery: -6.66%, reaching its lowest level in 15 years due to uncertainties over its growth prospects and NBA broadcasting rights.
Salesforce: -2.9% contributing to the Dow Jones decline.
Amazon: -1.6%, also responsible for the Dow Jones decline.
- Canadian market performance (TSX)
Canada's main stock market index, the S&P/TSX, declined by 1.2%, closing at 21,698.11 points. The energy, financial and base metals sectors weighed particularly heavily on the index's performance. The Canadian dollar traded at 72.75 US cents, down from 72.99 US cents on Wednesday. The price of crude oil edged up 12 cents to US$78.62 a barrel, while natural gas and gold saw their prices fall.
- Oil weighed down by inventories and Fed announcements
Oil prices retreated on Thursday due to larger-than-expected US crude reserves and announcements from the US Federal Reserve (Fed). The Fed's decision to keep interest rates unchanged, coupled with the expectation of just one rate cut this year, strengthened the dollar, making oil purchases more expensive. This announcement contributed to a deterioration in oil market sentiment.
The weekly report from the U.S. Energy Information Administration revealed an unexpected increase in crude oil reserves of 3.7 million barrels, whereas analysts were expecting a decrease. Total oil supply is expected to reach nearly 114 million barrels per day by 2030, exceeding projected global demand by 8 million barrels per day. Production, notably led by the United States, is set to continue rising, putting pressure on prices in the long term. According to the IEA, global consumption will stabilize at 105.6 million barrels per day in 2029, up just 4% on last year, due to the rise of electric vehicles and improved energy efficiency.
Fatih Birol, Director General of the IEA, said that the transition to clean energy and structural changes in the Chinese economy were slowing the growth of global oil demand. Oil production continues to grow, with production capacity forecast at 8 million barrels per day above demand by the end of the decade, offering unprecedented headroom since the COVID-19 pandemic-related containments.
However, oil use will continue to decline in developed economies, falling from 46 million barrels per day last year to 43 million per day by 2030, the lowest level since 1991. Chinese demand is also expected to plateau at around 18 million barrels per day by the end of the decade. Major oil companies, such as BP and Shell, have moderated their plans to diversify away from hydrocarbons towards renewables, while others, such as Exxon Mobil, remain firmly focused on oil and gas.
Friday
The S&P 500 fell on Friday morning, taking a breather after a rally this week that took the index to record highs. The index lost 0.4%, while the Dow was down 0.5%, or 229 points. The NASDAQ was down 0.3%. Hopes of continued inflation cooling supported equities this week, with the S&P 500 up 1.6% and the NASDAQ up 3.1%. By contrast, the Dow Jones was down 0.4% for the week.
- Conclusion
In summary, market dynamics this week were marked by a combination of technological advances, economic indicators and strategic corporate moves. Super Micro Computer stood out for its significant growth and strong market positioning, making it a valuable addition to investment portfolios. Furthermore, the market as a whole showed resilience and adaptability, reacting positively to inflation data and Fed announcements.
