This week ahead || May 20th - May 24th 2024
Markets brace for Nvidia earnings: What to know this week
Record Highs Amid Inflation Cooldown
Stocks surged to new records this past week, driven by optimism over cooling inflation and potential Federal Reserve interest rate cuts. All three major indices hit record highs on Wednesday:
- Nasdaq Composite (^IXIC): +2%
- S&P 500 (^GSPC): +1.5%
- Dow Jones Industrial Average (^DJI): +1%, closing above 40,000 for the first time on Friday.
Upcoming Week: Key Earnings and Economic Data
Earnings Reports to Watch
- Nvidia (NVDA): Expectations are high for Nvidia's earnings on Wednesday, with analysts projecting significant growth in both earnings and revenue.
- Other Key Reports: Target (TGT), Palo Alto Networks (PANW), and Lowe's (LOW).
Economic Data
- Manufacturing and Services Sector Updates: Key insights into economic activity.
- Consumer Sentiment: Final reading for May.
- Fed Meeting Minutes: Insights from the Federal Open Market Committee's May meeting on Wednesday.
Market Dynamics
Inflation and Interest Rates
April's Consumer Price Index showed core prices rose 3.6%, the lowest annual rise in three years, prompting markets to price in two interest rate cuts this year. The alignment with the Fed's projections is boosting market confidence:
- S&P 500 Target: BMO Capital Markets predicts the S&P 500 will end 2024 at 5,600.
- Fed's May Meeting Minutes: Expected to provide a deeper look at discussions on interest rate policies.
Investor Sentiment
- Bullish Forecasts: Deutsche Bank raised its year-end target for the S&P 500 to 5,500, citing robust earnings growth and an improving macroeconomic outlook.
- Nvidia's Influence: Nvidia's performance could significantly impact market sentiment, particularly around AI investments.
AI Sector Focus
Nvidia's Earnings
Nvidia's upcoming report is highly anticipated, with analysts predicting significant earnings and revenue growth. The stock's performance will influence the broader AI trade.
AI Expansion
AI enthusiasm is spreading beyond traditional tech giants:
- Dell: Shares rose 10% due to positive AI prospects.
- Energy and Utilities Sectors: These sectors are among the best performers in the S&P 500, partly driven by AI enthusiasm.
Market Outlook
AI's Future
The sustainability of the AI trade remains a critical question. JPMorgan Asset Management's Jack Manley emphasized the importance of understanding whether AI will fundamentally transform the world or if current valuations reflect over-enthusiasm.
Potential Risks
Market volatility could arise if earnings do not meet high expectations or if economic data suggests a slower-than-anticipated decline in inflation.
In summary, the coming week will be pivotal for the stock market, with key earnings reports and economic data shaping investor sentiment. The performance of Nvidia and the broader AI sector will be closely watched as indicators of future market trends.
Russian Oil Refinery Hit as Moscow’s Troops Press Kharkiv Region
Drone strikes forced a small independent refinery in southern Russia to halt operations on Sunday, causing significant disruptions. Simultaneously, Russian troops continued intense fighting in northeastern Ukraine, focusing their efforts near Vovchansk, Starytsya, Lyptsi, Siversk, and Pokrovsk. In Kharkiv, a Russian missile strike on a northern suburb killed at least five people and injured 16, targeting a civilian object in Mala Danylivka. Additional attacks included a guided bomb explosion near a soccer stadium in Kharkiv, with casualties expected to rise. Russia claimed to have shot down numerous Ukrainian drones, a tactical ballistic missile, and several US-made ATACMS missiles. The affected refinery, processing 4 million tons of crude annually, halted operations for safety checks following the drone strikes. The US has criticized Ukraine's strikes on Russian refineries, warning they could impact global oil prices and advising Kyiv to concentrate on military targets instead.
Earnings call: Vivos Therapeutics reports mixed Q1 results, aims for growth
Vivos Therapeutics reported $3.4 million in revenue for Q1 2024, a decrease from the same period last year. The company faced mixed results with a decline in VIP enrollments and appliance sales, but increased sales in other product lines and new lease programs. Despite the revenue drop, Vivos achieved a gross profit of $1.9 million with a 57% gross margin and reduced operating expenses by 22%, resulting in a lower operating loss of $3.8 million. CEO Kirk Huntsman remains optimistic about Vivos' growth, citing FDA clearance for severe sleep apnea treatment and new strategic initiatives to expand product access. Vivos aims to be cash flow positive by the end of 2024 or early 2025 and is pursuing new channel relationships to drive revenue and reduce burn. The company secured $4 million through a common stock purchase warrant exercise, with $2.6 million in cash and cash equivalents as of March 31, 2024. Despite a decrease in total revenue and reliance on VIP enrollments, Vivos' increased sales in Pediatric and Lifeline products, as well as revenue from the home sleep test ring lease program, highlight positive growth areas.
Earnings call: Draganfly reports 45% revenue increase in Q1 2024
Draganfly Inc (NASDAQ:DPRO), a leader in the commercial drone industry, reported a 45% increase in Q1 2024 revenue, reaching $1.3 million. The company achieved a gross profit of $280,000 with a 21% margin. Draganfly's cash balance was $4 million at the end of Q1, with an additional $3.5 million added subsequently. CEO Cameron Chell emphasized the company's strategic partnerships, military contract pursuits, and industry recognitions. Key achievements include being selected as the exclusive drone provider for Ulkatcho Nation and Squamish Search & Rescue and a partnership with MMS for delivering tactical payloads. Draganfly is focusing on international market expansion, particularly in India, the MENA region, and with NATO partners. The company is well-positioned to meet growing industry demands and secure valuable partnerships and contracts, highlighting its strong market presence and potential for future growth. CEO Chell also mentioned the possibility of industry consolidation driven by larger companies acquiring leading firms, further enhancing Draganfly's strategic positioning.