HP and Dell Crash Amid PC Market Slowdown

Author

Adam Garcia
November 27, 2024

Good morning. It's November 27th, and today, we’ll look at why two giants in the PC industry are tumbling while a tiny digital market stock is up by nearly 46% in premarket trade.

Previous Close 📈

U.S. stock markets closed at record highs again on Tuesday, continuing their strong run from the postelection rally. The gains were driven by a rebound in technology stocks and investor optimism despite potential geopolitical and trade uncertainties.

Futures

Stock futures show little change today as investors awaited the Federal Reserve's preferred inflation reading, the Personal Consumption Expenditures (PCE) price index. Dow futures are slipping by 11 points (0.02%), S&P 500 futures are down by 0.1%, and Nasdaq-100 futures by 0.3%.

Trading volume is expected to lighten ahead of the Thanksgiving holiday, but all eyes remain on inflation data to gauge the trajectory of the Federal Reserve’s monetary policy.

Technology

An intriguing new project called “Stargate” is reportedly underway, with Bill Gates and Microsoft leading the charge in AI innovation.

While details have been scarce, early footage has recently surfaced, revealing the scope of what Gates believes could reshape industries.

In 2016, Nvidia was just breaking onto the AI scene, and those who spotted its potential have since seen 20,000% returns.

Now, this new project could mark a similar opportunity, giving early investors the chance to benefit from the next wave of AI transformation.

Forbes describes Gates’ Stargate initiative as something that “will eventually reshape everything.” With AI expected to continue expanding into nearly every sector, this could be a pivotal moment for those watching closely.

What to Watch

Frontline (NYSE: FRO), Golden Ocean Group (NASDAQ: GOGL), and Arbe Robotics (NASDAQ: ARBE) will report their quarterly earnings before the market opens today.

A series of important economic data will be released this morning. Initial Jobless Claims for November, Durable Goods Orders, Advanced U.S. Trade Balance in Goods, and Advanced Retail and Wholesale Inventories for October will all be published at 8:30 a.m. ET.

The first revision of Q3 GDP will also be released at the same time.

Later, the Chicago Business Barometer (PMI) for November will be available at 9:45 a.m. ET, followed by Personal Income, Personal Spending, and the PCE Index for October at 10:00 a.m. ET.

Technology

HP Shares Plunge After Earnings Miss Amid Global PC Challenges

HP Inc. shares are down by 8.57% in premarket trading today after the company reported weaker-than-expected results for its PC division, reflecting ongoing struggles in the global PC market. Despite a modest 2% increase in unit sales to $9.59 billion, HP fell short of analysts’ revenue expectations, highlighting continued pressure on the sector.

The global PC market has faced significant challenges in the third quarter, including slow shipment recovery and tepid demand for new AI-optimized machines. These factors contributed to a weaker fiscal fourth-quarter outlook for HP, with personal systems sales acting as a major drag on the company’s performance.

HP’s stock, which had risen 30% earlier this year, closed at $39.10 but has since dropped to $35.90. The volatility underscores investor concerns about HP's ability to navigate current market conditions.

Dell Technologies (NASDAQ: DELL) also reported similar struggles, with PC revenue slipping 1% to $12.1 billion, missing Wall Street estimates. Dell’s stock dropped 10% despite strong growth in its infrastructure division, which saw a 34% surge driven by $2.9 billion in AI-optimized server sales.

The broader market remains under pressure as companies like HP and Dell grapple with evolving consumer demand and global economic uncertainty. Analysts are closely monitoring the performance of AI-focused products, which are yet to make a significant impact on the struggling PC sector.

Technology

Dell's Mixed Q3 Results Send Shares Tumbling in Premarket

Dell Technologies shares are down by more than 12% in premarket trading today after the company issued underwhelming revenue guidance for its fiscal fourth quarter on Tuesday, overshadowing solid earnings and robust AI-related server sales.

The tech giant reported adjusted earnings of $2.15 per share on revenue of $24.4 billion for the third quarter, surpassing analyst expectations of $2.06 EPS but falling short of the $24.7 billion revenue forecast.

While revenue grew 10% and adjusted earnings climbed 14% year-over-year, the company’s guidance for the January-ending quarter came in between $24 billion and $25 billion, below the $25.6 billion consensus estimate.

Dell's Infrastructure Solutions Group, which includes servers and networking equipment, showed a 34% revenue surge to $11.4 billion, driven by a 58% increase in server sales tied to artificial intelligence workloads. However, the Client Solutions Group, responsible for PC sales, reported a slight decline of 1% year-over-year to $12.1 billion, reflecting weaker demand in the segment.

Chief Operating Officer Jeff Clarke expressed optimism about AI-related opportunities, calling them a "robust opportunity with no signs of slowing down." However, these gains were insufficient to offset broader investor concerns.

Despite the recent drop, Dell shares have gained 87% year-to-date, buoyed by its position as a key player in the AI server market. Still, the disappointing guidance and softer PC sales raise questions about sustained growth.

Technology

CrowdStrike Reports Strong Q3 Results, But Shares Drop Upon Weak Q4 Guidance

CrowdStrike shares are down 6.2% in premarket trading after issuing fourth-quarter guidance that fell short of Wall Street expectations. This comes despite the cybersecurity firm reporting strong third-quarter results and achieving a significant milestone in annual recurring revenue.

The company posted Q3 revenue of $1.01 billion, exceeding analysts' estimates of $983 million, while adjusted earnings per share (EPS) came in at $0.93, above the projected $0.81.

CrowdStrike raised its full-year revenue forecast to a range of $3.92 billion to $3.93 billion, slightly above consensus expectations. However, its Q4 EPS guidance of $0.84 to $0.86 fell short of the anticipated $0.87, which weighed on investor sentiment.

CEO George Kurtz highlighted that as of October 31, CrowdStrike’s annual recurring revenue surpassed $4 billion, making it the fastest cybersecurity company to achieve this benchmark.

Kurtz emphasized the company’s resilience following a significant software update issue in July that led to widespread Windows system crashes. The incident disrupted industries globally, from airlines to medical services, but CrowdStrike responded with swift corrective measures.

The company also addressed a lawsuit filed by Delta Air Lines related to the incident. CrowdStrike asserted that Delta is deflecting responsibility for failing to update its outdated IT systems.

Despite these challenges, CrowdStrike continues to focus on growth, leveraging its market-leading position in cybersecurity software to maintain long-term momentum.

Music

The music industry is on the verge of a massive transformation, with Goldman Sachs forecasting a $4.2 billion market emerging from the direct engagement between artists and fans.

While streaming platforms have dominated for years, they’ve created barriers, preventing artists from directly connecting with their biggest supporters.

This company’s innovative technology bridges that gap, empowering artists to identify and reward superfans with personalized experiences—unlocking a new revenue stream in the process.

Protected by 15 granted patents, this company is leading a shift that could reshape the music landscape. Investors have a rare chance to get in ahead of this market’s rapid growth.

Movers and Shakers

Infobird Co. [IFBD] - Last Close: $1.82

Infobird Co.'s stock is surging by 46% in premarket trade today due to its acquisition of a 65% stake in Pure Tech Global Limited for $40 million.

Pure Tech specializes in digital advertising and marketing, particularly targeting the fast-growing maternal and infant market.

This acquisition strengthens Infobird’s foothold in the lucrative digital marketing sector, expanding its capabilities and market reach.

Investors are optimistic because this strategic move diversifies Infobird's portfolio and enhances its competitiveness in a high-demand market segment, potentially boosting future revenue and profitability.

My Take: Despite this strategic expansion, Infobird's stock performance has been notably volatile. The stock has dropped by approximately 83.3% YTD. It might be best to put this in your wait and watch bucket for now.

Ambarella [AMBA] - Last Close: $68.41

Ambarella is seeing a 22% premarket surge due to its strong performance and optimistic outlook.

The company reported $82.7 million in revenue, a 63% increase year-over-year, surpassing analyst estimates of $79.02 million.

While Ambarella still reported a net loss of $24.1 million (-$0.58 per share), this was an improvement over last year's loss and better than expected (-$0.67 per share).

Ambarella’s focus on edge AI technology, which accounted for 70% of its revenue—a record high—has driven significant growth.

Key applications in IoT, automotive cameras, and AI inference processors have gained strong market traction, leading to a 30% sequential revenue increase.

My Take: With $226.5 million in cash reserves and a positive outlook for the next quarter, Ambarella's strategic investments in AI and robotics position it well for future growth, despite ongoing profitability challenges. Keep this stock on your radar.

Portage Biotech [PRTG] - Last Close: $4.87

Portage Biotech's stock is up 23% in premarket trading today following its Q3 2024 financial results.

The company reported a significantly reduced net loss of $1.4 million, down from $5.2 million last year, driven by a dramatic 83% reduction in R&D costs and a 48% cut in general expenses.

These cost-saving measures have helped stabilize Portage’s finances temporarily. Investors are viewing the reduced losses positively.

My Take: The company faces severe challenges. With only $1.8 million in cash and current liabilities of $0.9 million, liquidity concerns loom large. Portage has even paused its ADPORT-601 clinical trial due to financial constraints. Overall, it might be best to adopt a cautious approach to this stock.

AI

A groundbreaking new AI project, known as “Stargate,” is quickly capturing attention, with none other than Bill Gates and Microsoft at the helm.

Early footage from a recent investigation reveals a glimpse into what might be one of the most ambitious AI undertakings yet.

Forbes has described Gates' Stargate initiative as something that “will eventually reshape everything.” With AI already transforming industries, this project could open doors to entirely new possibilities, propelling tech to the next level.

In 2016, Nvidia marked a turning point in AI stocks, and early investors saw a phenomenal rise of over 20,000%.

Stargate could present a similar breakthrough for those looking to be ahead of the curve in AI advancements.

Everything Else

That’s all for today. Thank you for reading. If you have any feedback, please reply to this email.

Best Regards,

— Adam Garcia
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