A Tiny Telecom Stock That's Up by Nearly 50%

Author

Adam Garcia
August 06, 2024

Good morning. Today is August 6th, and we’re going to look at the positive earnings reports from Palantir and Lucid, a possible setback for Apple, and a telecom stock that’s up nearly 50%.

Previous Close 📈

Yesterday was another bad day for the U.S. stock markets. All three key indices plummeted, with the tech-heavy Nasdaq the worst affected, dropping by 3.43%. S&P fell 3%, and the Dow Jones Industrial Average also fell by 2.60%.

Futures

Stock futures are rebounding today, with S&P 500 futures up 1%, Nasdaq futures up 1.5%, and futures linked to the Dow Jones up by 0.9%.

What to Watch

Keep an eye out for Uber Technologies’ quarterly earnings, which are due to be announced before the market opens today. At 8:30 a.m., the U.S. trade deficit data for June will also be released.

Look out for AirBnB too, which will be releasing its earnings data after the market closes.

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Technology

Apple Faces Significant Financial Risk Following Google's Antitrust Setback

Google faced a major blow to its search and advertising business on Monday as Judge Amit Mehta ruled in favor of the Department of Justice in an antitrust suit. This ruling could also have severe financial repercussions for Apple.

The decision may force Google to alter its business practices and potentially terminate a longstanding revenue-sharing agreement with Apple. Under this deal, Google has been the default search engine on Apple devices since 2002, with Apple receiving 36% of the search revenue generated on its devices, amounting to an estimated $20 billion in 2022.

This agreement significantly contributes to Apple's Services segment, which generated $78.1 billion in revenue in 2022. If the $20 billion estimate holds, it represents roughly 25% of Apple's Services revenue and 5% of the company’s total annual revenue. The Services segment is crucial for Apple, especially as iPhone sales slow, making the potential loss of this revenue stream particularly impactful.

For Google, losing its default status on Apple devices could result in a 60% to 80% drop in search volume on iOS, potentially cutting its revenue by $28 billion to $32 billion. This would represent a 15% to 17% reduction in Google’s overall revenue. Google plans to appeal the ruling, but if it stands, both companies could face substantial financial challenges.

Both Google and Apple are trading at nearly 5% below their previous close in premarket trading today.

Artificial Intelligence

Palantir Increases Revenue Outlook, Shares Soaring on AI Momentum

Palantir Technologies is rallying by 7% in premarket trading today after the company raised its annual revenue and profit forecasts for the second time this year on Monday, thanks to heightened demand for its generative AI services.

The stock is continuing its momentum from yesterday’s extended trading session, when the shares soared by over 12%, adding to a year-to-date gain exceeding 39%.

CEO Alex Karp noted in the earnings presentation that Palantir achieved its highest-ever quarterly profit during the April-to-June period and anticipates third-quarter sales to also surpass estimates.

The company's AI platform, instrumental in testing and debugging code and evaluating AI scenarios, has capitalized on the growing need for GenAI technology.

Palantir is now projecting annual revenue between $2.74 billion and $2.75 billion, higher than the earlier forecast of $2.68 billion to $2.69 billion and above the $2.70 billion estimate.

The company also raised its adjusted income from operations forecast to between $966 million and $974 million, up from $868 million to $880 million previously.

These positive updates have alleviated some investor concerns, following a 9% drop in shares last week after Big Tech earnings indicated longer-than-expected payoffs from AI investments.

Electric Vehicles

Lucid Stock Rising After $1.5 Billion Infusion and Positive Forecast

Lucid Motors announced Monday that Ayar Third Investment Company has committed $1.5 billion in funding to the firm.

This includes $750 million in convertible preferred stock and $750 million in an unsecured loan. The financial injection will give Lucid some breathing space amid production challenges and a slowdown in electric vehicle demand.

Consequently, it is rallying by 16% so far in premarket trading today, even though it was down by about 29% for the year as of Monday’s close. Earlier in March, Lucid received $1 billion from Ayar, and subsequently, it announced a workforce reduction of 6% by the end of the third quarter.

The new funding is intended for general corporate purposes, capital expenditures, and working capital, expected to sustain the company through the fourth quarter of next year.

Lucid reported second-quarter revenue of $200.6 million, exceeding Wall Street's estimate of $185.8 million, although it posted an adjusted loss of 29 cents per share, higher than the anticipated 27 cents.

Lucid, currently offering the Lucid Air sedan starting at $69,900, plans to launch the Lucid Gravity SUV later this year. CEO Peter Rawlinson emphasized that the new funding will support both the launch and production ramp-up of the Gravity.

In July, Lucid announced the delivery of 2,394 vehicles and the production of 2,110 in the second quarter, surpassing expectations. Yesterday, Lucid reaffirmed its forecast to produce 9,000 vehicles this year.

Infrastructure

Increased Infrastructure Spending Boosts Caterpillar's Quarterly Profit

Caterpillar is up by 3% in premarket trade today on the back of an increase in its quarterly adjusted profit.

The boost is driven by robust demand for its large excavators and other construction machinery amidst rising infrastructure spending in the U.S., despite weaknesses in its European and Chinese markets.

President Joe Biden's $1 trillion infrastructure law, enacted in 2021, has significantly contributed to Caterpillar's success by funding upgrades for roads, bridges, and other transportation projects.

Additionally, higher prices for larger construction equipment have helped maintain the company's profitability amid escalating manufacturing costs.

For the second quarter ending June 30, Caterpillar is reporting an adjusted per-share profit increase to $5.99 from $5.55 the previous year. However, revenue is down to $16.7 billion from $17.3 billion a year earlier.

Movers and Shakers

Lumen Technologies Inc. [LUMN] - Last Close: $2.59

Lumen Technologies is up by 49% so far in premarket trading today.

The telecommunications firm announced that it has secured $5 billion in new deals with cloud and tech firms, driven by AI connectivity demands.

This includes a significant deal with Microsoft to enhance AI workload capacity.

Lumen is also in discussions for an additional $7 billion in sales opportunities.

A surge in AI adoption has led companies to invest in high-capacity fiber, boosting demand for Lumen's secure networking solutions.

My Take: Stocks related to AI infrastructure can be a good long-term bet. Though Lumen hasn’t had strong performance in the past, it has been growing steadily this year. Keep this one on your watchlist.

RxSight, Inc. [RXST] - Last Close: $40.78

RxSight is rallying by 18.5% in premarket trading today.

The company reported second quarter results yesterday that exceeded analysts' expectations and raised its revenue guidance for the year.

The ophthalmic medical device company reported a loss of 16 cents per share on revenue of $34.9 million, beating estimates of a 22-cent loss on $32.3 million in revenue.

Additionally, RxSight increased its 2024 revenue forecast to $139-$140 million, up from the previous range of $132-$137 million.

My Take: RxSight has been steadily increasing its revenue and reducing its net loss over the past few quarters, which has helped the stock grow by nearly 40% year-on-year. This is a good one to watch out for.

Tenax Therapeutics, Inc. [TENX] - Last Close: $2.9200

Tenax Therapeutics is rising by nearly 25% in premarket trading after announcing today that it will receive a $100 million investment through an oversubscribed private placement.

The private placement was spearheaded by new investor BVF Partners LP, with additional participation from other new investors such as Venrock Healthcare Capital Partners, Vivo Capital, Janus Henderson Investors, and others.

This influx of capital will support the company's Phase 3 trials and operational needs through 2027.

My Take: The stock does not have a good financial track record, so despite the recent news, it might be best to put this in your wait-and-watch bucket.

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
Elite Trade Club

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