November 21st Market Overview

Happy Thursday everyone.

The market is seeing a strong sector rotation today, with heavy volume flowing from momentum names and tech broadly into Dow components.

While $NVDA's earnings were impressive, investors appear to be digesting the reality of decelerating growth rates across tech, particularly after the sector's extraordinary post-COVID rally.


Let’s dig in….

Executive Summary

• Major indices advance with Dow leading (▲ 1.3%), as investors rotate from tech into cyclicals
  

• Enterprise tech shows stark contrasts: $SNOW up ▲ 31% while $NVDA fluctuates despite beating expectations
  

• Initial jobless claims beat forecast at 213,000, though continuing claims rise to 1.908M
  

• Bitcoin surpasses $98,000 milestone, reflecting growing institutional interest

Market Overview

Key Market Drivers

1. Earnings Momentum: Enterprise software companies exceeding expectations, with $SNOW revenue up 28% YoY to $942.1M and $NVDA posting 94% YoY growth to $35.1B
   

2. Economic Indicators: Weekly jobless claims at 213,000 vs 220,000 expected, continuing claims rise to 1.908M from 1.872M
   

3. Sector Rotation: Investors repositioning from high-growth tech into cyclical sectors, particularly financials and industrials
   

4. Policy Developments: Fed officials, including Barkin and Bowman, signaling heightened caution on rate cut timing

Stock Spotlight

• $NVDA:

  • Q3 EPS $0.81 vs $0.74 expected

  • Revenue $35.1B vs $33.16B expected, up 94% YoY

  • Data center revenue surged 112% YoY to $30.8B

  • Cloud providers now 50% of data center revenue, up from 45% last quarter

  • Management expects AI enterprise revenue to double YoY

  • Q4 guidance: $37.5B revenue vs $37.1B expected

• $SNOW:

  • Revenue beat at $942.1M, up 28% YoY

  • Net revenue retention rate strong at 127%

  • Customer growth: 542 customers >$1M trailing 12-month revenue (▲ 25% YoY)

  • Forbes Global 2000 customers: 754 (▲ 8% YoY)

  • New partnership with Anthropic for Claude AI integration

  • FY25 product revenue guidance raised to $3.43B

• $GOOGL:

  • Shares down ▼ 6% on DOJ Chrome divestiture proposal

  • Company labels proposal “radical,” plans December counter-proposals

  • Second consecutive day of pressure on antitrust concerns

• $PANW:

  • Revenue slight miss at $2.1B

  • NGS ARR growth strong at 40% YoY

  • Added 70 platform deals, now at 1,100 cumulative

  • 2-for-1 stock split announced for December 13, 2024

Big Name Updates

• $GS: Added ▲ 3% leading financial sector gains

• $CRM: Top Dow performer, up ▲ 5% amid enterprise software strength

• $AMZN: Declined ▼ 3% in tech sector rotation

• $META: Slipped ▼ 1% as communication services sector lagged

• $NFLX: BofA raises PT to $1,000 from $800, citing strong reach despite weekend event technical issues

Other Notable Company News

• $MSTR: BTIG doubles PT to $570, citing strong start to $42B capital raise for Bitcoin acquisition

• $SBUX: Exploring strategic options for Chinese operations, including potential partnership or sale

• $ROKU: Jefferies downgrades to underperform, PT $55, citing Netflix’s shift away from Roku’s services

• $ULTA: William Blair downgrades to market perform, citing uncertain recovery timeline

Sector Watch

Policy Watch

• Fed’s Barkin warns of increased vulnerability to inflation shocks, particularly wage-related
  

• Chicago Fed’s Goolsbee indicates rates likely to settle “a fair bit lower” over next year, but suggests slowing pace of cuts as target approaches
  

• Fed’s Bowman notes inflation progress has stalled, advocating cautious approach
  

• Officials expressing concern about potential impact of Trump tariffs on inflation trajectory

What to Watch

1. $NVDA’s Product Transition:

• Blackwell chip production starting Q4 FY25

• H200 chip showing fastest ramp in company history

• Impact on gross margins: expected low 70% range initially, targeting mid-70s by H2

2. Enterprise Software Momentum:

• $SNOW's AI integration impacts on product adoption

• Customer expansion metrics, particularly Global 2000 penetration

• Cross-platform integration developments

3. Regulatory Landscape:

• $GOOGL's December counter-proposal details

• Potential precedent for other tech platforms

• Timeline for Chrome divestiture process

4. Labor Market Dynamics:

• Continuing claims trend after reaching 1.908M

• Impact on Fed policy considerations

• Weekly claims volatility heading into year-end

Thanks for reading 🙂

- John