Alright my friends, that is it for me today. I wish all of you, your families and loves ones a Happy Thanksgiving with all the trimmings and a wonderful start to the time of year I refer to as “Season’s Eatings.”

When the market re-opens on Friday for a shortened session, Doug Kass will be back to helm the Diary as we close out November.

With some final menu thoughts out of the way for Thanksgiving, let’s turn to expectations for the Black Friday-Cyber Monday shopping weekend and the larger holiday shopping season.

The National Retail Federation (NRF) expects a new record of 183.4 million people shopping in-store and online from Thanksgiving Day through Cyber Monday this year. That’s up from 182 million in 2023 and 18.1 million people more than five years ago in 2019.

Deloitte’s survey shows 80% of respondents plan to shop during Black Friday-Cyber Monday — similar to 2023 — but spending is set to reach a new high of $650 (+15% versus 2023).

Bain estimates that from Black Friday to Cyber Monday, U.S. retail sales could reach a record-breaking $75 billion. The firm sees that representing ~8% of U.S. retail sales during the holiday season, the highest proportion on record for that timeframe.

Per Gallup, Americans’ latest estimate of the total amount they will spend on Christmas and other holiday gifts is slightly higher than what they estimated at this time a year ago. The latest, $1,012, from a Nov. 6-20 survey, is up from $975 last November.

For the months of November and December, Adobe Analytics expects U.S. online holiday sales to hit $240.8 billion, up 8.4% year over year. Shopping on mobile devices is expected to hit a new milestone, contributing a record $128.1 billion and growing 12.8% YoY and accounting for more than 53 of online spending.

Adobe also sees Cyber Week (the five-day period including Thanksgiving, Black Friday and Cyber Monday) driving $40.6 billion in online spend, up 7.0% YoY and representing 16.9% of the overall holiday season. As part of that outlook, Adobe expects Cyber Monday will remain the season’s and year’s biggest shopping day, driving a record $13.2 billion in spend this year, up 6.1% YoY.

The next few days will tell us how on the money some of those forecasts are, but what I see is very supportive for the Amazon AMZN and Costco COST, positions we own in the Pro Portfolio.

Thinking about the larger interview with Butterball I share before got me thinking that maybe not everyone has figured out their full Thanksgiving menu. With that in mind, if you’re one of those still tinkering, here’s a potentially helpful hand:

A Complete Guide to Thanksgiving Side Dishes

One of my personal favorites for tomorrow, not counting the pies for dessert, will be the corn casserole.

“For almost 50 years, we’ve had the Butterball Turkey Talk-Line [essentially a 911 service for turkey help]. So we’ve got reams and reams of data where folks have called in and said, ‘I’ve forgotten to thaw out my turkey. What do I do? Family’s coming over in the morning.’ We’ve got reams and reams of that data. Plus we go out and talk to people after every Thanksgiving and say, ‘What is your biggest headache?’

Now AI is also able to go out and pull [third-party market research] data and summarize it so our marketing folks can look at it and go, that’s the biggest problem. Having that data, and then having a tool that can quickly go through and summarize it is going to be a really big game changer for consumer packaged goods companies.”

More of the interview with Butterball’s COO Neal Walsh can be found here.

Seems 6500 is becoming a popular Wall Street target for the S&P 500 in 2025. Joining Goldman Sachs GS in that camp, which sits above the consensus of 6300, is JPMorgan Chase JPM. 

What’s noteworthy in this is the pivot in JPMorgan’s far more dour thinking over the last two years, but that likely reflects a change in the team. The new folks, which have been in the saddle since the summer, base their “bullish estimate on expectations for a healthy labor market, interest-rate cuts and a capital-expenditure boom in the race to capture the lead in artificial-intelligence technology, among other tailwinds.”

Meanwhile, Morgan Stanley MS and Bank of America BAC see the S&P 500 hitting around the 6600 level. The high forecast, however, goes to Deutsche Bank AG and Yardeni Research, which both see it hitting 7000.

I have three thoughts on all this.

One, the S&P 500 at 6500 implies a P/E multiple of 23.6x times based on the consensus 2025 EPS estimate of $275.16. That’s a stretched valuation compared to what we’ve seen over the last 20+ years — and let’s remember the times its been at lofty ranges (2001, 2008, 2009, 2020) have been periods of falling EPS. So, either we need to see the market consensus EPS for next year move higher or we can expect “valuation!” concerns to crop up as the S&P 500 pushes higher.

Two, most of us here do not buy the S&P 500, but individual stocks. Over at the Pro Portfolio, we’ll continue to focus on well-positioned companies benefiting from multi-year tailwinds and poised to deliver superior EPS growth. That strategy is serving us rather well this year.

Third, predictions can be funny things. Events can happen that can alter the landscape in a meaningful way. And with that in mind, let’s revisit what those Wall Street strategists expected for this year near the end of 2023.

https://twitter.com/ChrisJVersace/status/1740737013941215239

According to a survey by Consumer Intelligence Research Partners, Apple’s AAPL latest iPhone models are not high on gift-giving lists this year, but those figures are better for iPads and Apple Watches.

I still think the reception to Apple’s iOS 18.2, which will bring more Apple Intelligence features and ChatGPT integration, could be the next catalyst for the iPhone upgrade cycle. I’m also watching for Taiwan Semi’s TSM November revenue report, which will also have implications for AAPL shares as well as a few others in the Pro Portfolio.

As we settle into the lunch hour, here’s what I’m reading and looking over as I refuel for the second half of the trading day:

2024 Deloitte holiday retail survey

Walmart and NBCUniversal kicking off shoppable linear TV ads

Inflation-Battered Consumers Are Going to Extreme Lengths to Nab Holiday Deals

Bitcoin Resumes Advance, Rekindles $100,000 Milestone Optimism

How did a Macy’s worker conceal up to $154 million in fake expenses? Experts weigh in

Meisler: Whispers That the Magnificent Seven's Reign Is Done

If history holds, the bulk of today’s excitement is over, and folks are hitting the road for the Thanksgiving holiday to spend it with family and loved ones.

The Transportation Security Administration projects it will screen 18.3 million people between yesterday and Dec. 2. The Sunday after Thanksgiving is expected to be the busiest day of the week for passenger traffic, and one of the busiest in U.S. history, with more than three million travelers. It expects today to be second busiest of the Thanksgiving stretch, which offers some solace but not much if you’re facing down long airport lines and gridlock.

AAA estimates that nearly 80 million drivers will travel more than 50 miles — 1.7 million more than last year and 2 million more than in 2019. That suggests packing some snacks and keeping fluids to a minimum.

Thank goodness I’m hosting Thanksgiving this year.

We now have the October PCE Price Index figures and what they show — core PCE rising to 2.8% YoY as expected and headline PCE coming in unchanged at 2.3% YoY, not falling to 2.1% as expected — points to inflation being, you guessed it, sticky. 

Take a look:

Soon after the October PCE was published, the CME FedWatch Tool still shows ~66% probability for a Fed rate cut in December, but we’ll want to revisit this in the next few hours.

As the market digests this, let’s recall last week’s November Flash PMI found inflation getting back on track to the Fed’s 2% target.

To me this means next week’s November PMI and jobs data will be something I watch closely as we get ready for the November CPI and PPI prints as well as the Fed’s upcoming policy decision.

Buyers:

Prospect Capital Corp. (PSEC) – Two executive bought 1,005,000 shares between $4.72-$4.78 worth approx. $4.8 million.

I3 Verticals (IIIV) CEO bought 88,544 shares between $23.51-$24.06 worth approx. $2.1 million.

CVR Partners (UAN) 10% owner, Carl Icahn, bought 25,815 shares between $70.72-$72.36 worth approx. $1.8 million.

Truist Financial (TFC) CEO bought 34,180 shares at $48.56 worth approx. $1.7 million.

Sellers:

Macon Technology Solutions (MTSI) 10% owner sold 187,562 shares at $133.15-$136.67 worth approx. $25.2 million.

United Airlines (UAL) EVP sold 60K shares between $94.72-$95.54 worth approx. $5.7 million.

Net Power (NPWR) 10% owner sold 431,009 shares at 12.76 worth approx. $5.5 million

Alkami Technology (ALKT) CFO sold 99,755 shares at $41.89 worth approx. $4.2 million.

Patrick Industries (PATK) CEO sold 30K shares between $135-$140.64 worth approx. $4.1 million.

FTAI Aviation (FTAI) Director sold 20K shares between $173.68-$174.99 worth approx. $3.5 million.

Astera Labs (ALAB) Director sold 30K shares between $104.91-$107.17 worth approx. $3.2 million.

Construction Partners (ROAD) SVP sold 25K shares between $100.66-$102.13 worth approx. $2.5 million.

Some breaking economic data points from this morning while we wait for the October PCE Price Index. According to Reuters, that data will now be released at 10 a.m. ET, not 8:30 a.m. ET, like it usually is.

The second estimate for Q3 GDP came in at 2.8%, matching the initial print.

October durable orders rose 0.2%, up from September’s 0.4% decline. Excluding transportation, new orders increased 0.1% and excluding defense, new orders increased 0.4% in October. Nondefense new orders for capital goods in October increased $1.2 billion or 1.4%.

The latest MBA weekly mortgage applications index for the week showed the sharpest increase in mortgage applications volume over the last two months. Applications for a mortgage to purchase a new home soared by 12% week over week, while applications for a loan to refinance a mortgage fell 3% in the period.

While this uptick in the MBA purchase index jives with findings from Redfin that folks were waiting until after the 2024 election to move or purchase a home, we’ll want more data to see if this is indeed what’s happened or, as we can see in the chart above, this is just a one-off pop in the data.

Upgrades:

Coca-Cola Hellenic (CCHGY) upgraded to Overweight from Neutral at JP Morgan

Dick's Sporting Goods (DKS) upgraded to Buy from Neutral at UBS; target raised to $260

Embecta Corp. (EMBC) upgraded to Buy from Neutral at BTIG Research; target $26

Henkel AG (HENKY) upgraded to Overweight from Neutral at JP Morgan

Martin Marietta (MLM) upgraded to Overweight from Neutral at JP Morgan; target raised to $640

Nestle (NSRGY) upgraded to Equal-Weight from Underweight at Morgan Stanley

Urban Outfitters (URBN) upgraded to Buy from Neutral at Citigroup; target raised to $59

Volvo (VLVLY) upgraded to Overweight from Neutral at JP Morgan

Downgrades:

Alexandria RE (ARE) downgraded to Neutral from Overweight at JP Morgan; target lowered to $121

Coca-Cola European Partners (CCEP) downgraded to Neutral from Overweight at JP Morgan; target lowered to $82

CrowdStrike (CRWD) downgraded to Hold from Buy at HSBC Securities; target $347

Eli Lilly (LLY) downgraded to Hold from Buy at Erste Group

Kohl's (KSS) downgraded to Neutral from Outperform at Robert W. Baird; target lowered to $18

PennantPark Investment (PNNT) downgraded to Neutral from Buy at Ladenburg Thalmann

Workday (WDAY) downgraded to Neutral from Overweight at Piper Sandler; target lowered to $270

Initiations

Bank of Hawaii (BOH) initiated with an Overweight at Stephens; target $90

Barclays PLC (BCS) initiated with a Buy at Erste Group

Booking Holdings (BKNG) initiated with an Outperform at Robert W. Baird; target $5850

Compass Diversified (CODI) initiated with a Buy at TD Cowen; target $34

Dynatrace (DT) initiated with a Neutral at UBS; target $58

enGene Holdings (ENGN) initiated with an Outperform at Raymond James; target $23

Expedia Group (EXPE) initiated with an Outperform at Robert W. Baird; target $225

First Hawaiian (FHB) initiated with an Equal-Weight at Stephens; target $30

GRAIL (GRAL) initiated with an Equal-Weight at Morgan Stanley; target $16

Plumas Bancorp (PLBC) initiated with an Overweight at Stephens; target $60

Now let’s turn to Dell’s DELL comments on its earnings call about AI servers and related equipment and see what it means not only for companies like Nvidia NVDA but also those that serve other aspects of digital infrastructure, including enterprise networking and carrier infrastructure such as Marvell Technology MRVL.

“ISG revenue was $11.4 billion up 34%. Servers and networking revenue was $7.4 billion up 58%. This was a Q3 record for us. And we continue to see strong demand across both Traditional and AI servers.”

“We shipped $2.9 billion of AI servers in Q3, resulting in AI server backlog of $4.5 billion. Our five-quarter pipeline grew more than 50% sequentially with growth across all customer types.”

“We expect multiple tailwinds going into next year, including more robust AI demand supported by our strong five quarter pipeline. There's also an aging install base in both PCs and Traditional servers that are primed for a refresh.”

In terms of its guidance for the current quarter, Dell sees it being impacted by the shift to Blackwell, which, according to Dell, represents “ a significant portion of the demand and now is a significant portion of the backlog” as the “order shift in Q3 shifted dramatically towards Blackwell.”

As part of their quarterly results last night, both Dell DELL and HP HPQ shared their insights on the PC market. We’re interested in the PC upgrade cycle as it relates to AI PCs given one of the Portfolio’s holdings.

Dell:

“More Enterprise customers are beginning to refresh, albeit modest and in a more price competitive environment. We are seeing an indication that customers are lining up their upgrade cycles with new AI PCs in the first half of next year…”

“Our Consumer business was weaker-than-expected as demand and profitability remain challenged. The PC refresh cycle is pushing into next year, but has significant tailwinds around an aging install base, AI-driven hardware enhancements like battery life and Windows 10 end-of-life.”

HP:

“AI PC units this quarter were more than 15% of our shipments. In fact, as recently published by Canalys, we have the number one market share of AI PC in the Windows ecosystem, and we intend to maintain this position. Looking ahead, the power of AI coupled with the strength of our portfolio will enable us to deliver new levels of efficiency and security critical to the future of work. We expect AI PC penetration to continue to further strengthen our commercial leadership. And since the Windows 11 refresh has ramped lower than previous industry transitions, we expect to see the impact of the upgrade to be more pronounced in 2025… At this point, we anticipate AI PCs will make up approximately 25% of our PC unit shipments in FY'25… three years from now, we expect them to be between 40% and 60% of the mix.

Putting it together, the AI PC mix shift appears to be tracking more or less to industry expectations, and we see that playing out over the next few years.

Coming up next, what Dell said about AI servers…

Yesterday I explained why I’m eyeing the IPO market as it relates to the Pro Portfolio’s positions in Morgan Stanley MS and Bank of America BAC. Those comments included a list of upcoming and potentially higher-profile IPO offerings.

One name on the list, autonomous driving technology company Pony AI (PONY), priced 20.0 million shares at $13.00 per share last night, the upper end of the targeted $11-13 range. The shares will begin trading later today, and we’ll want to watch the market reaction over the coming days. 

Wolfe Research is sharing a list of stocks with the greatest number on short screens.

Companies with some of the lowest earnings quality scores per the firm's findings are:

First Solar (FSLR)

Bloom Energy Corp. (BE)

Walgreens Boots Allliance (WBA)

JM Smucker (SJM)

Sarepta Therapeutics (SRPT)

Rivian Automotive (RIVN)

Intra-Cellular Therapies (ITCI)

Elf Beauty (ELF)

Neogen Corp. (NEOG)

Asana (ASAN)

VSE Corp. (VSEC)

Tesla (TSAL)

Pfizer (PFE)

CVS Health (CVS)

Snowflake (SNOW)

Good morning, everyone! 

We have some quarterly results to sift through from last night, including HP HPQ, Dell DELL, Nordstrom JWN and others, and also the Fed’s preferred inflation metric for October coming up at 8:30 AM ET. It's also a massive travel day for many, and an arctic blast could cause some travel disruption.

Equity futures are modestly lower as we get ready for the market open in roughly 2 1/2 hours, and most likely thinning trading volume as the day goes on. 

As Survivor host Jeff Probst is fond of say right before the survivors begin a new challenge: "Let’s get it on!"