VIDEO: Palantir Upgrade Draws Connection to Nvidia Valuation

Chris Versace reviews the June Employment Report and explains why the results, along with the continued fall in oil and petrochemical prices, is leading the market to re-think the number of rate hikes ahead. He also talks about the sequential strength in construction jobs created and how that is another indication we will need to revisit our price target for United Rentals (URI).

Walking through DA Davidson’s upgrade on Thursday for Palantir (PLTR) shares, he explains how that matches the analysis shared last week and ties it to his Nvidia (NVDA) valuation comments from Thursday morning. Finally, a word on Thursday’s strength in Boeing (BA) shares, and the upcoming catalysts we are watching.

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At the time of publication, TheStreet Pro Portfolio was long URI, PLTR, NVDA and BA.

TRANSCRIPT

Hey everyone, Chris Versace here. It is July 2nd, last trading day of the week, and folks probably want to get out of here ahead of the holiday weekend. Remember, US equity markets are closed tomorrow because of the Independence Day holiday. Now, the market is moving higher today, and we can probably trace that back to at least, I would say, expectations that the market had for two rate hikes between now and the end of the first quarter of 2027 are starting to get rethought. Some would say they’re starting to come off the table.

There are improving signs of inflation. You know, we talked about this yesterday when we walked through the June ISM manufacturing PMI report. And oil continues to trend lower today. There are reports of some progress being made between the US and Iran and shipping activity through the Strait of Hormuz. Well, that simply continues to improve.

The question you might be asking is, “Chris, did the weaker June employment report have anything to do with this? Well, let’s talk about it. the June employment report came in at 57,000 jobs. That’s way less than the expected 100 to 110,000 jobs the market was looking for. And at the same time, when we look at the prior two reports, because we know we tend to have revisions that happen, you know, when we look back at the April and May revisions, those were reduced by 74,000 jobs.

So the notion that the employment market may not be as strong as previously thought, I would say that certainly didn’t hurt the notion that we’re seeing flow through the market today. And by that I mean, of course, the CME FedWatch tool now showing that the market is only looking for one rate hike between now and the end of the first quarter. That one rate hike is still expected to come potentially in September

In terms of the jobs market, yeah, it’s slowing, especially when we trace the data back to March, which was the highest level in the last 12 months. And now we’ve seen with the revised data a step down from that high level in April, again in May, and again in June. So that’s probably stoking some concerns about the pace of job creation.

But here’s the thing: if we look back at the 12-month average, the 57,000 jobs we got today, was still ahead of that 36,000 12-month average figure. Throw in the activity we saw on the manufacturing sector with both PMI reports yesterday from ISM and SP Global, as well as the new order activity communicated in both. It tells us that the US economy remains on a growth path. How strong that remains to be seen, and that’s going to be really determined by what we see in next week’s June PMI, service PMI from ISM and SP Global. We’ll also be mining that report for what it says about inflation. And we’ll also be kind of doing a little backward view on what it says about job creation in the month of June for the service sector.

Remember, we always want to triangulate multiple data points so we have a true picture of what’s going on rather than relying on any one particular data point, especially since we know that there are aspects of the employment report that, because it’s survey-based, may not be the best indicator of what’s really unfolding in the economy.

We’ll have a lot more to say about the real pace of job creation once we get a little more data. Now, our view remains that inflation pressures, they are poised to fall more than the market had been thinking. And you know, again, what we saw in the data of late tells us that. we’ll be getting another picture of that, like I just said, next week.

But here’s the thing: we are still going to want to see the flow through from oil prices and petrochemical prices into the other aspects of the inflation data in the coming months. That is needed in order for the market to start.

Raising questions about whether or not we will see a September rate hike by the Fed. For us, it means back to business, continue to follow the data, especially since, as he reminded us yesterday, Fed chair Kevin Walsh is not going to be giving any details, any forward guidance about Fed policy. He wants the market and investors to follow the data. Of course, that is exactly what we do.

I do want to talk about one other thing about the June Employment Report. If we look again back over the last few months, what have we seen in a positive note? A steady pickup in construction jobs. That kind of confirms that we have moved into the seasonally strongest time of the year for that activity. Demand, as we know, remains strong due to secular tailwinds for power, data center, aerospace and defense, and of course, infrastructure.

Where I’m going with this is that maybe you noticed, maybe you didn’t, but the shares of United Rentals, they were a sleeper of a win for the portfolio in the second quarter. They were up more than 50%. And given what we’re seeing in the data, we are going to have to revise our price target higher. We will be putting pencils to paper, as we like to say, to kind of work that through. Some comments in the coming weeks from Caterpillar, Terex, and others on the demand for heavy equipment will help us solidify thinking, but we may make a move before we get that data. so again, you’ll want to be you’ll you will want to be watching for that.

Turning to Palantir, you’re probably noticing the sales the shares are moving nicely higher today. DA Davidson upgraded Palantir to buy from neutral this morning. They upped their price target to 175 from 165. The reason, kind of interesting – D.A. David says Palantir has, quote, grown into its valuation as its profits are up significantly and the stocks multiple has come in.

Well, if you remember when we laid out our Palantir game plan last night and we did a price to earnings growth ratio, peg ratio analysis, we pointed that very thing out to you, and that was why we picked up additional shares of Palantir later in the day. I believe we bought them right around 107, between 107 and 108. Shares currently around 132. So that was a nice pickup.

I will also remind you of the comment that we shared with you in our opening comments this morning about NVIDIA and its peg ratio. That gives us ample room given where it is just on 2026 earnings, around 0.5 or so. And the expectation obviously is NVIDIA’s earnings are going grow further in 2027, 2028. That tells us that the valuation when we look at 2027 is even better. Cheap, in other words.

That’s more than enough firepower for us to keep our one rating on NVIDIA. We’ll continue to watch the shares. If we do see them continue to creep back, that could give us a really compelling opportunity for the portfolio to put a little more money into NVIDIA shares.

Sticking with tech, earlier the week we talked about South Korea’s big spending plans. Today, we have a little more color on that from memory color, memory. can’t talk, folks, from memory company SK Hynix. we’re seeing that it plans to spend around $64 billion, that’s dollars, to build a new memory chip plant.

Now, context is always king. Remember, we recently heard from Micron that they are upping their capital spending for this year. Odds are Micron’s gonna have to increase its capital spending even further in 2027. The reason being is that the expectation for the memory supply-demand imbalance, well, it’s expected to last well into 2027, potentially 2028. Now, from our perspective, that is a positive for the Micron shares that we have in the EPS All-Stars Basket, but it’s also another positive for the shares of applied materials. Earlier this week, we upped our target to 800. This news certainly reinforces our confidence in that price target level.

The next catalyst for AMAT shares, though, will be CapEx comments in the coming weeks, Intel, Taiwan Semiconductor, and similar companies. We continue to think that Taiwan SEMI is likely to boost its capital spending for 2026, and we certainly think its capital spending will be higher in 2027.

Finally, we are seeing some lift in Boeing shares. They’re one of the portfolio’s more recent additions. They are rising today. There is no real discernible news as to why the stock is moving nicely higher today, other than that the company is getting a head start on union negotiations ahead of an October expiration for those contracts.

Now we have to pay close attention to that. But remember, our primary focus with Boeing is rising production levels and the incremental operating leverage. That’s going to drop to the bottom line. For us, that means that the next catalyst we’re watching for Boeing will be the report out potentially next week for the June deliveries. We want to see them be at May levels or slightly higher. That will show production levels rising for the second quarter compared to the first quarter, more importantly, compared to the year-ago quarter.

After that June delivery report, the other thing we will want to focus on as we move deeper into the earnings season is going to be capital spending comments from airlines, airline leasing companies. That will begin late next week when Delta Airlines reports. Based on what we see with tight capacity and the long-term outlook for air travel, especially outside of the US in markets like China, we continue to feel very good about the prospects for Boeing over the coming quarters.

Talking about air travel, that’s a good transition to remind you that I’ll be in London the next several days. So the usual volume of comments will be a wee bit lighter. I’ll be back in the saddle officially on June 9th, just a week from today. But rest assured, I will be keeping my eyes on things, and if we need to make any moves, we will do what needs to be done. With that, my friends, have a wonderful Independence Day holiday, and I’ll be back with you before you know it.

At the time of publication, TheStreet Pro Portfolio was long BA, NVDA, PLTR and URI.