I'm Eyeing Uber and Nvidia. Here's Why
Amid a 'magnificent' disappointment, I see Nvidia as much different than Microsoft or Meta and Uber has this going for it.
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Following a negative response to earnings from Microsoft MSFT and Meta META there is broad market weakness on Thursday morning. Breadth is more than two-to-one negative, with the Nasdaq 100 QQQ down 1.8% and the Magnificent Seven MAGS getting slammed for a 2.5% setback. We are seeing some relative strength in the Russell 2000 IWM, but it is still down 0.6%.
Thanks to earnings reports, we have a long list of stocks making big moves in both directions. The are a few small caps that are up sharply that I will have to study to see if they may be new leaders. But the gainers are heavily outweighed by poor action in a few big cap names like Super Micro SMCI, Uber UBER, Regeneron REGN, Microsoft and Meta.
The market has been nervous for a while, so the negative reaction isn’t too surprising. Next week, when the election results will be released, there is a big risk, and many big players are reducing positions.
Two large-cap names that I own are down, and I’m looking to add them to my position. Uber had a good report, but it came with some concerns about rising insurance costs and some sensitivity to price increases. The company has a strong balance sheet and will conduct buybacks. The poor response on Thursday is driven in part by market conditions. The company is looking to double earnings per share next year to $2.29 and is selling with a trailing price-to-earnings of 34. This is a far more attractive valuation than any of the Magnificent Seven names and should serve as support down to the $70 area. I’m actively trading the stock and plan to increase my longer-term position.
I also want to add to my position in Nvidia NVDA. Nvidia tends to trade in tandem with other big AI names, but there is a big difference between Nvidia and stocks like Meta and Microsoft. Nvidia is selling the chips that are the core of the AI infrastructure. Microsoft and Meta are under pressure in part because they have to spend more money on the chips that Nvidia is selling. Bad news for Microsoft is good news for Nvidia.
I’m not in a rush to buy Nvidia today, but the $130 level would be a good support level that would interest me.
It is very ugly out there, and the selling is picking up some momentum. Don’t forget that we have Apple AAPL and Amazon AMZN reporting tonight, and they could easily produce positive surprises.
At the time of publication, DePorre was long UBER, NVDA.
