The Market is About to Do Something Insane Next Week…
Summary
Jeremy provides an analysis of the current market environment, highlighting a teaching moment using Walmart's recent stock decline. Jeremy explains that while Walmart's stock fell 9%, the underlying income statement was actually strong with operating income up nearly 29%, though Jeremy finds the valuation too high at a forward price-to-earnings ratio of 37. Jeremy emphasizes the importance of understanding financial statements to achieve long-term wealth, contrasting the lifestyles of disciplined investors versus those who gamble.
Jeremy focuses heavily on the upcoming week, which Jeremy describes as monumental because of Nvidia's earnings report. Jeremy asserts that Nvidia needs to significantly beat revenue expectations and provide high guidance to keep the market moving upward. Jeremy also compares Nvidia to AMD, suggesting a shift in growth leadership is occurring. Jeremy provides the following insights on specific stocks:
Mentioned Stocks
Reasoning: Jeremy states that Celsius has the best return profile of any stock Jeremy tracks, with a potential 30-40% CAGR in Jeremy's bull case. Jeremy is considering putting $50,000 into the stock next week. Jeremy believes there is massive upside if the company can expand its 14% net income margins to the 20-28% levels seen by Monster or Coca-Cola.
Reasoning: Jeremy states that Nvidia is the 'big dog' and its earnings will move the entire market. Jeremy notes high expectations, requiring revenue of $94 billion and guidance of $109 billion to impress investors. Jeremy believes Nvidia's revenue growth will slow to 25-40% next year, making its valuation sensitive if growth peaks in the next 12-24 months.
Reasoning: Jeremy is a major shareholder and predicts AMD will dramatically outperform Nvidia over the next 2-3 years. Jeremy highlights a 'flipping' of growth rates where AMD is expected to grow 60-65% next year while Nvidia grows 25-40%. Jeremy believes AMD is the semiconductor stock investors want to be in right now.
Reasoning: Jeremy congratulates bulls on the recent 'double up' but maintains that the stock has a long, long way to go. Jeremy identifies SoFi as one of the top five stocks to value right now and predicts it will eventually be a $50 plus stock based on Jeremy's long-term outlook.
Reasoning: Jeremy views Estee Lauder as an overlooked high-quality beauty company with a profit recovery plan showing great results. Jeremy provides a bull case price projection with a 17-22% CAGR through 2030 and notes the stock is currently at $101, far below its $370 all-time high. Jeremy argues the business model offers protection and significant upside if net income returns to 2021 levels of nearly $3 billion.
Reasoning: Jeremy states American Express has one of the best business models in the world. Jeremy prefers it over Walmart because of its lower valuation, noting a forward PE under 20 and a two-year forward PE of 14. Jeremy lists it as an 'easy money' stock in the current market.
Reasoning: Jeremy describes the Honest Company as a 'steel deal' at its current price of $5.55. Jeremy claims it has the best risk-reward profile of any company in the market with a market cap under $1 billion. Jeremy views it as a top priority for value investors currently.
Reasoning: While Jeremy acknowledges that Walmart's underlying earnings were actually phenomenal, Jeremy finds the stock uninteresting due to its high valuation. Jeremy notes a forward PE of 37 and a 2-year forward PE of 31. Jeremy states Jeremy would much rather own Netflix or American Express, which offer better business models and growth for lower PE multiples.
Reasoning: Jeremy prefers Netflix over Walmart, citing a better long-term business model and a more attractive valuation. Jeremy notes Netflix has a $300 billion plus market cap with a 22 forward PE and 17 two-year forward PE. Jeremy considers this 'easy money' compared to retail giants.