Semtech
I can’t believe my eyes.
Semtech (SMTC) is not healthy, the stock’s overvalued, it’s low quality, and growth is unstable.
Yet, shares are up 23% since reporting earnings on March 28.
And the saga continues - because the stock is up another 6% today… for no reason.
We could chart it out and everything, the company is trading above its 50-day moving average right now, but there’s something eerie going on under the surface.
Analysts were over the moon that the company ticked higher sales - $869 million from $757 million – in 2023. Which is the reason for the recent growth spurt.
But sales are truly the only “good” number. And they’re not even that good.
Cost of those sales rose from $245 million to $411 million over the past year.
That means gross profits were down to $457 million (from $511 million in 2022).
Debts are also growing out of control. They’re hemorrhaging cash. Interest expenses have 10Xed in three years.
And they lost a billion dollars overall last year.
Remember that the total market capitalization of the company is $2 billion.
The stock explosion doesn’t make any sense – unless it’s a massive short-cover or has become a MEME stock.
That’s why I’d suggest buying longer-dated puts (which appreciate as the stock moves down) whenever the stock moves higher…
Like today. Reality will catch up with it.
Apartment Income REIT
When Blackstone moves in real estate, you must watch the dance.
Today, they struck a $10 billion deal to take Apartment Income REIT (AIRC) private in an all-cash deal for $39.12 per share, which is a 25% premium to where shares were trading on Friday.
That’s why AIRC is up over 20% today.
What’s important here is the timing.
Blackstone plans to build out their apartment portfolio and has allotted $400 million to do so. They took single-family landlord Tricon private in a $3.5 billion deal earlier this year as well.
On the back of Fed Presidents recently changing their tune on rates (and taking cuts this year off the table) and Jamie Dimon yesterday saying rates could reach 8% (we’re at 5.25% today) by the end of the year, home prices could very well move higher.
Blackstone isn’t in the business of buying high and selling low, so this is more of a bet, a confirmation, that home prices will only rise as the rate game becomes ever more complicated ahead.
Dell
Dell (DELL) has quickly become one of my top-rated companies for 2024.
Not many people are paying attention because it’s big, old, and has been boring for a long time. Yet it’s an incredible play on the AI Revolution.
That’s because there’s a major shift taking money out of application software and pushing it into the picks and shovels hardware that makes AI happen. Think data centers and how valuable those have become to companies like Nvidia (NVDA) and Microsoft (MSFT) over the past year.
There’s no better company at the fore than Dell in that shift. I mean, the majority of analysts years ago said the company faced a dire situation of being “eaten” by software, and look where it is now…
Shares have surged 217% over the past year.
Jensen Huang, CEO of Nvidia, recently said that no company is better than Dell at “building end-to-end systems of very large scale for the enterprise.”
The potential for the company to join the S&P 500 later this year – which propelled Super Micro Computer (SMCI) stock – could push shares even higher.
When you’re a $90 billion company, it becomes hard to “move.” But Dell is perfectly positioned already to take on the big business that AI will bring.