Author: The INO.com Team

Will Rivian's Surprise Announcement Paying off for RIVN Stockholders?

Posted on by The INO.com Team

Rivian Automotive, Inc. (RIVN), renowned for its off-road-capable truck and SUV models, has recently announced two new midsize EV SUV lines, including one surprise launch. This strategic move aims to broaden market reach and boost sales figures, showcasing the EV startup’s ongoing innovation within the automotive industry.

The introduction of two midsize SUV product lines – the R2 and the R3 – marks a significant expansion of RIVN’s consumer offerings alongside its existing R1T and R1S models. Among these new offerings is the R3 midsize crossover, accompanied by its high-performance variant, the R3X.

Described as a “midsize SUV delivering a blend of performance, capability, and utility in a five-seat package optimized for both adventurous outings and daily use,” the R2 boasts a starting price of $45,000. Consumers can expect the R2 to become available within the first six months of 2026.

Meanwhile, the company has already opened reservations for U.S. customers interested in midsize SUVs, with Rivian’s CEO RJ Scaringe expressing enthusiasm for the response. “In less than 24 hours, we’ve received over 68,000 R2 reservations,” Scaringe noted, emphasizing the strong resonance of the R2, R3, and R3X with the community.

RIVN plans to prioritize the launch and rapid scaling of the R2 before commencing deliveries of the R3 and its performance variant. The phased approach aims to ensure a seamless introduction of each model. Additionally, upon its debut, the R3 will be priced lower than its midsize counterpart, while the R3X promises “even more dynamic abilities both on and off-road” compared to the R3.

Navigating a Challenging Landscape

RIVN is facing a pivotal moment following its recent product launches. The initial response has provided a much-needed boost to the EV manufacturer. Shares of RIVN have gained more than 17% over the past five days. However, it’s highly doubtful if the stock will manage to sustain this momentum as Rivian’s prospects appear uncertain.

Last month, RIVN disclosed disappointing fourth-quarter 2023 results and a bleak 2024 production guidance, alongside announcing a reduction of approximately 10% in its salaried workforce. Founder and CEO RJ Scaringe attributed these actions to the challenging macroeconomic environment, citing historically high-interest rates and geopolitical uncertainty.

RIVN, which employs a total of 16,700 individuals, declined to specify the number of salaried employees affected. The workforce reduction follows two prior instances where the company laid off 6% of its staff as part of its efforts to mitigate losses.

The expansion of electric vehicle sales has also slowed over the past year, with automakers attributing some of this deceleration to high-interest rates. Concurrently, Tesla, Inc.’s (TSLA) aggressive price cuts on its vehicles have exerted pressure on competitors. RIVN reported a fourth-quarter loss of $1.52 billion last year, compared to approximately $1.72 billion during the same period in 2022.

Elon Musk, CEO of TSLA, commented last month on RIVN’s product design, acknowledging its merit but emphasizing the challenge of achieving volume production with positive cash flow. Musk suggested that RIVN could face bankruptcy within six quarters without substantial cost reductions and stressed the necessity of “cutting costs massively” for the company's survival.

Operational Realignment

RIVN’s latest announcement regarding the relocation of R2 production from a new Georgia facility to its existing plant in Illinois has stirred skepticism among investors. The decision, while touted as a cost-saving measure, raises concerns about the company's ability to manage its operations effectively.

Given the company’s history of falling short on production targets at its Illinois site, doubts loom over its capability to meet future goals. The move to halt construction in Georgia and redirect production efforts underscores underlying challenges within the company’s operational framework.

Investors, already wary of the company's cash burn rate and unmet expectations, could now face heightened uncertainty regarding its financial health and strategic direction. The abrupt shift in manufacturing plans may exacerbate apprehensions surrounding RIVN’s long-term viability in the competitive automotive market.

Investor Scrutiny

Pomerantz LLP has been investigating RIVN on behalf of its investors, focusing on potential securities fraud or other unlawful practices involving RIVN and certain executives. The probe aims to determine the veracity of allegations surrounding the company’s conduct.

RIVN’s fourth-quarter 2023 financial report highlighted significant disparities from analysts’ projections. The company disclosed its intention to produce 57,000 vehicle units in 2024, a figure notably lower than the anticipated 80,000 units.

These revelations may have far-reaching implications for RIVN and its stakeholders. Shareholders could experience negative impacts on their investments as confidence in the company's financial health and management practices may erode. Moreover, RIVN’s market value may face downward pressure amid concerns about its operational performance and strategic decision-making.

The Road Ahead

RIVN’s fourth-quarter and full-year 2023 results, unveiled on February 21, showcased a robust revenue expansion of 167.4%. However, the company notably floundered in crucial aspects beyond financial metrics, signaling significant shortcomings despite meeting revenue expectations.

More alarmingly, the EV company’s 2024 production forecast of merely 57,000 vehicles fell below analysts’ predictions, hinting at subdued revenue growth prospects for the year ahead.

Also, it’s imperative to recognize that RIVN is likely to deplete a significant portion of its cash reserves as it scales up production, prepares for the rollout of the R2 vehicle lineup, notably the R2 midsize SUV aimed at the mass market, and absorbs consequent quarterly operational deficits.

Compounding the situation, the launch timeline for the R2 models, including a budget-friendly electric pickup variant, extends beyond the current year, delaying consumer availability until 2026. The protracted timeline, coupled with anticipated ongoing losses, underscores a prolonged path toward revitalizing growth for RIVN.

Furthermore, RIVN may find itself compelled to seek external funding once more before the arrival of the R2 lineup in 2026. The potential necessity underscores the company's ongoing financial challenges and the imperative of securing additional capital to sustain its operations and strategic initiatives.

Bottom Line

RIVN’s strategic expansion with the recent announcement of new product launches could broaden the company’s market reach and boost its sales. However, despite the initial positive reception, the company could continue to face formidable challenges, including mounting losses, production delays, increasing cash burn, and fierce competition.

Therefore, until the EV company demonstrates sustainable profitability and operational stability, it could be wise to steer clear of RIVN.

Buy Alert: Is Ford (F) Entering a New EV Era?

Posted on by The INO.com Team

In recent years, the automotive industry has witnessed a seismic shift towards electric vehicles (EVs), fueled by both environmental concerns and technological advancements. One company that has been at the forefront of this transition is Ford Motor Company (F).

Traditionally known for its robust lineup of combustion engine vehicles, F’s foray into the EV market has been met with both skepticism and anticipation. However, recent developments suggest that F might be poised to make a significant impact in the EV space, potentially ushering in a new era for the iconic automaker.

Over the past few years, F has worked relentlessly to capture the EV market by launching several EV models. Beginning with the electrification of its most iconic products, the Mustang, F-150, and Transit, F rapidly ascended to become the second-largest EV brand in the U.S. by 2022.

Beyond simply providing zero-emission variants of its top-selling vehicles, the company is leveraging electrification to enhance the qualities that customers cherish most: performance, capability, and productivity. F’s strategy for electrification serves as a cornerstone in the company’s broader mission to achieve worldwide carbon neutrality by the year 2050.

In addition, in 2022, the company bifurcated its EV and traditional business into two distinct units, providing investors with greater transparency into its operations. The EV division was branded as “Ford Model e,” while the conventional operation retained the name “Ford Blue.”

However, despite F’s ambitious visions, the company’s EV division has grappled with major losses. In the fourth quarter of 2023, F’s EV division “Ford Model e” posted a $1.57 billion loss, more than doubling a loss of $631 million during the fourth quarter of 2022. Meanwhile, the company’s top-line and bottom-line figures for the same quarter topped Wall Street estimates.

While discussing the losses from its EV unit during the earnings call, F’s CEO Jim Farley highlighted a pivotal lesson learned. He noted that scaling EVs from 5,000 to 7,000 units per month and entering the early majority customer segment unveiled customers’ reluctance to pay a substantial premium for EVs.

However, in light of the significant losses incurred by its EV segment and customers’ unwillingness to pay premium prices, F’s teams are unwaveringly dedicated to prioritizing cost-effectiveness and efficiency in their EV products. This strategic focus is aimed at competing effectively with more affordable models from Tesla, Inc. (TSLA) and Chinese automakers.

Farley further added that F is reconsidering its strategies regarding EVs. The automaker had previously announced its intention to delay or reduce spending by $12 billion on all-electric vehicles. He emphasized that while F remains committed to the growth of EVs, widespread adoption among mass-market consumers is unlikely until the costs are comparable to traditional vehicles.

As F scales back and reassesses its EV business, it plans to focus more on the sales of hybrid vehicles, particularly trucks. The company anticipates a 40% increase in hybrid sales this year, having sold 133,743 hybrid vehicles in the U.S. in 2023.

Apart from F’s cost-cutting measures to make its EV models cheaper for its customers, the company has further taken significant measures to bolster its EV sales. A recent notable move involves tapping into TSLA’s Supercharger Network, enabling F car owners to conveniently charge their vehicles using TSLA's North American Charging Standard (NACS) plug.

Furthermore, F is offering a complimentary charging adapter to owners of 2021 through 2024 F EV models until June 30, 2024. Following this deadline, customers can acquire the adapter from F for $230.

Also, the forthcoming generation of F EVs will come equipped with NACS plugs straight from the factory, ensuring seamless access to the TSLA Superchargers Network. CEO Farley emphasized that this initiative enhances the public charging experience, offering customers increased choice and playing a crucial role in F’s evolution as an EV brand.

On top of it, F announced its acquisition of Auto Motive Power (AMP), a startup specializing in electric charging technology and battery management software. This strategic move aims to overhaul F's charging infrastructure and reduce the costs associated with its electric vehicles.

Analysts forecast for Ford’s first-quarter earnings reveal a mixed outlook, projecting a 21% year-over-drop in its EPS, reaching $0.56. The company’s revenue, on the other hand, is anticipated to increase 8.2% year-over-year to $42.28 billion.

Bottom Line

Despite the challenges being faced by its EV business, it’s crucial to acknowledge F’s significant advancements in the EV market. By prioritizing the enhancement of performance and productivity, F’s initiatives are in alignment with global carbon neutrality goals.

These strides underscore F’s steadfast commitment to innovation and sustainability within the automotive industry, highlighting resilience amidst the obstacles encountered in its EV segment.

Moreover, F’s proactive measures to enhance EV sales through price reductions and cost-saving initiatives are yielding tangible results, marking a promising trajectory for the company's EV endeavors.

Following an 11% year-over-year decline in January EV sales, F witnessed a notable turnaround in February. In February, F delivered 6,368 electric vehicles, marking an impressive 80.8% increase compared to the previous year. Specifically, sales of its Mustang Mach-E model surged by 64.3% year-over-year, with 2,930 units sold in February.

Furthermore, by tapping into TSLA’s Supercharger Network, F is addressing a critical concern among EV owners regarding charging infrastructure, enhancing convenience and accessibility for its customers.

The National Renewable Energy Laboratory (NREL) revealed that the United States has only reached 3.1% of its 2030 goal for DC fast chargers without the inclusion of the TSLA’s Supercharger Network. However, when factoring in the TSLA’s Supercharger Network, this figure rises to 9.1% of the nation’s target.

As highlighted by TSLA upon the official opening of the Supercharger Network to F’s electric vehicles, the network is expanding rapidly, with the addition of one new stall every hour. Considering the domination of TSLA’s Supercharger Network, the collaboration between TSLA and F could be a pivotal step in bolstering F’s EV sales.

Additionally, F’s strategic acquisition of AMP has demonstrated the company's dedication to advancing charging technology and reducing costs associated with electric vehicles.

F also remains steadfast in its commitment to returning value to its shareholders through dividend distributions. On March 1, the company paid a quarterly dividend of $0.15 to its shareholders. The company’s annual dividend of $0.60 translates to a 4.85% yield on the prevailing price level, while its four-year average dividend yield is 4.83%.

Overall, F’s strategic initiatives and promising developments in the electric vehicle market could position the company for long-term success in the rapidly evolving EV landscape, enhancing its competitiveness and brand loyalty. To that end, investors could closely monitor this stock for potential gains.

Forget NVDA, Buy This AI Stock Instead

Posted on by The INO.com Team

Dell Technologies Inc. (DELL) is thriving amid the burgeoning artificial intelligence (AI) revolution, capitalizing on robust adoption. Following a stellar fiscal 2024 fourth-quarter earnings report, Dell’s stock hovers near record highs. Active participation in the AI landscape is propelling the company’s prospects, aligning with the prevailing industry momentum.

Last Friday, DELL's stock witnessed a staggering 30% surge. Investors lauded the company’s AI-driven advancements and heightened demand for its offerings, driving the year-to-date surge to 54%.

The Texas-based tech firm reported fourth-quarter adjusted earnings per share of $2.20, surpassing analysts’ expectations of $1.72. Additionally, Dell’s revenue amounted to $22.32 billion, exceeding the projected $22.17 billion. Strong data center server sales for generative AI applications offset sluggish PC sales during the period.

During the quarter that ended February 2, 2024, DELL experienced a 10.9% year-over-year decline in revenue to $22.32 billion. However, the company’s net income surged 91.1% from the prior year’s period to $1.16 billion. Despite a 5.8% year-over-year decrease, its Infrastructure Solutions Group (ISG) contributed $9.33 billion to revenue.

AI-optimized servers emerged as the primary revenue driver, generating $4.86 billion, while storage revenue saw a significant 9.9% sequential rise, contributing $4.48 billion. Servers and networking remained pivotal, underscoring DELL's strategic focus on AI-driven solutions and storage innovations.

Jeff Clarke, Vice Chairman and Chief Operating Officer of DELL, highlighted the company's robust AI-optimized server momentum, citing a nearly 40% sequential increase in orders and a doubling backlog, reaching $2.9 billion by the end of the fiscal year.

Clarke said, “We’ve just started to touch the AI opportunities ahead of us, and we believe Dell is uniquely positioned with our broad portfolio to help customers build GenAI solutions that meet performance, cost and security requirements.”

Turning to cash inflows and the balance sheet, DELL reported a fourth-quarter cash inflow from operations of $1.50 billion, primarily fueled by profitability. The company ended the quarter with $9 billion in cash and investments, and it reached its core leverage target of 1.5x, exiting the fiscal year 2024.

During the quarter, the company repurchased 11.2 million shares of stock and paid a quarterly dividend of $0.37 per share. Furthermore, DELL announced a 20% hike in its annual dividend, now standing at $1.78 per share. The dividend increase surpasses the company’s long-term financial framework and underscores its confidence in the business trajectory and capacity to generate robust cash flow.

Strategic Business Advancements

DELL has been expanding its portfolio to meet diverse customer needs across clouds, on-premises, and at the edge. Enhancements to the Dell Generative AI Solutions portfolio include support for Advanced Micro Devices, Inc.’s (AMD) Instinct™ MI300X accelerator in PowerEdge XE9680 servers and a new DELL Validated Design for Generative AI with AMD ROCm™ powered AI frameworks.

New enterprise data storage advancements have also been introduced, with planned validation with the NVIDIA Corporation’s (NVDA) DGX SuperPOD AI infrastructure, facilitating swift access to data for AI workloads using DELL PowerScale systems.

Moreover, the company has unveiled plans for the broadest portfolio of commercial AI laptops and mobile workstations, integrating built-in AI acceleration with neural processing unit (NPU) technology. Additionally, new XPS systems boast NPU integration, enhancing performance, productivity, and collaboration.

Furthermore, DELL has forged a strategic partnership with Nokia Corporation (NOK), becoming its preferred infrastructure partner for Nokia AirFrame customers. The collaboration entails transitioning to DELL PowerEdge servers with comprehensive DELL global services and support.

A Comparative Analysis of DELL and NVDA’s Performance

Following its robust fiscal 2024 fourth-quarter results reported last Thursday, DELL’s stock has surged significantly, showcasing its dominance in AI offerings. The momentum stems from DELL’s utilization of NVDA’s AI-powered GPUs for its servers, aligning with the chip giant's remarkable success.

DELL’s AI-optimized servers integrate graphics processing units (GPUs) from both NVDA and AMD. Clark noted that the heightened demand was across the H100, H800, H200, and MI300X, with the first three GPUs manufactured by NVDA and the last one by AMD.

This development is likely to please NVDA investors, given that the company also reported fourth fiscal quarter earnings surpassing Wall Street's expectations for both earnings and sales. However, its CEO, Jensen Huang, has acknowledged investor concerns regarding the sustainability of this growth and sales level throughout the year.

Furthermore, NVDA’s data center revenue suffered due to recent U.S. constraints on exporting advanced AI semiconductors to China. NVDA’s CFO, Colette Kress, highlighted that despite enhancements in the supply of AI GPUs, shortages are still anticipated, particularly for the upcoming next-generation chip, dubbed B100, slated for shipment later this year.

Additionally, NVDA’s smaller ventures didn’t exhibit the same remarkable growth. Its automotive segment experienced a 4% decline, generating $281 million in sales, while its OEM and other businesses, encompassing crypto chips, saw a mere 7% increase to $90 million.

Moreover, NVIDIA’s valuation is deemed excessively high, positioning DELL as a more favorable investment choice at present.

In terms of forward P/E, DELL is trading at 26.78x, 29.5% lower than NVDA’s 37.96x. DELL's forward EV/Sales of 1.12x is 94.1% lower compared to NVDA’s 18.91x. Additionally, DELL's forward EV/EBITDA of 9.48x contrasts with NVDA’s 29.38x.

Reflecting the heightened demand and growing interest in enterprise AI, DELL’s stock has surged nearly 37% over the past month, outpacing NVDA’s gain of 24%. Furthermore, DELL has skyrocketed more than 155% over the past nine months, while NVDA has gained approximately 119% during the same period.

DELL's Upbeat Fiscal 2025 Projections

DELL's confidence in its fiscal year 2025 outlook stems from three pivotal trends: the escalating momentum in AI, notable enhancements in traditional servers, and the imminent refresh of the aging PC installed base. Against this backdrop, DELL anticipates fiscal 2025 revenue between $91 billion and $95 billion, with a midpoint of $93 billion, reflecting 5% growth, surpassing its long-term value creation framework.

The company anticipates ISG to surge in the mid-teens, driven by AI, with a resurgence in traditional servers and storage. CSG business is forecasted to expand in the low single digits for the year. The amalgamation of ISG and CSG is expected to grow by 8% at the midpoint, counterbalanced by a decline in other sectors.

For the first quarter of fiscal 2025, DELL projects revenue between $21 billion and $22 billion, centered around $21.5 billion, marking a 3% increase. The company anticipates ISG and CSG combined to grow by 5% at the midpoint, with ISG climbing in the mid-to-high teens.

Yvonne McGill, DELL’s CFO, said, “We have strong conviction in the growth of our TAM over the long term, and we are committed to delivering against our long-term financial framework with average annual revenue growth of 3% to 4%, diluted EPS growth of at least 8% and a net income-to-adjusted free cash flow conversion of 100% or better over time.”

She has also emphasized the commitment to returning 80% or more of the adjusted free cash flow to shareholders over the long term.

Bottom Line

DELL, renowned for its PC business, has garnered considerable attention due to increased demand for its resilient servers designed for AI workloads. The fourth-quarter results showcased an enduring interest in DELL’s AI offerings, spotlighting the Dell PowerEdge XE9680 as the fastest-ramping solution in the company’s history.

After DELL’s strong earnings report, analysts have voiced optimism and confidence in the stock’s performance. Morgan Stanley analysts, led by Erik W. Woodring, upheld a Top Pick rating for DELL stock, raising the 12-month target price from $100 to $128.

Additionally, Goldman Sachs analyst Michael Ng has expressed a favorable outlook, suggesting that DELL’s stock is poised to trade higher, buoyed by the stronger-than-expected AI server backlog and improved margins in the Infrastructure Solutions Group (ISG). That bolsters the bank’s bullish stance on heightened earnings potential and sustained growth amidst robust AI demand.

Industry experts have also emphasized DELL’s position as a clear leader in the AI hardware and services market, citing the company’s ability to swiftly supply high-end server models with accelerators from various silicon providers. Dell’s competitive advantage positions it to capitalize on the early stages of the AI server opportunity, especially in the enterprise-focused market.

Expansion in AI servers will also drive growth in DELL’s storage business. With extensive training conducted using rich data sets, the company’s venture into enterprise territory presents a burgeoning storage opportunity. DELL has enhanced performance concerning latency-sensitive workloads, aligning with enterprise requirements as customers transition from training to inference.

In conclusion, DELL’s outstanding fourth-quarter performance and upbeat fiscal 2025 outlook, propelled by AI server momentum, have instilled investor confidence and received a commendation from analysts. Given NVDA’s slowing revenue growth, regulatory challenges, and alarming valuation, it could be wise to invest in fundamentally sound AI stock DELL instead.

AMZN Enters the Dow: What It Means for Investors and the Market

Posted on by The INO.com Team

The Dow Jones Industrial Average (DJIA), often referred to as the Dow, is one of the most enduring and esteemed price-weighted indices, overseeing 30 prominent publicly traded companies listed on both the NYSE and the NASDAQ.

Throughout its history, the Dow has functioned as a reliable gauge of the overall health of the U.S. stock market and economy. The companies featured in the Dow are often regarded as stalwarts in their respective industries.

However, over the past years, the absence of a few major tech giants within the index has led to its downfall. As the S&P 500 takes the lead, questions have been raised on Dow’s ability to correctly capture the essence of Artificial Intelligence’s (AI) impact on the U.S. economy.

In 2023, the Dow recorded a 13.7% increase, whereas the S&P 500 saw a 24.2% surge. Looking at year-to-date performance, the S&P 500 has risen by about 7%, compared to the Dow's increase of over 2%.

The performance gap between the indexes can be largely attributed to the S&P 500's heavier focus on big tech stocks, which have emerged as significant market winners. The anticipation surrounding the Federal Reserve's potential shift from rate hikes to cuts, coupled with the AI frenzy, propelled tech stocks to unprecedented heights last year.

Out of the few major big tech players, namely Alphabet Inc. (GOOGL), Amazon.com, Inc. (AMZN), Apple Inc. (AAPL), Meta Platforms, Inc. (META), Microsoft Corporation (MSFT), and NVIDIA Corporation (NVDA), only two tech titans MSFT and AAPL were included in the Dow up until last month.

However, considering the Dow’s lagging performance compared to the S&P 500 and its lack of exposure to big tech stocks, in a recent bold move to revitalize its performance and embrace the tech wave, Dow replaced pharmaceutical retailer Walgreens Boots Alliance, Inc. (WBA) with e-commerce giant, AMZN. Among the 30 blue chip companies listed in the Dow, AMZN holds the 17th position by weight.

But What Led to AMZN's Inclusion Into the Dow?

AMZN's inclusion in the Dow Jones index can be attributed to a three-for-one split implemented by Walmart, Inc. (WMT), also in the Dow. Companies within the Dow are weighted according to their stock price. Therefore, WMT's stock split, which effectively reduces its price and thereby its weight within the index, necessitated a rebalancing. Consequently, the Dow opted to incorporate AMZN into its listing.

S&P Dow Jones Indices indicates that this adjustment mirrors the evolving landscape of the American economy, which is expected to amplify consumer retail exposure alongside other business sectors within the Dow. Beyond AMZN's retail aspect, its addition to the Dow could elevate the index's performance, propelled by AMZN's increasing influence in the tech sector.

Commanding a market cap of over $1.80 trillion, AMZN has spread its wings across various industries over the past few years. While renowned for its remarkable retail operations, its substantial advancements in the entertainment landscape through Amazon Prime Video, Amazon Music, Prime Gaming, and Twitch underscore its versatility and impact.

Moreover, the company has also achieved notable progress in the tech space, particularly with its Amazon Web Services (AWS) segment, capitalizing on the surge in demand for Cloud and AI services. According to Statista, AWS generated $90.80 billion with its cloud services in 2023.

Additionally, buoyed by a record-breaking holiday shopping season, AMZN witnessed solid year-over-year growth in both its topline and bottom-line figures in the final quarter of 2023. Meanwhile, its AWS segment, which recorded a net sale of $24.20 billion, was more profitable than analysts had predicted and accounted for 14% of AMZN’s overall revenue in the same quarter.

With AMZN’s focus on fortifying its foothold in the realm of AI, the company, during the fourth quarter, launched the Q chatbot for developers and nontechnical corporate workers, alongside unveiling its partnership with chip kingpin NVDA to provide cutting-edge infrastructure, software, and services, aimed at supporting customers' advancements in generative AI.

On the earnings call, AMZN’s CEO Andy Jassy emphasized that generative AI remains a focal point for AMZN, with ongoing dedication and investment. He highlighted its potential to revolutionize numerous customer experiences and processes, foreseeing it as a significant driver of tens of billions of dollars in revenue for AMZN in the coming years.

Bottom Line

Despite the Dow lagging behind the S&P 500 index, inclusion in the Dow serves as a clear signal to investors, analysts, and the financial media, indicating a company's status as a stalwart of the American economy.

That being said, AMZN’s inclusion among the top 30 blue-chip companies comes as no surprise, considering the company’s strong financial prowess, relentless success, and diverse portfolio spanning retail, entertainment, and technology.

In addition, AMZN's robust financial performance in its last reported quarter, along with its recent partnerships with industry giants such as NVDA and product launches to fortify its position in the realm of AI, underscore its potential for further expansion and innovation.

Looking forward, Wall Street is buzzing with high expectations for the company’s fiscal first-quarter earnings, forecasting an impressive 11.9% year-over-year revenue climb to $142.48 billion, alongside a remarkable 171.6% year-over-year EPS surge to $0.84.

Furthermore, driven by AMZN’s competitive advantages, including its strong positions in logistics, e-commerce, and cloud computing, Wall Street projects the company to achieve revenue growth close to 10% by 2028. Street also anticipates slight increases in its EBITDA margin, reaching 21.2% by the end of 2028, and predicts AMNZ's market cap will reach $3 trillion over the next five years.

With such bullish sentiment echoed by analysts for the company’s future prospects coupled with its inclusion in the prestigious Dow index, institutional investors are flocking to AMZN shares, with 2,532 holders ramping up their stakes, reaching a total of 312,340,167 shares. Moreover, 428 institutions have taken new positions (32,292,371 shares).

This surge in institutional investment speaks volumes about the growing confidence in AMZN's future prospects. In light of all the encouraging aforementioned factors, AMZN emerges as a compelling investment opportunity.

Nvidia vs. Netflix- Which Is the #1 Growth Stock to Buy in March?

Posted on by The INO.com Team

With the S&P 500 soaring roughly 8% year-to-date, stocks have experienced a solid start in 2024, with investors reaping the rewards of putting their money in high-growth stocks. This positive momentum is expected to persist throughout the rest of the year and beyond.

Amid this market rally, chip giant NVIDIA Corporation (NVDA) and entertainment powerhouse Netflix, Inc. (NFLX) have emerged as beacons of growth, capturing investor’s bullish sentiment.

Although operating in distinct industries with unique business models, these titans share striking parallels in their journey to success. Their unwavering commitment to excellence, combined with strategic flexibility, has catapulted them to the forefront of their respective industries.

Therefore, let’s explore the fundamentals of NVDA and NFLX to unveil the ultimate growth contender of the month.

Last Reported Quarterly Results

In the fiscal fourth quarter that ended January 28, 2024, NVDA witnessed a staggering 265.3% year-over-year surge in its topline, totaling $22.10 billion. The company’s non-GAAP net income surged to $12.84 billion and $5.16 per share, marking a remarkable increase of 490.6% and 486.4% from the prior-year quarter, respectively.

As of January 28, 2024, NVDA’s cash, cash equivalents and marketable securities stood at $25.98 billion.

Conversely, for the fourth quarter that ended December 31, 2023, NFLX’s revenue rose 12.5% year-over-year to $8.83 billion. The company also experienced significant growth in net income and EPS compared to the previous year’s quarter, amounting to $937.84 million and $2.11, respectively. As of December 31, 2023, NFLX held $7.12 billion in cash and cash equivalents.

Growth Trajectory

NVDA, the reigning chip powerhouse, is currently one of the market's most sizzling stocks. Since its inception in 1993, NVDA has spearheaded cutting-edge computer chip technology, pushing the boundaries of graphics-heavy video games to unparalleled heights.

However, with the emergence of Artificial Intelligence (AI), these chips have swiftly ascended to newfound prominence, reflecting NVDA's enduring innovation and strategic adaptability. The company stands as a global giant in the production of Graphics Processing Units (GPUs) renowned for their ability to handle complex mathematical operations, powering captivating visuals across devices.

These advanced chips have become indispensable for training state-of-the-art AI programs such as ChatGPT and Gemini, underscoring NVDA’s pivotal role in driving the AI revolution forward. Leveraging AI to its advantage, NVDA’s earnings reports have managed to exceed expectations throughout 2023.

Furthermore, NVDA’s shares soared roughly 200% over the past year, buoyed by the company’s stellar earnings performance and solid demand for its AI chips. This surge attracted both institutional and retail investors, driving up share prices. With a market cap of around $2 trillion, NVDA has now claimed the title of the world's third most valuable company.

On the other hand, commanding a market cap of over $268 billion, NFLX stands as a pioneer in the streaming entertainment space, revolutionizing how audiences consume content worldwide. With a vast library of original programming and a global subscriber base, NFLX enjoys unrivaled dominance in the industry.

In a recent conference, NFLX’s CFO Spencer Neumann elaborated on NFLX’s trajectory under its revamped Co-CEO structure and its ambitious vision for future expansion. Neumann emphasized the smooth transition to the new leadership structure and NFLX’s dedication to broadening its entertainment repertoire, spanning films, TV series, gaming endeavors, and live content experiences.

Over the last few years, the tech company has adopted several strategic approaches to bolster its financial health. NFLX’s growth strategy hinges significantly on its substantial investment in content, with an annual expenditure projected at approximately $17 billion.

In addition, Netflix is venturing into new revenue avenues, including the introduction of an ad-supported subscription tier and measures aimed at bolstering monetization, such as combating password sharing.

Moreover, despite its risky move of cracking down on password sharing, NFLX’s latest earnings report revealed a surge of 13 million new subscribers in the final quarter of 2023, marking its most substantial growth since 2020. While initially met with resistance, the strategic move has been designed to counteract declining subscribership.

Greg Peters, NFLX’s Managing Director, emphasized during the earnings call that the company's top priority regarding ads is scalability. He highlighted a 70% quarter-on-quarter growth in the last quarter, following a similar growth trend in the previous quarter, indicating a positive growth trajectory for the company.

Competitive Landscape

In the dynamic worlds of technology and entertainment, both NVDA and NFLX are fiercely vying for supremacy in their domains.

The soaring popularity of generative AI owes a significant debt to NVDA and its groundbreaking GPUs. With skyrocketing demand and tight supply, NVDA's GPU H100 has emerged as a highly sought-after and premium-priced commodity, propelling NVDA to trillion-dollar status for the very first time.

With tech giants such as Microsoft Corporation (MSFT), Meta Platforms Inc. (META), OpenAI, Amazon.com Inc. (AMZN), and Alphabet Inc. (GOOGL) heavily relying on NVDA’s GPU chips to power their generative AI planforms, these companies have started developing their own AI processors.

In addition, NVDA faces stiff competition from other chip makers like Advanced Micro Devices, Inc. (AMD) and Intel Corporation (INTC), all striving to release the newest, most efficient, and potent AI chips to dominate the market.

Meanwhile, NFLX confronts fierce competition from fellow FAAMG (Meta (formerly Facebook), Apple Inc. (AAPL), Amazon, Microsoft, and Alphabet’s Google) heavyweights. The streaming arena is now brimming with contenders like Apple TV+, Amazon Prime Video, and YouTube Premium, launched by Apple, Amazon, and Google, respectively.

This fierce rivalry compels NFLX to perpetually innovate and enrich its content library to retain its crown as the streaming kingpin. Furthermore, the mounting expenses of content licensing and the delicate balance between original productions and licensed content present enduring hurdles for NFLX to overcome.

Bottom Line

As evidenced by their latest quarterly results, both NVDA and NFLX continue to deliver impressive performances, standing as formidable players in their respective industries, with their growth trajectories reflecting their strategic prowess and market dominance.

NVDA's cutting-edge GPU chips have propelled it to the forefront of the AI revolution, with staggering earnings growth and market capitalization making it a top contender in the tech landscape.

Fueled by these promising prospects, NVDA’s shares soared to unprecedented heights last month, with its market cap skyrocketing by a Jaw-dropping $267 billion in a single day. This remarkable surge nearly matched the entire market cap of NFLX, reflecting immense investor confidence in NVDA’s prospects.

NFLX, on the other hand, dominates the streaming entertainment space with its vast content library and global subscriber base. Despite facing stiff competition from tech giants and emerging streaming platforms, NFLX remains focused on expansion and innovation, which is evident in its ambitious growth strategies and robust financial health in the last reported quarter.

While challenges and competition persist, NVDA and NFLX demonstrate resilience, adaptability, and a relentless drive for success, making them compelling options for investors seeking growth opportunities in the dynamic worlds of technology and entertainment.

However, NVDA’s shares are trading at a much higher valuation than NFLX. For instance, in terms of forward Price/Sales, NVDA is trading at 19.37x, 178.7% higher than NFLX’s 6.95x. Likewise, NVDA’s forward Price/Book ratio of 24.32 is 116.2% higher than NFLX’s 11.25x.

The higher valuation of NVDA compared to NFLX indicates investor confidence in NVDA's future growth potential, leading investors to be willing to pay a premium price for its shares. However, it also signals that NVDA's anticipated growth might already be factored into its stock price, potentially dimming its attractiveness compared to NFLX.

Furthermore, while NVDA’s ascent captivates the stock market and propels the S&P 500 Index to unprecedented highs, Barclays research analyst Sandeep Gupta anticipates that demand for AI chips will stabilize once the initial training phase concludes.

Gupta underscores that during the inference stage, the computational demand is lower compared to training, suggesting that high-powered PCs and smartphones could suffice for local inference tasks. Consequently, this scenario may reduce the urgency for NVDA’s expanding GPU facilities.

As a result, investors might be banking on future growth that could potentially fail to materialize. With that being said, NFLX may emerge as a more promising growth stock compared to NVDA.