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- Are Wall Street All Wrong?! đŹ
Are Wall Street All Wrong?! đŹ
PLUS: Tesla Who? The New EV King đ
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Are Wall Street All Wrong?! đŹ
Tesla Who? The New EV King đ
Are Wall Street All Wrong?! đŹ
Major Setbacks = Major Comebacks. Especially if everyone is betting against you.
Thatâs the position that Dell Technologies find themselves in with their earnings report just around the corner, scheduled for August 29th.
Stock price has dropped over 50% from May 2024 highs which has scared off investors & left most analysts are feeling bearish. Iâm talking 13 analysts downgrading their rating while only 2 have given them the thumbs up.
Analysts forecasts for Dells next earnings
Luckily, analysts donât define companies & the 50% drop mightâve been exactly what we needed to shake the hype out so we can buy Dell at a fair (or even great) valuation.
This might actually set us up for a huge earnings surprise. đ And who doesnât love a good surprise when it goes your way?
Let me tell you why I think Dell is primed to shock everyone & get back on the upswing.
First of call, capital investment is heating up. Dellâs customers have hinted that theyâre ready to open their wallets up again by spending on networking & infrastructure. Thatâs super important because if it comes to fruition weâll likely see fatter margins for Dell in the next few quarters.
Fatter margins = fatter profits which (in theory) means higher share price.
And you didnât think I was going to present a bull case without mentioning AI, did you?
The AI boom is still in itâs baby era & Dell is perfectly positioned to benefit. AMDâs strong performance with its data center chips is a clear signal that AI infrastructure is in hypergrowth mode.
Dell is ready to ride that trend with their AI server platforms. The total addressable market (TAM for short, is the total amount of money all customers could spend on a product or service) for AI compute is expected to hit $400 billion by 2027 (even more by 2030). If Dell make sure they get their fair share of that, & thereâs no reason they canât, then thereâs huge room for growth.
AI is changing the game for computers, too. Intel is seeing more demand for AI-powered PCs, which is great news for Dell's computer business. It signals a growing market that Dell can tap into, leveraging Intelâs advanced processors to enhance & expand their own computer products.
Now, what if we had to look at Dell through the eyes of the 13 analysts who downgraded the stock? What are the risks?
Well, any slowdown in the economy could make those enterprise customers put their wallets back in their pocket which wonât give us those fatter margins weâre hoping for. Weâre also depending on AI growth and that theyâll be be able to capture their share of the market. Dell are in a competitive space so it wonât be a walk in the park.
But with the broader AI trend looking positive for now & Dellâs diversified approach, the upside potential outweighs the risk for me right now.
Dell has been consolidating in the last 10 days as we wait for earnings. Iâd expect a breakout once we have some news & the risk/reward ratio looks good to me
The stock took a big hit dropping from $180 to $90 at itâs lowest. Theyâve recovered 25% since then. It has been trading flattish for the last 10 days or so which Iâd imagine is waiting for earnings.
Iâm going to go small with my position size & see how earnings goes because itâs impossible to guess which way the market goes. Sometimes youâll get a great report & the stock will drop. Sometimeâs itâll be awful & the stock will sky rocket.
And this is a long term play anyway so it really doesnât matter too much in the short term, assuming the earnings arenât awful.
If they can deliver a surprise & beat the analysts pessimism I think reaching old highs is very much on the cards. Iâll be targeting $200+ assuming I can see theyâre making moves in the areas Iâve mentioned. Thatâll be around 80% upside from current price.
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Tesla Who? The New EV King đ
Someone tell Elon to take a seat.
Thereâs a new EV king in town⌠in China, anyway. Iâm talking about BYD Co, a Chinese automaker. But BYD isnât just another car company. They started out in 1995 as a battery manufacturer & have evolved into a superhero in the EV space.
So what makes BYD special?
Well, for starters, theyâve mastered the art of producing high-quality vehicles at lower prices. In a competitive space like the Chinese market being able to offer consumers the best product at the best prices is a great place to find yourself.
Reliable + affordable = a massive customer base that loves your products.
Once youâve got a hungry hoard of customers the next thing you need to do is make sure you can give them what they want & make sure you get what you want too. For BYD, that means making sure they keep healthy margins & profits rolling in.
BYD have nailed that, too.
Yangwang is a premium brand for BYD. This is one of their cars with a Lamborghini vibe
In the NEV (New Energy Vehicle) segment theyâve captured 32% market share in China. Thatâs huge. And theyâre not just sitting back admiring their hard work. Plans are in the works to expand into premium brands like Denza, Fangchengbao, & Yangwang,
If they can tap into the high-end market in a similar type of way, their growth numbers are going to be insane.
But with all these crazy numbers is there still room for us to make money? Or has all this growth already been priced in?
Well, BYDâs stock is currently sitting at a P/E ratio of around 20, which is pretty fair given its growth trajectory. Itâs not dirt cheap, but weâre paying for quality & potential here. Plus, with the company's strong fundamentals, thereâs limited downside. If you want to be in the EV space and want to tap into the Chinese market, itâs probably one of the more stable choices in what can be a super volatile market. Especially with the general sentiment around Chinese stocks at the moment.
And to be clear, there are geopolitical risks, especially concerning exports to regions like the EU and Southeast Asia. But exports only make up about 8% of their sales so it isn't a deal-breaker.
The real risk is Chinaâs economic performance which is still finding itâs feet at the moment. If things get rocky, it could mean less people splashing out on new EVs. But even then, BYDâs strong position in the affordable car market gives them a cushion.
I think the risk is worth taking given BYDs position in the market, limited down & everything everything else they have going for them. Superior technology, cost efficiency, track record of smart management.
And theyâre in a market with huge growth potential still to tap into
The ranges that BYD Co typically finds support/resistance at which could make good entry & exit levels given the volatility in the Asian/EV market
The stock likes to find a support around $175 - $200 which weâve just moved away from. Resistance looks to come in around $275 - $300 which is a 25% -30% upside from current price. Thatâll be the price levels Iâm targeting to take profit.
It looks like the whole numbers (i.e $200, $300) could be acting as psychological support & resistance which could be indicative of profit taking in a volatile market. Just something to keep in mind but not to solely base your decision making off of.
Thatâs all! See you same time next week đ
P.S Hit reply & let me know what you thought of this weeks newsletter. All feedback is welcomed â¤ď¸
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