Reddit Stocks: What meme stocks are trending today? – October 10, 2023

US futures

• Dow Jones Industrial Average is up 0.1%
• S&P 500 is flat
• Nasdaq 100 is flat

US futures are treading water today as markets balance out fears stemming from the impact of conflict in the Middle East with hopes that the Federal Reserve may be done with its interest rate increases this year.

The Fed’s vice chair Philip Jefferson said the bank will “proceed carefully” in light of the recent rise in treasury yields, while the Fed’s Lorie Logan said the rise in long-term rates may require the bank to complete less tightening. Yields on 10-year government bonds puled back yesterday as the bond market reopened, but remain near 16-year highs.

That will remain a key theme today as several other Federal Reserve members are due to speak, including Raphael Bostic, Christopher Waller, Neel Kashkari and Mary Daly. Reports that the Chinese government is preparing to inject fresh stimulus is also providing some good news for stock markets today.

Some of the sharp movements we saw yesterday in wake of the Hamas-Israel conflict have unwound today, with oil and gold prices both pulling back, but the situation remains a major driver of some individual stocks from sectors such as defence, aviation and energy.

Most discussed Reddit stocks

Below is a list of the top 10 most mentioned US stocks on the WallStreetBets thread on Reddit over the last 24 hours, according to data from Quiver Quantitative. Exchange-Traded Funds (ETFs) and other instruments have been excluded:

1. Lockheed Martin
2. NVIDIA
3. Tesla
4. RTX Corp
5. Palantir
6. Visa
7. Northrop Grumman
8. C3.ai
9. Rocket Labs USA
10. Microsoft

Most active US stocks before the bell

Below are the most active stocks with a valuation of at least $500 million before the bell, based on trading data taken from Bloomberg:

1. Palantir
2. Akero Therapeutics
3. Rivian
4. Lucid Group
5. Tesla
6. 89bio
7. Nikola
8. Unity Software
9. Coca-Cola
10. Plug Power

US premarket winners and losers

Here are the stocks worth at least $500 million experiencing the sharpest movements in premarket trade, according to data from Bloomberg:

Top US stocks to watch

Let’s have a look at the top stocks to watch today.

Rampant appetite for defence stocks

Lockheed Martin, RTX Corp and Northrop Grumman are up 1.3% to 2% today as investors race to buy defence stocks as geopolitical tensions rise following the conflict seen in the Middle East.

Trading volumes popped yesterday as markets got their first opportunity to react to the conflict and this sent the trio to new highs. RTX is at a three-week high, Lockheed Martin is at levels not seen in over a month, while Northrop Grumman is at its highest level in six months!

Other stocks also appear to benefiting. Palantir, a favourite among retail traders that has close ties to US defence, booked its biggest daily gain in over a month yesterday and is up another 2.1% today, hitting two-month highs.

Can airline stocks take-off from new lows?

Meanwhile, major US airlines came under pressure yesterday in light of the Hamas-Israel war. Some took a hit after cancelling flights to and from Tel Aviv, while the entire sector took a knock by concerns that the subsequent spike in oil prices will further erode their profitability. All the major airlines have already warned rising fuel costs would result in lower profits in the third quarter before the latest spike in oil.

Southwest Airlines is up 0.7% after sinking to its lowest level in three years yesterday! American Airlines is up 0.4% after descending to one-year lows. United Airlines is up 0.7% and rebounding from its lowest level since early January. Delta Air Lines, which reports results tomorrow, is up 0.7% after testing five-month lows this week.

Oil prices slip, but stocks keep climbing

Exxon Mobil, Chevron and Occidental Petroleum are trading up to 0.2% higher today and building on the strong gains seen yesterday despite a pullback in oil prices today.

Brent and WTI have both pulled back after surging following the disruptive developments seen over the weekend. Still, appetite for oil stocks is rising because investors are more convinced that oil markets will continue to tighten this year and shrugging off any temporary pullback.

Israel-based stocks remain on the radar

US-listed stocks that are based in Israel or the wider region took heavy knocks yesterday and are likely to remain volatile as the world waits to see how the conflict pans out and whether it will escalate.

Intel spin-off Mobileye, which is headquartered in Jerusalem, is trading broadly flat today after experiencing its heaviest daily fall in over two months yesterday, sending it to three-week lows. Israeli chip company Tower Semiconductor is up 0.4% after hitting three-year lows!

US-listed Chinese stocks rise on stimulus hopes

Chinese companies listed on US exchanges are on the rise today amid reports that the Chinese government is considering raising its budget deficit for 2023 and inject new stimulus measures in order to accelerate growth, according to Bloomberg.

That is providing support to the likes of Alibaba, JD.com, Baidu and Pinduoduo, all of which are 0.4% to 1.9% higher this morning.

Birkenstock to price IPO today

Birkenstock will be the next company to test the waters and the appetite of investors for IPOs. The German sandal maker is expected to price its IPO today ahead of a listing tomorrow, according to reports. Birkenstock is expected to price its IPO at the high-end of its $44 to $49 price range, Reuters reported yesterday. Find out more in Everything You Need to Know About the Birkenstock IPO.

That suggests Birkenstock will come to market with a valuation that is equal to about 7.4x annual sales and 49x full-year net income based on its fiscal 2022 results. The fact profits plummeted in the most recent interim period covering the six months to the end of March 2023 suggests the PE ratio would be even higher based on forward estimates. That looks elevated when compared to some other footwear companies on the market.

IPO stocks: Arm rises as Instacart sinks

Let’s check in on the wider IPO market. Arm shares are up 1.7% at $55.16 and at an October-high of after a flurry of brokers initiated coverage on the British semiconductor firm yesterday after the quiet period on research expired following its listing last month.

The initial coverage from Wall Street when it listed was muted, but we saw more optimistic views feed through yesterday. The average target price according to a Bloomberg-compiled consensus of 23 brokers now sits at $62.80, implying there is just under 16% potential upside from yesterday’s closing price. That is helping install confidence behind Arm’s premium valuation.

Other new additions to the stock market are not faring as well. Grocery delivery and tech firm Instacart is down another 0.4% at $24.56 after sinking to all-time lows yesterday, and has now continued to drift further below its IPO price of $30 since the start of the month.

It is also worth flagging Vietnamese electric carmaker VinFast, which is up 1.4% today at $7.33 after also hitting record lows yesterday following the $140 billion bubble bursting last month. The company recently reported its first set of results since going public and revealed a big jump in deliveries, but this has done nothing to stop the stock from freefalling.

Pepsi stock climbs on rosier outlook

PepsiCo is up 1% today after raising its full year guidance for the third time this year as the beverage and snack giant continues to reap rewards from higher prices.

Prices were up over 11% from last year in the third quarter and this more than countered a 2.5% drop in organic volumes. That resulted in a 7% rise in net revenue to $23.45 billion, which came in just ahead of forecasts. Adjusted EPS of $2.25 came in above the $2.15 estimate.

PepsiCo said it is now targeting annual core EPS of $7.54 over the full year, marginally higher than its previous goal of $7.47. It reiterated its topline goal for organic revenue to grow by about 10%.

That also appears to be feeding through to rival Coca-Cola, which is up 0.6%. The company remains in deep oversold territory after sinking to two-and-a-half year lows last week.

Amazon launches Prime Day sale

Amazon is down 0.2% after its two-day Prime Day sales event for subscribers launched today, as the ecommerce giant tries to attract consumer’s early-on in the so-called ‘golden quarter’ for retailers in the final three months of the calendar year.

Forecasts suggest sales growth will accelerate from what we saw at last year’s event but still at a far muted pace compared to the boost it used to provide before the pandemic. Consumer spending is slowing and households are more cost-conscious than they have been in years.

Tesla margin takes centre stage ahead of earnings

Tesla shares are down 0.6% this morning at $258.09 as traders and investors place their bets ahead of the electric vehicle maker’s quarterly results out next week, when we will learn the financial impact from the big delivery miss in the third quarter.

The disappointing delivery figures were put down to factory downtime, but it has still stoked fresh concerns that demand is wavering and that more price cuts will be needed going forward, which ultimately erodes profitability. Jefferies reiterated its Hold rating this morning and lowered its target price to $250 from $265, citing fears of tighter margins and an uncertain demand outlook for 2024.

Rivian gets upgrade after capital raise

Rivian shares are up 2.8% at $19.30 after UBS upgraded the stock to Buy, saying the recent capital raise that prompted a selloff in the electric vehicle maker reduces the risk of another capital raise in the near future and provides a better picture ahead of its upcoming results.

Rivian shares slipped to three-month lows in wake of announcing  it was issuing a $1.5 billion convertible loan note. This was earlier than some analysts had expected, but UBS said it means Rivian is unlikely to raise any more capital until the end of 2025.

Juniper Networks is “most challenged” in sector

Juniper Networks is among the most traded stocks before the bell and is down 3.5% at $25.88 after JPMorgan downgraded the stock to Neutral and lowered its target price to $29 from $32, saying it could be “the most challenged” stock in the communications sector.

JPMorgan also downgraded fellow comms stock Corning to Neutral as it warned it expects an anticipated recovery to take longer than markets believe, cutting its price target to $36 from $43. Corning is down 2.5% at $28.70 before the bell.

Unity Software rises after CEO leaves

Unity Software is up 4.9% after announcing yesterday that CEO John Riccitiello is retiring and being replaced on an interim basis by James Whitehurst while a search for a permanent successor is undertaken.

Wall Street had mixed views on the news. Jefferies said Riccitiello’s retirement is “a good start in rebuilding trust with developers and investors following a series of missteps” but conceded it could inject more uncertainty over its strategy and outlook. Wells Fargo admitted Riccitiello was controversial but applauded the stellar growth delivered during his tenure.

Watch US banks ahead of Q3 earnings

US banks are also on the radar this week as JPMorgan, Wells Fargo and Citigroup will kick-off the third-quarter earnings season this Friday, with others like Bank of America, Morgan Stanley and Goldman Sachs to follow next week.

It is expected to be a tough quarter, with most expected to report a decline in earnings. We also expect commentary about consumer health and the economic outlook to be more cautious, especially as we approach 2024. However, markets have priced-in a bleaker outlook looking at the declines in share prices and valuation multiples trending below historical averages, with some having recently hit multi-year lows.

You can find out what to expect from the industry as a whole in our US Banks Q3 Earnings Preview.

Meanwhile, we have also taken a look at the largest bank in the US, JPMorgan, which is the only major player that has gained ground this year. We believe it will continue to outperform in an otherwise muted sector considering it is expected to report the best improvement in earnings and isn’t trading at a premium.

You can find out more in our JPMorgan Q3 Earnings Preview.