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Electric Cars

Companies View Charging as a Lucrative Business in Its Own Right

2024-11-18

Sarajane Leary's experience showcases a common trend where electric car owners utilize charging time at supermarkets. She plugs her Toyota bZ4X into a fast charger in a Hannaford supermarket parking lot and goes shopping for paper goods and potato chips. "I'll get a 50 percent charge while I'm here," she said. This practice is what retailers and shopping centers have been betting on for decades when installing EV chargers.

Unlock the Potential of Electric Vehicle Charging for Retailers

Retailers' Initial Mixed Experience with EV Chargers

For years, retailers' experience with EV chargers was inconsistent, and the actual benefits remained unclear. Ms. Leary's story is just one example of how consumers are now using charging time at stores. It shows that while the concept was there, the full impact was yet to be determined.

Many retailers were cautious about investing in EV chargers initially, unsure of the return on investment. But as more studies emerged, a clearer picture began to form.

The Impact of EV Chargers on Retail Visits and Spending

New studies have provided valuable insights into the effects of EV chargers. A peer-reviewed study by researchers at Boston University and the University of Wisconsin-Madison looked at nearly 1,600 Tesla Supercharger stations in more than 800 U.S. counties. They found a 4 percent increase in monthly visits for retailers within 200 meters of chargers after installation, with the effects being most pronounced within 150 meters. Additionally, there was a 5 percent increase in spending.

This shows that EV chargers are not just attracting foot traffic but also leading to increased spending by consumers. It's a significant finding that has changed the way retailers view charging infrastructure.

Some Companies Seeing Charging as a Profitable Business

Notably, Walmart, the largest retailer in the United States, is seeing charging as a potentially profitable business in and of itself. They have begun building charging stations under their own brand names instead of relying on providers.

Graham Evans, a director at S&P Global Mobility, emphasized that "companies are beginning to see charging as something that can potentially help the bottom line." This indicates a shift in the retail industry's perception of EV charging.

The stock market witnessed a series of fluctuations early Monday. Dow Jones futures saw a slight decline, while S&P 500 futures remained flat and Nasdaq futures rose modestly. This upward movement was buoyed by Tesla, and Nvidia (NVDA) earnings loom large. The stock market Trump trade faced setbacks last week, with major indexes falling sharply, especially on Friday, testing or undercutting key levels. Many leading stocks suffered losses or downside reversals, often related to earnings.

Navigating the Stock Market with Tesla and Nvidia

Dow Jones Futures and Market Sentiment

Dow Jones futures fell by 0.2% compared to fair value. S&P 500 futures showed little change, while Nasdaq 100 futures climbed 0.2%. The 10-year Treasury yield rose to 4.48%, approaching Friday's five-month intraday highs. Crude oil futures also edged higher. Bitcoin rose above $90,000 but retreated from overnight highs. It's important to note that overnight action in Dow futures and other markets doesn't always translate into actual trading in the next regular stock market session.

These fluctuations in Dow Jones futures and other market indicators reflect the complex nature of the stock market. Investors need to closely monitor these trends to make informed decisions.

Nvidia Earnings and Market Impact

Nvidia earnings are due late Wednesday. Analysts expect earnings to jump 87.5% to 75 cents a share, with revenue increasing 83% to $33.09 billion. This would mark the end of a five-quarter string of triple-digit growth for the AI chip giant. However, the focus will be on guidance and the ramp-up of Blackwell production. The next-generation AI processor is expected to start shipments in the current quarter, and the speed of this process will be crucial.

Nvidia stock fell 3.8% to 141.98 last week, with most of the decline occurring on Friday. Shares tested but held the 140.76 consolidation buy point and the 21-day moving average. However, early Monday saw a nearly 3% drop, indicating a clear move below these key levels. The new Blackwell GPUs overheat when used in older server racks, as reported by The Information. Nvidia has urged customers to use different racks to avoid this problem.

Stock Market Rally and Its Challenges

The stock market rally suffered sharp losses in the latest week, especially on Friday. The Dow Jones Industrial Average shed 1.2%, the S&P 500 index slumped 2.1%, and the Nasdaq composite lost 3.15%. The small-cap Russell 2000 tumbled 4%. The Nasdaq, S&P 500, and Russell 2000 have undercut the lows of the Nov. 6 postelection gap-up day. The Nasdaq fell below its 21-day moving average, and the S&P 500 finished just below this key short-term level, while the Russell 2000 held on.

The key indexes are around natural areas of support. Holding and rebounding from these levels would signal the continuation of the bullish trend. However, breaking lower from here and moving toward the 50-day line would be highly negative. The 10-year Treasury yield jumped 12 basis points to 4.43%, although it closed flat on Friday after hitting a five-month high intraday of just over 4.5%. The two-year yield climbed 4.5 basis points to 4.3%. Fed chief Jerome Powell's signal on Thursday that the Fed is in "no hurry" has led markets to expect a modest rate cut on Dec. 18.

Other Market Players and Their Performances

Among growth ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) dipped 0.1%, with Palo Alto stock being a notable holding. The VanEck Vectors Semiconductor ETF (SMH) dived 7.5%. Nvidia stock is the dominant SMH holding, along with Broadcom and Taiwan Semi stock. ARK Innovation ETF (ARKK) gave up 1.15% last week, and ARK Genomics ETF (ARKG) plunged 12.6%.

SPDR S&P Metals & Mining ETF (XME) skidded 6.1% last week. SPDR S&P Homebuilders ETF (XHB) retreated 2.6%. The Energy Select SPDR ETF (XLE) advanced 1%, and the Health Care Select Sector SPDR Fund (XLV) sold off 5.55%. The Industrial Select Sector SPDR Fund (XLI) retreated 2.1%, and the Financial Select SPDR ETF (XLF) rose 1.4%.

What Investors Should Do Now

The stock market rally, which seemed so strong just a few days ago, is now facing a key test. The major indexes and leading stocks could quickly rebound, but investors need to be aware of the potential character change. This is not a good time to be buying stocks. Several stocks that flashed buy signals last week faltered by Friday's close. Few stocks are in buy zones, and not many more are setting up after the large Trump gains followed by significant losses.

Investors may want to reduce their exposure, especially if they are on margin. Avoiding new buys and paring losers and round-trip stocks will help reduce the overall portfolio. Partial profits can also be taken or successful positions can be exited, depending on individual investing styles and convictions. Keep working on watchlists as a pullback should create buying opportunities. Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.

Please follow Ed Carson on Threads at @edcarson1971 and X/Twitter at @IBD_ECarson for stock market updates and more.

In 2024, stock-split fever has taken hold among many investors. The sheer volume of stock splits, with over 450 forward and reverse stock splits year to date, is quite remarkable. And there are more splits on the horizon in the coming weeks.

Big Winners and a Disappointment

Several stocks of companies that have already split this year have seen significant gains. Take Microstrategy, for instance, whose shares have skyrocketed by over 420%. Nvidia has also soared around 190%. However, there is one stock-split stock that has been a disappointment this year. But according to Wall Street, it could potentially crush the market in the next 12 months.

Meet Lam Research

Lam Research (LRCX -6.34%) conducted a 10-for-1 stock split after the market close on Oct. 2, 2024. In May, as a semiconductor fabrication equipment provider, it announced plans for the stock split along with a $10 billion stock buyback. CFO Doug Bettinger stated that the stock split would allow a larger proportion of Lam's worldwide employee base to participate in the company's employee stock plans. In the weeks following the announcement, the stock price took off. But then in July, it began to decline and is now roughly 36% below its peak.Despite this, Wall Street remains optimistic about Lam Research. The average 12-month price target for the stock indicates an upside potential of 29%, which is much more bullish than the predictions for the S&P 500. Goldman Sachs expects the S&P to rise around 9% over the next 12 months, while Evercore ISI anticipates a gain of around 12% by mid-2025. On the other hand, Stifel analysts predict a steep S&P 500 sell-off.Among the 32 analysts surveyed by LSEG in November, 16 rated Lam Research as a "buy" and four as a "strong buy". The other 12 analysts recommend holding the stock. None of the surveyed analysts saw Lam as a stock to sell. Even the most pessimistic price target for Lam was higher than its current share price.

Why Analysts Like Lam Research

We don't need to speak with the 20 analysts who rated Lam as a "buy" or "strong buy" to understand why they like the stock. It mainly comes down to the company's growth prospects. Spending on NAND flash memory is still in a slump, but Wall Street expects a rebound, and Lam is confident about it. CEO Timothy Archer mentioned in the company's third-quarter earnings call that technology updates should boost NAND investments. He predicted that more customers will switch to advanced nodes in 2025. Archer added that with the industry's largest installed base of 3D manned equipment, Lam should benefit disproportionately during these upgrades.Lam could also expand its market share in advanced extreme ultraviolet lithography (EUV) patterning next year. This EUV patterning is used to print layers on silicon wafers for semiconductor chips. Additionally, Lam has emerged as a leader in advanced packaging, which combines multiple chips to enhance performance and reduce costs.I believe analysts are generally positive about Lam Research's valuation as well. The stock's price-to-earnings-to-growth (PEG) ratio based on five-year earnings growth projections is 1.44. Although it's not a bargain valuation, it is lower than the 1.72 PEG multiple of Lam's top rival, Applied Materials (AMAT -9.20%).

Risks and Outlook

Lam faces some risks. China, which accounted for 37% of the company's total revenue in Q3, can be a volatile market. The possibility of steep tariffs on imports to the U.S. could have a financial impact on Lam.Nevertheless, I expect the demand for NAND flash memory to rebound, just as it has in the past. Lam is well-positioned to benefit from this. Whether the stock jumps 29% over the next 12 months or not, it should be a solid long-term winner.