Weekly Roundup

Mar 12, 2024

This week was packed with economic data and quarterly earnings that gave the market mixed signals.

We got numbers and analysis that at first supported the soft-landing narrative. Bank of America, for example, became the first large Wall Street bank to officially reverse its call for a recession. But some of this week's data, including Friday's jobs report and ADP's July National Employment Report, showed little progress on wage pressures. Also, rising oil prices, which benefited our position in the Energy Select Sector SPDR Fund, are translating into higher gas prices, something that could stifle further progress on inflation. And following developments between the Teamsters and UPS, negotiations between the United Auto Workers union and Detroit's Big Three could have implications for wage and other sources of inflation down the road.

As for quarterly earnings, we saw an increase in the number of companies issuing downside guidance for the current quarter. That, along with the continued rebound in the dollar and the 10-year Treasury yield finishing the week above 4%, weighed on all the major market indexes this week. While the market looked to finish the week on a positive note, a late-day sell-off on Friday saw the S&P 500 finish the week 2.3% lower, while the Nasdaq shed 2.8%. We viewed the downgrade to the U.S. credit rating was a non-event, something we touched on here as well as on this week's AAP Podcast, but it clearly had an impact on the market this week.

When we return next week, we'll look at the latest data from FactSet for S&P 500 consensus earnings, both for the upcoming quarters as well as full-year 2023 and 2024 expectations. We'll be looking for any positive revisions, but our sense, based on earnings so far, including those from this week, is any revisions are likely to be modest. On Monday, we'll also review the technicals for the S&P 500, updating key support levels for the market.

While the markets took it on the chin during the first few days of August, several portfolio positions made outsized moves this week including Coty, Universal Display, Amazon, United Rentals, Vulcan Materials, Energy Select SPDR Fund and our inverse ETFs. While we enjoy those gains, the market's move lower this week did have an impact on the portfolio and also some of the shopping list companies we are watching in the Bullpen.

With August trading volumes likely to shrink in the near term we will continue to tread carefully, watching the technical setup in the Bullpen residents, including Morgan Stanley and McDonald's that we are interested in. Kellogg will hold an Investor Day next week on Wednesday, during which we expect to get far more insight into its upcoming split into two companies. What we learn may lead us to call K shares up into the portfolio given events like this in the past have unlocked value for one or more of the entities.

Above we noted it was a busy week for data and earnings, and it would up being a busy one late in the week for the portfolio as well. Following quarterly results from Motorola Solutions Thursday night, we added to our Axon holdings on Friday. On the same day, we exited the portfolio's position in Cboe Global Markets and boosted our price target for Universal Display as well as those for Apple and Amazon. And with this edition of the Roundup, we close the loop on our Vulcan Materials earnings comments this week and increase our VMC price target to $260 from $250.

We cover a lot of ground during the week in our Daily Rundowns and the AAP Podcast. If you happened to miss one or more of them, here are some helpful links:

Monday, July 31: What We Haven't Seen So Far This Earnings Season

Tuesday, August 1: Here's Our Shopping List as Earnings Season Unfolds

Wednesday, August 2: Thematic Investing Explained and How the Portfolio Uses It

Wednesday, August 2: The Downgrade Lowdown

Thursday, August 3: What to Watch From Apple and Amazon in Their Earnings Reports

Friday, August 4: Carly Garner on Market Seasonality and What to Expect From Oil and Gold

(Note: T is the most recent period, T-1 is the prior period's reading and T-2 is two periods back, the intent being to illustrate any trends)

The big craze this year has been artificial intelligence. It seems every technology company that talks about AI in and around earnings gets a big jolt higher in stock price. We saw that starting to occur with Nvidia (NVDA) earnings earlier in the year, and many other companies followed suit talking it up in their conference calls. Of course, there needs to be some real business with AI, and as we heard recently from AAP names Microsoft and Google, there is plenty of opportunity in this very new approach. The Global X AI and Technology ETF has been a strong mover in 2023 and continues to reflect the optimism and hope that AI is going to carry the day for technology and overall markets.

The chart shows a nice, steady flow of higher highs and higher lows. That is bullish and as long as the ETF stays above those moving averages on the chart there is no reason the dips cannot be bought. The MACD shows a bearish crossover though, and the stochastics have already started to run toward an oversold reading. Yet, even as the indicators may look bearish, the price chart does not -- and we always pay attention to that indicator first and foremost. Hence, we would grade the chart of AIQ as bullish. We'll be watching this newer ETF very closely.

For a closer look at the chart above, click here.

Other charts we shared with you this week were:

Monday, July 31: Dow Industrial Average (DIA) - Displaying Strength We Haven't Seen in Decades

Monday, July 31: Amazon (AMZN) - Amazon Is a 'Head Scratcher' in Front of Earnings

Tuesday, August 1: Costco Wholesale (COST) - Costco Is on a Mission

Wednesday, August 2: Universal Display (OLED) - Sideways Action Here Is Not a Bad Sign

Thursday, August 3: Qualcomm (QCOM) - This Bullpen Name Is Back in the Penalty Box

Following a jam-packed week of economic data that reaffirmed the soft landing narrative for the U.S. economy, which increasingly looks like the best among the global economic horsemen, but also suggested wage inflation could be a thorn in the Fed's inflation-fighting plans, we have a far more relaxed economic calendar next week. However, there will still be several key pieces of economic data coming including the June Consumer Credit report and the NBIF Small Business Index. The May Consumer Credit report showed consumer credit card borrowings topped $1 trillion but with banks tightening credit, including that for credit cards, we will be looking to see to what degree consumers have embraced more costly borrowings. In the NFIB Small Business Index, we will be curious to see if respondents are having an easier time attracting the skilled labor they need and if not, it may mean another layer of wage pressure.

Late in the week, we have the back-to-back read on inflation courtesy of the July Consumer Price Index and the Producer Price Index. We, the market, and the Fed will be very interested in what the core CPI data reveals following June's sizable move lower. Another meaningful step down would add to the market's view the Fed isn't likely to enact another rate hike. Ahead of that data and after Friday's July Employment Report, Federal Reserve Bank of Atlanta President Raphael Bostic said US employment gains are slowing in an orderly manner and there may be no need to hike rates further to ease inflation. We will want to pay close attention to comments from Fed heads once the July inflation reports have been published.

Here's a closer look at the economic data coming at us next week:

Monday, August 7

Tuesday, August 8

Wednesday, August 9

Thursday, August 10

Friday, August 11

Monday, August 7

Tuesday, August 8

Wednesday, August 9

Thursday, August 10

Friday, August 11

Here's a closer look at the earnings reports coming at us next week:

Monday, August 7

Tuesday, August 8

Wednesday, August 9

Thursday, August 10

Friday, August 11

WEEKLY UPDATE: Competitor Motorola Solutions delivered a beat and raise with its June quarter earnings report. Moreover, Motorola's backlog continued to rise quarter over quarter spurred on by record June quarter orders reflecting strong city and state spending on public safety equipment and services. With Federal stimulus dollars entering the public safety spending funnel as well as other opportunities in video, software and services, we opted to add to our AXON shares on Friday ahead of its quarterly results out next week on Tuesday, August 8.

1-Wk. Price Change: -1% Yield: 0.00%

INVESTMENT THESIS: Axon Enterprise Inc develops, manufactures, and sells conducted energy devices and cloud-based digital evidence management software designed for use by law enforcement, corrections, military forces, private security personnel, and private individuals for personal defense. The company operates in two segments: Taser and Software & Sensors. Taser develops and sells CEDs used for protecting users and virtual reality training. Software & Sensors manufactures fully integrated hardware and cloud-based software solutions such as body cameras, automated license plate reading, and digital evidence management systems. Axon delivers its products worldwide and gets most of its revenue from the United States. President Biden's fiscal year 2023 budget requests a fully paid-for new investment of approximately $35 billion to support law enforcement and crime prevention -- in addition to the President's $2 billion discretionary request for these same programs. According to Mordor Intelligence, the wearable, and body-worn cameras market on its own was valued at $1.62 billion in 2020 and is expected to reach $424.63 billion by 2026.

Target Price: Reiterate $255; Rating: One

RISKS: Manufacturing and supply chain, competitive factors, government regulation, technology change.

ACTIONS, ANALYSIS & MORE: Strong Demand Bodes Well for This Conducted Energy Devices Firm, Initiating a New Position in a Public Safety Technology Name, Investor Relations.

WEEKLY UPDATE: League tables showed BofA displaced UBS to become one of the top three underwrites of US IPO offerings during the past month. We see that as a positive when the IPO window opens on a sustained basis, the same catalyst that would lead us to become more aggressive with Morgan Stanley (MS) shares. Also this week, citing the jobs market and ongoing consumer spending, BofA retracted its previous forecast of an impending recession, sharing the economy seems to be reaching a "stable state." The company is evaluating the impact of proposed rules on its regulatory capital, ones that if passed would be put in place over three years beginning July 1, 2025.

1-Wk. Price Change: -1.9% Yield: 3.1%

INVESTMENT THESIS: Bank of America is one of the world's leading financial institutions, serving individual consumers, small and middle-market businesses, and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 67 million consumer and small business clients with approximately 3,900 retail financial centers, approximately 16,000 ATMs and award-winning digital banking with approximately 56 million verified digital users. Bank of America is a global leader in wealth management, corporate and investment banking, and trading across a broad range of asset classes, serving corporations, governments, institutions, and individuals around the world. Bank of America offers industry-leading support to approximately 3 million small business households through a suite of innovative, easy-to-use online products and services. The company serves clients through operations across the United States, its territories and approximately 35 countries. From a reporting basis, the company's business breaks down as follows: Net Interest Income breakdown: Consumer Banking 57%, Global Banking 23%, Global Wealth & Investment Management 14%, and Global Markets 6%; Income Before Tax breakdown: Consumer Banking 42%, Global Banking 27%, Global Wealth & Investment Management 16%, and Global Markets 15%. Bank of America pays a quarterly dividend of $0.22 per share.

Target Price: $37; Rating: One

RISKS: Financial markets, fiscal, monetary, and regulatory policies, economic conditions, and credit ratings.

ACTIONS, ANALYSIS & MORE: We're Upgrading and Building Upon a Position, We're Initiating a Bank Position, Investor Relations

WEEKLY UPDATE: Competitor EVgo reported June quarter results that topped expectations and lifted the low-end of its 2023 revenue guidance. Those results along with management's comments for federal and state EV charging station funding suggest we are at or near a tipping point for stimulus spending starting to flow. To us, this sounds very familiar with where we were a few quarters ago with infrastructure spending that is now propelling non-residential construction spending higher and should continue to do so for some time given Washington's programs. We will continue to be patient, noting that as the uptake of EV continues while we wait for these EV charging programs to kick in, the pain point will only get larger. Next up is quarterly results from Blink Charging on Tuesday, August 8.

1-Wk. Price Change: -2.2% Yield: 0.00%

INVESTMENT THESIS: ChargePoint Holdings designs, develops, and markets networked electric vehicle (EV) charging system infrastructure and cloud-based services which enable consumers the ability to locate, reserve, and authenticate Networked Charging Systems, and to transact EV charging sessions on those systems. As part of ChargePoint's Networked Charging Systems, subscriptions, and other offerings, it provides an open platform that integrates with system hardware from ChargePoint and other manufacturers. According to the U.S. Department of Energy, the U.S. reached a milestone this past year with its 100,000th EV charger installed in 2021. Industry analysts at Guidehouse Insights forecast that a total of 120 million chargers will be needed globally by 2030, providing a meaningful opportunity for ChargePoint to expand its charging footprint. To that end, the U.S. Departments of Transportation and Energy announced nearly $5 billion over the next five years that will be made available under the new National Electric Vehicle Infrastructure (NEVI) Formula Program established by President Biden's Bipartisan Infrastructure Law. NEVI aims to build out a national electric vehicle charging network of high voltage chargers along designated Alternative Fuel Corridors, particularly along the Interstate Highway System.

Target Price: Reiterate $15; Rating: One

RISKS: EV adoption of passenger and fleet applications, changing technology, subscription renewals.

ACTIONS, ANALYSIS & MORE: We're Calling Up a Name From the Bullpen, The Needle Could Begin to Move on This Bullpen Name, Investor Relations.

WEEKLY UPDATE: Clear Secure reported June quarter results that trounced consensus expectations. Based on the strength of its business model, it guided above consensus expectations for the current quarter, and established a regular quarterly dividend policy. Exiting the quarter, Clear's total enrollments reached 17.385 million, rising considerably from 16.2 million in the March quarter and 13.1 million in the year ago quarter. Bookings continued to grow at an enviable clip, rising more than 40% in the quarter to $175.1 million. We'd note that continued to strong bookings growth rate over the last several quarters. Along with the steady membership growth, this should push back on criticisms over the demand for Clear's offerings amid ongoing airport congestion. And despite reports of under used Clear lanes, platform uses accelerated in the June quarter to 13.2 million up from 11.5 million in the March quarter and 11.348 million in the year ago one. As the company transitions from investing in new products to deploying them, we should see nice operating margin expansion in the coming quarters alongside further airport wins as it continues to target the top 75 US airports.

1-Wk. Price Change: 2.4%; Yield: 1.2%

INVESTMENT THESIS: Clear Secure is involved in the creation of a frictionless travel experience while enhancing security. Its secure identity platform uses biometrics to automate the identity verification process through lanes in airports, which helps to make the travel experience safe and easy.

Target Price: Reiterate $37; Rating: One

RISKS: Membership growth, partnership retention, and growth, competitive dynamics, new product offerings.

ACTIONS, ANALYSIS & MORE: We're Initiating a Position in This Identity Platform Company, We're Securing This Company a Spot in the Bullpen, Investor Relations.

WEEKLY UPDATE: Costco Wholesale reported net sales of $17.60 billion for the retail month of July, up 4.5% year over year. Comparing that against the company's June net sales increase of 0.4% and 1.2% in May, it's fair to say consumer re-embraced shopping at Costco during July. That view was reaffirmed by digging into Costco's July comp sales ex fuel and gasoline that rose 4.55% in the US vs. 2.0% in June and 1.7% in May. We see similar results comparing Costco's comp sales outside the US. Putting them all together, Costco's total comp sales rose 5.0% in July vs. 3.0%-3.3% in May and June. The coming July Retail Sales report will add another layer of context for Costco's July results. In terms of prospects for its high-margin membership fee income that is a robust contributor to Costco's bottom line, it exited July with 858 warehouses, up from 853 at the end of May and 834 at the end of July last year. That expansion bodes well for continued membership growth, something that should propel its membership revenue stream higher. We continue to think it is only a matter of time before the company announces the long-awaited membership fee price increase, something that will boost the contribution from that high-margin revenue stream to Costco's bottom line. With Costco set to report its quarterly results on Sept. 26, we will review our current price target of $575 for the shares once we have its August retail sales report. That report is expected to be released on Aug. 30.

1-Wk. Price Change: -2% Yield: 0.7%

INVESTMENT THESIS: We like Costco's long-term prospects, driven by a club-based operating model that focuses on volumes, not margins, and therefore offers its customers a value proposition of everyday low prices. The strength of this model has created an incredibly loyal customer base with low churn and continued share gains in both bricks-and-mortar and e-commerce. And this is a global concept, evidenced by the strength of sales both in the U.S. and abroad, which includes an emerging China opportunity. We see the company's membership model as a key differentiator vs. other retailers and its plans to open additional warehouse locations in the coming quarters should drive retail volumes and the higher-margin membership fee income as well. We also appreciate management's approach to capital returns and their willingness to return cash when it is in excess on the balance sheet. Earlier this year, Costco announced a 13.9% increase in its quarterly dividend to $0.90 per share.

Target Price: Reiterate $575. Rating: One

RISKS: Inability to pass through higher costs, fuel prices, weaker consumer, and membership churn.

ACTIONS, ANALYSIS & MORE: FY4Q21 Earnings Analysis (9/23/21), FY2Q21 Earnings Analysis (3/4/21), Upgrading Costco to a One (2/25/21), $10 Per Share Special Dividend (11/16/20), Recent Buy Alert (2/28/20), Initiation (1/27/20), Investor Relations

WEEKLY UPDATE: While we wait for Coty to report its quarterly results on August 22nd, this week beauty products company elf Beauty reported far stronger June quarter results than Wall Street had forecast. Sales for elf's June quarter soared 76% higher compared to the year ago quarter and the beauty company boosted its outlook for the coming year to $792-$802 million, up from $705-$720 million. We see ELF's results pointing to consumers continuing to gravitate toward premium beauty products, a positive for Coty's business and our shares as it continues to leverage its higher margin Prestige business as in leans into skincare and other products. Exiting the week, Grupo Santander started coverage on COTY shares with an Outperform rating and a $14.50 target. With COTY shares near levels at which we last picked them up and ELF's positive take on the domestic beauty market, we see the current share price as a good one for members who are underweight COTY shares.

1-Wk. Price Change:0.8%; Yield: 0%

INVESTMENT THESIS: Founded in Paris in 1904, Coty is one of the world's largest beauty companies with a portfolio of iconic brands across fragrance, color cosmetics, and skin and body care. Coty serves consumers around the world, selling luxury and mass market products in more than 130 countries and territories. The company derives almost 45% of its revenue from the Americas, 44% from Europe, Middle East and Africa, and the balance from Asia Pacific. By revenue category, Prestige drives 62% of Coty's revenue but more than 80% of its operating income with the balance derived from its Consumer Beauty segment. Management intends to further grow the Prestige business, expanding its prestige fragrance brands, through the ongoing expansion into prestige cosmetics, and the building of a comprehensive skincare portfolio leveraging existing brands. Management is also targeting margin improvement at its Consumer Beauty brands as well as expanding its presence in China across both of its reporting segments. China's beauty and personal care market is expected to grow at a quicker pace of 5.4% per annum through 2027, putting it at $70 billion-$75 billion by 2027.

Target Price: $15; Rating: One

RISKS: Industry competition and consolidation, product efficacy and safety, currency, brand licensing.

ACTIONS, ANALYSIS & MORE: We're Making Our Portfolio a Little More Beautiful Today, We're Adding a Name to the Bullpen, Investor Relations.

WEEKLY UPDATE: Solid earnings from Caterpillar this week along with strong guidance allowed Deere to draft higher this week, but the stock is still correcting from a monster run higher since early June. During that run, Deere is up more than 28% on some pretty strong turnover. This is accumulation, which is big institutional sponsorship of the stock. These investors tend to hold names like Deere for many months and years. This week the stock tested the important 20 day moving average as a 5% correction has ensued since late July. We believe the corrective period for Deere is ending and the stock could be poised for a large earnings run. The company will deliver earnings on Friday August 18. In news, the company expanded the size of its board to 12 members, a move many companies make to increase participation or to raise its corporate governance standards. Next week brings the next installment of the USDA's monthly World Agricultural Supply and Demand Estimates (WASDE) and we will be reaping what it says regarding key ag commodities and prospects for farmer income.

1-Wk. Price Change: -0.7% Yield: 1.2%

INVESTMENT THESIS: The global agriculture equipment market size is expected to reach $166.5 billion in 2027, growing at a 6% CAGR over the 2020-2027 period. The favorable outlook for equipment purchases in the coming quarters reflects rising farmer income that historically drives new equipment purchases. At the same time, Deere continues to lean into the sustainability movement with its precision ag offering. That technology is helping farmers drive crop yields higher while also realizing cost savings, which makes the new technology a productivity upgrade compared to older equipment. In February, Deere announced a 4.2% in its quarterly dividend per share to $1.25 from $1.20.

Price Target: Reiterate $500; Rating: One.

RISKS: Geopolitical uncertainty, economic conditions, raw material, and other input prices, prices for key agricultural commodities.

ACTIONS, ANALYSIS & MORE: Initiation (10/25/21), Investor Relations

WEEKLY UPDATE: Elevance is consolidating but in a good spot, above the gap from earnings in mid-July. That is a positive situation if the stock can continue to find buyers/support above that $462 area (bottom of the gap from July 19). Late in the week, a $237.4 million block trade for the shares crossed at $468, which suggests buyers for ELV shares exist and are looking for the shares in size. A breakout to the upside may be imminent with the weekly chart showing a break higher from the down trending channel. Should that follow through, the stock could make a run eventually to the all-time highs, situated at $540. Elevance will pay its third-quarter dividend of $1.48 per share on Sept. 22 to shareholders of record as of Sept. 8.

1-Wk. Price Change: -0.8%; Yield: 1.3%

INVESTMENT THESIS: Elevance, formerly Anthem/Blue Cross Health, is a premier health care brand that appears to be in the sweet spot for HMO companies. Mostly domestic, this company has a wide reach and coverage across the U.S., serving more than 118 million people via medical, pharmacy, clinical, and care solutions. Founded in 1944, Elevance offers a terrific business model that works in boom or bust economic times. The opportunity to find a company with reliable and dependable revenue and cash flows is right here with Elevance. Revenue growth for this company has surged in recent years, with better than double-digit growth since 2018 as the company thrived during the pandemic.

Target Price: Reiterate $550; Rating: One

RISKS: With any insurance business the risk is high for changes in regulation and government programs. Since the onset of Obamacare more than 10 years ago, companies like Elevance have changed their model to be more in line with a better cost/benefit analysis, reducing waste and squeezing out excesses (as was outlined and suggested in Obamacare). Separately, as the population increases and ages, there is more opportunity for Elevance to grow, but with those changes, there is a risk. Lastly, competition is brisk with some very strong opponents who keep their costs low (Humana, Cigna, UNH, CVS/Healthnet).

ACTIONS, ANALYSIS & MORE: We're Trimming One Stock to Add to Another, 2021 Annual Report, 2Q 2022 Earnings Report, Investor Relations.

WEEKLY UPDATE: The start of a fresh month brought the latest data for global search engine market share and across all devices, including desktop, tablet and mobile, Statcounter showed Google grew its market share to 92.07% up from 91.46% in June 2022. The next closest competitor was Bing with still under 3% share. Google's Waymo division that houses its autonomous vehicle efforts announced it will soon start initial operations in Austin, Texas. And Daiwa Capital upped its price target on GOOGL shares to $160 from $130.

1-Wk. Price Change: -3.4%; Yield: 0.00%

INVESTMENT THESIS: We believe that while search and digital ad dominance are what will carry shares in the near- to- mid-term, longer-term it is the company's artificial intelligence "moat" that will provide for new avenues of growth. AI is what has made the company's search, video and targeted ad capabilities best-in-class and is the driving force behind the company's success in voice (Google Home) and autonomous driving (Waymo). Furthermore, we believe it is this AI expertise that will also make the company more prevalent in other industries, including healthcare via subsidiary Verily, as AI and machine learning continue to disrupt operations across industries. Lastly, compounding out positive view of the company's future opportunities, we believe that Alphabet's free cash flow generation and solid balance sheet set it apart and are what will allow the company to continue taking chances on far-out ground-breaking and potentially world-changing projects.

Target Price: Reiterate $145; Rating: Two

RISKS: Regulatory risk (data privacy), competition, macroeconomic slowdown impacting consumers and therefore ad buyer activity.

ACTIONS, ANALYSIS & MORE: FY2Q21 Earnings Analysis (7/27/21), Why GOOGL Has Shrugged Off Antitrust Headlines in Early Trading Tuesday (10/20/20)

WEEKLY UPDATE: It was a quiet post earnings week for American Water following management reiterating its longer-term EPS and dividend growth targets of 7%-9% through 2027. Wells Fargo trimmed its price target for AWK shares to $164 from $168. The company continues to benefit from its expanding footprint, and petitions for higher water rates keeping American Water on path through 2027 with its EPS and dividend growth targets. Upside to the company's 2023 guidance could be had depending on acquisition timing, and management indicated it has over $550 million of acquisitions under agreement, including those two sizable deals. Also, in 2H 2023, the company has several general rate increases pending, including ones in California, Indiana, general rate cases in California and Indiana, Kentucky, and Missouri. The company has a solid and expanding base, which paired with additional rate adjustments should help it grow its EPS by 40%-50% between 2022 and 2027, with the same likely for its annual dividend. That gives us a long-term path for AWK shares and argues for the shares steadily moving higher over that time frame. That said, we also understand how the shares trade, which means if the historical seasonal move in AWK shares plays out, we would look to book at least some gains later in the quarter, buying back the shares during the seasonally week December and March quarters.

1-Wk. Price Change: -3.4%; Yield: 2%

INVESTMENT THESIS: American Water is the largest and most geographically diverse, publicly traded water and wastewater utility company in the United States, as measured by both operating revenues and population served. The company's primary business involves the ownership of utilities that provide water and wastewater services to residential, commercial, industrial, public authority, fire service, and sale for resale customers. The company's utilities operate in approximately 1,700 communities in 14 states in the United States, with 3.4 million active customers in its water and wastewater networks. Services provided by the company's utilities are subject to regulation by multiple state utility commissions or other entities engaged in utility regulation, collectively referred to as public utility commissions (PUCs). Residential customers make up a substantial portion of the company's customer base in all of the states in which it operates. The company also serves (i) commercial customers, such as food and beverage providers, commercial property developers and proprietors, and energy suppliers, (ii) fire service customers, where the company supplies water through its distribution systems to public fire hydrants for firefighting purposes and to private fire customers for use in fire suppression systems in office buildings and other facilities, (iii) industrial customers, such as large-scale manufacturers, mining and production operations, (iv) public authorities, such as government buildings and other public sector facilities. Because there is usually only one water utility available, the business has a rather wide moat, and the company has used its scale and balance sheet to acquire smaller, regional water utilities thereby further expanding its scale.

Target Price: Reiterate $165; Rating: Two

RISKS: Regulatory oversight risks, environmental safety laws, and regulations, weather-related service disruptions.

ACTIONS, ANALYSIS & MORE: We're Initiating 1 Name While Adding to Another Initiating a Position in This Public Water Utility Company, Investor Relations presentation.

WEEKLY UPDATE: Shares of Applied Materials were lifted higher last week by some strong earnings of competitors Lam Research and KLA Tencor, but this week the stock retreated on lower volume. We like to see a pullback on lighter turnover as it tells us the big institutions are not selling the stock. Yet, after a strong run from mid-July when AMAT tagged the 50-day moving average (support) the stock was due for a breather. We believe AMAT is gearing up for a run into and through earnings this month, which will be reported on August 17 after the market close. Following AMD's (AMD) quarterly earnings, AMAT shares traded off along with other semiconductor related stocks. If AMAT shares fall to key support levels, the next of which is the 50-day moving average at $140, we would look to add more shares to the portfolio. Part of our reason for wanting to own AMAT shares ties to the re-shoring of chip capacity, not only in the US but also the eurozone and Japan. We knew the flow of stimulus funds to re-shore that capacity would only start to flow in 2H 2023 and run for multiple years.

1-Wk. Price Change: -4.1% Yield: 0.9%

INVESTMENT THESIS: Applied provides manufacturing equipment, services and software to the semiconductor, display, and related industries. With its diverse technology capabilities, Applied delivers products and services that improve device performance, power, yield and cost. Applied's customers include manufacturers of semiconductor chips, liquid crystal, and organic light-emitting diode (OLED) displays, and other electronic devices. Applied operates in three reportable segments: Semiconductor Systems (73% of 2022 revenue, 78% of 2022 operating income), Applied Global Services (22%, 19%), and Display and Adjacent Markets (5%, 2%). Key customers include Samsung (12% of 2022 sales), Taiwan Semiconductor (20%), and Intel (10%). The company has a rising dividend bias with the current annualized dividend reaching $1.28 per share vs. the 2017 dividend of $0.43 per share and 2018's $0.64 per share.

Target Price: Reiterate $145; Rating: Two

RISKS: Manufacturing and Supply Chain, Competitive Factors, Government Regulation, Technology Change.

ACTIONS, ANALYSIS & MORE: We're Pulling This Name Up From the Bullpen, Investor Relations.

WEEKLY UPDATE: Positive comments this week on food inflation from Sysco Corp. support the view we should see continued margin improvement at Chipotle in the second half of 2023. Appearing on The Morning Ledger, Chipotle CFO Jack Hartung shared the company may lift price again given labor costs but remains sensitive to what menu price hikes may mean for consumers. This could mean we see targeted price increases on certain menu items rather than an across the board one. We will continue to watch other comments on this front when we head into the September conference season. The next known catalysts for CMG shares will be the July Retail Sales report on August 15 and the release of Black Box's July restaurant comp sales report. Given our $2,100 target price members should look to pick up CMG shares closer to $1,900.

1-Wk. Price Change: -1.1% Yield: 0.00%

INVESTMENT THESIS: Our investment thesis on CMG shares centers on its offering consumers better-for-you fare while also expanding its geographic density, embracing digital ordering, and bringing to market limited-time menu offerings that should spur traffic and boost average revenue per ticket. With the upside to our price target shrinking, we are once again reviewing the incremental upside and revisiting protein input costs.

Target Price: Reiterate $2,100; Rating: Two

RISKS: Input costs, particularly for the protein complex, labor costs, consumer spending, food safety, industry dynamics, and competition.

ACTIONS, ANALYSIS & MORE: Initiating a New Position in Chipotle, We're Adding Chipotle to the (Bullpen) Menu

WEEKLY UPDATE: Our shares of this ETF continued to grind higher this week as the soft-landing narrative continues to take hold while supply issues remain a factor. Ahead of the OPEC+ ministers meeting on Friday to review the oil market, Saudi Arabia said it will extend a voluntary oil output cut of one million barrels per day (bpd) for a third month to include September, adding it could be extended beyond that or deepened. Deputy Prime Minister Alexander Novak said Russia would cut oil exports by 300,000 bpd in September. While the OPEC+ meeting yielded no changes to output policy, the group noted that it could take additional measures at any time, which could mean additional cuts if market conditions worsen. This led UBS to share its view we could see Brent prices trade in the $85-$90 per barrel range over the coming months. Given the wonderful move in XLE shares from $77 in late June to the current share price, we may look to take some chips off the table should XLE shares move into overbought territory.

1-Wk. Price Change: 1.2%; Yield: 3.8%

INVESTMENT THESIS: Energy Select Sector SPDR Fund is an exchange-traded fund (ETF) that tracks the performance of the Energy Select Sector Index. The ETF holds large-cap U.S. energy stocks. It invests in companies that develop & produce crude oil & natural gas and provide drilling and other energy-related services. The holdings are weighted by market capitalization.

Target Price: Reiterate $98; Rating: Two

RISKS: Interest rates, weakness in the broad economy, energy prices.

ACTIONS, ANALYSIS & MORE: Adding to 2 Positions on Market Weakness, We're Initiating a Position in the Energy Sector, State Street Global Advisors SPDR Fact Sheet for XLE.

WEEKLY UPDATE: As has been a theme for months, more cyber attacks of different variety continue to happen and as such the reliance on spending for protection is increasing. We have seen the bigger names in this ETF break out of tight consolidation patterns recently. Names of note include AVGO, PANW, FTNT and ZS which all hit fifty-two-week highs in July. CIBR shared breached a new yearly high last month and may be poised for a run to $50 after a modest pullback. Above $50, we may look to lock in gains following the strong move in the shares that in early May near $38.

1-Wk. Price Change: -3.1% Yield: 0%

INVESTMENT THESIS: The First Trust Nasdaq Cybersecurity ETF seeks investment results that correspond generally to the price and yield (before the fund's fees and expenses) of an equity index called the Nasdaq CTA Cybersecurity Index. The Nasdaq CTA Cybersecurity Index is designed to track the performance of companies engaged in the cybersecurity segment of the technology and industrial sectors. It includes companies primarily involved in the building, implementation, and management of security protocols applied to private and public networks, computers, and mobile devices to protect the integrity of data and network operations. To be included in the index, a security must be listed on an index-eligible global stock exchange and classified as a cybersecurity company as determined by the Consumer Technology Association. Each security must have a worldwide market capitalization of $250 million, have a minimum three-month average daily dollar trading volume of $1 million, and have a minimum free float of 20%.

Target Price: Reiterate $62; Rating: Two

RISKS: Cybersecurity spending, technology, and product development, timing of product sales cycle, new products, and services in response to rapid technological changes and market developments as well as evolving security threats.

ACTIONS, ANALYSIS & MORE: We're Swapping One Cybersecurity Stock for Another, ETF Product Summary

WEEKLY UPDATE: There was plenty of news for Lockheed this, including several contract wins that add to the company's multi-year backlog, increasing its long-term revenue and EPS visibility. The company was awarded a ~$556.11 million contract modification for Phased Array Tracking Radar to Intercept on Target Advanced Capability-3 production. Work for this contract has an estimated completion date of Dec. 31, 2032. Lockheed was also awarded a ~$501.7M modification to manufacture and deliver an Air-to-Ground Missile System through September 2026. As we end the week, the National Defense Authorization Act continues to make its way through Washington.

1-Wk. Price Change: -0.7% Yield: 2.7%

INVESTMENT THESIS: Lockheed Martin is the largest defense contractor globally and has dominated the Western market for high-end fighter aircraft since the F-35 program was awarded in 2001. Lockheed's largest segment is aeronautics, which is dominated by the massive F-35 program. Lockheed's remaining segments are rotary and mission systems, which is mainly the Sikorsky helicopter business; missiles and fire control, which creates missiles and missile defense systems; and space systems, which produces satellites and receives equity income from the United Launch Alliance joint venture. Historically, the stability of defense spending has been a haven during periods of economic uncertainty, and we see that repeating once again even as geopolitical conflicts are likely to lead to incremental demand for Lockheed's products. The company has increased its dividend consistently over the last 19 years and is widely expected to boost it again in the coming days. In October 2022, Lockheed announced its board authorized the purchase of up to an additional $14.0 billion of LMT stock under its share-repurchase program. Entering 2023, Lockheed should have around $10 billion in share repurchase to be used over the ensuing 11 quarters.

Target Price: $520; Rating: Two

RISKS: Contracts and budget risk with the U.S. government and the Department of Defense, F-35 program funding and renewal, competition, subcontractor issues.

WEEKLY UPDATE: Solid action during the early part of July for Mastercard gave way to some selling later in the month and a strong earnings report last week. We have talked for some time about the very wide range for this stock, $300 on the low side and $400 on the top side. That high level was breached recently for a couple of days, but buyers are just not interested in paying that price. However, we have Mastercard now coming down to test the 50-day moving average ($385), and if successful the stock will have a solid 'higher low' in place, a potential clue its next visit to $400 may be a lasting one. Bloomberg Intelligence noted some improvement unfolding in Asian travel, a potential positive for Mastercard's international business. During the week, Bernstein boosted its MA price target to $475 while Citigroup lifted its to $455 from $440. Those increases follow ones from Wells, which boosted its target to $440 from $425, Credit Suisse to $430 from $400 and Morgan Stanley lifted its to $443 from $440. We will also be mindful of student debt payments resuming in October and continue to watch both consumer spending as well as real wage growth prospects. With more such data points in hand we will revisit our MA price target. Mastercard will pay its next $0.57 dividend on August 9.

1-Wk. Price Change: -0.4% Yield: 0.6%

INVESTMENT THESIS: Mastercard is a card network company that benefits from the secular shift away from cash transactions and toward card-based and electronic payments. On Covid-19 dynamics, we view MA as a "reopening" play and an economic recovery play within technology because its cross-border volumes fell sharply during the pandemic but will rebound as mobility increases and travel restrictions ease. Mastercard has more international exposure relative to Visa, making its growth outlook more susceptible to new travel restrictions. However, we view MA as the better long-term play as we are betting on that inevitable recovery.

Target Price: Reiterate $430 Rating: Two

RISKS: The recovery in cross-border transactions, regulation in payments market, competition from other fintechs, pricing pressures.

WEEKLY UPDATE: August started up with some weakness following a rousing finish for July. The PSQ was down moderately last month but remains a good hedge against bearish market moves. As we experienced Thursday, having some protection in place is a requirement in any sort of market. Though the Nasdaq is higher by 42% in 2023, there will be pullbacks and PSQ helps to reduce that volatility on the portfolio. With the market severely overbought last week and due for a pullback, we will continue to hold this piece of protection. Support on the Nasdaq 100 comes in at 15,000 and we'd note should that level fail, the technicals point to further downside.

1-Wk. Price Change: 3.3%; Yield: 0.0%

INVESTMENT THESIS: ProShares Short QQQ seeks daily investment results, before fees and expenses, that correspond to the inverse (-1x) of the daily performance of the Nasdaq 100 Index. The Nasdaq 100 Index includes 100 of the largest domestic and international non-financial companies listed on The Nasdaq Stock Market based on market capitalization.

Target Price: N/A; Rating Two

RISKS: Because PSQ shares track the inverse of the Nasdaq 100 Index, PSQ shares will move lower when the Nasdaq 100 Index moves higher.

ACTIONS, ANALYSIS & MORE: Selling Shares in 1 Position, Closing Another, Adding to 1, and Initiating 1

WEEKLY UPDATE: A 1.5% drop in the S&P 500 Wednesday had us relieved to have some protection in the portfolio. Remember, nobody rings a bell at the top, so days such as Wednesday will happen, sometimes seemingly out of nowhere. We still like the SH to protect ourselves against the downside in any timeframe. The S&P could be heading now for a modest corrective period, perhaps up to 5% more downside before a substantial bounce. We'll hold the SH as this continues to moderate portfolio volatility, but should we see further evidence of the soft-landing narrative and signs pointing to the Fed nearing the end of its rate hiking cycle we may look to exit our SH shares.

1-Wk. Price Change: 2.4%; Yield: 0.0%

INVESTMENT THESIS: The ProShares Short S&P 500 ETF seeks daily investment results, before fees and expenses, that correspond to the inverse (-1x) of the daily performance of the S&P 500. We are using SH shares to blunt market volatility and hedge the portfolio's performance against its benchmark, the S&P 500. Given the tactical nature of this position, we do not expect to hold SH shares for the same length of time as we do the portfolio's long positions.

Target Price: N/A; Rating Two

RISKS: Because SH shares track the inverse of the S&P 500, SH shares will move lower when the S&P 500 moves higher.

ACTIONS, ANALYSIS & MORE: Selling Shares in 1 Position, Closing Another, Adding to 1 and Initiating 1.

WEEKLY UPDATE: The price of gold fell a bit this week after testing the 2K level on Monday. It's natural to see gold move against the dollar, and that happened as the greenback continued to rebound this week. We still like to have gold as a diversifier against other asset classes and to counter inflationary trends. Economic data out this week point to more sticky and troublesome inflation currently and on the horizon.

1-Wk. Price Change: -0.9% Yield: 0.0%

INVESTMENT THESIS: The GLD ETF is a proxy for gold. This "trust" buys and sells gold futures each day to mimic the daily moves in the underlying asset, in this case, gold. We see gold as an ideal hedge against a weaker dollar, strong inflation (which tends to weaken the dollar) alternative, and in uncertain times (worry over war and battles). For the past 15 years, gold has been a strong asset class held by fund managers, countries, and banks. The metal is not correlated with markets and will move based on the demand/supply dynamic in the marketplace. Other precious metals such as silver and platinum are good proxies for the criteria stated earlier, however, gold is far more liquid and offers better upside opportunities.

Target Price: Reiterate $200; Rating: Two

RISKS: Weak inflation data, interest rate risk, dollar strength relative to other currencies, geographic risk.

WEEKLY UPDATE: In response to Trinity's June quarter results that topped Wall Street expectations, and confirmed our rationale for adding the shares to the portfolio, we increased our price target to $16 from $15. Given the strength of the business and the company's business development company status, we would be surprised if we didn't see another increase in the dividend during the current quarter. The one misgiving we have with the position is we only have modest exposure to the shares in the portfolio. Should the shares advance meaningfully toward our new price target, we may have to revisit our current Two rating. However, if the shares come under pressure along with the overall market, we would be inclined to add to our holdings between $13-$14. Late in the week, Trinity shares were under pressure following news the company priced secondary stock at $14.45 offering that should raise $75 million, with the proceeds earmarked to pay down existing debt under its KeyBank Credit Facility. While the market may not have liked that decision, we see it as another smart step by the management team.

1-Wk. Price Change: -3.3%; Yield: 14.6%

INVESTMENT THESIS: Trinity Capital is a Business Development Company (BDC) that provides debt, including loans and equipment financings to growth-stage companies, including venture-backed companies and companies with institutional equity investors. Trinity aims to generate current income and, to a lesser extent, capital appreciation through its investments. It does this by making investments consisting primarily of term loans and equipment financings and, to a lesser extent, working capital loans, equity, and equity-related investments. Because Trinity is a BDC, it must pay out at least 90% of its net income to shareholders in the form of dividends. Trinity is positioned to fill the gap left by recent bank failures and shareholders should benefit as that lifts the company's investment portfolio and income stream, and its dividend payout to shareholders.

Target Price: $16; Rating Two

RISKS: Global economic, political and market conditions; regulations governing our operations as a BDC; credit facility provisions

ACTIONS, ANALYSIS & MORE: Let's Dig Into the Thesis Behind Our Newest Position, As Banks Start Tightening Up on Loans, Let's Check This Bullpen Stock, Listen as We Make a Bullpen Pick -- and Talk Business Development Cos.; Investor Relations.

WEEKLY UPDATE: Following the company better than expected June quarter results and upbeat guidance, as expected, coming into this week the shares received a number of price target increases following our boost to $500.Stifel raised its target to $507, while Wells Fargo increased its target to $495 and Credit Suisse boosted its to $521 from $482. During the week, comments from Caterpillar (CAT) and Terex (TEX) spoke to the continued bright outlook for infrastructure spending owing to multiple spending programs out of Washington. We would recommend members wait for a pullback in the shares or for signs nonresidential construction spending is accelerates compared to levels realized in 1H 2023 before picking up the shares.

1-Wk. Price Change: 4.4% Yield: 1.3%

INVESTMENT THESIS: United Rentals, the largest equipment rental company in the world, operates throughout the United States and Canada, and has a limited presence in Europe, Australia, and New Zealand. It serves industrial and other non-construction; commercial (or private non-residential) construction; and residential construction. Industrial and other non-construction rentals represented approximately 50% of rental revenue, primarily reflecting rentals to manufacturers, energy companies, chemical companies, paper mills, railroads, shipbuilders, utilities, retailers, and infrastructure entities; commercial construction rentals represented approximately 46% of rental revenue, primarily reflecting rentals related to the construction and remodeling of facilities for office space, lodging, healthcare, entertainment, and other commercial purposes; and residential rentals around 4% of revenue. We see the company benefiting on three fronts -- the seasonal uptick in construction spending; the release of funds and projects associated with the five-year Biden Infrastructure Bill; and the company's nip-and-tuck acquisition strategy that should further enhance its geographic footprint. In January, the company announced a fresh $1 billion buyback authorization following the completion of $4 billion in share repurchases over the 2012-2021 period.

Target Price: Reiterate $500; Rating: Two

RISKS: Industry and economic risk, competition and competitive pressures, and acquisition risk.

ACTIONS, ANALYSIS & MORE: Initiating a Position in This Equipment Rental Company, We're Adding This Equipment Rental Company to the Bullpen, Investor Relations

WEEKLY UPDATE: In response to the Universal's better than expected June quarter results and tightened guidance as well as several positive development we discussed with members on Friday, we boosted our price target to $165 from $160. Earnings call comments from Qorvo (QRVO) and Apple (AAPL) point to improving smartphone revenue in the current quarter, which should benefit Universal, especially as larger format smartphones become a greater part of industry volumes. To us, the longer-term play toward general illumination and other markets is far more attractive in part given the incremental revenue opportunities to be had in the coming years. Given the sharp move in OLED shares following the June quarter results, we would wait for them to cool off before revisiting.

1-Wk. Price Change: 10.1% Yield: 0.9%

INVESTMENT THESIS: Universal Display focuses on the development and commercialization of organic light emitting diode (OLED) technologies and materials for use in display and solid-state lighting applications. OLED displays are capturing a growing share of the display market, especially in the mobile phone, television, monitor, wearable, tablet, notebook and personal computer, augmented reality (AR), virtual reality (VR) and automotive markets. This adoption reflects advantages over competing display technologies with respect to power efficiency, contrast ratio, viewing angle, video response time, form factor and manufacturing cost. Universal's business strategy is to develop new OLED materials and sell existing and new materials to product manufacturers for display applications, such as mobile phones, televisions, monitors, wearables, tablets, portable media devices, notebook computers, personal computers and automotive applications, and specialty and general lighting products. The company also looks to license its OLED material, device design and manufacturing technologies to those manufacturers. As such, Universal has a significant portfolio of proprietary OLED technologies and materials with more than 5,500 patents issued and pending worldwide.

Target Price: Reiterate $165 Rating: Two

RISKS: Patent and Intellectual property protection; maintaining OLED manufacturing and customer relationships; technology risk; market risk.

ACTIONS, ANALYSIS & MORE: We're Initiating a New Position Out of the Bullpen; Let's Visit Two Bullpen Stocks; Universal Display Investor Relations.

WEEKLY UPDATE: Vulcan Materials reported better-than-expected June quarter results that included strong margin expansion owing to pricing power and the company's focus on cost efficiencies. Revenue for the quarter increased 8% year over year and 28% sequentially, and in our view that quarter-over-quarter jump reflects the combination of favorable pricing and more infrastructure spending. More impressive was the dramatic improvement in both gross margins and operating margins, which rose to 27.6% and 21.3%, respectively, in the June quarter from 18.3% and 11.4% in the March quarter. Granted, we expect to see seasonal leverage in margins as construction activity improves in the June quarter. However, when we compare margin results for the June quarter to the year-ago period, we see the one-two punch of pricing and cost focus at Vulcan. Those prospects are leading us to up our VMC price target to $260 from $250, which keeps our Two rating intact. Vulcan recently announced its next quarterly dividend of $0.43 per share will be paid on September 6 to shareholders of record on August 17.

1-Wk. Price Change: 2.6% Yield: 0.8%

INVESTMENT THESIS: Vulcan Materials operates primarily in the U.S. and is the nation's largest supplier of construction aggregates (primarily crushed stone, sand, and gravel), a major producer of asphalt mix and ready-mixed concrete, and a supplier of construction paving services. Its products are the indispensable materials used in building homes, offices, places of worship, schools, hospitals, and factories, as well as vital infrastructure including highways, bridges, roads, ports and harbors, water systems, campuses, dams, airports, and rail networks. Ramping spending associated with the Biden Infrastructure Law should drive demand for Vulcan's products over the coming years. Vulcan has historically complemented its organic growth prospects by acquiring businesses to expand its geographic reach and product scope. Since 2014, the company has acquired more than two-dozen companies, including the 2021 acquisition of U.S. Concrete. That combination has allowed the company to deliver steady top and bottom-line growth over the last decade, with only a modest decline when the pandemic hit in 2020.

Target Price: Increase to $260 from $250; Rating: Two

RISKS: General economic and business conditions; dependence on the construction industry; timing of federal, state, and local funding for infrastructure; changes in the level of spending for private residential and private nonresidential construction.

ACTIONS, ANALYSIS & MORE: Initiation Post, Investor Relations

WEEKLY UPDATE: Following Amazon's stellar quarterly results Thursday night, Friday we boosted our price target on the shares to $170 from $145. While the company bested revenue expectations, including those for Amazon Web Services, and guided revenue above expectations for the current quarter, we were far more impressed with the margin improvement and what it means for the coming quarters. Management guided current quarter revenue to $138 billion-$143 billion, but similar to the June quarter the notable item in its guidance was what it said about operating income. It is expected to come in between $5.5 billion-$8.5 billion vs. $7.7 billion in the June quarter and $2.5 billion in the year ago quarter. If Amazon only delivers the same operating margin, it did in the June quarter that would suggest its guidance is conservative. When thinking about that guidance, we also have to remember Amazon had a strong showing with Prime Day in July and more than likely the full benefit of its cost reductions have yet to be felt. We also have to consider reports the company intends to hold another Prime Day later this year, most likely when more of the benefits tied to its cost reduction efforts will be felt. This likely means current expectations for the June quarter have some room to go higher as well. This has us increasingly bullish on Amazon shares, however, given the double digit bump we are seeing in the share price today, we will hold off in upgrading the shares to a Two rating even though we have about 19% upside to our price target. Should the shares retreat likely they typically do after such a pronounced move, we will look to upgrade them.

1-Wk. Price Change: 5.6%; Yield: 0.0%

INVESTMENT THESIS: We believe upside will result from Amazon's continued eCommerce dominance, AWS' continued leadership in the public cloud space, and ongoing growth of the company's advertising revenue stream, which feeds off Amazon's eCommerce business. Additionally, we believe profitability will continue to improve as AWS and advertising account for a larger portion of total sales as both these segments sport higher margins than the eCommerce operation. And while we believe the increasing share of revenue from these higher margin businesses will be key to driving profitability longer-term, we believe margins on eCommerce stand to improve as the company's infrastructure is further built out and economies of scale further kick in. The embedded call option is that management is always looking to enter a new space and generate new revenue streams.

Target Price: Reiterate $170; Rating: Three

RISKS: High valuation exposes the stock to volatile swings, eCommerce has exposure to slower consumer spending, and competition, management is not afraid to invest heavily, potential headwinds resulting from new eCommerce regulation in India, and management is not scared to invest aggressively for growth, which can at times cause volatile reactions as near-term concerns arise relating to the impact on margins.

ACTIONS, ANALYSIS & MORE: FY2Q21 Earnings Analysis (7/29/21), 2020 Letter to Shareholders (4/15/21), Initiation (2/2/18), Investor Relations

WEEKLY UPDATE: Apple shares have traded off following a steady climb from an early March low near $145 to $195 earlier this week. Given the size of that move, it's fair to say the market was looking for beat and raise quarter, especially given data pointing to share gains for the Mac business as well as the iPhone business. While those share gains were had, Apple surprised with a modest shortfall on iPhone revenue. While we recognize the Services sector is poised to become a larger part of Apple's revenue mix and we like the positive impact it will have on overall margins, the big question for us is how big of a reception will the iPhone 15 models have and what will their price points be relative to recent models? Given the Apple install base, we could see a solid upgrade cycle unfold especially if the new iPhone models embrace USB-C charging ports. That along with a more favorable mix of price points would likely get Wall Street back in favor of the shares. What will help even more is if Apple starts shipping these devices earlier than usual. Last year Apple made the iPhone 14 available on September 16 and the iPhone 14 Plus on October 7. If the company can make both available by mid-September that could give some lift to the September quarter as well as ensure a full quarter of those devices being available. While we are incrementally positive on Apple and its shares moving further into 2H 2023 the answers to those questions are likely to make us even more positive on the shares. Between now and those answers, if AAPL shares drifted to closer to the 100-day moving average near $176 we would look to upgrade them to a Two rating.

1-Wk. Price Change: -7.1% Yield: 0.5%

INVESTMENT THESIS: While we acknowledge that near-to-midterm performance remains heavily influenced by iPhone sales, the dynamic is shifting as investors finally place greater emphasis on Services growth. We are bullish on the 5G upgrade cycle and believe longer-term upside will continue to come as Services revenue grows its share of overall sales. Services provide for a recurring revenue stream at higher margins, a factor that serves to reduce earnings volatility while allowing for a higher percentage of sales to fall to the bottom line; as a result, we believe that Services growth and the installed base, are much more important than how many devices the company can sell in each 90-day period. In addition to improved profitability, we also believe the transparent nature of this revenue stream will demand an expanded price-to-earnings multiple as segment sales grow. Furthermore, we believe that Apple's desire to push deeper into the healthcare arena will help make its devices invaluable as more life-changing features are added and the company works to democratize health records. Lastly, also see upside resulting from increased adoption of wearables (think the Apple Watch) and potential new product announcements such as an AR/VR headset or an update on project Titan, the company's secretive autonomous driving program.

Target Price: Reiterate $200; Rating: Three

RISKS: Slowdown in consumer spending, competition, lack of new product innovation, elongated replacement cycles, failure to execute on Services growth initiative.

ACTIONS, ANALYSIS & MORE: FY3Q21 Earnings Analysis (7/27/21), Apple Product Launch Event Takeaways (4/20/21), Takeaways from WWDC (6/22/20), Initiation (1/4/10), Investor Relations

WEEKLY UPDATE: Comments this week and last from Alphabet, Microsoft, Amazon and AMD (AMD) point to a stronger second half of the year for data center demand. While consumers remain somewhat cautious, the evolving economic narrative and AI points to greater demand for Marvell. When it reported its quarterly results, NXP Semiconductor issued favorable comments for its Communication, Infrastructure, and Other segment, while chip demand for its Automotive segment remains solid. As we review all of those comments further, we would look to revisit our $62 price target for MRVL shares before the company reports its quarterly results on August 24.

1-Wk. Price Change: -3.4%; Yield: 0.4%

INVESTMENT THESIS: Marvell is a fabless supplier of high-performance standard and semi-custom infrastructure semiconductor solutions. These solutions power the data economy, enabling the data center, carrier infrastructure, enterprise networking, consumer, and automotive/industrial end markets. With roughly 75%-80% of Marvell's revenue stream tied to digital infrastructure, we see it continuing to benefit from rising content consumption and creation. Pointing to that rising demand that necessitate network densification and the build of digital infrastructure, Ericsson sees global monthly average usage per smartphone reach 46 gigabytes (GB) by the end of 2028 vs. 19 GB in 2023 and 15 GB in 2022.

Target Price: Reiterate $62; Rating: Three

RISKS: Technology risk, customer risk, competition risk, reliance on manufacturing partners and supply chain constraints.

ACTIONS, ANALYSIS & MORE: We're Watching These Three Names Set to Report Thursday, Why We Added This Chip Stock to the Bullpen, Investor Relations.

WEEKLY UPDATE: It was a relatively quiet week following Microsoft recent July quarter earnings report. As we shared in our review of that report, the company expects its capital spending to increase sequentially each quarter through the year as it scales to meet demand, primarily for its AI offerings. That increased capital spend will drive costs higher, restraining margin improvement, potentially keeping the company's operating margin flat on a year over year basis. Given Microsoft's position in cloud and AI and those growth prospects, we will want to continue owning the shares even though the market is not pleased with the spending ramp. That realization pressured MSFT shares this week. We would look to re-think our Three rating on signs that spending is being curtailed and or evidence of greater-than-expected margin leverage is appearing.

1-Wk. Price Change: -3.1% Yield: 0.8%

INVESTMENT THESIS: We believe the cloud to be a secular growth trend and that upside to shares will result from Microsoft's hybrid cloud leadership as the company grabs market share in this expanding industry. While companies may look to build out multi-cloud environments, Microsoft's Azure offering will be a prime choice thanks to the company's decision to provide the same "stack" used in the public cloud, to companies for their on-premises data centers. Additionally, we would note that hybrid environments are currently the preference for most companies because it allows them to maintain critical data in-house while taking advantage of the agility and scalability provided by public clouds. Outside of the cloud opportunity, we maintain a positive view on the company's growing gaming business, which we believe is becoming an increasingly prominent factor in the Microsoft growth story as gaming becomes more mainstream, management works to convert its gaming revenue from one-time license purchase to a recurring subscription model and as technologies like augmented/virtual reality evolve. Finally, as it relates to LinkedIn and other subscription-based services such as O365 and various Dynamics products, we continue to value them highly for their recurring revenue streams, which we remind members, provide for greater transparency of future earnings.

Target Price: $390; Rating: Three.

RISKS: Slowdown in IT spending, competition, cannibalization of on-premises business by the cloud.

ACTIONS, ANALYSIS & MORE: FY4Q21 Earnings Analysis (7/27/21), Ignite 2021, Microsoft Acquires ZeniMax (9/22/20), CEO Satya Nadella on CNBC (3/25/20), CEO Satya Nadella speaks at the World Economic Forum (1/23/20)

WEEKLY UPDATE: It was a relatively quiet week for this beverage and snacking company. The next known catalyst will be when snacking competitor Utz Brands (UTZ) reports it quarterly results next week on August 10. We'll be listening for comments on additional pricing action as well as insights on input costs that could translate into higher margins for PepsiCo's key snacking business. After that, the next catalyst to watch will be the July Retail Sales report on August 15. Given our concerns about potential risks to consumer disposable income entering the December-ending quarter, we see PepsiCo's portfolio of consumable snack foods and beverages continuing to resonate with consumers. Members who are underweight the shares should scoop them up between $180-$185.

1-Wk. Price Change: -3%; Yield: 2.7%

INVESTMENT THESIS: PepsiCo is one of the largest food-and-beverage companies globally. It makes, markets, and sells a slew of brands across the beverage and snack categories, including Pepsi, Mountain Dew, Gatorade, Doritos, Lays, and Ruffles. The firm uses a largely integrated go-to-market model, though it does leverage third-party bottlers, contract manufacturers, and distributors in certain markets. In addition to company-owned trademarks, Pepsi manufactures and distributes other brands through partnerships and joint ventures with companies such as Starbucks. The combination of the consumable nature of those products along with PepsiCo's ability to realize price increases has led to consistent revenue, EPS, and dividend growth during both the Great Recession and the Covid pandemic.

Target Price: Reiterate $210; Rating: Three

RISKS: Economic conditions, supply chain constraints, raw material costs.

ACTIONS, ANALYSIS & MORE: Adding to 2 Positions on Market Weakness, We're Initiating 1 Name While Adding to Another, This Stock Should Have 'Pep,' Even in a Recession, Investor Relations

* The AAP Ratings System

1 - Buy Now (BN): Stocks that look compelling to buy right now.

2 - Stockpile (SP): Positions we would add to on pullbacks or a successful test of technical support levels.

3 - Holding Pattern (HP): Stocks we are holding as we wait for a fresh catalyst to make our next move.

4 - Sell (S): Positions we intend to exit.

A more in-depth discussion as to how we utilize the AAP rating

Action Alerts PLUS is long BAC, AXON, COTY, LMT, ELV, GLD, SH, PSQ, XLE, PEP, MA, CIBR, AWK, AMZN, AMAT, URI, MSFT, MRVL, GOOGL, DE, COST, CMG, CHPT, AAPL, VMC, TRIN, OLED and YOU.