JaguarLive, December 4, 2024

Good Morning Jags!

Salesforce (CRM) – A lot of positive notes on CRM this morning from the entire analyst community after strong earnings last night. Considering it is the heavy weight in IGV, it will likely super charge the rally in entire sector similar to how SNOW two weeks ago. Recall my detail discussion about “Agentive AI” in webinar on November 5th in which I highlighted two stocks, see HERE. Salesforce earnings report showed that it is leading the way in Agentic AI cycle with Agentforce. To summarize key points:

Healthy Agentforce pipeline since October release which could drive more Q4 upside while company delivers on high margin with better pricing power

• Q3 results suggest that the company is leading the way in agentic AI cycle with Agentforce. Commentary on pipeline suggests meaningful customer interest in the weeks following October release. Also, this emerging product cycle is not derailing margin expansion, with a net 10 bps raise for FY25.
• Agentforce was included in 200 deals at the end of the quarter, only one week since generally available, underscoring healthy early interest. Commentary suggests meaningful pipeline builds for Agentforce for both Service and Sales. The release of Agentforce for Sales in 2025 is likely to provide a catalyst for deal closure in the coming quarters.
• Q3 cRPO growth of +10% nicely beats street’s +8.6% on strength in early renewals, multicloud and Data Cloud deals, driven by customers preparing data for running Agentforce across multiple clouds. Sales and Service Cloud growth both accelerated to +11%, up from +9% from pricing and upsell, suggesting improved pricing power. Marketing Cloud subscription growth accelerated as well to +11% from +6%, suggesting stabilizing and the hope for potential reacceleration.

Top Economic News –

— The Eurozone Services PMI dropped 2.1 pts to 49.5, revised up from 49.2 flash, marking the first contraction since January. See chart below. New orders from foreign clients were a major drag on total orders, causing backlogs of work to fall for a 7th straight month. However, services employment continued to rise, sustaining a run of job creation that stretches back almost 4 years. On prices, the report noted an uplift in inflationary pressures as both input costs and output charges increased at faster rates.

— Per Yonhap, South Korea’s finance ministry said overnight it is ready to deploy 10T won in liquidity into financial markets after President Yoon Suk Yeol lifted a martial law declaration that pushed the won to multi-year lows. The announcement came after Finance Minister Choi Sang-mok and Bank of Korea Governor Rhee Chang-yong held emergency talks overnight, to approve rescue measures for the local credit market. The central bank also said it will loosen repo collateral policies by accepting bank debentures issued by some state-run enterprises. Meanwhile, South Korean lawmakers have submitted a bill to impeach President Yoon Suk Yeol after the incident.

— President-elect Donald Trump is considering dropping his current nominee to lead the Pentagon, Pete Hegseth, and nominating Florida Governor Ron DeSantis in his place, WSJ reported late Tuesday, citing several sources familiar with the discussions. The article added that Trump could decide not to choose DeSantis and select another replacement, if Hegseth’s nomination falls apart.

Next up – ADP at 8:15 am ET, ISM Services Index at 10:00 am ET, Factory Orders at 10:00 am ET, EIA Petroleum Inventory at 10:30 am ET, Jerome Powell speaks at 1:45 pm ET, Beige Book at 2:00 pm ET

First Read – December 4

S&P futures are currently higher by 0.29%, NASDAQ is up 0.64%, and the Dow Jones is up 0.40% with focus turning to an afternoon speech by Fed Chair Powell. His address comes ahead of the Fed’s final meeting of 2024 where it is widely expected to cut interest rates by 25 bps. Very quiet otherwise as the sleepy start to December continues. In corporate news, Salesforce (CRM) is surging over 12% after the company beat Q3 revenue expectations and raised the lower end of its annual revenue forecast, helped by robust spending on its enterprise cloud.

Highlights from today’s First Read:

• Eurozone Services PMI joins manufacturing in contraction, with both input costs and output charges increasing at faster rates.
• Outperformance in US stocks vs international is likely to persist through 2025, according to Barclays.
• HealthEquity (HQY) initiated with an Outperform at Mizuho on increased HDHP commercial membership from a flow of incoming Medicaid-ineligible lives and higher interest rates.
• Notable Callout: Global-E Online (GLBE) follows up on strong Q3 earnings by reporting transaction volumes over Black Friday/Cyber Monday were up 43% YoY.

Semiconductors (SMH) – Four of China’s largest industry associations declared in a joint statement overnight that US chips are “no longer safe” and that Chinese business should seek to buy locally instead. The industry association warnings came after the US on Monday launched its third crackdown in three years on China’s semiconductor industry, while Beijing banned the export of critical minerals gallium, germanium, and antimony to the US — GlobalTimes

Pinduoduo (PDD) – The EU is considering stern measures on the growing flood of packages from Asian online retailers including PDD’s Temu and Shein following a large increase in e-commerce goods that evade custom checks, FT reported. According to five people familiar with the discussions, the bloc is considering a new tax on ecommerce platforms’ revenue and an administrative handling fee per item that would make most shipments less competitive — Financial Times

Going to live Conversations podcast shortly, please join HERE

**CEO OF UNITEDHEALTHCARE (UNH) FATALLY SHOT IN MANHATTAN

Brian Thompson, 50, was at the Hilton Hotel in Midtown Manhattan at around 6:46 a.m. when a masked man fired at the CEO and fled eastbound off of 6th Avenue: NY Post

Conversations with Jaguars – December 4

— I missed the trade in Pure Storage (PSTG) though I hope some of you were long into earnings last night. Back on October 18th in Conversations podcast, I mentioned that there is a high chance the company to announce a large $3 billion deal with a hyperscaler which would move the needle substantially for the outlook. That’s exactly what happened last night, though they did not reveal the name of this customer. Stock is sharply higher by +23% in pre-market. No trade here but if we see a gap fill below $60, I would be a buyer on the dip.

— An interesting contrarian bullish view in Crocs (CROX). Stock is down sharply from $145 in September to $110 currently. On this weakness, we are seeing insider buying picking up as well as March out of money call buyers establishing positions. Technically, from these oversold levels, we could see a retrace back to $125. What’s missing is fundamental story. Q3 was bad and nothing in our channel checks is showing sequential improvement in business yet. Therefore, no entry yet but if we spot something good in checks, we will point out. See Jay’s research note HERE.

— Lastly, presenting a bull case for Ambarella (AMBA) which has spent the last 2+ years building a large base. The company is showing early signs of turning around with Q4 sales outlook increased to $78M vs $69M estimate and FY25 sales outlook looking for re-acceleration in growth rate to reach +23% YoY. This is building on the momentum we saw in prior quarter which beat consensus easily in all metrics. Much more work needs to be done on this stock in my view to have conviction but importantly the $65 level is now a major support. See chart below.

Shopify (SHOP) – Deutsche Bank says growth is accelerating which should support upside potential for Q4 gross merchandise value.

Shopify’s Black Friday Cyber Monday (BFCM) sales of $11.5bn (+24% y/y) were ahead of Black Friday ($5bn +22% y/y) and signals that the company can achieve, and is likely to exceed consensus 4Q GMV growth expectations of +23.5%.

• We continue to see upside to BFCM growth for the quarter as success internationally should decrease BFCM as a percentage of 4Q. Assuming a modest tick down of BFCM as a % of 4Q from 12.4% last year to 12.3% this year implies ~25% y/y GMV growth.
• Datapoints across the weekend also reinforce Shopify’s ability to gain market share with Shopify GMV growth of +24%, well in excess of Salesforce and Adobe data indicating e-commerce growth of mid-to-high-single-digits. Payments trends from both Shopify (Shop Pay +58%) and Salesforce (+42% growth in Wallet transaction during Cyber Week) should bode well for Shop Pay adoption and thus GPV penetration and revenue growth.

**NOV FINAL S&P SERVICES PMI: 56.1 V 57.0E (confirms 22nd month of expansion)

Chipotle (CMG) – Company is announcing this morning that it will raise menu prices by +2% to offset inflation nationwide, effective immediately, according to an email to Bloomberg. There is no official press release yet but we may get one by the closing bell. Stock is breaking out. Truist analyst has following comment out:

“Our weekly web scrape indicates that CMG has taken ~+2% menu price at 20% of its stores in the past week, which we believe is the start of a system-wide rollout. The menu price increase is earlier than we (and cons.) expected (though alluded to in a WSJ article on 11/26/24) and a positive for the stock, in our view. We believe CMG is taking the menu price from a point of strength, with the Truist Card Data indicating strong traffic in Nov. and no clear red flags with operating cost inflation. With a December menu price increase not factored into 4Q24 guidance or our prior ’25 ests., we are increasing ests. and our PT to $74, from $72.”

**NOV ISM SERVICES INDEX: 52.1 V 55.6E

Palantir (PLTR) – It is absolutely wild that this stock now has $157 billion market cap with annual revenue run rate of $2.8 billion. The world we live in today is so different than prior decade before pandemic. Nobody cares anymore about valuation. It’s increasingly always about sexiness, eyeballs, narratives, social sentiment, and just whatever you can plug into the picture except valuation.

— Red line is the S&P 500 Index which keeps going higher

— Black line is ever falling e-mini futures volumes

Kratos Defense (KTOS) – Big bullish bet here. Are we ready to breakout from this wedge / triangle. They are establishing positions for a move to $30+ soon.

• Buyer of 5,000 February 30 calls for $1.10 offer
• Buyer of 5,000 May 35 calls for $0.85 offer

Coherent (COHR) – Clean breakout through key $107 resistance today with buyer of 690+ February 125 calls paid up to $7.70 offer moments ago. Approx $515,000 bullish bet.

Amneal Pharma (AMRX) – Keep an eye on this chart for a breakout. I like this biotech and covered it first time with bullish view in Conversations podcast on October 21st, see HERE. It’s a name that doesn’t usually see much option activity. Volume profile is improving in last two days with stock under accumulation and MACD giving bull cross. An easy trade here is to go long with hard stop at $8.25 key support.

Several growth drivers here working in sync to support the stock

• Obesity – On Nov 19th, the FDA approved Amneal’s ANDA for generic version of Byetta, an early-gen GLP1 agonist sold by AstraZeneca. This generic version is now slowly becoming an important driver of growth for AMRX.
• Parkinson – Crexont, Amneal’s novel treatment for Parkinson’s disease, was launched in late September and has earned $3M in sales in 3Q24 due to initial stocking. Mgmt reported strong initial uptake, with positive feedback from patients and healthcare providers. The company has partnered with Rytary which is targeting 12,000 neurologists in the US, expanding on the previous focus on approx. 700 movement disorder specialists with Rytary. Mgmt expects at least +50% coverage by next year, helping to incentivize switches from existing Rytary and CD/LD users as well as attract naive patients.
• Various Biosimilars – Amneal continues to make strides in the biosimilars space, driving commercial uptake of its first three commercial biosimilars Alymsys (bevacizumab), Releuko (filgrastim), and Fylnetra (pegfilgrastim). There are at least 6 catalysts lined up over next 6 months related to these launches.

Shift4 Payments (FOUR) – This is Jaguar Top Long Idea from Q4 Outlook that has been running strong nonstop for several weeks but it is getting smacked down -9% today on this news. From Reuters:

U.S. President-elect Donald Trump on Wednesday tapped Jared Isaacman to lead NASA, selecting a billionaire private astronaut and close associate of Elon Musk to oversee an agency closely linked to the SpaceX founder’s business. Isaacman, CEO of payment processing company Shift4 Payments, opens new tab, has flown to space twice in missions arranged by his Polaris program, an effort using SpaceX vehicles and the company’s spacesuits to conduct fully private flights in Earth orbit. If confirmed, he would oversee the National Aeronautics and Space Administration’s roughly $25 billion budget heavily focused on returning humans to the moon under its Artemis program, a multibillion-dollar effort promoted by Trump during his first four-year term that will rely heavily on SpaceX’s Starship. Trump’s pick for NASA came months earlier than past presidential transitions as Musk, SpaceX’s CEO and founder, has used his close proximity to the president-elect to discuss missions to Mars and other space exploration matters that could boost SpaceX. Trump attended SpaceX’s sixth Starship test launch in Texas last month.

**ROBINHOOD’S CEO: `KEENLY LOOKING INTO’ SPORTS BETTING SPACE

Robinhood (HOOD) – Continues to grind higher and here is an example of how traders are positioning for even further upside in coming months. Buyers of 2,400+ May 45 call options this afternoon for up to $5.65 offer. Approx $1.35 million bullish bet. See snapshot below.

In my view, we are witnessing making of a future monster within financial services industry. Today’s $35 billion market cap is at least $100 billion in the future and that’s likely being conservative. I say this because every month trading metrics are off the chart as company continues to add more features.

• Product velocity and innovation accelerating, leading to robust organic asset growth, that’s multiples of the industry with asset growth fueling revenue growth. Business diversifying with 9 products today generating greater than $100m of annualized revenue as newer products scale.
• Nonstop Adding Features That People Want – HOOD launched event contracts in Oct and plans to launch futures in early 2025 which they see as a nine figure revenue opportunity. Index options roll out started in Nov. HOOD plans to add trust accounts, custodial accounts, 529 accounts, among others over time. HOOD plans to launch Brokerage in Asia in 2025. In Crypto, HOOD plans more tokens (recently expanded to 20 tokens from 15 and scope to expand further), more capabilities (eg staking, advanced trader tools), and opportunities across institutional, international, exchange.
• Monthly Metrics Super Strong – November metrics show +37.6% organic growth well above company’s guidance and consensus estimate of +30% for Q4. This means the company will once again blow estimates out of water when it reports earnings in January. Approx 400,000 net funded accounts opened just in November, which is up +19.7% YoY and that’s a major acceleration from the low to mid single digit account growth we’ve seen in recent years; on a run-rate basis this is tracking 8.75% percentage points better vs 4Q24 street estimate. Notably, crypto volumes were up +436% m/m and +650% y/y which is meaningful acceleration from any time in history. Overall, system wide transaction volume in November is trending 52% above consensus estimate.

**Governor Jeff Landry Announces Meta (META) Selects North Louisiana as Site of $10 Billion Artificial Intelligence Optimized Data Center

Reference Link: Louisiana Governor Office

Entergy (ETR) – More background on this news. The direct play on that $10 billion investment by META is Entergy, which has been one of the best performing stocks since summer. It’s a name not sexy enough to catch anyone’s attention.

Background – Entergy Corporation is an integrated energy company primarily focused on electric power production and retail distribution. They generate and distribute electricity to around 3 million customers across Arkansas, Louisiana, Mississippi, and Texas. Entergy also operates natural gas distribution in New Orleans and Baton Rouge, Louisiana. Additionally, Entergy owns and operates a fleet of nuclear reactors, contributing to clean, carbon-free energy.

Meta Selects Northeast Louisiana as Site of $10B AI Optimized Data Center

• The 4 million square foot data center, to be located in Richland Parish, will be Meta’s largest in the world. Construction on the facility is expected to continue through 2030. Hyperscaler data centers such as the one planned for Richland Parish are housed in huge physical structures designed to process the vast amounts of data required to support digital technologies, including Artificial Intelligence (AI) workloads.
• To power the data center, which at its largest point extends more than one mile from front to back, Entergy will add clean, efficient power plants to its system to meet growing power demands, including from the data center. Meta has pledged to match its electricity use with 100% clean and renewable energy and will be working with Entergy to bring at least 1,500 MW of new renewable energy to the grid through its Geaux Zero program.

Zeta Global (ZETA) – That crash in stock down to $17 was such a gift. All because of few idiot short selling shops. Continue to make a recovery, now back to $26 and up another +9% today with nonstop call buying in March.

• Buyers of 1,000+ March 30 calls for up to $3.50 offer
• Buyers of 3,400+ March 35 calls for up to $2.15 offer
• Buyers of 5,600+ March 40 calls for up to $1.45 offer
• Buyers of 3,000+ March 45 calls for up to $1.00 offer

For background, I did this big discussion about “Agentic AI” in webinar on November 5th, see HERE.

Edwards Lifesciences (EW) – We finally have a breakout today through key resistance, though volume is still very light so I am not sure if I should be trusting this rally. Nevertheless, management tone is finally better. At investor day today, see slide deck HERE:

Overall guiding better but it is not a significant change

• Management is guiding reaching $2 billion in annual sales in year 2030 vs street at $1.6 billion. It is very long term outlook, but it is encouraging to see.
• For 2025, they are guiding +9% sales growth vs street at +8%.
• Breaking this down further, for TAVR sales in 2025, which is what the street cares about the most, they are guiding +6% growth which is in line with street estimate.
• Lastly, they are guiding slight improvement in margins by up to 50 bps.

**OpenAI’s Artificial Intelligence to Be Used for Anduril’s Drone-Countering Systems – WSJ

That is likely negative for Palantir (PLTR)

Chipotle (CMG) – Some additional thoughts about this breakout today. Recall, the original bull case I presented had to do with beef brisket launch in September. Now, you are starting to see in channel checks how that is supporting improving foot traffic in stores. From Truist today:

“The Truist Card Data suggests traffic accelerated slightly in November: CMG previously reported that its traffic improved to ~+4% (‘low 4% range’) in September, up from ~+2.5% in July, which continued into October. The Truist Card Data suggests that traffic accelerated by ~+50bps in November (5 weeks through 12/1), which gives us confidence that CMG is taking menu price from a position of strength and not just to achieve estimates. We continue to est. 4Q24 traffic of +4.5%, inline with consensus, and are increasing our SSS est. to +6.0%, from +5.5% due to the incremental menu price (+1.8% with a -0.3% menu mix).”

Gitlab (GTLB) – Reports earnings tomorrow, December 4th, AMC. We are currently holding February 70 / December (6) Weekly 80 strike diagonal call spread that we bought after Jay published bullish note in Weekend Research on November 25th, see HERE. I bring this up because Scotiabank has an earnings preview out today which speaks very bullish. See snapshot below.

“After a significant rebound in 2Q bookings, investors will be looking for continued strength in underlying growth amidst a seasonally stronger 2H. We see potential upside to cons 36% cRPO estimate and will be looking for another round of Duo wins, as checks pointed to an uptick in Duo adoption in 3Q. Consolidation is increasingly coming into focus per our convos though seat counts remain pressured (though marginally improving per our checks). NRR will also be in focus with a specific interest on seat expansion.”

**US EYES PARTNERS’ MISSILE STOCKPILES FOR MORE UKRAINE ATACMS

Energy (XLE) – A large bull is not bothered by this sell off today. They want more time so they are rolling position out as following:

• 26,000 December 95/105 call spread sold to close for $0.45 credit (approx $1.17 million premium collected)
• 26,000 February 97/105 call spread bought to open for $1.21 debit (approx $3.14 million new bullish bet)

Looks like Bitcoin is going to finally take out $100,000 any minute …

**POLICE SAY THE GUNMAN USED A SILENCER IN THE KILLING OF UNITEDHEALTHCARE CEO IN MANHATTAN

We are quite literally going to have one of the most expensive (valuation wise) and technically most overbought equity market when Trump takes the office.

Gitlab (GTLB) – Somebody was loading up June 80. July 75 and July 80 calls this morning. Between those three strikes approx $2.8 million net call premium bought.

Synopsys (SNPS) Kaboom!

SentinelOne (S) Kaboom!

Aerovironment (AVAV) Kaboom!

PVH Corp (PHV) Kaboom!

Ncino (NCNO) Kaboom!

American Eagle (AEO) Kaboom!

Ooma (OOMA) Boom!

Five Below (FIVE) Boom!

JaguarFlow – Please feel free to download Excel file HERE. Friendly reminder, this file is distributed each day for information purposes only.

Master Performance Tracker – Please download Excel file HERE. No changes were made in portfolio today.

Have a Great Night Jags!