This 1 Stock SOARS starting tomorrow‼️
Summary
Jeremy provides an analysis of the current market, starting with the economy where Jeremy uses CSX as a bellwether. Jeremy notes that CSX reported 10% revenue growth and a 6% increase in volumes, which Jeremy believes is driven by materials for data centers and semiconductor plants rather than housing or autos. This suggests to Jeremy that the underlying economy remains robust despite rising fuel costs and a depressed housing market.
Jeremy then transitions to the 'insanity' of Big Tech earnings, specifically focusing on Google. While Jeremy is impressed by the 82% growth in Google Cloud, Jeremy is alarmed by the $200 billion capital expenditure plan which has turned the company's free cash flow negative. Jeremy explains that this 'messy' situation extends to other hyperscalers like Meta and Amazon, as they are all forced to spend heavily on AI, which Jeremy believes puts a lid on these stocks by diluting shareholder value and increasing debt loads.
Finally, Jeremy discusses the software-as-a-service (SAS) sector, highlighting Service Now’s recent performance. Jeremy labels the report as poor because, despite 24% revenue growth, the company’s operating income fell by 55% due to exploding costs. Jeremy warns that this trend of 'dirty' setups makes it difficult to trust forward P/E ratios for companies like Salesforce, as profit margins are being eroded faster than Jeremy or the analyst community anticipated.
Mentioned Stocks
Reasoning: Jeremy explicitly mentions purchasing Celsius, giving it the nickname 'Celsius the wealthiest' to reflect Jeremy's bullish outlook. Jeremy believes the stock has officially bottomed and is now beginning an upward trajectory. Jeremy argues that the downward cycle for the stock has passed, making it a timely investment.
Reasoning: Jeremy states that AMD is a stock that investors can always count on to rise, noting that many market participants believe the share price will eventually exceed $1,000. Jeremy observes that even at levels around $500, people continue to view the stock as cheap. Jeremy highlights the strong momentum and the fact that investors seemingly cannot get enough of the stock.
Reasoning: Jeremy notes that while Jeremy has bought Salesforce heavily in the past, Jeremy now finds the setup 'dirty' because of the expense issues seen in the broader SAS sector. Jeremy believes Salesforce will likely beat revenue estimates but expresses doubt about whether analyst EPS predictions are reliable. Jeremy is cautious as margins across the industry are facing significant pressure.
Reasoning: Jeremy describes the recent earnings as a 'D report' because operating expenses grew much faster than revenue, causing operating income to drop by 55%. Jeremy explains that although revenue growth was 24%, the costs of doing business are eroding profitability. Jeremy maintains a six-figure position but is worried about the long-term margin profile and the 'dirty' setup of the stock.
Reasoning: Jeremy points out that while Google Cloud revenue growth of 82% is astonishing, Jeremy is deeply concerned about the $200 billion capex outlook. Jeremy notes that this spending has resulted in negative free cash flow for the company and will lead to increased debt. Jeremy considers the current setup to be 'messy' and does not feel compelled to buy more or sell existing shares.
Reasoning: Jeremy argues that CSX's strong earnings report, featuring 10% revenue growth and 21% net earnings growth, is a positive sign for the economy. Jeremy focuses on the 6% volume increase as a sign of industrial strength, likely tied to data center construction. Jeremy views this railroad performance as a reliable economic indicator that currently looks much better than many tech stocks.