December 14th, 2022 | 11:54 CET
Nvidia, Meta Materials, BASF - High-tech stocks in focus
Table of contents:
Nvidia - Mixed outlook, but strong share price performance
Since mid-October, Nvidia has decoupled from Google, Amazon and Facebook and gained a good 60% in 2 months. This seems surprising given the economic environment, i.e. high commodity prices, inflation, rising interest rates and export bans to China. Additionally, the crypto market is showing weakness, which still impacts the graphics card maker that should not be underestimated. Even if the CEO denies a major impact, one can see rising inventories in the past quarterly figures. If you take the last quarterly figures, inventories increased by 71% YOY.
That being said, the group reported revenue of USD 5.93 billion, down 17% YOY and 12% quarter-over-quarter. GAAP earnings per diluted share were USD 0.27, down 72% YOY and up 4% quarter-over-quarter. Non-GAAP earnings per diluted share were USD 0.58, 50% lower than a year ago and 14% higher than the prior quarter. In addition, data center revenue increased 31% YOY, and the Company paid out a quarterly return of USD 3.75 billion to shareholders. The successful launch of new platforms is expected to drive new growth.
Most analysts are positive on the stock. Of the 43 analyses in the past 90 days, 31 view the stock as a buy. 11 recommend holding and only one recommends selling. On average, the price targets are around USD 203. Currently, one share pays around USD 178.55. The next minor resistance is at USD 179.47. The next major resistance is between the zone at USD 191.64 and 192.74. New growth markets are 5G and the electric vehicle market.
Meta Materials - Spin-off executed
There has been a lot going on at high-performance functional materials and nanocomposites (metamaterials) specialist Meta Materials in recent weeks. The Company can significantly support the development of megatrends with its unique metamaterials. Since early November, it has been working with DuPont Teijin Films and Mitsubishi Electric Europe to improve the safety and efficiency of lithium-ion batteries. Meta Materials' PLASMAfusion copper foil plays a decisive role in this. In mid-November, the Company swept up two awards, the CES 2023 Innovation Award for its NANOWEB shielding foil, and from Deloitte, the Company was recognized as a Clean Technology in the Technology Fast 50 program.
On November 17, the Company opened its new headquarters in Dartmouth, Canada. The 68,000-square-foot facility will house R&D, advanced packaging for semiconductors, unique materials and chemical research, and the development and manufacture of holographic and other optical products. Board Chairman Jack Harding commented, "Today marks a historic milestone for Meta Materials." On November 23, the Board of Directors gave the go-ahead for the spin-off of its oil and gas business from its subsidiary Next Bridge Hydrocarbons. On December 7, FINRA approved the exchange of Meta Materials' preferred stock for Next Bridge Hydrocarbons' common stock.
The activities surrounding the spin-off gave the share fresh momentum. In early October, the share marked its low at USD 0.63. Since then, the share climbed as high as USD 2.34 by December 7. The share price received support from Jack Harding, who bought 126,000 shares through his subsidiary in November. With the rise in the share price, the NASDAQ listing issues are also off the table. Since the high in December, however, the share price has fallen again by more than 45%. The main reason is likely to be the sales of the largest shareholder Thomas Welch, who sold 75,000 shares. He is still expected to hold more than 23 million shares. If the USD 1.24 holds as support, a retest of the USD 2.34 is possible.
BASF - Renewed fear of gas shortages
Does BASF belong to the high-tech stocks? At the very least, the Company is involved in all three High-Tech Start-up Funds through BASF Venture Capital GmbH, which was first established in 2005, and is also part of the investment committee. In addition, high-tech companies are also among the Ludwigshafen-based company's customer base. Their well-being is critical to the chemical company's success, but they face challenges such as high energy costs, falling demand, disrupted supply chains and rising interest rates. Now that the cold snap is rolling in and gas could become scarce after all, this uncertainty is putting pressure on BASF's stock.
Back on October 26, the Group announced its Q3 results. Sales increased by 12% compared to the same period last year, reaching EUR 21.9 billion. However, EBIT before special items fell by EUR 517 million to EUR 1.3 billion, mainly due to higher raw material and energy costs. To optimize earnings, the Group aims to cut costs by EUR 500 million by 2024. To be prepared for the future, it plans to invest billions in China. Experts expect the growth markets to be in Asia. Currently, China accounts for just 15% of the Group's sales.
The move is understandable, as there are greater uncertainties in Europe due to the energy shortage. These uncertainties are poison for the share price of any company. This is also why UBS put the stock at Sell with a price target of EUR 38 on December 13. The analysts expect 2023 to be a challenging year for the chemical group. Currently, the share is trading at EUR 47.68. An upward trend has been established since October, which was only broken when the share price closed below EUR 44.19. The analysts expect the share price to remain stable. If the Company keeps its dividend constant, the current dividend yield is around 7%.
Should the FED put the brakes on interest rate hikes in view of falling inflation, this would boost high-tech stocks. Nvidia has already performed well in recent months. Meta Materials is a growth company, as its recent sales figures have shown. Falling interest rates would be particularly good for second-tier stocks. BASF is struggling with energy problems - additional costs were EUR 2.2 billion in the first nine months.
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