Wall Street Lunch: Bearish Crude?


Colorful Barrels

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OPEC+ overproduction and demand concerns are hitting crude prices. (0:16) Roaring Kitty getting kicked off of E*Trade? (1:25) Realty Income more bullish on investment volume. (2:27)

This is an abridged transcript of the podcast.

Our top story so far. Crude is trading at its lowest levels since February, with WTI (CL1:COM) and Brent (CO1:COM) shedding another -1.5% in today’s trading.

Goldman Sachs analysts said the OPEC+ decision on Sunday was bearish for oil, as the phasing out of voluntary cuts shows a strong desire by several members to restore production despite recent increases in global oil inventories.

“The communication of a surprisingly detailed default plan to unwind extra cuts makes it harder to maintain low production if the market turns out softer than bullish OPEC expectations,” Goldman said.

ING says “Preliminary OPEC production numbers for May are starting to be released,” noting a Bloomberg survey that “shows that OPEC output averaged 26.96M b/d in May, up 60k b/d MoM.”

“The numbers show that Iraqi and UAE output was a combined 458k b/d above their target level. There are still no signs of Iraq compensating for its overproduction since the start of the year. The lack of compliance by some members only reinforces the view that OPEC+ could struggle to continue with full cuts into 2025 if needed.”

In today’s trading, looking at the meme stocks, Morgan Stanley’s (MS) E*Trade is considering booting GameStop (GME) guru Roaring Kitty off the online brokerage platform due to growing concern over potential stock manipulation. That’s according to the Wall Street Journal.

Over the weekend, Roaring Kitty, whose real name is Keith Gill, disclosed a screenshot of an E*Trade account that showed he owns GME stock worth $115.7 million and a set of options scheduled to expire later this month. The image showed his total gains on the position at $6.86 million.

Executives at Morgan Stanley and its E*Trade division are debating whether Gill’s actions amount to manipulation and whether the firm is willing to risk the ire of his followers should it kick him off the platform, the Journal said.

Among active stocks. Bath & Body Works (BBWI) beat fiscal first-quarter expectations on the top and bottom lines.

For fiscal 2024, the company narrowed its guidance by raising the midpoint for earnings and revenue and is now forecasting net sales to range between a decline of 2.5% and flat.

Realty Income (O) boosted the lower end of its 2024 earnings guidance and increased its expected investment volume for the year. The diversified REIT now expects an adjusted FFO per share of $4.15–$4.21, compared with its prior guidance of $4.13–$4.21 and the Visible Alpha consensus of $4.18.

In addition, it expects 2024 investment volume to reach ~$3.0 billion, up from its previous expectation of $2 billion.

Canaccord Genuity upgraded SentinelOne (S) to Buy from Hold, noting that the selloff was overdone after the company’s mixed first-quarter results and trimmed 2025 guidance. But it also lowered its price target to $23 from $28.

Analyst Kingsley Crane said he views SentinelOne as a long-term secular winner due to the company’s positioning as a data-driven security platform, which is facilitated by its roots in Endpoint Security and a strong position in mid-market Enterprise.

In other news of note. Following up on the AI chip battle that led Monday’s Wall Street Lunch, Intel (INTC) unveiled new-generation processors and AI chips as it looks to regain data center market share amid intense competition from Nvidia (NVDA) and AMD (AMD).

At the Compuetex conference, the chipmaker introduced its next-generation Xeon server processors to address a broad array of use cases and workloads and revealed that its Gaudi AI accelerator chips would be priced much lower than its rivals.

And Taiwan Semiconductor (TSM) said it has held discussions with some customers about moving its chip facilities from the island nation amid rising tensions with China; however, such a measure would be impossible.

Separately, CEO C.C. Wei reaffirmed expectations for AI development to steer a 2024 industry recovery. Wei maintained previous forecasts for 10% chip market growth in 2024, excluding the memory sector.

And in the Wall Street Research Corner. Goldman Sachs added five stocks to its Conviction List of U.S. stock buys, including two solar companies: Enphase (ENPH) and Sempra (SRE).

Edwards LifeSciences (EW), Teradyne (TER), and Brixmor Property Group (BRX), a commercial REIT, were also added. Analysts led by Steven Kron removed First Solar (FSLR), Southern Co. (SO), Target (TGT), and Simon Property Group (SPG).

It’s been a year since Goldman launched its “Conviction List Directors’ Cut,” a curated list of 20 to 25 stocks with Buy recommendations.

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