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Summit Materials (SUM)
Entry: Unlock
Stop loss: Unlock
Price target: 44.00-45.00
Second PT: Unlock
Analysis done on daily timeframe. The Building Materials market size grew to a tremendous global value of $1.3 trillion in 2023, and is expected to continue immensely growing to an estimate of $1.8 trillion by 2032. Construction of new commercial and residential facilities is ongoing, but the years of the pandemic and the tight economic policy that followed grew concern over the sector. Large companies in the space reported a slow down, leaving investors awaiting a turnaround. Signs of a turnaround have recently surfaced, the most recent being last week’s report from the Equipment Leasing and Finance Association. The report reflected a 13% year over year (July) increase in U.S. business equipment borrowing, good news for the construction / building industry as a whole.
The upbeat report combined with excitement around an interest rate cut was enough to push stocks in the building material space higher on Friday, but we’ve zeroed in on Summit Materials because of their attractive fundamentals. Although the company’s stock has remained flat over the past twelve months, their numbers have steadily grown. In the first and second quarter of 2024, SUM grew their revenue by 85% and 53%, respectively. Net income trends are positive, which has helped them build a respectable balance sheet and slowly increase their free cash flow.
Trading at a market cap of only $7 billion, Summit Materials is an opportunity that savvy investors will take notice of soon, especially as their numbers continue to improve. They are still fairly young, so they should be treated with care.
In the short term, we expect the interest rate news to act as a catalyst to finally push this stock higher. As shown on the chart, their most recent earnings, which were by far their most impressive, forced a pull back on the chart and scared traders out. Since the decline, buyers have actively bought the dip and we expect them to continue doing so, pushing this stock to a new all time high.
Please note that this may take beyond this week to come around to price targets.
Ark Innovation ETF (ARKK)
Entry: Unlock
Stop loss: Unlock
Price target: 51.00-53.00
Second PT: Unlock
Analysis done on hourly timeframe. It may finally be the time for Cathie Wood’s Ark Funds to begin seeing some upside following last week’s reassuring speech from Powell. Innovation companies that are still in the growth cycle of their business have awaited interest rates to fall for months now, so they can spend more on employment and R&D, and boost their overall performance. Wood’s strategy for years now has been centered around buying high risk high reward innovation stocks, which ARKK holds plenty of. Some of the stocks that this ETF holds are: Square, Crispr Therapeutics, Palantir, DraftKings, Tesla…and so on.
Rather than buying these stocks individually, one can purchase ARKK and it gives them exposure to all these names. The easing of fiscal policy is expected to boost these stocks higher, especially if we begin to see capital rotation from large cap tech into small and medium cap stocks.
Please note that this may take beyond this week to come around to price targets.
Affirm (AFRM)
Entry: Unlock
Stop loss: Unlock
Price target: 37.50-38.50
Analysis done on hourly timeframe. Buy now pay later payments have grown in popularity through the economic changes and rising costs, giving chances to company’s like Affirm to take a piece of the market. The company has made a nam for itself, becoming one of the two go to BNPL platform, even partnering with Amazon.
Their popularity is reflected in their numbers, which reflect revenue growth of 48% and 51% in the past two quarters, respectively. Over all revenue reached $1.59 billion in 2023, and it’s expected to grow by at least another 25% this year.
The stock has yet to reflect the revenue growth, mostly moving lower since the start of 2024, but we expect that to change on their coming earnings. Buyers are looking for a strong positive catalyst to buy this name up, and a good earnings could be exactly that. With excitement around small cap stocks already coming back, Affirm may be in a perfect position to get a boost, but they absolutely need to impress on earnings.
Keep in mind this is a high risk high reward play if taken before earnings. Earnings can move stocks drastically to either direction.
Please note that this may take beyond this week to come around to price targets.
Tesla (TSLA)
Entry: Unlock
Stop loss: Unlock
Price target: 230.00-235.00
Second PT: Unlock
Analysis done on daily timeframe. Despite all the criticism around Tesla and Elon Musk, the company’s growth over the past few years has been great. Revenue has grown from $31.54 billion in 2020 to nearly $100 billion in 2023, with net income growing alongside of it to their largest yearly at $15 billion last year.
The company’s frantic efforts to build more efficient factories have paid off, and their new factories have added a significant amount of capital to their balance sheet. Their balance sheet has grown to $106 billion in assets and only $43 billion in liabilities. These numbers are impressive because you don’t often see a car company with such positive ratios, but Tesla is far more than just a car company, and Wall Street knows that.
The sleeping giant won’t be ignored for long, especially as interest rates come down and turn back in their favor. Tesla is still very much in its growth phase, and we expect them to top the $1 trillion valuation in the coming quarters, so long as they don’t make any major mistakes.
In the very short term, the reasons they made it to this week’s watchlist are:
- Interest rate optimism
- Nvidia’s earnings. Tesla has a history of sneaking past traders and rallying when least expected. Many times it has rallied during market sell-offs and when traders are focused on something else. Nvidia’s earnings this week are the perfect distraction for Tesla to start a rally, leaving retail traders in the dust. We expect buyers to take interest this week, then potentially run it through the weeks that follow.
Please note that this may take beyond this week to come around to price targets.
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The stocks posted are the preliminary stocks and set ups we’ll be watching this week. All price points are subject to change based on market performance and sector health. Please do your own research and analysis on these companies/charts before taking on any set ups. Trade at your own risk and as always, good luck! Let’s have a fantastic week.