Stocks Slightly Lower Ahead of Fed Chair Powell

Northrop Grumman Corp. (NOC) is currently at $505.89, down $14.53 or 2.79%

• Would be lowest close since Oct. 30, 2024, when it closed at $505.34
• On pace for largest percent decrease since Jan. 25, 2024, when it fell 6.33%
• Currently down three consecutive days; down 5.21% over this period
• Worst three day stretch since the three days ending Jan. 29, 2024, when it fell 5.52%
• Down 0.61% month-to-date
• Up 8.06% year-to-date; on pace for best year since 2022, when it rose 40.96%
• Down 7.85% from its all-time closing high of $549.01 on Oct. 31, 2022
• Up 9.06% from 52 weeks ago (Nov. 16, 2023), when it closed at $463.88
• Down 6.98% from its 52-week closing high of $543.88 on Oct. 1, 2024
• Up 19.48% from its 52-week closing low of $423.42 on June 13, 2024
• Traded as low as $503.81; lowest intraday level since Nov. 4, 2024, when it hit $502.14
• Down 3.19% at today's intraday low; largest intraday percent decrease since Jan. 25, 2024, when it fell as much as 8.17%
• 10th worst performer in the S&P 500 today

All data as of 10:58:32 AM ET

Source: Dow Jones Market Data, FactSet

ASML Holding NV shared its strategic roadmap during the 2024 Investor Day, highlighting key growth drivers and market expectations through the decade’s end.

The semiconductor equipment maker projected significant revenue expansion, with scenarios estimating annual sales of $46.51 billion – $63.43 billion (44 billion euros – 60 billion euros) by 2030, alongside a gross margin target of 56%-60%.

CEO Christophe Fouquet sees the company’s extended lithography portfolio and scalable EUV (Extreme Ultraviolet) technology as crucial assets in capturing the potential of these emerging opportunities.

Also Read: Taiwan Semi Boosts Advanced Chipmaking with Record EUV Expansion, Grabs 56% Global Share

ASML expects robust demand from the semiconductor sector, with projected global sales surpassing $1 trillion by 2030.

This outlook translates to an annual market growth rate of around 9% from 2025 to 2030. The firm anticipates a double-digit CAGR for EUV lithography spending within the same period, focusing on advanced Logic and DRAM nodes.

According to ASML, the integration of AI across industries presents a substantial opportunity for semiconductor firms. The company plans to leverage its EUV capabilities to accommodate the rising need for high-performance chips used in AI applications.

The scalability of EUV technology allows for efficient multi-patterning, which ASML expects will drive greater customer adoption through cost-effective manufacturing processes.

ASML’s CFO, Roger Dassen, highlighted the company’s confidence in its financial targets, citing a strong pipeline of product demand and increasing lithography spending.

He restated the company’s capital allocation strategy, which includes substantial returns to shareholders through dividends and share buybacks.

The company is navigating geopolitical tensions between Washington and China as a U.S. ally.

ASML CEO Christophe Fouquet acknowledges rising U.S. pressure to restrict chip technology sales to China. Despite this, China remains ASML’s top market, primarily for sales of mature chips rather than the advanced AI semiconductors targeted by U.S. export restrictions.

ASML dominates the market for specialized lithography machines, essential for companies like Taiwan Semiconductor Manufacturing Co in producing cutting-edge chips used in Apple Inc smartphones and Nvidia Corp AI processors.

Reports suggest that Taiwan Semiconductor plans to purchase advanced ASML lithography equipment by the end of the year, with each unit priced at $350 million.

Price Actions: ASML stock traded higher by 5.09% at $707.67 at the last check on Thursday.

Also Read:

• Mastercard’s 2030 Vision: A Future Without Passwords, Card Numbers

Photo via ASML

© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

ServiceNow NOW is adding Generative AI (GenAI) and governance innovations to the Now platform to foster responsible AI. NOW is adding more than 150 GenAI innovations to its portfolio, including new, expanded Now Assist capabilities with an AI Governance feature for secure and compliant AI practices.

NOW’s expanding GenAI portfolio and rich partner base have been driving top-line growth. A strong partner base, which includes the likes of Five9 FIVN, Visa, Microsoft MSFT, NVIDIA NVDA, Zoom, Siemens, Rimini Street, Siemens, IBM, Genesys, Fujitsu, Equinix, Boomi and Infosys, is strengthening ServiceNow’s AI capabilities.

NOW and Five9 recently signed an expanded partnership to deliver a turnkey AI-powered solution for unified end-to-end employee and customer experiences by combining ServiceNow Customer Service Management and the Five9 platform.

NOW’s prospects remain bright, with shares appreciating 48% year to date, outperforming the Zacks Computer & Technology sector and the Zacks Computers – IT Services industry’s returns of 30% and 15.8%, respectively.

ServiceNow shares are trading above the 50-day and 200-day moving averages, indicating a bullish trend.

NOW Trades Above 50-day & 200-day SMA

Let us dig deeper to find out the factors driving NOW’s prospects.

YTD Performance

ServiceNow Raises Subscription Revenue Guidance

For 2024, NOW expects subscription revenues of $10.655-$10.66 billion (up from previous guidance of $10.575-$10.585 billion), which suggests a rise of 23% from the 2023 actuals on a GAAP basis and 22.5% on a non-GAAP basis.

ServiceNow expects the non-GAAP subscription gross margin to be 84.5% and the non-GAAP operating margin to be 29.5%. The free cash flow margin is expected to be 31%.

For fourth-quarter 2024, subscription revenues are projected between $2.875 billion and $2.88 billion, suggesting a year-over-year improvement of 21.5-22% on a GAAP basis. At cc, subscription revenues are expected to grow in the 20.5%.

Current Remaining Performance Obligation is expected to grow 21.5% year over year on both non-GAAP and GAAP basis.

ServiceNow expects a non-GAAP operating margin of 29% for the current quarter.

The Zacks Consensus Estimate for 2024 earnings is pegged at $13.87 per share, up 0.4% over the past 30 days, indicating a 28.66% year-over-year increase.

ServiceNow, Inc. Price and Consensus

ServiceNow, Inc. price-consensus-chart | ServiceNow, Inc. Quote

The consensus mark for 2024 revenues is pegged at $10.97 billion, suggesting growth of 22.33% over the 2023 reported figure.

Strong Portfolio Aids NOW’s Prospects

ServiceNow is extensively leveraging AI and machine learning technologies to boost the potency of its solutions. NOW’s expanding GenAI capabilities are noteworthy, as its total addressable market is expected to hit $275 billion in 2026.

ServiceNow’s latest update, Xanadu, offers AI-powered, purpose-built industry solutions for domains, including telecom, media, and technology, financial services and the public sector.

The Xanadu update adds the latest AI capabilities to boost customer agility, enhance productivity and improve employee experiences. It expands the GenAI portfolio to enterprise functions, including Security, and Sourcing & Procurement Operations.

NOW plans to integrate Agentic AI into the ServiceNow platform and unlock 24/7 productivity at a massive scale. This service will be available this November for Customer Service Management AI Agents and IT Service Management AI Agents. It is expected to reduce the time to resolve an issue and make live agents more productive.

Strong Liquidity Makes NOW Stock Attractive

A strong liquidity position, with a cash balance of $5.295 billion as of Sept. 30, 2024, is noteworthy. ServiceNow generated a free cash flow of $471 million in the third quarter of 2024.

NOW expects the free cash flow margin to be 31% for 2024.

The strong liquidity position allows ServiceNow to pursue various growth opportunities, including acquisitions and share repurchases.

In third-quarter 2024, NOW repurchased roughly 272,000 shares for $225 million and had $562 million available for future share repurchases under the existing program.

NOW’s Strong Prospects Justify Premium Valuation

However, the NOW stock is not so cheap, as the Value Score of F suggests a stretched valuation at this moment.

In terms of the forward 12-month Price/Sales ratio, NOW is trading at 16.7X, higher than its median of 13.72X and the sector’s 6.37X.

Price/Sales Ratio (F12M)

We believe that the strong growth prospect justifies ServiceNow’s premium valuation.

Conclusion

ServiceNow’s robust GenAI portfolio and strong partner base are expected to drive its clientele, boosting subscription revenues. The Growth Score of B makes the stock attractive for growth-oriented investors.

ServiceNow currently has a Zacks Rank #2 (Buy), which implies that investors should start accumulating the stock right now. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Zacks Investment Research

This morning, pre-market trading is mild. The big relief rally following the General Election — Republicans yesterday won a majority in the House, officially making it a clean sweep — has given way to a more cautious approach, with one eye trained on economic data having influence over Fed monetary policy going forward.

The Dow is +83 points at this hour, while the S&P 500 and Nasdaq indexes are -1 point and -20 points, respectively. The small-cap Russell 2000 is +2 points. Following this morning’s economic releases, 10-year Treasury bond yields have moved up to +4.46% and the 2-year is up to +4.30%.

October PPI Shows Wholesale Prices Warming Up

On headline month over month for October’s Producer Price Index (PPI), the +0.2% reported was in-line with estimates and 20 basis points (bps) above the unrevised 0.0% reported in the prior month. Stripping out volatile food and energy prices, the core PPI month over month reached +0.3%, also 30 bps higher from September.

Year over year PPI came in at +2.4%, the third-highest print of 2024 so far, and up half a percentage point from the upwardly revised +1.9% the previous month. Core year over year came down a smidge to +3.1%, though ex-food, energy and trade this amounted to +3.5% — the hottest core wholesale inflation read since March of 2023.

By themselves, we are unlikely to see any shift in Fed policy regarding interest rates. Currently, another 25 bps cut is expected at the December 18th meeting, which would bring the Fed funds rate to +4.25-4.50%, the lowest since we were moving the other way in January of 2023. But continued hotter-than-expected inflation data may beg the question in the coming weeks.

Jobless Claims Remain Reasonable: 217K, 1.87M

Thursday morning almost always* brings us new Weekly Jobless Claims, and of late they have remained steady in a healthy labor force range. Initial Claims came in at +217K, staying within the +220K range and off the +260K we saw in early October. The previous week’s +221K is unchanged.

Continuing Claims reached +1.873 million, lower than the slightly amended +1.884 million reported the prior week. We haven’t been sub-1.8 million since late May of this year, but we have also yet to broach +1.9 million (upon revised numbers), at least since November of three years ago.

* Two weeks from today is Thanksgiving; Jobless Claims for this week will come out Wednesday instead.

Disney Up +9.4% on Strong Q4 Report

Ahead of this morning’s opening bell, The Walt Disney Co. DIS reported a 5-cent beat on its bottom line, to earnings of $1.14 per share in its fiscal Q4. Revenues of $22.6 billion also came in slightly ahead of estimates, from $22.57 billion in the Zacks consensus.

Disney+, the entertainment conglomerate’s streaming service, swung to a profit in the quarter, with a total of 174K Disney+ and Hulu subscribers. Entertainment direct-to-consumer (DTC) ad revenues grew +14% in the quarter; even ESPN saw ad revenue growth (though Sports overall were slightly down). Shares are +9.4% in pre-market trading, adding to the +13.8% share growth year to date.

JD.com Posts Mixed Q3 Results

Chinese e-commerce giant JD.com JD reported Q3 earnings ahead of the bell today, beating bottom-line estimates by +13.76% to earnings of $1.24 per share. Revenues came in ahead of expectations, $35.95 billion, short of the $36.54 billion analysts were looking for. The company reported +26.6% sales growth on +20% total shoppers. JD is often seen as a good gauge on the burgeoning middle class economy in greater China.

Zacks Investment Research