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AI and tech stocks remain in focus this week, following the sharp selloff to kick off Q3.
Recall that, as we highlighted in our July 1st “Market Pulse” report:
However, the Philadelphia Stock Exchange Semiconductor Index then fell 11.4% in the first 2 trading days of July, as investors sold and booked profits from high soaring AI and tech names.
These recent declines are set to frame this week’s high-profile events in the US stock markets:
Key Events This Week
Tuesday, July 7: SpaceX added to Nasdaq 100 index + fresh 12-month target prices by bank analysts
Wednesday, July 8: FOMC meeting minutes
Thursday, July 9 (before US markets open): PepsiCo earnings
Friday, July 10: SK Hynix ADRs (American Depositary Receipts) set to debut on Nasdaq
3 Assets to Watch (July 6-10)
1) SpaceX to rebound?
Nasdaq has confirmed that SpaceX will be added to the former’s Nasdaq 100 index - a popular basket of US tech stocks - on Tuesday, July 7th.
According to Bloomberg Intelligence, this addition to the Nasdaq 100 will drive nearly US$ 5 billion in purchases of Space X stocks.
On that same day (Tue, July 7), the so-called “quiet period” ends for analysts at:
NOTE: These above-listed banks underwrote SpaceX’s US$ 86 billion IPO.
The end of that “quiet period” means that these big banks’ analysts are set to publish their views on whether SpaceX’s share prices should be higher or lower, 12 months from now.
As things stand, according to the analysts who have already shared their views with Bloomberg, SpaceX has:
8 ‘Buy’ calls
4 ‘Holds’
1 ‘Sell’ rating, by Morningstar analyst, Nicolas Owens
The median 12-month target price, excluding Morningstar’s, suggests that SpaceX stocks may still rise another 34.4% over the next 12 months to $217.80.
And that’s before the wave of analysts’ forecasts from so-called “bulge bracket” (think: the biggest) US banks.
However, often these expected gains for a stock upon inclusion into a widely-followed index are front-loaded i.e. the stock often climbs PRIOR to its index inclusion.
Also, short-sellers have already begun aggressively building “short” positions (expecting the share price to fall) - as traders borrowing quantities of the stock surged 76% in the final week of June.
POTENTIAL SCENARIOS
UPSIDE: A wave of passive-fund purchases, accompanied by positive analyst recommendations as well as risk-on market sentiment, could see SpaceX rebound back above $180. This assumes that broader sentiment surrounding AI/tech stocks remain conducive for such gains this week.
DOWNSIDE: Should the short-sellers overcome the expected inflows from passive-fund purchases, while analysts at “bulge bracket” banks fail to adequately justify SpaceX’s lofty valuations, that may see SpaceX re-testing the $150 psychological support once more. Further declines should see SpaceX set a new post-IPO low towards its $135 IPO price.
2) SK Hynix to post new record high?
South-Korea based SK Hynix makes memory chips used in AI, and has been one of this year’s star performers across global equities.
At the time of writing, its shares in South Korea still boast a year-to-date gain of 260% (in Korean Won terms), despite:
falling 3.4% today (Monday, July 6th)
having fallen over 30% from its all-time high set on June 23rd
Yet, SK Hynix is set to raise US$ 28 billion by launching its ADRs this Friday, July 10th to capitalize on AI demand..
NOTE: ADRs (American Depository Receipts) are US-listed certificates that represent shares in a foreign company.
This allows investors in the US, and around the world, to easily buy and trade SK Hynix shares on US exchanges without dealing with foreign accounts/brokers directly.
After all, the US is the world’s largest capital market, and it’s set to take on what could be the biggest-ever, first-time share sale by a foreign company.
Bybit users could already access SK Hynix stocks 24/7 via perpetuals for over a month now!
According to analysts surveyed by Bloomberg, SK Hynix’s stocks could rise a further 39% over the next 12 months.
POTENTIAL SCENARIOS
UPSIDE: SK Hynix could rise and test its 21-day simple moving average (SMA) for resistance, after which bulls would be eyeing the 1800 psychological level, if investor demand for AI stocks is restored amid fresh demand for its ADRs.
DOWNSIDE: Should the AI trade further unwind, this could sink SK Hynix down towards the 1300 level.
3) PepsiCo to reach 6-week high? Or erase year-to-date gains?
This global maker of soda and snacks is set to release its Q2 earnings before US markets open this Thursday, July 9th.
KEY TOPICS:
Revenues are forecasted to rise by single-digits (5-6%), though rising input costs are set to cloud over its earnings outlook.
Ultimately, investors want to know details about Pepsico’s aggressive growth strategy: boost sales and productivity while delivering product innovation and cost cuts to achieve a targeted 5-7% earnings growth.
At the time of writing, Pepsico is barely holding on to a year-to-date gain of just 0.5% (before US markets open Monday, July 6th - after the long Independence Day weekend).
Markets are forecasting that Pepsico’s share prices will react with a 3.7% up/down move after its earnings release and markets re-open on Thursday, July 9th.
POTENTIAL SCENARIOS
UPSIDE: Pepsico stocks could set a 6-week high and rebound back towards $149.60 (watch psychological resistance around $150) if investors are excited about this F&B giant’s growth plans. Further rotation out of AI/tech names and into more cyclical/defensive stocks should benefit Pepsico as well.
DOWNSIDE: Pepsico could erase its measly 0.5% year-to-date gain and fall to $138.90 (watch psychological support around $139) if its earnings outlook fails to offset concerns surrounding climbing input costs.
READ MORE
published June 26th: Revisit how Micron hit our downside target after its own earnings announcement.
DISCLAIMER:
This article is provided for general information and reflects the author’s views only. It does not constitute investment advice, nor an offer or solicitation to buy or sell any financial instruments or digital assets. Your ability to access or use any products or services mentioned may be subject to the laws and regulatory requirements of your jurisdiction.
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