Last Friday I released my investment analysis on IES Holdings (NASDAQ: IESC) with a strong BUY rating. Since the release Friday morning, IES reported earnings a mere minutes later with a massive 8% beat on my q2’24 revenue estimate, driving the shares up 25% before settling at +18% at the close. Unfortunately, timing is everything in this industry and with my travel constraints last week, the report that was set for the prior week didn’t make it to ThePeachPit readers until the following week. Given the substantial upside potential of the name given their industry-leading data center power and networking equipment technology, I will do a short update report as part of this coming Friday’s equity report for all readers to review. Because IESC is thinly followed by the analyst community given its smallcap nature, I will continuously update guidance for this name as it may very well be in a position to be of the same caliber of growth as SMCI.
Macro Views
PMI Index Shows Signs Of Weakness
The macro picture continues to teeter on recessionary pressures as the broader market chug along. The Manufacturing PMI fell back below 50% to 49.2% for the month of June with new export orders, supplier deliveries, and new orders driving the decline. Services PMI remained above 50%; however, growth fell to a slower pace to 51.4% for the month of April driven by a decline in new orders, supplier deliveries, lower inventories, and a major 5.5% drop in backlog orders.
GDP Takes A Turn Into The Slow Lane
GDP growth continues to face challenges with q1’24 growth coming in at 1.6%. Growth was driven by increases in consumer spending, residential & nonresidential fixed investment, and government spending. This growth was offset by a decline in private inventory investments and imports as it pertains to IM/EX balances. The driving factor in consumer spending was higher costs for insurance coverage and health care. Personal savings is falling under pressure as the savings rate declined to 3.6% in q1’24 when compared to 4% in q4’23. In nominal terms, personal savings was $755b in the recent reading when compared to $815b in the fourth quarter.
Gross Domestic Product, First Quarter 2024
Though I’d like to generally remain bullish on the US economy, the majority of the broader market appears to be leaning out and remaining cautious as new orders dry up, pushing to a decline in the outlook for future business. The only bright spots I see in the market remain selective in the technology and energy space.
Even within energy, I see a lot of headwinds as natural gas prices remain at a relatively low level with few catalysts remaining to send prices above $3/mcf. Oil is falling in the same category in the mid-$70/bbl with futures pricing low-$70/bbl in 2025. Unless there is some massive exogenous geopolitical disruption that drives down international oil and gas production, I find it challenging to justify any major moves up across these commodities.
Uranium names remain on my high conviction list for 2024 as mining upstarts are expected to begin this year. As the supply/demand imbalance persists, I anticipate strong tailwinds for uranium producers with idled mines in the US. As the US weans itself off of Russian uranium supply and processing capacity, I anticipate some major positive catalysts coming into play throughout 2024 as supply may further tighten, especially when considering new nuclear power plant capacity coming online. UUUU and UEC remain in my high conviction list along with a newcomer, Boss Energy Limited (OTC: BQSSF), an Australia-based uranium mining company that recently acquired a 30% stake in the Alta Mesa Project in South Texas and commenced operations at their Honeymoon Project in southern Australia. The report was requested by the team at Seeking Alpha and should be available this week. I’ll be sure to post a link once available.
Research Published On Seeking Alpha
Equity Updates
GSI Technology (GSIT)
GSI Technology recently reported disappointing q4’24 earnings results of -$0.17/share EPS and $5.15mm in revenue, significantly below my already-bearish estimate. I anticipate this company to continue to underperform as the broader enterprise storage market remains adamant in maintaining their current chipsets despite the exceptionally higher performance GSI’s chips offer. My rationale involves both lack of relationships with the hyperscalers and the cost/benefit of using their storage chips. Shares have clearly surpassed my price target, and given the trajectory of the firm’s growth, I anticipate shares will continue to tumble as the firm faces challenges as a going concern.
GSI Technology's Market May Be Too Narrow For Profitability
Dell Technologies (DELL)
DELL shares appear to be nearing the end to a short-term retracement at ~$122/share before turning to the upside for wave II with the potential to reach $136/share. I’d keep this ticker on the radar for a buying opportunity and play the swing. Higher lows in the waves is a good sign for the trajectory of the stock.
Uranium Energy Corp. (UEC)
UEC appears to be back into the uptrend with an inflection point coming up towards the end of the week. UEC shares trade with relative predictability as institutional traders remain a heavy proportion of trading volume for uranium names. This company ticker may peak near $7.40/share in the near-term before turning back to the downside. Be sure to monitor this stock for any sign of weakness as there are significant positive fundamental catalysts that will be coming into play in the next few quarters as mines are brought back online.
Super Micro Computer (SMCI)
SMCI shares tanked 15% post-earnings last week as management guided below analysts’ estimates as the firm continues to face challenges in filling orders. As mentioned in my previous report, which I will be updating this week, SMCI is in the process of constructing new facilities as well as expanding their current facilities. Analysts remain overweight on the name; however, JPMorgan analyst Samik Chatterjee indicated that the firm may need additional capital raises in pursuit of operational expansion. I’ll share my updated guidance and operational outlook here once completed. For reference, my previous long-term price target called for around $1,700/share. Do note that this price target is based on future production once additional capacity is brought online. Looking at the chart, shares appear to be under pressure and may continue this downward trajectory in the short-term.
Palantir (PLTR)
Lastly, my favorite name in tech, Palantir (PLTR) reported a massive earnings beat and raise on May 6, 2024, kicking off the fiscal year in a big way. Total revenue grew 21% paired with significant margin expansion as the firm realizes economies of scale. I’ll be updating my guidance in the next few days on the firm as PLTR remains as one of my top picks in my high conviction list. Here’s my previous chart for reference. I’ll bake in some figures once I complete my review of the company’s earnings and guidance.
ThePeachPit Model Portfolio
Taking a look at the equity model portfolio, returns since initiation now total 7.33%. This is a nice little beat when compared to the S&P 500’s 2.07% growth for the same period.
Keep reading with a 7-day free trial
Subscribe to ThePeachPit to keep reading this post and get 7 days of free access to the full post archives.