Trump's Crypto-Friendly Stance: A Boon for Bitcoin and Beyond?

Posted on by The INO.com Team

As former President Donald Trump prepares to speak this week at the Bitcoin 2024 conference in Nashville, the big event is creating the most excitement in the crypto community. Bitcoin USD (BTC) has surged more than 9% over the past month and nearly 58% year-to-date, crossing the $66,500 mark and nearing its all-time high set earlier this year.

Moreover, this week, crypto investors are gearing up for several exciting developments, including the anticipated approvals from the Securities and Exchange Commission (SEC) for eight exchange-traded funds (ETFs) that hold Ethereum (ETH), the world’s second-largest cryptocurrency.

These ETFs can become staples in 401(k)s, IRAs, and pension plans, thereby boosting their mainstream acceptance. Notably, many money managers awaiting these approvals already manage ETFs that invest directly in Bitcoin, which sets a precedent for the new ether-focused funds.

Crypto-Friendly Stance From the Trump Administration

The cryptocurrency industry hopes the upcoming U.S. presidential election will usher in a softer approach to enforcement, potentially ending prolonged battles with Wall Street’s primary regulatory body. Former President Donald Trump has recently warmed up to the $2.5 trillion crypto industry and is hosting a Bitcoin-focused fundraiser on July 27.

While the Republican nominee was previously critical of cryptocurrencies, calling bitcoin a “scam,” Trump’s recent remarks have been more supportive, referring to cryptos as “amazing” in an interview with Bloomberg published last week. Legal experts predict a less aggressive stance on the digit-asset space from the SEC should he be elected.

According to data from the betting application Polymarket, there is a 62% chance of Donald Trump beating Kamala Harris. Following the assassination attempt on Trump last Saturday, July 20, the odds of him winning the U.S. presidential 2024 election have surged considerably.

Also, Trump chose crypto-friendly Sen. J.D. Vance (R-Ohio) as his vice-presidential candidate. In 2022, Vance held over $250,000 worth of Bitcoin.

Michael Selig, partner at Willkie Farr & Gallagher LLP, suggests that a Trump administration would likely seek to “reset and rethink the SEC’s crypto regulatory policy,” which would involve resolving ongoing enforcement actions and investigations initiated under the current administration.

Under President Joe Biden, the SEC, led by Chair Gary Gensler, has intensified its regulatory efforts, particularly following the collapse of crypto exchange FTX in 2022. The SEC has launched numerous enforcement cases against exchanges and broker-dealers for failing to register properly under securities laws.

Gensler maintains that most cryptocurrencies are securities and should, therefore, register with the agency, a stance that has led to several high-profile legal battles. While the SEC has settled some cases, litigation involving firms like Kraken, Coinbase Global, Inc. (COIN), and Binance is still tied up in court. Also, the SEC has closed some investigations, including one into Ethereum and another about BUSD, a Binance-branded crypto issued by New York-based Paxos.

“Remember, if Trump gets elected, the Republicans can immediately change who the chair is,” stated Austin Campbell, a blockchain consultant and adjunct professor at Columbia Business School. “What this means in practical terms is that many of these cases — which have been shotgunned out at highly variable degrees of quality and generating highly variable decisions that are increasing confusion — could all be settled instead of having to go forward.”

The GOP, in its 16-page party platform last week, explicitly criticizes the current administration’s approach to cryptocurrencies, stating, “Republicans will end Democrats’ unlawful and unAmerican Crypto crackdown.”

As the election approaches, the crypto community remains optimistic that a Trump administration could herald a new era of regulatory clarity and support for digital assets.

Bitcoin to Surge as Trump’s Chances of Winning Election Rise

Robert Kiyosaki, author of “Rich Dad Poor Dad,” predicts that Bitcoin could surge to $105,000 by August 2025 if Donald Trump wins the upcoming U.S. presidential 2024 election. Trump’s pro-crypto stance could drive up the prices of major cryptocurrencies, including Bitcoin and Ether, as well as other altcoins.

Additionally, regulatory clarity and support could pave the way for more financial products, such as ETFs and derivatives, further integrating cryptocurrencies into traditional financial markets.

Moreover, Bitcoin traders anticipate prices reaching up to $70,000 in the near term, driven by positive sentiment in the broader crypto sector ahead of the U.S. elections and a decrease in selling pressure from key wallets.

“The rebound in Bitcoin price shows the market has a more optimistic outlook in the near-term macro environment,” said Lucy Hu, senior analyst at Metalpha, in a message to CoinDesk. “The market was encouraged by Trump’s vice president pick, which indicates a more crypto-friendly administration and policies.”

“BTC could hover around the 120-day moving average, and the price may have the momentum to go up to $68k or even $70k, but we need to continue to monitor closely the Fed policies and implications of Mt Gox,” Lucy Hu added.

“A change in perspective on the digital assets industry in the US is creating expectations of more favorable policy toward Bitcoin and crypto as the elections look to capture single issue voters and special interest groups,” stated Nick Ruck, head of growth at BitU Protocol.

Ruck added, “There’s also less expected sell pressure in the long term as Mt Gox distributes funds to creditors.”

Bottom Line

With his pro-crypto stance, the potential of Trump winning the U.S. presidential 2024 elections could mark a significant shift in the regulatory landscape. A supportive regulatory environment could provide much-needed clarity for the crypto community, encouraging innovation and attracting more investors.

The anticipated SEC approvals for Ether ETFs further suggest a growing acceptance of digital assets in mainstream financial products like 401(k)s, IRAs, and pension plans, paving the way for broader adoption.

With Trump’s friendly crypto stance and the possibility of a more favorable regulatory environment, digital assets like Bitcoin and Ether could see a substantial surge in the near term. The potential changes underscore the importance of regulatory support in driving the growth and adoption of cryptocurrencies.

Is CrowdStrike's (CRWD) Stock Drop an Opportunity for Investors?

Posted on by The INO.com Team

CrowdStrike Holdings, Inc. (CRWD) experienced a steep decline in its stock price last Friday following a software update that triggered widespread technical outages. This mishap couldn't have come at a worse time for the company, as it is about to close its fiscal quarter at the end of this month, a period when software companies typically finalize major deals. With its shares having surged nearly 34% this year before the drop, CrowdStrike faces intense pressure as it approaches its July-quarter results.

For investors, mere expectation-matching results won't suffice; they will be looking for a strong performance that exceeds expectations and prompts an upward revision in forecasts.

On July 19, a faulty security update from CrowdStrike caused a global tech outage, affecting millions of Windows devices. Social media was abuzz with images of the infamous "blue screen of death," indicating system crashes. CrowdStrike clarified that the issue wasn’t a security breach or cyberattack but a flaw in the update affecting Microsoft Windows systems.

Despite a quick fix, the damage was done, with the stock plummeting over 20% since the incident. Microsoft Corporation (MSFT) reported that about 8.5 million devices were affected, representing less than 1% of all Windows devices. However, the outage had significant repercussions, particularly in sectors that provided essential services like hospitals, banks, and airports. This sharp decline in CRWD’s stock suggests investors are concerned about the long-term impact on CrowdStrike's position in the fiercely competitive cybersecurity market, where even minor missteps can be costly.

There's also concern about the potential financial fallout from the incident, including compensation for affected clients. While CRWD suffered, shares of its competitor Palo Alto Networks Inc. (PANW) rose by 2.8%. It's a central black eye for CrowdStrike, which is now a household name for the wrong reasons.

"This situation could have serious implications for CrowdStrike's business, particularly as it seeks to expand adoption among large enterprises to drive the next phase of growth," said Redburn analyst Nina Marques. “Furthermore, it could have impact on market-share shifts as customers seek alternative security solutions,” she added.

CrowdStrike Gets a Downgrade

Analysts are concerned that the disruptions caused by CrowdStrike's software update will delay new deals. Guggenheim's John DiFucci downgraded the stock from Buy to Neutral and stated that the global chaos caused by CrowdStrike, even if temporary, will likely negatively affect its business. He believes rebuilding its reputation might take time and could affect new business signings in the short term.

Similarly, BTIG's Gray Powell downgraded the stock to Neutral, stating that “the outage may have an impact on new customer wins and create deal delays.” He added that while the issue wasn't a security breach, the disruption violated a key principle for security vendors and might lead to demands for larger discounts or credits from existing customers.

What to Expect From CrowdStrike’s Next Earnings Report?

With the recent software mishap causing quite a stir, investors and analysts will closely monitor CrowdStrike’s following earnings report for signs of recovery. Last month, the company released its first quarter results for fiscal year 2025, which ended April 30, 2024, beating the analyst estimates for revenue and EPS.

The company reported a revenue of $921 million, a 33% year-over-year increase, against a guidance of $906 million. For the first quarter, CRWD’s earnings per share was $0.93, well above the consensus estimate of $0.89, and its revenue was higher than the analysts’ estimates by $16.21 million.

For the second quarter, the company forecasts revenue between $958.30 million and $961.20 million, with an EPS estimated at $0.98 to $0.99. Additionally, its non-GAAP income from operations is anticipated to be between $208.3 million and $210.5 million.

Meanwhile, Street expects CRWD’s EPS for the second quarter (ending July 2024) to increase 33.3% year-over-year to $0.99. Its revenue for the ongoing quarter is expected to reach $961.08 million, reflecting a 31.4% growth year-over-year. Moreover, the company surpassed consensus EPS estimates in each of the trailing four quarters, which is excellent.

For the fiscal year 2024, the company’s revenue and EPS are expected to grow 30.9% and 29.7% from the prior year to $4 billion and $4.01, respectively.

Bottom Line

Investors reacted strongly to the recent software mishap, causing CRWD’s stock to drop more than 11% on Friday. However, this reaction might be exaggerated. The incident, while disruptive, wasn’t a breach of CrowdStrike’s security and seems to be a one-off issue rather than a sign of ongoing vulnerabilities. As the company’s CEO, George Kurtz, pointed out, the problem stemmed from a botched update, causing significant but manageable disruptions. While resolving the issue could take several days, it’s unlikely to escalate further.

Analysts’ concerns are valid, but the company’s strong revenue growth and expanding opportunities “across Mexico, Brazil, and the broader Latin America market,” where CrowdStrike recently partnered to spread its Falcon platform, offer compelling reasons for optimism. The rise in e-crime in Latin America presents a significant revenue opportunity for CrowdStrike. Plus, S&P 500 inclusion means that plenty of index-fund holders will indirectly invest in CRWD.

The stock’s high forward non-GAAP P/E ratio of 65.84x, compared to the industry average of 24.89x, might deter some investors, but short-selling CrowdStrike could be risky. The stock will likely rebound and continue rising as long as the growth narrative holds.

Moreover, Mizuho analyst Jordan Klein even views the current dip as a chance to buy, likening it to a “one-time discount sale.” So, while the recent dip in CRWD might be unsettling, it presents a potential buying opportunity for long-term investors seeking quality exposure in the cybersecurity sector.

Broadcom (AVGO) and Micron (MU): Top Picks for Data Center Investment Surge

Posted on by The INO.com Team

The expected record spending on infrastructure by cloud computing leaders such as Microsoft Corporation (MSFT) and Amazon.com, Inc. (AMZN) this year highlights the escalating investments in artificial intelligence (AI) data centers, a trend likely to benefit chipmakers significantly.

Bank of America (BofA) analysts forecast that cloud service provider capital expenditures will reach $121 billion in the second half of 2024, bringing the total to a record $227 billion in 2024. This figure marks a 39% increase compared to the previous year.

c, Microsoft, and Meta Platforms, Inc. (META) are predicted to more than double their spending compared to 2020 levels, while Oracle Corporation (ORCL) is expected to increase its capital expenditure nearly sixfold. The proportion of this spending allocated to data centers is already around 55% and is anticipated to rise further, reflecting the critical role of data centers in supporting advanced AI applications.

While NVIDIA Corporation (NVDA) stands out as the dominant player in the AI GPU market, BofA analysts have highlighted Broadcom Inc. (AVGO) and Micron Technology, Inc. (MU) as compelling alternatives for investors seeking to benefit from this trend.

In this article, we will delve into why Broadcom and Micron are well-positioned to capitalize on growing investments by cloud service providers in AI data centers, evaluate their financial health and recent performance, and explore the potential headwinds and tailwinds they may encounter in the near future.

Broadcom Inc. (AVGO)

Valued at a $732.45 billion market cap, Broadcom Inc. (AVGO) is a global tech leader that designs, develops, and supplies semiconductor and infrastructure software solutions. Broadcom’s extensive portfolio of semiconductor solutions, including networking chips, storage adapters, and advanced optical components, makes it a critical supplier for data centers.

Moreover, Broadcom’s leadership in networking solutions, exemplified by its Tomahawk and Trident series of Ethernet switches, positions it as a critical beneficiary of increased AI data center spending.

In May, AVGO revolutionized the data center ecosystem with its latest portfolio of highly scalable, high-performing, low-power 400G PCIe Gen 5.0 Ethernet adapters. The latest products provide an improved, open, standards-based Ethernet NIC and switching solution to address connectivity bottlenecks caused by the rapid growth in XPU bandwidth and cluster sizes in AI data centers.

Further, Broadcom’s strategic acquisitions, such as the recent purchase of VMware, Inc., enhance its data center and cloud computing capabilities. With this acquisition, AVGO will bring together its engineering-first, innovation-centric teams as it takes another significant step forward in building the world’s leading infrastructure technology company. 

Broadcom’s solid second-quarter performance was primarily driven by AI demand and VMware. AVGO’s net revenue increased 43% year-over-year to $12.49 billion in the quarter that ended May 5, 2024. That exceeded the consensus revenue estimate of $12.01 billion. Revenue from its AI products hit a record of $3.10 billion for the quarter.

AVGO reported triple-digit revenue growth in the Infrastructure Software segment to $5.29 billion as enterprises increasingly adopted the VMware software stack to build their private clouds. Its gross margin rose 27.2% year-over-year to $7.78 billion. Its non-GAAP operating income grew 32% from the year-ago value to $7.15 billion. Its adjusted EBITDA was $7.43 billion, up 30.6% year-over-year.

Further, the company’s non-GAAP net income was $5.39 billion or $10.96 per share, up 20.2% and 6.2% from the prior year’s quarter, respectively. Cash from operations of $4.58 billion for the quarter, less capital expenditures of $132 million, resulted in free cash flow of $4.45 billion, or 36% of revenue.

When it posted solid earnings for its second quarter, Broadcom announced a ten-for-one stock split, which took effect on July 12, making stock ownership more affordable and accessible to investors.

Moreover, AVGO raised its fiscal year 2024 guidance. The tech company expects full-year revenue of nearly $51 billion. Broadcom anticipates $10 billion in revenue from chips related to AI this year. Its adjusted EBITDA is expected to be approximately 61% of projected revenue.

Analysts expect AVGO’s revenue for the third quarter (ending July 2024) to grow 45.9% year-over-year to $12.95 billion. The consensus EPS estimate of $1.20 for the ongoing quarter indicates a 14% year-over-year increase. Also, the company has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.

In addition, the company’s revenue and EPS for the fiscal year ending October 2024 are expected to increase 43.6% and 12.4% from the previous year to $51.44 billion and $4.75, respectively.

AVGO’s shares have gained more than 29% over the past six months and around 74% over the past year. Moreover, the stock is up nearly 40% year-to-date.

Micron Technology, Inc. (MU)

Another chipmaker that is well-poised to benefit from significant data center spending among enterprises is Micron Technology, Inc. (MU). With a $126.70 billion market cap, MU provides cutting-edge memory and storage products globally. The company operates through four segments: Compute and Networking Business Unit; Mobile Business Unit; Embedded Business Unit; and Storage Business Unit.

Micron’s role as a leading provider of DRAM and NAND flash memory positions it to capitalize on the surging demand for high-performance memory solutions. The need for advanced memory products grows as data centers expand to support AI and machine learning workloads. The company’s innovation in memory technologies, such as the HBM2E, aligns well with the performance requirements of modern data centers.

Also, recently, MU announced sampling its next-generation GDDR7 graphics memory with the industry’s highest bit density. The best-in-class capabilities of Micro GDDR7 will optimize AI, gaming, and high-performance computing workloads. Notably, Micron reached an industry milestone as the first to validate and ship 128GB DDR5 32Gb server DRAM to address the increasing demands for rigorous speed and capacity of memory-intensive Gen AI applications.

Further, MU’s strategic partnerships with leading tech companies like Nvidia and Intel Corporation (INTC) position the chipmaker at the forefront of technology advancements. In February, Micron started mass production of its HBM2E solution for use in Nvidia’s latest AI chip. Micron’s 24GB 8H HBM3E will be part of NVIDIA H200 Tensor Core GPUs, expected to begin shipping in the second quarter.

For the third quarter, which ended May 30, 2024, MU posted revenue of $6.81 billion, surpassing analysts’ expectations of $6.67 billion. That compared to $5.82 billion in the prior quarter and $3.75 billion for the same period last year. Moreover, AI demand drove 50% sequential data center revenue growth and record-high data center revenue mix.

MU’s non-GAAP gross margin was $1.92 billion, versus $1.16 million in the prior quarter and negative $603 million for the previous year’s quarter. Its non-GAAP operating income came in at $941 million, compared to $204 million in the prior quarter and negative $1.47 billion for the same period in 2023.

Additionally, the chip company reported non-GAAP net income and earnings per share of $702 million and $0.62 for the third quarter, compared to non-GAAP net loss and loss per share of $1.57 billion and $1.43 a year ago, respectively. Its EPS beat the consensus estimate of $0.53. Its adjusted free cash flow was $425 million during the quarter, compared to a negative $1.36 billion in the prior year’s quarter.

For the fourth quarter of fiscal 2024, Micron expects non-GAAP revenue of $7.60 million ± $200 million, and its gross margin is anticipated to be 34.5% ± 1%. Also, the company expects its non-GAAP earnings per share to be $1.08 ± 0.08.

Analysts expect AVGO’s revenue for the fourth quarter (ending August 2024) to increase 91.4% year-over-year to $7.68 billion. The company is expected to report an EPS of $1.14 for the current quarter, compared to a loss per share of $1.07 in the prior year’s quarter. Further, the company has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.

MU’s shares have surged over 30% over the past six months and approximately 75% over the past year.

Bottom Line

The substantial surge in capital expenditures by cloud computing giants like Microsoft, Amazon, and Alphabet highlights the importance of AI and data centers in the tech industry’s landscape. Broadcom and Micron emerge as two of the most promising chip stocks for investors seeking to benefit from this trend. Both companies offer solid financial health, significant market positions, and exposure to the expanding data center and AI markets.

While Broadcom’s diverse semiconductor solutions and Micron’s leadership in memory technology make them attractive investment opportunities, investors must remain mindful of potential headwinds, including market competition and geopolitical risks. By evaluating these factors and understanding the growth potential of these companies, investors can make informed decisions in the rapidly evolving technology sector.

Is Intel a Buy? Deep Dive into Software Expansion and AI Aspirations

Posted on by The INO.com Team

Intel Corporation (INTC), a global leader in designing and manufacturing semiconductor products, is making headlines with its ambitious goals for software expansion. Chief Technology Officer (CTO) Greg Lavender told Reuters that Intel’s push into software is progressing well, with the company potentially achieving cumulative software revenue of $1 billion by the end of 2027.

Progress in Building a Software Business

INTC has been steadily growing its software capabilities. The company generated over $100 million in software revenue in 2021, the year Greg Lavender was brought in from cloud computing firm VMware, Inc. (VMW) by CEO Pat Gelsinger to lead Intel’s software strategy. Since then, the chipmaker has acquired three software companies. It highlights Intel’s strategic pivot towards becoming a significant player in the software market, complementing its traditional hardware dominance.

Intel, which reported $54 billion in revenue in 2023, offers a variety of software services and tools, ranging from cloud computing to artificial intelligence (AI). Lavender stated that his strategy is centered on providing services in AI, performance, and security, with the company making significant investments in all three areas.

The chipmaker's investment in AI is particularly noteworthy. INTC’s upcoming Gaudi 3 chip is expected to generate significant demand, potentially positioning the company as a major contender in the AI chip market. Intel said it expected over $500 million in sales from its Gaudi 3 chips in the second half of the year.

Powered by the high-efficiency Intel® Gaudi® platform and boasting proven MLPerf benchmark performance, Intel® Gaudi® 3 AI accelerators are designed to tackle demanding training and inference tasks. Recently, Intel announced pricing for Intel® Gaudi® 2 and Intel® Gaudi® 3 AI accelerator kits, which redefine power, performance, and affordability.

A standard AI kit, including Intel Gaudi 2 accelerators with a universal baseboard (UBB), is offered to system providers at $65,000, estimated to be one-third the cost of comparable competitive platforms. Also, a kit including eight Intel Gaudi 3 accelerators with a UBB will cost $125,000, expected to be two-thirds the cost of comparable competitive platforms.

NVIDIA Corporation (NVDA) currently dominates this space, controlling about 83% of the data center chip market in 2023. However, INTC’s focus on developing versatile and efficient AI processors could challenge NVDA’s dominance.

Positioning as a Leader in the Tech Industry

Intel’s comprehensive approach to AI software development could significantly enhance its position in the technology industry. CTO Greg Lavender mentioned that Intel is backing open-source initiatives to create software and tools capable of powering a diverse array of AI chips, with further breakthroughs anticipated in the upcoming months.

A crucial part of NVDA’s success is attributed to its proprietary software, CUDA, which binds developers to Nvidia chips. However, France’s antitrust regulator is preparing to charge Nvidia with suspected anti-competitive practices. The regulatory body voiced concerns about the generative AI sector’s reliance on CUDA.

Intel is a part of the UXL Foundation, a consortium of technology companies working on an open-source project that aims to make computer code run on any machine, regardless of the underlying chip and hardware. Other notable members of this consortium include Qualcomm Inc (QCOM), Samsung Electronics, and Arm Holdings plc (ARM).

Furthermore, INTC is actively contributing to Triton, an initiative led by OpenAI to develop an open-source programming language designed to improve code efficiency across AI chips. This project is also supported by Advanced Micro Devices, Inc. (AMD) and Meta Platforms, Inc. (META). Triton is already operational on Intel’s existing graphics processing units and will be compatible with the company's next generation of AI chips.

“Triton is going to level the playing field,” Lavender said, emphasizing the potential impact of this initiative.

By contributing to open-source projects like Triton and the UXL Foundation, Intel aims to create a more inclusive and competitive AI ecosystem. This strategy boosts INTC’s technological capabilities and strengthens its reputation as a forward-thinking company willing to invest in the broader tech community.

Robust First-Quarter Performance but Weak Second-Quarter Forecast

For the first quarter that ended March 30, 2024, INTC’s net revenue increased 8.6% year-over-year to $12.72 billion, primarily driven by growth in its personal computing, data center, and AI business. Revenue from the company’s biggest business, Client Computing Group (CCG), which is responsible for chips for PCs and laptops, grew 31% year-over-year to $7.50 billion.

Intel’s Data Center and AI business, which makes central processors for servers and other parts and software, reported sales of $3 billion, up 5% year-over-year. The company continues to compete for server market share against well-established chipmakers like Nvidia.

Further, the company’s gross margin rose 30.2% from the prior year’s quarter to $5.22 billion. INTC’s non-GAAP operating income came in at $723 million, compared to an operating loss of $294 million in the previous year’s quarter. Its non-GAAP net income and earnings per share were $759 million and $0.18, compared to a net loss and loss per share of $169 million and $0.04, respectively, in the same period of 2023.

The chipmaker gave weak guidance for the second quarter. For the quarter that ended June 2024, Intel expects its revenue to come between $12.50 billion and $13.50 billion, and its non-GAAP earnings per share is anticipated to be $0.10.

Meanwhile, analysts expect INTC’s revenue for the second quarter to increase marginally year-over-year to $12.99 billion. The company’s EPS is expected to decline 21.6% year-over-year to $0.10 for the same period.

Bottom Line

Intel’s strategic shift towards expanding its software capabilities, primarily focusing on AI and cybersecurity, is setting the stage for substantial future revenue growth. The company’s progress in building a robust software business, evidenced by the significant revenue surge and strategic acquisitions over the years, highlights a promising growth trajectory.

By focusing on AI, performance, and security areas and making significant investments, Intel is diversifying its revenue streams and positioning itself as a formidable player in the tech industry. The company’s executives hinted at robust demand for its upcoming Gaudi 3 chip, which can help Intel take second place in the AI chip market.

While INTC’s involvement in open-source initiatives like Triton and the UXL Foundation, collaboration with industry leaders, and continuous innovation underscores its commitment to fostering a competitive and inclusive AI ecosystem, Nvidia’s dominance in the data center chip market is pronounced and presents a significant challenge.

Intel’s solid first-quarter performance reflects the effectiveness of its strategic initiatives, but its dim second-quarter guidance indicates some short-term challenges. Analysts predict a slight year-over-year revenue increase but a notable EPS decline for the second quarter. While it may face hurdles in the immediate future, INTC’s long-term prospects appear promising, driven by its software expansion and strategic investments in AI.

Cantor Fitzgerald reiterated a Neutral rating on INTC stock while maintaining a price target of $40. Also, TD Cowen reiterated coverage on Intel with a Neutral rating and set a new price target of $40 from $45 previously. Given this backdrop, it seems wise to wait for a better entry point in INTC now.

Eli Lilly (LLY): A Golden Opportunity for Investors?

Posted on by The INO.com Team

Eli Lilly and Company (LLY) is well-known for its groundbreaking drug development that addresses several common and rare medical conditions. With a robust drug pipeline and strategic acquisitions, LLY, valued at $847.82 billion, is emerging as a formidable contender in the pharmaceutical industry, poised to reach a trillion-dollar market cap. Eli Lilly’s stock has had a solid run, surging around 61% year-to-date and more than 110% over the past year.

This article delves into Eli Lilly’s diverse drug pipeline, recent acquisitions and partnerships, and financial performance, highlighting why it represents a golden opportunity for investors.

Innovative Drug Pipeline

Eli Lilly’s success is primarily attributed to its innovative drug portfolio, which continues to drive significant revenue and earnings growth. Its product portfolio includes Mounjaro, a revolutionary weight-loss drug that has garnered substantial attention for its efficacy, setting new benchmarks in the weight management sector, and Trulicity, a leading diabetes medication that helps lower blood sugar levels and has become a staple in diabetes management.

Further, the company offers Verzenio, a crucial treatment for breast cancer, Taltz, which targets autoimmune dysfunctions and has proven effective in treating conditions like psoriasis and rheumatoid arthritis, and Jardiance, an oral medication to treat adults with type 2 diabetes, chronic (long-term) heart failure, and chronic kidney disease.

Additionally, Humalog®, a fast-acting insulin, is another cornerstone of LLY’s diabetes treatments, widely used by patients to manage their blood sugar levels effectively. Zepbound, a new addition, is an injectable medication for chronic weight management in adults with obesity or overweight with at least one weight-related condition, including high blood pressure, type 2 diabetes, or high cholesterol.

Recently, Eli Lilly’s Kisunla™ got approved by the FDA for treating adults with early symptomatic Alzheimer’s disease (AD), which includes people with mild cognitive impairment (MCI) and people with the mild dementia stage of AD with confirmed amyloid pathology.

In addition to these established medications, LLY is continuously expanding its pipeline with cutting-edge treatments. Pipeline progress includes optimistic results from two Phase 3 trials of tirzepatide for obstructive sleep apnea, submission of mirikizumab for Crohn’s disease in the U.S. and EU, resubmission of lebrikizumab for atopic dermatitis, and initiation of lepodisiran in a Phase 3 study for atherosclerotic cardiovascular disease.

Strategic Acquisitions and Partnerships

To diversify and strengthen its drug portfolio, Eli Lilly has strategically acquired Morphic Holding, Inc., a biopharmaceutical company specializing in oral integrin therapies for severe chronic conditions. Morphic’s lead development program is a selective oral small molecule inhibitor of α4β7 integrin for the treatment of inflammatory bowel disease (IBD) that can potentially expand treatment options for patients.

This molecule, MORF-057, is currently being evaluated in two Phase 2 studies for ulcerative colitis and one Phase 2 study for Crohn’s disease. In addition, Morphic is developing a preclinical pipeline of other molecules aimed at treating autoimmune diseases, pulmonary hypertensive diseases, fibrotic diseases, and cancer. This acquisition broadens Eli Lilly’s therapeutic reach and underscores its commitment to addressing unmet medical needs.

Daniel Skovronsky, M.D., Ph.D., chief scientific officer of Eli Lilly, said, “We are eager to welcome Morphic colleagues to Lilly as this strategic transaction reinforces our commitment to developing new therapies in the field of gastroenterology, where Lilly has made significant investments to deliver first-in-class molecules for the benefit of patients.”

Also, in June, LLY announced a collaboration with OpenAI, enabling the company to utilize OpenAI’s generative AI to invent novel antimicrobials for treating drug-resistant pathogens. Antimicrobial resistance (AMR) is considered one of the foremost public health and development threats across the global health landscape. This partnership marks a groundbreaking step in combating the increasingly severe yet often overlooked threat of antimicrobial resistance.

Robust First-Quarter 2024 Results and Upbeat Full-Year Outlook

 Eli Lilly’s financial performance in the first quarter of 2024 showcases its resilience and growth potential. For the quarter that ended March 31, 2024, LLY’s revenue increased 26% year-over-year to $8.77 billion, driven by 16% increases in volume and 10% due to higher realized prices. The volume surge was due to solid growth from Mounjaro, Zepbound®, Verzenio, and Jardiance.

LLY’s non-GAAP gross margin grew 33% from the year-ago value to $7.23 billion. The rise in gross margin was primarily driven by higher realized prices, favorable product mix, and improvements in production cost. The company’s non-GAAP net income and earnings per share were $2.34 billion and $2.58, compared to $1.46 billion and $1.62 in the same period of 2023, respectively.

Following an outstanding first-quarter performance, Eli Lilly raised full-year 2024 revenue guidance by $2 billion. Also, the company increased non-GAAP EPS guidance by $1.30 to be in the range of $13.50 to $14.

Bottom Line

LLY’s relentless focus on innovation, strategic acquisitions and collaborations, and expanding its drug pipeline ensures sustained growth and profitability. Its significant progress in addressing some of the world’s most critical healthcare challenges has led to a higher demand for its medicines. To support future growth, the company is making substantial pipeline investments and rapidly expanding its manufacturing capacity to ensure its incretin medicines reach more patients.

Moreover, in May, Eli Lilly more than doubled its investment in its Lebanon, Indiana, manufacturing site with a new $5.30 billion commitment, raising the company’s total investment in this site from $3.7 billion to $9 billion. This expansion will boost Lilly’s capacity to manufacture active pharmaceutical ingredients (API) for Zepbound® injection and Mounjaro®, allowing more adults with chronic diseases like obesity and type 2 diabetes to benefit from these vital treatments.

Analysts also remain highly bullish due to the pharma giant’s robust fundamentals and growth prospects. Berenberg analyst Kerry Holford recently raised the price target on Eli Lilly from $850 to $1,000 and maintained a Buy rating on the stock. Moreover, Barclays analyst Carter Gould maintained an Overweight rating for LLY and increased the price target from $913 to $1,025.

With its stock up more than 60% year-to-date, Eli Lilly is on a clear upward trajectory. If this trend continues, the company is well-poised to join the exclusive trillion-dollar stocks club, a milestone that signifies immense market confidence and stability. For investors seeking a resilient and growth-oriented pharma stock, LLY stands out as a prime choice, promising substantial returns in the long run.