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Happy Sunday, everyone.
We’re hosting a Q4 Market Forecasting webinar alongside the Managing Partners of NEOS Investments this Thursday!
Here’s what to expect:
How to Fed cutting interest rates will impact specific sectors of the stock market
Where the market might be headed after the Nov. 5 presidential election results
Where Bitcoin might fit inside of your portfolio during the quarter
As with all of the webinars we host, questions are encouraged. Nothing is off the table, and we plan to shoot you all straight. We’re thrilled to be joined by a couple of Wall Street veterans and plan to make the most of it!
We have only 1,000 seats, so be sure to register before it’s too late!
Portfolio Updates:
Kicking this portfolio update off by confirming that I’ve deployed all $100K into SPYI as promised in last week’s post. I’m also really excited to see SPYI participating in the recent upside the S&P 500 has experienced — can’t wait to get paid that ~$1,050 monthly dividend in a few weeks!
For the rest of the portfolio, just about everything is the same.
I had a few thousand in cash sitting idle in the account that was deployed this week. I chose to deploy the capital into GitLab (GTLB), Microsoft (MSFT), and Meta Platforms (META).
GitLab because Morgan Stanley recently initiated coverage on the stock with a $70 price target (I already owned this name and have been bullish since the high-$40s). Microsoft because OpenAI has become the world’s most valuable privately-held company. And Meta Platforms because I firmly believe they’re going to leave Apple in the dust when it comes to the intersection of AI and hardware.
Continue to remain bullish on Bitcoin and Ethereum. No real updates to share there!
Week in Review — Too Long, Didn’t Read:
Delta will generate $3B in free cash flow in 2024, JPMorgan Chase is expected to buyback over $24B in stock in 2025, BlackRock welcomed $160B of investor inflows, Tesla announced their “Cybercab,” Amazon Prime members saved over $1B during the two-day event, AMD unveiled its next-generation AI chips, core inflation surpassed all projections (in a bad way), and credit card debt hit a fresh high of $1.14 TRILLION.
Key Earnings Announcements:
Delta will generate $3B in free cash flow in 2024, JPMorgan Chase is expected to buyback over $24B in stock in 2025, and BlackRock welcomed $160B of investor inflows.
Delta Air Lines (DAL)
Key Metrics
Operating Income: $1.4 billion, compared to $2.0 billion last year
Profits: $1.3 billion, an increase of +15% YoY
Earnings Release Callout
“We continue to lead the industry operationally and financially, with a double-digit operating margin and nearly $3 billion of free cash flow generation year-to-date. We expect our December quarter pre-tax profit to grow 30 percent over last year to $1.4 billion, which would mark one of the most profitable fourth quarters in our history."
My Takeaway
I’m going to be completely honest — and those of you who have been following my work for a few years know this — I refuse to invest into airline stocks, like Delta.
The reason being is because these companies can do everything correct — marketing, new stops, new planes, best customer services, etc. — and still lose money due to variables outside of their control. Gas, weather, natural disasters, strikes, etc. So despite the chart above looking absolutely beautiful (stock price in black clearly follows earnings per share in blue) I’m sitting this one out.
With that being said, let’s breakdown their recent earnings report.
Delta’s quarterly revenue by region: domestic was down -3%, transatlantic down -2%, Latin America down -6%, and Pacific down -16%. Management also stated the company’s investments in maintenance capabilities over the last year have driven maintenance-relation cancellations down -75% in 2024 — with a focus in 2025 being to drive further operational efficiency.
During the quarter, Delta took delivery of nine Airbus aircrafts and retired six. Delta’s fleet growth is expected to be less than 2% with ~40 aircraft deliveries this year and ~20 retirements.
The company generated $6.1 billion in operating cash flow YTD after investments, and $2.7 billion in free cash flow. The company’s balance sheet is in a very healthy position with an unencumbered asset base of $30 billion projected by year-end. With Fitch’s upgrade in July, Delta is now officially an investment grade credit.
It seems like this company is really turning things around. Again, they’re not my cup of tea — but certainly compelling! No shares.
JPMorgan Chase (JPM)
Key Metrics
Revenue: $42.7 billion, an increase of +7% YoY
Profits: $12.9 billion, compared to $13.1 billion last year
Earnings Release Callout
“While inflation is slowing and the U.S. economy remains resilient, several critical issues remain, including large fiscal deficits, infrastructure needs, restructuring of trade and remilitarization of the world. While we hope for the best, these events and the prevailing uncertainty demonstrate why we must be prepared for any environment.”
My Takeaway
JPMorgan Chase’s Q3 EPS of $4.41 topped Wall Street expectations of only $3.99 on stronger revenues and lower expenses. This came on the back of heightened concerns among investors around net interest income (NII) outlook after management talked-down expectations at an industry conference last month.
Wall Street believes a gradual rate-cut cycle should be quite managable for the bank given the potential for non-NII EPS levers (fees, credit costs, capital flex, loan growth, etc.) to mitigate any rate-driven NII pressures in an economic soft landing.
Wall Street also believes the market is underestimating the potency of JPM’s diversified revenue mix — which combined with strong execution provides superior defensibility. They believe JPM is well positioned to capitalize on growth themes ranging from climate transition / re-shoring, a pick-up in M&A / IPOs, private credit, digitization of banking services, and AI efficiency gains.
Despite $6B in share buybacks during the quarter, Wall Street is still expecting an additional $3B in buyback during Q4 — which would then accelerate to $6B / quarter in 2025 (to account for the significant amount of surplus capital).
I’m impressed. I think JPMorgan Chase is positioned well for success. With that being said, it seems like their stock price does a wonderful job following their EPS (shown in blue above) — and Wall Street is forecasting a -10% EPS contraction in 2025.
For that reason, I’ll remain on the sidelines unless JPM stocks begins to trade well-below 2025’s forecast of ~$200 / share.
No shares.
BlackRock (BLK)
Key Metrics
Revenue: $5.2 billion, an increase of +15% YoY
Operating Income: $2.0 billion, an increase of +23% YoY
Profits: $1.7 billion, an increase of +6% YoY
Earnings Release Callout
“The assets we manage on behalf of our clients reached a new high, ending the third quarter at $11.5 trillion, having grown $2.4 trillion over the last twelve months. Quarterly revenue and operating income both set new records, up 15% and 26% year-over-year, respectively. Our 45.8% operating margin is up 350 basis points.
My Takeaway
BlackRock reported EPS of $11.36, far exceeding Wall Street’s expectations of $10.36 — led higher by performance fees (+$218M) and positive operating leverage (+3.5% of margin YoY). This marked the highest operating margin since 2021.
Long-term inflows equaled +$160B as all asset classes were positive — led by equities (+$74B). By channel, retail had inflows of $7B, ETFs of $97B, and institutional of $56B. All regions saw inflows.
iShares is leading the industry in global flows with ~$250B through Q3 and historically sees upwards of 40% of its total annual flows in Q4. The company also generated 5% annualized organic base fee growth, the best quarter in 3 years. Flows in active strategies accelerated with $28B — with 90% of AUM being above the 1, 3, and 5-year period.
On the evolution of digital assets (cryptocurrency), management believes the utilization of this asset class with become more of a reality worldwide, with expanded investment in tandem with growth of blockchain technology and currency digitalization.
At the moment, BlackRock’s stock price seems to be trading at a premium to their historical valuation — as shown above. With that being said, this recent premium could be argued as deserved considering their continued momentum.
However, at 25X forward earnings I’ll stay on the sidelines. I’ll be adding them to my watchlist — if their stock price experiences a correction to the $850-900 range I might begin to nibble.
No shares.
Investor Events / Global Affairs:
Tesla announced their “Cybercab,” Amazon Prime members saved over $1B during the two-day event, and AMD unveiled its next-generation AI chips.
Tesla’s (TSLA) “We, Robot” Event
Source: Tesla
Tesla's "We, Robot" event revealed the much-anticipated Cybercab — a driverless vehicle slated for production by 2027.
Elon Musk emphasized the strategic importance of autonomous vehicles in Tesla’s future, positioning the Cybercab as a potential game-changer in the ride-hailing industry. Things will be interesting for years to come as Tesla looks to compete with the likes of Waymo, Uber, and Lyft. Priced at under $30,000, the two-seater Cybercab aims to democratize access to driverless technology and enable new taxi services.
Tesla also unveiled the Robovan, a larger autonomous shuttle designed to transport up to 20 passengers. Musk envisions these vehicles driving down the cost of transportation and increasing the efficiency of car usage — perhaps even dropping the price down to less than 20 cents per mile.
Lastly — you’ve probably already seen videos of the Optimus robots that were dancing and serving drinks. Humanoid robots at mass scale are becoming a near-certainty — which is why I remain incredibly bullish on Tesla for the long-term.
Source: Tesla
TSLA stock sank -12.3% this week — largely due to the event not revealing many numbers nor timelines. But hey — you can’t blame them for wanting to party with some fun robots.
Tesla (TSLA) Stock Performance, 5-Year Chart, Seeking Alpha
“This will be the biggest product ever, of any kind.”
Amazon (AMZN) Prime Days
Amazon (AMZN) Stock Price Correlated with Operating Earnings, 9-Year Overview, Fast Graphs
Amazon Prime Big Deal Days set a new record as the company’s biggest October shopping event, with more Prime members participating than last year.
The two-day sale offered deals across electronics, toys, beauty, and home essentials, with top brands like Dyson, Apple, and Mattel featured.
Prime members saved over $1 billion during the event, which saw higher sales and items sold than any previous October sale.
Independent sellers also achieved record-breaking sales compared to last year’s event.
Additionally, Amazon saw a significant increase in new Prime sign-ups ahead of the event.
We’re excited learn more during Amazon’s next earnings report at the end of October.
“Our 2024 Prime Big Deal Days event marked a strong start to the holiday shopping season, with record-breaking sales and participation from Prime members worldwide.”
AMD “Advancing AI” Event
Source: CNET
At its "Advancing AI" event, AMD unveiled its next-generation AI chips, including the fifth-generation EPYC server processor and the Ryzen AI PRO processors for enterprise AI. AMD also introduced the Instinct MI325X GPU, set for production in late 2024 and available to partners in early 2025. These releases come as the demand for AI chips soars, with AMD aiming to grow its market share, which reached 34% for EPYC processors in Q2 2024.
CEO Lisa Su highlighted partnerships with Meta, Google, Oracle, and Microsoft. Meta has already used over 1.5 million EPYC CPUs and AMD's GPUs for AI projects. Despite these announcements, AMD's stock fell -4%, as analysts expected more direct competition with Nvidia or new customer wins.
Advanced Micro Devices (AMD) Stock Performance, 5-Year Chart, Seeking Alpha
"We applaud the progress AMD has made with MI Instinct, growing a roughly $4 billion AI franchise from nothing in just 12 months… Unfortunately investor expectations have remained persistently out of reach."
Major Economic Events:
Core inflation surpassed all projections (in a bad way) and credit card debt hit a fresh high of $1.14 TRILLION.
Consumer Price Index (CPI)
In September, the Consumer Price Index (CPI) increased +2.4% year-over-year, slightly down from August’s +2.5% — but higher than the expected +2.3%.
Month-over-month, prices rose +0.2%, matching August but exceeding estimates of +0.1%.
Core inflation (excluding food and energy) increased +0.3% monthly and +3.3% annually — surpassing projections.
Shelter costs (up +4.9% annually) and food prices (up +0.4% monthly) contributed over 75% of the inflation increase.
Energy prices fell -1.9%, and food costs rose +2.3% over the past year.
Despite moderating inflation, it remains above the Fed’s 2% target. If Core inflation results come in higher than expected consistently — we’re all going to have a lot of questions for the Fed.
"If inflation data continues to indicate that prices are generally rising amid a backdrop of a cooler labor market, the Fed's next meeting will undoubtedly involve a more heated discussion of which of the Fed's mandates takes precedence…
Today's report is sure to spark concerns that a mild form of stagflation is beginning to take hold."
Consumer Credit
Revolving debt — primarily consisting of credit card balances — fell -1.2% in August. Despite record credit card debt of $1.14 trillion over the past year, consumers are showing signs of pulling back on spending.
Non-revolving debt — like auto and student loans — rose by +3.3%. High inflation and interest rates have shifted spending habits, with more people adopting a frugal approach.
The average credit card interest rate exceeds 20%, which is why I always remind you that you can’t out-invest high interest debt!
Economists suggest the spending slowdown may be temporary with the holidays right around the corner.
“Consumer spending is good for the economy, but it’s not good for your personal finances if you’re carrying credit card debt and paying a hefty interest rate.”
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