🌐 Not Your Father’s Metaverse

Plus, where cravings meet convenience: one chain stands tall.

October 01, 2024

Happy Tuesday afternoon to everyone on The Street. Here's a snapshot of where markets ended the trading session, plus tomorrow's trade idea delivered to you today.

  • 🟥 | US stocks fell Tuesday. The Dow fell 0.4%, the S&P 500 shed 0.9%, and the Nasdaq Composite dropped 1.5% as rising tensions in the Middle East dampened investor optimism.

  • 📈 | One Notable Gainer: New Fortress Energy shares surged 6.5% after pricing a 46 million share offering at $8.63, despite Deutsche Bank downgrading it to sell due to equity dilution and high business model risks.

  • 📉 | One Notable Decliner: HP Inc shares fell over 3% after Citi downgraded the stock from buy to neutral, citing a weakening industry outlook and limited short-term benefits from artificial intelligence developments.

  • 🌐 | Tomorrow's Trade: Not Your Father’s Metaverse. Scroll down for more.

Plus, ever wish you could turn back time and invest in Amazon's early days? Well, buckle up because the AI revolution is offering a second chance…

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TOGETHER WITH THE MOTLEY FOOL

Ever wish you could turn back time and invest in Amazon's early days? Well, buckle up because the AI revolution is offering a second chance.

In The Motley Fool's latest report, dive into the world of AI-powered innovation. Discover why experts are calling it "the rocket fuel of AI" and predicting a market cap 41 times larger than Amazon's.

Don't let past regrets hold you back. Take charge of your future and capitalize on the AI wave with The Motley Fool's exclusive report.

Whether it's AI or Amazon, fortune favors the bold.

S&P 500 Heatmap. Credit: Finviz

All Stock Heatmap. Credit: Finviz

Global ADR snapshot. Credit: Finviz

MARKET MOVERS

ARCO (+14.6%) Arcos Dorados Renews McDonald’s Franchise Agreement (TipRanks)

PAYX (+4.9%) Paychex Stock Climbed To a Record High Today—Here's Why (Investopedia)

DIS (-2.2%) Disney Stock Is Up Off Its Lows and Could Be Cheap - Shorting OTM Puts Works (Barchart)

CVS (-2%) CVS is weighing a breakup. What does it mean for the big healthcare business? (YF)

CLX (+1.5%) The Clorox Company (NYSE:CLX) Shares Bought by AQR Capital Management LLC (Benzinga)

OVERHEARD ON THE STREET

CNN: Apple's iPhone 16 pre-sales are down over 12% year-over-year, despite new AI features, with demand for the iPhone 16 Pro especially weak.

Reuters: The NTSB warns over 40 foreign operators may be using Boeing 737s with faulty rudder parts, posing potential safety risks after a U.S. incident.

QZ: GLP-1 medications like Ozempic have quickly surpassed insulin as the second most common treatment for type 2 diabetes in just seven years, per Trilliant Health.

CNN: CVS Health will lay off nearly 3,000 employees as part of a multi-year plan to cut $2 billion in costs and invest in technology improvements.

CNET: Verizon confirms its network outage has been fully restored after a day of issues; users still experiencing problems should restart their devices.

TOMORROW’S TRADE IDEA, TODAY

Not Your Father’s Metaverse

Pivot to AI

Meta (META) — a company infamous for its many pivots, often “to video” — has changed course once again. This time, it just might stick.

A mere few years after Mark Zuckerberg’s high-profile embrace of the so-called “metaverse”, complete with a name change from Facebook to Meta Platforms, the company has gone all in on AI technology.

At Meta’s annual developers conference on Wednesday, the release of its new VR headsets seemed like an afterthought next to several AI announcements. The company unveiled an AI digital assistant with celebrity voices from the likes of John Cena and Kristen Bell, as well as new features for its AI-powered Ray-Ban smart glasses.

Competitive Edge

AI may be a better bet for Meta than the metaverse. The company’s Reality Labs division records a nearly $17 billion annual operating loss, and netted little more than $2 billion in revenue for the 12 months ended June 2024. Meta Ads generate about that much in a workweek.

Meanwhile, Meta appears well-positioned to deliver its AI technology directly to customers, thanks to its massive existing consumer network of nearly 3.3 billion people.

In fact, it may even be better equipped to do so than AI-invested competitors like Apple (AAPL) or Microsoft (MSFT). To use Apple’s new AI tools, for example, you’d have to buy an iPhone 15 or later — and demand for the newer devices has been tepid so far. But most of Meta’s AI tools will be integrated into platforms users already, well, use.

Reaping the Rewards

When the crypto bubble burst, some market observers worried it would have an outsized impact on Meta, given its significant investments in the metaverse. But the opposite has happened. Meta’s stock has soared over 64% YTD, while Apple and Microsoft’s stocks are up 24% and 15% over the same period, respectively. 

Despite these significant gains, it may still have room to climb. 85% of analysts covering the stock are currently giving it a buy rating with an average price target of $581.80. It helps that its AI investments contribute to many facets of the business. Meta Ads is already benefiting as a result, according to D.A. Davidson’s Gil Luria. 

The metaverse bet may have been a dud. But there’s more to Meta than its name.

Are you bullish or bearish on Meta Platforms (META) over the next 12 months? Bullish Bearish

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TOGETHER WITH THE MOTLEY FOOL

Ever wish you could turn back time and invest in Amazon's early days? Well, buckle up because the AI revolution is offering a second chance.

In The Motley Fool's latest report, dive into the world of AI-powered innovation. Discover why experts are calling it "the rocket fuel of AI" and predicting a market cap 41 times larger than Amazon's.

Don't let past regrets hold you back. Take charge of your future and capitalize on the AI wave with The Motley Fool's exclusive report.

Whether it's AI or Amazon, fortune favors the bold.

ON OUR RADAR

AP: With 45,000 longshoremen striking at 36 U.S. ports, dockworkers may have the upper hand in wage and automation talks amid rising public support.

CNBC: Wawa was ranked No. 1 in the nation's first convenience store study, praised for its hoagies, fresh coffee, food quality, and fast service.

CNN: Home heating costs in the U.S. are expected to rise 10.5% this winter, with electric heating up 13.6%, straining already burdened households.

BI: Baby boomer retirements create a $10 trillion opportunity for millennials to buy small businesses, driving prices up 25% and boosting economic growth in overlooked areas.

Axios: A Xero survey shows that half of U.S. small business owners struggle financially, particularly Gen Z and Millennials, due to limited financial literacy.

YESTERDAY’S POLL RESULTS

🟩🟩🟩🟩🟩🟩 🐂 Bullish

🟨🟨⬜️⬜️⬜️⬜️ 🐻 Bearish

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