- U.S. stocks suffered their biggest one-day drop in more than two years on Tuesday.
- Oil & gas companies as well as auto manufacturers have managed to move higher.
- At the individual stock level, there have also been some interesting contrarian movers
Yes, the market’s strong September start was washed out by another hotter-than-expected inflation reading along with concerns that the Fed’s contractionary rate hikes could spell doom for the economy.
All hope is not lost, however, with the S&P 500 still comfortably ahead of its June 2022 lows. And thankfully, there have been some bright spots in an otherwise dim week.
Oil & gas companies as well as auto manufacturers have managed to move higher. It’s no coincidence in the case of the latter that steel and aluminum prices are slumping.
At the individual stock level there have also been some interesting contrarian movers especially in the electric vehicle (EV) space. And as these three stocks remind us, there are always winners to be found even during the reddest of weeks.
Why is NIO Stock Outperforming?
NIO (NYSE: NIO) has been the star of the week, up 15% since Friday. The China-based premium EV maker posted some second-quarter numbers that caught the market off guard and prompted sustained buying pressure. Revenue of $1.5 billion came in ahead of consensus and represented 13% year-over-year growth, a decent result considering lockdown conditions were in place in China for much of the period.
More than 25,000 vehicles were delivered in Q2 which marked a slowdown from Q1 but a 14% uptick from a year ago. NIO’s ability to deliver double-digit growth in a challenging setting bodes well for when macro conditions normalize.
August deliveries accelerated from July due in large part to the ES7 smart SUV rollout, which suggests things are starting to improve. And with production of the five-seat vehicle just starting to ramp, families in China will soon have more NIO SUVs to choose from.
Management’s forecast of 32,000 vehicle deliveries (at the midpoint) in the current quarter implies 31% growth. This has Wall Street energized by NIO’s road ahead and unanimously bullish on its stock. Earlier this week Deutsche Bank called NIO its top EV pick while Bank of America raised its price target to $30.
Why is Twilio Stock Going Up?
Twilio (NYSE: TWLO) is a surprise mover this week having advanced nearly 9%. As the communications specialist tries to recover from a 52-week low, an appearance at the Goldman Sachs ‘Communicopia’ + Technology Conference has revived interest in the stock.
Analysts have emerged from the event communicating a bunch of positive views on Twilio’s ability to reinvent itself in the post-Covid economy. Much like Zoom, Twilio shares enjoyed a big ride during the pandemic only to give back their gains and return to March 2020 levels.
Goldman Sachs, JMP Securities, and others reiterated their buy ratings on Twilio after the conference. JMP Securities is particularly bullish having placed a $175 target that suggests the stock can double from here.
Most of the positive feedback relates to Twilio’s announced restructuring. Some say it is a move that is well overdue given how rapidly headcount has grown in recent years amid Covid-driven demand and fervent M&A activity. Although layoffs are bad news for some Twilio workers, its good news for the stock because it shows management’s commitment to profitability.
The Street is now projecting a return to positive EPS by the second quarter of 2023 by when much fat trimming is expected to have occurred. As evidenced by last quarter 41% top line growth, demand for Twilio’s products is there, but a lean cost structure is not.
Has CRISPR Therapeutics Stock Bottomed?
CRISPR Therapeutics (NASDAQ: CRSP) is another counter-market mover this week having jumped 9% and regained its 50-day line. The Swiss-American developer of gene-based medicines for a range of serious diseases presented at Morgan Stanley’s 20th Annual Global Healthcare Conference on Monday.
Those in attendance apparently liked what management had to say, in contrast to the reaction to their Q2 report a month prior. That update got mixed reviews with some sell-side firms expressing caution around CRISPR’s first-generation CAR-T programs. Chimeric antigen receptor (CAR) T-cell therapies are a novel engineered approach to fighting cancer through gene editing. The technology has been highly touted as a major advancement in oncology but at this point remains largely unproven.
The bulls on the other hand see great things ahead for CRISPR’s CAR-T therapies in addition to its programs for sickle cell and other diseases. As is often the case with biotech stocks, the price targets are all over the map on this one, but on average imply little downside and significant upside.
Hedge funds have been gradually building positions in CRISPR the last two quarters as the stock returned to early pandemic levels. Trading volume off the May 2022 bottom has been solid and trending higher in a rough market could also a good omen for long-term investors.
