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Market Moves Yesterday

S&P 500 @ 5,321.41 ( ⬆️ 0.25%)

Nasdaq Composite @ 16,832.62 ( ⬆️ 0.22%)

Bitcoin @ $69,598.30 ( ⬇️ 0.78%)

Hey Scoopers,

Happy Wednesday! Here’s what we’re covering today:

👉 Apple slashes iPhone prices in China

👉 Retailers are cutting costs to boost profits

👉 UBS is bullish on AI stocks

So, let’s go 🚀

Market Wrap 📉

Stocks ticked higher on Tuesday, with indices such as the S&P 500 and Nasdaq Composite closing at fresh records while investors await Nvidia’s fiscal Q1 earnings today.

Shares of Nvidia are flat in pre-market trading at the time of writing, and the semiconductor giant is scheduled to report its quarterly results after the market closes.

NVDA stock is up 94% year-to-date, after more than tripling in the past year, as the company is at the epicenter of the AI megatrend.

Option traders are pricing Nvidia shares will swing as much as 9% up or down following its Q1 of fiscal 2025 (ended in April) earnings.

Trending Stocks 🔥

Urban Outfitters - The clothing retailer is up 6.5% in pre-market after beating estimates on its Q1 results.

Viasat- Shares of the communications company slid over 11% after it posted a loss of $0.80 per share in fiscal Q4.

Toll Brothers - Shares of the homebuilder advanced 1.2% after it posted revenue of $2.65 billion and earnings of $4.55 per share, higher than estimates of $2.53 billion and $4.14 per share respectively.

Apple Offers Huge Discounts in China

Apple is offering hefty discounts on iPhones in China to boost sales in the region amid competition from domestic manufacturers such as Huawei and Oppo. The move comes as promotions for the country’s 618 shopping festival get underway.

China’s e-commerce marketplaces have been selling select iPhone models at a 20% discount. For example, Apple’s 256 GB iPhone Pro Max is sold for $1,120, down from its original price of $1,390.

The tech giant is also offering discounts of up to $850 on the iPhone 15 when buyers trade in an iPhone 11 or later versions.

Apple initially slashed product prices in February as it aims to boost iPhone sales in China after it experienced weak demand in one of its largest markets.

Data from Canalys indicated Apple’s iPhone sales fell 25% year over year in China in Q1 of 2024, while its market share dropped from 20% to 15% in the last 12 months.

Despite lower iPhone sales in China, Apple has managed to maintain investor confidence following an earnings beat and the announcement of a record stock buyback program earlier this month.

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Retailers Bet on Promotions and Cost Savings

While Lowe’s beat earnings estimates in Q1 of fiscal 2025 (which ended in April), its operating margin fell more than two percentage points from the year-ago quarter, primarily due to early spring promotional activity.

It seems the home improvement retailers' promotional initiatives triggered a bit of margin pressure, which was offset by lower operating expenses.

Macy’s earnings beat was also buoyed by cost cuts as it revamps operations. The department store chain noted that merchandise margin fell 1 percentage point year over year due to additional discounting for warm weather products.

Macy’s emphasized promotions will continue to attract footfall as consumer spending remains under pressure.

Wall Street will be watching Target’s profit margins when it reports results this morning. The big box retailer announced plans to cut prices on 5,000 food, beverage, and household essential items during the next few months.

These cuts could undermine Target’s profitability as groceries are already a low-margin business.

AI Stocks Have Room to Grow

UBS believes artificial intelligence’s ability to transform traditional industries such as education and music will translate to strong earnings growth for AI companies.

In an investor note, UBS explained, “The structural growth prospects of artificial intelligence remain appealing. We see strong earnings growth ahead for AI-related names and the broader global tech sector, forecasting earnings growth of 20% this year and 16% in 2025.”

UBS stated that investors must have a healthy strategic allocation to AI-powered tech stocks, in addition to other growth themes such as low-carbon transition and health tech.

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Chart of The Day

The above chart shows the free cash flow generated by leading tech companies. Apple has the highest free cash flow, at $37.5 billion, followed by Amazon at $27.88 billion, Meta at $11.74 billion, and Nvidia at $11.24 billion.

Free cash flow is an important metric as it indicates the cash available to a company after accounting for operating expenses and capital expenditures.

A widening cash flow base allows companies to target accretive acquisitions, strengthen their balance sheets, or enhance shareholder wealth via dividends or buybacks.

Meme of the Day

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DISCLAIMER: None of this is financial advice. The newsletter is strictly educational and is not investment advice or a solicitation to buy or sell assets or make financial decisions. Please be careful and do your own research.