Latest news with #Redburn
Yahoo
2 days ago
- Business
- Yahoo
‘Follow the Hyperscalers' Dollars': Analyst Says These 2 Stocks Set to Thrive in AI Buildout
AI continues to make inroads into the digital world, as more and more companies make use of the technology. Generative AI, and more recently, agentic AI, are driving the current expansion of the tech, and the ripples are spreading into its associated hardware and power generation segments. Easily unpack a company's performance with TipRanks' new KPI Data for smart investment decisions Receive undervalued, market resilient stocks right to your inbox with TipRanks' Smart Value Newsletter The increasing buildout of AI presents investors with a potentially confusing patchwork of possible opportunities, made more confusing by worries that the capital expenditures required to build out AI will cut too deeply into the profits. Redburn analyst Mike Harrison has taken a deep dive into the situation, coming to some interesting conclusions. 'The Generative AI market can effectively be divided into three distinct segments: hyper-scalers' internal workloads, consumer adoption and enterprise adoption. For major technology companies, the first two segments (which often overlap) represent existential business priorities and are treated as defensive spending. The third segment is more cyclical, contingent on an acceleration of enterprise adoption rates that remain sluggish,' Harrison noted. At his bottom line, Harrison notes a bullish path, adding, 'We maintain a positive outlook on application-specific integrated circuits (ASICs), specifically because of their exposure to these defensive spending categories. As hyper-scalers and major tech companies invest to protect their competitive positions, ASICs are critical due to their better capital efficiency. By the same token, best-in-class networking providers will benefit from increasing accelerated compute cluster sizes and can assert pricing power while still delivering economic value for customers.' Harrison builds on this thesis to follow the hyperscaler dollars – and to recommend two stocks that will thrive in the AI buildout. According to the TipRanks database, both of his picks hold Strong Buy ratings from the analyst consensus; let's give them a closer look and find out what else makes them solid choices. Broadcom (AVGO) The first Redburn pick we'll look at is Broadcom, one of the semiconductor world's leading companies. Broadcom is a long-standing stalwart of the chip industry – its $1.1 trillion market cap ranks it as the second-largest semiconductor firm, while its $54.5 billion in revenue last year put it in fourth place among its peers. Broadcom has built its reputation on a wide range of product lines, including such items as cable modems; data center switches and routers; ethernet NICs, filters, and amplifiers; fiber optic solutions; and wireless connectivity solutions, to name just a few. These, and other high-end tech devices, have found application in an equally wide range of fields, particularly in data centers. More recently, Broadcom has emerged as a strong player in the ASIC segment. ASICs, or application-specific integrated circuits, are a key technology behind the success of both AI and cloud-based service providers. These chips are custom designed to meet the specific needs of the buyer, allowing for optimized performance on targeted workloads. Compared to general-purpose processors such as CPUs – and in many cases, even GPUs – ASICs can offer superior efficiency, lower power consumption, and faster processing for well-defined tasks. These advantages make them particularly well-suited for the high computational demands of AI and machine learning, especially in large-scale inference and data center environments. On the financial side, we've already noted that Broadcom holds a leading position among its peers when simply counting revenue. The company's most recent quarterly release, which covered fiscal 1Q25 – the quarter ending this past February 2 – showed total revenues of $14.9 billion, up an impressive 24.7% from fiscal 1Q24 and beating the forecast by $330 million. Broadcom's Q1 bottom line, of $1.60 per share by non-GAAP measures, was 9 cents per share better than had been expected. The company realized a free cash flow in the quarter of just over $6 billion, or approximately 40% of revenue. Redburn's Harrison likes Broadcom for its strong ASIC position, seeing that as the company's best path forward. He writes of the chip maker, 'Broadcom is arguably the gold standard of ASICs co-partners for hyper-scalers. Its deep expertise in networking silicon has acted as a springboard for ASICs design wins; and its networking chips are widely deployed in datacentre routers and switches – for instance, Arista's 7800R4 AI spine, built on top of Broadcom's Jericho3-AI processors.' The analyst goes on to rate AVGO shares as a Buy, and his $301 price target points toward a one-year upside potential of 24%. (To watch Harrison's track record, click here) Overall, Broadcom gets a Strong Buy consensus rating from the Street, based on 28 recent reviews that include 26 to Buy and 2 to Hold. The shares are priced at $242.07 and have an average price target of $253.04, suggesting a modest 12-month gain of 4.5%. (See AVGO stock forecast) Arista Networks (ANET) Next up is an industry leader in digital networking, Arista Networks. This company is best known for its position as a provider of networking solutions for large, data-driven, client-to-cloud systems, particularly those used to support AI and data center campus and routing environments. Arista's platforms provide necessary combinations of automation, analytics, and security, based on advanced operating stack technologies. Arista got its start in 2004, and last year celebrated 10 years as a publicly traded entity. The company boasts a market cap of $109 billion, and has more than 10,000 active customers on its books. Those customers choose Arista because of the company's strengths in developing high-end networks. Arista's product lines are based on modularity and scalability, making them relevant for a wide range of applications at any size. Arista's cloud network designs can support anything from 100 to 2,000 servers, and more advanced designs can handle 100,000 or more. The combination of quality with scalability and relative ease of expansion makes the company's network designs highly amenable to AI applications, which are dependent on rapid access and high-speed networks to back up their supercomputing servers. Turning to the financial results, we find that Arista's revenue and earnings have been on an upward trend for the past several quarters. In 1Q25, the last reported, the company's revenue of $2 billion marked a company quarterly record, doubling from the $1 billion milestone achieved just 11 quarters ago. The 1Q25 revenue was up 27% year-over-year, and beat the forecast by $30 million. Arista's earnings in the first quarter were reported as a non-GAAP EPS of 65 cents, which was 6 cents per share above the estimates. This company's strong performance and quality product lines are impressive, and caught Harrison's eye, too. The Redburn tech expert says of ANET, 'We would expect Arista's robust competitive position to translate into material market share of the nascent 800Gbps and 1.6Tbps Ethernet switch market, which is expected to account for around half of the market revenues by the end of the decade… Consensus expects a 17% revenue CAGR across FY24-30 in the Core business and an 11-12% revenue CAGR in Cognitive Adjacencies and Cognitive Networks… Although not cheap in absolute terms, the current multiples for Arista have now largely normalised relative to its history.' Harrison gives this stock a Buy rating, and he complements that with a $112 price target, implying a potential one-year upside of 29%. The 16 recent analyst recommendations here split 12 to 4 in favor of Buy over Hold, giving the shares a Strong Buy consensus rating. The stock's $86.64 trading price and $109.79 average target price together suggest an upside of 27% in the year ahead. (See ANET stock forecast) To find good ideas for stocks trading at attractive valuations, visit TipRanks' Best Stocks to Buy, a tool that unites all of TipRanks' equity insights. Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment. Disclaimer & DisclosureReport an Issue Sign in to access your portfolio
Globe and Mail
30-04-2025
- Automotive
- Globe and Mail
Redburn Atlantic: Time to Sell Tesla Stock (NASDAQ:TSLA)
Things have not been great for electric vehicle stock Tesla (TSLA) of late, nor for its various derivatives. And new word from analysts at Redburn Atlantic say it is time to pull out altogether. Investors, meanwhile, took Redburn's advice seriously, if only slightly, and shares of Tesla slipped fractionally in Tuesday afternoon's trading. Protect Your Portfolio Against Market Uncertainty Discover companies with rock-solid fundamentals in TipRanks' Smart Value Newsletter. Receive undervalued stocks, resilient to market uncertainty, delivered straight to your inbox. Word from Redburn Capital analyst Adrian Yanoshik calls for a mass exodus, as Tesla's recent history of declining sales volume and accompanying hurting cash flow is likely to carry on for the rest of the year. A combination of Mexico-US tariffs, China-Europe tariffs, and overall struggles with electric vehicle pricing are likely to produce troubles for Tesla through much of 2025. In fact, Redburn's projections on Tesla are downright pessimistic. Its estimates for free cash flow, and for earnings, are each 10% below Wall Street consensus, reports noted. And if the United States Inflation Reduction Act clean vehicle credits get pulled back as well, then that will take Tesla's sales down still another notch. Thus, Redburn's projected price target on Tesla stock stands at $160 per share. That represents a 44% drop against Monday's closing figures. Good Luck Buying One in New York And in New York, it may get tougher to even try to sell a Tesla to begin with. While state lawmakers have been previously seen working to bring more Tesla dealerships to New York under the guise of supporting green energy initiatives, that, somehow, changed. Now, New York is working to remove the five directly-operated Tesla dealerships in the state, because, apparently, Tesla cars are no longer green. Particularly when large amounts of them are being set on fire by 'protestors.' In fact, some Democrats in New York want to go farther still; instead of cutting off Tesla's ability to sell, they also want a 'comprehensive audit' of a deal that lets Tesla run a plant near Buffalo on a $1-per-year lease. Further, Dems also want clawbacks on previously-awarded subsidies, because again, somehow, Tesla electric vehicles just are not 'green' enough any more. Though, certainly, some have asserted that this is a matter of politics on Tesla's CEO's part rather than any issue with the vehicles themselves. Is Tesla a Buy, Hold or Sell? Turning to Wall Street, analysts have a Hold consensus rating on TSLA stock based on 17 Buys, 10 Holds, and 12 Sells assigned in the past three months, as indicated by the graphic below. After a 55.58% rally in its share price over the past year, the average TSLA price target of $284.74 per share implies 0.5% upside potential. See more TSLA analyst ratings Disclosure Disclaimer & Disclosure Report an Issue
CNBC
29-04-2025
- Automotive
- CNBC
Redburn says sell Tesla stock as EV maker faces tough outlook on tariffs and pricing
Redburn Atlantic recommended Tuesday that investors sell their Tesla stock, as the research firm expects another year of volume declines and strained cashflow. "Our challenging earnings outlook incorporates headwinds from electric vehicle (EV) pricing, Mexico-US and China-Europe tariffs," Redburn analyst Adrian Yanoshik told clients in a note. Redburn's estimates for Tesla's earnings and free cash flow this year are 10% below the Wall Street consensus as the firm sees more downside risk, Yanoshik said. "We note even further risks for downgrades associated with a possible rescinding of US Inflation Reduction Act (IRA) clean vehicle credits," the analyst said. TSLA YTD mountain Tesla stock performance Redburn has stock price target for Tesla of $160, which suggests about 44% downside from Monday's closing prices of $285.88 per share. Tesla stock has fallen about 30% so far this year. "Although aimed at reinvigorating sales, we only consider a modest net volume uplift from the refresh of the Model Y (which started deliveries in March) and Tesla's lower-price model that the company has yet to reveal, scheduled for a June launch," Yanoshik said.
Yahoo
01-04-2025
- Business
- Yahoo
Reddit's success may be inextricably tied to Google Search
Reddit has grown since going public last year, but some analysts fear it may be too closely tied to Google. Redburn Atlantic analysts warned Reddit's reliance on Google traffic and logged-out users may limit its long-term value. Reddit's stock has been volatile, affected by Google's algorithm changes and rumors of a Google deal. Reddit is growing quickly, but — like many media companies — it's struggling to separate itself from Google. Wall Street analysts from Redburn Atlantic rated Reddit "sell" on March 17 after saying in a note that the company's "potential, breadth of appeal and thus value as a company are being overstated," according to Bloomberg. James Cordwell and Joseph Barker, analysts for the firm, said that much of Reddit's growth over the past few years has been "misconstrued" because it came from logged-out users as the main driver, with many of those users coming from Google's algorithm, according to the outlet. Reddit CEO Steve Huffman has repeatedly said that people are going to Google more with the intention of ending up on Reddit. But the Redburn analysts say this trend could lead to more logged-out user growth than logged-in user growth. Reddit's daily active users who are logged in to their accounts were up 27% last year, but the same metric was up by 70% for people who were logged out, BI previously reported. "Accelerated user growth has been driven predominantly by logged-out users who arrive on the platform largely via Google Search," the Redburn analysts wrote. "These users are much less valuable to Reddit as they are typically just looking for an answer to a query and thus spend little time on the platform." Cordwell and Barker added that there is "clear evidence" that the boost to traffic from Reddit's recent changes is "hitting a ceiling, with a risk that what Google giveth, it will taketh away," according to Bloomberg. Redburn did not return requests for comment from Business Insider. A spokesperson for Reddit noted that the majority of analysts have maintained their "buy" rating for the company and that the experience for logged-in user has been driven by improvements to the platform. Jen Wong, Reddit's COO, recently described the relationship with Google as "symbiotic." "People are using Google to get to Reddit," she said at the Morgan Stanley Technology, Media, and Telecom Conference in March. "When I view it like this, I don't view it as existential; we have these two sources of traffic. It's not existential for us, but it is some chop that we managed through." Reddit has seen tremendous growth over the past year since going public in March 2024, but its stock has seen some volatility in recent months. On February 12, Reddit's stock dropped more than 15% after Huffman said in an earnings call that a tweak to Google's algorithm caused "volatility" in site traffic. He added that "traffic from search has recovered so far in Q1, and we've regained momentum. What happened wasn't unusual." On March 17, Reddit's stock jumped again after Reuters published an article that it later retracted, which said Google and Reddit had entered a new partnership. Reuters said in an update that the post was based on outdated information. Reddit users reacted to the post in r/stock, a community where users discuss stocks, market news, and finances. "Wild. There was just like a 10% pump and it instantly dropped back down. Is Wall Street Bets on this stock or something?" one user wrote in a comment about the article. Another user said in the comments they see many Google search results that use Reddit information. The user wrote that it is "insane how Google has basically sold out its Search function to operate as the Reddit search bar." "Most of the time when you Google something now you're either shown a list of Reddit pages or given an AI overview that uses Reddit to write the answer," the user wrote. Read the original article on Business Insider
