HypeIndex Weekly Trending Stocks Report July 22 - 26

The US stock market suffered a harsh reversal this week as the earning season continued. A key catalyst for the sell-off was the mixed financial results by Tesla and Alphabet, two of the biggest companies. 

The Nasdaq 100 index dropped to $19,000, its lowest point since June 5th while the S&P 500 index has retreated to $5,400, down by 4.8% from its highest point this year. 

State Street (NYSE: SST)

Background

State Street is a top financial services company that provides services like investment servicing and investment management. It is a leading custodian with over $44 trillion in assets under custody and over $5 trillion in assets under management.

State Street’s best-known product is the SPDR line of ETFs, which include the likes of SPY and DIA, which have billions in assets.

Summary

State Street stock had significant hype this week after it reported strong financial results last week. Its hype index rose to a high of 23 while its stock jumped to a high of $86.15, its highest point since March 2023. It has risen for six consecutive weeks.

In its recent financial results, State Street said that its revenue rose to $3.19 billion in Q2 from $3.11 billion in Q2’23. The revenue also rose from $3.13 billion in the previous quarter. The numbers were better than estimates. 

Additionally, State Street said that its net income came in at $711 million, down from $763 million a year earlier. 

A case for State Street can be made. It is a cheap company trading at a forward P/E ratio of 10.7, lower than the sector median of 12.2. This valuation is also lower than its five-year average of 12.

Technically, the stock has the momentum after it crossed the important resistance point at $78.56, its highest swing in January this year. It remains above the 50-day and 200-day moving averages (EMA) while the Average Directional Index (ADX) has pointed upwards. 

The stock also remains above the ascending trendline that connects the lowest swings since October 2022. Therefore, the most likely situation is where it rises and retests the key resistance point at $90, its highest swing in February 2023.

• Hype change: 108%

• Price change: 1%

• Sentiment: POSITIVE

CrowdStrike (CRWD)

Background

CrowdStrike is the second-biggest cybersecurity company in the world with a market cap of over $61 billion. Its product is used by thousands of companies who want to use artificial intelligence to secure their cloud. Some of its customers are firms like Amazon, Home Depot, and Bloomberg. 

Summary

CrowdStrike has been in the spotlight this month after its product upgrade triggered the biggest tech outage in the world that affected airlines, hospitals, banks, and other companies.

Its stock continued its sell-off this week as a sense of fear spread in the market and as some analysts like those from Guggenheim and HSBC slashed their guidance. 

However, as we wrote this week, the recent dip could be a good entry opportunity because the company is unlikely to lose customers. Analysts at Bank of Africa concurred with this view and upgraded their target. 

Historically, such bad news leads to an initial drop followed by a rebound as some investors buy the dip. For example, Boeing stock has bounced back by over 12% in the last three months as concerns about its business eased. 

• Hype change: 230%

• Price change: - 15%

• Sentiment: NEGATIVE

Lockheed Martin (LMT)

Background

Lockheed Martin is a top American company that manufactures tens of products for the military. Some of its most popular products are the F-35, F-16, and the Patriot Missiles.

The company, like other big names in the industry, has benefited from the ongoing geopolitical issues. The war in Ukraine is continuing while geopolitical risks between the US and China are escalating. 

At the same time, NATO and other countries are expected to continue boosting their defense spending in the coming years. 

Summary

Lockheed Martin stock jumped sharply this week and reached an all-time high after publishing strong financial results. Its sales rose by 9% to $18.1 billion, beating the consensus among Wall Street analysts. 

It also boosted its forward guidance for the year. It expects that its revenue will rise to between $70.5 billion and $71.5 billion this year while its profit-per-share will be between $26.10 and $26.60. Analysts from Cowen upgraded the company from a hold to a buy citing its aeronautics business. 

Lockheed Martin has numerous catalysts ahead. It has a strong balance sheet, a low dividend payout ratio, and is solving its supply chain issues. 

• Hype change: +153%

• Price change: +10%.

• Sentiment: POSITIVE

Tesla (TSLA)

Background

Tesla is a company that manufactures electric vehicles in the United States, Europe, China, and other countries. In addition to its vehicles, it is a big player in the renewable energy industry, where it installs solar panels and other energy storage solutions. Tesla also makes money by selling credits to other companies like General Motors and Ford. 

Summary

Tesla was in the spotlight this week after it published another set of weak financial results, leading to analyst downgrades. The company’s revenue rose slightly to $24.9 billion while its net profit dropped by $1.4 billion. 

Its revenue growth was driven by its carbon credits business while its auto margins dropped to 14.6% because of its price cuts. It also delayed its much-awaited robotaxis again.

Tesla faces many challenges as the EV industry slows and attention shifts to hybrid vehicles by companies like Toyota and Ford. It is facing substantial competition, especially in China, where companies like BYD and Li Auto are seeing double-digit growth.

• Hype: 91%

• Price change: -8.7%

• Sentiment:  NEGATIVE

The HypeIndex tool was highly accurate in predicting stock movements this week. As shown in the four companies above, most of them had a positive correlation with the HypeIndex tool. 

For example, Tesla’s stock retreat coincided with an increase in negative hype while Lockheed Martin’s stock rally happened as the positive sentiment rose. 

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