Top AI stock Marvell Technology and pharmaceutical giant Eli Lilly lead this weekend's watch list of five stocks near buy points as the S&P 500 bull market revs back up. MRVL stock, whose AI chip business is surging, and LLY stock, which is being powered by prospects for its Alzheimer's treatment and weight-loss drugs, are joined by cruise line Carnival, construction equipment supplier United Rentals and aerospace contractor TransDigm.
CCL stock and URI are both part of the flagship IBD 50 list of leading growth stocks.
For now, the powerful AI-led stock market rally has found its footing and taken another step forward after some earnings volatility. The S&P 500 finished the week at a 15-month closing high and just 4.5% off its record close on Jan. 3, 2022. The renewed momentum came courtesy of Federal Reserve chair Jerome Powell. He indicated that if benign inflation data in June continues, the Fed may be done hiking.
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MRVL Stock
Marvell makes chips used in wireless phone networks, automobiles, industrial systems, data storage devices and data centers.
MRVL expects its AI chip business to grow to $400 million in fiscal 2024, up from $200 million in fiscal 2023. Then it sees AI sales doubling again in fiscal 2025 to $800 million, reaching about 15% of sales. However, that strength will be partly offset by near-term softness in enterprise networking and data storage.
On Wednesday, Jefferies analyst Mark Lipacis highlighted comments by Microsoft and Google-parent Alphabet on capex and AI spending, saying his firm's "above-consensus" estimates for AI-chipmaker Nvidia "may prove conservative." He also sees their commentary as positive for Marvell, among others.
On July 11, KeyBanc raised its price target for MRVL stock to 80 from 70, highlighting design wins from Amazon and Google.
MRVL stock rose 1.6% to 64.91 on Friday. Marvell has a 66.81 buy point from a cup-with-handle base, according to MarketSmith. However, a move above Thursday's 66.24 high would constitute a break above the handle downtrend and give investors an entry point just below the official buy point.
LLY Stock
Eli Lilly stock is riding a wave of good news and optimism over its donanemab Alzheimer's treatment and its Mounjaro type 2 diabetes treatment.
LLY stock was featured as IBD Stock Of The Day on July 18 after it announced a 29% slower decline in cognition over 18 months for patients who received its experimental drug than for placebo recipients.
Leering Partners analyst David Risinger predicted FDA approval of donanemab by year-end 2023. Lilly also is hoping to gain approval this year for Mounjaro as a weight-loss drug.
LLY stock rose 0.8% to 458.48 on Friday. On Wednesday, LLY stock bounced off its 50-day moving average. With Friday's advance, LLY stock is now actionable, though the bounce above the 50-day has come on below-average volume.
Eli Lilly could be setting up a 469.87 flat-base buy point but needs another week to complete it.
CCL Stock
Carnival was featured as IBD Stock Of The Day on Thursday, as CCL stock broke a trendline following better-than-expected Q2 results.
On Thursday, rival Royal Caribbean reported big Q2 revenue and earnings beats, highlighting record pricing levels. Carnival reported results for its May fiscal second-quarter in June.
Recent data indicate little sign that the consumer is growing cautious when it comes to travel.
On July 11, Carnival's Holland America Line, a luxury cruise line, enjoyed a record day for bookings. "People are planning their vacations for next year and even into 2025, an in the process, they're choosing the best service at sea," Holland America Line president Gus Antorcha said in the news release.
Investors should note that Norwegian Cruise Line reports before Tuesday's market open.
CCL stock rose 1.5% to 18.49 on Friday. After finding support at its 21-day exponential moving average, CCL stock jumped higher late in the week, breaking a down-sloping trendline and offering an aggressive entry point. Investors also could use Thursday's high of 18.81 as an entry.
URI Stock
United Rentals was Friday's IBD Stock Of The Day, as the equipment-rental giant continued to bounce back after an initial selloff following Q2 earnings late Wednesday.
United Rentals topped estimates with Q2 EPS rising 26% to $9.88 and revenue up 28% to $3.55 billion. The company said its equipment sales surged 133%. Baird analyst Mircea Dobre said that the earnings beat and guidance raise largely reflect the equipment sales, while core rental operations basically matched expectations. But Credit Suisse said that URI's acquisition of Ahern, though a near-term drag, sets the firm up to capitalize on megatrends of infrastructure spending, reshoring of manufacturing and a clean energy boom.
URI stock tumbled just over 7% Thursday morning following earnings, but rebounded from the 10-week moving average and closed down just 0.7%. On Friday, United Rentals rose 1.1% to 446.07, though, finishing well off its 459.30 high. A move back above Friday's intraday high would break the handle trendline and offer an early entry. URI stock has an official cup-with-handle buy point of 471.82.
TDG Stock
TransDigm Group comprises 48 companies that produce highly engineered components and systems for nearly all military and commercial aircraft. About 90% of sales are unique, proprietary products, TransDigm says. About 50% to 55% of sales come in the aftermarket.
On July 6, Citi analyst Jason Gursky started coverage on TDG stock with a buy rating and 1,042 price target. He cited rising global air traffic, the healthy outlook for production of new aircraft and growing defense budgets. He also likes TransDigm's focus on proprietary products, giving it pricing power and margin-expansion potential.
TDG stock dipped 0.8% to 885.13 on Friday. TDG has now etched out a five-weeks-tight pattern, closing up or down by no more than 1.5% in each of the past four weeks. That has established an 899.97 buy point.
