With artificial intelligence stocks leaving behind the rest of the market after Nvidia's blockbuster earnings report, it's little surprise that three AI stocks top this weekend's watch list. Data-center gear supplier Arista Networks, autonomous driving technology leader Mobileye and chipmaker Monolithic Power Systems all surged close to buy points last week. ANET, MBLY and MPWR are joined by drug wholesaler McKesson and Smartsheet, whose work management software facilitates collaboration in the workplace.
Mobileye and Smartsheet are both part of the flagship IBD 50 list of leading growth stocks. Monolithic Power is on the watch list for the IBD Long Term Leaders list.
Mobileye Stock
On Thursday, Wells Fargo started coverage of MBLY stock with an overweight rating and 50 price target. Analyst Aaron Rakers sees Mobileye becoming a "platform enabler" for autonomous vehicles. SuperVision revenue should grow to $3.2 billion over the next five years, but could reach $7 billion in an upside scenario.
On May 9, Porsche, which is part of Volkswagen, said it will offer automated driver assistance using SuperVision. Mobileye said with its April 27 Q1 earnings report that a global U.S.-based automaker is expected to adopt SuperVision in the second half of 2023.
MBLY stock roared back over the past week, surging 10.6% to 45.14, recovering after a dive on Q1 earnings. Mobileye has an official 48.21 buy point from a 14-week consolidation, according to a MarketSmith analysis. A move to 47.04, which doesn't quite qualify as a double-bottom-base buy point, could offer an early entry. If MBLY consolidates here over the coming week, 46.58 — 10 cents above Friday's intraday high — might provide an earlier entry.
Arista Networks
Like Mobileye, ANET stock surged back in recent days following a Q1 earnings selloff. Bank of America Global Research added Arista to its "US 1 list" of best investment ideas on Wednesday. But shares really took off with other AI plays on blowout guidance from Nvidia on Wednesday night.
Rosenblatt analyst Michael Genovese wrote in a May 2 note that the earnings selloff partly reflected too much optimism surrounding the timing of Arista Switching revenue driven by cloud spending on artificial-intelligence clusters. But Rosenblatt thinks that revenue will ramp up in 2024, making consensus forecasts too pessimistic.
Arista, which has Meta Platforms and Microsoft as major customers, was Friday's IBD Stock Of The Day.
ANET stock leapt 9.1% to 170.35 on Friday, after gapping up 10.6% on Thursday. Arista has a 171.54 buy point from a nine-week consolidation.
Monolithic Power Systems
Monolithic Power's chips provide power solutions for industrial applications, telecom infrastructure, cloud computing, automotive and consumer applications. MPWR stock, like AI stocks Mobileye and Arista, also skidded on Q1 earnings and the Q2 outlook amid soft enterprise data sales as customers work through inventory or delay product introductions.
However, Monolithic has gained traction providing graphics processing units for AI use cases. On the May 4 call, CFO Bernie Blegen noted Monolithic's "very senior market share position" in the GPU space for artificial intelligence. While the market is still in an early stage, he said the firm is in good position to capitalize on its next-generation GPU and "leverage up our position."
MPWR stock surged 20.6% to 520.92 over the past week. That leaves MPWR just below a 530.75 buy point from a long cup-with-handle base. As with Arista and Mobileye, a pause for Monolithic Power would be constructive.
McKesson
While AI stocks are standing out as great growth plays despite a potential recession on the horizon, drug wholesale stocks also are seen as recession-proof, albeit with modest growth prospects.
That thesis got a boost as McKesson recently raised its long-run growth target for its pharma division to 5%-7% from 4%. Rival AmerisourceBergen also recently raised guidance on the back of solid utilization and pricing improvements.
McKesson was featured as IBD Stock Of The Day on Wednesday.
MCK stock slipped 1.9% to 387.95 on Friday. Still, MCK stock is within 3% of a 401.63 handle buy point from a 29-week consolidation.
Smartsheet
Smartsheet competes in the work management market software market with Asana and Monday.com. The focus for Smartsheet is helping white-collar workers automate processes to free up time for creative and collaborative work.
Analysts cite Smartsheet's scale, complexity of deployments and positive cash-flow as differentiating factors, according to Thursday's IBD Stock Of The Day feature.
Smartsheet stock gapped above its 50-day line on May 16, following strong quarterly results from peer Monday.com.
SMAR stock rose 3.7% to 47.86 on Friday, closing in on a 49.09 buy point.
Asana, which is also setting up, reports first-quarter earnings on June 1. SMAR earnings are due June 7.
Investors may want to be cautious ahead of the earnings report. One strategy around earnings would be to use call options.
