ServiceNow and Confluent, both AI enterprise-software plays, lead this weekend's watch list of five stocks near buy points. In addition to NOW and CFLT, the list includes Brazilian aircraft maker Embraer, Tidewater, whose fleet of vessels serves the offshore oil industry and cardiovascular treatment innovator Shockwave Medical.
ServiceNow stock is part of the IBD Leaderboard portfolio of elite stocks. ServiceNow, Tidewater and Shockwave stock are part of the flagship IBD 50 list.
Stock Market Set-Up
Both the S&P 500 and Nasdaq hit record highs last week, with the Nasdaq eclipsing its November 2021 intraday peak on Friday.
The S&P 500 added 0.8% on Friday, after climbing 21.5% in the four months through February — the biggest gain over a four-month stretch since the Covid comeback through July 2020.
Markets got a helping hand in recent days from easing Treasury yields and firming rate-cut odds. Yet economic data have been giving mixed signals. It's hard to know what to make of January's hot jobs and inflation reports but soft consumption and construction data. However, the February jobs report on Friday may start to clear things up. On Wednesday, Fed chair Jerome Powell will testify before Congress, and investors will be listening for clues about the rate-cut outlook.
Be sure to read IBD's The Big Picture column after each trading day to get the latest on the prevailing stock market trend and what it means for your trading decisions.
Bull In The Room: The Fed's Secret Reason For Delaying Rate Cuts
ServiceNow Stock
ServiceNow's cloud-based software platform automates IT processes, integrates with other enterprise-software platforms and churns out analytics for informed decision-making. The Santa Clara, Calif., company launched its Now Assist generative AI application in Q3 and it turned into its biggest-ever launch for the first full quarter in Q4 based on annual contract value.
"There's a real appetite to invest in Gen AI, and there's no price sensitivity around it because the business cases are so unbelievable," ServiceNow CEO Bill McDermott said on the Jan. 24 earnings call.
"I mean if you're improving productivity, 40%, 50%, it just sells itself. So, I think we're in a really, really good place. The Gen AI investments are coming. We're actually getting orders because we have great product."
On Feb. 7, Argus raised its price target for NOW stock to 910 from 770. The research firm noted that ServiceNow's decision to refrain from layoffs last year appeared to pay off with its quick launch of its generative AI application. The good news should continue with its ongoing expansion of its AI capabilities.
After breaking out on Nov. 7, NOW stock took a brief pause at its 10-week/50-day moving average in early January, before powering higher on its Q4 results and outlook.
ServiceNow again drifted back to its rising 10-week and 50-day lines in the second half of February. The stock is still showing resilience, retaking its 21-day exponential average. A move past its recent high of 791.87 would also be a break above the down-sloping trendline from its Feb. 9 peak, flashing an early entry opportunity.
It's possible that ServiceNow stock is in the process of forging a new flat base, though that would take a couple more weeks to develop.
Confluent Stock
Confluent's real-time data streaming platform has become a "de facto standard in over 75% of the Fortune 500," Stifel said in initiating coverage of CFLT with a buy rating and 40 price target on Feb. 20.
A data-streaming platform "has become a requirement to deliver business critical use cases like connected customer experiences, cloud migrations and now real-time generative AI," CEO Jay Kreps said on the Feb. 7 Q4 earnings call.
Confluent is the subject of this week's IBD New America profile.
Confluent gapped up following its Q4 report, with a one-day 34% gain that vaulted shares past the 200-day moving average. CFLT kept moving higher into mid-February.
After an intraday peak of 34.28 on Feb. 15, CFLT moved sideways over the next couple of weeks, etching out a handle- or shelf-like pattern. On Friday, CFLT climbed 1.3% to 34.30, making it actionable now.
Embraer Stock
Embraer, featured as IBD Stock Of The Day on Tuesday, produces commercial, luxury and defense aircraft.
In 2023, deliveries rose 13% to a total of 181 aircraft. The Brazilian company's backlog rose 7% to $18.7 billion.
Embraer's E2 line of medium-range commercial jets more than doubled to 39 deliveries while the executive aviation segment posted its largest delivery volume in seven years. In December, Embraer won a $544 million contract with South Korea for military transport jets, according to reports from FlightGlobal.
Embraer stock jumped 7% to 20.85 on Friday, clearing a 20.13 buy point from a cup base, which is part of a stair-step base-on-base pattern.
Friday's action was part of a four-day move, mostly in above-average volume. On Tuesday, Embraer scooted up 3.5%, using its 50-day line as a launchpad. The energetic move off the 50-day flashed an early entry opportunity.
Friday's gain left ERJ 15% above its 50-day line. But the cup-base buy point is still actionable, with the buy zone running to 21.14.
Embraer's relative strength line, the blue line in IBD charts that tracks a stock's progress vs. the S&P 500, is just below December's multiyear high.
Tidewater Stock
Tidewater was featured as IBD Stock Of The Day on Friday, as the operator of offshore support vessels surged on a bullish outlook, a $48.6 million stock buyback authorization and crude oil prices running up to four-month highs.
"The shortage of vessels, a record-low vessel newbuilding order book and improving offshore vessel demand visibility all support improving operational performance into 2024 and beyond," CEO Quintin Kneen said in the earnings statement. Those conditions support "our continued confidence in our ability to grow revenue by 40% and grow gross margin by 66% in 2024."
Tidewater stocksurged 14.4% to 80.09, after a moderate gap-up that saw shares of the Houston-based company open at 73.29.
But TDW stock powered past an early entry above 74.48 soon after Friday's open. It then took out a 77.53 buy point from an 8-week consolidation that is part of a base-on-base formation. On an intraday basis, shares rose through the 81.41 top of the buy zone, before easing back in range.
The RS line is not yet at 52-week or consolidation highs, but Tidewater stock is outperforming nearly all energy stocks.
Shockwave Stock
Shockwave pioneered intravascular lithotripsy, or IVL, which treats people who have problematic calcium buildups in their arteries.
The stock sold off hard in the second half of last year, partly over concern that a decision by Aetna to restrict reimbursements might be repeated by other insurers. But on the Feb. 15 Q4 earnings call, CEO Doug Godshall highlighted "a couple of meaningful reimbursement tailwinds that will support continued adoption."
Shockwave reported Q4 EPS of $1.16, up 3% from a year ago but trouncing estimates by 27 cents. Revenue grew 41% to $203 million. Shockwave's outlook calls for 25% to 27% growth in 2024.
SWAV surged 11.15% to 262.66 on its big earnings beat, then climbed as high as 270.96 on Feb. 22. That could be seen as a handle buy point on the end of a long and deep consolidation from June's 52-week high.
The latest action also fits the bill for a three-weeks-tight pattern, with back-to-back weekly gains or losses of no more than 1.5%.
