Markets News, June 17, 2024: Autodesk, Broadcom Lead Nasdaq to Sixth Straight Record

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GameStop Shares Sink After Uneventful Annual Meeting GameStop (GME) shares plunged Monday as the struggling video game retailer’s delayed annual shareholder meeting ended with apparently few insights into the company’s future for investors to consider. Reports said Chief Executive Officer (CEO) Ryan Cohen at the meeting told shareholders the company plans to continue cutting costs and wants to move to running a smaller number of stores selling higher-priced items. General Counsel Mark Robinson confirmed that the company raised $3 billion from stock sales recently, but provided no other details. The meeting had been delayed from Thursday when demand for a live stream of the event overwhelmed third-party servers. Shares of GameStop have been on a roller-coaster ride in recent weeks after one of the key drivers of the 2021 meme-stock craze, Keith Gill, resurfaced on social media after several years to again show his support for the stock. The stock was down about 10% late in the day but remained more than 40% higher year-to-date. -Bill McColl Adobe Charged by Federal Officials With Deceiving Customers Shares of Adobe (ADBE) fell in intraday trading Monday as the federal government accused the software company and two of its executives of deceiving consumers about fees and making it tough for them to get out of their subscriptions. The District Attorney for the Northern District of California filed the lawsuit in San Jose on the recommendation of the Federal Trade Commission (FTC). It alleges that the maker of Photoshop and Acrobat hid the early termination fee for its most popular subscription plan and made it difficult for consumers to cancel their subscriptions. The complaint argued that Adobe “pushed consumers toward the ‘annual paid monthly’ subscription without adequately disclosing that cancelling the plan in the first year could cost hundreds of dollars.” Adobe shares were down 1.2% Monday afternoon. They have lost about 13% of their value this year despite surging last Friday following a better-than-expected earnings report. -Bill McColl Broadcom Hits Fresh Record High After Stock Split Announcement Shares of semiconductor maker Broadcom (AVGO) continued rising Monday, setting a fresh record high and extending a stretch that began with last week's earnings report, which included the announcement of a 10-for-1 stock split set to take effect next month. AI-related revenue made up about a quarter of Broadcom's $12.49 billion in revenue for the second quarter, and the company also raised its revenue targets for the full fiscal year. A number of analysts raised their price targets for the company following last week's earnings report, saying the company is a "critical piece" to the growth of the AI industry, along with other tech heavyweights like Nvidia (NVDA) and Alphabet's (GOOGL) Google. Broadcom stock was on pace to close higher for a seventh straight session, up 5.5% at $1,830 Monday afternoon. Shares are up more than 60% in 2024. -Aaron McDade Adidas Probing Accusations of Kickbacks Given to Employees in China Adidas is investigating potential compliance violations by its employees in China following a whistleblower complaint accusing high-level executives of receiving millions of euros in bribes. The German sneaker giant said that it received an anonymous letter on June 7 and is “currently intensively investigating this matter together with external legal counsel.” The story was first reported in the Financial Times on Sunday. It said the letter, purportedly written by "employees of Adidas China," initially appeared briefly on a Chinese social media site earlier this month. The post named several workers in China who allegedly took kickbacks, including a senior manager who is accused of having received "millions in cash from suppliers, and physical items such as real estate." The company said in a statement to Investopedia that it takes allegations of possible compliance violations “very seriously,” and is “clearly committed to complying with legal and internal regulations and ethical standards in all markets where we operate.” American depositary receipts (ADRs) of Adidas (ADDYY) traded more than 2% early Monday afternoon. -Bill McColl Micron Technology's AI Reach Leads To a BofA Price Target Increase Shares of Micron Technology (MU) gained Monday after Bank of America raised its price target, saying the chipmaker will benefit from the booming demand for artificial intelligence (AI) products. BofA lifted the price outlook to $170 from $144, calling Micron its “top US memory company.” The researchers explained that they believe “the emerging market for AI features on-device, aka Edge AI,” will "slowly but steadily supplement core or data center AI hardware." They noted that the two most important beneficiaries of Edge AI will be manufacturers of compute and memory chips. The researchers wrote that because of rising demand for AI-powered personal computers, and the need for those to have more memory, plus their higher price tag, they are increasing Micron’s sales outlook for the 2025 calendar year and 2026 estimate by 10% and 12%, respectively. They also boosted their pro forma CY25/26E earnings per share (EPS) forecast by 20%/21%. Micron Technology shares rose 2% and are nearly 70% higher this year. -Bill McColl Autodesk Stock Jumps After Starboard Value Reportedly Pushes for Change Shares of Autodesk (ADSK) jumped Monday after The Wall Street Journal reported that activist investor Starboard Value had taken a stake of roughly $500 million in the engineering design software company and is pushing for changes. Citing people familiar to the matter, the Journal reported late Sunday that Starboard recently met with Autodesk executives to discuss concerns about the company’s operations, corporate governance, and a recent accounting probe. The activist investor thinks the software maker should improve its margins and shake up its board, the sources added. Autodesk’s stock price has come under pressure this year after the company announced in April that it had delayed releasing its annual report due to an investigation into its accounting practices relating to its cash flow and operating margins. Last month, the company provided an update, saying the probe found no material issues and that adjustments to its financial statements weren’t required. However, Starboard criticized Autodesk in the recent meetings for failing to disclose the internal investigation until after the window to nominate new board members had closed in March, the report said, adding that the activist investor is considering legal action to reopen the nomination window and to delay Autodesk’s annual shareholders meeting slated for July 16. Source: TradingView.com. Taking a look at the weekly chart, Autodesk shares have oscillated within an ascending channel since mid-March 2022 despite the 50-day moving average (MA) remaining below the 200-day MA for most of that time, a technical signal typically indicating a downtrend. More recently, the price broke down below the channel’s lower trendline but promptly reversed to close back within the pattern, potentially creating a bear trap. Given the mixed signals on the chart, investors should be prepared for a move in either direction. With the stock climbing, t’s worth keeping an eye on the $280 level, an area where the price may run into selling pressure near the channel’s upper trendline. On the downside, a close beneath last month’s low at $195.32 could lead to a retest of the $175 region that finds longer-term support from a trendline roughly connecting the July 2019 swing high and June 2022 swing low. Autodesk shares rose 5% and are down 3% in 2024. -Tim Smith Primo Water Stock Jumps After Announcing Merger With Poland Spring Parent Shares of bottled water company Primo Water (PRMW) jumped Monday after the company announced plans to merge with BlueTriton, which owns brands like Arrowhead, Deer Park, and Poland Spring. The all-stock transaction would see Primo shareholders own 43% and BlueTriton shareholders 57% in the combined company with $6.5 billion in annual revenue. Primo said that the company plans to pay a special dividend of 82 cents per share to shareholders before the deal closes, in addition to its regular quarterly dividend of 9 cents per share. The companies said the newly formed entity plans to continue paying Primo's previous quarterly dividend, but said a new long-term dividend policy will be created once the merger is complete. The special dividend is expected to be paid after Primo's board approves the merger and other details of the transaction have been finalized. The new company has not yet been named, but Primo and BlueTriton said that they expect it to continue being traded on the New York Stock Exchange (NYSE). Once the deal is approved by Primo shareholders, the companies said the transaction is expected to close in the first half of next year. The combined entity would maintain dual headquarters in Tampa, Fla., and Stamford, Conn., where Primo and BlueTriton are respectively based. Primo's Rietbroek and CFODavid Hass will serve in the same roles with the new company, while BlueTriton COO Rob Austin will be the operating chief of the merged entity. Primo shares jumped 6% bringing their gaines year-to-date to more than 60%. -Aaron McDade