Spotlight On Apple’s AI Strategy, The Fed Meeting, And Latest CPI Print

Summary:

Get ahead of the market by subscribing to Seeking Alpha’s Stocks to Watch, a preview of key events scheduled for the coming week. The newsletter keeps you informed of the biggest stories set to make headlines, including upcoming IPOs, investor days, earnings reports and conference presentations.

The major economic data release next week will be the May CPI report on Wednesday. Economists forecast a 0.3% month-over-month increase in the core inflation rate and a drop in the year-over-year rate to +3.5% from +3.6%. Seeking Alpha analyst Damir Tokic said that if CPI comes in at the level anticipated, it will fit the recent trend of sticky and elevated inflation. “Thus, the Fed is unable to start lowering interest rates and preventively respond to the sharply slowing economy to avoid a recession,” he warned. Later on Wednesday, the Federal Reserve will issue its policy statement and Jerome Powell will hold a press conference. While the Fed is expected to keep rates at their current level, the latest dot plot and economic projections will give investors a better idea of when the first interest rate cut might be fired off.

The earnings schedule for next week includes reports from Oracle (ORCL), Broadcom (AVGO), and Adobe (ADBE). ZEEKR Intelligent (ZK) will also publish its first earnings report as a publicly traded company. The event calendar will be dominated by Apple’s (NASDAQ:AAPL) WWDC event, Amazon’s re:Inforce conference, and Tesla’s annual shareholder meeting.

Earnings spotlight: Monday, June 10 – Yext (YEXT), Calavo Growers (CVGW), and FuelCell Energy (FCEL). See the full earnings calendar.

Earnings spotlight: Tuesday, June 11 – Oracle (ORCL), Casey’s General Stores (CASY), GameStop (GME), ZEEKR (ZK), and Rubrik (RBRK). See the full earnings calendar.

Earnings spotlight: Wednesday, June 12 – Broadcom (AVGO), Dave & Buster’s Entertainment (PLAY), and Oxford Industries (OXM). See the full earnings calendar.

Earnings spotlight: Thursday, June 13 – Signet Jewelers (SIG), Adobe (ADBE), and RH (RH). See the full earnings calendar.

Volatility watch: Options trading volume has moved much higher on Nvidia (NVDA) ahead of shares trading at their split-adjusted price on Monday. The most overbought stocks per their 14-day relative strength index include MicroAlgo (MLGO), Brinker (EAT), KNOT Offshore (KNOP). The most oversold stocks per their 14-day Relative Strength Index include MongoDB (MDB), DLocal (DLO), and Nerdy (NRDY). Short interest is still sky-high on SunPower (SPWR) and The Children’s Place (PLCE) heading into next week’s action.

IPO watch: Tempus AI (TEM) is expected to price its IPO and start trading next week. The company is focused on the use of AI in healthcare, providing data and analytics tools for precision medicine. Tempus AI is offering 11.1M shares in an expected range of $35 to $37 per share. Commercial-stage biopharma firm Telix Pharmaceuticals (TLX) is also going public next week. The post-IPO quiet periods expire on Armlogi Holding (BTOC), JIADE (JDZG), Raytech Holding (RAY), and Super Hi (HDL) to free up analysts to post ratings.

Dividend watch: Companies that have an ex-dividend date coming next week include Alphabet (GOOG), Nvidia (NVDA), Kohl’s (KSS), and Taiwan Semiconductor Manufacturing Company (TSM). Companies forecast to increase their quarterly dividend payouts include W. R. Berkley (WRB) to $0.12 from $0.11, Caterpillar (CAT) to $1.40 from $1.30, Johnson Controls (JCI) to $0.39 from $0.37, and Casey’s General Stores (CASY) to $0.44 from $0.43. Read through some of the dividend stock picks from Seeking Alpha analysts.

FOMC preview: The Federal Reserve Open Market Committee will meet on June 11-12. While changes to interest rates are expected to be announced, the Fed’s statement, dot plot release, and Jerome Powell’s press conference all have the potential to reset future expectations. Seeking Alpha analyst Damir Tokic highlighted that the June FOMC meeting dot-plot will change significantly because most FOMC members became more hawkish since the March meeting, based on public statements. Bank of America expects the Fed to revisit its outlook in favor of slower growth and firmer inflation. “We think the median Fed member will project two rate cuts this year, down from three rate cuts in March, which would imply a cutting cycle that begins in September,” previewed the firm. BofA’s line of thinking is that a narrow majority prefers to keep optionality for September alive as long as inflation cooperates. In the press conference, Chairman Powell is seen being confident that activity and labor markets are cooling and not overheating, but that patience is needed.

Apple WWDC preview: Apple (AAPL) is expected to provide an update on its AI strategy at the company’s WWDC event in Cupertino, alongside software updates for iOS 18, iPadOS 18, macOS 15, tvOS 18, watchOS 11, and visionOS 2. There are high expectations that AI will be incorporated into most of the new software updates, Siri in particular is expected to get a powerful AI boost. While no new consumer hardware products are anticipated to be announced, there could be some teasers on how the upcoming iPhone 16 will stand out. Wedbush Securities analyst Dan Ives said WWDC represents the most important event for Apple in over a decade due to pressure to bring a generative AI stack of technology to the forefront for developers and consumers to the forefront. “We believe AI technology being introduced into the Apple ecosystem will bring ample monetization opportunities on both the services and iPhone/hardware front and adds $30 to $40 per share to the Cupertino growth story as the vision starts to play out within the golden installed base of 2.2 billion iOS devices,” previewed Ives. Morgan Stanley sees the potential for WWDC to boost sentiment on Apple. “While investor expectations are high, we think Apple could positively surprise, helping to unlock pent-up demand, accelerate iPhone replacement cycles, and sustain recent stock outperformance,” noted analyst Adam Jonas.

Tesla annual meeting: Tesla (NASDAQ:TSLA) shareholders will meet on June 13 during the company’s annual meeting to vote on twelve proposals. The proposals include approving the election of two Class II directors to serve for a term of three years, a proposal regarding reduction of director terms to one year, a proposal regarding committing to a moratorium on sourcing minerals from deep sea mining, a proposal regarding adoption of a collective bargaining policy, a proposal to approve moving the company’s state of incorporation from Delaware to Texas, and the high-profile proposal of ratifying Elon Musk’s compensation under the CEO pay package that was previously approved at a special meeting in 2018. On the proposal of confirming the relocation to Texas, Tesla (TSLA) has pointed out that it has a significant number of manufacturing, operations, and engineering employees in Texas. “Texas is where we should continue working towards our mission of accelerating the world’s transition to sustainable energy, as we lay the foundation for our growth with our ramp and build of factories for our future vehicles and to help meet the demand for energy storage as well as with our progress in artificial intelligence via full self-driving and Optimus.” As for Musk’s compensation award, Tesla (TSLA) has recommended that shareholders vote in favor. In its SEC filing, Tesla (TSLA) said the board would need to negotiate a replacement compensation package if the 2018 award is not approved by shareholders. The company believes it is unlikely that the replacement reward would be any less costly or dilutive to shareholders. Ultimately, a rejection is seen costing time and money as the process plays out. Tesla (TSLA) said the 2018 award to Elon Musk was a result of “transformative” growth and “extraordinary” value for shareholders. On Wall Street, analysts have been hesitant to make a prediction due to investors and proxy firms already weighing in on both sides of the Musk compensation question. However, Piper Sandler thinks it is clear that Tesla’s (TSLA) share price would fall if the compensation award was rejected. The other key issue is whether Elon Musk walks away from the shareholder meeting with his goal of landing 25% of voting control of the company over time. If not, Morgan Stanley warned that Tesla (TSLA) shareholders should be prepared for the company to significantly slow down or curtail its direct investment in sensitive and advanced AI efforts due to Musk’s prior statements of wanting to be an effective steward of powerful AI technology. “While Tesla may still be in position to benefit indirectly from AI advancements, we believe that most of the adjacent AI efforts could be concentrated within non-Tesla entities where Elon Musk has control,” warned Piper Sandler analyst Alex Potter. Another risk is that Tesla (TSLA) loses its AI premium if Elon Musk is not satisfied. That issue has already cropped up with this week’s report that xAI may have received Nvidia (NVDA) H100 chips that were originally supposed to go to Tesla (TSLA). Gabelli Funds portfolio manager John Belton is just one of many skeptics that have noted that Tesla’s (TSLA) stock price is disconnected from fundamentals typical of an auto company. Of course, there is also the extreme wildcard of Elon Musk selling shares of Tesla (TSLA) to fund another venture, as he did with the Twitter acquisition. An approval of the compensation package and/or Musk landing 25% voting control is also seen having some variables that are difficult to forecast, such as the potential for new litigation or investor concerns that Musk will hold too much control.

Investor events: The event calendar in the week ahead includes more than just the attention-grabbing Apple and Tesla events. Amazon (AMZN) will hold its three-day AWS re:Inforce conference. AWS re:Inforce 2024 will cover the following tracks: data protection, identity and access management, threat detection and incident response, network and infrastructure security, generative AI, governance, risk and compliance, and application security. The conference is a way to explore and gain competence in AWS security services. Qorvo (NASDAQ:QRVO), Stellantis (STLA), Harmonic (HLIT), and Ryder System (NYSE:R) also have key investor events scheduled.