Citi: Buy Coinbase, AppLovin, Caterpillar, Dell, AMD stocks

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Written on Aug 8, 2024

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US equities are crawling back after tumbling hard on Monday.
Most companies have dropped by double digits this year.
Analysts at Citi believe that firms like Coinbase and Dell have upside.

American stocks were shaken this week as the Dow Jones, S&P 500, and Nasdaq 100 index falling by over 3% on Monday. While these indices have pared back most of these losses, analysts caution that the unwinding of the Japanese yen carry trade is not over.

They also note that the recent comeback could be part of a dead cat bounce, a situation where an asset in a strong downtrend experiences a brief comeback.

Still, despite the worries, analysts at Citigroup believe that some stocks are so good and that they will ultimately bounce back. Some of the most notable companies are firms like Coinbase, AppLovin, Caterpillar, Dell, DocuSign, and Alphabet.

Coinbase stock

Citi analysts believe that the Coinbase stock price will rebound after it crashed by 37% from its highest point this year.

The stock has dropped because of the recent Bitcoin crash, which has pushed it from over $73,800 to $56,000. This decline has led to a sharp drop in trading volume by both centralized and decentralized exchanges.

Still, analysts note that Coinbase has done a good job diversifying its business. While transaction revenue is the biggest part of the business, its other services like subscriptions, custody, and staking solutions are growing well. For example, data by TokenTerminal shows that Base, its blockchain, has made over $50 million in fees.

Coinbase has also become the biggest crypto custodian in the industry, where it holds Bitcoin and Ethereum coins for companies like Blackrock and Franklin Templeton. In a recent note, analyst at Citi upgraded Coinbase stock to $345.

AppLovin stock

AppLovin (APP) stock price has also dived hard in the past few weeks and has sunk to a bear market after falling by 26% from its highest level this year.

The stock retreated even after the company published strong financial results. Its revenue rose by 44% to $1.08 billion while its net income jumped by 286% to over $310 million.

Most of this revenue came from its software platform, which made over $711 million and an adjusted EBITDA of $520 million. The company’s forward guidance is that its revenue for the third quarter will be between $1.1 billion and $1.13 billion.

Analysts at Citi believes that the company has a bright future ahead, helped by its strong revenue growth and margin expansion. It is also reasonably valued considering that its rule of 40 metric (revenue growth+profit margin) stands at 40.

Caterpillar

Caterpillar stock price has moved into a correction as it dropped by over 13% as concerns about its growth continued.

These fears were confirmed this week after the company’s results showed that its revenue dropped by 4% in the second quarter to $16.7 billion. It attributed this drop to lower prices, which was offset by higher prices.

Caterpillar’s margins also thinned a bit, with the operating margin falling to 20.9%. Still, CAT is a quality American brand with a leading market share in key industries like mining and construction.

Caterpillar is also rewarding its shareholders as it continued buying back shares and paying a dividend worth $2.5 billion.

Dell

Dell stock price has had an eventful year. It initially jumped to $180 as the company’s growth accelerated and as it emerged as a top artificial intelligence company. It has then dropped by over 51% as Michael Dell continued selling the stock and as its growth concerns remained.

Dell’s concern increased this week when it published slow revenue growth. Its revenue rose by 6% to over $22.2 billion, helped by a 22% growth in its infrastructure division. Its client division’s revenue was flat at $12 billion while its net income was over $12 billion. Citi analysts believe that the company can bounce back, helped by its strong cash flow.

AMD

AMD is another stock that Citi analysts believe will bounce back. This is a brave call by Citi since the stock has crumbled by over 43% from its highest level this year.

AMD’s sell-off continued after the company published its second-quarter financial results that revealed slower growth than Nvidia. Revenue rose by 9% to over $5.8 billion while its gross margins expanded to 49%.

AMD’s operating margin rose to 5% while the net income spiked to over $265 million. AMD has room to bounce back as it starts investing in AI. Indeed, its recent results revealed that its data center revenue rose by 115% in Q2 to a record $2.8 billion. Analysts at Citi believe that the company can take a 10% market share in the AI data center business.

Client segment rose by 49% while its gaming segment falling by almost 60%. A key catalyst for AMD is that it could benefit from the ongoing Intel woes. Intel, once a top semiconductor company, has become a shell of its former sell as its revenue falls and as it starts laying off over 18,000 workers.