Ticker Take: a weekly newsletter on investing.

A recap of the week.

Bears are battered and bruised…but are they wrong? 

There’s been lots of buzz surrounding Marko Kolanovic’s abrupt depature from JP Morgan.  

The long-time stock market strategist had been one of Wall Street’s notable bears.  

Unfortunately for him, his repeated calls for a big drop in equities never materialized.

Being bearish in a bull market can be lonely.

And increasingly, skeptical strategists have been forced to joined the herd.

Bloomberg noted that at the end of 2024, the average year-end forecast for the S&P 500 in 2024 was around 4,850.  As of last month, the average forecast had risen more than 12%, to 5,450.

With this week’s fresh all-time highs, the S&P is now roughly 3.5% above last month’s average year-end forecast.

So what happens next?

Will firms like Goldman Sachs and UBS raise their year-end forecasts for a fourth time this year?

And if so, what would be their justification for further boosting their targets?

Perhaps it’s the easing inflation trends, which are building the case for U.S. rate cuts.

Or perhaps it’s the historical stats around momentum.

In data going back to 1954, when the S&P 500 rallies more than 10% in the first half a year, it rallies (on average) another 7.5% in the second half.

The strategy team at Society General put forward its own argument for a big move higher, suggesting the S&P could rally another 20% before reaching valuations similar to the dot-com peak.

Is it worth cheering on the idea of the AI boom morphing into an AI bubble?

Marko Kolanovic wasn’t willing to.  Ultimately, it cost him his job

Tesla’s stock tops the charts

Speaking of AI excitement, it has sparked quite the rally in Tesla shares.

After a rough start to the year, the stock has easily been the best performing stock in the NASDAQ 100 in the past month.

Investors have shaken off previous worries about a slowdown in the EV market to prepare for Tesla’s autonomous vehicle future.

Elon Musk has his sights set on operating a fleet of self-driving taxis.

For that reason, a report this week from Bloomberg that Tesla would delay its upcoming robotaxi event from August to October momentarily stalled the stock’s rally.

But by Friday, investors had begun to shrug that off.

UBS downgraded the stock, saying Tesla shares have rallied “too much, too soon.”

Most of Wall Street feels the same way, with the average 12 month target around $204.

But, as we’ve discussed in this newsletter before, 1-year target prices are not an ideal measure of long-term investment success with a company whose leader thinks in decades, not quarters.

A record run for Canadian stocks 

The S&P/TSX Composite Index took stepped into the stock market spotlight this week, adding to its gains in July and reaching record territory.

In many ways, Canada is the anti-tech play.

While it is home to some influential tech stocks, such as Shopify and Constellation Software, tech’s overall weighting is quite small compared to the S&P 500.

Banks, energy stocks, industrials and materials make up 75% of the index.  Those four sectors, by comparison, make up just a quarter of the S&P 500.

Interestingly, the TSX has gained more this year than the equal weight version of the S&P 500.

And based on a general view that Canadian stock valuations are relatively cheap, a good number of strategists believe there could be more upside ahead.

According to data compiled by Bloomberg, strategists on average see gains of about 12% for the index in the next 12 months, compared to around 6.5% for the S&P 500.

JPMorgan’s profit power

U.S. bank earnings season has begun and JPMorgan Chase & Co once again displayed its profit power.  

The industry giant reported record earnings, thanks to a busy quarter for its investment bankers and equities traders.

The market reaction to JPMorgan’s results was muted.

Net interest income was slightly below estimates, while expenses were up more than expected and the bank set aside more money for potentially bad loans.

But it’s going to take a lot more than a few shortfalls to shift analysts away from being largely bullish on the bank’s stock.

It has easily crushed the S&P 500 Bank Index over the past five years.

And 70% of the research firms that rate the shares believe they’ll be higher in a year’s time.

The average 12 month target price is $214.

Netflix in a nutshell 

Netflix is set to kick off tech earnings season next week.

The company has come a long way since 2022, when investors freaked out after a subscriber slowdown.

Since then, Netflix has cracked down on password sharing, rolled out its ad supported tier, and continued to boost its content offerings into areas such as sports.

And as traditional TV viewing declines, Netflix’s subscriber base continues to climb.

Analysts, on average, are expecting the company’s paid memberships to near 274 million in the quarter, up from roughly 269 million in Q1.

Netflix shares have already rallied more than 30% this year, but the analyst team at JPMorgan is recommending the stock ahead of earnings, boosting its target price on the shares to $750.

Is Costco’s membership fee boost a reason to buy?

Costco has boosted its membership fees for the first time in 7 years.

The move will affect more than 50 million basic and premium memberships, starting in September.

Wall Street had been waiting for such an announcement, since Costco typically increases fees every five years or so.

The membership program is Costco’s not-so-secret sauce.

With each boost, the company can use the proceeds to invest in operations and keep product prices down to help spur sales.

Analysts at William Blair are estimating the increase will bring in about $350 million in additional sales and operating profit over the next two years.

The attractiveness of the Costco business has helped the stock trade at a premium to rivals such as Walmart and Target.

Valuation might be one reason for investors to be skeptical.

But very few retail stocks have had as strong performance over the past decade.

And two thirds of the analysts who cover Costco recommend the stock.

More than a dozen analysts  — including JP Morgan, Evercore ISI, Deustche Bank, expect the shares will trade above $900 in the next year.

Meanwhile, Jefferies’ research team boosted its price target this week to $1,050.

Picks of the week:

Cathie Wood, Ark Invest: Tesla, Shopify

Stan Wong, Scotia Wealth Management: Lennox International, Netflix, Novo Nordisk 

Eric Nuttal, Ninepoint Partners: Baytex Energy, Nuvista Energy, Precision Drilling

Ross Healy, MacNicol & Associates: Alamos Gold, Peyto Exploration, BCE

Bruce Murray, Murray Wealth Group: Airbus, Air Canada, Evertz Technologies

David Burrows, Barometer Capital Management: Canadian Natural Resources, Teck Resources, Waste Connections, Eaton Corp, Stantec