Happy Sunday to everyone on The Street.

Well, what’d you think? How did the first week of our daily sends go? The data looks good, but we always love hearing directly from you. We’re keeping the intro short today to solicit feedback on the new cadence:

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3 Overvalued Stocks Predicted To Plunge First, Signaling A Market Crash

Especially amid market highs, stock valuations can surge due to various factors like hype, speculation, or optimistic market sentiment.

As history illustrates, these peaks seldom maintain their supremacy indefinitely.

And the current rally is not guaranteeing stability for three particular stocks that recently soared past 52-week highs.

Click here to uncover the overvalued stocks most vulnerable that could signal a market crash.

Preview

After a strong finish to 2023, characterized by an impressive rally in the final two months of the year, U.S. stocks had a shaky start to the new year.

Profit-taking behaviors in the wake of the rally, coupled with warnings from analysts concerning the performance of key tech giants and global geopolitical tensions, have combined to create an ideal scenario for the emergence of a negative week on Wall Street. Here are the top stories we were watching last week:

Apple's stock experienced a sell-off as Barclays downgraded the tech giant. This downgrade caught many investors by surprise and raised concerns about the company’s future performance, especially as it relates to iPhone sales.

Netflix is exploring opportunities to generate revenue from its gaming business. This move signaled the streaming giant’s commitment to diversifying its revenue streams beyond traditional video content.

WTI crude oil prices experienced a notable surge in the first week of the year, driven by escalating tensions in the Red Sea region. The situation was exacerbated by a series of ship attacks perpetrated by Iran-backed Houthis off the Yemeni coast, coupled with Iran’s deployment of a military vessel in the area.

In the last quarter of 2023, China’s BYD achieved a major milestone by surpassing Tesla in the electric vehicle race. The Chinese EV maker sold a record-breaking 526,000 battery-only vehicles last quarter.

The December jobs report exceeded expectations, indicating the robust health of the U.S. labor market. Non-farm payrolls increased by 216,000, surpassing both November’s 173,000 and the anticipated 170,000. The unemployment rate remained stable at 3.7% in December, while wage growth rose more than expected.

Preview

This week, the financial world is closely watching Thursday’s Consumer Price Index (CPI) report as a key determinant in the Fed's interest rate decisions.

Last week, Richmond Fed President Thomas Barkin shared his guarded optimism about managing inflation while fostering economic growth, leaving him hesitant to call for a victory lap or even rule out additional hikes.

Barkin likened the Fed's challenge to a pilot's careful navigation, emphasizing risks like economic slowdown, unforeseen market shifts, sticky inflation, and unexpectedly high demand.

Although last month's figures showed a slight easing in inflation, with the annual rate at 3.1% and core inflation steady at 4%, several Fed officials have hinted at continued rate hikes if inflation remains above target.

This week's CPI report could signal one more nail in inflation’s coffin, prompting the Fed to shift its cautious stance firmly in favor of rate cuts in the near future.

Earnings Spotlight

Monday

• Jefferies (JEF): In its last earnings announcement, Jeffries said it was optimistic it had reached the bottom of the cycle and momentum in investment banking, which saw a 28% quarter-over-quarter increase, would continue.

Tuesday

• Albertsons (ACI), Tilray (TLRY), and PriceSmart (PSMT): In October, Tilray reported record fiscal-first-quarter revenue of $177 million and grew its market share position in Canada to 13.4%.

Thursday

• Bank of America (BAC), BlackRock (BLK), Citigroup (C), JPMorgan Chase (JPM), Wells Fargo (WFC): The big bank earnings are seen as a bellwether for the upcoming earnings season, setting the tone for the quarter.

• Delta Air Lines (DAL) and UnitedHealth (UNH): Last quarter, Delta’s profits rose nearly 60%, largely due to strong international travel demand.

New Year, New Me

2023 Losers Might Bounce Back in 2024

The S&P 500 rose over 20% last year, thanks to gains from tech giants. Analysts are eyeing other industries to lead the way this year. 

CNBC compiled a list of stocks with the highest upside from analyst’s price targets. 

Halliburton (HAL), Marathon Oil (MRO), and Schlumberger (SLB) all made the cut. The three energy stocks struggled in ‘23, finishing the year relatively unchanged and massively underperforming broader indexes.

Upsides for these three stocks are projected at more than 30%.

Look to the Skies

A few airlines landed on the list as well.

Analysts project a 42% upside for United Airlines (UAL) and a 31% target for Delta Air Lines (DAL). 

TD Cowen has crowned Delta as a “best idea” for 2024. The firm believes Delta could outperform its competitors as it continues to strengthen its balance sheet.

Stick With This High Flyer

A 2023 winner in the tech world finds itself on the list to continue flying high: NVIDIA (NVDA).

The stock was up over 235% last year. Even with this massive growth in 2023, analysts still have an average upside price target of nearly 30% for the stock. AI tech is seen as a catalyst for NVIDIA.

Other names on the list include Humana (HUM), General Motors (GM), and Moderna (MRNA). These three all underperformed when compared with the S&P 500 in 2023. 

Investors will look to see if these projections come to pass in 2024.

POWERED BY VANTAGE POINT

3 Overvalued Stocks Predicted To Plunge First, Signaling A Market Crash

Especially amid market highs, stock valuations can surge due to various factors like hype, speculation, or optimistic market sentiment.

As history illustrates, these peaks seldom maintain their supremacy indefinitely.

And the current rally is not guaranteeing stability for three particular stocks that recently soared past 52-week highs.

Click here to uncover the overvalued stocks most vulnerable that could signal a market crash.

In: Expedia. Out: Uber.

Swapping Uber for Expedia

Mark Mahaney of Evercore ISI is leaving Uber (UBER) in 2023 and tapping into Expedia (EXPE) for 2024.

He says the move to replace Uber on his top pick list with Expedia is based on valuations. 

Mahaney argues that Expedia trades at a cheaper valuation than competitors Airbnb (ABNB) and Booking Holdings (BKNG). He believes that the gap will close in 2024.

Expedia stock jumped in 2023, rising by almost 75%, but shares still trade below the highs reached in 2012.

Getting Away From It All

Mahaney expects that consumer travel trends will continue to grow in the new year, specifically online travel. 

Mahaney goes against the flow with this call. Wall Street analysts are less optimistic about Expedia, with the average price target around 9% below the current share price.

Tech Talk ‘24

Mahaney has broader advice on the tech sector for the new year. After the Nasdaq’s huge returns over the past year, he cautions investors not to expect a repeat of 2023.

Mahaney outlines Amazon (AMZN) as a favorite for 2024. He believes the stock has underachieved compared to other tech names, and he is encouraged by its cloud division.

His peers are on his side with that call, with analysts’ average price target more than 15% higher than the current Amazon share price.  

Time will tell if these 2024 stock picks will underperform or outperform investor’s expectations.

A UK Drugmaker That Might Be Worth A Second Look

Pharma Stocks Hurting From Sales Lag

Big pharma stocks across the board have been down recently. AstraZeneca (AZN), based in the UK, has struggled as well. But experts think the company could be in for a rally in 2024. 

ADRs of the company’s stock were down 0.7% in 2023. COVID vaccine sales slowed significantly. 

To add insult to injury, the company’s new lung cancer treatment exhibited underwhelming trial data in October. The stock underperformed the S&P 500 by 7% in November, missing out on the rally entirely.

A New Frontier

Oncology is the company’s bread and butter and accounted for around one-third of its sales in 2023. Cardiovascular, immunology, “rare disease” drugs, and other diversified pharmaceuticals make up the rest of the company’s offerings. 

AstraZeneca is currently making a push into rare disease medications, which made up 16% of the company’s sales last year. The drugs are profitable and exclusive. The company purchased a portion of Pfizer’s rare-disease therapies in September.

Seemingly Undervalued

AstraZeneca has cast a wide net moving into 2024, making large investments into drugs with higher price tags and better profit margins. 

Given recent developments and current valuations, analysts see the stock as a buy. Currently, the stock is selling for 16.1 times forward earnings, yet its 5-year average is 19.5 times and the S&P averages 19.6 times. 

While it's true that the stock is more expensive than some competitors, its expected earnings per share is well above the industry average through 2030. 

The UK drugmaker might give a clean bill of health to some investors' portfolios in 2024.

Last Week's Poll Results

Which European stock will have the best 2024?

 🟩🟩🟩🟩🟩🟩 Prudential

🟨⬜️⬜️⬜️⬜️⬜️ Standard Chartered

🟨🟨🟨🟨⬜️⬜️ Soitec

Are you bullish or bearish on money market funds in 2024?

 🟩🟩🟩🟩🟩🟩 🐂 Bullish

🟨🟨🟨⬜️⬜️⬜️ 🐻 Bearish

Which stock do you think will outperform over the next 12 months?

🟩🟩🟩🟩🟩🟩 Kraft (KHC)

🟨🟨🟨🟨⬜️⬜️ McCormick (MKC)