Fed Rate Cut Signals and Investment Opportunities: Braze & Daktronics
It is Friday, what will happen next week?
- Andrei CN
- 3 min read
Fed Signals Potential Rate Cut
Federal Reserve Bank of New York President John Williams has indicated that it may now be appropriate for the Fed to reduce interest rates. In a speech at the Council on Foreign Relations, Williams stated that the Fed has made “significant progress” toward its goals of maintaining stable prices and maximum employment.
“With the economy now in equipoise and inflation on a path to 2%, it is now appropriate to dial down the degree of restrictiveness in the stance of policy by reducing the target range for the federal funds rate,” Williams said (Bloomberg).
This suggests that the likelihood of a rate cut on September 17th is higher than previously expected, which could lead to a market correction over the weekend and into next week.
US Unemployment & Earnings
The US unemployment rate for this month is 4.2% (down from last month’s 4.3%), as anticipated. Additionally, average hourly earnings increased by 0.4% (exceeding forecasts of 0.3%), signaling that short-term economic conditions are stable and under control.
Next week, we could potentially see a 2-3% rise in the US stock market, particularly in the S&P 500, which may be followed by a broader global market recovery. Diligent Yield suggests that investing in the stock market now is a good opportunity, especially with many stocks trading at a discount following the NVIDIA 20% drop.
Key Investment Opportunities
Braze, Inc. (NASDAQ: BRZE)
Despite strong year-over-year earnings and better-than-expected sales, Braze experienced a sharp 18% price drop last week, which appears to be a mispricing.
- Share Price: $36.76 (-16.70%)
- Volume: 3,218,569
- 52-Week Range: $33.93 - $61.53
- Day’s Range: $34.42 - $41.96
In Q2, non-GAAP net income swung from a loss of $0.04 per diluted share a year ago to $0.09 per share, beating analysts’ estimates of a loss of $0.03. Revenue grew to $145.5 million (vs. $115.1 million last year), also exceeding analysts’ forecast of $141.3 million.
Given this recent slump, Braze offers significant upside potential in the coming weeks.
Source: Braze Inc. (BRZE) - Nasdaq
Daktronics, Inc. (NASDAQ: DAKT)
Another attractive stock is Daktronics, which recently posted strong financial results, beating expectations for two consecutive quarters.
- Share Price: $11.675 (-1.06%)
- Volume: 314,839
- 52-Week Range: $7.20 - $15.97
- Day’s Range: $11.54 - $11.77
Daktronics’ Q1 2024 revenue was $226.1 million, surpassing the Street estimate of $216.8 million. Its EPS of $0.36 beat expectations by 20%, highlighting the company’s strong financial performance.
Source: Daktronics Inc. (DAKT) - Nasdaq
Conclusion
The US stock market is likely to recover at least 1.5% next week, making this Friday, September 6th, a prime time to invest in undervalued assets. Both Daktronics (DAKT) and Braze (BRZE) stand out as potential opportunities:
- Daktronics has strong financials, a low P/E ratio, and great potential in the next 15-20 days.
- Braze, although more volatile, has higher upside potential, with a 63% probability of delivering 19% returns next month.
Diligent Yield advises investors to seize the current mispricing in these stocks.