Deep Dive
Shownotes Transcript
Welcome to Seeking Alpha's Wall Street Lunch, our afternoon update on today's market action, news, and analysis.
Good afternoon. Today is Wednesday, June 4th, and I'm your host, Kim Kahn. Our top story so far. Wedbush star tech analyst Dan Ives, known for his bullish AI thesis, sees his namesake exchange-traded fund launch today. The Dan Ives Wedbush AI Revolution ETF, ticker symbol, surprise, surprise, IVES, opened for trading at $25.37 today.
The management fee is 0.75%. It's all about the use cases exploding, which is driving this tech transformation, being led by software and chips into the rest of 2025 and beyond, and thus speaks to our tech bull and AI revolution thesis with these 30 core names I said last month. Among the 30 holdings are Microsoft, Google, Amazon, Nvidia, Palantir, Snowflake, Apple, Meta, Palo Alto Networks, Micron, and more.
On the economic front, ADP said private sector employment rose by just 37,000 in May, missing the 110,000 consensus and cooling from a rise of 60,000 in April. That's the lowest level since 2023. That low figure caused some market jitters ahead of Friday's official jobs report, wiping out gains in stock market futures and pushing the 10-year yield closer to 4.4%.
But, as Pantheon Macro reminds us, ADP's forecast error, regardless of sign, has averaged 84,000 and has been as big as 348,000 since its methodology was overhauled in August 2022. That's a bigger average error than for the consensus forecast, about 50k, and the 73,000 error from simply taking the average first official estimate of growth in private payrolls over the previous six months.
The breakdown of ADP's employment estimates is just as unreliable, with the average absolute forecast errors for every major sector also bigger than simply assuming the prior six-month average growth rate. Still, that didn't stop President Donald Trump from highlighting ADP as another reason he thinks Fed Chairman Jay Powell should start cutting rates. In addition, the May ISM Services Index painted what Schwab strategist Kathy Jones called a soft picture of the economy.
The overall index fell into contraction territory at 49.9, down from 51.6, and below the 52 consensus. That's the lowest level in a year. New orders slumped to 46.4 from 52.3, while prices paid rose to 68.7 from 65.1. Employment held above 50, though.
Among active stocks, Apple caught a rare downgrade from Needham, which cut the stock to hold from buy, amid concerns over earnings growth and iPhone competition. Analyst Laura Martin said, "...despite Apple's premium valuation, it is growing revenues and margins slowest among the big tech competitors."
In fact, the other three big tech companies that we cover reported 2-3 times faster revenue growth and 3-12 times faster margin expansion than Apple for the March quarter, suggesting that Apple's premium valuation versus big tech peers is at risk. Hewlett Packard Enterprise is up after fiscal second quarter results beat estimates.
Evercore analyst Amit Daryanani noted Hewlett Packard pointed to a more positive outlook than feared going into the print, guiding July quarter revenue of $8.35 billion at midpoint, ahead of the streets $8.22 billion and EPS of 40 to 45 versus consensus of 41. The company expects sequential growth across all of its product segments, including mid-teens quarter-over-quarter growth in servers, driven in part by expected delivery of a large AI server order.
Guidewire Software is up after the digital platform provider for property and casualty insurance reported adjusted earnings per share of $0.88, which was a lot more than the consensus estimate of $0.47.
And looking ahead to Q4, Guidewire projects revenue between $332 million to $340 million, with a midpoint of $336 million, more than the consensus of $332 million. In other news of note, UnitedHealth Group announced that board members canceled the performance-based restricted stock units granted to former CEO Andrew Witte, who abruptly resigned from the company in May.
Witte's sudden departure sent UnitedHealth shares sharply lower in mid-May, as the company concurrently withdrew its full-year earnings outlook under new CEO Stephen Hensley. The board's Compensation and Human Resources Committee decided to cancel Witte's performance-based restricted stock units granted on February 20th.
And in the Wall Street Research Corner, Jefferies added six new names to its list of highest conviction, high-rated stocks. The list comprises stocks that are underpinned by differentiated analysis, supported by catalysts, and set evaluation levels that suggest upside.
The new names are NVIDIA, Capital One Financial, Expand Energy, Huntington Bank Shares, PVH, and UGI. ConocoPhillips and Global Eon Line were removed. Among other names are Caterpillar, DraftKings, Gilead, Microsoft, and Ventus. Check out the whole list in our story on Seeking Alpha. That link will be at the top of show notes.
That's all for today's Wall Street Lunch. Look for links for stories in the show notes section. Don't forget, these episodes will be up with transcriptions at SeekingAlpha.com slash WSB. And join the elite community of real investors to unearth great investing ideas. Just head to SeekingAlpha.com slash subscriptions.