The Animal Spirits Are Alive and Well

2024 has been one of the strongest-performing election years in history. With the Federal Reserve cutting interest rates and the “Santa Claus” rally phenomenon in full effect, the “animal spirits” are alive and well on Wall Street. Below are three momentum/speculative stocks to buy now to take advantage of:

BigBear.ai

BBAI Company Overview

Zacks Rank #2 (Buy) stock BigBear.ai (BBAI) is a software company focused on artificial intelligence and software products for the defense, finance, and healthcare industries. The company leverages AI solutions to gather massive quantities of data to help organizations and governments make well-informed decisions in complicated situations and conditions. Below are three applications for BBAI’s technology, including:

·       Government & Defense: Government clients leverage BBAI technology for mission readiness and threat detection.

·       Analytics: AI solutions allow companies to analyze large data sets like never before to make informed decisions.

·       Commercial Applications: BBAI technology can help companies to optimize their supply chains and logistics.

Palantir Partnership

$200 billion Palantir Technologies (PLTR) is the juggernaut in the rather obscure yet critical and profitable market that BBAI operates in. However, the good news for investors is that BigBear.ai and Palantir announced a partnership earlier this year in which the two companies’ products will be “integrated to extend the operating system for the modern enterprise with data and AI that provide advice and other actionable insights for complex business decisions.” In a statement on the company’s website, BBAI management said, “Big Bear.ai will have an opportunity to extend Palantir’s products with its forecasting, course of action optimization, conflation, computer vision, natural language processing, and other predictive analytics via low-code interfaces. Building upon the agility and scalability of Palantir’s Foundry data and analytics fabric, BigBear.ai’s products will enable businesses to achieve return on investment faster with out-of-the-box optimization solutions for pricing, inventory  and asset allocation, facility and operations management, and customer targeting  - all buil to be sensitive to today’s connected economy through the inclusion of BigBear.ai’s global data for situational awareness and competitive intelligence.”

Bullish Chart Pattern & High Short Interest

BBAI shares have been exhibiting unusual strength recently. For instance, on Christmas Eve, the stock rose 17% on volume turnover that more than doubled, even though the market was only open for a half day. Currently, the stock is attempting to break out of a high-tight-flag pattern. If the breakout is successful, the heavy short interest (15% of the float) will likely add fuel to the fire.

Image Source: TradingView

Robust Earnings Expectations

Zacks Consensus Estimates suggest that BBAI EPS will grow by 64.29% and 77.27% over the next two quarters.

GameStop

GME Company Overview

Zacks Rank #3 (Hold) stock GameStop (GME) is a global retailer that sells video games, consumer electronics, and collectibles. GME is the world’s largest video game retailer, with over 6,000 stores in the United States and 17 other countries. GME sells hardware and software for Xbox, PlayStation, and Nintendo, as well as accessories and collectibles. They also offer a trade-in program that allows customers to exchange used games, consoles, and accessories for in-store credit or gift cards.

Equity Offerings Raise Cash Hoard

Unless you’ve been living under a rock, you are probably aware of the Reddit (RDDT) r/WallStreetBets group that orchestrated one of the largest short squeezes in history. Though GME has soared in recent years on little more than hype and gamma squeezes, the company can use its soaring stock price to its advantage. Following the most recent short squeeze, GME sold 75 million shares of its common stock to the public and raised more than $2 billion.

With so much cash on hand, GME management can expand the business or do something like add Bitcoin to its balance sheet (which would cause a signficant short squeeze). As part of its digital transformation efforts, GameStop has hired talented individuals with ecommerce, UI, UX, and blockchain expertise. The company has pursued growth opportunities in crypto, NFTs, and Web 3 gaming verticals.

Bull Flag Reset

One of the highest probability technical setups occurs when a stock has a strong run, resets in a bull flag fashion and tags the 10-week moving average. This is exactly what is happening with GME currently.

Image Source: TradingView

Highly Unusual Call Flow

A deep-pocketed option trader recently bought $3 million worth of the January $125 calls. The stock is currently trading at $30! Could the trader be the famed “Roaring Kitty” who sparked the initial GME short squeeze? Stay tuned…

Rocket Lab

RKLB Company Overview

Rocket Lab (RKLB) is an end-to-end space company that provides reliable launch services, spacecraft design and manufacturing, satellite components, flight software, and orbit management. RKLB specializes in launching small satellites into low Earth orbit (LEO) using their Electron rocket.

Bullish Catalysts & Contract Wins

In RKLB’s last earnings call, management touted several wins, including a multi-launch agreement with a confidential satellite operator, a record number of annual launches, with more scheduled next year, and $55 million in new launch contracts signed in Q3. Meanwhile, the company was selected by NASA to propose a mission architecture that enables faster and more cost-effective return of samples from Mars in a historic first. NASA contracts are notoriously lucrative and long-term.

A Growth Path Ahead

Third-quarter revenue increased 55% to $105 million year-over-year.

Image Source: Zacks Investment Research

In addition, the company has a massive $1.05 billion backlog, representing 80% year-over-year growth. Furthermore, guidance of $125-$135 million means that Q4 will undoubtedly be the company’s best quarter ever.

Bottom Line

Investors can take advantage of momentum stocks when equities are in a bull market phase, the Fed is cutting, and the animal spirits are alive and well.

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GameStop Corp. (GME) : Free Stock Analysis Report

Palantir Technologies Inc. (PLTR) : Free Stock Analysis Report

Rocket Lab USA, Inc. (RKLB) : Free Stock Analysis Report

BigBear.ai Holdings, Inc. (BBAI) : Free Stock Analysis Report

Reddit Inc. (RDDT) : Free Stock Analysis Report

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