WBA - Wall Street Lunch: Copilot Gets Its Own Windows Key

2024-01-04 12:40:45 ET

Summary

• Microsoft is introducing a new Copilot key on Windows 11 PCs, highlighting the importance of AI in its business.
• ADP's measure of private sector employment shows strong job growth in December, aligning with pre-pandemic hiring.
• Apple gets a Piper downgrade, but another analyst sees a big camera upgrade.

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The following is an abridged transcript:

Our top story today so far

Microsoft ( MSFT ) is making the first significant change to the Windows PC keyboard in nearly three decades.

The company is adding a button to activate its artificial intelligence Copilot service, underlining just how much it expects AI to be central to its business.

Over the coming days leading up to and at the CES technology conference the Copilot key will come up on many of the new Windows 11 PCs from its ecosystem partners, with availability starting in late February through Spring, including on upcoming Surface devices.

Chief marketing officer Yusuf Mehdi said in a blog post that: "The new key will invoke the Copilot in Windows experience to make it seamless to engage Copilot in your day to day."

About 30 years ago, the company introduced the Windows key to the PC keyboard.

"We see this as another transformative moment in our journey with Windows where Copilot will be the entry point into the world of AI on the PC," Mehdi added.

In today’s trading

Stocks are getting some more buying support after two sessions of selling this week. But growth names are still on the back foot.

The Dow ( DJI ) leads the S&P ( SP500 ) and the Nasdaq (COMP.IND). Nine of the 11 S&P sectors are higher, led by Financials ( XLF ). Energy ( XLE ) is the weakest.

The 10-year Treasury yield ( US10Y ) is back around 4%, higher following a choppy previous session.

The morning data included a trio of jobs reports that indicated labor market strength.

Weekly initial jobless claims fell to 202,000 , the lowest level in three months and much lower than the 217,000 expected. Continuing claims rose to 1.855 million from 1.886M prior and lower than 1.883M consensus.

Challenger reported that employers announced 34,817 layoffs in December, down 24% from the 45,510 cuts announced in November and 20% from the prior month.

Kieran Clancy, economist at Pantheon Macro, says: "Claims are more likely to rise than fall over the next few months, given how low they are for this stage in the cycle, but leading indicators are mixed. The recent downshift in layoff announcements tracked by Challenger contrasts with the upturn in WARN notices of advance layoffs and plant closures, which have turned upwards in recent months."

And ADP’s measure of private sector employment said payrolls rose by 164,000 in December, topping the consensus of 115,000.

ADP chief economist Nela Richardson says: "We're returning to a labor market that's very much aligned with pre-pandemic hiring. While wages didn't drive the recent bout of inflation, now that pay growth has retreated, any risk of a wage-price spiral has all but disappeared."

The market is often reluctant to put too much weight on the ADP numbers, though, given their wide skew from government numbers and recent change of methodology.

The Labor Department releases the official jobs numbers for December tomorrow. Economists expect that nonfarm payrolls rose by 170,000, with the unemployment rate ticking up to 3.8%.

Among active stocks

Mobileye Global ( MBLY ) tumbled on updated guidance as it noted excess inventory at its customers. The company says it expected Q1 revenue to be down about 50% compared to the $458 million seen in the first quarter of 2023. For full-year 2024 it predicts revenue of $1.83 billion to $1.96 billion. That’s well below the Wall Street forecast of $2.57 billion.

Verizon ( VZ ) snagged its second upgrade in a week as Wolfe Research boosted the stock, saying it’s exiting "one of its toughest positions strategically" over the past two years. Wolfe raised shares to Outperform from Peer Perform and put a $46 price target, noting it sees upside in improving subscriber growth, a "steady" postpaid average revenue per user retail sales strategy and a decline in capital spending and leverage.

Walgreens Boots Alliance ( WBA ) beat Street forecasts for Q1 as sales from its healthcare segment jumped following the recent acquisition of Summit Health. But the company also cut its dividend by 48% to $0.25.

CEO Tim Wentworth said: "We are evaluating all strategic options to drive sustainable long-term shareholder value, focusing on swift actions to right-size costs and increase cash flow, with a balanced approach to capital allocation priorities"

In other news of note

Apple ( AAPL ) bulls are looking to avoid a fourth-consecutive down session.

Piper Sandler downgraded the stock to Neutral from Overweight citing concerns about iPhone inventory levels and a perceived peak in unit sales growth rates. Analyst Harsh Kumar predicts challenges for Apple, citing a weakening macro environment in China, difficult comparisons starting in 2023 and persistent currency headwinds. He also emphasizes the impact of elevated interest rates on Apple's overall performance.

But another analyst predicts that Apple is likely to give the 2025 edition a huge camera upgrade.

In a blog post, TF International Securities analyst Ming-Chi Kuo said the iPhone 17 line will come with a 24-megapixel front-facing camera and a six-element lens, compared to the 12-megapixel camera on the iPhone 14 15.

The upgrade is expected to "significantly improve the image quality," Kuo said adding that the 2024 edition of the iPhone — expected to be called the iPhone 16 — is likely to have the same 12-megapixel front-facing camera as recent models.

And in the Wall Street Research Corner

Goldman Sachs highlights 10 stocks with accelerating topline growth in 2024 from their Conviction List.

“Given the … expectation of a challenging top line growth environment, companies that can show sustainability of high sales growth and/or the acceleration of sales growth are likely to be rare and deserve an expanded valuation multiple,” equity analysts said.

They add that topline growth will be “increasingly scarce,” and accelerating topline growth will become “even scarcer.”

Among their top 10 stocks are: Jefferies Financial (JEF), Merck (MRK), Chevron ( CVX ) and Apple (AAPL).

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