Artificial intelligence chip stalwart Broadcom and fast-casual pacesetter Cava Group lead this weekend's watchlist of five stocks near buy points. In addition to AVGO and Cava, the group includes luxury cruise line IPO Viking Holdings, trading exchange operator Cboe Global Markets and insurance broker Brown & Brown.
The diverse group of technology, consumer and financial stocks all rallied over the past week as new jobs data appeared to confirm that the U.S. economy remains in good shape. Even as markets priced in fewer Federal Reserve rate cuts, investors pushed the S&P 500 up 0.2% for the week, finishing fractionally below Monday's record closing high.
Brown & Brown and Viking are part of the IBD Leaderboard portfolio of elite stocks, while Cava stock is on the Leaderboard watchlist.
SwingTrader has open positions in CBOE stock and Cava.
Broadcom Stock
William Blair started coverage of Broadcom with an outperform rating, noting the fabless chipmaker's $12 billion AI revenue target for fiscal 2024 and "a several-year runway for continued growth" in its networking and custom chip businesses. Tailwinds from AI include the build-out of massive AI data centers by the likes of Google and Meta and the ramping up of Ethernet networking as "the go-to networking protocol for AI data centers."
The analysts also see a new upgrade cycle as being in the early innings for Broadcom's traditional chip business focused on servers, storage, wireless and industrial markets. Finally, Broadcom's software business, which accounts for nearly 40% of total revenue, is set for strong growth as its VMware acquisition pays off.
Broadcom rose 2.3% to 176.64 on the week, rebounding mid-week from its 21-day line. AVGO stock has a 180.25 buy point from a handle on the end of a 16-week consolidation.
Futures Fall As 10-Year Yield Tops 4%
CAVA Stock
Cava's same-store sales jumped 14.4% in the second quarter, crushing analyst forecasts of 8.2%. That built in a 9.5% traffic increase and a 4.9% rise in the average ticket, which included a 3% price hike. Customer traffic got a lift from the June 3 launch of grilled steak as a menu item.
Cava opened 18 locations in the quarter, including its first two Chicago units, bringing the total to 341. CEO Brett Schulman told CNBC on Sept. 12 that Cava has a target of 1,000 restaurants by 2032, with a 15% compound growth rate.
In an Aug. 23 note, William Blair analyst Sharon Zackfia detailed initiatives that should boost sales and profit margins, including a revamped loyalty program that will debut in October and a new labor deployment model to improve the speed of service that will be rolled out in early 2025.
Cava stock rose 2.3% to 126.60 on the week. The action included a successful test of its 21-day exponential average. However, Friday's move crested two possible entry points before finishing a tad below one of them.
Cava rose as high as 128.59 intraday on Friday, which carried the stock past a 128.18 entry based on the Aug. 26 high that preceded the recent consolidation.
Also, investors could have scooped up Cava shares with Friday's move above the Oct. 1 high of 125.66, roughly coinciding with the 10-day moving average. That also broke a trendline sloping down from the Sept. 23 peak.
However, Friday's move came on volume that was 43% below average, suggesting a lack of conviction.
Viking Stock
On Tuesday, Viking said it had swept cruise line rankings from Conde Nast Traveler for the second year in a row, voted No. 1 for rivers, oceans and expeditions.
The company is in growth mode following its May 1 IPO. Last month, Viking celebrated its return to China with a Shanghai to Hong Kong trip. It also touted new itineraries along China's coast to "rarely-visited destinations and ports to which only Viking has access." In August, Viking took delivery of its new 82-guest ship for the Nile River and its 12-day Pharaohs & Pyramids itinerary.
On Sept. 4, Wells Fargo raised its price target for VIK stock to 39 from 35, keeping an overweight rating. The firm cited demand visibility, with 2025 voyages already 55% booked and prices running 10% higher than a year ago.
VIK stock rose 5.95% to 37.03 on the week. Thursday's 1.4% move cleared an early entry just above 35 as VIK broke above a trend line from the Aug. 20 rally high. VIK still has an official 37.25 buy point from an 11-week consolidation, according to MarketSurge.
CBOE Stock
Friday's strong jobs data diminishes risk of a recession. While good news for the stock market, it's not necessarily great for Cboe, which thrives on volatility. Cboe gives U.S. and global investors tools to hedge risk via its S&P 500 Volatility Index, or VIX.
Cboe's SPX index options are the mostly actively traded index options in the U.S., providing exposure to the large-cap index as well as options for managing risk.
Volatility soared when the August jobs report came in unexpectedly soft. On Thursday, Cboe said 62.7 million VIX contracts traded hands in the third quarter, the second-best on record.
Still, even if the U.S. economy is on a firmer footing, volatility probably isn't going away. The Middle East conflict keeps escalating and the U.S. election could throw some curveballs as well.
CBOE rose 3.9% to 210.42 on the week. Tuesday's 2.5% move — coinciding with Iran's missile attack on Israel — flashed an early entry opportunity as the rebound off key support at the 50-day moving average also save CBOE break above a trendline sloping down from its Sept. 17 recent high-water mark.
CBOE still has an official 216.14 buy point from a six-week flat base. The latest base is just above a prior consolidation, forging a bullish base-on-base pattern that is clear in a weekly MarketSurge chart.
BRO
Brown & Brown is the sixth-largest independent insurance brokerage in the U.S. On Aug. 12, Wells Fargo upgraded BRO stock to overweight, while raising its price target to 112. The research firm cited the broker's exposure to middle-market companies, where pricing has held up better. Further, insurance brokers generally don't face underwriting risk from hurricanes and other disasters.
The attractiveness of the business was highlighted by Monday's news that saw Marsh McLennan acquire McGriff Insurance Services for $7.75 billion in cash.
Brown & Brown has been an aggressive acquirer. Revenue grew 12.5% in Q2, with 2.5 percentage points coming from 10 acquisitions during the quarter.
BRO stock rose 2.9% to 105.65 for the week, rebounding from the 10-week line and clearing some short-term highs, offering an early entry. The stock closed the week just below a 106.02 buy point from a flat base.
Brown & Brown has a stellar 98 IBD Composite Rating on a scale of 1-99, based on a broad range of technical and fundamental factors, according to IBD Stock Checkup.
Be sure to read IBD's The Big Picture column after each trading day to get the latest on the prevailing stock market trend and what it means for your trading decisions.
