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🦉 The Night Owl Newsletter for July 6th
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Buy this stock tomorrow (From Chaikin Analytics)
Flash Crash or Cash? The AI Hardware Reset Investors Can’t Ignore
Written by Jeffrey Neal Johnson
Recent intraday volatility wiped $137 billion across top memory equities, triggering premature retail investor panic over an impending artificial intelligence (AI) hardware supply glut. The brutal sell-off hit the semiconductor sector after an extended run, prompting many market participants to question whether the memory boom had stretched too far and too fast.
Reports circulated highlighting worries about future oversupply, consumer resistance to rising flash pricing, and broader unease surrounding technology valuations. The resulting price action looked devastating on the surface, painting a picture of cyclical exhaustion.
Defragmenting the Panic: Why True AI Bottlenecks Survive
Memory markets are notorious for violent boom-and-bust cycles. When prices rise, manufacturers historically flood the market with capacity, eventually crushing their own margins. Retail participants saw the recent market slide and assumed the traditional cycle had peaked. However, under the surface, institutional demand remains unyielding. Leading compute memory capacities are entirely locked up through 2026, and hyperscale storage margins are expanding to record highs.
This localized technical reset offers a strategic entry point into the market’s most critical infrastructure bottlenecks before the next major capital expenditure deployment cycle. The recent pullback has separated true bottleneck winners from legacy storage names, a distinction that requires careful fundamental analysis.
Stacking Chips: The High Bandwidth Monopoly
To understand where the real leverage sits in the current market, investors should look at the infrastructure driving heavy compute workloads. Micron Technology (NASDAQ: MU) serves as the primary gauge for true memory demand. Micron Technology currently trades at a highly rational, nearly 23 trailing price-to-earnings ratio, a surprisingly grounded valuation for a $1.12 trillion enterprise operating at the center of the data center build-out.
Fears of a supply glut fail to account for the physical realities of high bandwidth memory (HBM) production. Creating these chips involves vertically stacking layers of silicon, a highly complex packaging process that consumes up to three times the wafer supply of standard memory. Micron Technology’s entire supply chain for these specialized components is contracted and completely sold out through the end of 2026.
Micron Technology is already aggressively ramping up shipments designed to integrate with NVIDIA’s (NASDAQ: NVDA) upcoming Vera Rubin architecture. To support this pipeline, Micron Technology initiated a major cleanroom expansion in Hiroshima, backed by approximately $3.33 billion in Japanese government subsidies. Sovereign capital flowing into advanced dynamic random-access memory infrastructure signals that structural under-supply remains a multi-year reality.
Retail investors frequently flag insider selling as a bearish indicator. Chief Executive Officer Sanjay Mehrotra recently liquidated nearly $85 million in shares across two transactions roughly a month apart, materially reducing his direct equity position. In the context of a sold-out supply chain and a multi-year cyclical run, executive profit-taking represents standard cycle harvesting rather than an internal panic over decaying fundamentals.
Storage Wars: Pricing the New Hardware Reality
In early 2025, a structural shift altered the landscape for data center storage. Western Digital (NASDAQ: WDC)successfully executed the spin-off of SanDisk (NASDAQ: SNDK) into a standalone, publicly traded entity. This separation fundamentally isolated each company’s risk profile, enabling the market to accurately price its distinct growth trajectories.
SanDisk now operates as a pure-play entity controlling the consumer and enterprise solid-state drive market. Following an unprecedented rally that pushed shares up by over 3600% over the trailing 12 months, SanDisk trades at a steep trailing price-to-earnings ratio of nearly 61.
Despite this rapid valuation increase, institutional capital continues to back SanDisk’s momentum. Citigroup recently increased its price target to $2500, which sits in the shadow of Susquehanna’s May 2026 increase to a street high of $3250, positioning SanDisk as a secondary beneficiary of the broader earnings cycle.
Executive profit-taking is materializing at SanDisk as well, with Chief Legal Officer Bernard Shek selling 1,200 shares over the past two months.
The elevated multiple highlights the vulnerability cited during the recent sell-off. If cloud computing budgets shift entirely toward active compute processing rather than bulk storage, legacy flash operators may face a severe risk of multiple compressions.
Western Digital now operates as a streamlined, pure-play mechanical hard-disk-drive enterprise. Shares rebounded by nearly 7% intraday following the sector wipeout, currently trading at a trailing multiple of around 34.
By shedding the consumer-facing flash business, Western Digital appears perfectly positioned to capture localized data center storage demand without the cyclical drag of retail hardware pricing resistance.
Magnetic Appeal: Seagate’s Margin Explosion
While flash memory commands retail headlines, the unsung hero of the current hardware cycle is high-capacity magnetic storage. Seagate Technology (NASDAQ: STX) just delivered a masterclass in operational efficiency and margin expansion. Seagate posted a blowout third quarter, reporting a 44% year-over-year revenue jump alongside a record 47% non-GAAP gross margin.
This profitability spike stems directly from the rapid adoption of Seagate Technology’s heat-assisted magnetic recording architecture. Modern computing workflows generate an immense volume of telemetry, log, and training data that requires cost-effective, large-scale retention.
Advanced magnetic architecture solves this exact bottleneck efficiently. Bank of America recognized this fundamental shift, pushing its price target on Seagate Technology to $1,150. The financial reporting clearly shows that pure-play hard drive operators are capturing substantial capital expenditure flows entirely insulated from consumer pricing headwinds.
Formatting the Portfolio: Capitalizing on Multiple Compression
The wave of insider selling, combined with stretched multiples in the flash sector, confirms that parts of the recent sell-off were heavily driven by valuation fatigue. The market is now forcing a necessary bifurcation between operations that rely on critical compute bottlenecks and those that rely on tangential consumer storage narratives.
The price target hikes from tier-one institutions demonstrate that seasoned investors view the pullback as a clearing event. Sustained elevated spot pricing and consistent forward guidance on server deployments remain the primary metrics to track. If supply chains remain tight and customer adoption of next-generation hardware persists, this temporary slide will simply serve as a reset button for latecomers.
Investors assessing the semiconductor sector may want to prioritize pure-play compute and advanced magnetic storage operators while exercising caution around consumer-heavy flash producers. Monitoring sequential gross margin expansions and enterprise contract durations will provide the clearest signal on whether the rebound holds its ground through the end of the year. READ THIS STORY ONLINE
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As Employers Drop Obesity Drug Coverage, Hims & Hers Could Be the Winner
Written by Jordan Chussler
The healthcare sector is one of the best-performing sectors in the S&P 500 over the past month, with a gain of around 6%. But while that rebound has been led by a handful of mega-cap Big Pharma companies, it has also been reflected in the performances of smaller firms.
One of those is mid-cap Hims & Hers Health (NYSE: HIMS), the telehealth platform that provides direct-to-consumer (D2C) personal care products and virtual medical services.
Over the past 30 days, HIMS is up more than 45%, which has brought the stock’s year-to-date (YTD) gain to nearly 20%. After a run like that, the stock may be due for a short-term breather. But according to healthcare industry experts, a looming catalyst could have an outsized benefit on Hims & Hers in 2027 and beyond, which is setting the stock up for a buying opportunity on its next pullback.
The GLP-1 Craze Is Pushing Up Employers’ Healthcare Plan Costs
As the cost of weight-loss drugs continues to climb, Reuters recently reported that some employers are planning to drop coverage for GLP-1 treatments, including Wegovy, Ozempic, Zepbound, Mounjaro, and Foundayo—products manufactured by Novo Nordisk (NYSE: NVO) and Eli Lilly (NYSE: LLY).
Last year, over 40% of employers covered weight loss drugs, and estimates for this year are roughly the same. But two industry groups’ analyses cited by Reuters show that is very likely to change in 2027.
According to policy research group Business Group on Health, about 10% of employers that currently offer coverage for GLP-1 drugs for weight loss said they planned to drop them in 2027. A second survey conducted by Mercer, a benefits consultancy, finds that 5% of large employers plan to drop coverage in 2027 or are actively considering doing so.
While that is unfortunate news for those undergoing treatment, it is welcome news for HIMS shareholders. Patients losing healthcare coverage for GLP-1 drugs should be a boon for Hims & Hers Health, which presently generates around one-third of its revenue from its weight-loss business.
Analysts forecast the company’s revenue to grow from an estimated $2.89 billion in 2026 to $3.45 billion in 2027, and increased subscription demand for weight loss drugs amid eroding insurance options should play a significant role in that top-line growth.
Lost coverage for GLP-1 treatments should spur a migration to D2C telehealth providers, with Hims & Hers serving as a natural destination due to its platform bundling medical provider access, unlimited clinical consultations, and pharmacy fulfillment services into one streamlined subscription.
Technical Analysis and Wall Street Suggest a Correction Is Ahead
With its recurring revenue model, Hims & Hers should be a long-term beneficiary of dropped coverage. The platform charges a $39 fee for the first month of its weight loss membership. After that, the charge goes up to $149 for clinical subscriptions, not including the cost of the medication itself. Medication is billed separately, and Hims says the membership does not include or guarantee a prescription. Compounded oral options, for instance, can run $145 to more than $199 per month, while branded GLP-1 pens—like Wegovy—can run even higher.
However, following its approximately 160% gain from its YTD low on Feb. 27, HIMS appears overdue for a price correction. According to the Relative Strength Index (RSI)—a technical momentum indicator that shows if a stock is overbought (above 70), oversold (below 30), or fairly valued (somewhere in between)—HIMS has pushed into overbought territory.
As shown by the green arrow below, the RSI on HIMS one-year chart currently reads 70.86, suggesting that the stock is overbought and due for a price reversal:
Technical analysis is hardly a perfect science. But the last two times the stock’s RSI breached 70—first in mid-April then again in mid-June—HIMS pulled back more than 28% and nearly 8%, respectively, before continuing its rally.
Meanwhile, Wall Street remains bearish on the stock after its outperformance this year. Of the 16 analysts currently covering HIMS, only four assign it a Buy rating.
Overall, the stock receives a consensus Hold rating alongside a 12-month price target that implies over 19% potential downside from current prices.
Concerningly, with a high-volatity beta of 2.35, current short interest for HIMS now stands at more than 32% of the float, or about 65.4 million shares valued at $1.97 billion.
That is the most the stock has been shorted since March and marks a nearly 5% month-over-month increase.
At the same time, insider activity has seen an uptick in selling this year. In Q1 2026, $3.46 million worth of HIMS shares were sold with no buys. In Q2, that figure rose $4.86 million against $1.17 million bought. READ THIS STORY ONLINE
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Contrarian Alert: 5 Downgraded Stocks That May Reward Long-Term Investors
Written by Thomas Hughes
Not every downgrade is a sell signal. Sometimes, a lower price target reflects reset expectations rather than a broken investment case. That distinction matters for Domino’s Pizza (NASDAQ: DPZ)and ServiceNow (NYSE: NOW), two high-quality stocks that have fallen toward long-term lows even as Wall Street’s broader view remains constructive. For investors willing to look beyond the latest target cuts, both names may offer rare entry points backed by durable growth catalysts.
Domino’s Pizza: A Tasty Capital-Light Model, Cash Flow, and Buybacks
Domino’s Pizza shares are down sharply in 2026 amid sluggish consumer spending, increased competition, and health trends linked to GLP-1 inhibitors. The result for analyst sentiment is a sharp reduction in share price targets, with the low end pegged at $290, but little change in the actual sentiment rating. First on the list of Most Downgraded Stocks, DPZ is rated as a consensus Moderate Buy by 30 analysts; the Buy-side bias is above 50%, and the consensus price target forecasts over 30% upside from early July trading levels. The catalyst for the move may come late in the month, when DPZ issues its Q2 earnings report.
While consumer trends are impacting sales, the company’s unrivaled scale, technological advantages, and purchasing power enable growth and cash flow. Cash flow is critical to this investment due to aggressive buybacks. Shares were reduced by an average of 2.2% in Q1, a pace likely to be sustained in the coming years, potentially increasing in Q2, given the share price discount. Institutions, meanwhile, have been accumulating shares and underpin market support with price action at long-term lows.
Lowe’s Companies: Baseline Demand Provides Cash Flow
Lowe’s Companies (NYSE: LOW) is down on the combination of persistent housing market weakness, cautionary guidance, and the ensuing downshift in analysts’ sentiment. However, despite ranking second as the Most Downgraded, the negativity is centered on price targets, and the market has overreacted. While low-end targets suggest some downside risk remains, as of early Q3, most revisions align with the consensus, which forecasts a modest double-digit upside. Pegged at $265, a move to the consensus puts this market within striking distance of its all-time highs, with capital returns in play.
Lowe’s not only pays a reliable, growing dividend but also opportunistically buys back shares. Opportunities for investors include the value, which is deep relative to forward estimates, the dividend, and the potential for buybacks. It will take time, but housing markets are expected to improve, drive cash flow for Lowe’s, and increase capacity to return capital. Until then, market dynamics suggest that baseline housing demand, home maintenance, and seasonal spending are sufficient to ensure dividend safety.
Zscaler: A Prudent Approach Provides Opportunity for Investors
Zscaler’s (NASDAQ: ZS) stock is down, and still down, because of the AI SaaS-pocalypse fear and a change in sales strategy. The change includes the departure of two key figures and the impact on guidance. Management felt it “prudent” to take a cautious view despite the strengths shown in its Q1 release by other leading cybersecurity firms. Their results and guidance (more so the guidance) triggered robust market upswings that have added triple digits to their prices.
Analyst trends indicate a bottom in this market, despite it ranking third on the list of Most Downgraded Stocks for Q2. June and July activity includes more than a dozen reiterated ratings and price targets, pegging ZS as a consensus Moderate Buy with 40% upside potential, reaffirming price targets that had been reduced ahead of the Q1 release. The likely outcome is that ZS shares recover quickly in subsequent quarters, as results reflect the company’s inherent strengths and outpace the low bar management set.
ServiceNow: SaaS-Pocalypse to Narrative Shift in 1 Quarter
ServiceNow’s stock price is at long-term lows due to the SaaS-pocalypse that AI was supposed to bring. The story today, however, is that AI underpins ServiceNow’s strengths, with a shift in market dynamics expected. Late June and early July analyst activity reflectsthe shift in sentiment, with them expecting a meaningful business impact linked to AI in upcoming results. Drivers include the new package tiers that include consumption-based pricing.
Early channel checks indicate traction, prompting analysts to end the prevailing downtrend in sentiment. Even so, ServiceNow ranks fourth on the list of Most Downgraded stocks based on trailing 12-month activity. The consensus price target, which forecasts approximately 35% upside in early July, is down by roughly the same amount since last year.
Tractor Supply Company: Business Growth Slows, It Didn’t Die
Tractor Supply Company (NASDAQ: TSCO) suffers from tepid growth and (slightly) below-forecast results. The critical detail is that store count growth and comp sales sustain system-wide growth and cash flow, enabling the dividend and share buybacks. TSCO stock is relatively high-yielding as of mid-2026, paying an annualized yield of 3.17%, and it is expected to increase its payout at year-end. Buybacks are also substantial, having reduced the Q1 count by an average of 1.2% over the trailing 12 months.
Analyst trends are a headwind for price action, but again, this is a near-term problem. While all analysts are reducing their targets, the market overreacted and fell below the low end, creating a deep-value opportunity, with consensus forecasting more than 40% upside. Catalysts include the roll-out of fresh pet food capability across 700 stores. Pet Supplies is the single area of weakness this year, dragging on overall growth, and premium food is the trend.
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