RJ Hamster
🦉 The Night Owl Newsletter for December 8th
Unsubscribe Before Tomorrow’s Open: 3 Quiet Setups You Should Review (From Street Ideas)What Dollar Tree’s Surge and Home Depot’s Slide Say About Consumer HealthWritten by Jordan ChusslerAs 2025 comes to an end, there continue to be signs that the post-April market recovery is bifurcated, not unlike the oft-referenced K-shaped economic recovery. And despite critical macro data that’s routinely provided by the government not being delivered during or in the wake of the shutdown earlier this fall, the way the economy is manifesting itself in the market is telling. That’s particularly true of the consumer discretionary and consumer staples spaces, which are highly sensitive to consumer spending habits. But it’s even more true for a handful of mega-cap companies that are so impactful, they’ve come to serve as barometers of economic health. Specifically, when it comes to The Home Depot (NYSE: HD) and Dollar Tree (NASDAQ: DLTR), both have demonstrated their ability to function as leading economic indicators.Shifting Consumer Sentiment Is Hurting Discretionary Stocks With the exception of April’s tariff tantrum, the consumer discretionary sector has basically been flat on the year. On the surface, the sector’s middling 6.74% year-to-date (YTD) gain is good enough to place it eighth among the S&P 500’s 11 sectors. However, upon closer inspection, the story is far different than what that YTD figure suggests. Since its post-tariff tantrum recovery on May 13, the consumer discretionary sector has been trading within a range, unable to achieve its next leg up as numerous headwinds have resulted in shoppers tightening their belts. Since that date, the sector has been unable to break overhead resistance despite numerous attempts to do so. That also goes for the stocks that call consumer discretionary home—specifically, Home Depot. Home Depot Has Stagnated as Consumers Buckle Down The home improvement chain has dealt with the fallout from tariffs, the least affordable housing market in U.S. history, and subsequently a slowdown in same-store sales. Not even Mother Nature has been on Home Depot’s side this year. Without any hurricanes making U.S. landfall, CEO Ted Decker noted in the company’s Q3 earnings call that “the lack of storms in the third quarter…resulted in greater-than-expected pressure in certain categories.” Between the administration’s trade policies, stubbornly high interest rates for 30-year mortgages, and a lack of natural disasters in 2025, shares of Home Depot have fallen nearly 17% since their YTD high on Jan. 27. With little relief expected in the housing market or in the affordability crisis over the next year, consumers will likely continue to put off home renovation projects that often require debt financing, as discretionary purchases take a backseat to necessities. In turn, that has ended an impressive streak for Home Depot. Following a run of 19 consecutive quarters of earnings beats, the company has posted three consecutive quarterly misses. After reporting Q3 results, the company lowered its full-year outlook. Meanwhile, Home Depot has seen its net income decrease more than 13% from $17.1 billion in 2022 to $14.8 billion last year. On a trailing 12-month (TTM) basis, that figure stands at $14.5 billion, suggesting that when 2025 is in the books, the company—and its shareholders—will be facing a worse fiscal and earnings performance than they saw in 2024. With consumer confidence—as measured by the University of Michigan’s Index of Consumer Sentiment Survey—showing that sentiment in November was 29% lower than the year prior and year-ahead inflation expectations at 4.5%, more pain could be in store for the company.Higher-Income Shoppers Flock to Dollar TreeOn the other side of the coin, Dollar Tree has seen its stock gain more than 60% YTD, including nearly 44% since its six-month low on Oct. 7. The discount retailer has been enjoying outsized gains as budget-conscious shoppers flock to its locations in search of deals as household budgets continue to be stressed by runaway utility costs, sticky inflation, and rising food costs. But while shareholders of consumer discretionary stocks like Home Depot are being punished, budget-conscious shoppers continue to drive top-line growth for discount retailers like Dollar Tree. In his Q3 2026 earnings call comments, CEO Mike Creedon stated that the company now serves “an increasingly broad spectrum of shoppers, from core value-focused households to middle and higher-income shoppers who are making deliberate choices about how and where they spend.” In fact, Dollar Tree had 3 million more households shop there during Q3 than it did the same quarter a year prior. However, even more impressively, shares of DLTR have benefited from a nearly 60% increase in higher-income shoppers (i.e., those earning more than $100,000 annually). And while the company was in the red last year, much of that was attributed to Dollar Tree facing massive impairments and charges related to its struggling Family Dollar chain. But the company sold Family Dollar and closed nearly 1,000 underperforming stores.That turnaround is already in the works. On a quarterly basis, the company has posted three consecutive quarters of net income gains during fiscal year 2026. The smart money is largely on board. Institutional ownership of DLTR stands at a staggering 97.40% of the float. READ THIS STORY ONLINENvidia CEO Issues Bold Tesla Call (Ad)While headlines focus on Tesla’s car sales, tech analyst Jeff Brown says the real story is Tesla’s role in a $25 trillion AI revolution — one that Nvidia’s CEO himself has called a “multi-trillion-dollar future industry” — and he’s uncovered a little-known stock 168 times smaller than Nvidia that could be positioned to ride this breakthrough. CLICK HERE NOW TO SEE THE FULL REPORT3 Stocks Most Likely to Split in 2026Written by Thomas HughesStock splits are a powerful tool for investors that provide portfolio leverage. While a stock split does nothing to alter the fundamental quality of the business of the stock value, companies that split are a rare breed whose stocks have been trending higher and tend to continue trending higher over time. Their qualities include growth, cash flow, and robust market support, sufficient to drive their stock prices to elevated levels and sustain the rallies over the long term.It is the elevated price points that matter in this scenario. The primary reason for a stock to split is that its price is too high for “average” investors to buy regularly, and there is an expectation for it to continue rising. Three stocks are positioned as strong candidates for a split in 2026, based on current share prices, recent momentum, and expected gains over the next year.Meta Platforms: The Stock Most Likely to Split in 2026Meta Platforms’ (NASDAQ: META) stock is among the most likely to split in 2026 because its bent on AI is driving growth, sustaining robust cash flow, and powering a strong capital return. The stock price entered a consolidation in 2025 but remains in an uptrend, likely to continue in 2026. Among the concerns is a forecast of increased tech investment; however, the takeaway is that when Meta invests in AI, it pays off. That’s why the stock is trending higher today and has risen 550% over the past three to four years.Coincidentally, Meta Platforms is the only Magnificent Seven stock that hasn’t split. Analysts believe that increases the odds for a 2026 split, as does their price target trend. The trend includes increased coverage, a firm Moderate Buy rating, and an expectation for 25% upside from critical support levels. They align with the December price bottom, a likely launch pad for 2026’s rally. Regarding 2026’s forecasts, analysts expect Meta to sustain a high-single-digit growth pace and to widen its margin incrementally.  Ulta Beauty: Gains Share, Outpacing Competitors, Widening MarginsUlta Beauty’s (NASDAQ: ULTA) stock price got a boost following its fiscal Q3 (FQ3) earnings report and is likely to head higher. As it stands, the stock is trading at record highs, near $600, and is on track for a 2026 stock split. Analysts’ forecasts are improving and point to another 25% upside, likely achieved well before the end of 2026, and results will likely sustain the bullish trend. While 2025 has been a good year for the business, the forecast for 2026 includes substantial margin improvement, and it is likely to be low. Ulta is gaining market share from competitors and expanding its store count, providing a dual tailwind for growth. Like Meta Platforms, Ulta Beauty focuses some of its cash flow on share buybacks. Unlike Meta, which reduces the count incrementally, Ulta Beauty aggressively buys its share. Activity in FQ3 reduced the count by more than 4.5% on average, and there is sufficient authorization to sustain the pace for years, which is why institutions like it. Institutional support is solid, with institutions owning about 90% of the stock, and the group is accumulating in Q4 2025.  Caterpillar: Blue Chip Stock Accelerates Rally With Robust SupportCaterpillar’s (NYSE: CAT) stock price is near $600 in late 2025 and heading higher in 2026. Business strength, compounded by less-than-expected tariff impacts, sustains the rally, and 2026 is forecast to be another good year. Strength is tied to activity globally, including the surge in datacenter construction, and underpins an outlook for accelerating top-line results and margin improvement. Margin is critical for this Dividend Aristocrat as it pays approximately 30% of its earnings to investors and has been increasing at a semi-aggressive 7% pace over the last few years. The analyst trends are supporting the CAT price action. Coverage is not only increasing rapidly, but sentiment has firmed from Hold to Moderate Buy over the last year, and price targets are trending higher. While the consensus offers limited upside in late 2025, it is up 60% in the past 12 months, with the high-end offering a 40% upside.  READ THIS STORY ONLINEBefore Tomorrow’s Open: 3 Quiet Setups You Should Review (Ad)Street Ideas highlights early activity in small-cap names before they show up on mainstream radars. Stay ahead of the noise with alerts focused on real momentum, not hype. GET EARLY ACCESS — JOIN FREEChargePoint’s Comeback Story: Why This EV Stock Is Charging Up AgainWritten by Jeffrey Neal JohnsonAfter a punishing year for shareholders, ChargePoint (NYSE: CHPT) delivered a powerful jolt to the market, with its stock climbing over 22% in a single session following its third-quarter earnings report. For investors who have watched the stock decline more than 50% year-to-date, the sudden surge raises a critical question: Is this a temporary spark, or the start of a sustainable recovery? A closer look reveals this rally is backed by more than just a simple revenue beat.Fundamental improvements in its core operations, a newly fortified balance sheet, and a clear roadmap for future growth suggest ChargePoint is charting a credible course toward a stronger future.Profitability Takes Center StageChargePoint’s third-quarter performance provided the fundamental proof that its strategic adjustments are taking hold. The company reported revenue of $105.7 million, comfortably beating analyst expectations and marking a 6% year-over-year increase. This figure signals a welcome return to growth, demonstrating that demand for its charging solutions remains resilient.More importantly, the company made significant progress toward profitability. Non-GAAP gross margin, a key measure of profitability on goods and services sold, hit a record high of 33%. This is a substantial improvement from the 23% margin reported in the same quarter last year.This expansion is primarily fueled by the impressive 15% year-over-year growth in ChargePoint’s high-margin subscription business. Revenue from recurring software and service plans, which Wall Street values for its predictability, now accounts for a substantial 40% of the company’s total revenue, showcasing the strength of its scalable business model.At the same time, management has demonstrated a firm grip on spending. GAAP operating expenses fell 16% year-over-year, a clear sign that cost-control measures are yielding tangible results. This combination of growing revenue, expanding margins, and disciplined spending allowed ChargePoint to narrow its GAAP net loss by 32% to $52.5 million, marking a significant step in the right direction.A Masterstroke in Financial ManagementWhile the quarterly results ignited the rally, a strategic financial maneuver executed in November provides the foundation for a long-term recovery. ChargePoint completed a debt exchange that fundamentally de-risks its balance sheet and addresses one of the most significant concerns that has weighed on the stock.This move was made possible by the company’s improved cash management, which resulted in net cash usage over the last four quarters decreasing to less than $39 million, down from $178 million in the prior period.The transaction was a decisive victory for the company and its shareholders, delivering several key benefits:Massive Debt Reduction: The total debt was slashed by $172 million, cutting the company’s outstanding debt by more than 50% at a significant 33% discount.Cash Flow Relief: The deal is expected to reduce annual interest expenses by approximately $10 million, thereby preserving crucial cash that can be reinvested in growth initiatives.Extended Runway: The maturity of the company’s debt has been extended to 2030, pushing any significant obligations far into the future and giving management a clear, long runway to execute its strategic plan.Shareholder Protection: The deal also eliminated a costly change-of-control premium of approximately $82 million tied to the old debt, which would have made the company more expensive to acquire and potentially deter future suitors.This proactive move does more than just clean up the numbers; it signals that the management team is in control of its financial destiny. By deleveraging the company so effectively, ChargePoint has increased its financial flexibility and shifted enterprise value back to shareholders, making the investment case substantially more secure.Silencing Skeptics with a Clear Growth RoadmapDespite the positive developments, some market skepticism persists, as reflected in a cautious analyst consensus rating of Reduce and a high short interest of over 13%. However, this pessimism may be overlooking the powerful growth catalysts the company is putting in place for 2026 and beyond. In fact, this high short interest provides potential fuel for the rally, as continued positive news could force short sellers to cover their positions, further driving the price up.A key pillar of the company’s future growth is its strategic partnership with power management giant Eaton (NYSE: ETN). The co-developed product lines, including the ChargePoint Express DC fast chargers, are engineered to reduce both installation and operational costs for customers by up to 30%.This is achieved by integrating with Eaton’s smart electrical hardware, which can eliminate the need for expensive and time-consuming site upgrades, a significant barrier to adoption.Furthermore, management has identified Europe as a rapidly growing market and a key driver of growth. This is backed by strong regulatory tailwinds, such as the EU’s Alternative Fuels Infrastructure Regulation (AFIR), which mandates the installation of fast-charging stations every 60 kilometers on major highways. ChargePoint’s new product portfolio is timed perfectly to capture this government-backed expansion.Back in the U.S., the National Electric Vehicle Infrastructure (NEVI) program is also gaining momentum, with over 40 states now actively awarding contracts for charging projects. In this sector, ChargePoint is a primary competitor.Fully Charged for the FutureChargePoint has successfully executed on two critical fronts: improving its current operations and securing its long-term financial health. The company delivered a quarter that not only surpassed expectations but also demonstrated tangible progress on its strategic goals of growth, margin expansion, and cost control.The subsequent debt restructuring provides a solid foundation for the future. While the electric vehicle sector remains dynamic, ChargePoint’s combination of operational momentum, a strengthened balance sheet, and multiple growth catalysts suggests the recent rally is not an endpoint, but the start of a sustainable recovery. READ THIS STORY ONLINEVirtually Unknown AI Company Solving Trillion-Dollar Problem (Ad)Amazon has quietly poured $144 million into a secretive AI chip company, and committed to buying a staggering $650 million of their product. Why? Because this obscure startup holds the key to unleashing the full potential of Nvidia’s revolutionary Blackwell chip.DISCOVER THE COMPANY AT THE HEART OF THE AI ARMS RACE.More StoriesNetflix Wins the Streaming Wars: The $82B Warner Bros. DealBroadcom’s Biggest Test Yet: Will Q4 Earnings Spark Another Rally?Turn your “dead money” into $306+ monthly (starting this month) (Ad)These 3 Little-Known Stocks Are Analyst FavoritesAI Is Powering Guidewire Software’s Growth—So What Spooked the Market?5 Tech Stocks Insiders Are Selling (But Smart Investors Are Loading Up)D-Wave’s 22% Surge: What’s Behind the December Rally?The Night Owl is a financial newsletter that provides in-depth market analysis on stocks of interest to individual investors. Published by MarketBeat and Early Bird Publishing, The Night Owl is delivered around 9:00 PM Eastern Sunday through Thursday. If you give a hoot about the market, The Night Owl is the newsletter for you. 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