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🦉 The Night Owl Newsletter for July 27th
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Buy this stock tomorrow (From Chaikin Analytics)
AirJoule’s Kubota Deal Is a Major Validation—But the Hard Part Comes Next
Written by Thomas Hughes
AirJoule’s (NASDAQ: AIRJ) deal with Kubota (OTCMKTS: KUBTY)strengthens its commercialization timeline and has its stock price on track for an explosive rally. While small at face value- only two Core systems, the deal accelerates the transition from start-up to active player in infrastructure markets, with Kubota a major player.
The initial impact is validation: Kubota will incorporate the Core systems as components in a larger water production, handling, and treatment system for residential usage.
The longer-term opportunity is access to water-constrained residential markets, with Kubota serving as AirJoule’s exclusive sales channel for multi-unit developments in Texas and California.
For AirJoule investors, this means revenue now and in the future, expanding use cases and diversifying the business away from AI and data centers. More importantly, it means integration into a nationwide sales and maintenance system, reducing its overall costs and time to market.
AirJoule Begins Kubota Deployments in Q3
Years in the making, AirJoule is on track to commercialize its products in Q3.
The first deliveries to Kubota are slated for the period, and Prime sales are expected by year’s end. With this in play, the Q3 and full-year revenue forecasts are likely to be low. As it stands, analysts forecast less than $500,000 in full-year 2026 revenue, with much of it back-ended for Q4. Assuming successful delivery, the Q3 results will outpace the consensus and strengthen the longer-term outlook.
Analysts responded favorably to the news, with client notes from teams such as H.C. Wainwright reaffirming already bullish outlooks.
AIRJ receives a consensus Moderate Buy rating from the five analysts who cover the stock, reflecting an 80% Buy-side bias, and a consensus price target that implies more than 90% upside.
Institutional data reflect the analysts’ position, showing a high 63.65% ownership rate for this small-cap stock and aggressive buying. Institutional accumulation exceeded $25 to $1 in the first half and is sustaining a comparably high pace in early Q3, limiting downside risk. The likely outcome is that they continue buying shares and underpin stock price activity for the remainder of the year.
Technical action aligns with analysts and institutional activity, with lows set in early 2026 now a bottom and support rising. Early Q3 activity reflects a price pullback, but support was confirmed at a cluster of important exponential moving averages (EMA). The cluster includes long- and short-term EMAs that, in turn, reflect a Golden Crossover and subsequent confirmation, a signal of market strength and potential for reversal. In this scenario, AirJoule’s market forces are aligning with traders, speculators, and investors all taking bullish stances ahead of several expected catalysts. Resistance targets include prior highs near $5.65 and the top of the existing trading range.
AirJoule’s Next Catalysts Depend on Deployment and Regulatory Progress
AirJoule’s catalysts center on the deployment of systems in the coming months, affirming its ability to scale and meet demand.
The first are the two Core systems ordered by Kubota, followed by a Prime delivery to the EU.
The Prime system will be showcased at the EU’s Net Zero Innovation Hub and marketed to regional hyperscalers.
Follow-on catalysts include regional launches in the Middle East, aided by a TenX partnership, and regulatory approvals in the US.
The lynchpin is regulatory approvals, primarily from UL, which will enable large-scale, mass purchasing by CapEx managers and an explosive revenue surge starting in 2027.
AirJoule’s biggest risk is operating costs, but those leaning heavily on this argument misinterpret the company’s utility. AirJoule is more expensive to operate than traditional desalination services. The caveat is that AirJoule products are intended to operate far from traditional water sources, fresh or saline, and provide numerous benefits for residential, business, and industrial applications in addition to fresh water. AirJoule systems enable easy access to water resources that bypass existing regulatory frameworks, speeding development and production, and reducing heat and humidity.
There is some risk in AirJoule’s cash burn, but it is limited as of mid-2026. The company’s cash and equivalents were sufficient to fund operations and planned deployments through 2027, leaving only a minor gap between production ramp and true profitability. The likely outcome is that another $20 to $30 million will be needed to bridge the gap, but won’t become a requirement until late in 2027 or early 2028. By then, the company’s business position will be firmly established, allowing it to raise funds more easily. The production ramp is mostly derisked,since it is linked to Carrier’s massive production footprint and existing manufacturing lines.
Technical price risks include short sellers. Short interest was relatively high as of mid-July, above 10%, and rising, and may cap gains in the near-term. The opportunity, however, is that upcoming catalysts trigger short-covering. READ THIS STORY ONLINE
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Refiner Stocks Are Near Record Highs—Can Iran-Driven Margins Keep Them There?
Written by Nathan Reiff
As the war in Iran appears to be intensifying once again, the petroleum industry is facing renewed threats to production and supply after months of prior challenges.
The result is that crack spreads, which measure the difference between the value of refined products and the cost of the crude oil used to produce them, continue to soar. Crack spreads have recently reached record highs and could remain elevated in the near term if production, inventory, and refining disruptions persist.
The continued war in Iran has already benefited some U.S. refiners, who are the new recipients of global demand that was once reserved for the Persian Gulf. At least until the war resolves—and potentially afterward as well—domestic companies in this space are well-positioned to continue to generate strong cash flow and return value to investors via dividends and share buybacks.
Three oil refiners have seen their share prices soar to all-time highs in recent weeks, and the ongoing conflict may signal even more room to run.
Valero: After 82% Rally This Year, May Still Have Momentum
Valero Energy Corp. (NYSE: VLO) is a nearly $90-billion downstream company with a sizable renewables business in addition to its refining operations.
Shares have skyrocketed about 84% year to date (YTD) amid the unique crack spreads environment.
The company has excellent positioning in its Gulf Coast operations that should allow it to capitalize on bottlenecks in oil refining, keeping margins elevated for the near-to-medium term.
Investors will get an update on Valero’s financial situation when the company releases Q2 2026 earnings on July 30, but it is heading into this report already in a strong position. In the first quarter of the year, $1.3 billion in net income attributable to shareholders and $1.8 billion in refining operating income were both a sharp reversal of less-than-impressive results in the prior-year period.
Investors may expect the company to continue its aggressive buybacks and dividend payouts so long as its cash windfall from the current oil-refining environment remains in place. With its latest dividend of $1.20 per common share, the company continues to build on its multi-year history of distribution increases while maintaining a dividend yield of about 1.6% and a sustainable payout ratio.
Despite the major rally, Wall Street remains fairly bullish on VLO’s potential, with 12 out of 21 analysts calling VLO a Buy.
Marathon: Midstream Bonus Gives an Extra Advantage
With more impressive returns even than VLO, shares of Marathon Petroleum Corp. (NYSE: MPC) have risen nearly 89% YTD.
The company’s footprint includes refinery operations in both the Gulf Coast and the Midwest, allowing it to benefit from crack spreads in a similar way to Valero.
Setting Marathon apart, however, is the master limited partnership MPLX LP (NYSE: MPLX), which the former company created more than a decade ago and in which it still retains a significant investment. MPLX provides a crucial stream of income from its midstream business, diversifying Marathon’s refining operations and benefiting from a different set of bottlenecks in the midstream space.
Even not factoring MPLX, Marathon has been performing very well: the firm ran refineries at 89% utilization in Q1 2026, completing about 40% of full-year planned maintenance during that period. Noteworthy adjusted earnings per share (EPS) of $1.65 and adjusted EBITDA of $2.8 billion have allowed Marathon to announce a $5-billion share repurchase authorization, even as the company continues to build capacity at multiple sites. Marathon also pays a solid dividend yield of nearly 1.3%.
Like Valero, Marathon remains popular among analysts even after its protracted rally, with 11 out of 18 calling MPC stock a Buy.
Phillips 66: Diversification Benefits and Drawbacks
Phillips 66 (NYSE: PSX) has both refining and midstream transportation operations in its scope, giving it built-in diversification with a similar outcome to Marathon above.
At the same time, the company’s diversification may have slowed down its share price growth a bit this year—its lower-margin chemicals business through CPChem may have suffered a bit even as the firm’s oil business is positioned to thrive.
The result is that PSX stock is up nearly 60% YTD, somewhat behind the other companies on this list but still far ahead of the broader market. Like other firms in the space, Phillips’ performance has been characterized by robust refinery margins and utilization, EBITDA growth, and other strong points. However, sizable mark-to-market losses in Q1 2026 caused an earnings miss, so caution may be warranted.
Still, Phillips offers the standout dividend yield of these three firms at about 2.46% and, like the other companies, remains a favorite of analysts with 13 Buys versus nine Hold ratings. READ THIS STORY ONLINE
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With a market-moving announcement expected on July 31st, Chaikin is urging investors to swap overpriced AI stocks for this under-the-radar name before markets open. He’s also releasing a free Hotlist and Hitlist of buy and sell ideas for the second half of 2026.GET THE TICKER SYMBOL AND FULL DETAILS AT NO CHARGE TODAY
Verizon May Be an AI Infrastructure Stock Hiding in Plain Sight
Written by Thomas Hughes
Verizon (NYSE: VZ) is an AI-enabler of first-class quality, and it isn’t getting enough attention. Its fiber optic networks are critical for AI connectivity, spanning all levels of the stack from data centers to devices. While not a semiconductor manufacturer, networker, or model builder, AI data can’t get where it needs to go without the long-haul and metropolitan fiber networks on which Verizon’s business is built. It is the data highway hyperscalers need, and the deal with Alphabet (NASDAQ: GOOGL) is the proof.
Verizon CEO Dan Schulman unveiled an industry-unlocking event when he announced that Alphabet would rent its dark fiber. Worth more than $1 billion in revenue, it is expected to be the first of many such deals as hyperscalers rush to lock in long-distance fiber-optic capacity.
The impact on Verizon’s revenue, cash flow, and earnings will be monumental, as the dark fiber networks already exist, as they are leftover, unused capacity dating back to the DotCom boom. The takeaway is that Verizon is unlocking unused assets in a high-margin fashion, with little to no start-up costs and Google footing the hardware bill; it will buy the machines to power the system and transmit the data while Verizon collects rent fees.
Verizon Improves Capital Position and Capacity for Capital Return
The dark fiber rent fees equate to growth, margin improvement, and a strengthened capital position, with Verizon already on track for balance sheet improvement and paying attractive dividends. Distributions annualize to roughly 6% with shares trading near late-July highs, more than 3x the S&P 500 average, with distributions expected to grow over time. As it stands, Verizon will be included in key indices such as the Dividend Achievers, a listing of stocks with at least 25 years of annual distribution increases, within the next few years, and share buybacks are also in play.
Verizon’s management revealed confidence in the turnaround, cash flow position, and future growth by accelerating buybacks in Q2. Quarterly activity aided an approximate 1.35% trailing 12-month reductionin share count, with the annual target lifted to $4.5 billion. The likely outcome is that VZ continues to buy back shares at a semi-aggressive pace, improving shareholder leverage, and may accelerate activity again in future quarters.
Analysts were not prompted to raise price targets or upgrade, but they responded with optimism, citing core strengths and margin improvements. The Alphabet deal is seen as a positive, but not yet transformational change, as the billion-dollar price tag is an incremental increase to the projected $140+ billion in 2027 revenue. Either way, the group remains supportive, rating the stock as a consensus of Hold with 45% Buy-side bias and price targets limiting downside risk. Institutions also limit downside risk in Q3 2026, owning more than 60% of the stock and buying at a pace of $2 to $1.
Verizon’s Improving Cash Flow Could Accelerate Debt Reduction
Verizon carries a fair amount of debt, which is one reason for analyst caution. The company’s debt load impairs cash flow and capital returns, but is expected to improve in the upcoming quarters. Underpinned by CEO Schulman’s turnaround efforts, improving service revenue, and reduced device subsidies are already driving double-digit cash-flow improvement that can be focused on debt reduction. With hyperscalers now leasing out dark fiber capacity, the odds are high that debt will fall more quickly than anticipated. In this scenario, VZ provides a catalyst for sell-side support, potentially prompting analysts to adopt a more bullish posture by year’s end.
The Q2 results were mixed, reflecting the impacts of turnaround efforts. Revenue contracted by 0.7%, underpinned by a 20% decline in equipment sales linked to reduced promotional activity. The top line underperformed expectations by a significant margin, which is bad news, but is offset by margin improvement, the good news.
The goal of reduced promotions is to shift focus to consumer quality (and satisfaction), which is reflected in margins. Services revenue grew across the board, helping drive cash flow and free cash flow improvements, as well as bottom-line outperformance despite top-line weakness. Free cash flow, the critical detail, grew by 16% in the first half, accelerating to over 24% in the second quarter and is expected to improve as the year progresses.
Guidance is a catalyst for this market. The company lifted its margin, cash flow, and earnings targets to above-consensus levels and may underestimate future strength. Verizon is inflecting into a structural shift, with service revenues accelerating, margins expanding, and secular tailwinds in AI. Additionally, the new bundled plans are resonating with consumers, reducing churn and overall costs while solidifying the revenue base. READ THIS STORY ONLINE
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Today’s Bonus Content: A 17-year investing experiment investigated in Dublin(From Porter & Company)
