🦉 The Night Owl Newsletter for August 26th

Unsubscribe The Night Owl, From Early Bird Publshing. Wall Street’s quietly buying these 3 AI infrastructure plays (From StockEarnings)tc pixel Williams-Sonoma’s Quarter Gave Bulls More Than Just a Beat-and-Raise Written by Thomas Hughes Williams Sonoma circular logo sign on a wall surrounded by kitchenware, bowls, a pepper mill, and cutting board. Williams-Sonoma’s (NYSE: WSM) stock broke out of a trading range earlier this year to confirm its uptrend remains intact. The market reconfirmed the breakout following the Q2 earnings release, signaling the next leg of the uptrend is at hand. How high the stock gets depends on several factors, including macroeconomic conditions, which are central to the opportunity presented. WSM sold off after the Q2 release because CEO Laura Alber noted that macroeconomic headwinds from housing and tariffs will linger. The stock price confirmed support at a critical level and could continue to rally, as the Q2 release showed the company’s strategy still works. Williams-Sonoma has mastered the art of retail, choosing to focus on quality and margin rather than explosive mass-market growth. Together, this creates sustainable growth, consumer loyalty, and an industry-leading selling environment where promotions and clearance are rare. The takeaway is that, as of early Q3 2026, Williams-Sonoma is firing on all cylinders, the high-margin business is outperforming expectations, and the robust capital return program should continue to flow. Williams-Sonoma stock rebounds from critical support near $220 after CEO comments, signaling resilience despite volatility. Williams-Sonoma Falls After Beat-and-Raise Results Williams-Sonoma had a stellar quarter with growth in all segments contributing to the industry-leading 6.7% growth and 6.2% comp. The core Williams-Sonoma brand performed best, up 7.6%, while all others grew by at least 3.5%, with key concepts like Pottery Barn and West Elm up at least 5%. Margin news is mixed. Gross and operating margins contracted compared to last year, but less than expected. Key details include a 17.3% adjusted operating margin, still at the high end of the long-term target range; $696 million in operating cash flow; and $2.10 in adjusted earnings per share, three cents above consensus. Looking ahead, Williams-Sonoma expects the strength to continue and has raised guidance to reflect it. At 5.5%, the midpoint of the revenue forecast is 75 basis points above consensus, and management is likely to be cautious. The likely scenario is that Williams-Sonoma performs at the high end of its guidance or higher, sustaining bullish market sentiment through year’s end and into the subsequent year. Bullish Analysts Trends Unchanged, Leading to Fresh Highs Initial analyst responses are bullish and align with current trends. They highlighted top- and bottom-line strength, noting the offset between operational quality and tariffs, and especially liked the guidance. As it stands, coverage is steady, with 18 analysts tracked; the Moderate Buy rating has a 50% Buy-side bias, and price targets are trending higher. August activity is particularly bullish, with four major firms, including Goldman Sachs and Bank of America, setting Street-high $260/$261 price targets and forecasting fresh all-time highs. Institutional activity is as solid as it gets for a stock. The group owns more than 99% of the floating shares and is aggressively accumulating, with activity spiking in early Q3. In this scenario, institutional activity helps limit downside risk, suggesting a strong price floor. The likely outcome is that institutions continue to underpin market activity, reaping the dividend while the company executes its strategy. The strategy centers on self-funded growth, cash flow, and capital returns. The company sustains a fortress-like balance sheet and uses excess capital to pay dividends and buy back shares. There were no buybacks in Q2, but H1 2026 activity is on track to match, if not exceed, that of the prior year. As a result, the share count is down 3.8% as of the end of Q2, in addition to the dividend payment. The dividend annualizes to about 1.3% with shares near the critical support target, a lowish yield but one that is highly reliable and expected to grow at a healthy clip in upcoming years. The company has been increasing the payout at a high double-digit pace in recent years, but is likely to slow over time. Share price catalysts include the potential for buybacks to accelerate as the company grows and housing markets recover. Williams-Sonoma’s biggest risk is a more prolonged downturn in the housing market. Higher-than-wanted inflation is keeping the FOMC from lowering rates and sapping demand for housing and the new furniture that goes with it. That pressure is affecting results at brands such as West Elm and Pottery Barn, but there is a ray of hope. Oil prices are the root cause of inflation in 2026; they are expected to fall sharply in 2027, potentially triggering a domino effect that reduces inflation and leads to FOMC rate cuts. Additionally, Williams-Sonoma's high-margin status typically commands premium pricing. Signs of weakness will be reflected in the valuation and could impair the stock price action. READ THIS STORY ONLINE Buy this stock tomorrow (Ad) tc pixel Buy this stock tomorrow Marc Chaikin, founder of Chaikin Analytics, is sharing a strategy he calls 'Sell This, Buy That' - a way to move out of overpriced AI stocks before the tech trade breaks down and into lesser-known names with real potential to challenge the Mag 7. One pick he calls 'an upgrade to Tesla stock' is a little-known company that just inked a partnership with Nvidia, positioning it ahead of Tesla in the autonomous vehicle race. GET THE NAME, TICKER, AND FULL HOTLIST BEFORE MARKETS OPEN Alcoa’s Gallium Project Opens a New Door Beyond Aluminum Written by Jeffrey Neal Johnson Alcoa logo on a metal plate surrounded by molten and solid metal ore in an industrial setting. The global semiconductor supply chain has a critical vulnerability that traces back to a single raw material. Used in everything from advanced military radar to next-generation artificial intelligence (AI) hardware, gallium is a critical material for modern technology. With foreign monopolies actively restricting the export of this critical mineral, Western governments are aggressively seeking domestic alternatives. Enter an unlikely hero in this geopolitical tug-of-war. By leveraging existing infrastructure, Alcoa Corporation (NYSE: AA) is quietly transforming from a traditional industrial miner into an indispensable technology asset. Alcoa recently broke ground on a facility in Western Australia designed to extract gallium directly from existing refining processes. This strategic maneuver bypasses the long delays typical of greenfield mining projects, positioning Alcoa to capture lucrative government subsidies and premium off-take agreements. The combination of this critical mineral pivot with deep fundamental value sets the stage for a compelling valuation re-rating. The Genius of Permitting Arbitrage To fully grasp the full scale of this operation, investors should look at the regulatory landscape of modern mining. Permitting a new mine often takes upwards of 10 years in Western jurisdictions. This regulatory friction stifles the rapid supply chain shifts required by the technology and defense sectors, especially following recent export restrictions imposed by dominant Eastern suppliers. Alcoa bypasses much of this bottleneck at its Wagerup alumina refinery. Instead of digging a new hole in the ground, engineers are retrofitting the existing circuit to extract gallium directly from the Bayer process liquor. Because gallium exists in trace amounts within bauxite ore, it naturally concentrates in the liquid byproduct of standard alumina refining. This operational efficiency translates to unmatched speed-to-market. The newly backed facility aims to produce around 100 metric tons of refined gallium annually. Capital expenditure for a project of this scope carries inherent risk, but Alcoa has reduced some of the development risk. The United States and Australian governments are funneling strategic capital into the project through established defense frameworks to secure non-monopolized supply chains. The project already has a confirmed off-take partner in Japan's Sojitz Corporation, operating through the Japan Australia Gallium Associates joint venture. When a materials producer can extract a high-margin critical mineral from an existing waste stream, with partial government subsidies and guaranteed international buyers, it creates a powerful catalyst for long-term margin expansion. Fueling the Furnace: The Aluminum Cash Cow Roars While the gallium narrative provides the growth catalyst, the legacy aluminum business remains the financial engine. It is easy to look at a recent quarterly earnings miss, where earnings per share came in at $2.12 against a $2.25 consensus, and assume the core business is dragging. A deeper look at profitability metrics reveals a highly efficient industrial machine capable of funding its own modernization without stretching its balance sheet. Alcoa boasts a robust trailing 12-month return on equity hovering near 19%, alongside net margins closing in on 9.5%. Generating roughly $1.16 billion in trailing net income gives management the financial flexibility to fund high-tech pivots while weathering standard commodity cycles. Management also rewards patience, offering a dividend yield of around 0.78%. Backed by a highly sustainable payout ratio of about 8% based on trailing earnings, the dividend remains safe. Alcoa is aggressively consolidating its upstream footprint to secure this cash cow. The recent strategic agreement to acquire South32's aluminum assets creates a highly accretive growth narrative. By expanding its foundational bauxite and alumina operations, Alcoa solidifies its pricing power in the traditional metals market. Simultaneously, this upstream expansion increases the raw volume of refining liquor available across its portfolio, inadvertently scaling its future capacity for critical mineral extraction. From Industrial Miner to Tech Proxy The broader market is currently pricing Alcoa as a cyclical legacy miner, largely ignoring its emerging role as a subsidized defense and technology proxy. The stock trades at a depressed forward price-to-earnings ratio of about 7.8. This is a discount relative to the broader materials sector and an even steeper one relative to technology hardware companies that rely on its output. This valuation disconnect represents a severe mispricing. While the consensus 12-month price target sits near $61, representing around 23% upside from recent trading levels, the upper bounds of institutional expectations point to considerably more upside. The high-end price target stands at $80, suggesting a potential upside of nearly 56%. This elevated target aligns with the multiple expansion expected when institutional capital fully recognizes the structural shift in Alcoa's revenue streams. Traditional miners typically command single-digit multiples, but specialty chemical and critical mineral suppliers frequently command multiples in the mid-to-high teens. Market mechanics reflect this underlying strength. Short interest remains relatively healthy at about 4.14% of the float, and recent options data shows a notable spike in bullish call volume following the Wagerup groundbreaking. Institutional ownership is exceptionally stable, anchored by long-term holders providing a solid floor for the stock as the transition takes hold. Beyond Bauxite: The Alcoa Blueprint The transition from a traditional aluminum producer to a critical node in the semiconductor supply chain will naturally take time to reflect on the balance sheet. The gallium stream is a high-margin byproduct, but it will take a few quarters for these revenues to meaningfully offset some of the cyclical volatility in the broader global aluminum market. If Western governments heavily subsidize multiple refineries globally in a panic to secure materials, there is a long-term risk of market oversupply that could compress future gallium margins. The immediate reality is that governments are desperate to secure critical minerals today. Alcoa already has the infrastructure, regulatory workarounds, and off-take agreements in place. As the Wagerup facility scales toward operational status, the market could begin pricing in this tech-adjacent premium. Investors building exposure to the semiconductor and defense sectors may want to add Alcoa to their watchlist before the broader market fully prices in the geopolitical implications of its evolving operating model. READ THIS STORY ONLINE Wall Street’s quietly buying these 3 AI infrastructure plays (Ad) tc pixel Wall Street’s quietly buying these 3 AI infrastructure plays Hedge funds are rotating out of AI hype and into the hardware layer powering it. New research identifies three profitable U.S. infrastructure companies leading this shift. One just posted 76% year-over-year data-center growth. Another holds a $12 billion backlog from global hyperscalers. A third is generating 59%+ gross margins on next-gen chips. ACCESS THE FULL ANALYSIS, PRICE SETUPS, AND CATALYSTS NOW Oura’s $16 Billion IPO Could Put a New Price on Wearable Tech Written by Jeffrey Neal Johnson Gold and silver Oura smart ring with sensors displayed on a dark stone surface beside the Oura logo. The wearable technology space is quietly undergoing a structural shift. Forecasts project that the global wearables market will surpass $100 billion in 2026 and reach roughly $230 billion by 2033. Investors seeking the next wave of hardware capitalization are closely watching Oura Health. Oura is reportedly preparing to seek up to $3 billion in a U.S. public offering at a valuation closing in on $16 billion. This potential debut could provide an important price-discovery mechanism for pure-play wearable health data platforms. Rather than just another tech IPO, Oura's targeted pricing could challenge Wall Street's valuation of established health-tracking platforms. By isolating the premium associated with health data aggregation and recurring subscriptions, the offering could prompt investors to reassess the value of wearable divisions within legacy tech giants. Moving Beyond Basic Hardware Margins Oura's potential $16 billion-plus valuation does not emerge in a vacuum. Oura Health is projected to reach approximately $2 billion in sales in 2026, implying an estimated 8x forward revenue multiple at a $16 billion valuation. In the hardware space, achieving that kind of multiple requires more than just moving physical units across a supply chain. It relies heavily on high-margin, recurring software subscriptions tightly paired with physical devices. A standalone hardware business traditionally trades at a steep discount due to manufacturing costs, supply chain vulnerabilities, and margin compression. Oura operates differently by positioning itself as a pure-play health platform. Users pay upfront for the physical ring, but the value proposition extends to the ongoing data processing, sleep tracking, and personalized biometric insights offered through its monthly subscription. By converting a one-time hardware purchase into a recurring revenue stream, pure-play trackers can create more predictable revenue and improve the economics of the hardware relationship over time. This predictable cash flow can also make the model more attractive to institutional buyers. If institutional markets validate Oura's proposed premium, the offering could establish a distinct benchmark and suggest investors are willing to assign software-like multiples to hardware companies if the underlying health data ecosystem is robust enough to generate recurring revenue. Heavyweights in the Corner: Obscured Value in Big Tech Wearables This pricing event creates an interesting dynamic for established tech ecosystems. Currently, technology sector companies like Apple Inc. (NASDAQ: AAPL) and Alphabet Inc. (NASDAQ: GOOGL) compete in wearables through products including the Apple Watch, Pixel Watch and Fitbit. Consider Apple's recent performance. Apple's Wearables, Home and Accessories segment posted about $7.88 billion in fiscal Q3 2026, representing a solid 6.5% year-over-year increase. Despite generating billions in revenue, Apple does not break out Apple Watch sales separately, making it difficult to isolate the value of the wearable business from the broader category. Because the Apple Watch serves primarily as an ecosystem anchor, designed to keep users tethered to the iPhone, iCloud, and Apple Fitness+, Wall Street rarely assigns it a standalone multiple. The true value of the wearable is obscured by its role as a supplementary driver for high-margin services. Alphabet faces a similar structural dynamic. Alphabet recently rolled out its screenless Fitbit Air alongside the Pixel Watch 5, further integrating the Fitbit brand into the Google Health ecosystem. Fitbit Air also puts Google more directly into the growing market for screenless health trackers occupied by companies such as Oura and Whoop. However, Alphabet does not separately disclose the financial contribution of its health-tracking products from its broader hardware operations. For both Apple and Alphabet, wearables remain relatively small pieces of much larger businesses. Apple's valuation is driven heavily by the iPhone ecosystem and Services, while Alphabet's rests largely on advertising, cloud computing and its growing AI opportunity. As a result, the value of wearables can remain obscured within their broader corporate structures. Institutional Capital Steps Into the Ring Institutional capital remains heavily concentrated in diversified technology, largely influenced by the ongoing generative AI boom. Alphabet's recent multi-billion-dollar custom AI chip deal with Marvell and Apple's reported $1 billion annual outlay for Alphabet's Gemini AI underscore a heavy strategic pivot toward computing power. Berkshire Hathaway recently boosted its Alphabet stake by 83% to nearly $37.8 billion, while retaining a substantial position in Apple. Insiders at both Apple and Alphabet have also recorded recent share sales. The upcoming Oura IPO will test whether institutional liquidity is prepared to support a targeted wearable hardware pure-play. If Oura successfully secures its $3 billion offering at the targeted valuation of more than $16 billion, it will send a meaningful signal that there is institutional appetite for specialized health data platforms. This dynamic creates a compelling narrative for the physical economy of tech. While software and language models dominate headlines, the actual collection of biological data requires physical hardware. Companies that can bridge the gap between physical data collection and recurring software revenue may be better positioned to command premium multiples. Such a scenario could apply pressure to Apple and Alphabet. When a pure-play competitor achieves a high valuation multiple, investors naturally begin to ask what a legacy tech company's internal division would be worth on the open market. While a spinoff of the Apple Watch or Google Pixel Watch is highly unlikely given their tight integration into broader operating systems, Oura's valuation could give analysts another reference point for assessing the embedded value of these businesses. The Next Era of Health Tracking The wearable tech sector is entering a mature phase in which health data aggregation commands a significant premium over basic step tracking. Oura Health's aggressive capitalization strategy highlights the immense value locked inside these data-driven platforms. While Apple and Alphabet continue to lead by sheer volume, their sprawling business models obscure the true multiple their wearable divisions could command in a vacuum. As the wearables market scales past the $100 billion mark this year, the focus will increasingly shift toward margin expansion through subscription software and pure-play health metrics. The potential Oura IPO provides a useful lens for pricing this industry shift and testing how much public-market investors are willing to pay for a standalone wearable health platform. Investors navigating this space may want to add Oura to their IPO watchlists to gauge broader market sentiment for health hardware. Simultaneously, those with long-term exposure to Apple or Alphabet could monitor how these tech giants evolve their wearable products and services as specialized competitors attract higher valuations. READ THIS STORY ONLINE Why Trump really wants Greenland (Ad) tc pixel Why Trump really wants Greenland The petrodollar arrangement that anchored the US dollar for 50 years quietly expired in June 2024. Since then, China has cut its Treasury holdings by 45% from their peak, and BRICS nations offloaded $47 billion of American debt in a single month. The Trump administration has responded with a $12 billion critical minerals stockpile called Project Vault, equity stakes in miners like MP Materials and Lithium Americas, and a push to secure resources from Greenland to Ukraine. Porter Stansberry lays out the full story in a new documentary, including five companies positioned at the chokepoints of what he calls Trump's New Dollar. WATCH THE FULL DOCUMENTARY BEFORE DECEMBER'S ECONOMIC SUMMIT IN MIAMI More Stories 5 Stocks to Buy in September Before Wall Street Catches On Palantir's Kool-Aid Moment: The Math Behind Karp's Forecast The pattern behind why traders buy high and sell low (Ad)tc pixel Tariffs Are Back in Focus: 3 Stocks With a Home-Field Advantage Gold and Bitcoin Are Rebounding—2 ETFs Give Investors a Different Kind of Exposure HONA: The Spin-Off Story the Market Is Reading Wrong Quantum Computing Is Raising the Stakes for Cybersecurity: 5 Stocks to Watch 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. The Night Owl Newsletter. View as a Web Page If you have questions about your newsletter, please feel free to contact our U.S. based support team at contact@marketbeat.com. Unsubscribe © 2006-2026 MarketBeat Media, LLC. All rights protected. 345 North Reid Place, Sixth Floor, Sioux Falls, S.D. 57103. United States.. Further Reading: Buy this stock tomorrow (From Chaikin Analytics)