Enphase, Broadcom and Vertex Soar

The Santa Claus rally continues as the S&P 500 rose for the seventh straight week. This is the longest stretch of weekly gains since 2017, according to Dow Jones data.  

The S&P 500 was up 2.5% last week to 4,719. As of the market close on Friday, it was 78 points off its closing all-time high of 4,796 on Jan. 3, 2022. Since Nov. 1, the S&P 500 is up 12.5%, and it has gained 3.3% since Dec. 1.

The Dow Jones Industrial Average also gained 2.9% last week, finishing the week at an all-time high of 37,305. The Nasdaq also had a good week, rising 2.8%.

For the year, the Nasdaq started Monday up 41% year to date, while the S&P 500 is up 23% YTD, and the Dow is up 12% this year.

The big catalyst last week was the Federal Reserve’s decision not to raise interest rates for the third straight meeting, fueling sentiment that the tightening cycle is over. Here are the top three performers on the S&P 500 last week.

1. Enphase Energy, up 20.3%

Enphase Energy (NASDAQ: ENPH) has been a volatile stock, plunging almost 53% year to date. However, it has gained about 63% since Nov. 1 and is now trading at around $124 per share. Last week, it was the top performer in the S&P 500, soaring 20.3%.

One of the big catalysts since then was the announcement that the Department of Energy was awarding $3.5 billion to boost domestic production of battery storage. However, the bigger driver lately has been the Fed, and it was again last week.

Enphase is a clean-energy company that generates most of its revenue from microinverters for residential solar panels and battery-storage systems. High interest rates have been a killer for Enphase on two fronts. They have increased the growing company’s cost of borrowing, but they have also hurt the market, as high interest rates make obtaining loans and leases for solar panels more expensive.

Thus, the fact that the Fed held the line on rates for the third straight meeting and indicated via its dot plot that there would likely be three rate decreases in 2024 and more in 2025 was good news for Enphase.

2. Broadcom, up 19.6%

Broadcom (NASDAQ: AVGO) has been surging all year. The stock has soared some 102% year to date, including last week’s gain of 19.6%, which brought it to $1,130 per share after ending the previous week at $944 per share. Broadcom is a semiconductor and software company that makes semiconductors for data center switches and routers, among other things. Its stock has soared since it reported strong fourth-quarter earnings on Dec. 7.

Broadcom posted a 4% year-over-year revenue gain and an 8% revenue increase for fiscal 2023 to $35.8 billion. Its net income rose 4.9% in the quarter to $3.5 billion, or $8.25 per share, and for the year, its net income jumped 23% to $14.1 billion, or $32.98 per share.

At the end of November, Broadcom acquired VMware, which makes cloud-computing software. CEO Hock Tan called the acquisition “transformational” for Broadcom.

“The acquisition of VMware is transformational,” he declared. “In fiscal year 2024, we expect semiconductor [sic] to sustain its mid-to-high single-digit revenue growth rate, with the contribution of VMware driving consolidated revenue to $50 billion and adjusted EBITDA to $30 billion.”

If Broadcom hits $50 billion in revenue, that would be a nearly 40% increase over fiscal 2023.

Broadcom was also helped last week when Citigroup (NYSE: C) upgraded it to a buy and BofA Securities increases its price target by $50 to $1,250 per share.

3. Vertex Pharmaceuticals, up 17.3%

Vertex Pharmaceuticals (NASDAQ: VRTX) received some good news on one of its therapeutics, and that boosted its stock 17.3% last week to over $400 per share. It is up some 38% YTD.

On Dec. 8, the U.S. Food and Drug Administration (FDA) approved CASGEVY, a therapeutic treatment Vertex created with CRISPR Therapeutics to treat sickle cell disease. It is the first CRISPR-based gene-editing therapy to be approved in the U.S. 

Then this past Friday, the European Medicines Agency’s (EMA’s) Committee for Medicinal Products for Human Use (CHMP) adopted a positive opinion for the conditional approval of CASGEVY. If approved, Vertex said it will be the only genetic therapy in Europe for sickle cell disease. An approval decision is expected in February.

There was more positive news last week as Vertex also received positive results from its Phase 2 study of VX-548, its NaV1.8 inhibitor for people with painful diabetic peripheral neuropathy (DPN). The study found that VX-548 “resulted in a statistically significant and clinically meaningful reduction” in pain for the users in the study.

Of the three, Broadcom looks like the best buy right now with a reasonable valuation and lots of growth potential. However, Vertex is also worth watching, as the approval in Europe could give it another bump.