The Insider Report: Tariffs Are Back on the Menu – Can Bulls Hold On?

Market Overview

Stocks were down last week after digesting another round of tariff news and even battling it out with bond vigilantes. The Nasdaq and Dow Jones Industrial Average were only down 2.47%, compared to the S&P 500 being down 2.61%. Bitcoin rallied to a new all-time high, and if it continues acting as a leading indicator, then it signals good things to come for stocks too. Bonds came off the lows too, and if we a bottom forming here contrary to the consensus of the crowd, it could turn into a big tailwind for tech again. Markets are closed on Monday for Memorial Day – where would we be without those that gave the ultimate sacrifice?

Stocks I Like

Gap (Ticker: GAP) – 54% Return Potential

What's Happening

• Gap, Inc. (GAP) is a leading global apparel retail company, focused on designing and selling clothing, accessories, and personal care products under brands like Gap, Banana Republic, Old Navy, and Athleta, with a significant emphasis on sustainable fashion and inclusive sizing as core parts of its style and accessibility strategy.
• The company's revenue and earnings have trending in the right direction. The latest quarterly report showed revenue of $4.15 billion and earnings of $206 million.
• This valuation on GAP is very fair. Its P/E is at 12.71, its Price-to-Sales is at 0.71, and its EV to EBITDA is at 7.78.
• From a technical standpoint, GAP just broke out from a wedge formation, which could lead to more acceleration to the upside in prices.

Why It's Happening

• The company has successfully reduced its exposure to tariff risk, sourcing less than 10% of its products from China and less than 1% from Canada and Mexico combined. This diversified sourcing strategy helps insulate Gap from potential supply chain disruptions and tariff-related cost pressures, supporting margin stability and earnings visibility.
• Gap's leadership team, including CEO Richard Dickson and CTO Sven Gerjets, has articulated a clear strategy for leveraging technology to drive value creation. This focus on digital transformation is expected to enhance organizational productivity and deliver more personalized customer experiences, both of which are crucial for long-term competitiveness in retail.
• Management has shifted its focus in 2025 to "continuous improvement through innovation," with a particular emphasis on artificial intelligence (AI) and technology-driven transformation. The newly formed Office of AI is tasked with driving innovation across operations, from customer experience personalization to supply chain optimization. 
• All four of Gap's major brands—Old Navy, Gap, Banana Republic, and Athleta—achieved flat or positive comparable sales for the year, with each gaining market share. This broad-based momentum across diverse banners reduces reliance on any single brand and points to effective brand reinvigoration efforts. 
• Quarterly revenue for Q4 2025 reached $4.15 billion, surpassing analyst projections of $4.07 billion. This top-line beat demonstrates Gap's ability to drive sales growth even in a competitive retail environment.
• Gap delivered a standout Q4 2025 earnings performance, posting EPS of $0.54—well above the consensus estimate of $0.36, a beat of $0.18 per share. 
• Analyst Ratings:
• JP Morgan: Overweight
• Barclays: Overweight
• Morgan Stanley: Overweight

My Action Plan (54% Return Potential)

• I am bullish on GAP above $24.00-$25.00. My upside target is $44.00-$45.00.

Credo Technology (Ticker: CRDO) – 45% Return Potential

What's Happening

• Credo Technology Group Holding Ltd (CRDO) is a leading provider of high-performance connectivity solutions, focused on designing and delivering advanced semiconductor and interconnect technologies for data centers, enterprise networks, and AI infrastructure, with a significant emphasis on energy-efficient, high-speed data transmission as a core part of its innovation and scalability strategy.
• There is notable growth taking place in both revenue and earnings in CRDO. The most recent report showed a surge in revenue, now up to $135 million. Earnings followed as well, as they climbed to $45.38 million in the last quarter.
• Valuation in CRDO is astronomical, but they're starting to put up the numbers. P/E is over 2000, Price-to-Sales is 33.37, and EV to EBITDA is at 715.99.
• From a technical perspective, CRDO is pressing up against resistance of a saucer formation. If that breaks, look out above.

Why It's Happening

• ​​​​​​Industry research projects the AEC chip market to grow from $68 million in 2023 to over $1 billion annually by 2028. Credo is already experiencing demand outpacing initial projections, driven by AI deployments and deepening customer relationships. Capturing even a modest share of this expanding market could translate into outsized revenue gains.
• The recent launch of PILOT, a diagnostic and analytics software platform, enhances network reliability and performance for AI data centers. Early customers report best-in-class usability and faster deployment, suggesting strong adoption potential. By layering software on top of hardware, Credo diversifies its revenue and increases customer stickiness, both of which support higher valuations.
• With $379.2 million in cash and short-term investments at the end of Q3 FY2025, Credo is well-capitalized to fund R&D, pursue strategic acquisitions, or weather macroeconomic volatility3. A strong balance sheet reduces risk and provides optionality for growth initiatives, which can further accelerate shareholder returns.
• Credo's products are integral to the rapid buildout of AI-enabled data centers, where high-speed, reliable connections are mission-critical. As AI chips proliferate, the need for advanced connectivity solutions like AECs and PCIe retimers grows exponentially. This secular trend positions Credo as a key enabler in a multi-year infrastructure upgrade cycle.
• Credo delivered a record $135 million in Q3 FY2025 revenue, representing a staggering 87.4% quarter-over-quarter and 154.4% year-over-year growth.
• Credo reported a GAAP net income of $29.4 million and non-GAAP net income of $45.4 million in Q3 FY2025, translating to $0.16 and $0.25 per diluted share. respectively
• Analyst Ratings:
  • Oppenheimer: Outperform
  • Roth MKM: Buy
  • Craig-Hallum: Buy

My Action Plan (45% Return Potential)

• I am bullish on CRDO above $51.00-$52.00. My upside target is $90.00-$92.00.

Toast (Ticker: TOST) – 41% Return Potential

What's Happening

• Toast, Inc. (TOST) is a leading cloud-based software and payment solutions provider, focused on delivering integrated point-of-sale, payment processing, and operational management tools for the restaurant industry, with a significant emphasis on user-friendly technology and data-driven insights as core parts of its efficiency and growth strategy.
• This company has steady revenue and earnings growth. The previous quarter showed $1.34 billion in revenue and $118.76 million in earnings.
• Valuation is steep in TOST too. It's P/E is at 165.44, its Price-to-Sales is at 5.17, and its EV to EBITDA is at 134.67.
• From a charting perspective, TOST is attempting a breakout from a massive wedge formation. This could lead to another huge rally in this stock.

Why It's Happening

• Toast's ARR soared to $1.7 billion in Q1 2025, marking a 31% year-over-year increase. This robust growth signals that Toast's subscription-based, recurring revenue model is gaining traction across the restaurant industry. As ARR is a key indicator of future revenue stability and predictability, investors can expect Toast to enjoy a steady stream of high-margin income, supporting both valuation and future expansion.
• The company added over 6,000 net new restaurant locations in the first quarter of 2025, bringing its total footprint to approximately 140,000—an impressive 25% increase year over year. This rapid expansion demonstrates Toast's increasing market penetration and the stickiness of its platform. A growing customer base not only boosts revenue but also enhances network effects, making it harder for competitors to catch up.
• Toast recently secured Applebee's—the largest deal in company history—covering approximately 1,500 locations, and also landed Topgolf as a major enterprise client. These marquee wins validate Toast's platform at scale and open the door to additional enterprise contracts. Such high-profile partnerships provide recurring revenue, brand credibility, and a powerful reference for future sales, accelerating Toast's move upmarket.
• Toast's platform goes far beyond point-of-sale, integrating payment processing, digital ordering, delivery management, payroll, inventory, and marketing tools. This all-in-one approach makes Toast indispensable to restaurants, increasing customer stickiness and average revenue per user (ARPU). As Toast rolls out new features and verticals, it deepens its ecosystem, driving upsell opportunities and reducing churn.
• Toast generated $79 million in net cash from operating activities and $69 million in free cash flow in Q1 2025, compared to negative cash flow a year ago.
• Toast delivered a GAAP net income of $56 million in Q1 2025, flipping from a net loss of $(83) million a year earlier.
• Analyst Ratings:
  • BMO Capital: Outperform
  • Morgan Stanley: Overweight
  • Wells Fargo: Overweight

My Action Plan (41% Return Potential)

I am bullish on TOST above $37.00-$38.00. My upside target is $60.00-$62.00.

Market-Moving Catalysts for the Week Ahead

Is the Fed or Treasury Going to Blink First?

Rising bond yields are the talk of the trading town, and for good reason. But a lot of the focus is on the fiscal effects and not on the steepening of the yield curve. Remember, a steep yield curve is actually healthy, and right now, the market is doing the Fed's job for them.

The problem has been and remains on the liquidity front. Rising bond yields aren't actually a problem, assuming they're discounting higher economic growth. Keep in mind that interest rates will naturally rise when growth is accelerating.

This idea comes in stark contrast to the overwhelming recession rhetoric, but this doesn't mean that there all the volatility is in the rearview mirror, especially when you consider that volatility exists to the upside too.

Catch Your Breath for the Holiday, and Then…

Markets will be closed on Monday, but don't let that let your attention slip from the slew of important data and earnings next week. At the top of my list to watch is the FOMC minutes on Wednesday. Is the Fed still asleep at the wheel or are they ready to join the rest of the developed economic world (save for Japan) and cut rates?

Then there is the first revision of Q1 GDP on Wednesday, and inflation data on Friday. Assuming both of these come in soft (just look at commodity prices, inflation isn't an issue at the moment), then it gives the Fed more reason to move and lower rates.

Finally, watch Nvidia's earnings very closely. This comes out the same day as the GDP reading on Wednesday, and with the stock within spitting distance of its all-time high already, be alert for a catalyst for this name to breakout again. If it does, bears are done for.

Sector & Industry Strength

Stocks were lower last week, but at a sector level, there really weren't any major negative developments. We still see the defensive sectors like healthcare (XLV) and energy (XLE) near the bottom of the pack, which is a good sing.

But the performance spread between consumer staples (XLP) and consumer discretionary (XLY) widened last week, which is a sign of caution near-term. Utilities (XLU) are still hanging out near the top of the pack, but pro-growth industrials (XLI) are still leading year-to-date.

The majority of sectors are still in positive territory year-to-date, but the biggest one we need to see go positive is technology (XLK). Remember, this market lives and dies by tech, so when it lags, it creates problems on the long side.

Editor's Note: A bit of caution crept back into the tape last week.

Key Tech Indicator Surges (Sector ETF: SMH/QQQ) 

The ratio between semiconductors (SMH) and the Nasdaq 100 (QQQ) is one of my favorites to monitor, because very few things do a better job of measuring the health and sentiment of the broader tech sector.

Here's the thing – the tech sector simply cannot advance and innovate without chip improvements. The logic would therefore have it that we want to see SMH outperforming QQQ, or seeing this ratio rise, in order to signal strong momentum overall.

And this is exactly what we're seeing now, which is cause for optimism. It looks like there was a false breakdown earlier this year from the wedge pattern, and we've since rebounded back above the upper trendline of the pattern. It looks like it's about to continue higher now.

The Battle of Alternative Assets (Sector ETF: BTC/GLD) 

The bear market in bonds since 2021 has cast many doubts over the traditional 60/40 portfolio, where investors would own 60% stocks and 40% bonds. The appeal of alternative assets has never been greater since then, and the two at the top of the list to consider are cryptocurrencies and precious metals.

Gold has captured the headlines for most of the year, with its outperformance during the equity market volatility a couple months back. But now, Bitcoin has stormed back into the picture, and just hit a new all-time high. Which one is better to own?

I think a little bit of each is good, but with an overweighting towards BTC. The ratio below shows a clear uptrend in favor of BTC over GLD, and there's a massive cup and handle formation from which a breakout could occur. Don't sleep on this setup.

The Inflation Stalemate Continues (Sector ETF: TIP/IEF) 

To inflate, or not to inflate? That is the question. The consensus is that inflation will return due to tariffs, but the bond market seems decided. Long-term rates are staying near their highs, while investors ponder what the Fed is doing to do next.

I like to look at the ratio between Treasury Inflation Protected Securities (TIP) and 7-10 Year Treasuries (IEF) to help measure inflationary pressures. When TIP outperforms IEF, it signals that the bond market thinks inflation is a problem, but when IEF outperforms TIP, it suggests that inflationary pressures are contained.

The ratio broke out from a descending triangle pattern last summer and has been creeping higher ever since. If it forms a lower-high here, which is a possibility, then inflationary pressures can stay contained, but I don't think it will stay that way for long.

My Take:

With last week's weak bond auction, the Fed's position on the sideline is becoming utterly irresponsible. Energy prices are at multi-year lows and inflation is not a problem per the data, yet they're stuck in this paradigm that tariffs mean inflation.

The question of course, is how stocks respond from here. It all depends on liquidity conditions. Remember, the Fed is technically in a "pause" and I do think that they will eventually resume cuts. Let's just hope nothing breaks before then.

Cryptocurrency 

Bitcoin’s technical structure has turned decisively bullish as it rallied to new all-time highs over the past week, and saw a notable acceleration in its upside momentum. Crypto has turned into an excellent barometer to measure market risk. 

Now we are observing an even larger broadening wedge formation. Prices already broke above resistance, and this is projecting a rally as high as 130,000-135,000. If and when it rallies to this zone, it could be a good area to capture profits.

With price now trading comfortably above $106,000, the previous resistance zone around $108,000 should now function as support on any pullbacks. The combination of strong momentum, a completed momentum pattern, and the break above major resistance creates an exceptionally favorable risk-reward scenario for long positions. As the saying goes, “the trend is your friend,” and the technical evidence suggests this uptrend has considerable room to run.

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