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Showing posts from 2018

Camping World: Momentum Stinks

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1/2/19 Update 
Camping World announced a major reorg including the hiring of a new CFO. The sudden resignation of the President of RV Operations looks more and more like a personal decision due to a disagreement with the organizational shifts and his new place in the business.

The stock is up about 5% to $12. Considering these reorgs usually occur when business is struggling, the recommendation isn't to jump into the stock on the rip. Continue to use dips to buy Camping World for the long term as 2019 could be another rough year.

Original Article
The last thing a weak stock needs is an executive departure. Camping World (CWH) is crashing to new lows based on the surprise resignation of the President of RV Operations.


One of the reasons to invest in Camping World was the solid management team lead by CEO Marcus Lemonis and other executives like Roger Nuttall with decades of experience in the industry. Naturally, the market is worried by a surprise move on a Friday evening during t…

Fitbit: Top App

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Fitbit (FIT) completed another successful holidays where their app ranked in the top 5 locations on the iPhone in 6 countries. In the Health & Fitness category, the Fitbit app reached the top rank in 29 countries.

Square: Lower Reset

Square shareholders have to reset expectations with the stock down $50 from the highs. Decelerating revenue growth trends will not be helped by a slowdown in the economy. The stock still trades at an elevated 12x '19 sales estimates. Despite obvious valuation issues,Square(SQ) investors were riding the stock higher above $100 earlier this year. The mobile payments provider traded at a market valuation approaching $50 billion while the company only guided adjusted revenues to $1.57 billion for the year. Myprevious articlediscussed that even a dip to the recent price of $50 would leave the stock in a stretched valuation so investors need to be careful chasing the stock here. Read the full article at Seeking Alpha. 
Disclosure: No position mentioned. Please review the disclaimer page for more details. 

Blue Apron: Oprah Momemt

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Blue Apron (APRN) has soared above $1 following news that the company has a partnership with Weight Watchers International (WTW). The move makes one wonder whether the partnership will lead to Oprah Winfrey pushing Blue Apron products. If so, investors can only dream of the same boost provided to Weight Watchers following their deal with Oprah. Beginning on October 1, 2015, the stock surged over 1,500% in the next 3 years.

Square: Momentum Play

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One of the biggest momentum trades coming out of the market correction of 2018 will likely be Square (SQ). The mobile payments firm dipped an incredible $50 or 50% from the peak in September over $100. The stock bounced off strong support around $50. 

Alphabet: Hardly Matters

Alphabet is positioned for substantial hardware revenue growth. The hardware division isn't positioned as a profit driver due to low margins. The smart speaker business isn't materializing as a direct profit driver as consumers shy away from voice commerce purchases. The stock remains cheap based on an enterprise value, trading at only 13.4x forward EPS estimates. As other tech giants make the move to high-margin services, Alphabet(GOOGGOOGL) continues making the odd shift into hardware. A big part of the move is to lock consumers into their services and advertising revenue streams. The stock remains incredibly cheap back below $1,000 as highlighted in my previous research, but the push into hardware isn't likely to contribute to this valuation. Read the full article on Seeking Alpha. 
Disclosure: Long AAPL. Please review the disclaimer page for more details. 

Zynga: Market Missed Bookings Boost

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As part of the announcement regarding the acquisition of Small Giant Games for $560 million, Zynga (ZNGA) increased bookings guidance for Q4. The mobile-game developer now expects to reach $260 million in bookings during the quarter prior to closing the deal.

Twitter: Outdated Negativity

Citron Research issued a $20 price target that isn't likely to be reached. The negative call is based on a 2017 report that's already outdated. The 2019 revenue growth rate doesn't accurately reflect the ongoing turnaround of the social media platform. A healthier Twitter will exceed the growth rates of competitors, warranting a higher stock price. The social media space continues to get hit by fears of data privacy and abuse mostly related to prior years.Twitter(TWTR) ended down more than 23% to $27 last week as Citron Research flipped back to negative on the stock based on a study of 2017 tweets by Amnesty International. Myprevious research already discussed the improved health of the network and this report doesn't appear to do anything but prove why the company has aggressively moved to cut trolls. Read the full article on Seeking Alpha. 
Disclosure: Long TWTR. Please review the disclaimer page for more details. 

Freeport-McMoRan: Copper Prices Holding Up

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The amazing part of Freeport-McMoRan hitting new lows at $10 is that copper prices have held up relatively well at $2.70/lb. The company highlighted a position of solid cash flows with copper up at $2.85/lb.

The recent weakness gets the copper miner closer to breakeven levels on a free cash flow basis, but all of the upside is in a trade deal with China that boost copper prices. Back above $3/lb, FCX starts generating up to $3 billion in annual FCFs. Much higher prices are all but inevitable as the market weakness derails new mines.

Use this weakness for the ultimate entry point here for a stock with a market cap down to only $14 billion. The only problem here is that the stock could head lower. The chart shows a never ending downtrend.




Tilray: Where The Bears Could Be Wrong

Tilray is generally viewed as an expensive stock with a $7 billion valuation and reported quarterly revenues of only $10 million. The October 17 legalization of the adult-use market in Canada is a major catalyst for the stock. Analyst revenue estimates appear low at only $12.8 million for Q4. The bear thesis could fall apart, if revenues top estimates as expected. After a hot IPO and first few months of trading,Tilray(TLRY) has come crashing down to $75. Shorts have generally written off the stock due to valuation concerns, but the company has the potential to prove the negative thesis wrong with operations in both Canada and Europe along with some high-profile partnerships. Read the full article on Seeking Alpha.


Disclosure: No position mentioned. Please review the disclaimer page for more details.

Micron Tech: Still Too Early

Micron Tech updated the market with horrible FQ2 guidance. The down cycle is only starting in the current quarter with historical down cycles lasting multiple quarters. The company built the net cash balance to record levels indicating the hidden weakness expected. Investors should expect additional weakness in FQ3 and shouldn't rush into the stock until YoY revenue declines reach a low. Myprevious researchtried to repeatedly warn investors that doom was still around the corner inMicron Tech(MU). Typically, the memory giant doesn't bottom out until the company has had multiple quarters of substantial revenue declines. The stock just wasn't going to bottom out after the previous quarter where YoY revenue growth was still up at 37%. TheFQ2 guidancegets the stock closer to a bottom, but it's still too early to get into Micron Tech. Read the full article on Seeking Alpha. 
Disclosure: No position mentioned. Please review the disclaimer page for more details. 

Johnson & Johnson: Weak Sign

JNJ continues to face escalating liability risk due to talc cancer lawsuits. The authorized $5 billion share buyback reduces confidence in the stock. Even after the selloff, the stock isn't appealing at 15x forward EPS estimates with the liability risk overhang and potential brand damage. In the middle of a crisis,Johnson & Johnson(JNJ) authorized a headline-grabbing stock buyback. The amount actually suggests that the talc lawsuits might have a bigger financial impact than originally thought. My consistentinvestment thesisremains intact that the stock should be avoided on this liability risk even after the stock dips nearly $20.
Read the full article on Seeking Alpha. 
Disclosure: No position mentioned. Please review the disclaimer page for more details. 

Baidu: No Google Threat

Google CEO confirmed the company wasn't planning on entering the Chinese search market. Oddly, Baidu ended down on the day despite this bullish news. The stock trades at only 13.5x '20 EPS estimates despite double the growth rate. Baidu(BIDU) remains one of the more perplexing stocks in the market. Despite a blooming Chinese internet sector, the market always has an excuse for avoiding the stock. My long-terminvestment thesishasn't changed, and the stock only becomes a better bargain on every dip. Read the full article on Seeking Alpha.

Under Armour: Don't Over-Read Into Baseline Targets

Under Armour provided 2023 financial targets at an Investor Day. The athletic apparel company has long-term plans for 10%+ operating margins. Based on company projections and peer margins, my 2023 EPS projection approaches $2. In a much anticipated event whereUnder Armour(UA,UAA) discussed long-term growth targets, the market was apparently disappointed with the updated 2023 projections. Mybullish investment thesishas long held that the athletic apparel company was under-delivering on margins, and their updated business model actually reinforces that thesis despite the initial 10% dip in the stock.
Read the full article on Seeking Alpha.


Disclosure: Long UA. Please review the disclaimer page for more details. 


Qualcomm: Global 5G Unlocked

Qualcomm is well positioned for the global launch of 5G. The wireless giant already has 20-plus license deals and expects to generate more revenue from additional RF front-end content. The delayed launch of the Apple 5G iPhone plays to the advantage of Qualcomm. The company remains on track for $7-plus EPS prior to 5G related growth. The most important note from the Snapdragon Tech Summit last week is that 5G is a global rollout utilizingQualcomm(QCOM) technology. A lot of the domestic wireless network providers are racing to become the first 5G providers, but anybody just focusing on the domestic market is missing the huge global market converging on 5G while other countries were far behind on 4G. Read the full article on Seeking Alpha. 
Disclosure: Long QCOM, AAPL. Please review the disclaimer page for more details. 

Aurora Cannabis: Questionable Mexico Deal

Aurora Cannabis agrees to buyout distribution partner in Mexico after one business day. The company has now formed an extensive global distribution and partnership network at the cost of major shareholder dilution. A legitimate investor should question whether Mexicans will buy Canadian cannabis with readily available domestic supplies. Maintaining key support at $5.40 is crucial for owning this cannabis stock. When a company issues news seen as generally bullish by the investor community and the stock declines, investors should start asking more questions. Shareholders ofAurora Cannabis(ACB) find themselves in that situation with the stock trading down slightly on the news of buying the only licensed importer of medical cannabis in Mexico. The deal sounds too good to be true reinforcing myinvestment thesisof watching the price action in the stock for confirmation that a leader in the cannabis sector is headed in the right direction. Read the full article on Seeking Alpha. 
Disclosure…

Apple: Holiday Gifts

Analysts are providing a holiday gift with the constant price targets cuts on Apple. The number of Buy ratings on the stock are at a low since the financial crisis. The actual number cuts aren't that aggressive. The stock trades at only 11.7x FY20 estimates before excluding a large cash balance. Ever since Apple (AAPL) reported FQ4 results back on November 1, analysts have repeatedly come out negative on the stock. The company decided to quit reporting iPhone unit sales and the market hasn't stopped hammering the stock on feared sales weakness. One of the best ways to play analysts downgrading a stock in mass is to take a contrary view and the recent price cut of an ultra-bull is the likely signal that analysts are generally done cutting Apple targets. Read the full article on Seeking Alpha.

FedEx: Immediate Amazon Threat Overstated

FedEx gets hit by Amazon fears every couple of years. The online retail giant isn't even a 3% revenue customer. Analyst estimates shouldn't take a hit from the expected growth of Amazon Air. The stock is too cheap trading at about 10.4x FY20 EPS estimates. The time to buy FedEx Corporation (FDX) is when the market gets anxiety over Amazon (AMZN) expanding into the package delivery space. While the large online retailer is always a threat, FedEx should continue riding the delivery economy higher. Read the full article on Seeking Alpha.

Facebook: Rock Bottom

Facebook continues to face a very negative news flow. Users deleting Facebook appears to have already peaked. The EPS trend has started heading back up. An additional $9 billion stock buyback authorization helps shift investor sentiment back positive. When a stock quits going down on negative news, the stock has probably hit the lows. Facebook (FB) finds itself in that position with an ongoing negative news flow and a stock that has rallied off the November 19 low and held in the face of a another market selloff. My investment thesis was negative on the stock when $150 didn't hold, but the thesis is shifting back bullish here below $140. Read the full article at Seeking Alpha. 

Aurora Cannabis: Up In Smoke?

Aurora Cannabis is now down 55% from the highs around $12.50. The market cap remains a large $5 billion despite the company only reporting pro-forma quarterly revenues of $35.6 million. The stock is oversold and back to strong support at $5.40. Any further weakness in the face of surging demand and reports of beverage and tobacco industry interest would a huge negative signal. The best time to get into a market like the previously hot cannabis sector is after the related stocks are beaten down. Such is the case for Aurora Cannabis (ACB) now down over 55% from the double top at $12.50. As more and more areas legalize medical or recreational cannabis use, the market opportunity will only grow exponentially. The market dynamics of the cannabis sector are complex and the stock valuations are still stretched so the best way to derive the right valuation for Aurora Cannabis is the strong support at the current price. Read the full article on Seeking Alpha. 

Verizon: 5G Pause

The news on the Samsung 5G Galaxy and iPhone should solidify that 5G won't be ready for prime time anytime soon. Verizon recently hit $60, topping off a big rally since the summer. The improved payout ratio from AT&T will make Verizon a source of funds as investors flip into that much higher dividend yield. TheannouncementthatSamsung(OTC:SSNLF) andVerizon Communications(VZ) won't launch a 5G phone until next year will likely lead to a pause in Verizon stock. The stock recently hitmy targetat $60 likely on the back of 5G excitement. The lack of devices to connect to a 5G network should cause the excitement over the new technology to come to a sudden halt. Read the full article on Seeking Alpha. 
Disclosure: Long AAPL, QCOM. Please review the disclaimer page for more details. 

AMD: Good To Go On Dips

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AMD (AMD) has made a solid rally off the lows in November. The stock appears good to go on any dips here with a rising support line.

AMD reached a high of $34 back in September and due to market share gains the company appears poised to survive and thrive in any downturn. An easy initial target on the stock is a re-test of those highs in early 2019.

More research:  Big Horizon

Disclosure: No position mentioned. Please review the disclaimer page for more details. 


What Was Micron Thinking?

Micron CEO updated corporate guidance at a technology conference. The company went forward with large buybacks in FQ1. The lowered revenue guidance will ultimately guide the stock. At an investor conference on Wednesday, theMicron Technology(MU) CEO updated guidance that was not a shock to ourinvestment thesis. The shocking part is that the company plowed ahead with large-scale stock buybacks in the face of a downturn gaining steam and knowledge that sector cycles always end up worse than expected. Read the full article on Seeking Alpha. 
Disclosure: No position mentioned. Please review the disclaimer page for more details. 

Fitbit: Positioned To Win

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The recent Gartner forecast on global wearables shipments is ultra-bullish for Fitbit (FIT). The research firm forecasts shipments to triple from 141 million in 2017 to 453 million in 2022.

Fitbit is a big player in the Smartwatch category and Gartner specifically points out the promises of medical devices what the fitness tracking company is just now entering.

The best story for investors is that the stock only trades at a market value of $1.3 billion with a sizable balance sheet. Risk always exists with a stock, but Fitbit offers an incredible reward, if the company gets the wearables trend correctly over the next few years.

Disclosure: Long FIT. Please review the disclaimer page for more details. 


Spirit Airlines: Back On The Radar

11/28 Update

Spirit Airlines (SAVE) has surged 20% over the last couple of days after the airline boosted Q4 RASM to ~11% growth. The airline had originally forecast 6% growth after a period of declining metrics.

The airline has amazingly hit new highs following my April article when Spirit Airlines was down in the dumps. Analysts are boosting 2019 EPS estimates above $5 per share. The stock likely rallies towards $70 on this bullish news.

Investors should turn more cautious at these levels. The airline has a tendancy to dramatically boost capacity as yields start to improve. Absent any capacity boost, my view could stay bullish on these gains.

FireEye: Slight Shift

FireEye generated impressive Q3 results with impressive cash flow improvements. The cybersecurity company is in the midst of a shift towards Security as a Service. The weak Q4 guidance placed the stock right back in the penalty box when trading at multi-year highs near $20. Myinvestment thesishas long held with most stocks that unless the stock throws off cash every day the company opens for business, the stock just isn't appealing.FireEye(FEYE) has long fell into that category due to the lack of growth to vastly change the cash flow picture, but the recentQ3 results change the equation ever so slightly. Read the full article on Seeking Alpha. 
Disclosure: No position. Please review the disclaimer page for more details. 

General Motors: Riding The Transformation

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GM plans to close multiple plants that focus on the assembly of cars. The company forecasts increasing automotive cash flows by ~$6.0 billion by 2020. GM is set survive any current down cycle in the auto sector and thrive beyond 2020 as TaaS ramps up. My investment thesis has long held that the General Motors (GM) under the leadership of CEO Mary Bara is not your fathers GM. The auto manufacturer has correctly invested in transportation-as-a-service (TaaS) opportunities to position the company for the future while cutting costs. The stock has lagged due to fears of peaking auto sales, but the transformation should position GM to profit through a down cycle and into the massive TaaS opportunity down the road. Read the full article on Seeking Alpha. 

AT&T: Just Relax

AT&T trades back near the yearly lows at $29. The stock offers an incredible 6.8% dividend yield. Analyst meeting on Nov. 29 should provide a catalyst for the stock. Market will soon shift focus to $25 billion FCF focus. While myinvestment thesishas constantly slammed on the decisions ofAT&T(T) management to shift business away from building the best wireless network, the stock has turned into a bargain due to strong free cash flows. At $29, AT&T offers a nearly 7% dividend yield while recently backing incredibly bullish financials for 2019. The ongoing stock weakness remains an opportunity. Read the full article on Seeking Alpha. 
Disclosure: Long T. Please review the disclaimer page for more details. 

Teledoc: More Downside Ahead

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Teledoc (TDOC) is at the center of digital health. My previous research was for investors to 'pump the brakes' when the stock originally hit $60. The stock went on to surge to absurd levels reaching a high of $89. It's very crucial for investors to understand that Teledoc trading this far from the highs doesn't necessarily make the stock a bargain.

The stock now trades at a market value of about $4 billion with '19 sales estimates of $550 million. Teledoc probably hits a buy zone down at $45 or when the price hits $3.3 billion or roughly 6x sales estimates.

Disclosure: No position. Please review the disclaimer page for more details. 

GreenSky: Fintech Panic

GreenSky takes a big hit falling below $10 following weak Q4 EBITDA guidance. All of the fintech stocks have inevitably taken a big hit following going public despite maintaining solid revenue growth. GreenSky maintains strong transaction growth and only trades at 8x EBITDA forecasts. The recent slump inGreenSky(GSKY) follows a trend in fintech stocks eventually collapsing following high profile IPOs. One has to question whether these modern financials belong in the public markets if a high EBITDA margin company with 30%+ transaction growth isn't rewarded. The stock isn't likely to rally until the company hit financial targets, but the opportunity exists to start scaling into the stock in anticipation of better days ahead. Read the full article on Seeking Alpha. 
Disclosure: Long LC, ONDK. Please review the disclaimer page for more details.

Fitbit: Holiday Special

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Fitbit (FIT) is one of the top downloaded apps over the holidays as people get fitness trackers as holiday gifts. The stock is in a precarious position where Fitbit could close the gap from the surge following Q3 earnings, yet the related company is expecting a strong quarter.


The amazing part is that those results signaled a turn in the business. The stock is exceptionally cheap here around $5. The key is knowing that any further weakness in the stock is technical in nature and not any signal of weak holiday sales. Fitbit could easily retest $4.50 based on this chart.

The stock shouldn't trade at an EV 0.5x sales estimates while the company is shifting towards a med tech future. The stock would make a great stocking stuffer.


Disclosure: Long FIT. Please review the disclaimer page for more details. 


Wayfair: More Weakness Ahead

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Based in part on the negative call by Citron Research, Wayfair (W) is down below $85 now. My previous articles ($$) were negative on the stock due to the similar issues of diseconomies of scale.

Until the online furniture company shows that offering a global delivery network for heavy furniture items can scale profitably, the stock is likely to struggle. Citron has a $40 target on the stock, but something closer to $70 appears the most likely short-term target.

My view is more constructive long term. The retail experience in the furniture market is less than desirable leaving a big opportunity for Wayfair that offers a better service and selection. The question is whether the company can leverage an already large tech department and turn this into a real business.

Disclosure: No position. Please review the disclaimer page for more details. 


LendingClub: Perplexing Negativity

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LendingClub reported another quarter of records. The stock still trades at the lows follow the scandal around the former CEO when the business was at risk. Even a $7 price target offers a very low FY20 EV/EBITDA target. After yet another earnings report, LendingClub (NYSE:LC) is trading in the $3.50 range following a quarter where key growth metrics grew at a 20% annual clip. My investment thesis remains solidly on track as the online lending platform with nearly $800 million of cash and loans held for sale is constantly ignored by the market. The perplexing value won't last as the fintech continues to survive and thrive in a rising interest rate environment. Read the full article on Seeking Alpha. 

Sonos: Don't Chase The Rip

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Sonos (SONO) is up sharply following FQ4 results that beat estimates. The smart speaker company easily beat EBITDA targets as their new smart speakers had a strong quarter.

Source: Seeking Alpha 

The biggest issue with the company is that Sonos still produced a $15 million loss last year and the company only monetizes a hardware solution. The story still isn't that compelling until Sonos figures out how to make money off the voice-assisted speakers, instead of the tech giants.

Disclosure: No position. Please review the disclaimer page for more details. 


Intel: Don't Buy The Buyback Just Yet

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Intel (INTC) announced adding $15 billion to the share buyback plan bringing the total to $19.7 billion. On initial review, the amount isn't substantial enough to move the needle on the stock. Intel has a market cap of $215 billion so the total amount falls short of 10% of the outstanding shares.

Based on history, the semiconductor giant isn't aggressive on share buybacks either. A net payout yield of 6.4% isn't impressive in a market with beaten down stocks. Besides, Intel wasn't that good with the last big buyback program in 2015 when the NPY topped 10% and the stock actually dipped.

Stay tuned, more to come here based on whether Intel is actually aggressive buying shares on the dips.

Disclosure: No position mentioned. Please review the disclaimer page for more details. 





What Was Applied Materials Thinking?

Applied Materials (AMAT) spent the last year convincing people of a new normal in the semiconductor space, but the December guidance suggests the cyclical sector hasn't changed at all.

- Downside Q1 guidance has revenue of $3.56B to $3.66B (consensus: $3.98B) and EPS of $0.75 to $0.83 (consensus: $0.93; -25% Y/Y at midpoint).

Consensus was for a revenue decline so it wasn't like the market expected great quarterly numbers from AMAT. The odd part was the decision of the BOD to spend $751 million during the quarter on share repurchases. Any company expecting to miss estimates by such a wide margin should not be loading up on stock buybacks.

The question here is whether the cycle has further downside. AMAT still expects solid profits so now isn't the time to runaway, but its too early until after Thanksgiving to even think about chasing the after-hours dip to $32. Lets see where AMAT trades on Friday.

AMD: Big Horizon

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The New Horizon event unleashed a big horizon for 7nm chips in the datacenter space. The AWS deal reduces the risk to the investment story. Analyst estimates for 2019/2020 are only taking into account baseline server CPU market share gains. The recent dip in Advanced Micro Devices (AMD) to below $17 and Monday's drop to $19 are rare opportunities to own a tech company on a major dip in front of a massive new product release. The Next Horizon event highlighted the big opportunity in the datacenter, reinforcing our bullish investment thesis. Read the full article on Seeking Alpha.  Update11/15: AMD closed down 5% in after-hours trading due to weak results from Nividia (NVDA). Those results shouldn't impact the market share gains expected of AMD in 2019 and beyond.






Disclosure: No position mentioned. Please review the disclaimer page for more details.