Showing posts from 2019

IB Net Payout Yields Model

Out Fox The $treet - December 31, 2019

Stocks to watch on the last day of 2019: AMD (AMD) - Rosenblatt raises the price target for the chip stock to $65. Analyst Hans Mosesmann has a similar view on the stock as Stone Fox Capital. The stock remains extended as 2019 comes to close. Investors will want to look for a pullback to start 2020 after the massive year end rally. Cronos Group (CRON) - pot stocks are seeing a big rally to end 2019. Cronos Group is up 17%, but the move just appears a dead cat rally. Don't chase any of the Canadian cannabis stocks higher. Disclosure: No position. Please review the disclaimer page for more details. 

Twilio: Stuck At $100

Twilio has a market valuation already at $15 billion. Revenue per share is only forecasted to growth at 29% in 2019. Massive share dilution has captured a vast majority of the recent revenue growth, limiting benefits to shareholders. The stock trades at a peak valuation near $100 of 10x '20 sales estimates. For the last couple of months,  Twilio  ( TWLO ) has been stuck around $100. After absorbing the SendGrid acquisition, my  investment thesis  was negative on the stock, based on a trend towards investors chasing revenue expansion and fading stocks with decelerating revenue growth. As 2019 ends, the company is on a path towards normalized revenue growth, and the question is what is the appropriate valuation for a stock with 30% growth, not something wild like 70% growth officially reported in the last quarter. Read the full article on Seeking Alpha.  Disclosure: No position mentioned. Please review the disclaimer page for more details. 

Aurora Cannabis: No Thanks To Ontario!

Ontario finally plans to allow new cannabis retail stores, but the 2020 target is far below industry hopes. Cannabis 2.0 rollout appears disappointing in part due to lack of Ontario retail stores until mid-2020. The $3 billion stock price remains expensive with capital needs while facing more industry delays. Just when the Canadian cannabis sector appeared headed towards a couple of major catalysts in 2020, the sector has again been sabotaged by the governments inability to license new stores or break the illegal market. My  investment thesis  was looking for a chance to turn bullish on  Aurora Cannabis  ( ACB ), but the company remains in a tough financial situation until catalysts kick in later into 2020. Read the full article on Seeking Alpha.  Update - December 23, 2019 Not surprising with all of the Cannabis 2.0 delays, Aurora Cannabis hit a new low today. The stock needs to test the sub-$2 range and once coming out the other side, ACB could become a buy. 

Out Fox The $treet - December 18, 2019

Stocks to watch on Wednesday: Slack (WORK) - report after report continues to suggest Microsoft (MSFT ) has become aggressive in pushing Office clients into their competitor to Slack. Teams now has far more users and Slack is facing decelerating growth. My price target remains $17.50 and the chart suggests the risk remains to the downside. FedEx (FDX) - the package delivery company remains a disaster. The stock appears to have more downside risk after another quarter of missing analyst estimates. FedEx is an interesting stock to watch as the company inevitably hits bottom as Europe improves. Disclosure: No position. Please review the disclaimer page for more details. 

LendingClub: Hidden Value

LendingClub trades near the yearly lows despite generating substantial EBITDA improvements. The company has moved 48% of the direct and indirect workforce outside of San Francisco to substantially reduce costs. The stock trades at ~3x EV/EBITDA estimates for 2019. LendingClub  ( LC ) still fails to get any respect from the stock market. The company grew adjusted EBITDA by over 40% in the last quarter and the market just yawned. My  investment thesis  remains very bullish despite the stock not moving on very positive numbers questioning what catalyst will ever move the stock higher. Read the full article at Seeking Alpha.  Disclosure: Long LC. Please review the disclaimer page for more details. 

AMD: Not Priced For Perfection

AMD isn't priced for perfection based on the Nvidia path. Investors tend to forget that AMD was priced for a financial disaster back in 2016. Nvidia has more normalized growth projections and still trades at 30x forward EPS estimates. My $15 billion revenue, $3 EPS plan would position the stock for substantial gains in the next few years inline with Nvidia from a few years ago. Due to the large rally in the stock of  Advanced Micro Devices  ( AMD ), investors consider the stock priced for perfection and pressured to meet lofty financial targets in 2020. The odd part is that  Nvidia  ( NVDA ) had a similar rally a few years ago and the stock traded at much higher peak valuation multiples than AMD is currently. The major separating fact is that AMD traded at distressed prices back in 2016 before these stocks rallied. My  investment thesis  remains very bullish on AMD due to the $15 billion sales plan. Read the full article on Seeking Alpha.  Update - December 14

Out Fox The $treet - December 13, 2019

Stocks to watch at week end: Lyft (LYFT) - the launch of Lyft Rentals isn't smart. The ridesharing service appears set to create another way to lose money. A prime benefit of the service is the door-to-door service where customers get a $20 ride credit each way. In essence, Lyft is giving away rides where the company already loses money in order to obtain what might only be a daily rental for $35. A lot of the service appears better for consumers, but the company is actually offering these ride credit discounts. Until Lyft can charge premium fees, avoid the stock. Canopy Growth (CGC) - the Ontario govt has approved a plan to license 20 stores a month starting next April. Canopy Growth expected 40 stores per month starting in January leaving a 300 store gap from expectations. This stock is still headed to $10. More research: Canopy Growth: Constellation Bid Appears Unlikely, For Now Stitch Fix (SFIX) - here comes the expected dip following another solid quarterly report.

CrowdStrike: Next Strike

CrowdStrike dipped following strong quarterly results, as the stock is still too expensive at over 17x FY21 sales. The looming venture fund sales will cap stock gains in the short term. Investors need to assume the stock breaches recent lows and touch the IPO price. When a company is worth more than 10x forward sales, execution has to be flawless for the stock to rally. In the case of  CrowdStrike Holdings  (NASDAQ: CRWD ), a stock trading closer to 20x forward sales has to virtually print money to reward shareholders. For this reason, my  investment thesis  remains very negative on this cybersecurity stock despite trading near the lows with the next strike of lockup expiration looming. Read the full article on Seeking Alpha.  Disclosure: No position mentioned. Please review the disclaimer page for more details. 

Canopy Growth: Constellation Bid Appears Unlikely, For Now

Canopy Growth rallied 14% on the hiring of the CFO from Constellation Brands on the hopes of a bid. Constellation Brands has a large debt position suggesting a large bid is highly unlikely. An executive void during the Cannabis 2.0 rollout is an unwelcome outcome of hiring a new CEO. The price target remains $10, or roughly 5x EV/FY20 sales target. Canopy Growth  ( CGC ) finally  hiring a new CEO  is not the recipe for a stock rally in an expensive stock. In addition,  Constellation Brands  ( STZ ) isn't likely to launch a takeover bid costing upwards of $10 billion when the company lacks the cash. My  previous investment thesis  placing the stock at $10 remains intact with the further delayed rollout of Cannabis 2.0 and a new CEO not starting until January. Read the full article on Seeking Alpha.  Update - December 11, 2019 The stock is trying to hold $20. A positive plug from Cramer today is helping Canopy Growth, but investors should consider the lack of ra

Out Fox The $treet - December 10, 2019

Stocks to watch on Tuesday: Stitch Fix (SFIX) - the online personalized style service reported a strong FQ1. Despite the rally, Stitch Fix is a fundamentally cheap stock trading at an EV/S multiple of 1x. The stock is up 50% off the lows so investors might look for dips to enter the stock, but the value remains insanely cheap. Canopy Growth (CGC) - the announcement of the Constellation Brands (STZ) CFO as the new CEO isn't a reason to celebrate. The cannabis stock is highly expensive at $20 with my previous value estimate below $10. In addition. Constellation Brands wouldn't hire a new CEO, if the company wanted to make a bid. The wine and spirits company doesn't have the cash for a big premium deal either. Fade this rally as the break of the downtrend is unlikely to hold. Disclosure: No position. Please review the disclaimer page for more details. 

Slack: Fade The Rally

Slack rallied despite confirmation of decelerating revenue trends. Microsoft appears to be stealing users at the margin. A valuation of 8x FY22 revenues places the stock at only $17.50. Despite  disappointing guidance ,  Slack Technologies  ( WORK ) rallied back on the day following earnings. The stock still trades near the lows following a hot IPO earlier this year as the market originally priced the collaboration service at irrational levels. The bounce places the stock in a position to rally off the lows, but the valuation remains far too rich to chase Slack here as my  long-term investment thesis  remains negative. Read the full article on Seeking Alpha.  Disclosure: No position. Please review the disclaimer page for more details. 

Slack Wants To Head Higher

After Slack (WORK) initially traded down following FQ3 results, the stock made an impressive turnaround on Thursday. Slack appears ready to rally after hit higher lows and closing at the highs. The stock valuation isn't that impressive here. My valuation places the stock at $17.50 at 8x FY22 revenue estimates. Paying far more and chasing this stock just doesn't appear wise. Disclosure: No position. Please review the disclaimer page for more details. 

Ambarella: Back To Reality

Ambarella beat FQ3 results, but the management team suggested revenues of $10 million were pulled forward. After years of spending, the company still can't disclose any needle moving CV chip deals with automotive customers. The stock is likely to retest $40 with revenue estimates for FY20 and FY21 declining. Despite all of the promises of computer vision chips and the huge stock rally this year,  Ambarella  (NASDAQ: AMBA ) still hasn't generated anywhere near the results and forward expectations warranting the stock rally this year. Investors should expect the stock to come back down to earth based on my  previous research  due to falling expectations for the next couple of years consistent with the past of this chip company and risks of basically operating in China. Read the full article on Seeking Alpha.  Disclosure: No position. Please review the disclaimer page for more details. 

Out Fox The $treet - December 3, 2019

Stocks to watch on Tuesday: Freeport-McMoRan (FCX) - as expected, no deal exists with China. The copper miner is a buy on weakness into the $9 range. The stock has capped upside at $12 until a trade deal is done. Twitter (TWTR) - Dorsey is headed to live in Africa next year. Investors should demand a new CEO with a vote for hiring Noto back from So-Fi. The CEO has turned around the company, but Jack has now striked out on several opportunities to develop Periscope and Vine into major revenue producing assets. Not to mention, the opportunity exists for premium services and recurring revenue streams that he hasn't made any moves towards. More research: Twitter Should Spend More Disclosure: Long FCX, TWTR. Please review the disclaimer page for more details. 

Apple: True Wireless Boost

Apple has a home run in the true wireless space with the AirPods Pro. The projections for selling 60 million units this year and close to 100 million units next year suddenly has AirPods as a $20 billion business. The tech giant should easily top my previous model for FY21 product revenues of $230 billion. My updated FY21 EPS estimate is $15.25, placing the stock at an EV of 15.9x those estimates. While  Apple  ( AAPL ) analysts focus on the surprise success of the iPhone 11, the market has generally ignored the massive success of the AirPods Pro. The tech giant continues to turn the wearables segment into a huge business, building another major growth avenue where competitors constantly fail. My  investment thesis  remains very bullish on the stock's path to $300 and beyond. Read the full article on Seeking Alpha.  Disclosure: Long AAPL. Please review the disclaimer page for more details. 

AMD: The $15 Billion Plan

Investors need to start considering a plan for AMD reaching $15 billion in annual sales. The company only needs to achieve a rather meager 25% market share in desktop, notebooks and server. The initial EPS target is $3 based on $15 billion in sales. The biggest negative against  Advanced Micro Devices  ( AMD ) is the general lack of current profits in relation to the stock price around $40. My  previous work  has focused investors on the drastically improving profit picture when the chip company gets to $10 billion in annual revenues. This article will focus on the next step of reaching $15 billion in annual revenues based on the company obtaining 25% market share in several key markets. Read the full article on Seeking Alpha.  Update - December 5, 2019 If these analysts would've only listened all year long, they wouldn't be raising the price target after the fact. - Baird reiterates a Neutral rating on AMD (NASDAQ: AMD ) and raises the target by $10 to $4

Out Fox The $treet - November 27, 2019

Stocks to watch on Wednesday: Aurora Cannabis (ACB) - the large Canadian cannabis company opened an 11K square foot store in Edmonton. The stock is up 4% on the news and further signals that momentum traders have not left the stock. Aurora Cannabis is not ready to rally until the stock doesn't surge on immaterial news. More research: Aurora Cannabis Needs Industry Help Under Armour (UA, UAA) - the athletic retailer is up 5% today as Raymond James slaps a $30 price target on the stock. As predicted here, the accounting probe fears were being over played. The real issue was bad sales practices. The stock remains a huge buy under $20 here and on any breakout above the recent resistance below $22. Ambarella (AMBA) - the chip stock trades at 10x sales despite revenues only growing 10% after a couple of weak years. Ambarella appears headed for a new downtrend as the hype from the CV chips starts to disappear. Disclosure: Long UA.  Read the full disclaimer page for more

Aurora Cannabis Needs Industry Help

The Canadian cannabis industry forecasts cutting cultivation capacity by up to 800,000 kg, but the top 10 producers are still expanding existing production. Aurora Cannabis still expects to more than double production from FQ1 levels while the top 10 producers are still on path to swamp legal demand. Revenue estimates are getting to levels where the company would need to see further material price cuts to not exceed targets. The stock price target is $2 without further Canadian cannabis industry rationalization. The major problems facing  Aurora Cannabis  ( ACB ) is that too much of the Canadian cannabis industry hasn't followed their moves with cutting cultivation capacity for 2020 and beyond. A few companies had already cut production targets for various reasons, but the bigger players in the industry still appear full speed ahead with expansion while the industry is already over supplied. For this reason, my  investment thesis  thinks Aurora Cannabis made smart d

Twitter Should Spend More

Twitter recently took a hit from Evercore issuing a Sell on the stock due to worries about underspending on R&D. The social media company already ramped up spending, and sector data points support the company spending more on R&D. Additional R&D spending that returns revenue growth to 20% places a $50 price target on the stock. After a Q3 issue with ad products,  Twitter  (NYSE: TWTR ) dipped below $30 on suggestions the company has underspent in the last few years. The numbers don't really support that the social media site underspent, but regardless, the company has the cash and the ability to substantially increase investments in research and development to build for the future. My  investment thesis  remains highly constructive on the stock around $30, with an enterprise value down to only $20 billion. Read the full article on Seeking Alpha.  Update - December 2 With CEO Jack Dorsey announcing plans to move to Africa in 2020 to focus on bitcoin

T-Mobile: Painful Loss

CEO John Legere officially announced plans to retire May 1, 2020. Top executives don't randomly leave a company when a big opportunity exists. The regulatory delays are pushing the T-Mobile/Sprint 5G network buildout behind AT&T and Verizon. Avoid the stock still trading near the peak after 7 years of strong outperformance. The official loss of a dynamic CEO by  T-Mobile  ( TMUS ) has been mostly ignored by the market this week. With the pending merger of  Sprint  ( S ), the move appears to suggest John Legere doesn't see the ability to generate the outsized gains of the past decade. The departure of several executives while the Sprint deal still faces  regulatory hurdles  makes the stock one to avoid. Read the full article on Seeking Alpha.  Disclosure: Long AAPL. Please review the disclaimer page for more details. 

Out Fox The $treet - November 25, 2019

Stocks to watch on Monday for the shortened Thanksgiving week: Glu Mobile (GLUU) - the market cap is down to $750 million with the stock down to nearly $5. The valuation remains as compelling as the chart from earlier in November. Glu Mobile is an absolute bargain whether or not Disney Sorcerer's Arena is a hit in Q1 or not. Aurora Cannabis (ACB) - the conversion of substantially all of a C$230 million convertible debt was a positive move for the company. The stock will suffer in the short term as these new shareholders have no restrictions on dumping the stock. Aurora Cannabis will need more cash to fund operating losses. As the company resolves some more of their funding issues and 2020 catalysts kick into full force, the stock will become a buy when the stock reaches $2. AMD (AMD) - new Ryzen Threadripper chips are just another reason to own AMD on the path to $50 and possibly much higher. The chip company is only starting the process of taking market share from

AT&T: $30 Is A Worse Case, Not A Target

AT&T took a nearly 10% hit from the recent highs due to negative analyst calls. The stock will benefit from up to $45 billion in share buybacks and debt repayments from 2020 to 2022. My $42.50 price target values the stock at a 2022 EV/EBITDA multiple of only 6.9x. A few negative analyst calls has  AT&T  ( T ) suddenly down $3 from the recent yearly highs near $40. While  my views  on the financial projections of the company are similar to those of these analysts questioning revenue growth potential in entertainment and the new SVOD service, my view on the stock valuation is where the disagreement exists. The stock is cheap on this dip and my price target is still firmly up at $42.50. Read the full article on Seeking Alpha.  Disclosure: Long T. Please review the disclaimer page for more details. 

Out Fox The $treet - November 21, 2019

Stocks to watch on Thursday: Kohl's (KSS) - the retailer is back trading at the yearly lows following a guidance cut for 2019 EPS due to investments in driving traffic to their stores as the company adds new brands. Today completes the 3-day rule and the stock is holding a higher low so far. Kohl's is a buy here. More research: Don't Overreact To Headlines Canopy Growth (CGC) - the stock has soared over the last couple of days due in part to a bullish analyst call by BofA and the news of the House Judiciary Committee voting in favor of the MORE Act which favors decriminalize marijuana. The stock has broken the downtrend, but investors should expect a quick reversal here as nobody expects the Republican controlled Senate to vote in favor of the MORE Act. My view the stock is on a path to $10 hasn't changed. More research: Canopy Growth: Still Rich Over $10 Disclosure: Long KSS. Please review the disclaimer page for more details. 

Out Fox The $treet - November 19, 2019

Stocks to watch on Tuesday: Aurora Cannabis (ACB) - the stock is headed towards $2 and fast. The cannabis stock has plenty of support around this level, but investors should be careful trying to catch a falling knife.  The stock valuation reaches $2.4 billion, but a lot depends on the amount of dilutive financing needed to fund ongoing operating losses. Kohl's (KSS) - the department store retailer had a mixed report with decent revenues while cutting EPS estimates due to extra costs. The dividend yield is a ridiculous 5.6% after this dip. The stock is now testing the lows from the summer sell off. Slack (WORK) - my previous research questioned valued above $17.50 and the news about top competitor Microsoft (MSFT) adding millions of new Team subs is highly concerning. Previous research: Slack: Wheels Just Fell Off Disclosure: Long KSS. Please read the disclaimer page for more details. 

Aurora Cannabis: Smart Decisions

Aurora Cannabis reported a horrible FQ1 quarter. The cannabis company made a smart decision to raise cash and cut capital spending by C$190 million. Cash remains a major problem requiring likely shareholder dilution to fund ongoing negative cash flows. The stock's market value at $3.4 billion is still high, but the company does have catalysts in 2020 positioning a near-term pivot to a bullish view. For the last year, the Canadian cannabis space was obviously headed to an oversupply scenario, yet companies like  Aurora Cannabis  ( ACB ) famously charged forward with more facilities. Along with the FQ1 report, the company finally  rationalized supply  to conserve cash. The move was very smart, but my  investment thesis  is still neutral on the stock due to the valuation while waiting for some bullish long-term themes to play out as the industry shakes out in the next few quarters. Read the full article on Seeking Alpha.  Update - November 18  The stock took a m

Yelp: Limited Wait

Yelp remains in a tight trading range between $30 and $40. The consumer review site is back on a reasonable path to 10+% revenue growth. The company reduced the diluted share count by 14% over the last year. At 3.0x EV/20 sales estimates, Yelp would trade at nearly $53 or ~50% upside. Over the course of the year,  Yelp  ( YELP ) has been stuck in a range between $30 and $40 despite solid revenue growth mixed with large stock buybacks. These moves generate long-term value for shareholders whether the market realizes the benefits in the short term. My  investment thesis  remains very bullish on the stock with the chart suggesting a resolution to this tight trading range in the near term. Read the full article at Seeking Alpha.  Disclosure: Long YELP. Please review the disclaimer page for more details. 

Out Fox The $treet - November 18, 2019

Stocks to watch on Monday: T-Mobile (TMUS) - CEO John Legere is stepping down May 1, 2020. The news is very negative for a wireless company that has thrived under his leadership. The stock needs to fall 10% to 20% before becoming an interesting investment without John as the CEO. Especially worrying is that the Sprint (S) deal isn't even done yet. The stock appears set for a new downtrend when $76 doesn't hold. AMD (AMD) - Cowen lifts the price target by $7 to $47. My research already lined out the path to $50 without meeting with CEO Lisa Su. The problem here is that investors needed to aggressively buy on the October dip to $28 and not this recent surge to $39. More research: AMD: Shift Up To The Next Level Aurora Cannabis (ACB) - the Canadian cannabis stock has broken below the downtrend. The valuation is starting to get appealing with several catalysts for the market to grow in 2020. The key is to let this trend play out and likely look for an entry point possi

Canopy Growth: Still Rich Over $10

Canopy Growth just released horrible FQ2 results. The company reported a C$155.7 million Adjusted EBITDA loss that isn't sustainable despite their large cash balance. Canopy Growth forecasted the flower market to remain oversupplied until next June. A price target of $10 places the stock at a more reasonable 5x EV/FY20 sales targets. The Canopy Growth ( CGC )  FQ2 quarter  was so bad an investor will find the results very difficult to analyze in order to value the stock. As  previously warned , the company had meager expectations for a supposed budding cannabis empire while any weak results were bound to crush the stock. In fact, investors should consider the closing price of just below $16 with a market cap of $5.3 billion as still highly stretched with the dramatically reduced exceptions in the Canadian market. Read the full article at Seeking Alpha.  Update - November 21 Fade this rally, as CGC heads back to $10 and lower.  Constellation Brands (STZ)

LivePerson: Hard To Get Behind This Valuation

LivePerson (LPSN) keeps rallying and appears set for a break higher after holding strong resistance in the $34 to $36 range. The stock has a market cap of $2.5 billion with a revenue goal of $290 million for this year and $350 million in 2020. LivePerson trades at 7x forward sales estimates. While not extremely expensive, the company needs some major catalyst for 20% revenue growth with large losses to make the stock worth owning here other than for a trade. Disclosure: No position. Please review the disclaimer page for more details. 

Yelp - Load Up On A Break Of Downtrend

For the last year,  Yelp (YELP)  has been stuck in a range of $30 to $40. The stock is stuck in this range despite an extreme valuation position in the low $30s. The stock has an EV of only $2.0B with '20 revenue estimates of $1.1B and adjusted EBITDA in the $250 million range.  Investors should jump on this stock on another dip to $32 or a rip above the slopping downtrend right around $36 now.  Disclosure: Long YELP. Please read the disclaimer page for more details.