Showing posts from January, 2019

Facebook: That Was Easy

After the close, Facebook (FB) reported Q4 results that smashed estimates. The stock is up 12% in initial after-hours trading and will likely stay above $150 for good now.

AMD: Mixed Results Are Good Enough

Following weak numbers from both Intel (INTC) and Nvidia (NVDA) , mixed numbers from Advanced Micro Devices (AMD) aren't a huge surprise. The chip company had better than expected Q4 numbers and rather weak Q1 guidance.

Novavax: Always Happens

Novavax ( NVAX ) surged as Wainwright slapped a $6 target on the $2 stock, but guess what happened to the small biotech stock.

Rite Aid: Ugly Reverse Split Ahead

After the close, Rite Aid (RAD) announced the intent to vote on a reverse split at a special meeting on March 21. The stock trades below $1 and the company needs to regain compliance with the NYSE so the move isn't surprising.

CenturyLink: Absurd 14.5% Yield

Since Jeff Story took over the CEO role last year, CenturyLink (CTL) has done everything to raise free cash flows. The stock continues heading lower based on irrational fears due to 5G broadband and dividend concerns.

Apple: Health Matters

Wearables have the potential of moving the needle at Apple. Adding health monitoring to AirPods expands the potential shift to medical devices. Medical device stocks trade at much higher valuations. Anything driving sales higher is a plus for a stock only trading an EV/S multiple of 10x. For a company with a revenue base of over $250 billion,   Apple   ( AAPL ) struggles to find opportunities that will move the needle. One potential revenue source is in medical devices as the tech giant moves into wearables that function as tech devices and health monitors. My   investment thesis remains bullish on the stock around $150. Read the full article at Seeking Alpha.  Disclosure: Long AAPL, FIT. Please review the disclaimer page for more details.   

Lam Research: $5 Billion Reasons To Buy

Lam Research (LRCX) reported a strong quarter after the close and the stock is up about 5% in initial trading. The company provided the market with $5 billion reasons to own the stock.

IBM: Next Step

Along with reporting Q4 results, IBM (IBM) reported the next step in returning to growth. The stock never belonged below $120.

Alphabet: Unhealthy Appetite

Alphabet made a small smartwatch technology purchase. The company has a long history of hardware failures and a smartwatch push will likely be no exception. Alphabet continues losing substantial amounts of money on Other Bets and generates low margins on hardware. The stock is incredibly cheap based on ex-cash, 2020 non-GAAP EPS estimates of up to $71. On Christmas Eve, my   previous research   extolled the benefits of buying   Alphabe t   ( GOOG ,   GOOGL ) despite doubts that the company would successfully transition to material hardware sales. The company appears to have an unhealthy appetite for hardware with the latest purchase suggesting another losing push into smartwatches. Regardless, the stock remains a buy even after a $115 rally in under a month to over $1,100. Read the full article on Seeking Alpha.  Disclosure: Long AAPL, FIT. Please review the disclaimer page for more details.   

Village Farms: Flooding The Cannabis Market

  Village Farms International (VFF.CA) filed an application to be listed on the NASDAQ under the symbol VFF . The company is a prime example of the problem lurking in the cannabis sector as they ramp up an incredible amount of capacity in a limited time.

Peak Social Media

  Recode has a nice graph slowing the sudden slow down in US and Canada social media users on Facebook (FB) , Twitter ( TWTR ) and Snap ( SNAP ) . All 3 major platforms saw users decline during 2018. The question is whether any of these stocks offer investment opportunities in 2019.

Aurora Cannabis: Animal Spirits

Aurora Cannabis continues rallying after another premium deal. The company not providing financial details of acquisitions and quarterly operating losses in press releases is a major red flag. Momentum traders on Robinhood are very bullish on the stock. Aurora Cannabis has the potential to improve the investment picture via more detailed financials on the FQ2 report with more details of the path to an EBITDA-positive FQ4. The company is still making the wrong deals. My  previous research  has been critical of  Aurora Cannabis  ( ACB ) making too many deals and aggressively expanding cannabis production into the inevitable sector crash. Instead of making strategic partnerships and looking to sell production facilities at premium prices, the company continues down the path of massive shareholder dilution that will eventually wreck the stock. Read the full article on Seeking Alpha.

Netflix: Subs Versus Cash Flow Burn

Netflix (NFLX) remains on a path to generate record subscriber additions for the year which should send the stock back to previous highs. As the year progresses, the free cash flow burn will become a huge problem as new streaming competition from Disney (DIS) and WarnerMedia (T) comes online.

Take-Two Makes NBA A Big Winner

According to the Wall Street Journal, Take-Two Interactive (TTWO) is paying the NBA $1.1 billion over 7 years for the license to create NBA 2K. Clearly, the success of the franchise is always going to come at an ever increasing cost similar to TV deals with sports leagues.

Apple is Investable Only After Settlement With Qualcomm

Typical of markets with its short-term memory,  Apple's  ( AAPL ) devastating weak iPhone sales warning gave way to a market snapping back. The S&P 500 rose 2.6% on the week.  The weekly total gains is effectively a year's worth of returns. Never mind the trade war, which will likely end with punitive tariffs still in place, or the government shut down.  DIY Members   will now build a trading plan as these companies report earnings. So far, banks are lifting markets, led by Goldman's (GS) strong results and Bank of America (BAC) reporting good numbers. Again. Netflix  ( NFLX ) subscription numbers will drive cash flow next. Only if 100% of the subs stay. Otherwise, that $2B+ FCF increase forecast won't happen. The stock is up 27% in just one month. NFLX reports results on Thursday, January 17 after market close. Apple Should Settle with Qualcomm Previously,  Qualcomm's  ( QCOM ) NXPI deal played out with trading gains for   DIY Members . The next game

Aurora Cannabis: No Deal

After the close, Aurora Cannabis ( ACB ) announced a proposed offering of $250 million convertible senior notes due 2034. Such an offering is a likely sign that Coca-Cola (KO) isn't offering the company a ton of cash to invest in their international cannabis expansion.

Bank Of America: A Big Fintech

Without much hype, Bank of America (BAC) is slowly becoming the worlds biggest fintech. In Q4, the large bank saw P2P payment volumes nearly double.

Snap: The Adult Just Left

If one ever wanted a sign that Snap ( SNAP ) isn't going to see a big rally, one only needs to review the contract of CFO Tim Stone that has decided to depart the company. Mr. Stone was hired away from Amazon (AMZN) to be the adult in the room and turn around the financials of the struggling social messaging company.

Blue Apron: Is Positive EBITDA Enough?

 Blue Apron (APRN) forecasts that Q1 and all of 2019 will be EBITDA positive. The company lost $18.8 million in Q3 so Blue Apron has to generate substantial improvements in EBITDA in the matter of 2 quarters to achieve this goal.

CyberArk: Failed Breakout

CyberArk (CYBR) plays in the volatile cybersecurity sector where companies constantly miss estimates after a big run. The stock made an attempted run at a breakout above $80 today.

Facebook: Easy Hurdle

Facebook set 2018 targets so low that the company has an easy hurdle in 2019. EPS estimates are already starting to trend higher, and the stock is following. The company will lower expense growth estimates throughout this year. A focus on family DAUs will provide support for long-term revenue growth. The stock trades at about 18x ultimate '19 EPS estimates of $8. Though   Facebook   ( FB ) continued to collapse with the market correction leading to the Christmas Eve massacre where the stock dipped to $123, the company set the seeds for a bottom in early December. The large stock buyback and an   altered DNA   has the company positioned for a better 2019 while the market is busy looking backward at the adjustments already made by CEO Mark Zuckerberg. Read the full article on Seeking Alpha.  Disclosure: Long TWTR. Please review the disclaimer page for more details.   

Citigroup: No Boogie Man

  The market didn't initially like the Citigroup (C) Q4 earnings report, but the report was an actual home run. The weak bank proved why big stock buybacks work. No surprise here that the bank is up about 4% in mid-day trading.

Fitbit: Lots Of Resistance Till $6.50

As predicted here, Fitbit ( FIT ) was an easy purchase below $5 last year. The stock was insanely cheap with the cash balance and revenue stream. The move toward medical devices offered a huge upside catalyst.

Glu Mobile: Design Home Keeps Winning

The ability of Glu Mobile ( GLUU ) to keep Design Home as a top grossing game has been the basis of a long-term bullish thesis on this stock. The mobile-game developer no longer has to generate new hit games in order to grow revenues that are needed to push the stock higher.

Yelp: Dips Are Easy

Despite the weakness today, Yelp ( YELP ) is still above the lows following the disastrous Q3 report. The stock is down to $34 following a downgrade to Underweight from Morgan Stanley. The analyst sees issues with paying accounts, but the consumer review site already took steps to rectify the issue in the last quarter.

IBM: Quantum Yield

IBM led the world in patents for the 26th consecutive year. The dividend yield sits at the highest level in over a decade at 5.2%. The stock continues to trade at only 8.5x forward EPS estimates. The Red Hat deal provides a potential catalyst with a new CEO. International Business Machines   ( IBM ) continues to lead the country in technology development that doesn't actually lead to meaningful revenue growth. The technology company does generate enough to reward investors with a 5%+ dividend yield and a stock trading at only $120 with a potential big catalyst from the Red Hat merger. My   investment thesis   remains bullish on this dip to $120. Read the full article on Seeking Alpha.  Disclosure: Long IBM. Please review the disclaimer page for more details.   

Kohl's Lifts 2018 Estimates

In the midst of the retail wreck today, lets not forget that Kohl's (KSS) raised guidance for the year. The retailer now expects to earn $5.53 per share. The stock is down an incredible 9% to $63 on the guide up.

Aurora Cannabis: Deal Or No Deal

Aurora Cannabis was left out of the major deal making in 2018. The cannabis company updated FQ2 guidance to revenues of $50 to $55 million with a continued focus on pure production growth. The stock is down as the market is becoming less impressed with commodity farming operations due to the prime Oregon example. The stock is below key resistance at $5.40 as medical cannabis patient totals failed to impress. As the end of 2018 came and went,   Aurora Cannabis   ( ACB ) was a notable absentee from the deal making in the cannabis market. Just about all of the other major Canadian cannabis players got large investments or signed up powerful partnerships, but the related stocks didn't generally maintain rallies following the deals. Based on the early legalization data in Canada and Oregon, the best option for Aurora Cannabis might actually be selling production capacity while the Canadian market remains hot. Read the full article on Seeking Alpha.  Disclosure: No

Glu Mobile: Beast Mode

Anybody following here knows that Glu Mobile ( GLUU ) has long been a strong buy. The mobile-game developer struggled with consistency until the CEO was replaced a few years back. The stock is now hitting all-time highs with a breakout above $8.

Uber Plans $90 Billion IPO

If Uber (UBER) can't cut their EBITDA loss as projected, the IPO will bomb. Even so, a $500 million EBITDA loss is a substantial amount for a $90 billion valuation. -The company forecasted doubling its 2017 net revenue to $14.2B by this year and that its loss before interest, taxes and non-cash items would fall to $500M from last year's $1.7B.

Snap: Bullish Trading Won't Last

Snap (SNAP) is back above $6 in early trading despite a price target cut from Pivotal Research. Even at $6, Snap still has a market cap of $9 billion. -Pivotal Research has downgraded its take on Snap (NYSE: SNAP ) to Hold from a previous Buy. Analyst Brian Wieser has cut his price target to $6 from $8.

Apple Dips To Fourth Largest Market Cap

In the span of a couple of months, Apple (AAPL) has gone from the first Trillion dollar company to the fourth largest in the US. Amazingly, Microsoft (MSFT) has taken the lead over Amazon (AMZN) and Alphabet (GOOGL) .

Novavax: At It Again

With Novavax (NVAX) , the company is always a few days away from issuing more stock and usually at not very opportune times. The small biotech just made such a move again. On December 31, Novavax filed to sell $100 million of shares at a 2% commission. As usual, the move made no sense with a cash balance that has to be in excess of $100 million and knowledge that the company was about to release positive Phase 2 data on NanoFlu.

AMD: Poised To Repeat In 2019

Nvidia followed up the top S&P 500 gain in 2016 with an 81% gain in 2017. AMD is positioned to raise long-term financial targets. My 2020 estimate remains $10.0 billion revenues, $1.50 EPS making the stock cheap at $18. One of my favorite picks in 2018 faltered to end the year. By all accounts,   Advanced Micro Devices   ( AMD ) had a huge year, but some in the market view the year as a failure with questioned prospects going forward. The reality is that a secular shift presents AMD with the ability to repeat the biggest gain in the S&P 500 index again in 2019. Read the full article on Seeking Alpha.  Disclosure: Long AAPL. Please review the disclaimer page for more details.   

Cloudera Completes Hortonworks Merger, Test Lows

After the initial rally following the signed merger between Cloudera (CLDR) and Hortonworks (HDP) , the stock has collapsed 50% from those $20 highs. The stock hit pennies away from a new low following their IPO over 18 months ago as the merger closed this morning.

Celgene Gets A Big Bid

Bristol-Myers Squibb (BMY) agreed to acquire Celgene (CELG) in a stock and cash deal valuing the later at a 51% premium from their closing price. So much to like with a deal that has an EPS accretion of 40% in the first year. The transaction is about 50% cash and 50% stock with a unique CVR worth up to $9 based on the 3 potential blockbuster drugs getting FDA approvals. Bristol-Myers should be up on this news, not down 10%. Disclosure: Long CELG. Please review the disclaimer page for more details. 

Apple: Don't Panic

After the close, Apple (AAPL) updated the market with a big guide down for FQ1. The new revenue target is down about 7% from expectations.

Chipotle Mexican Grill: One Stock To Avoid In 2019

After the market selloff, very few stocks are still overvalued. Chipotle Mexican Grill (CMG) is one of those stocks as the restaurant company continues to trade at extreme premium valuations.

Action List from 2018's Winners and Losers

The FAANG crash in 2018 selectively hurt stocks and the technology sector. While  ( AMZN ) rose 26.6%, Facebook (FB) lost 26%. The privacy scandal will not go away. The social networking giant must spend billions on security and staff to plug up holes and to re-gain user trust. Getting back that trust could take months at minimum. By then, users may flock over to...Instagram, a Facebook-owned asset. DGI value creation stopped at General Electric (GE) but started in the tobacco industry. PM and MO both pay a solid dividend yielding over 6%. Oil and Gas plunged in the last quarter after markets jinxed it with talk of $80 - $100 oil. At half that price, the supply glut will create buying opportunities for energy investors. Exxon (XOM), (COP) and (CVX) are the core holdings.

Activision: Buy After The Blizzard

Activision Blizzard is down nearly $40 from the highs near $85. Their prime Activision and Blizzard game franchises have a whole mobile world waiting for expansion. The interactive entertainment giant has a strong moat evident by 30% operating margins. The stock trades at 17x 2019 EPS estimates and is likely to dip further based on the CFO firing. Like most stocks lately,   Activision Blizzard   ( ATVI ) has seen the stock take a substantial hit. Some of the $40 hit is justified based on disappointing numbers, but the game developer is riding a strong industry for the next decade to build an interactive entertainment giant without the large content costs of other entertainment players. Read the full article at Seeking Alpha.  Disclosure: No position mentioned. Please review the disclaimer page for more details .