Showing posts from November, 2019

IB Net Payout Yields Model

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. 

Tilray: No End In Sight

Tilray continues to generate mounting losses. The Canadian cannabis company faced extreme pricing pressure during Q3. The risk that the company isn't EBITDA-positive in 2020 will pressure the stock next year with only $122 million in cash on hand. Investors excited by the revenue headlines from the  Q3 report  for  Tilray ( TLRY ) were hoodwinked into falling for the great Canadian cannabis disaster. These companies were built for massive growth and acquired additional global growth opportunities only to watch pricing collapse during this year of great growth following the approval of Canadian adult-use about a year ago. The $2.2 billion market cap remains far too expensive for their position in the market. Read the full article on Seeking Alpha.  Disclosure: No position mentioned. Please review the disclaimer page for more details. 

Out Fox The $treet - November 15, 2019

Stocks to watch on Friday: Aurora Cannabis (ACB)  - the large Canadian cannabis company continued the pattern of horrible September quarterly numbers. The company made steps to curb supply, but Aurora Cannabis still produced 41K kg in the quarter and only sold 12K kg. The market valuation is still a rather high $3.6 billion with quarterly revenues of only $57 million. The FQ1 results were the first big signs of rationalization in the sector, but also only a small step before Aurora Cannabis becomes a buy with an Adjusted EBITDA loss of C$40 million.  AMD (AMD)  - RBC raised the price target to $50 from $44. AMD remains in a major breakout towards $50, but the recent rally appears stretched. The stock might retest $36 here.   Fitbit (FIT)  - worth watching here with the stock trading down to $6.80. Some skepticism exists on whether the government allows  Alphabet (GOOG)  to buy Fitbit. The merger arbitrage is only about $0.55 now, but some easy money could exist on a further di

Square: Valuation Challenges Unrelated To Adjusted Revenue

Square beat Q3 estimates. The company will quit reporting adjusted revenues due to communication from the SEC. The end result is a focus on bottom line metrics pointing towards the stock trading at a max value. Square trades at 63x '20 EBITDA guidance. Along with the  Q3 report ,  Square  ( SQ ) offered a lot for investors to absorb. The fintech saw the core business beat estimates while the removal of weak Caviar made the comparisons difficult. All while the company is moving away from reporting adjusted revenues due to SEC guidance causing further confusion. My  investment thesis  still has the stock overvalued based on the $31 billion market cap and adjusted revenues of $2.5 billion, suggesting investors should let all of the revenue confusion shake out before finding the stock interesting. Read the full article on Seeking Alpha.  More commentary - WhoTrades Update - November 26 Macquarie's Dan Dolev starts Square with an Outperform rating and $105 p

Qualcomm: Forecast Signals Global 5G Launch

Qualcomm beat FQ4 analyst estimates that included sharp declines from last year. The stock is jumping due to solid FQ1 guidance despite ongoing disputes with Huawei and missing Apple chip sales. The company forecasts 200 million 5G device shipments in 2020. At $90, the stock remains a bargain with a $6-7 EPS target before the benefit of the global 5G launch. The quarterly results of  Qualcomm  ( QCOM ) remain extremely complex to analyze. The shifting payments of key license customers makes most of the results not comparable from period to period, but the stock is seeing a rally in initial trading following FQ4 results as the modem company sees a rebound in device shipments due to the 5G worldwide launch gaining major steam in FY20. The  investment thesis  remains bullish as the shift to 5G has considerable upside as the wireless giant will capture more content per smartphone. Read the full article on Seeking Alpha.  More commentary - Out Fox the $treet - November

Zynga: Relative Bargain Trading Below Peers

Zynga reported a strong quarter and boosted '19 bookings by $46 million. The mobile game developer continues to boost revenues per share by acquiring gaming assets on the cheap with massive cash balances. The stock remains cheap at 3.1x EV/20 revenue estimates. Despite  Zynga  (NASDAQ: ZNGA ) thriving in the last few years, the stock valuation still trades below peer stocks. The recent  Q3 results  were another prime example of the market virtually ignoring the improvements ongoing at the mobile game developer. The stock remains a bargain at  3.1x EV/20 revenues  in an industry where larger, slower growing players trade at 5.0x valuation multiples. Read the full article on Seeking Alpha.  More timely commentary - WhoTrades Disclosure: Please review the disclaimer page for more details. 

Intel: Better Lucky Than Good

Intel beat the Q3 revenue estimates due to luck from sales pulled forward and the immaterial nature of a competitor's ramp so far. Analysts are only forecasting the chip giant grows revenues in the 1% range while market share losses to AMD and Qualcomm will make this minimal target difficult. The stock trades at 12.3x forward EPS estimates while investors should expect estimate cuts. Intel  ( INTC ) has failed repeatedly over the last couple of years, yet the chip giant managed to  crush analyst estimates  in Q3. The company continues to prove it is better to be lucky than good as a prime competitor isn't able to ramp up supply of new chips fast enough to take meaningful market share in the near term. My  investment thesis  remains negative on the stock at the yearly highs despite the big quarterly beat. Read the full article on Seeking Alpha.  Disclosure: No position mentioned. Please review the disclaimer page for more details. 

AMD: Shift Up To The Next Level

AMD might've slightly missed Q3 revenue targets, but the company confirmed a long-term bullish trend. Investors should focus on the Q4 revenue growth of 48% and annual run rate of $8.4 billion. The stock only trades at 20x a 2020 EPS target of $1.75. A realistic 2021 EPS target of $2.50 would help the stock achieve a $50 price target next year using a 20x P/E multiple. The stock didn't initially rally following  Q3 results , but  Advanced Micro Devices  ( AMD ) generated the results and guidance reinforcing our  investment thesis  that the stock hasn't reached full value. While the market was focused on a slight revenue miss, AMD is poised to see revenues trend much higher over the next couple of years driving the stock price even higher. Read the full article on Seeking Alpha.  More commentary - OutFoxThe$treet - November 5 Disclosure: No position mentioned. Please review the disclaimer page for more details. 

Pinterest: You Were Warned

Pinterest dipped 20% following investor disappointment over Q3 results. The company actually generated strong revenue and MAU growth showing the existence of a good business. The market remains partially offside on Pinterest by not using the fully diluted share count of 651 million shares. Based on the other social stock valuations, my ideal target remains ~$15. The general impression from the Q3 results for  Pinterest  ( PINS ) was a solid quarter. The stock fell up to 20% following the report as the problem was the valuation was priced for perfection. Even strong revenue growth wan't enough to keep the stock valuation above $15 billion and investors shouldn't expect much upside with the stock still at $20. Read the full article on Seeking Alpha.  More commentary - WhoTrades Disclosure: Long TWTR. Please review the disclaimer page for more details.