Showing posts from December, 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.