Showing posts from March, 2020

IB Net Payout Yields Model

AMD: Work From Home Boost

The Work From Home economy is set to boost data center demand. AMD is poised to take market share from Intel in the growing data center space. The stock has long term EPS potential above $3 making the stock a bargain down at $40. The work from home economy has already boosted several companies in the virtual space which should lead to higher data center demand. While  Advanced Micro Devices  ( AMD ) has held up well in the downturn, investors have probably missed the boost in demand the company could see from the data center segment. My  investment thesis  continues to see the stock as a very compelling buy anywhere below $50. Read the full article on Seeking Alpha.  Update - March 27 Don't see the recent lows being broken. The risk is to the update as virus totals dip over the weekend in Europe and the US potentially hit peak new cases here soon. Disclosure: No position mentioned. Please review the disclaimer page for more details.  

Square: Attractive For First Time In Years

Square gets 45% of GPVs from sellers generating under $125,000 in sales. The payments company is likely to see customers go out of business. My base case is 0% revenue growth in 2020 and a return to only 15% growth in 2021. The stock is a buy at 7x '21 adjusted revenues with potential upside to estimates. The Covid-19 outbreak and the shutdown of the global economy has investors fleeing  Square  (NYSE: SQ ). The mobile payment company is highly dependent on small business customers, and the economic slowdown is going to hit their customer base the hardest. Just weeks ago,  my view  on the stock was negative with the price back above $80, and now, the stock is far more appealing after a 50% collapse in a matter of weeks. Read the full article on Seeking Alpha.  Update March 25, 2020 The company updated Q1 guidance to only slightly below original forecasts. The stock has already soared on the backs of the agreement on a stimulus deal to help small business. The

Apple: Future Boost

Apple closes all retail stores outside Greater China and should take a large hit to FQ2 and FQ3 sales. The company had most China stores closed for about one month. The market will increasingly look towards FY21 sales that should see a boost from delayed spending. My estimate is for a FY21 EPS boost to $17, making the $250 stock cheap at 14.7x this target. Apple  (NASDAQ: AAPL ) has seen several analysts  cut price targets  on the stock due to cuts to FY20 numbers. Regardless, the stock remains a strong investment option based on normalized numbers not impacted by the coronavirus impact on the global economy. My  investment thesis  recommends investing in stocks based on FY21 numbers that might even get a boost from sales pushed into the next fiscal year. Read the full article on Seeking Alpha.  Disclosure: Long AAPL. Please review the disclaimer page for more details. 

Alphabet: Sticking With $1,700 Target

Alphabet has dipped $400 on COVID-19 fears. The company has an EV down to only $670 billion due to $115 billion in net cash. A slash in travel ad revenues will cut $1-2 billion in quarterly revenues. The stock only trades at an EV of 12.2x '21 EPS targets. A $1,700 target is only 19.0x EPS targets. With analysts already warning on  Alphabet  ( GOOG ,  GOOGL ) losing ad revenue in the travel space, the stock has taken an amazing $400 hit from recent highs. While consumers Internet search usage may remain high, hotels and travel destinations aren't going to advertise on the platform with a lack of travelers. While the situation sounds dire in the short term, investors should buy the stock for the all but certain rebound in the digital ad space as the coronavirus fears dissipate in the next weeks or months. My  investment thesis  maintains a $1,700 price target on the stock based on no changes to 2021 estimates. Read the full article on Seeking Alpha.   Disc

AMD: Right On Target

AMD updated their long-term financial targets at Financial Analyst Day 2020 to levels supportive of higher stock prices. The company guided to >20% revenue growth and 25% operating margins eliminating a long-held investor view of limited profits. The conservative outlook is for 2023 revenues of $15.0 billion and 2024 revenues at $18.0 billion suggesting revenues doubling from 2020 levels. My long-term model has an $18.75 billion revenue target (25% market share) and a $3.72 EPS. On March 5,  Advanced Micro Devices  ( AMD ) held their  Financial Analyst Day for 2020 . Despite the DJIA dipping nearly 1,000 points on the day and the COVID-19 fears spreading around the globe, the management team stayed focused on the long term. Read the full article on Seeking Alpha.  Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

Spirit Airlines: Pricing In Too Much Risk

Spirit Airlines is down close to 50% from recent highs. The airline will obtain a massive cushion from lower fuel costs with jet fuel down to $1.42 per gallon. Global air travel rarely slows down based on virus outbreaks. The stock is a bargain at below 5x normalized EPS estimates. As the global coronavirus outbreak reduces travel, the domestic airline stocks are being hit hard.  Spirit Airlines  ( SAVE ) is now an incredible bargain after taking a $20-plus tumble in the last couple of weeks. The market has far too much fear over an airline with a rock-solid position. Read the full article on Seeking Alpha.  Update March 9, 2020 Jet fuel was down to $1.31 as of March 6 and will continue to fall. The lower prices are a huge benefit to the airlines like Spirit. The stock has held the lows from last Friday.  Disclosure: No position. Please review the disclaimer page for more details. 

Square: Confusion Over Results

Square rallied following soft 2020 guidance due likely to a confusion over net and adjusted revenues. Revenue guidance suggests only 25% growth this year. The stock trades at a very rich 76x EBITDA targets. Square  ( SQ ) has a lot of moving parts in their revenue numbers so the stock rallying on Q4 numbers and more specifically on disappointing 2020 guidance has investors chasing false revenue hype again. Despite the U.S. stock markets crashing over 10%, the stock is near recent highs. My  investment thesis  remains negative at this valuation due to the likelihood the market doesn't understand the presented revenue metrics and the ramifications. Read the full article on Seeking Alpha.  Disclosure: No position. Please review the disclaimer page for more details. 

Aurora Cannabis : 2020 Catalysts - Retail Stores

Aurora Cannabis should benefit from expanded Canadian cannabis retail store openings in 2020. The Canadian market remains very inefficient with key provinces of Ontario and Quebec lacking retail stores. Even based on planned store expansions in 2020, the company would only see a 25% boost to consumer cannabis revenues. The stock has a $2 billion valuation with analysts only forecasting sales reaching $356 million in FY21. As  Aurora Cannabis  ( ACB ) flounders around $1.50, the negatives surrounding the stock shouldn't completely overshadow the opportunities for the Canadian cannabis market in 2020. The company has substantial catalysts in 2020 including additional retail stores in Canada, the rollout of Cannabis 2.0 products and global expansion including the U.S. CBD market. This article is the first in a series of articles discussing the 2020 catalysts for Aurora Cannabis with a focus on the opportunity for more retail stores in Canada. Read the full article o