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The 5 Monster Stocks To Watch For The Week of July 30
MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN SHARES OF NXPI
AMD was the winner of our poll the other day on a stock to be analyzed post results. So let’s get to it.
The company just blew out expectations, with earnings beating estimates by over 10 percent. Revenue beat too by nearly 2 percent. When looking at AMD’s report, what stands out immediately is that gross margin improvement rising by 300 basis points from a year ago to 37%, and 100 bps better sequentially. It is the best gross margins they have in some years.
Despite the big beat, and improving margins, analysts have reduced their earnings and revenue outlook for the company over the past few days. With profits dropping by 7 percent, and now only expected to rise by 22.6 percent in the third quarter. Meanwhile, revenue estimates have also been reduced by 2.5 percent, and are now forecast to rise by just 4.5 percent.
The stock cares not, because it has risen by nearly 15 percent over the past 5-days, to its highest price in a decade. It may still have much further to climb. Looking at the chart, we can see the stock entered a more than a one-year-long period of consolidation, after rising from roughly 2 to $14.5. Now shares may be ready to continue its rise, to about $24.
Despite the slight guidance disappointment, AMD stock seems to have all the positive momentum behind it to see it continue to rise over the coming weeks. With the added bonus of improving fundamentals to go along with it.
Facebook was the disaster of the week, with shares falling by 20 percent from their highs. Analysts have cut their outlook for the coming third-quarter and now see earnings declining by 3.5 percent versus last years, after cutting estimates by nearly 13 percent. Meanwhile, revenue estimates have been reduced by 2.7 percent, and are now seen rising by 33.5 percent.
The stock stopped falling at technical support around $173, but I think the stock will need to continue to build a base before attempting to refill any of that gap.
Intel fell hard too, but I still think Intel was an overreaction. I think it is hard to say they are losing business to competition when analysts are upping estimates for the third quarter, after a blowout second-quarter.
Analysts have upped third-quarter earnings estimates by nearly 7 percent, and now see them climbing by almost 14 percent versus last year. Meanwhile, revenue estimates have increased by almost three percent and are now seen rising by 12 percent.
The stock is one of the cheapest in the group at just 11.25 times 2019 earnings estimates.
Intel fell right to support around $48, and I think it won’t be long until the gap gets filled.
I wasn’t as impressed with Amazon’s results and guidance as most were, and maybe that is because Amazon’s earnings do not impress me. Amazon has a history of playing with its bottom line, by adjusting its spending and investments back into the business. So right now, Amazon has reduced its spending, and its profits are jumping, but when will they start spending again?
Revenue is missed expectation in the second quarter by about 1 percent, and the outlook for the third quarter has been reduced by nearly 2 percent. But there is no stopping Amazon, and so I’m not sure any of this matters.
Analysts have now started adjusting their models for NXPI, and it’s looking pretty good. In fact, revenue is now expected to grow by 2 percent in 2018, and then accelerate to 5.6 percent in 2019, and 5.5 percent in 2020. More impressive is the earnings growth which is seen rising much faster, with growth of 1 percent in 2018, 12 percent in 2019, and 19 percent in 2020. The stock trades at less than at 10.5 times 2020 estimates, and that makes this stock dirt cheap, with a PEG ratio of just 0.56.
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That is it, good look this week.
Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future.
#amd #amazon #facebook #intel #nxpi