Stocks posted a solid day rising by nearly 90 basis points on the S&P 500 and more importantly it crossed 2,700. It sets up a run in the index between 2,800 to 2,830. Below is the chart I posted over the weekend; we can see the S&P 500 is continuing right along the path we laid out.
Russell 2000 (IWM)
The Russell confirmed the breakout and it appears to be on a path higher to around 1,562.
The housing sector broke out as well, and appears to be on its way back to 295.
We could go on and on with sector that breaking out because the market is breaking out — period. Well, maybe not the banks.
I laid you my bull case yesterday and today in my premium area.
Hard to deny at this point — right?
Amazon reported results tonight, and it seems to be a trend for them lately to disappoint investors with guidance. It is the second quarter in row guidance that was below expectations if I remember correctly. Looking through the numbers Amazon has become a slowing growth story. Sorry. Look…
I know some people will say, I’m crazy because they have a segment like AWS growing at 46%. But North America y/y sales slowed to 18% this quarter. Just look at the trend below that is highlighted for y/y growth. Q1 46%, Q2 44% Q3 35% Q4 18% – Slowing growth
Even international sales have slowed from 20%+ growth to upper teens. AWS growth although consistent is no longer seeing accelerating growth and has signs of slowing ahead.
But look facts are facts, the company is maturing, and the bigger the revenue gets, the harder it is to grow –its calls the law of large numbers. This isn’t a bad thing nor am I saying that Amazon is doomed. No, it’s not doomed, but as companies mature and growth slows, the valuation has to come down to adjust for that slowing growth. There are now pretty clear signs that Amazon’s growth is maturing.
The fact that Amazon has now disappointed on guidance two quarters in a row would suggest to me that investors are expecting faster growth out of the company. But the company can no longer grow at the pace investors would like. It is part of the reason the stock is down 5% tonight, trading at $1,635.
Look at the growth slowdown in the online store, third-party sellers, and subscriptions. Ad sales which are part of the “other” segment are just a small piece of the pie at this point. It will not move the needle of growth anytime soon.
Some investors want to say sure but look at the EPS growth. Ok, look at the EPS growth, it is growing. But be careful what you wish for because the stock trades at 65 times 2019 earnings estimates.
So on either front, valuations for the stock likely need to fall.
The stock is on the verge of a big break down tonight, and should it fall below $1620; it has further to fall perhaps $1475.
Let’s move on.
AMD was up again today clearing resistance at $24 and is likely on its way to $25.70.
Nvidia appears to be filling a gap up to $150, be careful with this one.
It is now clear, that I am wrong on Roku. It happens. The stock appears to be on its way to $48.20.
Bank of America (BAC)
Bank of America is having trouble because now rates are falling, and the yield curve is still flat. Not good for the banks. Mind the Gap — a drop below $27.90 triggers a sell-off to $26.
Broadcom is nearing a break out which could send it back to all-time high.
Look at Starbuck; those options traders nailed this one a few weeks back. From January 22 Starbucks May Rise Following Results
I do get things right once in a while 😛
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 results.