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Examining Acadia, Adobe, and SalesForce – A Look At The Week To Come


Examining Acadia, Adobe, and SalesForce – A Look At The Week To Come

Inflation watch is not over just yet, this week the consumer price index (CPI) will come Tuesday. According to Bloomberg, estimates are calling for a rise of 2.2 percent year-over-year, while ex-food and energy a gain of 1.9 percent y/y. Then on Wednesday morning, we get the Producer Price Index, and estimates are calling for a month over month gain of 0.2 percent. If the results come in as expected my guess is that market will be pleased, these estimates are not a sign of an overheating economy or inflation.

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This week will also mark quadruple witching expiration, which means Friday could be an exciting day with a high level of volatility, just keep that in mind.

The Wall Street Journal reported late on Friday that now Intel may look to acquire Broadcom, in a case of the hunter becoming the hunted. It is incredible the that drama keeps getting more and more entangled. I have no idea where it goes from here, but perhaps with Intel in pursuit to acquire Broadcom trying to block Broadcom’s acquisition of Qualcomm, maybe Broadcom backs off. There are plenty of other chip companies around that Broadcom could fit into its portfolio. But the news is likely to give investors even more reason to keep aggressively buying the chip stocks.


Adobe

Adobe has been a fantastic stock over the years, with the stock up 185 percent over the past three years! The chart is incredible, and it seems to have broken out yet again and looks to be entering a “Netflix” ramp-up on the charts.

adobe

Earnings in 2018 are expected to grow at 45.7 percent to $6.28 per shares, while revenue is forecast to rise by 20 percent to $8.77 billion in 2018. But now, analyst views are pointing to earnings growth of about 13 percent in 2019 to $7.10 and 15 percent growth in 2020 to $8.20. Is this a Nvidia type of story where analysts are underestimating growth, for the company only to come out and top estimates? It may not be the case with Adobe because last quarter they just surprised the street on earnings by 9 percent, and 2.7 percent on revenue, nowhere near a Nvidia type of beat.

ADBE Price Target Chart

ADBE Price Target data by YCharts

Of the 33 analysts that cover the stock, 82 percent have a buy or outperform rating, while the average price target on the stock is at roughly $218. Are analysts price target adjustments on the way? Potentially. The stock is not cheap at 31 times one-year forward earnings estimates, and 10.5 times one-year forward sales. Tough call….

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SalesForce

SalesForce is another stock that looks to have broken out, but again not all that different to Adobe.  Earnings are forecast to climb by nearly 52 percent in 2018 to $2.05, while revenue is expected to grow by almost 21 percent to $12.67 billion. But the earnings growth slows to the mid-20 percent range, which is still very fast, but it comes with a high price tag, at 50 times one-year forward earnings.

saleforce

The stock is trading well above its historical trading channel, and while 91 percent of the 45 analysts covering the stock have a buy or outperforming rating on the stock, their average price target is only $135.88, only 6 percent from the current price.

CRM Price Target Chart

CRM Price Target data by YCharts


Acadia

Acadia has performed horribly since results came out, and to be honest, there was nothing terrible enough to warrant shares being down by 21 percent since. I find it interesting that analysts have raised their revenue estimates for the year 2020 to $838 million! Meanwhile, the street is looking for revenue of $263 million in 2018, and $443 million in 2019. In fact, Wall Street is modeling for the company to earn $1.78 per share by the year 2020. Those are significant revenue and earnings growth numbers, the only questions I have is what are the estimates assuming? Is it just the market for Parkinson Disease Psychosis, or are they factoring in the success of future trials? I’m not sure, the only trial that we will get color on anytime soon is the Depression trial, so it is likely all based on PDP.

 

ACAD Chart

ACAD data by YCharts

The average price target on the stock is $50.11, yet shares trade at only $25.33 today, so there again, another example of a big disconnect by the street, and the stock. Who is right? We shall find out eventually.

That is gonna be it, for now, good luck!

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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.

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Tags: #sp500 #intel #broadcom #qualcomm #acadia #salesforce #adobe

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Micron, Microsoft, Qualcomm Vote, Job Report – The Week Of March 5th


Micron, Microsoft, Qualcomm Vote, Job Report – The Week Of March 5th

This coming week should be exciting, with ADP on Wednesday and BLS Job report on Friday morning. Has it been a month already? It feels like the other day the market was freaking out over “the hot wage” reading. Mind you the reading was a 2.9 percent rise in wages for January. It was 2.83 percent September, but nobody cared about the wage number back then.

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It is sad that wages grew at 2.9 percent in January and that was the highest reading since May of 2009.


What Happened To Wage Growth

This next chart will demonstrate how bad it has been now for years. Can you believe there was a time when hourly wages were rising at 9 percent a year? Look at that, true we had inflation issues in the 1970’s. But look at the growth in wages in the 1990’s. Now, look at today.


Shifting Workforce

The next chart shows us what has been happening to our workforce through the years. In 1970 Manufacturing jobs were the most prominent part of the labor force, with roughly 18 million workers, now it is about 12 million. Meanwhile, leisure and hospitality jobs have risen from approximately 6 million to nearly 16 million today. Retail trade in 1970 7.4 million, today 15.8 million.

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Shifting Wages

The jobs that pay the highest hourly wages Construction, Professional and Business services, while Retail and Hospitality pay the lowest. Durable goods and manufacturing are the third and fourth highest. Over the years, the economy has shifted from higher paying jobs, into lower paying jobs. It seems pretty clear, as to what has happened. 

 

Stocks

Obviously, this coming week will be critical to hear what the latest developments on the tariff situation and we should get more clarity this following week. The news around the tariff likely takes center stage, until Friday, when the only that might matter is Job report.

But we need to see the stock market continue where it left off on Friday. We are going to want to see a strong opening on Monday, and a solid follow through during the day.

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VIX

The vix is another important to gauge; we need to watch the vix spot vs. the future contracts. The chart below shows its nicely. Notice starting from the bottom with the purple line, the VIX spot is the cheapest, followed by the orange line (APRIL), Red (MAY), Green (JUNE), Purple (July), make sense? But notice how the market goes into backwardation at the start of February and where June become the cheapest, followed by July, May, April and then the Spot. Just keep an eye on this, it could be something to watch should the stock market start going off the rails. It tells us what the market is thinking regarding the future of volatility

^VIX Chart

^VIX data by YCharts


Micron

Micron could be on the verge of a massive breakout should be it able to rise above $50, and could see its shares rise to levels not seen in nearly two decades, back to $58.

micron

Roku

Roku appears to be on the verge of a major breakdown, that could send shares back into upper 20’s.

roku

Microsoft

Microsoft, found support at the previous downtrend, but will it hold? It also failed at resistance at $93.25, Microsoft will be an important one to watch? Does it break out or break down?

microsoft


Broadcom

It is a big week for Broadcom, with Qualcomm’s shareholder vote on Tuesday. Will Broadcom get its nominees on to Qualcomm’s board?

broadcom

The stock held support at $241, now where does it go? It will likely depend on the outcome of the Qualcomm board vote this pending week. Right now the options market is not looking for a deal to get between the two companies. The long straddle options strategy is looking for a rise or fall of only 11.7 percent, putting the stocks in a trading range of $57.5 to $72.5 by expiration on April 20.  The open interest for the $75 calls is relatively small at approximately 40,500 contracts, a notional value of only $2.8 million. Does Broadcom succeed at buying Qualcomm? Probably not.

qualcomm broadcom

 

That is it. Good Luck this week.

 

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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.

© 2018 Mott Capital Management, LLC.  Use, publication or reproduction in any media prohibited without the permission of the copyright holder.

Tags: #sp500 #micron #microsoft #roku #qualcomm #broadcom #jobs 

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Amazon, Microsoft, and Netflix Showing Sign Of Fatigue

Amazon, Microsoft, and Netflix Showing Sign Of Fatigue

To follow up on the weekend commentary, Amazon, Microsoft, and Netflix are continuing to show signs of weakness. In fact, today’s trading action, despite mild gains, actually strengthen that argument as each stock failed at crucial resistance levels. Plus I take a mild victory on NXP Semiconductor

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S&P 500

The stock market traded slightly lower today, with the S&P 500 down by about 60 bps, to 2,716, bring the S&P 500 down to our first support level around 2,713.

S&P 500

The chart above shows how the S&P 500 bounced right off, 2613, and managed to close right above it. Over the weekend, I wrote that the S&P 500 might fall to 2,691 to and I still believe that is the case, over the next couple days. Again, let me emphasize I am not saying or calling for the start of some massive sell-off, this, in my opinion, is just merely a minor pullback, in what has otherwise been a sharp and robust rebound. But if support fails and the index falls below 2,691 the story changes.

Amazon

amazon

Amazon finished the day higher by about 1.36 percent, but again Amazon continues to look extremely toppy here, and once again, the stock topped out along resistance and has yet to break above its previous highs.  To make matters worse for Amazon, we can see the stock had a relatively sharp sell-off of about 1 percent over the final hour and half of the day.

amazon

Additionally, if the stock fails to break to new highs, it could be a sign of a double-top forming on the daily chart. For now, the warning signs for Amazon, are a failure to rise to a new all-time high and a drop below $1,425. Should Amazon’s price fall below 1,425 shares likely fall sharply lower, perhaps to $1,250.

Notice volume was consistently rising for Amazon starting at the end of 2017, and it has been steadily declining even as the stock has rebound, again a bearish sign in my book.

Watch for these levels and these areas of interest. To be clear, I am NOT saying Amazon is about to enter some giant bear market, or this the all-time high’s never to be seen again! NO! I am merely suggesting that the stock may have a pullback over the next few weeks to months, and now is likely to err on the side of caution.

Microsoft

Microsoft also rallied 90 bps today, but look at that chart below, again failing right at resistance. You saw the chart from over the weekend. I don’t make these things up!

msft

If shares can clear $93.50, it is a sign that I am wrong, and the stock could continue to rally. That trendline is of critical importance to watch.

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Netflix

Netflix is the same scenario, also nearing a technical breakout/breakdown. Again, Netflix like Amazon must make a new all-time for any rally to continue to over the short-term. If shares are unable to rise above $287.50, it would suggest that the stock will fall and likely test support around $250.

netflix

NXP/Qualcomm

After a year of writing about the topic, Qualcomm has finally up its bid for NXPI to $127.50 or $44 billion.   I’m going to give myself a well-deserved pat on the back because it was in June, I said that Qualcomm would need to raise its offer $45 billion. Pretty darn close.

The most entertaining thing about the new offer? The tender closes on March 5, at 11:59 PM. Remember Broadcom is nominating people to run for Qualcomm’s board of director at the shareholder meeting. Broadcom made it quite clear they opposed Qualcomm upping its bid for NXPI. So what does Qualcomm do to fend off Broadcom, what they had too, up the bid. The best part, guess when that shareholder meeting is? You guessed it, March 6.

Talk about a kick in the teeth!

That is it! Good Luck

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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.

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Tags: #sp500 #stock #microsoft #broadcom #qualcomm #nxpi #netflix #amazon

 

S&P 500 Amazon Microsoft Apple Tesla Broadcom

Amazon, Apple, Microsoft, Netflix May Fall, Tesla & Broadcom May Rise

Amazon, Apple, Microsoft, Netflix May Fall, Tesla & Broadcom May Rise

It will be a shortened trading week for the stock market, with the President day holiday, but it should be anything but slow. The S&P 500 has rallied by 200 points since bottoming on Friday, February 9, a rise of 8 percent. But we could see the rally pause this week and take a bit of breather.

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The 5-minute chart shows how the S&P 500 stalled at the end of the day on Friday, options expiration,  and was unable to close at the highs of the day, with resistance at 2,742 proving to be too strong. It would suggest the S&P 500 is set to fall slightly, at least at the start of the week to roughly 2,690, a decline of approximately 1.5 percent. Should 2,690 hold, which is my expectation, a rise higher would continue from that point.

S&P 500 stock market

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Amazon

Amazon is likely not finished falling and could retest its 200-day moving average again around $1,300, in the not too distant future. We can see that in the chart the relative strength index has now been trending lower, despite the stock moving higher, a bearish divergence. Additionally, the recent price rise higher came on declining amounts of volume, which would suggest that buyers do not have the same level of conviction as the previous surge higher.

amazon

Additionally, the stock failed at resistance at $1,470 and the previous trend higher also acted as a resistance level. Again more bearish indications.

If that wasn’t enough, the stock is trading at peak valuations on a historical basis as well. As noted in an Investopedia article I wrote during the week, each time the stock has risen above 2.4 times one-year forward sales it has seen its stock decline.

Microsoft

Microsoft is not all that different than Amazon, with an RSI that is also trending lower, despite  a rising stock price. The stock looks set to decline to roughly $85.50, where it should find a meaningful support level.

Apple

Apple like the others is exhibiting the same patterns, with an RSI trending the wrong way. The best case scenario is for Apple to test that lower uptrend again, which is now around $160.

aaple

Netflix

Netflix is no different, with a divergent RSI, and waning volume levels each day following the lows. It likely indicates shares could be set to fall, perhaps to around $250.

nflx

Tesla

Tesla shares could look to continue to rise, and unlike the other stocks, it has an RSI that is trending higher, and again was able to test the $290 -$300 support level. The stock has been able to rise above the multi-month downtrend as well, another positive. Tesla never got to the extreme overbought levels either.

tesla

Tesla, unlike Amazon, is also trading at a historical discount on a one-year price to forward sales ratio. The last time Tesla was trading a ratio this low came two-years ago in February of 2016 when it was trading at 1.77 times one-year forward sales estimate. Now it trades at only 1.97 times forward 2019 forward sales estimates of $26.51 billion

TSLA Chart

TSLA data by YCharts

Broadcom

With the odds of Broadcom acquiring Qualcomm continuing to dimish, the stock is starting to reflect life without Qualcomm. With that, the stock has found a meaningful bounce off of support at $227, and the RSI has broken out of a multi-month downtrend. A breakout would come if the stock rose above $260.

broadcom

Shares are also historically cheap trading at less than 12 times one year forward earnings estimates of $15.30. The company issued strong guidance in just two weeks ago.

AVGO Chart

AVGO data by YCharts

Qualcomm

If the Qualcomm/Broadcom deal is dead, then Qualcomm has no right trading at $65, and likely reverts to the low $50’s. The company still has an on-going litigation with Apple, while analysts are looking for earnings to decline by nearly 20 percent in 2018 to $3.46, while revenue is expected to drop almost 5 percent to $22.2 billion.

qualcomm

In fact, the company is not expected to see revenue growth for some time.

QCOM Revenue (TTM) Chart

QCOM Revenue (TTM) data by YCharts

That is it for today. Good Luck

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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.

© 2018 Mott Capital Management, LLC.  Use, publication or reproduction in any media prohibited without the permission of the copyright holder.

Tags:#amazon #netflix #apple #qualcomm #broadcom #microsoft #sp500 #fall #rise #tesla

qualcomm nxp chipmaker stocks target

Target, NXP/Qualcomm, Chip Stocks, and More – Monster Week In Review

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Target, NXP/Qualcomm, Chip Stocks, and More – Monster Week In Review

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It was another record-setting week for the stock market, as the S&P 500 finished the week at 2,810.  Target ($TGT) shares continue to soar, now up by nearly 20 percent. Meanwhile, the chipmaker stocks have come roaring back to life after being left for dead at the end of 2017. Plus, we take a look at the Qualcomm ($QCOM)/NXP ($NXPI) deal, and how much Qualcomm may have to pay up, which could be as much $155 to get the NXP deal done.

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Broader Stock Market

Consumer Discretionary stocks ($XLY) continue to lead the charge higher in 2018, now up by over 7 percent, just beating out the healthcare ($XLV) names, which are up by 6.97 percent.  The S&P 500 is now up by just over 5 percent. Utility stocks continue as the worse performing group, down by over 5 percent, and with yields continuing to rise, and the 10-year likely on its way back to 3 percent, utilities, and the consumer staples should continue to have a rough year.

^SPX Chart

^SPX data by YCharts

Out of the top 25 holdings in the SPDR S&P 500 ETF ($SPY), only 4 are down, AT&T ($T), Intel ($INTC), Verizon ($VZ), and Procter & Gamble ($PG).

Top Performing Stocks

Target

Within discretionary stocks, Target continues to run, now up nearly 20 percent on the year, followed by Netflix ($NFLX), Lowes ($LOW), and Amazon ($AMZN), all up by more than 10 percent.

consumer discretionary stocks

Despite the sharp rise in Target’s shares this year, keep in mind the past three years have been horrible for the stock, and part of the reason we have seen the stock rise so sharply in 2018, is due to expectations that revenues will continue to recover. It would suggest that any slip up in this development could be problematic for the stock price.

The chart below shows the relationship between Targets trailing-twelve-month revenue and the stock price. Revenue estimates show how expectations are for them to return to the previous highs over the next two years.

TGT Chart

TGT data by YCharts

Additionally, Target has historically had a high effective tax rate, as well as improving revenue expectations, the market is looking for a boost to the company’s earnings from tax savings.

TGT Effective Tax Rate (Quarterly) Chart

TGT Effective Tax Rate (Quarterly) data by YCharts

As long as Target’s business continues to see a revenue recover, the stock should continue to flourish.


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Chipmaker Stocks

We haven’t focused much on the chipmaker stock much this year, but after having a rough finish to 2017, the sector is moving higher once again, with the PHLX Semiconductor ETF ($SOXX) up nearly 10 percent in 2018, with a new group of leaders emerging. 2017 saw Micron ($MU), Nvidia and the Apple supplier lead the group higher, this year it has been AMD ($AMD), ON Semi ($ON), Nvidia ($NVDA), ASML ($ASML) and Cypress ($CY), and notice how the Apple suppliers Broadcom ($AVGO), Skyworks ($SWKS), and Qrovo ($QRVO) have fallen to the bottom.

 

chipmaker stocks

ASML reported solid results just this past week, beating earnings estimates by over 40 percent, and revenue estimates by nearly 20 percent, according to Ycharts. Which also helped to lift shares of Lam Research ($LRCX), MKS Instruments ($MKSI), and Applied Materials ($AMAT) higher too.

ASML Chart

ASML data by YCharts

So apparently a rotation has started occurring to this point in 2018, out of the Apple suppliers into chip equipment suppliers, for now at least.

NXP and Qualcomm Should Start Heating Up

NXP and Qualcomm have finally received EU approval for the proposed deal, and with shares of NXP trading at over $120, Qualcomm faces a dilemma, pay up or be acquired by Broadcom.

I have said this for months, but Qualcomm needs NXP badly. Qualcomm’s battle with Apple shows just how fragile their licensing business is, and how badly it’s revenue streams needs diversification NXP offers Qualcomm that and would make Qualcomm an immediate force in near-field communication and the auto market.

Broadcom to this point has been very aggressive in its attempts at taking over Qualcomm, and I’d suspect should the NXP deal fall through, they will get even more aggressive.

Wall Street is forecasting no revenue growth for Qualcomm over the next three years, and that undoubtedly does not strengthen Qualcomm’s case to stay independent.

QCOM Revenue (TTM) Chart

QCOM Revenue (TTM) data by YCharts

At $120, NXP is now trading at only 15 times 2019 estimates of $7.98, while Qualcomm is trading at 15.10 times estimates of $4.25. You can see that Qualcomm is not even paying a premium for NXP at this point, and even a modest 30 percent premium get’s NXP to 19.5 times 2019 estimates or a price of $155. A 30 percent premium to Broadcom’s forward multiple of 13, gets NXP’s share price to $135.

NXPI PE Ratio (Forward 1y) Chart

NXPI PE Ratio (Forward 1y) data by YCharts

Qualcomm finds itself in an awkward spot for sure. Qualcomm can threaten to cancel the deal with NXP, but then they would have to pay a $2 billion breakup fee and likely have Hock Tan and Broadcom just gobble them up.

That is it!

Tomorrow, a look at the week and earnings to come.

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Tags: #sp500 #target #chipmakers #NXP #Qualcomm #broadcom