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Apple Becomes Wall Street’s First Trillion-Dollar Company

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Apple

Apple Inc. (AAPL), the world’s most valuable company, reached a major milestone Thursday after its market value crossed $1 trillion for the first time. The iPhone maker is the first publicly-traded U.S. company to reach that landmark, underscoring its explosive growth over the past two decades.

Shares of the Cupertino, California-based company reached a high of $207.05 on Thursday, enough to send its total market capitalization past $1 trillion. Share prices would later consolidate around $206.94 for a total value of $973.2 billion based on 4.92 billion shares outstanding.

The stock, which has returned 21% this year, was propelled higher by another solid earnings report showing above-trend profitability and revenue. On Tuesday, Apple reported an earnings per share of $2.34 for its fiscal third quarter on revenues of $53.3 billion. Analysts had forecast per-share earnings of $2.18 on $52.34 billion in sales.

The gains came even as iPhone sales basically flat-lined at 41.3 million.

Software and services revenue, which includes App Store, AppleCare, Apple Pay, iTunes and cloud computing services, posted quarterly revenue of $9.55 billion – the highest on record.

Although very few companies have rivaled Apple’s trajectory, the company is trying to fend off Amazon.com’s (AMZN) explosive growth. In 2011, the online marketplace was worth just a third of Apple’s value. On Thursday, it was worth roughly $875 billion, having surpassed $900 billion in July.

The technology-focused Nasdaq Composite Index traded sharply higher on Thursday, gaining 0.8%. The NYSE Fang+ Index, which includes Apple, Amazon and other high-growth stocks, was up 1.7%.

As Hacked reported Wednesday, 40% of technology stocks listed on the S&P 500 Index have entered into correction territory recently, raising the specter of a bigger market pullback in the near future. Tech giants Facebook Inc. (FB) and Netflix Inc. (NFLX) are down more than 20% from their recent peaks, which puts them in bear market territory.

Analysts at Morgan Stanley recently outlined the lending danger in a note to clients:

“With Amazon’s strong quarter out of the way, and a very strong 2Q GDP number on the tape, investors were finally faced with the proverbial question of ’what do I have to look forward to now?’ The selling started slowly, built steadily, and left the biggest winners of the year down the most. The bottom line for us is that we think the selling has just begun and this correction will be biggest since the one we experienced in February.”

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 773 rated postsChief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi




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4 of Amazon’s Biggest Growth Opportunities and How They Are Progressing

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Something interesting has happened in the tech space over the last 5 years, and it is only becoming more and more pronounced in 2019: everyone is competing against Amazon.

Amazon is almost becoming the presumed “victor” in many industries because of their past success at gaining dominance in markets that are considered new to them. So now I’d like to go into some of Amazon’s biggest growth opportunities and how they have been progressing over the last few years.

Using Voice to Foster Dominance

Domination of the “voice” feature with the Amazon Echo is “the” major opportunity for the e-commerce arm of Amazon. It provides the most frictionless ordering experience and includes a ton of data that can be mined and utilized for future e-commerce initiatives.

Predicting Customer Needs

The ability to guess what you’d like to buy will build out directly from the voice feature we just talked about. Companies like TrunkClub have already delved into this space, but preemptive shipping is likely to come into play in the near future. Amazon has so much data on us that it should be able to predict ahead of time what we would want to order.
Scott Galloway refers to this as “zero click ordering”, which is a catchy way of saying that AI does all the work and we just decide what we want to keep once it arrives. Recent patent filings and some press releases by Amazon give a strong likelihood that this becomes a reality in the first half of 2019.

Going After Grocery

Right now, Walmart is covering a much greater territory than Amazon with their grocery offering in the US (84% of households can be reached rather than Amazon’s 18%). This is one competitive area where Amazon still has room to go.

Everyone expected the purchase of Whole Foods to be a gamechanger in the grocery space, but it has taken much longer than expected to get the growth and breadth necessary to dominate the space. Walmart may be competing now, but who’s to say where they will be 2 years from now.

AMG’s Rocketing Growth

Amazon Media Group is in a period of aggressive growth right now, and it is looking like it will only continue to accelerate in the coming years. They actually did $11 billion of revenue, which is more than Twitter, Snap and Instagram combined. This is somewhat of an insane statistic, and says a lot about where the tech world is moving. Right now, this e-commerce company is killing media companies left and right. There is mass consolidation right now and with mergers and acquisitions activity continuing to accelerate, this trend can be expected to continue.

The End Game

In terms of competition, Amazon has no competitor with the same level of reach across so many industries. But a new competitive feature has emerged as Google and Microsoft become more attractive partners for companies wishing to avoid being wiped out by Amazon.

An “us against them” dynamic will continue, and it is likely to intensify as Amazon’s growth and dominance accelerates. The real question is what happens when the economy turns and we are no longer in a clear skied economy.

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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Does this Chart Spell Doom for the S&P 500 Index?

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It has been an impressive eight-week stretch for the U.S. stock market, with the S&P 500 Index staging one of its best relief rallies of the past three decades. Investors expecting to ride out another bull market should tread carefully now that the latest earnings forecasts are in.

Scary Chart

Following a painful entry into bear-market territory on the eve of Christmas Eve, the S&P 500 Index has recovered an astounding 18%. On Friday, it closed at 2,775.60, its highest since Dec. 3.

The recent run of good fortune has come largely on the back of better than expected corporate earnings as well as signs of progress on U.S.-China trade talks. But these catalysts could become headwinds in the near future.

Case in point: FactSet recently issued grim guidance for S&P 500 companies, forecasting a year-over-year drop in earnings during the first quarter of 2019. The research firm’s rationale for the downgrade comes from the so-called bottom-up earnings per share (ESP), which is “an aggregation of the median EPS estimates for all the companies” in the S&P 500 Index. This figure declined by 4.1% in January, a much bigger decline than the five-year, ten-year and 15-year averages.

All 11 primary sectors tracked by the S&P 500 recorded a decline in their bottom-up EPS estimate during the month of January. The biggest losses were reported by energy and information technology, the S&P’s largest and fifth largest sectors, respectively.

That leads us to the following scary chart, which appeared on the Quoth the Raven Twitter feed on Friday:

Forward earnings are a forecast of a company’s next-period earnings, usually to completion of the current fiscal year or next fiscal year.

Related reading: The January Stock Rally Could Face a Painful Reversal.

Watch Out for 2,800

Morgan Stanley, one of America’s largest banks, is warning investors not to “get caught up in price momentum” of the latest rally. The warning comes as the S&P 500 is once again approaching 2,800, a level where rallies come to die.

While valuation isn’t a reliable predictor for market timing, the headwinds posed by 2,800 are compelling. Combined with dismal earnings guidance, it’s likely that market fundamentals will detract from the latest rally attempt.

If the S&P 500 does go beyond 2,800, its valuation based on 2019 average per-share earnings will be 16.5 times forward earnings. As Bloomberg notes, that’s the average reading of the past five years and a strong sign that stocks are becoming overvalued.

“Don’t get caught up in the price momentum, as if the market is telling you something that may happen,” Mike Wilson, a strategist at Morgan Stanley, told Bloomberg TV. “The data isn’t improving, and the data probably isn’t going to improve over the next two to three quarters, and that’s going to create uncertainty again when you’re trading at 2,750-2,800.”

Featured image courtesy of Shutterstock. Charts via Barchart.com. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 773 rated postsChief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi




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Analysis

Traders Buying Activision Blizzard Options

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By Dmitriy Gurkovskiy, Chief Analyst at RoboMarkets

With the S&P 500 having recovered most of its Christmas losses, there are still stocks that have not even started to move away from their lows. Today we are going to analyze one of those.

Activision Blizzard (NASDAQ: ATVI) is a US based company that produces and sells game consoles, PC and mobile gaming content. Headquartered in Santa Monica, CA, ATVI is one of the largest gaming and entertainment companies in the world. It was founded in 2008 after the Vivendi Games and Activision merger, and currently owns such brands as Call of Duty, Quake, and World of Warcraft, among others.

In the last 6 months of 2018 ATVI experienced its most negative period in history, having lost around 50%.

Fundamentally, this was sudden, as all quarterly reports exceeded expectations.

The chart shows revenue went down in early 2018, but this is okay given the seasonal factor, and Q4 is sure to yield nice profits to ATVI.

With the reports being so good, then, what made the stock plunge so much? First, the market went down overall, but there were some other reasons, too. One of them is the lower expectations on Q4 2018 earnings. They were first forecast at $3.06B, but in November, the company lowered them down to $3.04. Another reason was the news of fewer users in Q3.

Then, four top managers got fired, including the CEO and president, as they were unable to create a new game during 2018; this was followed by Michael Morhaime, the former Blizzard CEO, leaving the company. He stopped being president in October and became an adviser, but he will definitely have left by April 2019.

Done with firing? Not really. In February, someone let slip the company is getting ready for a massive job cut, firing over 100 employees, in order to reduce costs.

Breaking off with Bungie added fuel to the fire, with the stock plunging by 7%. Activision Blizzard and Bungie worked together on Destiny, but this did not prove fruitful. In November, Activision Blizzard provided Destiny 2 for free just to ramp up the number of users, which means the sales were not very good. At Bungie, however, people reacted positively, as they were very happy to get rid of the strict Activision Blizzard schedule.

For ATVI, however, this not only caused the stock to plunge, it may have also led to trials initiated by investors. A few companies are already considering legal action because of the loss of potential profits. All these negative reasons are still keeping the stock near its lows. The reasons are already priced in the market, though, as the news on legal actions were known in January, while the firing campaign may be good for the company.

In December, we mentioned General Motors (NYSE: GM), where the management decided to cut jobs, and the stock went finally up, forming an uptrend.

Once Activision Blizzard is able to reduce costs, this may happen to this company as well. The market is expecting a positive Q4 report, which may change investor sentiment, which is now negative.

The P/E is currently at 17.54, with the average being 18.91, which means the stock does have some potential.

With such a large stock fall, the short float is quite low, 2.23%, meaning there are few people who want to capitalize on the fall.

Another important factor that may signal a rise is the news on buying 16,000 call options at $46, with the expiry on Feb 15. Traders have to pay a premium in order to buy options, and the price must rise above the strike ($46 in this case) for them to get profits; this means the price is very much expected to rise above $46 by Friday.

Technically, there is a descending trend, with the price being below the 200-day SMA. Once the price approaches $45, however, the volumes go up, which shows the traders’ interest.

A good report may well push the stock above $50, but the price should stay there for a while before one could start taking midterm longs. The target may be at around $65 or $70.

Those who bought calls hoped for a good report, but the options will expire in a couple of days (or sooner), and this support will come to an end. In order to understand whether one should continue holding longs on ATVI, one should monitor the number of new users and management speeches. The rising number of users may change the current negative trend, and, in this case, even the legal actions won’t be a big deal.

Disclaimer

Any predictions contained herein are based on the authors’ particular opinion. This analysis shall not be treated as trading advice. RoboMarkets shall not be held liable for the results of the trades arising from relying upon trading recommendations and reviews contained herein.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 30 rated postsHaving majored in both Social Psychology and Economics, I went on to continue my education in post graduate. Later I worked as a team lead of a tech and fundamental analysis lab in the Applied System Analysis Research Institute. This helped me to acquire all necessary skills and experience to become a successful trader and analyst, as well as a portfolio manager in an investment company. I'm a pro in the financial field and the author of articles for various international media. I also hold the position of Chief Analyst at RoboMarkets.




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