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Healthy Stage Set For February Penny Stocks To Watch

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A broad-based uptrend lifted all classes of January stocks, creating a healthy environment for penny stock plays in February, according to Investopedia. Big tech and blue chips posted the strongest showings, with tax cut legislation creating additional enthusiasm. The Russell-2000 small-cap index posted an all-time high and continues to build strength.

Penny stocks are poised to benefit in such an environment, emerging from multi-month basing patterns since the middle of 2017.

Equity blockchain plays subsided a bit in January, following a healthy fourth quarter. Blockchain companies nonetheless are among the February stocks to watch, along with emerging biotechnology companies and some beaten down stocks that are attracting new interest.

The top four stocks in the February Penny Stocks To Watch return from the January list.

1. Viking Therapeutics, Inc. (VKTX)

Viking Therapeutics, Inc., a clinical-stage biopharmaceutical company focused on the development of novel therapies for metabolic and endocrine disorders, rose from the ninth spot on the January watch list to become the top stock to watch in February.

The company went public at $8.50 in April 2015, topping out at $10.00 a month later. The downtrend found support just under $1,00 in November 2016, yielding a test in August of 2017 that completed a bullish double bottom reversal.

A September rally lifted the stock into December’s 2-year high at $4.40. The stock has consolidated gains in a narrow trading band, entering an uptrend that reached $5.19 on Jan. 9, 2017. A breakout above this level could attract broad buying interest.

The company in December of 2017 announced the closing of its previously announced underwritten public offering of 5.9 million shares of its common stock, including 769,565 shares sold pursuant to the underwriters’ full exercise of their option to purchase additional shares to cover over-allotments, at a public offering price of $2.50 per share, before deducting underwriting discounts and commissions and estimated offering expenses payable by Viking.

The gross proceeds from this offering are approximately $14.8 million, before deducting underwriting discounts and commissions and other estimated offering expenses. The company intends to use the net proceeds from the offering for continued development of its VK5211, VK2809 and VK0214 programs and for general research and development, working capital and general corporate purposes.

Source: Yahoo Finance

2. Nova Lifestyle, Inc. (NVFY)

Nova Lifestyle, Inc., a designer and manufacturer of modern lifestyle furniture, rose from the number six spot in January to the second top stock to watch in February.

The furniture maker went public at $2.05 in January 2013 and posted an all-time high at $10.35 a year later. The stock then declined into July 2016 to an all-time low at 38-cents, then recovered to $5.15 in October. In the summer of 2017, the stock spiked to yearlong range resistance at $2.75.

It turned higher in the fourth quarter of 2017, but fell in November after shifting its business model to blockchain technology. The buying impulse stalled at $3.10, holding close to that resistance level in the last month, raising odds for a breakout that could reach the 2016 high.

On Dec. 11, 20171, the company approved a share buyback program to purchase up to $5 million of its common stock in transactions conducted through a broker or dealer in compliance with Rule 10b-18 promulgated under the Exchange Act. The duration of the program will be one year. The share buyback program will be funded from the company’s cash and future cash provided by operating activities.

In November of 2017, the company issued fourth quarter guidance, noting that it expected to generate revenue to be approximately $35 to $36 million and net income to be approximately $1 million per month or in the range of $3 million to $3.5 million for the fourth quarter, a multifold increase from the same period the prior year.

Net income per share was expected to be in the range of $0.11 to $0.13 for the quarter, a significant increase versus the prior year.

The company noted its growth is based on expanded sales channels, new product offerings and repeat customer orders from Asia and Australia and expanded profit margins across nearly all product lines.

The company recently formed I Design Blockchain Technology, Inc., a wholly-owned subsidiary.

Source: Yahoo Finance

3. Nxt-ID, Inc. (NXTD)

Nxt-ID, Inc., which provides a comprehensive platform for technology products and services that enable the Internet of Things (IoT), rose from the number eight spot in January to the February number three spot.

The company went public at $30 in 2013 and posted an all-time high at $72.50 a month later. The stock fell to $1.60 in December of 2015, falling even further into November 2017.

The company joined the blockchain bandwagon on Dec. 20, announcing the creation of a cryptocurrency payment platform. The company then entered into agreements with institutional investors to purchase an aggregate of approximately $7 million of shares of common stock in a registered direct offering.

A vertical rally spike and deep pullback followed the company’s blockchain news while a Fibonacci grid stretched across the uptick, indicating a buying opportunity at the 0.786 retracement level near $2.75.

The pullback settled at the 50- and 200-day EMAs, just below the 0.786 Fibonacci rally retracement level, as a bounce over $3.00 launched a preliminary buying signal. It will take a buying spike over stronger resistance between $3.70 and $4.10 to generate stronger upside.

On Dec. 19, 2017, Australia and New Zealand Banking Group Limited and Fit Pay, Inc., a wholly owned subsidiary of NXT-ID, Inc. announced an agreement to extend contactless payment capabilities to a range of new devices. The agreement enables ANZ cardholders to make secure contactless payments at NFC-enabled point-of-sale locations directly from the Internet of Things (IoT) and wearable devices that are integrated with the FitPay payment platform.

Under the agreement, ANZ will participate in FitPay’s Token Requester Program, which enables cardholders to securely add their payment credentials to devices that are integrated with FitPay’s contactless payment platform. The platform uses tokenization, a payment security technology that replaces cardholders’ account information with a unique digital identifier (a “token”) to transact highly secure contactless payments. It allows consumers to pay at near-field communication-enabled point-of-sale terminals with a simple tap.

The collaboration with ANZ includes ensuring that the devices meet ANZ’s technical, usage, security, branding, and consumer experience requirements. Manufacturers of 15 IoT and wearable devices are currently integrating with the FitPay payment platform. Product announcements from the manufacturers of these devices are anticipated throughout the year.

Source: Yahoo Finance

4. Westport Fuel Systems, Inc. (WRPT)

Westport Fuel Systems Inc., a supplier of clean-burning fuel systems and components, reached an all-time high at $50.19 in 2012, then entered a decline to an all-time low at 82 cents of March 2017. The stock rallied to a 2-year high at $4.09 in October before pulling back into a trading range with support at $2.53.

An early January breakout attempt failed, creating a bull flag pullback now sitting on the 50-day EMA. An upturn could emerge, driving the stock to 2015 resistance $6.74.

Total consolidated revenues from continuing operations for the three months ended Sept. 30, 2017 increased by $4.7 million or 8% from $56.1 million in 2016 to $60.8 million in 2017. Total consolidated revenues from continuing operations for the nine months ended Sept. 30, 2017 increased by $65.5 million, or 56% from $117.3 million in 2016 to $182.8 million in 2017.

The company recently received certifications from both the U.S. Environmental Protection Agency and Air Resources Board in California for its 2018 ISX12N natural gas engine. Like the Cummins Westport L9N engine, the ISX12N meets California ARB optional low NOx standard of 0.02 g/bhp-hr, a 90% reduction from engines operating at the current EPA NOx limit of 0.2 g/bhp-hr. The ISX12N also meets 2017 EPA greenhouse gas emission requirements.

The company also recently entered into a development and supply agreement with Tata Motors Limited for its 4-cylinder and 6-cylinder, natural gas spark-ignited commercial vehicle engine family to meet the Indian Government’s new Bharat Stage VI emission standards, scheduled to take effect in April of 2020.

Source: Yahoo Finance

5. QuickLogic, Corp. (QUIK)

QuickLogic Corp., a developer of ultra-low power, multi-core voice enabled SoCs, embedded FPGA IP, display bridge and programmable logic solutions, tested a 2009 low at 51 cents in the fourth quarter of 2016, then rallied to a 2-year high at $2.48 in March 2017. The decline that followed found support at $1.15 in June.

An August test created a double bottom reversal that delivered modest upside in the last five months. The stock now trades just 50 cents under the 2017 peak and could test that level again soon. A breakout could attract buying interest, pushing the stock to a resistance between $4.50 and $5.00.

During the third quarter of 2017, the company generated total revenue of $3 million, which is flat compared to the prior quarter and represents an increase of 6% from the third quarter of 2016.

New product revenue was $1.5 million, which is flat compared to the prior quarter and represents an increase of 10% from the third quarter of 2016, which was primarily due to an increase of connectivity product PolarPro shipments.

The company’s mature product revenue was $1.5 million, flat compared to the prior quarter and third quarter of 2016, respectively.

For the third quarter of 2017, revenue generated from Samsung accounted for 48% of new product revenue and 24% of total revenue compared to 43% and 21%, respectively, for the second quarter of 2017.

In March of 2017, the company issued 11.3 million shares of common stock at a price of $1.50 per share, $0.001 par value. The company received net proceeds of approximately $15.2 million after deducting underwriting commissions and other offering-related expenses.

The company plans to use the net proceeds for working capital, to accelerate the development of next generation products and for general corporate purposes. The company may also use a portion of the net proceeds to acquire and/or license technologies and acquire and/or invest in businesses when the opportunity arises.

The shares were offered pursuant to a shelf registration statement which was declared effective by the SEC on March 16, 2017.

Source: Yahoo Finance

6. Tuesday Morning, Corp. (TUES)

Tuesday Morning, Corp., an off-price retailer with over 715 stores across the United States specializing in name-brand, high quality products for the home, selling luxury textiles, furnishings, housewares and seasonal décor, topped out at an 8-year high in the low 20s in 2014 before entering a decline driven by consumers’ shift to e-commerce.

The downtrend settled just above $1.50, an 8-year low, in June 2017 before a bounce filled the May 2017 exhaustion gap in October. Price action has since hugged the gap fill level, signaling that buying signals will begin when the stock trades over $3.30 to $3.50.

Net sales for the second quarter were $333.8 million, compared to $328.1 million for the second quarter of fiscal 2017. The company’s sales comparison to the prior year is impacted by the net closure of 16 stores during the last year.

Comparable store sales increased 1.8% compared to the same period a year ago, and were comprised of a 1.9% increase in customer transactions, slightly offset by a 0.1% decrease in the average ticket.

During the second quarter, 14 stores relocated, four stores opened, two stores expanded and eight stores closed, for an ending store count of 724 as of Dec. 31, 2017.

Sales at the 55 stores relocated during the past 12 months increased approximately 52% on average for the second quarter of fiscal 2018 as compared to the prior year quarter, and contributed approximately 340 basis points of comparable store sales growth, driven primarily by a better real estate and larger average store footprint.

Gross profit for the quarter decreased $0.3 million to $105.7 million compared to $106.0 million of gross profit in the second quarter of fiscal 2017. Gross margin for the second quarter fiscal 2018 was 31.7% compared to 32.3% last year.

The decrease in gross margin for the quarter was primarily due to a significant unfavorable shift from the first fiscal quarter in markdown timing as compared to the same period in the prior year. Partially offsetting this increase in costs was a continued improvement in initial merchandise mark-up along with lower buying and supply chain costs recognized as compared to the same period in the prior year.

Source: Yahoo Finance

Noble Corp., PLC (NLC.BE)

Noble Corp., PLC reached $40.83 in 2011, then suffered a downtrend falling to a 21-year low in August 2017 at $3.14. The stock turned higher in the fourth quarter, then stalled at $4.75 before rallying in early January to a 9-month high at $5.80.

The stock has since been pulling back and is approaching major support at the breakout level, aligning with the 50- and 200-day EMAs. A bounce could draw strong buying interest and bring the stock near early 2017 resistance levels between $7.50 and $8.00.

Noble Corp. PLC recently announced on behalf of its wholly-owned subsidiary, Noble Holding International Limited (NHIL), that NHIL has commenced cash tender offers for up to an aggregate principal amount that will not result in an aggregate purchase price that exceeds $750 million of NHIL’s outstanding 4% senior notes due 2018 and of which $250 million principal amount is currently outstanding; 4.90% senior notes due 2020, of which $167.766 million principal amount is currently outstanding; 4.625% senior notes due 2021, of which $208.675 million principal amount is currently outstanding; 3.95% senior notes due 2022, of which $125.661 million principal amount is currently outstanding; and 7.75% senior notes due 2024, of which $1 billion principal amount is currently outstanding; and the outstanding 7.50% senior notes due 2019 issued by certain subsidiaries of Noble Corporation, a Cayman Islands exempted company and the guarantor of the notes, of which $201.695 million principal amount is currently outstanding.

Source: Yahoo Finance

8. AVEO Pharmaceuticals, Inc. (AVEO)

AVEO Pharmaceuticals, also known as AVEO Oncology, a biopharmaceutical company dedicated to advancing a broad portfolio of targeted therapeutics for oncology and other areas of unmet medical need, reached an all-time high at $21.55 before entering a downtrend that fell between $5.07 and $3.01. The stock tested this resistance zone unsuccessfully in May 2015, then fell to an all-time low in March 2017 at 50 cents. A subsequent bounce stalled at resistance in August, followed by a fourth quarter reversal that has held firm at the 50-day EMA. The price action has built a basing pattern that could support an uptrend above $8.00.

AVEO Oncology and EUSA Pharma recently announced the presentation of preliminary results from the Phase 2 portion of the TiNivo study, a Phase 1b/2 multicenter trial of oral tivozanib in combination with intravenous nivolumab.

The company recently completed the refinancing of its $20 million debt facility with Hercules Capital, Inc. and its affiliates, the terms of which enable approximately an additional $12.1 million in cash flow over 2018 and 2019, when compared to the prior loan. The new $20 million facility has a 42-month maturity from closing, no financial covenants, a lower interest rate and an interest-only period of no less than 12 months, which could be extended up to a maximum of 24 months, assuming the achievement of specified milestones relating to the development of tivozanib. Proceeds of the new facility will be used to retire the company’s existing $20 million of secured debt with Hercules.

Source: Yahoo Finance

Safe Bulkers, Inc. (SB)

Safe Bulkers, Inc., an international provider of marine dry bulk transportation services, ended an uptrend at $11.48 in 2014, then entered a downtrend to an all-time low at 30 cents in January 2016. The stock then eased into an uptrend, gaining at a modest pace into September 2017 before the rally stalled at $3.65.

The stock carved an ascending triangle pattern in January that currently tests range resistance. A breakout will face a secondary barrier between $4.25 and $4.50.

The company recently called for redemption of all outstanding 8% series B cumulative redeemable perpetual preferred shares, par value $0.01 per share, liquidation preference $25 per share. There are currently 379,514 issued and outstanding series B preferred shares.

The series B preferred shares will be redeemed on Feb. 20, 2018 at a redemption price of $25 per share plus all accumulated and unpaid dividends to, but excluding the redemption date. After the redemption date, all distributions on the series B preferred shares will cease to accumulate, such shares will no longer be deemed outstanding, and all rights of the holders of such shares will terminate, except for the right to receive the redemption price without interest thereon.

In December, the company acquired a 92,000 dead weight, South Korean 2010 built, dry bulk, Post-Panamax class vessel. The vessel is a sister ship of the company’s two existing South Korean Post-Panamax class vessels. The acquisition was financed from cash on hand.

Source: Yahoo Finance

10. Digital Turbine, Inc. (AAPS)

Digital Turbine, Inc., which operates at the convergence of media and mobile communications, connecting top mobile operators, OEMs and publishers with app developers and advertisers worldwide, topped out slightly above $5.00 in 2012, then fell from a triple top pattern in 2015, continuing a downtrend to an all-time low in November 2016 at 56 cents. The stock then rallied, adding points into January 2018, and now trades at a 2-year high while its on-balance volume has hit an all-time high. Such tailwinds should support a greater upside in coming months, moving the stock near triple top resistance between $2.75 and $3.25.

Total revenue for the third quarter of fiscal 2018 was $38 million, representing an increase of 71% year-over-year. Advertising segment revenue of $24.2 million increased 49% year-over-year.

The company benefitted from substantially higher revenue-per-device with its four largest U.S. carrier partners during the quarter. Higher revenue-per-device metrics are reflective of higher average slot counts and strong advertiser demand for unique home screen access.

Content revenue for the third quarter of fiscal 2018 reached an all-time high of $13.8 million, representing year-over-year growth of 128%. Growth within the content business was driven by higher merchant spending levels, as well as the addition of new merchants and services during the quarter.

GAAP gross margin was 25% in the third quarter of fiscal 2018, as compared to 15% in the third quarter of fiscal 2017. Non-GAAP adjusted gross margin was 27% for the third quarter of fiscal 2018, as compared to 24% in the third quarter of fiscal 2017.

Net loss for the third quarter of fiscal 2018 was $3.8 million, or -0.05 per share, as compared to the net loss for the third quarter of fiscal 2017 of $2.6 million, or -$0.04 per share. Non-GAAP adjusted net income was $0.5 million, or $0.01 per share, in the third quarter of fiscal 2018.

Non-GAAP adjusted EBITDA for the third quarter of fiscal 2018 was $1.2 million, as compared to a loss of $2.1 million for the third quarter of fiscal 2017.

Source: Yahoo Finance

Featured image courtesy of Shutterstuck. 

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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3.9 stars on average, based on 8 rated postsLester Coleman is a veteran business journalist based in the United States. He has covered the payments industry for several years and is available for writing assignments.




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Analysis

The Air Transportation Market is Growing. Where to Invest?

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By Dmitriy Gurkovskiy, Chief Analyst at RoboMarkets

Today, practically every person who has internet access knows what Amazon and Alibaba are. These are the world’s largest internet-companies who, for the sale of their products, also use famous platforms like AliExpress and eBay.

Their total revenue constantly has been increasing year after year.

And as long as these companies are oriented toward international markets, 95% of the goods they sell are delivered by air.

Here we could pay attention to the aircraft manufacturers, as the air transportation growth rate will lead to increased demand for new aircraft. Boeing has conducted research according to which the demand for pilots, aircraft technicians and flight attendants in the world is growing, and the biggest activity is expected in the Asia-Pacific Region and in North America.

This week, the news feeds have been peppered with headlines on the current shortage of pilots in airline companies, and this demand will be hard to satisfy in the nearest 10 years.

Last week, Ryanair pilots went on strike demanding a salary raise and improved improved working conditions.

Consequently, investors have started showing interest in airline companies. Also, rumor has it that Warren Buffett is going to invest in one such company (or in several), but it has not yet been indicated which one exactly. According to some reports, it may be Southwest Airlines Co. (NYSE: LUV).

Southwest Airlines Co. is an American low-cost airline founded in 1971. It is the biggest low-cost carrier in the United States and in the world by the number of transported passengers. As of December 2017, there were 706 Boeing 737 aircraft in the company. By its financial performance, the company looks attractive for long-term investments. For example, profitability has reached 16.90%. The Short Float ratio is very low – only 1.82% and the debt to equity ratio is 0.48.

Based only on the rumors, Southwest Airlines stocks have left the consolidation range between the levels of $50.00 and $53.50, having broken out the 200-day moving average and indicating a possible formation of an ascending trend on D1. The closest resistance levels are at $62 and $67.

On W1, a stable uptrend is visible and the broken out levels are becoming a support for underlying price.

It is unclear precisely which company Warren Buffett will direct his attention to, so we can analyze the financial standing of other airline companies, which can become potentially interesting investments.

Delta Air Lines (NYSE: DAL) is one of the largest airlines in the world. Its destinations network includes countries in Asia, Europe, North, South America and the Caribbean region. As of January 2018, Delta Air Lines had 853 aircraft.

The financial performance of this company over the last 4 years shows a drop in income.

Profitability is 7.7%, the debt to equity ratio is 0.67 and the Short Float ratio is 2.65%.

According to technical analysis, the price is trading near the 200-day moving average, constantly breaking it out in both ways. Since December 2017 the resistance has formed on the chart, as the stock still won’t break out. In this situation, the breakout of $57.00 can be a signal for the further growth of the price of the stocks, but, at the same time, it has to be confirmed by good Q3 results.

On W1, there is still an uptrend, but we can already see a more serious resistance area from 2015 in the range between $53 and 56. The price is now in this range. The stock already tried to break out of this resistance in January 2018, but is has never managed to secure its position above this resistance. Here there is a high chance of the price falling to the support at $40. Currently, the potential drop of the price of the stock prevails over the growth.

The next airline company which we can direct our attention to is American Airlines, Inc. It is also one of the largest airline carriers in the world with headquarters in Fort Worth (Texas). The aircraft fleet of the company amounts to 958 aircraft in total.

Unfortunately, recently the financial performance of this airline has not been perfect either.

The debt to equity ratio (25.16) clearly demonstrates how risky this asset may be. That means that the company has 25 times more debts than the means to clear these debts. In this situation, the slightest decline of aviation operations may seriously hurt the company.

It should be noted that American Airlines has the “youngest” aircraft fleet now, as the company has invested its money exactly in the aircraft, which has caused such debts. Therefore, the company decided to risk, bu investors have not appreciated it, and thus the price of the stocks in 2018 was constantly falling.

Currently, the stock is in a downtrend. The price is gradually dropping within the descending channel, breaking out the support levels. However, near the level of $36 there has appeared a surge in rise, which indicates a possible forming of a strong support.

This can be due to rumors about Buffett’s interest towards the airline companies: his fund has now about $100 billion of available cash and a part of it will get to the market. Overall, the stocks of American Airlines seem to be a very risky investment.

There is another large airline company, which may be interesting from the point of view of investments: United Continental Holdings.

United Continental Holdings (NYSE: UAL) is the fourth largest airline company in the United States. It appeared out of the merger of United Airlines and Continental Airlines in 2010. As of June 2018, the aircraft fleet of United Continental Holdings amounts to 716 aircraft. Also, as in the two previously described airline companies, the most successful financial year was 2015. According to those results, profits reached $7.34 billion.

The Short Float ratio is 5.20%; the debt of the airline is 1.62 times bigger than its internal funds.

On D1, the technical analysis indicates an uptrend, as the price is now above the 200-day moving average and has secured its position above $80. In this situation, the further growth of the price cannot be excluded.

On W1, the stock also shows a stable uptrend trend and is currently trading near its historical maximums.

Thus, the technical analysis indicates a good growth potential for this stock, but the possibility of the correction of the price to $75 cannot be excluded either.

Having summarized the data on the revenue, we can see the big picture in the airline transportation market for 4 airlines.

American Airlines has lost the most income, while Southwest Airlines has been constantly increasing its profit.

The rest of the data indicates that the riskiest assets is American Airlines – its debt is the biggest out of all the 4 companies, its profitability is low and its Short Float is high.

To sum up, for the nearest years Southwest Airlines looks the most attractive investment-wise.

Amid all these data, Southwest Airlines noticeably stands out – all the rest have not been able to restore the previous revenue level after 2015. The fact of the matter is that Southwest Airlines has concentrated on low-cost transportation and this decision turned out to be the right one. If Buffett’s fund does buy Southwest stocks, this may become a very good investment for the coming years. Nevertheless, even without it, the expected growth of the passenger throughput will only be increasing the profit of this company and, consequently, the price of its stocks.

You should not consider this article as a guideline to follow in any way – this is only information for analysis.

 

Disclaimer

Any forecasts contained herein are based on the authors’ particular opinion. This analysis may not be treated as trading advice. RoboMarkets bears no responsibility for trading results based on 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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4.4 stars on average, based on 6 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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Stock Picks

Stock Pick: Twitter Incorporated

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Twitter Incorporated operates a popular social media platform that enables users to post and engage with messages known as tweets. In addition, the social media channel offers promoted products and services which include promoted trends, promoted accounts, and promoted tweets. These features allow advertisers to endorse their products and services. The company has 3,372 employees with 2017 revenues amounting to $2.44 billion.

Technical Analysis of Twitter Incorporated (TWTR)

TWTR moved as high as 74.73 in December 2013. Unfortunately for buyers at that level, the stock went into a freefall after it hit that price level. The downtrend began in March 2014 when TWTR breached support of 50. Bulls mounted multiple attacks to take out the resistance, but each attempt was denied. With bears in full control of the market, the stock dropped to as low as 13.91 in February 2016.

At that price level, TWTR formed a solid base. The base building continued until October 2017 when the stock surged in price and volume. The price action was a signal that the stock was ready for a bull run.

Technical analysis show TWTR broke out of a rounding bottom reversal pattern on the daily and weekly charts. The breakout looks valid as it was pushed by heavy volume. On top of that, the stock climbed as high as 47.79 in June 2018.

Recently, TWTR has been correcting. Nevertheless, this may be an opportunity to buy the dip.

Fundamental Analysis of Twitter Incorporated (TWTR)

On top of the technical analysis, fundamentals offer some support to our bullish outlook. TWTR’s trailing twelve months (TTM) price to earnings ratio (PE ratio) is 62.63. The stock appears overvalued. However, it has a three-year maximum of 333.4. This tells us that investors are willing to pay a premium for TWTR shares.

In addition, Variety reports that Twitter’s quarterly results beat expert estimates. Analysts predicted that the company would generate revenues of $605 million and a profit of 12 cents per share. However, Twitter posted revenues of $665 million and an earnings per share of 16 cents.

The strategy is to buy on dips as close to 30 as possible. If bulls can stay above this level, then we might see TWTR climb to 39.80. This point is crucial because by then, the stock would have created an inverse head and shoulders pattern. We’ll revisit TWTR once the target is hit for the possibility of a breakout.

The timeline for the initial target is less than three months.

Daily TWTR Chart

Weekly TWTR Chart

As of this writing, the Twitter Incorporated stock (TWTR) is trading at 32.98.

Summary of Strategy

Buy: As close to 30 as possible.

Target: 39.80

Stop: Close below 28.40.

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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3.6 stars on average, based on 223 rated postsKiril is a financial professional with 4+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and ETFs, as he does his own crypto research and is the subject matter expert at ETFdb.com. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.




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Analysis

Tesla: Even Record Losses Cannot Stop the Stock’s Growth

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By: Dmitriy Gurkovskiy, Chief Analyst at RoboMarkets.

About two weeks ago, we published an article on Tesla and its future prospects, but today we will talk about this company once again.

On August 1, Tesla reported on second-quarter financials. The results are sad – the losses of the company are topping record levels.

The second-quarter losses reached $718 million USD, and compared to Q2 2017 they have gone up more than two times. If we look closer at the dynamics of what is currently happening, we will see that the growth of the losses is gradually slowing down and, at the same time, the overall income of the company is growing.

From this perspective, the future looks quite bright – if it goes on like that, the company will very soon be able to become profitable. As a result, amid the growing losses, the price of Tesla’s stock has increased by more than 20%. Here, the situation is exactly the opposite with regard to that of Facebook, whose share price has fallen by 20% despite massive profit growth. Tesla investors have paid attention not to the growing losses, but to the promises of Elon Musk to reach profitability in the next two quarters of the year.

Share prices have been pushed higher by another growth accelerator as well, which may later lead to an even bigger increase in price.

The short float ratio for Tesla shares is 27.38% and it demonstrates that every third investor is going short. Such an impressive growth has naturally provoked the closing of short positions. According to some reports, the losses of the bears on Tesla shares reached $2 billion USD last week, and many have not completed their transactions yet hoping for the price to pull back in order to reduce the present losses. But if the decline does not follow, they will again become “clean buyers”, pushing the stock price further up.

Tesla presents a unique case for Wall Street; if we analyze its financial indicators, we will see that one absolutely should not invest in a company with such a high short float ratio.

Let us compare Tesla with Ford – one of the leading car manufacturers in the world. The capitalization of Tesla is already 1.5 times bigger than that of Ford.

The ratio of debt of capital for Tesla is 2.42, meanwhile the same ratio for Ford is even worse – 4.19. This being said, the profitability of Ford is 4.30% and that of Tesla is in the minus and amounts to -18.80%.

Despite positive quarterly results, Ford shares cannot form an ascending trend and are trading at $10 USD. The decline had been forecast even before the reports on Ford shares were published in the article in June.

At the same time, amid the growing losses, Tesla stocks are in an uptrend.

There are 23 times more outstanding shares of Ford than those of Tesla. If, in this situation, we divide the price of Tesla shares by 23, the result will be that one share costs about $15 USD. In other words, even in the case of such comparison we see that the shares of the company are overpriced, and if we add up the debts and profitability, it will become clear why Tesla’s short float ratio is so high.

However, there is one more detail that the company had concealed when the report was published. In the second quarter Tesla has moved over to a new income report standard of ASC 606 which has provokedartificial revenue growth. When the growth of the revenue was being compared to the same in the Q2 2017, the values have not been adjusted according to the new rules and it has not been indicated that the calculation has been made according to the old standard. Thus, the company has misled investors by this data and it does not seem possible to calculate the real growth of the revenue in the second quarter, as Tesla has not published any detailed information on the adjustments which had influenced this report.

If we look at the diagram at the beginning of this article, we notice the positive dynamics of  revenue. But if we look closer, we will see that the situation is completely different – the revenue values have in fact been inflated, while it is impossible to calculate the real values at the moment. It turns out that only the third-quarter report will reveal the real dynamics of Tesla’s revenue. As of yet, only the fact of the growing losses has been confirmed. On the basis of this information, at the moment of the publication of the statistics not everyone understood what these numbers reflect. This is why the demand for Tesla shares has grown so sharply.

In light of this, it would be logical if investors reconsider the situation and begin unloading Tesla shares. But, historically, shares of Tesla have long ago stopped being governed by logic, which is why the sellers can once again experience losses. Along with them, there will be more ill-wishers which are predicting an imminent collapse of Tesla and are trying to persuade everyone to sell their Tesla shares. Possibly, their predictions will become reality one day – the only question is if they will be able to cover the losses, which they have experienced from such a long wait.

If Tesla shares are not governed by logic, then what is the growth accelerator? The answer is banal – rumors and expectations. Elon Musk has promised that the company will become profitable during the next two quarters of the year (although he always promises something). Tesla is now setting all its expectations at Model 3 and the huge demand for it.

We cannot ignore the talent of Elon Musk either. He is not only a great inventor but also a good seller. Perhaps, it is only his persuasiveness that makes investors believe that the future is bright for Tesla and stimulates them to further invest. Currently, the company produces 5,000 electric cars a week and is planning to be producing 6,000 by the end of August.

The technical analysis still indicates that there is an uptrend and that the probability of the further growth of the price of the shares is high. The price is above the 200-day moving average and it has bounced off the support level of 300 USD. The closest resistance is at 400 USD.

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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4.4 stars on average, based on 6 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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