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Stock Pick: Alphabet Inc. (Parent Company of Google)

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Alphabet Incorporated (GOOGL) is a company that needs no introduction. The multinational conglomerate was established through the corporate restructuring of Google in October 2015. With the reorganization, Alphabet has created two segments: Google and Other Bets. Google focuses on internet products such as YouTube, Search Ads, Google Play and others while Other Bets specializes in selling internet and television services. The company had a net income of $12.662 billion in 2017.

Technical Analysis of Alphabet Inc. (GOOGL)

GOOGL has been correcting after posting an all-time high of $1,291.44 in July 2018. At that price level, the stock showed signs of bullish exhaustion. First, GOOGL had five attempts to get a weekly close above $1,254. However, each one failed because the volume was anemic. In addition, a long bearish divergence was spotted on the weekly RSI. As volume and momentum faded, price eventually followed.

Nevertheless, the pullback is giving us an opportunity to buy at a firm support level.

Technical analysis shows that GOOGL is headed to meet support of $995. This support level is strong as it used to be a firm monthly resistance back in May 2017. Bulls struggled to breach this area but they finally did it in October 2017. After that, the support was retested in April 2018. The retest led to the rally to the all-time high of $1,291.44.

With the S&P showing signs of weakness, we will just play the bounce to be on the safe side. Be sure to lock in profits once targets are reached.

Fundamental Analysis of Alphabet Inc. (GOOGL)

On top of our technical analysis, fundamental analysis also supports our short-term bullish view.

The parent-company Alphabet Inc. posted its third-quarter figures recently that beat expert estimates. Experts estimated an earnings per share (EPS) of $10.54 but the stock revealed quarterly earnings of $13.06 per share. With this development, GOOGL has gone above consensus EPS three times in the last four quarters.

In addition, its trailing twelve months price-to-earnings ratio is 39.59. While the stock may look overvalued, it is actually not far from its five-year average of 34.42. If you also consider that GOOGL has a five-year maximum P/E ratio of 66.23, then it is safe to say that the stock has some upside potential in the short-term.

The strategy is to buy on dips as close to $995 as possible. As long as the stock is above this level, it has the momentum to bounce to our targets of $1,112. Take that out and there’s a possibility of revisiting resistance of $1,254.

The timeline for the target is less than six months.

Weekly GOOGL Chart

Monthly GOOGL Chart

As of this writing, the Alphabet Incorporated stock (GOOGL) is trading at $1,055.94.

Summary of Strategy

Buy: On dips as close to $995 support as possible.

Target:  $1,112 and then $1,254.

Stop: Close below $976.

 

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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3.9 stars on average, based on 331 rated postsKiril is a CFA Charterholder and financial professional with 5+ 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 funds, as he does his own crypto research and is a Product Manager at Mitre Media. 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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Stock Pick: Activision Blizzard Inc. (ATVI)

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Activision Blizzard Inc. (ATVI) is a developer and distributor of content and services on multiple gaming platforms including consoles, mobile devices, and personal computers. The company is responsible for developing and publishing world renowned games such as Starcraft, Diablo, Warcraft, Call of Duty, Candy Crush, and Overwatch. As of December 2018 calendar year, the company has generated sales of $7.5 billion with a labor force of ~9,000 employees.      

Technical Analysis of Activision Blizzard Inc. (ATVI)

We like ATVI because it looks ripe for bottom picking. The stock has been on a freefall after printing the all-time high of $84.68 in October 2018. It only took the stock four months to lose over 50% of its value as it dropped to $39.85 on February 11, 2019. Needless to say, the stock is badly beaten. At the very least, it is due for a relief rally.  

Technical analysis reveals that ATVI is showing signs that a short-term bottom is likely in. This view comes after it respected support of $40 on February 11. The stock immediately rejected lower prices as it closed the week at $44.60. This was a signal that buyers are emerging.

Technical indicators support this view. First, on the week of February 11, ATVI printed volume that’s over 193% of its weekly average. The significantly elevated volume indicates that a big buyer has likely stepped in to stop the bleeding. The weekly RSI backs up this assumption. We can see a bullish divergence on the weekly chart which is suggesting that the stock is gathering bullish momentum.

However, it is important to note that we are only playing for the bounce. ATVI is still bearish as we have yet to see any trend reversal signals. Thus, it is very likely that the stock will resume its drop after the expected relief rally.

Fundamental Analysis of Activision Blizzard Inc. (ATVI)

In addition to our technical analysis, fundamental analysis also supports our short-term bullish view.

The trailing twelve months price-to-earnings ratio (PE ratio TTM) of ATVI is 15.87. The stock is still undervalued when compared to the 19.63 PE ratio TTM of the games and hobbies industry. On top of that, the current PE ratio TTM is far from its four-year high of 35.704. Considering these figures, ATVI has some room to grow.

However, ATVI reported mixed Q4 earnings while offering less than stellar guidance for the first half of 2019. The company reported an earnings per share (EPS) of $1.29, which is higher than the forecasted $1.28 EPS. On the other hand, ATVI generated revenues of $2.84 billion, which is significantly lower than the projected $3.04 billion. Also, the company announced that it plans to slash its workforce by 8% due to the unexpected drops in net bookings.

The strategy is to buy on dips as close to $40 as possible. As long as bulls hold this level, the stock will likely generate the momentum to bounce to our target of $49.44. Take that out and the next target is $55.28

The timeline for the target is less than six months.

Weekly ATVI Chart


Monthly ATVI Chart


As of this writing, the Activision Blizzard Inc. stock (AVTI) is trading at $42.78.

Summary of Strategy

Buy: On dips as close to $40 as possible.

Targets:  $49.44 and $55.28.

Stop: Close below $38.5.

 

Featured image courtesy of Shutterstock.

Disclaimer: The writer does not own shares of Activision Blizzard Inc. (AVTI).

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 331 rated postsKiril is a CFA Charterholder and financial professional with 5+ 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 funds, as he does his own crypto research and is a Product Manager at Mitre Media. 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

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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Stock Picks

Stock Pick: Foot Locker Inc. (FL)

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Foot Locker Inc. (FL) is an American retailer of apparel and shoes. The company operates 3,270 stores in 27 countries in North America, Europe, and Asia. These stores come in various formats, including Foot Locker, Kids Foot Locker, Lady Foot Locker, Champs Sports, Footaction, Runners Point, Sidestep, and SIX:02. As of January 2019, the company has 15,141 employees.

Technical Analysis of Foot Locker Inc. (FL)

We like FL because it is one of the few S&P 500 stocks that has gone through a major correction and is now showing signs of reversal. After printing an all-time high of $79.43 in December 2016, the stock showed signs of bullish exhaustion. The combination of bearish divergence and a double top pattern was enough to drive FL to as low as $28.42 in November 2017.

From that point, the stock bottomed out and started its reversal process. Over a year later, we believe that FL might have reversed its trend.

Technical analysis shows that FL has breached resistance of $52 in May 2018. This triggered the breakout from the inverse head and shoulders pattern on the weekly chart. While the stock pulled back and went below $52 in July 2018, the stock remained bullish. After all, it printed a higher low setup of $44.47 in October 2018.

With a higher low in place, FL once again took out resistance of $52 and climbed as high as $58.67 this month. Now, the stock is facing resistance at the 200 moving average on the weekly chart. The expected pullback will likely send FL down to $52 and flip the resistance into support.

Fundamental Analysis of Foot Locker Inc (FL)

In addition to our technical analysis, fundamental analysis also backs our bullish view.

The third-quarter 2018 performance of Foot Locker Inc. beat analyst estimates. Analysts projected that FL will print sales of $1,846 million yet the company generated total sales of $1,860 million. Also, analysts projected earnings per share of 92 cents. However, the company came out with surprising quarterly earnings of 95 cents per share.

Lastly, the trailing twelve months price-to-earnings ratio (PE ratio TTM) of FL is 12.85. The stock is undervalued considering that the PE ratio TTM of the apparel and shoes industry is 14.42. On the surface, the difference might not be significant. However, if you take into account that the four-year maximum of FL is 19.13, then it becomes more apparent that the stock has more room to grow.

The strategy is to be patient and buy on dips as close to $52 as possible. As long as bulls hold this level, FL will likely generate the momentum to bounce to our target of $72. Take that out and the next target is $78.

The timeline for the target is more than six months.

Weekly FL Chart


Monthly FL Chart

As of this writing, the Foot Locker Inc stock (FL) is trading at $56.68.

Summary of Strategy

Buy: On dips as close to $52 as possible.

Targets:  $72 and $78.

Stop: Close below $49.50.

 

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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3.9 stars on average, based on 331 rated postsKiril is a CFA Charterholder and financial professional with 5+ 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 funds, as he does his own crypto research and is a Product Manager at Mitre Media. 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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