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Top Hot Stocks of the Week: Netflix, Tesla, Walt Disney

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By Dmitriy Gurkovskiy, Chief Analyst at RoboMarkets

In this review, we are going to talk about the most discussed stock companies of the week.

Netflix (NASDAQ: NFLX)

Founded by Reed Hastings and Mark Randolf in 1997, Netflix is headquartered in Los Gatos, CA. This is an entertainment company focusing on movie and TV show production. In 2016, Netflix released 126 original movies and shows. As per 2018, it had 117.8M subscribers throughout the world, including 54.75M in the US. Netflix has been trading on the NASDAQ as NFLX since 2002.

Initially, Netflix focused on DVD rentals and sales, then limiting it to just rentals in the US. In 2007, it implemented streamed broadcast, and went global by 2010, starting with Canada. In 2016, Reed Hastings suddenly announced streaming was now available in 190 countries. As of now, Netflix still does not work in China, where the internet is regulated by the government, and the countries under the US sanctions.

In Q1, Netflix net profit rose by 56% to $290M, with $185M the quarter before. This was possible majorly because of the subscriber base increase and the subscription fee rise in October 2017. The number of new subscribers came at 7.41M in Q1, which is 50% more than last year and is above the company’s expectations. Overall in Q1, there were 125M subscribers. These positive trends are likely to continue in Q2, with Netflix expecting +6.2M new subscribers.

An average subscriber uses Netflix for around 10 hours per week, and 90% of those users are ready to pay more for their subscriptions, which makes the outlook for the company even more positive. Goldman Sachs, Pivotal Research Group, and Monnes Crespi & Hardt supported Netflix shares rating and raised the target price to $460-$500.

Meanwhile, Netflix CEO announced last week that Jonathan Fridland, PR Executive Director, had been fired after insulting African Americans while talking to the colleagues. This may cause a correction wave for Netflix stock and perhaps will give the investors an opportunity to buy shares at a better price. Jonathan Fridland leaving the company won’t have much influence on the future company’s plans, and large investors do understand it, so any massive sell-off is unlikely; conversely, any correction may provoke large volumes and push the price to its highs.

On W1, the stock is growing significantly, but any negative news or the indices falling may lead to correction to around $340 or $350.

netflix

 

On D1, the price is uptrending, far above the SMA; too much optimism led to a very fast price increase, which may then result in a significant correction. The latter may start as soon as 21st Century Fox and Disney, which are both Netflix competition, agree to a deal, so the current price is not the best point to go long.

netflix

 

Tesla (NASDAQ:TSLA)

Tesla Inc was founded by Marc Tarpenning, Martin Ebenhard, Elon Musk, and Ian Wright in 2003. The company focuses on producing electromobiles and its parts, as well as creating electric energy storing technologies.

On June 16, Elon Musk announced the company had constructed a new assembly line for Model 3 in 3 weeks with minimum investment. However, this assembly line was ‘just a large tent’, as some media said.

This news may be interpreted in various ways. The growing demand for Model 3 makes the company produce more, which leads to building more assembly lines, as the existing ones are not enough; this should be positive for the company and its earnings. On the other hand, an assembly line that looks like a tent is quite on the same page with the record losses of $710M in Q1.

It looks like the company just cannot afford to build a fully functional facility for an assembly line where products that weigh a few tons will be produced. This also requires certain temperature and humidity, which is very hard to provide in a building covered with a tent.

One could remember the Iron Man movie in this light, where Tony Stark managed to build a power suit, get out of the cavern, and even take off, but that was all he could achieve. We can only hope that the cars produced under a ‘tent’ will be able to both start and stop. Even if we’re exaggerating a bit, many say that Tesla is now putting the quantity far ahead of the quality.

Short float is rather high, 30.84%, which means than few investors are confident about the company’s success.

In an attempt to support Tesla, Elon Musk bought shares worth $24M at $434-$345 on June 12 and 13. This is a kind of warning for the bears that they can lose their money after the price goes up again; Musk has issued such ‘warnings’ before, and was quite right: for instance, such a thing happened in 2012, when Musk bought shares and they then skyrocketed by nearly 500%.

On W1, the shares may well correct till the support at $300 or $275, while overall the ascending trend formed in 2013 is still dominant.

tesla

On D1, the price is again trying to break out the 200-day SMA; currently, it is above it and may continue rising after correction.

tesla

 

The Walt Disney Company (NYSE: DIS)

The Walt Disney Company was founded back in 1923 by Walter and Roy Disney bros. Its headquarters are in Berbank, CA. This is one of the largest entertainment corporations in the world, owning a huge Hollywood studio, 11 parks of attractions, 2 waterparks, and a few broadcasting channels. News on Walt Disney Company acquiring 21st Century Fox is again on wire, this time with a deal amount of $85.1B.

It all started in 2017, when Walt Disney Company made its first bid for 21st Century Fox acquisition at $52B. Walt Disney still sees its major goal in taking control over streaming services and moving ahead of the competition, including Netflix. To this end, Walt Disney is going to become the major shareholder of Hulu by buying 30% of Huliu shares from FOX 30%, which will totally make 60%.

At that time, only the US Federal Anti Monopoly Service could bar such a deal, and it probably would. Now there is a good chance, as the Service has already allowed Time Warner to buy AT&T for $84.5B.

However, once this issue got nearly resolved, another competitor appeared in the market: it was Comcast that offered $65B to 21st Century Fox. Rupert Murdoch, the FOX owner, was then in good position and just wanted rto wait for a better price. This was not for nothing, finally, as Walt Disney submitted another bid in June, this one at $85.1B, from which $13.8B will be accepted as FOX debt settlement.

The FOX board met on June 20 and announced that Disney bid was better for them, also because it is supposed to be paid not only by cash, unlike Comcast, but with shares, too. However, no official response from FOX has been received yet. The company canceled its board meeting on July 10, when they were supposed to vote for or against Disney offer, and are likely to be waiting now for a counter-offer by Comcast. This way, Disney and Сomcast find it difficult to compete with Netflix and Amazon, as both companies are in need of this deal but nobody knows who will eventually win it.

Still, a new offer was enough for Disney to push their stock price 4% up to reach $109, but FOX being silent upset the investors a bit, with the price then going to $106.

Short float is very low at 2.12%, which means the investors are very reluctant at going short. On D1, the shares broke out the 200-day SMA and managed to stay above, which could mean an uptrend in forming. Once the acquisition is a deal, this trend will gain momentum.

walt disney

Meanwhile, on W1 one can notice a long term ascending trend correction. This trend started forming back in 2011, and right now the price is at the support near the 200-day moving average.The closest resistance levels are at $115 and $120.

walt disney

 

Disclaimer

Any predictions contained herein are based on the authors’ particular opinion. This analysis shall not be treated as trading advice. RoboForex 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 18 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: Symantec Corporation

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Symantec Corporation (SYMC) is a Fortune 500 company that sells cybersecurity applications and services. Their mission is to help consumers and organizations protect and manage their most valuable data. The firm carries reputable cybersecurity software brands including Symantec, LifeLock, and Norton. As of June 2018, Symantec has 13,000 employees with sales of $4.8 billion.

Technical Analysis of Symantec Corporation (SYMC)

Symantec has been correcting since it posted an all time high of $34.20 in September 2017. At that level, SYMC was showing signs of weakness. It created a large bearish divergence on the weekly chart. On top of that, the stock failed to go above $34 resistance after several attempts. These were indications that bulls were exhausted.

One year later, bulls appear to have replenished their numbers. They are now working hard to keep the stock from officially reversing its trend.

Technical analysis shows that SYMC is respecting its uptrend support when it bounced off lows of $17.49 in October 2018. The bounce was supported by heavy volume, which enabled to pair to climb as high as $23.57 early this month. The stock has been pulling back since but we’re confident that the bounce will continue.

That’s because Symantec has numerous support levels at this area on top of the uptrend support, including the 50% Fibonacci level of $18.71. In addition, the weekly RSI has broken out of two resistances. This tells us that bulls are gaining heavy momentum.

Fundamental Analysis of Symantec Corporation (SYMC)

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

In May 2018, Symantec made headlines as the stock crashed by 34.7% after the company announced an internal investigation. The investigation focused on the company’s questionable accounting practices. The cybersecurity firm sought the services of independent counsel and kept the SEC in the loop. Symantec also warned investors that the investigation might lead to financial restatements.

Four months later, Symantec announced that the investigation has concluded. The company said that it will not restate its previous financial statement with the exception of one transaction that’s worth $13 million.

With this development, the stock appears to have been unjustly sold. It might take SYMC some time to regain investor confidence but it seems to be fundamentally sound. Its trailing twelve months price-to-earnings ratio is 11.70. This tells us that the stock is undervalued considering that its five-year maximum is 23.33.

The strategy is to buy on dips as close to $20 as possible. As long as the stock is above this level, it has the momentum to rally to our target of $26.

The timeline for the target is more than six months.

Weekly SYMC Chart

Monthly SYMC Chart

As of this writing, the Symantec Corporaton stock (SYMC) is trading at $21.83.

Summary of Strategy

Buy: On dips as close to $20 support as possible.

Target: $26

Stop: Close below $18.75.

 

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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3.7 stars on average, based on 271 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 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

Black Friday: How to Capitalize on It

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By Dmitriy Gurkovskiy, Chief Analyst at RoboMarkets

The most interesting event this month in the US is the famous Black Friday, the day of large discounts, which is on Nov 23. On this day, Americans make 45% of all their annual purchases. The US economy is doing well compared to other countries, with the Fed hiking the rates in order to cool the markets down. The unemployment rate is at its record lows, which means people have money, and there’s going to be much hype about the Black Friday as usual. With this scenario, a few companies may show great potential during Q4. First, there’s e-commerce that is a very strong competition against offline stores. Amazon (NASDAQ: AMZN) is the leader here, with the market cap of $1T. In Q3, Amazon made a record high when it comes to quarterly earnings. However, the chart shows it is Q4 that is going to be the most profitable for the company.

Unluckily, after the Q3 report, the price was unable to reach new highs. Investors’ expectations were higher than the data that came out, which led to the share price going down. However, Amazon did make profit, and there’s a good trend in it. Furthermore, Amazon management expects to book the record profit in Q4 2018. In October, we analyzed Amazon and said the company stock is going to trade at around $1,400. It is now trading at its low at $1,476, however, and is above the 200-day SMA. When the price goes below $1,700, the volumes get much higher, according to the chart. Thus, this may be the support the price may start recovering from.

If the earnings expectations are met, Amazon may well rise above the round number of $2,000. Another large company that may get nice profits is eBay (NASDAQ: EBAY), which is mostly centered around e-commerce, too. The profits are good here, while the stock price leaves much to be desired.

Still, eBay incomes are rising quarter to quarter. According to the expectations, Q4 is going to be the most profitable in the recent few years.

Over 2018, eBay stock went down by nearly 30%. Perhaps, the reason for that is the increasing debt, with the debt to equity ratio now being 1.11, while, for Amazon, it is just 0.63. Technically, the stock went down till November last year, too, while after the Q4 report it traded at its highs. This time, the stock looks somewhat weaker than before, and may only reach $36 or so.

Walmart, an offline store chain, may also be included into this list, as this company is sure to get good profits thanks to Black Friday sales. Nevertheless, while eBay and Amazon shares corrected before Q4, Walmart is rising and is trying to break out its record highs made a year ago. Walmart earnings, like internet giants’ ones, are sure to be sensitive to the sales before Xmas.

The company reports its earnings on Thursday, and they are expected higher than the same quarter last year. The income is visibly growing up, and the record highs for Q4 earnings expectations are quite logical. Walmart has been recently going up thanks to large hedge funds positions, with around 52 funds now including this stock into their portfolios.

Technically, as said before, the stock is quite strong. The price is currently above the 200-day SMA, showing good growth and ready to hit new record highs. As for the entry, it’s hard to determine the risk. The nearest support levels are $100 and $90, and once the price reaches either, it could be a good entry point for the next few months.

 

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 18 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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Analysis

Time to Focus on General Motors

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By Dmitriy Gurkovskiy, Chief Analyst at RoboMarkets

As earnings season continues, analysts have been bewildered by General Motors’ (NYSE: GM) report.  Over the last year, GM shares became 35% cheaper, while income was mixed, both rising and falling, and net profit turned positive only in late 2018.

The GM stock price has been under pressure, most likely because of rising debt. General Motors went bankrupt in 2009, liquidating all previous debts, but new ones started appearing soon. The debt-equity ratio reached 1.93 ever since, making it a serious question whether or not to invest in such a company that had previously been bankrupt.

Since the second IPO in 2010, GM shares have been unable to overcome the 30% rise barrier, while the DJIA rose by over 100% over the same period. This made interest in GM quite low.

With ever-growing debt and shareholder pressure, the company had to cut expenses, and this was done through cutting jobs and closing factories in various countries. For instance, the GM Korea factory is likely to get closed, with over 2,000 jobs cut. Another factory, located in Saint Petersburg, Russia may be closed, too. Meanwhile, in North America, around 36% of jobs were cut.

Overall, the former multinational giant is leaving the markets in Europe, Indonesia, Thailand, India and Australia. The company may end up present only in the US and China.

Naturally, running a company with multiple branches in multiple countries is much harder than the one working in a single country. A good example is Tesla, which in 2008 was saved by a single contract with SpaceX (both owned by Elon Musk) worth $1.8B, while General Motors was unable to do with even $30B.

After the 2008 crisis, US automotive companies faced serious issues. Ford Motor, for example, has not shown any good results ever since, and is still trading at its 2010 lows.

Nevertheless, in mid 2018, Warren Buffet’s fund disclosed information on its Q2 portfolio that included Apple (Buffet said he would like to control 100% of Apple shares), Goldman Sachs, Teva, Delta Airlines and General Motors. If GM is on this list, other investors might also want focus on it.

Meanwhile, in Q2, GM shares rose sharply by 10%, which was the result of an agreement between General Motors and an investment fund run by SoftBank Group, the Japanese telecommunication giant. The fund invested $2.25B into the autonomous taxi development led by a part of GM team.

Thus, Q2 was overall positive for GM, and while the stock price did not increase significantly, the net profit did. As a result, the Q3 report was great, beating all expectations.

The net profit in Q3 reached $2.53B, or $1.75 EPS, against the $2.98B loss, or -$2.03, reported last year. The yearly EPS is expected at somewhere between $5.80 and $6.20, though GM management assumes it could be even higher.

Around 86% of net profit comes from the North American market, while only 14% covers the rest of the world. This is quite in line with the company’s policy regarding closing its regional branches.

Meanwhile, car production was lowered by 14.70% compared to last year, but GM succeeded thanks to the price increase and truck sales, where the yield is higher.

Technically, the price is still below the 200-day SMA, which may push values to the descending trend line which was broken out thanks to the positive report. If the price then bounces, it may rise above $40. GM management’s prediction on beating the yearly profit expectations may be priced quite soon, while then the yearly report comes, the price may head down. The Buy Rumors, Sell Facts rule may well work here.

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 18 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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