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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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4.6 stars on average, based on 26 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

AMD: Time to Find the Bottom

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By Dmitriy Gurkovsky, Chief Analyst at RoboMarkets

With the crypto hype nearly over, it’s time to see what’s happening with graphic board manufacturers. When demand boomed, their earnings burst, and so did the stock prices. Currently, however, the demand is down, and this is clearly seen in the earnings reports. While previously the earnings reached rather high numbers, they are bound to start shrinking now. What is important here is whether the management at such companies used the large capital inflows to take the companies’ performance to the next level.

Today, we’ll take a closer look at Advanced Micro Devices, known as AMD. We could also consider Nvidia (NASDAQ: NVDA), but its stock is seven times more expensive than AMD’s, which means it is much less available to the retail investors.

AMD earnings had risen by 2,200% when the crypto boom was at large, while Nvidia added 1,500% to its value. At the same time, when AMD shares were at the low, they cost around $1.50, which was quite alright for retail traders, while Nvidia shares were 15 times higher.

Advanced Micro Devices (NASDAQ: AMD) is a major GPU and chip set manufacturer. The company hasn’t had any production facilities of its own since 2009, and uses other companies’ facilities. Among AMD’s partners, one may mention Acer, Cisco, Dell, Ericsson, Fujitsu, HP, IBM, NEC, Nokia, Siemens, and Sony.

The major competition of AMD is Nvidia. In 2010, AMD was better than Nvidia, when its market share amounted to 51%. It was actually in 2010 when the first Bitcoin transaction was made. This was the jump start for the cryptos and, eventually, for mining devices.

By 2018, the crypto market cap reached its high at $840B, followed by the fall that has so far reached $119B. This caused a high demand for used GPUs, while the demand for new devices fell; this eventually led to the falling AMD sales. Investors booked their profits, and AMD shares fell, too. The earnings will continue going down, and the company will have to distract the investors from this.

The forecast for earnings in the coming quarter is not positive either, which means the stock has not reached its bottom yet.

AMD: What Happened Recently

In October, the Q3 report came in, with both the earnings and the ROI rising YoY. The operational profit went up to $150M, while the net profit rose by 70% to reach $102B. However, even with the earnings rising (mostly due to the CPU sales), the stock went down by 22% just because GPU sales shrank. When this happened, Deutsche Bank, Mizuho, and Morgan Stanley cut their forecasts regarding AMD share price.

In November, AMD partnered with Amazon to supply Epic CPUs for Amazon data centers. This pushed the price by 9% in the short term. Another price spike happened in December, when the 90-day ‘cease-fire’ was achieved in Sino-US trade wars; this was perceived as positive news for tech companies, and, in particular, pushed the AMD price by 7.50% upwards.

After that, the rise was over, and the shares were falling for 20 days in a row. The last hope was the Radeon IIV GPU release, which was presented at the CES expo on January 9, 2019. The stock started to recover but then went down abruptly.

This whipsaw may continue for long. What one may do is pay attention to the next quarter forecasts and do the tech analysis, while also watching the current and past events.

As such, some figures may show AMD’s strong points.

Thus, the equity ROI is 28.44%, with the overall industry number being at 11.84%; the profit margin is 5.05% versus 2.06%. On Dec 20, 2018, AMD was added into NASDAQ 100. Every year, the amount of data to process is increasing, while making the CPUs and GPUs smaller gets more and more difficult. This is likely to increase the demand, and, subsequently, increase AMD earnings, too.

On the dark side, AMD is not currently paying any dividends, while the P/E is 49.50 versus the 14.85 industry average, which means the company is well overpriced. The forecasts for the next quarter earnings are negative, which may put the AMD shares under pressure, too.

Thus, AMD shares may shrink in the short term, but in the longer term, they look quite attractive for investment. In order to understand where the price is going to ‘take off’, one should use tech analysis.

On W1, the price is above the 200-day SMA, which means there is an ascending trend. Fundamentally, however, the price may get lower, perhaps finding its support at the 200-day SMA.

The secondary support levels are at $10 and $15. $15, the nearest one, is very likely to get broken down, as it is quite far from the SMA. If the sellers get more active, the price may head further lower to reach and even break out $10. However, the odds are that the breakout will not continue for long, and a recovery will follow immediately. Thus, $10 may be considered a good level for taking long positions.

On D1, $22 is a currently strong level. In case it does not get broken out soon, it may become then a starting point for the price to start heading towards $10.

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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4.6 stars on average, based on 26 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: Starbucks Corporation (SBUX)

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Starbucks Corporation (SBUX) is one of the most popular coffee and tea companies in the world. The company founded in Seattle markets, roasts, and sells specialty coffees and teas to retail consumers. In addition to the Starbucks coffee chain, the company also owns and operates popular brands such as Seattle’s Best Coffee, Teavana, and Tazo. As of June 2018, Starbucks Corporation has a workforce of 277,000 employees and sales of $23.5 billion in fiscal 2018.

Technical Analysis of Starbucks Corporation (SBUX)

For over three years, the stock range traded between $47.40 and $61.40. While many stocks printed new all-time highs during this period, SBUX was stuck in sideways trading. This changed in November 2018 when the stock took out resistance of $61.40 with an above-average move. The price action ignited a rally to a new all-time high of $68.96.

While the stock has been pulling back since, something tells us that SBUX will likely generate a fresh ATH in the next few months.

Technical analysis shows that SBUX successfully flipped resistance of $61.40 into support. This happened early this month as the stock completed the retest of $61.40. The price action is bullish. It tells us that the market is ready to trend higher.

On top of that, we can see a golden cross between the 50 MA and the 100 MA on the weekly chart. The crossover sets up the ideal MA alignment where the 50 MA is on top of the 100 MA and the 100 MA is above the 200 MA. This setup indicates that the market’s uptrend remains healthy.

Fundamental Analysis of Starbucks Corporation (SBUX)

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

The most recent quarterly earnings report of the company beat expert estimates. Q4 earnings data reveal that SBUX posted an adjusted earnings per share of 62 cents versus expert estimate of 60 cents. It also surpassed expert projection of $6.27 billion in revenues as the company generated $6.3 billion. Lastly, the company printed global same-store sales of 3% as opposed to analysts prediction of 2.35%.

On top of the impressive Q4 earnings, the stock’s trailing twelve months price-to-earnings ratio (PE ratio TTM) stands at 26.27. It is still undervalued considering its five-year maximum is 39.60. This tells us that market participants are ready to pay a premium for SBUX shares. Along with the technical setup, it appears that SBUX has some upside potential.

The strategy is to buy on dips as close to $61.40 as possible. As long as bulls hold this level, SBUX will likely generate the momentum to rally to a new all-time high of $70.

The timeline for the target is less than six months.

Weekly SBUX Chart

Monthly SBUX Chart

As of this writing, the Starbucks Corporation stock (SBUX) is trading at $63.57.

Summary of Strategy

Buy: On dips as close to $61.40 as possible.

Target:  $70

Stop: Close below $59.

 

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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3.8 stars on average, based on 311 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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Stock Picks

Stock Pick: Apple Inc. (AAPL)

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Apple Incorporated (AAPL) is a company that needs no introduction, as it is one of the biggest and most valuable companies in the world. AAPL designs, builds, and markets media devices, computer software, as well as third-party digital content and apps. Some of the company’s popular products include the iPhone, iPad, and MacBook. As of June 6, 2018, Apple Inc. employs a workforce of 123,000 employees with sales of $247.5 billion in fiscal 2018.    

Technical Analysis of Apple Inc (AAPL)

The last several months for AAPL have been nothing short of a disaster. The stock has been in a freefall after posting its all-time high of $233.47 in October 2018. Last week, the stock was down by as much as 10% on the weekly chart as it dropped to as low as $142.

It seems like almost everyone is bearish on the stock. This is exactly why we think that a bounce is in order and the technicals support our view.

Technical analysis shows that AAPL is ripe for a dead-cat bounce. It appears to be respecting the 200 moving average on the weekly chart. Last week’s candle has a long wick below its body indicating the rejection of lower prices. On top of that, AAPL is oversold on the weekly RSI. These signals tell us that the market is ripe for a relief rally.

Also, the 50 moving average on the monthly is acting as support. Throughout AAPL’s parabolic run, the market has always bounced hard after hitting this indicator. The stock’s recent price movement tells us to expect the same reaction.   

Fundamental Analysis of Apple Inc (AAPL)

In addition to our technical analysis, fundamental analysis also backs our short-term bullish view. In other words, the stock remains bearish in the long-term but we can expect a relief rally for now.

Just a couple of days ago, Apple’s CEO Tim Cook issued a warning to investors to expect less than stellar numbers for the company’s fiscal 2019 first quarter. Instead of the projected revenue estimates of $93 billion, the company will likely post revenues of $84 billion. That’s a difference of 9.68%, which is huge if you’re one of the world’s top companies. On top of that, sales of the iPhone have been flatlining for years. This supports our view that the stock is bearish in the long-term.  

However, it is interesting to note that the trailing twelve months price-to-earnings ratio (PE ratio TTM) is 12.48. The stock is undervalued considering that its five-year average is 15.25 while its five-year maximum is 20.70. These numbers tell us that the stock is likely oversold and trading below its actual intrinsic value. This is why we believe that a bounce should be on the horizon.

The strategy is to buy on dips as close to $142 as possible. As long as bulls hold this level, AAPL will likely generate the momentum to bounce to our target of $168.

The timeline for the target is less than three months.

Weekly AAPL Chart

Monthly AAPL Chart


As of this writing, the Apple Inc stock (AAPL) is trading at $148.26.

Summary of Strategy

Buy: On dips as close to $142 as possible.

Target:  $168

Stop: Close below $137.

 

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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3.8 stars on average, based on 311 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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