Category: Stock Updates (Blogs)

August 12th Update

Posted on by io-fund

This week, we have a blog analysis on Alibaba that will be published after earnings. This is my favorite growth stock from China and if/when the price is low enough, it’ll make a solid long term holding. You’ll get this on Thursday.

We will also be publishing a PDF report on the alt-coin that I’ve been preparing over the last two weeks. Of the 1500+ alt-coins, this one is my favorite. This long-form analysis will be published on Friday. Keep in mind, it’s very early days for this alt-coin as the blockchain stack hasn’t been fully developed yet. I truly believe you’ll be pleased in about two years from now.

I’m also writing an article for MarketWatch on Nvidia this week. They tapped me to write a more technical explanation of Nvidia’s market position especially compared to AMD. There is an interesting angle that I dug up after revisiting these semis that I’m saving only for my Premium subscribers. You’ll get this by next Tuesday. I haven’t seen anyone publish on this angle and we’ve seen some documented trading by company insiders that confirms it’s worth a second look.

Last week was a bit of a roller coaster ride. Lyft saw a 11% spike after earnings due to revised guidance of $850M in losses. It eventually settled when the company announced the lock-up period is being shortened to August 19th. The next day Uber confirmed that profitability in the ride-sharing business is still a moonshot. These are my least favorite IPOs and I went on record about that before they went public.

Regarding Roku, its fundamental story remains as strong as it was the day it went public. I like the leadership quite a bit at Roku, as well. One reader asked on the forum if I thought Roku might be an acquisition target. My understanding is this is Anthony Wood’s opus and I think he will take this all the way. For anyone who didn’t read the full report  under the PDF tab on this website (I understand my analysis is quite long!), my best guess is Roku will be a $100 billion company due to global expansion. They have an excellent product and platform for global audiences – better than any OTT company on the market today.

The Trade Desk appears to be settling in price. Even after the earnings beat, the stock appeared to be overbought and is correcting. One reader had asked how to predict when The Trade Desk will face the inevitable competition that all third-party ad products face. It’s not easy as to track but I am going to an advertising event in September that should provide enough information to make a good assessment.

I had published a list of Huawei suppliers for hedging any long positions on August 1st. The 90-day exemption period ends this Monday, August 19th. You can watch that list closely and Apple and Google (Android), as well. Depending on how the story evolves, we may try to pick one or two trades from the list and cover them. I personally made decent money on hedging with Qualcomm and Skyworks in May but have not looked at the pricing since.

Website changes: There’s a new menu to help navigation on the site. You’ll see we nested the various research options. We are building a new forum and will be excited to see this launch in about 2 weeks. Content will be locked for new members dating back about 45 to 60 days starting in September. This means new members will not be able to sign up and access a long catalog of research for a lower price than our continuous and most loyal customers.

Gentle Reminder: Please do not share the PDFs or research via email or on other sites. However, it is okay to paraphrase on other sites and I appreciate the traffic that is sent to me – thank you!  We want our paying members to have time to  place their trades before the stock price changes. I do have a few institutions that follow me and I’ve locked them out of this site by requiring a commercial license. 

Lyft and Uber Update: August 7th

Posted on by io-fund

SimilarWeb provided a glimpse into Lyft’s driver daily active users in Q2 2019. The report revealed a decline of 18% in Q2 ahead of earnings today. The data does not account for riders; however, it does require caution as fewer daily drivers is likely to trickle down to less revenue.

Lyft is a native application only and does not operate a website. Native app data from companies like SimilarWeb tends to be accurate in this case. I’ve seen some data not translate if the company also has website traffic, such as Pinterest or Facebook.

Install penetration YoY has also slowed, according to SimilarWeb.

SimilarWeb has access to more data than they publicly disclosed to Yahoo – likely for liability purposes. The company has visibility into app rank and rider daily active users, as well. Therefore, a leak to Yahoo Finance from an unbiased third-party that directly precedes earnings is something I tend to take seriously. SimilarWeb’s business model is to sell data to investors. There is no guarantee Lyft will miss earnings today, however, SimilarWeb will see a material impact either positively or negatively if the data they release is seen as accurate.

Quick Notes on Uber:

  • Arianna Huffington and Matt Cohler stepped down from board positions – not common this soon following an IPO
  • Uber laid off 400 employees in marketing, or about 1/3 of the team, which was announced at the end of July

According to MarketWatch, Uber is expected to report losses of $3 billion this quarter due to stock-based compensation from its IPO. Lyft is expected to report losses of half a billion dollars. Fundamentally, this is unprecedented for a company at the $65 billion market cap level. If either company pulls off earnings this quarter,  I don't think the rebound will last long.

My original analysis on these two companies was during the euphoria of April 2019 when the market was confident Lyft and Uber would perform well. I wrote an analysis that went against the bullish sentiment before Lyft dropped 20% following the IPO and before Uber became the worst IPO performance in history. The issues that I pointed out still remain:

  • Subsidizing of Rides: Venture capital is typically used for product development and for human capital to help the company scale. In a rare twist of startup mechanics, venture capital for these two companies was used to drive market demand by using the capital to lower the price of the ride-share. The result is artificial supply and demand, and it’s uncertain what demand will be when the ride is no longer subsidized with venture money. This should have been solved prior to going public and prior to the companies reaching balloon-sized valuations.
  • The lockup expires in November and I agree with the theory that Uber and Lyft are liquidity events. Look for the true valuation of these companies in the two years following the lock-up period. While I do not expect an immediate dump, there will be a noticeable unwinding as more shares become available, and the stock price undergoes dilution. If you want to bet on these companies long term for autonomous vehicles or another thesis, then you will have much better opportunities for entry after the six-month lock-up period. (I am personally betting against these companies into Q1 and Q2 2020).

You can access my previous analysis on the public blog:

https://beth.technology/lyft-risky-intellectual-property/

https://beth.technology/uber-ipo/

https://beth.technology/uber-stock/

 

August 5th Update – Seeing Red

Posted on by io-fund

Information Technology led the losses today with XLK down -4.17% compared to other sector ETFs down 2-3%. Losses in the NASDAQ of 3.47% outpaced the Dow and S&P 500 at 2.90% and 2.97% respectively. Futures are trading at negative 2% on news that the U.S. declared China is a “currency manipulator.”

The market closed on its 200-day exponential moving average.  After hours, it broke through and will likely gap down to open tomorrow, while futures are currently showing the market trading into the 2790 region. The market is over-sold based on the RSI index and we are approaching key supports. A bounce is likely. The RSI is currently (as of the close today) lower than the RSI low in the May/June correction of this year.  Furthermore, we are approaching a major price cluster (red dotted lines).  This has acted as major support and resistance in the past.

The list of Huawei suppliers provided on Research Services is a decent list to hedge your long positions. It’s unlikely there is a resolution with Huawei for some time. I had written this in the Apple update, as well. The damage done to Huawei suppliers over the current trade war news should exceed what we saw in May. 

Most investors can agree that technology stocks are expensive right now. Our most likely scenario on the MongoDB report was an entry below the $141 support between $95 and $128.  We will keep you posted on this.

Snap is likely to break the final support on our most recent trade at $16.20 and we will be releasing information on entry for this stock again for anyone who exited. I’ve chosen to keep some of my position as there is room for a bull run on Snap due to monetization through Audience Network.

We also have a lengthy 12-page report coming out tomorrow on one of my favorite trends for the next 2-3 years – Connected TV Advertising. We will be guiding premium subscribers on entry for TTD and Roku. The latter is a stronger pure play, but this trend is critical to have in your portfolio, and there is room for both stocks to perform well in the near term of 2-3 years. TTD and Roku report earnings this week.

Uber and Lyft also report earnings this week – my two least favorite IPOs this year. 

Regards, Beth 

August 1 – Huawei Suppliers

Posted on by io-fund

In case a trade war intensifies, want to give you a short list of Huawei suppliers that had a rough few weeks in May during the last trade war scare. Huawei suppliers are battling both trade war tensions and national security concerns as opposed to solely trade war tensions.

  • Broadcom
  • Skyworks
  • Qualcomm
  • NeoPhotonics
  • Lumentum
  • AMD
  • Flex
  • Intel
  • Seagate
  • Qorvo
  • Micron, Nvidia and Xilinx have some exposure

Keep a close eye in case they break support. 

If Huawei is a threat to national security, the ban may not be officially lifted. There were mixed signals in June from the United States as the US Commerce Department placed five more Chinese entities on its so-called Entity List with an announcement on June 21st– one week before the G20 Summit. 

The five newly listed companies included Chengdu Haiguang Integrated Circuit, Chengdu Haiguang Microelectronics Technology, Higon, Sugon, and Wuxi Jiangnan Institute of Computing Technology. Included in the list is one of Higon’s five affected aliases, Tianjin Haiguang Advanced Technology Investment Co. (THATIC), THATIC is a joint venture Advanced Micro had set up with the Chinese government in 2016. AMD works with THATIC to license its microprocessor technology to Chinese firms, including Higon.

August 2nd – Technical Analysis Update

Posted on by io-fund

To improve accuracy and lock-in more gains, Research Services combines fundamental analysis and technical analysis on tech stocks.

The market broke through the 21-day and 50-day exponential moving averages, which is a psychological shift for the rally we’ve been experiencing. 2940 is an important number. If we close below 2940, which is may happen based on today’s actions, we should see 2900 rather quickly.

We are still in the probability of extremes. According to the methodologies I use, the market could go to as low as 2100-2300, which would be a reversion to the mean, or it can take us to the 3700-4200 region, and possibly higher, for one final bull push. I believe the bull market that began in 2009 has one final push left, and will do one of the three:

  • Most likely scenario is we retreat to 2600 before the last push towards 3700-4200
  • Lower probability: see SPX visit 2100-2300 and then resume the rally to 3700-4200
  • Lower probability: we go directly to 3700-4200 from here with normal corrections along the way.

Technicals Summary:

More comments on these stocks are located in the forum. It’s important that you follow the forum if you are interested in a specific stock.forum. It’s important that you follow the forum if you are interested in a specific stock.

Snap:  If we break $16.20 we will likely retest $14.  Snap has been strong at the $17 support.  I closed out my calls after earnings and am staying long in my other position for now. If we break the $16.20, I’ll sell half my long position and maintain a 35% trailing stop on the remainder. I usually do not like to time my entire position twice (selling and buying again) if my plan is to buy again.  However, with the market behaving the way it is this week, coupled with other metrics I follow, I want to lock in gains.  A wide trailing stop is a good idea and buying Snap on a market pullback is also a good idea.

Google: We still can see Google as low as $900 or as high as $1300 – follow me on the forum for updates. We think the privacy and anti-trust creates a lot of risk in this stock. 

Apple:  Apple is behaving weaker than the earnings beat calls for and this is likely due to the smartphone saturated outlined in the fundamental blog we sent prior to earnings. Apple is testing the $200 support as we speak. 

MongoDB:  MDB is tightly trading at the $141 region we highlighted.  It is currently trading just below this support as we had predicted in the MongoDB PDF analysis, and if we close below, I expect further weakness before initiating a position.

Bitcoin:  We see an entry opportunity in the $4200-$7800 range. Fundamentals to follow in the coming weeks.

 

My Background:

I’ve been trading on Beth’s fundamental analysis for about two years. I’ve made over 300% on Roku from the IPO by keeping some of my position in the stock during the pullback based on her analysis, plus another 200% by initiating a new Roku position and buying the dip in Q4 2018. I did not sell my position even when it lost 50% of its value bc of Beth’s high conviction.

I also made decent money on Microsoft during the Q4 pullback based on her conviction, Alibaba, Nvidia and Zoom’s IPO. I shorted Uber and Lyft based on her analysis and made roughly 20% and 15% (options weren’t available) and the only time I’ve successfully shorted Tesla was based on her analysis (I tried a few times prior) for a return of over 100% on options when price fell from $260 to $190. Overall, I’m averaging 120% returns in the last two years on my tech allocation based off Beth’s fundamentals.  

We believe Beth’s fundamental analysis combined with my technical analysis will increase gains quite a bit as we can help you find a good entry. We will offer you a shopping list if we see a pullback and we will also have a good idea of what stocks will keep winning if we see the bull market resume. 

Ideally, what I look for is to initiate entries into tech companies that are positioned to capitalize on emerging tech trends not known to the broader markets because true life changing gains can take place in the tech sector over time.  I personally will trade options, short weak stocks and hedge my longs when we are at valuation extremes, but my primary goal is to buy and hold solid tech companies at great prices. Buy and hold remains the winning strategy with one caveat – you have to be ahead of a major tech trend and choose the right company.

July 29th– Google Update and Apple Earnings

Posted on by io-fund

Website update: Check out the beta version of our forum for discussion with other members. We’ve got some great discussion going on there on Snap, MongoDB and more. our forum for discussion with other members. We’ve got some great discussion going on there on Snap, MongoDB and more. 

Last week, Google had a strong earnings report with 19% growth from $32.6 billion in Q2 2018 to $38.9 billion in Q2 2019. Net income also rose from $12.6 billion to $16.6 billion compared to the year-ago quarter. The leading drivers, according to the earnings call, were mobile search and YouTube, followed by desktop search. Google Cloud Platform has an annual run rate of $8 billion.

As of now, the thesis published in “Google: 2019 Analysis” has not changed. From an industry perspective, Google is between the rock of privacy and the hard place of anti-trust. For Google to have uninterrupted returns, the ad environment will have to remain tilted in its favor.  The headlines around these issues are causing fatigue – not to mention complacency (that is warranted) as Google continues to remain a strong stock in the face of these risks. 

My next update on these companies will come in early October after I spend a week with advertising professionals at AdvertisingWeek in NYC – one of the biggest ad industry events of the year with a lot of industry intel. I’ll get the scoop on Apple’s ITP 2.2 and update you on anything else I come across.

Apple Earnings:

At risk of being overly contrarian, I am also not excited about Apple as a long-term buy and hold in 2019 and 2020. Mobile saturation is a risk, and secondly, the trade war could potentially compound the cycle of hardware saturation. I don’t see the United States officially lifting a Huawei ban and I wrote about this both before and after the G20 Summit.

On a separate note, watch your Huawei suppliers carefully (QCOM, AVGO, SWKS, XLNX, etc).

Smartphone Saturation:

The smartphone market contracted in 2017 to 1.462 billion units and in 2018 to 1.42 billion units, and is expected to return to minimal yet positive growth percentages at a CAGR of 2.5%. While 1.5 billion smartphones per year is substantial, the law of saturation is likely to drive prices down, with Android owning 85% of the market today, and we see decreasing iPhone penetration in China where lower-priced competitors gain market share.

IDC estimated Apple will sell 242 million smartphones by 2022 up from 221 million in 2018. The issue with these estimates is that IDC does not break down the percentage of potential decline between 2018 to 2022. The most up to date number available from IDC is an anticipated decline of 0.8% in worldwide smartphone sales in 2019, published on March 6th.

We saw China decline 10% last year in global shipments of smartphones. Taiwanese company, TSMC, is the sole supplier of iPhone core processor chips and told Nikkei Asian Review that the company is cautious about demand for high-end smart phones, which is a nod toward Apple from a main supplier. Samsung Electronic’s Vice President Lee Myung-jin told investors in late January that “demand for memory chips has declined in the fourth quarter as external circumstances worsened and customers adjusted their orders” and he believes the decline “will continue in the first quarter, as key customers keep adjusting their orders.” This was before Samsung’s operating profit fell off a 60% cliff.

Conclusions: I do not believe Apple’s operating profit will fall off a cliff like Samsung but I wouldn’t be surprised if we see the stock trading sub-190 this year.  With that said, the cash pile and buybacks keep a lot of investors in the stock.

Status: Hold with potential of downside risk over next two quarters.

July 25th – Google Analysis

Posted on by io-fund

Facebook reported its first decline between Q4 and Q2 in its history of being a public company. The headlines did not catch that but it seems some investors did as the stock is down about 2.5%, as of time of writing. I was quoted in MarketWatch for calling Facebook an all-or-nothing stock – great financials in the middle of regulatory risk. My opinion is there is lower hanging fruit. 

Nobody can predict earnings with 100% clarity, however, Facebook’s decent earnings report followed by a decline in stock price helps our case with the Google thesis. Despite what Google reports today, we believe the browser changes that Apple is implementing will cause revenue erosion into the second half of the year and early 2020. The technicals are also weak on Google. 

Regarding Facebook’s technicals, as FB makes new highs, the RSI is making lower highs, which is the type of negative divergence we see just before a correction.  While the RSI is still in a bullish trading range, if it breaks 50 and begins to trade below 50, it will indicate a bearish change in sentiment accompanied by lower price action in the stock.

Fundamentally, Facebook is harder to shake from Apple’s browser changes because the majority of its revenue comes from mobile native applications (as opposed to the mobile web). This is an important distinction. For instance, you do not access Google search through an app on your phone – you access Google through a browser. This is why I’m more focused on Google with the browser changes although both show weak technicals.

The scenarios from the PDF provided are below for your convenience. 

Scenarios:

• If you are long on Google, put a disciplined trailing stop on the stock and re-enter when the technicals and fundamentals agree on a more bullish outlook. 

• If you want to trade conservatively, wait for Google to miss on revenue a second time between Q2-Q4 2019 and enter a short position or long-dated put. Especially watch for the effects of Apple’s ITP 2.2 as if/when effects are reported in Q2 or Q3, they will worsen over the course of the year.

• Higher risk scenario would be to purchase OOM puts that end in March of 2020 prior to earnings.

• Any short positions should be closed if Google makes all new highs around the 1300 mark. Shorting stock is all about timing and discipline. We will update as we go along if support or resistance is broken.

July 25th – Social App at $17

Posted on by io-fund

The fundamental analysis and technical analysis provided prior to earnings played out nicely this week. Snap crushed on DAU (daily active users), as our data had indicated the company would. For ad companies, DAU plays into higher revenue. The bigger story for Snap this year has not officially launched – Audience Network.

We will keep you updated if anything changes fundamentally. 

Technical Update:

Provided by TA contributor, Knox Ridley:

Snap broke out yesterday.  As you can see in the chart above, Snap was following a steady trend channel (in blue), bouncing between this channel until today. 

Our previous TA noted that Snap’s support was $14 and resistance was $17. Snap retraced, closed just above $14 on Friday/Monday and then sky rocketed above $17 the day following earnings. It not only closed above $17 but did so with high volume.

This is always a bullish sign.  We will likely see it retest the upper trend channel (outlined in the lite blue dotted line, trending up), before testing the $20 resistance level above (in yellow).  As long as Snap stays within this upward trend (outlined by the lower blue line), Snap should continue it’s upward movement. 

Regarding the internals of Snap – notice the top yellow circle.  This is highlighting the current price breaking through the upper Bollinger Band, while the lower Bollinger Band moves down. This is a very bullish indicator, which is supportive of higher prices. 

Further supporting the internal strength, the RSI closed above the descending trend line, showing some new found buying pressure.  As long as Snap holds the 55-50 region on the RSI, we should continue upward. However, keep in mind that broad market forces can raise and sink all ships, regardless of fundamentals.  If the $14 support region is broken due to a weakening broader market, we could see the price fall into the green box on the chart ($12.50-$9.50). 

Per Beth’s analysis, fundamentals are strong. The should be seen as a long term hold that will benefit from Audience Network in the second half of the year. If you’re in, mind your stops if the broader market moves downward. If you have yet to make a position, follow Snap’s retrace to the upper trend channel previously mentioned. That would be a good time to enter. 

SNAP Forum:

Please check out our forum and post there if you traded Snap or have questions on Snap for community discussion. One user posted some great information on the number of funds moving into the stock over the past two quarters. Here’s the post:

Institutions have been moving into SNAP over the last 2 quarters:
Date # funds:

Sep 2018, 177 funds
Dec 2018, 168 funds
Mar 2019, 198 funds
Jun 2019, 321 funds

July 22nd Update: Social App Pivot

Posted on by io-fund

There was a new web analytics report from SimilarWeb released last week that showed an increase of traffic to Snap’s advertising URL, up 23% YoY, compared to Facebook’s URL, up 4%. The comparison is provided to illustrate a common growth metric for ad URL traffic on social ads with the understanding FB receives much higher traffic volume. 

This is positive news. The report also confirmed that the popular filters maintained an increase in daily active user growth, up from 10 million to 11.6 million (peaking around 13 million with the new filters). One concern was if the filters had created an artificial new high, which does not look to be the case.

Due to the increase in app usage from this past quarter, illustrated in the PDF, the probability that Snap will beat earnings is the more likely scenario. If for some reason Snap does not beat earnings, I will still have a buy rating on the stock due to Audience Network. This will be a major breaking out point for the company’s revenue (Audience Network in testing as of April). 

In the article released 7/19, Audience Network is what Goldman is referring to as “Our checks with advertisers also lead us to believe that the company’s continued innovation in its ad-stack, particularly in self-serve, should allow SNAP to substantially improve monetization of user time spent on the platform over time.”

Technical Update:

Snap is currently trading at the $14 support level, and is holding as of today. Per our technical analysis, if Snap closes below $14, we could see it trade within the green box on the original chart ($12.50 – $9.50 range), before taking us up beyond the $20 range.  Listen to your stops, and understand that Snap’s growth story regarding Audience  Network is a matter of when, not if. The increase in app usage should also translate to an increase in quarterly revenue.

Keep in mind, there is high volatility in this stock. With the price retreating down to support levels as we head into earnings, there is likely to be a strong reaction tomorrow after- hours. Snap has jumped as much as 22% after a strong earnings report and dropped as much as 14%.

Regarding stops, we purposefully suggested wider stops to keep you from exiting prematurely, but also to get you out with a minor loss in case a correction occurs.  We may be early to Audience Network compared to the broader market, but that’s by design.

Thoughts on MSFT

Posted on by io-fund

My style of analysis is not about calling earnings. I have a much longer buy-and-hold strategy, and sometimes, missed earnings is a buying opportunity if the stock has good long term potential.  Please keep that in mind!

With that said, I doubt we will see a slowdown in earnings from the major cloud providers. The broader market may drag down tech as a sector, however, cloud is a more secular trend. 

I spoke with the CTO of Kubernetes at IBM yesterday at OSCON, the Open Source Conference in Portland. He stated cloud has a long runway with about 80% of companies still running on-premise. 

Microsoft is unique because they attacked this problem from a new angle; the hybrid cloud. This allows companies to keep sensitive information on-premise and less sensitive information off-premise. This is a winning strategy because it will allow AI applications and scalability without compromising security and IP.

Again, this is not an earnings call, but Microsoft is a company that has runway despite already hitting the $1 trillion mark. If there is a missed earnings, or the broader market drags tech stocks down, this will be welcomed news for entering the stock.

  • If you already own MSFT at an attractive price, you should have a solid investment into the foreseeable future 
  • If you’re looking to enter MSFT, wait for a missed earnings (from too high of expectations from analysts) or for a broader sector sell-off
  • We will provide more fundamental analysis and technical analysis when something new occurs