Pfizer Close to Long-Term Buying Opportunity

Pfizer Inc. (PFE) and BioNTech SE (BNTX) released positive data on their COVID-19 vaccine for ages 5 to 11 on Monday but the stock is losing ground with the broad market, adding to a five-week slide that’s already relinquished more than 16%.  The decline is roughly tracking the slow rollover of U.S. Delta infections and another slowdown in daily vaccinations. Last week’s FDA advisory meeting didn’t help, with the group declining to recommend broad-based booster shots.

Pulling Back from August Breakout

The pharmaceutical giant has gained 17% so far in 2021 despite the latest downturn, with a good portion of selling pressure generated by a rotation out of pandemic plays. However, the last six months have proved how difficult it will be to transition from pandemic to endemic, especially with billions around the world still unvaccinated. Taken together with Pfizer’s bullish breakout pattern, the current decline should offer a low risk buying opportunity.

Approval for ages 5 to 11 will open eligibility to more than 50 million new vaccinations in the EU and USA. As the business partners noted on Monday, “Pfizer and BioNTech plan to share these data with the FDA, European Medicines Agency (EMA) and other regulators as soon as possible. For the United States, the companies expect to include the data in a near-term submission for Emergency Use Authorization (EUA) as they continue to accumulate the safety and efficacy data required to file for full FDA approval in this age group.”

Wall Street and Technical Outlook

Wall Street consensus is surprisingly lukewarm, with a ‘Hold’ rating based upon 4 ‘Buy’, 15 ‘Hold’, and 1 ‘Underweight’ recommendation. No analysts are recommending that shareholders close positions. Price targets currently range from a low of $39 to a Street-high $61 while the stock is set to open Monday’s session on top of the median $44 target. While this placement indicates that Pfizer is fairly-valued, it’s also likely that analysts are underestimating the vaccine’s long-term revenue potential.

Pfizer topped out at 44.05 in 2018 and sold off to a six-year low during 2020’s pandemic decline. A volatile recovery finally reached the prior peak in August 2021, setting off an immediate breakout that posted an all-time high at 51.86 less than three weeks later. The pullback into September is now approaching a zone of strong support near 40, raising odds for a buy-the-dip wave that confirms the breakout and sets the stage for strong 2022 upside.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Adobe Rock-Solid Ahead of Tuesday’s Confessional

Nasdaq-100 component Adobe Inc. (ADBE) reports Q3 2021 earnings after Tuesday’s closing bell, with analysts looking for a profit of $3.02 per-share on $3.9 billion in revenue. If met, earnings-per-share (EPS) will mark an 18% profit increase compared to the same quarter last year. The stock rose nearly 3% after beating Q2 estimates and raising Q3 guidance in June and has added another 16% since that time.

Leader in Digital Transformation

The Silicon Valley blue chip has been an outstanding performer in the last decade, rising more than twenty-fold, and is currently trading near an all-time high. The company is perfectly positioned to benefit from broad-based digital transformation, with a product catalog described by Mizuho analyst Gregg Moskowitz as a “highly comprehensive end-to-end offering that differentiates it from competitors and should enable it to drive more holistic sales across its clouds”.

Moskowitz raised the firm’s target to $695 and reiterated a ‘Buy’ rating on Friday, noting that, “Adobe is slated to report its F3Q (August) earnings results after the close on September 21. Our ADBE checks were once again favorable, and we expect the company to report healthy upside to our & Street estimates. In our view, ADBE’s expansive portfolio of software solutions has made it the gold standard in content creation, consumption, and collaboration”.

Wall Street and Technical Outlook

Wall Street consensus remains pristine despite Adobe’s 30%+ year-to-date return, with a ‘Buy’ rating fueled by 20 ‘Buy’, 2 ‘Overweight’, 4 ‘Hold’, and 1 ‘Underweight’ recommendation. No analysts are recommending that shareholders close positions at this time. Price targets currently range from a low of $550 to a Street-high $750 while the stock closed Friday’s session on top of the median $658 target. This placement suggests that stronger-than expected metrics will be needed to generate higher prices.

Adobe completed a breakout above 2018 resistance in November 2019 and tested new support successfully during 2020’s pandemic decline. The subsequent uptick mounted the February peak at 378 in June, generating a strong uptrend that stalled at 537 in September. The stock mounted that resistance level in June 2021, and has added points at a rapid pace since that time. Even so, long-term price projections show a cluster of hidden resistance just above 700, lowering reward and raising risk potential for new long positions.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

American Express Could Hit 140 in the Fourth Quarter

Dow component American Express Co. (AXP) is trading marginally higher in Thursday’s pre-market after Bank of America Securities upgraded the stock from ‘Underperform’ to ‘Neutral’, posting a $169 price target.  The ratings change matches recent actions by Seaport Global Securities and Credit Suisse Group, highlighting analyst caution after the financial technology provider gained nearly 270% off the March 2020 low.

Delta Variant Stalls Business Travel Plans

The stock is highly levered to business and travel spending that’s been impacted by the COVID-19 pandemic. The growth outlook looked bright at the end of the first quarter but the Delta variant has forced corporations to delay plans to reinstitute airline travel, having a negative impact on airline, hotel, conference, and food transactions. That headwind has also impacted rivals Visa Inc. (V) and Mastercard Inc. (MA), with the trio pulling back from summer peaks.

American Express released solid August card metrics on Wednesday, reporting a U.S. Consumer Card Member net loan write-off rate of 0.6% vs. 0.7% in the prior month, or a -10 bps change. Consumer loans 30 days or more past due stood at 0.6% vs 0.6% in the prior month, marking no change, while the U.S. Small Business Card member loan net write-off rate of 0.5% matched 0.5% in July. Loans that were 30 days or more past due rose slightly to 0.5%, compared to 0.4%.

Wall Street and Technical Outlook

Wall Street consensus now stands at an ‘Overweight’ rating based upon 12 ‘Buy’, 1 ‘Overweight’, 13 ‘Hold’, 2 ‘Underweight’, and 1 ‘Sell’ recommendation. Price targets currently range from a low of $140 to a Street-high $227 while the stock is set to open Thursday’s session about $23 below the median $185 target. This low placement should favor a strong fourth quarter bounce but technical factors are telling a more bearish tale.

American Express topped out at 138 in January 2020 and sold off to a four-year low during the pandemic decline. The subsequent uptick reached the prior peak in February 2021, triggering an immediate breakout that posted an all-time high at 179.67 in July. A steady downtick since that time has flipped weekly and monthly Stochastics into sell cycles, predicting continued weakness that could reach 200-day moving average support near 150 in coming weeks.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held Visa in a family account at the time of publication. 

Las Vegas Sands Could Break 11-Year Support

Las Vegas Sands Corp. (LVS) is trading lower by nearly 5% on Wednesday, within spitting distance of 2020’s pandemic low, after China proposed tighter regulation of Macao casinos. Rival Wynn Resorts Ltd. (WYNN) is dropping like a rock as well, hitting the lowest low since November 2020. Both stocks have underperformed major indices by a country mile so far in 2021, trading deeply in negative returns, fueled by ongoing weakness in U.S. and Macao gaming operations.

Heavy-Handed Regulation Ahead

China proposes to remove the current sub-concession system, appoint Communist party delegates to oversee gaming operators, and compose a new illegal deposit crime to address money laundering. That nation’s attacks against the excesses of capitalism have taken a darker tone this year, punctuated by severe gaming restrictions for minors and, as colorfully scribed by Forbes, the “protracted dismemberment of billionaire Jack Ma”.

Macao is still getting hit hard by the pandemic, with border restrictions limiting traffic. As Las Vegas Sands noted in last week’s press release, “travel restrictions and the evolving COVID-19 situation in Macao and mainland China continue to limit visitation and hinder (majority-owned) Sands China Ltd. current financial performance. The COVID-19 pandemic has materially adversely affected the number of visitors to SCL’s facilities and disrupted SCL’s operations, and SCL expects this adverse impact to continue until the COVID-19 pandemic is contained.”

Wall Street and Technical Outlook

Wall Street consensus is surprisingly upbeat, given the exceptionally poor performance, with an ‘Overweight’ rating based upon 8 ‘Buy’, 2 ‘Overweight’, 6 ‘Hold’ and 1 ‘Underweight’ recommendation. No analysts are recommending that shareholders close positions, even though Sands has dropped nearly 53% in the last six months. Price targets currently range from a low of $50 to a Street-high $80 while the stock will open Wednesday’s session a jaw-dropping $13 below the low target.

Las Vegas Sands topped out 60 points under 2007’s all-time high in 2014 and entered a sideways pattern that briefly undercut long-term support below 35 during 2020’s pandemic decline. The subsequent uptick carved the fourth lower high in seven years in March 2021, giving way to a steep decline that’s now stretched within four points of last year’s low.  This is a dangerous set-up due to repeated action near this level since 2011, raising odds for a secular breakdown.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Oracle Could Sell Off into the 70s

Oracle Corp. (ORCL) is trading lower by more than 2% in Tuesday’s pre-market after posting a fiscal Q1 2022 profit of $1.03 per-share, $0.06 better than estimates, while revenue rose a modest 3.8% year-over-year to $9.73 billion, matching consensus. Fusion ERP cloud revenue rose a healthy 32% while NetSuite ERP cloud revenue gained 28%. IaaS plus Saas cloud revenue of $2.5 billion booked 25% of total quarterly revenue, with cloud services and license support up a modest 6% to $7.4 billion.

Strong Cloud Growth

Inline Q2 earnings-per-share (EPS) guidance of $1.09 to $1.13 triggered a swift sell-the-news reaction, dropping the stock to the lowest low since late July.  However, Oracle has still gained nearly 35% so far in 2021 so the bearish reaction can be viewed as simple profit-taking, rather than a long-term change in trend. Even so, it’s now trading below the 50-day moving average for the first time since June, raising odds from even lower prices in coming sessions.

Executives boasted that cloud income has become a larger proportion of total revenue, noting that “Oracle’s two new cloud businesses, IaaS and SaaS, are now over 25% of our total revenue with an annual run rate of $10 billion. Taken together, IaaS and SaaS are Oracle’s fastest growing and highest margin new businesses. As these two cloud businesses continue to grow they will help expand our overall profit margins and push earnings per share higher.”

Wall Street and Technical Outlook

Wall Street consensus is rather bearish, with a ‘Hold’ rating based upon 5 ‘Buy’, 1 ‘Overweight’, 18 ‘Hold’, and 1 ‘Underweight’ recommendation. In addition, three analysts recommend that shareholders close positions. Price targets currently range from a low of $60 to a Street-high $115 while the stock is set to open Tuesday’s session about $2 above the median $85 target. This mid-range placement suggests that Oracle is fully-valued, especially with the mixed guidance.

Oracle failed a 2019 breakout above resistance in the low 50s in March 2020 and bounced strongly, returning to the prior peak in September. It cleared that barrier at year’s end, entering a heathy uptrend that stalled in the low 90s in July. An August breakout attempt failed, reinforcing a trading range that’s now set off weekly sell signals. The range floor below 88 is now being tested, raising odds for continued downside could reach the upper 70s in the fourth quarter.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Better Times Ahead for Fedex Shareholders

Fedex Corp. (FDX) has given up 100% of 2021 upside since May and is now trading at the same price level first struck in January 2018, more than 44 months ago. It’s also trading below the 200-day moving average for the first time since June 2020, highlighting a stomach-churning fall from grace after last year’s impressive 76% return. It’s no coincidence that selling pressure surged when the Delta variant exploded in the United States, forcing economists to lower 2021 GDP projections.

High Odds for Rally Into Year’s End

Fortunately for shareholders, the packaging giant’s fiscal Q1 2022 report next week offers a perfect opportunity for the stock to turn higher and enter a sizable fourth quarter recovery. Analysts predict the company will post a profit of $5.04 per-share on $21.84 billion in revenue. If met, earnings-per-share (EPS) will mark a 3.5% profit increase compared to the same quarter last year. Fedex fell 3.6% after June’s Q4 2021 report, despite beating estimates and raising fiscal year 2022 EPS above consensus.

BofA Securities remains highly bullish on the stock, posting a ‘Buy’ rating and $372 target. Analyst Ken Hoexter outlined his thesis, noting “We see significant tailwinds, led by pricing gains, margin improvement, continued e-commerce growth, and the return of B2B volumes. Its performance has been driven by robust volume growth, with Express and Ground average daily packages up +12% and +23% year-over-year. The company believes the pull-forward of e-commerce demand is unlikely to reverse post-COVID”.

Wall Street and Technical Outlook

Wall Street consensus stands at an ‘Overweight’ rating, based upon 22 ‘Buy’, 3 ‘Overweight’, and 7 ‘Hold’ recommendations. Notably, no analysts recommend that shareholders close positions and move to the sidelines. Price targets currently range from a low of $270 to a Street-high $397 while the stock enters the new trading week nearly $12 below the low target. This dismal placement should offer a perfect catalyst for buying pressure if Fedex meets or exceed estimates.

Fedex topped out near 275 in January 2018 and entered a decline that bottomed out at an 8-year low in double digits in March 2020. The subsequent uptick completed a round trip into the prior peak in October, yielding a breakout, followed by rangebound action that’s crisscrossed the contested level repeatedly in the last 11 months. Accumulation remains strong while relative strength readings hit oversold levels, marking a potent combination that favors higher prices in the fourth quarter.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Apple Under Pressure After Adverse Ruling

Dow component Apple Inc. (AAPL) fell 3.3% on Friday after the U.S. District Court in Northern California found the tech icon in violation of the state’s Unfair Competition Law and issued an  injunction that allows developers to place external links at the Apple store, enabling them to bypass the company’s formerly-exclusive payment system. The news may have been anticipated because the stock fell more than 2% in the two sessions ahead of the ruling.

Barrage of Anti-Trust Complaints

The injunction will have a material impact on earnings because it permanently restrains Apple from “prohibiting developers from (i) including in their apps and their metadata buttons, external links, or other calls to action that direct customers to purchasing mechanisms, in addition to In-App Purchasing and (ii) communicating with customers through points of contact obtained voluntarily from customers through account registration within the app”.

Big tech faces a barrage of anti-trust complaints in the next year, mostly originating from an increasingly hostile Congress. Apple and other mega-caps have been using their immense footprints to grab market share and increase profits, igniting the wrath of those dependent on their ecosystems. Plaintiff Epic Games CEO Tim Sweeney summed up this anger, noting “Today’s ruling isn’t a win for developers or for consumers. Epic is fighting for fair competition among in-app payment methods and app stores for a billion consumers.”

Wall Street and Technical Outlook

Wall Street consensus is mixed after 2020’s outsized 81% return, yielding an ‘Overweight’ rating based upon 27 ‘Buy’, 5 ‘Overweight’, 10 ‘Hold’, 1 ‘Underweight’, and 1 ‘Sell’ recommendation. Price targets now range from a low of $90 to a Street-high $190 while the stock closed Friday’s session about $20 below the median $169 target. The court decision may force analysts to revisit spreadsheets, suggesting that Apple is more than fully-valued.

Apple mounted the January 2020 peak at 81.96 in June, entered a powerful uptrend that flamed out in the upper 130s in September. A January 2021 breakout failed, adding to rangebound action, ahead of a summer advance that added just 20 points to the 2020 high before turning tail last week. Unfortunately, accumulation readings have failed to confirm the mid-year breakout, exposing downside that could reach the 200-day moving average near 130 in the fourth quarter.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Sherwin-Williams Uptrend May Be Over

Sherwin-Williams Co. (SHW) hit a 6-week low in early trading on Thursday after a Q3 profit warning and JPMorgan downgrade. The paint and coating giant has been one of the year’s top SP-500 performers, benefiting from a booming housing market as corporations adopt rules that allow many employees to work remotely. The phenomenon has dovetailed with nearly ideal demographics, with the Millennial generation rapidly entering their nestbuilding years.

Persistent Shortages Undermining Demand

Demand for coating materials remains highly robust across architectural, industrial, and residential building markets but raw material shortages are continuing to impact rollouts schedules and home availability. Analysts and industry insiders expected those shortages to ease as the year progressed, but the Delta variant has thrown an unexpected curve ball, with constraints now expected to persist well into 2022.

Chairman, President and CEO John G. Morikis lowered Q3 sales guidance on Wednesday, noting that “raw material availability negatively impacted consolidated sales by approximately 3.5% in our second quarter, and we previously communicated that we anticipated less of an impact in the third quarter. We are now expecting raw material availability, including the unfavorable impact of Hurricane Ida, to negatively impact our third quarter consolidated sales by a high-single digit percentage.”

Wall Street and Technical Outlook

Wall Street consensus yields an ‘Overweight’ rating based upon 14 ‘Buy’, 2 ‘Overweight’, 11 ‘Hold’, and 1 ‘Sell’ recommendation. The stock has gained more than 34% in the last six months, forcing many analysts to readjust their ratings. Price targets currently range from a low of $278 to a Street-high $345 while Sherwin-Williams opened the session about $26 below the median $320 target. Current pricing looks fairly valued, given these targets and this week’s warning.

Sherwin-Williams topped out near 200 in November 2019 and fell to a three-year low during March 2020’s pandemic decline. The subsequent uptick reached the prior peak in June, ahead of a July cup and handle breakout that attracted intense buying interest. The graceful uptrend since that time posted an all-time high at 310.43 last week, ahead of a pullback that’s now testing the 50-day moving average and August breakout above the May high at 293.05. Weekly Stochastic has rolled into a sell cycle at the same time, favoring a breakdown and decline toward 260.

For a look at all this week’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.

Wrong Time to Buy Netflix

Netflix Inc. (NFLX) failed to reward shareholders for more than a year but is trading at an all-time high on Wednesday after JP Morgan and Atlantic Equities raised their price targets above $700. The streaming giant has been on fire lately, gaining more than 60 points in less than two weeks. Unfortunately, this vertical impulse has now landed on hidden resistance that favors a steep pullback and buying opportunity at much lower levels.

Q3 Subs Below Management Guidance

Growing optimism about the second half content slate and favorable year-to-year comparisons following 2020’s first half lockdown have underpinned these bullish calls. However, third quarter results through August project quarterly subscriber gains of just 2.7 million, well below management’s 3.5 million guidance, indicating that analyst projections require a September sign-up surge, dependent on new content that includes Money Heist, Lucifer, and The Circle.

JP Morgan analyst Doug Anmuth raised the firm’s target from $625 to $705, noting “We continue to like NFLX shares toward year-end based on strength of the 2H content slate, greater distance from pandemic pull-forward, stronger seasonality, & the significant global secular streaming opportunity w/NFLX only 20-25% penetrated among global pay TV households ex-China & at just 7% of US TV time”.

Wall Street and Technical Outlook

Wall Street consensus hasn’t changed in the last three months despite recent commentary, yielding an ‘Overweight’ rating based upon 29 ‘Buy’, 5 ‘Overweight’, 6 ‘Hold’, and 1 ‘Underweight’ recommendation. In addition, three analysts recommend that shareholders close positions and move to the sidelines. Price targets now range from a low of $342 to a Street-high $971 while the stock opened Wednesday’s session less than $20 below the median $625 target. Given the two-week surge, this placement suggests greater downside risk than upside potential.

Netflix sold off through 300 in March 2020 and turned sharply higher, nearly doubling in price into the September high at 555.88. Progressive highs and lows since that time have carved a shallow rising channel, with resistance struck for the third time in 14 months on Wednesday morning. This barrier is likely to stall the upward advance and trigger a proportional retracement that could offer a low risk buying opportunity in the 540 to 560 range.

For a look at all this week’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.

Kroger Overbought and Overpriced

The Kroger Co. (KR) reports fiscal Q1 2022 earnings in Friday’s pre-market, with analysts looking for a profit of $0.64 per-share on $30.7 billion in revenue. If met, earnings-per-share (EPS) will mark a 12% reduction in profit compared to the same quarter last year, when Americans overstocked their shelves with food and supplies due to the pandemic. The stock jumped more than 4% in June after beating Q4 2021 top and bottom-line estimates and is now trading near an all-time high.

Outperforming Larger Rivals in 2021

The grocery giant is outperforming Walmart Inc. (WMT) and Amazon.com Inc. (AMZN) by wide margins in 2021, despite the rapid growth of their supermarket services. The chain, which operates more than 3,000 locations under the Fry’s, King Sooper’s, City Market, and Ralph’s labels, has benefited from soaring foot traffic as unvaccinated folks visit their pharmacies. In addition, it has maintained profit margins despite food commodity inflation, strategically raising prices.

Many big investors own Kroger stock, including Warren Buffett, who raised his stake from 51.06 to 61.79 million shares during the quarter. Even so, earnings growth has decelerated since 2020, highlighted by a digital sales slowdown to an unimpressive 16% in the last quarter. Additional slowing could easily trigger a reversal and pullback, compounded by 24% upside since the last earnings report.

Wall Street and Technical Outlook

Wall Street is taking a cautious view, posting a consensus ‘Hold’ rating based upon 5 ‘Buy’, 1 ‘Overweight’, 15 ‘Hold’, and 3 ‘Underweight’ recommendations. In addition, four analysts recommend that shareholders close positions and move to the sidelines. Price targets currently range from a low of $28 to a Street-high $48 while the stock is set to open Tuesday’s session less than $2 below the high target. Given slowing growth, this lofty placement favors new short sales, if the seller is willing to pay the current $0.21 per-share dividend.

Kroger spiked into the low 40s in a vertical impulse in January 2020 and gave up those gains during the pandemic decline. A slow but persistent recovery wave reached the prior high in August 2021, yielding an immediate breakout that posted an all-time high at 47.99 last week. The stock is consolidating near that level as the new trading week begins, with headwinds favoring a sell-the-news reaction after Friday’s report.

For a look at all this week’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.

Apple Could Lose Ground in the Fourth Quarter

Dow component Apple Inc. (AAPL) posted an all-time high on Wednesday following an analyst upgrade, lifting its 2021 year-to-date return to 16.4%. Bullish summer sentiment throughout the big tech universe has underpinned this uptick, which is also feeding on positive reaction to the iPhone 12 Pro, released in the October 2020. However, there are technical dents in the icon’s shiny armor, raising odds that bears will take control in the fourth quarter.

Strong Upgrade Cycle

Analysts estimate that Apple has added 3% market share in China at the expense of Huawei, which now controls about 8% of sales. Here in the United States, telecom providers AT&T Inc. (T), Verizon Communications Inc. (VZ), and T-Mobile US Inc. (TMUS) have restarted aggressive promotions to existing customers, generating a positive impact on upgrade rates. Growing competition for 5G phones should force these companies to extend promotions well into the iPhone 13 product cycle.

Wolfe Research analyst Jeff Kvaal upgraded Apple to ‘Peer Perform’ on Wednesday, noting “we lift our FY22 iPhone unit/ASP assumptions from 228mn/$824 to 232mn/$833 given well-aligned US promotions and ongoing share gains. This translates into 4.6% sales growth and EPS of $5.85 (consensus 3.3%/$5.64). Recent PC results indicate demand remains well ahead of supply. We consider both products on a permanently higher trajectory as ~50% of shipments through the pandemic have been to new users”.

Wall Street and Technical Outlook

Wall Street consensus stands at an ‘Overweight’ rating after 2020’s historic 80% return, based upon 27 ‘Buy’, 5 ‘Overweight’, 9 ‘Hold’, 1 ‘Underweight’, and 1 ‘Sell’ recommendation. Price targets currently range from a low of $90 to a Street-high $190 while the stock is set to open Thursday’s session about $15 below the median $168 target.  Closing the distance into the median target could be tougher than it looks, given technical red flags.

Apple broke out above the January 2020 high at a split-adjusted 81.96 and entered an historic advance that stalled in the upper 130s in September. The stock has added just 16 points in the last 12 months, posting an all-time high at 154.98 on Wednesday. The rally has nearly reached the trendline of rising highs over that period, exposing hidden resistance. More importantly, buying pressure has gone to sleep, slumping well below October 2020 and January 2021 peaks, suggesting it will take little energy to generate a major downdraft.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Uber Sinks to 10-Month Low

Uber Technologies Inc. (UBER) continues to lose altitude, dropping to the lowest low since October 2020. A series of legal setbacks have impacted the ride-share model in recent weeks, forcing shareholders to reconsider exposure while driver shortages generate higher-than-expected costs to keep automobiles on the road. Given these headwinds, it appears unlikely the company will achieve profitability in the fourth quarter, as previously forecast.

Growing Legal and Logistical Headwinds

Uber beat Q2 2021 top and bottom line estimates in early August, posting GAAP earnings of $0.58 per-share, which isn’t comparable to traditional earnings-per-share (EPS) metrics.  Gross bookings rose 114% year-over-year, with Q2 2020’s slow motion recovery translating into easy comparatives. The $509 million EBITDA loss came closer to the quarter’s actual performance, highlighting how hard it is to make money transporting passengers and sandwiches.

August started well enough, with hedge funds Soros Capital, Appaloosa, Glenview Capital, and Third Point Management opening or increasing positions. However, the California Superior Court then struck down November’s gig worker law, setting the stage for driver employee mandates in the U.S.’s most populous state. The New York City council placed caps on food deliveries just days later, with both catalysts likely to encourage additional driver restrictions and higher costs of doing business.

Wall Street and Technical Outlook

Wall Street consensus remains wildly bullish, with a ‘Buy’ rating based upon 43 ‘Buy’, 4 ‘Overweight’, and 3 ‘Hold’ recommendations. One analyst is now recommending that shareholders close positions and move to the sidelines. Price targets currently range from a low of $34 to a Street-high $81 while the stock is set to open Wednesday’s session just $5 above the low target. This dismal placement suggests Main Street has a better grasp on reality than analysts sitting in their ivory towers.

Uber sold off from 42 to 14 during 2020’s pandemic decline and bounced in a two-wave advance that reached the prior peak in November. It then broke out above the 2019 high at 47.04, stretching to an all-time high at 64.05 in February. It’s been all downhill since that time, failing the breakout while accumulation has plunged to the lowest low in 10 months. The November gap between 36 and 39 looks the magnetic target, suggesting shareholders should expect more pain in coming weeks.

For a look at all of this week’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Snap Perfectly Positioned for Rally Into Upper 80s

Snap Inc. (SNAP) broke out above five-month resistance after strong Q2 earnings in July and promptly went to sleep, grinding sideways in a dead pattern that’s now lasted for more than five weeks. Breakout buyers have failed to book a penny of profit during this period, with that single price bar acting as an impenetrable barrier. Even so, it’s nearly impossible to make a bearish call on the social media app because their growth has been spectacular in the last two years.

Growth Firing on All Cylinders

The company booked a surprise profit of $0.10 per-share during the second quarter, beating estimates by $0.11. Revenue rose a phenomenal 116.2% year-over-year to $982.11 million, more than $130 million higher than consensus. 293 million daily average users (DAUs) marked a 23% year-over-year increase, inducing executives to issue upside Q3 guidance that now expects between $1.07 and $1.085 billion in revenue, compared to prior $1.01 billion expectations.

Wedbush analyst Ygal Arounia raised his price target to $88 after the news, noting, “Snap delivered exceptional 2Q21 results both on the top line and EBITDA, with materially better than expected 3Q revenue guidance as well. The digital advertising market is clearly strong and picking up steam as the global reopening and strong economic environment moves forward. Snap is seeing strength across the board, from multiple verticals (including retail and restaurants), and across all its ad products.

Wall Street and Technical Outlook

Wall Street consensus stands at an ‘Overweight’ rating after a historic 456% return since the start of 2020, based upon 24 ‘Buy’, 3 ‘Overweight’, 11 ‘Hold’, and 1 ‘Sell’ recommendation. Price targets currently range from a low of $42.20 to a Street-high $110 while the stock is set to open Tuesday’s session about $12 below the median $87 target. This placement suggests that any positive catalyst will generate a rapid advance to new highs.

Snap completed a round trip into the 2017 high in the mid-20s in July 2020 and broke out in October, entering a sustained advance that stalled at 73.59 in February 2021. A shallow correction worked off overbought technical readings through time instead of price, ahead of a powerful one-day rally after Q2 earnings on July 23rd. A mid-August breakout attempt failed, yielding a slow downward drift that could now offer a low risk buying opportunity.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

McDonald’s Could Sell Off in Coming Weeks

Dow component McDonald’s Corp. (MCD) has failed to capitalize on July’s impressive Q2 2021 earnings report, gapping down from an all-time high and failing a modest breakout above May resistance in the 230s. It’s now added just seven points since ending a COVID-fueled advance in October 2020 and has booked a mediocre 7% return since August 2019. Accumulation hasn’t budged during this period, exposing the fast food giant to a major correction.

Weak Two-Year Growth

The company beat top and bottom estimates in the last quarter, posting a profit of $2.37 per-share on a 56.5% year-over-year revenue increase to $5.89 billion. Even so, two-year growth rates exposed the deep impact of social distancing and lockdowns, with U.S. sales rising 14.9% while International Operated Markets gained just 2.6%. International Development Licensed Markets brought up the rear, gaining a paltry 0.3%. In addition, just 70% of U.S. dining rooms were open at the time of the July release.

Despite headwinds, Guggenheim analyst Gregory Francfort recently named the fast food giant as a ‘top pick’, citing long-term benefits gained through extensive investments in restaurant remodeling and digital offerings. As he notes, “McDonald’s is the largest quick service operator in the U.S. and the world with $110bn in global system sales projected (by us) this year. Roughly $1 out of every $20 in the U.S. that is spent on food away from home (not at a grocery store) is spent at a McDonald’s.”

Wall Street and Technical Outlook

Wall Street consensus has been glued to an ‘Overweight’ rating so far in 2021, now based upon 24 ‘Buy’, 3 ‘Overweight’, and 8 ‘Hold’ recommendations. No analysts are telling clients to underweight positions or move to the sidelines. Price targets currently range from a low of $232 to a Street-high $295 while the stock is set to open Monday’s session just $6 above the low target. This humble placement highlights persistent investor anxiety about the Delta variant’s long-term impact.

McDonald’s topped out above 220 in 2019 following a strong uptrend and sold off to a three-year low during 2020’s pandemic decline. It returned to the prior peak in September and broke out but the rally failed, yielding a decline into the first quarter of 2021. More positive action mounted resistance at 238 in July, but this uptick also failed, generating the 9th test at 50-day moving average support since May.  Long-term Stochastics have now rolled into sell cycles, raising odds for a selloff into the 220s.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Zoom Dead Money So Far in 2021

Zoom Video Communications Inc. (ZM) reports fiscal Q1 2022 earnings after Monday’s closing bell, with analysts looking for a profit of $1.16 per-share on $990.2 million in revenue. If met, earnings-per-share (EPS) will mark a 26% profit increase compared to the same quarter last year. The virtual meeting provider has beaten estimates every quarter since coming public in April 2019, posting a 191.4% year-over-year revenue increase in the quarter ending May 31st.

Growing Competition in a Post-Pandemic World

The company continues to diversify its product catalog after 2020’s historic uptrend, driven by pandemic lockdowns around the world. Meanwhile, multiple competitors are offering alternatives to the Zoom platform at the same time that lockdowns have drawn huge political opposition, despite the rise of the Delta variant. It’s been a race against time for Zoom, seeking to replace lost income to maintain its rich valuation and high stock price.

Morgan Stanley analyst Meta Marshall upgraded Zoom to ‘Overweight’ last week, noting “we think that enterprise momentum, combined with margin headwinds dissipating, creates a positive setup into FQ2. While revenue expectations are not low, we believe they are doable, which combined with upcoming Zoomtopia and FY23 guidance in a couple of quarters, leaves us more optimistic on the stock at current valuation”.

Wall Street and Technical Outlook

Wall Street consensus has improved in the last three months, now standing at an ‘Overweight’ rating based upon 14 ‘Buy’, 1 ‘Overweight’, 11 ‘Hold’, 1 ‘Underweight’, and 1 ‘Sell’ recommendation. Price targets currently range from a low of $242 to a Street-high $525 while the stock ended Friday’s session more than $75 below the median $416 target. This low placement highlights investor apathy toward pandemic beneficiaries, most recently illustrated by Peloton Interactive Inc.’s (PTON) steep post-earnings slide.

Zoom broke out above the 2009 high at 107.34 in February 2020, entering an historic uptrend that hit an all-time high at 588.84 in October, just weeks before Pfizer Inc. (PFE) and BioNTech SE (BNTX) announced the success of their vaccine. The stock has posted a long series of lower highs and lower lows since that time, crisscrossing the 200-day moving average and 50% rally retracement repeatedly since March.  Accumulation fell to an 8-month low last week, highlighting slow-motion profit-taking that could easily stretch into the fourth quarter.

For a look at all of this week’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Is It Time to Buy Advanced Micro Devices?

Advanced Micro Devices Inc. (AMD) beat Q2 2021 top and bottom line estimates in July, posting a profit of $0.63 per-share on an historic 99.3% year-over-year revenue increase to $3.85 billion. The company also raised Q3 and fiscal year guidance, setting off a powerful breakout above 7-month resistance in the 90s. The uptick continued into August, posting an all-time high at 122.49, ahead of profit-taking that gave up more than 20 points into last week’s low at 101.98.

Analyst Sets $135 Price Target

The stock turned higher this week, leading investors to wonder if now is the right time to buy AMD, especially with Dow component Intel Corp. (INTC) throwing in the towel and shifting its focus to foundry construction. There’s no easy answer, given the 37% advance off the July 27th low, which has set off short-term overbought technical readings. However, there’s also no guarantee the pullback will slice through the recent low and test breakout support.

BofA Securities analyst Vivek Arya took the bull case when the stock hit 106, expecting 25% additional upside. As he notes “We reiterate our Buy on AMD with a $135 price objective, or 25% upside to current levels. We see strong catch-up potential, despite the strongest upward EPS revisions in semis and with a clear path to doubling EPS to $5/share on consistent roadmap execution/share gains against INTC, who is distracted by expanding into non-core foundry market”.

Wall Street and Technical Outlook

On the other hand, Wall Street consensus has deteriorated, yielding an ‘Overweight’ rating based upon 16 ‘Buy’, 5 ‘Overweight’, 16 ‘Hold’, and 1 ‘Sell’ recommendation. Price targets now range from a low of $60 to a Street-high $170 while the stock is set to open Wednesday’s session just $3 below the median $110 target. This placement suggests analysts are squarely focused on chip shortages, rather than AMD’s quarterly performance.

AMD completed a breakout above the 2000 high at 48.50 in July 2020 and entered an historic advance that topped out in the 90s in September. December and January breakout attempts failed, yielding a steady decline, followed by a second quarter uptick and July breakout supported by heavy volume. The stock posted impressive gains before reversing in a correction that failed to reach the breakout level. Weekly Stochastics has now rolled into a sell cycle that could easily generate a final leg down into double digits and a lower risk buying opportunity.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Best Buy Blows Away Q2 Estimates

Best Buy Co. Inc. (BBY) is trading higher by more than 4% in Tuesday’s pre-market session after blowing away Q2 2021 top and bottom line estimates. The electronics and appliance retailer posted a profit of $2.98 per-share during the quarter, $1.09 higher than expectations, while revenue rose a healthy 19.6% year-over-year to $11.85 billion, beating consensus by more than $300 million. The company raised both Q3 and fiscal year 2021 guidance, indicating robust sales across all major categories.

A Year of Sub Par Performance

Even so, the stock has gone nowhere in the last 12-months, trading at the same price level first struck on this date last year. It more than doubled off the March low to reach that lofty level, setting off long-term overbought technical readings that are still impacting performance.  Of course, we’ve seen this story play out with other American retailers this year, translating into sub-par returns at big names that include Amazon.com Inc. (AMZN) and Walmart Inc. (WMT).

Best Buy’s long-term outlook remains highly bullish despite a year of sideways action, with Telsey Advisory Group analyst Joseph Feldman noting that “We expect Best Buy to further strengthen its position, with steady market share gains, stable profitability, leading Omni-channel capabilities, solid cash flow generation, a healthy balance sheet, and a strong management team. Despite all these positives, Best Buy’s valuation remains relatively inexpensive.”

Wall Street and Technical Outlook

Wall Street consensus has eased to an ‘Overweight’ rating in the last three months, based upon 10 ‘Buy’, 3 ‘Overweight’, 12 ‘Hold’, 1 ‘Underweight’, and 1 ‘Sell’ recommendation. Price targets currently range from a low of $77 to a Street-high $150 while the stock is set to open Tuesday’s session about $10 below the median $127 target. The positive post-news reaction raises odds that price will make a beeline into the median target in coming sessions.

Best Buy topped out at 84.37 in August 2018 and cleared resistance at that level in July 2020. The subsequent rally was short-lived, stalling above 115 in November. February and May 2021 breakout attempts failed, reinforcing horizontal resistance that now stretches up to 128. The current uptick could enter that contested zone in coming sessions but a breakout will be difficult, given mixed price action in other big retailers.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Peloton Could Rally After Earnings

Peloton Interactive Inc. (PTON) reports fiscal Q4 2021 earnings on Thursday, with analysts expecting the fitness provider to post a $0.34 per-share loss on $923.5 million in revenue. If met, the loss will mark a turnaround from the $0.27 profit booked in the same quarter last year. The stock ended a five month slide in May after beating Q3 top and bottom line estimates, despite a loss of $0.03 per-share, but remains stuck in the lower half of an 11-month trading range.

Shaking Off Headwinds

The stock fell with other COVID beneficiaries at the start of 2021 and turned higher when the Delta variant hit American news headlines. Controversies about treadmill recalls and injured kids are receding but fitness centers have remained open during the latest outbreak and they’re jammed with customers tired of working out in private. Peloton has responded with initiatives that include armband heart rate monitors and partnerships with corporate wellness providers.

Hedge funds are also moving back into Peloton, as evidenced by recent SEC disclosures. Tiger Global, Viking Global, and Third Point Management all increased position size during the quarter, suggesting comfort with the company’s long-term outlook. That buying pressure has shown up on technical charts as well, with accumulation readings lifting above 2020 levels, even though the stock is still trading more than 60 points under January’s all-time high.

Wall Street and Technical Outlook

Wall Street consensus has dipped in the last three months and is now standing at an ‘Overweight’ rating, based upon 20 ‘Buy’, 2 ‘Overweight’, 5 ‘Hold’, and 2 ‘Sell’ recommendations. Price targets currently range from a low of $45 to a Street-high $185 while the stock closed Friday’s session more than $25 below the median $135 target. This humble placement should support higher prices if Peloton beats top and bottom line estimates this week.

Peloton rallied above the 2019 peak at 37.02 in May 2020 and took off in a powerful uptrend that posted an all-time high at $171.09 in January 2021. It got cut in half into May and bounced, reversing again after mounting the 50% selloff retracement. The stock is now wrapping up the third month of testing at the 200-day moving average while weekly Stochastic readings have hit oversold levels. This is a potent combination for a relief rally after this week’s confessional.

For a look at all of this week’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

NVIDIA Trading Modestly Higher After Earnings

NVIDIA Corp. (NVDA) shook off a modest decline in Wednesday’s post-market and is trading higher by more than 1% on Thursday morning, after investors took a more bullish view of the mostly inline Q2 2021 earnings report. The chipmaker posted a profit of $1.04 per-share during the quarter, just $0.02 better than expectations, while revenue rose an impressive 68% year-over-year to $6.51 billion, about $170 million higher than consensus.

Warning on Supply Constraints

Vertical industry and hyperscale customers generated record data center revenue. Demand for gaming chips also underpinned results, outpacing supply due to the worldwide chip shortage. The company warned that “we will see a supply constrained environment for the vast majority of next year”, raising a red flag for industry rivals. Automotive revenue declined sequentially, as the self-driving juggernaut ran into the impenetrable wall of limited supply.

NVIDIA posted an historic 221% return in 2020 and has added another 49% so far in 2021. Supply constraints haven’t impacted the bullish technical pattern, at least yet, but it will be hard for risk conscious investors to take exposure until mean reversion takes control and prices drop off lofty levels. Even so, there’s little doubt the company is destined for long-term market leadership, given its amazing track record since 2016.

Wall Street and Technical Outlook

Wall Street consensus has declined to an ‘Overweight’ rating in the last three months, based upon 28 ‘Buy’, 6 ‘Overweight’, 4 ‘Hold’, 1 ‘Underweight’, and 2 ‘Sell’ recommendations. Price targets currently range from a low of $130 to a Street-high $300 while the stock is set to open Thursday’s session about $26 below the median $220 target. The modest buy-the-news reaction suggests that price can now ease toward the $200 level.

NVIDIA broke out above the 2018 high at a split-adjusted 73.19 in May 2020, entering a powerful uptrend that stalled just below 150 in September. The stock cleared resistance in April 2021 but momentum didn’t kick into gear until a May buying spree added 74 points into July’s all-time high at 208.75. Mixed weekly and monthly Stochastics readings since that time indicate that price has entered a trading range that could persist well into the fourth quarter.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Cisco Systems Fairly Valued Ahead of Report

Dow component Cisco Systems Inc. (CSCO) reports fiscal Q4 2021 earnings after Wednesday’s closing bell, with analysts expecting a profit of $0.83 per-share on $13.03 billion in revenue. If met, earnings-per-share (EPS) will mark a slight improvement compared to the same quarter last year. The stock closed marginally higher in May after meeting Q3 estimates and issuing mixed Q4 guidance. The company has met EPS guidance every quarter in the last five years so a downside surprise isn’t likely.

Strong 2021 Returns

Cisco underperformed throughout 2020, with contracts in the Commercial, Public Sector, and Service Provider segments impacted by the pandemic. Bulls have returned in force so far in 2021, underpinning a 25% year-to-date return. Even so, the stock is still trading below July 2019’s multiyear high at 58.26, which marks major resistance. A breakout after the news isn’t likely, given the proximity to that peak and the company’s reputation as a slow mover.

It’s been a relatively quiet quarter for the networking giant, with the recently reported acquisition of Israeli start-up Epsagon marking one of the few notable highlights. The transaction, valued at $500 million, will add to Cisco’s capability in the cloud space. It also won an open-ended $1.2 billion contract from the Defense Information Systems Agency to provide Smart Net Total Care and Software Support Services for the Department of Defense.

Wall Street and Technical Outlook

Wall Street consensus has improved in the last three months, now standing at an ‘Overweight’ rating based upon 14 ‘Buy’, 3 ‘Overweight’, and 13 ‘Hold’ recommendations. No analysts are recommending that shareholders underweight or close positions. Price targets range from a low of $46 to a Street-high $65 while the stock will open Wednesday’s session just $1 below the median $57 target. This placement suggests Cisco is fairly valued, lowering odds for big price change after the report.

Cisco Systems posted an all-time high at 82 in 2000 and has traded below that peak for the last 21 years. A multiyear uptrend topped out in the upper 50s in 2019, giving way to a pullback that accelerated to a two-year low during the pandemic decline. The stock posted a higher low in November and bounced strongly, reaching within three points of the prior peak this week. An extension into resistance is possible after the report but additional gains may take time to unfold.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.