3 Airline Stocks Ready for Takeoff

Coronavirus-induced stay-at-home orders and border closures have wreaked havoc on the airline industry in 2020. Furthermore, a move to remote working during the pandemic threatens to significantly reduce corporate travel moving forward. Philanthropist and Microsoft co-founder Bill Gates recently said he expects business travel to disappear by over 50% longer-term. “My prediction would be that over 50% of business travel and over 30% of days in the office will go away,” Gates told the New York Times’ Dealbook conference, per CNBC.

However, over the past month, airline stocks have flown back into favor with investors after successful COVID-19 vaccine breakthroughs give hope that pre-pandemic travel levels may return as more people take to the skies. Below, we take a look at the three largest airline stocks by market capitalization.

Southwest Airlines Co. (LUV)

The Dallas-based low-cost carrier operates over 700 aircraft in an all-Boeing 737 fleet, primarily targeting leisure and independent small business customers. Although the Federal Aviation Administration (FAA) lifted its 20-month ban of the troubled Boeing 737 Max from flying passengers Wednesday, Southwest said the jet wouldn’t re-enter service until later next year. From a technical standpoint, the share price broke out above a nine-month downtrend line that may see it retest its pre-pandemic high at $58.83. The airline has a market cap of $27.35 billion.

Delta Air Lines, Inc. (DAL)

With a market cap of $25.67 billion, Delta flies to over 300 destinations in more than 50 countries. The company announced in September that it plans to borrow $6.5 billion, backed by its frequent-flyer loyalty program to secure liquidity to ride out the tail end of the pandemic.

More recently, the full-service airline canceled one in every five flights it was scheduled to operate on Thanksgiving Day amid crew shortages brought about by the health crisis. Turning to the charts, a recent cross of the 50-day SMA back above the 200-day SMA and breakout above a multi-month downtrend line may lead to further gains toward crucial overhead resistance at $51.

United Airlines Holdings, Inc. (UAL)

United Airlines operates as a full-service carrier through its strategically located hubs in San Francisco, Chicago, Houston, Denver, Los Angeles, New York/Newark, and Washington, D.C. Last month, Raymond James’ airline analyst Savanthi Syth upgraded the airline’s stock to ‘Outperform’ from ‘Market Perform’ and reiterated the firm’s $60 price target.

Syth argues the company sits in a better position than its competitors for a travel revival after securing a pilot agreement through 2022. He also noted that United has no pending fleet retirements, allowing it to rapidly increase capacity when demand picks up. Moving on to the chart, a comprehensive breakout above a crucial downtrend line and the 200-day SMA could see the shares take flight to the January swing low at $74.34. The airline has a market value of $13.18 billion.

For a look at today’s earnings schedule, check out our earnings calendar.

3 Stocks for Investors Chasing High Paying Dividends

Interest rates were already near historic lows before the COVID-19 pandemic and look like remaining that way for the foreseeable future as the Federal Reserve encourages more borrowing to stimulate the economy. As an alternative to keeping cash squirreled away in a low-interest saving account or government bond, investors can chase a higher return on their money by purchasing high paying dividend stocks.

Bear in mind, companies can slash or reduce their dividend at any time. For example, the major airline stocks pulled their dividends earlier this year amid the uncertainty surrounding travel during the health crisis. In saying that, let’s take a closer look at the three stocks in the S&P 500 that each offer a dividend of over 7%. Currently, the average stock in the index yields 1.8%.

Exxon Mobil Corporation

With headquarters in Irving, Texas, Exxon Mobil Corporation (XOM) explores for and produces crude oil and natural gas. The global energy giant has increased its annual dividend for 33 consecutive years at an average of 3.53% each year. Investors currently receive a healthy forward dividend yield of 8.29%.

As of Nov. 26, 2020, the stock has a market capitalization of $172.55 billion and trades around 25% higher over the past month. From a chart perspective, a recent breakout above a 10-month downtrend line may trigger a retest of the early June swing high at $55.36.

Altria Group, Inc.

Altria Group, Inc. (MO) manufactures and sells cigarettes, smokeless products, and wine in the United States. Although not everyone’s cup of tea, the cigarette maker issues a smoking hot annual dividend of $3.44 per share, equaling an 8.52% yield. Furthermore, the company’s dividend has increased by an average of 11.75% annually for the past 11 straight years.

Altria shares have a market value of $75 billion and trade up a modest 3.33% over the last month as of Nov. 26, 2020. Technically, the price continues to find resistance from the top trendline of a descending channel that may see a decline to the pattern’s opposing side at $35.75.

AT&T Inc.

AT&T Inc. (T) provides telecommunication, media, and technology services through four segments: Communications, WarnerMedia, Latin America, and Xandr. The $206.58 billion communications titan pays a $2.08 dividend per share, with a yield of 7.17%. Impressively, the 37-year-old Dallas-based company has raised its dividend by an average of 2.04% each year for the past 36 consecutive years.

As of Nov. 26, 2020, AT&T stock has gained 4.21% over the last month, outperforming the telecommunications sector average by about 1%. Chart wise, the shares have consolidated since breaking above a multi-month downtrend line earlier this month. A breakout from this level could spark a rally to the June swing high at $33.24.

For a look at today’s earnings schedule, check out our earnings calendar.

Regeneron Nears Chart Support After Antibody Cocktail Approval

Regeneron Pharmaceuticals, Inc. (REGN) gained 0.94% Monday after The Food and Drug Administration (FDA) fast-tracked emergency authorization over the weekend of the biopharmaceutical company’s coronavirus dual monoclonal antibody treatment REGN-COV2.

The experimental therapy – given to President Trump when he contacted the deadly disease last month – works by binding antibodies to the coronavirus’ spike protein, limiting the ability of viruses to escape. In other words, the therapy attempts to speed up a patient’s immune system in preparation to fight the disease at its onset. Although the cocktail of drugs continues to undergo testing, the FDA said early results suggest the drug may reduce COVID-19-related hospitalization or emergency visits in patients at high risk for disease progression.

The development comes as the United States on Sunday reported 142,732 new infections and registered a record number of hospitalizations for the 13th consecutive day. “The emergency authorization of these monoclonal antibodies administered together offers health care providers another tool in combating the pandemic,” Patrizia Cavazzoni, M.D., acting director of the FDA’s Center for Drug Evaluation and Research, told the Wall Street Journal.

As of Nov. 24, 2020, Regeneron has a market capitalization of $55.87 billion and trades nearly 10% lower over the last month. However, the shares have returned 39.45% year to date (YTD). From a valuation standpoint, the company trades at a 41% discount to its five-year forward earnings multiple of around 22 times.

Wall Street View

Truist analyst Robyn Karnauskas raised the firm’s price target on Regeneron earlier this month to $770 from $750 while reiterating a ‘Buy’ rating. Karnauskas cited the company’s impressive Q3 Eylea and Dupi sales, as well as its pipeline execution ability during the pandemic, for the price upgrade. She also believes multiple potential approvals in 2021 will support further upside.

Sentiment elsewhere on the Street remains mostly bullish. The stock receives 13 ‘Buy’ ratings, 2 ‘Overweight’ ratings, and 11 ‘Hold’ ratings. Price targets range between $793 and $550, with the median 12-month target pegged at $675. This implies a healthy premium of 29% to Monday’s $523.61 close.

Technical Outlook and Trading Tactics

Since topping out at nearly $665 a share in mid-July, the price has traded mostly sideways to lower as investors waited for testing results of the company’s COVID-19 treatments. More recently, the stock slipped below the closely watched 200-day simple moving average (SMA) last week but found buying support yesterday near a four-month horizontal trendline.

Those who anticipate a reversal at these levels should target a move back to the 52-week/ATH at $664.64 while protecting capital with a stop-loss order placed beneath the November low at $509.34.

For a look at today’s earnings schedule, check out our earnings calendar.

Home Depot Slips Despite Topping Wall Street Forecasts

Home Depot, Inc. (HD) shares dipped 2.54% Tuesday despite the home improvement retailer posting better-than-expected quarterly earnings amid healthy ongoing stay-at-home spending during the pandemic.

The big-box retailing giant reported a third-quarter (Q3) profit of $3.43 billion, or $3.18 per share, on revenues of $33.54 billion. Analysts had expected EPS of $3.06, with sales of $32.04 billion. Moreover, the top and bottom line grew 23- and 24%, respectively, from the year-ago quarter. During the earnings call, the company said some of its temporary employee remuneration programs implemented in the wake of the health crisis will become permanent wage increases, resulting in $1 billion of additional expenses per year.

As of Nov. 18, 2020, Home Depot stock has a market capitalization of $306.73 billion, offers a 2.15% dividend yield, and trades 27% higher year to date (YTD). However, the shares have fallen 5.28% over the last month.

Focus on Professional Business

The impressive earnings come just one day after the company announced plans to acquire HD Supply – a former maintenance, repair, and operations (MRO) business it spun off in 2007. The $8 billion deal helps position the retailer as a leader in the commercial services market.

“That is a huge opportunity for the Home Depot to continue to grow, not only on the MRO side, but as we build relationships with customers on the MRO side, we build relationships to be able to participate in capital refreshes of those facilities as well, which is something that we’re pretty focused on,” CEO Craig Menear said, per CNBC.

Wall Street View

Telsey Advisory analyst Joseph Feldman upgraded the company to ‘Outperform’ from ‘Market Perform’ and bumped his price target to $315 from $300. Feldman sees further upside from strong business trends and the company’s acquisition of HD Supply.

Elsewhere on the Street, recommendations also favor the bulls. The stock receives 18 ‘Buy’ ratings, 3 ‘Overweight’ ratings, and 11 ‘Hold’ ratings. Just one analyst recommends selling the shares. Price targets range from as high as $350 to as low as $243, with the median $310 12-month target, representing a 14% premium to Tuesday’s $272.47 close.

Technical Outlook and Trading Tactics

Home Depot shares have remained stuck in a 30-point trading range since early August as investors have questioned whether the surge in home improvement spending is sustainable beyond the pandemic. Yesterday’s weakness may lead to further short-term declines as concerns mount over rising costs.

However, active traders who favor rangebound strategies should look for buying opportunities near the range’s lower trendline, where the price finds major support around $262. Those who open a long position at that level should consider protecting capital with a stop below $260 and targeting a move to the range’s opposing side at $292.

For a look at today’s earnings schedule, check out our earnings calendar.

Lordstown Motors Soars as Truck Orders Pick Up

Lordstown Motors Corp. (RIDE) shares jumped 25.98% Monday after the electric truck maker said it had seen strong demand for its all-electric Endurance pickup.

The company told investors that it has nonbinding reservations for 50,000 vehicles from commercial buyers. Lordstown plans to commence production of its pickup in September 2021 before ramping up operations throughout 2022. “We continue to make significant progress across all fronts, and we are excited to reveal these developments with the investment community and future customers today,” CEO Steve Burns said in a press statement cited by Barron’s.

Unlike many other players in the EV space, the company has its own production facilities after purchasing a large manufacturing plant from General Motors Company (GM) in 2019. Last month, the truck maker completed its merger with special-purpose acquisition company (SPAC) DiamondPeak Holdings before its Nasdaq debut on Oct. 26. The deal provides roughly $675 million in proceeds, which the company will use through the initial production phase, according to Burns.

Through Monday’s close, Lordstown Motors stock has a market value of $3.72 billion and trades 126.63% higher on the year. However, over the past month, the shares have pulled back slightly, declining 2.08%.

Wall Street View

Given the company’s recent listing, few analysts have commenced coverage of its stock. Currently, it receives 1 ‘Buy’ rating from  BTIG analyst Gregory Lewis who initiated his call with a 12-month price target of $50. This implies a further 122% gain from yesterday’s $22.55 closing price.

Lewis expects Lordstown to generate about $3.3 billion in sales by 2023, meaning its stock trades at around 0.8 times estimated 2023 sales. By comparison, EV market leader Tesla, Inc. (TSLA) trades at roughly six times projected 2023 sales. Look for more broker ratings over the coming months as analysts fine-tune their valuations and get a better understanding of the incoming Biden administration’s policies relating to EV companies.

Technical Outlook and Trading Tactics

After bottoming out below $13.50 near the 200-day simple moving average (SMA) shortly after its Nasdaq listing, the share price has rallied sharply. The bullish momentum continued Monday, with buyers bidding the stock above a short-term downtrend line on heavy volume.

Active traders who enter at these levels should look for a move back to the stock’s all-time high (ATH) at $31.80 while placing a stop-loss order either at the midway point of yesterday’s wide-ranging day or beneath the session low, depending on risk tolerance.

For a look at today’s earnings schedule, check out our earnings calendar.

Aurora Cannabis Inc Gets Smoked After Announcing Share Offering

Aurora Cannabis Inc. (ACB) plunged 7.71% Wednesday after the Canadian-based marijuana company announced it plans to sell more shares for growth opportunities, working capital, and other corporate activities. Under the proposed $125 million capital raising, Aurora expects to sell each new share for $7.50 with an attached warrant that allows the buyer to purchase another share for $9 within 40 months of the close date. However, the company said final terms would be finalized at the time of pricing.

Since the Nov. 3 U.S. presidential election, the stock has been on a high in anticipation of a cannabis-friendly Biden administration and reporting quarterly sales that came in well ahead of expectations. While the company’s fiscal Q1 revenue of $52.2 million declined 10% from a year earlier, the figure comfortably topped Street forecasts of $48.9 million. Moreover, Aurora said it expects to reach positive adjusted EBITDA next quarter.

As of Nov. 12, 2020, the stock has a market capitalization of $1.23 billion and trades up a massive 73% over the past week. Despite the recent surge, the shares have tumbled 70.45% year to date (YTD).

Wall Street View

Earlier this week, Cantor Fitzgerald’s Pablo Zuanic lowered his price target on the stock to C$12 from C$13 but reiterated the firm’s Neutral rating. The analyst cited disappointing Canadian recreational and medical cannabis Q1 sales along with a declining market share in the recreational business for the downgrade.

However, Zuanic likes the company’s shift from value to premium pot offerings. “The volatility notwithstanding, we think the relative valuation [versus other pot companies] leaves little downside,” he wrote in a research note to clients cited by Barron’s.

Elsewhere on the Street, other analysts also sit mostly on the fence. The stock receives 14 ‘Hold’ ratings, 1 ‘Overweight’ rating, and 4 ‘Sell’ ratings. Price targets range from a high of $12.34 to a low of $4.99. Wednesday’s $7.66 close offers a 5.7% premium to analysts’ 12-month consensus target of $8.10.

Technical Outlook and Trading Tactics

Since forging a 5-year low beneath $4 in late October, Aurora shares have staged an impressive upside reversal on heavy volume, breaking above both a multi-month downtrend line and the 200-day simple moving average (SMA) – albeit temporarily. In the past few trading sessions, profit takers have moved in as investors digest the company’s Q1 earnings and yesterday’s capital raising announcement.

Active traders should view the current retracement as a “buy the dip” opportunity, given price action has flipped the downtrend line from resistance into support at the $6.70 area. In terms of trade management, consider placing a stop-loss order beneath last month’s low at $3.71 and targeting a move to crucial overhead resistance at $18.

Investors Lose Appetite for Beyond Meats After COVID-19 Eats Profits

Beyond Meat, Inc. (BYND) shares added to Monday’s losses in extended-hour trading, plunging 22.44% after the plant-based meats company reported quarterly results that fell short of the mark as the pandemic crippled restaurant sales and consumers stockpiled less meat alternative products.

The company reported a Q3 loss of 28 cents a share, with the figure falling well short of analysts’ forecasts of a 5 cent per-share profit. Moreover, the bottom line declined from 6 cents a share in the year-ago quarter. Revenues of $94.4 million also came in below expectations but grew 2.7% on a year-over-year (YoY) basis. The substitute meat producer’s U.S. foodservice segment, which includes restaurants and corporate catering, weighed heavily on the top line, falling 11% as consumers opted to eat at home during the health crisis. However, sales growth of 40.5% in Beyond Meat’s grocery unit helped offset the decline.

“We experienced the full brunt and unpredictability of Covid-19 on our net revenues,” CEO Ethan Brown said in a statement accompanying the earnings call. “Unlike the second quarter, where record retail buying and freezer loading by consumers offset the deterioration of our food service business…the long tail of retail stockpiling by consumers, coupled with continued challenges across the majority of our food service customers, led to [third-quarter] results that were lower than we expected,” he added, per Barron’s.

Through Monday’s close, Beyond Meat stock has a market capitalization of $9.4 billion and trades up a whopping 107.49% on the year. Over the past three months alone, the shares have gained nearly 20%.

Wall Street View

In recent months, the company has copped a barrage of broker downgrades. Analysts have grown increasingly worried about rival players in the sizzling alternative meat space. Look for souring sentiment across the Street to continue after the disappointing Q3 earnings. Also, news that McDonald’s Corp (MCD) has launched a test of its own plant-based burger – the McPlant, could trigger additional re-ratings.

The stock currently receives 3 ‘Buy’ ratings, 1 ‘Overweight’ rating, 10 ‘Hold’ ratings, 2 ‘Underweight’ ratings, and 6 ‘Sell’ ratings. Price targets fluctuate from as high as $178 to as low as $55, with the median target pegged at $136. This represents a 16.5% premium to Monday’s extended hours closing quote at $116.73.

Technical Outlook and Trading Tactics

Since reaching a 52-week high in early October, the share price has retraced back below the 50-day SMA. On Tuesday’s expected weakness, active traders should pay close attention to the $121 level. This is where the stock finds a confluence of support from a multiyear horizontal trendline and the 200-day SMA. A price reversal in this area could trigger a return of bullish sentiment, leading to a retest of last month’s high at $197.50 or even a test of the all-time high (ATH) at $239.71.

Alibaba Plunges After Regulators Suspend Ant Group IPO

Shares in Chinese tech giant Alibaba Group Holding Limited (BABA) shares plummeted 8.13% Tuesday after regulators suspended the Ant Group Co. Ltd initial public offering (IPO) over concerns the fintech unicorn failes to meet requirements for listing on the Shanghai Stock Exchange. Alibaba has a 33% stake in the IPO, which was set to list Thursday and raise more than $35 billion through concurrent listings on the Shanghai and Hong Kong stock exchanges, making it the largest IPO in history.

Shanghai officials said they had halted the listing amid concerns that the company was able to meet conditions relating to changes in the regulatory environment. “Your company has reported significant issues such as the changes in financial technology regulatory environment. These issues may result in your company not meeting the conditions for listing or meeting the information disclosure requirements,” the stock exchange said, per Investor’s Business Daily.

As of Nov. 4, 2020, Alibaba stock has a market capitalization of $763.81 billion and trades 34.64% higher on the year. Over the past three months, the shares have gained nearly 11%. Despite the stock’s recent price appreciation, the company still trades just 18.7% above its five-year projected earnings multiple of 27.53.

Meeting with Regulators

The shock decision comes just a day after the People’s Bank of China and exchange regulators interviewed Ant Group co-founder Jack Ma about the IPO. According to Reuters, officials raised their concern about Ant’s lending business that originates loans underwritten primarily by financial-industry partners. Chinese regulators are reportedly growing fearful that financial institutions may encounter rising defaults in the wake of the coronavirus pandemic.

Wall Street View

Raymond James analyst Aaron Kessler has maintained his ‘Strong Buy’ rating on the stock. He argues yesterday’s sell-off appears to be an overreaction given Ant Group’s $300 billion valuation.

Elsewhere on the Street, analysts remain overwhelmingly bullish. The shares receive 50 ‘Buy’ ratings, 4 ‘Overweight’ ratings, and 1 ‘Hold’ rating. Currently, no broker recommends selling the stock. Price targets range between $377.82 and $278.04, with the median 12-month consensus pegged at $336.50. This represents an 18% premium to Tuesday’s close of $285.57.

Technical Outlook and Trading Tactics

After bottoming out at $170, Alibaba shares have remained in a steady uptrend. However, yesterday’s decline below both a key seven-month trendline and the 50-day simple moving average (SMA) may trigger further short-term weakness in subsequent trading sessions.

Still, those intending to buy should look for entries near $266, where price encounters support from a crucial horizontal line. In terms of trade management, consider placing a profit target in the vicinity of last month’s high at $319.32. Protect capital with a stop-loss order positioned under the September low at $264.56.

SolarEdge Technologies Dives as Revenue Outlook Disappoints

SolarEdge Technologies, Inc. (SEDG) plunged 16.14% in extended-hours trading Monday after the solar inverter systems company worried investors with its sales results. The firm posted third quarter (Q3) revenues of $338.1 million, missing analysts’ expectations of $343 million. Moreover, the top line contracted 18% from a year earlier. Guidance for the current quarter also came up short of the mark. Management expects Q4 sales of between $345 million and $365 million, while analysts had expected the figure to come in at $391 million.

On the upside, the company disclosed an adjusted profit of $1.21 per share during the period, nearly double analysts’ forecast of 61 cents a share. CEO  Zivi Lando credited the result to growth in the firm’s European business.  “Our third-quarter results reflect significant growth in Europe, despite the current economic slowdown caused by the pandemic,” he said in a statement accompanying the earnings release. Lando also noted that the company’s U.S. business is showing indications of a return to pre-pandemic levels.

Through Monday’s close, SolarEdge stock has a market capitalization of $13.42 billion and has surged over 180% year to date (YTD). In the past three months alone, the shares have gained 53%. Much of the upside may already be factored in, given the company currently trades at over twice its five-year average forward earnings multiple of around 18.

Wall Street View

Roth Capital’s Philip Shen raised the firm’s price target on SolarEdge to $300 from $191 while maintaining his ‘Buy’ rating. The analyst argues that strength in the U.S. residential market and ongoing European growth underpin the company but cautioned European Union (EU) shutdowns could provide potential challenges.

Sentiment among other research houses remains mixed. The stock receives 6 ‘Buy’ ratings, 1 ‘Overweight’ rating, 8 ‘Hold’ ratings, and 2 ‘Sell’ ratings. Price targets range wildly from as high as $378 to a Street low of $77. Today’s expected open at $224.50 implies a 6.9% premium to the Street’s 12-month median price target of $210.

Technical Outlook and Trading Tactics

After retracing to the 200-day simple moving average (SMA) during the March pandemic sell-off, the SolarEdge share price has trended sharply higher. Tuesday’s open looks set to test an area of August consolidation between $200 and 230. Falls below this level could see a test of the $180 level, where price finds a confluence of support from a horizontal trendline and the rising 200-day SMA. Active traders who buy in this area should consider using the all-time high (ATH) as a place a book profits.

Ford Shares Surge as Truck Sales Drive Q3 Earnings

Ford Motor Company (F) shares added 4.41% in extended-hours trade Wednesday after the Detroit-based carmaker reported a surge in quarterly earnings amid better-than-expected demand during the pandemic.

The company posted third quarter (Q3) adjusted earnings per share (EPS) of 65 cents, more than tripling analysts’ expectations of 19 cents a share. Moreover, the bottom line grew 91% from a year earlier. Revenue of $37.5 billion during the period rose by around $500 million from the September 2019 quarter and came in ahead of the $33.98 billion figure Wall Street had expected. “We executed very well this quarter,” Ford CFO John Lawler told investors during the earnings call, per CNBC. “We saw much higher demand than what we expected,” he added.

Management credited the positive results to a strategic shift several years ago of ramping up production of pickups, SUVs, and commercial vehicles while phasing out unprofitable sedans. The company said earlier this month that it had its best quarter of pickup sales since 2005. It also noted that North American results during the quarter helped offset weaker sales in Europe, South America, and China.

Through Wednesday’s close, Ford stock has a market capitalization of $30.63 billion and trades 15.59% lower on the year. However, price performance has improved over the past three months, with the shares gaining nearly 10%. The company has not indicated when it will reinstate its dividend, which it suspended in March due to the uncertainty of the pandemic.

Wall Street View

This month, Benchmark analyst Michael Ward upgraded Ford to ‘Buy’ from ‘Hold’ with a $10 price target. Ward argues the car marker’s new products and the need to replenish inventories of its full-sized pickup trucks should accelerate momentum into 2021.

Other analysts on the Street mostly remain on the sidelines. The stock receives 4 ‘Buy’ ratings, 12 ‘Hold’ ratings, and 1’Sell’ rating. However, the impressive quarter may lead to a string of upgrades, especially in light of newly minted CEO Jim Farley vowing to provide greater transparency. Price targets generally range between $5 and $10, with Thursday’s implied open at $8.05 sitting 2.5% below the median 12-month price target of $8.25.

Technical Outlook and Trading Tactics

Ford shares broke above an ascending triangle in early October before profit-takers moved in ahead of the company’s earnings. An open today back above the psychological $8 level should help swing momentum back to the upside as bulls scramble to rejoin the recent uptrend. Active traders who buy here should look for a retest of a significant zone of resistance between $9.55 and $10.55 while protecting capital with a stop-loss order placed somewhere below $7.50.

F5 Networks Gain After Earnings and Outlook Top Forecasts

F5 Networks, Inc. (FFIV) jumped 4.62% in Monday’s extended-hours session after the multi-cloud applications delivery company disclosed quarterly results that came in ahead of Wall Street expectations.

The $7.68 billion technology giant reported adjusted earnings of $2.43 per share for the September quarter, comfortably beating analysts’ expectations of $2.38 a share. However, the bottom line contracted 6% from the year-ago period. Sales of $615 million came in ahead of the $607 million consensus mark and rose 4.1% on a year-over-year (YoY) basis.

Looking ahead, the company expects to generate revenues of $595 million to $615 million in the current quarter, above forecasts of $592 million. It sees earnings per share (EPS) in a range between $2.26 to $2.38, above the average $2.28 estimate.

As of Oct. 27, 2020, F5 Networks has slumped 10% on the year and 17.57% over the past three months. At current prices, the stock looks attractive from a valuation standpoint. It trades just under 13 times projected earnings, below its five-year average multimer of around 15 times.

Strategic Shift Continues

Over the past few years, management has shifted its focus from hardware to software solutions. It also continues to pivot from perpetual licenses to subscription-based pricing. F5 CEO Locoh-Donou expects the firm’s software segment to grow by at least 35% in the September 2021 fiscal year.

“Going forward, we expect continued robust software growth from a more diversified base of subscription and SaaS revenue, a software subscription renewals flywheel that is starting to turn with momentum, and true-forward revenue opportunities on a significant percentage of our long-term software subscription contracts,” Locoh-Donou said in a statement accompanying the earnings call, per the F5 website.

Wall Street View

Last week, MKM Partners’ Fahad Najam upgraded F5 Networks to ‘Buy’ from ‘Neutral’ and bumped his price target to $170, up from $140. The analyst’s upward price revision implies a nearly 30% premium to Monday’s after-hours quote of $131.37.

Other research firms also remain mostly bullish about the stock. It receives 9 ‘Buy’ ratings, 1 ‘Overweight’ rating, 9 ‘Hold’ ratings, and 1 ‘Underweight’ rating. Price targets elsewhere on the Street range from as high as $190 to as low as $122, with the median pegged at $165.50. Look for further upward revisions over the coming days after the company’s better than expected earnings.

Technical Outlook and Trading Tactics

F5 Network shares have formed a broad inverse head and shoulders pattern over the past 14 months, indicating a market bottom is in place. The stock looks like opening at $131.37 on Tuesday, positioning the price back above the 200-day simple moving average (SMA). Active traders who buy around this level should anticipate a possible runup to the pattern’s neckline at $153.50. Protect capital by placing a stop-loss order underneath yesterday’s low at $122.25.

PayPal Rockets to All-Time High After Adding Cryptocurrencies

PayPal Holdings, Inc. (PYPL) shares surged 5.5% to a new all-time high (ATH) Wednesday after the digital payments company announced it plans to introduce cryptocurrencies to its platform. The firm said that it will initially allow U.S. customers to buy, hold and sell Bitcoin, Bitcoin Cash, Ethereum and Litecoin within their PayPal wallet in the coming weeks, followed by the ability to purchase goods and services using cryptocurrencies by early next year.

Management believes the company’s move into digital currencies will significantly increase their utility. “Consumers will be able to instantly convert their selected cryptocurrency balance to fiat currency, with certainty of value and no incremental fees,” the company said, per MarketWatch. PayPal also indicated that it wants to work alongside central banks and regulators to help share digital currencies’ role in the future of online payments.

As of Oct. 22, 2020, PayPal stock has a $250 billion market capitalization and is up nearly 100% on the year. In the past three months alone, the shares have added over 20%. By comparison, over the same periods, the Nasdaq Composite has risen  28% and 7.27%, respectively. From a valuation standpoint, the stock trades at a 42% premium to its five-year average forward earnings multiple of around 32 times.

Wall Street View

Barclays analyst Ramsey El-Assal raised the bank’s price target on PayPal yesterday to $235 from $228 and reiterated his ‘Overweight’ rating on the shares. EL-Assal sees COVID-related tailwinds supporting the company as e-commerce sales remain at elevated levels, despite easing slightly quarter-over-quarter. Meanwhile, Wolfe Research’s Darrin Peller told clients in a research note that the move into cryptocurrency “represents among the more import steps for crypto utility/normalization we have seen in years.”

Elsewhere on Wall Street, analysts remain overwhelmingly bullish on the stock. It receives 34 ‘Buy’ ratings, 3 ‘Overweight’ ratings, and 6 ‘Hold’ ratings. Only one analyst currently recommends selling the shares. Price targets range from a Street high $290 to a low of $200, with the average consensus forecast pegged at $220. This implies a 3% premium to Wednesday’s $213.07 close.

Technical Outlook and Trading Tactics

PayPal shares trended sharply high between mid-March and early August but have remained rangebound since. Therefore, yesterday’s breakout on heavy volume to a fresh ATH may trigger further buying in subsequent trading sessions. Those who position for additional gains should consider using a fast period moving average, such as a 15-day SMA, as a trailing stop. To implement this exit strategy, remain in the trade until the share price closes below the indicator.

IBM Slides After Revenues Miss Wall Street Forecasts

International Business Machines Corporation (IBM) shares fell 2.77% in after-hours trade Monday after the computing giant posted its third consecutive quarter of declining revenue as the coronavirus pandemic continued to weigh heavily on its end customers in industries such as retail and transportation.

The company reported third-quarter (Q3) net income of $2.3 billion, or $2.58 a share, roughly in-line with analyst forecasts. However, the figure was down from earnings per share (EPS) of $2.68 in the same quarter last year. Revenues during the period slumped 2.5% to $17.56 billion and came in below the consensus mark of $17.54 billion. The company has now seen revenue decline in all but four of the last 33 quarters on an annualized basis.

Through yesterday’s close, IBM stock has a market capitalization of $111.8 billion, offers an enticing 5.18% dividend yield, and trades relatively flat on the year and over the past three months as of Oct. 20, 2020.

Company Spinoff

Earlier this month, IBM announced that it plans to spin off its IT outsourcing business to focus more closely on cloud computing and artificial intelligence (AI). The company said revenue for its cloud computing offerings grew 19% in the third quarter. “We are making strategic decisions, taking actions, and increasing investments today to better position our business and accelerate our top-line growth on a sustainable basis,” CEO Arvind Krishna told investors during the earnings call, per CNBC.

Wall Street View

Morgan Staley’s Katy L. Huberty raised her price target on IBM to $140 from $128 while maintaining her ‘Equal-weight’ on the stock after the firm revealed details of the spinoff. The analyst argues the company is moving in the right direction by reducing its reliance on its legacy businesses and investing more in technology growth areas like the cloud and AI. More broadly, the stock receives 4 ‘Buy’ ratings, 9 ‘Hold’ ratings, and 2 ‘Sell’ ratings. IBM currently trades 11.5% below Wall Street’s median 12-month price target of $140.

Technical Outlook and Trading Tactics

IBM shares have oscillated roughly within a 20-point range since early May, offering several opportunities for traders who favor rangebound strategies. More recently, price broke above both an eight-month downtrend line and the 200-day simple moving average (SMA) after the company announced the spinoff. Since then, profit-takers moved in, leading to a retracement back to the initial breakout point, which now becomes a crucial support area.

Active traders who take a long position here should look for a move back up to major resistance at $151.50 while managing risk with a stop-loss order placed somewhere below the blue downtrend line.

United Airlines Flies Sideways After Quarterly Earnings Crash

United Airlines Holdings, Inc. (UAL) traded flat in the extended-hours session Wednesday after the Chicago-based carrier swung to a net loss of $1.8 billion in the third quarter (Q3) as the coronavirus pandemic continued to pummel air travel demand.

The airline reported adjusted earnings of -$8.16 per share, a wider loss than the -$7.53 figure Wall Street had expected. This compares to earnings per share (EPS) of $4.07 a share in the year-ago quarter. Revenue of $2.49 billion came in roughly in-line with analysts’ expectations of $2.50 billion. However, the metric fell nearly 80% from the September 2019 quarter as the airlines slashed capacity.

Management anticipates the challenging conditions to continue over the short-term but remains more optimistic about the longer-term future. “Even though the negative impact of COVID-19 will persist in the near term, we are now focused on positioning the airline for a strong recovery that will allow United to bring our furloughed employees back to work and emerge as the global leader in aviation,” United CEO Scott Kirby said in a statement accompanying the quarterly results, per Business Insider.

Through Wednesday’s close, United Airlines stock has a market capitalization of $10.36 billion and trades nearly 70% lower on the year. Since mid-July, price performance has improved, with the shares gaining 12%.

Improving Efficiency

The company said it reduced its daily cash burn and principal debt payments during the quarter to $25 million a day, down from an average of $40 million per day in the previous quarter. Meanwhile, total operating costs plummeted by nearly 60% compared to the third quarter of 2019. United also said it had commenced furloughing up to 13,000 employees after federal payroll support expired at the end of last month.

Wall Street View

JPMorgan analyst Jamie Baker upgraded United Airlines to ‘Overweight’ from ‘Neutral’ and lifted his price target to $52 from $44. Baker argues the company “can endure the current downturn with sufficient liquidity,” despite the recent volatility in the airline sector.

Most other analysts on Wall Street remain mostly bullish on the stock. It receives 7 ‘Buy’ ratings, 1 ‘Overweight’ rating, and 12 ‘Hold’ ratings. Just one analyst currently recommends selling. Price targets range between $60 and $32, with the average consensus 12-month target sitting at $43.41. This implies an upside of 22% from yesterday’s $35.61 close.

Technical Outlook and Trading Tactics

United shares have remained in a narrow eight-point range since late June, with neither the bulls nor bears able to take control of the price action. Instead of trying to guess which way price will break out, let the market determine direction. If the stock breaks to the upside, look for a retest of the June swing high at $48.95. Alternatively, if the shares break below the trading range, anticipate a fall back down to crucial support around the $22.50 level.

Disney Shares Surge After Entertainment Reshuffle

Dow competent Walt Disney Company (DIS) gained over 5% in extended-hours trading Monday after the media giant revealed its plans to reorganize its entertainment and media business, focusing on streaming content.

The company said it will accelerate its direct-to-consumer strategy to centralize its media businesses into a single organization that oversees content distribution, ad sales, and Disney+. The move comes as the global COVID-19 pandemic has crushed the company’s theatrical business and resulted in lackluster movie theater sales. Disney recently delayed its highly anticipated Pixar film “Soul,” which it now plans to screen on Disney+ later this year.

“I would not characterize it as a response to Covid. I would say Covid accelerated the rate at which we made this transition, but this transition was going to happen anyway,” Disney’s CEO Bob Chapek told CNBC’s “Closing Bell” program in relation to the restructuring.

As of Oct. 13, 2020, Disney stock has a market capitalization of over $200 billion and trades down 13.59% on the year. However, since mid-July, the shares have gained nearly 5%. From a valuation standpoint, the company trades at around 48 times projected earnings, substantially above its five-year average multiple of around 21 times.

Wall Street View

In late August, Citi analyst Jason Bazinet raised the bank’s price target on Disney to $150 from $135 and maintained a ‘Buy’ rating on the stock. Even before Disney’s announcement yesterday to accelerate its direct-to-consumer business, Bazinet saw “robust growth” in the segment. The analyst also expects a measured recovery within the company’s core businesses of Parks, Studio, and Media Networks.

Elsewhere on Wall Street, sentiment remains mostly bullish. The stock receives 14 ‘Buy’ ratings, 1 ‘Overweight’ rating, and 10 ‘Hold’ ratings. Price targets range from as high as $163 to as low as $103. The shares currently trade at a 10% discount to the 12 -month median consensus target of $138 as of yesterday’s close.

Technical Outlook and Trading Tactics

After rallying more than 70% between mid-March and early September, Disney shares have undergone a month-long retracement. They currently find support from the 200-day simple moving average (SMA) and a multiyear horizontal trendline.

Momentum appears to be once again turning bullish, with the moving average convergence divergence (MACD) indicator crossing above its trigger line to generate a buy signal. Furthermore, the 50-day SMA moved back above the 200-day SMA last week – a technical sign that often marks the start of a new uptrend. Those who buy the stock at these levels should look to book profits near significant overhead resistance at $146.50, with a stop placed beneath this month’s low at $120.61 to protect trading capital.

GoPro Rockets Nearly 30% Amid Growing Subscriber Base

GoPro, Inc. (GPRO) shares surged 29.23% Wednesday after the action camera company impressed investors with the growth of its subscription service GoPro Plus. The firm said its new flagship HERO9 Black camera has helped drive its subscriber base over 500,000, up from 400,000 in August. Moreover, the company expects to exceed its subscriber growth target of 600,000 to 700,000 between now and the end of the year if the current take-up continues.

“Thanks to a stellar global launch of HERO9 Black, our paid GoPro subscriber count is ahead of where we expected to be at this time and bodes well for us to exceed our previously-stated target of 600,000 to 700,000 paid subscribers by year-end,” said GoPro founder and CEO Nicholas Woodman, per PR Newswire.

As of Oct. 8, 2020, GoPro stock has a market capitalization of $1.01 billion and trades nearly 50% higher on the year. Gains have accelerated over the past three months, with the shares up 33%, outperforming the sector over that time by around 10%.

Promotions Helping Drive Subscribers

Whether the company can retain its subscriber base over the long term remains to be seen. To attract new members, GoPro has offered a range of enticing promotions in 2020, such as discounts, bundle deals with a camera, and free trial periods. The real test will be if these newcomers continue to pay up for their subscription when these sign-on sweeteners end.

Wall Street View

Most analysts are waiting to see if GoPro can continue to grow its subscriber base post-COVID and if members are prepared to pay extra for premium services. Currently, the stock receives 3 ‘Hold’ ratings, 1 ‘Buy’ rating, and 2 ‘Sell’ ratings. Price targets range widely from $8 at the high end to $2.50 at the low end. At yesterday’s close, the shares trade 33% above analysts’ 12-month consensus price target of $4.83.

Technical Outlook and Trading Tactics

GoPro shares broke above both a long-term downtrend line and the neckline of an inverse head and shoulders chart pattern on Wednesday’s stock-specific news. The move, which occurred on above-average volume, may act as a catalyst for a trend change back to the upside. Traders who play the breakout could place a stop-loss order either at the midpoint of yesterday’s wide-ranging day or just below the downtrend line at around $4.90, depending on risk tolerance. Consider booking profits at either $11 or $17 – both areas of crucial overhead resistance.

Alteryx Surges Over 20% after Lifting Sales Outlook

Alteryx, Inc. (AYX) shares surged 23.46% in Monday’s extended-hours trading session after the data analytics software company raised its third-quarter (Q3) revenue forecast and announced a new chief executive officer (CEO).

Management now expects sales to come in between $126- and $128 million, up from its previous forecast range of $111- to $115 million. FactSet analysts had tipped a consensus figure of $113.5 million. Meanwhile, the company has appointed Mark Anderson to succeed Dean Stoecker as CEO, effectively immediately. However, Stoecker will continue to serve as the firm’s chairman.

“When I decided to transition from day-to-day operations, it was clear to me that Mark is the ideal candidate to serve as Alteryx’s next CEO given his passion for our company and our newly created Analytic Process Automation category, coupled with his experience in scaling organizations,” said Stoecker, per PR Newswire.

As of Oct. 6, 2020, the stock has a market capitalization of $8.11 billion and is down nearly 35% over the past three months. Year to date (YTD), the shares have gained 13.8%. From a valuation standpoint, investors have factored in plenty of upside into the stock. Currently, it trades at 126 times forward earnings.

Earnings Beat in Challenging Conditions

The company swung to a profit of 2 cents per share in its latest quarter despite noting higher levels of scrutiny on spending across all sectors, resulting in longer sales cycles and smaller deals. The result came in substantially better than the 14 cent EPS loss analysts had anticipated and improved 100% from the year-ago quarter. Moreover, Alteryx added 271 net customers during the period, taking the firm’s total customer count to 6,714, up almost 30% year-over-year (YoY).

Wall Street View

Loop Capital analyst Yun Kim initiated coverage on the stock last month with a ‘Hold’ rating and a $110 price target. Kim argues that the company’s fundamentals remain strong and its business sits well positioned to benefit from a post Covid recovery. However, the analyst believes Alteryx’s exposure to large deals present sales execution risks in the current operating environment. Elsewhere on Wall Street, the sentiment is mostly bullish. The stock receives 10 ‘Buy’ ratings, 4 ‘Hold’ ratings, while just one analyst recommends selling the shares.

Technical Outlook and Trading Tactics

Alteryx shares have more or less remained rangebound for the past twelve months, fluctuating between $76 and $185. Despite the recent ominous death cross formation – when the 200-day simple moving average (SMA) crosses below the 50-day SMA – the stock looks like opening up today at $140.60 to partially fill the Aug. 7 earnings gap. Active traders should view an impulse rally to crucial overhead resistance around $185 as a mean reversion shorting opportunity. Those who take a short sale should consider buying to cover on a retrace back down to the 200 SMA around the $129 level.

Boeing Shares Edge Higher After FAA Chief Nods 737 MAX Fixes

The Boeing Company (BA) climbed 2.38% in extended-hours trading Wednesday after Federal Aviation Administration (FAA) head Steve Dickson gave a tentative endorsement to the fixes the airplane maker has made to its troubled 737 MAX jet. “I like what I saw on the flight this morning,” said Dickson, per the Wall Street Journal, after sitting in the cockpit on a recent test flight over the Pacific Northwest with other Boeing and FAA pilots.

Since the agency grounded the MAX in March 2018, Boeing has made several hardware and software changes relating to the airplane’s flight-control system that led to two fatal crashes, which killed 346 people. Wednesday’s flight was earmarked as one of the final steps to tick off before the FAA grants approval for the jet to take to the skies again – possibly as soon as November.

Through Wednesday’s close, Boeing stock has a market capitalization of $93 billion and trades nearly 50% lower on the year. The shares have faced stiff headwinds from uncertainty to when the 737 MAX will fly again and slumping global travel demand brought about by the coronavirus pandemic.

Passage of Preventative Bill

As the MAX waits for regulatory approval, the House Transportation Committee approved a bipartisan bill Wednesday that aims to prevent mistakes that downed the airliners from reoccurring in the future. Under the legislation, the FAA has more say in which Boeing employees carry out safety reviews on the agency’s behalf. It also increases whistleblower protections and introduces civil fines for manufacturers who fail to fully disclose details of critical flight-control systems.

Wall Street View

Not surprisingly, analysts remain somewhat divided about Boeing, given the ongoing uncertainty surrounding the challenges facing the company. Its stock receives 10 ‘Buy’ ratings, 1 ‘Overweight’ rating, and 14 ‘Hold’ ratings. Just one research firm currently recommends selling the shares. High-end price targets sit around $270, while lower targets come in around $125. The average 12-month target of $184.38 offers nearly 12% upside to yesterday’s $165.26 close.

Technical Outlook and Trading Tactics

After rallying over 100% between mid-May and early June, Boeing shares have remained entrenched in a sideways to lower trend. However, a recent cross of the moving average convergence divergence (MACD) line above its signal line indicates a shift in momentum.

Active traders should consider buying a volume-driven breakout above the blue four-month trendline and 50-day simple moving average (SMA) at the $165 level. In terms of trade management, look to book profits near the June swing high at $234.20 and limit downside with a stop-loss order placed under last month’s low at $145.02.

Inovio Plunges after COVID-19 Vaccine Setback

Inovio Pharmaceuticals, Inc. (INO) shares plummeted 28.34% Monday after the biotech company announced that the U.S. Food and Drug Administration (FDA) had put its COVID-19 vaccine on hold until it answers further questions about its vaccine technology.

The company previously told investors that it had intended to move to Phase 3 trials this month, in line with other developers searching for the elusive vaccine, but now must wait until the fourth quarter for the FDA’s findings before it can move forward. “The company is actively working to address the FDA’s questions and plans to respond in October,” Inovio said in a statement cited by the Wall Street Journal.

Inovio’s vaccine, which aims to provide immunity to the virus by inserting genetic instructions into cells to get them to release a protein found on the coronavirus, insisted that the early-stage trial of its Covid vaccine showed promising signs without any significant complications. It said the FDA’s concerns were more in relation to the details about administering the shot in its upcoming trial. As of Sept. 29, 2020, Inovio stock has a market capitalization of $2.03 billion, and still trades 268% higher on the year, despite Monday’s selling rout.

Additional Funding Required

Unlike many of its rivals that have secured millions – and in some cases – billions of dollars from government grants and industry investment, Inovio has flagged it’ll require additional funding to complete its Phase 3 trial. The company, which had just $372 million at the end of the June quarter, recently reported that it had received less than $20 million in grants.

Wall Street View

Despite Inovio’s vaccine setback, Maxim Group’s Jason McCarthy upgraded the shares to ‘Buy’ from ‘Hold,’ arguing the FDA trial holdup will be short-lived. Consensus elsewhere on the Street remains mixed. The stock receives 2 ‘Buy’ ratings, 5 ‘Hold’ ratings, and 1 ‘Sell’ rating. Twelve-month price targets range from as high as $36 to as low as $8, with an average target of $15.29. This represents a 26% premium from yesterday’s close of $12.14.

Technical Outlook and Trading Tactics

News of the delayed late-stage vaccine trial pushed Inovio shares down toward the $9.50 level, where they find a confluence of support from the 200-day simple moving average (SMA) and a multi-month horizontal trendline stretching back to late March. Active traders who buy the retracement to this high probability entry area should consider placing a stop-loss order beneath the September swing low at $8.78 and targeting a move back up to overhead resistance around $32. Manage risk by moving the stop to break even if the price climbs above this month’s high at $18.69.

Nike Swooshes Higher After Digital Sales Soar

NIKE, Inc. (NKE) shares soared 13% in extended-hours trading Tuesday after the athletic footwear and apparel giant reported a surge in quarterly online sales and remained upbeat about growing demand throughout the upcoming holiday season.

The company posted fiscal Q1 adjusted earnings of 95 cents per share, almost double the Street’s forecast of 48 cents a share. Meanwhile, revenue of $10.59 billion came in comfortably ahead of the $9.15 billion figure analysts had expected. Furthermore, the company also lifted its fiscal full-year outlook. It now expects sales to register in the high single digits to low double digits from the previous year.

Through Tuesday’s close, Nike stock has a $182 billion market cap, yields 0.86%, and trades 16% higher on the year. Over the past three months, the shares sport a 17.69% gain as of Sept. 23, 2020. From a valuation standpoint, the stock looks pricey. It trades at about 47 times projected earnings – 67% above its five-year average multiple of 28.34 times.

Digital Sales Spike

Nike’s Q1 digital sales, which account for roughly 30% of its total quarterly revenue, jumped 82% from a year earlier and 75% from the previous quarter as more shoppers purchased gear online during the pandemic. “We know that digital is the new normal. The consumer today is digitally grounded and simply will not revert back,” CEO John Donahoe told investors during the conference call. In recent years, the company has invested heavily in its website and mobile apps as more consumers move away from department stores and shopping malls.

Wall Street View

Bank of America expects Nike to continue benefiting from consumers’ shift to more solitary leisure activities. “We believe COVID-19 is accelerating the consumer spending shift away from traditional entertainment (e.g. amusement parks, movie theaters, & tourist attractions) and international travel to solitary leisure activities (bicycling, golf, marine, hiking, camping),” the investment bank said in a note cited by Investor’s Business Daily.

Sentiment elsewhere on Wall Street also remains bullish. The stock receives 23 ‘Buy’ ratings, 3 ‘Overweight’ ratings, 4 ‘Hold’ ratings, and 1 ‘Underweight’ rating. Analysts have an average 12-month price target on the stock at $126.07 – nearly 8% above yesterday’s $116.87 close.

Technical Outlook and Trading Tactics

Nike shares have continued trending higher after breaking above multiyear resistance in mid-August. Moreover, aftermarket data indicates the stock will open above $132 Wednesday, taking its price to an all-time high (ATH).

Given the recent runup into the company’s quarterly earnings, don’t be surprised to see profit-taking over the mid- to short-term as traders take some money off the table. Instead of chasing the price, look for a retracement entry back to $105, where previous resistance now acts as support.