S&P 500 Rallies As U.S. Dollar Pulls Back Towards Weekly Lows

Key Insights

  • The strong pullback in the U.S. dollar provided significant support to stocks. 
  • Treasury yields have pulled back after touching new highs, which served as an additional positive catalyst for S&P 500.
  • A move above 3730 will push S&P 500 towards the resistance level at 3760.

Pfizer Rallies After Announcing A Huge Price Hike For Its COVID-19 Vaccines

S&P 500 is currently trying to settle above 3730 as traders’ appetite for risk is growing. The U.S. dollar has recently gained strong downside momentum as the BoJ intervened to stop the rally in USD/JPY. Weaker U.S. dollar is bullish for stocks as it increases profits of multinational companies and makes U.S. equities cheaper for foreign investors.

The leading oil services company Schlumberger is up by 9% after beating analyst estimates on both earnings and revenue. Schlumberger’s peers Baker Hughes and Halliburton have also enjoyed strong support today.

Vaccine makers Pfizer and Moderna gained strong upside momentum after Pfizer announced that it will raise the price of its coronavirus vaccine to $110 – $130 per shot.

Biggest losers today include Verizon and Twitter. Verizon is down by 5% despite beating analyst estimates on both earnings and revenue. Subscriber numbers missed estimates, and traders pushed the stock to multi-year lows.

Twitter stock moved towards the $50 level as the U.S. may conduct a security review of Musk’s purchase of the company.

From a big picture point of view, today’s rebound is broad, and most market segments are moving higher. Treasury yields have started to move lower after testing new highs, providing additional support to S&P 500. It looks that some traders are ready to bet that Fed will be less hawkish than previously expected.

S&P 500 Tests Resistance At 3730

S&P 500

S&P 500 has recently managed to get above the 20 EMA and is trying to settle above the resistance at 3730. RSI is in the moderate territory, and there is plenty of room to gain additional upside momentum in case the right catalysts emerge.

If S&P 500 manages to settle above 3730, it will head towards the next resistance level at 3760. A successful test of this level will push S&P 500 towards the next resistance at October highs at 3805. The 50 EMA is located in the nearby, so S&P 500 will likely face strong resistance above the 3800 level.

On the support side, the previous resistance at 3700 will likely serve as the first support level for S&P 500. In case S&P 500 declines below this level, it will move towards the next support level at 3675. A move below 3675 will push S&P 500 towards the support at 3640.

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

Best Telecom Stocks To Buy In May

Key Insights

  • Investors continue to search for safe-haven assets amid broad market sell-off. 
  • Telecom stocks offer solid dividend yields, which attract income-oriented investors. 
  • Verizon and AT&T are trading at reasonable valuation levels, which provides additional support to these stocks.

While S&P 500 continues to fall, several telecom stocks have managed to find support amid demand for safer investments and reliable dividends. As a result, Verizon and AT&T managed to outperform the S&P 500 in 2022 and have a decent chance to continue the current trend.

Verizon

Verizon  stock found itself under material pressure in late April after the company released its first-quarter report. The report met analyst estimates, but investors focused on the company’s weaker guidance.

As a result, the stock dropped towards the $46 level. However, the company’s strong dividend provided sufficient support to the stock, which moved back towards the $50 level.

Currently, Verizon yields more than 5%, which makes the stock attractive for income-oriented investors. The safe dividend created enough demand for Verizon shares during the recent sell-off in the broader market, and this catalyst will likely continue to support Verizon in the upcoming weeks.

AT&T

AT&T stock has significantly outperformed S&P 500 this year. Investors bet that the company’s business will rebound after the recent problems, while the solid dividend yield of more than 5% provides additional support to the stock.

It should be noted that analyst estimates have been moving lower in recent months. Currently, analysts expect that AT&T will report earnings of $2.59 per share in the current year and $2.55 per share in the next year, so the stock is trading at 8 forward P/E.

Typically, declining earnings estimates serve as a bearish catalyst for the stock. However, a combination of an attractive dividend yield and cheap valuation has provided enough support to AT&T stock and pushed it to yearly highs.

To keep up with the latest earnings updates, visit our earnings calendar.

Verizon Is Down By 6%, Here Is Why

Key Insights

    • Verizon’s Q1 2022 report met analyst estimates, but the company’s guidance was disappointing. 
    • The stock is trading at 9 forward P/E, but current levels do not look cheap due to the company’s slow growth. 
    • Rising yields make Verizon’s dividend yield less attractive. 

Verizon Stock Falls As Full-Year 2022 Guidance Disappoints

Shares of Verizon found themselves under strong pressure after the company released its first-quarter report. Verizon reported revenue of $33.6 billion and adjusted earnings of $1.35 per share, in line with the analyst estimates.

While the report met analyst estimates, it failed to provide support to Verizon stock as traders focused on the company’s guidance for the full-year 2022.

Verzon expects that its wireless service revenue growth would be at the lower end of the previously guided range of 9% – 10%. Adjusted EBITDA is expected to grow at the lower end of the 2% – 3% range, while adjusted EPS is projected to be at the lower end of the previously guided range of $5.40 – $5.55.

What’s Next For Verizon Stock?

Currently, analysts expect that Verizon will report earnings of $5.45 per share in 2022 and earnings of $5.62 per share in 2023, so the stock is trading at 9 forward P/E.

However, analyst estimates will likely move lower after the company said that its 2022 earnings would be close to the $5.40 level. Investors questioned the company’s ability to grow its revenue and earnings at a robust pace, and the stock has been under pressure since the end of 2020.

The recent report highlights Verizon’s problems, and it remains to be seen whether speculative traders will rush to buy the company’s shares after the pullback. While the current valuation levels may look cheap, the company’s slow growth could hurt the stock even more. In addition, the company’s dividend yield has become less attractive in the rising interest rate environment.

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

T-Mobile Nears Intermediate Breakout

T-Mobile US Inc. (TMUS) is trading higher by less than 2% in Wednesday’s pre-market session after KeyBanc Capital Markets upgraded the stock to ‘Overweight’ from ‘Sector Weight’. The rally is setting off an important test at February resistance in the upper 120s, with a breakout signaling the next leg of an uptick that started near 100 in January. Notably, international tensions have barely affected the stock’s recent performance, with their domestic exposure acting as a safe haven for global-weary investors.

Long-term Competitive Advantage

The telecom giant’s profit margins are growing in a saturated smartphone environment while the Sprint acquisition is generating material cash flow. The company is leading rivals Verizon Communications Inc. (VZ) and AT&T Inc. (T) in 5G performance and availability, with that competitive advantage looking sustainable in the long-term. TMUS is also buying back stock at a healthy pace and could add another $60 billion in shares between 2023 and 2025.

KeyBank analyst Brandon Nispel highlighted T-Mobile’s ‘best-in-class’ 5G rollout while noting “our August downgrade was based on the view that competition in wireless was increasing, expectations for growth were high, and valuation represented too substantial of a premium. While we still see the wireless market as increasingly competitive from cable, we believe the company should continue to take substantially more share than AT&T and Verizon.”

Wall Street and Technical Outlook

Wall Street consensus stands at a ‘Buy’ rating based upon 26 ‘Buy’, 1 ‘Overweight’, 3 ‘Hold’, and 2 ‘Sell’ recommendations. Price targets currently range from a low of $106 to a Street-high $230 while the stock is set to open Wednesday’s session more than $35 below the median $165 target. This modest placement bodes well for continued upside in the second quarter, with a potential ramp-up into May’s Q1 2022 earnings release.

T-Mobile posted strong gains into February 2020, topping out at 101.35. It returned to that price level in May and broke out, carving a multiwave uptrend that hit an all-time high at 150.20 in July 2021. The subsequent decline sliced one-third off the stock’s value into the January 2022 low, ahead of a bounce that quickly reached 200-day moving average resistance. Recent price action has crisscrossed that contested level multiple times, with a breakout signaling a major improvement in technical tone.

Catch up on the latest price action with our new ETF performance breakdown.

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

Preview: What To Expect From Zoom Q4 Earnings

The San Jose, California-based communications technology company Zoom is expected to report its fiscal fourth-quarter earnings of $0.67 per share, which represents a year-over-year decline of nearly 24% from $0.88 per share seen in the same period a year ago.

The company, which provides video telephony and online chat services through a cloud-based peer-to-peer software platform, would post revenue growth of 19% to $1.05 billion.

“Reasons To Buy: Zoom Video is benefiting coronavirus-induced remote working trend. Its efforts to eradicate security and privacy flaws are expected to aid it to expand its userbase,” noted analysts at ZACKS Research.

“Reasons To Sell: Stiff competition with the entry of Facebook and Verizon in the video communication space and massive repercussion from customers due to security and privacy lapses are concerns.”

Zoom stock rose over 2% to $129.61. The stock fell over 30% so far this year after falling more than 45% in 2021.

Analyst Comments

“We have seen a reluctance of investors around Zoom given recent performance of WFH winners. Look to FY23 guide as opportunity to reset Street expectations, giving investors a cleaner path to getting involved. Remain OW on early days company at upselling large installed base with ancillary products,” noted Meta Marshall, equity analyst at Morgan Stanley.

Zoom has established its position as the leader in video conferencing, now a growth market. Company has meaningful competitive moat built on more than just architecture. Position within customers makes an attractive opportunity to expand into broader UC market. Early wins encouraging. Opportunities to expand platform remain. Manageable churn post-COVID as move to hybrid work setups continues.”

Zoom Stock Price Forecast

Twelve analysts who offered stock ratings for Zoom in the last three months forecast the average price in 12 months of $207.08 with a high forecast of $300.00 and a low forecast of $130.00.

The average price target represents a 63.09% change from the last price of $126.97. Of those 12 analysts, seven rated “Buy”, four rated “Hold”, while one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $165 with a high of $230 under a bull scenario and $100 under the worst-case scenario. The investment bank gave an “Overweight” rating on the communications software company’s stock.

Several analysts have also updated their stock outlook. Citigroup cut the price target to $147 from $250. Mizuho lowered the target price to $190 from $300. Baird slashed the price objective to $250 from $300.

Technical analysis suggests it is good to sell as 100-day Moving Average and 100-200-day MACD Oscillator gives a strong selling opportunity.

Check out FX Empire’s earnings calendar

Monstrous Earnings Ahead: IBM, Microsoft, Intel, Tesla, Apple, Visa in Focus, Along With The Fed

Investors will focus on Q4 earnings for stocks that are economically sensitive, which should show better profits than technology stocks. Increasing Treasury yields and risk aversion could also hit the stock market hard next week, making the big tech earnings that much more critical. In addition, investors will closely monitor the latest news on the rapidly spread Omicron coronavirus variant in order to see how it impacts earnings in 2022. The following is a list of earnings slated for release January 24-28, along with a few previews.

Earnings Calendar For The Week Of January 24

Monday (January 24)

IN THE SPOTLIGHT: IBM

The Armonk, New York-based technology company, International Business Machines, is expected to report its fourth-quarter earnings of $3.39 per share, which represents year-over-year growth of over 60% from $2.07 per share seen in the same period a year ago.

The world’s largest computer firm’s revenue would decline over 21% to $1.96 billion from $20.37 billion a year earlier. It is worth noting that the technology company has beaten earnings in most of the quarters in the last two years, at least.

International Business Machines (IBM) 4Q earnings will be focused on standalone model mechanics and whether Software revenue can re-accelerate while Consulting demand sustains. However, we believe the setup becomes more attractive in 2H21. We update our estimates to reflect IBM standalone post-KD spin,” noted Katy Huberty, equity analyst at Morgan Stanley.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 24

TICKER COMPANY EPS FORECAST
BRO Brown & Brown $0.38
BOH Bank of Hawaii $1.39
BMRC Bank of Marin Bancorp $0.57
CR Crane $1.12
HAL Halliburton $0.34
HMST HomeStreet $1.3
IBM International Business Machines $3.39
PETS PetMed Express $0.3
SMBK SmartFinancial $0.48
STLD Steel Dynamics $5.66
TRST Trustco Bank $0.74
ZION Zions Bancorp $1.33

 

Tuesday (January 25)

IN THE SPOTLIGHT: MICROSOFT

The Redmond, Washington-based global technology giant, Microsoft, is expected to post its fiscal second-quarter earnings of $2.28 per share, which represents year-over-year growth of over 12% from $2.03 per share seen in the same period a year ago.

The world’s largest software maker would post revenue growth of nearly 17% to around $50.3 billion. It is worth noting that with a track record of always beating earnings per share estimates in the last five years, Microsoft is one of the best FAANG stocks in terms of earnings surprises.

“We model Azure growth of 45% cc & see 2-3% of upside, translating to steady growth vs. 48% last qtr. We see potential for strong M365 demand ahead of price hikes, as well as continued execution from LNKD, PowerApps & Dynamics ERP. Although tougher PC/Server dynamics, we expect strengthening trends for C22. Expect Mar Q guide slightly above Street,” noted Derrick Wood, equity analyst at Cowen.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 25

TICKER COMPANY EPS FORECAST
MMM 3M $2.07
AGYS Agilysys $0.13
AXP American Express $1.75
ADM Archer Daniels Midland $1.19
BXP Boston Properties $1.51
CNI Canadian National Railway $1.25
COF Capital One Financial $5.15
FFIV F5 $1.97
GE General Electric $0.84
JNJ Johnson & Johnson $2.12
LMT Lockheed Martin $8.04
LOGI Logitech International $1.23
NAVI Navient $0.81
NEE NextEra Energy $0.41
VZ Verizon Communications $1.28
WSBC WesBanco $0.67

 

Wednesday (January 26)

IN THE SPOTLIGHT: FOMC MEETING CONCLUDES, INTEL, TESLA

Tuesday and Wednesday will mark the first meeting of the Fed’s policymaking arm in 2022. At around 7:30 pm GMT on Wednesday, Jerome Powell will conduct a press conference. This is expected to be the biggest market event since investors expect more details about the central bank’s plan to raise interest rates.

INTEL: The California-based multinational corporation and technology company is expected to report its fourth-quarter earnings of $0.9 per share, which represents a year-over-year decline of about 40% from $1.52 per share seen in the same period a year ago. The company’s revenue would fall nearly 8% to $18.39 billion.

Intel remains controversial. Long-term skepticism remains and share losses will continue until products ramp on the Intel 4 node (old 7nm), but with a new CFO, improving PC and server market outlooks, cash inflows from the US Govt, Mobileye on the horizon, and a February analyst day now reconfirmed, we are cautiously optimistic sentiment can continue to gradually improve. Still LOTS to prove,” noted Matthew D. Ramsay, equity analyst at Cowen.

TESLA: The California-based electric vehicle and clean energy company is expected to report its fourth-quarter earnings of $2.31 per share, which represents year-over-year growth of 180% from $0.80 per share seen in the same period a year ago.

“Q4 results on 26 Jan are critical to validate (or not) the Q3 profit dynamics that could see Tesla 1) carve out meaningful share from legacy OEMs busy protecting their own share by ramping up BEVs and 2) claim a disproportionate share of the industry profit pool. We raise 2021-23 EBIT and FCF 10%, mostly on higher volume,” noted Philippe Houchois, equity analyst at Jefferies.

The high-performance electric vehicle manufacturer would post revenue growth of over 50% to $16.65 billion. The electric vehicle producer has beaten earnings estimates only twice in the last four quarters.

Tesla 4Q deliveries were 20% above our forecast, annualizing to over 1.2mm units, which is already above our prior FY22 forecast. We raise our forecasts and target to $1,300 on this ‘opening act’ and look for more in FY22,” noted Adam Jonas, equity analyst at Morgan Stanley.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 26

TICKER COMPANY EPS FORECAST
ABT Abbott Laboratories $1.16
ANTM Anthem $5.11
AZPN Aspen Technology $1.41
T AT&T $0.76
KMB Kimberly-Clark $1.29
LRCX Lam Research $8.46
RJF Raymond James Financial $1.77
STX Seagate Technology $2.21
NOW ServiceNow $0.22
SIMO Silicon Motion Technology $1.56
SLG SL Green Realty $1.56
URI United Rentals $6.97
VRTX Vertex Pharmaceuticals $2.92
WHR Whirlpool $5.84

 

Thursday (January 27)

IN THE SPOTLIGHT: APPLE, VISA

APPLE: The consumer electronics giant would post its fiscal first-quarter earnings of $1.88 per share, which represents year-over-year growth of nearly 12% from $1.68 per share seen in the same period a year ago.

The iPhone manufacturer would post revenue growth of 6% to $118.13 billion. It is worth noting that with a track record of always beating earnings per share estimates in the recent five years, Apple is the best FAANG stock in terms of earnings surprises.

Apple is expected to report 1QFY22 earnings after market on Thursday, January 27th and host a call with investors at 5:00 PM ET. In our view, the recent strength in shares is a reflection of investors’ willingness to reward Apple for entering new markets, including electronic vehicles (EV) and the metaverse (with an augmented reality/virtual reality product). Now, we look for comments from management on its future product roadmap to justify the increase in share price,” noted Tom Forte, Senior Research Analyst at D.A. DAVIDSON.

“We are reiterating our BUY rating for Apple (AAPL) and putting our price target of $175 under review ahead of the company reporting 1QFY22 earnings.”

VISA: The world’s largest card payment company is expected to report its fiscal firth-quarter earnings of $1.70 per share, which represents a year-over-year decline of about 20% from $1.42 per share seen in the same period a year ago.

The global technology payment company would post revenue growth of nearly 19% to $6.8 billion. It is worth noting that the company has beaten earnings in most of the quarters in the last two years, at least.

Visa (V) is one of our preferred stocks, as it is a key beneficiary of resilient global consumer spend growth, the ongoing shift from cash to electronic payments, and broadening merchant acceptance. Global Personal Consumption Expenditure and secular growth drivers should support low double-digit revenue growth in the near-to-medium term,” noted James Faucette, equity analyst at Morgan Stanley.

“While Covid-19 headwinds are likely to persist, we see upside opportunity from the faster-than-expected recovery of travel. Continued investment in longer-term initiatives (faster payments, P2P, B2B) and partnerships continue to increase its TAM and offer an opportunity for compounding double-digit earnings growth for the foreseeable future.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 27

TICKER COMPANY EPS FORECAST
AOS A.O. Smith $0.77
ALK Alaska Air Group $0.21
BX Blackstone $1.3
CNX CNX Resources $0.5
CMCSA Comcast $0.73
DOW Dow $2.16
EMN Eastman Chemical $1.88
HCA HCA Healthcare $4.57
IP International Paper $1.02
JBLU JetBlue Airways $-0.39
MA Mastercard $2.2
MCD McDonald’s $2.32
LUV Southwest Airlines $-0.39
X U.S. Steel $5.12
V Visa $1.7

 

Friday (January 28)

TICKER COMPANY EPS FORECAST
ALV Autoliv $1.18
BAH Booz Allen Hamilton $0.97
CAT Caterpillar $2.23
CHD Church & Dwight $0.59
CL Colgate-Palmolive $0.79
RDY Dr. Reddy’s Laboratories $0.64
GNTX Gentex $0.33

 

In The Spotlight – Big Wall Street Banks as the Main Power in S&P 500

Banks’ earnings

Big Wall Street banks are in the spotlight right out of the gate with Goldman Sachs set to release results before markets open. They will be followed by Bank of America, Morgan Stanley, and U.S. Bancorp tomorrow (Wednesday). Bank results got off to a mixed start on Friday. JPMorgan Chase, Citigroup, and Wells Fargo all topped profit estimates for Q4 but JPMorgan and Citi delivered disappointments in other areas.

In particular, investors are nervous about higher expenses that cut into Q4 profits for both JPMorgan and Citi and which both banks forecast would continue to weigh on results in 2022. JPMorgan and Citi also saw -11% decreases in trading revenue, with fixed income trading down by double digits for both.

There are also signs of slowing loan growth that some analysts worry is an early sign of slowing consumer demand for big-ticket items as inflation continues to climb. While banks will eventually benefit from higher U.S. interest rates that are anticipated in the year ahead, a big pullback in consumer lending is a threat to some of the more lofty Wall Street expectations had for the sector in 2022.

Global economy

Globally, not a lot changed over the extended weekend. China might have provided a bit of a surprise with additional monetary easing into a struggling GDP and sagging real estate prices. It’s worth noting, Omicron has now been detected in Beijing for the first time, just three weeks before the city is due to host the Winter Olympics. Now the Chinese are shutting down and suspending the sale of Olympic tickets to the public.

Tensions remain heated between Hong Kong activists and Chinese government officials. North Korea launched its fourth missile test this month. After North Korea’s missile test last week, the US announced sanctions on eight North Korean and Russian individuals and entities for supporting North Korea’s ballistic missile programs.

Tensions between the U.S. and Russia seem to be headed in the wrong direction with Russia over the weekend moving troops and equipment into Belarus for joint military exercises.

The so-called “Allied Resolve” drills are set to take place near borders with NATO members Poland and Lithuania, as well as Ukraine where Russia has maintained its alarming military presence.

Most U.S. military experts don’t really think Russia has any real intentions of invading Ukraine or any other EU country. However, Western countries also have increased their military presence along borders and other strategic locations which increases the chances that a broader conflict could “accidentally” be sparked.

Europe’s gas supplies are also at risk as Russia continues to dangle the threat of cutting them off. Most of the tension stems from Russia’s demand that former Soviet countries be barred from entering NATO, something the U.S. and other NATO allies have refused.

In the USA, we are heading deeper into earnings season and investors are going to be paying close attention to costs and expenses. As I mentioned, late last week, JPMorgan warned that higher expenses and higher spending on hiring in 2022 could create some headwinds.

Looking ahead, it will be interesting to see how many executive teams start providing guidance and warnings that corporate expenses are rising faster than anticipated and what if any damage will be due to profit margins?

Remember, some companies have said they are passing the additional rising costs on to the consumer while other companies are eating a majority of the higher expenses in an attempt to gain more market share.

How the stock market decides to differentiate the strategy and style could greatly impact money flow and valuations. Goldman Sachs, J.B. Hunt, Charles Schwab, Citrix, Concentrix, and Interactive Brokers report earnings today.

Data to watch

Tomorrow we have Alcoa, Bank of America, Kinder Morgan, Morgan Stanley, Procter & Gamble, and United Airlines.

Thursday we have American Airlines, Baker Hughes, Netflix, and Union Pacific.

Then next week we have big names like Apple, Boeing, Caterpillar, McDonalds, Microsoft and Verizon reporting earnings.

Let’s also not forget next week we have the first Fed FOMC meeting of the new year.

With the U.S. Federal Reserve getting ever closer to implementing its first rate hikes, which most anticipate will begin in March, investors are growing less enchanted with some of the high-growth and momentum stocks that saw outsized share price gains last year.

This trend is most evident in the tech-heavy Nasdaq where nearly half of the index’s stocks have fallen by -50% from their recent peaks. The Nasdaq itself is only down by about -7% from its most recent record high. The selloff has been very much concentrated in highly-leveraged companies that have yet to deliver a profit, as the prospect of higher rates reduce future profit potential. Earnings results from these high-fliers will likely be harshly scrutinized as Wall Street tries to separate the “wheat from the chaff,” so to speak.

On the economic data front, Empire State Manufacturing and the NAHB Housing Market are today’s highlights.

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

Why AT&T Stock Is Up By 4% Today

The Number Of HBO Max And HBO Subscribers Exceeds Guidance

Shares of AT&T gained strong upside momentum after the company revealed that that it ended the year with approximately 73.8 million total global HBO Max and HBO subscribers. The previous guidance was 70 million – 73 million subscribers.

However, it should be noted that the main driver behind the recent rise in AT&T shares is the relief over the future of 5G deployment. Verizon and AT&T have recently agreed to delay 5G deployment due to safety concerns from the aviation industry, but the market believes that both companies are close to the finish line.

Verizon stock has also enjoyed strong upside momentum in recent trading sessions, so the 5G story seems to be the main catalyst for these two stocks, while the recent news on the number of HBO subscribers serve as an additional positive factor for AT&T stock.

What’s Next For AT&T Stock?

Analysts expect that AT&T will report earnings of $3.21 per share in 2022, so the stock is trading at roughly 8 forward P/E. It should be noted that there is some rotation into more traditional, value-oriented plays at the beginning of this year, which is bullish for AT&T.

For example, stocks like Alphabet and Microsoft have recently pulled back from highs while Coca-Cola stock rallied. In case this rotation continues, AT&T stock will get more support.

The company’s valuation remains attractive, and its current quarterly dividend of $0.52 per share makes it an interesting play for income-oriented investors.

It looks that the stock has suffered from tax loss selling at the end of 2021, but it was able to get more support when this catalyst was no longer in play.

Technically, RSI for AT&T stock has recently moved into the overbought territory, so the risk of a near-term pullback is increasing. Fundamentally, cheap valuation, expectations of 5G deployment and attractive yield may provide more support at AT&T stock in the upcoming months.

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

Sector Themes In Play In The Markets For 2022

Years like 2021 saw a solid broad-based performance in many stock market sectors. Relatively simple approaches such as Indexing and Sector Rotation did well. But with macro changes in play and many uncertainties for 2022, we may very well see broad indexes underperforming while individual sectors dominated by a few stocks really shine.

Dips will continue to be bought unless something significant changes. But let’s not forget that we’re long overdue for a substantial correction. Significant risk catalysts are:

  • Fed actions.
  • International conflicts (i.e., Russia and China).
  • Pandemic developments that are not currently known.

There’s always the risk of the unknown – the literal definition of a “Black Swan” event. We shouldn’t get too complacent, knowing that we may need to get defensive to protect capital suddenly. When it’s time to be defensive, let’s not forget that CASH IS A POSITION!

Sector theme DRIVERS FOR 2022

Many uncertainties about Covid and the lingering effects on the economy remain. Inflation has roared back to 30-year highs. Strong employment numbers and consumer spending are fueling significant growth in corporate earnings. We also have a shift in bias at the Fed on interest rates and quantitative easing. These are the “knowns” and are theoretically priced in.

For these reasons and more, we should expect more of a “Stockpicker’s Market” in 2022. Certain sectors will do well and weather corrections better than the broader markets.

Even short-term traders can gain an edge by paying attention to what sectors are strongest. Traders tend to benefit most from playing the strongest stocks in the strongest sectors for bullish trades and choosing the weakest stocks in weaker sectors for bearish trades. That “tailwind” can make a significant difference in results.

Let’s look at some sector themes and individual names to keep an eye on in 2022.

ECONOMIC NORMALIZATION

A long-anticipated return to a “normal” economy will continue to be a theme — we just don’t know if that will be Post-Covid or Co-Covid. Or when. Air travel, theme parks, hotels, cruise lines, etc., have all suffered in the persistent Pandemic. What does seem to be changing is the idea of a “new normal” where virus variants may be with us for years to come. We will adjust socially and economically to that for the foreseeable future. DAL, UAL, LUV, AAL are airlines to watch, and the JETS ETF may be a good way to play a general recovery in this sector.

5G INTERNET

The much-hyped rollout of 5G network technology had its share of setbacks and technology disappointments. But 2022 should see the 5G deployment start to take off as technical issues are worked out, and the promise of widespread coverage with transformational performance becomes real. In the background supplying the 5G infrastructure are AMD, QCOM, ADI, MRVL, AMT, XLNX, and KEYS. Along with infrastructure and testing companies, shares of major carriers T, TMUS, and VZ languished for much of the second half of 2021 and looked poised for recovery in the coming year.

ARTIFICIAL INTELLIGENCE

In all its various forms (including autonomous vehicles), AI will remain a developing trend. Big players in the space to watch include MSFT, AMAT, GOOGL, NVDA, AAPL, and QCOM.

EVs and AUTONOMOUS VEHICLES

Electric Vehicles (EVs) are nearing an inflection point where widespread adoption is poised to take off. Technology and cost competitiveness has improved where some EVs will reach price parity with their traditional internal combustion counterparts.

While there are many smaller players in the EV space, automotive stalwarts F, GM, and TM are investing very heavily. TSLA has been grabbing the headlines, but many others want to stake out their territory in the space, including whole tiers of manufacturers and infrastructure enablers like WKHS, XPEV, NKLA, and CHPT.

MATERIALS and MINING

Gold, silver, and related miners underperformed for much of 2021 and now look poised for a recovery year as inflation, and monetary concerns grow. GLD, SLV, GDX, GDXJ, SIL, SILJ look good as both longer and mid-term plays. Metals and miners may get hit initially with a significant downturn in stocks but could ultimately demonstrate their safe-haven potential.

Specific to the growth in EVs, battery technology, etc., copper, lithium, and related basic materials should see stronger demand ahead. FCX looks particularly interesting as a dual play on gold and copper. LIT may be a good ETF play on lithium battery technology.

SEMICONDUCTORS

The market for chips is primed for exponential growth. EV’s have about ten times the number of specialty semiconductors as conventional vehicles. AI, crypto, 5G, mobile devices, and ubiquitous computing should drive growth in the semiconductor sector for some time to come.

REAL ESTATE

Real Estate and Homebuilders should continue to do well while employment numbers remain strong and if interest rates don’t rise too quickly. The inventory shortage in most real estate markets will likely persist well into the new year.

Storage REITs like PSA, LSI, and CUBE have been big winners in the Covid economy and still have room to run.

SUMMARY

Many sectors still look bullish after gains in 2021. But there are “storm clouds” on the horizon, and we must not take future performance for granted.

Lastly, one of the simplest ways to assess how sectors are measuring up is to watch the charts for the S&P SPDR series sector ETFs and a few others. Here are some notable ones to watch:

https://www.thetechnicaltraders.com/wp-content/uploads/2021/12/Dec-31-article.png

These can give us a good starting place to look for leading stocks in winning sectors as the year unfolds.

Let’s remain vigilant for possible market corrections and may the wind be at our backs!

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Are Stock Bulls Back On A Track?

Earnings beats have actually been coming in at a wider margin than average, contrary to lingering fears that supply chain disruptions, material shortages, and climbing costs would lead to disappointing Q3 results.

Q3 Earnings

The big beats now have S&P 500 companies on track to post +30% earnings growth for Q3. Most Wall Street insiders are now expecting Q4 earnings to show right around +20% earnings growth.

Today’s earnings highlights include Albertsons and State Street. Some of the big names reporting later this week include Netflix, Haliburton, Johnson & Johnson, United Airlines, and Procter & Gamble on Tuesday; and Biogen, IBM, Verizon, and Tesla on Wednesday; American Airlines, AT&T, Chipotle, Intel, Snapchat, and Southwest Airlines on Thursday.

The following week is even more highly anticipated as many of the biggest names in the stock market will be reporting.

Economic data

In economic data today, Industrial Production for September is expected to dip due to a combination of Hurricane Ida and supply chain constraints. Supply chain challenges also likely lowered builder sentiment in the October NAHB Housing Market Index due today as well. The supply-side shortages of both materials and labor continue to weigh on economic growth outlooks for the last part of 2021.

However, most bullish analysts have adjusted their 2022 growth projections higher, believing lost growth this year will be made up next year. The labor market is expected to get a boost thanks partially to the dramatic decline in Covid cases, which are down nearly -50% since early-September.

The extreme worker shortage in some sectors has already led to rapid wage growth with hourly earnings in September up +4.6%, led by an increase of nearly +11% in leisure and hospitality. That is what’s considered “sticky” inflation, meaning that it is not likely going to be reversed.

Likewise for consumer goods’ prices that have been creeping higher as manufacturers try to offset higher costs. If wage growth can mostly keep pace with inflation, bulls will likely remain less concerned that rising prices will crush economic growth. In fact, Retail Sales released Friday showed no signs of consumer spending slowing down with sales climbing +15% in September, despite obviously higher costs for many goods. The thought of the economy heating back up quickly is both good and somewhat bad.

There now seems to be more talk on Wall Street about the likelihood of two rates hikes next year rather than just one. There’s actually even some talk of perhaps three rate hikes being possible in 2022, especially if the supply-chain complications continue to create higher prices and fuel higher inflation.

The biggest wildcard right now appears to be the global energy shortage which is already pushing up costs for both consumers and manufacturers and threatens to accelerate headline inflation far beyond wage growth.

Any energy “crisis” will likely only be temporary but it still potentially translates to several quarters of slower growth than many Wall Street bulls have been penciling. If it leads to a massive surge higher in inflation in the months ahead, it also could also pressure the Federal Reserve to pull forward its timeline to begin hiking interest rates.

Technical analysis

ES ##-## (Daily) 2021_10_18 (3_38_51 PM)

SP500 futures are testing daily MA50. With the strong accumulation in this market, I will not be surprised to see a base-building above moving average. If that happens, investors will gain more confidence. Thus, we can see money flowing aggressively into the stock market again. The weakness of the USD gives additional strength for indexes. In that case, bulls will target at least 4600 (important Gann level on a daily chart).

Breaking below 4250 is a game-changer. However, in the absence of bearish macroeconomic factors, we have more chances to see a bullish scenario.

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. 

Earnings vs Inflation – What Is The Right Bet?

As investment money will always be looking for a place to roost many stocks still look like the best opportunity for alpha, especially some of your bigger high-tech companies like Microsoft, Google, Facebook, etc… who don’t face the same headwinds created by supply chain dislocations, higher commodity prices, etc.

Fundamental analysis

Bulls are hoping to see more money lured into the market by strong Q2 earnings which have so far failed to ignite a meaningful rally. Analyst expectations for S&P 500 company earnings is still around +65%, something stock bears argue is lofty considering the extreme level of supply chain dislocations and labor shortages.

There is also a lot of debate about whether corporate profit gains are “peaking” in the face of slower growth in the quarters ahead as the reopening boom begins to fade. Remember, investors place bets on the future, not what happened last quarter.

The earnings pace really picks up next week with highlights including IBM on Monday; Chipotle and Netflix on Tuesday; ASML, CocaCola, Novartis, and Verizon on Wednesday; Abbott Labs, AT&T, Biogen, Capital One, Dow Inc., Intel, Snap, Southwest Airlines, Twitter, and Union Pacific on Thursday; and American Express, Honeywell, and Nextera on Friday.

Inflation

One of the biggest factors that seem to be weighing on investor sentiment continues to be inflation. The latest indication of rising costs was reflected last week in U.S. Import Prices, which climbed for an eighth straight month in June.

However, the year-on-year increase slid to +11.2%, down from +11.6% in May is an encouraging sign that some inflationary pressures might be starting to ease. Federal Reserve Chairman Jerome Powell, testifying before the Senate Banking Committee yesterday, repeated the script he’s stuck with for months, saying inflation will likely remain elevated in the coming weeks and months before moderating.

Powell also told lawmakers that the Fed is not in a hurry to start paring its monthly asset purchases but he stressed that the central bank is prepared to adjust policy if they see signs of inflation moving “materially and persistently beyond levels consistent with our goal.” Wall Street increasingly expects the Fed to start trimming asset purchases later this year and even start lifting rates as soon as Q4 2022.

The Fed meets next on July 27-28 but most analysts think Powell will wait to make any big policy change announcements at either the annual Jackson Hole symposium at the end of August or possibly the FOMC’s September policy meeting. Central banks in Canada and New Zealand this week scaled back their asset purchase schemes which some worry could start to put pressure on central bankers in other developed countries to also tighten.

The European Central Bank releases its latest policy decision next Thursday. Bulls still largely believe that U.S. growth will be able to outpace “transitory” inflation pressures but the outlook for some companies could dim if the Fed starts reining in its “easy money” policies sooner than investors have been anticipating.

sp500 analysis forecast 18 july 2020

SP500 technical analysis

SP500 pulled back last week after another attempt to break out. There is no surprise we see such choppiness in the middle of summer. Moreover, very likely this price activity will stay for a few more weeks. We are still in a bull market. However, the risk of deep pullback is rising. If that happens, SP500 will target to close the gap near 4000.

On the other hand, if the price sustains above Gann resistance 4400, bulls will target 4500 at least. Two of my favourite indicators are giving opposite signals now. So, I don’t have any strong bias at the moment. Advance Decline Line remains bearish. At the same time, Insider Accumulation is bullish. In general, swing traders have to focus on daily support and resistance. Likely it will take few more weeks to see a real direction. Short-term traders can use Gann levels and Cycles on 4h charts to find trading opportunities.

Verizon Shows Off 5G-Connected Robots at Barcelona Conference

By Supantha Mukherjee and Clara-Laeila Laudette

Edge computing uses augmented reality and machine learning to analyse bulk data where it was gathered – whether factory floor, oil rig or office space – and requires fast data transfers of the kind that only high-speed 5G signals provide.

“When you have more than one robot on the floor, you run into a problem, as these are still just machines, and they can’t naturally communicate with one another,” Verizon’s Chief Strategy Officer Rima Qureshi said at the event in Barcelona.

“5G will make it possible for robots to connect with other robots and devices of all kinds in a way that simply wasn’t possible before,” she said.

Connected, smarter robots are considered crucial to making areas such as factory floors more efficient through automation, with remote monitoring cutting costs and the need for plant infrastructure.

As part of the demo, Qureishi beckoned at the stage’s wings and two robots emerged: one dog-like robot called Gigi – after 5G – that walked stiffly on four legs, and a second boxy bot named Mekeal – a nod to mobile edge computing, or MEC – which rolled in on traction wheels.

To train the robots to become aware of their environment beyond a two-dimensional route that cannot account for elements beyond origin and destination points, Qureishi said engineers had jumped in front of them, sent other robots in their path and thrown boxes in their path.

“I’m happy to report that neither engineers nor robots were harmed in the process,” Qureishi said.

The market for the global 5G in the cloud is expected to reach $10.6 billion by 2028, growing at 79.2% annually, Research and Markets stated in a recent report.

Verizon is also working on connected drones that could be deployed at locations hit by natural disasters, avoiding putting a human in danger and controlled by a single operator from hundreds of miles away, with live video and thermal imagery available to anyone in the world.

With 4G networks, drones were able to fly into U.S. fire zones without on-site personnel and to send data, almost in real-time, to staff 4,000 miles away, but with 5G, Qureishi said, drones could stream panoramic video to multiple recipients, who could each focus on different aspects of the image simultaneously.

(Reporting by Supantha Mukherjee and Clara-Laeila Laudette in Barcelona; Editing by Bernadette Baum)

Verizon to Sell Media Business, Including Yahoo, AOL to Apollo for $5 Billion

Verizon has struggled to grow its media business, declaring them nearly worthless with a $4.6 billion write-down in 2018. Bigger players such as Facebook and Google have sweeped the digital advertising market.

Verizon will get $4.25 billion in cash, preferred interests of $750 million and retain a 10% stake in Verizon Media, as part of the deal terms.

The business will be called Yahoo when the deal closes, which is expected in the second half of 2021, the company said.

Verizon Media’s portfolio includes online brands such as TechCrunch, Makers, Ryot and Flurry, according to its website. It reported revenue of $1.9 billion in the first quarter of 2021.

In 2017, Verizon bought Yahoo’s internet properties for about $4.48 billion, betting its 1 billion-plus users would be a fertile audience for online ads. It acquired email service AOL for $4.4 billion in 2015.

(Reporting by Eva Mathews in Bengaluru; Editing by Bernard Orr and Shounak Dasgupta)

Why Verizon Shares Are Rallying Today?

Verizon Video 17.02.21.

Berkshire Hathaway Bought An $8.6 Billion Stake In Verizon

Shares of Verizon are up by more than 4% in today’s trading session after Warren Buffett’s Berkshire Hathaway disclosed that it acquired an $8.6 billion stake in the company.

Verizon stock remained under material pressure since early December 2020. At the end of January, the company released its quarterly report which included revenue of $34.7 billion and adjusted earnings of $1.21 per share.

The report exceeded analyst expectations on both earnings and revenue but failed to provide additional support to the company’s shares. At the beginning of this year, the market remained focused on high-growth stories which may have put additional pressure on Verizon shares.

Verizon stated that it expected to report adjusted earnings of $5.00 – $5.15 per share in 2021. Currently, analysts project that the company will be able to meet its target, so the stock is trading at about 11 forward P/E which looks rather cheap in today’s market.

Most likely, Berkshire Hathaway was attracted by the company’s valuation which became more attractive after the stock declined from the $62 level to the $54 level in just two and a half months.

What’s Next For Verizon?

Berkshire’s moves always attract plenty of interest so Verizon shares have a good chance to gain additional upside momentum in the upcoming trading sessions.

The stock traditionally attracts income-oriented investors and yields about 4.4% at current prices. This time, income investors may be joined by some momentum traders who want to bet on increased investor interest after Berkshire’s purchase.

From a big picture point of view, Verizon remains a defensive stock which may get some additional support in case the market risk appetite decreases a bit and investors pull some money out of high growth stories which have become very expensive during the recent market rally.

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

Verizon Communications Posts Better-Than-Expected Q3 Earnings; Target Price $63

Verizon Communications Inc, a major U.S. telecommunications service provider, reported a better-than-expected profit in the third quarter, largely driven by solid demand for internet services and phones as most people worked remotely amid the COVID-19 pandemic.

Verizon reported EPS of $1.05, compared with $1.25 in third-quarter 2019. On an adjusted basis (non-GAAP), third-quarter 2020 EPS, excluding a special item, was $1.25, compared with adjusted EPS of $1.25 in third-quarter 2019. That higher than the market consensus of $1.22.

The company estimates that third-quarter 2020 EPS and adjusted EPS included about negative 5 cents of COVID-19-related net impacts. Total consolidated operating revenues in third-quarter 2020 fell 4.1% to $31.5 billion. This decline was due to lower customer activity and the timing of certain device launches.

Revenue in Verizon’s media unit, which includes TechCrunch, Yahoo and HuffPost, plunged 7.4% to $1.7 billion, but an increase of 21.2% from second-quarter 2020.

The company forecasts 2020 adjusted EPS growth of 0%-2%, improved from the previous prediction of -2% to 2%. Total wireless service revenue is expected to grow at least 2% in fourth-quarter 2020 compared to last year.

At the time of writing, Verizon Communications shares traded 0.17% lower at $57.15 on Wednesday; the stock is down about 7% so far this year.

Verizon Communications Stock Price Forecast

Eleven equity analysts forecast the average price in 12 months at $63.20 with a high forecast of $70.00 and a low forecast of $57.00. The average price target represents a 10.51% increase from the last price of $57.19. From those 11 equity analysts, five rated “Buy”, six rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $60 with a high of $71 under a bull scenario and $42 under the worst-case scenario. Bernstein raised their stock price forecast to $63 from $60. Royal Bank of Canada reiterated a “hold” rating and set a $57 target price on shares of Verizon Communications.

Several other analysts have also recently commented on the stock. Credit Suisse Group reiterated a “hold” rating and set a $61 target price on shares of Verizon Communications. Oppenheimer started coverage and set a “buy” rating and a $70 price objective on the stock. Argus upgraded shares from a “hold” rating to a “buy” rating and set a $68 price objective.

Analyst Comments

“Attractive business mix, as the wireless market leader. Wireless service revenue 70% of consolidated revenue, and wireless EBITDA ~85% of consolidated EBITDA. Dividend yield and potential buybacks provide some support, while the transition to 5G creates opportunities and risks, with mid-band spectrum needs in focus,” said Simon Flannery, equity analyst at Morgan Stanley.

Upside and Downside Risks

Upside: 1) Continued strength in wireless. 2) Rates remain lower for longer. 3) Defensive market. 4) Developments around mobile video, and internet of things – highlighted by Morgan Stanley.

Downside: 1) Rising interest rates make the dividend yield less attractive. 2) Competitive price pressure from wireless competitors. 3) Wireline business faces significant secular pressures. 4) Spectrum spend/M&A pressure Balance Sheet metrics.

Check out FX Empire’s earnings calendar

Verizon to Acquire America Movil’s Tracfone For Up To $6.9 Billion; Target Price $70

Verizon Communications, an American multinational telecommunications conglomerate, said it will acquire Mexican telecom giant America Movil’s Tracfone, the leading pre-paid and value mobile provider in the United States, for up to $6.9 billion in cash and stock, sending its shares as high as 1.6% on Monday.

The consideration for the transaction will include $3.125 billion in cash and $3.125 billion in Verizon common stock, subject to customary adjustments, at closing. The agreement also includes up to an additional $650 million in future cash consideration related to the achievement of certain performance measures and other commercial arrangements, the company said.

Verizon expects to drive significant benefits and network synergies from the transaction. Verizon expects the transaction to be accretive in the first full year following closing, excluding transaction and integration costs, and does not expect the transaction to materially impact capital expenditures.

“We estimate Verizon’s (VZ) post synergy multiple will be just 3-4x, and that conservatively assuming no growth, will be 3% accretive to FCF/share in year two post-close, and we continue to believe VZ will be in a position to start buying back stock in 2022,” said Colby Synesael, equity analyst at Cowen.

“We view the deal as positive given (1) significant synergies that we estimate will increase TracFone EBITDA margins to 30% two years from close, and (2) increased exposure to value/prepaid subs in a recessionary environment as well as a potential upsell opportunity. Including a 10% capex assumption on TracFone service revenue, we estimate the deal will be 3% accretive to FCF/share and 3-4% accretive to EPS in year two,” Synesael added.

The transaction is subject to receipt of regulatory approvals and other customary closing conditions. Verizon expects the transaction to close in the second half of 2021.

Credit Suisse acted as financial advisor to Verizon and Debevoise & Plimpton acted as legal advisor.

Verizon’s shares closed 0.88% higher to $60.32 on Monday after rising as high as 1.6% intraday; however, the stock is down about 2% so far this year. Also, the America Movil ended 6.36% higher at MXN 14.22 in Mexico.

Executive comments

“This transaction is aligned with what we do best: providing reliable wireless service alongside a best-in-class customer experience,” said Hans Vestberg, Chairman and CEO of Verizon.

“This transaction firmly establishes Verizon, through the Tracfone brands, as the provider of choice in the value segment, which complements our clear leadership in the premium segment,” Vestberg added.

Verizon stock forecast

Twelve analysts forecast the average price in 12 months at $62.70 with a high forecast of $70.00 and a low forecast of $57.00. The average price target represents a 3.95% increase from the last price of $60.32. From those 12 equity analysts, six rated “Buy”, six rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave a target price of $60 with a high of $71 under a bull-case scenario and $42 under the worst-case scenario. Verizon Communications had its stock price forecast boosted by Deutsche Bank to $62 from $60.

Other equity analysts also recently updated their stock outlook. Verizon Communications had its price objective boosted by analysts at UBS Group to $60 from $59. The brokerage presently has a “neutral” rating on the cell phone carrier’s stock. Citigroup boosted their price objective to $60 from $55 and gave the stock a “neutral” rating. At last, JPMorgan Chase & Co. dropped their price objective to $62 from $63 and set a “neutral” rating.

We think it is good to buy at the current level and target $70 as 100-day Moving Average and 100-200-day MACD Oscillator signal a strong buying opportunity.

Analyst views

“We will be interested to learn why Verizon decided to jump into prepaid in a more aggressive way after generally preferring to go the wholesale route in recent years, while the prepaid segment overall has lost momentum relative to postpaid in recent years. With an election looming we will also be watching for any regulatory commentary given Verizon’s wireless/postpaid market leadership, although Tracfone is not a facilities-based player,” said Simon Flannery, equity analyst at Morgan Stanley.

“Attractive business mix, as a wireless market leader. Wireless service revenue 70% of consolidated revenue, and wireless EBITDA 85% of consolidated EBITDA. Dividend yield and potential buybacks provide some support, while the transition to 5G creates opportunities and risks, with mid-band spectrum needs in focus,” Flannery added.

Upside and Downside risks

Upside: 1) Continued strength in wireless. 2) Rates remain lower for longer. 3) Defensive market. 4) Developments around mobile video, and internet of things, highlighted by Morgan Stanley.

Downside: 1) Rising interest rates make the dividend yield less attractive. 2) Competitive price pressure from wireless competitors. 3) Wireline business faces significant secular pressures. 4) Spectrum spend/M&A pressure Balance Sheet metrics.

Check out FX Empire’s earnings calendar

U.S. Group Verizon and South Korea’s Samsung Electronics Sign $6.65 Billion 5G Deal

Verizon Communications, an American multinational telecommunications conglomerate, and South Korean multinational electronics company Samsung Electronics have announced to sign a deal worth $6.65 billion for 5G network equipment and services.

“With this latest long-term strategic contract, we will continue to push the boundaries of 5G innovation to enhance mobile experiences for Verizon’s customers,” Samsung said in a statement, Reuters reported.

Samsung noted in a regulatory filing the period of the contract, which Samsung signed with Verizon, is from June 30, 2020 to end-2025, Reuters added.

Samsung Electronics shares rose over 3% to KRW 58,300 on Tuesday. On the other hand, Verizon’s shares rose 0.12% to $60.55 in after trading hours on Friday and the stock is up about 2% so far this year.

Verizon stock forecast

Eleven analysts forecast the average price in 12 months at $62.30 with a high forecast of $70.00 and a low forecast of $57.00. The average price target represents a 3.01% increase from the last price of $60.48. From those 11 analysts, five rated “Buy”, six rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave a target price of $60 with a high of $71 under a bull-case scenario and $42 under the worst-case scenario. Verizon stock price forecast was raised by Deutsche Bank to $62 from $60.

Other equity analysts also recently updated their stock outlook. Verizon Communications had its price objective boosted by analysts at UBS Group to $60 from $59. The brokerage presently has a “neutral” rating on the cell phone carrier’s stock. Citigroup boosted their price objective to $60 from $55 and gave the stock a “neutral” rating. Oppenheimer reaffirmed a “buy” rating and set the price target at $70.

Analysts’ views

“Attractive business mix, as wireless market leader. Wireless service revenue 70% of consolidated revenue, and wireless EBITDA 85% of consolidated EBITDA. Dividend yield and potential buybacks provide some support, while the transition to 5G creates opportunities and risks, with mid-band spectrum needs in focus,” said Simon Flannery, equity analyst at Morgan Stanley.

“Our price target for Samsung Electronics is W70,000: We continue to employ a residual income (RI) valuation model, cross-checked against P/BV analysis. At our W70,000 price target, the 2021 P/B multiple would be 1.4x, which is in line with its long-term mid-cycle valuation level of 1.4x. Our terminal growth rate assumption is 5%, and we assume an 11.5% cost of equity, based on a beta of 1.0,” said Shawn Kim, equity analyst at Morgan Stanley.

Upside and Downside risks

Upside: 1) Continued strength in wireless. 2) Rates remain lower for longer. 3) Defensive market. 4) Developments around mobile video, and internet of things – highlighted Morgan Stanley.

Downside: 1) Rising interest rates make the dividend yield less attractive. 2) Competitive price pressure from wireless competitors. 3) Wireline business faces significant secular pressures. 4) Spectrum spend/M&A pressure Balance Sheet metrics.

Check out FX Empire’s earnings calendar

Equities Sink On Global Tensions, VIX Jumps 20%; Earnings Still In Focus

The Jamal Khashoggi Killing Has Markets On Edge

Global tensions sent equities markets around the world diving for cover. Fear of slowing growth, the fallout from the US-Sino trade war, and the killing of journalist Jamal Khashoggi all played a part. Asian markets were down the most falling an average 2.5% to 3.0% at the close of the Tuesday session. Indices in the region are trading at or near long-term low levels with the Korean Kospi hitting a near 20 month low with today’s action. The Volatility Index rose more than 20%.

European markets were down an average -1.0% to -2.0% at mid-day, up off the low of the session but still at or near their own 20-month lows and indicated lower. Focus in this region is on the murder of Khashoggi which is turning into a major international event. The journalist, a self-imposed exile from Saudi Arabia, has deep ties to the US, EU and other major western powers who are now faced with the problem of how to deal with the Saudi’s now the cat is out of the bag. The Saudi’s have promised not to weaponize oil but the crisis is far from over.

The Tech Wreck

Technology stocks were hit the hardest in the EU session. Chipmaker AWS led with a loss near -25% as the companies outlook for year-end sales was not convincing enough for shareholders to stand pat. AWS released earnings yesterday delivering a near 50% increase in revenue with upbeat guidance for the final three months of the year.

Tech stocks led Tuesday’s route in both the EU and the US. US futures were indicated down an average 1.5% to 2.0% going into the opening bell and looking weak despite a round of positive earnings releases. Reports from United Technologies, Harley Davidson, Verizon and McDonald’s all beat analysts expectations on the top and bottom lines sending shares of these stocks higher in early action.

US Corporate Earnings Are Strong, Outlook OK

United Technologies and Harley Davidson were able to raise guidance, executives at HOG say stronger sales in the EU have helped to offset issues with tariffs and were a boost to earnings. Verizon’s beat was driven by better than expected subscriber growth. On the flipside, shares of Caterpillar fell more than -6.0% despite its top and bottom line beat due to poor outlook and weak guidance. The company says tariffs and trade woe are having an impact on profitability but was able to reaffirm its guidance. The problem for traders is that guidance was in a range with the lower end well below analysts consensus.

McDonald’s beat was driven by strong comp store sales. Comps in the US rose a strong 2.4%, just shy of the 2.5% estimated, but global comps rose a whopping 4.2%. Analysts had been expecting a more tepid 3.7% but strength was seen in the lead international markets, up 5.4%, and in the high-growth target market, up 4.6%. There is no economic data scheduled for today so traders will be focused on earnings and global headlines. Notable earnings after the close of Tuesday’s US session are Chubb, Texas Instruments, and iRobot.