PayPal Holdings Could Offer Low-Risk Buying Opportunity

PayPal Holdings Inc. (PYPL) posted stronger-than-expected Q2 2020 earnings in July, booking a profit of $1.07 per-share on an impressive 22% revenue increase to $5.26 billion. The accelerated transition from paper to digital payment transactions underpinned the blowout results, completing a breakout above short-term resistance in the mid-180s. The uptick reversed above 204 last week, setting up a potential low-risk buying opportunity in coming sessions.

Paypal Opens Millions Of New Accounts

Total Payment Volume (TPV) increased 29% to $222 billion while PayPal opened more than 21 million new accounts, marking the strongest quarterly growth since the company came public in 2015.  The outlook for future quarters is equally bullish, with the COVID-19 pandemic signaling a paradigm shift into contactless payment systems.  The stock could post outsized gains well into 2022, given these historic tailwinds.

President and CEO Dan Schulman discussed the bullish metrics, stating” we have seen substantial macro changes that we believe will have a lasting and profoundly positive impact on our business. The world has accelerated from physical to digital across multiple industries including retail. Merchants are embracing a digital-first strategy, and these trends have fueled the rapid rise of digital payments. These are durable and meaningful tailwinds.”

Wall Street And Technical Outlook

Wall Street rates PayPal as a ‘Strong Buy’, based upon 28 ‘Buy’ and 5 ‘Hold’ recommendations. No analysts are recommending that shareholders sell their positions at this time. Price targets currently range from a low of $155 to a street-high $235 while the stock is now trading $15 below the median $209 target. The company carries a lofty 89.53 price-to-earnings ratio (P/E), lowering odds for further upgrades until Q3 performance trends become more transparent.

PayPal has posted a return in excess of 60% since breaking out above 2019 resistance near 120 in May, setting off overbought technical readings that have added fuel to the current downturn. The earnings news triggered a small breakaway gap between 184.75 and 190 while the stock is now trading near 194. Selling momentum could increase into this major support zone, signaling a ‘buy-the-dip’ trade that could book opportune profits.

Alphabet Losing Ground After Weak Quarter

Alphabet Inc. (GOOGL) sold off after reporting the first year-over-year revenue decline in company history on July 31st, settling into support at the 50-day moving average. The tech behemoth beat Q2 2020 top and bottom line estimates, posting a 29% drop in earnings to $10.13 per-share and a 1.7% revenue decline to a $38.2 billion. Quarterly performance suffered from weak advertising income and search activity, slowing 9.8% year-over-year, with small businesses forced to slash ad budgets in reaction to the COVID-19 pandemic.

Alphabet Notes Gradual Improvement

A company spokesman disclosed that ad revenue ‘gradually improved’ during the quarter but cautioned that it was too early to gauge the uptick’s resilience. Google Cloud revenue lifted an impressive 43% year-over-year, partially offsetting the impact of advertising losses, while monthly-based subscription services booked strong growth in user interaction. Alphabet also authorized an additional $28 billion in Class C stock buybacks.

CEO Sundar Pichai expressed caution about the 2021 outlook but noted “we saw the early signs of stabilization as users returned to commercial activity online.” He pointed to “good traction” in YouTube and Google Play subscriptions, with app and game downloads rising 35%, while the Cloud segment added an impressive list of new clients that include Deutsche Bank. Pichai also added that “customers are choosing Google Cloud to either lower their costs by improving operating efficiency, or to drive innovation.”

Wall Street And Technical Outlook

Wall Street consensus remains highly bullish despite the mediocre quarter, with a ‘Strong Buy’ rating based upon 30 ‘Buy’ and just 2 ‘Hold’ recommendations. No analysts are telling shareholders to take profits and move to the sidelines at this time. Current price targets range from a low of $1,500 to a street-high $1,990 while the stock closed Friday’s session $2 below the low target. This depressed placement suggests that Alphabet is over-valued at this time.

Alphabet failed a breakout above the February high on nearly three-times average daily volume after the release and is now wedged between resistance at 1,530 and moving average support at 1,460. A breakout through either end of this narrow trading range could gather steam, lifting the stock to an all-time high or starting the next leg of an intermediate correction that could reach 1,350 before attracting committed buying interest.

 

 

Apple Could Top Out After Stock Split

Dow component Apple Inc. (AAPL) is trading at an all-time high above 445 on Thursday after a dramatic breakout, triggered by blowout fiscal Q3 2020 results. The tech icon earned $2.58 per-share during the quarter, $0.51 better than estimates, while revenue rose 10.9% year-over-year to $59.69 billion, beating $52.56 billion consensus by a wide margin. Double digit growth in iPads, Macs, and wearables underpinned the bullish metrics while iPhone revenue rose 1.5% year-over-year to $26.4 billion, better than $22.0 billion consensus.

Apple Declares 4-For-1 Stock Split

The company declared a 4-for-1 stock split for investors of record at the close on August 24. The news surprised Wall Street veterans because this formerly-common practice has been abandoned in the last 20 years, in favor of buybacks and higher prices to attract more desirable institutional ownership. The recent explosion in commission-free accounts has apparently forced a paradigm shift, with younger, under-capitalized traders favoring cheaper stocks.

CFO Luca Maestri took note of the historic results, proclaiming “our second quarter performance was strong evidence of Apple’s ability to innovate and execute during challenging times. The record business results drove our active installed base of devices to an all-time high in all of our geographic segments and all major product categories. We grew EPS by 18% and generated operating cash flow of $16.3 billion during the quarter … a record for both metrics.”

Wall Street And Technical Outlook

Wall Street consensus is less bullish than might be expected, with a ‘Moderate Buy’ rating based upon 23 ‘Buy’ and 6 ‘Hold’ recommendations. Two analysts now think the stock is over-priced and are telling shareholders take profits and move to the sidelines. Price targets currently range from a low of $295 to a street-high $500 while the stock is now trading about $18 above the median $427 target. These metrics may presage a major top after the split date later this month.

Apple broke out above the 2018 high at 233 in October 2019 and has nearly doubled in price since that time, setting off long-term overbought technical readings. That hasn’t stopped the stock from gaining ground but is warning new shareholders the uptrend is getting ‘long-in-the-tooth. In addition, the rally has now stretched twice the length of the first quarter selloff, reaching an harmonic Fibonacci extension that favors a reversal lasting weeks or months.

Procter & Gamble Breaks Out To All Time-High

Dow component Procter & Gamble Co. (PG) broke out to an all-time high last week after beating top and bottom line Q4 2020 estimates and guiding fiscal year 2021 earnings-per-share (EPS) above consensus. The household goods giant reported a profit of $1.16 per-share on a 3.5% year-over-year revenue increase to $17.7 billion, underpinned by strong demand for household cleaning, personal health, and cleansing products in the U.S.A. and China.

Procter & Gamble Higher Sales Due To Pandemic

Organic sales rose 6% during the quarter, with the home care segment that includes Tide and Comet cleaning products reporting impressive 14% year-over-year growth. Procter & Gamble’s health care segment lagged badly, booking sales of just 2% after Crest and Oral-B products generated limp growth as a result of retail, electronic, and dental office closures. The company also noted single-digit declines in Gillette and Venus products, insisting that many customers are shaving less often as a result of the pandemic.

CEO David Taylor discussed strong tailwinds in a post-release interview, predicting “there may be a long-term increase focused on the home — more time at home, more meals at home — with related consumption impacts.” However, COO Jon Moeller followed up Taylor’s upbeat commentary, warning the pandemic will dictate trends in the next two years, stating “we’ll likely be operating without a vaccine or advanced therapeutics through fiscal 2021”.

Wall Street And Technical Outlook

Wall Street consensus rates the stock as a ‘Moderate Buy’ based upon 8 ‘Buy’ and 3 ‘Hold’ rankings. No analysts are recommending that shareholders sell their positions and move to the sidelines at this time.  Price targets currently range from a low of $125 to a street-high $153 while the stock has opened Wednesday’s U.S. session about $8 below the median $142 target. This placement suggests that additional gains are likely in coming weeks.

Proctor & Gamble is trading at an all-time high in the 130s after breaking out above the February 2020 high. However, accumulation readings have failed to match bullish price action and are slumping just above the midpoint of the major distribution wave posted between February and June.  In turn, this predicts the rally will stall soon and ease into a holding pattern that tests new support before yielding sizable upside, or a failed breakout.

eBay Could Roll Over Into Intermediate Correction

eBay Inc. (EBAY) sold off 3.1% after last week’s Q2 2020 earnings report, despite beating estimates and guiding Q3 and fiscal year above already-aggressive consensus. The stock has since regained those losses but dwindling volume lowers odds it will challenge the July 13th all-time high at 61.06, at least in the short-term. The apathetic tape also indicates that overbought technical readings are taking hold, raising odds for a long-overdue downturn.

eBay Takes Market Share From Competitors

The e-commerce giant has booked impressive market share gains in the digital retail space as a result of the COVID-19 pandemic. Investors and traders have taken note, more than doubling the stock price since the March low while posting a 57% return in 2020. These outsized gains have raised legitimate doubts about valuation while lifting relative strength oscillators into the most overbought levels in the company’s 22-year public history.

In addition to growing technical challenges, eBay got into hot water in June after the U.S. Attorney’s office in Massachusetts indicted former employees for an alleged cyberstalking campaign that targeted the publisher and editor of a newsletter who wrote critical comments. Early evidence suggests that senior executives were involved in the diabolical decision-making, raising the potential for bearish headlines when testimony is taken later this year.

Wall Street And Technical Outlook

Wall Street rates eBay as a ‘Moderate Buy’, based upon 11 ‘Buy’, 16 ‘Hold’, and 1 ‘Sell’ recommendation. That’s positively bearish compared to other e-commerce plays, suggesting that many analysts think the company is now overvalued. Price targets currently range from a low of $52 to a street-high $82 while the stock is trading $6 below the median $62 target. This placement indicates that price could add additional points with ease, despite growing headwinds.

Technically speaking, eBay has fired on all cylinders since breaking out above 2018 resistance at 46.99 in June. The rally has added 10 points since that time while accumulation readings continue to support higher prices. However, a distribution wave that started in July may be picking up steam, perhaps setting the stage for an intermediate correction that offers a low-risk buying opportunity near the breakout level.

What To Expect After Walt Disney Earnings

Walt Disney Co. (DIS) reports fiscal Q3 2020 earnings after Tuesday’s closing bell in the United States, with analysts expecting a loss of $0.64 per-share on $12.48 billion in revenue. The stock tread water after missing Q2 profit estimates by a wide margin in May, with shareholders hanging tough as soon as the company reported outstanding subscription growth in the Disney+ streaming service. It’s now trading 15% higher but still below levels broken in the first quarter.

Walt Disney Reopens Florida Theme Park

The Disney World Resort in Orlando, Florida reopened in July, right at ground zero in the U.S.A.’s COVID-19 summer spike. Anecdotal evidence suggests that out-of-state visitors are avoiding the park like the plague but the entertainment giant has offered few specifics. As a result, Wall Street analysts will be listening closely to Tuesday’s conference call, trying to gauge the success or failure of the questionable initiative.

Theme parks are just one of many divisions impacted by the pandemic, with the majority of film production still shut down, forcing Walt Disney to delay the filming of new Star Wars, Marvel, and Pixar movies. The ESPN sports division is struggling as well, with MLB games delayed due to team outbreaks that threaten to derail an abbreviated 60-game season. And, of course, no one expects Disney cruise ships to sail again before the second quarter of 2021.

Wall Street And Technical Outlook

Wall Street Consensus remains highly guarded, with a ‘Hold’ rating based upon 7 ‘Buy’ and 12 ‘Hold’ recommendations. Two analysts believe that shareholders should consider moving to the sidelines at this time. Price targets currently range from a low of $85 to a street-high $146 while the stock is trading $4 below the median $120 target. It’s possible another blowout quarter in Disney+ subscriptions could lift sentiment enough to reach the median target.

Walt Disney is holding up relatively well, given multiple headwinds, oscillating just below the 200-day moving average at 120. Buying pressure eased in June after an oversold impulse, with holding patterns pointing to a wait-and-see attitude by shareholders. A destructive second pandemic wave this fall and winter could shake that faith, generating an exodus that brings the first quarter low back into play.

Starbucks Could Test March Low

Starbucks Corp. (SBUX) rallied 3.7% on Wednesday after beating fiscal Q3 2020 consensus estimates but still lost $0.46 per-share on $4.22 billion in revenue, a staggering 38.1% decline compared to the same quarter in 2019. The company reported weakness all across the world, with revenue at the Global and Americas divisions dropping around 40%. Higher individual sales eased the bearish results but it wasn’t enough to lift earnings into the green.

Starbucks Vulnerable To Second Wave

The coffee giant now expects a fiscal year revenue decline of 10% to 15%, which forecasts a major sales uptick between now and year’s end. The positive guidance seems unrealistic, given the current path of the COVID-19 pandemic and likelihood of a second wave in the Northern Hemisphere this winter. Valuation could take a major hit in 2021 if sales continue to fall, sending the stock price to much lower levels.

Telsey Advisory Group analyst Bob Derrington recently lowered his target and discussed the long-term outlook, noting management was attempting to “restore and build confidence” by accelerating roll-outs of mobile order pay systems. He also outlined realignment initiatives for the new environment, indicating the retailer will “optimize its global store portfolio, including accelerated development of its smaller, more efficient pick-up stores and suburban drive-thru locations, and the closure of up to 400 urban cafes in the U.S. and 200 in Canada.”

Wall Street And Technical Outlook

Wall Street currently rates Starbucks as a ‘Moderate Buy’, based upon 10 ‘Buy’ and 14 ‘Hold’ recommendations. No analysts are recommending that shareholders sell their positions at this time. Price targets currently range from a low of $73 to a street-high $95 while the stock closed Friday’s U.S. session about $7 below the median $83 target. This placement suggests that higher sales will be needed to generate upside but that doesn’t seem likely in the third quarter.

Starbucks posted an all-time high near 100 in August 2019 and completed a double top breakdown in February 2020, establishing strong resistance in the low-80s. The stock sold off to a 19-month low in March and reversed at new resistance in June, easing into a holding pattern below that critical level. While a breakout will improve the technical outlook, the stock is trading perilously close to support at 71, with a breakdown raising odds for a decline into the March low.

 

 

 

What To Expect After Amazon.Com Earnings

Amazon.Com Inc. (AMZN) reports Q2 2020 earnings after Thursday’s closing bell in the United States, with Wall Street analysts looking for the e-commerce behemoth to report $1.62 earnings-per-share (EPS) on a staggering $81.3 billion in revenue. The stock fell 7.6% after missing Q1 profit estimates and lowering Q2 operating income guidance in April, but bottomed out quickly and rallied 30% into Wednesday’s close at 3,033.

Amazon.Com CEO Grilled By Congress

CEO Jeff Bezos and other big tech executives appeared before Congress on Wednesday and got grilled about allegedly monopolistic practices. Bezos denied the charges, insisting the company was competing against a host of large players. He also noted that Amazon accounts for less than 1% of the $25 trillion global retail market and less than 4% of retail in the United States. Finally, he claimed the company has done a good deed by inviting 3rd party retailers to participate, advising “we could have kept this valuable real estate to ourselves”.

BMO Markets analyst Daniel Salmon raised his Amazon.Com price target from $2850 to $3500 ahead of the release, noting “we believe AMZN’s long-term opportunity is stronger than ever and we continue to see outperformance over the next 12 months. But per CEO Bezos, you may want to take a seat, because [they] are not thinking small and we are cautious into the print, owing to recent stock outperformance and the potential for significant new investment spending.”

Wall Street And Technical Outlook

Wall Street rates the stock as a ‘Strong Buy’, based upon an astounding 36 ‘Buy’ and just 2 ‘Hold’ recommendations. No analysts are recommending that shareholders sell their positions and move to the sidelines at this time. Price targets currently range from a low of $2,162 to a street-high $3,800 while the stock is trading close to $200 below the median $3,200 target. This positioning favors higher prices after a strong report and bullish guidance.

Technically speaking, Amazon.Com is showing signs of fatigue after an historic uptrend underpinned by COVID-19 tailwinds. The stock has gained more than 50% since breaking out above 2018 resistance at 2,000 in March, setting off extremely overbought relative strength readings that now favor a consolidation of gains, rather than quick assault on 3,500. This pullback may have already begun, with steady profit-taking since the July 13 high at 3,344.

 

 

General Motors Trading Higher Despite Horrific Quarter

General Motors Co. (GM) is trading higher ahead of Wednesday’s U.S. opening bell after posting a loss of $0.50 per-share, beating estimates by an impressive $1.26. Revenues matched expectations at $16.8 billion, which marked a stomach-churning 53.4% year-over-year decline.  U.S. sales fell 34% compared to the same quarter in 2019 but improved sequentially between April and June, rising from a 35% to 20% decline at quarter’s end.

General Motors Cyclical Downturn

Traditional auto manufacturers were under pressure prior to the COVID-19 pandemic, with slumping comparative sales raising fears of a cyclical downturn. The outbreak has confirmed those suspicions, with most automakers reporting steep declines. Tesla Inc. (TSLA) has been a notable exception in this equation, but the EV upstart could face similar headwinds when mass production ramps up in coming years.

Chief Financial Officer Dhivya Suryadevara pointed out strong demand for trucks in a post-release interview, noting tight inventories in this successful product line. He stated the automaker should be able to repay some debt in the second half of the year, lowering anxiety about liquidity that’s taken a hit in the crisis. The CFO also pointed out the sequential improvement but wrapped up his comments by warning the ‘situation with COVID-19 is very fluid”.

Wall Street And Technical Outlook

Wall Street consensus rates the stock as a ‘Moderate Buy’, based upon 8 ‘Buy’, 3 ‘Hold’, and 1 ‘Sell’ recommendations. Price targets currently range from a low of $15 to a street-high $39 while the stock will open this morning’s session about $3 below the median $30 target. Upside appears limited despite the ‘buy-the-news’ reaction because short covering is probably driving this uptick, rather than investors coming off the sidelines in reaction to a more bullish outlook.

General Motors has underperformed broad benchmarks since posting an all-time high in the 40s in October 2017, caught in a decline that broke 2015 support in the first quarter downdraft. The stock remounted that level in May and stalled out, entering a testing process that’s still in progress, despite this morning’s uptick. It will now take about 5 upside points to confirm support and set the stage for another rally wave.  That seems unlikely without much stronger quarterly revenues.

What To Expect After Facebook Earnings

Facebook Inc. (FB) reports Q2 2020 earnings after the July 30th closing bell in the United States, with Wall Street analysts looking for a profit of $1.38 per-share on $17.35 billion in revenue. The stock rose 5.1% after meeting Q1 estimates in April and then added another 21% into this morning’s opening print near 233. The company has chosen not to provide Q2 or fiscal year guidance due to the ongoing impact of the COVID-19 pandemic.

Facebook Held Back By Political Headwinds

The stock has struggled since May, with growing political headwinds persuading on-the-fence investors to stand aside for now. Activists have been pushing for an advertising boycott in the last few weeks, chastising the social media giant for publishing discredited reports and conspiracy theories, mostly from the right wing. It’s also faces Congressional scrutiny about monopolistic practices, with CEO Mark Zuckerberg and other high tech executives called to a Wednesday committee hearing.

Florida Republican Congressman Matt Gaetz filed a criminal referral against Facebook earlier this week, citing alleged censorship directed against conservatives. Gaertz insists that “Mr. Zuckerberg repeatedly and categorically denied his company engaged in bias against conservative speech, persons, policies, or politics and also denied that Facebook censored and suppressed content supportive of President Donald Trump and other conservatives.”

Wall Street And Technical Outlook

The string of controversies hasn’t fazed Wall Street, which rates the stock as a ‘Strong Buy’, based upon 30 ‘Buy’ and 4 ‘Hold’ recommendations. No analysts are advising shareholders to sell their positions at this time. Price targets currently range from a low of $185 to a street-high $305 while the stock is trading more than $25 below the median $259 target. This placement bodes well for additional upside if the company can shake off persistent political pressures.

Technically speaking, Facebook broke out above two-year resistance around 220 in May and stalled above 240 just one week later, easing into a sideways pattern that’s posted 4 failed breakout attempts into July. Selling pressure is now increasing, favoring a bearish reaction if quarterly results fail to top modest expectations. Short-term sentiment may also come into play on Thursday if Zuckerberg’s Wednesday testimony sets of a new round of controversies.

Lockheed Martin In Holding Pattern Ahead Of U.S. Election

Lockheed Martin Corp. (LMT) is the world’s largest defense contractor, with the highly-popular but hugely-expensive F-35 fighter and THAAD anti-ballistic weapons system providing the fair share of total annual income. The blue chip manufacturer reported solid Q2 2020 earnings results last week, beating top and ottom line estimates while lowering fiscal year 2020 consensus as a result of supply disruptions, due to the COVID-19 pandemic.

Lockheed Martin Dependent On Military Contracts

The mega-cap depends on massive Congressional budgets to fulfill Pentagon wish lists, as well as lucrative foreign contracts with allied nations that include Israel, Saudi Arabia, and Japan. While Republicans have been recognized as military hawks for decades, defense budgets have rarely been reduced during Democratic administrations, lowering odds the November election will disrupt the nearly-continuous supply of new work orders.

Lockheed Martin named Jim Taiclet as CEO in June, succeeding Marillyn A. Hewson. Taiclet outlined company strengths, stating “I’ve seen first-hand much of the incredible work across this corporation providing the tools for a strong national defense and advancing scientific progress”. He then added a patriotic but self-serving note, remarking “it’s about doing something important for the frontline men and women that have to defend us. They deserve the best equipment, the highest technology, something better than our adversaries are going to have.”

Wall Street And Technical Outlook

Wall Street currently rates the stock as a ‘Moderate Buy’, calculated from 6 ‘Buy’ and 5 ‘Hold’ recommendations. No analysts are recommending that shareholders close out positions and move to the sidelines at this time. Price targets range from a low of $395 to a street-high $475 while shares are now trading $13 under the low target and $41 under the median $424 target. This humble placement bodes well for higher prices in coming months.

Lockheed Martin has been engaged in a strong uptrend since the first quarter of 2013, rallying more than 500% into February’s all-time high at 442. The stock failed a breakout above the 2018 high at 363 in the first quarter swoon but has now remounted that broken level, reinstating the bullish long-term outlook. While the rally could eventually lift well above the 500 level, the U.S. presidential election may limit gains between now and November.

American Express Could Sell Off To March Low

Dow component American Express Co. (AXP) reported mixed Q2 2020 results last week, with $0.29 per-share (EPS) beating profit estimates, while revenue of $7.67 billion fell well short of $8.25 billion expectations. Revenue contracted a staggering 29.2% year-over-year, undermined by the ongoing impact of the COVID-19 pandemic. The release triggered a modest sell-the-news reaction, dropping the stock 1.4% to a 2-week low.

American Express Heavily Exposed To Business Travel

The travel services giant has been pummeled by the pandemic, losing significant income since corporations worldwide stopped business travel in the first quarter and sent employees home to work through virtual meeting spaces. Many industry experts now believe that many of Amex’s blue chip customers will remain sidelined well after the infection runs its course, addicted to the lower costs of conducting business digitally, rather than in person.

Executives summed up the tough quarter, noting “while our second quarter results reflect the challenges of the current environment, we remain confident that our strategy for navigating this period of uncertainty is the right one. Our customers continue to be engaged with our products and services; we have a productive and dedicated workforce; our capital and liquidity levels remain strong; and we continue to focus on those areas most critical to our long-term growth.”

Wall Street And Technical Outlook

Wall Street consensus has grown increasing cautious on American Express in the last two months, unlike Mastercard Inc. (MA) and Visa Inc. (V), who have continued to book significant income through high volumes of digital transactions. It’s currently rated as a ‘Hold’, based upon 6 ‘Buy’ and 9 ‘Hold’ recommendations. Three analysts are now telling shareholders it makes sense to sell positions and move to the sidelines. Price targets range from a low of $85 to a street high $119 while the stock is trading about $6 below the median $101 target.

Technically-speaking, there’s little to love about American Express, which looks like a better short sale opportunity than long-term investment through the second half of 2020. It posted an all-time high in January, fell more than 50% into March, and reversed at the 200-day moving average in June, settling in the lower half of the 6-month range. Ominously, accumulation readings have dropped to depressed March levels, predicting that price may soon follow.

Micron Technology Could Test Bull Market High

Micron Technology Inc. (MU) beat fiscal Q3 2020 estimates at the end of June, earning $0.82 per-share while revenues rose 13.6% to $5.44 billion. The memory chip giant capped off the bullish presentation by guiding Q4 EPS and revenues above consensus, even though the company admitted that 2020 demand for smartphones, consumer electronics, and automobiles has been reduced by the COVID-19 pandemic.

Micron Technology Benefiting From Secular Trends

PHLX Semiconductor Index has outperformed broad benchmarks by a wide margin so far in 2020, completing a round trip into the first quarter high in June. It broke out at month’s end and has added to gains at a steady pace in the last three weeks, posting an all-time high above 2,100. Advanced Micro Devices Inc. (AMD), NVIDIA Corp. (NVDA), and other widely-held chip stocks have underpinned the upside, which is showing no signs of rolling over.

Needham raised their Micron Technology price target from $63 to $70 after the news, with analyst Rajvindra Gill commenting that MU expects, “data center demand to remain healthy and mobile to continue to improve”. He also notes that “although we acknowledge that near-term visibility across end markets is limited due to COVID-19 & macro uncertainties, we view MU as a key beneficiary of secular trends of higher memory content in 5G handsets and data center demand.”

Wall Street And Technical Outlook

Wall Street has grown increasing bullish since the earnings report, lifting the consensus rating to ‘Moderate Buy’, based upon 18 ‘Buy’ and 7 ‘Hold’ recommendations. Just a single analyst now recommends that shareholders sell their positions and move to the sidelines. Price targets range from a low of $35 to a street high $100 while the stock is now trading more than $12 under the median $66 target. This placement bodes well for higher prices in coming months.

Micron Technology has been rangebound since posting an 18-year high in the mid-60s in the second quarter of 2018. It sold off into the upper 20s at year’s end and has been trading between those boundaries for the last 19 months. The stock has recouped about two-thirds of the losses posted in the first quarter and is now carving a bullish consolidation on top of the 200-day moving average, indicating a small catalyst could ignite a rally up to range resistance.

Las Vegas Sands Looks Overpriced Ahead Of Earnings

Macao and Las Vegas resort operator Las Vegas Sands Inc. (LVS) reports Q2 2020 earnings after the U.S. closing bell on Wednesday, with analysts expecting a $0.73 loss on $549.0 million in revenue. That would mark a stomach-churning 80% year-over-year decline as a result of historic headwinds, driven by the worldwide pandemic. Companies with Macao exposure have been hit harder than domestic-only operations so far in 2020 because the Wuhan outbreak impacted the sector well before COVID-19 struck the United States and Europe.

Las Vegas Sands Vulnerable To Downside Surprise

65% of company revenue is booked through Macao while Las Vegas operations comprise just 12% of revenues. Both venues have reopened but Las Vegas traffic has been hurt badly by the resurgence in Nevada COVID-19 infections, with daily positives hitting an all-time high just last week. Given the adverse environment, current consensus may be understating the negative impact to second quarter earnings, raising the potential for a downside surprise.

Las Vegas Sands CEO Sheldon G. Adelson commented about reopening efforts following shutdowns in Macao, Las Vegas, and other key properties, noting “I remain extremely bullish about the future of our company and its growth prospects. We operate best-in-class properties in the leading markets in our industry and we are currently executing significant investment programs in both Macao and Singapore to create meaningful new growth from our existing portfolio”.

Wall Street And Technical Outlook

Wall Street currently rates Las Vegas Sands as a ‘Strong Buy’, based upon 9 ‘Buy’ and 3 ‘Hold’ recommendations. No analysts are recommending that shareholders close out positions at this time. Price targets range from a low of $48 to a street high $67 while the stock is now trading within a few cents of the low target. All in all, these ratings look over-optimistic, failing to account for growing infections and the likelihood of a second wave in China this winter.

The stock topped out in 2018 at a 4-year high in the 80s and sold off into the upper 40s in 2019. It broke that trading floor in the first quarter of 2020 and dropped to the lowest low since 2010, highlighting extensive technical damage. A bounce into June stalled at the broken 2019 support, yielding nearly 7 weeks of sideways action that’s failed to mount the formidable barrier. As a result, it’s the price level to watch if tonight’s earnings generate a ‘buy-the-news’ reaction.

Bank of America Struggling To Hold Above March Low

Bank of America Corp. (BAC) sold off despite beating Q2 2020 estimates last week and is now trading just 6 points or so above March’s 3-year low. Revenue fell 3.5% year-over-year to $22.3 billion while credit loss provisions rose to $5.1 billion, which includes a $4.0 billion reserve build for future bad loans as a result of the COVID-19 pandemic. Net interest income fell 11% due to lower rates that have made it harder for commercial banks to book consistent profits.

Bank Of America Sector Headwinds

Rivals haven’t fared much better during earnings season, with shareholders walking away from banking stocks, due to growing fears about a protracted recession that dampens business activity for months to come. 2019’s historic drop in bond yields stoked growing sector headwinds, which have escalated to hurricane force due to the Federal Reserve’s multi-trillion dollar stimulus program, which has raised the specter of negative interest rates.

DA Davidson analyst David Konrad highlighted banking industry challenges when he downgraded Bank of America earlier this month, lowering his price target from $27 to $25. He noted the company’s strong balance sheet and comparatively low risk profile but warned those risk constraints could undermine quarterly results. He also stressed collapsing LIBOR spreads in the adverse rate environment, negatively impacting the sector’s net interest income outlook.

Wall Street And Technical Outlook

Wall Street consensus currently rates the stock as a ‘Moderate buy’, computed from 5 ‘Buy’ and 5 ‘Hold’ recommendations. One analyst recommends that shareholders close out positions at this time. Price targets range from a low of $21 to a street high $41 while the stock is now trading less than $4 under the median $ 27.70 target.  The proximity of current price to the median and lack of bullish catalysts suggests limited upside potential.

Bank of America broke out above 2018 resistance in the fourth quarter of 2019 and topped out at a 12-year high in the mid-30s in December. It’s been all downhill since that time, failing the breakout during the first quarter rout. The stock has booked limited upside in the last 4 months while accumulation has barely budged. None of this bodes well for the technical outlook, raising odds the stock will test the downtrend low in coming months.

 

Twitter Trading Higher Ahead Of July 23 Earnings

Twitter Inc. (TWTR) is inching toward the February 2020 high in the upper 30s in Monday’s U.S. session, as speculators place their bets ahead of the July 23rd Q2 2020 earnings release. The stock fell nearly 8% after missing Q1 2020 profit estimates in April, when the company disclosed that advertising revenue fell 27% in the last three weeks of March, as a result of the COVID-19 pandemic. It bottomed out quickly and has risen nearly 30% since that time.

D.C. Critics Take Aim At Twitter

The uptick comes less than two weeks after a report the social media giant is getting ready to build a subscription service that could significantly reduce spam, bots, trolls, and other user distractions. Growing disputes with the Oval Office have dampened renewed buying interest to some extent, with the President and members of Congress complaining that Twitter and Facebook Inc. (FB) are exhibiting bias against conservative opinions.

A July job listing on the Twitter site appears to confirm the initiative, declaring “we are a new team, codenamed Gryphon. We are building a subscription platform, one that can be reused by other teams in the future. This is a first for Twitter! Gryphon is a team of web engineers who are closely collaborating with the Payments team and the Twitter.com.” The company has neither confirmed nor denied the contents of the listing.

Wall Street And Technical Outlook

The news hasn’t impacted cautionary Wall Street consensus in the last two weeks, with a ‘Hold’ recommendation computed from 5 ‘Buy’, 19 ‘Hold’, and 2 ‘Sell’ ratings. If confirmed at this week’s earning’s release, the subscription platform is likely to lift a number of Hold ratings into the Buy column, adding to rally momentum. Price targets currently range from a low of $23 to a street high $43, while the stock is now trading $4 above the median $31 target.

Technical speaking, Twitter could easily add to recent gains and lift into 2019 resistance at 45.85. That price level also marks the 2013 initial public offering’s first trade, which has acted as resistance since a 2014 breakdown. A breakout above that barrier could have a highly-positive impact on sentiment, perhaps allowing this perennial laggard to finally break out of a multiyear range and post new highs.

 

 

JPMorgan Chase Struggling In Adverse Economic Environment

Dow component and financial giant JPMorgan Chase and Co. (JPM) beat Q2 2020 profit estimates by $0.15 last week, reporting $1.43 earnings-per-share on $33.8 billion in revenues. Revenues rose a healthy 14.7% year-over-year but provisions for credit losses lifted to $10.5 billion, offsetting otherwise strong metrics during a period in which many business segments benefited from post-shutdown reopening efforts.

JPMorgan Chase Rising Credit Losses

U.S. banks have performed poorly so far in 2020, with the S&P Banks Select Industry Index dropping more than 34%, despite bouncing off a multiyear low in March. Twin headwinds of plummeting interest rates and slumping business activity have underpinned this weak performance, which may continue well into 2021. The recent surge in U.S. COVID-19 cases has added a third roadblock, renewing fears of a long and deep recession.

JP Morgan Chase CEO Jamie Dimon stressed the challenging environment in the earnings release, admitting “we still face much uncertainty regarding the future path of the economy. However, we are prepared for all eventualities as our fortress balance sheet allows us to remain a port in the storm. We ended the quarter with massive loss-absorbing capacity, over $34 billion of credit reserves and total liquidity resources of $1.5 trillion, on top of $191 billion of CET1 capital, with significant earnings power that would allow us to absorb even more credit reserves.”

Wall Street And Technical Outlook

Wall Street consensus currently rates the stock as a ‘Moderate Buy’, underpinned by 9 ‘Buy’ and 5 ‘Hold’ recommendations. No analysts are recommending that shareholders sell their positions at this time. This optimism seems unwarranted, given the banking sector’s laggard behavior this year, suggesting that downgrades may increase in coming months. Price targets range from a low of $97 to a street high $122 while the stock is now trading just $3 above the low target.

JP Morgan Chase has outperformed its peers since 2009, breaking out in October 2019 and posting an all-time high above 140 at the start of 2020. It then sold off with world markets, dropping to a 3-year low in the 70s in March. Price action has been crisscrossing the 200-week moving average for almost 5 months now, in a neutral position that’s unlikely to stoke long-term buying interest. Ominously, accumulation has been trending lower since the first quarter of 2018, increasing risk that committed sellers will eventually break the March low.

Citrix Systems Could Report Upside Surprise Next Week

Citrix Systems Inc. (CTXS) has emerged as a top play in the booming virtual meeting sector, rivaling momentum favorite Zoom Video Communications Inc. (ZM). The company beat Q1 2020 top and bottom line estimates by wide margins in April, reporting $1.73 earnings-per-share (EPS) on $860.95 million in revenues. Revenues rose a healthy 19.7% year-over-year, reflecting a major surge in demand driven by the COVID-19 outbreak.

Citrix Systems Rapid Growth

The Nasdaq-100 component booked first quarter gains in nearly all product lines, underpinned by rapid adaption of virtual meeting spaces by corporations and small businesses all around the world. However, the stock lost ground after the company issued mixed Q2 guidance, expecting that reopenings and a return to normalcy after pandemic shutdowns would increase business travel. Of course that hasn’t happened, setting an optimistic tone ahead of the company’s July 23rd earnings report.

Zack’s Equity Research posted a bullish note on Citrix Systems earlier this week, asserting “this cloud computing company has recorded a strong streak of surpassing earnings estimates. The company has topped estimates by 25.44%, on average, in the last two quarters.” They also highlighted a bullish acceleration in upside surprises, noting that “for the most recent quarter, Citrix was expected to post earnings of $1.17 per share, but it reported $1.73 per share instead, representing a surprise of 47.86%.”

Wall Street And Technical Outlook

Wall Street consensus now rates the stock as a ‘Moderate Buy’, computed from 6 ’Buy’ , 7 ‘Hold’, and 1 ‘Sell’ rating. Opinions haven’t changed much between mid-June and mid-July, during which the majority of American states have reported infection spikes. In turn, this lack of coverage raises the potential for fresh upgrades. The stock is now trading just below the median $154 price target and $50 below the street high $200 target. Meanwhile, investors have been scooping up shares, lifting accumulation readings to all-time highs.

Citrix Systems is sold as a rock technically-speaking, breaking out above 18-year resistance in 2018 and posting a healthy string of new highs into May 2020. It’s now trading just 5 points below the rally peak at 155, in a perfect position to break out if it meets or exceeds Q2 earnings estimates next week. There’s plenty of upside potential if that happens, with technically-oriented targets matching Wall Street’s street high $200.

 

Top COVID Play Moderna Reverses After Hitting All-Time High

Moderna Inc. (MRNA) rocketed more than 14% overnight, hitting a 2-month high after the New England Journal of Medicine reported positive results in Phase 1 trials of an investigational vaccine designed to protect against SARS-CoV-2, better known as COVID-19. The former small cap, now valued at $31 billion, has garnered greater interest than dozens of other vaccine-focused biotech and pharmaceutical plays due to encouraging early test results. Investors and speculators have taken note of their progress, lifting the stock more than 400% so far in 2020.

Moderna Encouraging Phase 1 Results

In a Wednesday interview, Moderna Chief Medical Officer Dr. Tal Zaks said the vaccine had produced antibodies that blocked the ability of the virus to enter the cell. More importantly, it’s induced a ‘rapid and strong immune response’, producing antibodies at or above the level of those previously diagnosed with the infection. He indicated the compound was well-tolerated by Phase 1 subjects but admitted a series of ‘adverse events’ that included arm soreness, flu-like symptoms, fatigue, and headache.

According to the U.S. government’s National Institutes of Health, the Phase 1 trial had no participants over the age of 55, which is COVID-19’s most affecting age group, dampening investor enthusiasm after the opening bell. In addition, Moderna has yet to fully evaluate the durability of the immune responses. The company has already begun enrollment in Phase 2 and will launch a Phase 3 efficacy trial later this month. Even so, few analysts or epidemiologists expect a safe and effective commercial vaccine before the start of 2021, at the earliest.

Wall Street And Technical Outlook

Wall Street consensus rates the stock as a ‘Strong Buy’, based upon 14 ‘Buy’ and just 2 ‘Hold’ recommendations. It isn’t surprising that no analysts are recommending that shareholders sell their positions, given massive upside potential. Of course, there’s also tremendous risk in holding this stock because a roadblock or setback could trigger a high percentage decline, especially if the delay provides a time-to-market advantage to a major competitor.

Moderna’s technical outlook looks extremely bullish but biotech plays have the power to ignore classic rules of price action when major catalysts hit the headlines. The stock broke out above the 2019 high near 30 in March and nearly tripled in price into the May at 87.00.  It traded just above that level at the start of Wednesday’s U.S. session, setting its sights toward triple digits. However, heavy speculation routinely attracts ‘weak hands’, raising odds for multiple whipsaws.

Delta Air Lines Bookings Have Stalled Once Again

Delta Air Lines Inc. (DAL) is trading lower in Tuesday’s U.S. session after reporting a Q2 2020 loss of $4.43 per-share, $0.19 worse than consensus estimates. Revenues matched low expectations at $1.47 billion, which marks a stomach-churning 88.3% year-over-year decline. The company warned that bookings have stalled once again after April and May upticks due to the surging pandemic in more than half of the American states.

Delta Air Lines Bookings Stall

Company executives now expect Q3 revenue will be just 20% to 25% of income posted in Q3 2019, adding to a cash burn that’s undermining the balance sheets of nearly all airlines around the world. They also warned that business travel may never return to pre-pandemic levels due to the rapid adoption of virtual meeting spaces by hundreds of corporations. Finally, they announced that middle seats would remain blocked, unlike rivals United Airlines Holdings Inc. (UAL) and American Airlines Group Inc. (AAL).

In a Tuesday interview, CEO Ed Bastian admitted the company will be forced to raise additional capital in the next few months, further diluting current shares. He indicated that cash burn currently stands at $27 million per day but insists the company has at least 19 months of cash left, even if they don’t raise additional capital. Remarkably, Bastian also noted that corporate travel is now less than 5% of total revenue, highlighting the exodus of their most important profit source.

Wall Street And Technical Outlook

Wall Street consensus now rates Delta Air Lines as a ‘Strong Buy’, assembled from 9 ‘Buy’ and 3 ‘Hold’ recommendations. Oddly, no analyst is recommending that shareholders sell their positions at this time. This unbridled optimism seems unwarranted, given obvious industry challenges in the next one to two years. Price targets range from a low of $26 to a street high $47 while the stock is now trading just a few cents below the low target.

Technically speaking, there isn’t much to love about Delta Air Lines, which has struggled to book positive returns since January 2018. It broke down from a multiyear topping pattern in the first quarter and fell to a 7-year low in May while the bounce into June failed to remount a single broken support level. As a result, a decline from the current price could easily reach and break the second quarter low, continuing the developing downtrend.