Tag: STOCKS

MarketBeat.com – MarketBeat

What is dividend yield? It’s an excellent question for budding investors. 

Dividends are one of only two reasons to own stocks and the only reason you can rely on stock to any extent. Dividends are the payments publicly traded companies pay to their investors, and the dividend yield measures how much payment you can expect relative to your investment. 

What is Dividend Yield?

So, to dig in deeper, what is a dividend yield? The dividend yield is more important than the dividend amount and should be the first and last metric when choosing a dividend stock. The dividend amount could be $1,000 per quarter per share, and the yield is only 1% — this doesn’t amount to much and is less than the average S&P 500 stock. Furthermore, shares that yield 1% while paying $4,000 yearly have an astronomical and prohibitively high share price. 

The dividend yield is the rate of return you can expect from a given investment, which is very similar to the yield on a savings account. The difference is that dividend payments and their yields usually pay out at the whim of a board of directors. In this light, a stock that costs $10 and pays a sustainable 5% yield is much more attractive than any dividend stock that pays a mere 1%, no matter how much the payment is in dollars. 

Understanding Dividend Yield

The dividend yield is a stock’s income relative to its share price. Expressed as a percentage, it tells investors what income they can expect from a stock in the future. 

How to Calculate Dividend Yield 

The dividend yield formula is easy to calculate. Here’s how to calculate dividend yield: Divide the annual dividend payment by the stock price and express that as a percentage. For example, a stock that trades for $100 and pays $1 has a 1% yield. 

Pros of Dividend Yield

There are many reasons to own dividend stocks, and here is a short list of the top reasons. You can find top dividend stocks using a dividend stock tool. 

• Income generation: The number one reason to own dividend stocks is to generate income. Dividend stocks pay you to hold them, and you can use dividends to reinvest, pay bills or for other purposes. 
• Enhance total returns: Dividend yield can enhance a portfolio’s total return or the combined gain of capital appreciation and dividend payments. 
• Compounding investments: The dividend yield is great for compounding investments. The distribution amount will increase each quarter if you use dividend payments to purchase more shares. If the distribution grows as well, investors can achieve a double-digit compound annual growth rate (CAGR). 
• Dividend capture strategy: You don’t have to own dividend stocks for more than a day to get the payment. The dividend capture strategy relies on the dividend ex-date vs. the day of record and allows for quick income with less risk. 

Cons of Dividend Yield 

Dividends, as good as they are, have some negative aspects as well, including the following:

• Double taxation: The money used to pay dividends is taxed twice because the company pays taxes on its earnings, and then you pay taxes on your investment gains. This has led to some intense criticism of the tax code, but it is not a reason to avoid dividend stocks. 
• Income vs. growth: Dividend-paying stocks, specifically the blue-chip dividend growth stocks like Dividend Aristocrats and Dividend Kings, are not in a growth phase. You may not see appreciable capital gains while holding them because growth has already occurred or prices into the market. 
• Diversification vs. income: You can get diversification with dividend stocks, but it is more challenging for non-dividend-specific portfolios. 

Example of Dividend Yield

A div yield is the amount of distribution an investor can expect relative to the initial investment. Dividend yield changes over time, along with fluctuations in price. Yield can also be used as a trigger for entering a top dividend stock. 

If a stock pays $3 per share in dividends annually and costs $100 to buy the stock, the yield is 3%. One sector that pays well-known dividends is the consumer staples sector, which yields about 2.35% on average. Stocks within the group have yields that range from 4% or better to under 2%. In some cases, they fall in the 1% range. Remember, it’s not the number of dividend stocks you own; it depends on the quality. 

Evaluating Dividend Yield

The dividend yield is easy to evaluate. The yield of most stocks relates to pertinent data, including the most basic metrics of comparison. After the yield itself, you may be interested in the payout ratio, the CAGR and the number of years of dividend increases. The payout ratio is the amount of earnings a company pays in the form of dividends. 

A higher payout ratio may indicate that a company pays out most of its income to investors. The dividend distribution could change if it needs to buy something or has an unexpected expense pop up. A low payout ratio is better because it means the company retains a large portion of earnings that it can use to strengthen its balance sheet, expand the business or buy back and retire shares. 

The CAGR is the average annual growth over a set time, usually three or five years. A higher CAGR is always better, but the higher the CAGR, the higher the unsustainable growth trajectory. A stock with a 5% CAGR might grow its dividend yearly for many decades at the same pace, while one with a 15% or 20% CAGR should slow increases over time. 

The number of years of increases can also help you make decisions. Stocks with a history of sustained annual increases are usually well-run, and you may rely on them for future payments and dividend increases. 

Finally, you should always check the balance sheet to see if you should worry about excessive debt. Most companies have some debt, but it should be manageable and not involve too much cash flow. 

Some metrics of interest may include the leverage ratio and the coverage ratio. The leverage ratio shows debt relative to equity the company has on the books. Lower debt relative to equity is better — under three times is very good. The coverage ratio tells the company’s ability to service its debt, so higher is better. A company with low debt and a high converge ratio should have plenty of room on the books to pay dividends and increase the distribution. 

Why You Should Use Dividend Yield 

Dividend yield is a valuable tool for investors. It tells you how much income a stock generates, and you can use it to evaluate a stock’s health and even its attractiveness relative to peers. For example, when looking at two stocks that are fundamentally equal in every way, the yield could be a deciding factor. 

If one stock pays more than the other or has a better outlook for distribution growth, then it is most likely the better buy. If the yield is excessively high, it could signal a red flag. You might want to look for a higher payout if it is too low. 

Should You Only Buy Stocks with High Dividend Yield?

High-yield investing is an essential subset of dividend investing. High-yield investors try to maximize their portfolio returns by only focusing on higher-yielding investments. However, first, define “high yield.” High yield could include any stock that pays more than the broad market S&P 500 average. In late 2022, that was about 1.5%, which was less than half the yield on the 10-year treasury at the time. In other cases, high yield may mean choosing the highest-yielding stocks in a sector, regardless of the payout relative to other sectors. 

For others, high-yield investing means targeting stocks with truly high yields — yields above 5% and 10%, in some cases. However, many of the issues on Wall Street that pay those kinds of returns are unsustainable, irregular or erratic, which can lead to excessive volatility and loss of capital. 

High-yield stocks may return capital to shareholders and not pay dividends from profits, causing erosion of shareholder value. Focus on high- or higher-yielding stocks but not necessarily at the slam-dunk win that it looks like at face value. 

Dividends: Why Investors Buy Stocks 

Dividends are one of the most critical aspects of the stock market. Some stocks, like the Dividend Aristocrats and Dividend Kings, have increased their payments yearly for decades. A stock with decades of annual dividend increases has already proven its value and ability to navigate uncertain times.

FAQs

Have questions about dividends and dividend yield? Let’s take a look at some answers to commonly asked dividend questions. 

What does the dividend yield tell you?

The dividend yield tells you the amount of payment a stock distributed to its investors as a percentage of stock price. The higher the yield, the larger the payment relative to the stock price. 

Why is dividend yield important?

The dividend yield is significant because it measures return on investment dollars. The higher the yield, the better, in most cases. 

What is a good dividend yield?

A good dividend yield is one the investor is happy with, and the company can sustain. Steer clear of an unsustainable dividend, no matter the yield. 

MarketBeat.com – MarketBeat

On a day when the broader market soared over 500 points, Lucid Group, Inc. (NASDAQ: LCID) was a notable laggard. Shares of LCID stock fell by less than one percent. But it continues the downward trend for the stock, down 30% in the last month and over 80% in 2022. 

One sore spot for investors is that the company recently completed a previously announced $1.5 billion equity offering. In a capital-intensive business like electric vehicles (EVs), investors have come to expect that start-up companies will need to raise funds as they achieve scalability.  

But when the company announced that one of the stated reasons for the infusion of cash was strengthening its balance sheet, it raised concerns. Specifically because Lucid has delivered some recent victories, one of these was a battery agreement with Panasonic Holdings Corporation (OTCMKTS: PCRFY).  

When an Order Isn’t an Order 

In 2020 and 2021, several EV companies, including Lucid, went public. These companies used one metric to spark investor interest: the number of reservations they had. This represented consumers who had put down a deposit for one of the company’s cars. It also gave companies like Lucid the ability to point to potential revenue. 

But potential orders aren’t the same thing as actual orders. Lucid reports that it will fall significantly short of meeting its full-year goal to deliver 6,000 to 7,000 vehicles. 

And consumers, for reasons that are not entirely clear, are beginning to cancel their orders. In the company’s most recent earnings report, reservations were down by 3,000 vehicles. While not all of those were cancellations, internal emails show that the company is more than a little concerned that cancellations are becoming a concern.  

Should this affect your decision to buy LCID stock? Think about it like this. When company insiders sell their company’s stock, it’s seen as a negative sign. However, there are many reasons insiders may sell a stock, and most of those have nothing to do with their belief in the company’s outlook.  

It’s possible (and I should put that in air quotes) that the same logic applies here. There can be many reasons for customers to cancel their order. Inflation remains high. Job losses are mounting. Depending on how you view it, the economy is already a recession or soon will be. There are many reasons why customers may be canceling a commitment for an EV that will cost north of $100,000.  

But a cancellation is still a cancellation. And that may signal that the EV market is facing supply and demand problems.  

Is EV Adoption the Slam Dunk it Appears to Be? 

Recent advertising suggests that mass EV adoption is already here. That may be closer to reality in major metropolitan areas. I know in my corner of small-town U.S.A., that’s not the case yet. 

Of course, one reason is a lack of available vehicles. But it also goes deeper. Aside from one location for Tesla charging, there is no established charging infrastructure. And that’s not a reality isolated to my small corner of the world. 

Two December news items suggest automakers may also believe this to be the case. First, Toyota Motor Corporation (NYSE: TM) president Akio Toyoda said that there is the silent majority in the auto industry that questions whether the industry should pursue EVs exclusively.  

Second, in its annual survey of 900 automotive executives, KPMG, the international consulting and accounting firm, revealed growing pessimism about EV adoption. This was being enhanced by rising inflation and supply chain concerns.  

However, the survey also said 50% of the executives were still confident that EV adoption would increase significantly by 2030. Toyoda, however, said that Toyota is still avoiding making a firm commitment to the buildout of an all-electric fleet as the right solution has yet to be determined. 

LCID Stock May Still Have Further to Fall 

Depending on your perception, electric vehicle adoption is either taking longer than expected or is right on track. Whichever view you have, it will take many years, if not many decades, for mass EV adoption to be a reality.  

That doesn’t mean LCID stock doesn’t have a path to success. Lucid Group is assembling and delivering vehicles. That’s more than a lot of SPAC companies can say. But it needs many things to go right on both the supply and demand front. And with the stock trading at over 20x sales, it’s more likely to go down than up in a risk-off market. 

MarketBeat.com – MarketBeat

The ongoing saga of meme stock AMC Entertainment Holdings Inc (NYSE: AMC) has captivated traders for the past two years. But its fortunes are linked to those of other companies, such as little-known real estate investment trust EPR Properties (NYSE: EPR). 

AMC shares are down 82% in 2022. 

AMC has been losing money since 2019. Even before the pandemic, ticket sales had been declining attendance. Higher prices for tickets and concession items drove revenue and hid the fact that fewer people were in seats, munching on popcorn and watching the latest action flick.

Earlier this year, theater operator Cineworld Group PLC (OTCMKTS: CNNWF), which owns the Regal chain of movie theaters, filed for Chapter 11 bankruptcy in a Texas court. The filing, which allows a company to operate while restructuring its debt, was an attempt to slash its $5 billion debt burden. 

AMC is in a different position, but it still presents a risk to shareholders and business partners. 

However, because it became a meme stock, AMC could raise cash in the public markets. As a result, it’s been able to save off bankruptcy, but ultimately it’s facing a familiar quandary: Expenses must be less than revenue to run a business efficiently. That’s tough for companies operating capital-intensive brick-and-mortar locations in an industry on the decline.

Declining Revenue Growth

AMC’s year-over revenue has been growing, albeit at decreasing rates, as you can see using MarketBeat earnings data for the company. The 2021 yearly revenue growth rates were easy comparisons over 2020, but that’s no longer the case. Revenue grew 27% in the most recent quarter, down from triple- and quadruple-digit rates in the past five quarters.

Ticket sales fell sharply after Labor Day, but with the holiday moviegoing season upon us, it remains to be seen if AMC can post solid year-over-year gains. Unfortunately, there’s potentially bad news with the much anticipated “Avatar: The Way of Water” underperforming expectations. 

Analyst data compiled by MarketBeat show a “hold” rating on the stock with a price target of $3.72, a downside of 26.19%. 

AMC announced Monday that it had raised $162 million by selling 125.9 million preferred shares. 

While the company is officially maintaining the outlook that 2023 business will outpace this year’s, the company remains mired in debt, which is a warning signal for companies like EPR. 

EPR bills itself as an “experiential REIT” due to its focus on sports, entertainment and cultural properties, as opposed to typical office buildings and self-storage REITs. 

AMC Is Major Tenant

The REIT’s most significant tenant is AMC, whose debt load and decreasing revenue are likely somewhat alarming to EPR’s management team and significant shareholders. 

As it happens, Cineworld is also part of EPR’s holdings. Theaters constitute 41% of EPR’s holdings, meaning it’s a business the REIT takes incredibly seriously. AMC is reportedly EPR’s most significant tenant by revenue. 

When Cineworld announced its bankruptcy, bond rater Fitch addressed EPR’s status. It said, “Fitch Ratings believes that EPR Properties (EPR) maintains ample cushion within our rating sensitivities to withstand potential implications from the recent declaration of Chapter 11 bankruptcy by Cineworld (not rated), parent of EPR’s third largest tenant, Regal Entertainment Group (Regal; not rated), which represented 13.5% of rental revenue at June 30, 2022.” 

Fitch said it didn’t believe theater attendance would regain pre-pandemic levels but expressed confidence that “theatres will remain an important part of movie release schedules.” 

Fitch maintained EPR’s rating of BBB-, which places it at the lower end of investment grade. 

EPR’s share price has held relatively well this year, down just 10.54% year-to-date. As a REIT, it has the added attraction of pass-through income to investors, a benefit in a down market.

For EPR, a way out of a potential decline in movie theater rental revenue would involve greater reliance on other forms of real estate. The company is already headed in that direction. Its second-largest tenant is Topgolf, and in its third-quarter conference call, EPR said it had recently closed on a property in California that it intends to develop as a resort and on property in Colorado to expand an existing alternative.

MarketBeat.com – MarketBeat

Consumer staples giant Kellogg Company (NYSE: K) stock is having a great year, trading up +12% versus the S&P 500 (NYSEARCA: SPY) , which is trading down (-20%) for 2022. The high inflation and an uncertain economic climate have benefited consumer staples companies. Kellogg is well known for its popular cereal and breakfast brands, including Special K, Raisin Bran,  Froot Loops, Eggos, and Pop-Tarts, along with snacks like Pringles and Cheez-It.

It competes with other cereal makers like General Mills, Inc. (NYSE: GIS) and consumer staples producers like Conagra Brands, Inc. (NYSE: CAG), The Hershey Company (NYSE: HSY), and The Kraft Heinz Company (NYSE: KHC). These food processors are all outperforming the S&P 500 in 2022, with year-to-date (YTD) gains ranging from +10% for Kraft Heinz, +11% for Conagra, +12% for Kellogg, +21% for Hershey to a whopping +29% gain for General Mills. In addition, Kellogg carries extra value for shareholders as it will split into three independent public companies in 2023.

Inflation Benefactors

Packaged food makers benefitted from the pandemic as consumers ate at home, especially during lockdowns. This trend became a lifestyle change for many post-pandemic. While rising inflation meant higher costs for ingredients and commodity prices, these manufacturers passed on the costs to consumers by raising prices.

This inevitably added to the bottom line resulting in continued growth during the post-pandemic period with little normalization. However, the recent CPI data shows inflation starting to ease as it fell to 7.1% for November, credited to the aggressive interest rate hikes from the U.S. Federal Reserve. This is good news for consumers but could mean a retracement for consumer staples stocks as investors migrate back into discretionary and technology stocks that have been hit the hardest by high inflation.  

Q3 Fiscal 2022 Earnings Release

On November 3, 2022, Kellogg released its fiscal third-quarter 2022 results for September 2022. The Company reported an adjusted earnings-per-share (EPS) profit of $1.01, excluding non-recurring items, meeting consensus analyst estimates of $0.98. In addition, revenues grew by 8.9% year-over-year (YOY) to $3.95 billion, beating analyst estimates of $3.78 billion.

Kellogg CEO Steve Cahillane commented, “We’re pleased to report another quarter of better-than-expected financial performance and an increase to our outlook for the year. This required navigating effectively through global supply challenges and working to offset cost pressures with productivity and revenue growth management, sustaining momentum in snacks and emerging markets, and continuing to recover inventory and share in North America cereal.”

Upside Guidance

Kellogg issued upside guidance for fiscal full-year 2022 for organic-basis net sales to grow 10%, up from earlier guidance of 7% to 8%. It raised its guidance for adjusted-basis operating profit growth to 6%, up from 4% to 5% earlier. It increased its guidance for adjusted-basis EPS growth to 3% on a currency-neutral basis, up from 2% prior guidance.   

The Spin-Offs in 2023

Kellogg will spin off two divisions in 2023 to form three independent public companies. These will be tax-free distributions. Shareholders will receive shares in the two-spin off entities on a pro-rata basis relative to their Kellogg stock holdings at the record date for each spin-off.

The Global Snacking Co. will be the international producer of cereal and noodles, North American frozen breakfast, and global snacks with $11.4 billion in net sales. Its brands include Kellogg’s Frosted Flakes/Zucaritas, Cheez-It, Pop-Tarts, Special K, Coco-Pops, and Crunchy Nut. Nearly 60% of its net sales are derived from Pringles, Cheez-It, Pop-Tarts, Kellogg’s Rice Krispies Treats, Nutri-Grain, and RXBAR. Almost 10% of its net sales come from noodles sales in Africa. Another 10% comes from its Eggo brand and frozen breakfast products. North America represents half its sales, with emerging markets accounting for 30% and developed international markets for 20%.

The North America Cereal Co. will be a leading cereal company concentrating on the U.S., Canada, and the Caribbean, with $2.4 billion in net sales. The business will focus on ready-to-eat cereal distribution in the U.S., Canada, and the Caribbean. Its brands will include Kellogg’s, Frosted Flakes, Froot Loops, Mini-Wheats, Special K, Raisin Bran, Rice Krispies, Corn Flakes, Kashi, and Bear Naked.

Plant Co., with $340 million in net sales, is its pure plant-based foods company centered around its MorningStar Farms brand seeking to capitalize on solid long-term opportunities concentrating on North America and future expansion internationally.

Trading Range Break

The weekly candlestick chart shows a double top around $77.00 and a trading range between $74.11 and $69.54. The weekly market structure low (MSL) breakout triggers above $74.11. The double top formed when shares collapsed on its earnings release down to a swing low near $68.00.

The weekly 20-period exponential moving average (EMA) sits at $71.78, and the weekly 50-period M.A. sits at $69.62. The weekly stochastic is attempting to bounce up through the 40-band as volume starts to flatten out. Pullback support levels sit at $69.54 weekly 50-period M.A., $68.60, $68.00 swing low, $66.96, $65.60, $64.36, and $62.53.

      

A lot has happened since my stock market (SPY) commentary last week! We nailed the interest rate hike — 50 bps, as everyone expected — and I was right that the dot plot and post-meeting commentary would spoil the party. This has certainly been a market where any bad news can send the market reeling… and that’s exactly what we’re seeing now. Keep reading for a full update on what’s going on….

shutterstock.com – StockNews

(Please enjoy this updated version of my weekly commentary published December 19^th, 2022 from the POWR Growth newsletter).

Despite all of Fed Chair Powell’s messages that there’s “more work to be done” to fight inflation…

Despite all of the warnings from economists and CEOs that a recession is likely in our future…

Despite the mass layoffs and inverting yield curves…

Everyone JUST realized next year is going to be painful. You can see the moment people snapped out of the rose-colored haze they’ve been living in.

Since this is an hourly chart, you can really see how the market reacted as traders digested the news.

Including Monday, the S&P 500 (SPY) has sold off 5% in the four days since Wednesday’s rate hike. Looks like Powell woke up the bears.

And yes, the Federal Reserve’s latest reality check — more on this shortly — is partly to blame for the drop, but we had other forces at work as well.

But I’m getting ahead of myself. Let’s go back to Wednesday, where all this trouble started…

First, the dot plot.

The Fed’s “dot plot” is basically a visual tool that shows where each of the Fed officials believe interest rates will be in the short, mid, and long term. Here’s the September dot plot (left) next to the one from the December 14 meeting (right).

The dots make it plain as day: A number of Fed officials now believe we’re going to have to raise rates even higher… and keep them high for longer.

When the Fed last released these projections in September, they showed forecasts that the fed funds rate would peak between 4.75% and 5.0% sometime in 2023 before slowly coming back down the following years.

Now, we have notably more hawkish projections for rates of 5.1% to 5.4% in 2023 (with some Fed officials forecasting rates as high as 5.5% to 5.75%)…staying above 4% throughout 2024…and then maybe coming further down in 2025.

(Also, I would love to know who that one super hawk is, projecting interest rates of 5.5% to 5.75% THROUGH 2025. Bold.)

Powell’s comments put words to the message painted by the visual — there’s more work to do. A few choice quotes from his post-meeting press conference…

“I would say it’s our judgment today that we’re not in a sufficiently restrictive policy stance yet, which is why we say that we would expect that ongoing hikes will be appropriate.”

“Historical experience cautions strongly against prematurely loosening policy. I wouldn’t see us considering rate cuts until the committee is confident that inflation is moving down to 2% in a sustained way.”

In other words, the Fed’s keeping its foot on the gas, and it’s not letting up until the job is done.

The market ended the day about 0.6% lower.

That’s a solid drop, but I expected a bigger reaction to the increased hawkishness and reminder that the mission was far from accomplished. However, at this point, I’m used to the market brushing off these bearish headwinds.

And while the Federal Reserve’s reality check was partly to blame, there were new forces at work as well.

On Thursday, both the European Central Bank and the Bank of England issued their own rate hikes, along with messages that further tightening is likely.

Lastly, the U.S. retail sales report showed spending dropped in November — not a very promising start to the holiday season. The market reacted accordingly, and dropped 2.5% on the day.

Friday was more of the same. The S&P 500 fell another 1.1% on news that S&P Global’s services PMI fell to a four-month low, while its manufacturing index hit a 31-month low in December.

We saw another notch lower today, with the S&P 500 (SPY) closing down 0.9%.

This has been an extremely bearish period following a historically bullish one. Powell keeps saying there’s still a chance for a “soft landing” where we successfully navigate inflation without triggering a recession, but that’s looking less and less likely.

Even if we do end up in a recession, that’s certainly not the end of the world. Stocks have always recovered their recession losses over time, and I don’t expect that to change now.

Is the road going to be bumpy? Yes.

But those bumps don’t mean we should panic. It just means we have to be nimble. The strategies that outperform going forward won’t necessarily be the same as what worked during the bull market. But here’s something incredible…

Applying POWR Ratings to growth stocks has been a consistent winner through bear markets, bull markets, expansions, recessions, and everything in between. Going all the way back to 1999, this strategy has delivered positive returns in every year but two and has beaten the market by double-digit percentage points every year but one.

It’s like nothing I’ve ever seen. And it’s a good signal we should stay the course. Once we’ve weathered the storm and the clouds start to roll out, we’ll own a portfolio of growth stocks ready to take off as the leaders in the next bull market.

Those are going to be some fun times, y’all!

The bears are awake. But here’s a fun fact… in 2022, the market has had nine other selloffs to rival this four-day 5% drop. And six of those nine times, the market went on to rally about 4% to 6% in the days that followed. Maybe we’ll get that surprise Santa Claus rally after all!

What To Do Next?

See my top stocks for today’s market inside the POWR Growth portfolio.

This exclusive portfolio gets most of its fresh picks from our proven “Top 10 Growth Stocks” strategy which has produced stellar average annual returns of +49.10%.

And yes, it continues to outperform by a wide margin even during this rough and tumble bear market cycle.

If you would like to see the current portfolio of growth stocks, and be alerted to our next timely trades, then consider starting a 30 day trial by clicking the link below.

About POWR Growth newsletter & 30 Day Trial

All the Best!

Meredith Margrave
Chief Growth Strategist, StockNews
Editor, POWR Growth Newsletter

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SPY shares . Year-to-date, SPY has declined -19.06%, versus a % rise in the benchmark S&P 500 index during the same period.

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About the Author: Meredith Margrave

Meredith Margrave has been a noted financial expert and market commentator for the past two decades. She is currently the Editor of the POWR Growth and POWR Stocks Under $10 newsletters. Learn more about Meredith’s background, along with links to her most recent articles.

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MarketBeat.com – MarketBeat

One company that’s been in the headlines lately is Elon Musk’s “other” company Tesla, Inc. (NASDAQ: TSLA). The stock is down 57.35% so far this year, with many analysts attributing at least part of the decline to Musk being distracted with his purchase of Twitter. 

Investors and even politicians are taking notice. 

To some degree, Tesla’s downward trajectory has paralleled the broader auto industry. Still, it’s inescapably true that Tesla’s performance is worse than established automakers such as General Motors Company (NYSE: GM) or Ford Motor Company (NYSE: F), or even some rival EV makers such as China’s BYD Company Limited (OTCMKTS: BYDDF).

Regulatory filings show that on December 14, after the closing bell, Musk sold almost 22 million Tesla shares between December 12 and 14, for a value of $3.58 billion. Many analysts who follow the company believe the proceeds will go toward funding Twitter, which Musk purchased in October. 

There was heavier-than-normal downside trading volume on December 12, 13, and 14. The stock declined 6.27% on December 12, 4.09% on December 13, and 2.58% on December 14.

Big investors are taking notice. Insider selling is just a fact of life for publicly traded companies. Contrary to popular belief, it doesn’t always signal that an insider is acting on secret information that will send lower shares. Executives sell shares for prosaic reasons, such as raising cash to buy a house or fund college tuition. 

Violating Fiduciary Duty? 

But there’s also a corporate governance angle whenever an insider, particularly the CEO, sells large numbers of shares. The CEO’s fiduciary obligation is to the company’s shareholders. If Musk, or any CEO of a public company, takes actions that are to the detriment of other shareholders, that may be violating his fiduciary duty. 

Over the weekend, Indonesian billionaire KoGuan Leo, the third-largest individual owner of Tesla shares, called for Musk to step down from his role as the car maker. 

On Monday, news broke that Massachusetts senator Elizabeth Warren sent a letter to Tesla board chair Robyn Denholm, asserting that Musk’s actions may hurt Tesla shareholders. Warren also raised the question of whether Tesla’s board, which also has a fiduciary duty to shareholders, has been adequately addressing the situation with Musk. In her letter, Warren asked Denholm if Musk had been misappropriating corporate assets and creating conflicts of interest. 

In another twist, Musk asked Twitter users in a poll if they believed he should step down as CEO, saying he would abide by their opinion. Tesla shares initially rose on news that the majority believed Musk should resign as Twitter CEO. Shares pulled into the red about an hour into Monday’s session before rallying again.

Not All The News Is Bad 

To be sure, there’s been some good news for S&P 500 component Tesla recently. 

Bloomberg reported last week that Tesla is planning to build a new manufacturing facility in Mexico. There’s been no announcement yet from the company, and it’s unclear precisely what Tesla plans to build there.

In addition, PepsiCo Inc. (NASDAQ: PEP) is prepping the rollout of 100 Tesla Semi trucks next year. Thirty-six are already in operation. 

MarketBeat analyst data for Tesla show a “hold” rating on the stock. Since November 29, 12 analysts have lowered their price target on Tesla or downgraded their rating. Six boosted their targets or upgraded their rating. One reiterated its “buy” rating. 

On Monday, Oppenheimer downgraded the stock to “market perform” from “outperform.” 

Meanwhile, Wedbush analyst Dan Ives wrote that he expects Musk to step down from his role at Twitter and renew his focus on Tesla. 

Analysts’ consensus price target for Tesla is $264.91, representing a potential upside of 78.23%. That’s certainly a plus for Tesla at the moment, along with Wall Street’s expectation that the company will earn $4.08 per share this year, up 81% from 2022. Next year, that’s seen rising another 40% to $5.72 per share. 

Tesla is a part of the Entrepreneur Index, which tracks some of the largest publicly traded companies founded and run by entrepreneurs.

MarketBeat.com – MarketBeat

It’s been a rough year for many stocks. And that includes several stocks that outperformed the market in 2021. One strategy that forward-thinking investors employ is to look for oversold stocks. One way to identify such stocks is by looking at a stock’s relative strength indicator (RSI). An RSI of 30 or lower indicates a stock that is oversold. However, any number under 50 suggests there could be bearish sentiment.  

The question for investors, however, is which of these stocks are oversold for a reason and which are just oversold? This article looks at five stocks that are down significantly in 2022. Each one has dropped for a reason but gives investors reason to believe there could be a turnaround story in 2023. 

Generac stock is down over 72% in 2022. The company is known for its home generators. But the company supplies a range of products, including power generation equipment and energy storage systems for its residential, light commercial, and industrial customers.  

The concerns about GNRC stock include the threat of competition and the idea that once customers purchase their products, they won’t need to replace them. This has caused investors to sour on the company even though it has beaten earnings estimates for the last four quarters.  

Investors will be watching to see if the company’s revenue and earnings topped out in the second quarter of this year. Still, with the stock trading below pre-pandemic levels, GNRC looks like an oversold stock to buy in 2023. And the analyst community agrees. Of the 23 analysts tracked by MarketBeat, the stock has a consensus price target of $237.10, which is 148% higher than its current price.  

Costco can’t be called the biggest loser of 2022. COST stock is “only” down 18% in 2022. But it’s down 24% from the 52-week (and all-time) high it set earlier this year.  

Like many retailers, Costco is under pressure as investors fear the consumer is running out of steam. In addition, retail numbers for November came in weaker than expected. And analysts are suggesting the holiday season may be more vulnerable than expected.  

The company has been beating on earnings this year, and revenue is up year-over-year. One key for investors to watch will be subscriber retention. So far, this has been no problem for the warehouse club. And if that continues, it will likely allow COST stock to justify its premium valuation. That’s because if consumers continue their membership, they will likely prioritize shopping at Costco (where they can also get gas) above other locations.  

Do you remember when TSLA stock was considered grossly overvalued? It seems like a long time ago, but it was only last year. But in 2022, TSLA stock is down 57% even though the company is profitable and is increasing deliveries and revenue every quarter.  

Yes, there are macroeconomic headwinds in China and the United States. And the stock is also under pressure as founder and CEO Elon Musk has sold a considerable number of shares, ostensibly to help finance his purchase of Twitter. And, oh, by the way, Musk himself was claiming that TSLA stock was overvalued. 

Nevertheless, the bullish case for Tesla comes down to fundamentals. The company has a profit margin nearly double the sector average, and the projections are for solid revenue and earnings growth in the next five years. That means it’s likely that TSLA stock will justify its premium valuation. If it does, buying shares now will be a good investment.  

It’s been a roller coaster ride for shareholders of the medical device maker. Shares plunged at the onset of the pandemic as demand for elective medical procedures cratered. In fairness, investors probably overcorrected to the upside in 2021. But another overcorrection is happening, with the stock down over 25% in 2022. 

There is a legitimate concern regarding product recalls. The company has reported 23 such recalls in the last two years. That compares to an average of five per year in the prior four years. And the company lowered its earnings guidance in its most recent earnings report.  

But once you look past the noise, value investors see a company that has grown its dividend in each of the last 45 years and currently has a yield of over 3.5%. And with MDT, a stock trading at a forward price-to-earnings ratio of 14x, it looks like an excellent choice for income investors.  

The energy sector will remain one of the best sectors for investors in 2023. However, in the short term, many energy stocks are under pressure. For example, NextEra Energy is down 14% for the year, but NEP stock recently sliced through two key moving averages and is now considered oversold based on RSI. 

The name implies that the company is a leader in the renewable energy sector, and it is. But the company’s portfolio also includes approximately 727 miles of natural gas pipelines. This allows the company to generate strong free cash flow. And the company is telling investors that it plans to apply a significant amount of that cash flow to dividend growth in the next few years. 

That means at 14x earnings and with a price target of approximately $85, NEP stock looks like a sound choice for both growth and value investors.  

MarketBeat.com – MarketBeat

Online pet products and services retailer Chewy, Inc. (NASDAQ: CHWY) stock has nearly doubled off its May 23, 2022, low of $22.22. The pandemic helped accelerate e-commerce usage and pet ownership, which are Chewy’s wheelhouse. Once a pet is adopted or acquired, it has essential needs, including food, medicine, and grooming supplies. Gathering these basic supplies can be a tedious chore to handle every month. Chewy has simplified this with its Autoship service that will automatically ship chosen products to pet owners regularly.

Autoship has been an anchor for the Company regarding consistent and stable cash flow. Customers are incentivized to use Autoship with deep discounts. It also whiteboards its PracticeHub platform for veterinarians to provide an e-commerce marketplace solution to grow practice revenues from its customers. Autoship guarantees recurring business from customers. The Company has teamed with Lemonade, Inc. (NASDAQ: LMND) to expand its CarePlus insurance and wellness programs. The Company expects to launch its nationwide Lemonade offerings in spring 2023. Chewy has proven that

Non-Discretionary Spending

Just as consumers need staples and essential items from grocery stores, pets need their form of crucial medications and food. Chewy notes that 83% of its revenues come from non-discretionary products like pet food and health items, while discretionary items like toys are declining (-5%) YoY.

Consumer staples stocks have been good performers this year, but pet staples stocks haven’t been performing as well, as Petco Health and Wellness Company, Inc. (NASDAQ: WOOF) shares are down (-49%) for the year, Wag! Group Co. (NASDAQ: PET) is down (-78%), and PetMed Express. Inc. (NASDAQ: PETS) is down (-28%) for 2022.

Chewy has data that indicates how Autoship customers spend $400 annually in year two and up to $900 annually in year 4. Chewy is also expanding its private label products under its brand Tylee’s, and pet wellness brand Vibeful. In addition, it continues to build its Chewy Health eco-system with services like Connect With a Vet telehealth service and CarePlus pet insurance plans.

Profit Surprise

Chewy released its fiscal Q3 2022 earnings ending October 2022 on Dec. 8, 2022. The Company reported an earnings-per-share profit of $0.01 versus consensus analyst estimates for a loss of (-$0.06), a $0.07 beat. Revenues grew 14.5% year-over-year (YoY) to $2.53 billion, beating consensus estimates for $2.46 billion. Autoship sales rose 18.8% YoY to $1.86 billion, making up 73.3% of total sales. Gross margins expanded 200 bps to 28.4%. The Company ended the quarter with 20.5 million active customers, up 9% over Q3 2019.

Chewy CEO Sumit Singh commented, “Chewy’s third-quarter results showed accelerating double-digit topline growth, sustained gross margin expansion, and solid free cash flow generation. The fact that we are simultaneously driving topline growth and expanding margins is proof of our ability to get big fast and fit fast, regardless of the macro environment.”

Upside Guidance

Chewy issued upside guidance for Q4 2022 revenues to come between $2.63 billion and $2.65 billion versus $2.63 billion. Chewy expects full-year fiscal 2023 revenues of $10.2 billion to $10.4 billion versus $9.95 billion consensus analyst estimates. CEO Singh summed up why Chewy is a recession hedge, “The operating environment remains dynamic and evolving. What hasn’t changed is how much pet parents value their pets’ enduring companionship, and this emotional bond sustains the pet category through all phases of the economic cycle.”

Rising Price Channel Emerges

The weekly candlestick chart on CHWY stock illustrates a new rising channel that formed after making a swing low in October 2022. Additionally, the stock held the weekly market structure low (MSL) buy trigger at $29.79 as it proceeded to form higher highs and higher lows into its Q3 2022 earnings report.

The weekly 20-period exponential moving average (EMA) has now crossed back up through the weekly 50-period MA offering rising support at $39.40. The weekly 50-period MA support sits at $38.76. Trading volume remains elevated, with selling being absorbed in the rising price channel. The weekly stochastic has been oscillating higher and continues up towards the 80-band.

A sloppy weekly seed wave will trigger a break of the double top at $51.57, setting up potential reversal zones (PRZs), which also act as price targets based on Fibonacci (fib) extensions. For example, the 1.27 fib target is $59.88, followed by the 1.44 fib target at $64.15 and the 1.618 fib target at $70.19.

Each of these fib targets is a potential reversal area to be aware of, which is no assurance the stock will continue to the next fib target. If CHWY falls below the rising price channel lower trend line, then pullback supports sit at the $37.05, $33.55, $31.89, $29.79 weekly MSL trigger and $26.47

MarketBeat.com – MarketBeat

Gone are the days when large-cap semiconductor stocks like Nvidia Corporation (NASDAQ: NVDA) and Advanced Micro Devices Inc. (NASDAQ: AMD) were riding high on pandemic-era demand for electronics gear, combined with chip shortages. Industry peer Intel Corporation (NASDAQ: INTC) didn’t fare as well in 2020 and 2021, but what do the prospects for all three look like now? 

These days, chip makers and chip-equipment makers are mediocre performers relative to other industries. 

However, each company’s outlook is quite different in its area of specialization. 

Nvidia is up more than 31% in the past three months, although that rally sputtered in the past month. 

Nvidia specializes in chips for video games and other graphics applications. When it reported third-quarter results in mid-November, revenue exceeded expectations, although the company missed earnings views, MarketBeat data show. 

Sales of $5.931 billion were 17% below the year-ago quarter. As a result, earnings of $0.58 per share were 50% lower. It was the second quarter in a row in which earnings fell year-over-year. 

The company expanded into data-center chips, a business that was dinged by U.S. restrictions on chips exported to China. The cryptocurrency collapse and a decline in crypto mining also hurt the gaming business unit. Covid lockdowns in China also hurt results. 

Since the earnings report, shares have been up 4%. Most of that gain occurred during sessions where the broader market also trended higher. 

Analysts have a “moderate-buy” rating on Nvidia, according to data compiled by MarketBeat. The consensus price target is $205.23, representing a potential upside of 22.78%. 

For the full year, Wall Street sees Nvidia earning $3.27 per share, down 25% from 2021. Next year that’s seen rebounding by 33% to $4.35 per share.

Slower Earnings Growth Ahead?

Advanced Micro Devices, meanwhile, is expected to grow earnings this year and next, although Wall Street sees a more significant bump this year, with growth slowing to just 4% in 2023. 

Despite that, analysts’ price targets for AMD show a consensus target of $99.88, which would be an upside of 52.88%. That may seem very optimistic for a stock that’s declined at a similar rate, 53.77%, this year. Nevertheless, it’s worth noting that stock takes more upside juice to regain its former value.

AMD competes with Nvidia in the market for graphics cards. While Nvidia has been gaining market share, some of that has come at Nvidia’s expense. In addition, AMD has suffered for some of the same reasons Nvidia has. 

On the other hand, while it and Nvidia have seen weakness in data centers in 2022, analysts expect AMD to see strong growth in that line of business. Nvidia is still a formidable competitor, though, as it announced its Grace line CPU Superchips, slated to begin shipping in early 2023.

In addition, Nvidia has the attraction (for some investors) of paying a dividend, something AMD does not yet offer.

Intel’s Long Price Decline

Meanwhile, well-established stalwart Intel declined 44.45% this year, continuing a downdraft that began in April of 2021. This stock completely missed the rallies that Nvidia and AMD staged heading into the final months of 2021. 

In addition, analysts have a dim view of Intel’s earnings growth prospects, forecasting declines of 63% this year and a more subdued drop of 2% in 2023. Intel has reported decreases in net income in six of the past eight quarters, as MarketBeat earnings data show. 

Intel remains the market leader in designing and manufacturing chips for servers and personal computers. It also has a robust data-center business. 

But Intel made several missteps when it came to new business ventures. Those mistakes resulted in the stock’s failure to rally in 2020, while other techs roared back from the initial pandemic-driven meltdown. As a result, revenue growth in the past two years has been scant or non-existent.  

The company’s missteps in recent years included forays into drones, wearables, robotics, virtual reality, self-driving cars, and smart glasses. 

However, last year, the company realized the error of its ways and hired a new CEO, Pat Gelsinger, who had served as a chip designer at Intel. A new CEO can often be a catalyst for renewed growth in stock. Gelsinger has discussed ambitious plans to gain ground on Asian chipmakers and make capital investments in U.S. facilities. 

Of the three companies, Nvidia appears the most suited to notch substantial price gains in 2023, based on analysts’ expectations for the company’s earnings. 

But events such as a new product announcement, a new partnership, or forecasts that exceed expectations always have the potential to send any higher stock than investors or analysts anticipate. 

 

NVIDIA is a part of the Entrepreneur Index, which tracks some of the largest publicly traded companies founded and run by entrepreneurs.

MarketBeat.com – MarketBeat

The world’s most prominent movie theater chain AMC Entertainment Holdings, Inc. (NYSE: AMC) stock has fallen (-67%) for the year, and its AMC Preferred Equity Units (NYSE: APE) shares have fallen over 90%. The meme stock craze of 2021, which includes the likes of GameStop Corp. (NYSE: GME) along with AMC stock, is all but a painful memory. The Company wasn’t able to capitalize on its short squeeze to make any dent in its debt load.

The U.S. Federal Reserve Open Market Committee (FOMC) interest rate hikes have not helped AMC either as its interest on first-lien secured debt due in 2026 has risen from 3.10% at the beginning of the year to 5.76% by the end of its Q3.

While the reopening has brought movies goers into its theaters driven by blockbuster releases like The Batman and Black Adam from Warner Bros. Discovery, Inc. (NYSE: WBD) and Top Gun: Maverick from Paramount Global (NASDAQ: PARA), the traffic is still down about a third from pre-pandemic levels. The Company has been able to expand to 950 theaters with 10,500 screens and plans to issue a credit card in Q1 2023 along with an AMC line of popcorn to hit grocery shelves.

The Company claims it will be a positive cash flow by the year’s end with blockbuster releases in Q4 2022 that include Avatar 2 and Black Panther: Wakanda Forever from The Walt Disney Company (NYSE: DIS). It’s hoped that the experience will outstrip the convenience of streaming movies, especially as they get streamed even sooner.

The Last Man Standing Curse

While there is a halo effect for companies that are seen as “the last man standing,” but there is a risk of being obsolete as there’s usually a reason why the competition died out. The last man standing is a status that usually applies to companies in a dying industry, just like Blockbuster Video. Netflix, Inc. (NASDAQ: NFLX) saw the future in streaming video, and it was the nail in the coffin for Blockbuster.

The digital music migration has eliminated the CD music business and record stores. The migration to digital readers and tablets has nearly eliminated bookstores and printed newspapers. The COVID pandemic accelerated the migration to streaming movies which have permanently buried movie theaters. Best Buy Co. Inc (NYSE: BBY) is the last man standing for consumer electronics, but that has worked for them. Analysts from Loop to Citigroup have been cutting AMC price targets down to around $1, with Credit Suisse giving it a $0.95 price target as recently as Oct. 31, 2022.

Q3 Calm Before the Storm?

On November 8, 2022, AMC released its fiscal third-quarter 2022 results for September 2022. The Company reported an earnings-per-share (EPS) loss of (-$0.20), excluding non-recurring items versus consensus analyst estimates for a loss of (-$0.25), beating estimates by $0.05.

Revenues rose 26.9% year-over-year (YoY) to $968.4 million beating $960.97 million consensus analyst estimates. The Company still had $115 million in operating losses for a total (-$225 million) in quarterly losses. Total losses for 2022 was $700 million with (-$750 million) in total cash burn. The Company ended the quarter with $905.2 million in total assets of which includes $685 million in cash and cash equivalents. The company will have $1.6 billion at the end of 2021.

Fall of the APEs

AMC declared a dividend in the form of AMC Preferred Equity (APE) units that began trading on Aug. 22, 2022. The APE units’ purpose was to sell them in the open market to raise cash to pay down its debt without further diluting the stock.

However, since it was basically like a stock split, it didn’t technically dilute the shares but definitely diluted the price. APE units were supposed to be used as currency to raise cash, but the Company has failed to raise enough cash as APE units fell from a high of $10.50 on Aug. 22, 2022,  to $0.73 on Dec. 16, 2022. AMC shares fell from $13.09 to $5.31 in the same period. Price dilution, not share dilution, is what hurt investors the most.

Meanwhile, the Company barely raised any monies even to impact the interest payments on its massive $12 billion debt load comprised of $5.3 billion in debt, $4.43 billion in leases, and $2.6 billion in other debt. There are concerns for a capital raise in 2023, but chances are slim that shareholders would approve more dilution in either shares or price.

Amazon to the Rescue?

On Nov. 23, 2022, rumors spread that Amazon.com Inc. (NASDAQ: AMZN) would spend $1 billion to produce 12 to 15 movies annually for movie theaters starting in 2023. This makes sense due to its history of spending heavily on original content, which includes nearly $13 billion in 2021 and $11 billion in 2020. It also acquired the iconic MGM Studios for $8.45 billion.

For years, there’s been speculation and wishful thinking that Amazon would be the proverbial white knight to rescue AMC Entertainment in an acquisition. Amazon does have over $58 billion in cash, and adding another $12 billion to its $164 billion in long-term debt would be a drop in the bucket. Its commitment to releasing theatrical motion pictures is keeping rumors alive that AMC could be a solid distribution channel to add to its eco-system. Time is on Amazon’s side, as the longer, it waits, the cheaper an acquisition would be if it were to happen.  

Big Double Bottom Test

The weekly candlestick charts point out the critical double bottom test for AMC stock near $5. It’s last spike to $9.15 on Dec. 1, 2022, saw it plunged (-43%) to a low of $5.13 in two weeks. Tax-loss selling is inevitable heading into the end of the year as investors adjust portfolios to harvest losses. AMC shares once again approach the swing lows that held in April of 2021 and October of 2022. The weekly 20-period exponential moving average (MA) resistance continues to fall at $7.63 followed by the weekly 50-period MA resistance at $9.19. The weekly stochastic is stalling at the 20-band to either cross back down or form a mini pup back up. The weekly market structure low (MSL) triggers on a breakout through $6.80. Volume has been on the light side. Pullback support levels on a $5 breakdown sit at $4.52, $4.27, $3.27, $2.37, $1.98, and $1.30.   

MarketBeat.com – MarketBeat

Domino’s Pizza, Inc. (NASDAQ: DPZ) has failed to deliver for investors in 2022. As a result, the stock is down more than 33%. That’s significantly higher than the S&P 500 index, which posts a 19% yearly loss.  

The company has faced rising ingredient costs and difficulty finding drivers due to higher inflation. That has shown up in the company’s earnings reports. As a result, earnings have missed expectations in the last four quarters.  

But analyst sentiment is improving. And in this article, we’ll explain why it may be time for investors to take a bite of DPZ stock while it’s trading below its pre-pandemic price. 

Pizza Has Pricing Power 

A key reason for analyst optimism is that Domino’s will enter 2023 with its highest prices in over ten years. And analysts believe that the company has room to increase prices on its $7.99 carryout deal and its $6.99 Mix & Match deal.  

This comes when analysts believe the company’s ingredient costs are about to level off or slightly decrease. That combination will support higher margins, more substantial earnings, and a higher share price.  

Defining the True Cost of Pizza Delivery 

According to Statista, consumer spending on pizza delivery hit a new all-time high of $19.8 billion in 2021. That was its most significant year-on-year growth and was up from $14 billion in 2020 and $11 billion in 2019.  

And the United States spends $11 billion a year on pizza delivery. But, of course, that’s just pizza delivery, not total food delivery. And Domino’s has the largest market share, with 31% of the actual amount consumers spend on pizza. 

But that growth has come at a cost. Specifically, the company finds it hard to find and pay drivers in a tight labor market. However, analysts believe that the current wave of layoffs, hiring freezes, and sticky inflation will likely increase the candidate pool of willing drivers.  

And even if it doesn’t, the company says there is some evidence that inflation is causing consumers to steer away from having pizza delivered. However, the company is also reinstituting its “carryout tip” this holiday season which may have the combined effect of driving demand while helping the company navigate delivery problems.  

Is It Time to Buy DPZ Stock? 

Strictly based on value, there may be better options right now. The stock still has a P/E ratio higher than the sector average. However, if the company hits the expectations for high single-digit earnings growth in the next five years, Domino’s may grow into that valuation.  

And while you wait, Domino’s offers a tasty dividend. While the 1.23% dividend yield may not be that exciting for investors, that can be deceptive. The company pays out $4.40 per share, has a sustainable payout ratio of around 33%, and has been increasing its dividend in each of the last ten years.  

In last week’ s commentary I said “It feels like the S&P 500 (SPY) wants to be bullish, but everyone is extremely anxious… like we’re collectively holding our breath, waiting for the next shoe to drop”. Well drop it did, and hard, with the broader indexes falling considerably on Thursday as everyone finally put together the latest pieces of the market puzzle. Keep reading to find out what the picture is showing us.

shutterstock.com – StockNews

(Please enjoy this updated version of my weekly commentary originally published December 15^th, 2022 in the POWR Stocks Under $10 newsletter).

Market Commentary

The S&P 500 (SPY) tumbled 2.5% on Thursday as traders realized next year is going to be painful.

Yes, the Federal Reserve’s latest reality check — more on this shortly — is partly to blame for the drop, but we had other forces at work as well.

But I’m getting ahead of myself. Let’s go back to where all this trouble started…

As I predicted in my last commentary, Fed officials voted to increase interest rates another 50 basis points. Great! A smaller hike. But then we got the latest dot plot and an updated commentary from Powell… and both reiterated that the war against inflation is far from over.

First, the dot plot.

The Fed’s “dot plot” is basically a visual tool that shows where each of the Fed officials believe interest rates will be in the short, mid, and long term. Here’s the September dot plot (left) next to the one from yesterday’s meeting (right).

The dots make it plain as day: A number of Fed officials now believe we’re going to have to raise rates even higher… and keep them high for longer.

When the Fed last released these projections in September, they showed forecasts that the fed funds rate would peak between 4.75% and 5.0% sometime in 2023 before slowly coming back down the following years.

Now, we have notably more hawkish projections for rates of 5.1% to 5.4% in 2023 (with some Fed officials forecasting rates as high as 5.5% to 5.75%)…staying above 4% throughout 2024… and then maybe coming further down in 2025.

(Also, I would love to know who that one super hawk is, projecting interest rates of 5.5% to 5.75% THROUGH 2025. Bold.)

Powell’s comments put words to the message painted by the visual — there’s more work to do. A few choice quotes from his post-meeting press conference…

“I would say it’s our judgment today that we’re not in a sufficiently restrictive policy stance yet, which is why we say that we would expect that ongoing hikes will be appropriate.”

“Historical experience cautions strongly against prematurely loosening policy. I wouldn’t see us considering rate cuts until the committee is confident that inflation is moving down to 2% in a sustained way.”

In other words, the Fed’s keeping its foot on the gas, and it’s not letting up until the job is done.

Yes, this absolutely contributed to the selloff we saw on… but as I mentioned at the top, it wasn’t the only factor.

On Thursday, both the European Central Bank and the Bank of England issued their own rate hikes, along with messages that further tightening is likely.

Lastly, the U.S. retail sales report showed spending dropped in November — not a very promising start to the holiday season.

Powell keeps saying there’s still a chance for a “soft landing” where we successfully navigate inflation without triggering a recession, but that’s looking less and less likely.

And if we do end up in a recession, that’s certainly not the end of the world. Stocks have always recovered their recession losses over time, and I don’t expect that to change now.

Is the road going to be bumpy? Yes.

But those bumps don’t mean we should panic. It just means we have to be nimble. The strategies that outperform going forward probably won’t be the same as what worked during the bull market. But here’s something incredible…

Applying POWR Ratings to stocks under $10 has been a consistent winner through bear markets, bull markets, expansions, recessions, and everything in between.

Going all the way back to 1999, this strategy has delivered positive, market-beating returns in every year but one (2008).

It’s like nothing I’ve ever seen. And it’s a good signal we should stay the course.

What To Do Next?

If you’d like to see more top stocks under $10, then you should check out our free special report:

3 Stocks to DOUBLE This Year

What gives these stocks the right stuff to become big winners, even in the brutal 2022 stock market?

First, because they are all low priced companies with the most upside potential in today’s volatile markets.

But even more important, is that they are all top Buy rated stocks according to our coveted POWR Ratings system and they excel in key areas of growth, sentiment and momentum.

Click below now to see these 3 exciting stocks which could double or more in the year ahead.

3 Stocks to DOUBLE This Year

All the Best!

Meredtih Margrave
Chief Growth Strategist, StockNews
Editor, POWR Stocks Under $10 Newsletter

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SPY shares closed at $383.27 on Friday, down $-6.36 (-1.63%). Year-to-date, SPY has declined -18.37%, versus a % rise in the benchmark S&P 500 index during the same period.

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About the Author: Meredith Margrave

Meredith Margrave has been a noted financial expert and market commentator for the past two decades. She is currently the Editor of the POWR Growth and POWR Stocks Under $10 newsletters. Learn more about Meredith’s background, along with links to her most recent articles.

More…

The post Market Nosedives as Investors Finally Get the Message appeared first on StockNews.com

Mr. Market (SPY) may be moody, but he is also quite predictable at this time of year. I am talking about getting ready for the Santa Claus rally that is one of the most profitable stretches for investors year in and year out. And this year we have the perfect strategy to add a little more ho, ho, ho to your holiday season. Read the rest below.

shutterstock.com – StockNews

Warren Buffett likes to talk about “Moody Mr. Market” and that investors need to learn how to take advantage of the wild mood swings rather than become a victim of them.

Another thing about Moody Mr. Market is that he tends to act differently at various times of the year. And over time, he has developed some fairly consistent patterns. This means that certain strategies have a higher probability of success when these seasonal trends are in your favor.

It’s The Most Wonderful Time Of The Year…

The best example of this phenomenon is the Santa Claus rally in which stocks outperform at the end of Q4 and start of Q1. Since 1950, this short window has been positive 77% of the time, which ranks it as the No. 1 stretch of seven trading days for stock investing.

Even though the market has recently faced selling pressure following December’s rate hike, a year-end Santa Claus rally certainly isn’t out of the question.

If we’ve learned anything this year, it’s that Moody Mr. Market is as moody as ever.

Following each of the Federal Reserve’s rate increases in 2022, we’ve seen an initial drop followed by a substantial upswing.

Indeed it does seem to be rounding into form just like clockwork this year. We had our last rate hike of the year, followed by a market drop, which means we should have a positive bump in our near future.

That is why I want to share with you the perfect strategy to make the most of this upcoming Santa Claus Rally.

The Right Strategy

The best way to take advantage of these bullish factors is to buy two categories of stocks that these fund managers will prioritize: momentum and deep value.

Momentum stocks are typically companies with accelerating sales and earnings that lead to major share price outperformance. These especially stand out in bearish markets like 2022 as so many other firms are displaying weak results.

Especially in our current economic climate, people are going to be looking for stocks that are still managing to outperform.

On the other end of the spectrum, deep value stocks are ones that have been ignored or forgotten by the market. They are deeply oversold and have very low valuations.

Like a dry tinder box, this means that any sort of spark can send shares rocketing higher. And that spark is often investors focused in Q4 on greatly undervalued stocks that have tremendous promise in the year ahead.

Focus On Stocks Under $10

If you agree that these two categories have the most upside into year-end, then you should consider focusing on low-priced stocks under $10.

Here’s Why…

Low-priced stocks have the most upside in any part of the market and benefit the most from a bullish environment. Additionally, most low-priced stocks either fall into the deep value or momentum categories explained above.

This universe of stocks always offers an incredible opportunity to savvy investors, but that will be even more true this year if we will have a powerful wind at our backs due to bullish Q4 seasonality and the Santa Claus rally.

Earlier, we talked about Mr. Market and how we should take advantage of his mood swings. Well, these stocks under $10 are the best place to find gems that have been unfairly tarnished by Mr. Market’s earlier mood swings, yet ready to shine at this unique time of year.

What To Do Next? 

Discover the best stocks under $10. That’s easy to do by starting a 30-day trial to our POWR Stocks Under $10 newsletter.

This newsletter portfolio harnesses an exclusive low-priced stock strategy that has generated an average annual return of +59.43%. In fact, four times in recent history it has produced annual gains north of 100%.

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SPY shares were trading at $382.29 per share on Friday morning, down $7.34 (-1.88%). Year-to-date, SPY has declined -18.58%, versus a % rise in the benchmark S&P 500 index during the same period.

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About the Author: Meredith Margrave

Meredith Margrave has been a noted financial expert and market commentator for the past two decades. She is currently the Editor of the POWR Growth and POWR Stocks Under $10 newsletters. Learn more about Meredith’s background, along with links to her most recent articles.

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Yesterday’s retail sales report showed that consumers pulled back on spending last month, raising fears of a recession. Moreover, the Fed signaled to keep raising rates more through the following year. Given an uncertain market backdrop, investors should buy fundamentally sound and dividend-paying stocks Johnson (JNJ), Coca-Cola (KO), and Cardinal Health (CAH), which could keep gaining and generate significant long-term returns. Read on….

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With inflation cooling considerably in the last two months, the Federal Reserve slightly eased its monetary policy tightening by raising its benchmark interest rate by 50 basis points this week.

“Inflation data received so far for October and November show a welcome reduction in the monthly pace of price increases. But it will take substantially more evidence to have confidence that inflation is on a sustained downward path,” said the Fed Chair, Jerome Powell.

The Fed officials indicated plans to keep raising rates through next year, with no reductions until 2024, and expect the “terminal rate” at 5.1%. Furthermore, the weaker-than-expected retail sales data suggests that inflation is taking a toll on consumers. Retail sales dropped 0.6% in November, worse than the Dow Jones estimate of a 0.3% decline.

The disappointing retail sales report and the Fed’s indication of extending rate hikes sparked recessionary fears. Wall Street tumbled yesterday, with the Dow Jones closing out its worst day in three months. The Dow Jones declined 2.3%, while the S&P 500 and Nasdaq Composite fell 2.5% and 4.5%, respectively.

Amid the ongoing market uncertainties, investing in fundamentally strong and dividend-paying stocks Johnson & Johnson (JNJ), The Coca-Cola Company (KO), and Cardinal Health, Inc. (CAH) could be wise for investors looking to generate massive long-term returns.

Johnson & Johnson (JNJ)

JNJ, the world’s largest and most diverse healthcare conglomerate, develops, manufactures, and sells various healthcare goods. Its business operates through three segments, Consumer Health Products; Pharmaceutical Products; and MedTech. Its core focus is items relating to human health and well-being.

On November 1, JNJ and Abiomed Inc. (ABMD), a world leader in breakthrough heart, lung, and kidney support technologies, announced that they have entered into a definitive agreement under which JNJ will acquire through a tender offer all outstanding shares of Abiomed, for an upfront payment of $380.00 per share in cash.

ABMD’s skilled workforce, strong ties with clinicians, unique cardiovascular portfolio, and extensive pipeline will complement JNJ’s MedTech portfolio. It will also enable JNJ to implement its strategic priorities, and vision for the new JNJ focused on Pharmaceutical and MedTech.

For the fiscal 2022 third quarter ended September 30, 2022, JNJ’s sales in the United States grew 4.1% year-over-year to $12.45 billion, while its overall reported sales increased 1.9% year-over-year to $23.79 billion, with adjusted operational growth of 8.2%. Its net earnings rose 21.6% year-over-year to $4.46 billion, while its EPS increased 22.6% from the year-ago value to $1.68.

JNJ paid a quarterly dividend of $1.13 per share on December 6, 2022. It pays a $4.52 per share dividend annually, which translates to a 2.51% yield on the current price. Its four-year average dividend yield is 2.60%. JNJ’s dividend payout has grown at a 5.9% CAGR over the past three years and a 6% CAGR over the past five years. The company has raised its dividend for 60 consecutive years.

For the fiscal year ending December 2022, analysts expect JNJ’s revenue to increase 1.4% year-over-year to $95.04 billion. The company’s EPS for the current year is expected to increase by 2.5% year-over-year to $10.05. JNJ has surpassed the consensus EPS estimates in each of the four trailing quarters, which is impressive.

In addition, analysts expect the company’s revenue and EPS for the next fiscal year to grow 2.6% and 3.2% year-over-year to $97.54 billion and $10.37, respectively. Over the past month, JNJ has gained 3% and 4.4% over the past six months to close the last trading session at $177.49.

JNJ’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

The stock has an A grade for Stability and a B for Value and Quality. Within the Medical-Pharmaceuticals industry, it is ranked #7 of 160 stocks.

Beyond what we stated above, we also have JNJ’s ratings for Growth, Sentiment, and Momentum. Get all JNJ ratings here.

The Coca-Cola Company (KO)

KO is a famous beverage company that manufactures, markets, and sells various nonalcoholic beverages worldwide. The company offers sparkling soft drinks, flavored and enhanced water, sports drinks, juice, dairy, plant-based beverages, and energy drinks. It operates through a network of independent bottling partners, distributors, wholesalers, and retailers.

On September 29, KO and Molson Coors Beverage Company (TAP) entered an exclusive agreement to develop and commercialize Topo Chico Spirited, a line of spirit-based, ready-to-drink cocktails inspired by the bright and refreshing taste of tequila and vodka-based beverages. It will be launched in more than 20 markets across the country in 2023 and might boost the company’s revenue stream.

For the fiscal 2022 third quarter ended September 30, 2022, KO’s net operating revenues increased 10.2% year-over-year to $11.05 billion. The company’s gross profit grew 7.1% year-over-year to $6.50 billion. Its operating income came in at $3.09 billion, up 6.6% year-over-year.

Furthermore, the net income attributable to shareholders of KO was $2.83 billion, up 14.3% year-over-year. Its non-GAAP net income per share grew 6.2% from the year-ago value to $0.69.

On December 15, KO paid its shareholders a regular quarterly dividend of $0.44 per common share. The company pays $1.76 per share annually, which translates to a 2.75% yield at the current price. Its four-year average dividend yield is 3.07%.

KO has a record of 60 years of consecutive dividend growth. The company’s dividend payouts have grown at a CAGR of 3.2% over the past three years and a CAGR of 3.5% over the past five years.

Analysts expect KO’s EPS to increase 7.4% year-over-year to $2.49 for the fiscal year ending December 2022. Likewise, the revenue estimate of $42.70 billion indicates a 10.5% growth from the previous year. Also, the company has surpassed the consensus EPS and revenue estimates in all four trailing quarters.

The stock has gained 3.2% over the past month and 8.7% over the past year to close its last trading session at $63.11.

KO’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, equating to a Buy in our proprietary rating system.

KO has a grade of A for Sentiment and B for Stability and Quality. Within the A–rated Beverages industry, it is ranked #16 out of 33 stocks.

Beyond what we’ve stated above, we have also given KO grades for Value, Momentum, and Growth. Get all KO ratings here.

Cardinal Health, Inc. (CAH)

CAH provides various healthcare services and products in the United States, Canada, Europe, and Asia. The company operates through two segments: Pharmaceutical and Medical. It offers customized solutions for hospitals, healthcare systems, pharmacies, clinical laboratories, and at-home patients.

Last month, CAH launched Velocare™, a supply chain network and last-mile fulfillment solution that will reach patients in one to two hours with critical products and services required for hospital-level care at home. Through a collaboration with Medically Home, Cardinal Health at-Home Solutions supports Medically Home health system customers with Velocare™ to enable scaled, high-acuity care in the home.

On September 15, CAH and PayrHealth announced a collaboration to help specialty physician practices simplify payor contracting and maximize financial performance. “We are very excited to partner with PayrHealth to bring meaningful efficiencies and cost savings to practices, so they can focus on patient care,” said Amy Valley, vice president of Clinical Strategy & Technology Solutions at Cardinal Health.

In the fiscal 2023 first quarter ended September 30, 2022, CAH’s revenue increased 12.8% year-over-year to $48.60 billion. Its revenue from the Pharmaceutical segment rose 15.1% from the year-ago value to $46.83 billion, while its segment profit came in at $431 million, up 6.2% year-over-year. The company’s adjusted free cash flow for the quarter stood at $342 million.

On November 8, CAH’s Board of Directors approved a quarterly dividend of $0.4957 per share, payable on January 15, 2023. Its annual dividend of $1.98 yields 2.91%. Moreover, the company’s dividend payouts have grown at a 1% CAGR over the last three years and a 1.6% CAGR over the past five years. The company has a record of 27 years of consecutive dividend growth.

The consensus revenue estimate of $199.25 billion for the fiscal year ending June 2023 represents a 9.9% improvement year-over-year. The consensus EPS estimate of $5.29 for the ongoing year indicates a 4.6% year-over-year growth. Furthermore, the company’s revenue and EPS for the next fiscal year are expected to grow 6.3% and 18% year-over-year to $211.81 billion and $6.25, respectively.

Shares of CAH have gained 51.1% year-to-date and 59.7% over the past year to close the last trading session at $78.57.

CAH’s financial strength and solid growth prospects are reflected in its POWR Ratings. The stock’s overall A rating translates to a Strong Buy in our proprietary rating system.

CAH has a grade of B for Growth and Value. Within the Medical – Services industry, it is ranked #4 of 77 stocks. To see additional POWR Ratings (Sentiment, Quality, Momentum, and Stability) for CAH, click here.

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JNJ shares were unchanged in premarket trading Friday. Year-to-date, JNJ has gained 6.48%, versus a -17.02% rise in the benchmark S&P 500 index during the same period.

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About the Author: Mangeet Kaur Bouns

Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.

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The post 3 Stocks to Buy That Could Make You a Millionaire in the Long Term appeared first on StockNews.com

MarketBeat.com – MarketBeat

A classic cup-with-handle base is often a precursor to a stock’s run-up, and retailer Tractor Supply Company (NASDAQ: TSCO) is forming exactly that type of consolidation. 

The Tennessee-based company specializes in items for rural lifestyles, including hardware, supplies for livestock and domestic animals, lawn and garden items, fencing, mowers, and clothing.  

It’s the nation’s largest consumer farm retailer. As of September, it operates 2,027 Tractor Supply stores in 49 states and an e-commerce platform. In October, it acquired 81 stores from Orscheln Farm and Home. These will be rebranded to Tractor Supply by the end of next year. 

Tractor Supply also owns Petsense by Tractor Supply, a small-box pet specialty supply chain primarily in small and mid-size communities. It runs 180 Petsense stores in 23 states. 

MarketBeat analyst data for the company show a “moderate-buy” rating with a price target of $235.94 and a potential upside of 10.88%. 

Analysts Expect More Store Openings

Morningstar analyst Jaime Katz writes that she expects Tractor Supply to grow to around 3,000 stores by 2031, including Petsense. Over time, the company seems poised for growth, but what about the more immediate future?

Shares are up 14.41% in the past three months as the stock began etching the right side of a cup pattern in September. It rallied to an interim high of $229.81 on December 1 and has been forming a handle since then. The cup-with-handle formation offers an early entry point before a stock regains the high price of the cup base. 

As the handle formed, the stock declined 1.63% in the past month. You don’t want to see a handle decline of more than 10% or possibly 15% at the outset; that would mean the setup has broken down. 

Another good sign in the current handle is: Trading volume has been below normal in the past two weeks as the price declined. That’s ideal, as a heavy-volume selloff could indicate a lack of conviction among institutional buyers. Instead, this handle appears (so far) to be the result of some mild profit-taking. That can serve to shake out investors who lack conviction, setting the stage for more interested buyers to nab shares at a lower price. 

But does the current setup suggest more significant potential for gains than even the analysts see? 

Shares were trading around $213.27 mid-session Thursday. That’s roughly 7% below a potential buy point near $230. If the stock clears that buy point without the handle sinking much further, then the stock may have the juice to rise more than 10.88%, primarily if a broad market rally also provides a lift. 

Sales, Earnings Continue To Increase

Do Tractor Supply’s fundamentals suggest the stock is ready to rally in the near-to-medium term?

The three-year revenue growth rate is 20%, and its three-year earnings growth rate is 29%. Revenue grew between 43% and 8% in the past eight quarters. One possible caveat: Revenue growth has been slowing from mid-double-digit rates to single-digit rates over the past six quarters. Make no mistake: Sales are still increasing at healthy year-over-year clips, but less frenetically than before. 

Earnings have been growing each year, as well. For the full year, Wall Street is eyeing a net income of $9.62 per share, an increase of 12%. Next year, that’s expected to grow another 9% to $10.47 per share. 

As with many stocks, Tractor Supply’s price action has tended to track the broader market. For example, shares advanced in five of the subsequent six sessions after the company’s most recent earnings report on October 20. However, as a nascent rally in the S&P 500 sputtered in early November, Tractor Supply also fell. Even its current handle formation is occurring in tandem with a moderate selloff in the S&P.

The cup-with-handle base, solid earnings and revenue growth, and future projections make the stock an attractive watchlist candidate. Investors should resist the temptation to jump into a promising stock too early, as their money may languish while other stocks rally sooner. 

Despite the aggressive rate hikes that plagued tech stocks since the start of the year, the software industry’s prospects look strong, thanks to rapid digitalization and demand for cloud-based solutions. While fundamentally strong software stocks Salesforce (CRM) and Mitek Systems (MITK) could be worth buying to capitalize on the industry’s long-term growth prospects, it would be wise to steer clear of fundamentally weak stocks Robinhood Markets (HOOD) and Fastly (FSLY). Keep reading….

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2022 has been a challenging year for tech stocks due to various macroeconomic concerns. The Fed’s aggressive rate hikes have made the high-growth tech stocks look unattractive to investors, leading to the tech-heavy Nasdaq Composite shedding 28.6% year-to-date.

However, inflation is now showing signs of cooling down, with November’s CPI rising 0.1% from the previous month and 7.1% from a year ago, below analyst estimates. The easing of inflation has prompted the Fed to stick to the word of slowing down the pace of rate hikes, as it announced a 50-basis-point rate increase yesterday.

With the Fed starting to slow down the pace of rate increases, software stocks could again turn into attractive investment options for investors. According to Gartner, enterprise software spending is projected to grow 8.6% in 2023.

Although the industry’s prospects look bright, not all software stocks will likely turn out to be profitable investments. In order to capitalize on the industry’s recovery prospects, it could be wise to buy fundamentally strong software stocks Salesforce, Inc. (CRM) and Mitek Systems, Inc. (MITK). On the other hand, Robinhood Markets, Inc. (HOOD) and Fastly, Inc. (FSLY) could be best avoided now due to their weak fundamentals and poor growth prospects.

Stocks to Buy:

Salesforce, Inc. (CRM)

CRM provides customer relationship management technology that brings companies and customers together worldwide. Its Customer 360 platform empowers its customers to work together to deliver connected experiences for their customers. The company’s service offerings include Sales, Service, Marketing, and Commerce.

On September 21, 2022, Insurtech leader, Zywave, announced a dedicated partnership and increased collaboration with CRM. This partnership is believed to bring together the worlds of insurance agency sales and client service, creating more efficient, strategic workflows powered by data and content to deliver a seamless client experience.

Raja Singh, Senior VP and General Manager at CRM, said, “Together, Salesforce and Zywave enable users to efficiently do their jobs and unlock their critical business data, so it can be leveraged for real-time intelligence going forward.”

For the fiscal third quarter ended October 31, 2022, CRM’s total revenues increased 14.2% year-over-year to $7.84 billion. The company’s gross profit increased 14.5% year-over-year to $5.75 billion. Moreover, its income from operations increased significantly year-over-year to $460 million.

Analysts expect CRM’s EPS and revenue for the quarter ending December 31, 2022, to increase 61.6% and 9.2% year-over-year to $1.36 and $8 billion, respectively. CRM has an impressive earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. The stock has fallen 15.1% over the past month to close the last trading session at $134.75.

CRM’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

Within the Software – Application industry, it is ranked #15 out of 139 stocks. It has an A grade for Growth and a B for Sentiment.

We have also given CRM grades for Value, Momentum, Stability, and Quality.Get all CRM ratings here.

Mitek Systems, Inc. (MITK)

MITK develops, markets, and sells mobile image capture and digital identity verification solutions worldwide. The company’s solutions are embedded in native mobile apps and web browsers to facilitate digital consumer experiences. It offers products such as Mobile Deposit, Mobile Verify, Mobile Fill, CheckReader, among others.

For the fiscal third quarter ended June 30, 2022, MITK’s total revenue increased 23.8% year-over-year to $39.33 million. Its non-GAAP net income came in at $10.18 million. The company’s non-GAAP EPS came in at $0.23, representing no change from the year-ago period.

Analysts expect MITK’s revenue for the quarter ended September 30, 2022, to increase 16.1% year-over-year to $38.61 million. For fiscal 2022, its EPS is expected to increase 17.1% year-over-year to $0.89.

It has a commendable earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. The stock has gained 24.7% over the past six months to close the last trading session at $10.90.

It is no surprise that MITK has an overall rating of B, translating to a Buy in our proprietary rating system. Within the Software – Application industry, it is ranked #8. In addition, it has a B grade for Growth, Value, and Quality.

Click here to see the additional ratings of MITK for Momentum, Stability, and Sentiment.

Stocks to Avoid:

Robinhood Markets, Inc. (HOOD)

HOOD operates a financial services platform that allows users to invest in stocks, exchange-traded funds, options, gold, and cryptocurrencies. The company also offers various learning and education solutions comprising Snacks, Learn, Newsfeed, and cash management services.

HOOD’s total net revenues for the fiscal third quarter ended September 30, 2022, declined 1.1% year-over-year to $361 million. Its net loss narrowed 87% year-over-year to $175 million. Additionally, its loss per share narrowed 90.3% year-over-year to $0.20.

HOOD’s EPS for the quarter ending December 31, 2022, is expected to remain negative. Its revenue for fiscal 2022 is expected to decline 24.6% year-over-year to $1.37 billion. The stock has fallen 48.8% year-to-date to close the last trading session at $9.09.

HOOD’s grim outlook is reflected in its POWR Ratings. The company has an overall rating of D, which translates to a Sell in our proprietary rating system. Within the same industry, it is ranked #120. The company has an F grade for Stability and a D for Value and Quality.

Click here to see the additional POWR Ratings of HOOD for Growth, Momentum, and Sentiment.

Fastly, Inc. (FSLY)

FSLY operates an edge cloud platform for processing, serving, and securing its customer’s applications worldwide. The edge cloud is a category of Infrastructure as a Service that enables developers to build, secure, and deliver digital experiences at the edge of the internet. It is a programmable platform designed for web and application delivery.

For the fiscal third quarter ended September 30, 2022, FSLY’s non-GAAP gross margin came in at 53.6%, compared to 57.5% in the year-ago period. The company’s non-GAAP operating loss widened 53.4% year-over-year to $19.84 million. Additionally, its non-GAAP net loss per common share widened 27.3% from the prior-year quarter to $0.14.

FSLY’s EPS for the quarter ending December 31, 2022, is expected to remain negative. The stock has fallen 73.2% year-to-date to close the last trading session at $9.50.

FSLY’s bleak prospects are reflected in its POWR Ratings. The company has an overall rating of D, translating to a Sell in our proprietary rating system. It is ranked #130 in the Software – Application industry. In addition, it has a D grade for Momentum, Stability, and Sentiment.

To see the additional ratings of FSLY for Growth, Value, and Quality, click here.

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CRM shares were trading at $130.55 per share on Thursday afternoon, down $4.20 (-3.12%). Year-to-date, CRM has declined -48.63%, versus a -16.86% rise in the benchmark S&P 500 index during the same period.

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About the Author: Malaika Alphonsus

Malaika’s passion for writing and interest in financial markets led her to pursue a career in investment research.

With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.

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The post 2 Software Stocks to Buy This Week and 2 to Avoid appeared first on StockNews.com

MarketBeat.com – MarketBeat

Enterprise Products Partners (NYSE: EPD) has recently been on a wild ride. It has gone thru some stunning peaks and troughs and ended up 7.82% year to date. As a result, investors might wonder if its current stock price represents a good entry for buying shares.

So let’s examine the bull and bear case for investing in EPD to see if we can piece together its valuation.

The Bull Case

Wall Street’s opinion on a given stock is a good starting point when investigating if it’s potentially undervalued. According to the MarketBeat consensus price target of $30.50, EPD has a 24.95% potential upside. In addition, eleven analysts rated the stock and came to the consensus that it was a moderate buy.

Other aspects of EPD’s fundamentals are also substantial, including the fact that some of its insiders have been buying shares and its low short-interest ratio. Insiders bought $248,000 worth of shares last quarter, and it has a short-interest ratio of 1.63%.

Then there’s EPD’s macro backdrop, which has improved substantially since the war in Ukraine began and crucially due to Russia’s termination of its Nord Stream 1 output to Europe. In July, the International Monetary Fund (IMF) wrote that Russia’s stoppage of natural gas to this region means that Europe’s economic output could fall by as much as 6 percent.

This means that alternative hydrocarbon suppliers such as EPD are poised to see an increase in demand in the region to help make up for the shortfall. And as geopolitical tensions between Russia, China, and NATO countries continue to escalate, western-aligned energy companies are likely to benefit from favoritism as a strong tailwind.

The Bear Case

Some weaknesses in EPD’s fundamentals and backdrop should be explored.

The first is its dividend, often cited as one of its main draw cards for buying the stock. EPD has increased its dividend for 24 consecutive years and is on track to become a dividend aristocrat.

However, the problem lies in its dividend coverage ratio, which currently stands at 81.90%. This means the company is paying out a considerable sum and proportion of its net income in dividends to shareholders, which is likely unsustainable under normal business conditions.

EPD may reduce its dividend within the next few years, thus ending its dividend growth streak. However, a plausible thesis is that the company will redirect some of its earnings on dividends into scaling its capital expenditure, which could lead to greater returns to shareholders later. This would mean EPD could further tap into a couple of opportunities, including the gas shortage in Europe.

Another catalyst is the world’s energy transition to renewables, which will be facilitated first through a rise in demand for hydrocarbon products. These are solid reasons for EPD to consider diverting its spending to infrastructure due to a quickly rising total addressable market for its output.

The final reason is that natural gas does not fit into the renewable energy paradigm and will eventually be replaced by cleaner and more efficient energy sources, such as green hydrogen and nuclear fusion. This means that while natural gas stocks like EPD may rise over the next decade, they provide only a transitory solution to reducing carbon emissions. Their preference may quickly wear off as better energy technologies are developed further.

The question then is one potential upside over the long-term and opportunity cost. In other words, are investors better off paying a premium for natural gas stocks to possibly receive a faster return, or do they invest where the energy market is ultimately heading at a lower price?

Uranium stocks, for instance, have lower valuation ratios on the whole than natural gas stocks, and hydrogen stocks can also be scooped up at a relative bargain. Investors waiting on these decades-long timeframes for hydrogen and uranium stocks to take off also take on more risk, which always is a factor to consider.

The Bottom Line

EPD has the momentum to continue its rally over the short term, and over the medium time frame, it will benefit from a couple of solid catalysts in its macro backdrop. However, investors should also consider their investment horizons and risk tolerance, as natural gas is not the intended solution for the world’s energy needs. There are less expensive stocks to buy that fit this solution which may have a more significant (as well as more speculative) upside potential than gas stocks like EPD.

MarketBeat.com – MarketBeat

Latin American e-commerce specialist MercadoLibre Inc. (NASDAQ: MELI) has only trended lower in 2022, and a new partnership could boost the stock.

Earlier this month, the chief financial officer of the Argentina-based company told Reuters that MercadoLibre would begin processing business payments for WhatsApp users. 

WhatsApp, owned by Meta Platforms Inc. (NASDAQ: META), offers free multiplatform messaging capabilities. Not well known in the U.S., but it’s popular worldwide among family members, friends, and business associates who live in different countries.  

While users have long had access to functionality, including making text messaging and voice and video calls, payment processing would be a new feature. 

MercadoLibre CFO Pedro Arnt told Reuters that the two companies are testing payment processing in Brazil. “This could be an opportunity for us to leverage WhatsApp efficiently to generate more sales and better customer contacts,” Arnt said.

“Seamless Checkout Experience” 

In a company blog post, WhatsApp addressed the Brazil initiative, saying, “Ultimately, we want people to be able to make a secure payment right from a chat with their credit or debit card. We recently launched this experience in India, and we’re excited to test this in Brazil with multiple payment partners. This seamless checkout experience will be a game-changer for people and businesses looking to buy and sell on WhatsApp without having to go to a website, open another app or pay in person.”

WhatsApp has been offering in-app payments in India since 2020. The Brazil test began in November. 

MercadoLibre went public in 2007. In its early years was viewed as the equivalent of eBay Inc. (NASDAQ: EBAY) or Amazon.com Inc. (NASDAQ: AMZN).

The company has expanded its operational capabilities in the years since and now includes a lending unit and in-house shipping operations. It also runs an advertising platform that provides classifieds, which allows users to list users to vehicles, vessels, aircraft, real estate, and services outside the Marketplace platform.

MercadoLibre reported having more than 88 million unique users in the most recent quarter, with operations in 18 countries. 

Strong Earnings And Revenue Growth

Despite this year’s poor stock price performance, sales and earnings growth have been vital in recent quarters. MarketBeat analyst data for MercadoLibre show a “moderate-buy” rating on the stock, with a price target of $1,317, representing a potential upside of 51.27%. A trend line connecting a series of recent price lows illustrates how that price may be reachable by mid-2023. 

Since the company’s most recent earnings report on November 3, Citigroup lowered its price target from $1,150 to $1,050. Nonetheless, that still reflects optimism about a potential upside of 23.34%. 

MercadoLibre’s three-year revenue growth rate is 74%. Sales increased between 45% and 111% in the past eight quarters. 

The bottom line has been more erratic, with losses in 2018, 2019, and 2020. Last year, the company returned to profitability, earning $1.67 per share. This year, analysts expect the company to earn $8.47 per share, an increase of 407%, and projected to rise another 63% next year to $13.78 per share. 

That figure has been revised higher recently, but not necessarily because analysts have weighed in on the potential of the WhatsApp partnership. 

Missed Earnings Views

Earnings data compiled by MarketBeat show MercadoLibre missing bottom-line views in the past three quarters. In addition, it missed top-line views in one of those quarters.

MercadoLibre’s chart shows a first-stage base that began in mid-August. It’s corrected 31% thus far, although it’s working on its fifth week in a row of declines. The stock is down 10.69% in the past month and 7.76% in the past three months. 

So far, the stock is holding above its previous low of $600.68 in mid-June. However, as of mid-session Wednesday, shares were trading below short- and longer-term moving averages. That means the stock still needs to stage a rally that could make it a less risky investment candidate. 

Generally, it’s better to focus on stocks beginning a rally rather than being mired in a correction.

MarketBeat.com – MarketBeat

U.S. mid-cap stocks are on pace to outperform their large-cap peers for the second straight year. The S&P 400 is down 13% year-to-date, a roughly 400 basis points edge over the S&P 500.

Mid-cap land has long been regarded as the ‘sweet spot’ for equity investors. Companies are fairly well-established in their respective markets but often have more room for growth than mature large caps. With mega caps out of favor in 2022, investors are discovering winners a bit further down the capitalization spectrum.

Another explanation for the return disparity is relative sector weightings. Technology dominates the S&P 500 with a 26% weight, double that of the S&P 400. The Industrial sector makes up the biggest portion of the mid-cap index at 19% but is just 8% of the large cap index. Tech is this year’s worst-performing group. Industrials have held up well and trail only the vastly outperforming Energy sector.

At the individual stock level, only one S&P 500 component has doubled year-to-date, that being Warren Buffet pick Occidental Petroleum. Ditto for the S&P 400 where oil & gas refiner PBF Energy quadrupled before a sharp pullback. 

Whether or not mid-caps outperform again in 2023 is anyone’s guess. What’s more certain is the classic risk-reward tradeoff — smaller-sized companies generally have greater return potential. Devoting more resources to mid-caps comes with increased risk but could help a portfolio recover faster.

Here are three mid-caps Wall Street sees as two-baggers over the next 12 months. 

What is the Outlook for Intellia Therapeutics? 

Intellia Therapeutics, Inc. (NASDAQ: NTLA) develops therapies based on the widely followed CRISPR-Cas9 genome editing technology. It has several in vivo and ex vivo programs for the treatment of lung disease, liver disease, cancer, and other indications. Intellia’s most promising candidate is NTLA-2001, which is being co-developed with Regeneron Pharmaceuticals as a therapeutic for ATTR amyloidosis. 

Absent any commercialized products, Intellia’s revenue is limited and its losses are steep — but Wall Street sees an inflection point ahead. The pipeline is progressing well and an investigational new drug (IND) application is expected to be filed next year to launch clinical studies on a lung disease candidate. The potential for marketed products is at least a few years away but clinical success could be a major catalyst. 

Analysts remain wildly bullish on Intellia as it slips to a new 52-week low. A $100 average price target equates to over 150% upside. 

Will Traders Lift Lyft in 2023?

Lyft, Inc. (NASDAQ: LYFT) continues to find support from the Street, and it makes sense. The ridesharing company has generated 30% higher revenue year-to-date and recovered from steep pandemic losses to book six straight profitable quarters. And yet the stock is down more than 70% this year. 

Despite the financial recovery, Lyft faces plenty of challenges. Ridership remains below pre-Covid levels and an impending economic downturn points to fewer nights out on the town and demand for a lift. The company laid off another 700 employees last month as it braces for a challenging 2023.

Still, the long-term outlook is positive and that’s why sell-side analysts see Lyft trading near an all-time low as an opportunity. Price targets are all over the map but the average of $22 would be a 100% return from here. 

The prevailing thesis is that current challenges will subside and lend way to an early-stage secular trend towards on-demand, cash-free transportation via car, scooter, or bike. Volatile gas prices and expensive repairs along with a craving for convenience are expected to shift consumers away from car ownership to transportation-as-a-service (TaaS). In turn, a lot of money could shift from car dealers to ride-hailing apps. It is a long road ahead for Lyft, but growth investors may want to come along for the ride.

Does Samsara Stock Have Good Upside?

Samsara Inc. (NYSE: IOT) is an Internet-of-Things (IoT) company that picked the wrong time to go public. It is the creator of the Connected Operations Cloud which helps businesses gain actionable insights and improve operations based on IoT data. The Street is mostly bullish on the $13 stock in thinking it can return to its December 2021 IPO levels in the mid-$20. 

Samsara is focused on video-based safety solutions for the transportation industry that detect things like driver cell phone usage and lack of seatbelt usage. Together with telematics and AI-powered video search, its subscription-based products generate strong recurring revenue. 

On account of its 2,828% three-year revenue growth, Deloitte recently named Samsara one of the fastest-growing technology companies in North America. It is coming off a beat and raise quarter that showed end market demand is sturdy despite the macro weakness. 

Not all enterprise SaaS companies are holding up this well, nor are they moving closer to profitability as Samsara is. Management is projecting 49% top-line growth this year and a narrower net loss. If this under-the-radar IoT play can deliver these kinds of results in a weakened economy, the future is surely bright.

Inflation eased again in November, which could allow the Fed to slow interest-rate hikes into the following year. Overall, the odds of the economy avoiding an anticipated recession are increasing. Given this backdrop, quality stocks CVS Health (CVS), ADT (ADT), ODP Corporation (ODP), and Universal Logistics (ULH) will likely see further upside next year. Read on….

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This year, the stock market has seen significant volatility due to record-high inflation, the Russia-Ukraine war, and the Fed hiking interest rates at a pace not seen in decades. However, inflation cooled notably last month and is at its lowest since December 2021.

The Labor Department yesterday reported that the Consumer Price Index (CPI) increased 7.1% from a year ago in November, lower than economists’ expectations of 7.3%. The moderation in inflation made investors optimistic about the central bank’s future course of action on the policy front.

“Cooling inflation will boost the markets and take pressure off the Fed for raising rates, but most importantly this spells real relief starting for Americans whose finances have been punished by higher prices,” said Robert Frick, corporate economist with Navy Federal Credit Union.

A weaker-than-expected CPI report combined with favorable data on jobs and income is increasing hopes that the economy could avoid an anticipated recession next year or suffer a mild downturn. Moody’s Analytics chief economist Mark Zandi is confident that the U.S. economy will narrowly avoid a recession, citing the recent favorable economic and market indicators.

According to Gagnon of the Peterson Institute of International Economics, the chances of a soft landing are between 50% and 60%, including the possibility of a “very, very mild recession.”

Given the backdrop, we think it could be wise to invest in fundamentally sound stocks CVS Health Corporation (CVS), ADT Inc. (ADT), The ODP Corporation (ODP), and Universal Logistics Holdings, Inc. (ULH) that have more room to run next year.

CVS Health Corporation (CVS)

CVS provides health services in the United States. The company operates through three segments: Health Care Benefits; Pharmacy Services; and Retail/LTC. It operates more than 9,900 retail locations and 1,200 MinuteClinic locations, online retail pharmacy websites, LTC pharmacies, and onsite pharmacies.

On December 1, CVS opened its first MinuteClinic locations in northern Delaware. MinuteClinic, the medical clinics inside select CVS Pharmacy stores, offers high-quality, affordable, and convenient care for various acute and chronic conditions for patients ages 18 months and older.

On September 5, CVS entered a definitive agreement with Signify Health (SGFY) to acquire Signify Health.

CVS Health President and CEO Karen S. Lynch said, “This acquisition will enhance our connection to consumers in the home and enables providers to address patient needs better as we execute our vision to redefine the healthcare experience. In addition, this combination will strengthen our ability to expand and develop new product offerings in a multi-payor approach.”

For the fiscal 2022 third quarter ended September 30, 2022, CVS’ total revenues increased 10% year-over-year to $81.16 billion. Its adjusted operating income increased by 3.9% from the prior-year period to $4.23 billion. In addition, the company’s adjusted earnings per share came in at $2.09, up 6.1% year-over-year.

Over the past three years, CVS’ revenue and EBIT have grown at CAGRs of 8.9% and 7.2%, respectively. 

Analysts expect CVS’ revenue and EPS for the current fiscal year (ending December 2022) to increase 7.7% and 2.6% from the prior year to $314.49 billion and $8.62, respectively. The company’s revenue and EPS for the next year are expected to grow 3.4% and 2.7% year-over-year to $325.26 billion and $8.86, respectively.

Furthermore, the company has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters. Over the past month, the stock has gained 2.7% and 11.3% over the past six months to close the last trading session at $101.19.

CVS’ strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR ratings assess stocks by 118 different factors, each with its own weighting.

CVS has an A grade for Growth and a B for Stability and Sentiment. It is ranked first out of 4 stocks in the B-rated Medical – Drug Stores industry.

We have also given CVS grades for Value, Momentum, and Quality. Get all the CVS ratings here.

ADT Inc. (ADT)

ADT provides security, interactive, and innovative home solutions to serve residential, small business, and commercial customers in the United States. Its segments include Consumer and Small Business (CSB); Commercial; and ADT Solar business (Solar). The company operates through a network of nearly 250 sales and service offices and three regional distribution centers.

On September 6, ADT announced its partnership with State Farm. State Farm will make a $1.2 billion equity investment in ADT, resulting in State Farm owning approximately 15% of ADT. Additionally, ADT plans to partner with State Farm and build upon its existing relationship with Alphabet (GOOG) (GOOGL), with the latter agreeing to commit an additional $150 million to support this opportunity.

In August, ADT announced its partnership with Uber Technologies, Inc. (UBER) to integrate ADT mobile safety solutions into the Uber app for riders and drivers in the United States to get live help, via phone or text, from ADT professional monitoring agents. This marks yet another addition to ADT’s growing Clientele that utilizes Safe by ADT to power their app-based mobile safety features.

For the third quarter of the fiscal year 2022 ended September 30, ADT’s total revenue increased 21.8% year-over-year to $1.60 billion, while the company’s adjusted EBITDA grew 11.9% year-over-year to $620 million. The company reported an adjusted net income of $83 million or $0.10 per share, compared to an adjusted net loss of $54 million or $0.07 per share in the previous-year quarter.

ADT’s revenue and EBIT have grown at CAGRs of 6.9% and 18%, respectively, over the past three years.

Analysts expect ADT’s revenue for the fiscal year ending December 2022 to increase 20% year-over-year to $6.37 billion. The company’s EPS for the current year is expected to come in at $0.51, compared to a loss of $0.25 per share during the previous year. Moreover, ADT’s EPS is expected to grow by 3.9% per annum over the next five years.

Shares of ADT have gained 7.1% over the past month and 20.5% over the past year to close the last trading session at $9.83.

ADT’s POWR Ratings reflect its bright prospects. The stock has an overall rating of B, translating to a Buy in our proprietary rating system. It has an A grade for Growth and Sentiment and a B for Stability.

ADT is ranked #5 of 60 stocks in the Home Improvement & Goods industry. Click here to see the additional ratings of ADT for Value, Momentum, and Quality.

The ODP Corporation (ODP)

ODP is an office supply holding company that offers business services, products, and digital workplace technology solutions through an integrated business-to-business distribution platform and omnichannel presence. It serves small, medium, and enterprise businesses. The company operates through two segments: Business Solutions and Retail.

In August, Office Depot, a wholly owned subsidiary of ODP and Uber Technologies, Inc., teamed up to bring business, office, and school essentials to customers nationwide. Office Depot is the first business solutions and office supply retailer to be available on Uber Eats. This partnership might boost the company’s revenue streams and extend its market reach.

For the fiscal 2022 third quarter ended September 24, 2022, ODP’s reported sales from ODP Business Solutions Division increased 9% year-over-year to $1 billion as more business customers returned to the workplace. Its earnings per share from continuing operations came in at $1.36, up 2.3% year-over-year. Operating cash inflows from continuing operations grew 34.7% year-over-year to $163 million.

Furthermore, the company’s adjusted free cash flow came in at $160 million, up 30.1% year-over-year.

ODP’s EPS has grown at an 85.4% CAGR over the past three years. Moreover, its total assets have increased at a CAGR of 7.6% over the same period.

The consensus revenue estimate of $2.14 billion for the fourth quarter of fiscal 2022 (ending December 31, 2022) indicates a 4.6% year-over-year improvement. Also, analysts expect the company’s EPS to grow 10.7% year-over-year to $0.79. The company has topped the consensus EPS estimates in three of the trailing four quarters.

The stock has gained 26% over the past six months and 22.1% over the past year to close its last trading session at $46.11.

ODP’s solid fundamentals and promising outlook is reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.

ODP has a grade of A for Growth and Quality and a B for Value. In the 47-stock Specialty Retailers industry, it is ranked #1.

Click here to access the additional POWR Ratings for ODP (Stability, Momentum, and Sentiment).

Universal Logistics Holdings, Inc. (ULH)

ULH provides transportation and logistics solutions in the United States, Mexico, Canada, and Colombia. It offers truckload services; domestic and international freight forwarding, customs brokerage services; and final mile and ground expedite services.

For the fiscal third quarter ended October 1, 2022, ULH’s total operating revenues increased 13.5% year-over-year to $505.69 million. The company’s income from operations came in at $69.77 million, up 317.4% year-over-year. Its non-GAAP EBITDA was $84.40 million, compared to $33.10 million in the prior year’s quarter.

In addition, the company’s net income increased 371.9% year-over-year to $48.48 million, while its EPS came in at $1.84, representing a 384.2% increase from the prior-year quarter.

ULH’s revenue and EBIT have grown at CAGRs of 4.9% and 8.1%, respectively, over the past three years. Its EPS has improved at a 6.5% CAGR over the same period.

Analysts expect ULH’s EPS for the fiscal year (ending December 2022) to come in at $6.40, indicating a 90.3% year-over-year increase. The consensus revenue estimate of $2.02 billion for the ongoing year represents a 15.4% year-over-year rise. The company has an impressive earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters.

The stock has gained 92.3% year-to-date and 103.3% over the past year to close the last trading session at $35.98.

ULH’s POWR Ratings reflect this positive outlook. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system.

ULH has a grade A for Growth. The stock has a grade B for Value, Momentum, Stability, and Sentiment.

ULH topped among the 17 stocks in the A-rated Air Freight & Shipping Services industry. To access the POWR Ratings for ULH, click here.

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CVS shares were unchanged in premarket trading Wednesday. Year-to-date, CVS has gained 0.30%, versus a -14.39% rise in the benchmark S&P 500 index during the same period.

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About the Author: Mangeet Kaur Bouns

Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.

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