Chaim Siegel

SPY Risk On Tech Earnings Season

If the S&P 500 ETF (NYSEARCA:SPY) index breaks 274, or worse, closes below 274 we’re most likely making further near term lows.

This is a risky time where many are looking for a low but the market has not proven to reverse trend.

We’ve been telling subscribers for a month or two that we’ve been cautious on the market. We either need a washout or a change in trend higher but so far have had neither so we think more risk ahead.

Because of that we’ve been taking more of a wait-and-see for tech earnings season rather than getting aggressive ahead of earnings reports.

With China tariff issues, dollar and rate issues we’d prefer to react to great reports than carry much risk in this time.

$SPY #stockmarket

Looking For Tech Earnings Home Runs

We spoke to the top tech companies over the last few months to identify what tech stocks have home run earnings potential. Earnings are what drives stocks, especially tech stocks. Finding those few tech stocks that have realistic earnings trajectories way above the Street can give you conviction to see a stock through to big upside. Dip your toe in the water with a free trial.

START FREE TRIAL

All investments have many risks and can lose principal in the short and long term. The information provided is for information purposes only and can be wrong. By reading this you agree, understand and accept that you take upon yourself all responsibility for all of your investment decisions and to do your own work and hold Elazar Advisors, LLC, and their related parties harmless.

We have no holdings in the stocks mentioned unless otherwise noted.

SPY Risk On Tech Earnings Season

If the S&P 500 ETF (NYSEARCA:SPY) index breaks 274, or worse, closes below 274 we’re most likely making further near term lows.

This is a risky time where many are looking for a low but the market has not proven to reverse trend.

We’ve been telling subscribers for a month or two that we’ve been cautious on the market.  We either need a washout or a change in trend higher but so far have had neither so we think more risk ahead.

Because of that we’ve been taking more of a wait-and-see for tech earnings season rather than getting aggressive ahead of earnings reports.

With China tariff issues, dollar and rate issues we’d prefer to react to great reports than carry much risk in this time.

$SPY #stockmarket

Looking For Tech Earnings Home Runs

We spoke to the top tech companies over the last few months to identify what tech stocks have home run earnings potential. Earnings are what drives stocks, especially tech stocks. Finding those few tech stocks that have realistic earnings trajectories way above the Street can give you conviction to see a stock through to big upside. Dip your toe in the water with a free trial.

START FREE TRIAL

All investments have many risks and can lose principal in the short and long term. The information provided is for information purposes only and can be wrong. By reading this you agree, understand and accept that you take upon yourself all responsibility for all of your investment decisions and to do your own work and hold Elazar Advisors, LLC, and their related parties harmless.

We have no holdings in the stocks mentioned unless otherwise noted.

Tech Stocks: More Risk For Earnings Season?

We’ve been telling subscribers that we’re cautious on stocks the last few weeks preferring lower exposure. Rising rates and tariff risk to earnings are key headwinds going into earnings season which starts next week.

Trade War Risk About To Hit Earnings?

So far the stock market has generally looked through trade war risk.

That said we’re approaching earnings season and that could change. While the news media can wiggle stocks, earnings are the ultimate driver to stocks.  If tariffs hit earnings reports that drops the E in the PE and likely can hit stocks.

We’re about to lap the tax benefits in early 2018 with tariffs in 2019. That earnings benefit gets lapped with an earnings drag. That could start this earnings season by way of company guidance.

That’s real for the market but we haven’t had to face earnings reality in the market yet for tariffs.

Except for Micron

You heard what Micron said about tariffs on their earnings call in September? It was one of the reasons they dropped guidance for next quarter and the stock dropped with it.

Micron said on tariffs “we’re working on steps to mitigate that. That obviously takes some time….. It’ll be a quarter or two before we start to see some benefit from the improvement there.”

But so far there’s been no let up in the build up of threats between the US and China. Even though Micron said they expect to see benefits in a couple of quarters, we don’t really know. They just dropped margin guidance because of tariffs. We’d guess other tech companies are in the same boat.

Micron Sneak Peak On Earnings Season?

Micron reports in between others and could be a sneak peak. We’re headed to hear how the rest of tech is going to deal with earnings as earnings season starts next week.

Looking For Tech Earnings Home Runs

We spoke to the top tech companies over the last few months to identify what tech stocks have home run earnings potential. Earnings are what drives stocks, especially tech stocks. Finding those few tech stocks that have realistic earnings trajectories way above the Street can give you conviction to see a stock through to big upside. Dip your toe in the water with a free trial.

START FREE TRIAL

All investments have many risks and can lose principal in the short and long term. The information provided is for information purposes only and can be wrong. By reading this you agree, understand and accept that you take upon yourself all responsibility for all of your investment decisions and to do your own work and hold Elazar Advisors, LLC, and their related parties harmless.

We have no holdings in the stocks mentioned unless otherwise noted.

Tech Stocks: More Risk For Earnings Season?

We’ve been telling subscribers that we’re cautious on stocks the last few weeks preferring lower exposure. Rising rates and tariff risk to earnings are key headwinds going into earnings season which starts next week.

Trade War Risk About To Hit Earnings?

So far the stock market has generally looked through trade war risk.

That said we’re approaching earnings season and that could change. While the news media can wiggle stocks, earnings are the ultimate driver to stocks.  If tariffs hit earnings reports that drops the E in the PE and likely can hit stocks.

We’re about to lap the tax benefits in early 2018 with tariffs in 2019. That earnings benefit gets lapped with an earnings drag. That could start this earnings season by way of company guidance.

That’s real for the market but we haven’t had to face earnings reality in the market yet for tariffs.

Except for Micron

You heard what Micron said about tariffs on their earnings call in September? It was one of the reasons they dropped guidance for next quarter and the stock dropped with it.

Micron said on tariffs “we’re working on steps to mitigate that. That obviously takes some time….. It’ll be a quarter or two before we start to see some benefit from the improvement there.”

But so far there’s been no let up in the build up of threats between the US and China. Even though Micron said they expect to see benefits in a couple of quarters, we don’t really know. They just dropped margin guidance because of tariffs. We’d guess other tech companies are in the same boat.

Micron Sneak Peak On Earnings Season?

Micron reports in between others and could be a sneak peak. We’re headed to hear how the rest of tech is going to deal with earnings as earnings season starts next week.

Looking For Tech Earnings Home Runs

We spoke to the top tech companies over the last few months to identify what tech stocks have home run earnings potential. Earnings are what drives stocks, especially tech stocks. Finding those few tech stocks that have realistic earnings trajectories way above the Street can give you conviction to see a stock through to big upside. Dip your toe in the water with a free trial.

Tesla’s Stock About To Turn Up

Here’s the famous vegetable turn up.
Whoops Turnip, never mind.

We’ve been patient for Tesla’s stock to start turning up. It may be happening. We called out a 280 support. It appears to have held.

Today was also nice. You had “bad news.” Oh no Lucid and oh no they have to deliver way too many cars and Musk is whining about it. It’s such a terrible calamity of course to have to deliver so many cars, right? Not really.

Ford and GM wish they could be crying on Twitter that they have to deliver way too many cars. Oh no, right?

And in the face of all that “bad news” the stock opened down and managed to crawl its way back to up all day. That’s also in the face of a market that got nailed into the close.

So you had bad news today and the stock worked its way up all day to flat in a down tape. That’s great action.

Tesla gets our official Turnip award for starting to turn up. Production, delivery and earnings reports around the corner with no-go-private news apparently behind us. Turn-up.

Quick quiz:
Having way too many cars to deliver is:
A) Terrible because as a reporter you have to put a negative spin on everything.
B) A big problem because you’ll probably make too much money which will cause pay-down debt hell.
C) A sign of lack of demand for Tesla which means they must be going bankrupt very soon.
D) Really a very nice thing that most car companies could only dream of.
Answer in comments.

Looking For Tech Earnings Home Runs

We spoke to the top tech companies over the last few months to identify what tech stocks have home run earnings potential. Earnings are what drives stocks, especially tech stocks. Finding those few tech stocks that have realistic earnings trajectories way above the Street can give you conviction to see a stock through to big upside. Dip your toe in the water with a free trial.

START FREE TRIAL

All investments have many risks and can lose principal in the short and long term. The information provided is for information purposes only and can be wrong. By reading this you agree, understand and accept that you take upon yourself all responsibility for all of your investment decisions and to do your own work and hold Elazar Advisors, LLC, and their related parties harmless.

We have no holdings in the stocks mentioned unless otherwise noted.

Would You Pay 11X For Tesla?

This isn’t easy but try to figure out why
we used this pic. No hints. Comment
in comments.

Would you pay an 11 PE for Tesla stock? Why not right? Ford and GM trade at low multiples. But Tesla’s about to have blow out earnings growth starting in Q3 as per their guidance.

We’re at about $27.00 in earnings for 2019 when factoring in 1) the gross margin ramp they saw in S&X in Q2, 2) their Model 3 unit plans through 2019 and, 3) the company’s gross margin targets for Model 3 which Musk reviewed on Q1 and Q2 earnings calls.

The stock price of $295 divided by our $27 gives you an 11 PE. Not bad, right, for one of the best earnings stories that exist today.

Two things that most did not notice but should have last quarter was the huge jump in S&X gross margins in Q2. They were up about 1000 basis points. They reached into the high-30s. That gives you some visibility that Model 3 margins also have upside.

Again, high-30s% gross margins for a car company? That’s not huge?

BMW and Mercedes are about 20% while the US manufactures are lower.

Musk’s focus on the machine being the production was proven out in that high-30s number for S&X. But you needed to back into that number, they didn’t outright say it. And who would want to go through that one extra step to try and figure that out? It’s probably the most important piece of their Q2 report.

Units are hitting the steep part of the S-curve Elon Musk has waiting for for some time. That steep part of the S-curve is causing blow out gross margins company wide.

You have too many bears rear-view mirroring it while earnings are about to explode starting this quarter, potentially.

In our experience what drives a PE are inventory turns and gross margins. The higher the both are the more a dollar of investment can turn-over so that dollar, so-to-speak, is worth more. That gives you a higher PE.

So we think Tesla’s PE should be closer to 50X, not 10X given its market leading gross margins. If they ever decide to drop price competitors are toast. Also what traditional manufacturer is going to want to mess up their earnings by scaling EV losses that Tesla now has behind them? It’s not an easy business decision.

Much like Netflix and Amazon spending big first, others are left to play catchup but never really catchup.

50 X our 2019 $27 = $1350. That would be nice, right? (Street’s at about $2.90 for 2019)

Quiz?
So why’d we use that pic up there?
Answer in comments.

Looking For Tech Earnings Home Runs

We spoke to the top tech companies over the last few months to identify what tech stocks have home run earnings potential. Earnings are what drives stocks, especially tech stocks. Finding those few tech stocks that have realistic earnings trajectories way above the Street can give you conviction to see a stock through to big upside. Dip your toe in the water with a free trial.

START FREE TRIAL

All investments have many risks and can lose principal in the short and long term. The information provided is for information purposes only and can be wrong. By reading this you agree, understand and accept that you take upon yourself all responsibility for all of your investment decisions and to do your own work and hold Elazar Advisors, LLC, and their related parties harmless.

We have no holdings in the stocks mentioned unless otherwise noted.

Sept 16, 2018 correction: picture change.

Semiconductor and Tech Macro Review

We had pointed out risks in semiconductor land about a month ago. Since then there’s been a battle in these stocks with rallies getting sold.

Fundamentally Bullish

Fundamentally we’re bullish in tech and semis. Our work still shows that there is strong demand at the datacenter and the enterprise.

Cloud hyperscalers are still aggressively spending especially with strong Cloud growth. Enterprise customers are really accelerating acceptance of off-prem cloud offerings as we saw with Azure and AWS growth last quarter.

Semiconductor sell-in to these cloud offerings, we’d guess has not slowed despite fears.

Memory Fears Not A Sign Of Tech Weakness

The slowdown in DRAM and NAND prices has spooked investors that there could be a tech slowdown or a semiconductor cycle peak.

We think that memory price declines are more based on supply catching up with demand for DRAM.  Apple unit weakness earlier in the year took the wind out of NAND. Apple also pre-bought commodities early and didn’t see the unit demand which also hurt memory pricing.

As for communications semis, we think channel inventory is back to normal which can help exposed companies that have been killed so far this year after weak Apple units earlier in the year.

No Cycle Peak

For a cycle peak you need a few things.

1) End demand would need to slow which we said above we don’t think is happening. A trade war would be a risk of that but, again, so far we don’t think there’s been a slowdown.

2) You’d need high channel inventories, which we think are fairly normal in most verticals. We do think there may be some elevated inventories in consumer gaming but that’s an outlier.

3) You’d need double and triple ordering which we don’t hear.

We don’t think we’re at a cycle peak in any industry yet. Again, if there was an all-out trade war, yes, slower demand could trigger a peak. Not there yet.

Conclusion

Net net sentiment is very negative looking for anything glass half empty but we’re looking for opportunities on weakness into Q3 earnings.

Looking For Tech Earnings Home Runs

We spoke to the top tech companies over the last few months to identify what tech stocks have home run earnings potential. Earnings are what drives stocks, especially tech stocks. Finding those few tech stocks that have realistic earnings trajectories way above the Street can give you conviction to see a stock through to big upside. Dip your toe in the water with a free trial.

START FREE TRIAL

All investments have many risks and can lose principal in the short and long term. The information provided is for information purposes only and can be wrong. By reading this you agree, understand and accept that you take upon yourself all responsibility for all of your investment decisions and to do your own work and hold Elazar Advisors, LLC, and their related parties harmless.

We have no holdings in the stocks mentioned unless otherwise noted.

$AAPL, $INTC, $SMH, $INTC, $AMD

Citi Tech Conference: Something New We’re Watching

It’s strange how the trade war has not really hit stocks. Why is that? Because the trade war hasn’t yet hit earnings. If it does the stocks can get hit on poor reports or weak guides.

So when we saw this from DRAMeXchange our antennae went up,

“…smartphone brands and a few server manufacturers have marked down their [Q3] shipment projections.”

That would not be good if true. The market’s soaring but if the above quote proves correct there’s risk to earnings and then stock prices.

We have not heard about this out of Q2 which was strong. If this proves correct it’s a risk. Trade war fears reflected in weak orders and slower earnings would be the ultimate risk to stocks.

We’ll be listening to the companies at the Citi Global Tech Conference tomorrow and Thursday for any signs.

Join Us For Our Live Coverage Of The Citi Conference

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Looking For Tech Earnings Home Runs

We spoke to the top tech companies over the last few months to identify what tech stocks have home run earnings potential. Earnings are what drives stocks, especially tech stocks. Finding those few tech stocks that have realistic earnings trajectories way above the Street can give you conviction to see a stock through to big upside. Dip your toe in the water with a free trial.

START FREE TRIAL

All investments have many risks and can lose principal in the short and long term. The information provided is for information purposes only and can be wrong. By reading this you agree, understand and accept that you take upon yourself all responsibility for all of your investment decisions and to do your own work and hold Elazar Advisors, LLC, and their related parties harmless.

We have no holdings in the stocks mentioned unless otherwise noted.

Cisco $CSCO
Intel $INTC
Micron $MU
Microsoft $MSFT
NVIDIA $NVDA

Apple $AAPL

Correction: Tickers added Sept 4, 2018 9:11 AM EDT

Tesla: Production Even Close To Estimates, Huge For Earnings

It was reported by Electrek that Tesla is apparently on track with their Model 3 quarterly ramp but below their 6,000 / week target.

The ramp is just so big that small misses don’t really matter. Worrying about such precise measurements misses the big picture.

Tesla even coming close to their targets means that Q3 deliveries would jump about 90% from Q2. If they continue this pace deliveries will be up 3X by Q2 next year from this year’s Q2.

Being high or low from those weekly, monthly, or quarterly targets misses the point.

…And Really Misses The Point For Earnings

What’s most exciting about the story is of course earnings. Earnings are what drives stock prices.

Any data that expects Tesla comes anywhere close to their production or delivery targets means huge things for earnings.

Analysts were in shock on Q2 as S&X gross margins jumped from Q1. They were up anywhere from 500-1000 basis points from Q1 to Q2.

Why?

CEO Elon Musk said, “as we improve efficiency, then gross margin and so the profitability per car just improves dramatically.”

Well you saw that in Q2.

What happens to gross margins if deliveries even come close to being up 90% in Q3 from Q2?

What’s going to happen to gross margins when deliveries are up 3-fold by Q2 next year?

We think gross margins are going to jump.

Shorts Missing The Forest For The Trees

Even with all the communication blunders or smart short stories out there, they all get erased as production ramps 90% sequentially and 3-fold year-over-year.

Remember, “as we improve efficiency, then gross margin and so the profitability per car just improves dramatically.”

That’s now.

Q2 deliveries were up 36% sequentially and gross margins jumped. So for Q3 if deliveries are up 90% sequentially what’s going to happen to gross margins? Look out.

Plug

We’re speaking to Cadence, NVIDIA and Cirrus this week as well as covering the Citi tech conference. Join Us.

Looking For Tech Earnings Home Runs

We spoke to the top tech companies over the last few months to identify what tech stocks have home run earnings potential. Earnings are what drives stocks, especially tech stocks. Finding those few tech stocks that have realistic earnings trajectories way above the Street can give you conviction to see a stock through to big upside. Dip your toe in the water with a free trial.

START FREE TRIAL

All investments have many risks and can lose principal in the short and long term. The information provided is for information purposes only and can be wrong. By reading this you agree, understand and accept that you take upon yourself all responsibility for all of your investment decisions and to do your own work and hold Elazar Advisors, LLC, and their related parties harmless.

We have no holdings in the stocks mentioned unless otherwise noted.

Correction: added the word “sequentially” Sept 3, 2018, 9:57 AM EDT

What We’re Watching At The Citi Tech Conference

The Citi Global Technology Conference this Wednesday and Thursday is timely. We’re two months into the third quarter. Third quarters are important in tech because you have the build for the holiday season.

Investors will be looking for any hints from management how trends are progressing.

Here’s some of the things we’re looking for…

General Body Language

Frankly we want to make sure companies are still pumped about business. They should be. Tech’s been strong and demand has been strong. We want strong language that tech and demand have not slowed. That’s what the stocks need to move up. If we don’t hear that there could be risk.

DRAM Price Weakness Not Because Of Demand

We’ve heard some analysts and companies concerned that DRAM prices peaking and coming down in the spot market could be an early sign of weak demand. We don’t think so. We think supply has caught up with demand to some degree but, we’d guess demand has not slowed.

Capex Strong

Datacenter demand has been very strong at most semi players. Capex spending has been accelerating at the hyperscalers. We think that should obviously translate to continued strong trends at the datacenter. As long as capex remains very strong we have medium term visibility that this tech boom is very much in place.

Capex moving up also allays concerns of weaker DRAM pricing.

Trade Tensions

Any disruptions thanks to trade tensions?

Apple Food Chain

Apple’s launching new products September 12. Some Apple suppliers appear to have bottomed and we want to hear that Apple is bullish about the Fall launch and that inventory is lean enough for suppliers to benefit.

Stock Action

You’ll have the biggest funds meeting with the largest tech companies. Stock action matters on Wednesday and Thursday. What those huge funds hear can quickly get reflected in the stocks moving up or down. Ear to the train tracks.

Here’s the list of companies we’re watching more carefully.

Twitter Inc $TWTR
Applied Materials $AMAT
Arista Networks $ANET
Autodesk $ADSK
Checkpoint $CHKP
Cisco $CSCO
Intel $INTC
Juniper Networks $JNPR
KLA-Tencor $KLAC
Lam Research $LRCX
Maxim Integrated $MXIM
Micron $MU
Microsoft $MSFT
MKS Instruments $MKSI
NetApp $NTAP
NVIDIA $NVDA
Qualcomm $QCOM
Roku $ROKU
Skyworks Solutions $SWKS
STMicroelectronics $STM
Texas Instruments $TXN
Western Digital $WDC
Xilinx $XLNX

Conclusion

Septembers matter for the stock market and timely tech conferences like Citi this week are key. We want to hear strong trends and want to see good stock action. If we don’t get either we probably need to do a little more digging and maybe watch out.

We also have a full slate of upcoming company calls.

Join Us Live

Join us for live coverage. We’ll likely post some of our findings publicly but for real-time reactions to what we hear and see join us with a free trial.

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All investments have many risks and can lose principal in the short and long term. The information provided is for information purposes only and can be wrong. By reading this you agree, understand and accept that you take upon yourself all responsibility for all of your investment decisions and to do your own work and hold Elazar Advisors, LLC, and their related parties harmless.

We have no holdings in the stocks mentioned unless otherwise noted.

Updated September 2, 2018 11:17 AM EDT