Rip Or Plummet On Monday? Are You Ready?

We’ve been waiting long enough for this Trump-Xi meeting at G-20 which starts tomorrow, Friday and ends Saturday.

We’re going to get news out over the weekend that the meeting on trade either:
1) Came to an agreement to cut tariffs and play nice, or
2) Have the makings of an agreement in the future with no change today, or
3) Continue to disagree with no progress.

Our bias leans us to the second option.

But if we get option 1 the stock market can rip higher by a huge number, maybe 5% on Monday.

If we get option 3 the market can just as easily plunge 5% on Monday.

There is a huge range of outcomes that we need to prepare for. This is a greatly anticipated event that shouldn’t be taken for granted. Large investment funds will likely chase the trend driving stock market follow through either way.

The trade war has slowed economic momentum causing a very weak Q3 earnings season. We told subscribers to hedge out for the earnings season which helped avoid risk.

A positive conclusion of the trade war could mean a forthcoming rally, but no changes could cause a stock market plummet. We plan to respect and follow the market whichever way the event decides.

We’re wishing you success.

Where Are We With Tech Stocks?

We wanted to give a quick update how we’re seeing things in tech stocks and what we see coming.

We told subscribers to completely hedge throughout October and most of November except to be long for the midterm election rally day. Then we got back to hedged-out. We did not want market exposure. We still don’t.

This earnings season confirmed our concern we had ahead of time that earnings growth rates could slow.

We hear the world trying to pick bottoms but I think it’s more important to respect the slowdown in revenues. These are typically not one quarter events.

We’re telling subscribers to remain hedged and reduce position sizes to avoid risk. We do find opportunities for earnings but the risk/reward for earnings events is also not perfect right now.

It’s a good time to stay cautious into year end.

Wishing you a happy Thanksgiving and successful trading.

We also invite you to try our service and chat with a 14 day no risk trial. Kick the tires. Get into chat and let us help you make money in tech stocks.

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Disclaimer:

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. All model portfolio trades are hypothetical to show direction, conviction and timing. Performance excludes all relevant transaction costs. Elazar and its employees do not take individual stock positions to avoid front running and other potential customer related issues. Elazar may trade in index futures.

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

Free Trial

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