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Square, SPG, ICLK, LLNW and SIRI as Zacks Bull and Bear of the Day
Read MoreHide Full Article
For Immediate Release
Chicago, IL – October 8, 2020 – Zacks Equity Research highlights Square (SQ - Free Report) as the Bull of the Day and Simon Property Group (SPG - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on iClick Interactive Asia Group Ltd. (ICLK - Free Report) , Limelight Networks, Inc. and Sirius XM Holdings Inc. (SIRI - Free Report) .
In early July, I profiled Square as the Bear of the Day -- even though I was still very bullish on this "Apple of Fintech" disruptor -- because analyst EPS revisions had dropped the stock into the cellar of the Zacks Rank.
Here's what I wrote then...
Square is a mad genius-level disruptive technology platform that just launched over 100% in Q2 because so many valuation-focused sell-side analysts and short-sighted hedge funds kept it below $75 for so long.
And as of July 9, the stock just tagged the moon above $133, for over 25% gains this month alone. Apparently (some of) the blind have begun to see.
Meanwhile, UBS and BofA offered downgrades to "Sell" and "Underperform" in May after the company's latest quarterly report when shares had just gotten back above $70.
And I think yesterday, a Cowen analyst made a much more timely downgrade after SQ's "200% rally" from the Coronavirus Crash lows. Lowering their rating to Market Perform from Outperform, they also thought they should raise their price target from $79 to something a little more respectable like $119.
(end of July 10 article excerpt)
I spent the rest of that article describing what most analysts were missing, how I stupidly listened to them, and what two other geniuses saw clearly. If I had only listened more closely to Jamie Dimon, who runs a little bank you've probably heard of, and Dan Dolev, then the Square analyst at Nomura Instinet, I would be sitting on over 200% gains in SQ shares this year. More on their views coming up.
And yet not a week after this detailed bullish case I laid out, Square was initiated with a Neutral rating and $133 price target at Goldman Sachs. Analyst Matthew O'Neill started 15 companies in the Payments & IT Services space, favoring enterprises with "strong secular growth trends" and those with the opportunity for total addressable market expansion.
O'Neill noted that COVID-19 will accelerate greater adoption of contactless payments and e-commerce, benefiting the networks, acquirers and processors. But he believed that "consensus Cash App enthusiasm" could prove too optimistic in the near-term to justify further appreciation for the already-rich valuation of Square shares.
June Quarter Knocks Their Socks Off
In early August, Square delivered a coronavirus report that was anything but recessionary. Sales and profits surged as online business activity offset the loss of in-person transactions for which the eponymous dongle became famous. Net revenue for the quarter was $1.92 billion vs the consensus of $1.14 billion -- for a unheard of 69% beat -- and adjusted EPS was +18 cents vs the Zacks Consensus of -7 cents, for a 350% beat.
There was a big bullish response from RBC Capital analyst Daniel Perlin, who raised the firm's price target on Square to $200 from $119 after the company reported implied adjusted net revenue of $677M, which was up 20% year-over-year and beat both his and consensus forecasts. He increased his revenue and earnings estimates following the "very impressive" Q2, which he sees illustrating the company's innovation, speed, and ability to pivot quickly, Perlin told investors.
Dan Dolev is Back!
Many analysts followed Perlin's lead in August, with average price target bumps up toward $170. But I was wondering why I hadn't heard from the biggest SQ bull of them all, Dan Dolev, and his proprietary "Cash App vs Venmo" tracker that he has used for years to chart Square's competitive stance vs. PayPal.
Turns out Dan was in a transition to another big Japanese i-bank. Here was his debut on August 26...
Mizuho starts Square with Buy rating and $225 price target: Analyst Dan Dolev initiated coverage of Square reiterating his long-held belief that the fintech disruptor is best positioned to benefit from the dislocation in small- to mid-sized businesses. Citing that the "superior" unit economics for its Cash App could help drive four-times growth in gross profit, Dolev noted that Square's margins are "understated" as it seeks to maximize its terminal value.
Then in late September, Dolev put out a note saying that Square's Cash App is "virtually unstoppable." After meeting with Square management, Dolev restated his case for Cash App's total addressable market, average revenue per user potential, user growth prospects, and revenue sustainability. The SQ fortune teller said that Cash App's average revenue per user has seen "stellar growth," rising from nothing to $45 in just five years. And he estimated that this number can reach $80 or higher by 2023.
Cash is Dead, Long Live Cash App
Also in September, Daren Fonda writing for Barron's observed that cash usage was already at an all-time low at the start of the new decade and COVID-19 just hastened the decline, with Americans stuck at home and now still wary of the close proximity required for the physical exchange of potentially infectious bills. While Fonda noted PYPL and SQ valuations were pushing to extremes, he for long-term investors that there was still time to jump in.
Wall Street analysts agree as well with estimates rising sharply since the August earnings report. Revenue consensus for this year now sits at 49% growth to breach $7 billion and a 27% advance is projected for next year's top line to hit nearly $9 billion.
For earnings estimates, even though the consensus sits at just 53 cents, for a 35% decline, that's up from the Armageddon scenario forecast over two months ago at just 18 cents EPS. And next year's target is up to $1.15, representing over 120% growth.
These rising estimates are why SQ is a Zacks #1 Rank again.
Dimon: Square Innovated Where We Should Have
As for Jamie Dimon, I can only share and still enjoy these quotes of his from a February 2019 article in American Banker by Andy Peters...
“They came up with this little dongle to process stuff and it was a great idea,” Dimon said.
Square then built off the success of its card-reader to provide other services to its business customers, such as wider variety of point-of-sale systems that allow merchants to accept cash or card payments. It also provides merchants with tablets and software that allows them to track sales patterns, inventory and other important data.
“We didn’t give them that opportunity, Square did," Dimon said. Finally, Dimon lamented that Square beat JPMorgan to the punch in making online loans to small businesses.
Square Capital, its online lending arm, began offering business loans in early 2014 — nearly two years before JPMorgan began making its own digital small-business loans via a partnership with fintech lender OnDeck Capital.
Square "said, 'you know what, since we know this company and they might need an advance this time of the year, we might advance them $10,000 or $15,000 or $100,000,'” Dimon said. “They did all this stuff we could have done that we didn’t do.”
The mark of a great leader is to recognize and admit failures, and hopefully learn from them. I wonder if Jamie thought about trying to buy SQ when it was on sale last spring at $25 billion.
I sure wish I had hung to my shares. And let's hope I've learned my lesson about sticking with disruptive innovation.
Simon Property Group is the $22 billion real estate investment trust (REIT) engaged in acquiring, owning and leasing of shopping, dining, entertainment and mixed-use destinations. The company’s real estate portfolio consists of malls, premium outlets, "mills" and various international properties.
As of June 30, 2020, Simon Property owned or held interests in 204 properties in the United States. This comprises 99 malls, 69 Premium Outlets, 14 Mills, four lifestyle centers and 18 other retail properties across 37 states and Puerto Rico.
My colleague Dave Borun profiled SPG as the Bear of the Day in July where he wrote...
The performance of Real Estate Investment Trusts has been a mixed bag lately. On one hand, public companies that own rental properties and are required by law to pay out 90% of their pre-tax income to shareholders have been providing yields that are much more attractive than the rates that can be earned in money-market savings accounts or fixed-income instruments like Treasury bonds.
In normal conditions, REITs tend to trade more like bonds, with prices that rise as interest rates fall.
On the other hand, there’s a very real possibility that REITs that invest in the commercial markets will see widespread tenant lease defaults. As consumers continue to shift their shopping habits to include more online purchases and fewer trips to the mall, an increasing number of large brick-and-mortar retailers have filed for bankruptcy protection.
At the beginning of 2020 when SPG shares were trading near $145/share, the company’s portfolio of 204 properties allowed them to pay a regular dividend of between 3-5% - a very solid yield. At the more recent share level of around $64/share, the dividend yield is now north of 8% annually.
(end of Dave Borun's excellent summary of the SPG business situation)
Since Borun's report, analyst revenue and profit estimates have continued to slide for SPG with this year's top line expected to fall nearly 17% vs 2019 to under $4.8 billion.
And in the past 90 days, EPS estimates have dropped another 8% for 2020 from $10.56 to $9.72, representing an annual decline of over 19%. Thus SPG remains in the cellar of the Zacks Rank.
Where Does a Real Estate or Income Investor Turn?
Investors looking for safe and steady income from REITs have had to reevaluate their strategy this year. But all is not lost in real estate because the home builders have some of the best investment profiles right now with the highest Zacks ratings.
For more on what could be an amazing decade for housing, see my recent Zacks Confidential report where I explain my thesis on what is about to unfold...
In that report, I use a lot of analysis from my favorite real estate expert, Tracey Ryniec. Her research helped convince me that the housing boom of 2020 could extend for the next 3 to 8 years.
If you want to get a copy, just email Ultimate@Zacks.com and tell 'em Cooker sent you. Until then, check out the interview I did with veteran private wealth manager Chad Willardson of Pacific Capital where he and I discuss how to navigate almost any market storm with a long-term plan that can easily beat the averages.
Chad's new book Stress Free Money: Overcome These Seven Obstacles to Find Financial Freedom is a short and handy guide to getting your "money game" tuned-up and ready to prosper in this exciting and fertile new decade. And we go over several of the important principles in my Mind Over Money podcast and article...
The article version of our podcast discussion (in that same link) has a snapshot of my core thesis about how to avoid shooting yourself in the foot with too many frequent decisions about your retirement nest egg.
Additional content:
3 Cheap Tech Stocks Under $10 to Buy Despite Volatility Fears
The S&P 500 has climbed 4% since September 23 to help claw back some of its early September losses. Wall Street has turned its attention to the election, which is only four weeks away and might have become more complicated by President Trump’s Covid-19 diagnosis.
Along with the election, investors are navigating how to price in what might be next on the coronavirus front. It is worth pondering how much political will there would be for another broad-based lockdown, as large areas of the economy still struggle to return to anything close to normal.
This prompted Fed Chairman Jerome Powell to double down on his push for Congress and the White House to provide more economic stimulus. “The expansion is still far from complete. At this early stage I would argue that the risks of policy intervention are still asymmetric,” Powell said in prepared remarks Tuesday.
“Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses. The risks of overdoing it seem, for now, to be smaller.”
On top of that, it is always worth quickly looking back to see how far the market has come. The market posted its best two-quarter run (Q2 and Q3) since 2009 after the coronavirus ended the historic bull run in March.
The S&P 500 is still up over 50% off its lows and roughly 6% in 2020. The proxy index for the broader market is once again back up above its 50-day moving average, after technical traders worried a few weeks ago about a big slip down to the 200-day.
The overall climb comes as the economy continues to add more jobs, even if things slowed down in September. The U.S. unemployment rate fell to 7.9% last month, with 11.4 million jobs added since the major layoffs in March and April. Plus, the S&P 500 earnings outlook continues to improve for the third quarter and beyond, and Fed’s choice to keep its interest rate near zero through at least 2023 should help support stocks.
Clearly, many investors might want to remain on the sidelines for now, or simply not make any new additions until some of the bigger questions are answered. But those with longer-term horizons can get hurt trying to time the market.
So let’s jump into three companies within a niche area of the market: tech stocks trading for under $10 per share…
iClick Interactive Asia Group Ltd.
Prior Close: $6.79 USD
IClick Interactive provides online marketing and enterprise data solutions. ICLK works with global brands to help provide exposure in the expanding Chinese market, where it claims it’s able to reach “98% of China Internet users.” The firm, which boasts that it connects “marketers worldwide to the right audience in China and beyond,” was founded in 2009 in Hong Kong and was listed on the Nasdaq in late 2017.
The company topped our bottom-line estimates in the trailing two periods, with sales up 25% in Q1 and 18% in Q2 FY20, which it reported near the end of August. ICLK’s performance helped send its stock price to new highs in early September. Shares of iClick are up 110% in 2020 to crush its industry’s 5% decline and have popped 125% in the last 12 months. This climb includes its recent downturn.
The stock rests nearly 30% below its recent highs, including Tuesday’s jump, which might set up a stronger buying opportunity for those high on ICLK. It’s worth noting that iClick issued 8.5 million ADS shares in an early September follow-on offering to help fund investments in its growing enterprise solutions segment and more.
Zacks estimates call for iClick’s Q3 revenue to jump 26%, with its fiscal 2020 sales projected to surge over 27% to $254 million to top FY19’s 25% expansion. Meanwhile, the online marketing and enterprise data solutions firm is expected to swing from an adjusted loss of -$0.04 a share last year to +$0.03 in FY20 and then climb to +$0.09 in FY21. ICLK’s positive earnings revisions help it grab a Zacks Rank #2 (Buy) right now.
The stock also earns a “B” grade for Growth in our Style Scores system and all four brokerage recommendations that Zacks has accumulated for the stock come in at a “Strong Buy.” And iClick announced on Tuesday a “strategic collaboration” with Tencent International Business Group on “Smart Solutions in Key APAC Markets,” which helped ICLK shares climb.
Limelight Networks, Inc.
Prior Close: $5.50 USD
Limelight provides digital content delivery, video, cloud security, and edge computing services. The Scottsdale, Arizona-based firm allows its customers to deliver streaming video and other digital content to “any device, anywhere,” and its offerings are geared toward industries from media and broadcasting to gaming. LLNW topped our Q2 estimates, with sales up 28%, while it swung from an adjusted loss to +$0.03 per share.
Limelight’s solid quarter helped it lift its full-year sales guidance. Zacks estimates call for its Q3 sales to jump roughly 15%. Peeking ahead, its FY20 revenue is projected to climb 18.1%, with FY21 expected to come in another 10% higher. The company is also expected to soar from an adjusted loss of -$0.02 in FY19 to +$0.08 a share in FY20, with FY21 expected to climb to $0.12.
Limelight is currently a Zacks Rank #2 (Buy) that holds an “A” grade for Momentum. LLNW is up 100% over the last 12 months, yet it rests nearly 30% off its early July highs. Luckily, the stock has started to bounce back, up 15% in the past month. And investors won’t have to wait long for company updates, with LLNW set to release its Q3 results on October 22.
Sirius XM Holdings Inc.
Prior Close: $5.61 USD
Sirius XM is a subscription satellite radio giant that expanded its reach through its early 2019 acquisition of Pandora. This helped boost its audio and music streaming presence as it competes against the likes of Spotify, Apple Music, and others. The firm now reaches over 100 million people every month. SIRI matched our Q2 earnings estimate at the end of July, even though its ad business has taken a coronavirus-based hit as advertisers pull back on spending everywhere. Sirius also added more users than projected.
Shares of SIRI are up 20% off the market’s lows, yet they remain 25% below their pre-COVID highs. This could give it some runway. Sirius is up 45% in the last five years, but the last two years have been tough. Luckily, its 0.94% dividend yield, which beats the 10-year U.S. Treasury note’s 0.73%, helps provide investors with some income. Plus, the board in mid-July announced the approval of an additional $2 billion in buybacks. And Sirius announced in July that it is set to storm into the booming podcasting market with its purchase of Stitcher from E.W. Scripps Co.
Zacks estimates call for SIRI’s fiscal 2020 sales to slip 0.48%, with FY21 projected to jump 5.5% higher to $8.18 billion. Meanwhile, its adjusted earnings are projected to climb 20% and 18% over this same stretch. And it has seen its earnings outlook improve recently to help SIRI earn a Zacks Rank #2 (Buy) heading into its Q3 financial release on Oct. 22.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
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Square, SPG, ICLK, LLNW and SIRI as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – October 8, 2020 – Zacks Equity Research highlights Square (SQ - Free Report) as the Bull of the Day and Simon Property Group (SPG - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on iClick Interactive Asia Group Ltd. (ICLK - Free Report) , Limelight Networks, Inc. and Sirius XM Holdings Inc. (SIRI - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
In early July, I profiled Square as the Bear of the Day -- even though I was still very bullish on this "Apple of Fintech" disruptor -- because analyst EPS revisions had dropped the stock into the cellar of the Zacks Rank.
Here's what I wrote then...
Square is a mad genius-level disruptive technology platform that just launched over 100% in Q2 because so many valuation-focused sell-side analysts and short-sighted hedge funds kept it below $75 for so long.
And as of July 9, the stock just tagged the moon above $133, for over 25% gains this month alone. Apparently (some of) the blind have begun to see.
Meanwhile, UBS and BofA offered downgrades to "Sell" and "Underperform" in May after the company's latest quarterly report when shares had just gotten back above $70.
And I think yesterday, a Cowen analyst made a much more timely downgrade after SQ's "200% rally" from the Coronavirus Crash lows. Lowering their rating to Market Perform from Outperform, they also thought they should raise their price target from $79 to something a little more respectable like $119.
(end of July 10 article excerpt)
I spent the rest of that article describing what most analysts were missing, how I stupidly listened to them, and what two other geniuses saw clearly. If I had only listened more closely to Jamie Dimon, who runs a little bank you've probably heard of, and Dan Dolev, then the Square analyst at Nomura Instinet, I would be sitting on over 200% gains in SQ shares this year. More on their views coming up.
And yet not a week after this detailed bullish case I laid out, Square was initiated with a Neutral rating and $133 price target at Goldman Sachs. Analyst Matthew O'Neill started 15 companies in the Payments & IT Services space, favoring enterprises with "strong secular growth trends" and those with the opportunity for total addressable market expansion.
O'Neill noted that COVID-19 will accelerate greater adoption of contactless payments and e-commerce, benefiting the networks, acquirers and processors. But he believed that "consensus Cash App enthusiasm" could prove too optimistic in the near-term to justify further appreciation for the already-rich valuation of Square shares.
June Quarter Knocks Their Socks Off
In early August, Square delivered a coronavirus report that was anything but recessionary. Sales and profits surged as online business activity offset the loss of in-person transactions for which the eponymous dongle became famous. Net revenue for the quarter was $1.92 billion vs the consensus of $1.14 billion -- for a unheard of 69% beat -- and adjusted EPS was +18 cents vs the Zacks Consensus of -7 cents, for a 350% beat.
There was a big bullish response from RBC Capital analyst Daniel Perlin, who raised the firm's price target on Square to $200 from $119 after the company reported implied adjusted net revenue of $677M, which was up 20% year-over-year and beat both his and consensus forecasts. He increased his revenue and earnings estimates following the "very impressive" Q2, which he sees illustrating the company's innovation, speed, and ability to pivot quickly, Perlin told investors.
Dan Dolev is Back!
Many analysts followed Perlin's lead in August, with average price target bumps up toward $170. But I was wondering why I hadn't heard from the biggest SQ bull of them all, Dan Dolev, and his proprietary "Cash App vs Venmo" tracker that he has used for years to chart Square's competitive stance vs. PayPal.
Turns out Dan was in a transition to another big Japanese i-bank. Here was his debut on August 26...
Mizuho starts Square with Buy rating and $225 price target: Analyst Dan Dolev initiated coverage of Square reiterating his long-held belief that the fintech disruptor is best positioned to benefit from the dislocation in small- to mid-sized businesses. Citing that the "superior" unit economics for its Cash App could help drive four-times growth in gross profit, Dolev noted that Square's margins are "understated" as it seeks to maximize its terminal value.
Then in late September, Dolev put out a note saying that Square's Cash App is "virtually unstoppable." After meeting with Square management, Dolev restated his case for Cash App's total addressable market, average revenue per user potential, user growth prospects, and revenue sustainability. The SQ fortune teller said that Cash App's average revenue per user has seen "stellar growth," rising from nothing to $45 in just five years. And he estimated that this number can reach $80 or higher by 2023.
Cash is Dead, Long Live Cash App
Also in September, Daren Fonda writing for Barron's observed that cash usage was already at an all-time low at the start of the new decade and COVID-19 just hastened the decline, with Americans stuck at home and now still wary of the close proximity required for the physical exchange of potentially infectious bills. While Fonda noted PYPL and SQ valuations were pushing to extremes, he for long-term investors that there was still time to jump in.
I agreed in my recent Zacks Confidential report Demographics and Economics: A Strong Case for the Roaring 20s Bull Market where I made SQ one of my top 3 picks for the decade of virtual, remote, and digital disruption. To see my full thesis and the other picks, just email Ultimate@Zacks.com and tell 'em Cooker sent you.
Wall Street analysts agree as well with estimates rising sharply since the August earnings report. Revenue consensus for this year now sits at 49% growth to breach $7 billion and a 27% advance is projected for next year's top line to hit nearly $9 billion.
For earnings estimates, even though the consensus sits at just 53 cents, for a 35% decline, that's up from the Armageddon scenario forecast over two months ago at just 18 cents EPS. And next year's target is up to $1.15, representing over 120% growth.
These rising estimates are why SQ is a Zacks #1 Rank again.
Dimon: Square Innovated Where We Should Have
As for Jamie Dimon, I can only share and still enjoy these quotes of his from a February 2019 article in American Banker by Andy Peters...
“They came up with this little dongle to process stuff and it was a great idea,” Dimon said.
Square then built off the success of its card-reader to provide other services to its business customers, such as wider variety of point-of-sale systems that allow merchants to accept cash or card payments. It also provides merchants with tablets and software that allows them to track sales patterns, inventory and other important data.
“We didn’t give them that opportunity, Square did," Dimon said. Finally, Dimon lamented that Square beat JPMorgan to the punch in making online loans to small businesses.
Square Capital, its online lending arm, began offering business loans in early 2014 — nearly two years before JPMorgan began making its own digital small-business loans via a partnership with fintech lender OnDeck Capital.
Square "said, 'you know what, since we know this company and they might need an advance this time of the year, we might advance them $10,000 or $15,000 or $100,000,'” Dimon said. “They did all this stuff we could have done that we didn’t do.”
The mark of a great leader is to recognize and admit failures, and hopefully learn from them. I wonder if Jamie thought about trying to buy SQ when it was on sale last spring at $25 billion.
I sure wish I had hung to my shares. And let's hope I've learned my lesson about sticking with disruptive innovation.
Bear of the Day:
Simon Property Group is the $22 billion real estate investment trust (REIT) engaged in acquiring, owning and leasing of shopping, dining, entertainment and mixed-use destinations. The company’s real estate portfolio consists of malls, premium outlets, "mills" and various international properties.
As of June 30, 2020, Simon Property owned or held interests in 204 properties in the United States. This comprises 99 malls, 69 Premium Outlets, 14 Mills, four lifestyle centers and 18 other retail properties across 37 states and Puerto Rico.
My colleague Dave Borun profiled SPG as the Bear of the Day in July where he wrote...
The performance of Real Estate Investment Trusts has been a mixed bag lately. On one hand, public companies that own rental properties and are required by law to pay out 90% of their pre-tax income to shareholders have been providing yields that are much more attractive than the rates that can be earned in money-market savings accounts or fixed-income instruments like Treasury bonds.
In normal conditions, REITs tend to trade more like bonds, with prices that rise as interest rates fall.
On the other hand, there’s a very real possibility that REITs that invest in the commercial markets will see widespread tenant lease defaults. As consumers continue to shift their shopping habits to include more online purchases and fewer trips to the mall, an increasing number of large brick-and-mortar retailers have filed for bankruptcy protection.
At the beginning of 2020 when SPG shares were trading near $145/share, the company’s portfolio of 204 properties allowed them to pay a regular dividend of between 3-5% - a very solid yield. At the more recent share level of around $64/share, the dividend yield is now north of 8% annually.
(end of Dave Borun's excellent summary of the SPG business situation)
Since Borun's report, analyst revenue and profit estimates have continued to slide for SPG with this year's top line expected to fall nearly 17% vs 2019 to under $4.8 billion.
And in the past 90 days, EPS estimates have dropped another 8% for 2020 from $10.56 to $9.72, representing an annual decline of over 19%. Thus SPG remains in the cellar of the Zacks Rank.
Where Does a Real Estate or Income Investor Turn?
Investors looking for safe and steady income from REITs have had to reevaluate their strategy this year. But all is not lost in real estate because the home builders have some of the best investment profiles right now with the highest Zacks ratings.
For more on what could be an amazing decade for housing, see my recent Zacks Confidential report where I explain my thesis on what is about to unfold...
Demographics and Economics: A Strong Case for the Roaring 20s Bull Market
In that report, I use a lot of analysis from my favorite real estate expert, Tracey Ryniec. Her research helped convince me that the housing boom of 2020 could extend for the next 3 to 8 years.
If you want to get a copy, just email Ultimate@Zacks.com and tell 'em Cooker sent you. Until then, check out the interview I did with veteran private wealth manager Chad Willardson of Pacific Capital where he and I discuss how to navigate almost any market storm with a long-term plan that can easily beat the averages.
Chad's new book Stress Free Money: Overcome These Seven Obstacles to Find Financial Freedom is a short and handy guide to getting your "money game" tuned-up and ready to prosper in this exciting and fertile new decade. And we go over several of the important principles in my Mind Over Money podcast and article...
Stress-Free Wealth Creation with Chad Willardson
The article version of our podcast discussion (in that same link) has a snapshot of my core thesis about how to avoid shooting yourself in the foot with too many frequent decisions about your retirement nest egg.
Additional content:
3 Cheap Tech Stocks Under $10 to Buy Despite Volatility Fears
The S&P 500 has climbed 4% since September 23 to help claw back some of its early September losses. Wall Street has turned its attention to the election, which is only four weeks away and might have become more complicated by President Trump’s Covid-19 diagnosis.
Along with the election, investors are navigating how to price in what might be next on the coronavirus front. It is worth pondering how much political will there would be for another broad-based lockdown, as large areas of the economy still struggle to return to anything close to normal.
This prompted Fed Chairman Jerome Powell to double down on his push for Congress and the White House to provide more economic stimulus. “The expansion is still far from complete. At this early stage I would argue that the risks of policy intervention are still asymmetric,” Powell said in prepared remarks Tuesday.
“Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses. The risks of overdoing it seem, for now, to be smaller.”
On top of that, it is always worth quickly looking back to see how far the market has come. The market posted its best two-quarter run (Q2 and Q3) since 2009 after the coronavirus ended the historic bull run in March.
The S&P 500 is still up over 50% off its lows and roughly 6% in 2020. The proxy index for the broader market is once again back up above its 50-day moving average, after technical traders worried a few weeks ago about a big slip down to the 200-day.
The overall climb comes as the economy continues to add more jobs, even if things slowed down in September. The U.S. unemployment rate fell to 7.9% last month, with 11.4 million jobs added since the major layoffs in March and April. Plus, the S&P 500 earnings outlook continues to improve for the third quarter and beyond, and Fed’s choice to keep its interest rate near zero through at least 2023 should help support stocks.
Clearly, many investors might want to remain on the sidelines for now, or simply not make any new additions until some of the bigger questions are answered. But those with longer-term horizons can get hurt trying to time the market.
So let’s jump into three companies within a niche area of the market: tech stocks trading for under $10 per share…
iClick Interactive Asia Group Ltd.
Prior Close: $6.79 USD
IClick Interactive provides online marketing and enterprise data solutions. ICLK works with global brands to help provide exposure in the expanding Chinese market, where it claims it’s able to reach “98% of China Internet users.” The firm, which boasts that it connects “marketers worldwide to the right audience in China and beyond,” was founded in 2009 in Hong Kong and was listed on the Nasdaq in late 2017.
The company topped our bottom-line estimates in the trailing two periods, with sales up 25% in Q1 and 18% in Q2 FY20, which it reported near the end of August. ICLK’s performance helped send its stock price to new highs in early September. Shares of iClick are up 110% in 2020 to crush its industry’s 5% decline and have popped 125% in the last 12 months. This climb includes its recent downturn.
The stock rests nearly 30% below its recent highs, including Tuesday’s jump, which might set up a stronger buying opportunity for those high on ICLK. It’s worth noting that iClick issued 8.5 million ADS shares in an early September follow-on offering to help fund investments in its growing enterprise solutions segment and more.
Zacks estimates call for iClick’s Q3 revenue to jump 26%, with its fiscal 2020 sales projected to surge over 27% to $254 million to top FY19’s 25% expansion. Meanwhile, the online marketing and enterprise data solutions firm is expected to swing from an adjusted loss of -$0.04 a share last year to +$0.03 in FY20 and then climb to +$0.09 in FY21. ICLK’s positive earnings revisions help it grab a Zacks Rank #2 (Buy) right now.
The stock also earns a “B” grade for Growth in our Style Scores system and all four brokerage recommendations that Zacks has accumulated for the stock come in at a “Strong Buy.” And iClick announced on Tuesday a “strategic collaboration” with Tencent International Business Group on “Smart Solutions in Key APAC Markets,” which helped ICLK shares climb.
Limelight Networks, Inc.
Prior Close: $5.50 USD
Limelight provides digital content delivery, video, cloud security, and edge computing services. The Scottsdale, Arizona-based firm allows its customers to deliver streaming video and other digital content to “any device, anywhere,” and its offerings are geared toward industries from media and broadcasting to gaming. LLNW topped our Q2 estimates, with sales up 28%, while it swung from an adjusted loss to +$0.03 per share.
Limelight’s solid quarter helped it lift its full-year sales guidance. Zacks estimates call for its Q3 sales to jump roughly 15%. Peeking ahead, its FY20 revenue is projected to climb 18.1%, with FY21 expected to come in another 10% higher. The company is also expected to soar from an adjusted loss of -$0.02 in FY19 to +$0.08 a share in FY20, with FY21 expected to climb to $0.12.
Limelight is currently a Zacks Rank #2 (Buy) that holds an “A” grade for Momentum. LLNW is up 100% over the last 12 months, yet it rests nearly 30% off its early July highs. Luckily, the stock has started to bounce back, up 15% in the past month. And investors won’t have to wait long for company updates, with LLNW set to release its Q3 results on October 22.
Sirius XM Holdings Inc.
Prior Close: $5.61 USD
Sirius XM is a subscription satellite radio giant that expanded its reach through its early 2019 acquisition of Pandora. This helped boost its audio and music streaming presence as it competes against the likes of Spotify, Apple Music, and others. The firm now reaches over 100 million people every month. SIRI matched our Q2 earnings estimate at the end of July, even though its ad business has taken a coronavirus-based hit as advertisers pull back on spending everywhere. Sirius also added more users than projected.
Shares of SIRI are up 20% off the market’s lows, yet they remain 25% below their pre-COVID highs. This could give it some runway. Sirius is up 45% in the last five years, but the last two years have been tough. Luckily, its 0.94% dividend yield, which beats the 10-year U.S. Treasury note’s 0.73%, helps provide investors with some income. Plus, the board in mid-July announced the approval of an additional $2 billion in buybacks. And Sirius announced in July that it is set to storm into the booming podcasting market with its purchase of Stitcher from E.W. Scripps Co.
Zacks estimates call for SIRI’s fiscal 2020 sales to slip 0.48%, with FY21 projected to jump 5.5% higher to $8.18 billion. Meanwhile, its adjusted earnings are projected to climb 20% and 18% over this same stretch. And it has seen its earnings outlook improve recently to help SIRI earn a Zacks Rank #2 (Buy) heading into its Q3 financial release on Oct. 22.
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