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It’s been a tough year for Chinese companies. As the US – China trade war dragged on, US equities have still performed well with the S&P 500 sitting near all-time record highs – up more than 22% in 2019. Shares of Chinese technology giant Baidu have been headed in the opposite direction for most of the year.
After topping out at nearly $280/share in May of 2018, Baidu’s share price had declined 62% to $107 last week. A combination of stale results and a slowing Chinese economy – along with the trade war – weighed heavily on Baidu shares. Baidu doesn’t sell any goods that are directly subject to tariffs, but the effect on the entire Chinese economy had reduced quantities and the prices of the company’s most profitable offerings.
After an excellent earnings report last week however, it appears fortunes may be changing for the company many investors refer to as the “Chinese Google,” making the recent share price declines a buying opportunity.
The shares rallied 15% quickly to $125, but have since settled back a bit to $118.
A slew of analyst upgrades and positive earnings revisions after the most recent report earn Baidu a Zacks Rank #1 (Strong Buy).
A decade ago, Baidu grew dramatically as the largest Chinese internet search and advertising company in a country with a rapidly expanding middle-class that in many cases was utilizing the internet for the first time. Over the past few years however, Baidu has seen revenues stagnate amid increased competition and deteriorating Chinese economic conditions. The company recorded it’s only quarterly loss ever in Q1 2019.
After several quarters of flat or declining sales, Q3 marked a turnaround with revenues up 7% over the previous quarter and adjusted net earnings of $1.76/share after one-time items. That was 40% higher than the Zacks Consensus Estimate of $1.25/share.
The company also raised guidance, increasing sales estimates for the next quarter to a range of $3.78B to $4.02B. They didn’t forecast a net earnings figure, but based on the revenue increases, the Zacks Consensus Earnings Estimate for full year 2019 has risen 27% from $4.40/share to $5.58/share in the past 30 days. That’s still well off the $9.64/share Baidu earned in 2018 - but keep in mind that the stock traded at more than double the current level in 2018.
Over the same 30-day period, 2020 expectations have grown even more – from $5.97/shareall the way to $8.45. If Baidu continues to recover, there’s significant room for share price appreciation.
If you’ve purchased tickets to live entertainment recently, you probably have mixed feelings about Live Nation Entertainment. The company’s business model of combining a patchwork of regional concert promoters into a single national entity has certainly increased the number and variety of acts that are available to the average fan.
On the other hand, Live nation’s position as gatekeeper of the biggest events, as well as owning Ticketmaster and many of the venues where concerts are held means that concertgoers are paying significantly more for tickets than they were a decade ago.
Live nation does a remarkable amount of business. Through the third quarter of 2019, they had sold 92 million tickets and had taken in $8.7 billion in revenue. Those are hugely impressive numbers, but unfortunately for Live Nation, not a lot of that revenue makes it to the bottom line.
The total cost of putting on the shows eats up about 75% of revenue, and that’s before Selling, general and Administrative expense, interest and other costs.
Though the company regularly adds acts and venues and sees increases in Ticketmaster fee revenue and in-person sales of food, beverages and merchandise to concertgoers, operating income so far in 2019 has been just $408 million – less than 5% of gross sales.
With a share price that has outpaced sales and earnings growth over the past decade as it rallied from less than $3/share in 2019 to around $65/share today, Live nation is a truly dismal value opportunity with a 12M forward P/E Ratio of 430X.
Yes, that’s not a misprint. The share price multiple is 430 times how much Live Nation is forecast to earn over the next year.
In full year 2019, the company is expected to earn just $0.15/share and 2020 doesn’t get much better with estimates of $0.42/share for the entire year. Those estimates have been reduced from $0.28/share and $0.62/share, respectively, over the past 30 days.
Four negative revisions in the past month help earn Live Nation a Zacks Rank #5 (Strong Sell). The style scores are equally ugly, with an F in Value, a D in Growth, an F in momentum and an overall VGM score of F. That’s just about the worst report card we give out!
Live nation is also currently a component of the Zacks Short List, an algorithmic trading service that uses a proprietary system to analyze thousands of stocks and find the ten with the least promising financial prospects. It’s not a place you want to find your stocks.
If a company with a near-monopoly control over a large portion of live entertainment events and almost $12 billion in annual revenue can’t figure out how to earn more than $0.15/share, they don’t deserve your hard earned investment dollars. Shares of Live Nation could fall by 50% and they’d still be significantly overvalued by any reasonable measure.
You might be stuck paying Live Nation an exorbitant service charge when you buy tickets and $14 for a draft beer at the show, but you’re certainly not stuck investing in the shares – and you shouldn’t.
Additional content:
CME Group (CME - Free Report) to Launch Bitcoin Options in 2020
CME Groupannounced the launch of options on its Bitcoin futures contracts. Persuaded by the growing interest in cryptocurrencies and customer demand to manage bitcoin exposure, the bitcoin options will be launched and be available for trading on Jan 13, 2020. The launch of the options is subject to regulatory approval.
CME Group, the derivatives marketplace, has first launched Bitcoin futures nearly two years ago in December 2017. Since then, it has seen 22 successful futures expiration settlements, with over 3,500 individual accounts trading the contracts. Close to 6,500 CME bitcoin futures contracts are traded on average each day. In fact, it derives 47 % of trading volume from outside the United States.
Based on increasing client demand and robust growth in the Bitcoin futures markets, this launch will provide clients with additional tools for hedging their bitcoin price risk and trading in a regulated exchange environment. With this launch, customers will be offered greater precision and flexibility to manage their risk.
CME Group anticipates the Bitcoin futures market to grow. In sync with this, the company announced to increase the so-called spot month position limits for bitcoin futures to 2000 from 1000 for any single investor.
CME Group boasts the largest futures exchange globally in terms of trading volume as well as notional value traded. CME group leads with about 90% market share of the global futures trading and clearing services.
Shares of this Zacks Rank #3 (Hold) company have rallied 8.7% year to date underperforming its industry's rally of 19.9%.
Stocks to Consider
Some better-ranked stocks in the same space include MarketAxess Holdings Inc.and Nasdaq Inc. While MarketAxess Holdings sports a Zacks Rank #1 (Strong Buy), Nasdaq carries a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.
MarketAxess Holdings operates an electronic trading platform that enables fixed-income market participants to trade corporate bonds and other types of fixed-income instruments worldwide. Its average four-quarter positive surprise is 1.45%.
Nasdaq provides trading, clearing, marketplace technology, regulatory, securities listing, information, and public and private company services worldwide. It came up with average four-quarter positive surprise of 2.94%.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.
This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Baidu, Live Nation Entertainment, CME, MarketAxess and Nasdaq highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – November 15, 2019 – Zacks Equity Research Shares of Baidu (BIDU - Free Report) as the Bull of the Day, Live Nation Entertainment (LYV - Free Report) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on CME Group (CME - Free Report) , MarketAxess Holdings Inc. (MKTX - Free Report) and Nasdaq Inc. (NDAQ - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
It’s been a tough year for Chinese companies. As the US – China trade war dragged on, US equities have still performed well with the S&P 500 sitting near all-time record highs – up more than 22% in 2019. Shares of Chinese technology giant Baidu have been headed in the opposite direction for most of the year.
After topping out at nearly $280/share in May of 2018, Baidu’s share price had declined 62% to $107 last week. A combination of stale results and a slowing Chinese economy – along with the trade war – weighed heavily on Baidu shares. Baidu doesn’t sell any goods that are directly subject to tariffs, but the effect on the entire Chinese economy had reduced quantities and the prices of the company’s most profitable offerings.
After an excellent earnings report last week however, it appears fortunes may be changing for the company many investors refer to as the “Chinese Google,” making the recent share price declines a buying opportunity.
The shares rallied 15% quickly to $125, but have since settled back a bit to $118.
A slew of analyst upgrades and positive earnings revisions after the most recent report earn Baidu a Zacks Rank #1 (Strong Buy).
A decade ago, Baidu grew dramatically as the largest Chinese internet search and advertising company in a country with a rapidly expanding middle-class that in many cases was utilizing the internet for the first time. Over the past few years however, Baidu has seen revenues stagnate amid increased competition and deteriorating Chinese economic conditions. The company recorded it’s only quarterly loss ever in Q1 2019.
After several quarters of flat or declining sales, Q3 marked a turnaround with revenues up 7% over the previous quarter and adjusted net earnings of $1.76/share after one-time items. That was 40% higher than the Zacks Consensus Estimate of $1.25/share.
The company also raised guidance, increasing sales estimates for the next quarter to a range of $3.78B to $4.02B. They didn’t forecast a net earnings figure, but based on the revenue increases, the Zacks Consensus Earnings Estimate for full year 2019 has risen 27% from $4.40/share to $5.58/share in the past 30 days. That’s still well off the $9.64/share Baidu earned in 2018 - but keep in mind that the stock traded at more than double the current level in 2018.
Over the same 30-day period, 2020 expectations have grown even more – from $5.97/shareall the way to $8.45. If Baidu continues to recover, there’s significant room for share price appreciation.
Bear of the Day:
If you’ve purchased tickets to live entertainment recently, you probably have mixed feelings about Live Nation Entertainment. The company’s business model of combining a patchwork of regional concert promoters into a single national entity has certainly increased the number and variety of acts that are available to the average fan.
On the other hand, Live nation’s position as gatekeeper of the biggest events, as well as owning Ticketmaster and many of the venues where concerts are held means that concertgoers are paying significantly more for tickets than they were a decade ago.
Live nation does a remarkable amount of business. Through the third quarter of 2019, they had sold 92 million tickets and had taken in $8.7 billion in revenue. Those are hugely impressive numbers, but unfortunately for Live Nation, not a lot of that revenue makes it to the bottom line.
The total cost of putting on the shows eats up about 75% of revenue, and that’s before Selling, general and Administrative expense, interest and other costs.
Though the company regularly adds acts and venues and sees increases in Ticketmaster fee revenue and in-person sales of food, beverages and merchandise to concertgoers, operating income so far in 2019 has been just $408 million – less than 5% of gross sales.
With a share price that has outpaced sales and earnings growth over the past decade as it rallied from less than $3/share in 2019 to around $65/share today, Live nation is a truly dismal value opportunity with a 12M forward P/E Ratio of 430X.
Yes, that’s not a misprint. The share price multiple is 430 times how much Live Nation is forecast to earn over the next year.
In full year 2019, the company is expected to earn just $0.15/share and 2020 doesn’t get much better with estimates of $0.42/share for the entire year. Those estimates have been reduced from $0.28/share and $0.62/share, respectively, over the past 30 days.
Four negative revisions in the past month help earn Live Nation a Zacks Rank #5 (Strong Sell). The style scores are equally ugly, with an F in Value, a D in Growth, an F in momentum and an overall VGM score of F. That’s just about the worst report card we give out!
Live nation is also currently a component of the Zacks Short List, an algorithmic trading service that uses a proprietary system to analyze thousands of stocks and find the ten with the least promising financial prospects. It’s not a place you want to find your stocks.
If a company with a near-monopoly control over a large portion of live entertainment events and almost $12 billion in annual revenue can’t figure out how to earn more than $0.15/share, they don’t deserve your hard earned investment dollars. Shares of Live Nation could fall by 50% and they’d still be significantly overvalued by any reasonable measure.
You might be stuck paying Live Nation an exorbitant service charge when you buy tickets and $14 for a draft beer at the show, but you’re certainly not stuck investing in the shares – and you shouldn’t.
Additional content:
CME Group (CME - Free Report) to Launch Bitcoin Options in 2020
CME Groupannounced the launch of options on its Bitcoin futures contracts. Persuaded by the growing interest in cryptocurrencies and customer demand to manage bitcoin exposure, the bitcoin options will be launched and be available for trading on Jan 13, 2020. The launch of the options is subject to regulatory approval.
CME Group, the derivatives marketplace, has first launched Bitcoin futures nearly two years ago in December 2017. Since then, it has seen 22 successful futures expiration settlements, with over 3,500 individual accounts trading the contracts. Close to 6,500 CME bitcoin futures contracts are traded on average each day. In fact, it derives 47 % of trading volume from outside the United States.
Based on increasing client demand and robust growth in the Bitcoin futures markets, this launch will provide clients with additional tools for hedging their bitcoin price risk and trading in a regulated exchange environment. With this launch, customers will be offered greater precision and flexibility to manage their risk.
CME Group anticipates the Bitcoin futures market to grow. In sync with this, the company announced to increase the so-called spot month position limits for bitcoin futures to 2000 from 1000 for any single investor.
CME Group boasts the largest futures exchange globally in terms of trading volume as well as notional value traded. CME group leads with about 90% market share of the global futures trading and clearing services.
Shares of this Zacks Rank #3 (Hold) company have rallied 8.7% year to date underperforming its industry's rally of 19.9%.
Stocks to Consider
Some better-ranked stocks in the same space include MarketAxess Holdings Inc.and Nasdaq Inc. While MarketAxess Holdings sports a Zacks Rank #1 (Strong Buy), Nasdaq carries a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.
MarketAxess Holdings operates an electronic trading platform that enables fixed-income market participants to trade corporate bonds and other types of fixed-income instruments worldwide. Its average four-quarter positive surprise is 1.45%.
Nasdaq provides trading, clearing, marketplace technology, regulatory, securities listing, information, and public and private company services worldwide. It came up with average four-quarter positive surprise of 2.94%.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.
This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.
See their latest picks free >>
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Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.